Swedbank AB (publ) (SWEDA) Earnings Call Transcript & Summary

Hello. Thank you all for joining. It's 2:00 here in Stockholm. So let's kick off. Welcome to our Q2 2026 pre-close call. I'm Maria Caneman, I'm Head of Investor Relations here at Swedbank. And as usual, this will be an audio-only Teams call, where you'll be able to unmute yourselves during the Q&A session. We would kindly ask you to remain muted unless you're about to ask a question. And of course, as per usual, this call is being recorded, and the script used for this call will be published on the Investor Relations website after the call. So we will focus on events during the second quarter, relevant public data and macro trends in our markets. We'll go through macro indicators, P&L statements, some comments on capital. We would like to highlight that we will only answer questions related to already disclosed information as well as publicly available data. To start off, there is one more day in this quarter compared to the previous one, resulting in a positive impact on NII and NCI. So looking at average day count effects, this results in around SEK 60 million per day on NII and around SEK 20 million per day on AUM. Starting on macro trends, FX movements, and this is as of end of last week, June 12. The Swedish krona had appreciated from end of March versus the dollar and the euro. On average, quarter-to-date compared to last quarter, the krona depreciated versus both the U.S. dollar and the euro. For P&L, the average quarter-on-quarter development is the relevant number to track. Riksbank policy rate was left unchanged at 1.75%, and the ECB raised its policy rate to 2.25% on June 11. As of June 12, the 3-month STIBOR rate had decreased by 15 basis points, while the 6-month Euribor rate was up by 16 basis points. On average, quarter-to-date compared to previous quarter, the 3-month STIBOR was 5 basis points higher, while the 6-month Euribor increased by 30 basis points. So turning to NII, and first of all, a reminder from what our CFO said in Q1. Wholesale funding costs improved slightly during the first quarter, but as STIBOR moved upwards towards the end of the quarter, we expect to see the effect of this on our funding in the second quarter. Let's continue with NII in Sweden, where mortgage list prices in Sweden were lowered on May 29 by 5 to 15 basis points, of which 3-month fixings were lowered by 5 basis points. This follows increases in the first quarter by 15 to 25 basis points, of which interest rates on 3-month fixings were raised by 15 basis points. This information can be found on our website, and we would encourage you to visit continuously the website as we show most of our offering there and where you can find the most up-to-date information. Actual mortgage prices increased by 8 basis points on 3-month fixings in the first 2 months of the quarter following an increase of 8 basis points in the previous quarter. On deposits in Sweden, rates have been unchanged as of June 12, and we paid 0% on transaction accounts as well as on e-savings accounts. So turning to the mortgage volumes and public statistics, Swedbank's volumes in own channels in April, excluding savings banks on our balance sheet, but including Stabelo, increased by SEK 2.8 billion, corresponding to a market share of around 23.2%. Swedbank's corporate lending grew in April by SEK 6.5 billion, corresponding to a market share of 29%. Retail deposits in Sweden grew in April by SEK 37 billion, and Swedbank accounted for SEK 7.5 billion of this, corresponding to a market share of around 20%. Corporate deposits in Sweden decreased in April by SEK 38 billion, of which SEK 3.5 billion is Swedbank. So now turning to the Baltics. And according to ECB data, total Swedbank lending in the Baltics in April increased by 13.9% year-on-year, private lending by 12.6% and corporate lending by 15.4%. Total Swedbank deposits in the Baltics in April increased by 12.7% year-on-year. Private deposits grew by 13.5% and corporate deposits by 11.6%. Regarding retail deposit rates as of 12th of June, we paid 0% in interest on transaction accounts, while e-savings accounts paid between 1.25% in Lithuania and 1.75% in Latvia and Estonia. So that's unchanged from the fourth quarter, and rates on all other accounts have so far been kept unchanged compared to the end of the first quarter. Continuing on net commission income. First of all, a kind reminder that asset management commissions are generated by daily fees. And looking at average values of the stock market development, which impact our asset management fees up to 12th of June and compared to the average of the first quarter, the Swedish stock market increased by 1.8%, while the U.S. and European stock markets increased by 5.9% and 1.2%, respectively. And also here, reminding you of the FX component where the Swedish krona by 12th June had depreciated against the U.S. dollar on average compared to the first quarter, and this should be considered when assessing the U.S. stock market changes. According to statistics from the Swedish Investment Fund Association, Swedish mutual fund market had net inflows during April and May of approximately SEK 47 billion, compared to an inflow of approximately SEK 4 billion in the first quarter. There were outflows in actively managed equity funds, while index funds and fixed income funds saw inflows. Swedbank Robur market share was 21.8% at the end of May 2026. Regarding card commissions, card activity in the second quarter is normally seasonally higher -- sorry, in the second quarter is normally seasonally higher than in the first quarter. And let me remind you what our CFO has pointed out in recent quarters that commission expenses continues to be higher due to the large investments that are needed to transform the Swedish payment system. Continuing to expenses. Please keep in mind the usual seasonal increase in costs in the second quarter, and this is stemming from annual salary costs, among other things. Our 2026 cost guidance is around SEK 27.5 billion, and that is excluding the SEK 1.3 billion extraordinary cost that we announced last quarter. We then also said that around SEK 800 million of provisions will be booked now in the second quarter and the remaining balance of around SEK 500 million. That's mostly direct costs that will be spread over 2026. On bank taxes, following the Riksbank decision on 6th of May regarding the interest-free reserve requirement, an annual interest cost will be booked upfront now in Q2, similar to what we did end of last year. And for this time, it's 12 months, and it will be approximately SEK 100 million. More on bank taxes, we continue to accrue 100% of the bank tax in Latvia, so that's around EUR 70 million per quarter. And if any threshold for discounts will be reached, this will be booked as reversals in Q4. So this is very similar to how it was done last year. Asset quality in Q1, as you know, the post-model adjustment was increased, stood at SEK 268 million by the end of the quarter. And in regards to capital, just a reminder that our balance sheet is affected by end-of-period FX rates, mainly via RWAs from the Baltics that are denominated in euro. And as mentioned earlier, by 12th June, the Swedish krona had weakened somewhat versus the euro. And then some additional items. As we talked about before, the Lithuanian pension reform is ongoing. And if you recall, we had corporate deposits that were a little bit elevated in the Baltics in Q1 due to this. So this money has now been transferred to individual accounts, both to Swedbank's customers and others, so that you should expect to see corporate deposits normalize and instead some increase in private deposits. And as a result of the expanded mandate of the business areas earlier this year, subsidiaries have, as of June 1, been organizationally moved into the business areas. So that means Swedbank Insurance and Swedbank Robur have both moved to Premium and Private Banking, and the business area has subsequently changed its name to Wealth Management. Swedbank Hypotek moved into Swedish Banking and Swedbank Pay into Corporates and Institutions. Overall, these changes do not impact the aggregated P&L lines as all income and costs already were allocated out to the business areas. But you will, of course, see allocated costs become direct costs. And of course, FTE numbers move around, numbers will be restated. And as we said in Q1, we intend to sell PayEx, and it was during Q2 moved to segment reporting, meaning that P&L is now reported in group functions instead of being allocated out to business areas. So just a reminder of what the numbers look like for the full year 2025, it was around SEK 400 million of income and the rough split would be 30% NII, 50% NCI, and the remainder other income and around SEK 400 million of costs. So previously, PayEx was allocated out to business areas, and it was mainly Corporates and Institutions, around 80% of it, and the remainder in Swedish Banking. That was all for the pre-close call. I'll pause for a moment to see if there are any questions.

And we have one from Magnus. I need to allow you to unmute. We can't hear you Magnus. You should be able to unmute.

Okay. Can you hear me now?

It doesn't seem to be working. Can I try with the next in line then, Sofie from Goldman Sachs. Are you able to unmute yourself?

Here is Sofie, can you hear me?

Okay. It might have been on my end. Sorry, I can now hear you. Okay. Sorry. Let's go back. I think it was setting on my side. So please go ahead, Magnus. I think your sound is fine now.

Is it fine now?

Yes, it's right.

Good. First of all, if you have any news about the potential increase in corporate IRB risk weights in the Baltics that you mentioned in Q1 could be another SEK 20 billion? And secondly, just -- I don't recall if you mentioned the day impact in net commission income in Q2. Thanks.

Sure. So first of all, you have not missed any update on the IRB side. We will provide those as soon as we have any. And secondly, on day effect, it's around SEK 20 million a day affecting AUM. And now we try again, Sofie.

So here is Sofie from Goldman. So I was also having 2 questions. The first one was on rate sensitivity. I know you mentioned that in Sweden, we should expect potentially higher funding costs. But how should we think about the rate sensitivity in the Baltics given that Euribor 6 months, as you mentioned, is up 30 basis points quarter-on-quarter. So if you could just talk us through the mechanics around the net interest income in the Baltics? And then my second question would be on VAT refunds. Last quarter, you didn't get any VAT refunds, but should we expect any VAT refunds in Q2?

Thank you. Let's take them in order. So first of all, on NII sensitivity. Last quarter, we added some additional details specifically around Baltics and the rate sensitivity in our presentation. So that, if I remember correctly, Slide 22 is in the appendix, where we've broken out exactly how much is what market rate connected. So of course, there is a higher sensitivity there given the larger deposit base. But please take a look at the numbers there, and happy to take detailed questions later then.

But sorry to interrupt, but is it then fair to assume that like if you use that slide, whatever number you get that it's kind of going to be immediately repriced. So we should already expect kind of the rate sensitivity to come through in Q2?

So yes, I guess that is the simple answer. But it depends on which deposits you are looking at, of course, some reprice immediately and some take a little bit longer. On VAT then, your question, if we have had any further refunds there, or we haven't said anything, but we have now submitted the applications for the final ones, which is the year 2024 and the first quarter 2025. We don't know when we will hear back, but the applications have been submitted. And next in line would be Namita.

I can probably look it up myself, but just quickly on the deposit side, on the Baltics on the retail side, have there been any changes to deposit rates since the ECB raised rates last week?

No. On deposit rates, I mean, in the Baltics, we pay 0% on transaction accounts. We paid some money in savings accounts, and that is unchanged so far in this quarter. So not yet is the question -- is the answer.

Okay. Cool. And then just another question. You talked about the corporate deposits being elevated in the first quarter in Lithuania and now some of it will move to the private deposits in Q2. Have you said how elevated the corporate deposits were in the first quarter of '26 for Lithuania?

We haven't specified specifically what was related to Lithuanian pension reform, but we had, if I remember correctly, around SEK 5 billion higher in Q1. So they were partly elevated due to this. And so what we mean to say by this is that you will see some traffic between there moving into private deposits, but it's difficult to say exactly how much and what individuals would do with this money that they receive. Jacob Kruse, please go ahead.

So just, I guess, 2 questions. Firstly, on your Swedish savings accounts, I think you have an account which pays about 50 basis points where you have a delayed withdrawal process. I just wanted to check, is that a relatively new product? And what kind of volumes are you looking at there if you -- or if you could say anything about sort of the take-up on that one? And then my second question would just be on the negotiated mortgage rates. It looks to me like you've managed to widen the spread a little bit versus 3-month STIBOR. But I guess it's hard for me to know what's going on inside your bank. So just any -- has there been a little bit of an improvement in pricing or growth that makes that market a bit better for you?

Thank you. So on the deposit question there, I don't have the numbers for that specifically. If I remember correctly, several banks launched this type of product last year, but I have to get back to you if we have any data on how much we have on those accounts. And secondly, I mean, we did see a slight improvement in Q1 in terms of net interest margin as a whole. Mortgage margins, I think you can tell from the markets has been looking to stabilize a little bit, but it's too early to tell. I mean it's a very competitive market. That continues to be the case. And I think you can see that from how the banks are also acting and reacting to price changes. Let's see -- are there old hands or new hands? Because I have Namita and Jacob, but maybe they were the same questions?

Can I ask a quick one?

Sure.

On PayEx, sorry, I'm a bit confused. What's going on? Is it getting discontinued?

So no. The thing is we have said that we will sell PayEx. It will never qualify as discontinued operations. It's too small. So we have said that we will sell it. We will, as a preparation of the sale, move it to segment reporting. So instead of being allocated out to the business areas, it moves and will be reported under group functions. And that's a preparatory step towards the sale. And then at some point down the line, when we approach a sale, we -- it may qualify as held for sale, so same as for Entercard. But that's a balance sheet activity. It doesn't affect P&L until it finally gets sold and out of our books.

May I have another question as well, if possible?

Yes, please go ahead.

So you may not have much here, but I just wanted to ask, the Swedish elections are coming up in September. I know the Social Democrats were talking about additional bank taxes in their shadow budget last year. Do you have any -- is there any live debate there about that topic? And I guess, in particular, how it would relate to existing bank taxes and resolution fees and these kind of things, if it's just additive or if this is sort of a change in composition?

Yes. So I'm afraid I probably won't be able to answer the question much. But yes, I mean, you're absolutely right. There is a lot of debate around this going into the elections. There have been all sorts of more or less wild propositions for new bank tax and also for a change of the existing one. So it's definitely a case for the elections. I think it's interesting that it's at the same time also a question, the legality of the existing one is questioned by the EU at the same time. So we have no idea where this is going, but it will, for sure, be a hot topic in the election. And I think, Sofie, are you next in line, I believe.

So just on Entercard, the sale of the consumer book, is there any update on that?

Yes. No, you haven't missed anything. There has been no update. So as soon as we have one, we will share it.

Okay. And should we expect something potentially later this year or it's further out?

We haven't said anything about the timing as such. But I mean, we're very much working on it as we classified it as held for sale now in Q1. Maybe I can just come back to the question on the savings accounts that we have a page in fact book, was it Page 40, I believe it was, where you see the balances on the different deposits account. It doesn't give you exactly what you were looking for in terms of those delayed accounts with a delay effect on them, but it just gives you a more detailed split on the different savings accounts, if that's helpful. Good. I believe there are no further questions. So by that, we would like to round off this call. Note that we will go into silent period on July 9, and our Q2 report will be released Friday, 17th of July, at 7:00 CET in the morning, and the analyst call will be at 9:00 CET. Thank you so much for joining. Enjoy the rest of your day.