Skandinaviska Enskilda Banken AB (publ) ($SEBA)

Good day, and thank you for standing by. Welcome to the SEB Financial Results Q1 2026 Webcast and Conference Call. [Operator Instructions] Please advise that this call is being recorded. I would now like to hand the conference over to your speaker today, Johan Torgeby, President and CEO. Please go ahead.

Good morning, everyone, and welcome to SEB's first quarter results presentation. First, I'd like to just comment on a pretty unusual quarter. We've clearly seen some turbulent times with some macroeconomic sharp turns during the first quarter of this year. After a very constructive start in January, February, we had the trigger of the military conflict in the Middle East where we saw interest rate expectation significantly increased following higher energy prices and the risk of higher inflation, fairly sharp drops in some of the equity markets and also a widening of credit spreads. What's good to see is that April has really contrasted to this development and things have clearly stabilized. The highlights of the first quarter is really around the sentiment that ended positively and came out weaker during March after stabilizing in April. We saw some areas really benefiting from the market volatility that increased, and we saw higher demand for commodity hedging supported by high activity in the secondary equities market. This quarter, we can also clearly see the cost consolidation at work, and this really creates the freedom of degrees that we would like to use for the future to invest in prioritized areas. We will also continue the share buyback program of SEK 1.25 billion for the coming quarter. Turning to the page with our credit exposure and lending. We noticed modest growth within the corporate segment. We also saw a little bit more growth within Property Management, whilst household lending was flattish. We can clearly see measured as year-on-year that we continue to have good growth coming from the Baltics and Wealth and Asset Management, and some growth within Corporate and Investment Banking. On the next page, we look at the business pulp, and we can clearly state that we had a shift in sentiment during March, which really meant less activity in the areas such as listing on the stock exchange, M&A and large investment decisions on behalf of our clients. We also saw an improved sentiment around fixed income, currencies and commodities as market volatility increased which is typical that activity thereafter follows. We also had 4 customer satisfaction surveys completed, and it was very constructive to see a good position for SEB within cash management fixed income in Sweden, financial sponsors in Sweden and their capital markets in Sweden. We saw some customer inflow in the corporate portfolio of business and retail banking. The AirPlus integration is on track, and we've also seen somewhat of an uptick in house prices in Sweden, which is clearly supportive of an activity level that might come back later during the year. In Wealth and Asset Management, we had some inflow here measured as the Swedish mutual fund inflow in Sweden of SEK 9 billion in net with a market growing SEK 4 billion in total. Also here, we got some recognition for our work within PWM and FO as well as asset management. Baltics continues to outperform, particularly measured as year-on-year with growth in mortgages and SMEs, both at 10% and large corporate in the Baltics of 4%. We also continue to see constructive signs of growing long-term savings and investments in the Baltic states. Turning to the next slide. As customary, we once a year, like to do the CIB numbers by clients in different geographies. First, one can conclude that the growth of total client income was muted with almost a sideline movement in 2025. But as we've experienced over the last decade, the new clients that we've entered into the bank over the last decade plus, are the ones that outgrow the older vintage of clients that we do have. Looking at the dependence on Sweden, we continue to see a stabilization, where we went from 66% of income coming from Sweden to now around SEK 50 million. Focus going forward will be to increase growth. This is a customer-oriented approach where we would like now to see the total increasing in the years to come. Lastly, as we are designing the strategy of the bank with a clear focus on positive operating jaws. We can see that we have now with clearly a different cost trajectory path, somewhat of a stabilization of the operating jaws. With that, I'd like to hand over to Christoffer Malmer.

Thank you, Johan. So turning to the next slide and the summary financials. The net interest income in the quarter declined by 6% year-on-year. And on an FX-adjusted basis, that decline was 4%. This should be put in the context of an increase in lending to the public of just over 3%. So the decline in net interest income is primarily reflecting lower deposit margins as a result of lower interest rates. The sequential decline in net interest income, so development versus Q4 was mainly driven by a couple of technical factors, including a lower day count higher costs for the deposit insurance guarantee and FX headwinds. Partly mitigating these effects was a positive contribution from treasury. So there has been some traffic between net interest income and net financial income in treasury in this quarter. Turning to fee and commission income. The momentum that was building during last year has been somewhat disrupted this quarter by the increased market volatility and the broader market uncertainty that Johan referred to in his introduction. So while the pipeline of pending transactions remains healthy and corporate customers have demonstrated both resilience and strength during this period, transactions and new issuance have in many cases, been placed somewhat on hold. Therefore, the outlook for market-related fee and commission income for the rest of the year will naturally remain subject to the broader market backdrop. Looking at net financial income from the divisions, it actually increased from the fourth quarter, notably within CIB, driven by FICC. So fixed income, currencies and commodities and commodities, in particular, performed strongly. FICC risk management generally performed well throughout the market volatility in March. Here also, the contribution from treasury has an impact in the quarter. And in this line item, it was negative. But as I mentioned, offset by a corresponding positive effect in net interest income. For both fees and commissions and net financial income, I think it's worth bearing in mind that the year-on-year comparisons are very demanding. The first quarter of 2025 was a record quarter for both those 2 line items. Turning to operating expenses. We continue to consolidate the cost base, which we started during last year. And for 2026, as we communicated together with our full year results back in January, our intention is to consolidate and reduce the underlying run rate to make room for prioritized investments. Now this has primarily been implemented through a pause in external hiring. And this allows the organization to consolidate past investments and also work with the natural churn of FTEs. This is also proving a helpful tool to realize efficiency gains related both to the increased initiatives around automation and the implementation of our AI tools. The development of operating expenses in the quarter has also benefited from lower costs from outstanding share price-linked incentive schemes. So these effects had a meaningful positive impact on the cost base compared to the same quarter last year. In total, expenses in the first quarter declined by 7% year-on-year. The number of FTEs is down by around 250 compared to Q1 of last year and is down by around 4% from the peak. Now taking into account FX movements in the quarter, we provided an updated annual cost target of SEK 33 billion, plus/minus SEK 250 million. So this is down from the original SEK 33.4 billion. As you can see, we are tracking well below even that updated cost target for the full year. And this is the result of our underlying cost base consolidating a bit faster then we are increasing some of the investments in our prioritized investment area. So this is according to plan. Now turning to the net ECL of SEK 546 million or 7 basis points. This is a drop from Q1 of last year and a small increase from Q4. Underlying asset quality remains robust and the provisions in the quarter reflect a similar pattern that we saw during the course of last year with a few exposures in a few sectors requiring additional provisioning. We have also in the quarter released some of our portfolio overlays and some of that has been attributed to individual exposures. Levies and taxes are in line with our communicated guidance. So the net profit comes out at SEK 9.4 billion and EPS at [ SEK 383 ] million. The return on equity for the quarter at 13.1%. And as we have mentioned before, we do have an impact from our overfunded defined benefit pension scheme, and that continues to have a nontrivial impact on our ROE. So for comparison, we also provide an ROE adjusted for that surplus. And for the quarter, that amounted to 14.5%. Turning to the next slide, we'll look at the net interest income. As the interest rate cycle now starting to stabilize, we pointed last year to a typical lag of some 3 to 6 months the last rate cut until the full effect of lower rates would have made its way through the balance sheet. We see no reason to change that assessment. Looking at the Baltics, the latest ECB rate cut occurred in June of last year. And in the fourth quarter, we recorded a sequential increase in net interest income in local currency as reported. This trend has now continued in the first quarter of this year. So net interest income in the Baltics, again, is up in local currency if we adjust for the day count, and that increase is about 2%. And that is driven by higher lending and deposit volumes with margins holding relatively stable. In Sweden, the latest rate cut came in October last year. So the turning point in net interest income is likely to occur now in the first half of this year. but will, of course, continue to depend on the interest rate development. The more technical factors impacting the net interest in the quarter that I mentioned previously around day count and FX adds up to around SEK 250 million to SEK 300 million compared to the previous quarter. But on the other hand, a number of smaller effects going the other direction across most divisions. It's a combination of higher business volumes in some areas. There's a lower funding cost at AirPlus in this quarter. And as I also referred to some positive developments in NII, offset by headwinds in NFI in treasury. These together added up to a positive contribution of around SEK 200 million. So net-net, there is a SEK 100 million, quite a modest development of net interest income declining in the quarter. Moving on to fee and commission income. As mentioned in the introduction, this is the area where the change in market sentiment has had the most visible effect compared to the momentum we saw building towards the back end of last year. Comparing the results in the quarter to the same quarter of last year, so adjusting for seasonality, the decline we see is most notable in what we refer to as net payment and card fees, which is down 8%. Now this is primarily reflecting developments related to Air Plus. Partly, AirPlus exited 29 noncore markets during the course of last year. So the scope of the change has changed, and that is very much, of course, in accordance with the plan of the implementation and restructuring of that platform. And also, we've seen a result of postponed corporate travel in the latter part of the quarter, of course, due to the conflict in the Middle East. The year-on-year decline in what we call Securities Commission is partly related to lower fees on new issues of securities or IPOs and other type of activities, as well as some lower secondary commissions. Fee income related to assets under management and assets under custody increased somewhat, and that's broadly in line with the move in asset values. If we compare to Q4, there is also the lower issuance of securities that accounts for most of the decline in fees from securities. And there is a drop in performance fees, which are typically higher in Q4. Finally, on this slide, we see a decline in life insurance commissions from the previous quarter, and that is reflecting a lower day count and lower asset values and the year-on-year effect is primarily driven by lower margins within notably unit linked. Turning to net financial income on the next slide. This line item has been affected by the restatement that we have announced prior to this quarter. Historically, we have pointed to a long-term average for net financial income, spanning over 16 quarters which in Q4 was around SEK 2.5 billion. And this we have pointed to as our best indication of the level around which this P&L item should move. Now taking into account the restatements, which is increasing our net interest income and reducing NFI that equivalent level looking at the past 12 quarters, over which we restated the numbers, is around SEK 2.1 billion. On the next slide, we look at the development of the capital position. We closed 2025 with a management buffer of 300 basis points and then taking into account the developments in the quarter, we're adding 40 basis points from accrued earnings, which is largely balanced by the combination of the upcoming buybacks that we deduct upfront, volume growth and FX effects. Then we do continue to see the impact as we phase in the IRB impact in the Baltics and a positive contribution primarily from asset quality. That takes us to a buffer at the end of the quarter of 290 basis points. On a pro forma basis, so taking into account the final part of the IRB phase- the Baltics, the buffer stands at SEK 250 million. basis points. Turning to the next slide. We continue to make progress in the area of AI, which is one of our prioritized investment areas. In this quarter, we have progressed well with our efforts to secure access to sovereign and also cost-efficient compute at large scale, a key component in growing and scaling AI solutions. So we have, together with 3 other companies from the Wallenberg [ Sferical AI ] Saab, Ericsson and AstraZeneca, formed a company called Sferical AI. Now this company is building powerful AI hardware here in Sweden, together with NVIDIA. And during this past quarter, we took delivery of around 1,100 GPUs. And based on NVIDIA's latest Blackwell Ultra architecture. This architecture offers significantly better performance per watt than any previous product from NVIDIA. And just to give a sense of the capacity of this installation because, of course, talking about GPUs, it's hard to quantify, we can say that the capacity of this installation enables around 150,000 to 200,000 users to simultaneously have a real-time AI conversation with everyone effectively acquiring the AI at once without any drop in performance. So it's a significant capacity that will allow us to roll out AI solutions and also use this capacity for sensitive data as it is our own installation, and continue to develop use cases in and around AI. We expect to start accessing these capacities to be up and running later during the course of this year. Finally, at the final slide, we conclude with our financial targets. There are no changes here. We continue to aim for a 50% payout ratio, a capital buffer between 100 to 300 basis points. and a return on equity of 15%. So with that, I hand over to the operator for questions.

[Operator Instructions] Our first question comes from the line of Magnus Andersson from ABG SC.

Two questions, please. First of all, good to see that corporate lending was up slightly quarter-on-quarter. I was just wondering what initiatives you're pursuing to improve your market share in corporate lending, particularly in Sweden, which you seem to be losing ground versus competitors. If you please can tell us something about that? Secondly, just on net commission income, expectations have come down quite significantly since the pre-closing call. And yet, you are even a bit below the down guided numbers. So I was just wondering is -- I mean, from here, is it purely market driven what happens? Or are there any specific actions you are taking? Or are there any technical factors related to AirPlus or something else we should be aware of?

Magnus, Johan here. So from last quarter, we discussed the corporate lending with a little bit focus on Sweden. We've taken quite a lot of internal steps to do something that is not particularly difficult but still hard to execute on and that back to business, back to focus on making the most effort we can to be relevant in the marketplace. And it's early days, but it's, of course, encouraging to see the point you made that there seems to be a little bit of uptick. We also, for Sweden last quarter looked very closely on the statistical Central Bureau the official stacks for Sweden. We can also see the same shift there, where I think we captured about 30% which is significantly above our back book market share of new corporate lending in Sweden, but still not outgrowing the best in the market. So constant focus now on just continuing this improvement, and we're not going to hold back we're going to try to do. I wouldn't say that we don't have a sense that we've lost a lot of business that we would like to do. So there are always different areas within the subsectors of a lending book, which we have differences of opinion in how hard we pursue it. So that's at least a little bit of cushion for us that we've done the business as the price and up the underwriting standards, we believe is appropriate.

Good morning, Magnus. So on the commissions, I think you're right to observe that the sequential decline is primarily attributable to the market-related fees and commissions, its issuance of securities and the advisory that accounts for that. So going forward, of course, those market-related revenues that has the opportunity to recover provided the market backdrop is constructive. From the cards business, there is the seasonality. So Q4 tends to be higher, corporate travel quarter, Q1, a bit slower and then Q2, a little bit higher. We've seen minor effects on the revenue in fees and commissions attributable to the corporate travel impact from the conflict in the Middle East, which we will recoup and travel resumes, but that's a very small number.

Johan, may I just follow up on corporate lending. Do you have any comments about pricing discipline in the market? As you briefly touched upon yourself, there's particularly one actor growing extremely fast relative to all others. I mean do you think that has impacted the pricing in any way?

I wouldn't say in a meaningful way that I can point to objectively. So I would be a bit cautious. But you can do some very simple analysis and see how lending grows has developed versus the NII development over the last 18 months, and you get a picture that there's definitely some signs of very tough competition. And it's not only one, there are a few more which we definitely feel that there is a more forward-leaning ambition in the marketplace. So it is heating up.

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

I just got 2 small ones first. On the net interest income, Christoffer, you mentioned the lower funding costs to AirPlus and some positive developments in net interest income offset by headwinds in NFI and treasury. Are these components sustainable and net interest income, i.e., should I not be expecting these elements to reverse? And then my other small one is on the cost group functions. Other expenses improved by SEK 500 million quarter-on-quarter. And even in the other expenses and the group cost base, it improved by SEK 150 million quarter-on-quarter. So what exactly is this? And then my final question, I appreciate the comments in the report that given the current outlook are stable to potentially higher interest rates, the ambition is to grow revenues and maintain a positive delta between income and cost growth, but when do you think you can actually get to a 15% ROE? Because consensus doesn't have you there in 2028. So I'm just trying to understand what stops you from getting there over the next few years?

Thank you, Namita for the question. If we start with the net interest income, as I mentioned, we had those headwinds from the account FX and deposit insurance currency of about SEK 300 million, offset by around SEK 200 million of the effects that you were referring to. I would roughly split those in half and say that half of that is more attributable to business as usual and half of that SEK 200 million is more treasury traffic between NFI and NII. Can I ask you to repeat the cost question, please?

Yes, sure. Look, I'm just looking at the cost and group functions and on the other expenses, just quarter-on-quarter, it improved by SEK 500 million. So I'm just trying to understand what that is. And even when I look at the costs on a group basis and what you call other expenses, there's an other within that, which also improved by SEK 150 million. So I'm just trying to understand what other is.

Yes. So the biggest delta in those costs between Q4 and Q1, it's partly attributable to the AirPlus restructuring charges and related redundancy fees. The second element that you also have, which is primarily in the salaries line as well where you see the bigger delta is attributable to what I refer to as impact from the movement in the share price impacting our LTI schemes. So those 2, I would say, are the biggest deltas between Q4 to Q1. But in the other line, you should find those implementation charges.

Let me -- that's in addition to a reduction of FTEs.

And just my final question?

Your final question on...

There's nothing holding as bad as such. So we do control the cost base with pretty much surgical precision is our ambition. But what we are lacking is really the income side. So that we do not control. I wish we did, but we would like to have a much more active investment bank. That's the biggest drop if you look at percentage terms. Even though it's not that meaningful in quantum, it's about SEK 2 billion of income from that per year in terms of the copper finance and primaries. Those are the 2 ones that are down now 30%, both Q-on-Q and year-on-year. And those are, of course, extremely high return on equity contribution areas as they are capital-light and doesn't really any capital. And the third one is, of course, that we do have a drag when we look at the 15% to your point, from the pension fund, which is capital -- I mean, it's a luxury problem to the extent that our surplus is growing as markets are appreciating, but it is capital that we really can't use for the business. And I would say those things are the ones that I think about in order to come quicker to the aspiration we have of 15 versus the consensus that you refer to.

Our next question for today comes from the line of Martin Ekstedt from Handelsbanken.

Could I focus a bit on retail banking, please? So your new Head of Business and Retail, he's had some time to sink his teeth into that division now, I imagine. That should have included, I guess, the business review and some benchmarking perhaps against his former employer where he oversaw some impressive market share gains. So are you able to share with us some of his views and recommendations? Perhaps any initiatives that we should be aware of to strengthen retail banking in particular? And just as a backdrop to this, please your former CFO, wrote an article in the Swedish Business Daily between quarters, saying mortgage growth basically will be unprofitable once it comes under current capital regulations and margins. Would you agree with this? I guess you may have read this article. What is the scope of widening mortgage margins in the current Swedish market?

On the retail banking side are now predominantly then for Sweden, it's nothing -- it's not rocket science. It's really an assessment that [indiscernible] has done around simplicity and speed. So very much back to basics, back to banking and make sure that you have those things that are a prerequisite to be quick and have the right product at the right price. So this is very much what we are redesigning right now. It's not that we haven't done it in the past. It's just something that is quite easy to think about and quite hard to execute on. But is everything from updating the technology side, making sure that you answer fewer questions. You get your mortgage promise in a very convenient matter at your own terms, et cetera. On mortgage growth, I would just say that margins move up and down. And there's definitely a relatively speaking, low margin business right now. So if we grow on this margin, there is a less impact financially than we had maybe 5 or 6 years ago. But in my opinion, the mortgage margins are cyclical. They go up and they go down. Right now, they are very depressed. But they could -- they will recover at some point in time in the future because they do. And I think that deposit taking and lending, they are communicating with each other. And the other thing on the totality, why this is, I would actually attribute it to a competitive market and a very well functioning bank market, in particular, Sweden, where there are no systemic permanent over profitability products. They tend to be completed away over time and there's not a permanent situation either where you have low profit as a whole that you make banking dysfunctional. So if you look at -- compared to many of the European countries over the last decade, you can see that there's higher swings between very high profitability to no profitability, whilst the market is quite well functioning here with some insecurity on pricing and return on equity that it kind of evens out over time. And this could be centered in our language around the 15% aspiration of return on equity. This goes into the analysis that we do. of what we think is an appropriate medium to long-term aspiration to have. Some years, we will get higher, some will go lower. But we will always try to work against that in the balance between customer satisfaction, very well-priced products and profitability for the group.

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

So I was wondering why you're keeping the cost guidance underlying unchanged given what we see here in Q1, which seems to reflect a much lower running cost base with fewer FTEs and the change trajectory, of course, as you mentioned, Johan. Do you have any large investment projects that require large hiring freeze hiring increase in the near term? Or do you see potential for reduced cost guidance later during the year?

No, I think the way we look at this is we talked about reducing the underlying cost growth and consolidating the cost base to make room for prioritized investments. And therefore, we do see some investments that are still scaling up. and we'll do so during the remainder of the year. So when we conclude the first quarter, there is the impact of our underlying cost base coming down before some of those investments are phasing up. Secondly, the impact that I referred to earlier around the share price movement remains, of course, an exposure that could go either way. And then we have an element of seasonality that Q1 tends to be a little bit of a lower cost base. We have the range still in the cost target of plus/minus 250 but where we are after the first quarter, we think it's too early to have a discussion around any changes in.

Could I just follow up? Is the hiring freeze still in place? And would you expect the FTE number to continue to decline also in the next couple of quarters?

So we have a -- we continue to hire externally only that we're working with a natural churn. So we are hiring less than our naturally leaving. And with the size of our organization, we have a natural churn around 800 to 900 FTEs every year. And what we've been doing over the last couple of quarters is continue to hire externally but a considerably lower pace than the natural churn. And for the time being, we like this model. We'll continue with this. because it also helps the organization to consolidate efficiency gains. We're introducing automation and AI, that's a helpful tool to work with. So for the time being, this will continue to be the model.

And then my second question was on profitability trends in the Baltics. So we can see that your returns on allocated equity went down quite a bit in the quarter by think slightly more percentage points due to higher equity allocation, I guess, to the model update. Are you happy with this profitability in the Baltics? Or do you see a need or potential to widen margins, given the increased capital consumption, I guess, in particular, given that your largest competitor now in the Baltics also seem to be facing higher risk weights in the Baltics?

You're right. The effect is a technical one from the increase in the risk weights there. We continue to work with those models. And our ambition is, of course, to resubmit and get approved IRB models going forward. And when we look at the impact on pricing, this is a competitive market that is very much priced of market conditions. So I think for the time being, we're ensuring that we're continuing to win and take the business that we want to take in the divisions and the operating teams. So we're not expecting any change from the allocation of capital.

Okay. And am I correct? It's still SEK 20 billion that you -- or it's now SEK 20 billion that you expect remaining increase from the model updates in the Baltics? You don't see any further increases on that. Is that correct?

That's correct. We see no further increases.

Our next question Comes from the line of Sofie Peterzens from Goldman Sachs.

Sofie from Goldman Sachs. So just a follow-up on the previous question. With the IRB models in the Baltics, when do you expect this to reverse -- like what's the time frame, if you could give us a little bit of details here. And then also, I was wondering how should we think about the levies going forward? Is it fair to assume that the current level is the good run rate for the remaining year? And then finally, my final question would be on cyber security. We have seen a lot of headlines around Messano bad people join the a banking system. So how do you think about this? And how do you ensure SEB's Cybersecurity 's top notch?

Thank you, Sofie. So starting with the IRB models in the Baltics -- this will take some time. So we are looking at the years for those to be submitted, and we expect to be approved eventually. But as I referred to on Nicola's question, the full capital effect from the Baltic IRB models is expected to be implemented by the end of the second quarter. And then we'll like to, of course, to work as quickly as we can to remediate that, but we are looking at years. The second question around the levies. The expectation for the full year is around SEK 3.3 billion. So that's sort of our best case right now where we stand, adding the various risk taxes, levies, et cetera, together. And on your third question, when it comes to [indiscernible] , this -- you're right that this is a development that, of course, has triggered a lot of conversations in many industries, banking, no difference. And we are very active working with our suppliers. Many of our technological partners are part of the Project Glass wing which do have access to the [indiscernible] model. So our way to work with our own exposures will be very much working with those partners. And second thing, which we are certainly focusing in on progressing more broadly is the ability to just reduce the cadence of releasing patches. So when there are vulnerabilities identified, the ability to quickly move forward, identify them and release matching. That will continue to work with in parallel. But this is a development that we're following very closely, and we are in close conversations both with authorities and our technology partners.

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

The first one is actually on provisions. I know you've reduced your management judgment buffer. -- somewhat despite it seems seeing some customer-specific events this quarter. So if you could just elaborate on what exactly is well and why you don't expect to occur at first? The second question is on the potential for rate hikes in Sweden. During the last hiking cycle, we saw a little bit of coverage on Swedish banks now being able to partially model the contract parity of overnight deposits. If we do get any great hikes in Sweden, is your behavior going to be materially different in terms of hedging this hiking cycle versus the previous one?

Okay. Thank you. On the provisions, well, you're absolutely correct in the question. So we take release a little bit, and we still have about SEK 0.5 billion or so. It's fairly concentrated to a couple of names within projects and infrastructure. So for us, this is, of course, never fun, but it's very normal, and the level is in line with what can be expected as we have more corporate and investment banking compared to retail. It's not to be viewed as a broader sign of asset deterioration or quality deterioration, but rather a fairly specific number of a couple of events project and Infra Finance. On hedging, no change really. So obviously, we have had an unhedged version of SEB. So if you buy the bank, you do get some interest rate sensitivities, and we have not changed our view on that.

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

Just a couple, if I may. If I'm not mistaken, just getting back, I think, to what Namita asked right at the beginning of the call, Christoffer, can you explain a little bit what you mean when you say [indiscernible] between NII and FI, this quarter. Just to understand if there is anything that should be taken as not recurring in this quarter or the other way around? The second question I have is on the buffer, including the full impact of the Baltic IRB models, the buffer now is 50%. Is this the number 250 basis points is this the number that you have in mind as an adequate buffer once the IRB models in the Baltics have been, let's say, [indiscernible] has been completely absorbed or do you think you could go lower to 200 given that you have 100 to 300 basis point range? And the last question I have is, if I remember correctly, one of the few calls, I think it was Q4, maybe Q3 I don't exactly remember, you mentioned the possibility or looking into SRTs, I was just wondering whether this is still something you're looking at, if you've done something in the meantime or it's something that you have no intention to do anything on this side?

Thank you, Ricardo. So coming back to the net interest income, and hopefully, I can clarify. So as I mentioned, there is about SEK 100 million in this quarter that within treasury is in NII moving from NFI to NII. So what's behind that? Well, this is effectively attributable to the funding of our Market Making business. And when you saw the kind of shift in rate expectations and rate moves during the quarter that just passed, there could be an effect in some of the swaps that you get the booking in NII versus NFI or the other way around as rates move. So what we want to flag is that the movement of around SEK 100 million could be reversed. And if so, it would show up in NFI instead. Does that make sense?

Yes, it does make sense. But it's not, let's say, a one-off by its nature is just rate movements this quarter, rates go up and down every single day. I mean there is nothing particularly one-off in this. It's just what happened in this quarter.

Yes. Well, you could argue that what happened in this quarter was quite unusual. And therefore, we just want to flag it that it moved from NFI to NII. But of course, in total revenues, it's still there.

So Ricardo, if I understand the question correct, the 250 pro forma, I have no disagreement with. That's roughly where we're thinking as well. When it comes to the acceptance of going down to 200 , I'll just say there are 2 reasons personally. This is, of course, for the Board and not for me, it's capital allocation discussions would be acceptable. So you shouldn't rule it out, is that why do you have a -- why do you go into the buffer. In this case, it's actually because we put in extra buffers in the Baltic. So that's a very good reason why you don't need to have extra buffer on buffer in terms of your management buffer. The other one would be business. So I would not rule out that you can absolutely hit 200 for 2 reasons, namely, we do have extra buffer now. So we are a more safe and secure bank with more loss absorption everything else being equal because of the B. That's the positive. The other one negatives, of course, and it's capital that we can't really deploy smelly. And we are still hopeful that the April indicators of strong equity markets, falling interest rates, volume credit spreads that we come back to where we were earlier this quarter. the past in having a more constructive view. Obviously, everything else being equal, the world looks more insecure right now after the war in Iran and it did prior to it. Otherwise, it's going to be the 100 to 300. And as always, if nothing [indiscernible] happens. The decision will take in December amount?

Yes. So on the SRTs, Ricardo, we continue with that work. We have not undertaken any transaction during the past quarter, but we continue to work prepare us and increase our readiness if we should deem that a relevant tool going forward. So work continues.

Just a quick follow-up, John. When you stated if I understand correctly on the buffer, I'm talking about buffer. Basically, you have 100 basis point add-on because the Swedish FSA is reviewing the whole model of the whole group then the ECB decided for SEK 50 billion additional risk-weighted assets on your Baltic exposure because of the [indiscernible] and then basically you are saying if you capital, let's say, the 300 basis point buffer you would have above them on above on a buffer basically 3 layers. The 100 basis points plus the SEK 50 billion plus the SEK 300 million is do I get it right, you're reasoning?

Yes, you are. And remember, when we introduced the Baltic IRB add-ons, we did say we will use the buffer for it. So I think you're right.

Our next question comes from the line of Emre Prinzell from Nordea.

Emre Prinzell from Nordea here. Just a quick question from my side. How should we look at the Baltic NII going forward? I noticed you print 10% year-on-year loan growth on mortgages and SME loans there. the 6-month Euribor is up some 30 basis points since the beginning of the war. And most, if not all, lending in the Baltics is explicit reference to the [indiscernible] right? So what does this mean for Q2 and Q3 sequential NII in the Baltics would you say? That's my first question.

Yes. I think I think you're right, these are exactly the variables that I would look into. So the development of Euribor, our volume progression and a margin development, of course. Now from a deposit base perspective, of course, the -- we now have around SEK 150 million to SEK 200 million or so of 0 cost deposits in -- across the Baltics, which would then be affected, of course, from rates 100 to 150 million, I should say.

And also looking at the corporate lending in Sweden, we already discussed it a bit, but provided what is happening now with the geopolitical uncertainty. Do you -- how should we look at the market growth would the corporate appetite for lending in Sweden going forward. It's been on a trend upwards, but will there be a dent in corporate appetite? Or will they continue to have demand for credit in Sweden?

I think it's a little bit too short term for it to have a meaningful shift. What happens is, of course, that larger investments they put on hold. So there is a marginal negative to lending demand. And in the end, as we've been talking about now for 1.5 years, we do need the consumer to come to the table for corporates to start increasing capacity to satisfy the demand of the end consumer. So in my book, I'm still a little bit cautious. It's improving. There is a little bit of lag. Now it looks good again after a weak March. So I don't draw too much conclusions from that. But I do think that the GDP estimates are being revised down, which is not helpful because we were looking for a consumption consumer-driven pickup. That's kind of been the area that's likely not stability, not investment ability, but whether that you need an end customer demand for all companies in the end to expand business. But it looks pretty constructive. And then you have, of course, a small signs also on the retail side with mortgages, not at least in house prices that at least looks neutral to marginally supporting.

We will now take our final question. And our final question comes from the line of Jacob Kruse from Berstein.

I guess just 2 small questions from me. First on the expenses, if I look at your other expenses, the IT cost came down quite significantly this quarter. So I think about SEK 1.3 billion in Q1 last year to just under SEK 1 billion this quarter. So I guess my question there is, is that a shift? Or is that what you're talking about in terms of this ramping up investment idea? And then the other question I just wanted to ask was in the mortgage business, when you talk about the pressure on margins currently, do you have -- are there any effect here of the rate moves that have a temporary effect on Q1 that will reverse in Q2 in terms of the pricing of the back book?

So on the IT cost, I would say the decline in Q1 is more of a seasonal nature. So this is 0.1 of the areas where we expect investments to show up. On your second question, if I understand correctly, no, there's no such impact in the first quarter visible in the numbers from those mortgage price adjustments.

Thank you. There are no further questions at this stage. I will now hand the call back to Johan Torgeby for closing remarks.

Thank you for today, and we wish you all a happy first of May, and see you soon. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now all disconnect.