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Edited Transcript of DNB.OL earnings conference call or presentation 24-Oct-19 7:30am GMT

Q3 2019 DNB ASA Earnings Press Conference

Oslo Nov 1, 2019 (Thomson StreetEvents) -- Edited Transcript of DNB ASA earnings conference call or presentation Thursday, October 24, 2019 at 7:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Kjerstin R. Braathen

DNB ASA - Group Chief Executive

* Ottar Ertzeid

DNB ASA - CFO & Group Executive VP of Finance

* Thomas Midteide

DNB ASA - Group EVP of Media & Marketing

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Conference Call Participants

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* Jan Erik Gjerland

ABG Sundal Collier Holding ASA, Research Division - Research Analyst

* Johan Ström

Carnegie Investment Bank AB, Research Division - Analyst of Financials

* Thomas Svendsen

Nordea Markets, Research Division - Director of Financials

* Vegard Toverud

Pareto Securities, Research Division - Analyst

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Presentation

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Thomas Midteide, DNB ASA - Group EVP of Media & Marketing [1]

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A very good morning to you all. Welcome to DNB and the results for the third quarter. In an uncertain world filled with political and financial turmoil, I hope DNB can be a safe haven for you all. So welcome to [us] this morning.

You can relax, lean back and let us take you through the DNB numbers. And as you know, we have well-known players in new positions this quarter. Our Manager and Head Coach, Kjerstin Braathen, will start off; and our attacking midfield, Ottar, new CFO, will take you deeper into the numbers. And we'll open up for questions in about 30 minutes.

So Kjerstin, the stage is yours.

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [2]

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Thank you, Thomas, and a very good morning to all of you, and thank you for being here and -- either online or physically to attend the presentation of our quarterly results. Some changes in the lineup of people and in the lineup of roles, but some things also stay the same, and we like to think that delivering good results is definitely one of them. So in the spirit of change, also made some changes to the setup and having standing tables instead of sitting down. Change is important in our business in large and small things.

The economic situation and the very strong trend in the Norwegian macro economy continues throughout the third quarter and expectations are, now for 2019, of GDP growth to be in the area of 2.4%. There is increased uncertainty around us. But even so, the outlook for next year is still expected to be good with GDP estimates in the area of 2.2% and also in 2021 at 1.6%, which we still define to be over trend. This shows the very strong underlying situation in the Norwegian economy and also the resilience with regards to the situation that we see outside of Norway.

Unemployment has fallen now close to 3.4%. And this is the lowest level in the past 6-year period. And if we look outside of Norway and look to Europe, this is approximately a level that is half of what we see across the European countries.

Clearly, investments in businesses is a very strong driver in this economy. And we see this across both the petroleum-related sector and also the mainline industries. Petroleum sector alone see a 15% growth in investment this year. We still expect growth next year; however, somewhat at a lower pace. And when petroleum investments are expected to level off, the growth in mainland investments is expected to more than compensate for the leveling off of growth in petroleum investments.

It leads to a very high activity and a strong fundamental for our business. And furthermore, the strong situation was confirmed by the Central Bank this quarter, when they, in September, announced to hike the reference rate one time further, which means that the Norwegian reference rate is now at 150 basis points, which is the fourth hike in the past 12 months. The situation is expected to be somewhat more stable in terms of the outlook, but again, raising the interest rate one more time indicates and proves the strength and resilience in the macroeconomic situation.

80% of our revenue stems from our activity in Norway. So clearly, a situation like we see during this quarter and expect going forward leads to high activity, robust quality and continued growth in demand also for our products.

And we have a strong third quarter, which you see the results of today. And what I would highlight is that it's solid and robust across all of the areas and customer segments throughout our activity. Return on equity for the quarter is 10.9%. And if we look at the rolling 12 months return on equity, we are at 12.3%, confirming that we are on track in terms of delivering on our most important target that we have communicated, which is a return on equity above 12%.

Several strong drivers contributes to the results. Net interest income, a growth of more than 4% compared to the previous quarter and a growth of more than 9% if we compare to the same quarter last year. And the growth comes across all sectors, but in particular, across the SME and large corporate area. And maybe even more importantly, the growth in capital-light income, which has been a longer-term ambition for us to consistently work to increase the size and the revenue related to capital-light income.

This quarter, we see a growth of more than 11% compared to the third quarter last year. Real estate brokerage is a strong area, but even more investment banking is a very strong area, and this in a quarter that is usually a slow quarter for this kind of activity. So across our income and cost, we continue to see very positive draws, both compared to the last quarter and also to the same quarter last year.

Looking at earnings per share. We continue to build earnings per share this quarter, NOK 3.6 per share, a growth of more than 6% compared to the same quarter last year. But maybe even more importantly, if we look at the number year-to-date, it's a growth of 15% compared to the same quarter last year, which clearly builds up and supports our capability to deliver on our dividend strategy and dividend policy for the year 2019.

Capital buildup is very strong for the quarter. And on this basis, we are also announcing today that we are launching a new buyback program for 50 basis points, again, in line with the dividend strategy and policy as communicated.

A few more words on each of the business areas and the activity across the various areas. If we look at the pretax operating profit across personal customers, it's relatively stable results. But a stable result in personal customers is, in our view, a testament to a very strong performance. We continue to see growth. Growth in this quarter of 0.9%. But in the longer term, growth in the past 12 months of 3.1%, fully in line with the growth in 2018 overall. And in an environment with increasing interest rates and tough competition and somewhat lower growth in credit demand in the market, we are very pleased to see our continued ability to grow in this market.

Deposits, very important across sectors, and personal customers contribute with an increasing deposit-to-loan rates. And looking at the average volume development over time, we see a deposit growth that is stronger than the credit growth -- loan growth, with an average of 4%.

Capital-light income is also growing across the personal customer segment. And here, I would like to highlight a strong performance in private banking for wealthy individuals, with asset management and increasing results across the capital-light areas also in this sector during the quarter.

The SME sector has a very, very strong quarter. If we look at pretax operating profits, it's up by 29%. This is partially due to a very strong portfolio and very low impairments in the quarter. But even looking at the numbers then before impairments, there is a growth in pretax operating profit of 15% compared to the same quarter last year.

Solid growth reflecting the activity and the high activity level in the Norwegian economy, a growth close to 2% for the quarter alone. And looking at the pace in the past 12 months, a growth of 7.8%. So the macroeconomic picture and activity is clearly reflected in the performance and in the numbers of the SME segments.

NII is growing by 14% compared to the same quarter last year, not fully, but close to the double of the volume growth. So clearly, mirroring the improvement we see in margin across lending and deposits in an increasing interest rate environment. There's also a very strong growth in capital-light income, where markets is -- and [the cooperation with] markets is the strongest contributor, both across interest rate hedging but also in the more advisory related and capital raising areas, which we see more and more also across the [cooperation] between the SME customers and our Markets business.

Large corporates has also had a very active quarter. As we've said, the growth in large corporates is likely to be more lumpy because of our ambition to increase the turnover of capital and distribute more of what we originate. So we had a very strong growth in the first 2 quarters and a slower growth this quarter, but that does not reflect the level of activity, which continues to be very high. Underlying growth this quarter is a slight reduction, which even enforces or highlights the performance looking at the NII that even so continues to grow by 2.9% compared to the previous quarter and 10% compared to last year. So consistently, NII growth outperforms loan growth, then reflecting good margins.

Cooperation with markets is also strong in this area. And for this quarter, it's been across several areas in DNB markets, both related to raising of equity and debt as well as advisory and hedging services.

Pretax operating profit is impacted by the announced impairment related to a single company-specific situation. Looking at the impairments beyond that, they are very low, both in SME and large corporates. And we continue to work on and see our level of high-risk exposure decrease both in nominal and relative figures and have a robust and well-diversified portfolio in this area.

So with that and some key messages related to the business segment, I will leave the floor to our new and rock solid, CFO, Ottar Ertzeid.

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Ottar Ertzeid, DNB ASA - CFO & Group Executive VP of Finance [3]

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Thank you, Kjerstin. Growth in the business segments continued in the third quarter. Growth year-to-date in the customer segments is in line with expectations. Loan growth in the customer segments is 0.9% in the third quarter and deposit growth 1.3%. The high growth in the large corporate area in the first half of the year has started to level off, in line with previous guiding.

Year-to-date, the loan growth is 3.4% or 3.2% adjusted for FX. We had previously guided for a 2019 loan growth of 3% to 4%. It may end a bit above this number if we see profitable business opportunities in the fourth quarter. Year-to-date, the profit growth is a healthy 6.1%.

Moving onwards to margin development. Net interest margin continued to trend upwards 2 basis points on a 12-months trailing basis and 3 basis points quarter-over-quarter. Net interest margin is positively affected by the interest rate hikes, remaining effect from the May repricing and partial effect from the August repricing. Volume weighted combined spreads are stable, with increased deposit spreads and compensating for lower lending spreads. Further increases are expected going forward as we get the full effect from the third repricing in August and effect from the November repricing as well. This will be partly offset by NOK 170 million further increase in the resolution fund fee and deposit guarantee fund fee, which will be booked in the fourth quarter. Full effect of all repricing will be seen in the first quarter of next year.

There is a solid increase in net interest income, as Kjerstin mentioned, reflecting the strong Norwegian macro environment. Net interest income is up 4.2% from the second quarter and 9.1% from the same quarter last year.

Contributing factors here are both volume growth and repricing; higher interest income from equity, reflecting the higher interest rate; one additional interest rate day, adding NOK 89 million; and increased amortization and fees, reflecting a healthy activity level in the quarter. The estimated effect from the last repricing effective November 7 is expected to be somewhat less than NOK 1 billion.

Commissions and fees show seasonal fluctuations due to the summer holidays. Compared to the same quarter last year, commissions and fees are up 11.6%. This is driven by real estate broking with an increase of 9.5%. The main strength being big increase in the investment banking of 53% from the third quarter last year, which was a bit slow, with solid contributions from all areas: debt capital markets, equity capital markets and M&A advisory services. On top of that, we have a 15.8% increase from nonlife insurance and defined contribution pensions. In the other categories, the performance is stable.

Operating expenses are down NOK 258 million compared to the second quarter, reflecting seasonally lower activity. Expenses are negatively impacted by a nonrecurring impairment of a leasing contract related to changing of an IT service provider. On the other hand, in the second quarter, we had the NOK 200 million provision for the DNB Norge case, which is now scheduled for the Supreme Court in late January next year in 3 months from now.

The seasonally lower activity is evident for IT expenses, which is down NOK 80 million compared to the second quarter, which reflects the lower activity during the summer months. The reduction in personnel expenses is related to lower pension liabilities. Pension expenses are NOK 109 million lower than in the second quarter, of which approximately 50% is due to too low -- too high provisions in the second quarter. We maintain our ambition of a cost/income ratio of below 40%.

We remain comfortable with asset quality. 94% of the portfolio is in stage 1 and less than 1% in stage 3. Impairments came in at NOK 1,247 million for the quarter, 85% of this stems from a one single exposure, as mentioned by Kjerstin. We see no spillover or read-through from this to the rest of the portfolio. Furthermore, we see no new industry trends that are of a concern.

As mentioned by Kjerstin, the macro backdrop is strong, but bear in mind that there will be evaluations in impairments quarter-to-quarter. The Norwegian FSA today made public the annual SREP decision regarding capital requirements. Buffer requirements for DNB are unchanged. Pillar 2 requirement is floored at NOK 19.4 billion, which imply a 14 basis points increase when risk-weighted assets decrease with the introduction of Basel III or CRD IV/CRR later this year.

The increased countercyclical buffer, which was announced last year, will take effect at the end of this year. There is [no] news regarding the Ministry of Finance proposal to increase the systemic risk buffer in connection with the introduction of CRD IV/CRR, probably at the end of this year. The Ministry of Finance proposal imply a year-end core equity Tier 1 capital requirement for DNB of 17.9%. This compares with DNB's current level at the end of the third quarter of 18.3%. The capital situation is thus comfortable with the core equity Tier 1 ratio of 16.9% under existing Basel I regime with transitional rules and, as mentioned, 18.3% under Basel III regime without transitional rules.

Core equity Tier 1 in the third quarter is strengthened by both strong retained earnings and from selling us down to 20% ownership in Luminor Bank.

The remaining part of the front-end insurance transaction is expected to be concluded in the first quarter of next year with a negative impact on capital of 10 basis points. The leverage ratio increases only 5 basis points from 7.06% to 7.11% due to higher deposits with Central Banks.

As mentioned in the second quarter report, we have approval from the FSA to repurchase up to 2% of issued shares as well as 0.5 percentage point for hedging purposes. We have today announced that we will commence 0.5 percentage point share buyback. This share buyback is reflected in the mentioned capital numbers.

Finally, a quick look at some key figures, summing up a strong third quarter performance. Return on equity is 10.9% for the quarter, but above the 12% target on a trailing 12-month basis. The cost income ratio shows a positive trend, down to 38.8% in the quarter and approximately 40% adjusted for mark-to-market effects and the one-off impairment on IT. Earnings per share is up 6.3% compared to the same period last year. Looking ahead, key drivers will come from the continued strong Norwegian macro outlook and from positive effects from the announced repricings in November.

And I take the opportunity to invite you all to this upcoming Capital Markets Day on November 20. Thank you.

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Thomas Midteide, DNB ASA - Group EVP of Media & Marketing [4]

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Okay. As usual, we'll open up for questions, and we'll have time for individual interviews with media afterwards, and we'll start up with Jan Erik. If you could wait for the microphone so the people on the webcast can hear us, that will be excellent.

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Questions and Answers

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Jan Erik Gjerland, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [1]

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A couple of questions from my side. On the volume side, could you please say -- talk a little bit about the lower loan demand on the household sector? Is it due to you're rejecting more customers because of the new regulation? Or is it actually lower demand from customers?

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [2]

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My comment was related to the credit growth in the household market, which has come down some basis points in the area of 40 to 50 basis points, I believe, from 2018 to 2019. So when we compare our growth in the past 12 months period, it's a relatively stronger growth than if we go in the year before that period. So it's just -- the comment was made relative to credit demand in the market for the sector.

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Jan Erik Gjerland, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [3]

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What are you seeing when you're seeing these trends? Are you rejecting more customers? Or are you actually taking the same amount of credit exception?

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [4]

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We are not rejecting more customers. I would say, on the contrary, we view our performance as better, starting to use customer insight, reading across, working more intelligently towards our customer base and having a higher success, I would say, in the growth that we see. So for us, a 12-month growth rate of 3.1% in this market is very satisfactory.

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Jan Erik Gjerland, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [5]

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Okay. Second question on the offshore side, you write-back, actually, NOK 75 million or something on the book. You have said previously, you had some NOK 5 billion of provisions to the oil and offshore-related stuff. How comfortable are you with the level currently versus ships still not being utilized, et cetera? And what do you think about the future for the offshore industry?

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [6]

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The underlying situation in the offshore industry is both related to the supply market and the rig markets. It's still challenging. As expected, we hadn't expected the market to come towards a balance yet. So that situation is ongoing. If anything, there are slight signs of improvement, but it's still a structural oversupply, in particular, when it comes to supply vessels, and the market has a way to go requiring increased activity and vessel scrapping before it comes back into a balancing situation.

What has been a change in the past quarter or so is more related to the financial markets, if anything, which in a more uncertain world is risk [off] related and maybe more reluctant to go into the sector after a first round of contributing to restructurings in the sector. There will be some companies going forward that will need, if the market doesn't improve sooner than expected, to have a relook at their debt. And what is in our books is at all times our current estimate of how we review the situation.

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Jan Erik Gjerland, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [7]

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So no new loan losses on the offshore side due to that restructuring -- potentially restricting coming up?

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [8]

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No new. The situation has developed in accordance with our expectations. So there's no major movements. The small movements you're referring to is more IFRS related.

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Jan Erik Gjerland, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [9]

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Okay. The final one on the capital then. You had 100 basis points up, including the 50 basis points buyback, which is impressive. Could you just shed some more light in terms of the Luminor and retained earnings because there must be other moving parts outside that?

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Ottar Ertzeid, DNB ASA - CFO & Group Executive VP of Finance [10]

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Those are the main effects, but there's also some volume being moved from standard model to IRB, which contributes positively to that effect. The effect is also slightly -- the Luminor effect is also slightly higher based on Basel III then on the transitional rules.

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Thomas Midteide, DNB ASA - Group EVP of Media & Marketing [11]

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Okay. Next one up, we have Johan Ström, Carnegie.

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Johan Ström, Carnegie Investment Bank AB, Research Division - Analyst of Financials [12]

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Just trying to work out the underlying cost in the quarter here. So if we subtract the impairment of the leasing contract, NOK 160 million, and then add back, did I get the numbers right by assuming NOK 109 million and half of that was a reduction of pension cost, we should add that back, so just below NOK 5.6 billion for the underlying costs in the quarter?

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Ottar Ertzeid, DNB ASA - CFO & Group Executive VP of Finance [13]

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Then you have the seasonal effects as well, as I mentioned, visible, for example, in IT expenses.

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Johan Ström, Carnegie Investment Bank AB, Research Division - Analyst of Financials [14]

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Great. And then on the comment on that you might go over the 3% to 4% loan growth for 2019, in which segment do you see the uncertainties on the upside there?

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [15]

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I wouldn't call it uncertainties. I think our main priority when it comes to growth is profitable growth. And as we've said previously, we do expect for the year a higher growth in personal customers and SMEs. And in large corporates, it will be more lumpy with the slower growth second half of the year than first half of the year. But 4%, we've not set it as a roof either. So we just look at the pace of growth across the business experiencing a very active market. We think there might be opportunities that -- across the segments that will lead us to grow slightly above the 4%. Growth pace in personal customers and SMEs is more gradual. Large corporates is more lumpy.

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Thomas Midteide, DNB ASA - Group EVP of Media & Marketing [16]

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Yes. We have Thomas Svendsen from Nordea Markets.

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Thomas Svendsen, Nordea Markets, Research Division - Director of Financials [17]

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You pointed out that the growth pace in the mainland economy is coming down over the next couple of years. So should we expect loan losses to return to normal levels over the next couple of years alongside this slower growth?

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [18]

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Were you asking growth rates or losses?

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Thomas Svendsen, Nordea Markets, Research Division - Director of Financials [19]

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When do you think we will return to normal loan loss ratios for bank?

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [20]

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I think looking at the macro economy, yes, there is the leveling off when it comes to investment growth across businesses, even so we are looking at growth in investments and the growth in the economy above trend. So I think it's important to point out that what we are talking about, even though slightly coming off, it's still a very, very strong position for the Norwegian macro economy. So we see a resilience when we take in the factors of uncertainty outside of Norway. We continue to see a very robust portfolio quality. And as you've seen, a decrease also in the high-risk exposure.

We do not guide specifically on loan losses. Looking at the portfolio quality is a natural item to come back to on our Capital Markets Day. But the portfolio is very solid, more than 94% stage 1. But as we always say, it can be company-specific situation. But in terms of trends, I mean, it's all positive and very robust.

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Thomas Svendsen, Nordea Markets, Research Division - Director of Financials [21]

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Final question. On costs, do you see any pockets are placed in the bank where you could do more efficiency potential to fight the natural wage inflation, given that half of the costs are personnel?

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Ottar Ertzeid, DNB ASA - CFO & Group Executive VP of Finance [22]

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I think we will come back to that in more detail also on the Capital Markets Day. But I think the CEO commented during the second quarter, will you repeat what you said then?

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [23]

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I mean fighting inflation pressure on costs and drop-down-related costs to investments, which we do, both in related to regulatory but even more investing into future positioning and digital platform and customer communication is a continuous activity. So I would just like to again restate that there is a continued high activity when it comes to taking out efficiency measures across the business.

This has also gone on for this year, even though there is a nominal cost increase compared to last year. It's lesser than what it would be if you look at the inflation pressure as such. The largest potential across, I think, what we say is in digitizing and automating core banking processes, and we won't be done by that in a quarter or in a year. This is a potential that we will be continuing to work on for a large time -- for a long time. One of the areas that we have addressed that we can also state that is continuing is using a chat bot in our call centers, for instance, that reduce to lower traffic and an ability to increase efficiencies. But again, this is something that it's also natural for us to come back to in more detail on the Capital Markets Day.

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Thomas Midteide, DNB ASA - Group EVP of Media & Marketing [24]

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Any more questions, Vegard? Is all clear? You've been thinking, Vegard. Be prepared.

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Vegard Toverud, Pareto Securities, Research Division - Analyst [25]

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Vegard Toverud from Pareto. I was -- you mentioned that before, obviously, and you mentioned it again today, this one engagement that you have taken a significant provision for this quarter. Could you give us any more information about this, the size of the full exposure towards this counterparty and confirm that it already was in the stage 3, just to our understanding? And also, if you can, how many other stage 3 engagements that you have in the same size?

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [26]

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We can provide some more clarity by saying that we had already made provisions towards this name specifically. So this was already a stage 3 exposure going into the quarter. And we have also said that there is limited, if any, further downside to the exposure and that we see no spillover or ancillary effects related to this specific company situation when it comes to the rest of the portfolio.

When it comes to the number of stage 3 customers of this size, I think we need to refer to what you can read off in the fact book, where you can see the spread across industries in the various stages, where you will again find that the dominant exposure related to our stage 3 commitments is in the oil and offshore-related part of the portfolio, and no other sector that stands out with any material exposure.

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Vegard Toverud, Pareto Securities, Research Division - Analyst [27]

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Yes. I don't have the supplementary in front of me, but I'm not sure if they are broken down by counterparties there, I think it's only volume. But...

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [28]

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It's not broken down by counterparties. And we are bound by customer confidentiality. We cannot talk to specific single exposures.

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Vegard Toverud, Pareto Securities, Research Division - Analyst [29]

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Okay. But the way I'm thinking about it, if you're taking [then provision of NOK 1 billion in 1 day] , and you've already taken provisions for it before, you could assume that it's [above] NOK 2 billion of exposure, at least. So I don't know if that's a correct assumption. But given that assumption, can you then talk to how many stage 3 counterparties you have with more than NOK 2 billion of exposure?

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [30]

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We really can't. I think the relevant information to look at and you have to make your assumption is to look at, one, the split in the industry exposure in stage 3 and the development over time; two, it's meaningful to look at the structure of the book related to the various risk classes where, again, both nominally and relatively high-risk exposure has been [built] down by more than 20% in the past 2 years. And if we look at that exposure geographically related outside of Norway, the reduction in high-risk exposure is double to what we've seen for the portfolio as such, indicating a clear and material reduction of risk in the past 2 years. I think those are really the most important elements I can refer you for in order for you to make your assumption.

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Vegard Toverud, Pareto Securities, Research Division - Analyst [31]

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I totally agree, and that was what we also looked at before, and that was also why this information came as somewhat of a surprise, and that's also why it could be helpful at sometimes also to have a feeling for the number of counterparties when they can change that much in a day. So that was the reason for my question and the reason why I also delayed in asking this.

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Thomas Midteide, DNB ASA - Group EVP of Media & Marketing [32]

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[Not that as] a Christmas wish list, Toverud. Then we have Jan Erik Gjerland from ABG.

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Jan Erik Gjerland, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [33]

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Just a follow-up on the growth, the profitable growth. How much more must margins drop in the household sector or personal customer business to be sort of on par with where you see the risk-adjusted returns on the SME side and also the large corporate side?

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [34]

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I'm not sure I really get what you're looking for, Jan Erik.

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Jan Erik Gjerland, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [35]

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The margin, you had a 10 basis points downtick in lending in -- on the personal customer side and a 13 basis points uptick on deposits.

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [36]

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Yes.

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Jan Erik Gjerland, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [37]

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So how much more must the lending margin drop before it's actually better for you to lend more money to corporates [and] to the household sector?

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [38]

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Well -- sure. Okay. Okay. Well, profitability-wise, it's actually the SME sector that is now returning the best profitability on allocated capital, but still a meaningful difference when it comes to personal customers and large corporates. So I think it's hard to give you a specific number in terms of margin drop, in particular, given the fact that we are looking at this in a customer profitability focus, also reading across how much we are able to increase capital-light revenue, and these are related across all of the various areas.

We are not making any changes when it comes to our statement related to growth. We will continue to prioritize personal customers and SME, also because of the fact that in large corporates, it's a lot related to the turnover of capital and through that activity generating capital-light revenue opportunities. The turnover of capital in that portfolio is now less than 3 years. So there is a lot of business being done every year and then growth tuned in, in relation to the activity.

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Ottar Ertzeid, DNB ASA - CFO & Group Executive VP of Finance [39]

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And please bear in mind that the margins are reflecting the repricing, not taking effect until later. So it's not a -- it will be changing in the coming quarters.

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Thomas Midteide, DNB ASA - Group EVP of Media & Marketing [40]

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Okay. So final chance for any last questions. Any takers? No. Then we wish you all a fantastic day, and thank you for coming.

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Kjerstin R. Braathen, DNB ASA - Group Chief Executive [41]

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Thank you.