Nordnet AB (publ) (SAVE) Earnings Call Transcript & Summary

[Operator Instructions] The presentation itself is available on our corporate website, nordnetab.com. So let's start the presentation. Lars-Ake, please go ahead.

Thank you Marcus. We can go to next slide, so we are starting with the key highlights for the quarter and there is continued uncertain macro environment that remains an overhang on trading activity and we have now more than 9 months of negative markets and the customers are uncertain about the direction from here and thereby trading less. But despite this uncertain macro, we have had an overall strong quarter with revenue profit in line with quarter 3 2021 and we see then the reduction in trading revenue is compensated by higher net interest income revenue. And also a good customer growth and positive net saving considering the circumstances, costs slightly higher in the quarter, but we expect to be in line with guidance for the full year. We also see now really net interest income revenue kicking in, with 77% increase year-on-year. We also have as you know, very positive interest rate sensitivity going forward and we said to grow net interest income significantly in 2023 and we'll cover that more in detail later. We also launched a mortgage for Private Banking in Norway and as an important milestone to be one-stop shop in all markets. And we also have introduced savings account with interest rates and also promote new fixed income products for customers that want to say with the risk profile. Go to next, short-term financial highlights. We have an unwavering customer growth of 12% year-on-year, savings capital is slightly down due to of course negative markets and number of trades is down 16% year-on-year and as you too like I said that the customers are uncertain about the direction from here and are now trading less than normal. Revenues are slightly up down quarter-on-quarter or year-on-year, sorry. And that's we have a slide -- we have down on trading revenue, but that's compensated by high net interest income and as you know was one-off of SEK 10 million impacting other income negatively and that's due to withholding tax for dividend on international shares. So underlying revenue was SEK 10 million higher. Operating expenses a little bit higher than year-on-year and is partly due to marketing, we have higher marketing costs, our allocation funds that we launched during the summer in quarter 3, but we expect to meet the full-year guidance on cost. Operating profit in line with last year and due to still good cost control and we see the full-year profit nice SEK 1.5 billion. Go to next and of course the negative market climate has impacted growth in customers and net savings, but considering the circumstances we anyway have a good inflow of customers, we have 35,000 new customers in the quarter and we also have savings of SEK 6 billion in the quarter even though we were slightly negative in September. And we can go to next slide showing a little bit more in detail that the net savings and the net flows and as you've seen on the top -- you see on the top part of this graph, the inflow from our customers onto our platform is stable since quarter 2, around SEK 3 billion, that's a little bit down for quarter one due to less customer inflow, due to the markets. But we see September is a higher outflow from the platform, that's mainly private banking and that some bigger customers has left the platform for higher yield. But we're confident that it will turn back when the market turns again because ultimately our customer base want to invest in the stock market over time. And as you know, we also introduced not rates on the savings account to also keep customers on our platform, but you see in the bar graph to the right there that the net flows in September, it was positive for retail, but negative for private banking and for some of the big important customers. Go to next and we also benefit highlights from the geographical diversification thus derisking our business model. If you look at the market development has been by far worse in Sweden with the stock market down with more than 30%, whereas Norway is only down 8% and Denmark and Finland somewhere in between. We see that both the savings capital is more maintained outside of Sweden and we also have higher customer growth outside of Sweden, so Sweden is, of course, due to the very negative tier most impacted both on customer growth and as well as Capital. Go to next, we have a good diversified resilient revenues and we see now drop in brokerage revenues is then well compensated by an increase in net interest income. And if you look at the graph down to the left, you see also that we had -- we have a stable year-on-year growth in all the all the revenue streams since 2019, 25% CAGR on net interest income to 3% CAGR on fund revenues and around 40% CAGR on the brokerage revenue. If we look at the graph down to the right, you see the margin for each revenue stream and on top there is margin for deposits and that's going up quite a bit and that due to the increased interest rates and that will of course continue to go up in the coming quarters. And in the middle line there is the margin on brokerage assets and that's going down due to less trades per customer. And the fund revenue is also slightly down due to mix shift from active to passive funds and also a little bit less trading in foreign transfer where we earn FX. We're going to cover now each of the revenue streams more in detail, starting with net interest income. Go to next, Marcus. And we see that the liquidity portfolio will generate around SEK 1.4 billion in 2023, assuming the volumes we have in the liquidity portfolio per country in quarter 3 2022 and also the credit spreads and the market consensus on IBOR development as we also see in this graph. This is not accounting for deposit rate we pay to customers, so we'll come back to that later. But if you look at the graph to top left, we have SEK 90 billion today in deposits, SEK 26 billion of those will land out and SEK 64 billion is then in our liquidity portfolio. And you see as the graph in the middle on the top here the yield on the liquidity portfolio has been very low, start picking up in quarter 2, higher in quarter 3 and is going to increase further in quarter 4 and giving the full effect into then 2023. Go to next and this is the loan portfolio, the SEK 26 billion and thus assumed to generate SEK 900 million in 2023, but this also assuming then the quarter 3 volumes, but also the interest rate we see now in September 30 for mortgage versus the increase we had in October 1. Also here not accountable deposit rates we paid to customers, but if you look at volume here up left, we are stable on the volume for our personal loans from SEK 4 billion. We have a growth in mortgage up from SEK 8 billion a year ago to SEK 10.6 billion now and we've been fairly stable on the margin lending in spite of a negative market climate, a little bit drop the latest quarter, but year-on-year is fairly stable. And we see then with the higher interest rates in the market, we see a pickup of the revenue from the lending portfolio SEK 190 million in the quarter and estimated to be the SEK 900 million with assumptions above in 2023. But here we of course have a potential upside. We will see higher interest rates and we will pass through some of those rates also to the customers and hope we will also see some higher lending volumes overall. So looking at the pass through rate, so far we have pass through the 90% of the interest rate increase to the personal loans 40% to 100% on margin lending where we are 100% in Finland, 80% in Sweden, 40% to 50% in Norway and Denmark and mortgage we pass through 100% both in Sweden and in Norway. We also have lending portfolio with low risk. The loan to value is fairly low 25% to 30% margin lending and 45% on mortgage. And as you know from before, where it was very low credit losses, virtually nothing on mortgage and margin lending and the realized profit on the consumer lending, private loan business as expected a little bit higher on the provisions due to IFRS 9 and taking inflation and unemployment into account, but also the consumer loan business is low risk is around 5% yield on that portfolio, which is a low risk portfolio and the credit losses overall are fairly low. We can go to next. And then as you know, we also introduced savings account with deposit rates and we have now deposit rates in Sweden and in Norway. And of course what we want to do is to balance interest rates versus outflows from our platform. So we monitor this on a daily basis, what's happening in the market, but also what's happening on our platform when it comes to flows. So far, it's fairly limited amount on the savings account is around SEK 2 billion, but this might of course increase over time with yield on the accounts. But we will of course have to come back to present more in detail in the coming quarters of the development in the savings accounts will look like. Go to next. So that was net interest income shortly about the fund business, which is a key strategic focus area for us, we launched a new fund company during the Spring, we launched our new allocation funds that have been well received and funds overall is both important to track the broader saving segment, but also very important for our pension business. And look at the fund capital of course has taken a hit due to the market, but we see in our Nordnet funds where we have currently SEK 27 billion. We have positive net flows during the year which is we are very proud of. Also looking at revenue from funds in total last 12 months is fairly resilient versus last year. Some key data, I mean average fund capital around SEK 170,000 per customer and 46% of our customer base own a fund and allocation is around 40% active and I would say overall around 40% index funds because our Nordnet branded funds is mainly index as well. Go to next, talk a little bit about the brokerage revenue. We see on the graph to the left that the share of trading customers in the base is going down and it's been slipping during entire 2022 and of course that's due to very negative market climate. But we have increased the customer base with 80% since 2020 and thereby we still even with the lower share, we have the absolute amount of trading customers is still high. And in the graph up to the right, you see that the number of trades per trading customer is still on the low side, again due to market. But at the bottom right, you see that the share of cross border trading is still good and that's due to the country mix where we have high share of cross border trading outside of Sweden. Go to next and trading pattern is of course affected by the significant macro uncertainty we have. And if you look in the graph to the left here, we see trades per customer per day on the top 2020 then 2021 and the blue line is average 2018 to 2019. And we are below the pre-COVID level on trades per customer per day and of course considered below the peak we saw in 2020 and 2021. But of course, trading, we expect to come back more to historic trends when the market turns positive again and we have a very strong customer base and we have onboard lot of good customers on our platform. Go to next, we can't control the market, but we can control while we continue to focus on our brand promise to build the best platform for savings and investments and we have overall a very high development speed and very frequent launches. And this quarter especially proud of the launching the Norwegian mortgage for private banking and we know from Sweden that this is a very popular private banking product both to attract private banking customers, but also attract the capital because more capital you have on our platform, the better interest rates you get. We also launched large number of new versions of our app with lot of new nice features and our overall aim is that you should be able to live your entire life on the app as a normal customer. So with that, hand over to you little bit to discuss also financials for quarter 3. Lennart?

Thank you very much, Lars-ake Norling. We can go to the next slide. There's lot of uncertainty within the market and I think as Lars-ake said, we have performed very well with 34,000 new customers within Q3, so that's great to see. However, the AUM or savings capital has decreased but lot during the year, but there is a shift also that the deposits has increased by SEK 11 billion and that has a impact on us later on as you will see in the capital requirement side. We can take the next slide. In respect of revenues, they are on a stable level of about SEK 800 million on the quarter basis. The thing is here I think is very important, we have the 4 countries, which really does it resilient and diversification comes into to good impact here, but not just on the country side, but also on the how they are distributed between streams as NII transaction and non-transaction-related income. Here we can see that the non-transactions have decreased a little bit, but at the same time picked up on the net interest income. So really good to have this diversification both country wise and revenue stream wise. We can go to the next. Also keeping the cost on a stable level throughout the years around SEK 300 million, yes, a little bit higher this quarter than before, but expectation as I say lot of focus fall in line with our target. So really stable cost and that is one of the key things here for us. So you can go to the next, this also leads us up to adjusted profit before tax and about just over SEK 2 billion on last 12 month basis after Q3. As you say, the cost has been stable 2019, but they have been stable further longer than that as you know. So we can take the next one. The correct capital requirement which I said, yes, it has decreased a little bit, it would rather increase, sorry for that, due to 2 things, the counter cyclical buffer was reintroduced or increased here at the end of September, but also with this SEK 11 more billion in deposit, we do invest those in interest bearing securities and that will require further capital rate. That is also the reason to the leverage ratio decrease from 4.8 at year end to 4.1 now, that is SEK 11 billion but also that our capital base has been affected by securities held as for sales, they are not -- the market valuation of those has due to increased credit spreads been affected. And that comes into other comprehensive result and thereby affect equity and that is about SEK 250 million. So that is a thing that has, those effects as we do hold those securities until maturity will come back further and so that's not a real loss for it. It's just that it does affect our capital base and thereby our capital requirement the figures here. So we're quite confident with the capital situation, even though it has decreased since year-end and see no reason for changing any dividend policy or anything like that due to that. So we hold on to it. Go to next. Yes, I'll leave it to you, Lars-Ake Norling. I think...

Yes, thank you, Lennart. So let's move on to little bit the long-term focus, our strategic ambitions you've probably seen before starting with having really happy customers, we build this one-stop shop for savings savers and investors in the Nordics, they're really great customer experience. Also important for us to have really passionate and talented and please otherwise we will never have happy customers. Sustainable businesses of course super important, we are in a trust business, we need to earn that trust every day and we need to manage our risks in a good way and overall be trusted life brand. And then is profitable growth, we have a fantastic growth potential in the Nordics, 6% market share ample room to grow for many years and then we'll of course continue to focus on our cost to maintain that on stable level also going forward, I'll come back to that. Can you go to next? And as you know, we have a very long-term growth and good growth in customers and savings capital. We see that growth accelerating from 2019 due to the big improvements we've done on the platform, with the new app and web, but we also now have scalability and enough customers in all countries attract were demand growth. But as I mentioned before, we've increased customer base around 80% since 2020 and this is good customers equally good as the customers we had before. So when the market churns, we, of course, expect to have an upside from the good customer base that we have. Go to next and also lifting our eyes a little bit is I mean overall, Nordnet is taking market share in a growing market. We have 6% market share of the population in the Nordics, 6% market share of the addressable market that's SEK 13 trillion that's a big market. But that's up from 3% in 2016, we basically double our market share in 5 years. And going forward, we see that the addressable market with increase both from underlying market growth, but also that we open new products like pension in Denmark and wrapper in Finland. And hopefully, we will also then expect to continue to take market share then in the growing market. And then to the right you see we have highest potential in the fund business and the pension business, where we also put a lot of focus today. You can go to next. And cost is very important for us. We have a continued focus on cost and keeping the costs down and we have a very scalable business overall with good cost control. And this of course will be key focus area for us also going forward. And as you see, we've basically been stable on cost for more than 4 years and the cost margin, the cost versus and savings capital is constantly been moving down. In our initiatives, we talked about them before as well, but just a short recap. We -- as a foundation is our scalable cloud power tech platform that allows us to onboard a lot of new customers without driving costs. We were continuously with process simplification and automation. Basically, we automate everything that we can and that's a win-win, was a win for customer, it works better and win for us, we scale better. And we also have a highly efficient customer growth, that's mainly PR and were math based, low acquisition cost. But at the same time, low churn on the platform and high lifetime value, so low -- very efficient growth overall. And then we've worked now very actively with third parties. We have a lot of big negotiations ongoing, not least in this climate, where we have inflation clauses and other inflation pressures into the third party spend. Go to next, little bit on the medium-term financial targets. We're currently underlying customer growth of 12%, so little bit below the midterm target of 15%.But we know in very -- yes, with difficult macro negative markets, the customer growth reduces, but we also know when the market comes back and the market is positive, we see higher growth. So over time, we expect it to be around 15%. Average savings capital per customer is currently spot on, but of course, if the market continue to drop, this will be a bit challenged, but we also know that this hopefully comes back when the market churns. When it comes to income ratio to savings capital, we are currently on target on 4 bps to 5 bps, but here we will see quite big increase in that margin due to the increase in net interest income from interest rates. When it comes to operating expenses, we see that we will meet the guidance for the year. We also see that we'll meet the mid-term guidance of mid-single digit. Of course, 2023 is a bit more challenging due to the high inflation. We see inflation in wages. We see inflation in our vendor contracts due to inflation clauses and also we have a very strong dollar. So we work very actively now to mitigate the inflation pressures, both to speed up automations even more. We also negotiate, as I said, heavily with the vendors and be a little bit more cautious on how to use marketing going forward. And we also will reduce the planned recruitment in product and tech to only the really focused areas and that's the wrapper and the lever will not scale down there, but we'd scale down the other plans that we have. And overall, then the dividend and the guidance for 2023. I mean it's either the upper end or mid-single digit growth or just slightly above. And if you look at the dividend payout ratio, as Lennart said, that's maintained on 70% of the net profit. So with that, I think it's time to hand over for Q&A, Marcus.

Great. Yes, thank you, Lars-Ake Norling and so now we'll open up for questions. [Operator Instructions] So first question comes from Maths Liljedahl at SEB. please go ahead.

Yes, Good morning and thank you. I hope you can hear me?

Yes, very well.

Starting a little bit with the leverage ratio now down to 4.1% and if I look this -- the possible target of 3.9%, you're right that you have a readiness to handle further SEK 54 billion. What does this mean? And how should I read this? Is that a capital injection then or how do you solve that?

If -- I mean, first of all, I think it's important to note that the 3.9% is a guidance from the SFSA, so it's not a hard target or anything, but the 3.0% is the hard target. And going down to that one would enable us to say that, yes, we have capacity to take on how much is SEK 34 billion more before we reach that point.

In deposits.

In deposits, yes, if that would happen, which is quite unbelievable asset would be a 50% increase of deposits. We can always say that, yes, we can reduce the dividend in that case, just to save it or to a capital injection. But I don't see that as at any risk at all. I think we should look upon the 3.9% and that is where we are and that is not the hard requirement. So that is how I look upon it. I don't think if you have any further comments on that one, Lars-Ake?

No, I mean, just to put it in perspective, with negative markets, deposits increased SEK 11 billion and we can absorb another SEK 34 billion before we are at 3%. So we're quite confident.

Okay. Thank you. And then one more question from my side. I'm just looking at the country, I know you have fierce competition in Sweden. But how is the -- how are you thinking and Norway looks particularly strong. If you could just elaborate on what happened there? And also how you're thinking about Sweden? Is there any not quick fixes, but how could you beat competition in Sweden going forward?

I can start with Norway, I mean, of course, Norway has been least affected by the market downturn, was stable up till August, basically, that market, not falling at all, then it's been falling in September, but it's only 8% down since the beginning of the year, while Sweden has been down more than 30%. That, of course, impacts the sentiment. So it's been more trading in Norway, but we also see in Norway, we have most rapid effect on net interest income because the Central Bank always started to increase the rates before Sweden and then Europe and Denmark. But it's a very well diversified revenue stream in Norway and we have the same in Sweden. We have a very well diversified revenue mix in Sweden. And overall, as we talked about before, very good customer base. We have high savings capital per customer, high income per customer as well and we are very strong in the private banking in the investor segments. But of course where we also focus also in Sweden out to see how we can expand more into the broader saver segment that mainly saves in funds. So that's why we also have a lot of focus on the fund business, with the fund company, but not least also the pension business, where I think where we have a big potential in Sweden.

Okay. Thank you. And then one final if I may and I know we have been discussing this a lot of times, but consumer loans or I mean, of course, it adds -- I looked at the NII chart and it adds some NII, but it's also there where you see main practice impacts all credit losses. Is that something really you need to offer in order to have an attractive -- I mean, your savings platform, you do mortgages and margin lending, I could understand as an add-on, but is that something I mean, competition is fierce, fear on credit losses? Is that something you -- I know you wanted to decrease it, but it's still there.

Yes, I mean I think it's a very -- we know it's a low-risk portfolio, the average yield is around 5% and the credit losses to assets is also low. And we continue to manage this in a careful way to even reduce risk going forward and focus on profitability. And -- but it is also a product that's used by the customer base in certain cases, not at least when we had IPOs to finance that for buying shares in IPOs, but in other aspects as well. So currently, we see it as part of our business, but we try to maintain it carefully with even reducing risk over time. We don't need to have a high risk profile in this portfolio. We have a good yield also managing the risk in a good way.

Next question comes from Patrik Brattelius at ABG.

Thank you. Can you hear me?

Yes, very well.

Perfect. Thank you. My first question is regarding the deposit rate. Can you see that since the introduction of savings account in Sweden that the outflows have stopped?

Yes, I think we managed this on -- and when we look at outflows or the flows on a daily basis in all countries and we see a more stable situation when it comes to cash, yes.

Okay. So given the introduction of these savings account, we should not expect you to start introducing deposit rates on ISK account or capital to saving account?

No, we see those as trading accounts. So if you want to save in cash, you should use a savings account. And we also think that's better for the customers due also for tax reasons, it's better to save the cash outside of the tax reprise.

Correct me if I'm wrong, want to be a tax if they move their money in and out of these accounts, though?

If you keep moving in and out many times, then you have a negative effect. But if you just move one out of one in, then it's okay.

Okay. Thank you. And now we expect to see a rate hike probably in November in Sweden again. Can we expect that you will increase the deposit rates on the savings account by the same magnitude? Or how should we think about the dynamics here?

Yes, when we look very carefully on the flows and the market overall, so we can't say exactly how interest rate increase will impact the deposit rates, you need to see what we do in the market at that time.

Okay. And a last question regarding this deposit rate then. At which level should we expect you to start introducing deposit rates in Denmark and Finland?

I mean now the interest rate is going up quite a bit also in Denmark and Finland, so we of course look at this, but there's nothing decided yet, but you will see that when it comes as well.

Okay. But is a guideline of -- at the level you introduced it in Norway and Sweden a fair assumption?

Yes, at least the same set up probably a fair assumption, exact levels, we cannot discuss, of course, but we'll be starting then from I mean the Norway has been increasing the most and that's why we also have the highest rate. So of course, you start in the lower level and move up.

Okay. Next question comes from Ermin Keric at Carnegie. Please go ahead.

Good morning. I hope you can hear me?

Yes, very well.

Perfect, thank you. So thanks for taking the question. Maybe first on in September, you obviously should have said the majority of the outflows were from your private banking clients.

Yes.

Could you just give us any disclosure or color on how much liquidity the risk on those type of accounts? And how much is outside of tax request?

Yes, I don't know, Marcus, do you have the exact figures on that? We have numbers on it, but I don't know if you have?

Right, I mean I think most of it is outside of -- outside of any type of account that would have an obvious negative tax effect from moving it by the way. But of course, you need to keep into account that it makes most sense for customers that have considerably large amounts of cash to move it to get interest rate, if you have a smaller amount of cash, the cash is most likely held in order to trade and you don't get a very high yield in the market. So it's a little tough just to look at the total balance of cash held in this type of account.

Got it. Thanks. Then I mean, your commission rate on the brokerage went up a little bit quarter-on-quarter, is there any change in which type of customers are active versus Q2? And also just generally, are they kind of pre-pandemic customers behaving any -- in any way differently from the cohorts that you acquired during the pandemic?

I think the reason for slightly higher income per trade is mostly country mix, not least in August where we had a lot of trading in Denmark and Finland and Norway compared to Sweden and thereby more retail customers as well than compared to private banking. So that affect. What was the other question, sorry?

Just if the cohort from before...

Yes, yes, okay. we follow that. You have that in the appendix as well in the Q2 presentation quarter 2022 quarter is good. They trade on the same level as all the customers, but we know also the new customers a little bit less trades per customer due to the less heavy traders, but the margin is also big because it's more outside of Sweden and more retail trades. So -- and the net savings more than 50% of the net savings is coming from the new customers. So I would say it's a good base and we saw the same for the 2020 and 2021 quarter.

Okay. Thank you. And then last question would be on the cost side. So did I get it right that you're not saying you'll probably be on the maybe upper end on this mid-single digit or maybe even above it for 2023?

Yes, either just the upper end or just above.

And with regards to project you can automate, is there any specific ones you could just share with us if you have some color?

We put a lot of effort now on pension transfers, both in -- we launched a new automatic pension transfer in Denmark. We're working on it in Sweden, we will launch soon. Then we do -- on the fund side fund transfers. We also automated front end for the customer, but we now automate the back end also for our transfer team. And then we put a lot of effort on all small issues that we see as well to have continuous automations, everything that we pick up from customer service or customer operations, we try to automate as much as we can. For example, the onboarding on miners and so if you were below 18, there was a manual flow. That's now basically fully automated in Sweden and in Finland, will be in the other countries onboarding of the legal enterprises are same and then we try to automate more than we've had before. So we work on both bigger tickets but also a lot of long range or smaller things, so we can move on quickly.

Great. Next question comes from Maria Semikhatova from Citi.

Couple of questions. First of all, on net savings, thank you so much for additional disclosure on Slide 5. Just surprising that the gross inflows have been so stable and just want to check with you. Do you think that the gross inflows could come down as customers are suffering from increasing energy costs and higher high interest rates or your customer base is less sensitive, you have higher wealth individuals, et cetera. Just want to hear your view.

Yes, it's of course a good question. We haven't seen any tendencies and as you said, we have a little bit of the higher end investors and traders on our platform. And we also know from external studies has been made that consumers first pull back on consumption before pulling back on savings. And of course, when Central Bank, what they want to achieve is that customers put back on consumption and not really savings. So -- but we don't see an effect of this yet anyway.

Understood. And then on your NII guidance on the lending portfolio, this SEK 900 million, what pass through on loans do you expect similar to what achieved this year? Or you think there is maybe -- you won't be able to pass fully further pay rates?

It's a good question, of course, depends on both the big the hike is and the market overall. But that's why we gave you pretty -- I mean we pass through so far and you can make your assumptions.

Okay. That's clear. I don't know if you can share any growth aspirations in the region mortgages, this is clear very competitive offer. I don't know maybe you can talk about your private banking customer base in Norway and what's the potential here?

Yes, I think maybe we, of course, see growth potentially mortgage growth in Sweden because we have still very attractive rates, but also not least in Norway, then since we launched a new product. I won't tell you exact numbers, but we see growth in mortgage during 2023.

Okay. Fair enough. And just maybe final question for me on competitive environment, let's say, relative to the Swedish and Nordic banks, do you see any changes in your kind of customer acquisition or overall competition with weaker market backdrop and high interest rates?

Not fairly from competition and was affecting us is the macro climate with the negative market for 9 months and we know that the customer flow is lower when the market is negative and is higher when the market is positive.

Next question comes from Panos Ellinas from Morgan Stanley.

Yes, Hi. Can you hear me?

Yes, very well.

Yes, just had a question on the fund business, that's fine. So you just reported 46% of the customers on a fund.

Yes.

I think the last reported was 44%, so that that's around, I think, 70,000 additional clients owing a fund. At the same time, you show that trading customers is down. So just want to understand the trends there, I mean, have you seen sort of change in behavior? And maybe can you comment on the trends across geographies within the fund business? And then my second question on the funds, it also seems there is a preference for index funds, the AUM there is steady at around SEK 13 billion despite the overall AUM in funds down 15%. So what's driving that? Is it the existing customers switching into index? Or is it this new customers preferring index funds? That's all for me. Thank you.

Yes, I think we have an ambition to grow funds in all countries, both as standalone but also part then of the pension offering. And of course, Sweden, Norway is -- have the biggest pension market, therefore, highest growth also in funds and pensions. But as you know, we're going to open now Livrente in Denmark over time to address that full market for pension and also the wrapper in Finland is also going to be I think used quite heavily for funds. But we see good growth in all countries and especially, like I said, we are proud of that we have positive net flows into the Nordnet funds over the year in spite of the negative market. But of course, the impact that saves capital down in the other types of funds. And then you have the mix shift from active to passive. So 40% of the funds are active and 40% give or take are index today. And I think customers are moving to cheaper index, but also the type of allocation funds that we launch now where we have the mix of good geographical mix on shares, but also interest leg, so lower risk, but the same at low fee. And I think many customers have been a bit disappointed with the active performance as well.

Thank you. Maybe I may follow up, just in I think in Norway the fund capital declined quarter-on-quarter, is it performance driven or have you seen outflows there?

Yes, I mean Norway was very stable in quarter one, quarter one because Denmark was not impacted. They had a big hit in -- from mid-August I will say and then the oil prices dropped and also we have the taxation on salmon companies, et cetera. So Norway was very negative from mid-August and also September both impacting the savings capital, but also some outflows from the funds. But that's natural when you have a big, big down, is a little bit more stable now.

Okay. Next question comes from Enrico Bolzoni from JPMorgan.

Just a few questions from my end. So one, on customer growth, clearly, the target was double digit. But if you look at the latest monthly prints, clearly there's a bit of a slowdown, I presume, given the current macro environment. How confident are you in the ability to keep growing customers at double digit levels in 2023 if the market environment remains challenging. So that's my first question. The second question goes back to your -- the question on funds, so again, have you ever thought about changing your pricing structure for funds to maybe be a less impacted by mix shift within the fund AUM. And then finally, in Norway, could you maybe give a bit of color in terms of what do you think is the opportunity from the expansion of the mortgage offer in terms of volumes, in terms of that revenues. So any color there would be appreciated.

Yes, I am going to --- I'm writing here, but starting with the funds part and the pricing structure on funds. In Norway, we have a platform fee. So we're less dependent on what funds the customer have, but we have a slightly lower platform fee index compared to active. We don't currently see that we want to change the fee model in the other countries. We look, of course, on the market on what the competitors do, but so far only platform fee in Norway. Then I think it's important also we import -- launch new kind of funds like the allocation funds that we have now that have as a good diversification index like, but still a good fee, but still higher than just a normal index fund, which also is helping the fund margin overall. When it comes to mortgage, it's -- we don't disclose figures for next year, but we see is anyways potential of SEK 3 billion to SEK 5 billion in mortgage volume in Norway over time, depend a little bit on the deposits.

Thank you. And on customer growth?

Yes, sorry, that's what I couldn't read. Yes, so customer growth is, of course, depending on the market. So if we don't see a pickup in 2023, we'll likely be a little bit lower also on growth during that year. But we know that will pick up again when the market turns and we have 6% market share of the addressable customer base in the Nordics, we have ample room to grow and a very strong position, as you know in all Nordic countries.

Okay. I got a written question from Andreas Hakansson, Danske Bank. He asking how do you explain the 106 basis point margin on mortgages, which is on one of our slides, should it not be 270 basis points given that your funding cost is zero?

Yes, just that we haven't seen the full pickup yet in the mortgage rates, so this is up to September. We've made all the increases in beginning of October. So you will see the full effect going into quarter 4.

Okay. Great. And the next question comes from Jacob Kruse at Autonomous. Please go ahead. Looks like you are unmuted, so please go ahead.

I hope you can hear me now.

Yes, now we can hear you.

So firstly, just on the deposit side. I think you introduced the rates -- the savings rates early October and obviously, that savings account slide goes up to end of Q3. So what did you see? Could you comment at all on what you've seen in terms of the appetite for that savings product during...

In Norway we launched it before, so there you see the trends also in quarter 3 and we see a slight pickup. We see a slight pickup in Sweden as well, but nothing major at this stage, but of course, this will be very interesting to follow them in the coming quarters. But don't see any major shifts to date, of course, some increase but nothing major.

And could I also ask, how long -- do you have an estimate of how long the average deposit stays in the normal deposit account before the savings account?

It's hard to tell, there was the long time we have the savings accounts and positive interest rates. I think market turn is positive again, of course, some of that money will be invested. It might be that if you have larger amount that you still keep some of it in cash to save also in cash as a mix of your portfolio, but of course, some of it will go also into investments.

No, I mean, more on the ISK, so the general brokerage accounts, are those money very transient?

Okay. Okay. Sorry, I misunderstood you. No, we don't see that too much that is very transient and it's also very fairly stable so far.

What we can say, the only thing we do measure is the deposit rate according to savings capital and that is on a long-term basis, just since 2001, stable on 12 -- about 12% between 11% and 13% around. And then you have some pickups and some downs, but that is where it usually is. as a growth perspective.

You mean how much is moving out from the ISK to deposit accounts?

No, no, I guess my question is, if you take the typical deposit on an ISK from the client perspective? Are they normally -- how long are they normally parking it there, are we talking months or years or days, whatever is the kind of...

Normally is for transactions is probably more months than years, but we know all the customers essentially a big customer base, customers score in and out of position. So that means we always have a fair chunk of deposits also in ISK.

Thank you. Next question comes from Nicolas McBeath at DNB.

Thank you. So I was disconnected for some time, so apologies.

We got the questions, onset.

So -- but just to get back to the deposit flows. So if you could comment please on what's been the reception to the new rates on the savings deposits you introduced earlier this month, so we can get an understanding for the sensitivity for changes from deposits and cash on the tax wrappers into the savings products please?

Yes, I mean I think the reception has been overall good. But we -- at the same time, we don't see any major flows into the savings account. So of course, some pickup, but nothing major so forth. But of course, some customers appreciate it, especially customers with larger mounts, they want to also keep the money liquid for a bit longer time, they want to have interest rates on that. But no major shifts on to the savings accounts so far.

But has it still been sufficient to stop the outflows from banking customers that you saw in September?

Yes, I mean we monitored both cash inflows and cash outflows on a daily basis and I think we have a rather stable situation.

Okay. So you wouldn't expect the outflow trend to continue in Q4. Could you comment on that?

No, no as we see it on pure cash, but that's, of course, I mean, it's early days still, but...

Sure. And then also if you could give any flavor of what you've seen so far in October, please, when it comes to customer activity. So markets have been a bit more positive and October is also a month where we normally see some seasonal uptick in customer activities. So if you could comment, please on -- should we expect the normal seasonal uptick to be the outcome this year as well? Or are there any reason for why we should be more cautious in our expectations for October?

Yes, I mean I think we need to have a more clear turn in the market for real, I think it's lot of customers still believing this is a bear market rally again and customers are in general more careful. Then of course, you have the reporting so that also cause extra trades on some days. But I think underlying the customers are still careful. They don't really trust that this is the bottom.

Next question comes from Jacob Hesslevik at SEB.

So my first question is, if you just could remind us of how the split of FX looks in your liquidity portfolio, is it still 50% Euros, 30% SEK and 20% NOK, has there been any changes in the quarter?

I think you have that on Slide 8, so no big shifts I would say, but you have the full break down on Slide 8 in the presentation for currency.

All right. Thank you. I will look into it, perfect. And then could you also share what the medium size is of your ISK in SEK , I think you give average, but I think it would be quite interesting to see what the medium size of ISK users.

Okay. I think, Marcus, you need to come back with that.

Well, I can look that up off-line.

All right. Thank you. And then maybe one last question on growth in Sweden. I mean looking at in your report number of users increased by just 3,200. What is the main reason? I mean you have launched new funds et cetera, but the number doesn't show that you are taking uses within the same segment. So what initiatives you have taken?

Yes, well, I think it's still market, but if you compare to advance, we actually take a larger share of the flows now from the banks to digital platforms than before. But like I said, it's mainly all the focus we have on funds and pension that we expect over time to also grow the customer base. But that said, we still have a very good inflow of the investor and trader segment, really good customers, which is really important to take care of in a good way.

Okay. It looks like we are out of questions. So we will wrap up there. If you have any more questions, you can reach out to me and you can, of course, also read our report and presentation at our website, nordnetab.com. Our next quarterly report is on January 31. So have a good day. Thank you and goodbye.

Thank you.

Thank you all.

Bye-bye.

Bye.