Swedbank AB (publ) ($SWEDA)

Good morning. Thank you for dialing in this morning. I am Maria Caneman, Head of Investor Relations here at Swedbank, and it's my pleasure to welcome you to our first quarter results presentation. I am joined today by our CEO, Jens Henriksson; and our CFO, Jon Lidefelt. Jens and Jon will start with the presentation, and then there will be an opportunity to ask questions. With that, over to you, Jens.

Thank you, Maria. Swedbank has started 2026 by once again delivering a stable result in uncertain times. The resilience of the global economy is once again tested with increasing geopolitical tensions and rising energy prices. The IMF revised down global growth slightly the other week. But they warn that the effects on the world economy could be significantly worse if the conflict in the Middle East is prolonged or escalates. The bank's 4 home markets continue to perform well, especially relative to other countries. Our economists estimate that the Swedish economy will grow by around 2% this year, and the same applies for Estonia and Latvia. The Lithuanian economy is expected to continue to grow by around 3% in 2026. In our home markets, growth is driven by both private consumption and large public investments. In these uncertain times, Swedbank is once again delivering stable results. The quarter was characterized by increased productivity. New regulations for Swedish mortgages also contributed to more customer interactions. Turbulence in the equity markets led to higher activity in the savings area. Despite the fact that demand for corporate credit is somewhat muted to the global turmoil, the bank has done more business in both the Baltics and in Sweden. In total, we achieved a profit of SEK 7.3 billion in the first quarter of 2026. The return on equity is way down by the fact that our dividend was not paid out until the end of March and therefore, amounted to 13.3%. The cost-to-income ratio was 0.4. Credit quality is solid. Credit impairments amounted to SEK 164 million. Our CET1 capital buffer amounts to 2.7 percentage points. Swedbank has a strong capital and liquidity position. We want to make our customers' financial lives easier. And just under a year ago, the 4 business area heads, our CFO, Jon, and I presented our plan, Swedbank 15/27. The plan has a clear business and customer focus, will strengthen our customer tractions, grow our volumes and continue to increase efficiency. When presenting the last quarterly report, I said that the business area would be given more responsibility and influence. This is now in place. The business area has been given full responsibility for meeting customer needs. Business development has moved closer to customers, and large portions of our IT are centralized. This will increase our pace and strengthen our ability to execute. I also announced that we would clarify our plan for card and consumer credit following the acquisition of Entercard, and this plan has 3 parts. One, we will grow our card business with existing customers of Swedbank and with our partners. Entercard continues to operate a card business under its own brand. Two, we will create a unified consumer credit business based on Swedbank's values and credit standards. Everything is done with Swedbank as a part -- within Swedbank as a part of our offering to existing customers. Three, we will realize synergies in both card issuance and consumer credit. To realize the value from the organizational changes I talked about and from the Entercard plan, we are running a program that will reduce long-term annual cost by around SEK 1 billion. To do this, one-off cost of SEK 1.3 billion will be added during the year. It will cover transitional costs, competence shifts and integration. As a consequence, the number of employees will decrease from 17,350 today to 16,800 at the end of 2027. In addition, we intend to divest PayEx, which today primarily works with various types of invoice financing. This will increase their opportunities to grow while reducing capital that is tied up in the bank. All of this is in line with our plan, Swedbank 15/27, and contributes to more business-oriented, focused and efficient Swedbank. The mortgage market in Sweden continues to be characterized by a somewhat muted customer activity and intense competition. To grow at least at the same rate as the market, several actions have been taken. Availability has increased significantly. We are faster and more business focused. In November last year, we finalized the acquisition of the digital mortgage challenger, Stabelo, they complement our offering well. As a result, our market share of new mortgages in Sweden through our own channels was almost 17% in the first 2 months of the quarter. Since Stabelo was acquired, it has grown steadily and contributed with over 3 percentage points to this. Swedbank's mortgage portfolio also grew in Estonia, Latvia and Lithuania during the quarter. Activity in the housing market remains high, supported by rising real wages. At the end of the quarter, the savings area was affected by increased market turbulence. In these times, we place even greater priority on being available and providing advice and support to our customers. Net inflows to Swedbank Robur were SEK 4 billion. The number of customers who choose our premium concepts is increasing. Growth was particularly high for customers in need of personal qualified investment advice. The bank's corporate business continue to develop at a steady place. As a result of renewed and increased uncertainty, we saw a cautious attitude among companies at the end of the quarter. Total lending volumes increased by SEK 9 billion. In Sweden, growth mainly came from large customers in the real estate sector. In the Baltic countries, lending to corporates increased by 2%, and the energy sector accounted for a large part of the increase. In our corporate business, we continue to focus on customer value and productivity. Customer satisfaction among our large corporate customers has increased. Let me also, as always, say a few words about Swedbank's societal engagement. Children and young people are particularly important in our work to promote financial literacy. Every month, we educate tens of thousands of school children in personal finance and we distribute the magazine, Lyckoslanten. And those of you who are not in Sweden now had a pleasure to see the front page of the new edition from that coming out soon on the right-hand side on the other -- old one on the left-hand side. It is Sweden's largest youth magazine and is distributed in schools to all children in grades 4, 5 and 6. And Lyckoslanten celebrates its 100th anniversary this year. Since 1926, it has been important for increasing young people's understanding of money and savings, something we are both happy and proud of. And with that, Jon, the floor is yours.

Thank you, Jens. The quarter was stable with good business momentum despite the geopolitical uncertainty. Return on equity was 13.3%, weighed down by the higher equity base as the dividend payout was as usual in the end of the quarter. The cost/income ratio was 0.4, and the CET1 buffer was around 270 basis points. Swedbank has a strong capital and liquidity position. Lending volumes increased by 1% in the quarter. In Sweden, mortgage volumes sold through our own channels increased by SEK 4 billion. Stabelo now grows at good pace, clearly showing that Swedbank's strong balance sheet is enabling growth. The positive trend in corporate and institutions continued with SEK 6 billion of loan growth. In Baltic Banking, growth momentum continues. Volume growth in mortgages was strong, adding SEK 4 billion. Corporate loan demand remained high across sectors with loan growth of SEK 3 billion. On group level, you now see that Entercard's consumer lending portfolio is reported as held for sale. Deposits continued its strong trend during the quarter, driven primarily by Baltic Banking, with good growth mainly in the corporate deposits. The pension reform in Lithuania has temporarily boosted corporate deposits by around SEK 3 billion. These are transferred to individuals during the second quarter. In Sweden, private and corporate deposits were stable. Net interest income increased by 3% compared with the previous quarter. As last year's rate cuts were rolled in at year-end, we now have the full quarterly NII effect. The impact was offset by solid underlying loan growth. Furthermore, the full quarter effect of Entercard added SEK 481 million compared to last quarter. FX and 2 fewer days had a negative impact of SEK 192 million. Wholesale funding costs improved mainly due to the lower STIBOR rate in the beginning of the quarter. Changes in mortgage rates typically fully feed through to our lending with a lag of around 3 months in Sweden and 6 months in the Baltics. Our rate sensitivity dynamics is as expected with the impact on the funding side materializing ahead of the impact on the asset side. Net commission income decreased by 2% compared to the fourth quarter, which was boosted by one-offs. The decrease was mainly in securities and corporate finance as they normalized following the positive one-off effects we had in the fourth quarter. Asset management commissions benefited from strong performance and added a net inflow of SEK 4 billion, offset by day count effect and FX. Total assets under management was SEK 2.6 trillion. Robur is the largest fund manager in Sweden and in the Baltics. Asset management commissions contributed with around SEK 2 billion to our total NCI. Payments income increased and card commissions were higher due to the full quarter effect from Entercard, adding income SEK 67 million. As usual, card commissions were seasonally lower. Insurance income was boosted by annual profit sharing from insurance partner companies of SEK 49 million. Net gains and losses decreased as we had exceptionally large treasury revaluation effects in the fourth quarter. Business related income remained, however, strong driven by client trading activity. The treasury result was impacted by revaluation effects in derivatives, offset by positive evaluations in equity holdings. Other income decreased by 20% in the quarter, mainly driven by higher claims from the insurance business in Baltic Banking. Results from associated companies were lower, mainly due to P27. As a reminder here, our collaboration with the savings banks include cost sharing for IT development and administrative services. The savings banks' share of these costs is included in Swedbank's total expenses with a corresponding compensation recognized under other income. Costs in the first quarter were higher compared to the previous quarter, but Q4 included one-off effects of around SEK 1 billion. So adjusted for that, costs were seasonally lower. Entercard full quarter impact added SEK 241 million compared to the previous quarter. Asset quality remains solid. Total credit impairments for the quarter amounted to SEK 164 million. Macro scenarios have been updated, but as the heightened uncertainty is difficult to fully capture in our models, we have added post model adjustments, which now stands at SEK 268 million. Individual assessment increased mainly due to a few corporate exposures, but we also saw increased repayments. Entercard added SEK 48 million. Overall, our asset quality is solid, and I'm comfortable with our strict credit origination standards and the strong collateralization of our lending portfolio. Our CET1 capital ratio at quarter end was 17.5%, corresponding to a buffer of around 270 basis points above regulatory requirements. In the quarter, we have taken the decision to add an Article 3 add-on of approximately SEK 11 billion. This relates to our IRB application for retail exposures in Baltic Banking and is a self-imposed capital add-on, which will remain until the ECB has reviewed and we have implemented the updated models. With the reorganization implemented during Q1, we have realigned responsibilities and resources to sharpen customer focus and improve speed and execution. We have also taken further steps to transform and streamline our operating model for card issuing, card acquiring and unsecured lending to strengthen business focus and capture synergies across the group. Areas such as IT and operations will be consolidated to enable synergies, while Entercard and Swedbank Pay will continue to act as focused distributors of non-Swedbank branded products. As communicated previous quarter, the consumer finance back book of Entercard will be sold, and you see it reported as held for sale in the balance sheet. We continue to focus on efficiency. And in 2026, we will have extraordinary costs of around SEK 1.3 billion. The majority around SEK 800 million will be booked in the second quarter, and the rest during the remainder of the year. Our cost guidance of SEK 27.5 billion is excluding the extraordinary cost. In 2027, we will continue to have an elevated investment level related to this. But as the synergies will start to materialize, I expect them to offset the additional costs in 2027. We also expect an FTE level of around 16,800 by the end of 2027. At the end of 2028, the synergies will fully materialize, resulting in a lower run rate of SEK 1 billion. On top of this, PayEx will be divested. Recent years, we have restructured and streamlined the company, and a few months ago, it was split into 2 legal -- separate legal entities, Swedbank Pay and PayEx. The new PayEx consists of mainly invoice servicing and tailor-made financing, products that meaningfully complement our offering but are best sourced through a third-party provider. It is not our core business, and we believe PayEx can realize its potential better with another owner. The financial effect of this, you can find specified in the appendix of the presentation. Divesting pay will also create room to invest more in our core business, creating further shareholder value. We expect the CET1 release of approximately 15 to 25 basis points, stemming mainly from the divestment of Entercard's consumer finance back book. To conclude, our actions combined will continue to support our strong profitability and market-leading cost efficiency. Back to you, Jens.

Let me now summarize. We live in uncertain times. In these times, Swedbank once again delivered a stable result with a return on equity of 13.3%. Our credit quality is strong. Swedbank has a strong capital liquidity position, and we continue to deliver according to our plan, Swedbank 15/27, and we are continuously improving the bank by strengthening our customer interactions, growing our volumes and increasing efficiency. Our customers' future is our focus. And with that, Back to you, Maria.

We will now begin the Q&A session. I'd like to start with a kind reminder to please limit yourselves to 2 questions per turn. Now operator, please go ahead.

[Operator Instructions] The first question comes from the line of Ekstedt, Martin with Handelsbanken.

Can you hear me?

Yes, we can.

Excellent. So first, I wanted to ask about mortgages. We saw mortgage growth on a systemic level but was published actually today by Statistics Sweden just an hour ago or so. And growth on a systemic level then crept up above 3% year-on-year in March. You improved your share of less new lending, but you're still too -- you're well below your back book market share. I know you just look at your own channels in terms of market share, though. But I wanted to check if policy rate now -- the policy rate, sorry, now potentially come up again to go against inflation. How do you see further growth in the mortgage sector playing out from here? Are there any particular initiatives on your side beyond Stabelo to further enhance your share of that growth? And then lastly, please remind us of the state of your work with your call center to be able to spend the incoming calls to the branch network when mortgage volumes pick up? Are these now all up and running?

Well, thank you for very good questions. And let me take the overall view first. So as you know, we are the market leaders in all our 4 home markets. And sometimes, we tend to forget to talk about how good we are in Estonia, Latvia and Lithuania, where we continue to see strong growth in volumes. And during the quarter, volumes increased by SEK 3 billion, excluding FX. Now if you look on the Swedish housing market, I dare to say it's still somewhat muted. The positive effects of new mortgage rules and improved domestic economy, economic sentiment are almost fully mitigated by geopolitics and energy prices. And if you look on our mortgage volumes, you described it right. It has increased. But during 2024, we captured a meager 5% on the front book market share sold for own channels. That doubled to 10% in 2025, and I'm sorry, I haven't seen the numbers yet for March because they came this morning and I've been focused in presenting the results. But in January and February, we had a market share of above 13%. Now on top of this, you should see Stabelo's market share has gone from negative before we acquired it to over 3% after we acquired it. All in all, almost 17% for our own channels. So rightfully said, still slightly below our back book of 18%, but hard work and a strong customer focus will take us there. Be available, be fast, be more proactive, and that is what we are. Now when you see the numbers from statistics Sweden this morning, and I'm sorry, once again, I haven't seen them. Do not forget that Stabelo is not on that list. The final thing I want to answer is on the phone system. Yes, that system is fully operational. And what we did during 2025 was that we changed the opening hours for walk-ins. And that meant that the people working in the local branches could take the phone and do meet the customers through the phone. And that is one reason why with lower number of FTEs working in the Swedish business area are answering calls, and I think the numbers I saw were that during the quarter, we've been around 90% of the calls answered within 3 minutes. And if you look on the number of minutes, people have to wait in line at offices, I think it's somewhere around 80% are being sort of met the customer representative within 20 minutes. So we are faster, we are more agile, more productivity. But we will deliver more. And it's a strong focus on this. And let me look at the numbers and get back to you because we want to grow.

The next question comes from the line of Andersson, Magnus from ABG.

Yes. Just on the reorganization here. It's always a bit difficult for us with these programs with the large upfront cost and effects materializing over a number of years. So I was just wondering if you could share with us something about how we should think around cost growth net then 2027, 2028 or yours or anything there? And also related to this, is this program an increased ambition for -- from you, guys? Or is it just measures you have to take in order to stay below a 40% cost-to-income ratio? And on cost also, head count reduction, if you can say anything about the pace there of getting down to 16,800 at the end of '27.

That's a lot of questions. I'll do sort of -- I'll answer first, and I'll give the floor to Jon, who can sort of cover what I missed. The first thing is you need to start in 15/27. I talked about SGI, I'm not going to repeat it. And that plan was presented by our business area heads, and that was no coincidence because the plan has a clear business and customer focus. And then what we did during the quarter was we've taken important steps in strengthening the role of the business areas. That means that business development has moved closer to the customers. Most of the products are now in the business area and IT has been centralized. Now this will increase speed, agility and delivery. And then by clarifying roles and responsibility, working more efficiently, we see that we can take away double work. We can reduce the number of -- or sort of shrink the processes, and that is what we are using within this program we talked about. If you look forward, we today said that we go from 17,350 to 16,800. And Jon, do you want to follow up more?

Yes. Thank you, Magnus. First of all, it's definitely an increased ambition. We have always work to do with efficiency, and we constantly work with this. This is an extraordinary work, and hence, we also take an extraordinary cost for it. And let me also be clear that the divestment of PayEx that we have talked about, that is outside or on top, depending on how we want to put it on this program. It's also so that we already before said that we're going to sell the back book credit -- consumer credits in Entercard because it was on a different risk level than what Swedbank would like to stand for. That is also sort of on top of this or outside of this in that sense. So what we're now doing is that as we have done, the reorganization implemented that, that has made it easier to some extent to work with efficiencies even though the reorganization was mainly focused on strengthening the business, as Jens talked about before, but it has also made it easier. Then we have fully integrated or fully bought, I should say, acquired Entercard, and we have overlaps in terms of IT systems. We have overlaps in terms of back office and other types of operations. All of this makes it possible for us now to put the structural work to realize the synergies that we highlight based on the reorganization. And based on that, we then have operations in different parts. So the extra costs of SEK 1.3 billion that we saved this year, they are related to that we have double IT systems, i.e., we have double licenses, but then we need to consolidate those IT systems. They're also related to premises and other things that we will have less use of when we're fewer people. And, of course, related to severance pay as we reduce the number of FTEs. This year, we will not have any material synergies from this. But next year, we will start to materialize the synergies. So even if we will continue with the investment during next year to integrate IT systems and so forth, those extra costs will be met by the synergies. And from '28, we will see a large portion of these synergies. And when we leave '28, we will have a SEK 1 billion lower run rate compared to what we would have had if we don't do this program. So then as you know, we will come back in conjunction to the Q4 report and guide you on the costs for next year. But I think I've given you sort of the components of that so that you can make your own judgment of it.

Yes. Okay. So what you're saying about '27 is really that the increased investments should be met by synergies, so nothing in addition to kind of normal cost growth?

Not from this program, no. The extra additional investments for integrating IT systems next year will be met by the synergies that start to materialize from the work that we do this year. Yes.

And the pace of the head count reduction until the end of '27, is it mainly a '27 thing or?

Yes. I mean it will start this year. But we said that when we end the next year, we will be then 16,800, excluding PayEx to be very clear then. And you can see the effects of PayEx and so on in the appendix of the presentation. But that is on top of this SEK 1.3 billion program.

The next question comes from the line of Hakansson, Andreas with SEB. So first on the Baltic IRB that you took the increase in your risk-weighted assets. And you said that over time, you would get benefits that would offset it. Could you tell us a little bit about the timing? Do you have any visibility when you're going to get those risk-weighted assets down again? That's my first question.

Thank you, Andreas. I mean what we have said before, if we look at the total IRB journey that both for Baltics and Sweden, it will be positive when we come through it. But then depending on sort of the order of things, it might go a bit up and down as we come to the end state. But when we are at end state, we expect a positive impact of it. When it comes to Baltics, we have then been in a dialogue with ECB. And it's been clear to us that we need to do some adjustments to our application and that, that will then prolong the process. And as a consequence of that, we have taken the decision to self impose an Article 3 add-on for that. The duration, it's hard to say really since it's not fully in our hands, it's also in the dialogue with ECB. But it will take years before we are fully through with Baltics and with the Swedish part of the IRB application, then we expect to see different models to be approved, at least on the Swedish side during the coming years.

Okay. That's fine. Then a little bit on the Entercard divestment. You said that you're selling, what is it, SEK 7 billion gross. I think in the balance sheet, your held for sale is a little bit smaller than that. And the NII from that is around SEK 600 million, right? But could you tell us how much cost savings are going to come through? Because I imagine, you need to reduce costs in Entercard if you're going to reduce your loan book by that much.

Yes. I mean just selling it will not by itself reduce cost, but let me come back to that. The [ SEK 7 million ] is the net figure. The gross figure is larger. But if you recall what we said when we -- in the Q4 presentation that we have taken extra provisions due to the higher risk level in the Entercard back office -- in back book portfolio. So the SEK 7 billion is the net value, not the gross value, just to be clear, the gross value is SEK 11 billion of the portfolio that we are selling. The synergies, you're right. I mean, as both Jens and I said, we are going to integrate future going forward. We're only going to have consumer finance business in Swedbank AB. Today, we have it both in Swedbank AB and in Entercard. So this synergies from this is part of this program that we have talked about, part of making sure that we do not duplicate IT systems nor for cards or for consumer finance, that we do not have duplicate sort of operations around rather cards or consumer finance. I will not split this program up, but on total level for everything, which then includes the consumer finance operations, it is SEK 1.3 billion this year and then a lower cost of SEK 1 billion as we leave 2028.

I can follow up then to just say that when we talked about Entercard, there was 3 parts. First, we want to grow our card business in Swedbank. Entercard will continue as a smaller and sales-focused company with a card business under its own brand. Two, within Swedbank, we will create a center of excellence for all our consumer loans based on our values and credit standards as a part of offerings to our customers. And three, we will realize the value of synergies in both card issuance and consumer credit. So that's the plan I talked about.

Good. Just to understand, didn't you say before that the 16,800 excluded PayEx, but it also exclude the potential savings from Entercard?

No. The FTEs include Entercard, but not PayEx. What I tried to say that maybe I was unclear was that, I mean, just selling the portfolio itself will not create much savings since we still will sit with IT systems and the FTE. So we need to do an additional work on top of it. But maybe I was a bit unclear.

And I will also follow up there. Like half a year ago, we were 16,800. Then came -- Entercard came in. We're now at 17,350. And when we go out from 2027, we will then be back to 16,800.

The next question comes from the line of Saitkulova, Gulnara with Morgan Stanley.

So the first question is a follow-up on the synergies. So you highlighted the potential cost synergies between cards and consumer credit coming from IT systems premises and licenses overlap. Should you view these benefits as primarily cost-driven? Or is there also scope for revenue synergies? And if so, how material could this be? And how do you plan to realize them?

Well, I think I got it. It was a bit bad line here. But the key point is, of course, this will provide us with more opportunities to do business. But that's not something that's calculated in this. What you see are the effects of this cost synergies. But we have plenty of customers within Swedbank that doesn't have credit cards with us. That's an opportunity. We have plenty of customers that use their credit cards, not as much as they do in other places, that's potential. We see a lot of Swedbank customers that have consumer finance loans with other institutes, and we think we can give them a better deal with lower interest rates and because we know their credit history. So we see potential in this, but that's not included in this. That's a business perspective, and that's why we went into this. But then we found quite a lot of cost synergies as well.

And the second question on capital allocation. So you mentioned divesting PayEx could allow you to invest more in the business. Can you remind us your priorities when it comes to the capital allocation? Now you're operating at the upper end of your management buffer, how are you thinking about the capital allocation priorities at this stage? And how do you balance the organic growth in Sweden and the Baltics, particularly given the faster growth in the Baltics against the bolt-on M&As and the shareholder returns?

Thank you. Yes, what I said about PayEx, it will have some positive capital impact from 5 to 10 basis points. But that was not what I meant with that it will create room for investments. I mean we -- as you see, the costs for PayEx, and you see the income for PayEx in the appendix. What I mean is that when we divest this, we will have room and focus both cost room and focus on that we can divert to something that will create better shareholder value. Then when it comes to our capital distribution between Baltics and Sweden, yes, we have excess capital, as we have talked about before. We have a target range of [ 100 to 300, ] and we want to come down to the [ 200 ] going forward when the uncertainties around us that we have talked about before are lower. The dividend policy that we have of 70%, it will give us room to capture good growth both in Baltics and Sweden. So it's calibrated to make sure that we can continue to grow at a good pace with our customers as our markets grow.

The next question comes from the line of McBeath, Nicolas with DNB Carnegie.

I wanted to follow up first on the IRB uptick in the Baltic. So I was wondering, has anything in the discussions with the ECB regarding these models come as a surprise to you? As I think you, last year, seem quite confident that the developments for ECB did not apply to you. Yes. So I'll start with that question.

Yes. Thank you. I cannot fully go into details of this since it's ongoing dialogues that we are having. But it is a difficult journey. And what we have said before that we did take an overhaul of our program some years back and that we have been in the dialogue with them. Now as we have seen that there are adjustments that we need to do with our application, which will somewhat prolong the time line. Then we think it's prudent to take the self-imposed add-ons as we move forward.

All right. But you mentioned, this is for the retail part of the portfolio. But would you expect anything similar also on the corporate book? And if you do, I mean, would you dare to speculate how much that could be? Because as I recall, I think corporate risk weights in the Baltics are relatively high. So would that kind of cap the potential headwind from a similar development on the corporate portfolio?

I cannot, at this point, sort of speculate or comment on the outcome of the review of the corporate models. So we will come back on that when we have more clarity. But just for an answer to your second question, hypothetically, if we would do the same, then it would be SEK 20 billion over the year approximately. But I don't know at this point, it's ongoing dialogue. So we will have to come back when we have come through that.

All right. And then my second question was to follow up on the mortgages. And if you could say anything about what kind of change you've seen on the mortgage demand since the new mortgage rules were implemented in April with [indiscernible]. Have you seen any size on the commitments picking up? And I mean do you have any figures this year there? Or is it more like a case where you've seen some increased interactions that's not necessarily any substantial in changes on the ticket sizes?

Well, thank you. Well, let me say that what we saw was quite an uptick before the rules came in, and we saw that mortgage more came in a bit more. On the discussions with the customers, I would say that it's this balance right now. I mean, in one sense, we expected house prices to go up. But of course, the geopolitical sentiment has affected our customers, and we have not seen as much as maybe you could have expected in the Swedish economy performing so good. So the volumes are okay, and we will continue to fight to reach our target of at least in line with the back book.

The next question is from the line of Prinzell, Emre Prinzell with Nordea.

Emre Prinzell from Nordea. I agree with your earlier statement, Jens. I want to speak more about the Baltics. So regarding the Baltics then. How should we look at the Baltic NII going forward, Jens? I noticed you printed double-digit year-on-year loan growth and 6 months Euribor is up some 30 basis points since the start of the war in the Middle East. So provided euro stays and remains at these levels, shouldn't we see a mechanical repricing of Baltic loans by Q2 and therefore an increase in NII? That's my first question.

Thank you. Yes, you're right. Euribor and also STIBOR and other IBOR rates have come up. What I've said, and that stands when it comes to our sensitivity is that it takes 6 months for a rate change in the Baltics to fully feed through and 3 months in Sweden approximately. So if you look forward from the components here, and we have also in the appendix included sort of the balance sheet and highlighted the various things so that you can do your own estimations. The positive part from -- or that you're on to, yes, Euribor increase, it will if it now stays on these levels, feed through during the coming 6 months on the asset side in the Baltics. On the group level, you will also see, and that also has an impact on Baltics, of course, that highest IBOR rate will impact our funding going forward since that is mainly STIBOR 3 months related after swapping it. But it will also have a positive effect on our asset side in Sweden as we also have increased mortgage rates in the end of the first quarter, and we also have around SEK 500 billion, sorry, of STIBOR or IBOR related lending in C&I. And then also reminding you that the negative effect comes on the funding side before the positive effect of rate hike comes on the asset side. But we are, of course, positively exposed to increased interest rates. But you will all have in the end make your own assumptions on where the rates will stay during this time and also on continued loan growth and on margin development since those will also have a high impact on the NII going forward. And I will not guide you on that. But look in the appendix and there, you have the components to make the assessment.

You also printed some 5% year-on-year growth in corporate lending or within C&I. Can you provide some color, within what segments did we see the lending occur? Is it real estate, SMEs, large corporates? And do you expect Swedish corporate lending demand to continue to these levels? Or should we see a drop in the market demand for credits provided the geopolitical uncertainty?

Well, let me say that overall, loan demand from both corporate and private customers is still somewhat muted. And of course, you see the effects on what's ongoing in the world when it comes to geopolitics. The Baltic demand is stronger. When you look into the corporate loan book, it has increased mainly in the real estate sector in Sweden. In Baltics, it has been broader, but also quite a lot of within the energy sector and infrastructure.

The next question comes from the line of Srivastava, Shrey with Citi.

Only two for me, please. The first one is the FTE reduction target you have for 2027. And presumably, the percentage of FTE you are reducing is actually greater than this, and it's offset by some investment in customer-facing areas of the business. So if you were to frame it in terms of what percentage of equities which are not customer facing that you're cutting versus how much investment you're making in customer-facing areas? How would that look? That's my first.

Okay. Well, I'm not going to give a percentage point, but I will say it will be much more in head offices and sort of back office meetings. I'm not saying that nobody of these persons are facing customers and some of them are working with customer systems. I would say, the majority and even more is on back office and headquarters.

And my second question is on -- it's the same question I ask your peers today. We've seen a lot of coverage about the Swedish banks being now able to, at a certain extent, model the contractual maturity of overnight deposits. In the case that you get some rate hikes this year, would there be a material difference in how you're hedging this time versus the last hiking cycle a few years ago?

Yes. Thank you. I mean, as we have talked about before, we have some NII hedges, but they are immaterial when it comes to our NII development. And the reason for that is that the Swedish FSA's way of looking or on internal model for nonmaturing deposits is limiting us from the capital perspective. They still think that in the models that we can get approved from the Swedish FSA, the liability side is still shorter than the asset side. So if we would put more hedges on to prolong the asset side, which would potentially be what we would want to do in these hedges, it would increase our capital requirement. So we have hedges, but they are immaterial. So you can discount them from the NII analysis. I've also said before that should this change, then we will be transparent with you on that. And since I haven't this quarter, then nothing has changed.

The next question comes from the line of Sandgren, Markus Sandgren with Kepler.

If I can start with following up on the cost savings. You have quite a lot of staff in the Baltics, where the average salary is much lower, but the pace of salary increases is much higher. So what are you -- how are you thinking about the balance between FTEs in Sweden versus Baltics or things that are interchanged, so to speak? That's my first one.

Thank you, Markus. You're right that the salary increase level in the Baltics has been high and is still high, and I know that -- I mean, Jens, you have talked about several times that if there are some concerns for the productivity in the Baltics, if that continues and don't slow down over time. But in many aspects, it's still beneficial from a cost perspective to do things in the Baltics and in Sweden. We have not made any major changes to this here and now, and the cost savings that sort of we have talked about, that -- of course, there are people in the Baltics, but that is not the main part of it. It's also so that we have or Entercard does have people in Norway, for instance, and so on. So that is. But of course, on the broader type, where we operate and where we have staff to do different things that we're trying to balance both from the cost and efficiency perspective, but also from the security perspective of actually being able to do things on our home markets and for the country that is done. So there are many aspects that are into this, but not related specifically to this program that we now have talked about today.

Okay. And then secondly, we would have sustained high oil and gas prices or if they would even go higher, which we don't hope, how I guess the impact on the Baltic economies would be much more severe than on Sweden? Is that right, and can you just?

Well, I'd love to answer all the macro questions, but Jon is an expert on Estonia, Latvia and Lithuania. So I'll let him shoot.

Thank you, Jens. I mean, generally, you're right. But I think we need to look at it from -- also from the comprehensive level. The gas storage is still on an okay level in the Baltics. It's a little bit lower compared to previous year because the winter was colder this year. So they have used a bit more of the gas. And they will then, during the summer or in the end of the summer, start refilling this. Of course, the price level will have an impact. But I think you need to -- if you look at the price level for gas now compared to what it was when the full-scale invasion of Ukraine took place, then the levels are completely different. So some impact, yes. But look back at the price levels and the impact back then. So I think that it will be manageable. But of course, some impact, but not -- you shouldn't overestimate the impact on the current levels that we're having.

Okay. I was more thinking about -- I mean, now we're talking about canceling flights and so forth because there's lack of fuel. If there should be any, I mean, substantial lack of gas for the Baltics, that must be an issue? Or is that not right?

We don't have any indications at this moment that they should not be able to refill the gas storage. But of course, it will be, as it is now roughly 50% higher than last year, but still way below the levels that we had some years back.

The next question comes from the line of Rovere, Riccardo Rovere with Mediobanca.

Thanks for taking my two follow-ups. One thing is on -- when I look at your financial statements, the way I understand is that the consumer finance of Entercard, and the book is classified asset held for sale of SEK 7.4 billion. But revenues related to that, so NII is included in the P&L. So if you had to sell it, the NII, as far as I understand, would be closer to SEK 11 billion rather than SEK 11.147 billion that you have reported. You say in the presentation, the SEK 600 million of NII related to that. Am I right in understanding the way you reported the number this quarter? The second question is the 16,800 FTE that you expect by the end of '27, that without PayEx would actually read [ 16,500 ], did I get it right? And last thing I just wanted to better understand this Baltic RWA add-on. We have added something related to only retail exposure this quarter. And is the number is your best estimate? Or is it a number that you have discussed with ECB? And sorry to ask this, it's not clear to me whether something on corporate will follow at some point.

Yes. Thank you, Riccardo. If I start with the NII for Entercard, you're right. It was SEK 600 million, the NII for 2025 related to the back book portfolio that is classified as held for sale. So the day that we sell that portfolio, then the NII related to this portfolio will go out, [ SEK 7 million ] approximately is what we have in our balance sheet for since when we bought it, we bought a large portion of this as purchased or originated credit impaired, and then made the valuation upfront of it from that day. So that valuation was lower than sort of the nominal value of this portfolio. So the nominal is rather in the range of SEK 11 billion. That's why [ SEK 7 million ] and SEK 11 billion are corresponding depending on what kind of number you're looking at, and SEK 600 million was the NII for 2025 related to that. So that's correct. The 16,800 FTEs, that is related to the program. PayEx, the divestment of PayEx is on top or outside of this program. So you're correct on that, too. In accordance with ECB, we have multipliers on our corporate models since before, as we have talked about in previous calls. So there are add-ons compared to the models that are in place also for the corporate. Now we took a self-imposed decision for the retail to add an Article 3 on top of the levels that we had for retail.

Thank you all for calling in. Thank you for once again asking difficult questions that makes us better. And as you could hear, we are continuously improving the bank by strengthening our customer interactions, growing our volumes and increased efficiency. I'm really looking forward to meet you again. Thank you.