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

Good day, and thank you for standing by. Welcome to the SEB Financial Results Third Quarter 2024 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. It is now my pleasure to hand you over to the President and Chief Executive Officer, Mr. Johan Torgeby. Please go ahead.

Thank you very much, and welcome, everyone, to our Q3 2024 results. As customary, we will refer to the slides from the slide show that we posted on SEB on the web. So starting with our highlights on Page 2. This is clearly a quarter where interest rates continue to fall. And amidst a falling interest rate environment, one can see the diversified business model of SEB in play, where both fees and commission and net financial income mitigates the otherwise falling trend in interest rates. We've also now consumed the acquisition of Germany's AirPlus, the corporate credit card business. And therefore, we reiterate the underlying cost target for 2024 of below or at SEK 29 billion and we now include AirPlus, which we will come back to and the new target is SEK 31.0 billion. We continue after the decision of the Board yesterday with our share buyback program with another SEK 2.5 billion per quarter. And this means that we are -- continue to commit to our capital target of 300 basis points or below as a capital buffer as of year-end 2024. And also, this quarter is the first quarter after some reorganization and alignments of the organizational strategy in the bank to support our strategy going forward. Flipping to Page 3, just a few words about the 2 major changes in the organizational change we announced in September. First, it's the establishment of a Chief Operating Officer function, which is really aimed to improve speed, make clearer decision-making in an ever complex -- more a complex world. If you do look at banking over the last 20 years, you can clearly see that the number of people that you traditionally would think about as bankers meeting clients is now a minority and banking is becoming much more about the backside of the firm that supports client's interaction and client interface. Of course, the most explanatory factor here is the emergence and dominance of digital banking. Hence, in order to adapt to that new reality that we are having more resources in technology and operations in security and financial crime, we would like to streamline decision-making, very clear mandates and empower the employees to progress forward. The second change is really one of the most fragmented areas in previous time in the bank and that's savings and investments. We, therefore, create a division, wealth and asset management, where we put the main areas within this area together. And hopefully, we'll get a more crystallization of what this means to SEB. This is a very big and important area and definitely a key strategic focus for the future to continue to develop. This means that wealth and asset management will consist of private wealth management and family office, Life, our pension side and asset management, our mutual fund and institutional fund side. Clicking to Page #4, we have recently received the SKI. This is the Swedish Quality Index, which is a survey amongst the Swedish population about their perception of banks. This is both for SMEs and it is for retail and more or less represent our C&PC division's survey. And one can just see that the outright scores for both corporates and private individuals have improved marginally and come up to the highest levels that we've seen in recent history. We can also note that the NPS, where we actually measure declines of SEB is also very constructive at high levels. However, the whole industry have seen a quite strong recovery in general public opinion and we have relatively underperformed. So both when it comes to our larger bank peers in Sweden and when we compare to all banks in Sweden, both for corporates and for private individuals, we have dropped a notch or 2, which is not satisfactory and something we take seriously in order to shape our focus in the future. On Page 5, a few recent developments and I'll start at the bottom with customer surveys. These are 3 minor surveys, not the big ones that we typically track, but they are coming in sporadically during the year and this is for LC&FI, and it's very comforting to see that we have maintained #1 position within FX in the Nordic countries. We also won the #1 position for Nordic equities and also asset management in the Nordics. At the top of the slide, we have 2 wealth and asset management-related investments that we have done during the quarter. The first one is predominantly for private wealth management and family offices. That's Boyer Advisory. It's a very small firm. So it is not necessarily something that is financially meaningful, but it's certainly something that is strategically very important and that is the nonfinancial services associated with private banking customers that can be outsourced. It's something that we have done, but in an unstructured manner. With the acquisition of Boyer, we will now formalize this type of service, so you can get nonfinancial services helping your daily lives as a private banking customer. The other one is in the Life division and we will have an insurtech investment. So this is insurance technology through buying a minority stake in Lumera. Clicking to the credit portfolio on Page #6, nothing new to report. More or less, what we've experienced now for some quarters is a very muted situation where we have a sideline movement on the credit portfolio and the lending per se. A few comments here. We clearly see that the macroeconomic picture for 2025 continues to look very constructive in Sweden. It looks a little bit better and a higher probability for soft landing and recovery in the U.S. However, I would argue it feels a little bit weaker in Europe, particularly in Germany, which is an important market for the Nordics. We have a little bit of an uptick in mortgage demand in the Baltic countries. But in Sweden, it's very much of a sideline and I would characterize the whole area as wait-and-see situation. With that, I'd like to hand over to our newly appointed CFO, Christoffer Malmer. Welcome him to this forum and then ask him to run through the financials.

Thank you very much, Johan, and good morning, everyone, on the call. So I'll start on Slide #8 with a financial summary year-to-date 2024. And as you can see, we've added some new columns to this slide to reflect, as Johan was referring to, the first-time consolidation of the acquisition of AirPlus. So if we look on the first 9-month operating income, it has continued to grow by 3% on an underlying basis to SEK 61.9 billion for the first 9 months of the year. Operating expenses are up on an underlying basis by 6% to SEK 22.3 billion. You can see that the increase adjusted -- including AirPlus is somewhat higher and that is affecting the operating costs of AirPlus that we've also singled out in the report in conjunction with some of the transaction-related costs that have been booked year-to-date. On the expected credit losses, the reading remains low. So we are 2 basis points for the period January to September, which results in an operating profit of down 1% compared to the same period of last year. Turning to Slide #9 and we look at the development during the third quarter. And also, here, you will find for comparisons, a column where we exclude the impact of AirPlus. Here, you can see that operating income is at SEK 20.9 billion reported, which means it's the sixth consecutive quarter where we're generating operating income above SEK 20 billion. And that's also true even if you do not include the impact of AirPlus in the quarter. However, if you look at the composition of the income, it differs somewhat from what we have seen in the previous quarter. And most notably in net interest income, we are seeing a 4% sequential decline, excluding the impact of AirPlus to SEK 11.1 billion. And we'll come back to the net interest income in a moment. Fees and commissions are up, including AirPlus, but they are down, which is very much in keeping with our seasonal pattern by 4%, excluding the impact of AirPlus on the fees and commission line. For net financial income, it's a significant increase compared to both the same quarter last year as well as the second quarter. And we are going to detail a little bit more what the impact is there, but we are generating some gains on some of our strategic holdings. But nonetheless, even underlying, it's a strong performance of net financial income in the quarter. So these developments add up to the SEK 20.9 billion that I mentioned. Operating expenses at SEK 7.7 billion reported, that's an increase of 5%, including then as previously referred to, the operating cost of AirPlus as well as the transaction costs. On an underlying basis, excluding that impact, costs are down sequentially by 4%, which also makes us comfortable to reiterate, as Johan mentioned, our cost target for the year on an underlying basis of at or below SEK 29 billion. Net expected credit losses in the quarter of SEK 393 million reflects on the one hand, some reversals of the portfolio overlays. And on the other hand, some specific provisions we've done on a small number of exposures, which are largely uncorrelated in various geographies and markets and the underlying asset quality remains strong. This takes us to a basis point ECL level in the quarter of 5 basis points. Imposed levies, just under a SEK 1 billion, which also is in line with what we previously communicated for the second half levy impact of at or below SEK 2 billion, which leads to an operating profit of SEK 11.8 billion for the quarter. This is on an underlying basis, a decline of 7% compared to the same period last year and a 2% increase underlying versus the second quarter. Return on equity of 17% and we continue to build capital, as Johan was referring to, there is very little movement in the balance sheet. So our common equity Tier 1 ratio increases from 19% in the second quarter to 19.4% in the third quarter. Turning to Slide #10. We would like to provide an update on the cost target that Johan was alluding to in his introductory remarks. You will recognize the upper part of the slide, where we have previously communicated our cost target for 2024 of at or below SEK 29 billion, consisting of the impact of inflation, our planned investments and our planned efficiency gains. Now in addition to the SEK 29 billion, we are now consolidating AirPlus. AirPlus was consolidated in the third quarter for 2 months, August and September and it will then be fully consolidated in the fourth quarter. This is estimated to have a full year impact on costs of SEK 1.25 billion. In addition to that, we have booked transaction-related costs during the year and we are also expecting to book an implementation charge in the fourth quarter of about SEK 550 million. So those costs together adds up to SEK 750 million and takes us to the updated cost target of SEK 31 billion. Moving to Slide #11 and the development of the net interest income. And here, we have seen a sequential decline, as I alluded to previously, from SEK 11.6 billion in the second quarter to SEK 11.1 billion. And we would like to try to provide a bit of color on the various movements in the various divisions. As you can see in LC&FI, the decline is just over SEK 300 million and the impact here is coming from a couple of different aspects of the business. Roughly 1/3 of this sequential decline is attributable to a change in the deposit mix. So we have seen a shift of deposits from somewhat higher margin impact deposits within our investor services business to an increase in deposits in our traditional corporate term deposits. This is attributable to roughly 1/3 of the sequential drop in the quarter. Another 1/3 is attributable to our market NII. And this is something that we have been referring to previously as somewhat communicating between net interest income and net financial income and we are also seeing this effect in this quarter. Now we are operating with an inventory of fixed income securities in our FICC business in LC&FI. And as a result of that and the impact we have seen from an inverted yield curve, i.e., the short end of the curve is higher than the long end, we're seeing a negative impact on net interest income as short-term funding cost is higher than the coupon on the portfolio. This, however, is offset by a contribution in net financial income and it's also the reason why we're seeing the net financial income being strong. So this is attributable to roughly 1/3 of that change. The last 1/3 in the LC&FI development in the quarter is also a communicating effect between the division and treasury attributable to IFTPs internal fund transfer pricing. Now if we move to C&PC, we have roughly the same size of sequential decline just over SEK 300 million. And here, we can say that roughly 1/3 of this decline is the impact of the consolidation of AirPlus, which contributed negatively to net interest income as highlighted and also the financing cost of the equity that has been used to purchase AirPlus, which is then booked in the C&PC division. And we're seeing somewhat lower return on business equity as well as the IFTP effect that I was also referring to in LC&FI. 2/3, however, it's the impact that we've seen from lower rates and that is primarily visible in our deposit margins in the quarter. On the Baltic division, there is no movement between the division and treasury because they have their own treasury in the Baltics. So this is fully reflective of the various movements in the quarter. And here, we have seen an impact of the falling rates in the quarter. As Johan was alluding to, there is some volume growth in the quarter and the net effect is what you can see on the slide of a drop of about SEK 100 million quarter-on-quarter. On the Funding & Other, we see some of the positive effects of the IFTP resulting in the SEK 11.1 billion reported net interest income. Moving to fees and commissions on Slide #12. You can see that our fees and commissions attributable to custody, mutual funds and brokerage is small up versus the previous quarter, which is encouraging in a typically seasonally lower quarter. We have seen net outflows from assets under management in this quarter. And as you will remember, in the second quarter, we saw significant inflows. This is primarily in the quarter attributable to somewhat lumpy developments in a couple of mandates, particularly in private wealth and family office business. And this is, of course, a somewhat lumpy nature of that business. However, this remains a big focus area for us, as Johan was referring to as well. And we continue to see that underlying sales look encouraging, but we continue to focus on this area and we have more work to do. For fees, lending and advisory fees in the quarter, there is a sequential decline of 17% compared to the second quarter, which was strong, but also the impact of a slower activity in the third quarter. We were talking in the second quarter about a pickup in activity levels. We continue to see encouraging signs of conversations with customers, but it has not yet translated into activity levels in terms of loan demand or transactions. For the payment and card fees, a sequential increase of just over 30%. And here, you see the consolidation of AirPlus contributing about SEK 360 million of commission income in the quarter. Turning to Slide #13 and the net financial income. And here, we -- as I mentioned previously, a strong quarter. And as you can see from the breakdown of the slide, it is a contribution also from the -- what we refer to as NFI Other, which is not attributable to the divisions. Here, we see a positive impact from some of our strategic holdings. We also collect some dividends from those holdings. And we have also made some exits from investments in our venture capital portfolio within fintech. So some contributions in there. But nonetheless, the underlying NFI on a divisional basis is strong in the quarter. Turning to Slide #14 and the capital development. Starting the quarter at a buffer of 430 basis points over the capital adequacy target or minimum regulatory requirement rather and building up throughout the quarter, primarily as a function of retained earnings. The sideway movements of balance sheet that Johan was referring to is effectively leading to a sideway movement also in risk-weighted assets in REA. And we see the consolidation impact of AirPlus of 45 basis points. To the right, you can see the same development year-to-date and we closed the quarter at a buffer of 470 basis points and a very strong common equity Tier 1 ratio of 19.4%. Two, a couple of balance sheet measures. As referred to previously, we continue to enjoy strong asset quality with an ECL of -- for the first 9 months of 2 basis points, NSFR and liquidity coverage ratio at stable levels and the capital position, as mentioned, strong at 19.4%. So to conclude on the outlook, it's a familiar slide to all of you. We finished the quarter on a strong capital position and we are committed to our target of by year-end, get to the management buffer of 100 to 300 basis points. We reiterate our dividend payout ratio, which is at 50% and we continue to aspire to a 15% return on equity on our business. So with that, we conclude on the financials and I think we open up for Q&A.

No. I would like to switch to the next page and just give a little bit of [ puff ] for our sustainability event on the 15th -- sorry, 13th of November. So I welcome you all to join if you have the desire, where we will talk about sustainable finance with external and internal speakers as we do these days once a year. And finally, I'd just like to thank Christoffer for his first presentation and also thank Masih who is our departing CFO, who has had a tremendous contribution to the bank and to myself. And I think many of you also appreciated him a lot over the years and wish him all the best in the future. And with that, we'll close the prepared remarks and we go to Q&A.

[Operator Instructions] Our first question comes from Magnus Andersson from ABGSC.

First of all, Christoffer, welcome back to this line of work, although this time from the other side of the fence, it will be fun.

Thank you, Magnus.

Secondly, Johan, just on a strategic note, you mentioned that asset management and wealth is one of your key strategic focuses. What's your view on the ongoing consolidation in -- within asset management we are seeing in Sweden and also now going cross-border, why are you not participating? Is it about price possibility to offer attractive incentive structures? Or why you're not there? And also, how you see at M&A opportunities in the various business areas given your super strong capital position? That's the first one.

Thanks, Magnus. It should not be too long. So I'm sorting out a priority here in my answer. It's a very big topic. Let's say that it's a very attractive underlying growth characteristics for savings and investment asset management and wealth. I am proud to say I'm not the only one or SEB is not the only one who have identified this. So the game is on. This is a very, very common and I think very easy area in order to see that over the decades to come, it's an area that will grow. We are doing a lot of small things like now I've just announced 2 of these minor things that are changing. We do a lot organic. And when it comes to the bigger consolidation play, both cross-border and as we have recently seen here local, the reason we have not played is that you don't do too many of these. As soon as it becomes large and transformational, you don't only do a few. So it doesn't -- you shouldn't think that we are not looking at these things or we're not close to them. But it doesn't mean that we feel any pressure to use the capital strength, as you alluded to, because of stress of deploying it and to buy things. But long term, it is an area where you have enormous fragmentation in the whole of Europe and particularly in the Nordics, where we have many successful asset managers of different shapes and forms and things are moving and SEB is keeping a very close eye on developments.

Okay. And secondly, then to you, Christoffer, just on the massive [ bit ] once again on net financial income also adjusting for the market value changes of strategic holdings. I mean, this line has been on an increasing trend for at least 15 years, while the uptick has been more pronounced with the rate increases. I mean, how should we look at the sustainability of this line in a falling interest rate environment? I'm asking particularly as when we look at market expectations, they are still below even your -- the average of SEK 2.5 billion you point out. So what will the sensitivity be if, let's say, rates flatten out in Sweden and Eurozone at around 2%?

Yes. Thank you, Magnus. As you know, we don't provide any guidance on this line. And what we have said historically is that the only thing we can really do is to look at how things have developed historically. So what happened when rates went up and what have happened when rates come down historically as sort of a proxy for where we are. Of course, the bank is bigger. The operation is bigger and that has an impact, of course, on all the various income lines. But this one, as you're referring to, is notoriously difficult to predict and that's why we're not doing anything else but pointing to history. The one thing that I did mention in relation to the net interest income in LC&FI and the somewhat communicating aspect between NII and NFI related to the steepness of the yield curve. So that could be one aspect to keep an eye on. But more broadly speaking, it is difficult to forecast this one and we'll continue to point to our historical development as the best guidance for the future.

And Magnus, if I may add, it is inconclusive to me if you have falling or increasing interest rates for NFI, but it's very clearly conclusive that it's bad if you have negative interest rates. This is predominantly driven by 2 things. Part of this, I view almost like an asset management firm. We have assets and those go up when the price of those assets goes up. That's interest rates falling or equity markets performing and we just translate the delta of those financial securities like any asset management firm would through the P&L here. The other one is activity. So of course, when fixed income commerce, when FX and commodities and commerce around the markets area goes up, this helps this income type. And that is, of course, where things go bad with negative interest rates. There is no commerce. There's no business. There's very low activity on government bonds and credits and other things compared to when we have here. So in my work, if rates go down and as our macro economists think it stabilizes at 2%, it's a quite constructive place. And I've talked a lot about this over the last 2 years. And I think we can conclude that there has been a little bit of a revenge for the asset classes on markets, excluding equities that has done, of course, very, very well for a long time, that we are coming back where fixed income, in particular, have a place in institutional and private investors portfolio and hence, that is a beneficial thing for us.

Our next question comes from the line of Shrey Srivastava from Citi.

Two from me, please. The first on AirPlus. Do you think the sort of integration costs are going to continue in a similar quantum on into 2025? And in the initial announcement, you mentioned the work they've done in migrating to a modern tech platform, et cetera. So what are the extent of cost reductions, if any, do you think you can further achieve here in the long run? That's my first.

Thank you very much. So if I start with the restructuring or the implementation cost, we are planning to book SEK 550 million in the fourth quarter. As far as 2025 is concerned, we will come back at the year-end to give more of an update exactly how we're planning to see things pan out in 2025. So we don't really have a number for the implementation cost. But in the absence of anything right now, I would assume that that run rate could be a reasonable assumption for 2025. If I look at the run rate of costs, as you are referring to, the cost level in AirPlus is roughly SEK 250 million per month at the moment. That is what we are planning to continue throughout the remainder of 2024. That's what's going into the numbers and the updated cost targets. We have started the restructuring to turn around the business in AirPlus and combining it with SEB Kort. And that's also, of course, reflective of the implementation costs we're planning to take in the fourth quarter. Now as communicated, we're expecting AirPlus to be EPS accretive during the calendar year 2025. And as you know, sort of the run rate of cost and income at the moment, they need to effectively meet during the course of 2025 so that we can, for the full year, reach the accretive level on an EPS basis. So that's probably what we can say at this point in time, but we'll come back with some more updated estimates of particularly the restructuring charge at the -- in conjunction with the full year results.

Okay. My second is a slightly different point. On the deposit mix shift you highlighted in LC&FI, would you say that this has picked up in earnest this quarter as rates come down and corporates are looking to lock in higher rates? Are there any specific impacts which affected this quarter? What I'm trying to get at is, is this something we should assume will continue going forward or particularly affected this quarter for some reason?

No, I wouldn't say that there are any such more permanent signs. These things move around a bit. There are different type of margins you experience if you have money parked in Investor Services, where you're not looking for yield versus if you actually as a client of the bank, manage your surplus liquidity. So no such things. And the locking in, capitalizing on falling rates, et cetera, I wouldn't say have any meaningful impact in the business right now.

Our next question comes from the line of Sofie Peterzens from JPMorgan.

Here is Sofie from JPMorgan. So one of your Swedish peers yesterday alluded to that they have a deposit hedge in place in Sweden. Looking at your numbers, it seems that you don't have one, but could you please comment if you do have one? And if you don't have one, why not? And has something changed in Sweden to make kind of a deposit hedge easier to put in place? And then my second question would be also related to net interest income. When I look at your deposit costs, they were down much less compared to your peers. Is this just a timing issue? Or is there more -- something more in this number that we should kind of think about?

Thank you very much, Sofie. So as far as hedging is concerned, the answer is no, we don't have a hedge in place. And our philosophy on this one is really to reason that, we think that over time, it should be paying off a little bit of the income to pay for a hedge. So yes, there will be the full effect coming through in the P&L, but we don't put on hedge and that's the long-term economical reason why. As for the timing effect, I think that when rates went up, there were some timing effects and some differences between the quarters between the banks. And I think that's probably reasonable to assume on the way down. I think we're operating in a similar market environment, similar competitive pressures and similar circumstances in many ways. Now the one difference that maybe could be worth highlighting is that we, in our bank, have a relatively high proportion of our loans linked directly to STIBOR and EURIBOR rates. So that basically follows with our margins on top of that. So that could be somewhat of a difference in the kind of DNA of the balance sheet between us and our peers. But broadly speaking, I'm just referring to our developments rather than commenting on what we've seen from the others, we can walk through the changes in the net interest income as we did in the presentation and that's what we've seen really in the quarter.

Okay. That's very clear. And then could you just remind us of any capital headwinds and tailwinds that we should expect? Some of your peers, again, they kind of said Basel IV or the new banking package in Sweden is not going to have any material impact. So if you could just remind us of any capital headwinds and tailwinds to come?

Yes. Thank you. So we would refer to the slide that we presented in the second half deck where you see the different effects. And we've said that the impact that we foresee and that we have estimated is the Day 1 Basel IV effect that comes to effect on the 1st of January 2025 and we've said that's around 50 basis points. The one thing we can say is that one driver of that number is operational risk capital, which is linked to revenues. So as revenues go up, that number will be a little bit higher. So would say high 50s rather than low 50s, if you like, as a guidance on Basel IV Day 1 effect.

Okay. One of your peers, again, yesterday kind of flagged that the [ OP ] risk will go up, but they said that they will get very large or equally or even larger kind of offsets from credit risk and CVA. You're not going to see anything similar to that?

No, we don't have any further comments on those in addition to what we presented at the second quarter results where you saw some of the effects, but we expected those to be neutral overall. So this was the one effect that we've highlighted on the Day 1. So there's nothing additional for us to report in that regard.

Our next question comes from the line of Gulnara Saitkulova from Morgan Stanley.

This is Gulnara from Morgan Stanley. First question on provision. We have seen a meaningful uptick there this quarter compared to the previous 2 quarters. And if you look at Stage 3 exposure, it was also higher versus Q2 despite the -- and we saw these increases despite the release of the overlays. Can you please comment which parts of your book and which sectors have contributed most to the uptick in the provisions? And are there any areas of your corporate book that you are watching more closely? And maybe one more question on the capital return. Can you elaborate how should we think about the pace and the size of the potential buybacks going forward? Would you prefer to do the buybacks maybe of a similar size given that you have solid capital levels and strong capital generation? And -- or do you think the potential size of the capital return could be bigger?

Thank you very much for the question. If I start with the ECL, as I was referring to in the introductory remarks, we have seen a couple of exposures where we have added provisions and it's a small number and they are uncorrelated in different markets and different industries. So we don't see that as a sign of any broader deterioration, quite the opposite, we continue to see good asset quality. And as far as the increases of the level of the Stage 3, you can see in our disclosure on Page 23, what's been happening to the different industries and it's been primarily in business and household services and manufacturing where we've had those movements in the Stage 3 assets.

And if I may add, the increase, which is still a very minor one in the greater scheme of things, is also not very broad-based and we have a few engagements again that describes most of it. And just as this is kind of the first credit cycle we have in this direction since IFRS 9, please be reminded that overlays are not earmarked. It is the tool that we have at our disposal signed off by auditors. When you see worrying signs of credit quality, but you cannot say exactly which company, which counterparty might run into trouble, which is the specific reserves. As we have taken some of those, you can also think about this that now things have gone much clearer and we've earmarked now to specific companies. So there's a switch from overlay and call it, allocated reserves to other ones. And also note that the total reserves or allowances, the protection that we have actually increased despite your very accurate comment to begin with, marginally, but still.

And on your second question in relation to the capital management and the buybacks, we are reiterating our targets to reach our capital buffer or management buffer of 100 to 300 basis points before the end of the year. And we have tools at our disposal, which is our dividend. And of course, if there's any growth in the business during the course of the quarter. And then we have extraordinary dividends if we add an extra dividend as well as share buybacks. So really, those are the tools at our disposal that we will work with in order to meet that targets.

Our next question comes from the line of Namita Samtani from Barclays.

I just wanted to ask on your German business. I see quite juxtaposed views. On one hand, the macro data seems quite weak and auto companies are profit warning. And you're also pointing to it being a weaker market. And on the other hand, there's an Italian bank taking a stake in a German bank. So I just wanted to get your views on your German business and whether you would look to expand there and how you perceive asset quality? And staying in Germany, I also wanted to ask on your German tax case. So the 2020 press release you put out stated that your German subsidiary will appeal the claims and at that time, it was estimated to take up to 5 years. So given we're at the end of year 4, what's the update on your tax case? And lastly, just a question on your nonfinancial corporate deposits. I appreciate they aren't all in Sweden. But if I look at the deposit level today, it's actually up versus 2 years ago in a time when QT has been happening. So why do you think that's the case?

Okay. Let's try. So first, Germany. I would say that asset quality is excellent. That's the headline. We are modestly expanding in Germany as part of our Nordic German growth case that's been going on for a decade. We are, of course, not at all in the same position as 10 years ago. So right now there is less to go for than we've had in the past. But as you can see, it's been a very strong contributor in the last years, both on income and profitability compared to where it used to be. That being said, it is definitely the sick child in the family in Europe. So we are, of course, very keenly watching what's happening in Germany as an industrial country. Not only is it an important export market for our most large Nordic exposure, but also German industrials are, of course, not in the best of positions right now. No one can avoid exposure to the automotive industry if you operate in Germany, both the outright OEMs, but of course, all the sub suppliers and everything that comes around it. And it is a particularly tricky question. Here, I would say that for today, famous last words, I am not worried about the credit quality. It's an equity story issue. So we -- these companies that we have exposure to, we've gone through in very much detail and feel we are comfortable that the current ECL levels and whatever we communicate here today, all that has been taken into account. However, as you point to asking what should one look at, I think this is an obvious one for Europe and for Germany that the increased competition, the electrification, which is now feeling that it's slowing down a bit, but it is a massive capital allocation shift in the installed capital base for the transportation and the automotive sector. And that is, of course, playing out as we see -- as we speak, predominantly on the scene of Germany. The German tax case, no change. So the irony is that we are not -- I mean, we should change this disclosure in the year 4 out of those 5 that were communicated 5 years ago. We are still at 5 years out. So this is, of course, a very unfortunate position where it's not moving forward. So we will come back to you as soon as anything changes from the disclosure. But timing-wise, I just don't want to have any misunderstanding. This is not going to be done in 1 year's time as we are entering the fifth of that previously combined. So from the day we announced that the cases will be processed, that is a 5-year process, and it has not yet started. And the nonfinancial deposit, I struggled understanding and hearing the question. Could you repeat that, please?

I just wanted to understand, if I look at like nonfinancial corporate deposits, they aren't -- I know they're not all in Sweden, but if I look at the deposit level today versus 2 years ago, it's actually up and it's a period when QT has been happening. So I'm just wondering why, like why that would happen? I would expect corporate deposits would shrink actually.

Yes, sure. I mean there is a bank-to-bank relationship, which is not at all similar for different banks. We are a very large provider of services to financial institutions. So we have a lot of banks and we have a lot of investors. So these are the nonfinancial deposits. They are very differently treated from corporate and retail deposits in all the key ratios and we have just had very much success of being the bank-to-banks and the banks-to-financial institutions as they are doing more things in the marketplace and they need a local house bank.

Our next question comes from the line of Nicolas McBeath from DNB.

So a couple of follow-ups on AirPlus. So if you could just help us understand the P&L you provided for AirPlus. I think you included expenses of almost SEK 500 million for the 2 months. And at the same time, you say that you will have SEK 750 million in total implementation costs. So should we think about that there were SEK 250 million -- sorry, you said SEK 750 million in total implementation cost for AirPlus in 2024. So has SEK 250 million of those been taken in Q3? That's my first question.

I'll see if I can try and straighten out the numbers. So you're right to say that the operating run rate of expenses is about SEK 250 million per month. The exact number is SEK 488 million of operating expenses consolidated in the quarter for August and September. We're expecting that run rate to continue at around about SEK 250 million per month and that takes you to the estimate of SEK 2.5 billion underlying operating expenses for AirPlus during 2024. In addition to that, we see for the full year 2024, an impact of SEK 750 million, of which SEK 200 million is attributable to transaction costs, so costs incurred in relation to the transaction and then SEK 550 million of implementation charges that we're planning to book in the fourth quarter as part of the restructuring of AirPlus.

Okay. That's clear. And then just maybe a bit more on the kind of medium-term outlook for AirPlus. So wondering how does the road map to being ROE-accretive look like for AirPlus? You paid now around SEK 5 billion in Swedish krona for AirPlus. So it seems to be the case that this needs to generate something like SEK 900 million annually in pretax profit to deliver a 15% ROE. First of all, is this more or less how you think about what AirPlus needs to deliver in terms of financials? And how does the road map look for this kind of profitability improvement? So there's probably a delta of around maybe SEK 1.5 billion to go from turning SEK 600 million loss annual, let's say to around SEK 900 million in pretax profit. So yes, how do you think about this profitability improvement? What's going to drive that?

Yes. Thank you for that question. So what we're communicating as for 2025 is to say that it will be EPS-accretive. And rightly to your point, that means that income and costs need to level out for the calendar year 2025. And we are starting already now. We have started with those restructuring initiatives to reduce costs. So that's the activities -- those are the activities that are taking place right now. And we are thinking of this very much, of course, as a merger between AirPlus and SEB Kort. And there are a number of different areas there where we see the opportunities to improve efficiencies and run this combined entity on a more scalable business. So those are the trajectories that we put up for the year. Now exactly how that will pan out in 2025, where we will land, it will depend, of course, on the revenue trajectory and how fast we manage to drive down the operating expenses. But the commitment for 2025 is to have that being accretive, excluding restructuring charges. For 2026, we've said that we see that business being profitable, excluding -- sorry, including restructuring charges. So if there were any more restructuring charges to come in 2026, they should be able to be borne by the business and still be profitable. And then we're reiterating our guidance to have a medium-term ROE enhancing business, which means that the card business, of course, is a high ROE business. Combining 2 card businesses should give us a bigger ROE enhancing business.

Okay. And then a final question to you, Christoffer, as well. So just wondering about your more recent projects, I mean, working with SEBx and Embedded, if you could comment perhaps on the status of these projects and how much have been invested on these and if there are any revenues at this point? And also, it would be interesting to hear your kind of overall insights and lessons learned from working with these projects for a number of years when thinking about the priorities and potential investment needs for SEB over the coming years. Do you think large banks in general and SEB in particular, need to speed up tech investments? Or do you think current investment rates are satisfying to keep up with, I guess, fintechs and other competitors in the market?

Yes. Thank you. No, I think I'm very pleased and I'm very proud that we are doing these kind of initiatives like SEBx, like SEB Embedded and they're done for exactly the reason that you're alluding to, which is that our world is changing. We're seeing new competition and we see an increased digitization of our business. And we also see opportunities, of course, to work with new technologies like cloud infrastructure, like AI and a range of different tools that we can implement and to have those kind of platforms where we can explore and elaborate and then draw from that and build out in the broader group over time. Now for SEB Embedded, in particular, that has moved away from being more of that exploration space to become a business to offer banking as a service. And in the third quarter, we saw the launch of the Hemkop, the Swedish grocery firm Hemkop, launching their [indiscernible] powered by SEB Embedded. And what we say about that opportunity really is that we're seeing this growing across Europe and the U.S. as a trend to bring banking as a service as a line of business. Now what we typically say is that the opportunity is a little bit too big to ignore, but it's a bit too early to say what the financial impact could be of this over time. But we clearly see demand for this type of a product and this is particularly playing into our large corporate customer base, which are the buyers of this service. And it's, of course, exciting to see now use cases coming to life as they've done in the third quarter together with Hemkop. But too early to start putting anything in terms of financial contribution at this point. Now when it comes to broader needs, I think this is an area where we have been investing. And as part of our plan that we updated today as well that part of our investments that we're doing in the bank are towards tech and engineering. And this is, of course, a focus area. And as Johan alluded to in his initial remarks, it is becoming a bigger, bigger part of our bank. So yes, it's absolutely front and center of our ambitions going forward.

Our next question comes from the line of Bettina Thurner from BNP Paribas Exane.

This is Bettina from BNP Paribas. I have a big picture question, sorry. On the corporate lending side, we've seen in the official statistics quite a bit of a deleveraging in Sweden, then you as well point to lower volumes in the LC&FI division. So can you maybe shed some light on what the sentiment here is on the ground? Are corporates deleveraging? Are they delaying investments? Do they need less working capital? Are they just waiting for uncertainties to realize? So any kind of color and whether you expect this to continue would be very helpful.

Thank you. Take this for what it is. This is my personal opinions of what all the data points that one can consume in this position can get. So I would say cautiously optimistic is the sentiment around large corporate and corporate lending with emphasis on cautious. There is very little need here and now to borrow money against interest expense in order to meet any type of demand that the corporate customer base faces. That's number one. That is always a matter of capacity utilization when demand as it is slowly, slowly picking up. At some point, that triggers, I need to invest in order to satisfy it, but that is -- and borrow for that investment and that's not happening. If you do look at the national accounts of Sweden, this is very relevant for SMEs and a little bit relevant for large corporate as most of the large corporate exposure is outside Sweden and also the Swedish one is not dependent on Sweden. It is actually quite surprising to see that investments are going up. So I myself in the last 6 months have seen that it is coming up. But the reason is it's not borrowing. So there's enough and you are deleveraging up until now. There's enough on the cash accounts that you can finance organically any minor investments, but it is absolutely picking up in the GDP statistics where you can see the sum, but no sign that people need to raise equity or raise a debt in order to finance it. It's too modest. That's my personal opinion. This has happened many, many times during my career. And sooner or later, it kind of starts, but it's very difficult to predict when.

Okay. That's very helpful. And if I can ask a question related to NII and the building blocks that you show on Funding & Other, which was a positive this quarter. Is this just wholesale funding rolling on to lower rates, interest rate, market rates are coming down? Or are there any other big items that play a role and that we should keep in mind here?

Thank you. Yes, you're right. The Funding & Other is benefiting from that. In addition to that, as I mentioned on that Slide #11, we've also seen some changes in IFTP, Internal Fund Transfer Pricing, which has meant that LC&FI and C&PC has seen an equivalent decline, which has then come through as a positive in that column. We should mention that this will probably continue a little bit into Q4 as well as a movement between the divisions and Funding & Other. However, on a group level, of course, that's a net zero.

Our next question comes from the line of Jens Hallen from Carnegie Investment Bank.

And I just have one clarification as a question. And sorry to get back to the deposit hedge question. But from all the conversations, it appears that the wording has been very important. Can I just confirm? So when you say that you do not hedge, does that also then include not having started the behavior analysis of your deposits to match with longer -- with sort of contractually longer assets to mitigate falling rates? So I think that is what was going on at Handelsbanken. And from the outside, we can only see you have a PCR for market risk, which is equivalent to what they have. I just want to make sure that your comments include that and so that we're not missing anything on -- as rates are starting to fall.

I think I understand the question, so I'll give it a try. We do not have any financial hedges to protect NII. We have many natural hedges in the bank. That's asset liability. That's constantly what a bank work with to match maturities and these things, but that's business or you can deposit [indiscernible]. So there are no strategies or analysis done that leads to that we buy derivatives or do any other financial transactions to protect the bank from the downside or take away the bank from the upside. So from that perspective, it's a pure. So a bank is a big fixed income security in one aspect and we are not hedging NII for the bank. It's one -- it's what we do. And we're not hedging away up or downside. So I don't know, does that answer the question?

Yes, I think it does in a way. I think the confusion yesterday that was to do with actually using derivatives and that's what the equal sign to hedging, whereas it sounds like actually normal banking and doing asset liability management where, I don't know, a deposit account with contractually overnight behavior is very long term and that can be matched with a longer-term asset. And it sounds like that is the normal kind of business that you also do. There was nothing really special yesterday.

Of course, every time we do a funding, you decide completely by yourself if you want to do a 3-year, 5-year, 7-year, 10-year or a 30-year. And those go in, of course, that's a product of your view of how you want to run the bank in asset liability management to match asset and liability. That's not hedging to me. That's what we do.

Yes.

Hedging is when I'm taking away over the top what would be produced by the organization in order to protect downside or lock in a rate or give away upside in exchange for lower volatility or a combination of the 3.

Our next question comes from the line of Riccardo Rovere from Mediobanca.

I have 2, if I may. Still on NII, there is something really I don't understand. In your report, you clearly say that interest income from loans go down SEK 800 million in the quarter and interest expenses and deposits go down less than SEK 200 million in the quarter. Now you are a corporate bank, actually a large corporate bank. And I'm pretty sure that whenever rates go up, your large corporate clients knock at your door, flagging to you that rates have gone up. I don't understand why on the way down, you are not knocking at their door saying, you know what, rates have gone down and now the remuneration of your deposits has to go down because at the very end of the day, it seems to me that that's the problem. The cost of deposits is kind of unchanged or go down very little. And I don't understand why considering -- also considering that you know that part of your book is floating rate. So is it a commercial decision or maybe these are term deposits that are fixed for 6 or 12 or whatever months? Why now you're not cutting it? This is my first question. And the second question I have is, when we think about the capital at the end of the year, you have announced another buyback, okay? This is going to wipe out 25 basis points of capital, not much as usual. And it's not clear to me how you can bring down the capital to the 300, forget the 100, the 300 basis points on top of your requirement. Clearly cannot be done with the buyback, that is the share price is not liquid enough. So there is only one option. And in this question, I just wonder, the banking package, Basel IV is something that falls into your calculation in 2024, or is something that you will take into account as a capital in 2025 because you will continue to generate capital hopefully in 2025 too?

Okay.

Okay. Riccardo, thank you. I'm not sure I understood the first question. So I might say that I'll give it an attempt to answer and then we can follow-up if it's not clear. But when it comes to the corporate side on income received, it comes very much, of course, from the lending that we do. More or less all lending is LIBOR, STIBOR-based, EURIBOR or dollar LIBOR or anything. So it just follows the underlying interest rate with a locked-in credit margin and that is typically 5 to 7 years at the inception. And as they roll down and the whole portfolio is there, so I would say an average maturity of 2.5 to 3 years is kind of where -- so not a lot of commerce is happening. In order to increase it, you need to renegotiate the credit spread, not the interest rate. And there is no chance a banker can decide what the clientele pays or when they want to do that. And as a matter of commercial dynamic right now, not a lot is happening. We are working hard to stay still because the loan book, of course, matures 1/3 of it every year. So you need to write SEK 300 billion, SEK 400 billion, SEK 500 billion of new loans every year for the exposure on the corporate book just to move like it is right now, sidelines. Hence, there is a significant contribution to both NII, but most important to net fees and commission from the loan fees, but it's not growing. It is kind of stable where it is. Equally on deposits, the LC&FI is fairly insulated against interest rate moves, not completely. So there is the same travel -- direction of travel as for traditional deposits in retail with term, et cetera, but it's much, much less. As again, most deposits are priced with a fixed margin towards a reference rate, which is a market rate. And they just move around. And negotiation about margins are very, very difficult and very, very stable. If you look at the margins that we charge for corporate book or for the deposit book in terms of micro [ loans ] when you meet the client, they don't move around that much. And so, I don't know if this clarifies anything. I share your frustration, why don't we just fix it. But there is no, call it, easy way to do that except for winning slowly but surely in the market where you perform. Anything to add on income?

No. I can take the second question on the capital. So just to clarify, all the effects that we've been talking about, the Day 1 Basel IV, et cetera, will come in 2025. So I'll just reiterate that our target to get to 100 to 300 basis points above regulatory minimum is for the full year 2024. And effectively, that means that we have the tools at our disposal, which is dividends, ordinary dividends, extraordinary dividends and buybacks. So those are the tools at our disposal and we remain committed to get to the level communicated between 100 and 300 basis points above the regulatory minimum.

Okay. Just to get back one second to the first question. I have no problem with the asset side. I perfectly understand that. What sounds a bit strange to me to understand is, if you say that deposits are set with a margin on certain rates on certain benchmark rates, I imagine that this certain benchmark rate is not going to be STIBOR, but it may be, I don't know, interest rate swaps, 1 year, 2 years, 3 years, which are moving much less than the STIBOR because otherwise, the cost of the deposits could go down not by SEK 200 million in a quarter, but much more than that. Am I right in saying so?

Not sure. I won't say you're wrong. But first, it's not -- the large corporate and corporate deposits, it's not STIBOR. It's predominantly foreign currency and it's multi-choice. You often can choose whatever currency you have and any company who is international would typically have 5% to 10% of their business in Sweden, 90%, 95% of their business in foreign currency and they try to match salary payments and expenses with any cash balance they have to keep it in the right currency. There are multiple, multiple currencies in these cash pools, as we call them, where you manage the liquidity. And these are sizable, sizable numbers. These are really large numbers. I don't know if that clarifies it. Otherwise, I'd like to just come back to you.

Okay, okay. I'll take that offline.

Our next question comes from the line of Patrick Nielsen from Goldman Sachs.

First of all, also just thank you for going through the moving parts of the NII bridge. It's very helpful. Much of the questions have already been answered. So I just had a broader one. You've now started to onboard AirPlus, which supports the fee part of the business. But what other opportunities are you most focused on in terms of which product offerings you want to strengthening and which geographies you want to grow further in organically or inorganically?

So thank you, Patrick. I'll start organically only. So AirPlus is, of course, a corporate investment in Pan-Nordic, not Sweden and -- sorry, Pan-Europe, not in the Nordics as we have Eurocard or SEB Kort and a very, very strong position. This is a complement, but also to our business predominantly in Germany, but also the one that we are very cautiously building in Austria, Switzerland and the Netherlands as this is 1 out of 20 financial services or products that you can add to the pallet or the menu when you meet new or existing clients outside the Nordics, which we haven't had in the past. And if you do look at the Nordics, how successful we've been on our corporate customer base to also have credit cards or corporate cards for the employees, this is, of course, the inspiration, if we can develop this over the coming 5, 10 years, this could be a very high, although I know very small, but it's a very high return on equity contributing business. And it's transformational for SEB cards, but it's not, of course, super meaningful for the bank, but everything counts. We then have a general corporate expansion, which is in the Austria, Switzerland and the Netherlands, also very humble, but it's definitely something that on the margin, this is a long-term marathon game. You need to win more clients and win market share over time in order to have outperformance on income. And then we have more digging where we stand, we call it. So it's never stop. I mean, we have a number of clients becoming saturated in the Nordics, particularly in Sweden and Finland. But there is more to do with the existing client base, which has much higher profit generation. The delta down to bottom line is enormous because you don't need any investments. You need to win more, call it, market share at the client. Next one is the wealth and asset management. So we have not been able to brag about the net flows in asset management or wealth management for some time. This is, of course, the -- change is one of the aims in order to get increased focus in the bank and particularly servicing clients in a better manner. So that's also -- and it's all organic to begin with. But as previous comments from Magnus Andersson was around things are moving around. And of course, we are not saying that we can't look at things also to acquire, but it's not part of the base case or the plan as we typically work that way. Then we have a few areas, as I commented on to address in retail banking. You saw the general public's opinion of customers and that's, of course, something that is not satisfactory. But here, we at least have -- we maintain the market share, but of course, we would like to play to win to a greater extent. And then there are several small initiatives within different products. So first of all, we are not very large in the euro product. We are very dominant in Swedish krona and strong in the Nordic currencies. And that is, of course, dollars and euros and everything. You can see that the NFI and how it stands out as an income type for us. And we'd love to develop that further because it's a scale game. Not every bank can be around having a fully-fledged markets division with sales, traders with research and in all commodity types, currency, commodities, equities, derivatives. But we are very committed because that's part of our core offering to institutional investors, to banks and of course, to large corporates. And this has been a 10-15-year game of a consolidation. We actually showed a slide a year ago on how the sum of NFI has changed in the market and to whom it has gone. And it's a very costly proposition. So I'm very aware that that's not easy to do because these are expensive things to maintain, both on technology -- well, actually mostly on technology, but also you need to take care of a wider range of staff to do this in a professional manner. And generally, as a last comment, we have said that asset-light is to be preferred or if you want return on equity-enhancing or if you want fee and commission-enhancing. And that is, of course, mostly from the perspective of return on equity. So in order to deploy more capital organic or otherwise, we have a very strong ambition to do that at the higher end of products and business lines when it comes to where they are on return on equity. However, I do say as a corporate bank, you also need to lend. It's the #1 driver of NII, which we also would like to generate, but NII does not generate return on equity. It is pretty much what you can do on top of NII that dictates if it's a profitable business or not.

Our next question comes from the line of Tarik El Mejjad from Bank of America.

Thanks for the clarification on the hedges. I think these kind of things we shouldn't be second guessing them, but thanks for the clarification. My question is on NII still are on the Funding & Other. It's a follow-up question. Should we link -- I mean, I will link it to in your facts book in Page 38 on your group function and eliminations. I see the run rate for your NII there has been around SEK 1.4 billion negative in the last 3, 4 quarters. And is the gap we see mostly in that division? And what should we think about the run rate there and the moving parts?

Yes, you're right, that's where we're including the treasury department and the group functions as you're referring to. And what we've said there is that the impact in this quarter related to the IFTP effect has coming both from LC&FI and C&PC and we expect that to continue into the fourth quarter. So we should continue to see some impact on net interest income moving between the divisions and Funding & Other also into the fourth quarter. Does that clarify your question?

Well, I mean, I heard that earlier. It was more about the group functions specifically where we have less visibility on the NII big negative. So I just want to know more there how we think about the run rate there.

Yes. And that is primarily the treasury operations that are in that part of the group.

Yes.

And over time, the ambition is to have it at zero. It should average out. It's not a profit center. It's the internal bank for the business. And it goes up and down a bit. But over time, if you do 3 years moving averages, it should be -- we always aim to adjust the model, so it kind of equals out in that function. Yes.

Our next question comes from Piers Brown from HSBC.

Actually, most of my questions have been asked, but just one clarification on AirPlus. Did you actually give the revenue number for August, December? You've obviously given the cost number SEK 250 million. But if you could just give us a revenue number so we can…

Yes.

Get a bit of a bit of an understanding of how much of an ask it is to be EPS-accretive next year?

Yes. So we provided in the report, there's a small table where you see all the contributions from AirPlus in the quarter. And the biggest revenue contribution is coming from net fees and commissions of SEK 359 million. And then we have a negative net interest income contribution of SEK 39 million. Net financial income is SEK 5 million and other income is SEK 5 million. So total operating of SEK 329 million for those 2 months, August and September. It's on Page 8 in the release.

Our next question comes from Markus Sandgren from Kepler Cheuvreux.

Congrats, Christoffer, to your new position. I was just thinking, is there any update on your potential investigations from U.S. authorities on AML shortcomings?

No, there is no update. It's very quiet. And as a reminder, it's been going on for a few years. But so far, there are -- continues to be no accusations or no findings or anything that we are aware of. So we have used the word information request, which continues.

Okay. And then secondly, I was thinking now when rates are starting to come down, what -- is there anything in the tone from authorities when it comes to banking taxes and resolution fund fee? I think they suggested a new tax in Latvia. I'm not sure if it has gone through. But I mean, what are you hearing when you're talking to authorities?

I would say that there's no political change in tone, but I would attribute that predominantly because it's been such a short time where what they would call super profits or over profitability, which has been very much the political narrative around the last 8 quarters' results, it hasn't really changed yet. The tax in Latvia is the second one, but there's also a discussion in Lithuania about extending it. And of course, that's been in Sweden too, but nothing as far as I can remember right now has been proposed to materialize. My expectation is, of course, that the banking system, it tends to be very selective narrative. So it was very interesting for me for many years since I became CEO, the first 6 years, it was all about that we have too high margins on mortgages. And that was a source of political and public opinion debate and very much part of the media narrative. And that's when we had 1%, 1.5% in mortgage rate, but we had negative interest rates of 0.5%, hence, 1.5% to 2% margins, enormously historically speaking, high. Of course, that changed 2 years ago. So now it's been all a discussion up until now that we have too low deposit rates, but no one is, of course, looking at the margins that depressed immediately on the mortgage side, but they expanded on the deposit side. And right now we are right in between these 2 worlds. And they are very important in the selection of narrative when it comes to politics, general population, society at large and media. So we'll see, but I wouldn't say there's a change right now. And on the taxes, Christoffer?

Yes. So on the taxes and just maybe a quick run-through of the levies. We're expecting the Latvia mortgage levy to discontinue, which will then contribute positively to the levies for 2025. However, as you are referring to, we're expecting a solidarity tax is not finalized yet, but that to be introduced in Latvia. In Lithuania, the solidarity taxes, as you know, based on a run rate of net interest income relative to history. So with that rolling forward, that should be somewhat lower in 2025 compared to 2024. The resolution fund fee in Sweden, we're not expecting the fund to be fully replenished this year. So we're expecting a resolution fund fee to continue into 2025. And of course, then we have the risk tax. So those are the levies that we're expecting for 2025.

Next is a follow-up question from the line of Riccardo Rovere from Mediobanca.

It is going to be really a quick one. Have you ever done any synthetic securitization? There is a consultation paper by European Commission trying to, let's say, to make more -- to make easier to use this kind of instruments. And have you ever thought to ask the Swedish FSA if you could use at some point the Danish compromise considering you have insurance operations, there has been examples in Europe by someone that this could be a way to expand certain type of operations like asset management, an example, with reducing the capital absorption?

On synthetic securitization, we have not entertained any such transactions, looked at it many, many times, but not found it to be palatable. In my world, there's nothing limiting us in doing it other than commercial aspects. It's like you have to give away a lot of NII in order to do it and you would get a rate potentially also the risk and of course, it is a very common tool when you struggle in finding adequate return on the capital that you carry. So these techniques have different, call it, benefits depending on where one is. Then as far as I know, we have not talked to the FSA about the Danish thing.

Sorry, Johan, because you don't want to do it or...

No. I have to check. It's just what I don't know. I'll check if we have talked about that insurance and the compromise in Denmark because I don't know.

Our last follow-up question comes from the line of Shrey Srivastava from Citi.

Extremely quickly, just as a point of clarification. You mentioned that it would probably be good to look at the SEK 750 million, I believe, of integration costs as a reasonable run rate for 2025. Just so I confirm, that's a run rate, so you're assuming SEK 750 million for the second half. So a reasonable assumption is about SEK 1.5 billion for 2025? Or is it more frontend loaded? Just getting clarification on that.

Yes, sure. Thank you. I'll clarify that. So in the SEK 750 million that we have for the fourth quarter and also the full year, there's a implementation charge in there of SEK 550 million. So of the SEK 750 million, there's SEK 550 million of implementation charges. There's also another SEK 200 million in there, reflecting transaction-related costs that we've incurred during the course of 2024. So that's what adds up to your SEK 750 million. The comment we made previously was that the SEK 550 million of implementation charge in Q4 could be a reasonable proxy for the kind of size of implementation charge we expect to see in 2025. We caveat that with it being a little bit early and we would like to come back at the year-end to confirm what that number would be, but that would give you a SEK 550 million for '24 and another SEK 550 million for '25.

So these transactions -- they're not going to be repeated, the SEK 200 million.

We have reached the end of the question-and-answer session. Thank you all very much for your questions. I'll turn the conference back to Mr. Johan Torgeby for closing comments.

I'll just thank you all for participating today and wish you a nice fall wherever you are. See you soon. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.