Unidentified

Company Representative: Good morning, everyone and a warm welcome to the Handelsbanken Q1 Presentation -- Q1 2021. I thought I'd begin by showing you this slide with the highest Q1 profits so far ever, that's the heading as you can see. This is a quarter where everything is going in the right direction, all the numbers pointing in the right direction. We're doing what we set out to do, we're keeping the net interesting come up in spite of being in the midst of a pandemic. We see major reductions in interest.

We're still number one in important markets and important areas, the mortgages not least and deposits, and asset management. This is becoming more visible in our net commissions where we see it’s gaining a greater part of the total income costs entirely in line with the aim set and the target sets, and the same when it comes to the Swedish brand network development, so the best Q1 performance ever. Moving on to have a look at the income statement, looking at the first quarter compared to 2020 starting at the bottom line where adjusted for foreign exchange FX and the Oktogonen and profit sharing system, we see an increase by as much as 15%. Moving up a little bit in this document, we see that our costs are adjusted at the level of 2%. I'll get back to that.

And then looking at the income side, we see that our net fees and commission up by as much as 10%, driven mainly by deposits and savings and then decrease in the interest side. As you can see, I'm going to get back to those various components later on this. Also have a look at the sequence with Q1 compared to Q4 at the bottom. You see a reduction about 2% in operating profit, we see a small change in net interest income and impact to that in terms of the volume impact but the net fees and commission. As you can see it’s up by 3%, all-in-all costs are up by 1%.

They’re of course down by 1% in spite of the annual wage adjustments and we have a provisional Oktogonen provision as well which is made. So we saw net recovery of $8 million in total. Moving on then to have a look at the net interest income development for Q1 compared to the same period last year, as I mentioned earlier. I think it's important to bear in mind that against the backdrop of the turbulent year and turbulent period we saw in 2020, I’d still like to say that our net interest income is relatively stable. All-in-all, we've continued.

The pandemic situation, it’s bigger than last year. It had affirming its grasp, we saw an impact in several of our home markets. In spite of this, we've been able to keep a good tab on net interest income. The lending has been relatively volatile, not in mortgage but in corporate. More so where we saw early in the pandemic that there was a major increase in lending to corporates and over the subsequent months in 2020 and then gradually it slowed down and leveled out.

During this quarter, we had a relatively extensive foreign exchange impact and we also see the impact of the fact that we now have put in our other markets beyond the home market. So all in all, a stable net interest income situation. Let's look at it from a sequential perspective when it comes to the development of the net interest income. We see from quarter to quarter but positive volume contribution, that's the first time in several quarters. And when we look at our margins, we see that they remain stable.

There's a pressure, of course, not least on mortgages, which we've mentioned earlier but there's no dramatic situation. And we've also been able to compensate with lower funding costs. And during the quarter, we've also seen, which we always do, a day count during the first quarter. And if we continue and look more in detail at the increased lending to the public looking to the left side of this slide, first of all, we see household lending. This is mainly lending for mortgages.

And we zoom out a little bit and go back, we see growth by 4% that's a very good performance in a home market. We remain the bank which is gaining the greatest share of influx compared to other banks and we were very happy about that situation. And then to the right on this slide, we have corporate lending. And here, which we’re all familiar with, it's highly volatile and it has been so during the pandemic. It peaked in the middle of last year and then slowed down again.

But if we look at it quarter by quarter, we can see that there's overall increase in lending to the public by 2% and that includes the positive development from the corporate side as well. The small red bars are meant to illustrate the stepping down we've seen in markets outside of the home markets where we see that the impact in terms of the volume cut backs outside of home markets is almost entirely completed. So that impact is now part of our income statement. And we continue to attract deposits from the public. We see this both on the household side where deposits are growing steadily with a positive impact.

We can use this funding. For example, it's not quite as obvious on the corporate side with more volatility, but we see excellent growth in the deposits from corporate as well. Moving on then to have a look at our net fee and commission income. This is driven to a large extent as you know by the deposits, the savings. And if we look at the net fee and commission income development, it remain stable.

And if we zoom out and compare two years back, we've seen an excellent stable growth. And we also see that we have the highest quarterly levels thus far. And as I've said before, this is something that takes up one more space in our income statement commission and net fee and commissions as a matter of fact make up 26% compared to year ago when the corresponding figure was 20%. And looking at net fee and commission, we know that this is driven to a great extent by a nice growth in other savings as a business and that is what we see in this slide, where we have up as much as 22% and a lot share of net fee and commission come from the savings business. If we look at other commissions, we see that we have reduction in payment fees and the rate at which we have a slow down has decreased, but it’s still headed down.

Looking at the other commissions, we see that that rate is still also slowing down and here as well we have an impact from what we do outside of our home markets. We do continue to grow when it comes to asset management. And if we look at our mutual fund flows and this is something that has applied for a long time, fact is that for 11 years now we are the bank who has received most of the increase of the inflows in the market, 40% of net inflows first quarter 2021, our market share is growing at a steady pace and is low 12%. We see a nice inflow also in other parts of the bank, other home markets outside Sweden, which is very positive. And we have total assets under management now of $48 billion, which is about $160 million up or 46% up in the year.

And if we continue with the development of expenses and do so quarter by quarter, I'm going to try to explain the slide that we see. We have decided to adjust for Oktogonen and also for items affecting comparability, and the bars they show as the cost, green is development costs and blue, underlying costs. And we see that we have a reduction of those underlying costs, which is in line with our plan, and it's as much as 5% when adjusting for items affecting compatibility. And then this is all according to plan also with the development costs increasing. And if we look that from a 12 month rolling perspective, we see the same things, total expenses down 1%, development costs up and others underlying costs decreasing, which means that we're headed in the right direction.

And we have been working with this trend for several quarters now and we see that things are headed in the right direction. With the development costs, we want to go out going up and other expenses going down. If we then look at the initiatives that have been taken, and what we have communicated and been communicating since 2019 also 2020 where we have an ambition to reduce costs with $3 billion up until the end of 2022 where we want to have stable level at around $20 billion. And here we take into account underlying inflation and also the developments that will be done over the next two to three years and where are we after today. Well, $20 billion that is cost that we expect end of 2022 and we have taken initiatives we have agreed on and we have realized about $1 million and what we is see some $200 million out of these and the other $800 million is what we're going to execute according to plan in 2021 to the greatest extent.

We have used about $1 billion of the restructurings reserve of total of $2.3 billion. And that means that cost of developments and the initiatives, everything follows the plan that has been previously communicated. And then if we move on to our credit losses, and let me start by saying that we continued this quarter with a very stable balance sheet and nice credit portfolio, and this is what we see net recoveries [$8 million] and we expect very low credit losses. We have reduced the risk in our credit portfolio somewhat. And we see that we have new macro trends that are more positive.

But of course there are sectors, for example, the hotel sector that is being challenged, which means that we have 27 that we have put into our reserve but our credit losses are very, very close to zero. If we then continue with our capitalization, it continues to be good. Our CET1 ratio is 20.2%, which is to be compared with the requirements from the Swedish FSA, that's about 13.9%, which means that we're well above that target and also our target range. And we should stay under normal circumstances in our target range but we're now in a situation that is not normal. When we get back to normal then we will get back to this capitalization situation.

But let me say that we do have an ambition to grow and the bank is generating capital, which means that we are in a position where we can grow fast, it means that we have a very, very good starting point for the future. And if we then continue with the goals that have been set up for a sustainable future, the ambition that we have. This is something that we have communicated with the Q4 results where we have these measurable goals that have been set by the bank and we’re also working with other sub goals was to these and we are well underway, not the least when it comes to responsible investments, our mutual funds, also, financing where we want to contribute to having a big part of our lending being green we're working together with our customers on this. And then last but not least, we also have our advisory services where we do something that I feel is very important where it is about making it easier for women to invest and we wanted to close that gap that know exists between men and women, and we want to do way with those injustices that we have for women more generally speaking. And here we want to pay attention to the fact that, well, this is something that needs to be remedied.

And Handelsbanken Sweden then, let me just briefly comment on our home markets. I will begin with Sweden and here we can say that the transformation of the Swedish branches that we've been talking about previously, well, this is following the plan that we have. Many of the branches that are being merged or closed, well, that has been communicated and it is according to plan. We're strengthening our corporate offering and that we are moving skills and competencies to branches and areas where we have a market position, where we can grow and we have opened up more units for private banking more than the five that we've had and this is also something that's close to the customers in our daily day to day activities. And we see this as well looking at the operating profit compared to last year where we see a nice development, good profitability.

And as I’ve said before, we continue with the strong inflows into mutual funds’ 40% market share, we’re the biggest in Sweden in the mortgage lending market since February and we continue to work with these restructuring and we make sure that we have satisfied customers in our Swedish branches. If we then look at other home markets, we can say and I think I’ll show you everything in one go. We can say generally speaking, when looking at these home markets, if we take Finland, for example, Finland, Norway, Denmark and Netherlands, we have a quarter behind us where many things are headed in the right direction. If we look at Norway, we can say that they're in the position where they have a tough journey behind them with interest rate reductions, but they are now pretty much back at the same situation where they were before COVID with good operating profit CI ratio being improved and return on allocated capital as well. Finland as well underlying activities are headed in the right direction.

Here we’re switching to new platform and we have some costs that we'll have in Finland for some time, but things are developing in a nice direction. Same thing goes for Denmark with a nice quarter CI ratio, et cetera. And the balance sheet might look like it's slapped but the mortgage business is better than what we can see here. They're working together with another institute and get the commissions from mortgage and that is something that's going up. Netherlands, well, it’s a small business but it's growing with high efficiency, good profitability and nice growth in those segments, those markets where we want to be.

Then we have the UK, which definitely has been more challenging country hard lockdowns during this period. And we also have the interest rate reduction from last year that has an impact on the results and we continue with the transformation of the UK business. But we also see in the first quarter that we have an underlying more positive development looking at asset management inflows and also more proactive work through works towards customers. And it's a stable feeling. So I would say that we have many positive things that we bring with us into next quarter.

And then my last slide, consistently good trend. Looking at this first quarter, the expenses go up. Well, they have to do with investments for the future and we're investing more in the future, which is good and other costs go in the right direction head down. And we continue to take market share in asset management, I’ve talked about this. We have an very nice quality in our credit portfolio and we work according to plan with the Swedish branch reorganization.

And I think I'll stop there and we open up for questions. Unidentified

Company Representative: Now it's time for the Q&A. Unidentified

Company Representative:

Operator: No, there are no questions in this press meeting.