Danske Bank A/S (DANSKE) Earnings Call Transcript & Summary

Welcome to the conference call for Danske Bank's Financial Results for the first 9 months of 2022. Please be aware that due to the company announcement #15 from this morning, this call replaces the conference call planned for Friday morning. My name is Claus Ingar Jensen and I am Head of Danske Bank's Investor Relations. With me today, I have our CEO, Carsten Egeriis and our CFO, Stephan Engels. In today's call, we will present Danske Bank's financial results for the first 9 months of 2022. We aim to keep this presentation to around 30 minutes and after the presentation, we will open up for a Q&A session, as usual. Afterwards, feel free to contact the Investor Relations department, if you have any more questions. I will now hand over to Carsten.

Thank you, Claus. I would also like to welcome all of you to our quarterly conference call, which we host a day before scheduled due to the sizable provisions related to primarily the Estonia matter, which we have booked with effect in the third quarter, and I will address this a little bit later in this presentation, but I wanted to start with comments related to our operating environment and our financial performance. Back in July, when I had the opportunity to address the bank's performance for the first half of 2022, the background was a high degree of geopolitical and macroeconomic uncertainty. Unfortunately, we have not seen any changes to the better during the last quarter, as inflation has continued upwards. Despite prices for some energy sources starting to come down, they fall from historically very high levels, and we only have very little visibility for the future, not only for prices, but also from other disruptions as the recent and unfortunately, ongoing geopolitical tensions clearly shown. However, overall activity in the Nordic societies remains relatively high despite very low consumer confidence. Employment levels are holding up well despite signs of slowdown in specific sectors and a negative economic outlook. And this translates into a continuation of strong credit quality and low impairment charges, which we will comment on in more detail later in this call. Despite the turbulent environment, we have seen good commercial progress as evidenced by continually robust lending growth of 7% compared to last year and a derived positive impact on our core banking income driven by NII up 8% compared to last year. We've been focusing on a stringent execution of strategic pricing initiatives and higher central bank rates have supported our efforts to partly re-establish deposit margins. The lending growth is also reflected in our market shares, as we continue to see relative improvements within different segments. Our business activities within trading and insurance that are closely linked to the developments in the financial markets have been impacted by very difficult market conditions due to a significant repricing of almost all assets. This repricing has happened over a relative short period of time and with a magnitude we usually only know from stress test scenarios. We took corrective actions for our risk appetite in our rates and credit business over the summer and despite this, we're happy to see an improvement in performance to an expected level in the third quarter. However, our insurance business, in particular, continues to be impacted from negative valuation effects despite good development for the underlying business. We've also invested a lot of efforts in making progress on our sustainability agenda and with special focus on maintaining our position as a market leader within issuance of green bonds. Another proof point has been the recognition we have received from Position Green as being outstanding in terms of sustainability reporting. We are one of only 7 listed companies in Denmark. In respect to expenses, we continue to make progress on lowering underlying cost, driven by continued efficiency and digitalization. Compared to the level 2 years ago, the numbers of FTEs is down 8% when excluding AML and compliance. For the third quarter in isolation, our total expenses include one-offs, reflecting good progress towards final solutions to the bank's legacy cases. Firstly, at the end of August, we communicated an accelerated solution to the debt collections case, where we've set the debt of 90,000 customers to 0. And the solution entailed a one-off cost of DKK 600 million and a one-off impairment charge of DKK 650 million. Secondly, as it appears from the company announcement published earlier today, we have made progress in our discussions with the authorities in relation to the Estonia matter and I'll now comment on that in more detail. On the 27th of April, we announced that we were in initial discussions with U.S. and Danish authorities on a resolution of the Estonia matter. Today, we're now at a stage in our discussions, where we reliably can estimate the total financial impact of a potential resolution. The estimate amounts to DKK 15.5 billion and includes the provision of DKK 1.5 billion recognized in 2018. Hence, the additional provision amounts to DKK 14 billion, which is fully recognized in the financial results for Q3. On that basis, the Board of Directors have decided to cancel the remaining dividend from 2021 and retain accrued dividend for 2022. Hence, no dividend for 2022 will be paid in 2023. The isolated effect on the CET1 capital ratio from the additional Estonia related provision is 1.7% and the CET1 ratio now stands at 16.9%. The minimum regulatory capital requirement reflects the release of the Pillar II add-on of DKK 7.5 billion as a result of the provision made and on the basis of a dialog with the Danish FSA. Our dialog with the authorities on the final resolution continues and while there is still uncertainty around timing and whether a resolution will be reached, we are working towards a resolution before the end of the year. At this stage, we're not able to comment further on details for a potential final resolution. Based on the additional provision for the Estonia matter and a goodwill impairment charge in Danica, we revised our net profit outlook for this year from DKK 10 billion to DKK 12 billion to a net loss better than DKK 5.5 billion, which I will comment on in more detail at the end of this presentation. Slide 3 please. At our personal customer business unit, we continue to see positive traction towards strengthening our Danish retail position. Progress on our legacy cases should support our efforts even further, but we're already seeing improving customer flows and for some of our key segments, we have seen a net inflow of customers. In terms of market shares actually in Denmark, we see the upward momentum in front book shares continuing tracking 2.6 percent points higher than a year ago with a clear positive trend through the past quarters. Our bank lending market share has increased to 19.5%, which is more than 1 percentage point higher than a year ago. Together with the benefits from improved deposit margins, this led to a 22% increase in NII in this quarter alone at PC DK, which is supporting the significant uplift in profit before impairments. Within PC Nordics, we continue our focus on profitable growth through utilizing our partnership agreements. This will further support our strategy of enhancing profitability across the region and our cross-selling efforts are already becoming evident in the 10% year-on-year uplift we're seeing for fee and trading income. For our business customers, we have continued to develop the close dialog with our customers as they navigate the current uncertainties and we're pleased to see solid volume gains materializing across the Nordic region. Our ability to support our customers with transition financing and credit facilities along with more ancillary offerings underpin our position as a focused relationship bank that can leverage our expert advisory services in times of turmoil. And at the same time, the broad mix of services are contributing to our resilient business model when particular cash management and FX products have shown a strong development this year, underpinning a 9% year-on-year uplift in ancillary income, which is also a result of our fee pricing initiatives. So, while the operating environment is certainly changing and our customers within both personal and business customers require a whole new aspect to their financing needs, our universal banking offerings and prioritized digital solutions have further supported our value proposition. By leveraging these further in the period ahead, I'm confident that we will continue to capture market share based on profitable growth and provide an additional uplift to our efficiency and financial performance. Slide 4 please. Let's take a look at LC&I. It's been a busy year for LC&I with high customer activity. We experienced strong demand for our lending, our adviser and our risk management solutions as we supported our customers in managing this uncertain environment. Our strong position within advisory and expertise, coupled with the significant demand for credit, enabled us to support customers with more than DKK 60 billion in additional lending. Measured in relative terms, lending volumes at LC&I increased 33% compared to the level the year before. And overall, our customers have drawn on new and existing facilities on the backdrop of a challenging operating environment, given for instance the rapid increase in energy prices and challenging access to capital markets. We've seen growth across Nordic -- across our Nordic franchise and in Denmark and Sweden in particular. The strong growth in lending volume as well as higher deposit margins were key drivers for NII, which increased 13% year-over-year and notwithstanding the increase in NII, total income in the first 9 months of 2022 was down 16% from the same period last year as a result of lower fee income and significantly lower net trading income. The decline in fee income of 9% from last year stemmed from lower capital markets related activity, primarily reduced ECM activity. The slowdown in activity was less pronounced within Nordic sustainable bonds issuance and loans, where we maintained our leading lead table positions in the Nordics. Higher net fee income from M&A advisory and also corporate everyday banking services such as cash management mitigated lower income from capital markets. The turmoil in the financial markets had a significant impact on our trading activities, as a leading Nordic fixed-income house, we supported our customers through the volatile periods. In the third quarter, trading income recovered based on robust customer activity and came in at a more normalized level as market conditions improved and despite initiatives taken in the second quarter to lower risk utilization. Our asset management activities saw an impact from adverse financial market conditions, which led to a decline in assets under management. However, increased fee income from improved margins and asset management mitigated the negative effect. Next, I'll focus briefly on our insurance activities. While the persistently turbulent financial markets have negatively impacted the performance in Danica Pension, in general, the underlying business continues to be sound. We know that as part of our continued focus on ensuring profitability after a period of high growth, we've seen a decrease in premiums recently albeit from a high level. Moreover, we continue to see a more positive development in the health and accident business than we expected with fewer claims and people returning faster to work. In 2022 claims have remained at a stable and lower level compared to previous years. The result for the first 9 months of this year and the result for the third quarter came in significantly lower than the results of the same period last year and for the preceding quarter respectively in Danica. The turbulent financial markets with rising interest rates and rising inflation led to negative valuation adjustments and therefore had a negative impact on the investment results on life insurance products where Danica holds the investments risk as well as on the investment results in the health and accident business. Please note, also that the result for the first 9 months included the gain from the sale of Danica Norway of DKK 0.4 billion and a product related one-off charge of DKK 150 million booked in the third quarter. Furthermore, a goodwill impairment charge in Danica of DKK 1.6 billion relating to a higher applied discount rate is booked as a separate line item in our income statement. Slide 5 please and then I'll hand it over to you, Stephan.

Yes. Thank you, Carsten. I will now -- I will now go briefly through the reporting lines in the income statement and reserve comments that are more detailed for the following slides. As Carsten just mentioned, we saw good progress for our core banking activity in the first 9 months of the year, where strong commercial momentum led to an increase in lending volume primarily with our corporate customers, followed by execution of pricing initiatives. Income from core banking activities performed well and was in line with expectations. NII was up 8% from the same period last year as deposit repricing initiatives and higher volumes more than mitigated the margin pressure from lending activities. The improvements accelerated in the third quarter where NII was up 9% from the preceding quarter as higher central bank rates -- central bank rates led to further repricing of deposits. Net fee income was in line with the level in the same period last year when fee income benefited from strong capital market activity and one significant ECM transaction in particular. The slowdown we have seen in the first 9 month is primarily due to lower activity in capital markets business. However, the effect is almost fully mitigated by higher activity related income from the reopening of the societies post the pandemic, when comparing Q3 with the preceding quarter fee income came in lower, primarily due to lower investment activity. For net trading income, we have seen an impact from volatile and difficult financial markets on our rates business. Moreover, negative valuation effects added to the decline in income. In the third quarter the development in our rates business reversed, income into a more normalized level partly as a result of the re-calibration of our risk appetite we implemented at the end of the previous quarter. However, due to higher interest rates, we continue to see negative valuation effects also in the third quarter. The difficult conditions in the financial markets had a significant impact on our insurance business. As Carsten mentioned earlier, the underlying business at Danica performed well with high premiums and a modest level of claims. However, net income from insurance business came in significantly lower due to negative investments results on life insurance products, where Danica has the investment risk. The result for the first 9 months include one-off effects as just -- as Carsten just explained. Other income amounted to DKK 1.2 billion for the first 9 months, including the gain of DKK 0.4 billion from the sale of our business activities in Luxembourg in Q1. Operating expenses, excluding the additional provision for the potential resolution of the Estonia matter, came in 4% higher than the same period last year. The increase can mainly be attributed to the solution to the debt collection case, which entailed a one-off cost of DKK 0.6 billion recognized in Q3. Remediation costs remained elevated during the first 9 months, however, we continued to improve our underlying cost quarter by quarter, which I will comment on in more detail later. Loan impairment charges reflects the continued strong credit quality and amounted to DKK 0.4 billion in Q3, slightly up from Q2. The charges for the third quarter include the one-off effect of DKK 0.7 billion from the debt collection case. Excluding this, we saw net reversals in the quarter driven by individual customer exposure and despite an increase related to macroeconomic adjustments. We continue to have sufficient post model adjustments in place, which I will also comment on later. Finally, the tax line where the effective tax rate reflects primarily the non-deductible status of the goodwill impairment charge and the additional provision for the potential resolution of the Estonia matter. Net profit for the period thus amounted to minus DKK 9.2 billion, down from DKK 9.3 billion for the same period last year. Slide 6, please. Now, let us take a closer look at the development in net interest income for the group. Overall NII saw a healthy improvement of 8% in the first 9 months of '22 from the same level in -- from the same period last year and 9% quarter-on-quarter driven by deposit margin as well as robust lending volumes we highlighted earlier. The positive effect was partly countered by various lending margin effects. On the deposit side, the uplift was driven by the pricing initiatives we did when navigating in the negative interest rate territory as well as recent changes when the ECB and the Danish Central Bank moved into positive territory, which has allowed us to partly reestablish deposit margins. On the contribution from lending, we continue to see positive effects from volumes, particularly due to strong demand from our corporate customers. This effect was however offset by various margin effects including delay effects in our Nordic business, lower margins for Danish mortgage loans driven by lower LTVs and an impact from credit facilities that had been fraught at 0. And finally, the credit demand, we have seen recently includes liquidity facilities to some of our larger and better rated corporates, which is contributing positively, but at the same time has lowered our average lending margin. Given the level of uncertainty in the financial markets and the associated elevated credit spreads, as well as the status of the Estonia matter, we have largely refrained from issuing new funding outside covered bonds. We remain comfortable with our overall funding position and we are confident in our ability to access the capital markets. Finally, the decision we saw from the ECB a few hours ago to raise its policy rate by another 75 basis points will be an additional tailwind to NII going forward. Our sensitivity to changes in the interest rates beyond what we have seen today is comparable to our previous guidance. We expect a positive impact of approximately DKK 800 million to DKK 900 million per 25 basis points based on a parallel shift of the yield curve across all currencies. Slide 7 please. Next, I will comment on our fee income development. We report slightly lower fee income, down 2% year-on-year as the volatile conditions in the financial markets have continued to impact our capital markets related activities. However, please note that our income last year -- last year saw a positive contribution from a significant landmark deal, excluding this deal, fee income is largely in line. In this environment, we were pleased to note that our diversified business model enabled us to balance different trends for fee income during the year. The lower capital market related fee income and investment fees were to a high degree mitigated by activity driven fees, which were up 22% and lending fees, which were up 9% year-over-year. When compared to the previous quarter, the trends in Q3 for almost all fee categories were essentially the same as my previous description. In the third quarter, the activity driven fees were up 4% whereas fees related to lending and guarantees slipped slightly due to slowdown in housing market activity. Slide 8 please. Next, let us turn to the development in trading income. As mentioned previously, the high volatility in the financial markets and the general repricing of almost all assets we have seen for most of the year, had an adverse impact on trading income. The negative impact came primarily from our rates business with the effect being partly mitigated by our FX business that continues to develop positively. Initiatives taken in the second quarter to lower risk utilization had the desired positive effect in LC&I in Q3, where income recovered to a more normalized level. Income from strong customer activity and the banking activity was almost up 45% since last year, and maintained good momentum compared to the previous quarter. The result from other activities was negatively impacted by value adjustments related to an interest hedge -- interest rate hedge in Northern Ireland, however, this should be seen in the context of strong uplift in NII in Northern Ireland. Slide 9 please. Now let's take a look at our operating expenses. Total cost in the period were clearly affected by the additional Estonia related provision and the goodwill impairment charges in Danica. Outside of these effects, our operating expenses came in higher compared to last year, partly explained by expected elevated remediation costs that also led to our accelerated solution we announced earlier in the quarter. Increased Swedish resolution fund contribution and IT cost driven by expenses of a one-off nature also drove cost higher compared to last year. Expenses in the third quarter were also impacted by the provision and the goodwill impairment charge and furthermore included the DKK 600 million one-off we took this quarter in relation to the debt collection compensation. Looking at our underlying cost development in the third quarter, we continued our efforts to reduce complexity and outside the aforementioned one-offs, our cost base was down 4%, despite an increase in IT cost, which was caused by higher energy prices for our data centers. The improvement was driven by continued progress in our underlying staff cost as a result of further FTE reductions. The FTE count has been reduced by 8% since the peak in 2020, when you disregard the planned AML up staffing. We have, however, started to see an impact from salary-related inflation in parts of our business as well as from indexation of supplier contracts. We continue to allocate significant resources to our AML compliance agenda in order to remain on track towards completion of our financial crime plan by 2023. In the third quarter, we saw a decline in costs from a high level in the second quarter. Continuing our efforts to improve operational efficiency is increasingly a key focus area for us given that we must foresee an increase in inflationary pressure that will be a headwind going forward. No doubt the level in 2022 has been higher than initially anticipated, but it has been driven by our deliberate decisions and it is in many cases characterized by items of a one-off nature that put legacy cases behind us and enhanced the foundation to meet the cost income targets we have outlined. Slide 10 please. Now let's have a look at our credit portfolio and impairment trends. While the deteriorating macro outlook and higher interest rates are expected to impact both corporates and household, the quality of our lending book remains strong. We have seen limited downward migration and exposures between stages and the share of net exposure in Stage 3 continues to trend downward as single name deteriorations remain very modest. As such, net new impairments would have led to reversals for the quarter if it hadn't been for the one-off charge of DKK 650 million we previously announced, and which we previously announced and booked in Q3. The total of DKK 368 million booked in Q3 equates to an annualized loan loss ratio of 8 basis points, which also includes an additional macro model charges of DKK 150 million. These were driven by adjusted scenarios to reflect the lower growth expectations. We are generally conservative in our application of macro estimates in our models and this includes a severe recession scenario. Our post-model adjustments were kept at DKK 6 billion despite the outcome of our debt collection case and this provides an additional cash and equivalent to around 4 years of normalized loan losses. So looking ahead, we remain comfortable with the composition of our balance sheet, including the sound household finances that is further supported by very low LTV levels. Headwinds in the corporate segment could naturally be expected, but the financial resilience of our corporate clients provides comfort at this point. In addition, we can mitigate further uncertainties and tail risks not visible in our portfolio are captured through our models with a sizable provisions we have made through our post-model adjustments. Slide 11 please. On this slide, I want to focus on our capital position. Our reported core Tier 1 ratio was impacted by the additional Estonia related provision we have highlighted in the beginning of the presentation. The impact on capital was however mitigated by the decision to cancel the remaining portion of the dividend for 2021 as well as the retained accrued dividend for 2022. Furthermore, the core Tier 1 ratio benefited from lower market risk REA in general, including re-calibration of risk appetite and the associated capital consumption, while the credit risk REA was stable in the quarter as indicated in the previous slide. Finally, the deduction related to Danica improved after the volatility impact we saw in Q2 and it further benefited by the regulatory treatment of the goodwill impairment charge in the capital deduction. With the above in mind, our reported core Tier 1 ratio now stands at 16.9 at the end of Q3. The release part of the Pillar II capital add on of DKK 7.5 billion was partly offset by the expected increase related to the countercyclical buffer reactivation. We remain comfortable with Danske Bank's solid foundation and healthy buffer to current and future regulatory requirements. Slide 12 please. And then I would like to comment on our outlook for the remaining part of the year. We are revising the outlook due to the booking of the additional provision for the Estonia matter and the goodwill impairment charge. As you will see from our financial result, which we have presented today, our performance is according to plan and reflects good activity and continued progress for our business despite the adverse development in the financial markets we have seen this year. The effect from the provisions entail a decline in the expected net profit from between DKK 10 billion to DKK 12 billion to a net loss better than minus DKK 5.5 billion, of course, subject to uncertainty from macroeconomic conditions and from financial markets in particular. The revised outlook includes the gains from MobilePay, Danske Bank International and Danica Norway. For 2023, we remain our ambition on shareholders -- on the return on shareholders' equity as well as cost-income ratio. As usual, we expect to provide more details on our financial outlook for next year in connection with our full year report in the beginning of February. Slide 13 please and back to Claus.

Thank you, Stephan. Those were our initial comments and messages and we are now ready for your questions. Please limit yourself to 2 questions. If you are listening to the conference call from our website, you're welcome to ask questions by email. A transcript of this conference call will be added to our website within the next few days. Operator, we are ready for the Q&A session.

[Operator Instructions] And your first question comes from the line of Jakob Brink from Nordea.

Just on cost, if I may start there, just to give a bit of sense where you are in relation to efficiency measures also going into next year, so now I guess the target for this is around DKK 26.1 billion, DKK 600 million is related to the debt collection case. And also if I look at your initial guidance earlier this year, it was DKK 1.5 billion reduction you expected from '22 to '23. Is that still the case and if so, we would be down to around an underlying level of DKK 24 billion, how much inflation should we be adding to that 4%, 5%, 6% or what are you -- what are we looking for in 2023, please. That was my first question.

Yes, maybe if I can pick up directly on that, our original assumption on how to -- how cost would look in 2023 included an inflation assumption of roughly DKK 500 million. Again, we need to look at this stuff in more detail and we are still trying all to get to grips with the matters going on, but I think there is obviously some clear signals already now, both on indexed supply agreements, wages and other things that will -- that will likely lead to some more pressure on that matter, whether we can fully mitigate these with additional cost measures is something that we are currently in discussion, but I think that basically puts it where we are right now.

Okay, but the angle sort of the -- let's say, okay, so at least your starting point efficiency measures still stand and they might be larger, that's what you're saying. And then what we need to do is, you have put in around 2% cost inflation, it sounds like. So if I believe in 5%, then that would be the difference, is that how to look at it or has anything else changed?

I would think that given that our main cost driver obviously is staff cost and that's, call it, 60%. I would -- I would more think that we are, if you net for FTE development, more looking like a 4% to 5% inflation assumption in our original bridge that we gave to you and that is something that we need to look at now. Again the aim has to be to mitigate as much as we can. Again it needs further detailed analysis, but let's be honest, I think we all understand that there is a bit of an inflationary pressure that is at least partly out of control and it remains to be seen how quick we can react to these things.

On net interest income...

If I may add I think our cost/income ratio ambition and that is, I think maybe also important in this context, our cost/income ratio ambition clearly remains completely the same as before.

On net interest income and loan growth, especially in LC&I, could you maybe give us a bit more detail about the sustainability of the growth, how long is the lending you've got on the books. It also looks like, if I just try to calculate the margin on the new lending, it seems to be somewhat lower than the back book, is that correct. And is it a mix change or is it just it's lower risk lending that has come onto the books and then maybe lastly if you can give some indication on what sectors the growth has come from.

It is mainly a reflection of, call it, better credit quality and lower duration drawing on revolving facilities. Some of it is obviously a reflection of, call it relatively unattractive bond markets, at least for some of our customers. If that would move out once capital markets are either opening again or the customers decide to go there, then basically that part of the income line would probably move from NII into capital market related fees. So in that sense, we are looking at this with quite a level -- a level of comfort. The other one, sorry was -- the second question, you had...

What sectors, I guess you partly explained that it was due to bond markets not functioning, but can you say anything more, energy...

I would say, the usual suspects energy is definitely one of them, but it goes well across our corporate -- our corporate book. So we see that as being something that is still a reflection of good activity and good economic underlying activity in the customer base.

We will now go to our next question. And your next question comes from Sofie Peterzens from JPMorgan.

Here is Sofie from JPMorgan. So, my first question would be on your rate sensitivity guidance. On the pre call that we you a few weeks ago, you guided that NII would be up around DKK 330 million to DKK 340 million in 2022 and you would have 2 months impact in the third quarter from this. So now net interest income is up around DKK 500 million quarter-on-quarter. I know you maintain your rate sensitivity guidance unchanged going forward, but I'm just wondering why such a big delta -- or how should I think about the big difference because, if I take 2 months from DKK 340 million, it's roughly DKK 135 million, but your NII, which is mostly helped by better deposit margin was up DKK 500 million quarter-on-quarter. So that would be my first question. And then my second question would be, you showed in one of your slides that you have 3,600 employees working with AML, but could you just remind us how large your AML and all the kind of related costs to the Estonia case had been so far year-to-date.

Carsten here. I'm not sure I understood the entire question on AML, but let me give it a shot. I mean we've invested, of course, significantly in AML and compliance and we have said that AML related costs would flatten out this year and into next year at around DKK 2.2 billion, DKK 2.3 billion and then that they would normalize at somewhere between DKK 1.5 billion, DKK 1.6 billion as we go out in 2025 and we continue to feel comfortable about that plan and a significant amount of that cost reduction will, of course, come from FTE reductions in line with sort of the process improvements, digitization and transaction monitoring improvements that we're making. And then Claus, I'll maybe ask you just to comment on the rate sensitivity point.

Yes, I'll be happy to do so. The amount you were referring to from the pre-close call where a comment we made in respect to the isolated effect we saw from the rate hike in ECB and the Danish Central Bank. But there has also been further effects during the quarter from some of the other countries, from the Bank of England hikes and also higher rates in the other Nordic countries. So, that's something that one should add to what we have guided for in respect to euros and Danish kroner and then, of course, also because we are getting into positive territory, there is a couple of effects here where I would say, we have been, maybe slightly surprised to see that the deposit volumes has actually kept up very well during the quarter. And that's, of course, also something that adds a little bit of uncertainty to the exact NII development in the quarter.

Okay. Just a quick follow-up on the AML costs. So, did I understand it correct that currently that the AML costs are somewhere -- should be somewhere around DKK 2.2 billion, DKK 2.3 billion and that will go down to DKK 1.5 billion, DKK 1.6 billion. So basically we're talking about a DKK 700 million -- or DKK 700 million roughly lower cost by 2025 all else equal.

That's correct.

We will now go to our next question. And your next question comes from the line of Martin Birk from SEB.

My first question goes on capital, where I know that you guys have gotten a relief on 75% of the Danish FSA's Pillar II profit requirement. And my thinking is that why is your -- why is your capital target still 16%, shouldn't that also be reduced correspondingly to 15%. That would be my first question. And then sort of just on timing, I mean it's -- now you guys are approaching Q4 and with this settlement almost done and dusted, what should we expect in terms of communication future around strategies, et cetera.