Ladies and gentlemen, welcome to the Swedbank Interim Report Q4 2024 Conference Call. I'm Sandra, the Chorus Call operator. I would like to remind you that all participants are in a listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must now be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Annie Ho, Head of IR. You will now be joined into the conference room.

Good morning and thank you for dialing into Swedbank's Q4 and Year-End 202024 Results Presentation. My name is Annie Ho, Head of Investor Relations and we have our C-suite here in the room with me Jens Henriksson, our CEO; and for the first time Jon Lidefelt, our CFO; and Rolf Marquardt, our CRO. Let's start with our usual presentation and then follow up with Q&A. Jens, I hand over to you.

Thank you, Annie. Swedbank has once again delivered a strong result supported by timing effects. We are creating value for our customers and shareholders in both good and bad times. The global economy remains weak. Falling interest rates are cautiously starting to have a positive effect on the economic development, but regional differences are growing while the geopolitical situation has deteriorated. During the quarter, the Federal Reserve, the ECB and the Riksbank continued to cut their policy rates and they are expected to be cut further in 2025, but uncertainty about when and how much has increased. Economic activity is strong in Lithuania, while the development in Estonia, Latvia and Sweden is more cautious. Significant public investments in defense as well as infrastructure will support economic growth and give us business opportunities. Strong public finances, rising real wages, innovative companies and lower interest rates imply that our home markets are expected to be among the fastest-growing in Europe in 2025. In this environment, Swedbank stands strong. The profit for the full year 2024 increased by 2% compared to the previous year. The result for the fourth quarter amounted to SEK8.5 billion. Net interest income declined during 2024 and was stable during the quarter due to positive timing effects. During the year lower customer interest rates on lending had been offset by lower funding costs. Net commission income increased during 2024 and was stable during the quarter. Costs developed according to plan and ended up in line. What we have communicated we maintain strict cost control and our hiring freeze implies that we are fewer employees today than we were a year ago. Our cost to income ratio was 0.34 for the full year and 0.36 for the quarter. For the full year 2024, we thus deliver a return on equity of 17.1% and for the quarter a return of 15.8%, a strong result. Swedbank has a conservative and thorough lending process. We had credit impairment provision recoveries in the fourth quarter as well as for the full year. Our credit quality is solid, our liquidity and capital position is strong, and we have a strong ability to generate capital. Swedbank's Board of Directors yesterday decided to change the dividend policy to between 60% and 70% of the profit. We have accumulated capital for a long time, and we have no desire to hold more than necessary. This policy gives us the possibility to both develop the bank and increase lending as the business environment changes, while securing a continued strong capital position. The Board of Directors therefore intends to propose a dividend for 2024 of SEK21.70 per share corresponding to 70% of the profit at the Annual General Meeting. The dividend goes to our owners in savings banks, insurance companies, pension funds, funds, retail investors and foundations that in turn give back to society. At Swedbank's Investor Day 2022, the road to a sustainable return on equity of at least 15% was formulated. It is a plan that we have delivered on. By leveraging our proven business model, we have increased business volume, grown in prioritized segments and improved our operational efficiency. We look forward to presenting an updated strategic plan for the coming years at the New Investor Day before the summer. Swedbank is the leader in mortgages in all our home markets and we maintain that position in tough competition. We have seen increased customer mobility on the Swedish market during the year which has affected us to a larger extent as we have the largest number of mortgage customers. During the year, our mortgages through own channels have increased by about SEK2.5 billion, which is below our market share. During the third and fourth quarter, our mortgage volumes has declined slightly. This is mainly because we have had too low availability at the time when many wanted to talk to the bank. In Estonia, Latvia and Lithuania, lending increased during 2024 as well as during the fourth quarter and it is the green mortgage loans that continued to drive the mortgage development. The development in savings remained strong with significant inflows to our Robur funds in 2024. In Estonia, Latvia and Lithuania, the development in savings has been very good which continues to be a growth opportunity going forward. We are proud to contribute to savings cultures in all our home market. In addition, inflows to the pension insurance business also developed strongly in 2024. Premium and private banking has reached a new milestone. In 2024, 10,000 customers have signed up for our concerts. In Sweden, the demand for corporate loans remains muted and Swedbank has maintained its market share in a declining bank lending market. Looking forward, the underlying view on the Swedish corporate market is positive. The combination of a local presence and national expertise remains at the center of our corporate business. Corporate lending increased in Estonia, Latvia and Lithuania for the full year and the quarter, and the development since the summer has been strong. We are the leading corporate bank in Estonia and Lithuania, and our ambition to establish the same position in Latvia remains. But we will be more selective going forward as the new bank tax will make new lending per se unprofitable in the coming years. We invest for a better and stronger Swedbank to sustainably deliver on our customer promise of an easier financial life. In 2024, we have had an accelerated investment pace. And let me give you some examples. Our advisory platform. We have now migrated half of our customers to the platform. Our omni channel communication platform to increase our availability and an improved end to end lending process to increase our speed. In Sweden, we adapt our ways of working to meet customers where they want to meet us. And we see that more and more customers want to meet us digitally and by phone. Therefore, we are reallocating resources to advisory meetings in those channels, all to increase our availability and speed. Sustainability is at the core of Swedbank's business strategy. And at the heart of our vision, a financially sound and sustainable society. In 2024, we reached several milestones. Swedbank's sustainable asset register exceeded SEK120 billion at the end of the year, after increasing by more than 70% during 2024. And 36% of Swedbank's arranged bonds were sustainable bonds. Also in our Annual Report, we will report under the EU Sustainability Directive, CSRD, 1 year before it comes into effect in Sweden. Directing financing towards sustainable assets is both profitable and our responsibility. It is our way of contributing to accelerating the necessary transition of society. Looking at the financial health, which is an area close to our hearts, we continue to contribute to increasing general knowledge of economic concepts and promoting better financial decision making in our home markets. In Sweden, we have educated more than 100,000 children and young adults in personal finances in 2024. Now let me give the floor to Jon Lidefelt, who will deep dive into the financials in his first quarterly report as CFO. Jon, you have been with the bank for nearly 2 decades in total, and he knows the bank very well, and his leadership is well suited for the next step in the bank's journey. Jon? Jon Lidefelt: Thank you, Jens. I'm pleased to present the financials for yet another strong quarter. Some of you I've met in my previous role as Head of Baltic Banking, and I look forward to further discussions with you in our upcoming meetings. But as a starter, I'm very proud of what we have achieved in the Baltics over the past years, where we have managed to combine substantially growing the business, and at the same time, expanding into new income streams. We have done so with a diligent focus on profitability, cost, and capital efficiency. In my new role, the overarching objective for me is, of course, to ensure focus on shareholder value. To deliver on that, I know that we must have a diligent focus on return on equity, and thus, cost efficiency, capital efficiency, asset quality, and of course, income growth. Further, that we steer the bank with a long term focus while being agile and adjust as we go. With that as a start, let me move over to lending and deposits. The overall loan portfolio was stable, excluding a positive FX impact during the quarter. In Sweden, the lending environment continues to be muted. However, household confidence is improving and the cautiousness to borrow is slowly subsiding. For mortgages in Sweden, we continue with our pricing strategy and maintain focus on the balance between volumes and long-term profitability. Mortgage volumes decreased with SEK2 billion while mortgage margins increased during the quarter. On corporate lending, volumes in Sweden decreased with SEK8 billion during the quarter, mainly related to a couple of individual customers' repayments. Underlying, we, however, see some positive signs in terms of customer activity stemming from our focus on 1 corporate business in Sweden. In Baltic Banking, lending continues to grow. The interest rate reductions since June have improved household affordability and consumer confidence contributing to an increase in activity. Private lending increased with SEK2 billion and corporate with SEK6 billion excluding FX. Customer deposits increased by SEK4 billion excluding an SEK8 billion positive FX impact. In Sweden, private deposits decreased by SEK1 billion and corporate by SEK16 billion mainly due to seasonal outflows from money market accounts. In Baltic Banking, we received some temporary inflows of public funds and payment of a 13th monthly salary in Lithuania, following the same pattern in December this year as previous years. Private deposits increased by SEK17 billion and corporate deposits by SEK4 billion. Year-on-year, we have increased our market share in private deposits in Baltics and volumes have grown by 13%. If we turn to the P&L. Net interest income was stable with a quarter-over-quarter increase of SEK45 million mainly driven by timing effects. Lending income decreased due to lower customer rates, largely offset by lower customer deposit rates as well as lower funding costs. Let me take the opportunity to deep dive on our NII sensitivity. We provide you with an update of our balance sheet composition and how we come to the full NII impact. That is also disclosed in the fact book. We have around SEK640 billion of non-remunerated deposits and equity. That imply, ceteris paribus, that a rate reduction of 50 basis points leads to a SEK3.2 billion lower NII fully phased in. In reality, of course, volume, margin and FX changes will have an impact, and you have to make your own assumptions of that. However, the journey to the fully phased impact is hard to estimate, as was discussed during the Q3 call. Let me elaborate a bit on the dynamics here. The trends we saw in Q4 have been similar to what we saw in Q3. And therefore, the NII development continues to be impacted by timing effects. This occurs as our liabilities reprice faster than our assets. All on demand savings deposits, where we pay interest, reprice immediately when the pricing changes. Further, as we have seen recently, IBOR rates have declined ahead of and even more than central bank rates, which means that our wholesale funding costs have declined earlier and faster than assets that are dependent on central bank rate changes. On the asset side, our Swedish mortgage book on 3-month fixings reprices over a 3-month period after we have lowered rates, which we have typically done around the central bank rate decision. Therefore, when rates decline, our total funding cost will reduce earlier than our income. This is why in a period where rates fall fast, we have experienced a better NII development short term and why the NII development quarter over quarter in the current environment is hard to forecast. Over to net commission income, which is stable, mainly driven by stock market performance within Asset Management and market maker fees of SEK50 million. Our emphasis on cross selling pension and investment products have resulted in higher activity. For example, our new business area, premium and private banking, has seen a positive effect in attracting new inflows from private occupational pensions. Card commissions were seasonally lower, hence following the same pattern as previous years. Net gains and losses were strong, but down in Q4, ending at SEK923 million. Client trading continues to be solid, and we benefited from revaluations of equity instruments. Reminding you that Q3 was impacted by large positive revaluations of funding related interest rate swaps. Other income decreased by SEK309 million. Net insurance income decreased by SEK142 million, of which SEK121 million stemmed from less positive revaluation effects quarter-over-quarter. Underlying net insurance income was stable. Profit from partly owned companies decreased by SEK244 million, of which SEK120 million was a one-off adjustment in Entercard during Q3. The businesses in other income are meaningful, steady sources of income. One of our key business initiatives lies within net insurance, where the P&C business in Baltic banking has seen an impressive 50% increase in revenue over the past two years. Total expenses for the year developed according to plan including FX, ending at SEK25.4 billion. Looking ahead, we continue to be in an investment mode, and I will ensure continued strong cost discipline and aim to increase our focus on efficiency. We strive for long-term positive jaws in order to achieve profitable growth with shareholder value and focus. With long-term, I mean that we need to see through rate changes and plan based on a longer horizon with stable rates. For 2025, we set a cost guidance of SEK26.5 billion based on 2024 year-end FX rates. Of that, we have temporary investments of around SEK1 billion to accelerate certain initiatives such as the omnichannel advisory platform, payments infrastructure, data transformation, and IRB overall. It is also important to mention Swedbank's strategic partnership with the savings bank. Through our close cooperation, both on business origination operations and IT development, our joint operational efficiency and customer offerings improve. Costs for services provided, are compensated by the savings banks and thus do not negatively impact our net profit. A word on other impairments before I hand over to Rolf to talk about credit impairments. Following the front-loading of IT investments since 2024, which replace older systems, our regular accounting review of intangibles have resulted in a write-down of 757 million. With that, I hand over to you Rolf.

Thank you, Jon. Credit quality is solid. For the full year of 2024, we made recoveries of 268 million. The economic recovery in most of our home markets has been delayed and the impact still lingers from this. But we see positive signs on the back of lower interest rates. Past-due loans increased somewhat in Sweden but improved in the Baltics. In the fourth quarter, credit impairments ended at the recovery of 394 million. The impact from macro factors reduced provisions by 212 million, explained by updated interest rate projections. Rating and stage migrations increased provisions by 353 million due to downgrades of a few individual customers. At the same time, SEK146 million of the post-model adjustment was released, mainly related to property management in Sweden and agriculture in the Baltics. The remaining post-model adjustment is now SEK720 million to cater for geopolitical and related uncertainties. For individual assessments, we recovered 56 million. Net repayments and balances reduced provisions by SEK333 million. Out of this, SEK83 million was related to net recoveries on written-off exposures. In the property management sector, we have in 2024 seen a stable development with open wholesale funding markets, strengthened balance sheets and stabilized interest coverage ratios. Our assessment is that the credit quality is solid. So with that, I leave the word back to you, Jon.

Turning to capital, REA increased by SEK14 billion net and ended the quarter at SEK872 billion. The annual recalculation of operational risk added 16 billion, reminding you that next quarter we will see the impact of the implementation of Basel 4, which we expect to have a limited negative impact. The effect is primarily stemming from revised coefficients for operational risk REA. With the new dividend policy and the 2024 dividend proposal, our CET1 capital ratio is 19.8%, meaning we have a buffer of around 460 basis points above the requirements. In addition, at the 15/25 presentation where we targeted 200 basis points, that is the mid of the management buffer, we talked about 300 basis points in excess capital. This has gradually grown given the new dividend policy and the proposed dividend for 2024. We now expect around 250 basis points in excess capital once we are through the work with IRB. Hence our capital position continues to be strong. With that, I hand it back to you Jens.

Let me now sum up the full year. We deliver a strong result for 2024. The profit increased by 2% compared to the previous year. Return on equity was 17.1%. Our cost-to-income ratio was 0.34. The credit quality is solid. With a changed dividend policy, the Board of Directors intend to propose a dividend of SEK21.70 per share at the annual general meeting. Our capital buffer is strong at 4.6 percentage points. We have delivered on our plan Swedbank 15/25 and we look forward to presenting an updated strategic plan for the coming years at the New Investor Day before December. We create value for our customers and our shareholders in both good and bad times. Our customer's future is our focus. A - Annie Ho: Thank you very much. Let's begin the Q&A session. And to remind you to keep two questions per turn.

[Operator Instructions] Our first question comes from Magnus Andersson from ABG. Please go ahead.

Yes. Hi. Can you hear me?

Yes, we can.

Yeah. Okay. Good. Excellent. Just on NII, as your NII sensitivity analysis you have in your factbook hasn't changed for a long time. I guess what you're saying is that we should continue to expect this positive timing effects for as long as short-term rates decline in average terms, quarter-on-quarter and that it will reverse or normalize once rates flatten out, which, according to the current expectations, could be during the second half of '25, which means that it's from that point we should come down to whatever we thought was the underlying level, excluding these timing effects, whether that's correctly understood or not. And my question number two, Jon, since with your background in the Baltics, if you could comment on the windfall tax in Latvia from 2025 and '26 and whether you think that these windfall taxes we will have now in Latvia and Lithuania will be temporary or whether they will be replaced by something else, i.e. so that we should really expect bank taxes in the Baltics to be recurring. Those are my questions.

Well, thank you. I'll steal the word from Jon here because he's the CFO right now. So I'll talk about the Baltics. When it comes to bank taxes, let me first as always remind you that banks are an important part of our society and what we do is that we channel our customers hard earned deposits to lending, thus empowering people and businesses to create a sustainable future. And to do that we need to be profitable. And a sustainable bank is a profitable bank. And we are proud taxpayers that contribute to the financing of welfare and security in our home markets. What we do not like are sector specific taxes, retroactive measures and an unpredictable regulatory environment. What we do like is equal treatment, rule-based systems and an investment climate that fosters growth, financial stability and green transformation. And let me not just talk about Latvia, let me do a quick tour across our four home markets. In Estonia, corporate tax increased with 2% this year according to plan. In Lithuania, the investor tax on NII will last the year out and then the government has declared that it will disappear. The general corporate income tax increased by one percentage point from the 1st of January while reminding you that since 2020 there is already a 5% extra tax on banks. In Latvia, we will now for three years have an investor tax with a similar definition of that to Lithuania, namely 60% on NII, exceeding 150% on our average NII between 2018 and 2022. But the main difference is that unlike Lithuania, income from new lending will not be excluded. That will hurt the Latvian economy in the short, medium and long-term. Our ambition to become the leading corporate bank in Latvia remains, but the tax will have impact on our business strategy. In Sweden, we have a bank tax that the government is reviewing with the aim to introduce a base deduction while delivering the same tax revenues, thus leading to an increased tax for the larger Swedish banks. Now, Jon, NII.

Thank you, Jens. And if I just may add two things on the tax. Reminding you, Magnus, that the bare construction in Lithuania makes this tax at least temporary. At the same time, we also have an extra 5% corporate income tax for banks there that is permanent. And the Latvian has a different construction, as Jens said. But I'll leave it with that. On the NII, I mean, yes is the short answer. I mean, I did this deep dive to give you the components and explain why we have these timing effects. At the same time, it will be very, very hard to do a correct forecast quarter-over-quarter due to all the moving parts and when rates are changing as they are now. So that's why I also reiterated the long-term sensitivity and sort of the components that in the end will impact that volumes, margins, FX and so on. And there you will have to make your own assumptions.

Yes, but nothing of this is really recovering, assuming that the asset side will also reprice, although it reprices a bit later. So when rates flatten out we should be at the correct underlying level regardless of these effects short term.

Yes, the long-term sensitivity is exactly what I have explained.

Yeah. Okay. Thank you.

The next question comes from Martin Ekstedt from Handelsbanken. Please go ahead.

Thank you for taking my question. And Jon, welcome to the team. And my first one, could you talk a bit about the derivatives effects that you see in the NII accounts, both on the interest income and interest expense sides, they contributed a material positive portion in the quarter. And then secondly, if I may, the fall in card commission income in Swedish banking. Could you just speak a little bit more about the underlying factors there that you saw in the quarter? Thank you.

Thank you, Martin. If I start with the derivatives, I think, first of all, when you look here, you have our trading related NII is in this. And you can see also how much of the trading related NII that is then move. So, you need to keep that in mind when you look at this. The trading related NII has moved to NGL in the end. But you also -- on the expense side, you can see how our lowering funding cost is coming through. And here you need to look at the derivative line in combination with the debt security initiative. So, you will see our lowering funding cost coming through. But you will also have to take into account the trading related NII here which is in the end not included in the NII line. On cards, I mean, we have a move between different within the net commission income since we have where we have concepts where we price. So things are moving from one part of the NCI to another part moving out from cards to concepts partly so that is the traffic you need to keep in mind there.

Okay. Thank you for that.

The next question comes from Gulnara Saitkulova from Morgan Stanley. Please go ahead.

Hi. Good morning and thanks for taking my questions. When it comes to the volumes, to what extent do you think the potential recovery of those maybe throughout the 2025 can support the NII dynamics? Maybe can you talk about the outlook for the loan growth momentum for both mortgages and corporate customers in Sweden and the Baltics? And what are the key observations when it comes to the customer behavior on the mortgages? And maybe can you also touch on the competition? How does it evolve throughout the Q4? Do you see some easing of their competitive behavior lately, or do you think it still remains intense? And may I also ask the second question on the capital, your capital buffer looks very solid. You're 460 basis points above the regulatory requirement and you have increased the dividend payouts, but still you are well above the management target buffer of 200 basis points. Assuming that after the AML investigation is closed, what would be your priorities when it comes to this excess capital? Would you consider potential buybacks, special dividends, M&A, or would you focus mostly on the organic growth? Thank you.

Thank you. Let me see what I can answer. Then Jon you have to see what sort of left behind there. The first thing, if you look on the loan demand, it is as we said, muted in Sweden when it comes to the corporate side. We see that the mortgages have increased during '24 compared to '23 while still at the low level. And in the three Baltic countries we still see continued good demand. But let me say a few words, deep dive into the mortgage market. And as you know, we are the market leader in all our four home markets when it comes to mortgages. In the Baltics, our mortgage volumes increased with SEK6 billion during 2024 and we have a market share of around 40%. In Sweden, mortgages sold for our own channels increase with around SEK2.5 billion during the year, translating to a meager front book market share of around 5% compared to our back book of 18. The year started well, but the last two quarters our Swedish mortgage book has been slightly, slightly negative. The competition is tough and we strive to strike the right balance between margins and volumes. And the market has been characterized by tough competition, increased customer churn due to high activity in our large customer base and thus many customer interactions which has caused, as I said in my introduction, availability issues and long waiting times. Our investments in the cloud-based omni communication platform means that we can start serving customer calls both from service centers and local branch offices and thereby we can start using the national potential of our professional, local, employee, mortgage and client advisor. This is a transformation that will take some time but lead to results without increasing FTE levels. Now let me say a few words on capital and let's take the overall perspective here as well. And we're very proud that the Board yesterday decided on a new dividend policy and that policy is that 60% to 70% of our profit should be returned to our shareholders through ordinary dividends. And as you rightfully said, since 2019 we had a dividend policy of 50%, and we have continuously built capital and that cannot continue forever. And we have no intention to hold more capital than necessary. From now on, we have a sustainable dividend policy of 60% to 70%. That will give us the possibility to develop the bank for our customers and increase lending in line with the changing business environment, while making sure that we have strong capital buffers. And you know that for 2024 the Board will propose a dividend of SEK21.70 which amounts to 70% of our profit. After this, as Jon pointed out, our capital buffer is 460 basis points. We still have the management buffer range between 100 and 300 basis points, and in 15/25 we targeted the mid of it, i.e., 200 basis points in 2025, that stands. So when can you then expect capital release so that we can reach our target. Well, there are always uncertainties related to what the regulators might do, but the biggest uncertainty is, of course, the U.S. investigations. And as I've said many times, we have no information and when they will be concluded. The U.S. authorities fully own the timeline. And we cannot assess whether we will get any fine. And if we do get any fine, we cannot make an assessment of the size of such a potential fine. Sorry for being so long.

Thank you.

The next question comes from Tarik El Mejjad from Bank of America. Please go ahead.

Hi. Good morning, everyone. Just a couple of questions from my side. First, I'll start on costs. Just to be clear, what do you factor in your guidance? Do you still include the SEK1 billion extra investments you had for '25? And also, I guess, you factor in the higher regulatory costs or windfall taxes in Baltics. And then another question, I mean, on the CMBI you answered partly to Gulnara, I guess, but I mean, I understand that you reach a certain level of capital that's very comfortable and you don't want to go above. That's very sensible. So, how then you're comfortable come with the plan in, and your plans tend to be quite a long timeframe without knowing exactly what the size of the fine could be. Are you -- do you have any idea or evidence that it will be within the buffer you set? Just my experience of lots of banks having been through this litigation settlements is that it's hard to set longer term targets for growth and so on if you don't know exactly what capital you have in hand. And just sorry to come back on the NII, I just want to make sure I understand this derivatives point as well. So, basically on NII you have the benefit from the derivatives which is basically you're swapping your fixed rate liabilities into floating, which is actually what we refer as a timing difference because these reprice faster and quicker than the loans. But then you have parts of it offset through trading which will be a negative effect. We have the same actually effects in other banks in Europe, and I think would be useful to show actually what's the kind of aesthetic elements outside NII. And then I guess this is where you say when rates will stabilize, that effect will basically diminish. Thank you very much.

Let me start by the U.S. authorities. And to zoom out, as you know we are in discussion with three U.S. authorities. the Department of Justice, the Securities and Exchange Commission and Department of Financial Services, New York. And as I've said many times when I was new as CEO, I called around and met with colleagues that been in similar circumstances and they told me that the process like this usually takes three to five years. In spring, six years have passed, but the timeline is fully owned by the U.S. authorities and we do not know how it looks like. And I do not know whether we will get any fines. And if we do get fines, we cannot estimate the size of those. And we have been as transparent as possible during this process. And when something material happens, we will continue to adhere to that principle. Jon?

Jens, thank you. If I -- let me start with the NII. I mean, reiterating that what you see there in the factbook is trading related NII and that is then moved out to NGL. That is not mainly related to the funding. And you see how much trading related that is moved out, but it's partly in the derivative that you have there. As you know, then our wholesale funding cost, it is as you said, then swapped to 3-month or floating whatever you want to call it. And to see how the lower funding cost is filtering through. Then as I said, you should look at the development on the derivative side in combination with the debt security in issue. Having said that, I will not try to go into sort of what is the exact timing effect here. It will be highly theoretical to if I would filter that out and I would have to make a lot of assumptions. So, I'll just reiterate that you need to keep the focus on the long-term again, and then accept that it will be hard to forecast quarter-over-quarter. On the cost side, first of all, yes, we have SEK1 billion extra investment included for 2025, just as we had for 2024. Then as I know that my predecessor has talked a lot about, we have a headwind in terms of salaries, in terms of maintenance variety, in terms of general inflation impacting a lot of our costs. Over time, we need to mitigate that through increasing our efficiency, otherwise our costs will grow too fast. And for that we have a structured process where we work with identifying efficiency potentials and also more structural cost topics that we can use. We have a process for identifying them, prioritizing them, and then continuously working with them. And it often takes some time, one to a couple of years from we identify to actually see the benefit of it. So that's why it's so important that we have this as a continuously ongoing process to make sure that we improve our efficiency year-over-year.

Thank you very much.

The next question comes from Bettina Thurner from BNP Paribas. Please go ahead.

Yeah. Hi, everyone and thanks for taking my question. I have two questions of which one is just a clarification. Maybe to start with this one, on your capital targets that you pointed out, I think Jon has made a comment on when you're through with the IRB model, the excess should come in at 250 bps. And do I understand this correctly that you expect this to be the excess over the MBA or if you just could just clarify what you meant with that. And then the second question would be on your front book market share. You said that part of the reason was -- and obviously that you were considering a balance between profitability and volumes, but also the availability issue that you're trying to fix with the cloud center. Would you say this is completely fixed now, or is this still in the process, or are you basically ready to go to pick up volumes from here on? Thank you.

Well, first, when it comes to availability, you cannot say it's fully fixed. We work with that quite a lot and we are looking at the pilot projects, whether we can see sort of the help of our professionally local employed people how they can help answering the phone. We're working with it, but it has been a lot of customer activity and this is a strong focus for the bank. Jon, you want to?

Yes, you're right. I said that once we are passed through the IBOR, I expect our excess capital with excess, I mean then above the mid of the management buffer. So above the 200 basis points, I expect that to be around 250 basis points. I also said that now in Q1 you will see the effect of Basel 4, which we deem to be limited negative for us. IBOR, most of the effects are already included in our current capital forecast, as we think. But then it might be a little bit on timing effects when different approvals come. But when we are through, it should be more or less new comparable to what we have today. So yes, 250 above the 200. We are best estimates today.

Perfect. Thank you very much.

The next question comes from Andreas Hakansson from SEB. Please go ahead.

Hi. Good morning, everyone. Sorry, just taking it back to the net interest income again. Could we just try to understand a little bit of the timing? And if we assume that the Swedish Central Bank cuts one more time now in January, which I guess is fully expected and then partly expected one more cut in March and then the Swedish Central Bank is done cutting. How quickly do you think that the headwinds you have seen on the liabilities are primarily easing?

Well, thank you for the question. I think the reason once again to give you this deep dive was to give the components. In the end, it will depend on how fast IBOR rates fall ahead of Central Bank rates and so on. So, it will be very hard. So, I'll just reiterate that you need to keep focus on our overall sensitivity that is the one that you can make a correct assumption on in the end. So, focus on that.

It's fine. I'm just thinking that if the market is now pricing that the Central Bank stops at 2% in March, then the IBOR rate should be in anticipation that going to 2% before that and then both rates stay at 2%. So, does that mean or doesn't it mean that the headwind you've seen on the liability side should end quite quickly after that, or is it something else that drags on?

As I also said, our asset side mortgages are three months to a large extent so we tend to lower the rates around when Central Banks are changing. On the Baltics it's six months, IBOR so that is sort of. So, I think you have it in the deep dive to make your own assumptions.

Fair. And then also on the net interest income, I mean, if I look at your issuance of senior unsecured bonds and also senior nonpreferred over the last year, you increased it quite sharply at the same time as you haven't really done any volumes on the lending side. So your NSFR is now 127% which I would argue significantly too high. Does that mean that you actually pre-funded a lot also looking into 2025.

I mean if you look back around the last previous year-end then we had to catch up with MREL requirements. A lot of the issuance there were related to that. Now we have the buffer levers that we want. So, going forward, we plan to issue around the same as we have done last year, around SEK145 billion. And we will, as you know, use covered as the instrument to handle loan and deposit development throughout the year.

Yeah. I'm just thinking covered is fine, but if I look at the two more expensive bonds, is there any reason why you should continue to grow it from the already quite high-level or should we able to stay there while the volumes are catching up with your funding?

As I said, we're fine where we are in terms of MREL. So it's more a matter of filling when instruments fall off, so to say going forward.

Thank you. That's it from me.

The next question comes from Sofie Peterzens from JP Morgan. Please go ahead.

Yeah. Hi, here is Sofie from JP Morgan. Thanks for taking my question and apologies for going back to net interest income. So, could you just confirm that you don't have any derivatives on the asset side, i.e. that you would have been swapping some of your floating rate loans in the fixed rate to kind of manage your asset liability mismatch. So, if you could just confirm it. And then my second question is also on net interest income. Should we -- I know it's a timing issue, but like how should we think about net interest income in the next couple of quarters? Is it fair to assume that hypothetically first quarter net interest income should be down compared to the fourth quarter and then subsequently second quarter NII should be down quarter-on-quarter. Then, my final question would be on trading income. Your trading income was 25% higher in 2024 compared to '23 with kind of higher interest rates, more volatility. Is it fair to assume similar to some of your peers that trading or net gains and losses can be structurally higher going forward? Thank you.

Sorry. Thank you, Sofie. On the first question, the answer is no we do not have or we have so small structural hedges that you should discard from it. We have talked about the reason before that it will require too much capital for us at this point. So, no is sort of the short answer to that. When it comes to the NII development for the coming quarters, I don't and I can't go into guide on that. It has so much to do with the different rate development short term. So once again please focus on the long-term. The sensitivity stand for that. When it comes to the trading income, I mean it is volatile in the sense so -- but, of course, it is a business area that we want to do business in, but it is volatile by its nature.

Okay. And maybe if I can just kind of squeeze in a final question. We've seen quite a lot of M&A across Europe, both in southern Europe, but also got off DNB buying Carnegie. Do you have any comments on Carnegie where you're looking at it? How do you think about kind of M&A opportunities for Swedbank considering that your capital position is so strong?

Well, first, let me just say that it is a strong competition. Of course, we follow what's happening out there. We I always look at M&A opportunities and if something will happen, I will get back to that, but there are no big things there. Thank you.

Okay. Thank you.

We have now time to take one last question from Markus Sandgren from Kepler Cheuvreux. Please go ahead.

Hello. No, I was just thinking on NII again. How much volumes do you have in e-savings accounts and alike that are administratively set and what's the average rates on them? So that's the first one. And then secondly on costs, so it seems like the guidance is 4.5% higher than 2024. And is that -- or I mean you reduced staff a bit now in Q4. Is that including in staff reductions next year as well or is it flat or up? Thanks.

Thank you, Markus. If I start with the cost, you'll have to wait a bit for us to come back on the 2026 year cost guidance. So, for this year I've set the number and it includes SEK1 billion temporary and also that we then are mitigating parts of the underlying headwind to make sure that we are efficient on cost over time. Then, on the NII and the deposit rates, I don't have them at top of my head, but you are -- if you look at the Easy Saver and so on in the Baltics, we have not in the quarter result that you see lowered them to the same extent that that you IBOR has gone down. So on the Baltic side, we've actually had a lower beta than one throughout the Q3, whereas in Sweden it's been more around one. But I don't have the exact figures on top of my head.

No, that's fine, that's fine. But is there still room to go lower on them? I guess so we can expect these timing effects in a couple of quarters more.

I mean, over time, yes, there are rooms, but then it's a business decision short term, what is the optimal to when to lower different rates. And in the Baltics, they have kept them up a bit.

Yeah, very good. Okay. Thanks. End of Q&A:

Well, I think that sums it up. And thank you for always asking the tough problems, the tough questions. Let me also take this opportunity to thank Annie Ho for her service as Swedbank's Head of Investor Relations for more than four years. Annie has decided to pursue opportunities outside the bank and I wish her the best of luck. Thank you. I now look forward to meeting many of you and continue our dialogue on Swedbank. Enjoy the rest of the winter. Take care.

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