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

I have our CEO, Lars-Ake Norling, and our CFO, Lennart Kran. Lars-Ake and Lennart will start off by presenting the results. And then, as usual, we'll have a Q&A session. [Operator Instructions] The presentation itself is available on our corporate website, nordnetab.com. Okay. Let's start the presentation. Lars-Ake, please go ahead.

Thank you, Marcus. So I can go to next. Starting with some highlights for the fourth quarter. Very strong financial performance and record revenue and profit, the best quarter ever. Also very good customer growth and positive net savings and considerably better than quarter 4 last year. And we also see that we're regaining positive momentum in our core fund and brokerage business, which has a growth quarter-on-quarter versus last year for the first time since 2021. Net interest income increased by 40% due to higher interest rates, but also higher lending volumes. Continued good cost control with cost in line with guidance. And also very strong capital situation where we will have a dividend of SEK 7.20 in line with our guidance of 70% of net profit. But also, we decided to redeem and buy back the AT1 that's due in March, and we're also evaluating a buyback program. And our CFO, Lennart, will talk more about this point later in the presentation. And we also see very strong results in different customer satisfaction service across the Nordics, both EPSI and SKI, where we are #1 in EPSI in Denmark and Finland -- and that's like SKI and #2 in SKI, Swedish Quality Index, in Sweden. And we are the bank with the highest growth in SKI. And in some categories, we are actually #1, like product quality. So we're very happy to see that. And we're also planning to invest extra in marketing to capitalize on the strong position and growth opportunity that we'll come back to as well. We go to the next. So some of the financial highlights in the fourth quarter, customer growth 9%, which we still consider good in this market. Savings capital up 15%, both from underlying growth in the savings market, but also net savings. Number of trades is slightly down from last year, but quite a bit up from quarter 3 this year or in 2023. Revenue is up 25%. And again, here, I would like to stress that now we see revenue growth in all revenue streams, both the fund business, the trading business and net interest income, which we, of course, are very happy about. Good cost control, cost in line with guidance of 7% and still very good operating leverage in the business with a profit growth of 33% to SEK 830 million. Go to the next. This is full year figures. Customers and savings capital is same story. Trades is down 13% from the rather tough market last year with a lot of uncertainty and also overall low volatility in the markets. And the revenues is up 35%, where we see then a drop in trading revenues for the full year, even though we were positive in quarter 4, but then compensated by increasing net interest income from high interest rates. Costs also, for the full year, is 7%. And actually, underlying with the -- excluding FX, with the weak Swedish krona, the cost growth was actually around 6%, a good cost control. And again, a very good profit growth of around 50% year-on-year. Go to the next. And we see continued growth in customers and net savings despite uncertain macro and, on a full year basis, the growth in customers and net savings is about the same as in 2022. But if you look at quarter 4 versus quarter 4, it's considerably higher customer growth and also net savings in '23 versus '22. Go to the next. We also benefit from being a Nordic player with geographic diversification that derisks our business model, but also enables growth. And we see good growth in both customers and savings capital in all of our Nordic countries. Go to the next. Coming in to talk a little bit about the different revenue streams, starting with trading. And to the left, we see the number of trading customers picking up in quarter 4, and that's due to that we saw strong markets in November and December. So trading activity was higher. But still trading per trading customer, up to the right there, you see is still on fairly low level. And following the VIX index that's -- we've seen overall low volatility in the markets, especially in H2. But share of cross-border trades are on a stable high level around 25%, and that's due to the country mix that we have higher share of cross-border trading outside of Sweden. Go to the next. So we see there in the graph to the left, in spite of considerably lower trades per trading or per customer per day, we see that the total number of trades per day has almost doubled since 2019, and that's due to we have doubled the customer base during the same time. And clearly, with this big and active base, when market picks up, like we saw in November and December, we get a definite boost on trading. So hopefully, with stronger markets going forward, that will enable higher trades per day for us. Also, the income per trade is higher than in '19 due to higher share of cross-border trading then from the country mix. Go to the next and talk a little bit about our fund business, which we're actually very proud of. We have very good growth in the fund business, both stand-alone, but also that in the pension business. And we've increased now the fund capital to SEK 185 billion, and that's 28% up in 1 year. So it's 2x the growth we have on average savings capital. And this is due to a very strong net fund buying during the year of SEK 23 billion. And especially, we see very strong growth in the Nordic branded fund portfolio, which is now currently about 1/4 of fund capital, around SEK 43 billion, SEK 44 billion. Also I would like to highlight a little bit the shift we've seen from active to passive funds in 2020. The active share of the funds were -- it was 48%, but that's down now to 32% in 2023. And likely a big part of the shift from active to passive is behind us, also allowing for a more stable fund margin going forward. Go to the next. So talking a little bit about the NII, net interest income. Starting with the deposit development and we have deposit to savings capital of 8%, which is historically low. Deposit volume decreased a little bit in the quarter due to customers that are not buying funds equity and not fully compensated then by net savings and dividends. But we also, in this quarter, had a pretty big currency effect, because the krona actually strengthened, of SEK 2 billion. So without the currency effect, it would have been rather flat on deposits quarter-on-quarter. Go to the next. So I'm going to now walk through quickly the different components of the net interest income, starting with the liquidity portfolio. And as usual, we do a snapshot and we see that we can reach about -- around SEK 1.6 billion in revenue from the liquidity portfolio in 2024, assuming then the volume we had at the end of quarter 4, 2023 and also the market consensus on IBOR rates that you see down to the right. Currently, we have SEK 43 billion in the liquidity portfolio derived from the SEK 67 billion in deposits and some cash equity of SEK 6 billion, and then you subtract the lending of around SEK 30 billion. But clearly, you see that in the bar graph, up to the right, that we have a sensitivity in -- of course, of the deposits. If deposit volume would increase, and we are, like I said, a low level of 8% deposit to savings capital, if that would increase 1%, that would mean a SEK 300 million additional revenue in 2024. Go to the next. Then the lending portfolio snapshot, around SEK 1.5 billion in 2024. That's higher than 2023 due to higher lending volumes. But then this -- as that is based on also fourth quarter volumes and a pass-through of interest changes of 50% margin lending, mortgage 100% and unsecured business of 90%. And here, we likely have a little bit upside because the volumes will probably increase during 2024 and some of the interest rate hikes we announced also in quarter 4 has not been taken effect yet either. We have overall a very low-risk loan portfolio with loan to value of around 40% for margin lending and 45% for mortgage and credit losses is only in the unsecured business, which is around 2% during 2023. It's a little bit up from '22, but still very good level in this market and a low-risk portfolio. We'll go to the next. And then deposit interest and cost snapshot is SEK 500 million in 2024, and assuming that the interest rates and volume per December 2023 with 100% then pass-through of changes of the rates that we saw in the previous pages, but also a stable volume of SEK 13.5 billion on the savings accounts. We see the development on the savings account that is still the transfers are most pronounced in Sweden. It's considerably less in other countries, even though we now have competitive interest rates in all countries, not just Sweden. But of course, here, we have a sensitivity with an increased volume of savings accounts and smaller pass-through. We could then -- if we would go to SEK 18 billion, for example, then from SEK 13.5 billion and pass-through of 50% instead of 100%, then it's SEK 100 million higher cost here from SEK 500 million to SEK 600 million. But we have to remind ourselves also when we increase the savings account volume, a majority of that volume is actually external deposits, which was also a yield on the liquidity portfolio. So all in all, for net interest income, if you look at the snapshots, it is around SEK 2.6 billion and same level as 2023. But in summary, resilient revenue streams then bolstered by -- resilient revenue bolstered by diversified revenue streams. And we -- you see there down to the left, that we have good growth in all the revenue streams, of course, most pronounced in net interest income lately because of the interest rates increases. But we also know that net interest income and trading is a little bit communicating vessels. When interest rates are high, market performance is a little bit worse and vice versa. Looking at the margins by product, of course, high now in deposits due to interest rates. You see the trading margin going down due to less trades per customer, but we see now that the fund margin has started to stabilize. And it was just 1 bps drop in 2023. And the main reason for this is that we likely now have the big shift from active to passive funds behind us. Go to the next. So if you boil all this down to the P&L, you see that we have grown the revenues around 30% a year since 2019. At the same time, we had the cost fairly stable on the 4% growth. So that means almost the entire revenue growth is ending up on the bottom line, so to a position of profitable growth, a very good operating leverage. Next, some product highlights. Of course, we're doing a lot every quarter. We launch a new web version every second hour and a new app every 3 days. But just a few things. I mean, we've now started to include a lot more dynamic pages on our web and not least for inspiration, and we just launched a new stock inspiration page, which has been very well received. We've also come very far in the migration of Shareville from the old app and web into the Nordnet app and web. We launched a number of nice features during the quarter, like onboarding and profiles and groups. But what's most -- what I'm most happy is -- about is that the migration also has been very successful. We've seen engagement in our post dramatically up in 1 year when people start using the new platform instead. So with that, I hand over to Lennart, the CFO, to talk about the capital situation.

Thank you so much, and we can go to the next slide, actually. And we have a strong capital situation and that is due to continuous good earnings and a very low risk business model with limited lending that puts [indiscernible] here. During the year, we have increased the own funds by almost SEK 1 billion. Most of that is from the earnings, of course. But also the capital requirements have been lower, both as an effect of SFSA's SREP as they do every second year, but also lower deposit levels that mean our liquidity is down, but also derisk of the liquidity portfolio. So really, it's a joint effort, both increased own funds and reduced risk and capital requirements. Leverage ratio is still the long-term constraints. And even though it is up to -- slightly, end of year, 6.7%, this is mainly due to, of course, the strong capital situation, we're doing funds, but also the low level in historical means of deposits according to savings capital, which is now down to 8.2% as you saw earlier here. And the low level is mainly due to our customers during 2023 being net buyers of stocks and funds actually. And we expect the deposit level to increase going back upwards related to -- in relation to deposit -- in relation to savings capital which will then increase -- decrease the leverage ratio, but also increase the NII, of course. Leverage ratio is the constraint also because that is harder for Nordnet to control. The risk capital rated -- capital adequacy, that we can control by invest differently in the liquidity portfolio but the deposit, which drives the leverage ratio, it is all the customers' choice and how they prefer to do. So that is what we have to have a buffer for, both in the long term, how that is developing, but also having the buffer for very, very short term, quick changes of it as we saw in March 2020 when the deposit increased by SEK 20 billion, almost 40% of that time within a quarter. So yes, the leverage ratio is still the constraint for us. But with this capital situation, we are continuing doing the dividend of 70% of earnings -- net profit, sorry, giving in a dividend of SEK 7.20 a share. But we also mean to reduce the capital that we do by redeeming the AT1 bond, which is first call, 21st of March. We have received then a permission to do that from SFSA. And for your knowledge, I mean, that is [ SEK 500 billion ] on stable plus 6.75%, an annual cost of SEK 60 million about. We are also evaluating a long-term buyback program, and that is to manage further excess capital, of course. This would not be onetime. It will be long term over a couple of years to slowly get us down to the proposed leverage ratio range of 4.0% to 4.5% as we also announced today. And then we have just those capital ratios. We have implemented those to be more transparent with you about our capital situation and the plans ahead. And that is to have this buffer to regulatory requirement, but also saying, yes, this is where the leverage ratio is sustainable, and this is where we want to be, between 4.0% and 4.5%. Thank you.

Thank you, Lennart. A little bit about a recap of our strategic focus. You can go to the next. As you know, we have 4 key strategic ambitions, starting with the -- having the most happy customers, being a one-stop shop for savings investment with an outstanding customer experience and to get there, building on our platform for sales investments every day with a high speed in development. And we also know we can never have happy customers unless we have happy employees with the upward trend on engagements and also that we can attract and retain top talent, which we can. Then a sustainable business, we are in a trust business, and we need to earn that trust every day and work extensively, that risk management, with both compliance risks and other risks and overall secure, every year, trusted and liked brands. And the last here is profitable growth to capture the Nordic growth potential to continue to take market share in the growing savings market and also ensure scalability and cost control going forward. We can go to the next. And as you know, we've had very good long-term growth in both customers and savings capital, both from a dramatic improvement in customer experience that we continue to enhance basically every day, but also that we have a particular mass of customers in all countries. We have now more than 400,000 customers plus in each one of the Nordic countries, driving -- fueling then where the mass grows. And of course, good net savings during the period as well. Go to the next. And we are taking market share in the growing savings market. We have 6% market share of the population, 6% of the addressable savings capital that was, in 2022, SEK 13 trillion, and that was up from 3% in 2016. At the same time, we know that the market is growing both from underlying growth in the savings market, but also that we launched new product like the endowment wrapper we launched in Finland this fall and the livrente product we're going to launch soon in Denmark. So the addressable market is -- we estimate it to increase from SEK 13 trillion to around SEK 20 trillion in 2026. And to the right, you see we have highest market share in equities and lower in funds and pension. Thereby, we also put a lot of effort in those areas. And we're also really happy to see that development coming now with very strong growth in the fund business. Go to the next. Costs and cost focus is also really important to us. We've had a rather stable cost development since '19 in spite of doubling the customer base from 900,000 customers to 1.8 million customers during the same period. So very scalable business and overall, very good cost control. Key drivers is that we have a very modern, scalable, cloud-powered tech platform that can onboard a lot of new customers without driving cost, really work with the automation and simplification when it comes to processes, which is a win-win, works better for customers, we scale better. Also very efficient customer growth, lower acquisition cost, mainly driven by PR and word of mouth. We plan to increase this a little bit now and I'll come back to that, but it's still a very efficient growth even without spend. And also that we manage the third-party spend in a good way. Go to the next. So looking at the medium-term financial targets. We -- if you look at the actuals in 2023 versus the targets, we are in line or above on all targets, except for customer growth, where we're slightly below with 9% versus guidance of 10% to 15%. But we still consider this is good in a rather difficult market during last year. We made 2 changes then to the medium-term financial targets. One is, like Lennart talked about, we added the capital ratio targets to set some kind of boundary for a share buyback program. And when it comes to cost, I mean, the underlying cost is still mid-single-digit growth, but then we plan to invest an additional SEK 80 million per year in marketing, which I'm going to talk about now. And we want to capitalize on the position that we have. We have a very strong market position in the Nordics. We have a good platform. We have very happy customers. And we hopefully also will see a little bit more benign market going forward with better macro and a little bit better performance in the markets. So we think it's a good time to do an extra investment now. And the investment we announced is up to SEK 80 million extra per year from the level of SEK 45 million. So last year, we spent around SEK 10 million then in marketing per country, which is a low level. And now we increased that to -- we plan to increase that to roughly SEK 30 million per country. And what we want to achieve with this, of course, is to increase the customer growth. So we -- from the 9% where we are to the upper band of 10% to 15% or upper part of 10% to 15%, which is our guidance. Of course, that this will take some time. You build this over time. But to do this, then this investment will allow us to drive brand awareness, but also increase the pool of customers that can consider Nordnet as a platform. But we will be very transparent. So we will disclose and track the market costs separately. And of course, if we, over time, see that this is not efficient, we can also scale back. But it takes time to see the full results of this. And it's not a thing you can just do for 1 year and scrap. It takes a couple of years before you see the results. Yes, finally, just rounding off with the priorities for 2024, we're working extensively with the Danish livrente pension product. We have a branch management in place. We're going to hand in the branch application during quarter 1. We aim to launch at the end of this year or beginning of 2025. We continue to expand our Nordnet-branded fund offering. It's a new exciting launch coming up now mid-Feb. Watch out for that one. And as I said, also the integration and migration of Shareville app and web to the Nordnet app and web is going really well, and we're likely going to be done with that work during the summer and then we're going to close the old platform. And that brand position we have talked about to strengthen brand awareness through extra marketing spend. But overall, of course, we're going to continue to focus on cost control and ensure that we have a scalable business also going forward. I think I'll stop there, Marcus, and hand over to you.

Great. Okay. So it's time for questions. [Operator Instructions] So the first question comes from Jacob Hesslevik at SEB.

So my first question is on the increased advertisement. I think you said during your presentation, but could you reiterate if you have already begun with the campaigns and have they seen any effects already, and also which market you see the biggest potential in?

Yes. So we haven't increased spend yet. What we are doing now is working on concepts, and we're going to do that together with the external party. When that concept is done, then we're going to start rolling it out and it's likely going to be from, I would say, end of quarter 2. And how we spread the spend, we haven't fully decided. It's likely that perhaps a little bit less than in Finland since we are #1 and the only platform there and a little bit higher in the other countries. But I'd say, I think we have a good potential in all of our countries with an increased marketing spend, if we do this right, of course, and execute it well.

And just related to the customer growth target of 15%, if you get to that band, should we expect to see it already in 2024? Or is it rather 2025?

2024 is too early. It takes time to build brand awareness and consideration within the customer base. So we're likely going to see sign of that in 2025.

Perfect. Very clear. My second question is then on buybacks. So first of all, do you have a mandate from last AGM in spring of 2023? Or is this something you will request in the upcoming AGM?

We do have the AGM mandate. However, the buyback also requires permission from SFSA, which we have not -- we do not have at the moment.

Likely, I mean, the buybacks is going to be from H2. So likely, we'll start the buybacks from H2, both to have a new approval from AGM but also an approval from the SFSA.

That's very clear. So we should expect you to use buybacks then to get down to 4.5% or it's 4% and alternative then in the leverage ratio.

Over time, yes, over a couple of years. I think it's important to know that, I mean, over a couple of years, we do also see additional earnings where we'll add on to own funds during those years, and we also watch closely the development of deposits, of course, so we don't jeopardize anything.

That's very smart, I think. And just one very last question. Do you have any update on the unsecured lending portfolio divestment?

No, just as it's ongoing, so either sell or -- the book or divest it in runoff. But we'll come back as soon as we have something to communicate.

The next question comes from Patrik Brattelius at ABG.

Can you hear me?

Yes.

Perfect. I would like to start regarding the comment where you mentioned that you expect the deposit base to savings capital to increase the coming years, given that it's below average historical levels. Can you please share with us some of the reason why you believe that will occur?

I didn't say it will increase, but it's, of course, a likelihood that we see a little bit stronger deposits over time since we are right now on very low levels. And, of course, a little bit market-dependent on that one. I would say if it's more volatility, I think you'll see more deposits and also higher customer growth will also probably lead to more deposits. A bit stronger market, for example, will probably do that for -- also increase the inflows to the platform. So I'm just saying that we are on historical low levels, so there is a likelihood that we have an upside, and I just wanted to share the sensitivity on that upside. So 1% increase is about SEK 300 million.

I think one aspect of deposit levels that's sort of underappreciated is the effect of higher transaction levels. So right now, we see net buying, which is -- reduces deposits. But when you have buying and selling across 1.9 million customers, you have that transactional cash that's kind of missing now. Back in 2021, when we were at sort of 13% deposit to [indiscernible], that was all transactional cash since there was no savings account to park your cash in. So once trading activity comes back, that will actually help with liquidity and deposit levels.

Because we have seen increase in equity markets during Q4 and deposit has fallen despite that quite sharply in November, do you -- how do you -- how is your strategic thinking about raising deposit rates to attract more deposits to offset this drop in deposits?

If you look at quarter 4 in total, we actually were flat if you exclude the FX effects. We clearly saw, especially in November, December when it was more volatility in trading that the deposit held up very well. And you get -- got more trading deposits. I'd say I think we have competitive interest rates in the markets now to at least to keep the deposits we have on our platform. If we should increase that further to attract even more capital, that remains to be seen as, of course, a cost to that as well. We have a pretty interesting model in Norway, where we have differentiated a little bit between the private banking rates and retail rates to track private banking capital with very good interest rates and see how that plays out.

And then a question on the buyback, a little bit of a follow-up. According to my calculations, it looks like your overcapitalization then adjusting for this SEK 81 million would be roughly SEK 1.5 billion, but then you build capital, given your high profitability. And then you talked about maybe the exposure also falling? Do you have in -- can you share with us some of your thinking about the run rate buyback level, given that you wanted to have it on a long-term, not just a short-term buyback program?

I think that's not what we want to see when we see the development of both the earnings and the deposit levels, how they line out during the years. But also, I think it's important to see that it is within the range of 4.0% and 4.5%. And if you go to 4.5%, that's SEK 1 billion, a little bit more than that, of excess capital. So it is a little different there. But the range is to be within 4.0% and 4.5% within some years, so that we have those tools to work with.

Okay. That is fair. And then I squeeze in just the last question. Can you talk about any impact in Finland from the tax wrapper launch, given that it launched here in the fall? And has it gone according to plan? And were you expecting a bigger impact or a smaller impact? Can you please share some details here, please?

Yes. I think the product builds very steadily, not least in the private banking segment. It's been very well received, and we are approaching -- it's around close to 1,000 customers and close to SEK 500 million in net savings. But the activity overall and the customer base is higher than expected. So all in all, all I would say, we have a good start, but this will build over time like any insurance products, but we see the feedback from customers and from the market has been very, very good.

And next question comes from Nicolas McBeath at DNB. And I think you need to unmute on your end, Nicolas. Try now, I think you're unmuted. Nicolas, can you hear us? Okay. Hopefully, Nicolas can come back. We will go to Ermin Keric at Carnegie.

Do you hear me?

Yes.

Perfect. So starting maybe on the increased marketing spend. Have you made any analysis on kind of the payback period or the conversion rate you usually have on marketing spend on the marketing spend you've had previously?

Yes. I mean we -- right now, we have acquisition costs around SEK 700 but lifetime value to acquisition cost is 24 [indiscernible], which is very high. So with this investment, we're likely going to increase the CAC to roughly around 1,100 but still have a very good LTV to -- lifetime value to CAC. So I think it really makes sense to fuel growth with the low LTV to CAC that we have and the strong position we also have in the market. But of course, we're going to follow this over time to see that we get the effects that we want. Otherwise, of course, we will scale back. But it will take some time before you see results here, especially when you build brand awareness and consideration, that takes definitely more than a year, probably 2.

Got it. And maybe just following on, on the cost topic. So marketing, I suppose it could be seen as a normal running thing you need to have in your operation as well. Is there other parts that aren't included kind of in the cost guidance that could come up in the coming years to make you actually, on a reported basis, have an overrun compared to your cost target?

Not as we see it. And this was a considerate investment. I mean, just -- we had good growth also with low spend. I mean we spent SEK 10 million per country last year, and we still had 9% growth. But I think there is a clear opportunity for us not to push a little bit with the strong position that we have and increased customer growth. Of course, over time what's really fueling our business is customer growth and net savings.

I 100% agree, I think for the long-term franchise value, it makes a lot of sense. Then just on your NII sensitivity as well. You assumed 90% pass-through on lower rates on the consumer lending. Given that you anyhow kind of want to churn out that portfolio, why would you pass on anything of lower rates to those customers?

It's probably somewhat regulated in a [indiscernible]. So you need to pass through some of the interest rate decreases.

Let's try Nicolas again. Let's see. Let's try. I think you need to accept to be unmuted. Nicolas? All right. Okay. We'll move on to Michael Macnaughton at UBS.

Can you hear me?

Yes, we can hear you.

Great. Just another follow-up on the marketing. I think most of the questions have already been asked, but just thinking about the sequencing in 2024, should we expect that to be kind of front loaded or evenly spread out across the year?

No. I mean, like I said, right now, we're working on a concept together with a third party. So, of course, there is going to be some costs related to that, but we won't start the market -- the external market to push until the end of quarter 2, and then quarter 3, quarter 4. So probably a little bit skewed to later in the year. But like we said, we're going to report marketing costs separately. You will see it in Excel sheets. So it's going to be very easy to track as well.

Okay. Great. And then just another follow-up on the [ Star ] package in Sweden. I just wondered if it's seen any impact of that in Q4. And then also you saw some pricing competition from some competitors in Denmark as well. Any comment there on how that's affecting your pricing?

Yes. But I think in Sweden, with the -- since now we're really competitive on the [ Star ] offering and also you can change commission clause. That's really -- we see some positive effects, but not least on also NPS score and customer satisfaction, of course, not just due to this, it's overall, everything we do on the platform, but discounts as well. So we have a very positive trajectory in customer satisfaction. We saw that in SKI as well as Swedish Quality Index. What we still need to work with in Sweden is awareness -- brand awareness. So that's why I think some extra push also in Sweden on marketing spend makes sense. When it comes to Denmark and the Saxo lowering prices, we haven't seen any effects. They did this in beginning of January, but we have an extremely strong stock in Denmark with both customer growth and savings. And we want to have -- we position ourselves to be this one-stop shop with a great customer experience. We don't necessarily need to be cheap on every single price point. Of course, overall a good price. But -- so, so far, no effects, of course, we'll monitor the situation and see how it plays out. But remember that Saxo has always been cheaper than us basically. And they've been moving their prices a little bit up and down. They were down quite a bit in 2021, 2022 and then I think they raised the prices and now they moved back again.

Great. Okay. And then just one final one on the level of net inflows. I think in Q3, you mentioned that it was at the reduced levels still because of reallocation of capital from private banking clients. Is that still what you're seeing in Q4? Or are there any other trends that are emerging...

No. I mean the retail trend is still very strong and stable, still allocation, especially in all the cohorts of private banking, which has earned quite a lot of money. But again, hopefully, if the interest rate starts going down and the markets are performing a little bit better, then we will see quite a lot of that capital coming back to be invested also in equities and funds.

Let's see. I'm not going to try Nicolas again, but I'll try his colleague at DNB, Emil Jonsson.

It's Nicolas here. I'm using Emil's headphone. So yes, a follow-up on the increased marketing spend and the potential communication between higher marketing and customer growth. So looking back since the IPO, you've kept your customer growth target largely intact, actually even reduced it slightly from the 15% you had for some time as well. So now it's doing 10% to 15% while the cost growth guidance has increased from being flat for many years ahead that you stated in the IPO, later raised to 5%, and now you're going to be probably above 10% for 2024. So is it fair to conclude that it is more expensive than you previously assessed to reach your customer growth ambition? And secondly, how can we be confident that your cost growth will indeed go back to the 5% in the medium term, given the trend with accelerating cost growth we've seen now from 0% to 5% to now, yes, around 11%?

Yes. Well, I think you see a little bit different factors. A lot of changes since the IPO. I mean, I think no one could dream about the growth in customers and net savings and overall in the business that we've seen. And in spite of that, I would say we have a very stable customer development. We increased cost per year on average 4% per year since 2019. At the same time, we doubled the customer base from 900,000 to 1.9 million customers now. So I'd say, overall, we have a very scalable business and a very good cost control. I think we showed that also last year, even in a very high inflation environment. We managed 7%. But the underlying, if you exclude FX, it was actually 6%, so in line with our guidance. So underlying, we see that we can maintain mid-single-digit. It's just that we see an opportunity for an extra push in marketing. Of course, if that doesn't give effect over time in a way we want, we can step that back. Like I said, we'll report it separately, we'll be able to track that cost item specifically.

Okay. But what has triggered you to reassess the yield you get from marketing expenses right now? So traditionally, you've been more -- targeting more growth through branding, using savings economists, podcast events and also word of mouth. So does it suggest that you see higher customer acquisition costs in the future?

Yes. I mean, not really. I think we -- I mean, like I said, our acquisition cost is around SEK 700 versus a lifetime value -- what is it, [ 20,000 ]. So lifetime value to acquisition is like 24 currently, so it's extremely efficient customer growth. And I think that makes an opportunity to push a little bit extra on marketing. It increases acquisition costs a little bit, but still have a very good LTV to CAC. And of course, we -- I mean, we want to reach as big part of the market as possible when we're strong in the investor trader segments. We want to be stronger also in the service segment. But to fully get there, we need to build additional brand awareness that we don't necessarily do in those segments with the savings economists and word of mouth. So I think it makes sense to build a more generic brand awareness in the markets where we are and also then increase the pool of customers that can consider Nordnet as a platform.

All right. And then how much additional net inflows do you expect the kind of incremental 5% higher customer growth to bring? So let's say, go from 9% to upper end of the 10% to 15% interval, so are those customers you hope to gain from more marketing and expected to be minor customers in terms of AUM or substantial drivers of incremental net inflows?

Yes. Well, we see -- I mean, when we grow as much as we've done in the last years, I mean, the new cohorts have been traditionally very strong, both when it comes to activity and net savings. Of course, you can't match the fully -- have a trading segment that we had before when it comes to trades per customer, but it's been very good and active customers and also putting a lot of good net savings over time on the platform. So we don't see that, necessarily, cohort going to be worse going forward. It's just that we want to have a higher reach.

All right. And does that then suggest that the slide you showed with trades per trading customers should continue to trend down?

Yes, I mean, I think, like I said, with the new cohorts, if you look at trades overall, the number of trading customers, that's equal between the cohorts. It's just the number of trades per trading customers a little bit less in the new cohorts due to the old cohorts due to -- that we have more heavy traders than in the old cohorts. But I don't say it will dramatically, I mean, push the level down. I think why we see the level now is more market-dependent. And I think for the customer base of 1.9 million, we'll have some more activity in the markets where we have an upside on trading going forward.

And I think especially in Sweden especially where you've seen that trend where we started with having mainly heavy traders, and then expanded more to broader market outside of Sweden, we have all kinds of customers. We are the #1 platform and have a very broad segment of the market. So incremental customers are generally sort of probably average there. You don't see that same sort of obvious dilution outside of Sweden, and we've grown outside of Sweden for a number of years.

Yes. And then on the net interest income, so I appreciate the NII snapshot for 2024. But clearly, it's a bit speculative, given the uncertainty regarding rates and volumes. So could you say something more specific on what this -- your snapshot suggest for Q1? I think you mentioned, Lars-Ake, that you still expect some further tailwinds to the yield on the liquidity portfolio from previous rate hikes. So do you see potential for higher NII Q-on-Q and Q1?

I think what we need to see then is how deposit plays out. And then also, we see additional upside. It was not only liquidity, it was on the lending portfolio where we had announced hikes which were not there in the snapshot and also likely a higher volume. And then we see, of course, on the downside a little bit then how much transfers we get to the savings accounts. But again, the majority of the inflows to savings accounts, we know, come from external deposits that would also then drive yield on the liquidity portfolio.

So did I understand correctly that you have some announced rate hikes to your -- on the lending that is not included in the snapshots?

Exactly. That will come in play in quarter 1. It's not dramatic, but it's like, of course, like 25 points -- bps on some products.

But on the lending book, does that...

I think the markets can come back...

It's in Denmark and Norway, I think all lending products there...

And still we do an adjustment on all the individual rates and margin lending in Jan as well. So that will also play out.

Yes, I think [indiscernible] and I clearly like to make a sort of assumptions on your own assumptions. But with the way we laid out the snapshot with what we know now, if you look at sort of where the risk is, if it's topside or downside, I think the market rate curve prices in sort of rates starting to come down in H1, about a total of 100 bps and change across the market for the year. I think that sounds fairly reasonable that rates cuts would be more aggressive than that. It's probably not likely. Then on the volume side, that's, of course, tough to know. But we are in all-time low when it comes to the process to AUM and loan growth should likely continue to grow. So I'd say that the risk there is more to the upside, too. But of course, it's hard to know so we lay out sort of a snapshot so you can apply your calculations to it. The next question comes from Rickard Strand at Nordea.

Starting off with a question on capital. You have announced that you have the intention to buyback your AT1 thereof SEK 500 million. But going forward, would you be interested in this new AT1 capital if you see tighter spreads? Or is this -- should we see this sort of shift here that -- as permanent?

No, I think we should -- we do not consider any issuance at the moment. We have excess capital. But if that will be a good alternative, we can always look upon it. But not in the plans as of today and definitely not to replace this one that we redeem at the moment.

But if we do something, we can be opportunistic. And so it depends on the market development, the rate [indiscernible].

And then coming back to the cost increase there in terms of marketing spend. Just interested to hear, is there any -- is this something particular in terms of timing that inspired you to take this action now in terms of product launches, trading -- change in trading sentiment, et cetera?

Yes. But 2 things, I would say. One is, I mean, that we get a platform that's really appreciated by the customers. We are a one-stop shop now in all countries, but we also see -- of course, you measure your customer satisfaction ourselves by NPS, but what we see also in the external benchmarks that we're very strong, that we're very strong take-up in SKI in Sweden, #2 on the bank that's growing, also #1 on product quality on that one. For example, we're #1 in similar measurement, EPSI, in Denmark and in Finland. So of course, we want to leverage the strong customer satisfaction and strong market position we have, and I think it's a good time. And the other part is also macro a little bit. Hopefully, we have a little bit more benign macro in the coming years, so hopefully, then drive a little bit higher growth in the markets as well, a little bit more activity in the markets.

Yes. And then we had one of your main competitors talking about improving their offerings to more active customers. And they mentioned specifically that they could potentially lower FX fees for cross-border trading. Is that something you see could impact Nordnet's brokerage income from cross-border? Or do you think that your customers are happy across the Nordic countries?

Yes. I mean if you look at why they choose us as a platform to start with this one-stop shop that you can find everything that you need and, of course, coupled with the outstanding customer experience, then, of course, you need to, overall, be competitive on price. But we clearly see that we don't need to be cheapest on every single price point. You see that with the [indiscernible] coming in with 0. Basically, we've seen that commission, we've seen that with big banks lowering commission. We've seen it so far with Saxo as well. So of course, you're going to monitor at all time competition and see how it plays out, but we also know from experience that we can rely also on the strong position and a very good platform that we have.

And then one final one for me. Lars-Ake, you mentioned -- it sounded like you're getting a little bit more optimistic about flattening out the margin pressure on funds. Is that something you see as sort of the trend leveling out? Or is that just sort of a hope for...

How about saying -- I mean, we clearly saw it in between 2022 to 2023, there was virtually flat on margin. And I think it's a tremendous shift from 8% active in '20, down to 32% active in 2023. I think it's likely that majority of that shift has happened because there is clearly room for active funds and so on.

Next question comes from Enrico Bolzoni from JPMorgan.

Just one clarification on the marketing cost, to start. The previous spend of SEK 45 million you mentioned, that will still be reported together with the operating cost, right? So it's just the SEK 85 million that will be on a separate line? Or are we going to see...

The entire marketing costs, so you'll see the SEK 45 million plus SEK 80 million.

So the entire would be in a separate line, okay.

You have it today, if you -- in the Excel that's on the website, you can see it, we have split it out already, and you have all the history there, too.

That's helpful. And related to that, I know it's early because you said that you're going to start in 2Q. I was just wondering whether -- is there any seasonality we should be aware of? So for example, in the U.K., a lot of firms usually increase marketing around the icy season, so the first quarter. Is this going to happen as well in your markets? Or actually, it's going to be more evenly spread out once you start?

Yes. I think, of course, there's some seasonality with us as well. Especially during summer vacation, probably we won't feel that much, for example. When people get back to work in August, September, I think it's a good time, for example. But then it can be a little bit market-dependent as well. But we'd rather spread out anyway. But of course, we will try to stay a little bit during -- so we don't spend too much in the quiet periods.

Okay. And then I had a question on -- just on the regulatory pressure, again, the read across here in the U.K., there's been a lot of regulatory pressure on trading, on NII. I was just wondering if you could give us just your take in terms of how the regulators in the markets you operate are seeing the margins that the platform has generated on cash, but also, I would say, more recently, the FCA has been a bit concerned about the gamification of trading, so the advertisement around trading shares for retail customers, which clearly is relevant to you. So I was just keen to hear your thoughts on this.

Yes. I think when it comes to NII, it's more in the big banks, we've been a little bit scrutinized. I think we are very competitive. We have high interest rates on savings account, and we have good lending rates. And we are a bank. We have a bank license, so we can run a bank business, which is also a bit different from many of the U.K. platforms. When it comes to -- so no real pressure to regulate or have some windfall tax on NII in any of the countries. When it comes to gamification, I think, I mean, we're a long-term savings platform. We promote long-term savings, diversified savings. And also, to save regularly, most customers actually do this. And we're also very careful on our marketing. There's been a number of marketing service, one in Denmark, I think in Norway, et cetera. And I think the one in Denmark has been closed, and we came out without any comments basically. So -- but we really try to be careful and adhere to regulation, of course, when it comes to marketing.

And one final question, please, on the pass-through rate in terms of the remuneration, saving accounts, as rates start to fall. You put that sensitivity table, which is useful. What are your thoughts here? I mean, what are the chances that actually you'll be able to pass through 100% of that? I'm just thinking from probably a competitive dynamic, does it really matter what the other players will do? Or there are other consideration which we should keep in mind?

I think outside of Sweden, we are more of a price-setter since we're the #1. In Sweden, we need to see a little bit what Avanza is doing. And they might be bound a little bit on the interest rate on their external accounts that they provide, but let's see how that plays out. But we need to, as a #2 anyway, follow competition in Sweden.

A couple of last questions before we wrap up. So we have Panos Ellinas from Morgan Stanley.

Yes. Can you hear me?

Yes.

We can.

Yes. I think most of my questions are answered. Just maybe to put everything together. So marketing spend is going up. As you mentioned, acquisition costs going up as well. So you need to spend more to grow the customer base to your targeted 10% to 15%. Is it specific type of customers you're looking at? Especially then maybe are you aiming more towards probably banking type of customers? And then tied to the marketing spend, you also touched upon the competitive landscape and the pricing likely coming down in brokerage and FX and stuff. But also on the rates, I mean, as my colleague also mentioned on the Avanza and the postponement of the rate hikes in Sweden, you also gave some sensitivity on the deposits for 100%, a 50% pass-through. So does this suggest that you'll likely delay the pricing once rate cuts commence? And is it more likely to be towards a 50% than 100%?

I think with the customer marketing and customers, we target all of our 3 segments, the investors, traders, and savers. But of course, I think this investor, traders segments are big, and we want to build as high awareness as possible in all of those segments because I think there are great growth potential in all. So it's not just going to be directed to one specific group like PB, it's going to be a broader brand awareness campaign than that. When it comes to the rate cuts on the deposits, on savings account, like I said here, we are more the price-setter outside of Sweden, where we can change probably with 100% pass-through. In Sweden, it's different, we need to also look at what Avanza is doing. So that's going to tell again a little bit how it plays out in Sweden.

I think the last question from Andy Lowe at Citi.

Can you hear me?

Yes.

We can.

Great. Just, I would love if you could provide any thoughts on, throughout 2024, sort of mix shift from your savings deposits to your mixture of deposits. Savings, you've obviously seen a big step-up and that's increased throughout 2023. So do you think that mix shift is done? And then maybe another way to think about that is if you take your non-savings deposits as a share of your savings capital at about 5.6%, do you think we're close to the lower bound? Or do you think there's scope for that to go lower?

I didn't quite -- did you understand, Marcus?

I think the -- there was one question of sort of savings account balances. I think we -- it's hard to know where it's going to stabilize. It's at 39% of deposits now, but it makes sense that it would start to stabilize once rates come down because the rates have triggered it to come up and rates are starting to come down. We'll see where it lands.

That will also need a market pickup, so more money moved into transacting instead of savings.

Exactly. And then that's sort of what I talked about for that transactional cash, which, as Andy pointed out, is at some kind of -- close to an all-time low now. And what would trigger that to come back is sort of markets to be a bit more investable, this sort of trading instead of just net buying. So I think that the risk is clearly to the upside there. And the trigger of this coming back a bit more, this transactional cash, is markets being a bit more investable, which would make customer growth come up, customers bring new cash. That cash, even though it's meant for investing, it sits for a day or 2 or a week. Take that across 1.9 million customers, you have some constant liquidity, take the private banking sort of allocation away from markets coming back, amid that markets are more investable. Some of that cash trickling in and coming back, that would also help deposits, and that would be cash coming back to be invested, that sort of transactional cash. So I think there are a number of factors clearly that will help deposits come up and it's to the upside. The question is, of course, sort of timing, how fast it goes and at what point, but I think it's clear that it's heading in that direction at some point. I think that is the last of the questions for today. So thanks a lot for attending this presentation. You can visit our website at nordnetab.com or reach out to me if you have any questions. So thank you for your interest in Nordnet. Have a nice day, and goodbye everybody.