Earnings call transcript: Aktia Bank Q4 2024 shows strong growth, stock rises

Aktia Bank (AKTIA) reported solid financial results for the fourth quarter of 2024, highlighted by a 7% increase in total operating income and a 19% rise in comparable operating profit to €124.5 million. The company’s stock responded positively, climbing 1.54% to 9.92 in pre-market trading. With a market capitalization of €747.77 million and an attractive P/E ratio of 7.29, InvestingPro analysis shows the stock trading near its Fair Value. Despite a challenging interest rate environment, Aktia’s strong performance and strategic focus on IT investments and new product launches bolstered investor confidence.

Key Takeaways

• Total (EPA:TTEF) operating income grew by 7% in 2024.
• Comparable operating profit increased by 19% to €124.5 million.
• Stock price rose 1.54% following the earnings announcement.
• Continued investment in IT and digitalization.
• High customer satisfaction and competitive position in key Finnish markets.

Company Performance

Aktia Bank demonstrated robust performance in 2024, with significant growth in operating income and profit. According to InvestingPro data, the company achieved impressive revenue growth of 13.65% and maintains a strong return on equity of 14%. The bank’s strategic initiatives, including new product launches and IT investments, have positioned it well in a competitive market. With a beta of 0.74, the stock shows relatively low volatility, while offering shareholders a substantial 7.16% dividend yield. The company’s strong presence in growth cities like Helsinki, Turku, and Tampere has contributed to its positive results, despite challenges from declining interest rates.

Financial Highlights

• Total operating income: 7% growth in 2024.
• Comparable operating profit: €124.5 million, a 19% increase.
• Net commission income: 9% growth in Q4, 4% for the full year.
• Common equity Tier One ratio: 12%.
• Proposed dividend: Higher than the previous year, representing 60% of comparable profit.

Outlook & Guidance

Aktia Bank anticipates a challenging 2025, with expectations of lower comparable operating profit and net interest income due to falling rates. However, the bank plans to continue its focus on IT investments and cost management. InvestingPro analysis reveals a GREAT overall Financial Health Score of 3.15, suggesting strong fundamentals despite near-term challenges. A strategic review and new targets are set to be announced on February 27. For deeper insights into Aktia’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

CEO Alexei Leptonen highlighted the company’s strong performance in 2024, stating, "2024 was a strong year for Aktia." He emphasized the importance of cost control and acknowledged the challenges of declining interest rates, noting, "No player in the Banking business is totally immune of the falling rates."

Risks and Challenges

• Declining interest rates impacting net interest income.
• Expected increase in operational expenses.
• Potential challenges in maintaining growth in a modest housing market.
• Continued need for investment in IT and digitalization.
• Competition in the financial advisory and wealth management sectors.

Q&A

During the earnings call, analysts inquired about the outlook for the housing market, changes in asset management allocations, and the bank’s IT investment plans. Aktia addressed concerns about credit impairment provisions and highlighted its strategic focus on maintaining a strong competitive position in key markets.

Full transcript - Aktia Bank Abp (AKTIA) Q4 2024:

Oscar Taimitarha, Head of Investor Relations, Aktia: A very good morning, and welcome to Agtea’s Q4 Results Briefing. My name is Oscar Taimitarha. I’m Head of Agtea’s Investor Relations, and I will be the host for this event today. Earlier this morning, we published our financial statement release. A stable quarter ended a strong full year.

Aktir’s CEO, Alexei Leptonen and CFO, Sakari Jarvella, will talk us through the results. And after the presentations, we’re happy to answer your questions. If you’re following us online, please feel free to write your questions in the comments field. So let’s move on. Alexey, please welcome.

Alexei Leptonen, CEO, Aktia: Thank you, Oskar, and welcome on my behalf as well. Today, we’ll focus on the fourth quarter of twenty twenty four. Of course, I know that you would like to hear more about our strategic considerations. And we as we announced this morning, we will go them through on the February 27 in an investor event. It is now my privilege to go through the fourth quarter and also a few words about the full year of 2024, together with our CFO, Sakari Jarvella.

So let us have a look at the Q4 highlights. First of all, I’m very pleased by noticing that Aktia’s customer satisfaction increased the most in the independent EPSI survey among private investors. Aktia was assessed to have the most active dialogue with its customers in Finland. And as an asset manager and a bank, customer satisfaction is of the utmost importance in our journey to be the best partner for those who want to increase their wealth over time. The fourth quarter results ended a strong year for Aktia.

Our comparable operating profit for the fourth quarter amounted to €28,300,000 which is 11% higher than in the fourth quarter last year. Hence, the 2024 full year result is one of the best results in Agtia’s history. Our net commission income increased 9% quarter on quarter, driven by good development in asset management, particularly within mutual funds. The net interest income remained stable and the performance of AKTIA Life Insurance (NSE:LIFI) business was once again solid. A key for this was the income from the investment linked insurances reaching to a new all time high.

As we have already mentioned, we continue to develop and invest in our IT, and still, we have maintained strict cost control. Our credit loss provisions increased mainly due to a provision in the corporate loan book based on the management’s assessment. Given all this, comparable return on equity reached to 15% and the comparable full year cost to income ratio improved to 0.56% being better than our long term target at 0.6. We reported nonrecurring items compressing the result in the fourth quarter twenty twenty four this morning. However, the impairment of the IT related intangible assets do not affect comparable results.

In quarterly comparison, as you can see here in the graph, our performance has been solid throughout last year, and every quarter we have outperformed the corresponding period in 2023. The fourth quarter was not an exemption. And as mentioned, we delivered one of the best result in AKTIA’s history in 2024. And when showing this picture, I once again have to remind you that for 2022, we restated the numbers for our Life Insurance business according to the IFRS 17. And therefore, we show two bars for 2022 in order to show both the reported and restated figures.

So let’s have a look at how the full year result in 2024 compares to our long term financial targets that are existing now. As I mentioned, 2024 was a strong four Actia. And when we compare the results with our long term financial targets set out for end twenty twenty five, I. E, this year, we are proud to tick all the boxes one year ahead. As said, the comparable operating profit of EUR 124,500,000.0 is one of the strongest in Actias and its predecessors’ history.

And a comparable return on equity of 15% is indeed a good achievement. Also, the costincome ratio at 0.56 came in at a better level than the target at 0.6. The stable development of our core Tier one ratio, set one, means that we also met our target there. Against this background, it’s an appropriate time to look ahead and set new ambitious targets for the coming years. And as we announced today earlier, we will describe these to you in more detail on February 27 in a meeting.

This favorable comparable result has given our Board of Directors a reason to propose a higher dividend than last year. According to Actia’s dividend policy, we tend to pay out a dividend of approximately 60% of the profit for the reporting period to our shareholders. Our goal ultimately is to provide a competitive dividend yield to our shareholders. And now, Agtia’s Board of Directors proposes that a dividend of per share is to be paid for 2024, and this constitutes 60% of the comparable profit and corresponds to a dividend of approximately million. The IT related impairment we announced today do not affect our ability to pay dividend.

The proposed dividend is higher than the last year’s per share, which amounted to approximately million, reflecting good result last year. And before we take a closer look at our business areas, I would like to invite you to our investor event, as said on February 27 in Kulturikas Army here in Helsinki. You are welcome to participate on-site or online at your convenience. During the event, we’ll provide updates on Actia’s strategy and long term financial targets. But now let’s look at the performance of our three business areas.

I’ll start with our Asset Management business. First of all, I’m happy to know that our net commission income for the whole group was 9% higher than in Q4 last year. The increased NCI was driven by good development in mutual funds and securities brokerage. However, assets under management decreased slightly by the end of the year, mainly due to allocation changes among domestic institutions institutional investors. During the fourth quarter, we also launched a new product family of discretionary management solutions, and these products combine Actia’s spare head knowledge in fixed income and cost efficient ETFs through our top tier asset allocation processes.

It has been very well received by investors already. And this is how we define a leading wealth manager. We build on our strengths and build partnerships with the leading global players. And through that, enabling us to be our clients’ best companion in creating wealth. Then our banking business.

As I already mentioned in the beginning of my presentation, I’m happy to know that Agtia’s customer satisfaction increased the most compared to last year according to the independent EPSI survey among private investors. I’m particularly pleased that we are recognized as the most active advisor in town. In addition, our service quality and our product quality and availability were rated highly, which are already important for the future success. For both private and corporate customers, we noticed a clear pickup in new lending and the fourth quarter was by far the best in 2024. The loan book increased within our core segments, for instance, premium customers.

In Corporate Banking, the trend with strong growth in higher purchase and leasing financing continued. Lastly, the demand for investment solutions remained strong, especially among private customers within Banking segment. And finally, our third business area, Life Insurance. Life Insurance is playing an increasingly important role in Wealth Management. We see this in the high use of insurance wrappers and investment linked policies.

Risk insurance, on the other hand, plays an important role in providing security and stability in wealth planning. Our customers have really found these products and see the great benefit in them. We are delighted to see that the amount of investment linked insurance has reached to a new all time high. This favorable development contributed greatly to the fact that the life insurance result was once again a solid one. I’m also pleased that Aktia’s investment linked insurance policies and thus Aktia’s asset allocation expertise are now also sold by pulp banks as a result of a cooperation agreement that entered into force in the November.

And then let’s move on to the sustainability topics. Looking at our ESG KPIs, I actually repeat what I said during the Q3 presentation. Many of our 2025 targets are already met. And now I’m pleased to add that the carbon footprint milestone for 02/1930, I. E, minus 50% change in relative carbon footprint of equity and credit portfolios was met already in 2024.

And actually, it is minus 60% as seen in the graph. On the employee satisfaction side, our indices under the People headline here in the middle section have been developing in the right direction during the whole year. In Q4, we measured the Signi flame index and the eNPS as part of our continuous monitoring. And once again, we took steps in the right direction, although I must say there’s still room to improve. And now let me finish my part by going through the outlook for 2025.

The changed interest rate environment has so far had only small impact on our net interest income. But during this year, the net interest income will be lower. This will, of course, affect our operating profit. No player in the Banking business is totally immune of the falling rates. Regarding the other parts of our business, we expect more stable development.

Our income mix supports us in changing market conditions, and we expect the net commission income to be somewhat higher than 2024. We will maintain strict cost control, but we expect a slight increase in operating expenses as we, for example, continue to develop our IT platforms and systems. Credit losses are expected to remain at the moderate level, but as we all know, there is uncertainty related to the Finnish real estate sector that may have an effect on the impairments. All in all, our comparable operating profit for 2025 is expected to be lower than the comparable operating profit for 2024 that was million. And now I will hand over to Sakari to go through our financials in more detail.

Sakari, the stage is yours.

Sakari Jarvella, CFO, Aktia: Good morning, everyone, and welcome also from me. My name is Sakari Jarvella, and it’s a great pleasure to be here representing AKTIA for the first time since joining the bank in mid January. I will present the financial result for the fourth quarter and full year 2024. So let’s have a look at the numbers a little bit more detail. As Alexi already stated earlier, we’re very happy to report a very strong fourth quarter and full year result with broad based top line growth both for the quarter and for the full year.

Before diving deeper into the individual line items, I just wish to highlight a few of key items that are important for us. First, the full year 2024, we recorded total operating income growth of 7%, which each of the main income lines with each of the main income lines contributing positively to the growth compared to full year 2023. Also, we managed to keep costs tightly under control with total operating expense of EUR 178,600,000.0 for the full year 2024, only 1% higher compared to last year. Given the growing top line and flat costs, our comparable operating profit increased to $124,500,000 or 19% growth compared to the previous year. Notably, as Alexi already mentioned, this is very close to being a record year ever for Agtea in comparable EBIT and something we are naturally very, very proud to show.

Comparable return on equity was 13.1% in the fourth quarter and 15% for the full year. And common equity Tier one ratio ended also slightly up for the year at 12%. I am largely concentrating here on the comparable results, and this is due to the EUR 26,400,000.0 impairment charge we decided to make writing down some of our intangible assets related to IT systems and licenses. Very positive development of net commission income with EUR 32,500,000.0 income generated in the fourth quarter. That represents 9% growth compared to Q4 last year and 3% growth for the full year 2024.

Net interest income was stable in the quarter compared to previous year, and the net income from life insurance grew also healthy 4% in the year. As mentioned earlier, it is worth noting that when we look at the whole year, the growth really was broad based across all income lines, highlighting the strength and solidity of our earnings. Within the net commission income, the growth was driven largely by good performance in mutual funds and asset management and security brokerage. This positive trend shown in the black and green bars of the chart is especially notable as these are the income lines mainly related to Wealth Management and are showing healthy growth in line with our chosen strategy. Net commission income from Wealth Management activities is a key KPI for us, and we pay particular attention to its growth.

For the full year, total NCI grew by 4%, and we want to see this growth accelerate going forward. The assets under management decreased by million in the last quarter, leaving AUM flat compared to last year. This decline was mainly due to larger allocation changes by a small number of our larger Tier one institutional clients. So while decline in AUM is in itself somewhat disappointing for us, we can still highlight that it is not a result of losing clients and also the impact on the net commission income was limited in the quarter. The net interest income in the fourth quarter was flat compared to Q4 twenty twenty three, but lower compared to the first half of this year.

The income from lending was lower due to slightly declining lending book during the year and also falling interest rates and margins. The lower income was partly offset by the falling interest cost we pay for our funding that is senior financing and deposits. It is worth bearing in mind, again, as Alexi already mentioned, that falling interest rates have so far only had a minor impact on our net interest income. But as for everyone in the industry, e flow rates persist, this will eventually impact the NII negatively also for us. I said, we retained a very good cost control during the year with no increase in average headcount during 2024 and personnel costs practically flat compared to the year before.

We increased our spending on IT development as we continued upgrading our core IT system. This is required to be able to meet increasing need for speeding up our front end digitalization efforts and being able to further develop our data and AI capabilities. The increase in IT costs compared to last year was offset partly by no resolution fee payment being required in 2024. Due to the really good collateral position of the bank, the credit losses remained at a moderate level. The SEK 1,800,000.0 increase compared to last year is mainly explained with a provision in the corporate loan book.

This increased provision was based on management’s assessment outside of what our credit loss model would have required, highlighting our prudent approach to credit loss provisioning. We have seen a moderate increase also in household loan defaults in 2024, but noting that in this definition of default, this also includes customers marked as unlikely to pay. And this increase results partly from weekend repayment capacity of some customers, but also importantly, the launch of the positive credit registry also played a significant part as we now discover financial distress at an earlier stage than before. Our CET1 ratio continued to increase steadily reaching 12% at the end of the year, up 0.7 percentage points compared to a year ago. This increasing trend underlies our intention of continuing to run the bank based on a prudent balance sheet policy with strong capitalization rates.

Then to the IT related impairment charge, which was published as a separate stock exchange release this morning. The impairment was 26,400,000.0 affecting the intangible assets on our balance sheet at year end, consisting of a 25,000,000 of IT related intangible assets and 1,400,000.0 expensed IT licenses. On our income statement, it is reported as a non recurring item affecting our operating profit, but not the comparable results. The impairment follows from a reassessment of a reassessment we made of accounting values and depreciation times of some of our IT assets, the large part of which relates to the core banking system. We are currently investing in some more sizable upgrades on our core banking system and will be launching this new upgraded version of the system sometime in the near future.

Hence, as a normal course of business, we have reevaluated the accounting values and depreciation times of some previously activated parts of the system, which led to this impairment charge. As mentioned, the non recurring items do not affect Auctia’s comparable operating profit. And very importantly, the items have only a marginal impact on the core Tier one equity calculation for capital adequacy as intangible assets are not part of this calculation. Regarding funding activities, Q4 was relatively quiet as we currently hold very strong level of liquidity shown in our liquidity coverage ratio of 214% at the end of the year. We obviously keep monitoring the market during Q1, especially for senior preferred private placements in euros, but we are very happy with the current liquidity level, so no large issues are expected right now.

To finish my part, I would also like to highlight that we will be publishing our annual report and pillar three report on March 13, which will provide further disclosure regarding our operations and our financials. So some of your questions will be answered there. And in the meantime, we will welcome you to our Investor event on the February 27, where we’ll be opening our new strategic areas a little bit more. With that, I would like to pass the word back to Oskar for the Q and A session. Thank you.

Oscar Taimitarha, Head of Investor Relations, Aktia: Thank you, Alexi and Sakari. Welcome back on stage. And now Kati Ericson, EVP for Asset Management, has also joined us. Welcome, Kati. So now we’re happy to answer your questions.

And Alexey, Akti announced that you will talk about the strategy on the twenty seventh. What can you tell us about the process and what can we expect?

Alexei Leptonen, CEO, Aktia: Yes. Thanks for the question, Oscar. Yes, indeed, we have worked last autumn and this winter very thoroughly on our strategic questions. And we’ve came up with updated and updated version, which we will now publish on the twenty seventh in the investor event. The process have been very well according to our plans and that’s why now it’s a proper time also to outline our longer term new finance targets for the next upcoming strategy period.

So I’m very pleased to invite all of you on that event.

Oscar Taimitarha, Head of Investor Relations, Aktia: Thank you. And Sakari, Akria announced $26,000,000 1 offs today. What were the assets written down?

Sakari Jarvella, CFO, Aktia: Like I said, maybe as a background, we made a decision to invest in upgrading our core banking system. And parts of the old system or the full old system is activated on our balance sheet as an intangible assets. So while we make this investment decision, we also spend a little bit more time in going through line by line what is in the balance sheet and evaluating the accounting values and the depreciation times. And given that we now invest in some of the major a little bit more major upgrades, they will obviously mean that the old items in the balance sheet we considered that the depreciation times should be shorter. So it is the major part or majority of the impairment relates to the core banking system.

And then in addition, some other line items and licenses.

Oscar Taimitarha, Head of Investor Relations, Aktia: Thank you. And Kati, how did the Wealth Management business develop during Q4 in your view?

Kati Ericson, EVP Asset Management, Aktia: Thank you, Oscar. Well, asset and wealth management for Aktia is a key in our value proposition. So I’m very pleased that we can deliver continuing growth in our net commission income as reported by both Alexey and Sakari that the growth quarter on quarter was 9%. And that was mainly driven by AKTIA funds and also asset management and securities brokerage. All of these three areas developed very well regarding the net commission income.

Towards the end of the year, as mentioned before, couple of our very large institutional investors did some allocation changes in their portfolio and that then ended up showing as a net redemptions in our AUM figures. That was partly reflecting in our own ACTIA funds AUM numbers, but mostly in our third party manager selection offering, which is a lower margin offering. So that was kind of the big picture of those redemptions. We didn’t lose any of these big clients, but we are definitely continuing our long term relationship with them and supporting them in their own activities regarding their portfolio management.

Oscar Taimitarha, Head of Investor Relations, Aktia: Thank you. Do we have any questions here on-site? So if we begin with Antti Sari from OP.

Antti Sari, Analyst, OP: Hello, Ant. Thanks for taking my question. Firstly, I would like to ask what’s your outlook for the Finnish housing market and house loan demand at the moment?

Alexei Leptonen, CEO, Aktia: Thank you, Antti. The housing market is, as we saw in Q4, our loan book grew both on the corporate side and on the housing side compared to other quarters last year. So we saw a pickup in new lending in the last quarter. However, I must say that we are still far away from the levels we saw in previous years. So it’s a little bit modest, the housing market.

We have to remind everyone that Aktia plays in the geographic area of growth cities. The capital area, Turku, Tampere, Vasa, etcetera. Actually, the origin of the name of Aktia is from Greece. Akti means coastal in the Greek language. So we are in the growth areas of Finland and over two thirds of our loan book in housing is actually in the capital area.

So that’s why also the collateral values are really centered in the growth areas of Finland.

Antti Sari, Analyst, OP: Okay. And then another question regarding asset management. These quite significant negative subscriptions were mentioned to be from few very large clients that met allocation changes. Have you discussed with the clients that why they choose another asset management? Because you also have quite wide range of products.

So that the thing that they changed the allocation doesn’t mean that they need to take the money out from Akti, right?

Alexei Leptonen, CEO, Aktia: Maybe I’ll hand over it up to Kati, who is in very details on this question, if okay.

Kati Ericson, EVP Asset Management, Aktia: Of course, we do have a very deep dialogue with the clients. And actually, we have seen from this same particular clients also in flow. So but on net terms, it ended up being a net redemption. There has been, how do I say, a more strategic shift in our pension companies regulation. So and that will be also reflecting or have been reflecting their asset allocation decision towards the end of the last year and probably we will see some going forward.

Obviously, we do have, as you mentioned, a very good range of products. And definitely, we are very full focus on delivering in all of the asset classes areas that we can support our clients.

Oscar Taimitarha, Head of Investor Relations, Aktia: Okay. Thanks. And then Kasper Mennelas, Inters.

Kasper Mennelas, Analyst, Inters: Hi, and thanks for having my questions. Do you expect most of the decrease in net interest income to come through during this year? And should we also expect some minor headwind from NII margins in 2026?

Oscar Taimitarha, Head of Investor Relations, Aktia: Sakur, I think this one is for you.

Sakari Jarvella, CFO, Aktia: I think given my relatively short tenure, I will also refer Alex if you feel free to add. But obviously, the lower rates will result in a lower NII as we have guided in 2025. Typically, I would say that also margins get affected when interest rates decline, but it doesn’t mean that we are necessarily expecting a a specific margin pressure for this year. But Alexey, feel free to add.

Alexei Leptonen, CEO, Aktia: Thanks. Nothing really major to add. We believe that for this year, it will have an impact. And then it’s then the actual rate environment that plays out. And as we saw and as we said in the presentation, actually, this is a broad question for the whole banking sector and no one is totally immune of the rate environment.

Kasper Mennelas, Analyst, Inters: Okay. How much do you expect your costs to increase during this year? And is the growth distributed evenly between cost items? Or do you expect some line to grow faster than the others, for example, IT costs?

Alexei Leptonen, CEO, Aktia: Thank you. Yes, that is pretty much the case. We guided that operational expenses will grow somewhat, but at the same time stating that we will continue to be very strict on our costs. For last year, actually, our personal costs decreased few million euros, while the IT investments grew a bit more, leaving us for a bit of operational expenses increase in the last year. So for the IT, we expect them to be somewhat higher, yes.

Okay.

Oscar Taimitarha, Head of Investor Relations, Aktia: If I continue here, we had a question from SAB Equity Research concerning the same topic. That’s why I think that we could take it at this moment. So the question from SAB is given the larger IT investments mentioned, how large pickup will we see in IT spend during 2025?

Alexei Leptonen, CEO, Aktia: I think we do not disclose it exactly. Of course, we have a thorough plan in place in order to within our IT setup. And on the Investor Day, our CIO will go through in more detail our IT setup. But we expect in totality a slight increase on the operational cost side. But having said that, we still are considering costs in a very strict way.

Oscar Taimitarha, Head of Investor Relations, Aktia: Thank you. And I suppose, Kasper, that you had another question.

Kasper Mennelas, Analyst, Inters: Yes, I do. What was included in the non recurring costs of EUR 3,200,000.0 according to my calculations in Q4?

Sakari Jarvella, CFO, Aktia: I think we’re going to have to come back to that number.

Kasper Mennelas, Analyst, Inters: Okay. And the last question is, was last year better than normal for risk policies? Did this result have some non recurring items that boosted last year’s figures that you don’t expect to continue going forward?

Alexei Leptonen, CEO, Aktia: Are you Kasper referring to Life Insurance?

Kasper Mennelas, Analyst, Inters: Life Insurance.

Alexei Leptonen, CEO, Aktia: Yes. Overall, as I said, our Life Insurance business was well on track. It was a solid good year for life insurance business. And I said, the part of the business, which is linked to investment linked insurance policies, we got a new all time high in that side. Also, the investment side was as expected.

So no big surprises in any front on our life insurance side.

Kasper Mennelas, Analyst, Inters: Okay. Thanks for the answers.

Oscar Taimitarha, Head of Investor Relations, Aktia: Thank you. And then let us continue with some more questions from the SEB team. And we were talking about life insurances, so let’s continue on that topic. Jakob Turebajner from SEB asked a couple of questions on life insurance. First, the investment linked insurance book continued well on its track.

Could you elaborate what was the market move impact during Q4? And how much of the growth is thanks to new sales? Alexei, what do you want to do?

Alexei Leptonen, CEO, Aktia: It’s a detailed question. I think we’ll take it separately with Jaakko on that note.

Oscar Taimitarha, Head of Investor Relations, Aktia: Yes. Let’s come back to that. Yes. And then Jaakko’s second question was your CSM was marginally up during the quarter. Was this mainly thanks to new business?

And could you remind us what should we assume for the CSM release run rate annually or quarterly? I suppose that’s also a question in detail so that we have to come back to.

Sakari Jarvella, CFO, Aktia: Yes. I think I would on the side of caution here and give a detailed answer after the event rather than inaccurate now.

Oscar Taimitarha, Head of Investor Relations, Aktia: Yes. And we’ll publish, of course, the answers on our website. And then continuing with the SEB questions. So could you help us understand the net interest income margin uptick in Q4? Is it driven from any timing effects?

Or have you been able to expand the margins on mortgages?

Alexei Leptonen, CEO, Aktia: Well, actually, when we look at the mortgage margins, we see a somewhat positive trend in there. So that is, of course, helping it. And as said, we saw also a volume increase on the last quarter.

Sakari Jarvella, CFO, Aktia: And if I may add, I think on the net interest income side, it is so that our interest income is more tied to the twelve month year LIBOR and deposits are largely shorter. So there’s a timing effect that benefits us a little bit in the fourth quarter.

Oscar Taimitarha, Head of Investor Relations, Aktia: Thank you. And then next question from SAB. How do you view deposit and loan growth for 2025? From an outside view, Finland’s economy seems to be struggling, but are you seeing any improvements? Answer that one?

Alexei Leptonen, CEO, Aktia: For the housing market, the really the jury is out there how would that develop. Certainly, one can expect if the rates would come down further that that would increase the demand somewhat. We do believe that the bigger trends will prevail, I. E, people are tending to move into bigger cities where we are present. So that will most likely also help in relative terms.

Then on the corporate side, as we saw and as we said, we saw a healthy growth in our leasing and higher purchase financing. And we do expect that to that trend to continue.

Sakari Jarvella, CFO, Aktia: And if I add on the deposit side, just a short comment. Obviously, the deposit demand or the deposit volumes is dependent on the absolute level of the interest rate. So when interest rates go down, customers will naturally shift from their funds from deposits to other higher yielding investment. So what we have seen, we have seen a decline in term deposits during 2024 as the rates have come down.

Oscar Taimitarha, Head of Investor Relations, Aktia: Yes. Thank you. And next question, how do you view the uptick in credit impairments during the quarter? ’22 basis points is slightly higher than what we are used to. Is it broad based or is it any specific geography or customer groups?

Alexey?

Alexei Leptonen, CEO, Aktia: Yes. We our ECL model, our credit loss expected credit loss model is actually pretty accurate. So the result from that was very well within our own expectations. For the geography, we do not see any big differences. There is somewhat seeing as we report also in our report somewhat what we are seeing in the household businesses, a few difficulties in certain clients for the repayments.

But maturity of the uptick in Q4 was explained by the additional management judgment we did overall to our corporate loan book and that explains the majority of the increase.

Oscar Taimitarha, Head of Investor Relations, Aktia: Thank you. And then I think this one goes to you, Kati. Were there any one offs in the negative net subscriptions within private banking? Were there any particular one offs?

Kati Ericson, EVP Asset Management, Aktia: One offs. No one offs. No. No, I think in private banking also in institutional sales, but in private banking, we are in the middle of transitioning towards more systematic active client service model. And also with that, we are shifting our focus in our investment solutions to be able to deliver to private banking clients a higher quality differentiated products, which are also scalable.

So this is the shift that we are now working on. And at the same time, when we focus on adding value to our clients, we want to focus also on the profitability of our offering. And for example, the one mentioned in the presentation, our discretionary portfolio mandate also leaning into ETF equity portion is actually something that before we offer to our clients 100% ETF solution. And now that we add on our excellent asset allocation skills and also the active fixed income component, we can increase our margin in this product, for example, over 30%. So this is the work that we are doing underlying.

And obviously, changes also reflect to the client front.

Oscar Taimitarha, Head of Investor Relations, Aktia: Okay. Thank you. And then on this list of questions from ACB, the last one, I think our Chief Economist would be perhaps the right person to answer. But feel free to speculate. The question is what do you expect the salary inflation to be during 2025?

And considering the negotiation situation in Finland, that’s highly speculative.

Alexei Leptonen, CEO, Aktia: Yes. Maybe it’s not for us to comment on let the parties be active in their dialogue. I think everybody expects to have a good result that also is a long term that supports the society and the economy at large. So I would leave that comment to the parties that negotiate these questions.

Oscar Taimitarha, Head of Investor Relations, Aktia: Thank you. And then one more question from SEB team. After the ECB finish cutting the rate, when do you expect NII to stabilize? Six months, months, shorter or longer?

Sakari Jarvella, CFO, Aktia: I think that’s a that is a difficult question to answer given that it is also a little bit dynamic and based on actions we take. What I would say is that we will publish our pillar three report and our annual report in a few weeks’ time And that will have more disclosure on the interest rate sensitivity. So I would wait until those numbers are out and then we can answer in more detail.

Oscar Taimitarha, Head of Investor Relations, Aktia: Yes. Thank you. So yes, they will be published on the March 13. And then we have a question about our announced event on the February 27. Is it streamed online?

And yes, I can assure you, it is streamed online. So you can, at your convenience, choose if you participate here in Helsinki or online. Do we have any more questions here on-site? Well, then I think we go to the last question. If of course, you can still post questions, but this is one I really like.

Alexey, I think this is for you. The nickname curious investor asks, what steps have been made to keep the employees happy?

Alexei Leptonen, CEO, Aktia: Yes, many steps. If I start by saying that quite recently, we created a new HR strategy for the bank. But ultimately, this business lies on motivation to help our customers to prosper, being either a household customer, investor, corporate, institution. And this is what our actions, as we call our people, are really good at. And that motivation is seemingly in place when we see this Epsi results.

We are the most active player in town with our good quality service and products. And I’m so pleased that we have taken right steps in that front. So I’m looking very much forward for the upcoming strategy period to make that even full year.

Oscar Taimitarha, Head of Investor Relations, Aktia: Thank you. Well, ladies and gentlemen, I think on this happy note, that seems to have been the last question for today. Minister, thanks to all of you, both you have participated here on-site and those who are following us online. And see you again on the twenty seventh. I wish you all a very nice day.

Thank you and goodbye.

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