Nordea Bank Abp ($NDAFI)

Good morning, and welcome to Nordea's First Quarter 2026 results. I'm Ilkka Ottoila, Head of Investor Relations. As usual, we'll start with the presentation by Group CEO, Frank Vang-Jensen, followed by a Q&A session with Frank and Group CFO, Ian Smith. Please remember to dial in to the teleconference to ask questions. With that, Frank, please go ahead.

Good morning. Today, we have published our results for the first quarter of 2026. It has been an unsettled start to the year once again. The conflict in the Middle East that escalated in March has created further geopolitical uncertainty and is driving volatility in the financial markets. It also has implications for short-term energy supply and inflation. Sustained disruption to global energy markets may dampen economic activity, including in the Nordic countries. While the situation continues to evolve, it's something we are monitoring closely. Fortunately, the Nordic countries have a strong track record in navigating uncertainty. The stability, fiscal strength and global competitiveness of our home markets make them some of the world's best places to live and do business. This is something I have talked about a lot in recent quarters. It is, in addition, worth noting that our region is also structurally well positioned in terms of energy resilience. This is due to its substantial renewable capacity and Norway's role as a major energy exporter. We clearly saw the benefits of that stability during the last energy crisis in 2022. As for Nordea itself, we are uniquely diversified across these attractive Nordic markets. Years of relentless strategy execution have made us stronger and more resilient than ever and leave us very well placed to support customers. That strength showed again in our first quarter performance with solid growth in business volumes and high profitability. Return on equity for Q1 was 15.4%. The implementation of our 2030 strategy has started well. One of our key strategic priorities is growth. And here, our agenda is focused on 6 distinct growth areas. We are seeing -- we are seeing good early momentum in Private Bank, Life & Pension, small businesses and cross sales. We're also encouraged by the steady progress we are making in Sweden and Norway. Our two other strategic priorities are to strengthen our customer offering and make more effective use of our Nordic scale. And execution on these is likewise off to a good start. During the quarter, we launched our unified Nordic corporate credit and lending platform. We also took further steps in our deployment of a more scalable and resilient payments platform. All part of our drive to enable outstanding customer experiences and superior efficiency. Let's now take a look at the first quarter and some of the financial highlights. Our return on equity was strong at 15.4%. Earnings per share were EUR 0.36, up from EUR 0.35. We were especially active in our corporate customers, with our corporate customers increasing lending by 11%. Corporate deposits went up 2%. Households were active too though to a lesser extent. Mortgage lending was up 2% and retail deposits were up 5%. Asset under management increased by 9% to EUR 464 billion. Net fee and commission income was strong, up 6%, driven by growth across fee types. Net fair value result was down due to lower market making income, that followed the sharp increase in interest rate expectations during March as the Middle East conflict intensified, which led to exceptional losses across certain desks. Total income was resilient with a 2% decrease primarily reflecting lower net interest income due to policy rate reductions and lower market-making income. We continue to manage cost with discipline. First quarter operating expenses were flat before foreign exchange effects. Our credit quality remains very strong. This quarter, we fully deployed the remaining portion of the management judgment buffer we created during the COVID-19 pandemic. We reallocated EUR 116 million to further strengthen our model provisions, and we released the remaining balance of EUR 160 million, which was deemed surplus provisioning. Excluding the release, net loan losses and similar net result for the quarter totaled EUR 61 million or 6 basis points. Our strong capital generation continued and our CET1 ratio was 15.7% at the end of the quarter, which is 1.9 percentage points above the current regulatory requirements. With a solid start to the year and despite the increase in uncertainty in the latter part of the quarter, our full year 2026 outlook is unchanged. We expect a return on equity of greater than 15% and a cost-to-income ratio of around 45%. Our Q1 net interest income was lower as expected, reflecting the policy rate reductions and lower lending margins. We moved beyond the low point in daily NII and returned to growth during the first quarter. This was supported by both higher business volumes and our deposit hedge. Among corporates, we increased lending by 11% year-on-year, with all countries contributing. This was the first time we have had double-digit year-on-year growth in any quarter since 2022, and it underlines how Nordic businesses are very adaptable to the changing environment and are showing willingness to invest. Corporate deposits were up 2%. That's modest growth, which we likewise interpret as a sign of increased risk appetite. Household customers also increased their activity with mortgage volumes up 2% from still muted levels. The housing market is picking up, though only gradually. As in previous quarters, households have been more focused on strengthening their savings and investments. Retail deposits were up 5%. The deposit hedge meanwhile, continued to provide support to our income year-on-year, improving NII by EUR 55 million. Our net interest margin for the quarter was 1.57%, unchanged from Q4. Net -- drive by growth across different fee types. The higher savings fee income was driven by the higher average assets on the management and positive net flows in investment products of EUR 1 billion even with nearly EUR 2 billion of outflow related to dividend payments. In our Nordic channels, we continued to see very good customer intake in private banking with solid net flows. In our international channels, we delivered positive net flows again despite increased investor caution. Brokerage and advisory fee income increased, supported by stronger debt capital markets activity, and strong income growth, 11% from our secondary equities business. Higher customer activity also drove growth in payment and lending fee income, and we were particularly pleased to have driven good performance in the strategically important cash management area. After a strong start to the quarter -- brought extremely volatile market conditions driven in particular by the developments in the Middle East, the resulting sharp increase in interest rate expectations resulted in losses in our market making operations in March on doing the strong start to the year. Consequently, net fair value result was down 22% year-on-year, reflecting the impact from those March market. Customer activity was strong through most of the quarter, particularly in FX and interest rate hedging as clients actively manage risk. Activity in equities and securities financing also held up well -- with our plan and were flat year-on-year, excluding foreign exchange effects. Our strategic investment spend was stable and we are managing costs with our usual disciplined approach, taking the market environment into account. Including FX, costs were up -- income and there is no change in our guidance that we expect to be around 45% for the full year. During Q1, as part of our 2030 strategy, we announced restructuring initiatives to change the composition of our workforce. With our Nordic scale and with the impact of AI and process optimization, we expect to have fewer employees in the use of that today. The restructuring initiatives are set to effect around 1,500 employees across the group during '26 and '27 and from '28 should deliver annual cost reductions of at least EUR 150 million. This is a part of our 2030 strategy and is in line with the target we communicated at our Capital Markets Day to deliver structural gross cost reductions of EUR 600 million by 2030. In connection with these initiatives, we booked restructuring costs amounting to EUR 190 million this quarter. This has been reported as an item affecting comparability and is excluded from our 2026 financial outlook. Our credit quality continues to be very strong. This quarter, we fully deployed the remaining portion of the management adjustment buffer we established 6 years ago during the COVID-19 pandemic. All this period, the buffer has been continuously assessed in light of the macroeconomic conditions and in the knowledge that our loan portfolio performance has been consistently strong. Risk has been assessed to be largely reflected in our modeled provisions without the need for additional management overlays. As a result, the buffer has been gradually reduced and is now fully deployed. On the remaining balance, we reallocated EUR 160 million in the quarter to further strengthen our model provisions, while EUR 160 million was deemed surplus and was released. Consequently, net loan losses and similar net results amounted to a reversal of EUR 99 million. Excluding the release, net loan losses and similar net result for the quarter totaled EUR 61 million or 6 basis points. We continue to have a strong capital position. At the end of the quarter, our CET1 ratio was 15.7%, 1.9 percentage points above the current regulatory requirements. Our strong capital position and continued robust capital generation support lending growth and continued shareholder distribution. During the quarter, our AGM approved a dividend of EUR 0.96 per share for 2025, which was paid to shareholders in early April. Additionally, the AGM granted the Board authorization to decide on the distribution of a midyear dividend in 2026, which would correspond to approximately 50% of the net profit for the first half of 2026. Turning to our business areas and starting with Personal Banking, where we maintained solid business volume momentum and customer activity. Despite the market volatility, customer savings and investment activity remained at high levels and household prioritize increased by still positive despite the market turbulence though lower than in the previous quarters. Housing market activity continues to gradually pick up but remains slow. Even in this environment, we increased mortgage during mortgage market growth well above our own back book market share. Customer engagement with our digital services continued to increase supported by our expanded offering of self-services features in our mobile app and online. App users and log-ins were up 4% and 6% year-on-year. And we are also seeing a growing share of savings and investment activity through digital channels. One of the areas we are targeting for growth is cross-sales. And we are seeing good traction, supported by successful product launches in savings and by more automated process for account opening and onboarding. Net fee and commission income increased by 6% driven by higher payment cards and savings income and net insurance result increased by [ 46% ]. Total income decreased by 5% year-on-year, driven by lower net interest income and the lower policy rate environment. Return on allocated equity with -- we maintained solid business momentum and deliver a resilient investment performance in difficult markets. Cost of acquisition remains strong, reaching record highs in both Denmark and Finland and supporting net flows of EUR 1 billion in private banking. In our international channels, we recorded positive net flows again in the first quarter despite increased investor caution due to the Middle East conflict. The wholesale distribution business has shown resilience since the middle of 2025 and positive flows in the current environment testify to the attractiveness of our product offering. Net flows in life and pension were EUR 1.7 billion. We maintained good momentum across our 4 markets and third, reinforce our position and Nordics second largest player. Gross written premiums in the quarter amounted to EUR 4 billion, up from EUR 3.7 billion a year ago. Assets under management increased by 10% year-on-year, to EUR 185 billion. This was driven by market performance and the positive flows despite the sharp decrease in investor confidence in March. We continue to progress with our strategic ambition to offer an outstanding savings and investment experience across the region. Among other enhancements made in Q1, we are now using AI to provide timely and relevant information to our customers about their investments they hold. Total income was up 1% year-on-year, with net fee and commission income rising in line with the higher asset under management. Return on allocated equity with amortisized resolution fees was 38%. The cost-to-income -- good growth in Sweden and Norway and stronger activity in Denmark. Deposit volumes also grew by 8% with all markets contributing. We continue to strengthen our digital offering across the Nordics, a key enabler of our growth ambition in the small business segment. In Q1, we launched that DDTL onboarding platform in Denmark and Norway, making it -- a wider Nordic expansion is planned for the coming quarters. We also kicked off the Nordic rollout of our new business inside service, which helps mall businesses manage liquidity and cash flows more effectively. In Sweden, this was fully launched in Q1. The launch was well received, and the service will next be rolled out in Finland, eventually to all countries. Total income was unchanged year-on-year, as higher volumes and ancillary income were offset by lower deposit income. Return on allocated equity was 18%. The cost -- business volumes as we supported our customers in the volatile market environment. It was a solid quarter on most line income lines, but extreme market volatility in March, negatively impacted our Market Making results -- lending fees and bond issuance activity supported a 14% increase in net fee and commission income. Deposit volumes decreased by 5% year-on-year, but increased by 2% compared with the previous quarter. Debt capital markets activity remained high despite the market volatility -- 190 debt capital markets transaction so far this year, so off to a strong start. Primary equity market activity remains subdued, but our secondary equities business grew by 11% -- the cost-to-income ratio was 41% -- so markets later in the quarter. While there is uncertainty around global growth, confidence among Nordic businesses has not wavered, underlining the resilience of our region. Resilience is a critical asset and one that Nordea also demonstrates. As a large and well-established group, we are continually investing in capabilities that makes us even stronger, including in digital services, technology, security and risk management. We're also very well equipped to support customers and all stakeholders, thanks to our unique market position and presence, leading offering and strong balance sheet. The higher business volumes in both lending and deposits are likewise encouraging and will support our income. Our outlook for the full year 2026 is unchanged. We expect to deliver a return on equity of greater than 15% and expect our cost-to-income ratio to be around 45%. Our vision is to become the undisputed best performing financial services group in the Nordics. Thank you.

Operator, we are now ready to take questions.

[Operator Instructions] The next question comes from Gulnar Saitkulova from Morgan Stanley.

So on NII, as resin that Q1 marks the trough for NII, could you walk us through how do you expect the trajectory to go from here, particularly in a scenario where the rate hikes materialize, and big drivers between the hedge contribution pricing and the volume growth? That's the first question.

Gulnar, and thank you for the question. So let's set aside potential rate hikes for the moment. What we -- what's driven the, I guess, the -- moving on from the trough and NII is that we've been able to add volumes. And how we proceed from here for the rest of the year is really a question of volume development and margins. And we're pretty confident that we'll continue to add volumes over the course of the year and that's going to help move NII forward. Margins are a bit more difficult. We continue to see pressure on the margin side, particularly on household and as we've said consistently, a return to confidence that drives higher volumes is most likely the answer to that. So we're pretty constructive on NII continuing to improve. I think the outlook for the full year is kind of in line, maybe slightly better than 2025. Now rate hikes, first of all, they've got to happen. So we need to see policy rates actually move before we see that impact our NII. So let's see if that happens. Our latest market expectations so that these are going to impact the second half of the year rather than anything in Q2. And then in terms of hedge, let's -- we'll work that through in terms of the timing and extent of rate hikes, not expected to see anything dramatic in terms of impact in 2026. So overall, provided we don't see something untoward on the margin side. You can expect to see a gradual improvement in our NII.

And a related question on the volumes. As we move through Q1 into Q2. Have you observed any meaningful changes in the customer sentiment, particularly in the light of the geopolitical tensions in the Middle East. And given the current backdrop, how are you thinking about the loan and deposit growth across your markets into 2026.

This is Frank speaking. So I think our customers in the Nordics and across the countries has -- they have acted quite calmly, pushed through the deals. They have been active. There might have been a couple of weeks where it was a bit or realistic what happened and how the rate changes and so how dramatic it went. But there has been no change in behavior. And I would say that -- now we're talking about the -- of course, the first quarter, but at the end of the quarter and the beginning of Q2 has showed good activity. I think we have -- and we have been speaking about it quite a long time that there comes a point of time where you just have to accept as a business leader that we are living in times where we will have to cope with a lot of volatility and uncertainty on predictability, but we cannot wait for continue waiting for the perfect moment. We have to push now for growth. Our investments in the different strategic parts and whatnot. So I think that's what you see now. We -- of course, we are not forecasting 11% growth year-on-year on corporates rest of the year. But there's no indications that it will slow down significantly right now.

The next question comes from Magnus Andersson from ABG SC.

Just a follow-up there on the -- I think the corporate lending growth is what is striking all of us. I mean in business banking, adjusted for currencies, you grow by more quarter-on-quarter. Then the market is growing year-on-year. And on the large copper side, I guess, the numbers are not actually not adjusted for FX, but still, I mean, Sweden is super strong. So could you say anything about sustainability of these growth rates on a quarterly basis. And also, I mean, you mentioned the new onboarding platform. It is Norway and Sweden growing, which you talked about at the CMD, but just the quarterly trajectory looks quite stunning. And my second question is just on capital and share buybacks. You didn't launch a new program now. Is it because the previous program, which was just finalized -- was expected to run until the eighth of May. And therefore, we will have to wait until mid-May before potentially you launched another program.

Thank you, Magnus. Let me take the first 1 and then Ian, the second one. So of course, the growth rates of 11% within corporates is a high number, and I don't want to commit to that number each quarter going forward. But let me say in the following way. So when growth is higher than expected. And when we have lots of credit, I get an overview on who they are and what is the purpose. And it looks very stable, honestly. It's super strong names. It's the customers that we have been working with for a long time. And then it can be -- you're just waiting for the opportunity to enter or we have agreed about doing something more. So there's not really any silver bullet or any single deal that has pushed it very high. So that's one. The second one, which is very positive, is that in a more broad based business banking. It's actually 3 out of 4 countries that are growing quite significantly. And it's a lot of different deals. I think what we do see now as well is that we start to see some of the proof points of our Nordic scale. So we have implemented, as you alluded to, the credit platform. We are making progress on our global payment platform as well. These initiatives help in the speed, for example, onboarding and onboarding for the customers, especially the smaller ones, on the corporate side is super important. That is helpful. So we actually also have a data point we have not talked much about, but we have a data point on our small businesses. We have, for years, struggled with some outflow. Last year, we turned it and this year has actually increased quite nicely. And so I think the momentum is good. There is no silver bullet. 11% is a high number. So don't put 11% in year-on-year or quarter-on-quarter all the time, but I cannot see why we should not continue to show nice growth within or within the corporate side this year with the information we have right now. Ian?

Yes. And you're not feeling that you're sacrificing anything in terms of margins to achieve this growth?

I think that we are well positioned to continue to delivering greater than 15% return, and that goes for the corporate business as well, and we are not accepting any deviation to our return targets. And of course, the business knows that. So I guess I'm answering -- I'm happy with what I see right now. Yes.

Magnus, it's Ian here. So you're all familiar with how we think about buybacks, and there's absolutely no change. And as I look at the market expectations for 2026 in terms of buybacks, they look -- it looks like a pretty sensible estimate versus how we're thinking about it. So no interruption to the progress there. You're right, the EUR 500 million program we launched before Christmas, which is -- we hand over the control of that to the broker in terms of levels of execution and things finished a little earlier than planned. The Q1 was an interesting quarter from a capital perspective. As you see from our disclosures, we generated capital as normal, as you expect Nordea to do. And quite a lot of that was deployed into growth. And we saw a little bit of elevated market risk capital requirements as you can imagine, emerging from what happened in March. So it's 1 of the first times where we've seen those dynamics where we've deployed the capital generated into growth. We're still really comfortable with our plans for the rest of the year in terms of capital return to shareholders and say, I think the market's got that right. We still see opportunities for growth out there. And so we'll work through Q2 and make our decision on the right time to do another buyback. And that's really when we've got excess capital that we're prepared to trim. So things proceeding as normal. I don't expect anything in the very short term but you can expect us to continue with our regular consistent buybacks during the rest of '26.

The next question comes from Andreas Hakansson from SEB.

Thank you, and good morning, everyone. Well, I really want to talk about capital, but since Magnus covered that we could move on, I think it's quite refreshing that we are talking about growth rather than just capital distribution. But Ian, you mentioned that retail is still a bit tough on the margin side. Could you quickly because we -- in Q4, we were a bit worried about the NII in Norway and then we're a bit worried about retail asset quality in Finland. Could you just briefly go through the 4 countries where you see in terms of volumes, margins and asset quality in each of the countries, please?

So let me start with -- and Andreas, let me start with asset quality, take that one off the table. No issues or concerns there at all. And so we can set that aside. I think the growth picture in each of our markets is, as always, a little bit different. We still -- as you see from the publicly available information, we're still the market leader in Sweden in terms of capturing front book share. And in our other countries, things are a little bit slow, we do see underlying growth in Norway, particularly towards the end of the quarter. So -- and this is really a function of the market and its slowness. Frank referred earlier in the conversation to the still reticent consumer, I guess. We had -- our economist certainly had high hopes towards the end of last year that, that consumer confidence would increase and that would lead to higher investment and consumption. We've had an unsettling into the first quarter that I think holds that back a little bit. And then in terms of what we're seeing on margins, still intense competition for those smaller volumes throughout. So we're having to be very much on our game in terms of managing our pricing. We've seen some positive price moves in Sweden, but we will have to see if that feeds through into margin improvements, and then very competitive in Norway, particularly among the savings banks. And so it's tough to increase margins in there. When it comes to the Danish market, you'll have seen some of our pricing moves, which is in response to the competition there. I think we see a good response from customers. And we're hopeful that feeds through into the numbers and the performance and then Finland, as market leaders there, we really want to see the market move a bit more in order to see whether we can improve our NII. So that's on the lending side. Deposits going well. Deposit margins are stronger than we had planned for and deposit volumes are good, and that's a really helpful contributor to NII. But there's no doubt that it's a tough market on the retail side and people are fighting for every -- I was going to say penny, but we don't have those in this market every krona.

And I mean...

Sorry, but the sentiment in Q1 is better than it was in Q3 and Q4. So it's going slower than we would hope, but it is building somewhat and there's -- we sense there more activity across the board. But it's different, as Ian mentioned, between the countries.

And even if we don't see central banks hiking across the board until maybe late in the year and next year, we've seen that the -- rates in all markets have moved up quite sharply. To what degree is that helpful for your NII in the near term?

So it helps a little bit on the treasury side. And I can imagine that it might encourage all of us to look at pricing because essentially that's what drives a big chunk of the cost of funds for us. So I can see that it might encourage a slightly positive development, but we really have to see the policy rate changes come through for it to start to move NII meaningfully.

The next question comes from Martin Ekstedt from Handelsbanken.

Thank you, and good morning. So first question, the staff reduction program that you've announced in Q1. So once implemented, this will deliver around EUR 150 million of annual cost savings, right? Which is about 25% of the EUR 600 million of gross cost takeout that you mentioned that you see in November. So as such, I was just wondering, should we expect 3 more cost reduction programs of roughly the same size in the year leading up to 2030, i.e., the end of your CMD plan? Or will other parts of the EUR 600 million of gross cost takeout be less lumpy, say, and less noticeable come from other areas? That's my first question.

Yes. Martin, and thanks for the question. No, we're pretty clear that we don't expect to launch another restructuring program. We tested ourselves pretty hard before launching this one about whether it was the right thing to do, both in terms of the way we manage our workforce and other factors. The reality is that we will need to reshape the workforce, particularly in technology. And that's where the focus of the restructuring has been. And everywhere else, our cost reductions are expected to come from sort of regular management of FTE because we will see FTE come down, but that's not going to come through large restructuring programs and other initiatives such as infrastructure simplification and AI. And of course, the restructuring is big. It's a very important contributor. And those EUR 150 million of cost savings, yes, the 25% of the EUR 600 million gross, but we think of it as almost 40% of the EUR 350 million net that we're committed to. So that's a long way of saying what I said at the beginning. No further cost restructuring programs.

And for the remaining part -- Martin, it's Frank. So for the remaining part, of course, there are firm plans owned by a deal team member for each stream that will lead to these cost reductions needed to deliver on our promise of EUR 600 million gross, EUR 350 million net. So of course, there is an execution risk, but we know what to do, when to do it, how to do it, and we'll tell that development very, very thoroughly.

Okay. Very clear. And then my second question then around the release of the management overlay buffer in full. That surprised at least me a little bit that you released it in full already in Q1 against the backdrop of increased geopolitical uncertainty. So could you tell us a bit more about how your thoughts went around provisioning in front of Q1? And what scenarios, if any, could prompt you then to start building up that buffer again? And additionally, perhaps, if I may, in what sectors or segments was collected provisioning strengthened by that portion of the management overlay that was used now rather than believed.

Yes, it's an important question, Martin. So first of all, we wouldn't be releasing if we thought we had any prospect of having to restore it at any point. The key thing is having looked at what remained of a provision that was established for COVID 6.5 years or 6 years ago. We concluded that there was a portion that was clearly surplus. And clearly, surplus, not just in respect of its original purpose, both from a thorough review of the portfolio, looking at stress scenarios, looking at our estimate of the impact of the energy prices caused by the escalated conflict in the Middle East. So we've looked at this from every angle exactly as you'd expect. And each time we came up with of those EUR 276 million of provisions, we would keep EUR 116 million and deploying those into our IFRS 9 model. So no longer a sort of separately categorized provision and that EUR 160 million was clearly surplus. And then in those circumstances we released. Now releasing provisions we've been pretty clear, I think, that in 2026, we would take action on the management judgment buffer. We think it's now the right time to move on and we maintain healthy provision levels, good coverage and have addressed any small areas of concern in the portfolio but these have been small in terms of how we deployed that EUR 116 million.

Okay. So the EUR 116 million was not earmarked for any particular part of the portfolio?

It has a number of different components. My point is that it's not the bulk of it is not targeted at anything specific. It was really a granular EUR 10 million here, EUR 15 million year, that kind of thing. So...

The next question comes from Markus Sandgren from Kepler Cheuvreux.

So we've been talking a bit about cost savings. I was just curious, now it seems like there is new AI tools for cyber criminals. Is that something that you have that is changing your view on cost development? Or is that already taken care of, so to speak, in your program for IT development. And secondly, I was thinking about also credit losses, as Martin was alluding to, are now with the strengthening of the provisions are the 10 basis points that you have in your business plan, is that just a conservative number? Or is that what you actually think you will have in the coming years?

This is Frank. Thank you for the question, Markus. So the first 1 regarding cyber. I would say there's nothing new here. It would be wrong to say that we fully understood the Entropic question and understood what it will create. But we have been all the time, very clear about that AI will grow and it will accelerate the growth when it comes to quality, and also what it would be able to do for us, for our customers, for our efficiency, for our shareholders. And so -- but of course, misused, it can also be used again against any company, any organization, any country you want. And I think that what we see here is an example of that. That tool was not built for criminals, but it can be misused by criminals. And in wrong hands, it appears to be quite strong. We have always planned for that. And the way we see it is that you have to continuously improve and strengthen your skills and your defense within cybersecurity, information security, you have to believe that the counterparts of the criminals will have the same capabilities or even better than yourselves, which means that you have to continuously invest significantly and that is what we have in our plan. So I think no big change. I think it's just not a proof point how fast AI is developing and you must embrace it. You must deploy it. Doing so, you will get a tool that can be helpful for different purposes, and it can be defense, of course, as well. That's the best I can say. Ian, over to you.

Yes. Markus. So the way we think about credit losses is we have guided as 10 basis points as the, I guess, long-term expectation. I'll come back to what expectation means in a moment, but of the portfolio loan loss levels. Of course, within that, you have our household loan losses, which are much, much lower than that. And the corporate loan losses that from time to time are double digit, so between sort of 10 and 15 basis points. The reality is, over the last 6 years, we've always been well within our 10 basis points, which says that the portfolio has been performing well and largely due to much lower levels than normal of corporate losses. So the corporate portfolio has been extremely robust. At the Capital Markets Day last year in November, I said that despite that experience, I don't think I can stand here and say that we would always expect to see such low levels of losses. And so renewed our guidance for 10 basis points. But we'll always strive to keep it well within that. So 10 basis points is the guidance. It's a composite for the full portfolio performance but our track record is much better than that.

The next question comes from Shrey Srivastava from Citi.

My first is if we do see 1 or 2 rate hikes materialize this year, how would you expect pass-through behavior would be to deposit customers relative to the much larger hiking cycle that we had a few years ago. And my second one is, we obviously saw the news about Avanza's Danish expansion citing 5 years to be profitable. Is this something you factored in to your business plan? And if not, how does it affect your outlook?

Shrey, it's hard to prejudge what banks will do when faced with rate hikes, but I know you're asking for my opinion rather than a prediction. I can't see -- I mean the particularly at these levels where we've looked at what we saw in the last rate hiking cycle on rates at these levels. When they were getting much higher sort of north of [ EUR 350 million ] that kind of thing. A much different story because I think you end up creating an unsustainable position. So I think it's reasonable to assume a fairly high level of pass-through at these levels. But we'll have to see when they actually happen.

And in regard to Advance, fully as expected, no surprises. We have been planning for more of the platform players coming, and we are investing heavily in that area already and will continue to do so. So I'd say that, no, and it doesn't really make any difference to us.

The next question comes from Namita Samtani from Barclays.

The first one, just on net interest income. Can you help me think about it beyond 2026, please? Because the rate sensitivity for 2027 on Slide 19 looks flat based on the first quarter and consensus as net interest income going up 5% in 2027. So do you think the volume growth can more than offset margin pressure and the negative impact from the hedge? And my second question, I read this article in Boston about Nordea's own employees opting out of having a pension with Nordea Denmark citing IT issues related to integrating the acquisition of Topdanmark a few years ago. I just wondered what's being done to fix this? And why is the pension side in Denmark, not as slick as what we can see, for example, in Sweden?

Take the first question about the paper that you read in Perenti Copenhagen. So our acquisition of Topdanmark's Life and Pension business is fully aligned with our plan. That business is an SME business, and we wanted to be an SME business. It has taken some time to get it separated from the seller, which we knew, but it has been difficult from the seller to separate assets should be delivered on its own LEX and not integrated data seller systems. That was delivered, as I remember, 12 months ago, since has the job been about integrating it fully into our systems and raising the quality and, of course, of the interface. So it meets the Nordea standards. And they are high, much higher than what this company came from on digital capabilities, which we knew, so no change. Then there are some that are, for example, brokers that would like to see that we were attacking and more and more active on large corporates in Denmark. That's not our focus, and it has never been our focus with this our intention with this company right now. But we're actually very happy with the acquisition, and it progressed well. It has -- due to the seller's problems by separating the company, but we have full control now and are working with the plan to get it up to the standard that you should expect from Nordea. Then it might be that we 1 day will go to the large corporate sector as well is a very competitive, profitability is low. It might be we will go there. And when we will potentially go there, of course, we should offer our own employees to be -- to put the pension scheme, which is a group time for Danish employees to that company. It has been fine with the current company for many, many years. So -- and we are not going to change anything for the sake of our own pension team as we are happy with that. So that's a factor route net acquisition. I think it was -- it came out a little bit different in this paper. Ian, over to you.

Yes. So on 2027, NII, I -- we're not ready to actively plan for NII improvements and rate hikes at the moment. So I think it remains a scenario. And I think our Slide 19 is a good way to model the impact of that scenario. We've always been, I think, fairly consistent in showing those the impact in both the first 12 months and then beyond of a 50 basis point movement. So our guidance has always been based on how we thought about things at Capital Markets Day last year, which is that the drivers of net interest income will be volumes and margins. We were planning for volume growth, both on the asset and liability side and margin stability. So we weren't baking in improvements in margin and a fairly neutral position on the hedge. I think that's still the right way to look at it. We do see, as I talked about earlier, some quite sort of tough margin pressure on the household side and we're absorbing that at the moment. But I think when we look out to 2027, growth in volumes on both sides of the balance sheet and margin stability is probably the right way to think about it.

And operator, we'll take the last question now.

The next question comes from Nicolas McBeath from DNB Carnegie.

So I was wondering, given the more positive view on productivity improvements that you mentioned through Q1 from AI, I guess, in particular, in software development, do you see potential to speed up the Nordic scale initiatives for these processes that you talked about in lending and payments, for instance, as we -- Yes, as we went through at the CMD last year. And do you see potential then to reach the cost/income target for 2030 before the time line given that you will seem to become more bullish on this technology.

So it's a good question, right? So -- and I cannot give you a firm answer. But what I can say is that the quality of AI is increasing fast. And what also increased very fast is, I think, most companies understanding of where they can apply AI -- deploy AI. And when you look at the use cases we have as a foundation for delivering on our Nordic scale benefits, they are -- we are on plan -- we had previously. So then the question is how fast can you deploy up to be concluded, I would say. But it clearly looks even more positive when I look at it -- we look at it right now compared to just half a year ago. So we are realigning in. We also have to ensure that we understand the risks, and we are not taking too much risk, but we're realigning in and we are pushing now. And I think when I get questions about it, how I see it, my advice is embrace it, understand the risk, cope with the risk, but embrace it because it is quite impressive what it actually can do for you nowadays.

All right. I appreciate that. And then just a quick final question, if I may. Given the improved market conditions so far you've seen in Q2 when the decline in interest rates, would you expect much of the market making losses that you mentioned in March to be reversed in the second quarter?

Ian?

Yes. So Nicolas, the -- what happened in March was very much a sort of isolated performance matter on a couple of specific bits of our market business. So we talked about desks in the euro and SEK area. We sort of closed out positions where we needed to move down. So I think the real question is are we back to normal levels of performance in our markets business following that pretty disruptive market incident and the short answer is yes. So we're back to performing normally.

All right. Thank you all for participating. As usual, just come back to us if there's anything that we can do for you. So thank you. Have a nice day.