Earnings call transcript: Jyske Bank Q1 2025 earnings beat forecasts, stock surges

Jyske Bank reported robust financial results for the first quarter of 2025, significantly surpassing market expectations. The Danish bank’s earnings per share (EPS) reached 25.5 USD, compared to a forecast of 17.33 USD, while revenue hit 3.23 billion USD, exceeding the anticipated 3.19 billion USD. Following the announcement, Jyske Bank’s stock price surged by 7.18%, reflecting strong investor confidence. According to InvestingPro analysis, the bank currently trades at an attractive P/E ratio of 7.34, suggesting potential undervaluation despite the recent price surge. InvestingPro’s comprehensive Fair Value analysis indicates the stock may have additional upside potential.

Key Takeaways

• Jyske Bank’s EPS outperformed forecasts by 47%.
• Revenue surpassed expectations by 40 million USD.
• Stock price increased by 7.18% in pre-market trading.
• Net fee income rose 20% year-on-year.
• Cost base reduced by 3% year-on-year.

Company Performance

Jyske Bank demonstrated strong performance in Q1 2025, with notable improvements across various financial metrics. The bank’s EPS grew by 2% year-on-year, while net fee income increased by 20%. Despite a 1% quarter-on-quarter and 10% year-on-year decline in net interest income (NII), the bank maintained a return on tangible equity (RoTE) of approximately 11%. The cost-income ratio remained high, reflecting ongoing cost management efforts.

Financial Highlights

• Revenue: 3.23 billion USD, up from 3.19 billion USD forecast
• Earnings per share: 25.5 USD, exceeding the 17.33 USD forecast
• Net fee income: Increased by 20% year-on-year
• Cost base: Reduced by 3% year-on-year
• CET1 ratio: Dropped to 15.7% due to Basel IV implementation

Earnings vs. Forecast

Jyske Bank’s Q1 2025 EPS of 25.5 USD significantly exceeded the forecast of 17.33 USD, marking a 47% positive surprise. Revenue also surpassed expectations, coming in at 3.23 billion USD against a forecast of 3.19 billion USD. This earnings beat is notable compared to previous quarters, highlighting the bank’s ability to navigate challenging market conditions effectively.

Market Reaction

Following the earnings announcement, Jyske Bank’s stock price surged by 7.18%, closing at 589.5 USD. This positive market reaction reflects investor confidence in the bank’s performance and strategic initiatives. The stock currently trades near its 52-week high of 91.02 USD, with InvestingPro data showing impressive returns of 14.42% over the past six months. The stock’s technical strength is further supported by its low beta of 0.42, indicating lower volatility compared to the broader market.

Outlook & Guidance

Jyske Bank maintained an unchanged outlook for 2025, expecting low loan impairment charges and a potential slight increase in costs compared to 2024. The bank continues to engage with the Financial Supervisory Authority (FSA) regarding capital targets, aiming to maintain a CET1 target range of 15% to 17%.

Executive Commentary

CEO Lars Maach stated, "We’ve had a strong start to the year, building upon the positive momentum from recent quarters." He also expressed comfort with the bank’s capital position within the lower half of the 15% to 17% target interval. CFO Bjorn Nielsen Larsen highlighted the increased macroeconomic uncertainty due to trade tensions.

Risks and Challenges

• Trade tensions: Potential impact on Danish exports and financial markets.
• Basel IV implementation: Affects CET1 ratio and capital requirements.
• Macroeconomic volatility: Uncertainty due to expected rate cuts and global trade dynamics.
• Cost management: Continued focus on efficiency improvements amid potential cost increases.

Q&A

During the earnings call, analysts inquired about the bank’s NII sensitivity and potential mitigation strategies. Executives discussed sustainable mortgage NII margin expansion and clarified accounting buffers and capital buffer approaches. The potential impacts of trade tensions on business operations were also addressed.

Full transcript - Jyske Bank A/S (JYSK) Q1 2025:

Simon Harvat, Investor Relations, Newske Bank: Hi, everyone. Thank you for joining us on Newske Bank’s conference call for the financial results for the first quarter of twenty twenty five. This is Simon Harvat from Investor Relations speaking. With me, I have Newske Bank’s CEO, Lars Maach and CFO, Nielsen. Larsen Bjorn will walk you through our prepared remarks.

Afterwards, we’ll open up for questions. I will now hand over to Lars.

Lars Maach, CEO, Newske Bank: Thank you, Simon, and thank you, all of you, for joining this conference call for the Q1 results 2025. We’ve had a strong start to the year, building upon the positive momentum from recent quarters and growing EPS 2% year on year, and that is despite significantly lower Danish policy rates. The operating performance is supported by improved momentum with Personal Clients, higher assets under management and increased activity levels. Net fee income thus rose a full 20% year on year. In addition, effective cost management reduced the cost base by 3% year on year.

Credit quality remains very solid, and we have increased our buffer for macroeconomic risks even further. In the last year, we’ve improved customer satisfaction significantly in all areas. This reflects a number of efforts, including boot camps, a reorganization and increasingly proactive interactions with clients. On the back of this, mortgage financing for personal customers in Q1 reached the highest organic growth rate since 2018. We look to build further upon this as strong customer relationships remain an integral part of our strategy.

Lastly, we’ve gained improved visibility on the impact from upcoming regulation following the implementation of Basel IV input floors on January 1. This has increased Reija and reduced the CET1 ratio a bit shy of one percentage points. This is in line with what we have guided. We are comfortable with our current capital position in the lower half of the 15% to 17% target interval, and we’ll look to update our capital targets in the coming quarters. We expect no significant impact from upcoming regulation, entailing that future earnings largely can be reserved for other purposes, including, obviously, growth and capital distribution.

Overall, UscoBank is in a solid position with a positive momentum, and we are ready to support our customers.

Bjorn Nielsen Larsen, CFO, Newske Bank: Yes. And moving on and looking at the financial numbers in a bit more detail. Overall, our we have a higher downside risk now in interest rates than we had back in 2024. We expect two further cuts for the rest of the year, and that’s one more than we expected formally. And secondly, the uncertainty is higher regarding the macro environment due to the trade war.

And finally, the third remark initially is that it has led to higher volatility in the financial markets. Looking at the numbers, we are still on a good footing when it comes to RoTE, about 11% costincome ratio, well above 50 cost of risk, still very, very close to zero earnings per share, DKK19.4, very much aligned with what we’ve seen in the former quarters. And then the CET1 ratio saw a drop to 15.7% relating to what Lars referred to before and the new implementation of the regulation. If we look at the profitloss statement in the middle of the chart, you can see that NII is down only 1% Q o Q and 10% over the year, whereas fee income is up 20% over the year. And value adjustment this quarter has performed well due to healthy customer activity.

Core expenses is under control and actually down 3% year over year. On the right hand side, volumes. Asset under management has been on the rise for many quarters. But here in the first quarter of this year, we saw a slightly dip due to the higher volatility in the market, but still a net inflow of funds under management. If we look at the lending line, lending is mortgage wise up 1%, and we saw the highest growth for mortgage lending to private individuals in one quarter since 2018.

On the bank lending side, it’s very stable. Public entities required fewer loans, whereas corporate was slightly up in the quarter. And finally, when I look at deposits, you can see there is a slight uptick of 1%, which is driven both by private individuals as well as corporations. The outlook for the year is unchanged relative to Q4. And please bear in mind that loan impairment charges still is expected to be low in 2025 despite the higher uncertainty.

Lars Maach, CEO, Newske Bank: Turning to customer satisfaction. We’ve seen a big improvement across our three main business lines. If we go back to 2022, prior to the integration of Handsbanken, we saw an okay level of customer satisfaction, but a drop in customer satisfaction after the acquisition, which is normal when the organization is busy integrating and you have new clients on board who has not decided themselves to move to the new bank. So I think everything on this chart is normal up until 2024, a year ago, where we’ve seen the number of initiatives that we have started, starting to pay off. And we see a huge increase in customer satisfaction during the last year across both personal clients, business clients and private banking.

On personal customers, we saw the biggest uplift of any bank in Denmark last year, and we’ve seen that momentum into 2025 also, which is hugely positive. And it is obviously nicer to be an employee in a company where the customers are happy. And it’s obviously also gives us a better possibility for landing the next new business that a private individual or business is going to embark on. So this is a positive development beyond also our own expectations.

Bjorn Nielsen Larsen, CFO, Newske Bank: And the next one, looking at the fee income line, as we said, 20% up year over year from a relatively low level in Q1 twenty twenty four. The main drivers have been asset under management up since Q1 twenty twenty four and also higher trading activity as the two main parts. And then we have changed the discounts after the Handelsbanken customers migrate to use the bank with a discount on their transactions costs. Apart from that, we also, when it comes to fee expenses, see a more average wise average like level here in Q1 of this year. So an uptick of 20% to the highest ever level in a given one first quarter of the year.

Looking at the cost development, we still believe that we can see and expect a slight uptick in costs for this year versus last year all in. But the development in Q1 has been strong. And also from a seasonal perspective, the lowest level for cost of the year. One off items are significantly lower than in Q1 of twenty four. And the payment resolution fund is very close to zero.

We have seen 2% lower number of employees. And then of course, the flip side of the coin, wage increases and investments in new strategy has lifted the overall cost level. But still, 3% down year over year and the underlying cost is only up 1% over the year. Moving to risk, cost of risk and post model adjustments. We have they are lifted a bit here in Q1 to EUR 1,900,000,000.0 due to the reason that we have seen greater uncertainty relating especially to the trade war.

Apart from that, individual impairments are close to zero. Realized losses are very low still, 39,000,000 this quarter or one basis points. And if you take the Stage three level of exposure, still steady going, 1.1% this quarter versus 1.2% in the first quarter of last year. So we are confident and state that we still expect low levels of impairments also for 2025. And if we look at the implications of the trade war, National Bank has made some analysis on the implications for Denmark.

And if you look at the chart, you can see that there is 3% that crosses Danish borders and will be directly impacted by a tariff. Apart from that, goods that are not crossing Danish borders or production abroad, for instance, will consume 9% or consumes 9% of our total exports and hits The U. S. And services are not impacted are the last 6%. So short term, a small impact and long term close to neglectable impact, because customers or businesses will naturally restructure production and look at different markets.

So a very manageable impact for a, say, 10% tariff from The U. S. Finally, looking at the CET1 ratio and the capital situation here post Basel I. We have been speaking about Basel I sorry, Basel IV. We’ve been speaking about Basel IV for quite some time, and we are happy now to bring the final outcome of the new regulation.

We have guided you up to 1.5 percentage points in implication on the CET1 ratio. Actually, it came close to only one percentage points, which is, of course, a positive. The reason for the implication of one percentage point is the fact that we have a very large low default portfolio of especially mortgage loans, which are impacted by input flows. And that is the main reason for the big shift in CET1 and RIIEA. Looking at the development from Q4 to Q1, profit, of course, adds to the solvency ratio.

Then we paid 2,250,000,000.00 for the buyback we announced back in February. And then the Basel, on the right hand side on the chart, as I said, took off close to one percentage points on the total level. In the middle, you can see a reservation for stimulated 71% for the payout ratio in 25%. And as you recall, in ’24, we did reserve 30% of our retained earnings for dividends. And after dialogue with the FSA, we will now deduct in the quarters of ’twenty five another 41% for buybacks, but calculated on the 24% earnings.

And please bear in mind that buyback programs will, of course, only be known and the size first known when they are fully approved by the FSA. The total implications in Q1 is a level of 15.7% in the interval of 15% to 16%, as we have referred to earlier. And if we exclude the extra 41% on buybacks, we are at 16.1%, but fully in line with our former expectations and announcement in the market.

Simon Harvat, Investor Relations, Newske Bank: Thank you, Lars, and thank you, viewer. We’ll now open up for questions. And the first question in line comes from Esbjorn Murch from Danske Bank. Please go ahead.

Esbjorn Murch, Analyst, Danske Bank: Yes, good afternoon. Thanks for taking my questions. If I may begin with net interest income development, obviously, quite nice trends for Q1, adjusted for interest days. But if I sort of look at the breakdown in your fact book, it looks as if interest from lending is down CHF 150,000,000 ish, but then your interest to cost to deposit is down more than CHF 200,000,000 in the quarter. And I guess the real because you also have a benefit from your mortgage NII obviously this quarter.

So the real struggle comes from your liquidity positions. So have you actually been able to mitigate quite a lot of the NII pressure, it seems, from active management decisions? Now given the next two rate cuts that you have in your guidance, could you just elaborate a bit on what kind of impact you would expect from your management decisions on NII sensitivity? So what more can you do to mitigate the pressure from lower rates? And is what should we take from Q1 into Q2?

Bjorn Nielsen Larsen, CFO, Newske Bank: Of course, whenever there is a rate cut from the Danish Central Bank, we do an initial and internal thorough investigation of the possibilities in the market. And as you said, we will try to steer as efficient as possible when it comes to managing rates in the market with the customers. That was that happened in Q1. And of course, we that will, to the extent possible, continue in Q2 and Q3 with the expected rate cuts. That being said, it’s clear that there is a slower or a minor impact from our passing through to customers than what we initially saw in the beginning of the rate cut season here a few quarters ago.

And so please expect that the implications on the NII line could be slightly higher because of downside risk being higher when it comes to policy rates.

Simon Harvat, Investor Relations, Newske Bank: Yes. And maybe just to sum up where we are at currently. So we’ve lowered the deposit rates for transaction accounts to 0% in April, and savings products have been gradually or deposit rates for saving products have gradually been lowered in recent quarters. So yes. And as you mentioned, in Q1, we did have a positive impact from CRE repricing.

So I think that would be of

Bjorn Nielsen Larsen, CFO, Newske Bank: course, that

Simon Harvat, Investor Relations, Newske Bank: won’t come back in Q2.

Esbjorn Murch, Analyst, Danske Bank: So how should we look at your NII sensitivity? So is it fair to assume that given the sort of the management decisions that you’ve been able to make, your NII sensitivity has been lower, but now going forward, the EUR 500,000,000 for 100 basis points is more the way to look at it? Or would you say it’s bigger now than the EUR 500,000,000 because we’re getting closer to the zero floor?

Simon Harvat, Investor Relations, Newske Bank: Well, in general, in fact, what we have seen is our interest rate sensitivity has been larger than DKK 500,000,000 so far. And that’s due to us being able to increase the deposit margin more than what we assume in our interest rate sensitivity. I think this is the case for yes, this is probably not just the Uske Bank thing. I think that’s more of a sector thing. So sensitivity is probably higher than the €500,000,000 going up, and that’s likely to be the case going down as well then.

Esbjorn Murch, Analyst, Danske Bank: Okay. Fair enough. Then on the

Lars Maach, CEO, Newske Bank: But for Esperan, maybe if I could add also, there’s also a bit of a market in this one here. We don’t know what the other banks are going to do, but I think it’s you could speculate that the closer you get to zero, the more the banks will also be monitoring their own income in the future quarters. And management decisions in terms of pricing is likely to take priority, I think, across the market here, the closer we get to zero. So I think banks will also be focusing on the pricing here.

Esbjorn Murch, Analyst, Danske Bank: But what would be sort of your view on deposit pricing going down in terms of savings accounts going to zero if we get further rate cuts from here?

Bjorn Nielsen Larsen, CFO, Newske Bank: Well, to the extent possible, given the market conditions, we will follow suit on also lowering savings accounts interest rates.

Esbjorn Murch, Analyst, Danske Bank: Okay, fair enough. Then on the mortgage NII, the margin expansion that we’ve seen in Q1, can you just how sustainable do you think that is given the Basel IV and the commercial real estate risk buffers, etcetera? So what should we expect going forward from this?

Simon Harvat, Investor Relations, Newske Bank: This is highly sustainable, I would say. This is just we are basically just repricing to reflect the impact from the systemic risk buffer, which is specifically targeting these types of exposures, but also Basel IV, which largely impacts these types of exposures as well. So this is a sector wide issue, I think, in terms of profitability, I think it’s fair to say that that’s here to stay.

Bjorn Nielsen Larsen, CFO, Newske Bank: Yes. And please look at the repricing on the CRE buffer in comparison with Basel IV, higher charges on corporate exposures in general. So yes, it is sustainable.

Esbjorn Murch, Analyst, Danske Bank: All right, that’s very clear. And final question from my side on fee income side. If I look at your securities trading and safe custody fees, they’re up 18% year over year. Your AUM is up 9%. So is it if you could sort of break out that line in your fee income, how much is asset management and how much is securities trading and safe cost or more market activity based fee income would be good

Simon Harvat, Investor Relations, Newske Bank: That’s fair. As we unfortunately, we don’t split that out. I think in the annual report, can find somewhere in one of the notes that how much is asset management activities, but of course, that’s not for Q1. But it’s fair to say that the vast majority is asset management activities. We did see higher trading activity, but that’s a low double digit million figure that contributes with year over year.

Bjorn Nielsen Larsen, CFO, Newske Bank: If we recall what we said if you all recall what we said in ’24, the main driver was higher ABN.

Simon Harvat, Investor Relations, Newske Bank: All right. This is basically normalization from low we mentioned some of the specific factors to keep in mind on the slide here. But it’s more you should more think this as the normal level than the Q1 twenty twenty four level.

Esbjorn Murch, Analyst, Danske Bank: So okay. So you would expect the q one twenty five level to be a recurring level going forward, so hence quite nice year over year growth for the rest of ’25?

Simon Harvat, Investor Relations, Newske Bank: Oh, yeah. Well, that depends on developments in assets under management. Also equal.

Bjorn Nielsen Larsen, CFO, Newske Bank: Quite right. And please be aware, as I said before, that the lending for more workers fees from lending to both private individuals and corporates was at a historic low last year. Now they lifted up 31%, but still there’s room to go even further and much higher on that line in the coming quarters.

Esbjorn Murch, Analyst, Danske Bank: All right. That was very helpful. Thanks.

Simon Harvat, Investor Relations, Newske Bank: Thank you, Esperan. And next question in line comes from Martin Birt from SEB. Please go ahead.

Lars Maach, CEO, Newske Bank: Thank you so much.

Martin Birt, Analyst, SEB: I have a few questions on buffers. If we start off with your accounting buffer, namely your PMAs, I see those are those PMAs are going up again. When is enough, enough?

Bjorn Nielsen Larsen, CFO, Newske Bank: That’s a good question. But I think to be totally transparent here, we did a thorough analysis on the uncertainty given the trade war. And it still applies when it comes to the market. It hasn’t been settled with any firm number. And therefore, we can’t give you the exact outcome on our customer base.

And that’s also the reason why we mentioned the implications in broader terms in a Danish context. That being said, I think it is prudent and it is also but it’s also timely to be aware that uncertainty has significantly lifted been lifted. But please be aware that in our books so far and in our dialogues with the customers, we are still very confident, And that’s the reason why you can see Stage three levels are steady, realized losses stay low, individual impairments close to zero. So there are no warning signs as we look in our books. But to the extent that we need to prepare for future events not seen in the books and not heard from customers, we need to take action here.

And I think the lift of EUR 100,000,000.0 is a fair assessment, but it’s an assessment on the top of a prudent and strong portfolio.

Simon Harvat, Investor Relations, Newske Bank: Okay.

Martin Birt, Analyst, SEB: Doesn’t it I mean, my point is, is that we hear that peers, I mean, you saw Nordea reporting earlier, I believe, this month, they took a reversal of their PMAs, and they said that over the coming years, they will bring it down to a normalized level. And now you are saying the complete opposite. You have loan impairment charges, which are well sorry, PMAs, which are ForEx normalized loan losses. And you had that for an elevated period stretching all the way back to the beginning of twenty twenty. Isn’t it soon time to start to reverse or address these buffers rather than just every time you have a chance to add stuff to them, you just sort of add to them?

Lars Maach, CEO, Newske Bank: Yes. We have actually a margin reversed a couple of times since 2020. And we were also hoping for that to continue. I think this, with the possible trade war, is going to creep into all banks. It’s a matter of timing here.

I think, in general, I think what you should look at here is that we’ve been prudent in taking this upfront very early on. We still see a book that is extremely strong and performing extremely well in the first quarter here. So hopefully, that can end up as reversals at a later point in time.

Martin Birt, Analyst, SEB: Okay. All right. Moving from your accounting buffers to your capital buffers. You have a roughly 100 points 100 basis points hit from the implementation of Basel IV, but you do not lower your CET1 target. Why isn’t that just a plain vanilla symmetrical adjustment?

Bjorn Nielsen Larsen, CFO, Newske Bank: Yes, very relevant question. We haven’t finalized the dialogue with the FSA. So before we have done that, we can’t give you the clear answer to that. That’s the reason why we stayed 15% to 16% or the lower half of 15% to 17% still, and that applies as long as we are in a dialogue with the FSA.

Martin Birt, Analyst, SEB: And what’s the expected charge from FRTB on January 1?

Bjorn Nielsen Larsen, CFO, Newske Bank: That is actually, as we state here, we don’t see any significant shifts from FRTB or output floors in the very long run. So taking the 100 around close to one percentage point here in Q1 is by far the largest chunk of implications on our rear as we can see it now. So FRTB and output flows are only insignificant effects on the real level going forward.

Martin Birt, Analyst, SEB: Okay. Then perhaps a final question on capital. I see you have a pretty large accrual ratio in there. There was also another Danish bank reporting this morning having fairly similar capital policy as you do, a fixed dividend policy and then one ish annual share buyback, and they only accrue for the dividend policy. Why are you having a 71% accrual ratio when other players have less?

Bjorn Nielsen Larsen, CFO, Newske Bank: I can’t answer for other banks than Usikbank. But given the dialogue we’ve had with the FSA, we decided on an equal treatment of buybacks and dividends.

Simon Harvat, Investor Relations, Newske Bank: Okay.

Martin Birt, Analyst, SEB: Then final question from my side. The and I think this is a CEO question, the revised totality framework. Does that change anything your book? Does it change your strategic priorities in any kind of way?

Lars Maach, CEO, Newske Bank: No. I think basically nothing new has happened. They’ve agreed apparently on how to progress from here. The important part is basically not that agreement. That is agreement between the competition authorities and Tutai Petit, which is opening the door for the smaller banks for a potential exit at a point in time when they deem it relevant.

And the new agreement, as I understand it, it just incorporates these things into the general framework, then there are a number of smaller adjustments to that adjustments that is small and not relevant in terms of the final decision that a bank will make on where to purchase their mortgage loans going forward. The most important thing for us is probably the fact that this opens up for consolidation and consolidation comes when it’s relevant. The new agreement will not be an issue in relation to this.

Martin Birt, Analyst, SEB: And

Simon Harvat, Investor Relations, Newske Bank: next question in line comes from Matthias Nielsen from Nordea. Congratulations

Matthias Nielsen, Analyst, Nordea: on the strong results this morning. So if we start on cost, they came out 3% below consensus. How should we think about this? Is this the new level? Or is it just the timing difference since your guidance is unchanged?

And could you also please remind us how much you expect in extraordinary cost from, given the domicile in Copenhagen and what other one off costs that you have planned this year?

Lars Maach, CEO, Newske Bank: Yes. I think Bjorn will answer the specifics here. But I think part of this is basically us doing what we’ve said that we wanted to do. And after the acquisition of Hans Martin and PFA Bank, we we had an integration job to do, and that job is now finalized. And this means that we are approximately 90 employees less at this point in time than we were at the same point in time last year.

So this is part of it. Then there are a number of one offs, the one and the other way. And I think if you could go into that, Bjorn.

Bjorn Nielsen Larsen, CFO, Newske Bank: Yes. Q1 numbers are seasonally the lowest for the year, as I said. And we took off one offs. If you take the Q1 last year, we had a decent chunk for the integration. We had some lawsuits costs and we had some VAT issues that gave us some uplift in one off items.

And those elements actually, well, all of them are not present this quarter. And quarter by quarter, this year, we expect to see low one offs and there will be a small implication from the Kalibelbogen or Glasgowen,

Simon Harvat, Investor Relations, Newske Bank: the Copenhagen. Yes. Relocate three different locations in basically, we acquired BRF Credit once, we have acquired Hansbank Denmark, and Uske Bank has another branch in Copenhagen. And we merged those three buildings into one, and that will be done sometime this year. And the implications will be a double digit million figure, but not in the high end.

Lars Maach, CEO, Newske Bank: And longer term, this will actually be a little bit lower cost in Copenhagen than what we’ve had historically. So by merging these three facilities over time, we’ll get cost savings out of this. And on top of that, we expect efficiencies also by having 900 people in the same building.

Matthias Nielsen, Analyst, Nordea: Okay. So if I come back, so like on the follow on this one. So like the start to the year, has that been better on cost than you expected? Or has it been on par with what you had expected internally?

Bjorn Nielsen Larsen, CFO, Newske Bank: Well, I think Q1 was a slim cost wise quarter, but more or less as expected because we have expected a big drop in one off costs in Q1. And that’s why we still reiterate that we could see a slight increase in 2025 versus 2024.

Matthias Nielsen, Analyst, Nordea: Okay. Okay. If we then move on and a follow-up on Martin’s questions and what you said about the dialogue that you have with the FSA on the capital targets. When should we expect that to be finalized? Is that something that takes one month, two months, one or two years, one or two decades?

How long should we wait?

Bjorn Nielsen Larsen, CFO, Newske Bank: Well, that’s a good question. We don’t know. But we will do our utmost to finalize it as quickly as possible. So whenever we are ready, of course, we’ll announce it to you. But I think don’t don’t expect any major shifts in levels 15 to 16 is is a solid level now, and that includes the CRE buffer of one percentage point.

So doing the math on that alone, and if we can exclude that, that, of course, gives us a change in expectations and the targets. But it’s too soon to say because we need to finalize matters with the FSA.

Matthias Nielsen, Analyst, Nordea: So when that’s finalized, will you then set it out in a separate release? Or will it be coming with the following quarterly results? How should we think about that?

Bjorn Nielsen Larsen, CFO, Newske Bank: I think you should expect us to announce it timely with a quarterly result.

Matthias Nielsen, Analyst, Nordea: Okay. That’s very clear. And then maybe on the lending growth, you also had some small sentence on that on one of the slides into Q2 that you haven’t seen any significant change to credit demand. Is there any difference between the corporate and the personal banking side? Is there how people are reacting to this and how we should think about that going forward?

And also on the mortgage business, seems like it’s that you have a bit balloon growth in the mortgage business and also on the personal banking side. So that seems nice. But how should we think about that when we look at Q2 and like and going forward as well?

Lars Maach, CEO, Newske Bank: Yes. I would like to be able to give you a very precise answer on this one. Our thinking around this is that personal banking and the personal banking segment seems less affected. And even the lower interest rates could mean that the momentum is keeping up in that area. We’ve also seen that our organization works extremely well, and we’ve seen an increased momentum also compared to the to the market.

On the on the business and corporate clients, we’ve not seen big change in demand so far. But I think people could speculate if some investments could be postponed if there’s gonna be uncertainty on the tariffs and so on. So we have not seen that yet. We we have discussions with our organization and advisers on a daily basis, we obviously inform them about what they should be aware about in terms of tariffs other areas. And basically, they come back and say, the optimism is still there.

And we also see that from some of the cross Denmark analysis that the optimism is still around in the companies. Our view would be that it will be a little bit subdued in terms of demand on the corporate and business clients, but we don’t see a big change.

Matthias Nielsen, Analyst, Nordea: Also, like one of your peers also reporting today, they say that they have seen net working capital like coming down among the clients on the corporate side, leading to a lower drag on the credit facilities. Is that something similar that you see have seen in Q1 as well?

Lars Maach, CEO, Newske Bank: Not to a large extent, no. And we’ve not seen the opposite either, that people are using their facilities to a larger extent that you could normally also see entering into a crisis. So we have really not seen that the uncertainty that we are talking about creeping into the real numbers yet.

Matthias Nielsen, Analyst, Nordea: Thanks a lot. That was very clear. Thanks a lot.

Simon Harvat, Investor Relations, Newske Bank: Thank you, Matthias. And next question in line comes from Namita Samtani from Barclays. Please go ahead.

Namita Samtani, Analyst, Barclays: Hi. Thanks for taking my questions. Just firstly, on the commercial real estate systemic risk buffer, like if if that gets taken away, do you then reduce your pricing for customers? Like, how does that work? Because you’re you’re not gonna get both.

Right?

Bjorn Nielsen Larsen, CFO, Newske Bank: Well, the CRE buffer will be reassessed in in the systemic risk council here in the early days of the autumn, expectedly with an outcome later this autumn. Whether it will be an unchanged level, half the level or fully cancellation is, of course, unknown. But down the line, over the years, I think if we can demonstrate and the market can demonstrate a strong performance in the CRE segments and pricing are holding up. Equity stakes are well in that segment of business overall. There are good arguments as to why to bring down the CRE buffer, but the timing is uncertain.

When it’s brought down and it’s canceled, as we said before, we think it’s sustainable that we have lifted our pricing for some segments of the corporate businesses due to higher capital charges, one being the CRE. And even though we lift it, take it off or cancel it, we still have higher charges for some of the segments when it comes to input flows from Basel. So that’s the reason why we don’t see that we need to reverse these price changes in the foreseeable future. Our pricing has not been

Lars Maach, CEO, Newske Bank: linked one to one with the buffer. So there will also be individual customer cases here in a way to on this. So some of them, we would not need to reduce necessarily because there’ll

Bjorn Nielsen Larsen, CFO, Newske Bank: be a change.

Namita Samtani, Analyst, Barclays: That’s helpful. And then secondly, in your presentation, when you write AUM has only gone down by less than 2% in April, how is that possible? Because the market has gone down a lot more than that. So are you seeing inflows? Or what’s going on?

Simon Harvat, Investor Relations, Newske Bank: Well, you need to remember that a large chunk of our AUM is also bonds, and there, we haven’t seen much of an impact. And and we we we haven’t seen much change in terms of inflows so far. But and then, of course, the last one is during April, there was a nice comeback in some markets, at least in terms of equities as well. So we were happy to see that, yes, we didn’t see much of an impact at the end of the month.

Lars Maach, CEO, Newske Bank: But I think there’s been and you’re saying that indirectly also, there’s been a nice inflow of new investments into the area also.

Namita Samtani, Analyst, Barclays: Do you think that’s, like, Yescous specific, or you think it’s, like, across the market that’d be more close?

Lars Maach, CEO, Newske Bank: What I’ve seen from and and there are other experts on the call here, I’m afraid. So I’m I’m afraid of of guessing here. But I think I’ve seen in some of our peers’ results that some of the peers also see a positive inflow here. And I think it’s due to the net savings of the Danes altogether that and increased interest in investing. So I think there’s a general trend.

What we saw in last year was that we were better than the general trend, And that is also what we hope for this year that we can have a little bit bigger uplift than the market.

Namita Samtani, Analyst, Barclays: Okay. That’s helpful. And then just finally on the FTEs, like they were down 2% quarter on quarter. Do you expect the FTEs keep declining this year?

Lars Maach, CEO, Newske Bank: They were they were down approximately 90 FTEs from first quarter last year. Yeah. And that is predominantly due to us taking out the extra resources that we needed for the full integration of Hans Banton or rather taking out the synergies that we promised at the time of the acquisition. This year, you’ll see two different trends, one of them being continued cost focus, but also part of the strategy is investing in important areas to ensure a strong bank, but also to look at individual profit pools that are interesting to us.

Namita Samtani, Analyst, Barclays: That’s helpful. Thank you.

Simon Harvat, Investor Relations, Newske Bank: Thank you, Nemita. And it seems as if there are no further questions in line. So we would like to thank you for participating in today’s conference call. A recording of the call will be made available on our IR website in the coming days. Please do not hesitate to contact us if you have further questions.

We appreciate your interest in Newscope Bank, and

Bjorn Nielsen Larsen, CFO, Newske Bank: wish

Simon Harvat, Investor Relations, Newske Bank: you a nice day.

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