Svenska Handelsbanken AB (publ) ($SHBA)

Good afternoon, everyone, and welcome to this call ahead of our silent period that starts on April 8. This is Peter Grabe, Head of Investor Relations speaking. And with me today, as always, I have the whole Investor Relations team. Lars Kenneth Dahlqvist, Andreas Skogelid and Per Aronsson. We would like to remind you that this call will be recorded. The call is intended for sell-side analysts and will not include any communication of new information, information is not publicly known or any new guidance. The name of this call is to remind about publicly communicated matters for housekeeping purposes of estimates and expectations ahead of the interim report. In this call, we are not aiming at steering you towards any specific numbers. And the outcome of the quarterly results will occasionally deviate more or less from the trends we comment on in this call. And we will only ask a question related to public information. [Operator Instructions] Now let's go through the respective lines and start with NII. First, in terms of volume development, we always refer to the official statistics muni communication in the Q1 report was that Swedish mortgages saw a slight pickup, while corporate lending growth remained muted. Volumes are gradually increasing or we're all increasing in the U.K. and the Netherlands, while the growth remained muted in Norway. Second, in terms of margin development and NIM sensitivity, we don't guide because of the abundance of moving factors such as funding competition, mix effects, et cetera. Generally, we have stated that lower policy rates burdened the transaction account deposit margins and that it should take about 1 to 2 quarters with flat policy rate for the impact from the changes to have fully filtered through into the NII. In terms of policy rate changes, they were unchanged during Q3 and also in Q1 so far in Sweden, Norway and the Netherlands but Bank of England cut the rate by 25 basis points in late December. Third, Q1 has 2 days less than Q4. The net day count effect over the past quarters has been around SEK 20 million to SEK 30 million per day. Finally, in terms of FX, the average rate of the Swedish krona in the quarter has strengthened so far compared to the euro and the sterling pound and weakened slightly against the Norwegian kroner. This should mean a headwind to sequential NII development. As always, when assessing the FX impact on the P&L lines, look at the average FX level in the quarter compared to that in the previous quarter, and take that times the P&L line in local currency in respective segments. Then over to fee and commissions, starting with savings related fees, which account for around 2/3 of the commissions. The development of the daily average stock market indices during the quarter usually tends to be somewhat of a leading indicator for savings related fees. There are, however, of course, several other factors affecting the savings related fees such as level of inflows, mix effects, et cetera. But we can note that the daily average of the stock market indices are actually up somewhat in Q1 compared to Q4 so far. In the savings business, there is a slight take count effect of around SEK 20 million per day. And to remind, there were no performance-related fees in Q4 to bear in mind. And in terms of the other fee lines, we can only refer to the historical seasonal patterns. Moving on to NFT. The NFT is a minor income line, as you know, and has averaged about SEK 500 million to SEK 600 million per quarter over the past few years. However, as seen in the past, it can vary by a few hundred millions in some specific quarters on credit spreads, interest rates or and/or currency rates have been particularly volatile. Over the past few quarters, this over a few quarters, these weeks tend to even out though. The best component of the NFT line is the customer-driven NFT, which is fairly consistent at around SEK 400 million to SEK 500 million per quarter. Then to the cost lines. Just like on the income side, it's fairly easy to get a sense of the FX impact also on the cost side. As mentioned previously, the Swedish krona has generally strengthened, which means slightly lower costs in our foreign home markets in Swedish krona terms, all -- may I please ask everyone to mute. Thank you. In terms of potential Oktogonen provisions, we do not guide, as you know. But as always, we appreciate when you are transparent about your after garner estimate in order to be able to assess the underlying expectations for the staff costs. However, just to note, in Q1, most of the years, the Octagon provision has been more or less equal to the quarterly average of the previous year's final provision. For part of that, we can only refer to historical patterns of the costs in Q1 versus Q4. Credit losses. The only thing we can say is there has been no public disclosures that you might have missed for Q1 regulatory fees. First, in Q4, there was a booking of interest-free deposits at Central Bank of SEK 98 million covering the period until end of June. That will, of course, not reoccur in Q1. Second, from January 1 each year, the risk tax and resolution fund fee are recalibrated -- the resolution fund fee formula suggests a minor increase in Q1, given an increase in total liabilities between 2024 compared to 2023. In terms of the risk tax, the formula has changed somewhat with a high 3%, but a deduction in the base amount. If you do a back of the envelope calculation based on the publicly announced formula, it would suggest a few tens of millions higher level per quarter compared to in 2025, all else equal. Finally, on capital. The reported CET1 ratio in Q4 was 17.6%, which was 285 basis points above the SREP this means that the bank was back within the target range of 100 to 300 basis points above the SREP. We will come back in the report -- in the Q1 report in terms of the dividend anticipation but will not guide on an exact targeted level within the target range since the target ranges of range and not a specific point within the range. And with those final words, we open up for questions.

And I think Andreas, you are first up.

Policy rates have been stable, as you say. But we've seen market rates move quite sharply especially during March. Could you tell us how does the market rate impact your bits and pieces that are rate sensitive I mean it's not all policy fit, then should we then start to see a benefit from that rather in Q2, since it's only in March. Could you just go through the different parts that's sensitive to the different rates, please?

I'm afraid we're going to have to pass on that question. We haven't been explicit in terms of sensitivity to short-term market rates. So I'm going to refer to what I said previously that generally, when there are policy rate or cuts, you do usually see an effect on the transaction account deposit margins. But apart from that, I'm afraid we're going to have to pass.

But just to understand, I mean, if you take the equity capital, around SEK 200 billion, I would assume that that's invested in the short end of the curve. So it should be impacted by market rates. Is that not the right way of thinking?

Again, Andreas, I'm afraid you're not going to get an explicit answer from us. You can slice both sides of the assets and liability side in different ways and draw different conclusions. But -- what your lentis 1 way of looking at things. But I'm afraid I'm not going to be able to provide more more information to that. All right. Markus, you're up next.

Yes. I was just wondering 2 things then. First of all, in terms of you had VAT recoveries in Q4, whether you said anything for which years those were and whether you have applied for anything more that could come into Q1? And secondly, on capital, is the most reasonable expectations we can do is that you keep the management offering intact on accrual into Q1?

Well, in terms of the VAT, what we said that there might be some more coming. We won't explicit on the exact year. But what we said, I think it was in the analyst call -- sorry, in the conference call in conjunction with the press conference, we said that there might be more coming ahead, but it's too premature to speak about the amount and when and so on. So we're going to have to come back on that. I'm sorry, could you just repeat your second question again?

Just on dividend accrual. Is it fair to assume that you, like last year, keep the same management offer then the accrual is derived from that? Again, as I mentioned, in Q1, we will come back when it comes to the anticipated level, and you will get more information then. But at this time, I mean the last thing we've said is that we are at 285 basis points about the SREP. And I mean, if you assume something else for Q1 and then need to recalibrate that assumption when you get the numbers, well, that might be the case. But we will come back in terms of the anticipation in Q1. I think, Sophie, you're up next.

No, thank you. Yes, actually, I got what I was going to ask. Sorry about that. Sorry.

No worries. Then we move over to Namita.

Peter. Just on the wholesale funding side. Sorry, I joined the call a bit late, so sorry if you already talked about this. But have there been any noticeable maturities In the quarter? And how is the issuance versus the maturities been.

Well, this is Andre. I don't remember the exact figure of maturities during the quarter, but it's very evident if you look in the debt IR presentation to look at that. And when it comes to to our the funding activities, we have done 2 senior trades on in [indiscernible] and 1 in i.e., we have exactly followed our internal funding plan. So nothing from that respect, it deviates from other quarters in any way. All right. The only hand I see raise now is Sophie still. You might have a follow-up to the other -- sorry.

Yes. I was just wondering about the single residential fund fee. I know you said that going to be slightly up year-on-year. But do you have any visibility on rendering resolution fund fee could disappear in Sweden?

No. Our guess is just as good as yours, unfortunately. It's a Swedish National Debt Office that typically publishes a level where the front stands. So you will get that information at the same time as we will. So unfortunately, we have no more insights on.

And what about if you have a change of government in Sweden, do you think there is a risk that we could potentially see an additional banking tax?

Again, I'm afraid it's anyone's guess really. It's too premature to also address that question, I think. So have to pass on that 1 as well, unfortunately. That's fine. Thank you. All right. I don't see any raised hands at the moment. I'll give it a few more moments. If anyone want to ask a final question. Well, that does not seem to be the case. So thank you, everyone, for listening in. And if you have any follow-up questions, so of course, know where to find us. We wish you all a very good day. Thank you very much.