Nordea Bank Abp ($NDAFI)

Dear Nordea shareholders and everyone joining us today, welcome to Nordea management Q&A ahead of our Annual General Meeting 2026. My name is Tuomas Forsell, and I will be moderating this event. Today, we are hosting Nordea's first fully virtual Annual General Meeting. During the first part of today's program, we will have a question-and-answer session with Nordea's management. [Operator Instructions] We will go through as many questions as possible during the session. The formal Annual General Meeting will begin later today, shortly after this event. I will explain how to join the meeting at the end of this session. With that, it is my pleasure to give the floor to Nordea's President and Group CEO, Frank Vang-Jensen for an overview of the financial year 2025.

Good afternoon, and thank you for joining us. In my remarks, I will reflect on the past year for Nordea and also outline the ambitions we have for our new strategy period. However, I would like to begin by acknowledging recent global events, including the difficult and troubling situation in the Middle East. Together with the ongoing war in Ukraine and tensions around global trade, the conflict in the Gulf has underlined how quickly geopolitical tensions can escalate. Given all the uncertainty, the world economy has proven stronger than many expected it would. That said, there are clearly significant risks to growth today, and we are following those developments closely. In times like these, resilience is a critical asset. Fortunately, the Nordic countries are well positioned with strong economies, political stability and a proven ability to adapt in challenging global conditions. The Nordics are also home to thousands of companies, many of them our customers that have competed and continue to compete very effectively in global markets through their commitment to quality, innovation and by being agile. These enduring strengths give me confidence that our region, one we have called home for generations, will continue to perform strongly. At Nordea, we are also well equipped to fulfill our responsibilities to customers, stakeholders and society with advice and capital and with a broad range of financial services and a very strong balance sheet. Our diversification is a key strength. Income, lending and profits are well balanced across sectors and across our 4 home markets. And 2025 again showed the value of this very well-diversified model. We delivered strong results, achieving high profitability and driving higher customer activity and business volumes. Consumer confidence across our home markets remained understandably muted and markets were flat or growing only slowly. Even so, we grew volumes faster than most of our competitors. Income was pressured by the subdued markets and lower policy rates. We offset some of that pressure with strong cost management, including adjustments to our workforce. Earnings per share were slightly lower year-on-year, though the decline was smaller than for many of our peers, again, reflecting the resilience of our business. Return on equity was 15.5% for the year, the third year in a row, it exceeded 15% and placing us among the leading European banks. The performance reflects the momentum we have built since we set out to reshape the business 6.5 years ago. We now have 2 successful strategy periods behind us. And in the second, running from 2022 to 2025, we again met or exceeded all targets. Over this period, we worked steadily to strengthen our competitiveness, putting customers at the center and focused relentlessly on serving them better. And that work is paying off. We have grown our business with both existing and new customers. Today, we are also a digital leader in financial services in the Nordics and are recognized as being among the best in Europe in this area. Moreover, we have strengthened through significant strategic investments in technology, data and artificial intelligence, growth and risk management. These investments reinforce our position as a safe and trusted financial partner. Growth has been particularly notable in our strategic focus areas, including Sweden and Norway. In Sweden, targeted initiatives has helped us reclaim a leading position in one of Europe's most competitive markets. Alongside further gains in mortgage market share, we grew in private banking and in small- and medium-sized businesses. And in Norway, we have complemented organic growth with bolt-on acquisitions and grown significantly in several areas. Across the Nordics, growth has been broad-based, including in savings and investments, life and pensions, private banking and corporate banking. The strong progress in recent years is visible in our financial performance. We are more profitable. Our return on equity of 15.5% in 2025 compared with a return on equity of 11.2% in 2021. We are more efficient. Our cost-to-income ratio of 46% last year compares with 48.3% in 2021 despite significantly increased investments in strategic areas. Credit quality has remained strong throughout the period with loan losses of 5 basis points, well below the long-term average. And capital generation has remained very strong. All of this has enabled substantial shareholder distributions amounting to more than EUR 17 billion, well above our original target. Our momentum in the early part of the period led us to raise our ambition from EUR 15 billion to EUR 17 billion to EUR 17 billion to EUR 18 billion, and we ultimately delivered EUR 17.4 billion. All in all, we can look back on a successful period for Nordea. By many measures, we are stronger now than we have ever been. Our progress reflects the hard work of our employees, and I would like to thank my colleagues for their efforts. I'm also grateful to our customers and shareholders for their continued trust and support. We begin our new strategy period, the third since our repositioning from a solid foundation and with high ambition to be the undisputed best-performing financial services group in the Nordics. Looking across to 2030, our priorities are clear. The first is to grow faster than the market while sustaining high profitability, and we have identified 6 distinct growth pockets where we believe we can outperform. The second is to lead with a compelling customer offering and the best digital experience. And third, we will deliver Nordic scale benefits for superior competitiveness and efficiency. Nordea's size and scale are a significant advantage for both us and our customers because we operate across all 4 Nordic countries, we can spread costs, share systems and invest more than smaller or more local players. While we have already benefited from our scale, much of the potential still lies ahead. Efforts are focused on 4 everyday banking areas that matter most to customers, mortgages, corporate lending, savings and payments. The aim is to be better, faster and more consistent in better in these areas across the Nordics using technology, data and AI. For example, in mortgages, customers want a fast and seamless experience, and we will have 90% of the mortgage loan promises automated. In corporate lending, credit decisions will increasingly be supported by automation and AI, cutting decision times dramatically, in some cases, by up to 90%. In savings, improved digital tools and more streamlined products will reduce the time customers spend in advisory meetings by up to half. And in payments, more modern and reliable payment systems will make experiences smoother and reduce the need for customers to contact us for support. In many areas, we will replace local processes with Nordic ones. And in doing so, we will strengthen our competitiveness and deliver better customer experiences faster and at lower cost. Supporting the transition to a more resilient society is very much part of our responsibility and purpose. Building resilience means taking action on a range of environmental and social factors that matters to us, our customers and the societies we serve. When it comes to the environmental impact from our operations, we have made good progress. Among other of things, we have reduced carbon emissions from our own operations in targeted areas by more than 50% since 2019. At the same time, we recognize that our greatest impact comes through our lending and investment portfolios. By supporting customers in their transition, we can help reduce emissions and strengthen environmental and social performance across our portfolios and make a real difference across the Nordics. Since 2019, we have reduced financed emissions in our lending portfolios by 44%. That keeps us firmly on track to meet our 2030 target and on a clear path towards net zero by 2050 at the latest. Since 2022, we have also facilitated EUR 235 billion of sustainable financing to our customers, demonstrating our ability to contribute to the societal transition. Building resilience also concerns our own workforce and people in the communities where we are present. And as an employer, we are committed to ensuring inclusion, equal opportunities and a healthy work environment. We believe diverse teams and inclusive leadership lead to better decisions and stronger performance. And in 2025, women held 43% of roles across our top 3 leadership levels in line with our long-term target. Our financial ambition is high in the new strategy period. We are targeting a return on equity of greater than 15% each year through to 2030 and significantly higher in 2030 itself. Accordingly, we expect to deliver a return on equity of greater than 15% for the full year 2026. We're also targeting a cost-to-income ratio, excluding regulatory fees of 40% to 42% in 2030. From today's level of around 45%, reaching that target will be a gradual process with progress accelerating as structural and cost reductions come through. While we do aim to improve our cost-to-income ratio every year, there are still uncertainties in the world today that cause us to be prudent in our guidance for this year. Accordingly, we expect to deliver a cost-to-income ratio excluding regulatory fees of around 45% for 2026. Rest assured that we will carry out our plan forward with the same dedication, discipline and focus that have guided us through our past 2 strategy periods. When you make a commitment, we stand by it. Once again, our ambition is to become the undisputed best-performing financial services group in the Nordics.

Thank you, Frank. We will now move on to your questions. Joining us today on stage are, Sir Stephen Hester, Chair of the Board. Sir Stephen; Sara Mella, Head of Personal Banking; and Martin Persson, Head of Asset and Wealth Management. [Operator Instructions] While we wait for you to type, Sir Stephen, let's start with a question about today's AGM. Why did Nordea choose to go with this fully virtual form?

Well, we're actually quite excited about the virtual AGM. And there are some, of course, if you like, modernity reasons for doing it. The whole world is moving in a digital direction. Companies all around the world are increasingly holding AGMs in virtual form. And one of our big business ambitions is to be the most digitally successful bank in the Nordics and the Nordics itself is a digitally advanced region. Secondly, of course, there's an environmental reason. We'd much rather the people who care passionately about the environment and otherwise have burned carbon to come to our annual meetings can make the same points to us by online instead of having to burn carbon to come here. But more importantly than both of those reasons is really an issue about fairness or let's call it, democracy. And that is to say that Nordea is in some ways, unusual that we are the only genuinely pan-Nordic bank and not just in terms of where our operations are and where our history is, but also where our shareholders are. The great majority of other companies have retail shareholders, in particular, concentrated in one country. Ours are across the Nordics in very large numbers. And so historically, by holding physical AGMs in just one place, we have de facto disenfranchised the great majority of our retail shareholders who live in other places and practically are not able to travel to the AGM. And there's no doubt that when you have a physical meeting and an online combined, the people online are at a disadvantage to the people in the room. And so we think that this way, our shareholders in Denmark, our shareholders in Sweden and our shareholders in Finland are on a completely equal basis. They can contribute to our deliberations, not just in this meeting, but together with this virtual AGM, we will have a program of shareholder events physically in each of our countries over the next year to make sure that for those people who want to physically interact with management and some Board members, there is that opportunity also in a more relaxed and informal way than the formality of resolutions. So for all of those reasons, we think it's a good thing to do. We hope it goes well. And we, of course, will collect feedback from everyone afterwards to see how we can keep improving in future years.

Thank you very much. Let's then move to the chat questions. And Frank, I think the first one here is a follow-up for your speech here. There, you, of course, mentioned the 2030 strategy announced at the Capital Markets Day in November. How has the investor reception been since the November event?

Thank you, Tuomas. The reception has been very positive. So we have had enormous many meetings since the announcement of our strategy at our CMD in November. And the short story is that the investors of ours appreciate the very ambitious plan, the targets and that it is a strategic plan and not only an operational plan that is very short term that basically just will short-term cost or something. This is making a plan that will make Nordea even more competitive and even stronger and even more fit for the future. And it's building on a foundation that is super strong, and we know what we are capable of delivering. So looking at the targets, which has been very much supported, you will understand that they are very ambitious. So we are targeting a return on equity greater than 15% through the entire period and significantly higher in 2030. And we're also are targeting an improvement of our cost income from 45% to 40% to 42% in 2030. And finally, our ambition is to grow the company. So it's a combination of growing the company and making even more efficient. And that will likely lead us to above EUR 0.02 per share EPS. So that's an increase of 45%, 50%. So all in all, very well received.

Thank you, Frank. We have another strategic question, Sara, the questions I think this might be more for you. AI has been mentioned as a key part of the 2030 strategy. But what can Nordea customers then expect for their services? What are the improvements by AI in the coming years?

Thank you for the question. AI will support us to enhance customer experience and be faster and more efficient with our processes that will benefit customers. Three things that I could especially mention. First is personalization. So we will provide even more personalized services to our customers. In practice, that is more relevant insights and offers and guidance to our customers real time, meaning that on the spot, they need it. We will also have faster and faster responses and resolution for customer asks and needs. First of all, of course, with the conversational chatbot for the customers who enjoy that and like that and prefer that, but also with our advisers and customer service staff because we will have AI assistant supporting our advisers. And then third thing to mention is that customers will experience more frequent new digital services and upgrades to our digital services as our software developers will also have AI supporting them. So therefore, our release cycles to bring in new services, it will be more frequent and more often. So overall, I would say, faster and smoother banking experience.

Let's Martin, then move on to you. We here have a question about recently, Nordea updated some of its sustainability sector guidelines. Can you explain the reasoning for these current updates? And are you planning to continue expanding sector targets also to additional industries?

Yes. I mean, first of all, we run overarching portfolio lending targets that's on financed emissions. So that's important to state first, where we have promised to reduce our finance emissions by 40% to 50% by 2030. And by end of 2025, we have already reduced by 44%. Remember that all sectors of lending is included in that target. I think we're quite unique in the banking sector to have that inclusion. To support that overarching target, we also disclose with transparency individual sector targets. We have now -- today, we have shipping, we have agriculture, we have residential real estate and oil and gas extractions. February update was a good example as the question stated, where we make further transparency and disclosure updates. We have an annual will or annual approach to the updates. We constantly strive to become better and better for all our stakeholders, and that we will continue with.

Let's take one follow-up question, Martin, on this as well. You mentioned the oil and gas guideline as well, there's a question, how does this guideline take into account the impact of oil and gas operations for the indigenous people in the Arctic?

Yes. I mean, first of all, we share the importance and sensitivity with and around Arctic, right? That is also why it's important for Nordea to state that we have reduced our financed emissions by more than 99% since 2019. We now have a total lending to oil and gas extractions of 0.001%. So 1,000 of a percent. That is -- and also, as I said, the update we did now in February, where we roll out the baselines from 2019 to '24 and the target from '30 to 2035. So we are constantly reviewing and updating and yes, to become a better bank.

Thanks, Martin. There are a few other questions on this topic as well. But for the sake of time, this will be addressed also later in the session. So let's move on to a few other questions now as well. So Stephen, this, I believe, is a chair question. How do you, in the future, want to balance growth of dividends and share buybacks in your capital policy?

Thank you for that question. And of course, our policies in terms of distribution are flexible. We can change them over time. But I guess the way we think about it is first of all, we want to have the best possible business we can have to service our customers. And so if it's possible for us to profitably invest in better services, better technology, whatever forms of investment, we want to do that. If we can meet our customers' needs in bigger amounts, if we can grow with our customers, we want to do that. And in serving our customers well, of course, we then seek to make a good profit. And the first use of our profit is to continue that process of supporting customers of growing and investing in our business. To the extent we have some left over, I hope it's not too much left over because it would mean we would be growing very fast with our customers. But normally, there's a good amount left over, and we think that we should pay the largest amount of that in regular dividends that our many retail investors can rely on. But there's inevitably uncertainties in our business. The demands of our business can go up or down, the profits can go up or down. And so a more flexible element can be taken care of in share buybacks. If there's money that we can't profitably invest in our business on top of the dividend, share buybacks is a good way of doing it. And so I would expect roughly the pattern of what we've been doing in recent years to continue, subject to how much we can profitably invest in our business, which is always our priority #1.

Thank you. Let's move on to a few current questions here. If we bundle 2 here. Maybe, Frank, I'll give this to you. How does the current geopolitical uncertainty effect. First, of course, Nordea, your business, and then also your customers?

Thank you, Tuomas. In general, of course, it's not helpful. It creates some uncertainty and uncertainty is not really helpful for growth. That said, when you look at the Nordic societies in which we operate, they are holding up very, very well. Our customers are in a good shape. They want to move ahead. We have seen the start of the year being very positive when it comes to believe in the future, investment initiatives and so and even the consumer confidence has increased. So I think we are in a very, very strong position and very resilient place of the world. For Nordea, I would say that Nordea is built to be strong in all sort of kind of weather. And with the risk profile we run with, I would say that we are very well equipped to continue supporting our customers and also grow the company in the future. What happens at the moment, of course, in the Middle East, nobody knows how it will end. Right now, it's a question about energy prices. Over time, it might be a question about increased inflation and thereby what will that do to the growth as interest rates will come up and so as well potentially. But let's see, it can still change. And hopefully, we'll get some piece down there. So all in all, super strong position for Nordea and our clients.

Thank you. Another very current topic that I believe this is especially for your business area. New regulations for the Swedish mortgage market will come into force on April 1 this year, just about a week ago. How will this affect Nordea, your customers? Some of the questions.

We, first of all, of course, welcome that there is a bit of a release for the younger customers. So it's less of a down payment that they need in order to invest and buy a new home. And I think that will support the market growth overall in Sweden. And then we -- as I believe also other banks are questioning a bit of the change that existing mortgage customers when they would need to do, for example, top-ups on top of their existing mortgage that there, they can only lend 80% to their property value. So it's reduced 5% from 85% to 80%. And that, of course, there's a bit concern that is there possibly a delay to some needed renovations that customers would need to do or that they would need to seek for other type of funding, unsecured funding, which is, of course, more expensive for them. So hopefully, it supports the market overall and especially we're happy for the younger customers.

Thank you, Sara. We also -- Martin have a question regarding your business area, also for Sweden, but then also Nordic as well. How will Nordea secure a competitive edge in an increasingly crowded private banking market?

Yes. Good question. I think what we presented in the 2030 strategy is all about having super sharp value propositions that we invest in the digital customer experience. We also need to hire more advisers because we are going to aim for more than 15,000 more families to join our franchise and our fantastic offering. And we need to play, as Frank has already stated on the Nordic scale and efficiencies for the benefit of the customer experience and offerings and many, many more things. But we have -- it's all about being clear with the strategy and sticking with it. And we are already in full swing in the execution of what we have promised.

Thank you, Martin. Frank, let's take one for you. Next, bolt-on acquisitions are part of Nordea strategy. When can we expect Nordea to act? Could you enter also a market outside the Nordics?

So starting with the latter part. So our strategy is Nordic. So our home markets are the 4 countries in which we have operated for many, many, many years, and that's where we wanted to develop this coming strategy period. Our main focus is organic growth, meaning that we have a plan. We'll do whatever we can to execute on that plan, and that will lead to more customers, more business, higher income and more efficiency. If we can accelerate that plan by adding companies that will fit well into the Nordea family, we, of course, would be very happy to do so. We have done a number of bolt-on acquisitions in the recent years, and we very much welcome even more. But let's see what the future will bring.

Thank you, Frank. There is sort of in the same area, of course, within strategy, but Sara maybe I'll give this at least first to you. There's a question. Nordea has targeted Sweden as one of its key growth areas. How are you planning to reach your growth targets there?

First of all, I could say that we are very experienced in winning the Swedish market. We've done that for several years, and we definitely plan to continue on that. We will strengthen our brand, our customer service and our offers and offering to customers. And I think we are quite well -- we have an advantage, I would say, on 2 things, especially. One is that our digital services are really valued by the customers, especially on the mortgage journey that our customers have. And then the second thing that I would highlight is that we have a fantastic culture in Sweden. We are very passionate and obsessed about winning the hearts of our customers. And that is something that has been a key thing in the recent years. And that is also something which is very difficult to copy by others. So we plan to continue in the same way in Sweden.

Thank you, Sara. I think you already covered part of the next question is for Sweden. But Frank, maybe if you want to follow here, what are the key directions where Nordea is seeking growth geographically and business area-wise?

So we have 3 main legs in our strategy. One of them is grow above market, so growth pockets to our countries. So we have especially our special focus, strategic focus on Sweden and Norway. We have 2 segments. These are small businesses and private banking, which private banking, Martin talked about. And the small business is an area that we will go all in on now and we'll claim our natural market share on these as well. And then we have what we call cross sales. That's basically about dressing up our customers, helping with all their needs and ensure that they feel the size and the quality of Nordea by being exposed to all the services that we have that is relevant to them. And then there's life and pension. These 6 areas we are investing in quite significantly, and we believe that we have the right to win in these areas.

Thank you, Frank. Let's continue a little on the theme, Martin, a follow-up question on this few as well. Nordea asset management is largest in field in the Nordics, but compared to global players, still room for growth. Does Nordea intend to claim to become a global asset management player?

Well, I would claim that we already are a global asset management in the leg of our international ambitions of asset management. So that we already are. But it's true, we are slightly smaller after current consolidation, specifically in the European asset management industry. But we are very happy where we are, and we are going to win in the fields of the strategy where we have defined fixed income BetaPlus and the sustainability families to be our very core in the strategy and that we are going to be very disciplined and supported with.

Thank you, Martin. Frank, coming back to you with bit detailed going back to Capital Markets Day as well in November. At the event in November, you said you expect an average annual cost growth to be around 2% in the run up to 2030. Should we expect 2% cost increase in 2026? And do you aim to grow income more than costs? I believe this is for this year.

So what we have said for 2026 is that we are targeting a cost income of around 45%. And then we have guided for what we call CAGR, so an average cost growth rate of 2% throughout the 5 years period. But what we also have said is that we expect the income to grow significantly faster than the cost and how it will play out each year then, let's see. But we are guiding for the first year now, and that's based on a cost/income ratio.

Thank you, Frank. Now at this point, I think we'll thank you for the questions so far to everyone who participated to recognize active shareholder engagement and dialogue, we have also agreed in advance to give AkademikerPension from Denmark opportunity to submit a prerecorded shareholder comment. The video will be then followed by a short statement from Nordea's Chair.

Dear Chair, Board and management. My name is Anders Schelde, and I'm Chief Investment Officer at AkademikerPension, and I'm today speaking on behalf of AkademikerPension. I'm here today to follow up on our constructive dialogue where we call for greater transparency on how Nordea's climate ambitions are reflected in practice. Nordea has set ambitious climate targets and demonstrated the ability to act on them. We recognize the achievement and the dedication. However, one question remains, how does continued financing of oil and gas align with these targets? In response, Nordea has launched a report enhanced disclosure for Nordea's oil and gas portfolio. First and foremost, we appreciate the swift response to our request for greater clarity. The report shows clear progress, including a significant reduction in exposure since 2019 and a more focused portfolio, largely in upstream activities on the Norwegian continental shelf. The report outlines Nordea's rationale for continued financing, including reduced exposure, a more selective portfolio and the role of lower emission production and energy security. However, this does not fully resolve how continued oil and gas financing aligns with the bank's long-term climate targets. From an investment perspective, this is where we see an important tension. The report highlights the importance of being clear and honest about climate risk that still exists about credibility and about responsibility. Nordea manages its commitments primarily at the portfolio level. Climate risk does not arise at the portfolio level. It materializes in individual decisions, transactions and exposures. That is where we see that long-term finance risk can build up. As investors, we need clarity on how your commitments influence financing decisions, especially in the sector with high transition risk. If climate targets are to be credible, they must also be decisive. There must be action behind the words, just as Nordea has already demonstrated in reducing finance emissions. We will continue our dialogue with Nordea as a constructive effort to ensure alignment between targets, decisions and accountability. Thank you.

Terrific. Well, I think if I might say that welcome and interesting contribution is, of course, one of the things made even more possible by this virtual AGM as we have, in this case, a Danish shareholder able to contribute to the meeting and to do so without using carbon emissions. Also, I would thank the contribution, in particular, because AkademikerPension have been a showcase of the engagement with Nordea of the willingness to give us their ideas, to exchange ideas with us, have helped us in certain aspects of enhanced disclosure, and we welcome that engagement from any shareholder. And so I welcome the contribution. On the matter at hand, I think it's -- there's not in a way, too much more to say. We share the passion and the ambition for our societies and our world to decarbonize and to mitigate some of the worst effects that will otherwise occur from climate change. And we want to be in the vanguard of encouraging society to move in that direction. And we are in that vanguard. We are absolutely at the leading edge of our commitments for the future and of the action we have taken so far in reducing our financed emissions. So we, in a sense, feel that we are the good guys in this respect. But we also have an even bigger duty to all of our customers and the societies in which they operate. And it is simply the case that our societies, the Nordic societies and broader across Europe are not able today to cut off in a fast and immediate way their exposure and their reliance on oil and gas. And we see what's happening in the Middle East underlying this. If it were not for Norwegian oil and gas, the Nordics would be dramatically poorer and so would Europe also and maybe not just poorer in a very dangerous situation. And so there has to be a transition. And in line with our responsibilities to our society and to our customers, we want there to be a transition, not a sudden cutoff. And that's very much the way we are trying to lead. We believe that we will be in the vanguard of the transition, but we have to have our first responsibility to our customers and society as a whole. So thank you very much for the input, and we will, of course, look forward to continuing this dialogue.

Thank you, sir, Stephen. And this now concludes the management Q&A session. Thank you again for all your questions. To those whose questions we did not have time to address now, our Investor Relations team will be happy to follow up. We will now prepare to move into the formal Annual General Meeting, which will begin shortly. If you are participating online, please follow the instructions on your screen to join the meeting. We will take a short break now before the AGM starts. Thank you again, and see you soon.