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

Good morning, everyone. I hope you can hear me all right. Welcome to Swedbank's Q3 2026 pre-close call. So I'm Maria Caneman, I'm Head of Investor Relations here at Swedbank. And this will be an audio-only Teams call, which is being recorded, and the script used for this call will, per usual, be published in the Investor Relations website after the call. So we will be focusing on the events during the third quarter, relevant public data, macro trends in our markets, go through macro indicators, P&L and also a few other comments where relevant. We would like to highlight that we only refer to already disclosed information or publicly available data. To start off, there is, as you know, one more day in this quarter compared to the previous one. So this is resulting in a positive impact on NII and NCI. So if you look at average day count effects, it's around SEK 70 million a day on NII and around SEK 20 million a day on AUM. Starting with the macro trends. On FX, as of 30th of September, the Swedish krona had depreciated from end of June versus the U.S. dollar and the euro. And on average, compared to last quarter, the krona depreciated versus both the dollar and the euro. So for P&L, the average quarter-on-quarter development is the relevant number to track. The Riksbank policy rate was left unchanged at 1.75% during the quarter, and ECB raised its policy rate to 2.5% on September 10. As of 29th of September, the 3-month STIBOR rate had increased by 11 basis points while the 6-month Euribor rate was up by 53 basis points. Looking at average quarter-to-date compared to last quarter, the 3-month STIBOR was 1 basis point lower while 6-month Euribor had increased by 23 basis points. Moving on to NII for the -- for Sweden. Mortgage list prices in Sweden were raised on 18th of September by 13 to 25 basis points on fixing longer than 3 months, while the 3 month fixing was left unchanged. This follows decreases in the second quarter by 5 to 15 basis points, of which interest rates on 3-month fixings were lowered by 5 basis points. All this information can be found on our website, and I would encourage you to visit continuously because we do show most of our offering there, and that's where you can find the most up-to-date information. Actual mortgage prices decreased by 6 basis points on the 3-month fixings in the first 2 months of the quarter, following an increase of 7 basis points in the previous quarter. On deposits in Sweden, rates were unchanged in the quarter, and we paid 0% on transaction accounts as well as e-savings accounts. So turning to mortgage volumes and public statistics, Swedbank's volumes in own channels in the first 2 months of the quarter, excluding savings banks on our balance sheet, but including Stabelo increased by SEK 5.3 billion, corresponding to an average front book market share of 19%. Swedbank's corporate lending grew in the first 2 months of the quarter by SEK 2.8 billion, corresponding to an average front book market share of around 22%. Retail deposits in Sweden decreased in the first 2 months of the quarter by SEK 10.6 billion, and Swedbank accounted for SEK 3.6 billion of this. Corporate deposits in Sweden decreased in the first 2 months of the quarter by SEK 4.7 billion, out of which SEK 1.2 billion in Swedbank. So turning to the Baltics. According to data provided by DCB, total lending in the Baltics in July increased by 13.5% year-on-year, private lending by 12.6% and corporate lending by 14.4%. Total deposits in the Baltics in July increased by 10.6% year-on-year, private deposits grew by 12% and corporate deposits by 8.7%. Regarding retail deposit rates, we paid 0% in interest on transaction accounts, while Easy Saver accounts paid 1.5% in Lithuania, 1.75% in Estonia and 2% in Latvia. During the quarter, rates on longer fixings were raised in Latvia by 10 to 100 basis points and in Estonia by 25 to 35 basis points, while they remained unchanged in Lithuania. So please let me remind me -- remind you of the timing effects of interest rate changes in that the negative effects from interest rate increases materialize ahead of the positive effects, as has been repeatedly pointed out by a CFO. Moving on to net commission income. First of all, a kind reminder that asset management commissions are generated by daily fees. Looking at average values of the stock market development which impact our asset management fees. On average in the quarter compared to the average of the second quarter, the Swedish stock market increased by 4.8%, while the U.S. and European stock markets increased by 4.8% and 4.5%, respectively. So on FX, just a reminder here on that component, where the Swedish krona had depreciated by 3% versus the U.S. dollar on average compared to the second quarter. So this should be considered when assessing the U.S. stock market changes. According to the statistics from the Swedish Investment Fund Association, the Swedish mutual fund market had net inflows during July and August of approximately SEK 42.5 billion compared to an inflow of approximately SEK 63.3 billion in the second quarter. The trend with inflows to index fund and fixed income, both long and short term continued, while outflows in actively managed equity funds remains. Swedbank Robur had continued net inflows in July and August, with a market share between 11% to 16% of the total market net inflow and Robur's back book market share of AUM at the end of August was 21.7%. And on to costs, our full year 2026 cost guidance is around SEK 27.5 billion, excluding extraordinary items. So at Q2, we said at current levels, the full year FX effect is estimated to add around SEK 200 million versus guidance. So please keep this in mind, and the krona has depreciated even further since. The cost guidance excludes the settlement to pay USD 50 million to the Department of Financial Services in New York, which was booked here during the third quarter. And also, the cost guidance excludes the SEK 1.3 billion extraordinary cost for the restructuring program that was announced in the first quarter. We booked a little over SEK 800 million of those in Q2, and the remaining is mostly direct cost that will be spread over the rest of 2026. Bank taxes, we continue to accrue 100% of the bank tax in Latvia, so around SEK 17 million per quarter. If any threshold for discounts will be reached, this will be booked as reversals in Q4, so similar to last year. On asset quality, in Q2, the post-model adjustment decreased and stood at SEK 161 million by the end of the quarter. And let me also remind you of the positive revaluation of expected credit losses of approximately SEK 0.5 billion to be recognized here in the third quarter, as announced already in the press release because this is due to the sale of Entercard's back book of nonperforming loans. But you have all the details in the press release, but the credit loss revaluation will be recognized already in Q3. On capital, I'd like to just mention that the 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, the Swedish krona has weakened versus the euro in the quarter. Let me also flag to you, this is what we said in the Q2 report that the reorganization of the business area, Swedish Banking and Wealth Management, has been done, and the restatement file for this is being published during today on our Investor Relations page, something called Investor News. So this is neutral on group level. But for those of you who wants to look into the business areas, that restatement file will be available today. And that was all for the pre-close call. We -- please note that we go into silent period on the 9th of October. So if any questions, feel free to reach out before that.

And I see that we have a question here from Magnus. Let's see, are you able to unmute, Magnus? Yes, now it's working.

Yes. Okay. You have to unmute us, I think.

Yes, I did, but didn't seem to work, but please go ahead.

Okay. Just 2 questions. First of all, on capital, whether you will publish your SREP like SEB did yesterday evening, I think you used to do that. And secondly, if there are any regulatory issues or anything impacting risk-weighted assets quarter-on-quarter we should be aware of? Secondly, just -- I don't know if you mentioned the remaining SEK 440 million in restructuring charges for the second half. Have you said anything about how that will be distributed between Q3 and Q4?

Thank you. I'll start with the SREP. No, we will not be publishing that separately. We will, going forward, we'll be publishing that in our quarterly reports. So no update on that until Q3. No further items to point out on risk-weighted assets, I believe, and -- apart from the restatements and these things, but those are net on -- neutral on group level. And the last question, what was that one again? Sorry. Could you repeat the last question?

That was just on the restructuring charges, the -- Q3, Q4 if you have indicated anything?

We have not said anything else. They are more than that they are direct costs so all the provisioning that was -- and the big part was already booked in Q2, as you know. And we have not guided on specifically how it falls between the quarter. It will be distributed over the Q3 and Q4. Thank you. And next in line is Andreas.

Just you talked about this timing effects that you said your CFO has been flagging. But isn't that related to the covered bond funding and the pricing of it? And shouldn't we expect that the covered bond funding turned cheaper during Q3 compared to Q2? I mean, I think you priced at 207 bps in Q2 and you should be at 201 bps now in Q3, while you said that your mortgage prices were down, but net with other months of previous quarter, you're actually up 1 bp. So wouldn't we see a positive timing effect in this quarter? That's my first question.

So the timing effect that our CFO is mainly pointing to is that when market rates move now ahead but policy rates are staying that you see in Sweden, where you saw the negative effect in Q2. Now Q-on-Q, that should not be a big effect versus STIBOR, which has been, on average, flat, but you see that effect on Euribor, where Euribor has moved ahead of the ECB rate change. So that type of timing effect because we're not repricing until the policy rate change typically. So that is the kind of dynamic. And then you have -- if you're looking at wholesale funding, the way we usually, that is affected also, of course, by the increasing Euribor. And then you need to add, of course, increasing volumes on that as well Q-on-Q.

Yes. So I follow in Sweden. So that -- my first question was on Sweden. So we shouldn't have negative timing effects in Q3, which we had in Q2. But then in the Baltics, have I misunderstood or aren't you repricing your loans according to Euribor? So given it's 6 months, it's 1/6 every month automatically. So shouldn't that be repricing as we speak?

Yes. But you -- I was referring to the wholesale funding aspect of it as you see higher funding costs. But yes, you're right on the [ repricement ] mechanism versus Euribor.

So you said that Euribor was up 23 bps in the quarter, but that's irrelevant, right? Because we should see the people in Q3 repricing from what it came from Q1. So isn't the repricing that's going to happen in Euribor some 70 basis points really?