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Edited Transcript of SEB A.ST earnings conference call or presentation 23-Oct-19 12:15pm GMT

Q3 2019 Skandinaviska Enskilda Banken AB Earnings Call

Stockholm Oct 31, 2019 (Thomson StreetEvents) -- Edited Transcript of Skandinaviska Enskilda Banken AB earnings conference call or presentation Wednesday, October 23, 2019 at 12:15:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Masih Yazdi

Skandinaviska Enskilda Banken AB (publ.) - Finance Director

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Conference Call Participants

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* Adrian Cighi

RBC Capital Markets, LLC, Research Division - Analyst

* Jacob Max Kruse

Autonomous Research LLP - Partner, Scandinavian Banks

* Johan Ekblom

UBS Investment Bank, Research Division - Equity Research Analyst of Benelux and Nordic Banks

* Nicolas McBeath

DNB Markets, Research Division - Analyst

* Riccardo Rovere

Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst

* Richard Smith

Keefe, Bruyette & Woods Limited, Research Division - United Kingdom Analyst

* Sofie Caroline Elisabet Peterzens

JP Morgan Chase & Co, Research Division - Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the SEB's Q3 2019 Results Conference Call. (Operator Instructions) I would now like to hand the conference over to the first speaker today, Mr. Masih Yazdi. Thank you. Please go ahead.

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [2]

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Thank you very much. This is Masih Yazdi, Finance Director, and I have together here with me, Christoffer Geijer, Head of IR. I'll just do a short introduction and then I'll open up for Q&A. So I'll just go through the numbers quickly so that you have all the information we also gave this morning at the press conference. If I start with net interest income, as you've seen, it's up 5% quarter-on-quarter. That's mainly driven by the lending growth we've had but also partly driven by the lower funding costs.

In addition to that, as you probably used to since the past, is that we sometimes have some volatility in our net interest income coming from our markets business. We noted this quarter that NII from our markets business is about SEK 100 million higher than the average over the last 8 quarters, and we expect this to come down over time. Exactly when it happens, it's difficult to say. It could be right away in Q4. It could be later on. But over time, it's about SEK 100 million elevated, I would say. This is sort of money that is creating a traffic between net interest income and NFI, net financial income. So to say to the same degree, net financial income is under as stated this quarter.

If I move to commission income, which is up 4% compared to the same quarter last year, that is very much driven by lending fees, payment fees and card fees as well as adviser fees that are about double the level compared to the same quarter last year. Nothing strange in those numbers, I would say, so this line is clean. NFI, as you are used to, we typically guide for that number to be between SEK 1.2 billion and SEK 1.4 billion, excluding [SBA] and excluding treasury. This will quarter will land at SEK 1.2 billion.

So just to comment on that, so I had mentioned the SEK 100 million that is sort of going from NFI to NII this quarter. In addition to that, we have negative SBA effects SEK 160 million this quarter and then we have approximately of SEK 100 million negative effect due to the sharp decline in interest rates that happened mainly in August, which has an impact on valuations on bonds in treasury but also a negative impact in our life business. So if you adjust for that, the level, I would say, in this quarter is pretty much in line with previous quarters. And we have no reason to, at this point, change the guidance we've given on that line.

Moving to cost. They are up 3% year-on-year so far this year. If you adjust for FX, that level will be 2% up, and that 2% is very much in line with the cost target we set in our business plan in December last year. So costs are developing according to the plan that we have set within the bank. Credit losses, 9 basis points this quarter. It's up slightly from the previous quarter. A large amount of that increase is due to the changed assumptions on the macroeconomical outlook that our Chief Economist and his team did earlier in Q3. They increased the likelihood of a negative scenario when it comes to global GDP and Swedish GDP, which leads to higher reserves for expected credit losses. If you adjust for that, the nominal credit loss level would be approximately the same level as we had the previous quarter.

And then finally on capital, you can see that our buffer declined by 20 basis points in the quarter. That is very much due to FX headwinds, continue to have that as the Swedish krona has continued to depreciate as well as the falling interest rates leading to a lower discount rate for our pension liabilities. The requirement this quarter is flat for us, so even though we had an increased countercyclical buffer, that increased requirement by about 30 basis points, that has been offset by lower Pillar 2 requirements for pension risk as well as interest rate risk in the banking books. So the requirement is unchanged at 14.7%, with a ratio of 16.4%. The buffer stands at 170, above the around 150 buffer basis points management target that we have set.

With that, I'll open up for Q&A. So back to you, operator.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Nicolas McBeath.

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Nicolas McBeath, DNB Markets, Research Division - Analyst [2]

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So first, a question on the dividend and the growth. I mean you have been approaching your management buffer target here over the next 3 quarters, and if you could elaborate a bit how you think about the balance and priority between continuing to growing your loan book and the increasing order in our dividend in line with your dividend ambition.

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [3]

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Okay. Thanks for that, Nicolas. Yes, I mean we started the year with a buffer of 270 basis points, and it's been almost a perfect storm ever since with the krona coming down quite significantly and with interest rates falling. And in addition to that, we have had very strong credit growth. So we're very happy that we started the year with the buffer that we had, and we've been able to consume that buffer in a good way, I think, generally as the business we have had this year has had a good ROE on it.

Now obviously, at this point in time, we have a smaller buffer that we started the year. Saying that, I think it's also very unlikely that credit growth continues to be at the very high level. It has been the last couple of years. Given the macro outlook, it should come down. But in the end, obviously there could, at some point, be a conflict between raising the dividend and continue to grow at this rate. I think in the end, it's going to be up to the Board to exactly decide on what dividend they want to propose for next year -- over this year, in early next year.

So we'll see where that -- how that discussion goes. But typically, if you look at the business we're doing right now, the return on equity is around 13%, which is obviously above cost of equity. So from that standpoint, it creates more value in our view, both for the customer as well as for the shareholders to continue to grow if we have that opportunity.

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Nicolas McBeath, DNB Markets, Research Division - Analyst [4]

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Okay. And then if you could just summarize or spell out what is the expected changes to your capital position and the capital requirements that you foresee over the next few quarters.

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [5]

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Yes. So I think Q4, as what happened so far this quarter is that FX is pretty much unchanged so far. We have interest rates coming up by 20, 25, 30 basis points. So if that sort of stays at the current level, that will be positive for our discount rate for pension liabilities. We know in December that we will have a couple of hikes in a couple of jurisdictions on the countercyclical buffer. It's not a massive impact, but that's going to come up by a few basis points when it comes to requirement and then we'll obviously, we're going to -- hopefully generate some profits. So that's sort of the Q4 development. I think we have a good chance of showing a buffer in line with this quarter or maybe above this level, assuming that the Board does what it usually does, which is increase the DPS by 0.25.

Then past that, so next year, we know that there will be some kind of proposition from the Swedish FSA on the commercial real estate. We have no idea at this point exactly what that will be, but the scope for that will be in how much they want to raise interest rate -- risk rates. So we'll have to see how that comes into force, but I think that will be in the autumn of 2020. In addition to that, looking beyond that, we have the bank package that will be introduced in 2021 and then obviously beyond that, we have Basel IV. And when it comes to both of those introductions, it's very difficult at this point to say exactly how they will look and to what extent the Swedish FSA will offset any negative effects from the bank package and Basel IV. So we'll just have to wait and see for that.

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Nicolas McBeath, DNB Markets, Research Division - Analyst [6]

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Okay. That's clear. And then second question, a bit more long term, if you have attempted any assessment or quantifications of landing potential into sustainable finance like renewable energy and energy efficiency and if that's something you could share?

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [7]

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Yes. We have. We set up a new energy team, a global bond in the sense that we have people in our -- all our home markets working in a virtual energy team now. And that's part of our advisory initiative that will be presented with the business plan, and it has a very sort of sustainable appeal to it. We've done some work on how we think that renewable energy will grow in the next 10 years, and we see an expanding profit pool, and we think that we, as a bank, could be a very good adviser to our customers, both the customers that we have today that will be in a transitional process moving from fossil fuels to more renewable energy in the coming 10 years, but also to potentially new customers that already sort of in the renewable energy to whom we can advise different kind of energy solutions. So we have set up a team. I think there are more than 10 people now, and it's part of our advisory initiatives. So obviously, we view that as a very good potential for us going forward.

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Operator [8]

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Your next question comes from the line of Adrian Cighi.

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Adrian Cighi, RBC Capital Markets, LLC, Research Division - Analyst [9]

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Just 1 follow-up on capital, please. We're still expecting, as you noted, some measures from the Swedish FSAs on commercial real estate, potentially in December. Do we have any more insight as to what the footprint this will cover? Is this all commercial real estate or just sort of the residential?

And just to clarify on your buffer, does the 150 basis points buffer cater to headwinds from the regulator? Are you -- would you be comfortable lowering that buffer once we know the impact? Or will you offset the potential higher capital with other measures, like a lower dividend or sort of potentially other measures?

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [10]

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Okay. Thank you, Adrian. On the commercial real estate, no. What we know so far is that it will only cover Swedish exposures, so nothing outside of Sweden. Whether it's going to be both commercial or residential property as well, we don't know at this point. It could be both. It could be just one of them. So we'll just have to wait and see. I think the FSA has said that they will publish something in November, so not too many weeks off. That's all we know.

When it comes to the buffer, the buffer is set at around 150 to cater for FX headwinds, i.e., the krona weakening and also to cater for the discount rate for pension liabilities coming down. The buffer is not there to offset any regulatory changes. Obviously, would there be some kind of regulatory change now, it wouldn't be the first time. We've had many of those in the last few years. I think just to have as a background, we generate about 250 basis points of capital per year pre-dividend. But I think as long as you do that as a bank, you really don't have any capital concerns because you're generating enough capital to offset different types of uncertainties. Obviously, you might have to, at some points, adjust the dividend if something happens that are -- that's extraordinary. But in the last 10 years, we haven't had to do that, even though we've had several regulatory surprises.

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Operator [11]

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Your next question comes from the line of Sofie Peterzens.

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Sofie Caroline Elisabet Peterzens, JP Morgan Chase & Co, Research Division - Analyst [12]

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Yes. Here is Sofie from JPMorgan. So I was looking at the corporate and private customer net interest income. It's down 2% quarter-on-quarter, but your volume is very up 2% quarter -- yes, 2% up quarter-on-quarter, and you had also both the [day gone] effect. Could you just elaborate a little bit on why the NII in the Swedish retail business was so weak?

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [13]

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Yes. Sofie, we can do that. There are 2 main reasons for that. The first one is the adjustment on the deposit guarantee scheme that we had this quarter. That's a SEK 68 million negative, and I think all of that hit the CMPC division. In addition to that, there's a add-on change, i.e., internal funds transfer pricing change for Swedish deposits, so the most sticky deposits that we have, which meant that treasury paid less for those deposits to CMPC, which had a negative effect of, I think, around SEK 35 million this quarter. So if you include both those, the -- it's a negative impact of SEK 100 million on CMPC Q-on-Q. So I think if you adjust for those 2, you will see that CMPC's NII grew Q-on-Q.

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Sofie Caroline Elisabet Peterzens, JP Morgan Chase & Co, Research Division - Analyst [14]

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Okay. That's clear. And then I was wondering on asset quality. You mentioned that you did a little bit higher provisions this quarter due to macro adjustments. But how should we think about kind of NPLs going forward? If I look back, NPLs are up 37% year-on-year, and we have seen NPLs rising every quarter this year. Is that all due to macro adjustments? Or is there something else in the NPL number?

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [15]

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No. I don't think that's driven by macro adjustments, and that's -- I mean first of all, you have to have in mind or look at how much our balance sheet has grown. So you'd have to compare the development of NPLs with the balance sheet in general. So first of all, I would do that adjustment. Now I mean there's been an increase in loan losses or expected loan losses. You can see that in the numbers from very low level starting 2018 and then that has creeped up to a more sort of normal but still low level of 8, 9 basis points.

And we saw an uptick this quarter as well. It's driven by a handful of credits here and there. It's mainly within LC&FI, and it's different sectors. We can't really see a linkage to a general macro development and the expected loan losses that we've had. And we have dug pretty deeply into this, and everyone, all the sort of people in credits we have, they're very experienced. They say that there's no correlation between the expected loan losses that we've had right now and the deteriorating macro. So we don't see that correlation at all at this point.

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Sofie Caroline Elisabet Peterzens, JP Morgan Chase & Co, Research Division - Analyst [16]

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Okay. My last question would be one of your peers was announced, saying that they are closing down some of the international operations. I guess in the current environment, it's just less profitable to operate in noncore markets. Are you considering anything similar, especially considering that you have still operations in countries like Ukraine?

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [17]

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No. We're not. The way we look at it is that the offering we have to our customers, I mean we have very international customers. We help them across the globe, and it's been very good for us to be able to help them in other jurisdictions than only the Nordic countries. So the branches we have, the rep officers that we have across the globe, we think has been very beneficial for us to serve our customers. So that's how we look at it.

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Operator [18]

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Your next question comes from the line of Riccardo Rovere.

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Riccardo Rovere, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [19]

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A couple, if I may. The first one is again on, I'd say, the dilemma between growth and dividend. It was very clear, your comment right at the beginning, but I was wondering whether at the current stage, you see less growth opportunities than, let's say, 12 months ago or 6 months ago because of the deteriorating macro outlook? Or do you think you can -- in the growth opportunity you see are exactly the same? This is my first question.

The second question I have is on the cost of medium- to long-term funding, when it comes to, let's say, replace the maturing covered bonds, the maturing senior unsecured or when it comes to issue senior nonpreferred, what is -- would you be able to quantify a little bit the lower coupons that you are paying today in respect of what comes to expiry?

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [20]

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Yes. Thank you, Riccardo, for those 2 questions. When it comes to growth opportunities, I mean I think I have 2 answers to that question. The first answer is, no, we don't see a difference because the business, when we talk to them, they say that the pipeline looks healthy. It looks -- it continues to look good. So from that perspective, no, there's not a difference. But then the, sort of, the second answer will be, yes, there is a difference because if you look at what's happened in the last 6 months, you can see that growth outlook has deteriorated. Every economist out there and also the fixed income market is telling us that macro is slowing down. So I mean we obviously look at the top down view as well, that we are coming closer to the end of this cycle, and it's likely that when that happens, you will see less growth. And that's how it usually is. That's how it's supposed to be. So just from our perspective bottom up, no change; top-down, yes, there is a change.

On the funding side, I think, generally, when it comes to the normal types of funding, so covered bonds, senior bonds and also senior nonpreferred, all of those are passed -- on the funding costs for those are passed on to the customers. So if the funding cost goes down, it doesn't really matter. It's going to be passed on to the customers. And if it goes up, it doesn't really matter. The only time it matters if we -- if our funding cost differ compared to our peers. And I can't really see that, that has happened to any large scale.

The only part of the, sort of, liability side of the balance sheet I would look more closely at is sort of the hybrid capital instruments that we have to issue, so the Tier 2s and the additional Tier 1 instruments. Those costs are usually not passed on to the customers to the same degree. So if the funding cost for those go up or down, that could be positive or negative for us. We have an 81, for example, that has a call date in May next year. We will replace that prior to that. So when we issue that, if that is issued at a price lower than the last one and if the volume is different to the last one, that could have a positive or negative effect on NII. So when I analyze that, I will more look into sort of the hybrid capital instruments rather than the sort of normal funding operations as those costs are typically passed on.

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Operator [21]

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Your next question comes from the line of Richard Smith.

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Richard Smith, Keefe, Bruyette & Woods Limited, Research Division - United Kingdom Analyst [22]

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Two for me, please. I guess the first, I was just looking at the lending growth that you saw in the quarter on Page 34 of the report, and it looks like a chunk of that growth has come through from the finance and insurance side. I just wanted to check if that was something that we were expecting to persist or if that was sort of more short-dated lending that may be rolling off? And if it is going to roll off, what the impact of that might be in terms of NII, i.e., is it sort of higher or lower margin?

And then the second one was just on the updates on sort of FSA investigation and things like that. I mean I took the comments that you made in terms of the press conference this morning but it's difficult to split out the exact amount that you're investing in AML and things like that. But I just wondered if there were any additional programs that you launched since sort of conducting your end response to the FSA that you could call out in terms of kind of number of initiatives or anything like that.

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [23]

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Okay. Thank you for that, Richard. Lending growth, when it comes to -- I mean I think I can answer that generally. The lending growth we've had in the last 12 months is extremely broad-based. So when you look at the 40 largest customers we have in the bank, and we can see that 30 of those 40 have increased lending in the last 12 months. And also we mentioned a number of SEK 100 billion in corporate lending growth FX-adjusted in last 12 months. Those SEK 100 billion, $80 billion of those $100 billion comes from 30 single customers. So -- and those 30 customers we know very, very well and we've been doing business with them for a long, long term.

Finance and insurance, exactly, I mean maybe. I mean you probably heard of a deal with it during Q3 EQT. It could be linked to that if it's increasing something due to that, so if there's any funding or bridge loan. But these type of loans, they go up and down, and sometimes, we have bridge loans that are 3 to 6 months and then they go down again and then they issue a new one. So I think just generally, activity has been high, and we've had short-term loans earlier quarters that have been replaced with new short-term loans coming next few quarters. I would more generally look at the activity level.

The FSA investigation, no, we haven't done any, no, sort of additional programs. I think maybe to some degree, the whole focus on AML has sort of accelerated existing programs. And I think that's really what has happened. So nothing that's been additional. And if you look at our cost level so far this year, it's very much in line with the business plan that we set in December, so there's nothing that's really happened that is leading to a cost inflation through a new program. So maybe to some degree it's been accelerated and maybe some people in the bank have been working more on AML rather than other things, but no sort of large amounts of additional cost at this point.

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Operator [24]

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Your next question comes from the line of Jacob Kruse.

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Jacob Max Kruse, Autonomous Research LLP - Partner, Scandinavian Banks [25]

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Could I just ask a couple of questions? Firstly, the dividend, I was just wondering if you could just talk me through the accrual of your dividend in the -- how much are you taking against equity and what kind of payout ratio that's based on?

And my other question was on lending growth. Could you just talk a bit about -- and I guess this comes back to this pipeline. If you look at the growth that you saw during this quarter, is there a difference between the start of the quarter and the end of the quarter? And could you also say something around what has been happening to the margins on the lending in the quarter?

And then my last question was just there was a comment around your investigations in Latvia when it comes to money laundering. Could you expand a little bit on that? Will you say there's a risk of criticisms or sanctions? What kind of -- what is the scope there? Or what are we actually talking about?

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [26]

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Okay. Jacob, thanks for those questions. When it comes to the dividend, we accrue for 70%, a 70% payout ratio adjusted for the IAC. So the items, I think, in comparability that we had last year, which was SEB pension and the sale of UC. So 70% of the underlying profits.

Lending growth, no, I don't think there's a big difference between the start and the end of the quarter. When it comes to margins, they are pretty much stable. I think there is some margin pressure or dip, but the main margin pressure in the corporate sector is in Denmark. That was the case in Q2, and that continues to be the case. There's also some margin pressure in Finland, but it's much less than Denmark. And then in Sweden and Norway, margins are pretty much stable.

When it comes to the investigation in Latvia, so this was an investigation that was started in 2017. It's a regular sort of investigation that they did, which has to do with how the bank has introduced AML 4 or compliance with AML 4. Since it's been a lot of focus on AML in general and since everyone out there already knows that there is a Swedish investigation going on, that will be concluded soon. We felt that because of transparency, we have also this investigation that will be concluded soon, and we think it will be concluded during Q4. And we just wanted to put it out there that there is something that could come out, and it could lead to criticism or sanction, and we have no way of assessing the risk of that at this point. We just know, as we have an investigation, that's always a possible outcome of any investigation. So for full disclosure, we wanted to put it out there so that everyone knows.

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Jacob Max Kruse, Autonomous Research LLP - Partner, Scandinavian Banks [27]

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Okay. And just on the AML, not here in Latvia, but when it comes to the Swedish investigations, do you get any sense that they may look at implementing Pillar 2 buffers for Swedish banks like we've seen in Nordea, we've seen in Danske Bank?

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [28]

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No.

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Operator [29]

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Your next question comes from the line of Riccardo Rovere again.

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Riccardo Rovere, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [30]

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Yes. Just a quick -- very quick follow-up. With regard to the SEK 100 million [trade-in], I just wanted to be 100% sure that you stated there was SEK 100 million more that in NII that should or could have been accounted in trade-in revenues? Did I get it right?

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [31]

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That's absolutely correct.

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Operator [32]

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(Operator Instructions) Your next question comes from the line of Jacob Kruse again.

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Jacob Max Kruse, Autonomous Research LLP - Partner, Scandinavian Banks [33]

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Just a follow-up on the dividend accrual. I guess what confuses me is if I look at the statement of the change of equity, the dividend to shareholder up to September is SEK 14.1 billion versus income of SEK 14.3 billion. So is -- have -- am I -- is there another adjustment somewhere? Or have you ordered accrued for what looks like 70% of full year?

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [34]

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I have to look at that, to be honest. It should include something else. So we haven't assumed that the dividend will be SEK 14.1 billion for the first 3 quarters. That would be at very high level. So it has to be something here that's included. So I'll ask IR to come back to you after the call.

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Operator [35]

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And your next question comes from the line of Johan Ekblom.

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Johan Ekblom, UBS Investment Bank, Research Division - Equity Research Analyst of Benelux and Nordic Banks [36]

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Just a quick follow-up on the capital and buffer discussion. If I look at your Fact Book, it looks like over -- since the beginning of 2018, you've had some SEK 120 billion increase in RWA related to FX. And admittedly, there are positive P&L effects of that, too. But if you just adjust for that FX, that's kind of a 300 basis points capital headwind over a little shy of 2 years. When you set your buffer, do you think about 150 agnostic of where the absolute valuation of the Swedish krona is? Or agnostic as to the absolute level of long-term rates? Or wouldn't this be the time when you'd expect the buffer to be used?

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [37]

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Yes, Johan. If I start with the first one, I think you might be reading that table incorrectly. So what that table shows you is the FX effect every quarter and it's cumulative for the full year. And then when you go into the next year, it's reset. So you can't add the previous year to the next year. So actually, when I read that table earlier this week, I did the same mistake. But then I understood that, no, the effect cannot be that large.

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Johan Ekblom, UBS Investment Bank, Research Division - Equity Research Analyst of Benelux and Nordic Banks [38]

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It's not going to be big?

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [39]

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Yes. So it's not that large, but obviously, we've had very negative FX effects for several years now. And if you add back all the years, it will be quite -- a couple of hundred of basis points. So that is correct. But then just when it comes to FX, we have a return of equity of about 13%. So basically, obviously you have a negative impact on capital right away, but then through your P&L, it takes about 7 years before you get it back. So it's just a lag effect, but obviously, in sort of in the short term, it's annoying, and it could impact your capitalization quite a bit.

Yes, we do set the buffer sort of agnostic to the current level of the Swedish krona. I mean it's very difficult for us to have an assessment of whether the Swedish krona will weaken or strengthen from here even though people think it's very weak. So we believe that we should have this buffer irrespective of how we get to this. But then obviously, you have a buffer for you to be able to consume it at some point in time if you have very negative developments.

So if we tap into the buffer and go down to 120 or 110, and it's due to FX or it's due to the discount rate coming down, then we have used the buffer in the way it was intended to be used. So I think it's very important to actually view buffers as something that are usable. If you see them as a minimum requirement, then they have no use and then you can start discussing having a buffer on top of the buffer because the buffer cannot be used. So I think it's important from an external point of view but also internally to be accepting when it comes to using buffers.

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Johan Ekblom, UBS Investment Bank, Research Division - Equity Research Analyst of Benelux and Nordic Banks [40]

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And I guess the flip side of that is if the Swedish krona were to enter a phase of long-term strengthening or, God forbid, long-term interest rates would once start to rise, we should expect you to either distribute that capital or use it to accelerate growth.

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [41]

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Yes. I think that's just speculation. We'll have to see exactly what that would lead to at that point in time.

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Johan Ekblom, UBS Investment Bank, Research Division - Equity Research Analyst of Benelux and Nordic Banks [42]

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Fair enough. It might not happen tomorrow?

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [43]

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It might not. No.

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Operator [44]

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(Operator Instructions)

There are no question at this time, sir. Please continue.

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Masih Yazdi, Skandinaviska Enskilda Banken AB (publ.) - Finance Director [45]

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Okay. Thank you very much for very good questions. We're coming to London this evening and hopefully, we'll see some of you tomorrow. We'll bring our head of digital customer experience and communication. I think that will be very exciting for you, so please attend tomorrow's afternoon Swedish fika if you can. Thank you very much, and good night. Thank you.

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Operator [46]

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Thank you. That does conclude our conference for today. Thank you all for participating. You may all disconnect.