Earnings call transcript: Aktia Bank’s Q1 2025 sees stable profits amid market turbulence

Aktia Bank (AKTIA) reported stable financial performance in the first quarter of 2025, maintaining a comparable operating profit of €28.7 million. Despite a challenging market environment, the bank’s strategic initiatives, including cost control and innovation, have supported its resilience. According to InvestingPro data, the company has demonstrated consistent profitability with a P/E ratio of 9.08 and trades near its Fair Value. The stock price, however, experienced a decline of 3.85% to €9.49, reflecting investor concerns over decreased net interest income and market volatility.

Key Takeaways

• Aktia’s comparable operating profit remained stable at €28.7 million.
• Net interest income fell by €3.9 million, while net commission income rose 2% year-on-year.
• The bank’s stock price dropped 3.85% post-earnings.
• Aktia launched a new private equity fund and upgraded its core banking infrastructure.
• The company anticipates lower comparable operating profit in 2025.

Company Performance

Aktia Bank demonstrated resilience in Q1 2025, maintaining a stable comparable operating profit of €28.7 million. This performance was bolstered by a 2% increase in net commission income, despite a €3.9 million decline in net interest income. The bank’s strategic focus on cost control and innovation, such as the launch of new funds and infrastructure upgrades, played a key role in navigating a turbulent market environment.

Financial Highlights

• Comparable operating profit: €28.7 million (stable quarter)
• Net interest income: Decreased by €3.9 million
• Net commission income: Increased by 2% year-on-year
• Common Equity Tier One ratio: Increased to 13%
• Total operating expenses: €44 million

Market Reaction

Following the earnings announcement, Aktia’s stock price fell by 3.85% to €9.49. This decline reflects investor concerns over the decrease in net interest income and ongoing market uncertainties. InvestingPro highlights two key insights: the company pays a significant dividend to shareholders and maintains profitability despite market challenges. With 12 additional ProTips available on InvestingPro, investors can gain deeper insights into Aktia’s financial health and market position. Despite the drop, the stock remains within its 52-week range, indicating moderate investor sentiment amid broader market trends.

Outlook & Guidance

Looking forward, Aktia anticipates lower comparable operating profit for 2025. The bank has set long-term targets for 2029, including a comparable return on equity exceeding 15% and gross assets under management over €25 billion. Aktia also aims for organic net commission income growth of more than 5% annually, supported by its Momentum acceleration program. For comprehensive analysis of Aktia’s growth prospects and financial health, investors can access the detailed Pro Research Report available exclusively on InvestingPro, covering over 1,400 top stocks with expert insights and actionable intelligence.

Executive Commentary

CEO Alexey Leytolenen emphasized the bank’s commitment to strategic success, stating, "We are committed to succeed where it matters the most." He also highlighted the importance of the Momentum program in navigating market challenges: "In times of uncertainty and market turmoil, we are well supported by this Momentum programme." Kati Eriksson, EVP Asset Management, noted the value of active wealth management, saying, "This is a very good time for an active manager, active wealth manager to be close to the clients and offer any advice, any solutions that they might need."

Risks and Challenges

• Decreased net interest income could pressure future earnings.
• Market volatility may impact investor sentiment and asset management performance.
• Continued uncertainty in the institutional investment space poses challenges.
• The need for increased IT spending may affect cost management.
• Changes in risk-weighted asset calculations could impact regulatory capital ratios.

Q&A

During the earnings call, analysts focused on the Momentum program’s progress, noting it is ahead of new customer acquisition targets. Questions also addressed the impact of market turbulence on loan demand, which remains stable. Analysts were interested in Aktia’s focus on active wealth management and the methodological changes in risk-weighted asset calculations.

Full transcript - Aktia Bank Abp (AKTIA) Q1 2025:

Oskar Teimitarra, Head of Investor Relations, Aktia: Good morning, everyone, and welcome to Aktea’s Q1 results briefing. My name is Oskar Teimitarra. I’m Head of Aktea’s Investor Relations, and I will be moderator for this event. Earlier this morning, we published our Q1 interim report. Even in this turbulent market environment, Aktea’s results were once again stable.

A major focus during Q1 was, of course, the implementation of the new strategy we launched in February. Aktiv’s CEO, Alexi Leytolenen and CFO, Sakhari Jarevela, will soon go through the results. And after the presentations, we are happy to answer your questions. If you are following us online, please feel free to write your questions in the comments field. Well, let’s move on.

Alexey, the stage is yours.

Alexey Leytolenen, CEO, Aktia: Thank you, Oskar, and welcome on my behalf as well. For all of us who actively follow the markets, this year has so far been an interesting one, to say the least. News affecting the economy, both global and local, is coming thick and fast. In this environment, it’s an advantage to be an institution with two hundred year history and the related perspective with an eye on the future of long term value creation. Today, I will present yet another stable quarter in which Aktia launched an updated strategy with new long term financial targets.

Even in this turbulent market environment, it gives us a clear direction in everything we do for our customers, shareholders and society at large. I’ll give an overview of the quarter and our CFO, Sakari Jervala, will then delve deeper into the figures. Let us have a look at the Q1 highlights. First of all, Aktia’s comparable operating profit, which amounted to €28,700,000 was in line with the previous quarter, actually even a little bit stronger. Compared to Q1 twenty twenty four, the comparable operating profit was lower as the net interest income decreased due to the lower interest rate environment.

The net commission income was 2% higher than last year, driven by good income from payments and cards business and also from fixed income funds. This is in line with our target setting to increase fee based income lines. The comparable return on equity for the quarter was 13.5%. During the quarter, which was as said characterised by market turbulence, our AUM came down slightly. The main reasons were decline in market values and changes in individual institutional investors’ allocations.

On the other hand, we saw positive net subscriptions in the last month of the quarter. And on this topic of AUM, I’d like to remind you that from Q1 onwards, we report both net and gross AUM figures. Gross AUM at the end of the first quarter amounted to €15,700,000,000 The performance of Aktia Life Insurance business was once again solid, although the Insurer Service result was somewhat lower than in the very strong corresponding quarter last year. On other fronts, we continued to develop and invest in our IT and we have a fresh concrete example of this. As a part of our investments to build the bank for the future, we successfully upgraded our modern banking infra during the Easter break.

Despite these investments, we’ve maintained and we continue to maintain strict cost control. Our credit loss provisions increased somewhat compared to last year, which reflects the market situation. Sakari will touch upon this in more detail later in this presentation. In February, Moody’s confirmed our long term A2 rating and raised the outlook from negative to stable. As a particularly important highlight of the quarter, I am very pleased to share that the employee Net Promoter Score, I.

E. ENPS, rose strongly from plus 19 to plus 32 in the fresh survey we conducted right after launching our updated strategy. Satisfied employees usually correlate very strongly with satisfied customers. This supports greatly the Aktia experience that we want to give to all of our customers, being a cornerstone of our strategy. When we compare the quarter with the previous quarters, we see this year starting in line with the end of twenty twenty four.

This is also in line with our assumption for this year. We expect the comparable operating profit for 2025 to be lower than for 2024, mainly due to the lower interest rate situation. To ensure strong value creation, we launched an updated strategic plan and an acceleration programme, which I will touch upon next. At our well attended investor event on twenty seventh February, we announced our updated strategic plan, our long term financial targets and our updated dividend policy. Our overall objective is to become a leading wealth manager empowered by a strong banking heritage.

We are committed to succeed where it matters the most. In providing a genuine active experience, meaning the combined employee and customer experience in focusing on active, comprehensive wealth management and in winning in our strategic segments. We have competitive advantages and strengths to build on, such as a very strong client base and an award winning asset management. To ensure an effective implementation of our value creation plan, we launched an acceleration programme called Momentum. Through this concrete programme, we will ensure that we can show measurable results already in the next two years.

Let me briefly show you the building blocks of the programme. As said, we will strengthen the execution of our value creation plan with the Strategy Acceleration Programme. This will ultimately result in an increase of our operating profit through a concept of operating profit run rate. This run rate increase should be considered as a high quality recurring boost in our operating profit. We’ve launched 10 focused streams with numerous initiatives where we can see the biggest potential for growth and operating profit increase.

The biggest impact can be realised from the six business oriented streams market here in green. This will be supported by other initiatives such as operational efficiency, IT and balance sheet optimisation. We’ll take an active role in capturing growth by driving momentum in Premium Banking, Private Banking, small and medium sized companies and institutional segments. We will strengthen our Asset Management operations by capitalising on our high expertise and building on our service model. All this will be supported by our continuous efforts in data and technology to enable growth in a scalable and efficient way, as well as the needed cultural shift underneath.

We are confident that through these 10 streams in the programme, we will be able to achieve a recurring operating profit run rate increase of €20,000,000 by the end of twenty twenty six. The work has started well and, as we said at our investor event, we will report every six months of the progress of this programme. So we are well underway and I can mention, for example, that new customer acquisition among premium and private banking customers is well ahead of our very ambitious targets for this year. These customers have on average signed up for a broad range of products and services from several categories, which obviously I’m very pleased to see. An important argument for choosing Aktia is our accessibility, and therefore it is of great importance that our customer service unit has again received excellent marks for the service level with an NPS of a very high level at 60.

In the times of uncertainty and market turmoil, we are well supported by this Momentum programme, Having in place an overarching programme with focus on impact, it will support us in navigating any changes in our operating environment. And now, let us have a closer look at our three business areas and their performance in the first quarter twenty twenty five, in addition to sustainability topics. I will start with our asset management business. As I said in the beginning of this presentation, the first quarter was characterised by market turbulence. The turbulence has continued.

Our assets under management came down slightly due to the decline in market values and net redemptions, mainly explained by changes in individual institutional investors’ allocations. However, we saw positive net subscriptions in the last month of the quarter. International demand for our fixed income funds was strong. We launched a new private equity fund, Aktia Nordic Real Estate Opportunities, while Aktia Debt Fund II and Aktia SolarWind III were again opened for subscriptions. Let’s take a look at the banking business.

The pickup in new lending to private customers continued, as we noticed in the fourth quarter twenty twenty four. New lending to private customers increased 20% year on year. The loan book remained approximately at the same level and the average margin of the loan book continued to grow. The quality of the loan book has remained stable and the collateral situation can be considered healthy. In Corporate Banking, the trend with strong growth in higher purchase and leasing financing continued.

The demand for investment solutions remained strong, especially among premium customers, being an important part of our updated strategy. Last but not least, the service level in Q1 within our customer service was excellent and the NPS as said increased to plus 60, which I am very pleased to see. Finally, our third business area, Life Insurance, which again delivered a stable net income. The insurance service result was relatively stable, thanks to a growing insurance book of profitable risk insurances. Also, the investment linked insurance book continued its strong growth.

Life insurance is playing an important role for us in our Wealth Management offering and the Unit Linked insurances reached to a new all time high over €1,300,000,000 Then, let’s move on to sustainability topics. As we have reported before, we have already reached most of our twenty twenty five targets one year in advance. This time around, I would like to specifically highlight the achievements here in the middle. As said earlier, the employee Net Promoter Score, eNPS, increased to plus 32, which exceeds well our target level of 20, as defined in our sustainability programme. This good performance was measured right after the launch of the renewed strategy, and the improvement was visible in all parts of ACTIA’s organisation, making the results even more valuable.

Thereafter, I would also like to draw attention to the She Index that measures and compares the gender balance in various organisations. We are at the level of 82 and starting to be very close to our target of 85. Already with 82, which is considered very high, Aktia is in the highest percentile amongst banking and capital markets companies. Our sustainability programme will be updated later this year, and therefore an update also of the double materiality assessment has started. For the outlook, I’d like to inform that we keep our outlook for 2025 unchanged.

Our comparable operating profit for this year is expected to be lower than the comparable operating profit for 2024. In our assumptions about net commission income, however, we are slightly more cautious and know that market uncertainty may have a negative impact on the net commission income. Now, I will hand over to Zachary to go through our financials in more detail. Zachary, the stage is yours.

Sakhari Jarevela, CFO, Aktia: Good morning, everyone, and welcome also from me. Going into the quarter numbers in the first quarter, as Alexey already stated earlier, we are very happy to report a stable first quarter. Before diving deeper into the individual line items, I just wish to go through a few key highlights. First, the operating income decreased in the quarter, which is mostly due to the €3,900,000 decrease in the net interest income. This decrease follows directly from the lower levels of short Euribor rates compared to a year ago.

Our net commission income grew by 2% compared to Q1 twenty twenty four. On the other hand, we managed to keep costs tightly under control with total operating expense of €44,000,000 Our comparable operating profit amounting to €28,700,000 even increased compared to the previous quarter, as did the comparable return on equity, which was 13.5%. The bank group’s common equity Tier one ratio increased to 13% from 12%, which is 4.4 percentage points above the minimum requirement. The improvement is explained by a partly temporary reduction in risk weighted assets, which I will come back to later in the presentation. Looking at the net commission income, it did not offer any major surprises in the first quarter, increasing by €700,000 compared to the corresponding quarter in 2024.

We recorded an especially strong performance in higher service fees and income from card business, but also solid development from mutual funds where net commission income increased by 2%, mainly driven by fixed income funds. This is an important line of business for us given our recently announced strategy, so we are very happy to see growth in the funds business. The net interest income declined in the quarter, as expected, following the significant decline in the short term rates over the last twelve months. The reported net interest income was €3,900,000 lower compared to the first quarter twenty twenty four, and interest income from borrowing and lending decreased by €5,500,000 But this was partly offset by the falling interest cost from funding. At the same time, the deposit stock was slightly lower than in Q1 twenty twenty four, but also slightly above the year end level at the end of Q4 last year.

Comparable personnel costs remained relatively stable as expected and we and were in line with the second half of twenty twenty four. This was due to collective bargaining agreement increases, but also because of a temporarily low FTE count in the comparison quarter in Q1 twenty twenty four. We have retained a very good cost control during the first part of the year with no increase in average headcount from the second half of twenty twenty four. We have on purpose increased our spending on IT since the beginning of twenty twenty four as we continue to update our core IT system. This enables us in turn to meet the increasing need for speeding up our front end digitalization efforts and being able to further develop our data and AI capabilities.

Depreciation decreased by 2,000,000 from the comparison period, mainly due to impairments made in the fourth quarter of twenty twenty four. Impairment of credits and other commitments increased slightly compared to last year. The total increase in impairments from the loan book was €2,900,000 offset partly by €1,000,000 of reversals of previous year’s write downs. Overall, credit losses are expected to remain at the moderate level. However, as we have stated earlier, the uncertainty in the Finnish real estate sector may affect the development of impairments and provisions for credit losses.

This was taken into account in our decision in Q4 last year to implement an additional provision in the corporate loan book based on management’s assessment. Our loan book consists mostly of loans to households and private persons with residential or real estate collateral with adequate loan to value levels. On the corporate side, there are some individual Stage III cases which are being actively managed. Due to the good collateral position of the bank, we don’t expect any substantial impact on credit losses. Coming back to what I mentioned earlier about risk weighted assets or RWAs, there are two important methodological changes that will affect the calculation of our RWAs during the ’25 and hence also will affect the core equity Tier one ratio.

Firstly, the new capital requirement regulation, CRR three, came into force at the beginning of this year. So in the first quarter numbers, we calculate our RWAs for the first time according to this new regulation, which leads to a relatively significant decrease in our risk weighted assets of approximately €350,000,000 compared to the year end. This effect is visible in our reported numbers now in our Q1 report. However, later in this year, we will also implement another methodological change affecting RWAs. Currently, we calculate our corporate loan book risk weights based on the foundational IRB model, but are in the process of moving to using the standardized model for this part of the loan book.

This change will take effect in the third quarter of this year. Based on our initial estimates, this move from FIRB to standardized model will lead to an increase in our risk weighted assets. We do not yet disclose a full quantification of this third quarter impact, but as said, we expect it to be an increase. And further, we expect the increase to be somewhat lower than the €350,000,000 decline we recorded this quarter. These effects are shown in the illustrative diagram.

So taking this together, there will be some methodology induced volatility in our risk weighted assets during this year, whereby we will report first three fifty million euros reduction in the first quarter, which will be partly offset by an increase in the third quarter. Very importantly though, I want to emphasize that the change to standardized model applies only to the corporate loan book, and we will still continue to apply the advanced IRB methodology to our retail loan book. Moving then into Common Equity Tier one capital ratio. As shown here, it increased to 13% in the quarter, which is 4.4 percentage points above the minimum regulatory requirement. The improvement is mostly explained by the reduced risk weighted assets, which as just explained will be at least partly temporary as we expect a reduction in CET1 ratio in Q4.

I would still like to emphasize though that we are very pleased that our capitalization continues to be solid. On February 26, we were greeted by the good news that Moody’s Investor Services had upgraded the long term outlook on Aktia’s credit ratings for short term and long term funding from negative to stable. At the same time, Moody’s confirmed Aktia’s short term funding rating at A2P1 and long term funding rating at A2. We see this as an important and good testament to the confidence in us, our financial position, our stability and our management. We still hold very strong level of liquidity on our balance sheet shown in our liquidity coverage ratio of 161%.

This is somewhat lower than the level at the end of twenty twenty four, as we have deliberately reduced our excess liquidity during the quarter. In the funding front, we keep monitoring the market during Q2, 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. And finally, I would just like to recap on our long term financial targets for the five year strategy period we just started. Our three core financial performance targets are comparable return on equity that is expected to exceed 15% by the end of twenty twenty nine we’re aiming to have gross assets under management over €25,000,000,000 by 2029 and we aim to organically grow our net commission income over 5% per year. According to our new capital policy, we target common equity Tier one ratio two to four percentage points above the regulatory requirement and typically would expect it to be at the higher end of the range.

Last but not least, we have made an addition to our dividend policy, where we reaffirmed our goal to distribute 60% of the period’s profits, but we guide that we could consider repatriating capital through extra dividends and share buybacks should we find ourselves in a situation of excess capital. We can note now that our CET1 ratio at the end of Q1 was above the higher end of the range in our capital policy. But as we expect a partial reversal of this quarter’s increase again in Q3, we will be calmly monitoring the development of our CET1 later in the year. So no actions required or expected on this front. This completes my part of the presentation.

So I hand back over to Oskar for the Q and A. Thank you.

Oskar Teimitarra, Head of Investor Relations, Aktia: Thank you, Alexey and Sakhary. Welcome back on stage. And now Kati Eriksson, EVP for Asset Management has joined us as well. Welcome, Kati. Thank you.

And as said, now we’re happy to answer your questions. So Alexey, let’s start with the Momentum program. How has it started in your view?

Alexey Leytolenen, CEO, Aktia: Thank you, Oskar. Yes, we did launch the acceleration program called Momentum at the same time we launched the updated strategy. And the work has started really well actively in every front on the 10 streams we have, which is overarching consisting every part of our operation and it started well. Particularly pleased to see, for example, our key private segments, private individual segments, premium and private banking, we are actually ahead of our relatively ambitious new customer acquisition targets. And therefore, the activity level that I see with Actions doing is of great level at the moment.

So very good start. Yes.

Oskar Teimitarra, Head of Investor Relations, Aktia: Thank you. And on the same topic, Saqqari, when you’re talking about the Momentum program, you were talking about the run rate. Could you please explain what do you mean by this? Sure.

Sakhari Jarevela, CFO, Aktia: I mean, we discussed already when we launched the strategy in a little bit of detail, the run rate is what we follow to focus our efforts on the impact of actions we’d undertake. As we all know, the operating profit of a bank can be affected by many external factors such as the interest rate forward curve or values of risky assets, as we sit now in the market. But what we want to isolate is that in this program, we have initiatives, as Alexey mentioned. And in these initiatives, we undertake actions that improve our profitability. And it is this annualized impact of those actions that we want to follow with the run rate.

Oskar Teimitarra, Head of Investor Relations, Aktia: Thank you very much. And then Kathy, we saw a clear turn for the better in international sales. What’s behind this?

Kati Eriksson, EVP Asset Management, Aktia: Of course, it’s a continuous work that we’ve done for many years already. And now obviously, I think this market environment gives our investors an opportunity to see the kind of diversifying effect of EMD, EMD frontier, EMD local currency. We saw in international sales, both existing and new clients approaching us and investing in our good quality funds. So that was really nice to see. And obviously, pipeline going forward is strong, so we are working on that every day.

Oskar Teimitarra, Head of Investor Relations, Aktia: Thank you. And then here on-site, do we have questions here on-site? Caspar Mellas, Indres. Yes, if there’s the microphone.

Caspar Mellas, Investor/Analyst, Indres: Hi, and thanks for the presentation. Have you seen any negative signs in loan demand due to increased uncertainty? Talking about the last few weeks or the last month?

Sakhari Jarevela, CFO, Aktia: Alex, please.

Alexey Leytolenen, CEO, Aktia: Thank you. What we saw in the beginning of this year, we saw increasing demand in mortgage loans. And actually, the new lending was up 20% year on year, although we need to remember that the correspondent period last year was really slow, but obviously a good trend. For the very last weeks, the turbulence that we see has not resulted in any significant changes to the levels. We do monitor, of course, the activity.

And as said, our advisers are really active towards our clients.

Caspar Mellas, Investor/Analyst, Indres: Okay. Then could you walk us through what was the difference between net and gross assets under management?

Sakhari Jarevela, CFO, Aktia: I can start and Gotti can add. But the basic principle is that when we have our own funds that are part of different mandates or funds of funds. Previously, we did not count the mandates and the funds of funds separately as we that’s what we mentioned or considered a net AUM. But now we add this second layer in totality because all of that is fee generating, and we believe that’s more or less a market practice these days. So that’s why we introduced the gross, which is the difference between those two.

Kati Eriksson, EVP Asset Management, Aktia: Exactly right. And reporting both of these, I think, gives perspective to analyzing the underlying both the client AUM but also the fee generating AUM that we hold.

Caspar Mellas, Investor/Analyst, Indres: Okay. Makes sense. Were the EUR 2,000,000 of reorganization reorganizing costs in Q1 related all to the acceleration program?

Sakhari Jarevela, CFO, Aktia: It was the great majority of it was related to the Momentum program.

Caspar Mellas, Investor/Analyst, Indres: Okay. And when do you expect to book the remaining costs from this program? And is the estimated total still at €6,000,000 Yes,

Sakhari Jarevela, CFO, Aktia: the estimated total is still at €6,000,000 We expect that to materialize more or less sort of linearly throughout the year, I would say.

Caspar Mellas, Investor/Analyst, Indres: And do you expect any significant onetime costs related to the change negotiations in Q2?

Sakhari Jarevela, CFO, Aktia: No large costs expected there. Okay.

Caspar Mellas, Investor/Analyst, Indres: Well, that’s it for me. Thanks very much for the answers.

Oskar Teimitarra, Head of Investor Relations, Aktia: Thank you very much, Kasper. And then we have a lot of questions on the line today. Let’s start with Antti Saari from OP, his first question. It was mentioned in the report that in Q3, Aktia intends to switch from the foundation IRB approach to the standardized approach for corporate exposures. Could you give us any estimate about the magnitude of negative impacts on CET1?

You said in the presentation that we’re not disclosing any exact numbers, but would you like to add anything on this?

Sakhari Jarevela, CFO, Aktia: Sure. I mean, maybe I’ll just say exactly what I said in the presentation, which is what we at this point in time disclose. So as I said from the CRR III, the impact this quarter was a decline of DKK $350,000,000. We now when we move from foundational IRB to standard, it will be an increase. It will be most likely less than the SEK $350,000,000, so it’s somewhere in between.

But also the graph on the slide was illustrative, so you shouldn’t try to measure it with a ruler. So that is not supposed to give you the right answer. But there’s many things that will in the first quarters, Q1, Q2, Q3, affect the risk weighted assets other than the move in this methodology. So that’s why we don’t want to guide too

Oskar Teimitarra, Head of Investor Relations, Aktia: accurately right now. Thank you. And on the same topic, Andreas Hockensen from SEB asks he’s thinking about the reason and asks why will you move to standardized RWAs on the corporate side later in the year?

Sakhari Jarevela, CFO, Aktia: Well, answer is that in our discussions with our regulator, the Finnish FSA, it became clear that the sort of the bar is a little bit raised on what kind of data and calibration is required for a bank to be able to apply an IRB model. And in the corporate side, our history and our internal data is a little bit shorter than in the retail side. So hence, we made a decision that we’d rather move right now than be forced to move later. So that is a sort of controlled action from our side.

Alexey Leytolenen, CEO, Aktia: Yes. And just to add a good explanation, Sakhary, just to add that on the retail side, we continue to apply and work with the advanced model that we have. So there is no changes on that side.

Oskar Teimitarra, Head of Investor Relations, Aktia: Yes. And the loan stock the majority of the loan stock is, of course, retail stocks or retail books. Indeed. Yes. Thank you.

And then we have a lot of questions, of course, in this market environment about market environment and asset management. So Kathy, I’ll turn to you. Jako Tiruvallen from SEB asks, April saw high uncertainty in the market. Have the turbulence been impacting your net flows recently?

Kati Eriksson, EVP Asset Management, Aktia: No. I think the turbulence that we see and if we think about the Institutional Clients segment, which is obviously volume wise oftentimes affecting the flows, institutions are mostly, in a way, watching how this will play out. And obviously, we all know that the in a way, both ends of the tails are fixed. So definitely, no big decisions have been made in within the institutional space recently. But we do have a super active communication towards, obviously, institutions, but all of our private banking clients as well.

And I think this is a very good time for an active manager, active wealth manager to be close to the clients and offer any advice, any solutions that they might need.

Oskar Teimitarra, Head of Investor Relations, Aktia: Okay. Thank you. And Jakot Irvine has another question. Have outlined a clear plan to grow your wealth management and AUM. The initiatives are still on early phase, but when are you expecting the actions to turn into more tangible growth in net flows?

Kati Eriksson, EVP Asset Management, Aktia: Obviously, this is a long term business, and we wake up every day and meet our clients and do the work. And we just started with the project momentum. But as said in the strategy launch, we have already, in a way, revamped and revised our client strategy in each of our strategic segments, and now we are working on to get those results. Alexei mentions already good results within the Private Banking and Premium clients gaining new clients. Within Institutional space, we have focused say, improving the quality of our RFPs when institutions go out for a tender RFP tender.

So we have actually have a high hit ratio during the first quarter above our targets, which were already ambitious. So I think it’s a good kind of, in a way, early signs of the direction that we have is the right one.

Oskar Teimitarra, Head of Investor Relations, Aktia: Okay. And then Antti Sare continues on this topic by asking, in Q1 and Q4, you have lost AUM due to allocation changes of few large institutions. Do you believe that this is already behind now?

Kati Eriksson, EVP Asset Management, Aktia: Well, obviously, institutions are continuously working with their asset allocations. But I think in a specific case of Q4 and early Q1 was that regulatory shift that we saw in the pension segment, reflecting our pension segment clients revamping their asset allocations in new order. And definitely, we saw asset allocation changes, a couple of individual clients that started late Q4, continued early Q1. And I think that shift might be behind us. But as I said, institutions are continuously revising their asset allocations, and it might reflect either way.

But we are supporting our clients and supporting their asset allocation decisions. And most importantly, we are supporting our clients’ asset allocation decisions. We are not losing clients. And I think there is a big difference.

Oskar Teimitarra, Head of Investor Relations, Aktia: Okay. Thank you. And actually, think that you managed to answer the next question for Jakob Hesselwig at SEB. He asked, could you provide some more color on the net flow in asset management during the quarter? But you just did, so thank you for that.

And then let’s go to the world of loans and credits. So we have a couple of questions from SEB here. If you’re ready to speculate, Jakob Hesselvik asks, what interest level from ECB is required in order for volumes to start growing stronger, Alexey?

Alexey Leytolenen, CEO, Aktia: Yes. We do not like to speculate, first of all, even though the question is really valid one. I could perhaps just outline that what we have already seen is the demand pickup and partly it might well be the declining ECB rate level. Now what the forward curve suggests is a bit of a continuous path that might easily also then support more for the individual consumer to rethink their living and purchasing new home and therefore applying a mortgage loan. Obviously, the turbulence around here is something that possibly every individual considers what it means for their own finances.

But we are here to support our clientele and new clients for their aspirations, and that’s our aim, that’s our purpose, that’s our why we are here. So we welcome everyone to discuss with us the possibilities for acquiring Neuhom, for example.

Oskar Teimitarra, Head of Investor Relations, Aktia: Thank you. And we have one investor asking, did in your view, did Actia actually benefit from the rate environment as much as its peers? What do you think?

Alexey Leytolenen, CEO, Aktia: Well, the forces are many fold. Obviously, the rate environment, which goes down, then hits our NII as we’ve seen and as the whole industry has saw in these quarters. And then on the other hand, it possibly increases, for example, as I just discussed, the propensity to consume, for example, a new house or apartment. So there are different ways. Obviously, also the centralized pay raises that we’re going to see in Finland offers more leeway for individual private economy that helps.

And so it’s a totality, obviously, with the directions of many fronts. Thank you. Sarkarik.

Sakhari Jarevela, CFO, Aktia: Maybe I can just add. I mean, it’s we don’t follow our peers with that kind of granularity. What is safe to say that where the low rates made banks’ operations very beneficial is when you had a very high amount of deposits on your balance sheet. And I believe that we are, on average, a little bit more funded from senior financing and covered bonds. So in that sense, it could be that there’s some truth that structurally we were not benefiting as much, but that is not based on a scientific argument.

Oskar Teimitarra, Head of Investor Relations, Aktia: Thank you. And this brings us to the question that I was expecting it and now it came from Antti Sarri, OP about hedges, of course. Are you still building hedges with the current interest rate levels?

Sakhari Jarevela, CFO, Aktia: I wouldn’t say that we’re necessarily building hedges. I think we’ve been following a very sort of structural plan in structuring our balance sheet, and we haven’t changed that. So we operate largely at the same level when it comes to balance sheet and any hedges we have as we did before. So and we haven’t been opening up our hedging policy in more detail, we don’t intend to start now either. But I think you can look at the history as a guide.

Alexey Leytolenen, CEO, Aktia: And Pillar three report.

Sakhari Jarevela, CFO, Aktia: And Pillar three report, yes.

Oskar Teimitarra, Head of Investor Relations, Aktia: And your financial report, We have disclosed something at least. Then continuing on the topic of the balance sheet. Jako Tjorveinen from SEB asks, could you give more color on the expected NII pressure coming from the continued decline in short term rates? Should we expect similar magnitude in the coming quarters given the continued slide of Euribor’s? Maybe if I start, think in the Pillar three report, we have quantified a 200 basis point shift down in the forward curve.

Of course, that kind of

Sakhari Jarevela, CFO, Aktia: shift has become a lot less probable than it did maybe a year, one point years ago. And I think it looks like we have this year or for the last six months or so, I think the rates have followed the forward curve relatively accurately. So we probably see some sort of plateauing level in the short term interest rates in the next six months or so. That’s what we expect. And in that case, obviously, when the rates plateau, you don’t see such an effect.

Alexey Leytolenen, CEO, Aktia: And maybe just to add a very good answer, Sake, when we did our financial plan, which obviously our outlook is based on that was based on the forward curve when it comes to rates. So we did not take any aggressive view in any sort. So changes in the forward curve is therefore then seen in our figures that we comment on.

Oskar Teimitarra, Head of Investor Relations, Aktia: Thank you. Do we have any more questions here on-site? We have still one question at least here online from Jakob Hesselvik at SEB. Could you give a bit more color on the elevated credit impairments in the quarter? Was there some clear one offs there?

Or is it just due to general economic situation? How do you see trends in nonperforming loans going forward?

Sakhari Jarevela, CFO, Aktia: Perhaps, Sakharib? I can start and Alexey feel free to I think there was no clear one off. There were a handful of cases that were a little bit larger than the others. But as Alexey commented, I mean, still see probably the late part of the impacts from the increased interest rates cycle in some of the credits, and the impairments are a little bit elevated, but we sleep our nights relatively comfortably still with these levels.

Alexey Leytolenen, CEO, Aktia: And that is the good night’s sleep is supported by good collateral situation of our bank. We have around 84% of our loan book with LTV less than 50% on average. So that is fair to say that we are well secured in terms of the final losses. Obviously, the rate increase that we saw a few quarters ago did affect on certain household customers’ ability to service their debt. And therefore, the NPEs have been also developing in that direction.

But we constantly monitor the situation. We are calm with it. We are forcing ourselves in stablemoderate credit losses as we’ve seen in the past as well.

Sakhari Jarevela, CFO, Aktia: And maybe I’ll just add. I mean, what is also good to note in our results, we also we added DKK 2,900,000.0 impairments in the book in the quarter, but we also reversed DKK 1,000,000 of impairments we had done in previous quarters, but we got payments. So that’s also important to understand that we impair prudently and write down loans when they are in default. But we also, given the good collateral, the final amount that we actually lose is not that number necessarily.

Alexey Leytolenen, CEO, Aktia: Maybe finally to remind us probably all of us who follow us closely, remember we did in our Q4 result, we did a separate management judgment, 1,700,000.0, And we have so far not been touching it, so that keeps within our back pocket as an additional reservation for any losses. Yes, and

Oskar Teimitarra, Head of Investor Relations, Aktia: that was particularly in the real estate sector. Yes. So the first and last question. We still have some time left. Is there anything you would like to add?

Alexey Leytolenen, CEO, Aktia: We are, as said, started our new strategy period and associated acceleration program started well, and we are happy to invite all of the current customers and new customers to this fine story and fine journey ahead.

Oskar Teimitarra, Head of Investor Relations, Aktia: Thank you for that comment. Do we have any more questions here on-site? Otherwise, thank you very much for the discussion and the questions. And many thanks to all of you, both those who have participated here on-site and those who have been following us online. I wish you all a very nice day.

Goodbye. Thank you. See you again.

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