Transcript : Nordea Bank Q2 earnings call:

Good morning, and welcome to Nordea’s Second Quarter 2025 Results Presentation. I’m Ilkka Ottoila, Head of Investor Relations. Here in Helsinki, I’m joined by our President and CEO, Frank Vang-Jensen; and our Group CFO, Ian Smith. As usual, we’ll start with the presentation by Frank, followed by a Q&A session. [Operator Instructions] With that, let’s get going. Over to you, Frank.

Good morning. Today, we have published our results for the second quarter of 2025. It was a quarter marked by high uncertainty and the most volatile market conditions for some time. Concerns over higher U.S. trade tariffs, an increase in geopolitical tensions resulted in significant financial market turmoil. Despite the external pressures, overall sentiment among Nordic households and businesses, remained calm with customer activity increasing in most areas as the quarter progressed. Global trade volatility clearly presents risks. However, we believe the Nordic economies are better positioned than many to manage through periods of turmoil. That advantage is rooted in our region’s strong economies and fiscal positions and our globally innovative and competitive businesses.

Looking ahead, we expect that lower inflation and interest rates will further support increasing activity levels as confidence returns. In this extraordinary environment, Nordea delivered a not so strong performance. We grew lending and deposit volumes and increased assets under management. We delivered strong profitability with a return on equity of 16.2%. The result underlines our structural improved profitability and our position as a strong resilient market-leading financial services group. It also keeps us firmly on track to meet our full year guidance.

Looking at some of the highlights for Q2. Our return on equity was strong at 16.2% with earnings per share at EUR 0.35. Mortgage lending increased by 6% and retail deposits were up 8%, supported by Norway and Sweden. Corporate lending and deposits also grew significantly, both increasing by 5% year-on-year as we help corporates strengthen their liquidity and financial flexibility. Assets under management grew by 9% to EUR 437 billion. Total income was resilient in the turbulent markets. As expected, net interest income was lower and the declining interest rate environment decreasing by 6% year-on-year and by 2% quarter-on-quarter. Net fee and commission income was stable year-on-year after being significantly impacted by the financial market turmoil. Net insurance results and net fair value result were also both resilient and broadly stable year-on-year.

Operating profit was EUR 1.6 billion compared with EUR 1.7 billion a year ago and was stable quarter-on-quarter. Costs increased by 3%, excluding foreign exchange effects, in line with our plan with more than half of that increase driven by our strategic investments including the Norwegian acquisition. The cost-to-income ratio with amortisized resolution fees was 46.1%. Our credit and asset quality remained exceptionally strong, with net loan losses again well below long-term expectations. Net loan losses and similar net result amounted to a net reversal of EUR 21 million. This quarter, we released a [ EUR 30 million to EUR 60 million ] from our management adjustment buffer given the lower provisioning requirements and continued strength of our credit portfolio.

Our strong capital generation continued. At the end of June, our CET1 ratio was 15.6%, which is 1.9 percentage points above the current regulatory requirement. Our 2025 outlook is unchanged, and we are firmly on track to meet our guidance for the full year of a return on equity above 15%. With that summary, let’s now take a closer look at the results, starting with the income lines.

Our net interest income developed as we expected, in line with the lower policy rate environment holding up well with a decrease of 6% from a year ago. This quarter, NII was supported by a higher lending and deposit volumes as well as the contribution from our deposit hedge. The deposit hedge contributed EUR 127 million to our income compared with Q2 last year. Compared with Q1 this year, the contribution was EUR 19 million, in line with our guidance. Our net interest margin for the quarter was 1.63% compared with 1.83% a year ago, with reductions from rate cuts as expected impacting deposits and equity margins. Mortgage lending grew by 6%, driven by strong growth in Sweden as well as the positive contribution from the recent Norwegian acquisition.

We increased corporate lending by 5% Retail deposits were up 8%, while corporate deposits were up 5%. Net fee and commission income was stable year-on-year, with growth slowing as a result of the significant financial market turmoil early in the quarter. Brokerage and advisory fee income was lower in the quarter reflecting lower corporate finance and debt capital markets activity. Card and payments activity was higher with increased customer transaction volumes during the quarter. Savings fee income was stable year-on-year, while end of period AUM was up, the average AUM was lower due to the market volatility caused by the tariffs. Also the mix of business with strong performance in lower-margin institutional clients dampened growth.

In our Nordic channels, we had net flows of EUR 4.5 billion with continued strong performance in Private Banking and our life and pension business. Inflows from international institutions were lower following 2 strong quarters with inflows from larger mandates and our wholesale distribution flows continued to stabilize. Net fair value result was up 3% year-on-year, driven by higher customer activity. In a volatile environment, customer demand for our risk management products remained high, especially in foreign exchange and interest rate products. As we guided, we usually peak in Q1 where we saw a real strong result. Q2 was lower and in line with our expectations, with solid customer activity while market making and treasury was impacted by the tariff-related volatility.

Costs developed in line with our plan, and we’re up 4% year-on-year or 3% excluding foreign exchange effects, with more than half of that growth driven by our strategic investments including the acquisition in Norway. We continued our significant investments in key areas of the business, including technology, our digital capabilities, data and AI and cybersecurity, which will support our income growth, profitability and overall resilience. We do not plan to increase investment levels this year and will continue with our usual cost discipline. We, therefore, expect year-on-year cost growth to slow significantly in the second half of the year. Full year costs are expected to be no more than 2% to 2.5% higher than last year, assuming end Q4 2024 FX rates.

Our cost-to-income ratio was 46.1% for the second quarter. Nordic households and businesses continue to have stable financial position. That shows in our exceptionally strong credit quality and low credit losses, which remain well below our long-term expectations. For Q2, net loan losses and similar net result amounted to a reversal of EUR 21 million This quarter, due to lower provisioning requirements we released a further EUR 60 million from our management judgment buffer. The buffer now stands at EUR 341 million compared with EUR 397 million in Q1.

We maintained a strong capital position reinforced by continued robust capital generation. The CET1 ratio stood at 15.6% at the end of the quarter. 1.9 percentage points above our capital requirement. We have been consistent in our ability to generate capital from profits supporting lending growth and absorbing or offsetting the impact from our Norwegian acquisition, regulatory changes, such as Basel IV and our share buyback programs. Our latest buyback program launched on the 16th of June. We expect this EUR 250 million program to complete by the end of September 2025 at the latest.

Let us then take a look at our business areas. In Personal Banking, we performed well, delivering solid growth in lending and deposit volumes. Mortgage lending was up 6% year-on-year, driven by both Norway and Sweden with an exceptionally good performance in June. We further strengthen our possession in Sweden, where we also took more share of the mortgage market. The Nordic housing market are continuing their gradual recovery after 3 slow years, activity overall is still muted. In Q2, demand for loan promises grew once again which shows there is appetite among our customers for investing in their homes. As confidence returns, we expect the market to pick up further.

Retail deposits for the quarter grew by 8% year-on-year in local currencies. Customer use of our digital channels in Q2 remained high mobile users and logins grew by 7% and 6%, respectively, year-on-year. Total income decreased by 2%, driven by lower policy rates. The decrease was partly offset by the higher volumes and higher payment card and savings fee income. In the volatile quarter, personal customers continued to have a high level of investment activity leading to positive net flows of EUR 0.7 billion in our Nordic retail funds. Return on allocated equity with amortisized resolution fees was 18%. The cost-to-income ratio was 51%.

In Business Banking, we also performed well, driving strong growth in deposit and lending volumes. Our lending volume growth of 4% was mainly driven by Sweden and Norway with indication of higher activity levels among small and medium-sized enterprises. Deposits were up 10% year-on-year in local currencies, with all of our Nordic markets contributing to that growth. Equity markets activity was subdued. However, because of the macroeconomic uncertainty. During the quarter, we continued to improve customer experience in support of our ambition to become the leading digital bank for small- and medium-sized enterprises. We made improvements to the business, our dedicated digital services for our businesses, including by adding a new tool, making it easier for customers to select the right product for their needs.

In June, we also began patenting our new business insight service. Once fully available, the service will help Nordic small business customers manage their liquidity and cash flows. Social income for Q2 was down 6% year-on-year, driven by lower net interest income. Net fee and commission income was stable, while net fair value income was down 1%. Return on allocated equity with amortized resolution fees was 16%, while the cost-to-income ratio was 46%.

In Large Corporates & Institutions, we grew lending volumes by 4% year-on-year or 6% when adjusting for foreign exchange effects, supported by a pickup in June. Despite the uncertainty, Nordic businesses are cautiously optimistic, supported by their strong competitive positions in global markets. During the quarter, we were active in helping our customers raise financing. Debt capital markets activity was high and well diversified among both corporate and institutional customers supported by our leading positions for our Nordic corporate bonds and Nordic bonds overall yet to date. The overall market sentiment for our equity capital markets and mergers and acquisitions remain challenging with volatility and uncertainty postponing transactions. At the same time, we led the way in the IPO market, taking part in multiple Nordic IPOs.

Total income was down 8%, driven by lower rates. Net fee and commission income was down 2%, driven by continued slow markets in event-driven business. Return on allocated equity was 15%. The cost-to-income ratio was 42%. In Asset and Wealth Management, business momentum remained strong with solid investment performance and continued growth in our Private Banking business. The development of our Private Banking business is a key focus strategy. In Q2, customer activity continued to be strong, and we attracted net flows of EUR 2 billion in Private Banking, driven by Finland and Sweden. These contributed to a solid overall performance in our Nordic channels.

Net flows in our international channels were lower after 2 exceptionally strong quarters, amounting to outflows of EUR 0.4 billion in Q2. Flows in the higher-margin wholesale distribution channel continued to stabilize and amounted to EUR 0.2 billion for the quarter. For the year-to-date, we have had net inflows in our international channels of EUR 3.8 billion, which, together with a good performance in our Nordic channels meant we had total first half net inflows of EUR 8.1 billion. Asset under management increased by 9% year-on-year, to EUR 437 billion, while asset management fees were impacted by the volatility early in the quarter and customers’ preference are lower risk and lower margin products.

The strong year to date performance in international institutions added to the margin pressure as this part of the international channels is lower margin compared to wholesale distribution. Our life insurance and pension business continued to perform well with Q2 net flows of EUR 1.2 billion. Gross written premiums amounted to EUR 3 billion compared with EUR 2.9 billion a year ago. In Denmark, we were named Commercial Pension Company of the Year by EY and [ Finnish Watch ]. Total income development reflected the lower policy rate environment and lower net fee and commission income and was down 6% in the quarter. Return on allocated equity was 33%. The cost-to-income ratio was 43%.

In summary, this was another solid quarter for Nordea, and we remain on track to deliver a return on equity of above 15% consistent with the target we set 3 years ago. Our performance so far this year clearly highlights the strength of our well-diversified business model and structurally improved profitability. It also reflects the advantages of operating in the strong and stable Nordic markets, home to globally competitive businesses and a bold entrepreneurial spirit. Few countries are better equipped than our home markets to navigate the current global shifts.

We look forward to presenting our strategy for 2026 and beyond at our Capital Markets Day in London on 5th November. We will share the concrete steps we are taking to build on our successful foundation with continued focus on our 4 home markets. This will enable us to outgrow the market, continue delivering market-leading return on equity and achieve superior earnings per share growth. Thank you.

Operator, we’re now ready to take questions. And just as a reminder and as a courtesy to others, could you please limit yourselves to 1 max 2 questions.

[Operator Instructions] The next question comes from Magnus Andersson from ABGSC.

Yes. Good morning. I have a question. I mean you keep your guidance of more than 15% ROE for the year. And you also keep your cost guidance and I think that for most of us, it looks like a close call, especially if I mean, rates continue down in NII where we could end up lower in the second half than in the first half. So I was just wondering if you could get us a feeling for the outlook for the various P&L items for the remainder of the year as obviously, you have a plan in place? And secondly, just on a more detailed note, I know if your deposit hedge guidance unchanged for ’25 and ’26 despite the fact that your rate scenario probably has changed. When will we get an updated scenario? Or is it not as sensitive as we perhaps think it is?

Magnus, it’s Ian here. Thank you for your questions. So I think we finished the first half strongly. We’re doing well in markets that are a bit quieter than normal given some of the market volatility, activity levels, particularly on the equity and corporate finance side are lower than normal. And we’ve seen some volatility. But we finished the quarter and the half year with the business firing on all cylinders. So I think that’s a strong start into the second half. A general sense though is that given usual seasonality in Q3 and the market quietness we’ve seen, we’re not expecting to see a pickup in activity in Q3.

Customers are generally a bit more cautious, a little more risk off given what they’ve experienced in the first half of the year. But I think we’ve seen momentum building particularly into Q4. And so if we don’t see further shocks or disturbances, I let us to finish the year quite strongly. What does that mean in terms of the key line items. On net interest income and the rate environment. I mean, first of all, if we have a look back in Q2, we did get a small benefit from a lower deposit guarantee scheme fee. I think we’ll see a similar average policy rate change impact as we saw in Q2. There was about EUR 100 million or so of margin impact there. And we have seen some pressure on lending margins driven by competition, particularly in the corporate space.

There is pretty strong — some might even see aggressive competition out there, but we win. We win on the accounts that are important to us. So — and I think thinner volumes on the household side in the mortgage market means that the opportunity to expand margins is still, I think, a little bit further in the future. So I think that picture says we will see lower NII and — but still resilient, particularly in comparison to our peers. On the fee side, again, despite lower activity levels, I think we posted a good outcome in Q2. We did see there on the savings side, which is particularly important to us. The benefit of semiannual custody fees around EUR 10 million that came in Q2, that happens every half year, but it’s not a Q3 item. I mean now will slow things down a little bit.

Net fair value, another key line item. We generally stronger first half than second half, particularly in Q1. We always think about that one as being worth about EUR 1 billion a year with the key contribution being fairly stable on the customer side, but then you get the more volatile trading and treasury elements, which is around about. There can be anything from 0 to EUR 50 million in the quarter certainly don’t expect more than that. But I think second half, just a little bit smaller than the first half. That’s the sort of broad shape. And so expectations for the whole year for net fair value, probably around EUR 1 billion, something like that, give or take.

I think what I’m trying to leave you with here is we expect things to strengthen towards the end of the year on the sort of growth and income side. But perhaps still a slightly quieter quarter in Q3. On the cost side, everything proceeding according to plan. We reiterate our guidance of 2% to 2.5%. We’ll always look very closely at costs. And then the other elements that contribute to ROE, really, really good loan loss performance. But it is exceptionally strong and we’re well provided in that space. And we have a buyback program ongoing. We will stick to our promise of distributing excess capital that we can’t deploy in the business I think all of those moving parts contribute to our confidence that we’ll deliver on our above 15%.

So a long answer, Magnus, but I hope it captures the key moving parts, and I can certainly go back to any one of those if you need it. And then on the deposit hedge, we think it’s too soon to revise guidance. And — so we might come back to that in Q3 depending on how the rate environment evolves and rate expectations. We probably saw slightly higher average rates than expected in Q2 which means that the deposit hedge contribution was slightly smaller. Clearly, when rates move downwards, we’ll see the hedge kick in. So no need to revise guidance at the moment. And just in case I wasn’t clear on costs, as I say, reiterating guidance of 2% to 2.5% full year. The Q3 run rate is probably a little bit higher than Q2, say, EUR 20 million, EUR 25 million. But the overall full year, I think consensus is in the right place.

Okay. Just 2 quick follow-ups that impacts ROE obviously. First of all, reduced your management judgment buffer by EUR 60 million, and you signed some very bullish on the underlying asset quality. So I think it’s probably not unreasonable to expect further reductions of that buffer in H2? And secondly, just on capital, how close to your 1.5% management after target can you be realistically?

So yes, Magnus, we’ve consistently said that we would expect to either use or release the management judgment buffer. I’m pleased to say we haven’t seen any opportunities to use it. So what you’re seeing so far is releases because of the strength of credit quality. And you’re right. We are very confident about the strength of the credit portfolio. So I reiterate our normal position, which is we use or release. And we see underlying credit conditions as pretty strong. And then on the capital side, we can — I think it’s always difficult to be precisely on the line. But we do carry a substantial excess both to our overall capital requirement, but also to the [ 150 ] management buffer. So I think we’ve got a fair bit of flexibility there on buybacks, and we’ll judge according to market conditions.

At the moment, one of the things, I think, was a positive feature of the Q2 capital development was we saw some absorption from lending growth. That’s a good thing and it’s good that we generate the capital to support that as well as our buybacks. So I think we’ve got a bit of play in that ratio even if we don’t go all the way down to our management buffer line. So we feel good about continuing to deliver on our commitments on returning excess capital to shareholders when conditions allow.

The next question comes from Andreas Hakansson from SEB.

Coming back a little bit to the NII, and I’m looking at your Page 18 in the presentation pack where you show the sensitivity to rising or falling interest rates. And I would assume that, that is at the current interest rate level? And if we assume that rates are going to fall further in basically all 4 countries in the region, do you see that the sensitivity increases as you go further down? I would think in Denmark, you are not paying very much on your deposits at the moment, and we’re not actually show in Finland, but how big would the sensitivity be if we cut another 25, 50 basis points? And then also on NII, could you tell us — in Norway, retail NII started to go down already before interest rates were cut really and could you tell us what’s driving that? And also in Business Banking Denmark that seems to be quite tough in the quarter?

Good morning, Andreas. Yes, I think the first thing to understand is our sensitivity prescribes a range. And it’s exactly for the reason that the rate path is never certain. And I think there are sort of equally balanced expectations for cuts or no cuts going forward outside Norway. I think there’s a pretty strong expectation that there will be a cut there. So broadly speaking, I don’t think we see much reason to change our sensitivity at the moment, but we might be towards the upper end of the range that we talk about there. And then your specific questions on Norway, the NII compression there is around some of internal items rather than rate cut related. So they’ve absorbed a slightly higher treasury cost in our business in Norway this year. So nothing related to market out there. And in Business Banking Denmark, it’s a very, very competitive environment. And so I think there’s a bit of margin pressure that we see there, but nothing more than that.

Perfect. And then very quickly, so after you get the change with the Norwegian adjustments in Finland. Is the new capital target really 15.5%. Is that what we should see it in the end of the year?

So first of all, we’re — we’ve seen the decision. We don’t agree with the decision, and we’re thinking about how we might respond to that. We see clear overlaps between the many macro buffers that we are required to carry in this additional requirement. If it sticks, it, of course, will increase our overall requirement. But then when we think about the capital trajectory, we sort of factored the possibility of that into our thinking — it doesn’t change the overall long-term picture in terms of our capacity to continue generating and distributing capital.

The next question comes from Gulnara Saitkulova from Morgan Stanley.

My questions are on outlook on capital. So you have mentioned a higher — potentially higher capital requirements from Norwegian systemic buffer coming in Q4. How should we think about the remaining capital tailwinds and headwinds for the coming years? How do you expect the organic risk-weighted assets to evolve given that you expect to pick up in activities starting in Q4. And more broadly, when it comes to the longer-dated headwinds and the impact from the output floors, it looks like the potential risk-weighted assets increase would amount to 20% What levers can Nordea pull in order to mitigate this headwind? And do you think there will be any changes in the regulatory capital requirements or regulatory framework that could potentially help to partly assess the impact? And how through these headwinds will there be any impact on your capital distribution considering these headwinds?

Good morning, Gulnara and thanks for the questions. So I think in terms of the near-term moving parts on capital, we’re certainly not aware of anything waiting out there in the wings in terms of new regulatory requirements, anything of that nature as we’ve all seen the FRTB elements of Basel IV have been pushed out a little further. And bring back to your attention that we’re working very hard on remediating some of the issues that we know we can fix in relation to our retail models. So we flagged EUR 4 billion to EUR 6 billion of real benefits coming through in the next couple of years from that.

So certainly, in terms of outlook on capital requirements in the near term, no particular issues there. And capital is in a really good place. We’re in a very strong position. So I think the outlook is relatively stable. Of course, things can change, but for now, relatively stable. On the sort of recent interest in impact of the Basel IV output floor. I think from where we sit, so technically, if you move from IRB risk weights to Basel IV output floor risk weights, that does drive on a pro forma basis on Q1 2025 REA, as you say, around EUR 30 billion of REA increases. We don’t think of that as a headwind.

Two things to think about. First is around 1/3 of that falls away next year because we have in schedule an enhancement — a technology enhancement that will allow us to pick up the full value of collateral, which currently because we don’t use standardized models we haven’t prioritized. We’ll make that technology change, pick up the value of collateral feeded into the standardized models. And that theoretical REA inflation is reduced by 1/3 already. The remainder of that relates to the risk weight increases of unrated corporates. And I — first of all, we have many of our corporate customers out there that have ratings that we currently don’t use or pick up. So we’ll ensure that we capture all of the data that is needed to start to deal with that requirement.

And then we have time. Over the next few years, I expect that the market will come up with a solution to deal with unrated corporates and will be part of driving that solution. So we don’t — where we sit today, thinking about the impact of these rules by 2033. We don’t think of it as a headwind. And as I’ve outlined, I think there are a number of things that will happen to reduce that.

Could I just add — it’s Frank here. In regards to the Norwegian and the reposition, it’s absolutely no problem to us. It’s just annoying. It’s 20 basis points around that number, so it doesn’t really matter, but it’s wrong as we, in our belief, there are clearly double counting, which should not be the case. And that’s why we also that clear says that this we disagree about and, of course, are considering how to tackle it. So it’s more a, say, a basically a structural question for us or a political question, we need to get this right and — but ultimately, add to no problem.

And do you think this double counting may be eliminated at some point in the future by the regulator? Or do you think it will be unlikely?

I think that the European system is increasing where that the micro and the macro capital requirement system is not working as effective as it should in Europe. And they are — it’s about trust in the system, and there should definitely be a better coordination and there should be no overlaps, which is not the case at the moment. And I think this is a good example where it’s not managed in the way it should. And that we, of course, intend to address, which we have and will continue to do.

The next question comes from Tarik El Mejjad from BofA.

Two quick ones. I will come back on the hedge, Slide 18. And by the way, very helpful. So on the bottom left chart, where you saw the [indiscernible] impact from deposit hedge. The incremental or the lower headwind, I would say, from the hedge so far, it’s still very low. I think that we are now well advanced in the rate cut cycle. And my question is why has it taken so long for the hedge to turn positive? And if you can remind us what was the guidance for the hedge contribution as a delta, I guess, year-on-year? And then the second question, you have your CMD in early November. And I would like to know in which mindset you are and what kind of big thematics or areas you would cover obviously at a high level, just to understand what mindset you are going into the Investor Day?

Yes. If I go with the hedge question and then I think Frank will handle your question on CMD. I suppose it’s going to be helpful and unhelpful. We’ve never guided on a sort of precise NII number for obvious reasons because we see fluctuations in the market. But what I can say is that the hedge contribution is pretty much proceeding as planned. We give general guidance as to what we expect from the hedge on our slide there. And we’ve said before, it’s probably a net EUR 20 million quarter-on-quarter in terms of incremental support. I’m not sure what I can add to that. It’s performing as planned, and I think we’ve been pretty clear in our guidance.

I mean I think for this is more the mechanism of actually you already had the rate cuts. I mean, yes, it goes in line with your budget expectations. But in the mechanics, Why? I mean, we are happy to finish the rate cycle to start to see turning positive. I mean — and I think I remember last year, you were also talking about breakeven in the hedge actually earlier than that, if I remember well.

I don’t think we ever did. We’ve been very clear and very consistent on our guidance, Tarik. I think the pace of it is determined by the repricing over time. So the shape of the hedged item. I’m a bit perplexed at the question because we’re performing pretty much in line with how we guided. So I guess, look, let’s take it offline if there’s something I’m not seeing here, but we’re on track.

In regards to your question on theme for the coming period, I think we have being sort of like talking about it to some extent up until now in previous calls. So I don’t think there will be anything wrong to give a little bit out here on sort of like the themes. But it is about building on a very, very strong foundation we have. It is being even stronger in the Nordics. It is about growing our income above markets and evidence where we will do that. It is about making the unique Nordic scale of ours to play a very crucial role and we do know how to do that, and we’ll show you how to do it and what it will do to make it really play a big advantage source. And then, of course, eventually, it is about keeping a market-leading return and a superior — delivering a superior EPS growth. And we know what to do. We know how to do it and look just forward to being able to present it at the Capital Markets Day.

The next question comes from Martin Ekstedt from Handelsbanken.

So could we have an update on the Norwegian business after the integration of the acquisition from Danske. So looking at your back book and I see fee and commission income in the Personal Banking segment, up 26% year-on-year and 10% quarter-on-quarter, which is quite good. Is this cross-selling revenue synergies kicking in? Or am I just overinterpreting Q2 figures there?

Martin, it’s Frank speaking. No, I think you are on the details, right? I would leave it to Ian to just call it check [indiscernible] something that is not justified. But the sentiment is very positive. So the plan was to take over the portfolio to address up the customers with all our services and products instead of not just only but to some part only do mortgages. And that is happening while we speak and it’s actually developing quite well. We have, at the same time, in [indiscernible] sort of like a bit the same exercise on the old Nordea mortgage book in Norway, where it’s basically about growing the relationship with our clients and that part is going very well as well.

When we look at the, you can say, the business case of the acquisition, we are fully aligned with plan, probably also slightly better. We expect a little bit churn. The customers that only have been choosing the previous owner for price would probably some extent sort of like look for alternatives if you go for a price only. But at the end of the day, it is a total relationship and the total income, and that’s actually looking very, very nicely, so better than planned. And we — if you look at our ancillary and cross-sell, you can say, metrics is in Norway compared to, for example, Sweden, we are much less developed in Norway. So here, we clearly have an area in which we believe we can continue to outperform for quite some long time. Did that answer your question?

Martin, just a couple of follow-up data points there because I think it’s important. I mean, the sense you get from our people on the ground in Norway is that the new customers are really engaged. And as Frank says, the cross-sell performance is going extremely well. On the year-on-year, up 26%, that’s somewhat masked because the new customers were not there a year ago. But quarter-on-quarter, we’re up 10%. And that is 2 full quarters with these customers and the fee income up 10%, and I think that shows we’re doing a good job.

And then secondly, my second question, if I may, change topic to Denmark. I just wanted to quickly check given it’s been about a year since this is resurfaced is on this Danish AML court case that failed to set about a year ago now. Are you still retaining, I believe it was EUR 98 million or something like that provisioning for this?

Yes. So first of all, Martin, no change to the provisioning levels, and there’s no requirement to change. We continue to both believe in the strength of our case ourselves. And we have 3 independent legal opinions that support that position. The court case started in May, and it’s going to be a long process. But certainly from the initial discovery and things like that, nothing to change our view on both. But first of all, our responsibility in the case. And secondly, as I said, no change in provision requirements.

Understood. And just to clarify, when you say long process, are we talking years or quarters or months?

I think the initial phase is scheduled to take almost a year. So this will continue.

The next question comes from Namita Samtani from Barclays.

My first question, just in your 2024 annual report, it says Nordea has 6,628 nonemployees, which include consultants. I just wondered what so many consultants were doing at Nordea and what the plans were for these consultants in the future? I appreciate maybe that number has changed since the end of ’24. And secondly, what part of your franchise do you see most momentum in right now? And where do you see like the most opportunity?

Good morning, Namita. Yes, on the external employees that as we term them, there’s a mixture there. Certainly don’t get the impression that there’s 6,000 people from the big consultancies, we don’t work that way. The vast majority of that relates to outsourced technology function. So we have partners elsewhere in Europe and the world that undertake technology development and other things for us. So they are classed as these external consultants, if you like, and that’s the vast majority of that figure. So always a focus on cost and managing that down, but it’s certainly not consultants as we tend to think of them.

And the other thing in regards to momentum, let’s — we can split it in business areas first, and then we can look at countries. Our Asset & Wealth Management business is having a very good momentum. The key there is private wealth, so Private Banking. And we are in a very good position, I would say, we are speeding up even faster in more than we have done before and are across the countries are showing very good progress. When it comes to the inflow within our asset management, it looks good. Of course, it has been risk off. It has been quite — there has been quite much turmoil. But when looking at the inflow, it’s really strong. I think the inflow for the first half was EUR 8.1 billion. So fine in the first bit difficult year.

Our life and pension business, doing very, very well, very solid, very consistent and and we gain market shares. Looking at Business Banking, I would say it’s — that’s a business — small and midsized corporates are quite sort of like muted now in their investment at [ TMTs ], but we’re doing very well in Sweden, for example. We did very well in Q2 in Norway. Finland is gaining market share, but in a very slow market. Denmark is probably losing a little bit market share but all in all, good growth, 4% up year-on-year in the quarter. LC&I and also first, retail. Retail is doing well in line with our plans. The mortgage markets are muted, but it’s building. And we clearly see consistent increases of the activity level each quarter strongest in Sweden, we took after the first 5 months, as we have not June numbers for the margin yet. We were 20-plus percent on the front book market share or now backlog market share is around 14%. So clearly, much better than our peers.

And Norway and Finland doing well, a little bit slower in Denmark. Large corporates, I would say, picked up well on the lending side, which was nice to see. We were very active and did well in the debt cap while the equity side was very slow. So IPOs, ECM, M&A activity in the Nordics in the quarter was at a very low level, and that was very visible in our figures. So all in all, I would say, momentum is building. And I’m very pleased to see that actually lending on the corporate side is starting to come in now, which is nice to see. Contrary-wise, we are very strong in Sweden and winning market shares are win for the, what, 5, 6th consecutive year within mortgages and SMEs and banking now is really taking off.

It’s a good position. Norway, a good position here in Q2. We are building and it looks good. Finland, I would say we come from a sort of maintain to a winning culture now, and that’s visible, but the market is very slow, but we are actually above our back book in a number of areas. And Denmark, I would say, doing very well in wealth and doing well, very well in large corporates. A bit slower on the retail and the SME business, which is items that we work with, and we will bounce back and I think late in the year or early next year. So all in all, I think we are in a good position in firing all cylinders, and activity is just very low. And as Ian said in the beginning, Q3, you shouldn’t expect any big pickup. It’s vacation, it’s slowly building up. There is a risk of focus from customers, but we do see signs that makes us believe that in Q4, it will pass through, and then we will start to see an increased momentum. And we are on our own side in a very good shape. Sorry for the long answer.

The next question comes from Shai Srivastava from Citi.

One shorter term and one a bit more longer term for me. The first one is just on the large corporate deposits, particularly in Denmark and Sweden. Is this a function of pricing changes, just normal seasonality or something else you see? Just a little bit more color on that would be appreciated. And the second one, you’ve talked at length previously about utilizing the benefits of sort of pan-Nordic scale. Could you — I mean, if not the size of the benefit, could you give a bit more detail on where you see the biggest cost saves in such initiatives and where you are in that journey?

Yes, on the LC&I deposits, there’s an element of seasonality there. We’ve just come through dividend season. So there’s always a bit of depletion of corporate bank accounts from that. And then we’ve seen 1 or 2 situations where customers have completed acquisitions, and that meant that the money raise that was with us has now been deployed in completing those acquisitions. So those are the 2 main reasons.

On the Nordic scale benefit, I would say, so first of all, I would say that I would like, but I would prefer waiting to the Capital Markets Day where we can elaborate on the theme. I would say that probably now we have eliminated the complexity and the flip side by being big in 4 countries. And that I think that is visible when you — if you calculate the cost income in their way, and owned has do what some auto banks do, for example, in Sweden, where they remove the bank fees or the regulatory fees and put them under basically the profit line and then exclude them from cost income. And then I would say that, of course, there are different business mix and so, but we have neutralized the complexity.

And now it’s about materialize. So basically, showing the benefit by being big and having the scale. And it’s very obvious that the banking or financial service is a scale business. It has been difficult for us to get out the complexity. We have done that now. We have made the plans. We do know what to do. And we have a number of streams that we are working on exactly 7 streams that we are working on right now, which will now bring a significant increased efficiency. And that is among other things what we will talk about on the Capital Markets Day. But there is a — needless to say, there’s absolutely no reasons for all is equal, that we will not be the most at least in top of the efficiency game within the Nordics going forward.

And operator, I think we have time for one last question, please.

The next question comes from Nicolas McBeath from DNB Carnegie.

Okay. So I just had a follow-up on the helpful elaboration you made, Ian on the various P&L drivers for second half. So 16% ROE, I guess, seems reasonable, in particular, given that you might get some ahead from further release of the management buffer in the second half. But I’m struggling more with the 44% to 46% cost-to-income outlook given that you were at 46% in the first half and normally second half has higher costs and revenue is still unlikely to grow materially given the rate trends. So just wondering how confident are you that the cost income will come in below 46%? And what can you say to help us build confidence in that outlook, please?

So we’re always confident that we hit our targets. And clearly, things can happen. But certainly, a crystal ball for the second half now says that we’ll make it. I think that first of all, we’re within 46% for the first half of the year, so 45.4%. And one thing I think that we need to continue to clarify is we guided at the start of the year that we would expect our costs to more evenly the phasing will be a little bit different. So you won’t see the same pickup towards the end of the year that you’ve seen in previous years. And part that is a function of at the end of last year, the second half of 2024, we increased our investment spending substantially. We’re maintaining levels this year. So you’re not going to see that same pickup much more evenly accrued costs over the year, and we are within the 46%.

All right. I think we have reached the end of the meeting. So thank you so much for great questions. And as usual, if you have anything that you want to discuss, please reach out to us. Thank you very much, and have a nice summer. Thank you.