DNB Bank ASA (DNB) Earnings Call Transcript & Summary

Hello, and welcome to the DNB Q2 2021 Conference Call. My name is Jazz, and I'll be your coordinator for today's event. [Operator Instructions] I will now hand you over to your host, Rune Helland, Head of Investor Relations, to begin today's call. Thank you.

Thank you, and hello, everyone, and welcome to DNB's second quarter analyst call. Here in Oslo, we are pleased to have Alexander Opstad, which is the Head of DNB Markets; Ingjerd Blekeli Spiten, Head of Personal Customers; Harald Serck-Hanssen, Head of Corporate Banking; and of course, the CEO, Kjerstin Braathen; CFO, Ottar Ertzeid. Before we kick off the Q&A, Ottar will give you the highlights from the quarter. So please, Ottar?

Thank you, Rune. It has been a quarter with strong pickup in activity in certain areas and continued high activity in others. This reflects the fact that the Norwegian economy is doing well and even better than previously forecasted. This is reflected in the Central Bank raising the policy rate passed for the third time, now forecasting the first rate hike in only 2 months in September and a total of 6 to 7 rate hikes or 25 basis points each. It's also visible in the unemployment numbers, which are now down to 2.9% and the Central Bank forecast that we will come down to 2.3% next year, which is the same we had before the pandemic. Although GDP is back to the pre-pandemic level, and I think it's fair to say that these last quarters has really demonstrated what we have talked about a number of times, the built-in stabilizers in the Norwegian economy, be it the fiscal policy of the sovereign wealth, the monetary policy with its own currency and also the floating currency rate [ or each of them and all of them ] being played out with full force during the pandemic period. Clearly, this provides a positive backdrop for organic growth in the quarter. We have also launched and worked on a couple of M&A activities. The cash bid for Sbanken and also the agreed merger of the digital wallet of Vipps, Pivo and MobilePay in Denmark, which we recently announced. Looking at the second quarter numbers, we are happy to see that loan growth for personal customers increased, it's now 4.2% over the last 12 months. And we also saw a higher growth rate in corporate loan volumes, 2.7% for the quarter with SMEs continuing to grow the fastest by 3.4%, but now also with positive growth rate of 2.1% for the quarter for large corporates. Total loan growth for the quarter, 2%. We maintain our guiding of 3% to 4% annual total loan growth going forward. With regard to deposits, that line has been growing quite fast for several quarters. And also this quarter, we see more than 4% growth in deposits. And as we have mentioned before, this will be increasingly valuable with the forecasted policy rate hikes by the Central Bank reversing some of the floor effects before last year when rates were cut to 0. Underlying margin development in the quarter was stable. There is a mix effect also this quarter from deposits growing faster than loans, impacting the volume-weighted combined spreads by 2 basis points. The spreads are also impacted by the lower money market rate in Norway in the second quarter, which is reflected in higher lending spreads and lower deposit spreads. But overall, the bank has close to 0 net exposure towards NIBOR, and this is also reflected in the net interest income for the quarter, which is up almost 2% or NOK 179 million, driven by one more interest rate day driven by increased volumes for loans and deposits and also lower funding costs. The largest increase we saw in commission and fees growing 10% from the previous quarter and increasing 20% from the same quarter last year. The growth in commission and fees is in line with our ambitions of growing these capitalized income more than loans and deposits. And the growth is fairly broad-based with a 14% growth in real estate broking, 25% growth from asset management, 8% from insurance and more than 50% from investment banking. And again, quite broad-based with regard to industries, geographies and products. With regard to operating costs, we had yet another quarter with a high return on the pension scheme, which has been hedged, contributing NOK 67 million in both expense line and in the income line from financial instruments. We also had NOK 37 million of additional restructuring expenses in Poland and the quarter numbers also reflect the very high activity in commission and fees which is reflected in NOK 70 million increase in variable pay related to those increased activity, particularly with regard to real estate broking, investment banking and asset management. We remain firmly committed to deliver a cost income ratio of below 40% during the planned period until 2023, as we communicated in February. With regard to asset quality, we saw NOK 833 million in net reversals, NOK 300 million in stage 2, the performing loans, reflecting improved underlying credit quality and NOK 520 million in reversals in stage 3, reflecting customer-specific situations. Overall, we repeat that the portfolio is robust and well diversified, and that loan levels will vary from quarter-to-quarter. Before I conclude, a few comments on capital. Capital generation continue to be solid at 38 -- 31 basis points in the quarter. There is a high lending growth in the quarter, particularly for corporate customers. It means that the capital ratio is down 10 basis points, but also the capital requirement or our expectation is also down 10 basis points, meaning that the all-time high headroom of 320 basis points is unchanged from the previous quarter. There has been -- the Ministry of Finance has announced an increase in the countercyclical buffer requirement in Norway. But in our capital planning, we have taken full account of the countercyclical buffer and returning to the maximum pre-pandemic level and that's why we have communicated that the capital expectation of 17.1%, which truly reflects this, and we are 200 basis points above that level. So to sum up the quarter, operating performance was strong with healthy growth in loans, in deposits, in net interest income and particularly in commission and fees and impairments. Return on equity 11.1%, earnings per share NOK 4.01, 31% up from the second quarter last year. And we have stated before, the forecasted rate hike and also the tax offer for Sbanken are both expected to be accretive for return on equity and earnings per share going forward.

Thank you, Ottar. Then we will open up for questions, please?

[Operator Instructions] And the first question comes from the line of Adrian Cighi from Credit Suisse.

This is Adrian from Credit Suisse. I have two questions, please. One on fee income and one on capital. On fee income, Q2 shows a fantastic performance, up 20% year-on-year. Is there anything in this performance that you expect as unusually strong or one-off? You've reiterated the ambition of increasing fee income by 4% to 5% annually and you've had a close to 20% increase in H1 year-on-year. This would suggest sort of a meaningful slowdown in fee income. Is that what you expect? Any more color on that would be very helpful. And the second question on capital and specifically on your capital target. You're clearly very well capitalized and your capital requirements are gold-plated by including the full countercyclical buffer, 100 basis points management buffer, which at 17.1% is one of the highest level among European banks. So I sense that you're somewhat reluctant even with this framework outlined what your capital target is more precisely and reiterated even this morning an unspecified level of capital buffers over and above the 17.1%. I'm trying to understand what sort of reason is behind this. Is this sort of -- do you see potential headwinds or uncertainties in terms of capital from the regulator? Is this due to some sort of strategic flexibility? Again, any color here would be very much appreciated.

I can comment on the first one, Adrian, and then Ottar can answer the second one. This is an all-time high quarter for fees and commissions, and we're very pleased with the results. But more importantly, I mean, what does this mean for the future? We are not changing our sort of longer-term guiding of 4% to 5%, also indicating, which is important to us, that we will target to grow fees and commissions more than we will grow volumes where we're targeting 3% to 4% or I believe that is the sustainable level. But we have particularly pointed to 3 areas that we strategically believe will outgrow the pace of GDP and where there's a strong market sentiment. And all of these 3 areas are delivering well in the quarter. Starting out with nonlife insurance. We see a strong pickup in sales, commissions from that area are quite close to 50% compared to second quarter last year. This is within the insurance category. This is definitely an area where we see further potential. And there, we [ make fees ] both on retaining of customers as well as sales to new customers. So there's a lasting positive expectations for the development there. Beyond that, asset management. That is, of course, a combination, both of the net inflow, which has been strongly positive this year, more so than last year; and also a development in market valuations. So it's easier to impact the first, which is our activity. And there, we do expect further growth and activity. As for market volatility and the development in market valuations overall, of course, we are more dependent on how the market actually develops. Thirdly, which showed the highest growth this quarter is investment banking. It's a record high level of listings, IPOs, equity raisings and also high activity in the M&A area. We do see results of systematic work over time to broaden our activities across sectors, across geographies and across products, in particular, Sweden with our Nordic efforts. So there is not only market volatility there. And certainly, the trends of sustainability and the need for future investment is an underlying driver for further activity. But if the activity will remain at this level over time, I think it's more difficult to say. I mean, usually, it goes in -- it moves more and more in windows. It's not to say that we're seeing anything as of yet. Activity is still high going into the third quarter. But this has been a very high -- it has been very high activity first half of this year. For us, we are focused on the performance given the market activity, and we see that we are performing better and better, and that is the focus.

With regard to the capital, the supervisory expectation is currently 15.9%. But with the future maximum countercyclical buffer requirement, again, in Norway and our neighboring countries, the capital expectation would be 17.1%, and is thus the number we are taking into account in our capital planning. We are stating that we need some headroom above that under normal circumstances to cover FX fluctuations, for example, to cover growth opportunities and also taking into account any possible huge regulatory changes, even though for the time being, the only one we know is the CRR II/CRD V being implemented at year-end with only a marginal effect. But some headroom, about 17.1%, but we prefer not to quantify an exact number. If necessary, [ can come ] very close to 17.1% under normal situation perhaps to have some flexibility. But we reiterate that we will not sit on excess capital. All excess capital will be repaid to our shareholders one way or the other through ordinary share dividends or share buybacks if you have a capital above what is needed for the growth of the business.

The next question comes from the line of Sofie Peterzens from at JPMorgan.

Here is Sofie from JPMorgan. My first question would be on Poland. Could you just remind us kind of what your exit strategy is from Poland? And also, in terms of the FX provisions for the non-Polish mortgages, how much more provisions should we expect? I understand you did NOK 116 million of FX provisions this quarter. But how should we think about these provisions going forward? And my second question would be on corporate loan growth. It was very strong this quarter. And also you mentioned -- or also your investment banking services fee income was exceptionally strong. I'm just wondering, those 2, are there any kind of linkage between them? Is there any bridge financing that you did this quarter to support some of the equity raisings or M&A deals that you had and, as such, some of the corporate growth that we saw in the second quarter, if that's potentially going to disappear in the coming quarters? So if you could just comment on kind of the corporate loan growth and especially what segments within corporate lending drew that growth.

Thank you, Sofie. It's Harald trying to answer some very interesting and comprehensive questions. With regard to Poland, I would like to remind you that we have already been phasing out our activities in Poland over a number of years. Eight years ago, we had 1,000 people in Poland. We have reduced our activity level. We have a legacy portfolio, as you point out, on the mortgage side that we have been provisioning for. In terms of the large corporate business, that has been completely aligned with our overall large corporate activities. And some of those relationships, we will phase out. And some of the exposure, we will keep and manage out of a different location ultimately. So I don't think there's anything dramatic in terms of exiting Poland and it will happen gradually over time. When it comes to the corporate loan growth, I would rather say that it is despite the high activity in the capital markets rather than as a consequence of the high activity. If you go back previous quarter, we did say that the loans did not grow because there was such a quick take-out in the capital markets of bank debt. I think that still applies for the second quarter. But second quarter is, of course, also a quarter where our customers are traditionally very active. If I should try to pinpoint some of the industries, I would say that volume growth is really across sectors and across geographies, but there is this particularly high increase in the areas that we highlighted as a target at our Capital Markets Day in February. So that is strong growth in the SMEs. We've seen a strong growth in Sweden throughout the first half and in particular, second quarter of this year with increasing number of customers, record-high level of activity on the IBD side, and [indiscernible] transactions also on traditional backgrounds. We also see a high level of activity in various parts of the value chain related to renewables. And finally, we see a number of transactions on private equity, both structured fund transactions and portfolio companies. Did that answer your question, Sofie?

Okay. And -- yes. But maybe just on Poland. Could you just remind us how much of FX mortgage provisions do you have against the outstanding book on the mortgage side? So should we expect any more FX provisions to be taken or this is it?

The provisions -- the number you mentioned, the NOK 116 million, is provisions taken against offers given to customers. And there is some uncertainty to the level of acceptance of the offers. So it's an estimate. It's too early to say if that's going to be the final number. But we are working on solving this in a gradual way, also transferring some of the other corporate loans to booking entities in Norway.

Okay. And kind of if we take a bear case scenario, what's the worst case? How much additional provisions could we potentially see against the FX mortgages in Poland?

We haven't given any numbers, but there might be additional numbers over time, but we're talking about the same level we saw this quarter. So it's not a dramatically different number going forward.

The next question comes from the line of Maria Semikhatova from Citibank.

A couple of questions. First of all, on the cost -- yes. I have a couple of questions. First of all, on the cost outlook, it would be great to hear your thoughts on key items that you disclosed in the presentation. First of all, IT expenses. We've seen that they are now over NOK 1 billion for the quarter and mostly driven by consultant expenses. Do you see this as a run rate? You mentioned that you are replacing IT consultants with internal staff. So when do you think this will be visible in IT costs? And do you expect any material benefit for the overall cost of the group? And also, you highlighted that Polish restructuring was a factor in our cost for the second quarter. Do you anticipate further restructuring charges related to this? And maybe when we will see the benefit? I believe you have over 150 FTEs in the Polish division that you are trying to exit. That's on the cost side. And on sustainability targets, you are now aiming for NOK 1.5 trillion in sustainable financing and facilitating by 2030. I think you previously disclosed around NOK 600 billion in sustainable financing by 2025. So I just wanted to confirm with you if your ambitions for the next 4 years have changed or the bigger number is a reflection of a different or a wider definition of longer time horizon.

With regard to IT expenses, I think it's fair to say that we are now back at a normal level after a somewhat lower activity level during part of the pandemic period. So the second quarter reflects the true and normal activity in the IT area. With regard to Poland, we took NOK 82 million in restructuring expenses in the first quarter, NOK 37 million this quarter. Going forward, there might be some smaller amounts but much smaller than NOK 37 million per quarter. So we estimate that the majority of the restructuring provisions have been taken in Poland, [ while it ] be some time before the wind down will be complete and the cost savings will be visible.

And just to elaborate and refer back to the presentation given in detail on the Capital Markets Day and also by Ottar on the extended fourth quarter presentation, we continue to work on all the efficiency initiatives ongoing that we outlined with gross savings ambitions of NOK 1.5 billion to NOK 2 billion and that is proceeding according to plan. But it's also important to emphasize again that return on equity is our most important target and that we will invest across the business when it's accretive to return on equity as we do also on technology and to the necessary extent, in compliance. But the main important thing is that we're committed to our cost income target of getting our cost levels down below 40% towards the end of the planning period. And we are systematically working to improve efficiency and feel that we've shown our ability to do so over time. As for the sustainable strategy ambitions, we have increased and widened our ambitions to support sustainable investments by financing, either from our own book or through our investment banking operations through a capital raise or advisory. And previously, we referred to real estate and renewables. Now this is broadened over to other categories where third parties have -- where we will lean on third-party definitions as to what is sustainable. So this is scaling our ambitions in this area further with the NOK 1.5 trillion that you are referring to towards 2030.

The next question comes from the line of Nick Davey from Exane.

Three questions, please. The first one, on provisions. I remember in the past, your provision models seem to be quite sensitive to moves in things like Baltic Dry and the oil price. I just wondered whether under IFRS 9, that sort of input from these external factors still exist or whether things nowadays should be a bit more smooth and subjective if we get volatility in those numbers in the future. The second question on Norwegian house prices that are just starting to slow. I wondered if you had a view on soft landing or hard landing as we go into the period of rate hikes and anything you can share. I'm not asking from a sort of default risk perspective, but just -- maybe just a comment about the broader implications for the Norwegian economy. And the third question would be on distributions. I know these are board decisions, but looking at the consensus of people listening today seem to assume 80% of your earnings in the next couple of years will come out in dividends and buybacks. And I just wondered whether you thought that was a reasonable assumption, particularly in light of some of this corporate volume growth coming back and picking up on RWA inflation. I'll try my luck with that.

Thank you. I'll do the 2 latter and maybe you can answer on the provisions.

With regard to provisions, the macro variable and also oil prices and shipping freight rates goes into the variables impacting stage 1 and 2 provisions. So in the second quarter, the improvement is mainly from improvement in underlying credit quality among the customers where there is some positive effects in the shipping sector with regard to container and bulk shipping due to improved rates in the second quarter, but that is a minor part of the reversals in stage 2, mostly improvement in underlying credit quality.

And bear in mind also that our portfolio has changed substantially compared to the years and periods you're probably referring to. I mean back to the financial crisis, we had a shipping portfolio of more than 10%. Today, it's 2.1% and within the 2.1%, well diversified across sectors with any sector capped at maximum 20% of the portfolio. So outlook for the dry cargo market, outlook for the container market does have an impact, but it hits a much smaller part of the portfolio. Hence, the reduced volatility that we've systematically been working to achieve. As for Norwegian house prices, certainly a soft landing. The outlook for the economy is positive and the Central Bank, what they're indicating is up to 7 rate hikes. If reactions or response should be different than they anticipate, I'm sure they will adjust, as they've done on several occasions. This time around, actually reacting on our positive results even and moving the rate hikes closer in time. The housing market is very important for the consumer confidence and for the Norwegian market. And I'd say on a positive note that we think it's positive that the market has cooled down somewhat as a growth rate above 10% on an annual basis is too much over time, and we'd like to see it more in line with the growth of disposable income. So I think it's fairly consensus among all analysts that they're looking at sustainable growth levels in the housing market going forward.

The Central Bank's forecast, 5% this year and then declining gradually to 4% annually in 2024. So it's a 1 percentage point decline, but the increase in this disposable income helped to stay in that market.

As for distribution, I think we've been very open with regards to our thinking, and there is no change on that. Priority #1 is to reinvest into the business. We generate very attractive capital levels through our running operations. And we have guided for a 3% to 4% growth rate across the various segments, with the highest growth expected, not guided, but expected in SME and personal customers. And beyond that, a very transparent dividend policy, where what we aim is a minimum 50% distribution of net results and a cash dividend and an increasing nominal payout per share per year. And then we haven't targeted a specific amount of buybacks, but we have said that we will use buybacks as a tool to optimize around the capital situation. And I'll just refer back to the CFO's very clear statement earlier to say that we aim to pay out excess capital over time through the use of the various tools in our dividend policy.

Our next question comes from the line of Riccardo Rovere from Mediobanca.

Two or three, if I may. The first one is on the funding side. The demand deposit keeps going up. I've seen in this quarter, although I know this is a bit volatile, the securities, the medium- to long-term funding has come [ off ] a little bit. Now in general terms, in the medium- to long-term funding, what kind of growth should we expect? Should we expect the volumes to remain more or less at these levels and the growth of 3%, 4% growth in the loan book can be absorbed by deposits? Just your thinking around that. The second question I had is on the reserve ratios, the [ covered ] operations on stage 3, which has come off to the levels which is slightly below the numbers I have, the levels you had in 2019, so lower than 35%. Is this a level that we should assume more or less to stay as it is? Or given a different mix of the NPLs could go eventually lower than it was in ahead of pandemic? And the other question I have is when you set your targets, okay, the return on equity, does this assume different rate scenario than it is today? So rate could go up 100 basis points, 50, whatever and to distribute the capital because clearly, with this level of equity and the amount of profits to generate every single quarter, the -- let's say, the denominator is going up too much for you to get to your target. So how should we think about your ROE target in the current environment?

With regard to deposits, it's important to stress that we only receive deposits on which [ we make money ], which are profitable. We are not in a negative rate territory in Norway. So all deposits are profitable, and we expect them to be increasingly so with the deposit rate hikes by the Central Bank particularly, deposits from personal customers and SMEs which are typically [ in effect ] at our discretion and where we have that severe floor effect last year when the rate was cut to 0 by the Central Bank. And hopefully, this will now be reversed. With regard to the growth rate of deposit, it's harder to forecast since it's actually more or less to the customers to decide how much to place with us. It's easy to come up with a forecast for loan volumes. We don't expect the high growth rate we have seen through the pandemic to continue going forward. But the savings rate in general in the population has picked up and we expect it to remain at the 6% to 7% level going forward. With regard to stage 3 provisions, I think that differs from sector-to-sector and from customer-to-customer, depending, for example, on our collateral position. I think it's very difficult to read very much into those numbers. Those numbers are also impacted, for example, debt-to-equity conversions and restructuring. So we can just say that we are comfortable with our level of provisioning. And I think the history so far from after the first quarter of last year has proven that to be the case. With regard to return on equity, it's based on our expanded fourth quarter presentation in February that we expect that this year of policy rates seem to end and we expect the policy rate hike from the Central Bank going forward. And that is included in -- when we stated the target of return on equity above 12% by the end of the planning horizon that we communicated to be 2023. And that remains the case. And the rate passed by the Central Bank has since been increased. We should make that target even more realistic than before.

Okay. Just one -- couple of clarifications. If I got it right, when you were talking about deposits, I got that you expect the current growth will remain more or less unchanged, okay, with regard to the selling rate of households and so on. Did I get it right? And if I got it right, how should we think about the other side of funding, the medium- to long-term funding, the bonds that you wish -- coverage bonds, senior bonds, whatever?

We do -- going forward, we do not expect to use senior bonds anymore. So our market-based funding will be covered bonds to the extent it has not been covered by deposits. And then we need this senior nonpreferred to comply with the MREL requirement. But that is driven by risk-weighted assets and not by liquidity. So the demand for the funding driven by liquidity is determined by deposits and then covered bonds for the part not being covered by the profits. So seeing that, that will no longer be used unless we have a cap on the MREL requirement of subordination.

Right. Okay. Okay. And on the target...

Go ahead, Riccardo.

Okay. Sorry. And just very quickly, on the target, on the ROE target, also capital distribution is included, right?

We have included and communicated dividend policy as the CEO also just elaborated on, so paying out excess capital. So it's assuming that we have the -- that we fulfill the capital expectation with this. Some margin, some headroom, as I talked about, but nothing more. Excess capital will either be deployed into the business, growing the business like we stated or paying out excess capital through dividends and/or share buyback.

The next question comes from the line of Ulrik Zurcher from Nordea.

So one question on corporate credit risk weight. In general, I think lately, the corporate risk weight has been growing at a slightly lower rate than your lending, but that turned this quarter, at least because you saw such an increase in the standard method approach for corporates. How should we look at this going forward? Should we expect risk weights to grow roughly in line with lending or -- any flavor on that would be appreciated.

I think you highlighted correctly that it was a shift this quarter, and this is in particular related to the mix of the growth this quarter. And to evaluate over time, it's better to take a somewhat longer-term view and look at the development of risk-weighted assets. So we are not expecting it to be [ as ] then like it was this quarter over time. But again, to reiterate that volume growth in large corporates will vary from quarter-to-quarter, and it should be read into the overall guidance for growth for the group on an annual basis.

Is it possible to give a bit more details on why you have to put so much in the standardized approach this quarter?

We haven't said anything beyond what I've just said now, and this will vary from quarter-to-quarter. It is related to the specific areas of growth, and this will vary somewhat from quarter-to-quarter, but we're not sort of going further down into the details on that.

And all the growth which is -- all this growth is individually priced and then the capital requirements taken into account in considering profitability. So it's profitable growth.

Next question comes from the line of Jacob Kruse from Autonomous.

I just wanted to ask, firstly, on your current strategy or your sort of geographical thinking, are you still very much Norwegian-centric? Or are you opening up a little bit to either Nordics or Northern Europe when you think about your retail and corporate business? And my second question was just on cost. With a slightly higher-than-expected costs this quarter, how should we think about the kind of starting cost base this quarter, the savings and what you view as kind of underlying cost inflation? Is there -- is this cost run rate of NOK 6 billion roughly the level you're comfortable with or is it -- is there something we need to do to adjust it?

Thank you, Jacob. I'd say that our geographical strategy has been very much consistent. The retail business is, for all practical purposes, focused on Norway now, apart from the payment side where we are maturing more also into the Nordic with the merger announced by this -- earlier this quarter. As for large corporates, we have very much announced a Nordic focus, which Harald also alluded to earlier, specifying that we are increasingly delivering on that out from Sweden and very much building the investment banking activity alongside corporate lending activity to cater for a Nordic market, which we see it to be more and more. As for the Northern Europe, we also have our operations being led out of London that has a responsibility for the remainder of Northern Europe where we are active. I don't know, Harald, if you want to add more to this.

Yes. I think approximately 40% of our large corporate business is from the international offices. We see a steady stream of transactions, and it creates some, I would say, increased stability in terms of activity level as it tends to vary over time between different geographies. We have a global strategy within energy where, obviously, renewable energy is becoming increasingly important. We have a global strategy on seafood, and we have it on shipping and other parts of the maritime sector. Then we have a more selective international strategy on health care, tech and telecom, in addition to what our CEO said about the Nordics.

With regard to costs, 2 special items in the numbers. As I mentioned, you have the pension expense of NOK 67 million being hedged and having a corresponding gain in the income line. So that could vary from quarter-to-quarter, but it's net 0. And the second is the restructuring cost in Poland of NOK 37 million this year this quarter. Besides that, the expenses in the quarter, it reflects the higher level of activity in the quarter, including the NOK 70 million increase in variable pay, which should be viewed in light of the strong increase in capitalized income from the various brokerage and asset management activities. The only remaining COVID effect in the numbers is approximately NOK 25 million quarterly lower traveling costs. Otherwise, activities truly back to a normal level as of the second quarter. The flip side of operating in an economy doing well is some underlying wage inflation in the economy. In Norway, we are running at 2% wage inflation, about 2.2% going forward, and also headline inflation in the same ballpark. But as the CEO mentioned, we are fully committed to our cost/income ratio, which is what we're primarily focused on in order to reach the return on equity target. So we are willing to invest in the business, for example, in the capital-light areas where we are seeing solid results from those investments also going forward.

There are currently no further questions in the queue. [Operator Instructions]

All right. If there are no further questions, we are going on a digital global road show in a couple of minutes. So we would very much like to wish you all a very good summer. And hopefully, we will see you over next quarter and meet with you face-to-face. Thank you very much.

Thank you. Bye-bye.

Thank you for joining today's call. You may now disconnect your lines.