Carina Akerstrom: Good morning, everyone, and welcome to this call for the Second Quarter 2021. Together with me today, I have, as usual, our CFO, Carl Cederschiold; our Deputy Head of Investor Relations, Peter Grabe; and Head of Accounting, Annika England. As usual, I will start by giving you an update on the overall strategic progression of the bank. And then Carl will talk you through the key financial topics for the quarter followed by a Q&A.

Carl Cederschiold: Thank you, Carina.

I will comment on a few selected topics and then we are happy to discuss all questions in detail in conjunction with the Q&A. To start off with a few remarks on our different home markets, in Sweden, the development business -- the development in the business where we focus has been strong. Earnings wise, Q2 was the second best quarter since 2011 and were driven by a few things.

Operator: Thank you. First question comes from Magnus Andersson from ABG.

Please go ahead. Your line is now open.

Magnus Andersson: Yes. Hi, I might have missed part of your statement there on the Slide 14, but in order to be crystal clear, I mean this development costs, I guess that you will always have development costs in order to stay relevant as an incumbent bank. So just to be crystal clear, out of the extra SEK1 billion in IT spending you were talking about in conjunction with the Q3 report last year, how much have you booked so far? And how much of what you have booked has hit the P&L being capitalized, respectively?

Carl Cederschiold: Thank you, Magnus, for that question.

We -- what we can say is that during the first half of the year, we have SEK1.490 billion in IT spend. So that's 5% higher than last year. So we are -- and we're likely to actually speed that up during the second quarter. Coming from the extra SEK8 billion, I think the figure is roughly SEK170 million. And then -- but what you have to take into consideration then is that the capitalization level on the balance sheet was only 9% during the second quarter.

So the consequence for the cost side during the second half of the year will be a mix of -- most likely we will speed up the IT spend and a higher proportion will be from the extra IT billion, but it is still uncertain what the level of the capitalization will be.

Magnus Andersson: Okay. So because I got a bit surprised, I saw this SEK168 million number in the report there on Page 5. So that's SEK168 million out of the billion, including capitalization. So it implies that your second half will be very heavy in terms of the extra IT development cost term?

Carl Cederschiold: I mean we do it over two years.

It's in a...

Magnus Andersson: You're talking about 2021 as the main year for this SEK1 billion in two quarters now? That change extended.

Carl Cederschiold: It will be done over two years. So both '21 and '22. So in linear terms, it would be SEK250 million, but that would imply that we cost -- we take it over to the cost 100%.

But yes, we will speed it up.

Magnus Andersson: And it still 65% do you expect to expense?

Carl Cederschiold: I think the.

Magnus Andersson: That will be capitalized?

Carl Cederschiold: One of the messages in this report is obviously that if you, as a bank, run a business where you develop everything yourselves, you build your core systems, et cetera. You have all the assets on the bank then you tend to capitalize a fairly high proportion. And the average of us has been 30% to 35% in the past, and we've taken 65% of the cost.

Once you move over to cloud integration and most likely using other ones system, you will have a tendency to take a higher proportion over cost. You can't tell theoretically what the correct level is. You will move it through the accounting rules once the development is done. But it is most likely that the bank, going forward, with a higher proportion of cloud integration, will have a lower proportion of capitalization. And as you see -- but 9%, as we have in this quarter, is very extreme, I would guess.

Magnus Andersson: Okay, thank you. And then on a more strategic note for you, Carina, although it's not a large part of your business today, but in terms of investment banking, we are probably in the mother of the mother of all bull markets that I've seen at least. And we know that you are increasing your ambitions within that area. We noticed that locally, we hear it, we see it, but we don't see anything in your numbers from this as opposed to in other banks and independent firms, et cetera. So my question is just, from a strategic point of view, what's your ambition with this? You don't mention it -- you didn't mention it in your initial initiation speech, so to speak, but something has changed there.

You're still not mentioning it, but should we expect it to, at some point, have any meaningful earnings contribution to your business? Or is it more to complement your branch office operations, if you can sell some light on that ramp-up of spending within that area?

Carina Akerstrom: Yes. Thank you very much for that, Magnus. Yes, I think that having an investment bank is definitely in line with the transformation that we've seen in Handelsbanken today, where we've focused on certain areas as well as we do in asset management and financing and so on. So this is very much a business that will support that transformation to support those customers where we can see that we -- they like the offer that we have and to support the business that we have with those customers. So that is very much in line with the focus on the transformation of banking the bank moving forward.

So I think that you should read nothing else. And we come from -- a couple of years back from an investment bank, where we saw that we lost a lot of market share, to be honest, and to support the business that we are moving forward with this will support, and that's why we do -- we have done an extra focus on the investment bank to support the business that we are going to focus on moving forward. So having an investment bank to support that, I think that is crucial. And in some areas, we can see when we look at how we want to develop the private banking business, for example, this is an important part of that, just for example. So we will see that moving forward, definitely.

Magnus Andersson: But it sounds like it's more a support to your other business rather than that you strive for having a really strong independent investment bank within Handelsbanken?

Carina Akerstrom: Yes, definitely. I mean this is -- we want to have an investment bank that is -- have a really high quality because that is the business we want to move on in all the other focus areas that we have. So this is definitely something to -- going to support that business.

Operator: Thank you. Our next question comes from Matt Leitgeb from SEB.

Please go ahead. Your line is now open.

Matt Leitgeb: Yes. First question related to the U.K., how you see this progressing both in terms of the IRB model approval, when could we expect that to materialize if you have any insight? And then also on the cost income in relation to the transition of the U.K. operations, I know it won't be like the Swedish transition.

But what could we expect or when could we start to see some effect in in the U.K. cost income or overall cost level because it's currently still on a very high level. That's the first question. And the second is more on the savings platform or net inflow. Do you have any distribution on how much is from Handelsbanken in internal, and how much is from external platforms and the age distribution of those brackets, i.e., if it's Handelsbanken clients, is that younger generation coming in? Or is it old, existing clients and also from platform? I don't know if you have that info, but it would be very helpful.

Carl Cederschiold: Thanks, Matt, for the questions. Well, first of all, I'll start with U.K. then. The IRB approval will -- the progress we're making is that, that will most likely be in place starting 2024-ish. So -- and that's a project we're running in conjunction with the PRA.

So we're following the normal route there. But having said that, I mean, the capital level as well, that could be different going forward anyway, because it's just not an IRB issue. It's an issue of what the Swedish FSA decide that we should have what kind of buffer requirements you should have on the British operation. And then going over to the cost to income levels, what we can say is that U.K. is shifting from five regional banks to one U.K.

operation. They are cutting down the branch levels at decent size. It's not -- it will not be the Swedish magnitude, but still decent. And as well, they put a lot of emphasis on integrating the wealth management and asset management business into the organization. So we do actually believe that we will have -- or decreasing cost, and we will actually have increasing income as well going forward.

And we started seeing small touch upwards on the income side, and we will most likely, going into 2022, see decrease in cost. I mean we don't know if it will happen to Q3, but still we believe there are many factors actually pointed to a good development there. Then moving over to the savings net inflow, a good question, Matt, what we can say like this is that we -- during the first half year, we had SEK36 million -- billion, sorry, in net inflow in total. I think we have SEK70 billion, if you look a year back in net inflow. The majority of it is into this -- to Handelsbanken's funds, but it's quite a large proportion, which has actually come via retail brokers as and also institutional flows.

The SEK36 billion for the first half of this year, SEK23 million is Sweden and SEK13 billion. 1-3, is other home markets. So there are quite a few developments going on beneath the surface here that we're growing outside of Sweden, which is really good because that's more retail money, i.e., higher income. And it's also -- we also have more legs to stand on and grow on. The majority of the retail flows from Sweden is most likely fairly high in age terms.

But having said that, the product supply we're having with a high tilt towards ESG, and as you know, we've been talking around before, the sustainable energy fund, which, last year, took a lot of flows, this year, is more or less flat or a bit positive actually. Obviously, that kind of tilt really is targeted or is targeted younger generations to really appreciate it. So I would most likely say that the flows coming from outside has a younger average age vis-à-vis Sweden. So it's a lot of components going on, but a really good question, Matt.

Matt Leitgeb: Okay.

And just to clarify the U.K. costs, I mean, it is more or less flattish if you look your first six months '21 compared to 2020. And we should -- I should rather expect that to be flattish rather than decreasing, but then income will grow much faster? Or do you expect that number to come down?

Carl Cederschiold: No. No. We definitely expect the cost levels to come down, but it's a bit more challenging to say what quarter, but definitely coming down.

We will have structural decrease in cost there.

Operator: And our next question comes from Antonio Reale from Morgan Stanley. Please go ahead. Your line is now open.

Antonio Reale: Hi, good morning everyone and thanks for the presentation.

I have two questions, one of which is a follow-up. And just the first one on cost, I'm looking at your Slide 15. I want to make sure I understand this correctly. You've addressed SEK1.3 billion of cost savings, of which SEK400 million are already in your cost base and another SEK900 million is agreed, but still to come through. If I take this SEK1.3 billion and deducted from your SEK21.9 billion cost base, it means you need to need another SEK600 million to SEK700 million net savings in six quarters to meet your target.

So basically SEK100 million net savings in the quarter give or take? Now first, do I understand that correctly? And secondly, how long will it take for the SEK900 million to come to the cost base? And that's the first question. The second one is really a clarification still on costs. And I think you partially answered this, so apologies if it's a repetition. But I understand that the underlying cost trends, of course, have been affected by this higher IT development, as you showed on the slide earlier. And the IT developments are going through the P&L instead of being capitalized.

You mentioned that you have a number of projects to do with migration to cloud. But this is you from loading expenses that you book a lower amount by the balance sheet and amortize less over the years. Is that right? And so will that lead to a sort of lower cost base taqrget from 2022? That's the clarification. And lastly, just if you have time, if you could provide your outlook for mortgage and in Sweden, how do you see competition? And what, in your view, will be the effects of the amortization program from the Swedish government coming to an end in September on both house prices and mortgage demand?

Carl Cederschiold: Thank you, Antonio. I think the mortgage question is interesting for many.

So, I do apologize you for the third question there. No worries. First of all, the cost question then. Yes, you are correct on that we have agreed and negotiated SEK1.3 billion of savings out of SEK0.4 million is flowing through the books right now. So there are another SEK 0.9 million to materialize in lower cost.

We have agreed for staff reduction of SEK700 million or a bit more than -- sorry, sorry, 700 persons in staff reductions. And that will the majority of them will come the next and the third and the fourth quarter of this year. But the total of the cost savings, you should expect to flow through during 2022 as well. And I agree with you, yes, there are SEK600 million or SEK700 million missing, which we will -- which we haven't agreed upon yet, but we have plans on. So they will flow through the book during 2022 as well according to plan.

Then, in theory, you are definitely correct that if we take more of the cost over P&L and less over the balance sheet, obviously, that will imply lower cost going forward. It's a bit tricky and too early to tell the conclusion for this. But yes, of all of our banks, we will have a higher proportion of cloud migration. And if we don't own the systems in the same degree, there will be more of a P&L and less over balance sheet. But it's too early to make any conclusions on the cost target going forward.

So all else equal, yes, it will lower the future cost, but we still guide on SEK20 billion. Then moving over to the mortgage side, I think it was a general question on competition there. Yes, it's fierce competition. We focused quite a lot on this one. We do believe that the success in mortgages should definitely be measured by market share, but it should -- but it's even more important, the absolute numbers.

And we are taking the biggest market share in absolute numbers. We are growing the fastest. We are picking up the pace. In May, we had 90% market share, and that was equal to SEK4 billion in absolute numbers. And in June, we had SEK5 billion, and we don't know the market share of that one yet.

We have done a few things. We have obviously strengthened the branch network. We have as well started improving the telephone bank, and we have as well improved the digital services to the branch network in order to improve their work on the mortgage business. So we do believe -- we do look positively there. Of course, there's fierce competition there.

Most of the banks want to be in that market. We expect that to continue. We expect margins to have pressure on them. But we don't see a general trend downwards in margins now. And on the average of the bank, we actually see -- we have more home markets actually now with increasing margins than other.

And then I think it was a question of the consequence of the amortization scheme going away. And we will have to wait and see the consequential for that one. Of course, there will be less money perhaps to be saved as generally in the market, but we've seen fairly few proportion of our clients being involved in amortization schemes and i.e., then they should be less affected.

Operator: Thank you. Our next question comes from the line of Sofie Peterzens from JPMorgan.

Please go ahead. Your line is now open.

Sofie Peterzens: Hi, it's Sofie Peterzens from JPMorgan. So sorry for going back to the cost question, but I would just wondering again on Page 15, what kind of underlying inflation have you assumed on the cost base in 2022 from wages and other products. Do you expect range inflation to be close to zero? Or how do you think about that? And doesn't mean that the underlying cost saves are actually a little bit more than the just SEK600 million to SEK700 million that you got need to come up with? So that would be my first question.

And then my second question would be. I know you made a general government initially on the dividend payout, but how should we think about a potential interim dividend in the fourth quarter? Is it something that you can do? What approvals would you need? Is it just the Board meeting or an AGM that you need? Or are there any other approvals you would need? And also, if you wanted to pay over 100% of your profit in dividends, would you need any special approvals for this?

Carl Cederschiold: Thank you, Sofie, for the questions. To start with the -- we've been using 2% inflation in the estimates. And obviously, a lot of things are moving in the banks. So there will be a lot of moving components when we're going to realize these cost journeys.

But we've been using 2%, for your information. Then on the dividend question, obviously, it's early. We -- what we like to have a lot of capital in the bank, we want to wait until the Swedish FSA tell us, both take away the restrictions, but also most likely guide us on countercyclical buffers. That will then imply the -- that will then make us take back the analysis of that want and move -- go to the Board and we will sit down with them and do it really, really quietly and over time. And then we will -- if -- it's far too early to tell if that's going to be adjusted then on the general annual meeting in the spring time or if it's need to do it earlier than that.

But it's too early to tell. But -- and we don't know what kind of restrictions the Swedish FSA will put on us. So -- but it's a good situation to be in. We are really well capitalized.

Operator: Our next question comes from Robin Rane from Kepler Cheuvreux.

Please go ahead. Your line is now open.

Robin Rane: Yes, two questions, please. Starting off with the Slide 28, where you have visualized the impact of future lost -- oh sorry, I think it was, yes, 28, visualize the impact of last year of additional funding and so on. Is -- do we expect any benefits, any more benefits from that going back to normal ahead? Or is that fully, fully now in the numbers? And then secondly, I understand that you lowered the left to live on calculation of the cooler in Swedish calculation in the quarter.

And I guess this is a -- more of a competitive consideration than anything else. But it would be interesting just to hear you listening on the, the risk in the Swedish market. I mean, we are 15%, 20% higher on the housing prices now. And is now a good time to lower this threshold do you think?

Carl Cederschiold: Let me start with the second question, and then I'll leave the first question to Peter. But no, as you said, we have -- we've lowered the -- in basic words, what we've done is the underwriting policy on mortgages, we've decreased the level of interest rate we calculate on to solve for the left to hit one number.

And as you're saying, I think that we obviously been running a really conservative underwriting policy here. And I think in the end, the amortization scheme as well on the cap on the levels, how much amount you can borrow on your loan that takes away quite a lot of the tails of the market. And then we're obviously a bank, which are really focused on the client segments, which we are. And we've been seeing for many years that most likely our levels, has been a bit high on that proportion. So, we don't see any large magnitude coming from that change actually.

But of course, on a general note, of course, the market will be more risky when prices are high for sure.

Peter Grabe: Yes, this is Peter. And in regards to your first question, yes, last year was obviously very volatile on the NII line. And as we alluded to already in Q2 last year, we said that all of the negative impacts we experienced on the funding side would not be reversed due to the rate cuts in particular in Norway and the U.K. And you saw that also in Q3 that we saw some recoveries or some positive sequential development on the funding side.

But then when we went into Q4, we were back to sort of a normal starting point again. And as you can see, the development, since Q4, has been very normal in the sense that the drivers have been the traditional ones, i.e., the volume development a fairly neutral funding effects and fairly minor other effects. So you can say that Q4 is a fair starting point for you guys in your estimates.

Operator: Your next question comes from Namita Samtani from Barclays. Please go ahead.

Your line is now open.

Namita Samtani: I've got two questions, please. Firstly, why has there been a lower Oktogonen charge this quarter versus the last quarter? And secondly, given the margin and funding impact and split out for net interest income in Sweden, could you please just talk about the margin dynamics there and whether there was pressure in the second quarter?

Carl Cederschiold: Well, first of all, Oktogonen the -- for you analysts, I mean, the way we accrue for Oktogonen is really a quantitative measure where we have a lag of a quarter. So what you see here, the numbers here are just a reflection of the difference between our ROE vis-à-vis our peers from Q1 and rolling four quarter backwards. So in the end, it will be a board decision at the AGM next year.

And we haven't put any subjectivity into that figure at all. And then coming down to the margin situation on the Swedish mortgages, we do -- it is definitely pressure, but we don't see that apparent pressure now. We have fairly flattish levels here in Sweden right now. It's too early to tell, but if there's any guidance to tell from other home markets, they actually have increasing margins in some parts. So it's -- we believe there will be fierce competition.

We will have to see what the margin is, but we don't see any reason why the margin pressure should be much higher than this now.

Operator: Our next question comes from Andreas Hakansson from Danske Bank. Please go ahead. Your line is now open.

Andreas Hakansson: And we've gone through most things, but let's look at two things.

First of all, on Slide 14, you talked about the development cost as they temper, but on you forced to do this higher development cost now because you were under spending in this area historically, and should this mean that, going forward, you should continue to spend more in order you're not going to lag behind again sometime in the future? That's my first question.

Carl Cederschiold: Okay. Thank you, Andreas. Yes, I think as we've been saying before, and I do really appreciate the analysis you put out on the banking market, I think that was really well thought through and really informative. But having said that, I don't think the correct peer group, on being the real good IT development bank, is not other banks.

It's actually the stronger IT corporates out there. So I do think that banks, in general, are inefficient in IT. So I do think that you shouldn't see this -- you shouldn't read any trend into our numbers now that we try to speed up. What we do is, we try to help the transformation in the branch network. And in that sense, yes, of course, we're investing quite a lot in digitalization and in client interfaces and these kind of things.

So I do think that it's not like the best-run bank will be the one with the highest IT expenses vis-à-vis banks. I think that's the wrong KPI of a strong digital bank. So I don't think -- what we guide on is that we have SEK2.6 billion annual spending in IT on general perspective, and we guide for another SEK1 billion over two years. So you should view us as trying to spend more or less SEK3.1 billion or a bit more than that per year now in 2021 and 2022. We will have to see, then we will obviously adapt to what future may hold, but we -- it's not like we're catching up, no.

Andreas Hakansson: Okay. I just had a thought when you said that you are allocating less talk to Oktogonen because of the ROE calculation. It's been many times when you haven't allocated to Oktogonen, but then it's been more related to cost overruns or whatever. Is this the first time we're actually not able to allocate money to Oktogonen because you're always falling behind your peers?

Carl Cederschiold: I actually don't know the answer. I mean, no, it's not.

And from quarter-to-quarter, obviously, these may vary. But what we can say is that, yes, you're correct. We've had years now that has not been the ROE, which has been the consequence of our decision in the end. This time, it is -- this time, it is a measure of just the way we quantitatively reserve. But no, it's not the first time.

Operator: Our next question comes from Martin Leitgeb from Goldman Sachs. Please go ahead. Your line is now open.

Martin Leitgeb: If I could just have two follow-ups, please, one on NII and one on capital and the payout ratio. And on NII, I was just wondering if you could give us an update on how we should think about NII progression from here? It seems like margin was stable in the quarter, partially impacted by costs in the first quarter so without that maybe slightly down, but volume trends continue to be strong.

So should we continue that to -- should expect that to continue from here, so flattish, slight improving outlook? Also the question just with regard to, I think, one of your peers was sounded slightly more cautious with regards to NII outlook going forward. And the second question, just on the payout ratio then to come back to the 40% payout ratio, just looking at the capital level, looking at comments that revenues will grow faster than costs and the quality of the loan book. Is there -- do you see that 40% still as appropriate at this level? Or could be a scenario that, going forward, this can be revisited and potentially go back to some form of historic approach where the previous year payout ratios stay tune of that in the quarterly basis?

Carl Cederschiold: Thank you, Martin, for these questions. To start out with on the NII, First of all, obviously, we are a large business in Sweden, but we do have other home markets as well. And then what we should say is that we're fairly constructive in the volume development in all of our home markets.

We do believe that Sweden is -- has proven that they are really, really resilient and strong going now. And for the -- in the second quarter, they did take SEK13 billion in the mortgage market. So I do think that's a more important measure than the market share in percentage points. So volume-wise, we do believe that Sweden is well suited, and we do as well see that the real estate financing towards corporates as well have strong growth. It's actually plus 6% over the first half year there.

And then obviously, we have the volume development in other home markets. And it's not that many home markets where we're actually negative vis-à-vis the history now in volume terms. And then it comes down to a margin perspective. And of course, we see a risk of margins dropping further. But we're adjusting to that one.

And we do actually see that in quite a few of the markets, we're actually improving margins. And please remember that we took a huge margin hit in Q2 last year in U.K. and Norway on the deposit side. And if anything, that's actually retracing back a bit. So the mortgage market in Sweden is really, really important to us, but it's not the whole picture.

Then on the capital level, I think it's fair to say that the constant in the equation is the target range of the Board. And obviously, they can change that over time, but we run with a target ratio of 1.3 percentage points. And then it comes down to the way we can grow the bank. And as you've seen in this quarter, we've been using quite a lot of the net revenue of the dividend to growth. But then on the other side, we made a positive volume and rating migration.

So over time, if we manage to grow nicely and still leave capital on the bank, of course, we will, over time, distribute more than 40%. But I do think it's a good position to be into what we anticipate 40% and in the end, we will deliver -- I mean there are no reason for a bank to build capital for the purpose of building capital. It is to support the client growth and be a really stable bank. And in that sense, we're steering to the 1% to 3% in target range, and we want to have capital to grow.

Operator: Our next question comes from Rick Strand from Nordea.

Please go ahead. Your line is now open.

Rick Strand: Thanks for taking the question. I have a follow-up question on the mortgage margin development in Sweden. You write in the report that it's unchanged Q-on-Q.

Still, looking at your average prices versus your sort of a benchmark funding cost, it looks like margins for you and for the peers are sliding down, so some pressure there. Is there anything that we're sort of missing in this sort of simplified analysis when you conclude that margins are unchanged while they appear as they're sliding?

Carl Cederschiold: I mean the number that we commented on in the report is the gross margin. So -- and when you talk about margins, you can do the calculations in different ways. But our message in the report is that there was no material impact on the margins in the mortgage business for the bank in the quarter. But then as I said, I mean, you can calculate the margins in different ways.

I don't think that the development that we're seeing should deviate materially from what you see elsewhere in the market. So I mean there is an underlying pressure in the mortgage industry as such, and we've had that for a number of years. And there's nothing really changing that picture as of now.

Rick Strand: And sort of between Swedish banking and sort of treasury, has there been some sort of change in the on transfer pricing or anything in Q2 versus Q1 that we should be aware of that's sort of impacting this development.

Carl Cederschiold: No.

Rick Strand: No? All right. All right. Then second question on depreciation that appear to be up somewhat in Q2, both sequentially but also year-over-year. Just interested to see if there's something impacting that temporarily? Or if we should expect a continued sort of higher -- somewhat higher level for depreciations going forward?

Carl Cederschiold: No. I think that's -- well, idiosyncratic isn't the right word in using in these terms, but it's not something which you should extrapolate going forward, no.

Operator: Our next question comes from Maria Semikhatova from Citibank. Please go ahead. Your line is now open.

Maria Semikhatova: Yes, Hello. Thank you for the presentation, a couple of questions on margins.

Just on the Swedish mortgage market, your peer mentioned that there is underlying pressure for customers opting for longer-term fixed mortgages. Can you maybe provide some color if you're seeing the same trend that's affecting your book and the split of fixed versus floating for your outstanding mortgage balances in Sweden? And then outside of Sweden, if we look to the second half of this year, I think we are -- economies are expecting a hike in Norway in September. If you can maybe quantify what could be the benefit for your operations there? And similarly, in Denmark, a number of players revised the threshold for charging negative rates on retail deposits and also lower rates on corporate deposits. Are there any actions you are taking on your deposit base in Denmark? And maybe where you are relative to peers?

Carl Cederschiold: Okay. Maria, let's start and see if we can -- first, around the relation about fixed and floating in Sweden.

Yes, we see the same trend that more of our clients do pick the fixed loans. And that's fairly rational in this low rate environment and especially if you do believe that rates will go up. And in that sense, that product mix change, that creates lower margins. So we see that underlying as well. Then you were asking around the Norway.

And what we saw was, obviously, last year, we had -- we took a hit in Norway when Nordisk Bank cut rates. And that's obviously then what we said that, first of all, rates dropped structurally or margin dropped structurally on the deposit side when rates go lower, but also it's a notice period, and that was a temporary thing. If Norway were to increase rates now, first of all, it's likely that the deposits margins structurally go up a bit, but their notice period could hit us again.

Peter Grabe: Yes. Similarly, as with deposits, when we make changes that would negatively affect customers, we have noticed periods also on the lending side, which means that there will should there be a rate hike, it's likely that we should see some headwind due to a notice period in Norway as well as in the U.K., if we will see rates being hiked there as well.

Carl Cederschiold: But the long-term consequences will most likely be positive because it will reverse some of the negative trends in deposit margins. And then I actually didn't follow your question around Denmark. Did you, Peter?

Peter Grabe: No.

Maria Semikhatova: Just on the retail deposit threshold, I think even Danske reduced their threshold for charging negative rates to DKK150. I think you have a higher threshold if I'm not mistaken.

Just wanted to confirm if there is the upside to margins in Denmark from repricing of customer deposits?

Carl Cederschiold: Yes. Please let us get back to that one in a minute, and let's take another question and then we'll answer that one in a minute for you.

Operator: Our next question comes from Jacob Kruse from Autonomous. Please go ahead. Your line is now open.

Jacob Kruse: Just two questions. So, firstly, on the corporate business, I think you're gradually losing market share, although very slowly in the Swedish market. At the same time, you have really no credit losses even in this relatively stressed environment. So do you think that with this review of your business that there's any room to increase the risk appetite in some sectors a little bit? And my other question was just on the U.K. Do you see any issue at all with the business mix you have of the loan book there? Or are you comfortable with that being largely a mortgages and commercial real estate and property management business?

Carl Cederschiold: Thank you, Jacob.

First of all, let's -- on the corporate business side, first of all, running a bank, we see very, very little reason actually to try to run a bank with -- and try to live with credit losses in order to gain volumes. So that's not the way we run the bank. We like good clients and good clients don't have credit losses. So that's the way we try to steer it. As you know, we are -- focus in the bank even stronger in that sense.

-- To your first question. I think the second question was around U.K. Was that correct, or? Sorry. And then it was around the loan book.

Jacob Kruse: I think the loan book on the corporate side is almost entirely property management at this point, yes.

And I guess my question is just this used to be sort of framed as a just fire principle local businesses and kind of very present in the local market. In that context, it just seems a bit odd that you're so focused on just one client segment. And I guess also within that, are you moving away with from that when you're starting to reduce the branch network?

Carina Akerstrom: Answer the question before you fill in, Karl. I think it's important to say that when we look at the corporate business that we have in all our home markets and not least in Sweden, we do have the highest market share actually. But since a lot of years back, 10, 15 years back, we have built a really good real estate portfolio when it comes to the corporate business.

But again, we do have really good owner-managed companies as well. And with them, we have a really good profitable growth, and that we will continue. So we are not just going to do one way. But again, we do have a history way back, but this is where we do have a really good impact in the real estate business even when it comes to the capital market as well as the lending in the bank. But again, the corporate business, outside real estate markets, is really good as well.

But we do that together with making sure that we have profitable growth, low risk even in that environment, but we do have really good corporate business overall, and we have a really fair market share, I would say. And that goes the same for all our home markets. And you can see that it's different, of course, when we started the home market. If you look at Holland, Netherlands, for example, yes, they focus very much on the real estate business. But that is where how we have had really profitable growth in the Netherlands.

In the U.K., it's more a mix in Norway. It's definitely more of a mix. But again, since 10, 12 years back, we do have a really good corporate real estate business. So I think that is to focus even further is not a bad thing to do, but at the same time, keep the other corporate business really good and in all our home markets. So please fill Carl.

Carl Cederschiold: And I think that, to some extent, actually answered your second question that we don't think that we make any gradual changes. We don't think that the review of the branch network as such will have any meaningful impact. And then you should put in perspective that the journey we make in Sweden even though we're halving our branch network, we actually do believe that we have a much better offering to the corporates actually. We're strengthening the capacity in the branches, which we still will run. And the same will obviously go for U.K.

So you shouldn't view this in essence as we're changing the way we do business, just the methods of it.

Operator: The final question comes from Jens Hallén from Carnegie. Please go ahead. Your line is now open.

Jens Hallén: And my first two questions.

My first question is a little bit linked to what you just answered enough to do with the revenue attrition you used to talk about the SEK1 billion. And the question is, do these estimates still stand? And if so, are they still -- are they now on the books fully? Or have you found ways to compensate for it?

Carl Cederschiold: Thank you, Jens. Well, first of all, the negative revenue attrition from scaling back the international markets, they are firmly in the books now. And they were conservatively estimated, obviously, and the impact was less in the end. And then the negative income attrition from what we were saying last quarter, that is, we don't have any new guidance coming from that one, no.

And we don't have any more information to give you on the payment business as of yet. We will get back to that one when we have information to tell you.

Jens Hallén: Okay. Perfect. And the second question, this is just a clarification of what you said before.

I just wanted to understand, did you say that you wanted a clear confirmation about future countercyclical buffers before making a decision on what to do with excess capital? Or was that just an example of things to come?

Carl Cederschiold: Obviously, what the Swedish FSA and other ones has been saying is that they -- that in normal times, we should have a full countercyclical buffer. And so we're obviously -- we will plan our capital situation based on the inferred of countercyclical buffers. And if they are transparent around them, they make our life a bit easier. If they're not transparent around that one, we will not go out and first distribute capital and then need to build it again. So it will most likely affect us.

But obviously, if they're not telling us something transparently, then we will obviously need to treat that the planning of it ourselves. But they have been transparent around that in normal times, they view it as full.

Jens Hallén: Exactly. So from a poor analyst point of view, we can -- worst case, we have to assume a full countercyclical buffer, but you don't but we are -- we can have a workspace scenario in terms of planning.

Carl Cederschiold: You will have to wait and see what the consequences of the Board decisions will be on the dividend, et cetera.

But what we can say is that pre-corona, we obviously had 1.9 percentage affect of countercyclical buffers. So I mean, in that sense, we know the -- more or less the number.

Operator: Thank you. As there appears to be no further questions, I will turn the conference to speakers for any closing remarks.

Carina Akerstrom: Okay.

Thank you very much, and thank you very much all of you for listening to this -- listen to us during this hour, and thank you for all the questions. And I wish you all a really, really good vacation in the summer. So thank you very much, and have a nice day.

Carl Cederschiold: Thank you.