Avanza Bank Holding AB (publ) (AZA) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Avanza Full Year Report 2024 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Gustaf Unger, CEO. Please go ahead.

Thank you, and welcome all. Here in the room in Stockholm, we have Sofia Svavar, Head of Investor Relations and Communications; we have Anna Casselblad, CFO; and myself, Gustaf Unger, CEO. So I hope we are well represented to take your questions after the presentation, which I will start on a broader note, and then Anna will go into the P&L and balance sheet. And then I will make a swift concluding remarks before we open for questions. If I look at 2024, I'd say that it was a good year and it was a great last quarter. The one achievement that I'm mostly proud of is that we had, again, the most satisfied savings customers. We increased our lead, vis-a-vis competitors, and we were ranked #1 in all individual categories. I think that's a great testimony from our customers. The year also showed strong growth. We had inflows of SEK 86 billion, which I think is really good. We attracted 171,000 new customers. And maybe more importantly, that trend accelerated in Q4. And in Q4, it accelerated in December. So we have a good momentum into this year. I think the year was also a year of high innovation, and we had many appreciated launches, especially towards our most active customers to improve their ability to do fundamental analysis, to do technical analysis and to do better order execution, to mention a few areas. The risk willingness among our customers increased in the latter part of the year, and we reported the highest share of foreign trading ever. We also saw that customers were fully invested, and only 7.1% of their savings capital were in cash on our balance sheet. And we had an increased appetite for margin lending. Volume grew with 32% during the year. And the fund business continues to grow, and we report our best full year profit ever. And as you recall from Q3, we set new targets and strategic priorities up until 2030. If we go into the different parts and start with the fund side, we grew our net flows into funds with 76%, I think that's an impressive number, from SEK 24 billion in 2023 to SEK 41 billion last year. And the fund business is increasingly important for us now amounting to almost 1/3 of the total savings capital, and that is contributing with a stable source of income. Proceeding to the trading side. The market sentiment has improved, and we see increased customer activity across all segments, similar to previous periods of positive market sentiments. We saw 12% more customers generating brokerage in 2024 compared to the year before. And we saw, as I mentioned, the highest share of foreign trading, and that trend has been ongoing for long and should continue as home buyers diminishes. We saw increased trading, especially in Q4, and that was spread across mainly large blue chip stocks and crypto-related securities, including ETPs, but we are still way below the pandemic levels on activity. If I look back on the targets we had entering into 2024, I think we can be fairly satisfied. We ticked the box on customer satisfaction. We ticked the box on employee engagement, and we ticked the box on the value growth side on reaching our return on equity target we are -- or the Board is proposing a dividend that is way in line and above the dividend policy. And our cost to savings capital ratio decreased from 16 to 14 basis points. On the sustainability side, there is a little bit more mixed picture. The sustainability's core of our customers' overall investments improved, but we still have lots to do to help our female customers to become bigger savers and investors. And here, I reiterate our strategic priorities and long-term targets that we presented in the Q3 report. And we want to develop and grow the leading position in our core business, and that is savings and investments in Sweden. And the emphasis here is to improve our share of wallet, which currently is around only 1/3. We want to achieve market leadership in private banking. We want to achieve market leadership in occupational pension. We want to increase our efforts to fuel further growth, including cloud migration and automating manual processes. And we want to establish Avanza in at least one additional European market. And of our 7 long-term targets, 3 are new, the ones in the middle, to grow our savings capital with an average 15%, to have an annual cost growth of 8% and to decrease our cost to savings capital over time. The other targets that you see there. You are well familiar with from previous years. And our ambition is, as mentioned, to grow savings capital in Sweden by 15% annually and reach SEK 2,000 billion by 2030. Historically, we have grown the savings capital over the last 5 years on average with 19%. And in 2024, we grew it by 22%. But to the right, you can see that we were helped by a very nice market appreciation of 11%. So I think it's important to look at the net inflow, which last year was strong of 11%, and our target is to grow the savings capital by 15%, which we can decompose into a net flow of 10% and a market depreciation assumption of 5%. And to visualize our growth potential, I'd like to compare our market share on the front book versus the back book. And in the latest market data, we take 20% of all new business that hold only 7.5% market share of the back book. So mathematically, if we continue to do a good job, we should have 20% in our back book, i.e., our portfolio, but that will take time. Going into the Private Banking side. I am happy that we announced the acquisition of Sigmastocks. I think it is an important step for us to deliver on our ambitions, and it helps us to swiftly create a digital discretionary offering to our customers. And this is a market -- the discretionary market in Sweden is around SEK 1,000 billion, and we don't even compete there today. And it's frustrating to see our customers having part of their portfolio with competitors because we don't offer this solution today, that we will then soon. We got new figures from Prospera during the fall showing that our customers are the most willing to recommend Avanza compared to our competitors. That's great news. Our market share decreased slightly to 12% and to a #5 position when it comes to number of customers, but these numbers fluctuate a bit between the years. What you can see to the right is that we have a great potential to build our brand within Private Banking. So our customers are very willing to recommend others, our Private Banking offering, but our -- the knowledge of us offering Private Banking is low. And as I mentioned in the beginning, many of our product features we launched in 2024 was directed towards the more complex and demanding customers. And last week, we launched Simply Wall Street as an advanced analysis tool, and we continue to make our offering stronger among the Private Banking customers. We also want to achieve market leadership within occupational pension. And we, since 2, 3 months have a new development team in place that will work solely on improving the experience for the corporate. The corporate is the one who actually buys the service from us. We're also making improvements for the individual pension customer. And our market share when it comes to premium increased to 11% and to a #4 position. And we will increase our sales force during 2025 to leverage our improved offering and strengthen our position in this market. Our market-leading cost efficiency is an important competitive advantage, and the new long-term target to demonstrate increased scalability is to decrease cost to savings capital ratio over time. And as I mentioned, it decreased from 16 basis points in 2023 to 14 basis points last year. And increasing our operational efficiency is a step-by-step process, where we systematically go through our main processes. And to exemplify, we have recently automated the securities transfer process that was previously manual. And our cloud migration is progressing according to plan. We are currently negotiating with suppliers. We're preparing migration of our systems, and we will start migration and new development in the cloud in the latter part of this year. Before I hand over to Anna, I want to say that I think that we are well positioned in an improving macro environment. There is -- we, Swedes, we get more disposable income now after having a bit of a depressed couple of quarters. We see lower rates, we see lower inflation, we see lower taxes, which is all good for us, Swedish households. We also currently have an improved trading environment, positive market sentiment, increased volatility, big movements where people can act in quant computing or Novo Nordisk or the 10-year U.S. rate or in crypto. And we have tax incentivized savings on the popular ISK and endowment insurance. And these are all positive on the Swedish savings market. And then our job, of course, is to take an overproportion part of this growth, and I think we're well positioned to do that. We have very good customer satisfaction. We have a great platform. We are the -- by large, the biggest players when it comes to Swedish transactions, which makes a big competitive advantage to use us, vis-a-vis other players. And we have highly engaged employees. To summarize, our strategy 2030 ambitions before I hand over to Anna, we want to sustain our #1 customer satisfaction position. We want to maintain our unique corporate culture and high employee engagement. We want to strengthen our position as the #1 savings and investment platform in Sweden. We want to more than double our customers' savings capital. We want to take the leading position within Private Banking and occupational pension. And we want to expand into at least one additional European market before 2030. And we want to retain and improve our industry-leading cost position. Anna?

Thank you, Gustaf, and good morning, everyone. I'm proud to say that we are reporting record full year results today. And once again, the strength of our business model with several income streams have been demonstrated. We are also reporting a strong Q4, where operating income increased by 11% compared to Q3 boosted by the pickup in trading activity, while NII remained resilient despite the policy rate decreases. When it comes to costs, we have been affected by a few one-offs during the year that couldn't been foreseen when we set the 2024 budget and ended up at 11%. Excluding these one-offs, we are coming in slightly below our cost guidance at a cost increase of 9.2% compared to 2023. Net profit was up 17% compared to last year and return on equity ended up at 38%, fulfilling our ROE target of at least 35%. Altogether, this means an earnings per share of SEK 14.33 for the full year, 13% up from 2023. Total income, both for the full year and the quarter, came in at record levels. It is also our first quarter ever reporting revenues above SEK 1 billion. Net brokerage income increased compared to last quarter as a result of higher brokerage generating turnover and notes, despite 4.5 fewer trading days in Q4. And as Gustaf mentioned, the high trading activity is spread across all customer segments, and the number of brokerage-generating customers have increased in general. The mix of customers who are trading was stable. And the share of brokerage from Private Banking and Pro customers only decreased slightly compared to Q3 and was 25%. The brokerage margin increased to 11.8 bps positively affected by higher trading in exchange traded products and a higher share of foreign trading, which reached an all-time high of 29% in the quarter. This was also reflected in the substantially higher currency related income compared to Q3, and that set the trend towards the higher share of foreign trading has been ongoing for years, but spiked since the U.S. election in November. We are also seeing a healthy development of our fund business, which provides a stable source of income. For the full year, we have had net inflows to funds of SEK 41 billion, and fund capital volumes have grown by 37%. This is key to keep growing fund revenues, even though we're still seeing pressure on the margin with an increased share of allocation to index funds. And despite this, net fund commissions are at an all-time high. Other income has been negatively affected by customer compensations related to ISK tax during the year, primarily in Q2 and Q3. In Q4, we saw a significant jump to a few things, which, together with higher income from external deposits, were the main contributors to higher other income. And going forward, we expect customer claims to stay low. NII have shown good resilience in the quarter, despite policy rate decreases and its negative impact on STIBOR. On the positive side, we have larger lending volumes, higher credit spreads and, on average, roughly SEK 2.5 billion more excess liquidity in the treasury portfolio. Still, due to the policy rates and STIBOR coming down, income from the treasury portfolio decreased by 8% in the quarter and income from lending portfolio by 5%. Average interest rate on lending decreased from 4.3% to 3.8%, an effect of rate decreases in August, October and November. However, both mortgage and market lending volumes continued to increase in the quarter. On the cost side, the average annualized rate on deposits decreased from 1.7% to 1.3%, resulting in 80% lower cost. Although our own savings account continue to grow, and we are not paying interest on a smaller part of the saving capital liquidity compared to Q3, a total of 60% versus 65% in Q3. Compared to full year 2023, NII was more or less flat. Total policy rate cuts of 125 bps since May where, to a great extent, compensated by higher credit risk and higher volumes in the treasury portfolio. And income from surplus liquidity grew by 60%. On top of this, increasing lending volumes contributed positively as well as slightly higher average lending rate. However, while the cost of risk volumes increased by 21%, as did annualized average interest rate and the interest expense rose by 46%. And looking into 2025, on January 8, the Riksbank policy rate increase of 25 bps that was announced in December took effect. This would result in further pressure on the NII. However, our mortgage rates were also lower by 25 bps on the 8th of January and margin lending by 70 bps. And lending volumes have grown strongly in the past quarters. We also lowered our deposit rates. And as we have said before, going forward, our intention is to keep on following the policy rate cuts on our savings account. But important to note, though, depending on how far the rate cuts will go, the savings account is today an important part of our customers' asset allocation, and we want to have an attractive offering also going forward. And adding to this, the Swedish FSA has announced new requirements on credit institutions and banks, which use deposit platforms for funding. And this means that our offering of external savings accounts will not be as attractive for these players going forward, which in turn will affect our customer offering. And as a consequence, we have today announced that we decided to phase out our external savings account, and it's still too early to speculate around the effects on our deposit volumes. Firstly, it will take time as the deposits will stay with the other banks as long as the customers don't make a massive decision to move to Avanza. And secondly, we will have to fight for the volumes with an attractive rate of our own. But although I'm sure that our customers still prefer the strong Avanza brand and are not as rate sensitive due to this. Moving on to costs. As already mentioned, we came in slightly below our cost guidance at a cost growth of 9.2% compared to 2023. This is excluding the one-offs related to changes in our media company, Prospera, and the fine from IMY, which we are not aware of when we set the guidance. Personnel costs are up compared to Q3 as a result of seasonally low personnel costs during summer vacations in the third quarter, and the marketing costs are seasonally low in Q4. One of our targets until 2030 is to keep annual cost increases at an average of 8% with higher cost growth in the beginning of the period due to increased investments related to our strategic priorities. And therefore, the cost increase for 2025 is estimated at 11%. And this includes our efforts to strengthen our position in Private Banking and pension where, for example, an increased sales force as well as the acquisition of Sigmastocks, with the development of digital discretionary portfolio management are included. Included are also further work with our core business to make sure Avanza stays in the forefront when it comes to offering and user experience. Our marketing organization is already both efficient and successful and has received several awards in the quarter. However, to support growth, we will invest slightly more in marketing during 2025 and decreased marketing spend included in the core Private Banking and pension part of the chart. Operational efficiency is also an important area to support continued strong growth. We already have a leading position when it comes to cost of savings capital ratio. And the 5% of estimated cost growth this year is dedicated to keep improving this area, where the vast majority is connected to our accelerated cloud journey. Total salary adjustments are expected to amount to around 4%. And cost efficiency is a competitive advantage where -- that we have the ambition to retain and improve. And over time, cost growth is expected to slow ending at 5% in 2030. We have a very strong capital position with good margins, both to the total capital requirements and the leverage ratio. And as already mentioned, there are some uncertainties around the phase -- of us phasing out the external savings account offering and how this will affect the cost of volume through our own balance sheet. And therefore, our assessment is that we need somewhat larger margins to the requirements for some time. And taking this into consideration, but also our strong results, the Board of Directors has decided to propose a dividend of SEK 11.75 per share, which is slightly higher than last year. And the dividend corresponds to a payout ratio of 82%, which exceeds our target, but also implying that we continue to build capital. And this also gives us room to maneuver regarding our strategic priorities. And with that, I would like to hand back to Gustaf.

Very good. So final slide before we open up for questions. I just want to make some closing remarks. 2024 has been a fantastic year for us. And even more so, Q4 was a great quarter. We saw a strong growth, despite households being under pressure from macroeconomic factors. We saw record results. And I think it's compelling to see that we are standing on several legs. So when rates go down, other income stream can compensate. We want to highlight the healthy development of our fund business. It now accounts for 1/3 of our customers' portfolio, and it's a very important part of their portfolio construction. And I think we had a year of strong innovation and high customer satisfaction. And I'm optimistic looking into 2025. The depressed financial situation for the household is reversing. We have an improving macro environment that will put our Swedish households in a better financial situation. I think that would lead to increased consumption, but it would also lead to increased savings. We have a more favorable market sentiment right now. And we have, I think, a solid initial progress of our strategic priorities. And last but not least, I think we see high engagement and focus internally among our colleagues to deliver on our priorities and targets. And with that, we open up for questions.

[Operator Instructions] And the first question comes from the line of Patrik Brattelius from ABG.

A few questions from my side, I would like to start on the cost. In the last quarter, you mentioned you would have approximately SEK 300 million in cloud moderation cost until 2030. Can you please elaborate a little bit how much of that is allocated now to 2025?

Yes, sure. We still see, SEK 300 million is our estimate. And we -- for the coming year or for this year, we are -- SEK 50 million of the increase is allocated to the cloud migration.

Okay. And should we see 2025 as a peak investment year? Or is it the many years where we should expect a similar growth rate in costs? Or will it gradually come down from here?

I think that we have -- what we have said before, it would be higher in the beginning of the period, but what you can calculate with is that we will have 8% growth over time and up at 5% in the end of the period.

And Patrik, the long-term trend is clear. This is an investment year. And we want to come down to cost increases of around 5% by the end of this strategic period. So the trend is clear, I think.

Yes, yes. That's true. But SEK 50 million out of SEK 300 million, that implies perhaps that 2026 will also be investment heavy. Is that a little bit along the right lines?

Yes, yes. I mean, this -- we estimate that we will invest roughly SEK 300 million in the cloud migration over this period. So it's -- with SEK 50 million in this year, it's -- mathematically, it's fairly spread across the planning period.

Okay. And then this termination of external savings account, could you please then help to elaborate how much of income comes from these external savings account in the other commission income?

For competitive reasons, we haven't said anything about how much we get on that is deposit.

Is it -- can we talk about is it a meaningful amount? Or is it something that could help us understand the magnitude of income that will gradually be removed?

If you compare it to our total income, it's small. And we don't know how our customers will react. We announced this to our banking partners, the banks who are then getting the Sparkonto Plus deposits on their balance sheet, we communicated that to them just before we released our reports. So we need to sit down with them and do that, have a proper discussion with them to make sure that, that is a good process. I think -- I personally think that this would be positive from an income perspective, but it depends on how our customers behave.

And then if we -- just to help us understand, is it in the other commission income, which was SEK 57 million in the quarter, is that part of it? Just so...

Yes.

Okay. Which other items are in that other commission income?

You have the external mortgages, for example, and you have a lot of small pieces of different distribution fees. So there's quite many lanes or ropes about the market, yes, you have specified.

That's separate.

Yes.

Okay. Fair. And then just as a last question regarding M&A. You bought Sigmastocks here in Q4. Can you share a little bit more details regarding your strategic thinking of future M&A in Sweden?

We don't have any other target on our radar right now. This was, I think, a perfect fit. We really want to offer discretionary portfolios to our customers. And with the acquisition of Sigmastocks, we win a lot of time to do that. And I think we're well positioned, being so tech savvy to introduce something unique to the Swedish market. We don't have any other acquisitions on the radar in Sweden right now.

And the next question comes from the line of Jacob Hesslevik from SEB.

On your statement that you're looking into shutting down your external deposit platform, could you provide a time line for this process?

Jacob, it's a little bit challenging. We just communicated to our -- to the banks who are dependent to some extent on this funding. We want to do this in a proper way with them. We have not had the opportunity to do that being on the phone with journalists and with analysts yet. So we need to get back on that. But I don't think you will see something swiftly. Maybe customers will -- some customers will start to act just by this communication. But we need to do it in a good and order way. So I don't think you will see big movements in the near future.

Okay. Perfect. And I assume that the margin on the external deposits has been around 5 basis points. And now when it transferred to your own savings account, we should see that the margin expense to 50 bps, right?

I think margin, comparing an external product with an internal product, the margins internally are higher. So it all depends on how customers will react and how good we are to attract capital to our platform -- to our own platform, so to speak.

Yes, of course. But correct me if I'm wrong, but you can't withdraw deposit from your external deposit platform and transfer it straight to, for example, Resurs. It has to go through your own home bank first, right?

Are you meaning if you are having an account on Avanza's platform with, for example, Resurs? Are you meaning if you're having -- then you can transfer it to Avanza.

No. But if you have used -- if you have the deposit on your platform and I have the money at Resurs through your external platform, and I want to deposit at the Resurs internal channel, I have to withdraw it from Avanza first to my home bank and then from my home bank transferred over to Resurs, right?

We don't have the exact specifics on how it's going to be done, but the money is with the other banks. So it's not on the Avanza...

But if you withdraw the money from, let's say, Resurs account on your platform, that deposit on Avanza first, right?

Yes. That's -- yes.

Yes. Okay. So it's quite a complicated process to actually move it around. So it would be reasonable to assume that at least 80% of the SEK 43 billion will be transferred to your own savings account on your own balance sheet.

I wouldn't want to lean out my head through the window, yes, Jacob. I think it really depends on customers behave, how well we manage the process and so on and so forth. But I think that it will be net positive for our P&L.

Yes, it probably should be. And then just a quick question. On the lower ISK tax in 2025, Nordnet wrote that it saw a strong start in January. Have you seen any similar strong activity in the beginning of this year?

I think we're very transparent launching our monthly statistics. So in a few days, you will see the data on January. But what I can say is that we ended the year 2025 (sic) [ 2024 ] with a very good momentum. So if nothing changes, if nothing on the macro side, it's nothing on the customer behavior changes, that should continue into 2025.

And the next question comes from the line of Nicolas McBeath from DNB.

So first a question on the NII in the quarter, which held up relatively well given the lower rates, which seems to be partly explained by quite markedly higher spreads in the liquidity portfolio. So just wondering if there's anything in particular that explains the uptick in the credit spreads in your liquidity portfolio in this quarter. I understand that there's a difference here between the yields -- or the spreads between the bonds that are maturing and the new ones you're acquiring. So is there anything completely going on this quarter? And do you see further increases in the liquidity spreads in the coming quarters? Or are the margins on the bonds that you acquire now in line with the ones that are expiring?

That is correct. As you say, Nicolas, there's a lot of different parts. And of course, how much that has been matured during the quarter and how much we reinvest and the spreads that we are getting. But from this year, we have seen the spreads coming down a bit. So it's really hard to have any prediction on that.

Okay. And then I was wondering about your net savings trends as well. And as you mentioned, you've seen very strong trends towards the end of 2024, with December being particularly strong. Any particular segments or client that accounted for the large increase in inflows? And how much do you think we should read into that when we think about the outlook for savings in 2025?

It was -- the growth in the latter part of the year was broad if you look at the customer segment. I think we have a fairly ambitious target of growing our savings capital with 15%. But it should be an ambitious target because Avanza is a good company. As it looks now, and as I said, we're going in with good momentum into 2025. That helps us, and it helps the industry. And I think there are a lot of factors that you have highlighted also and other -- of your colleagues that we Swedish households, we get more disposable income in 2025 compared to 2024. We have better tax treatment of ISK and the endowment product. So all else equal, that should boost the Swedish savings market. And then my and my colleague's job is to make sure that we take such a big share of this growth as possible.

Right. So could that suggest that your 10% annual net savings ambition is maybe too low of a bar?

I think -- we're 3 weeks into a 52-week year. I think it's a little bit early to say, Nicolas. But we will not stop running. 15% is not a ceiling for us, but it's the ambition that we want to reach on average every year. Some years will be better. Some years will be more difficult.

Right. And then just some follow-up on the Sparkonto Plus discontinuation as well. So do you think that there is a need to make your -- the conditions on your savings accounts more attractive to incentivize those customers to move within Avanza? Will you also start to consider introducing term deposits as well to be able to offer higher deposit rates?

We're looking into that, and we have been looking into this since the Swedish FSA came out with their new view on deposits from platforms. There are a lot of factors here. If we would have longer-term deposits, we could take longer-term bets in the treasury portfolio without increasing the risk for Avanza, et cetera, et cetera. So it's a lot of factors playing into this question. We're looking into it.

All right. And then related to that is the impact on your capital position as well. So could you please update us on your capital planning? Do you have any ambition to consider issuing Tier 1 capital once these -- some of these deposits are starting to move to you internally? And if you could also please update on what kind of leverage ratio margin you intend to be at -- in the slightly longer term.

Okay. Firstly, on how we're planning our capital allocation going forward, and as we have said before, a T1 capital is something that we have been looking into and will going forward. And that is a fair assumption that would be a proper way to do it going forward. And the other part was leverage ratio, the margin, we haven't communicated and we haven't decided with the Board exactly what the amount would be or how much target or excess capital we would like to have. And that is also something that we have to look into when we see how our customers behave when it comes to the Sparkonto Plus, whether they will move to our platform, whether they will be on deposit accounts or whether they would start to trade anywhere. But as before, we are sensitive to the leverage ratio, and that is why we have to have a higher margin down to the 3.5 leverage ratio, including the Pillar 2 guidance that the FSA has set on us.

And I observed, Nicolas, that we have risk on among our customers, meaning that they are more fully invested. So they only hold 7.1% of the savings capital as deposits with Avanza. Should they be more risk averse and park their money, and then that 7.1% would increase and that would increase our balance sheet. We think the level that we would be at after the proposed dividend is a suitable one.

Okay. And then a final question on -- a slightly detailed question on your cost guidance for 2025. So you're now guiding for 11% cost growth versus reported costs in 2024. But those costs include a couple of one-offs, which are not really part of your recurring cost base. So suggesting really that your underlying cost growth in 2025 will be around 13%. But at the same time, I recall that you kind of pushed back in the last quarter's conference call on a question suggesting that cost growth in 2025 could be around 13%. So just wondering here if anything has changed. Or why do you now seem to think that the cost growth will be slightly higher in the near term compared to what you seem to think a quarter ago?

I would say we haven't changed our view. We maybe had more visibility than you had on where we would end the full year full cost for 2024. 2025 is an investment year. It is investments in our strategic priorities. We think it's the right thing to do to build long-term value, yes.

And the next question comes from the line of Martin Ekstedt from SHB.

This is Martin from Handelsbanken. So just a quick one on the dividend target. So given another year above 70%, did you consider breaking this up into, say, an ordinary dividend and a special dividend? Could you just help us understand the application of the 70% dividend payout ratio target going forward?

Well, it's a fair question. Exceeding the policy 2 years in a row, Martin, we don't want to become fat with capital. We want to have a suitable buffer, especially with the uncertainty of the leverage ratio given that, that is dependent on customers' behavior. And right now, it's particularly dependent on Sparkonto Plus customer behavior, but we don't want to be -- we don't want to build unnecessary capital. And now 2 years in a row, we have shown that "we have to" distribute more than 70% of the profit. So I think it's a fair question.

Yes, yes. And then another one, perhaps a cheeky question. But you mentioned in response to a previous question that you're not looking at any other acquisitions. You don't have any other acquisitions on the radar in Sweden. Just with a reference to potentially taking another European market before 2030, is there anything other outside of Sweden that looks palatable at the moment?

Yes. But we communicated our 5 strategic priorities, and we like to hit the road running. So I think we've progressed well on all 5. So of course, when it comes to the last one, to establish Avanza in at least one additional market, of course, we're investing time in that, and we're looking into the markets. We're looking at potential targets, and we will continue to do so. But I've said before that I think for the next 2 years or so, we have so much exciting stuff that we want to do in Sweden. I talked about the Private Banking. I talked about the occupational pension, where we want to grow faster. So going into a new market organically now, I think, would spread us a little bit too thinly. So going abroad in the near term, say, the next 2 years needs to be acquisition driven if we want to do that. After that, I think we could cope with going abroad organically. So yes, we're looking at targets. We don't have any concrete new things to say. And it is, by definition, M&A is very opportunistic. It needs to be something that is available in a country where we want to go in. It needs to be the right timing. It needs to be at the right price. So hence, we need to look out for opportunities all the time, but it may take time.

And the next question comes from the line of Michael Macnaughton from UBS.

Maybe another followup on the external deposits. Just trying to think about, what is your actual incentive to gather these deposits? If you look at the actual NII that you generate off these, assuming a similar spread that you currently have in your savings account, then the return on capital relative to the amount of capital it would absorb would be pretty dilutive at group level. So how important are these deposits to drive activity elsewhere in -- on the platform? Just how are you thinking about the level that you'd actually want to retain?

I think your question assumes that the capital will be backed 100% by equity and nothing else when you do that comparison. But I think one needs to look at savings capital also in the longer perspective. When we have the savings capital on our platform, be it deposits, be it invested in equities, be it in funds, then it's very likely that it will stay on our platform for a very long time. If it's not on our platform, it's not on our platform. So we really like net inflows, and it's important for us to retain as much as possible all of our customers' savings here. And one of our strategic priorities is around share of wallet, where we only have 1/3 of our customers' financial wealth with us on our platform. So we like increased deposits even if it's short term dilutes return on equity, if the leverage ratio is the constraining one and we back the capital 100% with equity. So I hope that clarifies.

Yes, yes. That makes sense. And then maybe kind of follow-up on the yield and liquidity portfolio as well. I think if I look at it, it is now about 60 basis points above kind of average STIBOR rates in the quarter. And you mentioned some of that credit spreads. But if we think about where that should trend longer term, should we be thinking that, that 60 basis points returns back to -- historically, it's been pretty close to STIBOR or slightly -- even slightly below it sometimes. So should we be assuming that, that comes down meaningfully? Or is the investment kind of investing in slightly higher credit premiums, et cetera, in the liquidity portfolio?

I think it's very hard to predict where the market will be going. And I mean, your colleagues on the fixed income side, Michael, has this as their job to project credit spreads, trim spreads, interest rates, et cetera, et cetera. We observed slightly higher credit spreads in Q4. Where that will take us, I think it's very hard to estimate. I don't know, Anna, if you can give some more color.

No. And after -- beginning in 2025, we have seen credit spreads coming down, but that is also a mix effect, I would say, of our own treasury portfolio where we get a higher yield when we remit nowadays in STIBOR bonds compared to those that we bought like -- or 5 years ago. So that is also one mix effect that is hard to predict. And you can see the maturity structure in our report. And you can see that we try to keep it as evenly as possible just in order to handle those fluctuations.

Okay. That makes sense. And then maybe just one final question was on the foreign trading income. Obviously, that's reaching very high levels. I wondered if you launched the new multicurrency accounts, I think, in December. Anything you can share on what you're seeing and the impact of that would be useful.

Michael, we would have loved to launch it in December, but we still have not launched it. We're working hard to get it out to our customers. I think -- all else equal, that should compress the FX income slightly. But I think, we will have dynamic effects of more transactions, more volumes, more customers coming to us. So I think the net effect should be -- I think, that's just my personal view, will be positive. And I think it's an important picture for some of our customers.

And the next question comes from the line of Ermin Keric from Carnegie.

Maybe starting on the last one actually. Just when you expect to see a net positive from the FX accounts, is that on the currency income standalone? Or is that then including that you have higher commission rates, et cetera, on cross-border as well and you expect more overall cross-border trading?

I think it's -- I have looked at it more on the latter part. The individual income streams is less important than the totality, I think. But we have customers who do certain transactions with others as a result of not having this product. So I hope to win back some business. And I think that, that will compensate on the total level, Ermin.

Great. And then on the occupational pension, you mentioned that you're about to strengthen the sales team. Is it possible to talk anything about kind of how many have they been, how many will they be, how much premiums were signed in 2024 and how many new corporates, et cetera, were able to sign in terms of premium value during '24?

I don't have these numbers in my head, and I don't think we have communicated them in the past when it comes to number of occupational pension customers. But what we're doing is we're putting a lot of effort in improving the experience for the corporate, and that has been one hurdle to gain, to grow faster on the occupational pension side because there is administrative burdens for some customers today. That we are building away, and we are improving the experience for the individual occupational pension customer as well. And we want to be -- we want to have a really good product before we push the sales button. So I think the strengthening of the sales force, I'm more looking into the summer or before the summer, not now-now.

Understood. And then just on the Q4 trading. How much of that was crypto related in different trackers, certificates, et cetera?

In Q4, 5% of the turnover was crypto related.

Perfect. Then the final question would just be going back to Sparkonto Plus again, if I may. So could you talk anything more about how the process will be? Can you do an active push in kind of, I don't know, having a pop-up? Do you want to keep your capital on Avanza, yes, no or something like that? Because I suppose, the final question is kind of if this is just removed, does that mean that the capital then will just move over to the current partner. I suppose it goes back to Jacob's question. If they would then need to actively maybe withdraw the money from a partner to their house bank and then back to Avanza, just flipping the way he was saying it basically, if nothing else is then.

We really want to have these discussions with our partner, these banks, to do it in a proper way with them. They got the information just this morning. It's important to them. I really want us to have that discussion with them before we start talking about how the process would look like with you. I think that would be the wrong way. When it comes to your question do we want these deposits into our balance sheet, yes, the answer is clearly yes.

And the next question comes from the line of Andrew Lowe from Citi.

Just curious to understand a bit more the drivers of the brokerage margin, being it was much stronger than expected in Q4. Was this driven by a mix shift as you have customers who don't usually trade as frequently and, therefore, have some higher fees than those who do trade more frequently? Is those sorts of customers trading more? And then as a sort of follow-up to that. How does that mix compare to history? And any thoughts on how that may evolve during 2025?

I'll hand over to Anna for some more color if she wants to. But the one key driver is the bigger interest for foreign securities in Q4. And as I mentioned, that was higher than we have seen in the past. And that improves our margin.

I could add that if you look at the share of trading from the Pro and Private Banking customers, it was about the same as last quarter. So I would say that we have seen increased interest in trading among all customer groups.

The next question comes from the line of Panayiotis Ellinas from Morgan Stanley.

I have a follow-up on the NII and the external deposits potentially transitioning to internal. So can you give us a sense of the split between the external accounts and the fixed accounts within the external? And also do you know maybe what's the average rate that the customers earn on these accounts?

We have -- if we start with some broader numbers, we have -- where our customers have SEK 43 billion of their savings capital in this product, Sparkonto Plus. The rates that these banks are paying to our customers is now changing rapidly. So one of the key banks lowered the rates to 1% just recently because the value for them from a capital perspective and liquidity perspective is much lower due to the new views from the Swedish FSA. So that can change by the day.

And most of the cash that is external accounts or fixed term out of the SEK 43 million?

I don't have the exact number, but I would say main part is floating rate.

So it's fixed. So it's not only from fixed term deposits.

No. There are some fixed term deposits as well, but it's mainly 3 months. .

Okay. So the average duration is 3 months.

Yes. It's a floating 3-month rate.

Yes. But I think your question is the term deposits where the customer is locked in for a period of time.

Yes, exactly. Yes.

Yes. And main part is not, and I don't have the exact number. .

Sure. Okay. So do you think you can convert them into internal at the current rate you are offering? Or do you think you have to actually increase the rates?

We have managed to get a fair amount on our own savings account without having the highest interest rates on the platform comparing to our external savings account, and that is what I reflected on -- just before that. We know that customers prefer to have money on our platform rather than with these external savings accounts. So to some extent, they are not as rate sensitive. They prefer the Avanza brand.

Okay. And then I have another follow-up on the pricing. Obviously, you mentioned you're considering a more simplified pricing model and also looking on the changing the FX commissions, too. So when can we expect an update on this? Is it going to launch in Q1 this year? Or is it going to be in other quarters?

I think what I've said, Panayiotis, is that when I got questions from you or your competitors that some customers perceive our pricing model on the brokerage side as not simple, and that's one of our leading words for Avanza, to be simple. When it comes to FX, we're not planning to change the pricing model. As such, we're planning to introduce a product where the customer can have dollar, euro, Canadian dollars, et cetera, and manage him or herself, not having to go back to the base currency SEK every time you buy and sell.

So this would be on line from this quarter.

That remains to be seen. But we're working hard to get it out to our customers.

Sure. And then maybe on the Private Banking. We have seen a strong increase in 2024. I think you onboarded 5,000 new Private Banking clients. It was one of the highest you had in the recent years. And now given the focus and efforts on that specific segment, what level of new clients are you targeting for '25 and outer years? Is it some -- are we expecting to see some acceleration in the acquisition?

I think we have quite ambitious targets to be the biggest player on the Swedish market in terms of number of Private Banking customers by 2030. So we have to run fast, and I think we started in a good way in Q4. And we will continue to run fast.

Sure. And also the flows were very strong in Q4, exceptionally high, actually. What was the driver there? I was just wondering, was it gaining client wallet? Or was it flows from new clients in the -- in Q4?

It was a mix. But I think from a management perspective, it's quite interesting to see what you can do with an organization when you put clarity on the direction. And we said in the Q3 also towards the organization, of course, that we want to be the largest player in Private Banking. Of course, that's a strong signal to the organization. And I think our colleagues have done a great job to start in a faster pace to attract new customers and new assets.

Nice. And then maybe last one on M&A. Considering your target to expand abroad, right? Recently, we had free trade acquired by IG Group. So would you consider -- or are you looking to similar type of businesses like Freetrade maybe in terms of the exposure of the offer and also the size of the business? Is this something that's one of your targets, let's say, that group?

I think if we could decide, which is always difficult when it comes to M&A, it will be a smaller acquisition in a country that we like, that gives us a foothold to build from. What I noticed is that there seems to be some consolidation in our markets in Europe with both Freetrade and also financing dot net in Germany being acquired by a private equity player. So things are moving.

So you prefer a more sort of single country platform rather than a European player.

At this stage, yes.

And the next question comes from the line of Ian White from Autonomous Research.

A few follow-ups from my side, please. Can you just say a bit please about what progress has been made thus far on recruitment and hiring for the cloud migration? What do you expect to do on that front during 2025? And what have you sort of achieved already? Secondly, what has driven the increased recommendation rate within Private Banking? I wondered if that was something price or service led. If you could provide some color there, that would be interesting, please. And just lastly, maybe I could just follow up on the crypto turnover point. I think you said it was 5% of turnover in 4Q. Can you just help us understand what sort of levels was it at in the prior quarters in 2024, please?

I think if we start the last one, I think it was 2% in Q3 and it increased to 5% in Q4. So that's quite a difference. And -- but there was a lot of buzz around cryptocurrencies in Q4, so I'm not surprised. When it comes to the Private Banking and the likelihood that our customers will recommend Avanza, I think it is a result -- first of all, one should take these numbers with a bit of grain of salt. It's 600 interviewed Private Banking suites. So it's not a huge survey. So you will see some fluctuations over time. But we have, for the last 12 months, I would say, focused our development a lot towards the more demanding customers. So we have done a lot during 2024 for this customer group on fundamental analysis, on technical analysis, on order execution. So I think we have improved our offering clearly towards the Private Banking segment. When it comes to the cloud migration, we started during the fall to build up our competence around cloud. We had some internally. We have our whole data platform in the cloud, but we have strengthened it during Q4, and we will continue to strengthen it during this year. And that's part of the investments that we -- that Anna talked about.

And the last question comes from the line of Enrico Bolzoni from JPMorgan.

Just a quick follow-up on Private Banking. Can you give us some additional color in terms of the type of clients within segment categories? So you clearly have very high ambition there. Do you want to go after also slightly high net worth individuals? Do you think you can just serve them just as well as the rest? And typically, what is the -- what sort of range of clients will you see in terms of net wealth? So if you could give us an idea of the very minimum you need to have to be considered a Private Banking clients? And up to what level you see clients using Avanza? And then finally, on this point, what do you think is your unique selling point? Is it the digital offering? Is it the product? Is it something else? So what gives you confidence that you can actually achieve #1 place there?

To give you some color on the type of customers, we're -- our lower threshold for Private Banking is low compared to where you come from. It's SEK 5 million -- so SEK 3 million, so EUR 300,000, roughly. The growth that we have seen during Q4 is broad, but we have numerous several hundred million customers, and we have even SEK 1 billion customers. So I think our offering is attracting the whole range from upper affluent to high net worth to ultra high net worth. Our clear strength, and you can see that from service, is our digital offering. I think that is our #1 unique selling point also to this segment.

As there are no further questions, ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.