Nordea Bank Abp Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Markus Sandgren - Kepler Cheuvreux - Analyst : So I was thinking about the lending margins. Could you give us some more flavor both on the corporate space and what's happening there? If you compare it to the bond market, it seems to have opened really well? And how is the competition from that? And then secondly, on the -- is there still flows from savings -- sorry, from transaction accounts to savings accounts? Is that factoring in in the margin drop? Thanks.

Question: Markus Sandgren - Kepler Cheuvreux - Analyst : Okay, thank you. And then secondly, I was thinking about capital. Why are you talking about that you will reassume buybacks in next year? I mean, should we take this as you're adequately capitalized for now? Or why is it brought up now? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 15, 2024 / 8:00AM, NDAFI.HE - Q2 2024 Nordea Bank Abp Earnings Call

Question: Markus Sandgren - Kepler Cheuvreux - Analyst : Okay. Thank you.

Question: Nicolas McBeath - DNB Markets - Analyst : Thank you, and good morning. So a follow up question on the impact from the Norwegian acquisition. So first, if you could say anything about the kind of revenue implications, how much NII impact do you anticipate the acquisition to have? And then also on the acquisition on the capital impact, I note that you keep the 40-basis-point headwind from the impact that you guided for initially when the acquisition was announced. But I note that the lending portfolio has shrunk a lot since then. So I was just curious why the capital impact has not changed given the much lower size of the lending portfolio.

Question: Nicolas McBeath - DNB Markets - Analyst : All right. Thank you. And then a question related to costs. So I think, Frank, you mentioned costs are slightly up in 2024 versus 2023. I think previous guidance was flat or slightly up. So just wanted to clarify, is this kind of change in guidance? And have you -- are you now anticipating more cost headwinds than previously or more investments? And then related to that as well, the increase in cost for 2024 versus 2023, so just quite high underlying cost growth before one adjusts for the one-offs last year and also the fact that regulatory fees are coming down a lot this year. So I was just curious if you could say anything whether you think you can substantially bring down the cost growth into next year, given now that revenue trends are clearly softer versus, let's say, one year ago? Should we think that you will continue to invest and strengthen the bank in a similar fashion also going into next year?

Question: Nicolas McBeath - DNB Markets - Analyst : Okay. Thank you very much.

Question: Nicolas McBeath - DNB Markets - Analyst : Great. Thank you.

Question: Andreas Hakansson - SEB Equities - Analyst : Good morning, everyone. I'm looking on your slide 17. I just had some questions on your risk weights and the delay in the buybacks. And let me understand it first. You used to say that EUR16 billion was the increase you expected in your risk-weighted assets, EUR10 billion for the IRB approval and EUR6 billion for Basel IV. Now you said that it's going to be EUR17 billion with, what is it you say, EUR4 billion coming from Basel IV. So has the IRB model gone from EUR10 billion to EUR13 billion? That's the first question.

Question: Andreas Hakansson - SEB Equities - Analyst : Okay. And I had a feeling, and I might be wrong, of course, that in Q1, it sounded like you expected to initiate your buybacks once you get the approval on the IRB models. And now, you got it and you have delayed it. Are any other factors impacting? I mean, we read in media that you have a Danish court case on AML with an uncertain outcome, of course. Could you tell us, has that had an impact? And also, when do you expect to have an outcome of that court case?

Question: Andreas Hakansson - SEB Equities - Analyst : Okay. And then sorry, final question on risk weights. You haven't put in the expected benefits from your corporate models that we expect to happen in 2026. Could you help us give us a rough size of that so we can compare to the negative impact on retail today?

Question: Andreas Hakansson - SEB Equities - Analyst : Okay, that's it for me. Thank you.

Question: Magnus Andersson - ABG Sundal Collier - Analyst : Yes. Thank you, and good morning. I note that you have not lowered your deposit rates in Finland as a response to lower short-term rates, while you did so in Sweden. And you have announced cuts in Denmark, which comes into force tomorrow, if I remember correctly. So why not in Finland, if you could tell us something around that, please?

Question: Magnus Andersson - ABG Sundal Collier - Analyst : Okay. So this is according to plan for your responses in Sweden, Denmark, and Finland.

Question: Magnus Andersson - ABG Sundal Collier - Analyst : Okay, thank you. And sorry, I might have missed it. It was a bit noisy here. But did you say why you slightly raised your cost guidance, what it was referring to, what the reason was?

Question: Magnus Andersson - ABG Sundal Collier - Analyst : Okay, thank you.

Question: Gulnara Saitkulova - Morgan Stanley - Analyst : Hi, good morning. This is Gulnara from Morgan Stanley. Thank you for taking my questions. First one, a follow-up on the buyback. So you stated that you aim for the buyback early next year. Maybe can you elaborate how should we think about the size of the buybacks going forward? Would you still prefer to do the smaller but more frequent buybacks rather to go for a bigger-sized buyback once a year? And if you were to do the more frequent buybacks, would you apply for approval for the total amount at once or it will be two separate approvals from the ECB? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 15, 2024 / 8:00AM, NDAFI.HE - Q2 2024 Nordea Bank Abp Earnings Call

Question: Gulnara Saitkulova - Morgan Stanley - Analyst : Thank you. Very clear. And can I ask another question to follow up on the competition? How would you describe the competitive environment across your key markets and especially in Sweden, because as the market outlook seems to improve, the customer activity should return? And would you say that the competitive pressure could subside in the coming quarters? Or do you think it's still early to see the visible improvements in the near term?

Question: Gulnara Saitkulova - Morgan Stanley - Analyst : Thank you very much.

Question: Sofie Peterzens - JPMorgan - Analyst : Yeah, hi. This is Sofie from JPMorgan. Thanks a lot for taking my question. I see that in your report, you wrote that the retail model approval also includes some regulatory REA add on. And then you say that after completing the planned remediation actions, you expect to get EUR4 billion to EUR6 billion of risk-weighted asset release, but this is all subject to regulatory approvals. Could you just clarify for me what the remedial works are and also what these add-ons are, which portfolio, what products? Just give a little bit more detail. And also on the remedial work, is it more a data issue or is it a system issue that you're having? That would be my first question. Thank you.

Question: Sofie Peterzens - JPMorgan - Analyst : But I guess the follow-up question here would be like how likely is it that you will get it in 2026? Is it more like a '27, '28, or even further out considering that -- I mean from the outside at least, it sounds like it's a quite complicated process and also if all these models then need to be approved by the ECB, which we know always takes more time than expected?

Question: Sofie Peterzens - JPMorgan - Analyst : Okay. Okay, that's fine. And then my second question would be on the hedge. So the hedge -- the deposit hedge, it looks like it shrank a little bit. And then quarter on quarter, it was small positive net interest income. But why was the deposit hedge year on year a EUR26 million drag to your net interest income? And could you just remind us how much the hedge is costing Nordea's net interest income every year and how should we think about the hedge benefits as rates come down, especially in '25 and '26?

Question: Sofie Peterzens - JPMorgan - Analyst : Okay. Thank you. And then if I may, just a final follow-up. Of the 3.5% gross invest or gross growth that you saw from the investment, how much of that gross growth comes from financial crime prevention? And how much of the financial crime prevention is forced by the regulators? Because it seems that financial crime is becoming quite an issue in the Nordic region.

Question: Sofie Peterzens - JPMorgan - Analyst : Okay. Thank you.

Question: Shrey Srivastava - Citigroup Global Markets Limited - Analyst : Hi, Frank. Hi and thanks for taking my questions. You've obviously reiterated the (technical difficulty) distribution from '22 to (technical difficulty) the clarity of that possible capital distribution, '26 and onwards. Since obviously, that's going to (technical difficulty) add-ons started to come off in addition to potentially further broaden your corporate models. Are you thinking (technical difficulty) that's my first question. Thanks.

Question: Shrey Srivastava - Citigroup Global Markets Limited - Analyst : Yeah, sure. Is this better at all?

Question: Shrey Srivastava - Citigroup Global Markets Limited - Analyst : Yeah. So you've obviously reiterated the EUR17 billion to EUR18 billion for '22 to '25. But I'd like to get further clarity on distribution from '26 onwards, since obviously that's when you're guiding for the retail model add-ons to come off in addition to potentially a further benefit from the corporate models. How are you thinking about additional distribution from '26 onwards relative to what we can expect for '24 and '25? That's my first question.

Question: Shrey Srivastava - Citigroup Global Markets Limited - Analyst : Thank you very much for that. And my follow-up, having looked further into the future and something a bit. The EUR17 billion that you've given for retail models in Basel IV obviously includes a EUR2 billion benefit from the Norwegian proposals, LGD flows, and mortgage risk weights. What gives you so much confidence that those will come through to include that in your plan, if you could provide me with more detail? Thanks.

Question: Shrey Srivastava - Citigroup Global Markets Limited - Analyst : Thank you very much for that.

Question: Namita Samtani - Barclays - Analyst : Good morning, and thanks for taking my questions. Firstly, does this Danish AML investigation put you off from doing business in Denmark, given how the authorities are treating you? Secondly, do you think the good DCM activity this quarter was driven by customers front-loading, i.e., doing activity ahead of the US election, rate volatility? Or are we on a new trajectory for DCM and ECM and IB fees? And lastly, just a question on the interview, Frank, you did with (inaudible) Industry where you referred Nordea operating in four countries with 3,200 internal software applications and the need to reduce these applications to get processes which run the same in all four countries. I just wanted to ask, wasn't this the point of the core banking platform project, to operate on one system? And I'm curious to understand why four countries operating on one system hasn't been achieved yet and whether you believe you can achieve cost efficiencies going forward. Or is that actually impossible given the complex that you're operating in four countries? Thank you.

Question: Namita Samtani - Barclays - Analyst : That's helpful. Thank you very much.

Question: Piers Brown - HSBC - Analyst : Yeah, good morning. Two for me. One is on assets under management. That number obviously is still being held back for the activities you've seen in international AUM. Is there anything which gives you hope that you're anywhere close to a turnaround on the international AUM picture? And then the second question is back to capital again, but thinking about the underlying pace of risk-weighted asset growth just from new business. What are you thinking? And when you think about capital planning, what's the case of RWA growth, excluding all of the considerations around (technical difficulty) et cetera. What are you thinking of? And I'm just thinking about the Q1. I don't think you've given the Pillar 3 report yet for Q2 and Q1. But to the IRB numbers, it looked like you have reasonable inflation for asset size growth but offset by reduction in -- for improved asset quality and just whether you think that dynamic continues to play out in coming quarters. Thanks.

Question: Piers Brown - HSBC - Analyst : Great. Thank you very much.