Jyske Bank A/S (JYSK) Earnings Call Transcript & Summary

Hi, everyone. I hope you're well, and thank you for joining us on Jyske Bank's Q2 2023 Post Results Conference Call. This is Simon Hagbart from IR speaking. With me I have our CFO, Birger Nielsen; and our Director of IR and Sustainability, Trine Norgaard. If you have trouble hearing us during this call, please feel free to reach out to us, and we'll get back to you after the call. Please make sure that your devices are muted, as Birger will walk you through our prepared remarks, afterwards, we will open up the Q&A.

Yes. Thank you, Simon, and everybody, welcome to everybody. Thank you very much for joining us on this call. And I will, as Simon, says go through some of the remarks as an introduction, and please feel free to ask any questions afterwards. Looking at the big picture, we still expect to see growth in the Danish economy during the course of '23. Exports and public spending are on the rise, whereas if we look at investments, private spending are trending downwards. The economic sentiment has improved to a more or less long-term average level. But despite all these elements, we still expect to see some dampening effects in the private sector from the gradual impact from high interest rates hitting both corporates and individuals during the course of '23 and '24. That being said, if I look at, as you can see on the slide here, the third upgrade for '23, hit the market recently from Jyske Bank, and we have now been able to deliver DKK 37 for the first half of this year compared to DKK 24 last year, a very solid and very stable development during the last quarters in Jyske Bank. Back in '22, we delivered DKK 55. And if you go back from average 2013 to 2020, you saw DKK 29 as an average return earnings per share return annually. Secondly, and very importantly also, we have made a small acquisition during the course of the second quarter. On the 13th of June, we announced an acquisition of PFA Bank, which, of course, supports our wealth management business and strategy. I'll come back to that just in a second. Thirdly, net interest income is still very strong, and the momentum is still very strong, 78% growth year-over-year, of course, due to high interest rate but also due to the inclusion and acquisition of Handelsbanken Denmark. And that being said, despite the fact that we have seen savings accounts and time deposits growing with lower margin than transaction accounts. Fourthly, if you look at the cost/income ratio in the group, we're trending steadily downwards due to -- especially due to high earnings -- retained earnings in the last couple of quarters, but also cost management, still tough and consistent cost management in the group, down 12 percentage points over the year. Now in sub-50% territory, I will come back to that just in a second as well. And then on the credit quality side, very stable quarter with no big swings in the sub portfolios whatsoever, 0 basis points in actual write-offs and 0 basis points in cost of risk. Capital position has been rebuilt even further here in the second quarter, we're now at 16.1% in the middle of the announced interval between 15% and 17%. And on top of that, we also just recently received an upgrade from S&P. Now our issuer rating is single A+ as opposed to single A flat and the outlook is stable. And that, of course, further includes the stability of the group. Looking at the other acquisition we made a year ago -- can you change the, yes. Sorry, looking at the acquisition we made just recently -- sorry, I have to start there. With the PFA Bank acquisition announced on the 13th of June. It's a small bank, it's a no-lending bank. There is no credit risk involved. And it's a bank -- banking ARM of PFA, Pension of PFA -- PFA Pension established in 2014, 9 years old. We have taken over around 10,000 personal and private banking customers, around 43 full-time employees. And the assets are DKK 15.5 billion under management invested in PFA invest their mutual funds. And it stems from 3 sources. One is investment through the investment platform in PFA Pension. Secondly, third-party assets, those 2 are small numbers. And the big chunked stems from PFA Bank, which we acquired here in June, announced the acquisition now in June. Then on top of that, we have DKK 1 billion in deposits. And if I look at it from a strategic perspective, yes, it's a very attractive customer base. We're adding volume within asset management. We have cross-selling potential. Some of these customers are single-product customers, and we have a possibility to approach them to make them full line customers with Jyske Bank. And finally, as we stated here in the bottom, it supports our wealth management business and strategy, and we have now for 8 consecutive year been claimed in having the most satisfied private banking clients by Voxmeter. On the financial side, of course, it's a small business. It's a very small capital consumption, which relates to no loans, but primarily asset management. We paid a total consideration of DKK 245 million, DKK 120 million is equity and DKK 125 million is goodwill or customer relations on top of that. And so the total impact on the CET1 ratio is less than 0.1 percentage points. We expect to close in Q3 and everything is running according to plan as of now, and we expect also the approvals by the authorities to be delivered on time. We -- as I said, the allocated capital is very low and since it's decent returns on these products and businesses, of course, we deliver -- expect to deliver a high return on the allocated capital. We will see the full effect of that in -- from '25 onwards, and we have to book around DKK 50 million in integration costs in '24. Then going to the other integration, we announced a year ago with Handelsbanken, we're now in the process of closing, well, reaching the milestone in October of '23, where we should have merged and closed the branches that overlapped and 22 of the 30 branches mergers we want to make has been finalized here by July of this year. And then in November, we expect to complete the full migration with the IT integration of Handelsbanken and Jyske Bank on the same IT platform. Looking at the locations, as you can see, we're now down to 97 locations nationwide and it's 20% down from Q4 last year. Integration costs expectedly -- expected DKK 0.3 billion this year, we're around DKK 100 million here by the end of the first half. And we expect still the integration cost to be back-end loaded in -- over the year due to further IT costs and branch mergers. The main driver behind the DKK 97 million in the first half was cost to basically the IT platform, employee cost, branch mergers and transitional service agreements, which we made with Handelsbanken. The other -- the flip side of the coin, the cost synergies around DKK 84 million in the first half. It is primarily related to employees, lower cost to external systems and rental costs, which have driven the improvement of DKK 84 million in total cost synergies. And we're still facing and expecting to deliver DKK 0.2 billion this year and DKK 0.4 billion by the end of next year. Then going into the financial result of the second quarter. Overall, as you can see, DKK 18 in earnings per share, a bit down from the very strong Q1 and also a bit down from the exceptionally strong Q4 of last year, but still fully on track within the interval DKK 70 to DKK 80 per year in 2023. Business volumes on the right-hand side, as you can see, deposits has shifted a bit down in Q2 primarily due to corporates coming from an extremely high level in Q1 of this year, rather volatile elements, of course. Secondly, if you look at the loans, the green line, small increases on total loans. If you look at the yellow one, AUM on the rise, but primarily driven by market conditions, leasing and mortgage, the 2 latter ones also small increases in the quarter, demonstrating that activity has not been particularly high in Q2. And if you look at the left-hand side at the bottom, you can see the swing from 9.2% ROE in Q2 last year to 11.8% this quarter-to-quarter in 2023. The main drivers, of course, are net interest income, the inclusion of Handelsbanken and interest rates, but also a more positive financial market development, and the flip side naturally higher cost expenses due to Handelsbanken. And when it comes to loan losses, we have shifted from reversals last year to a small expense this year. And then also a negative delta on the investment portfolio relating to the extra funding that they have to pay and only gradually can reinvest their portfolio at high interest rates. Then looking at the NII line, just focusing a bit on that, which is, of course, the main driver to the growth in earnings. You can see that on the chart, that from Q2 '21 to Q2 '22, the quarterly returns or NII line was relatively steady. Then in Q3 '22, we started changing pricing on corporate deposits and private individual deposits. And also, we saw a change in the interest rate level that led to a higher return on the bond portfolio. And then from Q4 onwards, you've seen this massive shift where the yellow box illustrates the return on the bond portfolio trending significantly upwards. And the red one at the bottom shows that we're now paying of course, positive interest rates on deposits in total. And in the -- the dark green box demonstrates the effect on the customer rates on loans, which has also been lifted significantly. And if you do a comparison, Q3 '22 versus Q2 this year, you see a lift of around DKK 1 billion. And that, of course, includes Handelsbanken as a significant part of the equation and explanation. Looking at the costs. Cost/income ratio now below 50%. The last 4 quarters, 48% and Q2 '23, in isolation actually is 46%. From '17 to '20, we had a long period with tough cost management and very low growth on the income lines, whereas from '21, '22 onwards, we have continued focusing on cost management, but now the income line has topped up the development and the cost income line or ratio delivering the sub-50% return here in Q2. And if we look at the cost line in isolation, it is clear that the online cost, as they've been in Q2 and in Q1 was 3% underlying growth. We have taken on board number of FTEs, especially in the field of AML. Employee costs have grown higher, IT costs on bank data and then, of course, we write off customer relations in relationship to the acquisition of Handelsbanken. That being said, of course, our main focus is, of course, to keep cost as slim as possible. But the environment, as we've talked about in several quarters, of course, leads us to underlying cost growth. But still looking at this picture, we're very fond of the situation where we have brought down the cost/income ratio well below 50%. Credit quality is a special story. If you go back and do a write-off illustration as we've done here, trailing 4 quarters from '13 to '18, around '18, we had around DKK 1 billion to DKK 1.2 billion average-wise in write-offs and then you saw a massive drop, which demonstrate -- where we now are down to DKK 200 million on a trailing 4 quarters calculation, and actually, the Q2 number is around 0. It demonstrates, first and foremost, that we have nothing left over from the financial crisis. It also demonstrates the quality of the book where both banking business and mortgage business has improved, and it demonstrates the derisking of the portfolio which we have been -- which has been ongoing for now many years since we merged with BRFkredit. Near-term risk, if I'm -- if I have to focus on that, and I want to do that just to demonstrate that it's not a one-way delivery. We can see some swings in the numbers here, also both in the write-offs, but also impairments. We said that impairment is an expense this year, and you've seen small numbers being booked but we can't, of course, rule out that there will be some impairments also in the second half or into 2024. The reason being expected lower disposable income due to high interest rates, which will gradually hit both private individuals and corporates. And of course, the overall risk of lower employment, which I see as the most prominent element that could trigger a slight reversal of this very, very strong development. But still, we're talking about extremely low levels of write-offs, and we're talking of extremely low levels of impairments well below an average year, which in our book is 12 to 13 basis points. Capital, when we entered and merged with Handelsbanken in Q4, we dropped from 18.6% to 15.2% on the CET1 ratio, still within the interval of 15% to 17% at the low end, then we have rebuilt the capital levels over 2 quarters. And now we're running steady in the middle of the interval 15% to 17%. The reason for the strong development from Q1 to Q2 this year is primarily high retained earnings and a drop in REA, where market risk actually drops, whereas credit risk is relatively steady from Q1 to Q2. We're also favored by an upgrade from S&P, which they announced here in July, where they had listed our issuer rating from single A flat to single A plus. The reason is being that our MREL funding is strong and solid, and our funding plan is also strong and solid, improved earnings in the group and a solid capital position. Those are the 3 main elements behind the high issuer rating, which also, still is -- with a stable outlook as it was formerly with a single A flat rating. Regarding capital, the Board endeavors to still -- to distribute capital in the second half of this year, and that is, of course, what we're focusing on in the coming months and quarters. It's up for the Board to decide. And then naturally, there will be a process with the FSA for them to finalize such an approval. Yes. Looking at the outlook. Well, core income expenses will grow, both of them due to Handelsbanken. Loan impairment charges, as I said, still very modest and we still have a post-model adjacent buffer of unchanged DKK 1.4 billion. Net profit is lifted according to DKK 70 to DKK 80 per earnings per share. DKK 4.7 billion to DKK 5.3 billion as we -- as I announced 3 times, we have listed this level for the year 2023. And the CET1 ratio of 15% to 17% is still what we're looking into. And as of now, we stand very solidly in the middle of that range. I think that covers my first remarks, and please any questions will be very welcome.

Yes. Thank you. If you would like to ask a question, please raise your hand or unmute your device. I believe the first question in line is from Asbjørn Mørk from Danske Bank.

A couple of questions from my side. Firstly, on capital. You mentioned yourself the intention is still to do buybacks in the second half of this year. But just maybe a little bit of flavor on the actual process here. I obviously understand you've been busy with the PFA Bank transaction and obviously integrating Handelsbanken and then the July upgrade on your profit. But is it so that -- should we interpret your communications such as now you will approach the FSA? Or have you already done so, hence, we should expect some buyback communication rather soon. Haven't we seen the buyback because you don't want to bring the CET1 below 16%. Is there anything like that we should have in mind? And also maybe a little bit longer term your view on capital distribution, now obviously being a much more profitable for the bank than you were a couple of years back with limited REA growth. Your free cash flow is improving quite significantly. What kind of payout ratio do you expect, is that 100% from here more or less considering that you are where you want to be? Just -- that was my first question, please?

Yes. Thank you very much, Asbjørn. We -- the process when it comes to buybacks is rather straightforward. The FSA has to approve it as opposed to dividends, which is the matter with the -- at the Annual General Meeting. But the process here with the buyback is that if we -- if the Board decides we can apply and then the FSA has a certain time period in order to look into that application and they can ask questions during that period of time. And then they will come with a verdict and relatively soon afterwards, we need to announce that to the market whenever that is closed and finalized. And so looking at this situation, I said that we're in a solid -- with a solid level of 16.1% in the middle of the range, yes, we're well off now. We have rebuilt our capital base relatively quickly over only 2 to 3 quarters. And so we find ourselves in a strong position, especially also when we look at the retained earnings and expectations for the year, DKK 4.7 billion to DKK 5.3 billion post tax net profit. So we believe we're building up strong capital position relatively quick. And of course, that gives us -- the Board a great flexibility in order to decide. I can't be more precise on timing and anything else because it's up to the Board to decide, and we can't reveal any information before it's settled with the FSA. Please also be aware that the FSA has recently, over the last half year, been more harsh in their views on the banks and the uncertainty in the market, especially relating housing -- house prices, IRB models being able to capture the possible swings in the market, et cetera, et cetera. So of course, there are elements involved in such a process that is not known in the market. Secondly, if you ask about long-term. If I go back in history and please correct me, Simon, if I'm wrong, but I think we can demonstrate around 70% payout ratio average-wise in -- over the last few years. And we have to take in consideration the expected growth in the REA, of course. And so whenever things are more smooth and things are up and running, and we can get approval from the FSA, of course, we want to bring back our payout ratios to a decent and decent high level due to the very strong earnings capacity in the group.

Maybe just a follow-up on that one, Birger. So I guess with the EBA stress test, and I admit there's a lot of limitations to that test, especially on your side with the acquisition. But given that and the comments you made on the FSA, is it then really 16% we should be looking for? Or is it more the upper end of the 15% to 17% that is the sort of realistic go to target?

Well, we can't announce any specific numbers to look at. But as I said, we're in -- we find ourselves in a very solid position in the middle of the range and can fully comply with Basel IV requirements first quarter '25. And I also believe that when we announced -- when we sent out the press release here in July, when after the EBA stress test, we underlined that there were some limitations to the quality of that stress. And I also believe that if you read the FSA comments afterwards, that they seem rather reassured of the quality of the Danish banks and capital position. So it's more stress test related or normal stress test related issues that needs to be managed in the relationship with the bank and the FSA when applying for a buyback.

Okay. Fair enough. Then on your NII, I see your cost of deposits come up from my number, 26 basis points Q-over-Q to 116. Could you give a little bit more flavor on what you see on the deposit side in terms of flow into savings products? How much of your deposits are yielding a positive rate and maybe also a bit on your -- on the running yields in your portfolio of bonds, which seem to be 2.3% or something, there seems to be some upside here. So maybe a little bit of what you see as a tailwind and as a headwind going forward on your NII.

Yes. So we continue to see a moderate pace of private clients migrating to savings accounts that has not accelerated. At the end of Q2, more than 1/3 of private client deposits were placed in savings accounts with the majority in easily accessible demand deposits yielding between 1.05% and 1.65% per annum. Additionally, in the recent years, as you have noted also from sector statistics, corporate clients have been migrating to time deposits, which, of course, lowers our margin, but those migrating are likely to be more price-sensitive clients that we did not expect to fully maintain a margin of several percentage points on -- so that's sort of what we're seeing in terms of the deposit migration. And overall, you're right that we have a significant bond portfolio of more than DKK 90 billion at the end of Q2, which will very gradually be repriced to the higher level of interest rates. At the moment, you're right that the yield or the coupon rate on that bond portfolio, which impacts our net interest income is quite low compared to the current level of interest rates. And that is also the effect that you can see under the investment portfolio earnings, where we have a short-term funding cost impacting immediately and then a more gradual repricing of the investment portfolio, which results in a negative net interest income on that line. So you're right, hopefully, eventually, we'll be yielding a higher level of interest rates on our bond portfolio, but we still have some ground to make up there.

All right. Fair enough. The final question from my side on credit quality. You're still guiding for an expense for 2023. Obviously, that is a wide range. But if I look at your actual exposures, your Stage 3 exposures year-to-date, down DKK 0.3 billion. Your provisions against Stage 3 up DKK 0.1 billion. So there seems to be some quite interesting changes there. I acknowledge you made some model changes in Q1. But just basically looking at from here going forward, if you don't make any incremental changes to your credit model, what kind of provision level are you seeing for the next couple of quarters?

Well, if you look at the -- you're quite right, there's been some model changes due to the uncertainty in the market. And of course, the inclusion of Handelsbanken also makes some swings between the discount of -- 1-day discount and then the actual impairments. But the overall impression when we look at the book as of now is it's a very steady one. We see no -- as I said, formally, we see no big swings in the sub-portfolios. The write-off is more or less done deal. So it's only a matter of looking into the future. And there, we have DKK 1.4 billion in management estimates, which is unchanged from Q1 and making sure that we're well positioned to manage uncertainty that may occur in the second half of this year. There are no segments or sectors, industries that are special -- are in special difficulties. So we believe we have done what is necessary through all sectors to manage this uncertainty that we're facing. And so just to -- maybe to answer your questions, but I can't do it correctly because I don't know exactly where we're heading. But we're -- we stated that we see an expense because there's been a shift in the sentiment from gradually improving corporates and individuals to a more stable development. Now we're looking into an interest rate scenario where things gradually will lead to lower disposable incomes, especially for private individuals. And that could trigger a few impairments, and that's the reason why we use the word expense for the year.

But just to get that straight view. So the post-model adjustments of DKK 1.4 billion, to what extent will you use those for credit deterioration? And to what extent do you see that as a buffer on the buffer?

Well, we came from DKK 0.6 billion 3 years ago, and now we're at DKK 1.4 billion. And we believe there is certainly room to manage uncertainty to bring down the buffer, but not to the level of DKK 0.6 billion. So if things turn for the worse, which we don't expect now, of course, we need to rebuild that buffer a bit. But otherwise, we have a strong cushion of several hundred millions to be used before we even book DKK 1 in the P&L.

But it doesn't sound like we should expect a major change versus Q2 on provisions?

You're quite right. That's what we expect as of now. But the word expense, we need to book here and talk about here because we don't see reversals going forward given the macro environment and given the interest rate level.

And next question in line comes from Jakob Brink from Nordea.

Sorry for coming back to Asbjørn's initial question on buybacks. But just -- I appreciate you can't say if you did approve it or apply already or not. But just to understand, let's say, you had a Board meeting in June, which I believe you typically do have. Would that be the time where you would discuss this? Or would it be fair to assume that a Board would want to see the actual CET1 ratio for the quarter before applying.

Well, if we take the situation and it's just registration purposes. We -- there is a Board meeting in June, as you say, yes, there is a Board meeting in June. They look at the stress test as they do every quarter and the stress test demonstrate that we're well off capital-wise in 3 to 4 years' time on the CET1 level and the overall capital level. And they decide we want to return some of the capital to shareholders, then they can ask the organization, Jyske Bank to make an application to the FSA. And then that will be managed and we'll send it to the FSA. And then they have a certain time period to look into the matter and they can come back with questions. And then in due time, they deliver a verdict, and we have to announce it to the market. I think it's a relatively straightforward process and that it's actually an ongoing monitoring and supervision of the quality of the stress test and the quality of the capital levels that the Board is looking into. And so, yes, that could be an outcome, which is -- could be a possible outcome, yes.

And the fact that by June, you didn't, of course, know the in-tuned CET1 ratio. So, I guess you did know it early July either since it wasn't included in the upgrade, but came in connection with the S&P announcement. Is that then something you feed back to the FSA whenever the number is ready? Or can you kind of apply on the back of rough numbers? Or just.....

We can actually do several things, and we have several options. When we apply and I go back in history when we applied to the FSA for a buyback program, we sent them the information we have at hand at that point in time, say, a Q1 result with the stress test. And then we can tell them if their process period overlaps Q2, then, of course, we can update the information with Q2 numbers or Q3 numbers or where we're in the calendar year. And so that is an option we always have, and we can also have a dialogue, of course, with the FSA regarding their views on our quality of the capital. So it's an open process where we can deliver new material and they can ask questions.

Okay. That's clear. And then on -- actually also the deposit cost that we already discussed a bit, but looking in your fact book and the increase on the deposit costs quarter-on-quarter, taking that in relation to total deposits. It's like a 30 basis points annualized increase. So I was just wondering, I mean, that increase you have quarter-on-quarter seems relatively big when looking at the movement in deposits. So your time deposits moved from 40 to 60 and then I think 50 now in Q2. But let's say, DKK 10 billion to DKK 15 billion average increase in deposits and time deposits during the quarter or during the half year. And now you get such a big increase in the deposit cost. So I was just wondering if there is anything else than just people moving to time deposits impacting the deposit costs?

Yes. There are several factors. So starting on corporate deposits, corporate deposits are money market based and the [indiscernible] [ money migrates ]. So we have increased [ events ] for those types of deposits. On the -- that's the primary factor on corporate deposits. But you're right in terms of the mix with a smaller share of the time deposits, but that was mainly some short-term time deposits, so we attempted doing the one. So there's a very little impact on the line for those. Moving on to price. We made some quite significant changes to our savings deposits prices in April. We raised the deposit rates on the 17th of April by up to 75 basis points on some savings products, and we also introduced more attractive terms on time deposits for private clients upping those by 50 basis points for 6 months time deposits. So those factors combined resulted in an increased expense for -- even though the volumes didn't have much of an impact.

So the 75 basis points, was that on sort of real savings account where you lock them in for a year or longer or what to do, Simon?

No, that was the demand part of -- maybe just a quick clarification. So we have demand deposits that are regular transactional demand deposits and then we have a special product in many Danish banks, where we have a demand deposits that's for savings purposes, not related to a transactional accounts. So they are readily, easily accessible. But you obtain instead of 0% interest rates, you obtain the 1.1% to 1.6% per annum at the moment.

Okay. And you said you increased that to 75 when?

That was on the 17th of April and the 75 basis points was on deposits between DKK 100,000, DKK 500,000.

Okay. Then on the cost line, if I look at the cost details, which includes the -- from the fact book, which includes the integration cost on Handelsbanken. So I guess that's part of the explanation. But I see costs are quite high, both in Q1 and Q2. And -- should we -- what level should we expect those to drop back to when you're done with the integration here in H2?

Yes, that's -- I can't answer that specifically, but we can say that many of the IT costs from Handelsbanken is a cost booked on the IT costs and many of them relates to BEC, the data vendor, where we have some increased cost in the short term. And towards the end of the year, we expect to be able to migrate from BEC to our data vendor in the form of bank data. So that should help significantly and I would still -- but I would still expect a higher level than what was before we purchased Handelsbanken Denmark, also given the current inflation on IT contracts.

Okay. Last question from my side. On the liquidity portfolio, we talked about earlier as well, the interest rates on your fixed income books are not rolling every quarter, but I think I understood something about semi-annual rate setting or repricing. Is it possible to give any more details, so we know kind of how much we should expect of [ adulting ] in Q3 versus Q2 from this book on rates that have already gone up, but you haven't earned yet.

Yes. So we -- again, I can't be too specific, but I can say that it's a small portion of the -- I mean, we have DKK 91 billion of bonds and it's a small portion of that. So vastly below half and also below a quarter of that, significantly below a quarter of that. So I wouldn't expect any sort of major change in terms of what we obtain from bonds, but we should see a larger increase in income from bonds in Q3 versus Q2 than we saw from -- I mean, from Q1 to Q2. And next question in line comes from Martin Birk from SEB.

Just a couple of follow-ups. If we start on NII, what kind of assumptions do you guys make on volume growth for the remainder of the year?

If you look at the development in the last couple of quarters, you've seen very flattish developments on bank loans, leasing, mortgage -- nominal mortgage loans trending slightly upwards. And for the second half of this year, as I said, we -- there is some uncertainty as to the risk appetite and also the consequences from high interest rates that could dampen the development. So a good view here from our side is more or less flattish to slightly up, but a very stable development in the second half of this year.

And you would expect the same to occur on deposits?

Well, deposit is a slightly different story because it's more volatile. And you can see the swings we saw from Q1 to Q2, which is related to corporate dealing with deposits in a more volatile manner than private individuals and SMEs. And that could, of course, trigger some swings in that line going forward. But when you talk about the SMEs and private individuals, you see we're more focused on seeing the shift from transaction accounts into savings accounts with time deposits, which is the main trigger behind what impact will be with the deposit line have on the P&L.

Okay. So when you look at your Q-o-Q decline in your deposit base of around, I think it's 4%. Does that tempt you to bid up for deposits? Or are you okay with seeing that?

Well, it's -- we're okay with that because we saw a significant growth from corporate deposits in the former quarters. So I think we're well off looking into that and still our metrics, liquidity metrics short, long term are very strong by end Q2.

Okay. Then perhaps jumping on to fees. I guess this has been sort of the negative surprise in terms of the P&L for you and also for many of your peers. When do you see this bottoming out? And then -- and what other elements do you have on your fee line in order to sort of recover some of the lost fees from lower, the lending activity?

They are very good questions. We made a change in the fee structure for private individuals on 1st of April, which is now fully implemented, of course. The lower levels relates, of course, primarily to mortgage business, loan application fees as well. And there is a specific one-off this quarter, which also hits our books. But overall, I think it's a direct mirror to the lower activity we saw in Q2. And if we're right in our assumption that there will be some, well, stable development in the second half, we don't expect to see significant growth in the fee line over the coming quarters. And please add, Simon, if you have further questions -- comments.

Yes. I fully agree. So of course, on a quarterly basis, we will see some -- the usual seasonality. So Q2 being the weakest quarter of the year, we will, of course, see higher net fee and commission income in Q3 and Q4, but activity levels are likely to remain sluggish.

Okay. And if I just may come back to a follow-up questions on both Asbjørn and Jakob and then just turn it around and say, well, now you have sort of reclaimed or regained your Basel III savings, which is spent on Handelsbanken. And when you look forward, we're looking into a scenario with very little growth. And basically my question is what is holding you back from having a payout ratio over the coming 2, 3 years of 100% or at least very close to 100%?

Well, that's a very good question. As you say, it depends very much upon the growth prospects. Short term, we're quite -- we believe we quite agree that the growth is not significant going forward, of course, it's to be seen. But our payout ratio historically has been around 70%, and hopefully, we can go higher than 70% in the coming year, 1, 2, 3 years. With this earnings capacity in the group that has improved significantly and manage -- fully managed REA development, risk development, we find ourselves in a fortunate position. So we will see when these elements can be realized in our market.

Okay. And then maybe just perhaps a final question also back on -- back to questions on loan losses. If you expect Q3 to be a repetition of Q2, it looks like you're going to be squeezed quite a lot in your guidance on the upside, right?

Just to understand your question, are your questioning regarding loan losses in the second half?

Yes. Yes. My question is why you're not upgrading today, again?

Oh, upgrading. Okay. Now I get your point. Well, I think we delivered DKK 37 the first half. A repeat of that would give us DKK 74 in the middle of the range, DKK 70 to DKK 80. I think that's the simpler calculation, but the more enhanced view is that we have seen a couple of -- or 3 very strong quarters actually, Q4 last year, Q1 and 2 this year. And of course, there is uncertainty, we still believe that we can deliver more or less what we've seen in the first and second quarter of this year, even in the second half. And if that comes through, then we will end in the DKK 70 to DKK 80 area and territory.

I think we're running out of time. So if there are.....

There is another question.

Yes. We have another question from [ Alan Chester ].

Can you hear me? Can you hear me?

Yes. Alan. We can. Go on.

Okay. That -- yes, I go back to the share buyback. And in the Jyske Banks' year report of the 28th of February, the Board said that they would take a buyback up in the second half year of 2023. I should ask, well -- I'm sorry, I'm Danish, so kind of put -- to put it in Danish, it's easier. But what has changed since you're now not going to buyback because the results are going from DKK 60 to DKK 70 per share to now DKK 70 to DKK 80 per share. So what has happened since you're not follow up on that.

Yes. Very good question. When we announced this in the full year report in February, we said that the Board will endeavor to start distributing capital in the second half. And there is no timing on the announcement being made. And as I said just recently to one of our analysts here, we're looking at this on a quarterly basis with the Board, and they are very keen on actually distributing excess capital back to shareholders. But it all is a matter of timing of stress testing, quality of the capital position, but also a dialogue with the FSA. So I think we're still within the range of saying that we will -- we hope to start distributing in the second half of this year. We can announce it at any point in time whenever we get an approval from the FSA. And it's not tied to the days where we release the quarterly numbers.

But you would have expected it at 28th of February, then you had expected that it was all right to start it up. But now you don't think it's all right to start it up because we haven't seen the buyback and the shareholders are very disappointed today.

We have -- when we announced this in February, we said that the Board will endeavor to distribute capital. There was no guarantee, but it was our aim because we had to rebuild capital after the acquisition of Handelsbanken in December of last year. And I think we're still within that time frame of delivering on that note from February of this year.

Okay. We expect it soon.

Thank you all for participating in today's conference call. A recording of the call will be available on our IR website in the coming days. Please do not hesitate to contact us if you have further questions. We appreciate your interest in Jyske Bank and wish you a nice day. Thank you. You may now disconnect.