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

Okay. Hello, everyone. It's 10 o'clock. So let's start. Welcome to the presentation of Nordnet's Financial Report for the Third Quarter of 2023. My name is Johan Tidestad, and I'm the Chief Communications Officer at Nordnet. And with me today, I have our CEO, Lars-Ake Norling; and also our CFO, Lennart Kran. And Lars-Ake and Lennart, hello, guys.

Hello.

Good morning. Lars-Ake and Lennart will start off by presenting the results and then we'll have a Q&A session. All participants will be on mute during presentation. And when we come to the Q&A part of this presentation, you have 2 alternatives to ask questions. You can click the raise hand button, and I will then unmute you and call your name. And you can also submit the question in writing through the Q&A button. Just write your question and I will read it out loud. And the presentation itself will be available on our corporate website after this session, nordnetab.com. All right. Then let's start the presentation. Lars-Ake Norling, please go ahead.

Thank you, Johan. We can go to next page. So some key highlights for the third quarter. Very strong financial performance overall, with revenue growing 42% and profit 64%. And overall also good customer growth and positive net savings in spite of challenging markets. We have the uncertain macro environment and low volatility is an overhang on trading activity, which is still on a lower level. And net interest income more than doubled due to higher interest rates. We have good cost control and with costs in line with guidance. And we also launched the Finnish endowment wrapper, which is an important step to become a one-stop shop for savings and investments in Finland. And overall, a very strong capital situation that provides optionality, and Lennart is going to talk more about that, the CFO. And we also initiated a strategic review of our unsecured lending business. This business is becoming smaller and smaller part of our overall business and it's also not naturally linked to our core business. And this was a product -- it was a good product in a low rate environment that provided yield on our liquidity. But now, we are in different market with a high yield environment where we can find returns in other ways. And we're going to come back to the market when we're done with the strategic review when we look at the potential sale of the business or as an alternative that we limit the lending and reduce the portfolio over time. Go to next. Overall, a very good quarter. Customer growth 9%, which is good in this market climate. Savings capital is also up from -- and also because we had a bottom in the market last year, end of September, but also due to net savings. Number of trades down 14% due to a very uncertain markets and overall low volatility in the markets, both in the Nordics and in the US. The revenues are up with 42%. We have a slight down on trading revenues, but considerable growth in net interest income. When it comes to expenses, we have good cost control and the cost growth is in line with the guidance of 7%. But if you look at underlying cost growth in fixed FX, we know that the Swedish krona has weakened considerably. That underlying growth is 5.5%, so 1.5% less. And still very good operating leverage in the business and the profit is an increase with 64% year-on-year. Go to next. Also, continued growth in customers and net savings in spite of this uncertain macro. And we see that the customer growth in the quarter was higher than last year, which is good. Net savings is also higher. Net savings in the quarter both versus quarter 2, but also versus last year. And we see continuous good net savings from the retail segment and less volatility in the private banking segment. So, overall good net savings in quarter 3. Go to next. And we benefit for being in 4 markets with diversified revenue streams. We have okay growth in Sweden. But we have even higher growth outside of Sweden when it comes to customers and savings capital and with the highest growth overall in Denmark, both in customers and savings capital. Go to next. Looking a little bit more on the revenue stream, starting with trading. We have more trades in quarter 3 compared to quarter 2, slightly less trading customers but the trades per trading customer is higher, but is still on a low-level volatility. We see the VIX index here is on a very low level in quarter 3 and also, of course, on certain markets that might make our customers hesitant to do trades. But the share of cross-border trading is keeping up on a good level. That's also due to the country mix where we have now a lot of customers outside of Sweden that trade more outside of their home markets. Go to next. Looking at on the trades per day in a historic perspective. So even if we have the lower number of trades per trading customer compared to what we see before, we have almost doubled the number of trades per day. Due to that, we're basically doubled -- we doubled the number of trades per day since 2019. We've almost doubled the customer base during the same time. So when the market turns more positive again, we are, of course, very well positioned with the large customer base that will trade more in a positive market climate. We also see that the income per trade is higher than historic levels. And that's due to -- that's more cross-border trading. It's due to our country mix. Go to next. And little bit about our fund business, and here we are very proud of the development in the fund business. And as we've talked about, this is a strategic focus area for us. We've put a lot of effort into funds, coupled also with the pension business that also drives the fund business overall. And we've grown the fund capital with 30% in one year versus 15% when it comes to the total savings capital. And if you look at the Nordnet funds, they've grown even more. We have a SEK 170 billion of fund capital on the platform. Now, we're up SEK 40 billion is Nordnet branded funds, and also good growth in customers taking up the fund products with 850,000 fund customers now, which is an 11% growth in one year. Now looking at the graph at the top in the mid there, you see the allocation of funds or different fund categories and here we see a slight increase in fixed income funds, which is natural in a high yield environment. And then we have the red, which is the growth of the Nordnet funds. And then the dark blue, which is index funds and at the bottom is active funds. But Nordnet funds is mainly index funds as well. So the total share of index funds is around 50%, and the active share has been going from 48% in 2020 to 33% in quarter 3 2023. So it's a massive shift from active to passive funds. It was very good net buying in the fund business overall in last 12 months. We go to next. So now, we're going to talk a little bit about net interest income, starting with the deposits. And as before, we are on a rather low deposit level versus savings capital of around 9%. And that's lower than historic levels, which is around 11% to 15%. And we see even though the customers are not trading, a lot is still led by the market, both equities and funds, SEK 12 billion in quarter 3, and that's not fully compensated by debt savings in cash and that's why we reduce deposits somewhat down to SEK 70 billion in the quarter. You can go to next. Looking at the liquidity portfolio, and the snapshot that we have given now in another quarterly reports. And the snapshot for this year is SEK 1.7 billion, assuming then the volumes we have in quarter 3, currency allocation, credit spreads and market consensus for the IBOR rates for the rest of the year. The main sensitivity here is, of course, the development of the deposits in quarter 4. Looking at the liquidity portfolio, that's currently -- or end of quarter 3 at SEK 45 billion. It's derived from the SEK 70 billion in deposits, SEK 6 billion in cash equity and then reduced by the lending of SEK 31 billion, so SEK 45 billion in quarter 3. And we have continuous growth from the return in the liquidity portfolio. So in spite of slightly lower volume, liquidity portfolio is still growing due to higher interest rates. Go to next. The loan portfolio snapshot is SEK 1.4 billion in 2023, assuming then quarter 3 volumes and interest rate as per October 1. And looking at the lending portfolio to the left here, we have a stable development in the personal loans business. In the mortgage business, we are stable in Sweden and up in Norway. And then we are growing the margin lending business in spite of pretty tough markets, but it's also partly due to the FX effect with the weak Swedish krona. And we have, of course, good growth also in the loan portfolio when it comes to revenues, both then from increased lending, but also, of course, from increased rates. But overall, a low-risk portfolio. The margin lending and mortgage is around the loan-to-value of around 40% and basically, no credit losses there. So the only part of the credit losses is in the unsecured portfolio, which is a little bit higher than last quarter due to more challenging macro, but it's still a very low-risk credit portfolio. Go to next. Looking at deposits then. So the interest we give on our savings account, we estimate that to be around SEK 400 million in 2023, assuming the volumes on the savings account we see in quarter 3 and the currency and customer account mix. Of course, the big sensitivity here is the transfer to the savings account, migration to savings that come from other accounts. Currently, 31% of the customers' deposits are eligible for deposit interest. And we see up to the right that it's mainly in Sweden, where you see a transfer to the savings account from other accounts. And it's a much smaller development in the other countries in spite of fairly high interest rates, both in Norway and in Denmark. And one reason for this is that we have a lot bigger customers in Sweden that, of course, if you have a lot of money, and part of that is cash, you want to have as good yield as possible. And down to the right, you see net savings also. We don't see any clear correlation between net savings and interest rate we have on the savings account. We have the highest rates in Norway and Sweden, and lower rate than in Finland and Denmark, but still very considerable net -- Finland and Denmark, still we have considerable net savings in Finland and Denmark. We can go to next. So all in all then, resilient revenues, bolstered then by our diversified revenue streams. We see, of course, that net interest income is growing and we have a lower volume of trading revenues, but a pickup in the fund revenues. But as we talked about last quarter, we see net interest income and trading revenues, its communicating vessels in a high-rate environment. Of course, you have good net interest income, but then you have negative markets and that will impact trading and vice versa. And revenue per margin by product, on deposits, of course, going up with higher interest rates. The trading revenue has continued down due to lower trades per customer. And the fund revenue is also a little bit down, and that's due to the mix shift from active to passive. We can go to the next. So all in all, if you look at the revenue development, we have had 30% CAGR since '19, so very good revenue growth, but also a very scalable business and good cost control. Of course, it's only been growing 4% per year. So, that means basically the entire top line growth ends up on the bottom line, which is a true position of profitable growth. Go to next. Also a little bit on the product side. We launched a new fund recently in Nordnet Global Index 125. It's a global fund with leverage. It's around 25% leverage, and it's been very well received. It's a similar product to the AP7 product, the very popular fund in the Swedish pension scheme. And we also had a lot of new versions of our app. On average, we launched a new app version every 3 days, both with new Shareville features, but also a lot of initiatives to improve the onboarding and the conversion of customers coming in and making them active. We can go to next. Then the big launch is, of course, Finnish wrapper, which is, like I said, an important step to be a one-stop shop for savings and investments in Finland. And it's a very good product for private banking. And over time, this will grow considerable capital on our platform. It's a SEK 400 billion market in total. And the differentiators for us is that we have a fully digital solution, also very flexible. You can trade both equity, ETFs and funds. And of course, we have low and transparent fees as well. And for the customers, this is a good product. There's no capital gains when you trade in the account. It's just when you take the money out. And also, it's good for inheritance. Beneficiaries don't need to pay capital gains tax, but only inheritance tax. On other accounts, you need to pay both capital gains tax and inheritance tax. So overall, a very good product, and we are very proud of this launch. We go to next. We go to next. So with that, I hand over to you, Lennart, to talk about the capital and liquidity situation.

Yes. You can go to the next slide, please. First of all, I mean, Nordnet has a very solid underlying capital position, with also very strong liquidity and good credit quality, we are risk averse to say. With a total capital ratio of 26.4% and a CET1 ratio of 18.7%, we increased the own funds by almost SEK 1 billion this year. But in addition to this, this quarter, we also received a new SREP or Pillar 2 requirements, which was significantly lower than the ones that we had before by giving us a greater buffer than previously. So, this total capital ratio of 26.4% compared to the requirement of 15.5%, gives us a great optionality to see how to optimize the capital situation for us. But as you can see, the credit quality in the portfolio is still AAA and A, very few others and a good maturity on the investment as well. We have a liquidity reserve that is in relation to deposits of almost 65%. So, a very solid liquidity position as well. We can take the next slide. This new Pillar 2 requirement gives us, as I said, a great buffer and we are now looking into how to optimize service one in this situation, where we, of course, first of all, need to see the growth possibilities we have and how we -- what requirements we need for that because that is the main thing for us. In addition to that, we also look upon the level of outstanding AT1 bonds. As you all know, we have a bond with the first call in March of SEK 500 million. But then also, there are other aspects of the capital situation or tools for us, of course, if that would be considered. And that is, of course, buybacks and dividends and things like that. But first of all, we have to maintain a capacity for growth. And then secondly, we look into the AT1 level, of course. And then the other tools are used in -- after that, if necessary or needed to do the optimization. Yes?

Thank you, Lennart. Little bit on the strategic focus. Go to next. As you know, we have 4 key strategic ambitions, starting with having the most happy customers. So high on NPS. And overall, we want to be a one-stop shop with a great customer experience, and we get there by building the best platform for sales and investments. But we also -- we know we won't reach there unless we have very engaged employees, very passionate employees, which we have and that we also have an upward trend on employee NPS, which we also have and that we can attract and retain top talent. And third area is a sustainable business. We are in a trust business. We need to earn that trust every day, and especially, we need to manage our compliance and other risks in the business and all be trusted and liked brand. And the fourth area is profitable growth that we capture, the fantastic growth protection we have in the Nordics, where we're taking market share in a growing savings market. And also, of course, have to ensure a good cost control and scalability also going forward. We can go to next. Also, very good long-term growth in customers and savings capital, of course, driven by our constant improvement on customer experience, but also that we have critical mass when it comes to customers and all customers to -- in all countries to drive then with the mass growth. And we have even higher growth in saving capital compared to customers due to also market growth, but also net savings coming onto the platform. We can go to next. And this is an important slide and shows that we are taking market share in a growing savings market. And that's been one of the main reasons why we've grown the revenues as much as we've done historically, but also gives a good revenue potential going forward. We have 6% market share when it comes to the population in the Nordics. We have 6% market share when it comes to addressable market, which is biggest, SEK 13 trillion, and that's up from 3% in '16, so we're taking market share in a growing savings market. And we estimate that the addressable market for us is going to be SEK 20 trillion in 2026, both from underlying growth in the savings market, but also that we launch new products, especially the Finnish wrapper that we just launched and the next one is the livrente in Denmark. And to the right, you see we have the highest market share in equities, but low market share in funds and pension. And that's why we have a lot of focus on both funds and pension business to grow that over time within, I think, a great potential. Go to next. And slso, overall, very good cost discipline that drives an operating leverage. We've doubled the customer base since 2019 from 900,000 customers to 1.8 million customers, but at the same time, keeping cost on a stable level. So very good cost control, very good scalability in the business, partly due to -- we have a very modern cloud tech platforms, so we can onboard a lot of customers who are driving costs. We work with process simplification, automation, which is a win-win, works better for the customer and we scale better. We also talked about before our highly efficient customer growth. It's mainly word of mouth and peer-based, low acquisition costs and at the same time, low churn and high lifetime value. And then we work very actively with all of our third parties as well to manage spend. Go to next. So, this is the performance versus the financial -- mid-term financial targets, and we are basically in line with all the targets. The only one where it's slightly below is the customer growth, where we're at 9% versus the target 10% to 15%. But 9% growth is still very good in this very negative market. So positive markets drive normally a higher customer growth. Go to next. So the key priorities for this year has been to, of course, launch the wrapper, but not to capitalize on the wrapper, to get customers and savings capital in, also lay the foundation then for the next big launch, which is a Danish livrente pension product during next year. And here, we are recruited other coming branch manager, Liselotte, in Denmark, and we're now going to apply for a branch license in Denmark. And continue to integrate Shareville in our app and web. And we've come far, and there's a lot of actually active usage of Shareville in our normal Nordnet app and web. And also continued expand Nordnet-branded fund offering, where we launched the Global 125 funds, but we have more exciting funds in the pipeline. And of course, to continue to focus on cost control and scalability. So I end there, Johan.

Great. Thanks a lot, Lars-Ake and Lennart. Now on to Q&A. So like I said, you just click the raise hand button at the bottom of the screen, and I will announce you by name and then unmute you. Or you can submit your question in writing by clicking the Q&A button. First question comes from Jacob Hesslevik from SEB.

Can you hear me?

Yes, we can. Please go ahead.

Perfect. So, my first 2 questions are on your different markets. So, we saw a very strong customer growth in Denmark. Is it due to Novo Nordisk that have increased the interest for investing in equity? Or have you done any marketing campaigns? Or where does the growth come from?

Yes. I mean, commenting on Denmark, I think you've seen a very strong development in Denmark for many years. We are clear #1. We managed to be really this one-stop shop. So, I think we see -- I mean, the good growth this year is also due to -- we have also good growth in the previous years. But then, of course, it helps with a positive market. And the Danish market has been performing a lot better than other markets and not least in Novo Nordisk.

Okay. Perfect. And I was also wondering if we could get an update on the Finnish endowment product. Can you say anything about how many number of customers have opened the SIP account? How much capital you have just so far? Or any indication of how interest has been?

We don't comment on specific numbers, but it's been a huge interest in the market for the product, I would say, both from customers and from the press. Then we have to remember it's an insurance product. It will take time to build this. And as always, I mean, some hassles if you want to transfer from existing double per [indiscernible] you need to sell down and things like that. So it will build a lot of capital over time and it's a good start, I will say.

All right. And maybe one last question on capital. How should we think about your excess position, especially if you divest the consumer portfolio, which will help to cover parts of the outstanding AT1? You will still be very overcapitalized. So do you prefer buybacks and extra dividend?

We're looking into all the possibilities. But the main thing, first of all, is that we shall confirm growth capacity. That's the main objective for us. And then we see on the AT1 levels and then we consider the other 2s after that. And we will see how the profit turns out forwardly as well. That grows the capital -- the own funds as well. So it's really creating that. But it's a growth part that is the most important, of course. But as you say, I mean, there's a number of room for the -- between the capital -- between the own funds and the capital requirement, yes.

I mean, to start with, I mean, of course, you're going to look at -- we are on a low level, as you know, on deposits now. We want to see how that develops. We're also going to look at AT1 volumes. So that's number one and number 2. But then, of course, we don't have an intention to overcapitalize and we can see -- look at the other parts like dividends or buybacks.

Thanks a lot, Jacob. Next person up is Patrik Brattelius from ABG.

Can you hear me?

Yes, we can.

Great. Yes. I would like to follow up where we or Jacob asked about the capital situation. Given this overcapitalization, do you have a target range buffer that you aim to be at in the future?

We are looking in that, as I said, trying to navigate it to an optimization on a long-term growth for us because always, when you count the capital considerations, you have to look upon it very far ahead because that's nothing you just do and then flip it back again. So, we will come back to that as well later on. But yes, as you say, I mean, that is also one of the reasons you can see the historical buffers that we have had and are pleased with in the slides.

And continuing on that, you talk about growth ambitions. But in the very short-term here, you will still, I guess, be very overcapitalized when we looking into the fourth quarter and you have good transparency into the growth avenues. Can we assume that the payout ratio can be temporarily increased in order to reduce the overcapitalization?

Like I said, I mean, number one is to look at the deposit -- goes from here. The deposit level, we are on a low level today. And will that now increase in quarter 4 and quarter 1? Number two is they want volume. And then, of course, we can see what else to do. So, this is something we monitor continuously. And of course, we don't have an intention like we said to be overcapitalized and so we monitor the situation ongoing.

And my last question was a follow-up regarding the Finnish tech wrapper. You mentioned it was a huge interest. Should that be interpreted as we should see an effect already then in the Q4 in the savings capital or customer inflow?

Yes. Like I said, it's a huge interest both from customers and also from the press. That said, I think it's going to be a product that will build up over time like most insurance products. And we can come back in quarter 4 and see where we are then, but it will be a product that will build over time for sure.

Okay. And the last question. You announced the stock package in Sweden yesterday. Is that something that will be rolled out to the other markets? And can you share an expected impact of this stock package in absolute numbers, please?

We don't see that we're going to roll it out in other countries. We do this too much, Avanza, to be on par with their customer offering. And of course, in Sweden also, we are very strong in the higher-end segments, and this is a product which is very good for stock package, which is very good for retail to start testing our platform. So, I think it makes especially sense in Sweden. The cost for us is no. We have -- in this -- it's mainly then for new customers, but for existing customers, you need to opt-in to this offering. But in this -- so customers that are -- can take up the offering is around SEK 700 million in fund capital. So the impact from refunding is more. It's around SEK 5 million -- maximum SEK 5 million per year. But on the other hand, we will get more customers in and more capital in. So, that will compensate that. But it's a very limited impact. So it's limited fund capital for existing customers, and they also need to opt-in.

I see. But if you are below your customer growth target, wouldn't it make sense to roll out this product launch in the other countries, given that would be an incentive for customers to join the platform?

Yes. I mean, of course, we can see how this [ lies in ] Sweden, first roll it up, perhaps in other countries, we see is very good. But also a little different position in Sweden. We are stronger in retail already in the other countries. So, this is a good product to attract retail customers in Sweden to show our good platform and also a little bit due to competition. But let's see. I won't rule it out, but that's not the plan today. But let's see how it plays out in Sweden.

Thanks a lot, Patrik. Next person up here is Nicolas McBeath from DNB. Hello, Nicolas. Nicolas, you are on mute. So you need to unmute, Nicolas. Hello, Nicolas. Nicolas is there, but we can't hear him. Well, he can come back later. Let's move on then to Ermin Keric from Carnegie. Go ahead, Ermin.

Do you hear me?

Yes, we can. Please go ahead, Ermin.

So maybe if we start on the NII, could you give us any kind of same snapshot as you're doing now for 2023, but for 2024. Is there anything kind of outside of the IBOR curves we need to consider? Is there any pricing that you've already announced or anything like that, that we should consider for 2024?

No. I'd say nothing, you haven't announced -- we haven't announced. But I think the big thing to look at -- I mean, overall, with these IBOR curves that we have right now, the estimate for IBOR curves in 2024, we see definitely a potential to grow net interest income also in 2024. The sensitivity, as I said, that's the same for the 2023 snapshot is the deposit level, and also how much capital that is transferred to the savings accounts. But I think a lot of the trends you see already. And deposit level versus savings capital, as you know, is already on a very low level.

Correct. Then on the correlation between net savings and the rate offered on savings accounts, you said that wasn't so strong. What is your analysis why Avanza is having much stronger inflows in Sweden this year than you're seeing on a Nordic basis? If we look in previous years, you've been quite on par.

Yes. It's varying a little bit because last year, we were considerably stronger then, especially in H2. And this year it's a little bit the other way around. And I think they've got some capital back also from what left them in H2. But then I think there is also a customer mix that we have a larger share in Northeastern Sweden with bigger customers. And we know that the private banking segment, they have done quite a lot of reallocation in their portfolios. That has impacted net savings over the quarters, less so in quarter 3, but more in quarter 1 and quarter 2. But again, the retail segment has been very stable and very good net savings.

And then maybe a final question. It ties a little bit into some previous questions. But in Sweden, now you've changed so you can have a switcher commission class much more frequently. You expanded a stock offering. Are you doing an increased push on Sweden currently?

Yes. But in Sweden, we want to definitely broaden more into the retail segment. We are very strong in the investor and the trader segment. And we want to broaden in the retail segment. And I think with -- we want to match the offerings in the market fully. And also, we put a lot of effort in our fund and pension business, which is also critical to expand into retail. So, we are definitely pushing into retail in Sweden. But in the other countries, we already have a strong retail position as well. And change commission class, for example, every day, you can also do in Norway. We can look at other countries as well. But of course, if it's -- like we discussed previously, I mean, if you see that something flies well also in Sweden, we can also export it to the other countries.

Thanks a lot, Ermin. We'll go back to Nicolas to see if we have him with us. Hello, Nicolas. No, we don't. I think there is something wrong with the Nicolas' line here. Okay. So let's move on then to Nordea and Rickard Strand.

Can you hear me?

Yes, we can.

All right. So first question tying it into Ermin's previous question there on NII in the various countries. Just want to hear if you could give an update on the pressure you feel to raise both savings account rates, but also if there is any pressure to raise other rates to customers outside of Sweden?

Yes. I mean, of course, we monitor the market continuously and we monitor flows, especially, as you know, I mean, we've increased the rates in other countries as well. In Norway, we have a high rate almost on the level as we have in Sweden, but in different buckets, depending on capital. We also increased the rate in Denmark to SEK 175 million recently. The country where we currently don't have rate is Finland. And that's also market we'll look at a little bit as well what to do going forward. But adding rates on the savings account in Norway and Denmark hasn't really created a lot of transfer to the savings accounts, not at all in the same way as we've seen in Sweden. But that's also, again, due to a little bit of the customer mix, where we have customers with bigger capital in Sweden. But there has not been any push to put interest rates on other accounts than the savings account.

And then on capital. As I understood, you aim to come back with sort of a buffer range that you want to operate in within -- on the leverage ratio. Was that correctly understood?

Yes. Mainly, I mean that's the -- the one that we don't solidly control ourselves regarding the risk-weighted requirement. We actually can always adjust it because we do invest in credit quality. It's not a lending bank in that respect. So that is the one where we have to have a buffer for customers' initiatives rather than our rules.

Yes. And then if I understand it correctly, the reduction you got on the leverage ratio guidance now in Q3 was related to reduced volatility on deposit accounts. Do you see a risk that this add-on could come back if deposit flows get more volatile? Or was this related to an extraordinary event during COVID? Or what's your view here?

Volatility was, of course, extremely volatile during the COVID and especially at the start of it, actually, when we in 2 months' time, received SEK 20 billion in new deposits. But I also think if there was a reconsideration from the SFSA, where they motivated and saw things in another angle. We saw that the other banks similar to ourselves had the same reduction on it. And I'm also quite sure that the regulators want the leverage ratio requirement to be less than the risk weighted because otherwise, you force banks to actually invest more risky than they should. So, I think I don't see that risk is huge, but of course, it's always there. If there would be volatility, we would have two small buffers. Yes, of course, they will require us to increase or rather they will put a higher requirement on us, yes. So, we have to watch this and balance it out properly.

And then a final question from my side. The strategic overview taken on your consumer loan book, how do you see the timing here, given that the sort of price type for similar asset is quite depressed currently? What's the timeframe you're looking at? Could you potentially hold on to it for a bounce back in valuation, et cetera?

Yes. So I mean, we look at 2 tracks for this. One is the sales. The other track is to basically limit lending volumes to reduce the portfolio over time. So we will, of course, not sell unless we get the price that we want to have. So, we're working on this during -- at least during quarter 4. And as soon as we have something, we're going to update the market, of course.

Thanks a lot, Rickard. We move on, and we come to Michael Macnaughton from UBS.

Great. Yes. Just a quick follow-on on the NII. Could you give us an indication of kind of changes in flows you were seeing on the start of the quarter into savings accounts in Sweden versus the end of the quarter? There was a big difference there in the kind of speed of the flows?

What we see still is very strong flows from retail, which we've had all year. But the more volatile inflows is from private banking due to reallocation of the portfolios. So let's see. I can't comment more specifically. We don't see any change in trends. Retail is still very strong. So it depends on what the private banking, if they will do reallocations or not.

Okay. But there's no kind of indication that that's the kind of the larger customers have moved their money and have kind of slowed down? Is most of that already done? Or can you expect that to be...

Yeah. But it's off and on. It can also be that they contribute actually to bring money back, but they want to make a big investment in the unlisted company. It can be a big event or want to buy bonds. It's a different -- a lot of different reasons, but it's, of course, been a lot of relocations during this year and second half of last year as well due to the markets we're in. But that can also mean that over time that you get money back because we allocate back more into the equity markets.

Sure. Okay. And then just on fund commissions, big pickup in passive funds. Do you disclose kind of the average fund commission margins on your active funds versus the passive ones?

We only have the mix as you see it now in Norway little bit more transparent because then we have a platform fee, as you know, where we have 19 bps for index and 29 bps for active. But also, our fund company and our own Nordnet-branded funds mainly expands and they are very popular, doing expands and also funds of index funds. And in that portfolio, we also have a better margin than just have a distribution fee for external funds. So, I think we -- by the focus we have on our own company, our own funds and our own index funds, we can also, over time, create a fairly okay margin on index funds as well.

Okay. Great. And just quickly as well, could you remind us the timing plans for the Danish life insurance product, some point in 2024, I believe?

Yes. The target is 2024.

Next person up is Alex Medhurst from Barclays.

Just a couple of follow-ups here, if that's all right. Firstly, can you talk a bit about why you think trading volumes have diverged between Sweden and other markets in Q3 and whether you expect that to persist? And then a second question. Just on thoughts into FY '24 costs come just sort of the inflationary environment is still high but receiving a little bit. How do you feel about costs versus the medium-term guidance of mid-single digits in the next year?

Yes. The trading volume, as you know, is a bit volatile between the quarters, especially between the countries. And that's why we are very happy to have 4 countries to spread the market risk. And this quarter 3, I mean, development in Sweden was basically flat quarter-to-quarter, but considerably or quite a bit up in the other countries. And one reason for that is, of course, the development in the markets where especially Denmark and Norway did fairly okay. Sweden had a bad quarter. Finland as well. But it's very good to spread the market risk over four markets. When it comes to costs, I mean, we are aiming for the mid-term guidance, and we can manage that unless inflation really spikes back where the FX or the Swedish krona crashes even further. But with the current environment, we see that we can meet the mid-term guidance.

We'll go to Mr. Enrico Bolzoni from J.P. Morgan.

One on the Finnish wrapper. You mentioned the addressable market, the total addressable market. Can you give us an idea of what is the total addressable market in terms of incremental net flows that go into this product every year? So that's my first question. And then just a specification on the -- if you look at the OpEx evolution, the only country that really saw an increase quarter-on-quarter is Norway, which was a bit more pronounced than the others. Can you just remind us what might be the cause for the higher cost growth there compared to other markets?

Yes. It's a SEK 400 billion market in total. Part of that is an insurance product that we have. That's about half or a little bit more than half. But I mean, we have a 9% market share in the savings capital overall in Finland, and I don't see why we shouldn't be able to take over time a 9% same market share in this space. But I stress it will take the time to build this up. It's like almost like a pension product. You build it over time, but it's a very sticky and very good product when you have it. When it comes to costs, I think, I mean, we -- the cost per country is fairly small versus the big cost, which is product and tech in Stockholm or Sweden. So, I don't know there was no specific event in Norway. Lennart, I don't know if you have any further, but it's no -- it's probably just some volatility.

Yes. I would say it's normal volatility throughout the year, yes, definitely. Because that's such a small part of the total cost in each country really.

And sorry, can I -- just going back to the Finnish product. My question was more in terms of what is the annual growth in this total...

We don't guide specifically on it. But I mean, our target is to have around same market share space as we have in the other addressable savings market. But it will probably be clearer after -- I mean, going into '24, how long time it will take to build up the capital. But it's definitely more slow-moving than a normal account because it's more like an insurance pension account type.

We have a couple of people left that want to ask questions. The next one is from Morgan Stanley, Panos Ellinas.

Just a few follow-ups. On the savings accounts, obviously, the flows accelerated in Q3 and you also increased the rates towards the end of September. So, I'm just wondering how do you think of the flows for this quarter? And can you give us a bit more color as to where these flows coming from? Is it from existing clients making new money on the platform? Or is it from new clients just parking cash? That's my first question.

Yes. I think the flows -- what we've shown is the majority of that is still in Sweden and definitely smaller flows in other countries. Of course, some of the flows is from external customers, but the main flows is from external -- internal migration. But on the other hand, if they hadn't migrated to our savings account, we'd have probably lost the money out. So, I think it's a good way to protect the capital on the platform.

Sure. And then when I look at the NII guidance for the full year, I guess, does it include any potential impact from divesting the personal loans or...

No. So it's not -- so that process is ongoing definitely in quarter 4. So, we'll get back to you as soon as we have more information. But it's no numbers included there from that in anything. But profit-wise, we want to have a big impact because the -- let's say, if you sell the business, liquidity that we free up, the SEK 4 billion, we can reinvest in the treasury portfolio with a good yield. It's basically wash compared to the profit we have today.

And my last one on costs. I presume the guidance of a 7% cost growth for the full year implies about 5% cost growth in Q4 compared to the 8% in the 9 months so far. So I'm just wondering, do you have some flexibility in the cost base? Or is it something that... I mean...

Yes. It's a little bit of also the FX. Let's see how the FX plays out, but we aim to meet the cost guidance, but with a flag on FX there. That's been hurting us. Underlying, we are 1.5% lower on cost growth, if you would have fixed FX during this year.

And maybe my last one on capital. I mean, quarter-on-quarter, the strongest growth was in Norway in the funds compared to other markets. So, I don't know, can you share some color there turning to Norway?

Yes. I mean, it is probably also because Norway has been a little bit stronger. We had a tough market. So, Denmark and Norway were stronger. Finland and Sweden were bad market wise. But if you look at the flows, I think we have good and strong net flows, net buys in all of the countries and not least in our own Nordnet-branded funds.

We'll take a question in writing that comes from Jacob Kruse from Bernstein Autonomous. When you say capital optionality for growth, is that predominantly organic? Or are there serious considerations to acquire assets? That's the first one. Secondly, on capital, what would be your target level of SEK 81 million in the capital base, number two. And number three, finally, could you comment on the ROE or profit of the consumer lending business. Lars-Ake or Lennart, you can take it as you want.

Yes. I mean, starting with first, I mean it's organic. We don't have any M&A plans. Of course, if it's a potentially interesting case in the Nordics, we will look at it, but we take that case by case, but that's not for that. It's more -- we know the deposit versus savings capital now is on a low level. So, we need to have room to increase deposits over time. So it's that. And the second part, we look at and I say AT1 volume, but I don't know, Lennart, if you can say that we have any targets for AT1 volume. But we look at AT1 volume and when we do something, we'll communicate to you.

Correct. Yes.

And the profit on consumer lending, the net profit is -- or the profit before tax is around SEK 150 million, give or take. So if you reinvest the SEK 4 billion into the liquidity portfolio where around 4% yield is basically the same profit before tax there. So it was a very good product when it was a low yield environment for getting yield on liquidity, but now we are in a different environment.

Last person up here to ask a question today is Emil Jonsson from DNB.

It's actually Nicolas here for Emil. Yes. So just a follow-up question on the NII. So, if I take your NII outlook for 2023, that implies around [ SEK 800 ] million in NII for Q4, which annualized translates into SEK 3.2 billion. If you look at consensus NII for 2024, it's at SEK 2.6 billion. So, yes, it's assuming a quite marked decline in your NII run rate from what you're indicating in your outlook. So, how do you think about the NII growth in 2024? Do you see similar decline as consensus given our market rate expectations look? And yes, do you see any reason to expect substantially higher deposit costs going into 2024?

Yes. Overall, we see definitely a potential to grow NII also next year, if the estimate on market rates are correct. But we also know, I mean, you always have this deposit volume versus the interest rate on savings account that we monitor continuously, as you know, and we have the rates that's competitive, so we don't lose capital out from the platform. And that means, of course, we need to follow the market also during next year. I think we are already at the high end in Norway and Sweden for rates on savings account. And we increased quite a bit in Denmark, perhaps a little bit more to go. But the big question then what we should do in Finland? Probably, we need to do something there as well. But again, with rates on savings account in Denmark and Norway, even with very high rates, we haven't seen any massive internal flows anyway to those accounts. So, let's see how that plays out.

Okay. And then a question on your market shares in deposits. As you showed in the presentation, it's fairly low at just 1%. So do you think this is also something prioritized for you to grow? And if so, what do you have in mind to expand this -- potentially expand this very low market share in Nordic deposits?

Yes. We currently -- I mean, we focused on keeping the existing money on the platform. Of course, we can look at different ways to also market the products. We have a little bit more to perhaps attract more capital from the outside. We have the room on leverage ratio for sure to increase deposits. And we have a very good rate, not least in Norway and Sweden that we perhaps can talk about more.

All right. And then just a follow-up on the consumer lending business. Is this still -- I think you mentioned in the IPO process, this is also like a 25% to 30% ROE business. Is this still the case you think in the current rate environment? And I don't quite understand the comments how you could receive similar income from kind of -- if you were to put this in roundoff or reduce the SEK 4 billion in lending and invest into the liquidity portfolio, shouldn't there be some kind of negative impact? I would assume you have a higher interest income on the consumer lending portfolio than in the liquidity portfolio?

Yes, you have higher income, for sure. I mean the revenues, give or take, is around SEK 250 million, but the profit is SEK 150 million. It costs money to run the portfolio and you also have credit losses. So if you look at the profit before tax, it's around SEK 150 million. So if you then free up the SEK 4 billion and invest that in the liquidity portfolio, you get roughly the same number. So, you need to look at the bottom line. Of course, the top line is a little bit different.

All right. Thanks for the clarification. That's all for me.

Thank you, Nicolas. And that was also the last question for today. Thank you all for attending this presentation. And our next quarterly report will come up on the 30th of January. Please visit our website, nordnetab.com, or reach out to the IR department if you have any questions about Nordnet. Thank you for your interest. Have a nice day, and goodbye.

Thank you.

Thank you all.