Skandinaviska Enskilda Banken AB (publ) (SEBA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the SEB's Q2 2020 Results Call. [Operator Instructions] And I would now like to hand the conference over to your first speaker, Mr. Johan Torgeby. Thank you. Please go ahead.

Thank you very much, and good morning, and welcome to SEB's Second Quarter Results Call for 2020. A little bit just formal instruction. If you want to follow the presentation that myself and Masih will refer to, you can find the presentations on sebgroup.com, and there is a link for the Q results. And there, we will have the slide show that we will refer to during this presentation. Starting just with some comments about the macro on Page 2, the financial markets development. I don't think anyone has missed that we've seen a very strong reversal from the Q1 weakness that we saw in the financial markets. So we note that year-to-date, the Stockholm broader index is actually up, and it's significantly up compared to a year ago and not too far off the recent peak that we saw on the 19th of February. This has clearly had a positive effect on our second quarter when it comes to market valuations and also AUM. Looking at credit spreads, they've also continued to tighten during the quarter. We can see that both the high-yield and investment-grade index has a little bit left to go to come to the previous lows, a little bit less recovery, but still a meaningful improvement compared to Q1. We've also included SEB's credit spread, which is marginally higher than we saw before the corona started to affect the credit mark pricing. This has also had a very strong reversal effect, particularly on NFI, where the CVA, the credit value adjustment, particularly is driven by the perceived SEK 4 billion to default, implied by the credit spreads in the markets. On the interest rate side, it's been -- it remained very low, and we've seen a sideline movement. So nothing -- no large impact coming from them. Flicking to the next page, Page 3, the economic effects of COVID-19 lockdown. We've included this slide as it has become quite topical around the Swedish model. We're not going to comment on the health impact and what it might or might not mean for Sweden, but we thought it would be useful in the context of future credit loss assessments and also economic activity assessment to share a few points on how it looks in Sweden. Sweden is, of course, our largest market, where the largest exposure on credit exists. If we start with just looking at some public data from Google data on people mobility, we've included 2 data points just to show how much less Sweden has been affected. First, when it comes to the geographical position in retail or recreation sites, we see a 20% drop. And then compared to several different European countries, it's meaningfully less than you've seen in those countries. Also tracking the transit stations, this is really where you go to school and you go to the office or what you do, also here, we can see less of a reduction in activity for people mobility at 36%. These 2 soft factors are, we think, a good representation of how it felt. We have been affected in this country, but not as much as many others. Looking at the more harder data, there is a picture being clearly showing that the domestic economy seems to have done quite well. If you're not exposed to business travel or you're not affected by the restrictions of travel, such as retail consumption and domestic services, we see a clear difference in economic activity both in retail consumption and in PMI services compared to Europe at large. Looking at industrial production, it looks much more in line with Europe as such. As Sweden is a small open export-oriented economy, we are clearly dependent on global supply chains working and, of course, demand outside Sweden to be able to meet that demand and we see a much more similar picture on the industrial side. And then lastly, just sharing our own economists' projection on GDP and unemployment, we also see here that it looks like the recession will be less deep than is expected for Europe at large and unemployment levels marginally lower. Going to the next page, Page 4, COVID-19-related credit requests. We have here from the first quarter, again, put in a picture for large corporate and financial institutions. This is the division which has had and which we are seeing the largest demand, increased demand for credit coming through. And just pointing to this graph and end of Q1 2020, we had a credit exposure in this division of SEK 925 billion. Looking at Q2 2020, that had gone up to SEK 996 billion. So this is an 8% increase in 1 quarter of credit exposure to the large corporates and financial institutions in SEB. In Q1, we also included a more recent updated data point as of 17th of April, which we also put in here for comparison with today. And one can clearly see that the increased demand that we saw in Q1 has fallen down a bit. So at that point in time, we had SEK 83 billion in a pipeline that we thought was likely to be converted into real exposure, that has gone down to SEK 63 billion. And just to be clear, there is still an increased demand, but less so than we saw previously. We've also seen the on-balance sheet exposure, the dark green proportion of the total exposure gone down. And this means that the propensity to use these credit facilities as an insurance for a rainy day in the future, as we pointed out in Q1, has increased. So many of these are there for a rainy day rather than being drawn here and now. That can also be interpreted in a positive way given the economic impact amongst the large corporates. As they have not drawn, their cash flow estimates for the next 2 or 3 quarters seems to be intact that they have not really needed to use the money for now. However, I would point out that visibility is low, although there is a trajectory we are sensing to a more normalized situation, where we have less discussion with clients around COVID-19 and a more normalized discussion with clients on how to proceed. Going to the next page, we then look at the actual development for the whole corporate and credit exposure in the bank. And we can note a slight acceleration from elevated level in Q1 where corporate exposure grew by 10% FX-adjusted year-on-year in the second quarter and also a slight acceleration in Swedish mortgages that grew 7% during the second quarter compared to last year, both indicating a very healthy activity level going into the rest of the year. Next page, Page 6. I would like to put in context. In April 2019, the FSA in Sweden announced that they would conduct a larger supervisory review of SEB's governance and control of its Baltic's subsidiary from 2007 up until 2019. On the 25th of June, the FSA published its findings, and I'd like to just go through some of the decisions that they have made, our comments to those decision and how we plan to respond. The Swedish FSA has decided to give SEB a remark, which is the lower degree of an administrative sanctioned, coupled with an administrative fine of SEK 1 billion, which represents 14% of the new sanction scale the FSA has at its disposal to impose on a bank. We can also say that given this decision, we've now heard from all the Baltic and the Swedish FSA and the ongoing supervisory reviews have now been concluded in the AML area. This morning, we have commented on the FSA's decision, and I'll just give you 3 summary points on what we think. First, SEB question some of FSA's conclusions and therefore, subsequently also the proportionality how those conclusions can lead to SEK 1 billion in an administrative fine. This is really based on a question that we have about what has actually been a deficiency and when should that have been addressed. It is unclear to us. Secondly, FSA's observations have already, in the past, largely been identified, reported and addressed by SEB and that's good for the future that we are on track to improve. And also for the avoidance of doubt, SEB does take full responsibility for all its subsidiaries, not at least the Baltic subsidiaries despite some comments made by the FSA in conjunction with the published report. SEB has now decided not to appeal this decision. We think after careful analysis that we create more value for shareholders and other stakeholders by focusing on developing the bank and our offering, including spending the time and energy it would take to look at this kind of report and spend that time and money on invest for fighting financial crime in the future. We've also done a careful assessment of the initiatives and investment, and we conclude that we can fit all those initiatives in under our previously communicated cost target for 2021 of SEK 23 billion. Going to a summary page on what we're now doing on the area of regulatory compliance and AML on Page 7. We, of course, would always strive to adhere to current regulation and our own internal high requirements, and we seek to have the highest standards for corporate governance in the bank. There are 2 important initiatives that are currently ongoing. The first one is part of our business plan that was launched in December 2008, where we have a significant program to enhance our capabilities, a program we call Financial Crime Prevention Programme. Part of this includes investing in new technology and reviewing several different areas of the bank to improve. Secondly, we initiated a cooperation between banks to share information to become more effective, finding financial crime. It's also a cooperation between banks and the financial intelligence unit, the financial police, so we can start working together actually addressing the core of the problem. This has now been launched, and it's called SAMLIT, and we are very hopeful that this will lead to a much more effective way of fighting financial crime in the future. Next page, Page 8, continued business development. I thought I'd just summarize some notable events to us during the second quarter. First, when we come to advisory leadership, we have been selected to be the adviser to Daimler for financial issues relating to an electrification of the automotive side in Germany. We've also issued a health bond for Region Stockholm, this is a local municipality. And this health bond is an innovation in itself as it's targeting diabetes and potentially limiting also obesity for the future. We've also been selected together with Toronto Dominion to be IFFIm's ranger of an immunization bond, particularly financing the corona situation. We got awarded the most ESG responsible banking group in the Nordics by Capital Finance International. And we've also launched in the wake of corona, an initiative together with a few very reputable financial institutions in Sweden, a corona solvency company. This is a company with SEK 5 billion at its disposal to put in equity-like capital from medium-sized, predominantly non-listed company that need equity type of capital to weather the storm. This is an area of the capital markets that we identified lacking when it comes to meeting supply and demand. I'm very happy, and we look forward to that initiative, accessing a market in the private space for those companies that are well functioning just need not liquidity, but they need equity-like capital. On operational excellence, we're very pleased, as part of our initiative to improve our digital-savings capability that we've launched digital trading in the app for funds. So now both buying and selling funds of different natures can be done in the mobile channel as well on the desktop channels. And we have launched also secure messaging, which is really a secure digital dialogue tool in the mobile channels. And given what we have learned and how important this is going forward following corona, this is also a good step forward. We have another initiative around extending our presence. This is reaching customers in new ways and in new areas where we previously didn't. And here is Verified, a validation of identity tool, which is cloud-based for e-signing. This is contract and also verification of identity for medium-sized and large corporates. In Sweden, we have something called the bank ID that works very well for private individuals. And this is almost like an extension into the corporate space. Under the open banking initiative, we also launched a cooperation with Fitek in the Baltics, which is enabling integration of e-voicing into the -- through the API structures in the bank. So both of those are also very interesting to us, developments for the future. Page 9, we now go into the financial results during the second quarter. The highlights we conclude are that we've seen encouraging client activity and a very resilient underlying business during Q2. We've seen the positive turnaround, the strong reversal in financial markets, which has had a positive effect in several areas of the bank. Return on equity increased to 8.7%, including taking a provision for the SEK 1 billion administrative fine as well as increasing expected credit loss provisioning to a level that we think is appropriate. And we just conclude that we have a strong capital and liquidity position well placed to continue supporting and developing the bank -- supporting the clients and developing the bank. Next page is just looking at the first 6 months, and then I will ask Masih to go through Q2 in more detail. But it's interesting to see what their -- these 2 quarters actually sum up to. It's the same income roughly as we had the first half last year. It's the same cost as we had last year, and it's the same profit before credit losses. The large difference compared to last year is, of course, the increased ECLs of SEK 4.2 billion so far year-to-date. And the item affecting comparability of SEK 1 billion, which is directly linked to the administrative fine. Net ECL level is at 35 basis points, cost/income at 0.47, core equity Tier 1 of 17.8% and return on equity of 7.4%, up roughly 1% from the first quarter isolated. And if you adjust for the SEK 1 billion administrative fine, return on equity increased to 8.6%. With those remarks, I will now hand over to Masih, who will go through the second quarter financials in more detail.

Thank you, Johan, and good morning, everyone. So I'm on Slide 12 now, the financial summary for Q2 2020. And as you can see, year-on-year, we've seen 15% revenue growth and with 0 cost inflation that leads up to 28% pre-provision profit growth versus Q2 '19. And as Johan said, the elevated loan losses means that the profit post credit losses is down 8% versus the same quarter last year. In the quarter, the net ECL level is 46 basis points, the cost-to-income ratio is low at 0.41 and return on equity, excluding items affecting comparability, is 11.2% in the quarter. Next slide, Page 13, net interest income. It's up 11% year-on-year, year-to-date, so far this year. And there are mainly 3 factors that has led to this improvement: the first one is increased volumes; the second one is the lower resolution fund fee that we pay this year; and the third one is improved deposit margins driven by the repo rate hike we saw in December last year. Partly offsetting this is some margin pressure on lending, especially for mortgages. Now I thought I'll comment a couple of minutes on the NII in Q2, which is down versus the Q1 level. And I would say there are mainly 3 factors that have led to this. The first one is related to treasury and our short-term funding. We issue commercial papers in U.S. dollars, and we did this at elevated levels around year-end '19 and early 2020. We do this at fixed rates at the prevailing rates at that point in time, which was around 1.5%. Most of this is swapped to other currencies, but some of it is placed in Federal Reserve as a liquidity reserve. Now when we had the rate cuts from the Federal Reserve, this means that the yield on the liquidity that we have at Federal Reserve comes down, and that this has led to a pressure on net interest income. On the other hand, what we've swapped to other currencies goes up in value and has a positive offsetting effect on net financial income. When we look at these papers, as I said, it was elevated year-end. And if you look at it by end of Q2, it has come down to more normalized levels. And -- so this should be a temporary effect. And going forward, we don't expect this to continue. The second factor, which has had a negative effect on NII is margins within C&PC, so corporate and private customers. Most of the lending we do in this bank is related to a reference rate at some point. But then we have a few products where we have a more centralized pricing for the lending we do. And this is mainly for mortgages, consumer loans and SMEs, some parts of our SME book. In Q2, funding costs went up in the bank, and we decided not to increase pricing to these customers, which means that we had margin pressure for these products. Now if you look at end of Q2, funding costs have come down, and we have also slightly adjusted prices, both for mortgages for consumer loans and SMEs. So again, if you look at our disclosure, you can see that the net interest income within C&PC is down around SEK 100 million in Q2, but this should reverse going forward given the lower funding cost and increased pricing. The last part is within the Baltics. In the Baltics, we've seen now for some period of time that deposits have outgrown lending. And now in the Baltics, we have a loan depo ratio below 1. Now in Q2 when this continued, it means that we cannot use the deposits to increase our lending, so we place it at central banks, mainly the ECB at minus 60 basis points. And this has led to margin pressure within the Baltic business. This part, I would say, is likely to be more structural. It is possible that some of it is temporary, but it's been -- we've seen this development for some time. So it's more likely to be structural. So if I sum this up, the 3 factors I have mentioned, I think, has had a negative effect on this bank in Q2 of around SEK 250 million to SEK 300 million in this quarter. And we believe that a big proportion of this is temporary and should reverse going forward. So if I look at the NII line, we had 14% growth in Q1 year-on-year, we have 6% growth in Q2 year-on-year and the average year-to-date is 11%, and it feels like the average year-to-date is more representative for this year's development. Let's move to the next slide, fee and commission income. It's flat year-on-year. If you look at this quarter, it's down 6% from Q1 and that's mainly related to card fees. And for us, it's mainly related to transactions on corporate cards that have come down, mainly due to the travel restrictions as these cards are mainly used for those kind of purposes. If you look at Q2 and specific months in Q2, we can see that the bottom came in April. We saw an improvement in May and a further improvement in June, but June is still a bit below normal level. We continue to expect that this will be a bit depressed going forward. And maybe by year-end this year, it will have reached a more normalized level. I will also comment here our net fee and commission, that lending fees see a 10% growth year-on-year, obviously related to the credit requests that we have seen from large corporates. I move to net financial income on Page 15. You can see that we've had this big recovery in Q2 versus the negative numbers in Q1. And I conclude, when you look at this slide, the last 9 quarters, the average level for this line is around SEK 1.7 billion, SEK 1.8 billion. On the next slide to explain what's happening in Q2, we're comparing this to what we had in Q1. As you can see in Q2, we have an underlying level on this line that is above the level of Q1 and then we've had reversals relative to Q1 for several different factors. CVA/DVA is one of them. We've recovered almost half of what we lost in Q1. But as you can see, we still have reserves here for the future, around SEK 700 million net reserves on CVA/DVA. This will come back eventually unless we see defaults in the counterparts we have derivative exposures to. Strategic shares is up actually more in Q2 than we saw the loss in Q1. It's mainly driven by Enento or was used to call Asiakastieto, as the share price is higher now than it was at year-end. And then you see recoveries in life. And then the treasury improvement, part of that is driven by what I mentioned on the short-term funding that is swapped to other currencies where the value has gone up after the rate hikes in the U.S. Next slide, our favorite slide, operating leverage. As you can see, it looks pretty good, pre-provision losses. We haven't added a bar here for H1 '19. But had we done that, you would have seen that so far this year is in line with the same period last year on both revenues as well as costs. Moving to Slide 18 and a few comments on credit provisioning. Here to the left, you can see what we did in Q1. So in Q1, we had underlying losses or provisions based on individual names of around SEK 400 million, and we did a model overlay of SEK 1.1 billion. In Q2, we have updated the bank's macro models according to the view we have in Nordic outlook by our economists, and this has led to increased provisioning of around SEK 600 million this quarter. On top of that, we've done another model overlay of SEK 500 million, of which a majority is related to oil and gas exposures made within the offshore sector. And then in this quarter, we have individually identified companies we've done provisioning for, summing up to SEK 1.6 billion, of which most of it is coming within the LC&FI division. And to the right, you can see that the total model overlay we've done in the first 2 quarters this year of SEK 1.6 billion and the distribution of that to different sectors. And as you can see, half of it is to the oil and gas sector. If I move to the next slide, Slide 19. Here, this is a way for us to show you the sensitivity we have in our models to different macro assumptions. What you see on this slide is what we've used to come up with the almost SEK 600 million higher provisions this quarter. We have a base case scenario where we had a 60% probability and then we have a positive and negative scenario with a 20% probability each. And you can see what we assume here in terms of global GDP growth as well as Swedish GDP growth. And obviously, we had asset prices, real estate prices backing this up and other important factors when you do this provisioning. To the right, you can see what would happen to these provisioning -- macro provisions if the probability of either the positive or negative scenario would increase to 100%. So in a situation where the probability for the positive scenario goes up to 100%, our provisioning would be reduced by SEK 760 million. And on the contrary then, if the negative scenario would materialize, the provisioning would increase by SEK 1.25 billion. If you look at it right now and look at our economists' forecast, they believe that it's more tilted towards the positive scenario. But obviously, we have a couple more months to go before we update this again for Q3. Summarizing on the next slide, Slide 20. What I would mention here is, firstly, the customer deposits. It's up SEK 270 billion year-to-date or 23%, which is a massive growth. It's linked to some conservatism when it comes to corporates as well as households, but also likely linked to the increased liquidity in the system with most -- a lot of central banks doing QE. The second thing I would mention here is the capital. We have a buffer of 410 basis points this quarter. It's up 100 basis points. And the driving factors here are FX 40 basis points, we have almost 30 basis points from the change requirements on SMEs and infrastructure lending and then 20 basis points is a net effect from risk migration. Now the reason this is a positive effect is that we've had more migration to risk class 16 than -- which is a default risk class than within the non-default risk classes. And for risk class 16 or default risk class, you don't hold capital against that, you hold reserves, which we have done this quarter. And also the new lending in the banks during the quarter has been to a lower risk weight corporate, so investment-grade corporates than the average fact book of the bank. The buffer you see here 410 basis points is excluding the dividend that was previously proposed for 2019. If you add that back, the buffer will be 590 basis points. That was my last comment. I think we open up for Q&A. Thank you.

[Operator Instructions] And your first question comes from the line of Chris Hartley.

I've got a couple of questions, please. Just firstly, on kind of capital returns. You've also got a very strong capital buffer right now. Can you maybe update us on your thoughts about how and when and how much of that might come back to shareholders. Maybe remind us of what the regulator is saying and any sort of capital drags that are coming down the line? And I guess sort of related to that is you just mentioned risk migration. You've kind of set out a sort of SEK 6 billion being a sort of maybe sensible provision number for the year. How does the credit migration pattern sort of fit into that? Would we see sort of deterioration in that as time goes by? And so it's a bit of a drag on capital? Or is that sort of all in now? And then just a follow-up on your NII that you mentioned. You just mentioned 11% as being sort of sensible sort of number for kind of development for the year. Is that everything included in there? Or is there any kind of margin pressure to think about? Or yes, just sort of a little bit -- to elaborate a little bit more about what's in that 11% number?

Okay. Thank you. I can start with the capital returns. And then I'll just step back a few months. The last thing we formally heard was really the EBA, ECB guideline that we should be very cautious as an industry in repatriating capital to shareholders. And it was a date signaled, namely the 1st of October, just to say that visibility on loan demand and visibility on future credit losses would be very welcome to have before we take any firm decisions on capital repatriation. That has meant in my book that most banks have followed this recommendation and therefore, canceled or postponed dividends for 2019 until further notice. Currently, there is, of course, a little bit of a debate, should that be extended from the 1st of October for the rest of the year in order to create some clarity and unison around banks. And that's where we are. So there has been some statements calling for it to be extended. Some say that there's no reason to, because why don't we just wait for the disability to be improved and then we'll make a decision. And whenever that comes, that would be the appropriate time to bring the question up. So the door is, of course, in that sense, open. However, in this bank, we have said, until further notice, we just don't pay dividend for 2019, but there is an assessment that needs to be done as appropriate when that time comes. We've also said that the capital structure targets of the bank are not being changed. So if you look at a medium- to long-term perspective, we want to run this bank with an adequate buffer and have a progressive dividend over the years, but we repatriate similar to the past as a percentage on payout ratio, et cetera. Then how that de facto will materialize is up for the Board and shareholders, but there's no permanent change in switching into a buffer that is not in line with what we previously liked to run the bank, which is very prudent conservatively but also shareholder friendly.

Okay. I'll take your second 2 questions. So when it comes to risk migration and, obviously, if you look at what we've done so far this year, we've taken SEK 4.2 billion out of the SEK 6 billion we expect. And this is partly driven by the fact that we've had migration to stage 3, which we do reserves for. Now obviously, this means that we don't expect as much provisions for the remaining 2 quarters, i.e., not as much migration to stage 3, so therefore, we don't need as much reserves for the coming 2 quarters. But we do expect that we will see in this kind of a scenario, macro scenario that we have, that there should be negative risk migration going forward. Maybe not to stage 3, but within the nondefault risk classes. So I think a conservative and a likely scenario is that the risk exposure amount in the bank should go up because of negative risk migration in the coming couple of quarters. I think that should be your base case scenario. On NII, I mean, I think the point here is to say that we've had a very strong quarter in Q1 on a year-on-year comparison of 14%. Maybe that's not representative for the development this year and neither is the 6% we have in Q2. And maybe on average of those 2 is more representative for the full year. If you look at what's happening in the bank this year, we have a reduced resolution fund fee of SEK 800 million. That's obviously positive for NII. We have a repatriate by year-end last year, which is positive for deposit margins. And we're growing the balance sheet of around 5%. If you add all this up, it leads to around a 10% NII growth. There could be margin pressure on top of that, and there could be other temporary effects coming in the coming quarters, we don't know about yet. But if you do sort of a likely outcome, you should add these 3 together and you come up with these kind of numbers. So that's the message.

And your next question comes from the line of Magnus Andersson.

I think I should start with NII. And just if you can say something more about lending margins since that's what you mentioned in your report as a negative quarter-on-quarter, and you were touching upon it. I saw during the quarter on the mortgage side, you, for example, raised your list price by 8 bps on the 1st of June, then you lowered it by 10 bps on the 13th of July. So just what's going on in the mortgage market, what you're seeing there? And secondly, on the corporate lending, there were expectations that margins potentially could come up, if -- why that's not happening? Is it mainly prenegotiated credit lines being drawn? Or how should we think about lending margins generally?

Okay. I'll do that, Magnus. So yes, we've had margin pressure in the quarter. It's mainly related to what I mentioned on consumer loans, on mortgages and on some SME loans. And that's driven by higher funding costs, so that has been the case. But -- as I also mentioned, we did raise the prices on mortgages, as you said, 8 basis points in June, and we also raised prices on consumer loans and SMEs by 20 to 25 basis points in June. It is correct that we did reduce the price by, I think, 9 basis points yesterday on mortgages, but that is very much in line with what has happened to funding costs since we raised prices by 8 basis points. I don't think that stand-alone should lead to any margin pressure. On corporate lending, it's a bit complicated. I mean, first of all, many of the requests that we have approved have not been drawn. So it's not leading to any NII at the point in time. But if you look at the rates that we have approved these requests on, the margins are up compared to what these margins would have been hadn't this pandemic happened. But then the average quality of the corporates we're doing new credits to is higher than the back book. So it's on a like-for-like basis, that margins are up not necessarily compared to the back book. So I think it's -- on a sort of return on equity basis, it is higher but it does -- it's not the same thing that it's going to be enhancing for the bank as a whole. So I think it's a bit complicated, but you have to keep both those 2 thoughts in your mind at the same time.

Yes. Okay. And then just on net commission income. I think you broke up, at least, on my line there on payments commission. Did you say that you expected them to be back to normal in Q4?

When we talk to our C&PC division that follow this more closely, they expect that by year-end, I'm not saying Q4, maybe it's going to be December, this should start to reach a more normalized level. So basically, we're also saying that Q3 should not be a quarter where you're going to see this as a normalized level. But we do see a recovery. If you look at the different months within Q2, that June is much better than April, but still a bit below a normalized level.

Okay. And then on capital, you had a positive impact from the increased SME supporting factor here in Q2. Is there -- and I see that on Page 23 in your fact book. Is there any more coming in into Q3? Or did you take everything in Q2?

There's nothing more coming on the SME supporting factor. There is one outstanding issue when it comes to the regulatory changes that are discussed in EU, and that's on software deductions or intangible deductions on your capital base. They said that they're going [ to include ] that in Q3. If they do that, that's potentially a positive impact. So you don't have to deduct as much intangibles from your capital base that could have a marginal positive impact on our capitalization as well in Q3. We'll see what happens with that.

Okay. And finally then, just on TLTRO and the Riksbanken facility of SEK 500 billion, did you take any money from that during Q2? Any of those?

We took -- I think in Q1 -- I don't think we took that much in Q2 or any, to be honest. And we have to take -- yes. So we -- I don't recall exactly how much it was, maybe SEK 15 billion or so in Q1, as a way of supporting the Swedish economy.

Next question comes from the line of Nicolas McBeath.

So a question on the AML. I was wondering if you've had any renewed interest from any U.S. authorities to look into your AML history after the FSA sanction decision? And also, if there's anything on the FSA's action list that you expect to bring significant additional cost inflation on top of what you have budgeted for 2021 since before?

Thanks, Nicolas. We start with the U.S. There is, to our knowledge, no ongoing investigation with the sanctions case against SEB in the U.S. That is not to be mixed up, that you never know. The relationship with the U.S. regulators is slightly different because they might do something on a desktop, but there is nothing there for us. And also, as we pointed out in Q1, we have now taken away from our risk factors in the Q1 report, the things that we think of a significant nature, we did add the FSA out in the Swedish investigation, as it is a factor one should consider, and we've not added any in this quarter. I hope that serves as a good comment, trying to weigh the different interests in commenting on this. When it comes to the action plan, and as we have concluded, most of the areas that we need to improve has been already identified by the bank and is part of the plan. We also need to remind ourselves that this ended in Q1 '19. So it's a year and a quarter ago, these findings were find -- the last point, and a lot of things have happened in the last year, including resources, investments in the current business plan, et cetera. So there will be investments going forward. We will continue to accelerate. You might remember, we had pointed to a 200 over and beyond investment last year in the full year results, but we are convinced that we can fit that in the current cost framework, reallocating and prioritizing in the best way we can.

Okay. And then a more general follow-up on costs. I think in Q1, you mentioned that there are some positives and some negatives impacting the cost base from the COVID-19 downturn. If you could just please update on your view on that, I guess, less traveling and entertainment expenses, but maybe high IT expenses. What's your view on the net impact from this dynamic, please?

Yes. Nicolas, you can see in our disclosure in our fact book that travel expenses this quarter were SEK 20 million compared to SEK 120 million the same quarter last year. So obviously, we do see that positive effect. Whether that's temporary or permanent, I think we'll have to wait and see. I'm pretty sure that it's going to come back to closer to a historical level, but a permanent reduction of some sort is likely. So we see that happening. And on the digital part, yes, I think that will lead to higher cost, but what the net effect of these 2 will be, I think it's a bit too early to say. So we basically have the same comment as we had in Q1 that there are both positive and negative, and it's difficult to conclude that whether the net effect is going to be positive or negative in the long term.

And your next question comes from the line of Andreas Hakansson.

I hope it was my name Andreas Hakansson from Danske Bank. Two questions. One, coming back to your capital distribution. When you said that you're going to see and that the Board has stated that they might distribute if this is appropriate by the end of the year. I mean, if I look at the old capital requirement, I guess, the new one is not going to be a good measurement. But if I take the old one, you have a 270 bps buffer to that one, and you have a management buffer target of SEK 150 million, and you have been lending quite significant to the economy, and you keep a strong profitability. On that, what do you consider to be appropriate? What are you really looking at? That's the first question.

Okay. I mean, I should be careful here. So let's state what is formally decided right now, and this is a Board decision. It is not to pay out anything for 2009. Just so everyone is -- okay, the Board can, at any time they want, of course, ask us in management to do a different proposal, but there is no such ask right now. So there needs to be some type of trigger, change in the environment for this to change. When it comes to the buffer, you adjusted for the dividend that we actually still continue to reserve, just so you don't overestimate the capital strength of the bank. We have no difference in our long -- medium- and long-term target as we have today, which is a -- call it, an around 150 basis point buffer to the minimum capital requirement. Of course, one needs to take into account in the medium-term if the countercyclical buffer is likely or not beyond 2021, '22 to be reversed, so you don't sit in a tight position then. But for now, the Board has not assigned any other than that type of management buffer at our disposal. So that is intact. And that's, of course, the question then what time and how will one normalize? If this goes well, this needs to be normalization next year. If it doesn't, we probably need to spend these for the benefit of our clients, and that's a good thing, but we also need to have a significant buffer to -- for potential losses if there is a second wave, which we are not assuming right now.

Okay. Fair enough. We'll wait and see with that one. And then a question on your loan operation side. Apart from the general overlay and macro provisions, it seems like almost all your underlying provisions are oil driven. 2 questions on that. First, why didn't you take more oil in Q1, given that we already saw where we were heading? And then two, could you tell us the underlying apart from oil, it seems to be exceptionally strong. Could you tell us a bit about how you see that area?

Yes, Andreas, I'll try to do that. If you look at Q1, I think, I mean, there are a lot of things that happened just in a couple of weeks when we closed the books in Q1. And I think the oil price reduction actually came in the first few weeks of April. So I think it was very difficult at that point to conclude exactly what would happen. What we've done in Q2 is to go through many, many of the large corporates that we have on individual name basis and see whether we think that some of them might have problems in the future. So I think now we've had more time to do that exercise, and therefore, we've been able to more closely identified the companies we believe that we need to do reserves for us. So I think that's the explanation for why the reserves on individual names on the oil sector more comes in Q2 rather than Q1. It is correct that the underlying quality is very good. It is very difficult to see corporates with problems outside of oil. And within oil, it's also not just one picture, it's mainly offshore driven, I would say, and within leverage finance, within leverage finance, it could be different sectors, but it's mainly related to retail, for example, or health care, but it's not very widespread. So it is correct that we don't see that large effects in the book as a whole. And as you can see in our disclosure, the average risk weight is coming down, and we haven't seen that much risk migration across the book. It's mainly related to oil and gas and especially offshore. So for now, it's difficult to see -- say whether these are temporary effects and how much government support is helping out here. But yes, I think we're seeing basically what everyone else is seeing that so far there's no real broad-based deterioration of asset quality.

And two follow-up on that, which should I then assume that the couple of billions that you expect in loan losses for the second half, what's left for the SEK 6 billion, that's then going to be more in the broad economy rather than oil again? And then could you tell us how much is actually oil because you group it together with mining and I guess mining could be quite big for you. Could you tell us what is really oil?

I can't give you the number. But as you can see, 50% of the model overlay, so SEK 800 million is related to oil. So we do expect that the future provisionings on individual names will also be related to oil to a large degree. It's difficult to say exactly what will happen in Q3 and Q4. I mean, we have a model overlay. That's based on an assumption of future problems we could have. If problems arise outside of those assumptions, then it could be different. If it's within those assumptions, then we can use some of the reserves we've done on a portfolio level. So I mean, it's too early to say, but we feel fairly confident that given the outlook we have in Nordic outlook, around the SEK 6 billion number will be the actual outcome for this year.

And your next question comes from the line of Robin Rane.

So starting up with the trading line. The underlying trading in Q2 were about SEK 2 billion. And you -- I think you've said previously that you would expect the underlying trading to be around SEK 1.4 billion or something. How do you see this going forward? Is there something structure that we might see a higher level going forward? Or is Q1 more of a one-off year?

Thank you for that question. I think one need to recognize that there has been highly volatile markets in Q1 and Q2. So we only had SEK 950 million or so of underlying, so we were somewhere between SEK 200 million and SEK 400 million short. That's more or less compensated for Q2. So I personally just urge anyone to be a little bit more kind to the analysis than intra-quarter because this is moving around a lot. We have not seen any reason to change our guidance that over time, on average, we expect the underlying to be SEK 1.2 billion to SEK 1.4 billion. And then on top of that, of course, we've always talked about plus/minus SEK 200 million, SEK 300 million. That has, of course, changed as we saw how much impact we had on following the corona. That's just pointing to that this is a volatile line but it tends to be reversing. I wouldn't say recovering all the time, but it will be reversing over time subject to market prices. So same guidance.

Okay. And then a follow-up on payments, in particular, a corporate card revenue. So you said that you think that by year-end, this should be back to normal level. But what are you assuming there in terms of, I guess, corporate card revenues is very much driven by traveling and business traveling. So are you expecting business traveling to come back? I think you said that you didn't do that when you talk about costs. So what assumptions are you making there? If you could shed some light on that?

Yes. Yes. I mean, I think that's the conclusion you have to draw. We base what we say on the forecast we have in our Nordic outlook. And in that forecast, they don't expect that there will be a second wave of lockdown. So we are on a path of normalization, and the question is how fast that will happen. And based on that path, we believe that by year-end, at some point, this will be back on a normalized level or at least the levels it was a year before that. You should also obviously remember that we've had a structural growth when it comes to our payment fees over time for many, many years. So even if we're back to last year's level by year-end this year, it still means that we're missing a few percent that we normally have in terms of growth. So part issuance goes up all the time and transactions go up all the time. So you should have that in mind as well. But I mean, yes, it is based on a view that at some point in time, travel will go back to closer to a normal level.

Okay. And then lastly, just if you could remind us on the cost target for 2020, adjusted for FX, what -- where will that stand now?

Yes. There's no cost target for 2020, but '21, it's SEK 23 billion, right? With the current FX, it will be SEK 23.2 billion.

And your next question comes from the line of Nick Davey.

Three questions, please. The first one on -- following up on that cost point, is there anything you've learned in the last 3 months, which changes your view of the sort of medium-term cost efficiency measures you can take in the bank outside this discussion of travel costs? The second question would be around Slide 4, this famous slide about pipelines in the large corporate business. It's, I guess, somewhat surprising how different the last quarter has been relative to '08, where you just had the pipeline showing up in credit facilities, but actually loan book shrinking. I just wondered whether you thought that dynamic would change in the second half or whether this is really the shape of large corporate activity at the moment, just setting up the safety nets, but not using them? And then the third question, I just wanted to come back to your comments about putting up SME lending rates by 20 to 25 bps in June. Could you just talk a bit more about that? Specifically, maybe the size of the SME book, if you could remind us and also how quickly it filters in to lending rates? And any comments about whether you've seen peers doing similar? Just trying to understand that move in a bit more detail.

Okay. First question was around cost efficiency. I think -- I mean, we don't have any further comments on that at this point in time. We are doing extensive work internally on lessons learned from what's happened in the last few months. And when we update our business plan by year-end, we will have concluded on how we see the future given what's happened in terms of both the outlook on the revenues and cost, but also what we think will permanently change when it comes to our customers' behavior. So I think we haven't finalized that work yet, and we've done that. We're going to disclose that to you and the market as a whole. On Slide 4, on the credit facilities and the difference to '08, I think a big part of the difference is the actions by central banks. They've been much more forceful this time around, much faster, much quicker, much more in terms of support to the financial markets. And this support has had a very significant effect. So what we saw in March was that the very professional investment-grade large corporates were really quick on setting up new facilities. But as the financial markets recovered very quickly because of this support, these facilities have so far not been needed. They are there as some kind of an insurance, but I think it's very much driven by the financial markets. We have recovered much quicker this time around than they did in '08. So I think that explains the difference between what we're seeing so far this time, we haven't concluded this yet. We'll have to see what happens, but so far compared to '08. On SME lending, we can't disclose the nominal. It's not a massive impact. I'm just referring to the fact that we have high-margin pressure here, and then we've revised prices in June. And obviously, this runs through the books quite quickly, so to the extent that we had margin pressure in Q2 here, it should reverse in Q3.

And your next question comes from the line of Sofie Peterzens.

Yes. Here is Sofie from JPMorgan. Just one question on the cost side, the Estonian FSA when they published their report, the fine was very small at only EUR 1 million. But there was a quite long lease of system improvement that's needed for Estonia. And if you didn't meet these improvements within 6 months, you're going to be fined EUR 32,000 per day per each. And if it's rectified, but not satisfactory, the fine goes to EUR 100,000 per day. I was just wondering if you could give an update on where you are within these improvements? Have you already made all the necessary improvements? Or do you need to do more improvements in Estonia on the system side?

Thank you, Sofie. There were 2 main areas in Estonia, and both of those areas of improvements were identified prior to the result being public. However, our plan is longer term. So we have decided within the plan to accelerate those areas that are mentioned by the Estonian FSA. And our aim is to conclude them in time, and it will not change the cost target. We can do it within it, Sofie.

So you can do it within 6 months. So basically, as of today, do you think would your systems be at the minimum level that the Estonian FSA is requiring? Or as of today, would you potentially -- if the deadline was today, would you potentially see the EUR 32,000 fine per day? Or do you have the systems already in place?

No, we need to do some work. So we have a deadline about a year away or so. And then we need to just do that work, and our ambition is to comply with that in time.

Okay. And that's on all the 2 pages of the different things that need to be fixed?

Yes.

Okay. Okay. And then my second question would be, you mentioned that you take advantage of the U.S. Fed rate. Could you just give the magnitude of net interest income that you typically generate from these replacements?

Sofie, see, I didn't say we take advantage of it. I think the rate cuts in the U.S. has had a negative effect on the Q2 net interest income as we placed some money with -- in the Fed as a liquidity reserve. And this is very much driven by the fact that we need to hold dollars as reserves because of the LCR requirements in dollars, which now has been abolished. But by year-end, when we did this funding, we needed to hold very large liquid facilities at the Fed. If I look at the impact here, I think the negative impact in Q2 from the rate cuts you've seen there is around SEK 100 million to SEK 150 million on NII.

And that the SEK 100 million to SEK 150 million will fully reversed? Or will it be a negative drag going forward as well?

It will reverse going forward.

Okay. And then on the SEK 1.7 billion of single-name loan losses that you took in the LC&FI or large corporates and financial institutions book, could you give a little bit more detail around the nature of these companies? How many companies you had and kind of what size companies these were or what it just get use single-name companies?

Yes, it's SEK 1.6 billion. They are mainly within offshore, and some of them are within leveraged finance. I would say that about 10 companies sum up to this amount. So those 2 sectors or business lines for us and the largest [ 10, ] they make up for a very large portion of the SEK 1.6 billion.

Okay. And then just a clarification. On Slide 19, you say 100% negative raising in the negative scenario, would mean SEK 1.2 billion of additional provisions. Does this mean that then if it's a negative adverse scenario materialized EBITDA of provisions of SEK 7.2 billion?

I'm not sorry if I caught that. So we have today allowances of SEK 10.4 billion. If the negative scenario would materialize or the probability would increase to 100%, we have to increase that SEK 10.4 billion by SEK 1.25 billion. So everything else equal, yes, provisioning would go up by SEK 1.25 billion in that kind of a scenario. This is very model driven. It has not that much to do with reality and actually what happens in terms of corporates going into default. But I would guess there is some correlation.

But the SEK 1.2 billion is not in relation to your guidance on SEK 6 billion of loan losses that you're guiding for 2020?

No. I think...

If you have the negative scenario you realizing, it doesn't mean that it means SEK 6 billion plus SEK 1.2 billion?

Yes. If you allow me to answer. The guidance is in line with what we have in Nordic outlook, which is the base case scenario here. So obviously, if our economists were changed their view to a more negative macro outlook then our guidance will not hold because it's contingent on their current outlook.

Right. But in a negative scenario, 100%, what would your loan loss guidance then be more than SEK 7.2 billion?

We haven't given a guidance on that. So I don't know, then we will have to do work based on that scenario. I mean we have done that internally. We looked at more severe scenarios than our base case scenario, but for now, we'll only guide on this base case scenario. But as I said before, if it's tilting on any direction right now, it's tilting slightly to a more positive scenario than a base case scenario.

And your next question comes from the line of Geoff Dawes.

I'm going back to Slide 18, I'm afraid. I know you've given this slide a good workout, but just a couple of quick questions. You give the split by industry of the model overlays on the right-hand side. And if you took the underlying loan losses that you've actually booked the provisions you booked, does the split by industry look substantially different to that model overlay split? Or is it different sectors and so on? And then related to that, 2 specific areas. First of all, commercial real estate hasn't really seem to give you any problems. Can you just give us some commentary around that, if that's an area that you see developing in risk terms over the next few quarters? And second of all, the Baltics you had in the underlying, quite a step-up compared to some of the Swedish retail operations. Can you just give us a little bit of color around that? Is that to do with the macro scenario in the Baltics, the composition of your book or anything specific there that we can get a handle on? And that's it.

Thank you. I mean generally, the underlying is, when we looked through the book, we started looking at the exposure that we feel are larger and potentially more risky or could have a bigger nominal effect on the bank. So by definition, when you go through that, you go through the big exposures. And when we look at the riskier ones, those are more related to the oil and offshore sectors. So I would say that when it comes to the underlying level and if you compare that to the model overlays, it's even more tilted towards oil and gas. So the model overlays are more broad-based than the underlying level. And this is by definition because when you look at smaller companies, it's very difficult to go through all the several hundred thousand smaller companies we have as customers. So therefore, in a very early stage of a recession or negative scenario, you make an assessment on portfolio level for these companies because it's too cumbersome to go through each and every one of them. So I think by default, in the early part of this kind of scenario, you have this tilt where you can identify the larger corporates on individual name basis, but you do model overlays for smaller companies. And that's why you see a bigger tilt when it comes to model overlay for both C&PC as well as the Baltics as the corporates there are smaller. On the Baltic, I mean, I think that's -- we do see a more negative outlook on macro so far in the Baltics than we see in Sweden. And we have smaller corporates there in general, and therefore, we had some model overlay there this quarter. It is too early to say. It's difficult to say what's going to happen. I think what the Baltics went through 10 years ago will be very supportive for both those economies, but also people living in those countries because they learned a lot 10 years ago. I don't think they have overleveraged in the last 10 years. So I think you're going to have a generation here now that are very cautious in terms of taking on risk. And I think that's going to benefit us through this kind of a downturn scenario. And then you had a question on CRE. I think our view on CRE is very much in line with what you've seen so far when the biggest Swedish companies have reported their Q2. We don't see much yet. We don't see any real effect, to be honest. I mean, they've given some leeway in terms of rents, but it's a very, very small proportion of their income. So, so far, basically no effect. But again, we don't know what's going to happen in the next few quarters. But so far, so good.

And your next question comes from the line of Riccardo Rovere.

I want to get back 1 second again on the model overlay. Correct me if I'm wrong. Those SEK 1.6 billion are not allocated to any specific name. And correct me if I'm wrong on that. If that is the case, and considering the comments you made before, where you stated it is difficult to see troubled firms outside the oil and gas exposure, and there is no broad base asset quality deterioration. At some point, I think you will have to decide what to do with this SEK 1.6 billion model overlay because that should not theoretically exist in the purest version of IFRS 9. So one day, all you allocate these specific names where you see deteriorating [ big GBs LGBs, ] blah, blah, blah, or what is going to happen to that in the future? And when should it happen because you cannot keep this model overlay forever, I would imagine. But again, correct me if I'm wrong in thinking about that. The second question I have is on the -- just a curiosity, basically. If you didn't have SEK 3.5 billion of trading revenues, mark-to-market revenues, the SEK 2.7 billion credit losses would have been the same? Or did you seize the opportunity of such big jump, a big rebound in financial income to add a little bit more than you were maybe thinking 2, 3 months ago? And the very last question I have, based on the SEK 2 billion credit losses you expect in the second half of the year, so SEK 1 billion per quarter. That would remain roughly speaking, 2x larger than the pre-COVID-19 situation where you were charging SEK 400 million, SEK 500 million per quarter. If the situation does not change materially in 2021, do you see SEK 1 billion as a run rate or maybe closer to SEK 500 million, EUR 400 million as it was before after 2020?

Thank you, Riccardo. On your first question, I mean, you're absolutely right in a sense that we've done our model overlay. If we, in the coming quarters, do not identify individual households or companies, where we need this SEK 1.6 billion for, then we don't need it anymore. It will be reversed at some point. We wouldn't have it as a reserve on the balance sheet forever. So we have made an assumption that we will identify companies and households in the future that we haven't yet, and therefore, we need these reserves. But obviously, we cannot guarantee if this will be the case. And if that's not the case, then it will go back. Another way of answering that, if you look at our disclosure, you can see that the provisions for stage 1 and stage 2 loans have gone up. The coverage ratio for those kind of loans have gone up. Whereas for stage 3 loans, which are the ones we individually identify is pretty much flat. So if there's no migration from the stage 1 and stage 2 to stage 3, then the provision rate for stage 1 and stage 2 is higher now than it's normally the case. And there's no other reason -- there's no structural reason to have a higher coverage ratio for those. So we have an underlying assumption that there will be more migration to stage 3 when we do this model overlays. On your second question, I'm not sure if I fully caught that, but you asked about whether there's been any tactical view on the fact that the NFI is strong, and we've taken more provisions now. I don't really have a comment on that. We've done the provisions, we think, are necessary given the outlook we had. And we do -- yes, we acknowledge that we have front-loaded it since we've taken 70% of the expected level this year in the first 2 quarters.

Okay. And on the third one, on the SEK 1 billion versus the previous SEK 500 million, SEK 400 million?

Riccardo, it's -- I can just elaborate on this. We -- this is how -- I just want to clarify, this is difficult for anyone who tries to assess. Now we do not have failures to pay or real bankruptcies in the first 6 months of this year. So when you don't have that, but you're still asked to put aside a prudent reserve for the future, you need to make proxies. These are all statistical estimates, and there are 3 ways of doing them. One is to look name by name and assessing a probability. That's what we call the underlying. In no shape or form, are we going to be 100% accurate. We will overestimate and underestimate, but we do our best. Then you have a macro correlation assessment, which is just saying, if GDP goes down by X, the house prices goes down, credit should do something. You add that. And then you use more or less your experience and what you think is appropriate as an expert judgment on top quality model overlay. What really will happen is that the first real bankruptcies and failures to pay, they will come in 2021. If you look at any of the large corporates that really drive this, should we have a problem, I would say, very rule of thumb, it takes a year from the day you have a problem because before you even know if you're going to be able to solve it or not, but you reserve immediately. And in a year, maybe in the beginning mid-2021, you know if it's unsolvable or not. And most times, if you look back the last 20 years, we solved more than we initially think. We tend to be -- when we're pessimistic, we're overpessimistic. And here, we just try to be accurate. So what is happening right now is that we're front-loading reserves in 2020. 70% of this year's current assessment is done. That means a stabilization with what we know now. I cannot say if it's SEK 1 billion or if it's less, but it's clear that 2022, we are with opinion, and when this thing normalizes, we should not be too far off where we previously were. But remember, we have had exceptionally low losses over time. So even when we had the 6 and the 8 and the 10 basis point cost of risk, we always indicated for the medium and long run, you should have something higher, that those are exceptionally low numbers. But that's all I can say right now. So we'll see what actually materializes in 2021, and that will dictate if we will -- then when we recalibrate the reserves that we put on right now are sufficient or not. And it's either going to be reversals? Or are we going to increase them.

So just to understand it correctly, the overlay, whatever the number is going to be at the end of 2020 will be reassessed over the course of 2021, and then we will see. Do I get it right?

Yes. I mean, let's assume we are very accurate, and it happens like we think, the model -- the overlays right now will be consumed by individual names when and as we see them. But right now, you cannot foresee every single name that will come in mid-2021. So this is a judgment call and an expert judgment where credits in the bank, of course, is spending an enormous amount of quantitative resources to try to get accurate.

And your next question comes from the line of Jacob Kruse.

I guess I'm running low questions. Just wanted to ask, in the Baltics, you talk about this recycling into negative central bank rates. Are you or any of the other banks or are you seeing any kind of discussion on introducing negative deposit rates in those countries at this point? And my second question was just, have you -- in your review of the coronavirus and the impacts, are you seeing yourself or are you seeing your clients shifting the amount of real estate that they feel that their operations require?

Thank you, Jacob. There is no debate about introducing or discussion around introducing negative rates as of now in the Baltics. On corona, there is a lively debate about the required square footage for commercial real estate and office space after corona. I don't have a view. The bank has no view. We're actually doing the work ourselves, what would happen to the required square meter or square footage, should we allow large portions of the bank to work more remotely or have it more flexible definition of geographical space. Just recycling some of the larger real estate CEOs that I've met and heard about, there are many kind of gathering around the number that maybe 10% of office space will be freed up. But I have no clue if that's going to happen or not. So there is, of course, a tendency in that direction that we will work a little bit more from home and have other. But on the other hand, there might be other things that consume the space.

And your next question comes from the line of Martin Leitgeb.

Martin Leitgeb here from Goldman Sachs. Could I just have 2 questions, just being mindful of time. And the first one, I was just wondering on your earlier NII comments, you obviously cautioned on what might happen to competition and margin pressure from there. What is your expectation currently for the second half of this year, maybe for next year? How the competitive landscape will change? Because just looking at capital ratios, looking at loan loss provisions, it seems like banks are running at a much higher capital buffer compared to before and equally your risk cost guidance implies that risk cost step down in the second half. Could this lead to a scenario where you would see more competition in mortgages in the corporate segment? Or would you expect pricing discipline to continue? And then just a quick follow-up on the question on capital return and the dividend resumption from here. Is the discussion from here mainly to switch dividends back on, and they would then resume in a similar way in similar structures to before? Or do you think -- could there also be some discussion to changing the dividend structure in a way that if certain uncertainty were to prevail or couldn't be excluded going forward that one could move either to a quarterly dividend or to some element of surprise. Is that any consideration? Or is it purely a switch back on to full annual cash dividend?

Thank you, Martin. On the competitive landscape, I think it's difficult, I mean, to assess the future here. I think you're right that if you compare it to the financial crisis, it's a different situation in the banking sector at least up here that most banks do have a lot of capital. So you shouldn't see the same kind of squeeze in terms of less competition. At the same time, if look at Q2, we've seen somewhat less competition on mortgages, at least we've seen as an incumbent bank that we have less customers leaving us to smaller banks in this kind of environment, at least. So in the short term, we've seen a bit less competition on mortgages. I think for us, as a bank, we are seeing a different competitive landscape outside of the Nordics, we can see that any banks are withdrawing from other parts of the world where Nordic banks have been operational historically, thinking about Asia, for example, and other parts of Europe where other banks have been more operational and then they're withdrawing. So from that angle, when it comes to our wholesale business, I think the competitive landscape is -- has turned a bit to our advantage. On capital returns, I think for now, you should expect that at some point in time, we're just going to go back to what we were used to, i.e., we pay dividends. And if there's any change to that, and we're going to do that on cart level or do buybacks, then disclose that at that point in time. But for now, I think, just back to dividend will be a good help.

There are no further questions at this time. Please continue.

Then I'd like to thank everyone for participating in this 1 hour and 23 minute call. And just wish everyone a very good summer. And some of you we will see after the summer. And I hope we can have these in physical form soon. Thank you.

Thank you. That does conclude our conference for today. Thank you all for participating. You may now disconnect. Speaker, please standby.