Carina Åkerström: Good morning, everyone. And welcome to this presentation of Svenska Handelsbanken results from the first quarter 2022. I am here together with the CFO of the bank, Carl Cederschiöld. And we are going to take you through the results for Q1. Let me start by saying that these are very turbulent times that we experience around us with more in our neighborhood with unimaginable humanitarian suffering, inflation, interest rate increases, and also just behind us at the lockdowns due to COVID, but the bank stays stable.

We have made choices and we see those in our earnings. We are doing well. We have good coworkers, good customers, and that gives us a very stable beginning of the year. Activities continue to be very high, and we grow where we wanted to grow. And we continue to see the developments that we saw previous years, as well, as I said, we grow where we want to grow.

We see lending volumes gaining momentum. And we continue to grow also when it comes to our asset management. We continue to reduce the costs, the CI ratio is moving in the right direction, which is pleasing. And we continue with this stable growth with good credit quality, credit loss ratio. This quarter, as well, was basically at zero.

The capital situation is good. Growth in our business is generating capital, but also creates opportunities and flexibility looking ahead. And something that is very pleasing is that we have the best start in several years in our UK operations. Things have turned; we see volumes and activities, gaining momentum in a very positive way. And last but not least, we also see that our customers are very pleased in these times with greater turmoil.

We also see that the local presence and local interaction we have with our customers is making a difference, not at least in times like these. If we look at the results for Q1 compared to last quarter 2021, we also see that the C/I ratio is down 49.7%, and credit losses, as I've said, is at zero, and ROE end up at 13.4% and CET1 ratio at 18.7%. What is also gratifying is that NII is continuing to develop in a positive way 4% comparing quarters. And of course, we have seen stock exchanges going down, and that has an impact on fee and commission. And savings related fee and commission that is down somewhat.

If we look at our costs and the expenses, we continue to reduce expenses underlying. They are now being reduced with 3% comparing the two quarters, in spite of us are having a lot of development going on in the bank in this quarter as well we see that we are charged with the new risk tax, it’s about SEK 1.3 billion on an annual basis and SEK 329 million in the quarter. The operations that are being discontinued in Denmark and Finland we see that the underlying result is up at 7%. And if we look at the quarter year-on-year, we see that underlying income is up 5%. And this is very gratifying to see that NII is up significantly with 8% driven by a very good growth in lending margins’ volumes business related.

This is driving development. Fee and commission income is up around 9% and here as well it is the engine that we have in our savings, our asset management, but we see nice developments. Also, when it comes to other fee and commission expenses are up 3%. And I would say that that is exclusively due to the fact that we increased our development costs that is what we are investing in. C/I ratio down to 45.9% and the underlying result there is unchanged.

And if we were to adjust for risk task resolution fee, et cetera, then we see that earns up 6%. We have high activities. We saw high activities end of 2021. And that continues in this quarter. We see household lending developing in a stable manner.

Mortgages are growing; they have been doing so for several years now with 5%, which is very good. And comparing this with last year, we also see that corporate lending is up with 8%. And that is well a nice mix of property-related lending and also other types of corporate lending. Our fee and commission, as I have said, continue to show nice developments compared to previous years. Our asset management, our savings businesses, this is the engine in the growth, and we continue to grow.

And we do that in a stable manner. If we look at savings-related fee and commissions, the last few years we have seen an increase in average of 15%, which is very, very good. Which also means, of course, that we had a good offering. And this is something that grows steadily and has been doing so. Funds has been growing in average with 16%.

And 2021 with our market share of 16% we got to twist much of the net inflows. So, this is something that is very stable. So, income is growing faster than expenses. And at the same time, we see that we are in a period where we are doing a lot of development work in the bank to increase efficiencies and to ensure that we will have future growth in the bank in the last couple of years. And that is what you see here.

Income has gone up on average with 4%, whereas expenses are up at 1% and the CI ratio has been going down during this period. We grow our business with good cost control. And at the same time, we invest more than we've been doing before. And we have continuously good credit quality, credit losses being basically at zero. And this is a trend with the low credit losses.

That is not a chance comparing us to our banks. We have good customers, great coworkers, and a well tried and tested credit process, which means that we have been able to keep credit losses at extremely low levels. And then if I'm to conclude, before I hand over to Carl, with a few words in our home markets, if we look at Norway and the Netherlands together, we see that growth continues, it's high, it's stable. In Norway, lending in local currency is up 4% and in the Netherlands 18% year-on-year and in Norway have increasing interest rates. And that of course has an impact.

NII is up 6% and the CI ratio is 37.9. In the Netherland income is up 17% and the CI ratio is down to 54.6%. And as I mentioned initially, in the United Kingdom, we see the strongest start of a year that we've had for several years. And this is in accordance to expectations we have seen a negative trend, but that has stopped. We see corporate lending that had a positive development end of Q4.

And we see that continue. And in NII, local currencies of 6% compared to previous quarter and reached its highest level for eight quarters and costs, expenses are being reduced with 6%. And we end up with a C/I ratio of 67.6%. Last but not least Sweden, Sweden is stable with high efficiencies and very good profitability, lending is growing in a stable manner. And that is what we've seen for several quarters up 6% compared to last year, I've already mentioned household lending mortgages up in a very competitive market and lending to companies up 8%, C/I ratio ending up at 36% and ROE 13.1.

So all-in-all, all our home markets, we see a lot of activities. We see volumes and improved margins. And that means that we have a stable net interest income and we continue to reduce expenses which is very gratifying. And that being said, I would like to hand over to Carl.

Carl Cederschiöld: Thank you, Carina.

Well, now we're going to have a look more specifically at the net interest income. On this slide, you can see the development for the bank compared to the previous quarter and what you see in this slide in the top right hand corner so that we've a strong NII development up by 4% from one quarter to the next. And it's driven both by positive volume growth to the tune of just under 2%. And in addition to positive margins development, this is something that we've seen. We've talked about it to some extent, we can see this as we move forward and it's Norway and the UK that are taking the lead.

We see central banks raising interest rates. It's producing, raised margins and dividend and the money we have in the central banks, a very positive development. And you see that we have more temporary factors that set up each other for the rest. We have a positive FX effect, been a negative one on the day count, et cetera, so a strong development for the quarter, all-in-all. If we look at the same numbers comparing the first quarter of this year to the first quarter of last year, we have a very strong development up 8% on net interest income.

We see that this is driven by volume, the large green box, almost 5% in volume growth and still reasonably a relatively low flat situation for margins. But in the shift between the quarters, we're starting to see some reactions. So that may well develop further. We see the positive FX effect of a weakened Swedish currency, the krona. And so the adjusted underlying net interest income is 5%.

Looking at net fee and commission income, we've seen a stable development over a number of years and since 2019, you can see here in this slide that we are up by 9%. And in spite of the stock markets dropping or during the first quarter, the net fee and commission from savings is up. If we break down the fee and commission in different components, we are gratified to see that we're growing in the right places, savings, fees and commissions to the left up by 11% from last year. This is our engine. However, it's also gratifying to see the bars in the middle, payment fees and that were coming out of a pandemic period.

We see societies opening up. People are socializing, traveling. And so payment fees also see a positive development up by 16% compared to last year. In other fee and commissions relatively flat overall, we see good development of corporate advisory related fees. So that's worth noting.

Moving on then to have a look at our expenses, the cost side it's relevant and important to tell the story based on what we're doing to develop the bank to the left. And this slide, you see a breakdown of our development portfolio split into different components. We've wanted to achieve the right balance about one-third of our development costs are allocated to running the bank, the operations, basic development of fundamental and then one-third, where we create preconditions for long-term productivity and efficiency. It's anything from cloud transformation to transitioning to a more data driven business model. And then the final third has a lot to do with strengthening the meeting with customers, it's business driven and you know that we stepped up our ambition over the past year.

And you see this to the right on this slide. You see the development over the year for costs. The bars to the right describe are fundamental, basic development, 600 million per quarter, more or less with some seasonability or seasonality should I say? And then next to those bars, you see the extra billion that we've added during 2021 and 2022 to strengthen our meeting places, how we interact with customers to drive customer satisfaction and growth. Now to sum up expenses. This shows cost development compared to quarter one of last year.

The bank has now achieved a fairly good balance where we have reducing underlying cost. You can see that in the first green box down by 1%, and this is coupled with a strong income development as Carina showed you earlier. So it's a good combination, a good position to be in. We're very pleased with the situation. The underlying costs are done by 1% adjusted, both for currency octagonal and IT, at the same time, we see the large growing pink box and that's precisely what we're talking about.

We're investing in growth for the future with a lot of IT development from a year-to-year, this cost is up by 32% and that beat produces 4% on the total cost. And so on the final bar impact is 3%. So these are costs we appreciate they’re driven by development driving, development in the future productivity and other costs are down and falling. We’ve put a great deal of work into our cost initiatives and that’s a very important component here. During the first quarter, our cost initiatives have reduced the cost base to the tune of about SEK500 million.

Clearly a major factor we’ve achieved about 70% of the work completed on our initiatives. Overall, it’s been going according to plan. There are some time adjustments where we have to make corrections and allow for adjustments. We’ve talked about extra. We had wanted to be even more, even further in the process, but we’re working constructively and we will get back to with more information as soon as possible.

All in our, we’re pleased with the current situation with a good development for underlying cost and at the same time, we’re investing for future growth. If we look at the development quarter-on-quarter, let’s begin by looking at the pink bars. As you can see, Octagonen is up somewhat and FX also on expenses. So the more temporary impact is up quite significantly. But if you adjust for those, you see that the underlying expenses are falling significantly whilst IT is up somewhat.

So a positive development underlying costs down by 3%. IT adds one approximately. So fairly unchanged cost situation all in all. Let’s have a look at credit losses. As Carina touched upon, we have a very strong asset quality for the third of the past five quarters where at zero basis points of credit losses, it’s a very strong development; underlying reasons we have SEK43 million in credit loss recoveries in Phase 3.

And as Carina said initially, we’ve been through a quarter of turmoil with a deterioration of macro forecast. That in addition to Stage 1 and 2 provisions has added SEK43 million in provisions. We’ve now gone through two years of pandemic and COVID, in this quarter, we’ve dissolved our COVID-related provisions and the reasons being that in our home markets, the pandemic is no longer considered dangerous a threat to society in general, but we’ve also had two years to adapt our own processes. And we are now a lot more at assessing the impact in our own models. At the same time, the world around us is more insecure than it has been in a long time, I’m thinking of course of the Russian invasion of Ukraine.

It has strengthened various trends and issues. The uncertainty factors concerned interruptions in supply chains. We might see an impact of the current lockdowns in China or sanctions, which will change commercial and trading patterns in the world. We see a lack of commodities, anything from wheat, electricity and labor to semiconductors. And we see disruptions of energy supply in various parts of the world.

We’ve chosen to make a very conservative interpretation based on the regulatory environment. And so we’ve introduced a new expert based provisions. We work with this along the lines of previous of the past and all in all the new provisions amount to SEK512 million. The net of the resolved – dissolved COVID based provision and the new expert based one is more or less unchanged. It’s up by SEK13 million all in all SEK6 million in credit loss provisions in total.

And by way of conclusion, a few words about capital. As Carina mentioned, we have a very good situation, 18.7% of CET1 ratio, 4.8% above the regulatory requirement, 13.9%. And it’s also 1.8% above our target range. Our ambition remains to calibrate towards state target range in normal times, but it’s important to point out that we’re currently in a period where we will reintroduce the countercyclical capital buffer requirements. We know that they will be approximately 1% higher in a year or so from now for the bank.

So all else equal, we’re calibrating towards the target range. During this quarter, our CET1 ratio dropped from 19.4% to 18.7% and it’s worth perhaps having a look at the various components to see what it consists of. First of all, we’re very much in a favor of the balance we have in the engine for the bank 0.0 percentage points of increased CET1 ratio generated by our profit. We’re using this to respond to our the strong growth we’ve seen in our lending volumes that covers about 0.3 of the 0.7. And then we make provisions for dividend this quarter.

We’ve chosen not to do this according to the 40 points ratio rather to anticipate based on historical numbers according to the regulatory framework. So we’ve allocated at 56% of the result 0.4% minus is the impact. So we can serve a strong growth and good capacity to pay dividend in the bank. For a number of years, we’ve had a position where we’ve excluded capital covered for structural value adequate – capital adequacy. The bank provides loans in different currencies, and if there’s a weakening of the kronor, we will see an impact.

And so we need to allocate more capital to ensure capital adequacy. We’ve ensure to have that we are able to balance by having currency available. If you look at a small dotted line in pink on this slide, you can see that there’s a weakening of the Swedish currency, the kronor, so risk weight assets have reduced, but our own assets in other currencies is up. The FSA has informed us that we will no longer be allowed to make exemptions or exclude the hedging from capital coverage. And as you can see on these slides, this has a negative impact to the tune of 0.7 percentage point or to the right NOK28 billion in risk exposure amounts.

We have a very constructive dialogue with the FSA currently. We’ve submitted a new application and we know that we will be divesting Denmark and Finland, which reduces the need for structural FX hedging. And there are various options to deal with this situation where do not see any cost for concern, nor does this impact the long-term capital situation in the bank. With those words, we have to sum up an excellent capital situation being able to service on good growth and offering money up for a healthy dividend. Carina back to you.

Carina Åkerström: Thanks. Well, thank you. Thank you, Carl. And before we start the Q&A session, let me say that we are in a very good position. The bank is stable.

We have done what we said that we were to do and you can see that in a result activities continue to be high. And we see this in volume developments as well in all our home markets. We’re bringing expense system completely according to plan, and very gratifying is that we have now seen a turnaround in our UK activities. And we have a very good feeling. Everything is very stable.

With that being said, thank you to everyone who’ve been listening. We’ll now have a short break five minutes. And then we’ll continue with the Q&A session.

Carl Cederschiöld: Hello, everyone. And welcome back, we are now ready to start a question-and-answer session.

So operator, could we please have the first question.

Operator: [Operator Instructions] First questions comes from July of Antonio Reale from Morgan Stanley. Please go ahead.

Antonio Reale: Hi, morning, everyone. Thanks for taking the questions.

I have two questions and one clarification, if I can on cost. The first one is on the UK and it looks like you’ve finally reached that inflection points when it comes to net interest income in the UK. We’ve seen mortgage approvals at record high for the last two, three quarters, at least at peers pricing, almost doubled. I guess, to what extent are we seeing a catch up and what’s your expectation for Handelsbanken in terms of contribution from your UK operations this year? If you could perhaps comment on the key line items across the P&L that would be great. My clarification on costs is, there’s still sort of items affecting underlying costs this quarter, particularly higher IT development going through the P&L versus the capitalized on the balance sheet.

You mentioned in the financial report, you’re writing a number of projects to do with migration to cloud services. Now, unconscious, you are running quite a lot of them, but to the extent you can help us sort of reduce some of the volatility and help us quantify this amount going forward. Could you share some color there? Can we use your IT investments as proxy for this, I think add SEK500 million budgeted left for 2022? Any color you can share here will be very helpful. And lastly, on the structural FX position you’ve made it very clear now, you have to risk weight those and given the material increase you’ve talked about alternative methods. Can you maybe elaborate a little bit more on how much you would expect to recover from the sale of Delmark and Finland and for many management actions? Thank you.

Carl Cederschiöld: Thank you, Antonio for your questions. Well, let’s start with the UK then, as you say, we reach an inflection point, we believe now and we obviously see, first of all, increased NII and that primarily as you can see in the figures comes from a margin improvement, which come from obviously increased rates from Bank of England, flowing through all books as well. And as you know, we have a really good loan to deposit ratio there. So increased rates means higher deposit margins and as well, high returns on the pounds, we live at the central bank in UK. And then when it comes to cost, yes, as we’ve said numerous times, we’ve spent an awful lot of time going through the KYC on all of our clients, et cetera.

That has required a lot of consultants. And in this quarter, you see quite a short decrease in the number of consultants. So we are not – so that will look – that will prolong for the – and we’ve also done some efficiency, which we’ve also been working on in UK as we know, we’ve been merging a few branches, we’ve been going from five regional banks to one, et cetera. So we look constructive on going forward, we do believe as Carina was saying that in the end of the quarter, we saw actually positive volume development, especially in corporates. So as we’ve said before, it’s not unlikely that we could see cost drop and income improving.

And right now, as we are in an increasing rate environment, we haven’t changed that view at all. Then when it comes to the IT cost question of yours, yes, as you say, we spend a lot on the IT development and that’s obviously been a strategic choice for us. We’ve had the view we needed to improve here. So year-over-year we’ve increased the IT spending by 32% and quarter by quarter, we’ve increased the IT spend by 4 percentage points. As you say, we plan to spend SEK500 million in 2022 as the extra added IT spending.

And after that, we plan to scale that time. But as we’ve also said, obviously we are in a position now where we like where we are positioned in the various home markets. We do believe we have position to – possibility to grow, and we want to – we definitely want to catch that possibility. So if we will do further investments, we will get back to that later. When it comes to the structural ethics question of yours, we are in a discussion with the Swedish FSA.

We have delivered more info and we’ll do. So the discussion isn’t closed, this is the outcome as of the first of Jan. So that’s the first question of it. And if you would look back on the behavior of our C/I ratio, you would see that the structural ethics edge has obviously been extremely structured and beneficial for the stability of the C/I ratio. So we think there’s – we look constructive on that discussion.

When it comes to divestment of Denmark and Finland, I think you can look at the volumes of these segments and you can get a fair assumption of the relative size of that hedge. I think that – well, obviously then it comes down to, we’ve obviously stabilized the balance sheet to quite a lot of extent during the last year. Now, we have obviously changed the way we manage our pension system, and we’ve also improved quite a lot in the structure and stability. So in the end, obviously, we will balance the possibilities out and see if we continue doing it like this, if we hedge it by other financial instruments, or if we live with higher volatility. And we will get back to that one, but it starts with a clear decision from the Swedish FSA.

Operator: Thank you for the question. Next question comes from Andreas Hakansson from Danske Bank. Please go ahead.

Andreas Hakansson: Yes. Good morning everyone.

If we look at the corporate volumes, they were quite good and you mentioned real estate. Could you tell us a bit about your corporate volumes? One question is, have you seen more bridge financing, which could fall off in coming quarters? That’s one part. And also on the real estate side is that the new clients that have had a tougher time funding in the market because of rising spreads? Or what’s driving the corporate loan growth? Let’s start with that question.

Carina Åkerström: Thank you very much, Andreas. Yes.

As you said, our corporate volumes definitely increased, and we have seen that high activity in the end of 2021. And as I said, is a really good mix of real estate and ordinary corporate business, corporate volumes. And so that is something that we have seen for quite some time. So obviously we do still have a really good standing when it comes to real estate business. But at the same time, we see an increase in the other corporate lending, so to speak.

And what we see now is, its real volume growth. It’s not bridge financing, its real volume growth taking place in our balance sheet. So that is for sure. Do you take the funding?

Carl Cederschiöld: Sorry, Andreas, can you throw at your last question?

Andreas Hakansson: No, that was good on the corporate side. I had two more questions.

While I was supposed to only do two. So let’s do your capital position at time of Q4, you said that if you would’ve sold Denmark and Finland, then your capital position would’ve allowed you to do buybacks for the proceeds. Could you tell us how do you feel with the capital position now when you start to see better volume growth and a little bit tighter capital?

Carl Cederschiöld: No, as you said, obviously, we really like the volume growth we have this month or this quarter. And we’ve also said in the last quarter that was a reason for us to stay conservative when it comes to dividend. But we do believe that the bank is generating quite a lot capital.

We are in a balance situation right now. So we will get back when we divest Denmark and Finland, we will get back on how we use the proceeds. But yes, we are in a really good situation, obviously, and we’re not in a need of capital.

Operator: Thank you for the questions. Next question will come from the line of Sofie Peterzens from JPMorgan.

Please go ahead.

Sofie Peterzens: Yes. Hi, good morning. Here is Sofie from JPMorgan. So my first question would be on interest rates in Sweden.

In the past you never gave rate sensitivity, but if you give that now, that would be extremely helpful. But if you don’t give guidance, could you just comment on invest or the governor of the Riksbank has said that he thinks that it’s not unconceivable, that Sweden is going to have 10 rate hikes by end of 2024. Given that you have a lot of real estate on your book some of the real estate companies are quite leveraged in Sweden in particular, how should we think about asset quality for Handelsbanken and what are you doing to kind of stress your clients in a higher interest rate environment? How comfortable do you see with kind of net losses remaining close to zero, even in a rising rate environment? So that would be my first question. My second question would be a follow-up on Denmark and Finland. Could you just give any updates on the sale in Denmark and Finland? When should we expect a potential transaction to be announced? How is the discussion going? Any color you can share with us? Thank you.

Carl Cederschiöld: Well, first let’s start with the Ingves question then. Yes. As you said, he went vocal and said that we might see 10 hikes or 25 each more or less, and that’s obviously would change the picture quite dramatically. And so it’s obviously fair discussion. We as a bank obviously are working under the same underwriting policy and the same principles as we’ve done always.

We tend to be beneficiaries when the market turns a bit more south and we don’t change anything in the way we think about risk. We rather have stated constant during the upturn and we will try to stay constant during the downturn. But of course, as you say, if rates are increased quite a lot, most likely the demand will tend to be a bit less. But on the other hand, we’ve seen such a massive uptick in the capital market finance perspectives over the last years. And we are obviously see ourselves as beneficiaries.

So, if we go back to bilateral and being in a bank with an extremely sound capital situation, we believe puts us in a good position, actually, even in a downturn. When it comes to Denmark and Finland, we won’t give you any more guidance. It works according to plan; we will get back as soon as possible when we have something to say. So, we don’t have any further information there at the time being.

Operator: Thank you for the questions.

Next questions comes from the line of Robin Rane from Kepler Cheuvreux. Please go ahead.

Robin Rane: Yes. Good morning. Thank you for taking the questions.

Two questions on NII. So, as you mentioned the margin contribution in the quarter was quite large, and I guess the largest that we have seen for some time much driven by UK and Norway as understood it, are there any temporary factors we should consider in this or should this will be viewed as the new baseline? And then my second question on the NII. So, looking into the possible rate hikes, we mentioned 10 possible rate hikes from invest. How do you think about your ability to pass on high lending rates to customers? Are there any markets or segments where this would be easier or more challenging? For example, the Swedish mortgage market or mortgage markets in other countries. So that’s my two questions.

Thank you.

Carl Cederschiöld: Thank you, Robin. Well then to start with the NII question. Yes, as you say, we obviously see really good margin improvement then on this quarter. We can confirm that there are no temporary effects behind that one.

And it is obviously in Norway, in UK, and it is to quite high extent actually from the deposit margins coming. So, we won’t give you any guidance going forward, as you know, it’s very complicated to make guidance, because it’s so many factors around it. And it is also both landing obviously, and the deposits around it. But we look really positive on it. And we like what we see, and we only so far, we only see it in Norway, in UK to some extent.

The possible hikes and the ability to pass on these to clients. I think that will be a matter of the competitive landscape. I mean, right now we must say that we see fierce as competition in this Swedish mortgage business. We are really, really happy to have such a good performance and so happy clients on the corporate side with us. So, we see really good volumes there, but we – as you know, we’ve been struggling touch on the mortgage business and it is due to the fierce competition there.

When hikes come through or if hikes come through, I, there might be reason to believe that this it will affect the competitive landscape. I mean, it’s, it has been extremely easy to fund startups and to fund to fund initiatives from the pension system. They will have other possibilities to use – to solve their ALM perspective. So, the landscape might change, but so far we sit in a situation with fierce competition. So it is hard to say how much of it we will pass on, or how much we will take as some kind of margin increase or pressure.

But so we’ll have to tell, but so far so good. I think as you know, we may guide on a few quarters that we thought the constructing margin development would come from the countries, which hikes earliest. And so we – and we’ve already seen it now flowing through the books. We will have to wait and see what happens to Netherland and Sweden.

Operator: Thank you for the questions.

Next questions will come from the line of Rickard Strand from Nordea. Please go ahead.

Rickard Strand: Hi, good morning. Thanks for taking the question. First off a question on your cost outlook, you previously talked about the SEK 3 billion of gross savings.

If you could just start by giving us an update of where you are with those you talked about 70% of initiatives being in place, et cetera, but could we just start there with an update, please?

Carl Cederschiöld: Yes. Thanks Rickard. For the question. Yes, as we said, we talked about the SEK 3 billion worth of cost initiatives, and we have agreed and negotiated SEK 2.3 billion in value during, at the end of Q1, and SEK 500 million on a quarterly basis is flowing through the books now per Q1. And the reason why that has increased some a bit is that obviously the AML and KYC consultants in UK, they have moved out of the books.

So, that’s been quite a good development. So, we come quite far, SEK 2.3 billion of SEK 3 billion, roughly.

Rickard Strand: Okay, thanks. Then second question on the UK operations. You talked about the activity and the demand among your clients picking up on a good start of the year so far, still the household volumes appear to be down 2%, quarter-on-quarter, and same sort of pace as in Q4, et cetera.

What do you see there? What do you need for that one to turn around? Or if you could give also an outlook of when you expect that to be flat or level up?

Carl Cederschiöld: Yes, we won’t guide on when we expected to become flat or positive or so, but as you say, yes, it’s true that we’ve struggled a bit more on the household lending, vis-à-vis the corporate lending. And we do believe the bank – as being the bank, we are in UK, we do believe that the turn will first come on the corporate side, and we see that happening now during the last month on the quarter. So it is tougher on the household side. We will have to wait and see, but obviously they tend to be a bit correlated at least, but time will have to tell, and we will have to wait and see when that turns positive.

Operator: Thank you for the question.

Next question is from the line of Magnus Andersson from [indiscernible]. Please go ahead.

Unidentified Analyst: Yes, good morning. Just on costs and the partly UK and Sweden there. Again, I note that the average number of headcount is flat again quarter-on-quarter after having declined in Q4 and it's even up slightly in Sweden flat in the others and down in the UK.

Is this what we should see going forward was the decline between Q4 will start it on headcount reduction from your efficiency enhancing measures? And that you could increase from here with perhaps a decline in the UK and the flatter increasing in Sweden and related to data. So the number of branches is down quite significantly in the UK as well. So I guess absolute cost should be down going forward in UK, but not necessarily. So in Sweden, that's number one on cost. And secondly, I might have missed it, but I didn't see anything about how much of your structural charge you now have used that's cost.

And just on capital briefly, if you could say whether you would actually consider share buybacks as a realistic option in addition to dividends as the way you are repatriating any potential excess cash?

Carl Cederschiöld: Thanks, Magnus. And please Peter and Carina fill in if I missed something here. Well, first of all, obviously, yes, you're correct on that one. We've seen FT numbers drop for some time but quarter by quarter, we saw an increase in Sweden. And the reason for that one is that we've actually seen very, very healthy demand here.

So, as we say, it is a matter of one foot at each pedal here. We try to serve our clients and be reactive to the growth possibilities whilst also working a lot on the structural efficiency. So we will continue and most likely see a decrease when it comes to head counts from the structural initiatives. But also we will be constructive when it comes to the possibilities we see in various parts. When it comes to the structural charge, we have a bit more than 500 million left.

So, that's what you can then – that's what we, you see in the numbers. And yes, as you say, we – when, and if we repatriate money, we use to using more of the dividend route, but we don't close the door at all to buybacks. And that will be a question of both obviously the valuation of the bank, but also the – a bit around the efficiency around the tools going forward. But no, we don't close the door on buybacks. And please, did I miss something, Peter?

Peter Grabe: No.

Operator: Thank you for the question. Next questions come from Namita Samtani from Barclays. Please go ahead.

Namita Samtani: Hi. Just a question on the staff cost.

I see that increased by a percent quarter-on-quarter, and I included the annual salary review. Could you just tell us in terms of percentage, how much have you passed on in each country and will the next salary increases be in 2023 now? And the second question on the UK NII, so the net amount of change margins and funding costs increased net interest income by 128 million quarter-on-quarter. Are you able to tell us a split between what was higher deposit margins and what was the improved return on the liquidity deposited within the bank of England? Thanks.

Carl Cederschiöld: Let me start with the first question, and then Peter can fill in the second. As you say, the staff cost, yes, they increased – the yearly salaries are in the books now, and apart from one of the countries, we do this at the similar time of the year.

So you definitely see in the absolute majority of the staff cost inflation flowing through the books right now in the figures. And then when it comes to the UK NII.

Peter Grabe: Yes. What we saw on the margin effects in the UK it was predominantly driven by the deposit margin increase. We saw some slight lending margin pressure as we've seen for some time.

But of the overall figure it's predominantly deposit margin. So the lending margin impact was minor in relation to the deposit margin impact.

Operator: Thank you for the questions. Next questions comes from Maths Liljedahl from SEB. Please go ahead.

Maths Liljedahl: Yes. Good morning. Thank you. A little bit on asset management. Good inflow, but have you seen any change in behavior for clients.

We have seen or peers have said that some investors to in a higher degree, choose more passive funds or fixed income, and could that have an effect of on margins going forward? We can start with that. Thanks.

Carl Cederschiöld: Thanks, Maths. As you say, we've obviously during the first quarter, we're obviously seen outflows. On the other hand, we've seen less outflows vis-à-vis our market share.

So, we're actually gaining market share in the downturn there as well. So we show the same trend as we seen in the very positive years now. As you say, yes, when markets turn sour, you tend to see the investor change from active equity funds into passive equity or into fixed income or into mixed solutions funds. And I would say that we – if we see selling markets in general, we most likely will have a negative margin pressure. But on the other hand, the solution funds have quite nice margins on them.

So – and people tend to move from equity, active equity into solution funds as well. So, yes, most likely we'll see a structured trend, but as we've seen – as we've said before, as well, we see really constructive way we build the business model now in Netherlands, Norway, UK when it comes to the savings business as well. And when we grow retail flows in these markets, they will tend to come with higher margins vis-à-vis the Swedish average. So it's a lot of moving parts in that portfolio mix as well.

Maths Liljedahl: Okay.

Thank you. Well you mentioned in Netherlands, anything new here? I know that it was – I know you moved this UK or Euro liquidity buffer there. But the results look a little bit, or it's had weak, but inflows are relatively good. How do you see Netherlands going forward? No, any change in your thinking here?

Carl Cederschiöld: Well, I don't – well I would ask you later what you see, what kind of weakness you see in the figures because we're extremely happy with the Netherlands performance. And as we've said for a long time now, we – Netherlands are a very focused business model.

They focus on lending to private individuals and to real estate primarily. We are also building and making improvements in our savings offering and for the last years, two years more or less we've been working quite heavily on integrating the asset management in the bank. So we get the power of the distribution capability from the branch network. So we see, we look very positive on that one. It's obviously growing massively and that's been really impressive.

So, and as you say we have moved the Euro liquidity into Netherlands and that might obviously come with a touch, a hit on the income line, but nothing we see structural.

Operator: Thank you for the question. Next question comes from the line of Maria from Citibank. Please go ahead.

Maria Semikhatova: Yes.

Hello, thank you for the presentation. Two questions from my site. First on expenses, I understand that you have additional 500 million nearly on a relative costs that was budgeted and flat previously. But if I look at the ordinary development spent, it was around 2.9 billion if I annualize first quarter. And this is compared to 2.1 dealer last year.

I just wanted to check with you, have you increased the ordinary development budget span or we should expect lower spending in the common quarters? That first question. And second on margins, we have seen that if factor margins and funding costs in Sweden was negative. You mentioned that you are facing serious competition in Swedish mortgages. Do you see signs of intensifying competition over the quarter, given the increasing funding costs? And also if you could provide some comments, what is happening with the corporate margins in Sweden? Thank you.

Carl Cederschiöld: Well, let me start with the development cost.

No, no, we can't say we haven't made any decision to increase the underlying IT spend. As you see on the staples we showed, it's a huge fluctuation around it and the average was actually 600 million of it, which is obviously 2.4 on the yearly number. So we still plan to have 2.6-ish on the underlying IT spend. So nothing has changed there. When it comes to the margin development, I think the first quarter in Sweden has been a very challenging quarter in the sense that rates has moved so dramatically, which makes different business model, which reacts to the movement from the central banks.

They react differently. So I think it's been a challenging month in the way that you can't really judge the really competitive pressure here. Because some parties might have had the same rate for a bit too long-time. All other ones have moved it instantly when the Central Banks has changed. So we tend to see little reason why structurally the competitive pressure should increase when rate increases.

On the other hand, obviously we see initiatives are being started or being improved in Sweden. So we will have to wait and see, but not thing in the first quarter changed our view of the competitive landscape there.

Maria Semikhatova: And sorry, there was a – the last question was corporate margins, was it?

Carl Cederschiöld: Corporate margins tend to be more volatile than the mortgage margins as we've seen historically. And they're a slight pressure in this quarter. But again, it's – it varies more on the corporate side than on the household side.

Operator: Thank you for the questions. Next question comes from the line of Jacob Kruse from Autonomous. Please go ahead.

Jacob Kruse: Thank you. Just two quick one with NII.

Firstly, could you just say how, I think you guided for 100 million of impact of the move of liquidity from the discontinued to the continuing operations of the liquidity to Netherlands from Finland. Was that 100 million fully reflected in this quarter or is it – is there something coming through in Q2? And then secondly, just on the interest rate sensitivity, you gave the sensitivity on your annual report about 1.4 billion of NII for 100 basis points, which I think you talk about being based on historical data is how do you view that indication relative to what you kind of expect when you look at the potential benefit from rate types? Thank you.

Carl Cederschiöld: Yes. To start off with the Euro liquidity that we've placed on the Finnish Central Bank, that liquidity was moved to the Netherlands in the last days of the quarter. So we did not see any NII impact in continuing operations in the first quarter, but that of course means that the effect should show up in total for the second quarter.

So what you see in the numbers is that we're talking about roughly 125 million, 130 million or so all as equal being the total negative effect in discontinued operations. All of that does not moved to the Netherlands, only the part that does not relate to the Finnish operation. So you say 100 million roughly, I mean, it's probably a fair ballpark number. But of course when we move it to continuing operations, it means that there'll be an offsetting impact in continuing operations with the same amount. So that should be reflected in your Q2 numbers.

And then, in terms of NII sensitivity as Carl said earlier, there are a lot of moving parts and we refrain from providing any detailed guidance on that.

Operator: Thank you for the questions. Our next question comes from Martin from Goldman Sachs. Please go ahead.

Martin Leitgeb: Yes, good morning.

And thank you for taking my question. I just have a follow-up question on the more – earlier questions regarding the mortgage market in Sweden. And I was just wondering if you could share your outlook for the mortgage market, maybe in terms of, volumes this year coming from very strong volume growing – last year, would you expect the mortgage market to continue with fixed rank or do you see risk that is potentially a slowdown in terms of volume and within that have you seen any changes in terms of customer behavior? So whether that's switching from viable rate mortgages, into fixed rate mortgages has to been any change there and if you ambition to essentially retain your kind of share both in terms of stock and flow going forward. Thank you.

Carl Cederschiöld: Wonder, thanks.

And please fill in well first of all; obviously when it comes to the mortgage market in sensitivity versus rates, obviously it's a lot of uncertainty now. Yes. If we see the, the hikes west is mentioning, obviously that will be tough for the market to swallow, that will increase, increase the cost of living quite a lot for the ones who own their apartments or houses, obviously. So but obviously also we've been talking for many years about a pent-up demand for houses that comes on the other hand of it. And then when it comes to markets going a bit more sour, we tend to be beneficiaries there.

So being in a situation with the balance sheet, we have, we tend to stay very constant in our behavior. So that could actually be good for us on the other hand. And then as you know, we are investing and focusing quite a lot on strengthening our offering here. So and we hope to make improvements there as well. So that could turn positive for us.

Yes. As you say, we have the client behavior has changed from floating rates to higher proportional, fixed rates and fixed rates has lower average margins. So that comes with a margin pressure. On the other hand, obviously the clients tend to stick in the bank longer when it has fixed rates. So when, and obviously if the market pricings too many hikes, it becomes tough to go from float into fix.

So, but time left to tell when that dynamic is changing. Did I miss some question over?

Carina Åkerström: No, I don't think so.

Operator: Thank you for the questions. [Operator Instructions] Our next question comes from the line of Cameron VanDeMark [ph] from Mediobanca. Please go ahead.

Unidentified Analyst: Good morning, everybody. Thanks for taking my question. I have just, one is on risk cost when COVID-19 at the time of COVID-19 outbreak, you charge some overlay is right at the beginning, but then the risk costs remained very low throughout all the pandemic. And I'm not asking you for guidance. I know you will not give it.

I'm just trying to understand this time with Ukraine and Russia conflict. Do you see the level of uncertainty being higher this time than, when it was about judging, assessing what might have happened with the COVID-19?

Carl Cederschiöld: Well, thanks Cameron for the question. I think our message is that we're extremely pleased with asset quality. We have in the books and we've been working quite many years in the strategy we run in the bank. We believe have improved the general asset quality.

Then obviously, we work according to the accounting rules. So we and we try to interpret them as good as we can. And then work accordingly. And as you say, we've been moving from a COVID overlay to some kind of expert based overlay now. I don't know if the uncertainty, I think the uncertainty is quite high in the market.

I think that over time, obviously some things have changed with Russia's invasion of Ukraine and it will have an impact and these kind of impacts will most likely be it will stop the globalization and it will make us unsure a bit more of our business. We tend to believe, that we are in a situation where we are fairly well positioned in this. We have zero direct exposure. We have very little indirect exposure. We have strategically focused the business model to four countries, which we think is very well suited in Europe for such a transition.

So in that sense, we do like the strategic position of the bank. And we can't say that that on a relative perspective has dropped during, since the invasion. Then obviously we will see a lot of structural changes in the world coming from the invasion, but that's long term And then I think it's also important to stress that it's only gone five weeks since the invasion and we will have to review this method of ours every quarter. And that's exactly what we've done with the COVID overlay as well. So we will take all the prudent approaches we can going forward.

Operator: Thank you for the question. There are no more questions from the line. I'll like to hand a call back to the management for concluding remarks.

Carina Åkerström: Thank you very much. And thank you for all your questions and issues.

And thank you for being with us on during this almost hour. And so have a real nice day and hear from you again. Thank you very much.

Peter Grabe: Thank you all.