Good morning everyone, warm welcome to this call for the first quarter of 2021. Together with me today I have our CFO, Carl Cederschiöld, our Head of Group Financial Strategy and Investor Relations, Lars Höglund, and Head of Accounting, Annika Engler. I will start by giving you an update on the overall strategic progression of the bank, and then Carl will walk you through the key financial topics for the quarter, followed by a Q&A. As usual, Lars will most likely jump in as well. Despite the prevailing uncertainties relating to the pandemic, the bank recorded its best Q1 so far. Apart from the corporate borrowing demand being in a bit of a standstill year-on-year, but sequentially up 2%, the business momentum was strong. On the mortgage side, we have continued to be the biggest player in the Swedish market when it comes to net inflows, and the same goes for mutual fund savings in Sweden, where we took 40% of the net inflows in the market in Q1. The costs are under control. Underlying costs, excluding Oktogonen and development costs, show a strong trend down. The progress in the cost initiatives runs according to plan. SEK 1 billion is agreed and decided to be executed, most of it in 2021. We are increasing our development cost, these are investment to build the bank for the future. As I said, other costs are down. The asset quality remains very strong with a net reversal in the quarter, despite a continued conservative management overlay approach to COVID sensitive exposures. The capital position is also strong, with a CET1 ratio of 6.3% points above the FSA minimum at 3.3 percentage points above the upper end of our target range. This provides a good opportunity for growth, among other things. Most of our employees have been working from home also in Q1, but we have still managed to be very productive in executing on initiatives communicated last autumn. In Sweden, the transformation of the branch operations are progressing according to plan. The operation in Sweden continues to deliver growth with high efficiency and good profitability, and our customers remain satisfied. The work to set up a new customer service function with improved availability and extended mandate is also progressing well. Basically, all our other home markets show a more positive development in Q1, and in some of them, a really good start of the year. In the U.K., the work to replace five regional banks to four districts and the formation of a new unit that will focus on further development of the digital customer offering and proactive support to the branches is also ongoing. In sum, we have a strong quarter behind us, and we are moving steadily on our path to reach our ambitions of higher profitability, lower cost, and more satisfied customers. All in all, this should mean a strong foundation for shareholder value creation in terms of earnings per share growth and a stable dividend growth. I will stop here. With that, I will leave over to you, Carl. Thank you, Carina. I will touch upon a few selected topics, and then we are happy to discuss all the questions you have in details in conjunction with the Q&A. Let's start with net interest income. Compared to Q4, and please go to slide eight. As you can see, the quarter was fairly uneventful when it comes to the overall margin development. We were happy to see that the sequential volume contribution again was positive after two quarters of negative net contribution to NII. When the soft corporate loan demand more than offset the stable growth on the mortgage side. The mortgage volumes have grown very steadily throughout the pandemic, while the corporate volumes were very volatile until Q4 last year. Now the corporate demand is in a wait and see situation, but at the same time, we hear a lot of positive noise around activities in our branches once we have come a bit further in opening up society around our home markets. We had a negative contribution from day count effect as there were two less days in Q1 compared to Q4. Roughly half of that impact was offset by a positive FX contribution. Finally, the scale-down of our international operation outside our home markets is contributing slightly negatively, which is in line with expectations. If you go to slide nine, you also get an illustration of the progress of scaling down the corporate portfolio outside of our home markets. As you can see, we have come quite far in reducing those exposures. What is also positive on the business volume is what you see on slide 10, which shows the development of deposits. The trend has been very positive for several years. Since 2018, the average annual growth rate has been 8% on household and 12% on corporate deposits. If we move over to the fee and commission, we can see on slide 11 that Q1 reached a new all-time high quarterly figure. Fees and commission now make up 26% of our revenues. Not too long ago, the share was just over 20%. On the next slide, 12, you can see a rough split of the commission components of its savings-related commissions today account for roughly 60%. The very strong net inflows, together, of course, with recovered stock markets, grow savings-related commissions up 22% compared to last year. In the past decade, we have continuously had a market share of the net inflows on mutual funds in Sweden of around 20%-30%, compared to the back book market share of around 12%. In Q1, the market share was 40% of net inflows, and it goes without saying that this will continue to be a key growth area for us. The payment fees have, on the other hand, seen a decline due to lower card fees during the pandemic, breaking an up until then positive trend. The sum of the remaining commissions, i.e., loan and deposit fees, guarantees, securities commissions, et cetera, have shown a relatively stable development during the year. Note, though, that the scale down of our known home market business means that especially the guarantees fees are trending down. All according to the plan we communicated a year and a half ago. If we move over to costs on slide 14, in order to illustrate the underlying trends, we've broken down the quarterly cost in the first component of development cost and the second one, the other cost. We've adjusted everything for one-offs and Oktogonen provisions. Total underlying expenses continue to drop and were down 1% compared to last year. Note though, that this includes an increase of development cost by 38%. Total development spend increases 4% in line with our plan. You can conclude that we have capitalized less and expensed the highest share of our IT development this quarter. This is related to the nature of products in our current IT development. Other expenses dropped by 5%. It is quite clear in this picture that we turned a corner in Q1 last year with a shift in the cost trend. If we move on to slide 15, and the trends on a 12-month rolling basis, the picture of the changed trend becomes even clearer. We have started to gradually reap the benefits from the initiatives launched in the past one and a half years, while at the same time scaling up IT investments. Over 2021 and 2022, we will make additional targeted IT development investments equivalent to a total of SEK 1 billion, which should come on top of our ordinary IT development of around SEK 2.5 billion per year. Hence, it is fair to assume that the green bars will be somewhat elevated over the next seven quarters or so when we make these targeted investments. Until the end of Q1, around SEK 90 million of SEK 1 billion had been exercised, of which around SEK 20 million being capitalized. As we alluded to in Q4, it is probably fair to assume that these temporary increases in IT development to a large extent will offset the positive effects filtering through from the other initiatives during 2021, with the material net positive effect on the total cost line rather showing up in 2022. For a few updates and comments on the progress on the initiatives, please go to slide 17. All in all, we have more than 100 initiatives ongoing, all contributing to the cost reduction. We follow all these initiatives closely and of course also have timelines for each of them. Some of them, like the branch operations in Sweden and U.K., are large, but many of them are considerably smaller. However, summing them up is what will take us to the SEK 20 billion cost level. If factoring in underlying inflation, the total initiatives required to reach the cost target amount to more than SEK 3 billion over two and a half years. Up until end of Q1, around SEK 1 billion or roughly 30% of the initiatives had been addressed and agreed upon with the affected parties. Only parts of these have so far shown up in the reported cost though, will of course do so gradually in the coming quarters. Reported costs have been reduced by around SEK 200 million since last summer on the back of execution on the initiatives. In terms of the restructuring reserves, we have so far used about SEK 1 billion of the total amount of SEK 2.3 billion. Now let's move over to the credit losses on slide 18. We saw net reversals in the first quarter of SEK 8 million and a credit loss ratio of one basis point. Just to clarify, when booking one basis point credit loss ratio while making net reversals, credit losses are based on on and off balance items while the credit loss ratio is based on lending to the public on the balance sheet. You find the formulas behind this in the fact book. Clearly, the asset quality remains very, very strong despite the pandemic. In Q1, there were, as always, fine tunings of the IFRS 9 macro and COVID overlay assumptions, which you find on slide 38. One can note that we've increased the stress somewhat on the hotel company exposures, but generally, there were no major moves this quarter. Let me finish off on capital, and please go to slide 19. The CET1 ratio decreased marginally from 20.3 to 20.2, putting the bank 6.3 points above the expected FSA requirement per Q1 of 13.9. This also means 3.3 percentage points above the upper end of our target range, which is one to three percentage points above the FSA requirement. In the CET1 capital, we have deducted 40% dividend accrue from the earnings in line with previous guidance. In the quarter, there were no major changes to items in the capital ratio components really sticking out. In terms of near-term regulatory changes to the capital requirement, it is mainly the CRE floor in Norway, which remains a question mark. We still have no information about when and how such a floor could impact the requirements. As we've said before, a worst-case scenario would mean an increased requirement in the area of 30-40 basis points. At the same time, it could be significantly less. Many of you are likely to ask again about the capital plan after September when the current dividend recommendations by the FSA will expire. The only answer we can provide at this stage is the following. First, it is far too early to guess what the FSA's view will be as we approach September. Second, the dividend decision and capital distribution is at the end of the day, a board decision, which is based on an overall assessment, which of course, can change over time depending on the business outlook and opportunities and regulatory outlooks. For now, all we can refer to is that the bank's long-term capital target range of one to three percentage points above the SREP under normal circumstances. Obviously, we are not in normal circumstances yet, but we will of course come back and address the capital situation in the coming quarters. In any case, our capitalization is very strong, and that's a really good place to be in terms of enabling us with flexibility to really support our customers and aim for growth in the bank. To sum up, a very stable NII with continued strong mortgage lending, muted corporate lending, fairly neutral margin and funding effects, and some FX tailwind being offset by negative day count effect. Commission income reached a new all-time high, and again, it is the success in the savings business that is the driver. Continued good progress on the work to streamline and strengthen the branch operations and the offering to our customers. The cost progress runs according to plan, and the bank remains firmly committed to the cost target of SEK 20 billion by the end of 2022. Asset quality remains very strong despite the pandemic, and the capital position is also very strong. With that, let's open up for questions. Thank you. Thank you. Our first question comes from the line of Magnus Andersson from ABG. Please go ahead. Yes. Hello. My first question is on costs really and your headcount development. You touched upon it, just to try to understand what's happening here. You've used almost half your restructuring reserve, we hardly see any impact at all in your headcount development in your home markets. You are in your report alluding to some in the U.K. which will have a positive impact or make headcount go down. Related to that, just if it's still relevant, the slide 23 you had in Q4 where you showed we should expect kind of a flat underlying cost development year in a year in 2021 at around SEK 21.6 billion, that we get the whole decline in 2022, which I think would imply that we should see lower costs in the second half of this year than in the first half. Okay. Thank you, Magnus. Let's start with trying to address some of the topics here. First of all, yes, you're alluding to the FTE development, there's a few components worth to highlight here. As you're saying, we used up SEK 1 billion of the SEK 2.3 billion in restructuring reserves. Obviously, during last year, we offered staff going into retirement a bit earlier, and that's concluded in Q3, Q4, but the staff will obviously leave the bank gradually over 2021. We have used restructuring cost for that purpose, but the staff haven't left the bank yet. Second of that one, it is also that we've obviously switched out of consultants and into permanent staff instead. That's a reduction in cost, but actually a component which is increase in the number of FTEs employed by the bank. That's at least two perspective. You are correct on that we guided on flat development on cost during 2021, and we should see the gradual or the bigger parts of the decrease during 2022. The specific measures in the U.K., I can add there, which we all see that the performance is still very lackluster, very low profitability despite net recoveries on the loan loss line, et cetera. How are you going to improve your ROE there? No, it is obviously true that we have been struggling in the U.K. for some years now. We have been keep reiterating, and we do that once again, that first of all, we needed to PLC ourselves when Brexit came, so that is taking up a lot of our time and efforts. We spent a lot of time as well on AML components, and we are totally in line with the U.K. regulators there, and we move according to plan. Thirdly, obviously, right now U.K. is in a restructuring mode, mirroring, to some extent, what we do in Sweden. They are closing five regional banks and moving to a country organization, and they are trimming their branch networks. What we see underlying in business development is actually fairly positive. Obviously, U.K. has been a very closed down perspective. Right now we see fairly strong momentum in both deposits and the asset management perspective. We are looking fairly positive on the outlook going forward when it comes to lending as well, when the COVID and the lockdown abates. Having said that, obviously it is clear that in U.K. standards, we run a very efficient bank. If you compare us in cost-to-income ratio, et cetera, with peers, we are competitive there. On the other hand, obviously, we run with a higher capitalization level at the time being. We keep on moving on this restructure, and we keep on working and bringing it back, and we still see a really good market possibility in the long term. Okay. Thank you. The next question comes from the line of Antonio Reale from Morgan Stanley. Please go ahead. Hi, good morning. Thanks for the presentation. I've got two questions and one clarification, please. The two questions are, the first one is on U.K. NII. If I look at U.K. mortgage approvals, they've been at decade highs in the last six months, and pricing almost doubled versus a year ago. My question is, how come you've not been able to grow your NII? Do you think we've reached the trough point when it comes to NII this quarter? That's my first question. Second question is on the level of fees coming from asset management. You've spelled out very clearly that we've reached new record high levels in terms of AUMs and very strong retail funding flows. I realize it's always difficult to predict markets, but you've been gaining lots of market shares for a few years now in Sweden. How should we think about the outlook for fees here for the rest of the year? Lastly, just one clarification on the cost. You said that the SEK 1 billion IT investments will be mostly offset by the cost savings, suggesting all else equal, there should be no changes to the absolute underlying cost levels compared to last year. How should we think about Oktogonen for the year? Should we just expect a similar quarterly contribution? Any comments you can share, welcome. Thank you. To U.K. Hi, Antonio, it's Lars here. I will start off with the first question. You're right in the observation, of course, that the margins in the U.K. market have improved lately. We have seen those signs as well. Having said that, as you have seen, we haven't really come to the growth trajectory in our business volumes there yet on the lending side, as Carl was alluding to. Definitely, we see the underlying improvement in the margins there. Then I hand over back to Carl. Yeah. Then if we speak a bit about fees in asset management, obviously, we have had very strong inflows and a really good volume development. Then it comes down into margins as well. Playing the margin game correctly in the asset management is a multidimensional perspective. On the one side, we believe that we will be margin pressure more or less in each bracket, whether you're looking at products or client segments or geographies. On the other hand, you can see that if you tilt your product mix, and if you are well-positioned in equity funds, in sustainability funds, in solution funds, and if you're well-positioned to take margin share in retail markets, in the other home markets, then you are actually fairly well-positioned to increase your average margins. That's exactly what's actually happened during the last year, that even though we see margin pressure in each and every bracket, we've had stable or actually touched increased margins when it comes to the overall perspective. Coming down to cost, lastly, yes, you're correct in interpreting that we believe that the increase in IT cost will more or less offset the decrease in the underlying cost level during 2021. They will more or less cancel each other out, we believe. If we are on the move to SEK 20 billion, and if we keep this strong momentum of the bank, we believe we're in a good situation to have higher return on equity with our peers, and that would imply an Oktogonen provisioning. Obviously we need the board's full support in the strategy we're running. We believe we were positioned for that. Just maybe to highlight again, once again on Oktogonen that the SEK 20 billion target is before any potential allocation to Oktogonen. Thanks. Thank you. The next question comes from the line of Robin Rane from Kepler Cheuvreux. Please go ahead. Yes. Hi, good morning and thanks for the presentation. What has been the reception from Swedish customers on the closure of branches in Sweden so far, and how do you think about the market share of the growth in particular in mortgages, which is below your natural market share and at the same time as you close the branches? Yes. Thank you. I take that question. When you look at the Swedish branch network and the transformation we're doing there, I think that, as I said during the press conference, I feel very confident that when we do this, we do this aligned with the customer and we can still see that the customer satisfaction and how they look into us are still on a very high level. I think when we do this, we do it very carefully among together with the customer, with the employees, and definitely to keep the business ongoing. From that perspective, it's not very much noise. Again, I feel that we are taking care of the customers really well. So far so good, if I may say so. It's a very small noise actually. I think that we have been able to provide a good option, a good alternative from that perspective. When it comes to the mortgage business, I think that we have a good position as it is today. Again, we are not developing that business in line with our back book. The intention and the ambition is definitely to move ahead along with that. Some of the development, the IT spending we do is definitely in the mortgage business, i.e., when it comes to digitalization and to provide an offer both local and through the digital channels. Our ambition is still very high here. We are spending resources and time and spending to support that business even looking forward. All right. Thank you. On the capital, I know that the distribution question is of course a board decision and so on, but I guess you are SEK 30 billion-SEK 40 billion above the lower range of your targeted buffer. The circumstances now is not normal, but what could happen that you would need all this capital, actually? I think the way we see it is that the Swedish FSA will need to come out and stop the recommendation about the restrictions on dividends. Obviously it's not unlikely that we get some guidance as well on the inference of countercyclical buffers. Until we see and until we understand the inferral to a normal situation, I think it's very tough to guide on the capital strategy going forward. Of course, as we keep reiterating is that under normal circumstances, we want to run within the buffers. It's just to get clearances on a few on the unknowns, and then we can move forward. All right. Would it be an option for you to consider growth through acquisitions employing this capital? It's not that we view it that we have an extra amount of money to play around with. We will always try to build the business we can as good as possible. Obviously that mainly we've been interested in organic growth, but obviously we don't rule out structural growth. It's not that we see it as that anything has changed in that condition. We've always run the bank with a really good capital situation, and we will try to do that going forward. Okay. Thank you very much. The next question comes from the line of Adrian Cighi from Credit Suisse. Please go ahead. Hi there. Thank you very much for taking my questions. Two questions from my side as well. On capital, a follow-up, please. You mentioned the potential headwinds from the Norwegian CRE, but can you give us any thoughts on the expected headwinds from the ongoing model review by the Swedish FSA, even in terms of color, if not quantum? Secondly, in terms of revenue attrition from the ongoing restructuring plan, can you give us any update where we are versus the initial estimates, please? Thank you. Thank you for these questions. Well, first of all, obviously, we are having a model review of the IRB models in Swedish from the Swedish FSA, and these are delivered now during the first half of this year, and they will be reviewed. We have no view, or we can't guide you on the consequences of that one, but obviously it's not dramatic in that situation. When it comes to the revenue attrition, we have guided on that a total of a negative of SEK 1 billion in the past, and the first half of that one was attached to the moving back from the international market. In this report, we've just shown that most likely we've seen the majority of that income effect. The first half of the SEK 1 billion is probably in the books already. On the other half, we don't have any other information to give at the time being. Thank you very much No negative consequences on that either. It's just that we will have to wait and see. Thank you very much. The next question comes from the line of Sofie Peterzens from JP Morgan. Please go ahead. Yeah. Hi. Here is Sofie from JP Morgan. I was wondering on the Swedish banking tax, it seems that it went all pretty quiet. Do you have any update on if the banking tax is still going ahead, and what the potential impact for Handelsbanken is potentially from the beginning of next year? My second question would be that when I look on your NPL or Stage 3. Stage 3 went up a little bit quarter and quarter, and coverage went down to 30% from 32% end of the fourth quarter. What level of coverage do you think is sufficient for Handelsbanken? Do you think the 30% NPL coverage will go down even further, or you think this is basically as low as it gets? My final question would be, just on the U.K., how should we think about the U.K. costs going forward? Previously, you mentioned that you need to make quite big IT investments in the U.K. Are these costs included in the SEK 1 billion IT spend? The SEK 1 billion IT spend that you have, how much is basically in the U.K.? Thank you. Thanks, Sofie. It's Lars here. I will start off with the two first questions. On the Swedish banking tax, nothing new there really. We believe it's still up for judgment on the EU level whether that will be possible or not. What we have said, if it's decided, if it's approved, you can basically view the impact on our P&L as in the similar range as the current resolution fund fee. Having said that, the way that fee is constructed still is that once we have reached a certain level of the fund, so to speak, that fee should drop off and become much smaller. You might have a year or two with the double impact. Once the resolution fund fee then hopefully drops off, we will be back at the current level of impact. Again, no decisions in the parliament yet on the banking tax. Your question on Stage 3 volumes. Yes, they went up a little bit in the quarter, as you say. The provisions were down somewhat, and this is really because of the nature of the exposures that went into Stage 3. You can have exposures going into that stage, but where you still deem that you will make no losses, and typically, that's because of the collateral you have on those exposures. If you look carefully in the table, which I know you have already done, you can see that some of it is related to property lending, and that typically means we have collateral with very low LTVs. That's the general explanation. Then we don't guide or have any view really on the level of provision on Stage 3. That will vary from quarter- to- quarter as you have seen, again, depending on the nature of the exposures and the collateral. I think Carl is ready to take number three. On the U.K. question around the IT investments and whether or not that's a part of the extra SEK 1 billion. No. The IT investments in U.K., they will be a part of SEK 2.5 billion-ish of the yearly spend in IT. The extra SEK 1 billion we've focused on rather changing and improving the digital meeting places with clients and so on. In that part, yes, a part of the SEK 1 billion might be allocated to U.K., but not coming to a core banking system change in U.K. If I may just remind you of our house rules. Try to limit your questions to two per person. If we have time at the end, we can catch up with more questions, or otherwise you're always welcome to call us this afternoon. Thank you. The next question comes from the line of Rickard Strand from Nordea. Please go ahead. Yes, thank you. Starting off with a high-level question. Given the tough competition on Swedish mortgages and your current restructuring program in Sweden and closure of branches, what do you see as most challenging so far and also going forward in terms of keeping your current customer base and mortgage customers or attracting new ones? Thank you. I can take that and start with that. Yes. We have started the transformation, the restructuring earlier this quarter, and we can see that we can still keep up with the mortgage business pretty well, I would say. Of course, when we look ahead, I still think that we can provide a really good offer to the branches that we will have locally. At the same time, as I said, that we are increasing the speed to make sure that we do have a digital solution when it comes to the mortgage business overall. Again, we will have our customer service in place to provide our offer through telephone and proactivity through that in those places where we are leaving for the moment. I think that we have thought that very carefully through to make sure that we still can be very local, still can be very transparent and visible in the markets that we do have a lot of customers. I think from that perspective, I feel quite confident that we can keep up and even increase. Okay, thanks. In terms of IT spending and capitalization, you write in the report that it's fluctuating between the quarters, et cetera. I'm thinking going forward, is it fair to assume that the investments you will do ahead will have a lower capitalization rate, i.e., meaning that you will gradually reduce the capital IT assets that you have on your balance sheet in the coming years? Thanks for that question, Rickard. I think it's too early to tell, obviously. Our capitalization level will be dependent on the structure of the IT investments. If we are running a bank with huge investments in core banking platforms, et cetera, which we will keep for many, many years, obviously we will put more on the balance sheet. If the IT investments are more in meeting places and digital advancements towards the clients, I think it's fair to assume a lower capitalization level. We will have to see that going forward. It's not a strategic decision. It's rather a consequence of the thing we invest in development. Okay, thank you. The next question comes from the line of Jens Hallén from Carnegie. Please go ahead. Thank you. First question on Oktogonen. If I just look at the reservation for now in Q1 and annualize that, we end up at the SEK 850 million cap for the year. Is the bank already that profitable compared to peers? If so, is that including what the other banks were doing in terms of loan loss provisions Q1 2020? Thanks for that question, Jens. I think rather the component and the decision process for reserving or not, it's fairly mechanical, actually. We just compare vis-à-vis the past, then the real decision of accruing or not will be done at the end of the year by the Board. Based on the figures we've already seen for last year, the mechanics tell us to reserve. Since we have had a constructive discussion with the Board around their view today at the bank, our momentum in restructuring as well, this is the best thing we could do. The decision will be made at the end of the year. You're absolutely right, Jens. Sorry, you're absolutely right in that when we compare our ROE with the ROE of the peers, if they have made big loan loss provisions. that will impact their ROE. We think that makes all the sense in the world. If you have lower loan losses, that has a value. No, absolutely. I think actually when I was looking forward, if they then happen to have large reversals. Yeah underlying, you're not going to be worse than them, but they will still report elevated ROEs. Yeah a mechanical process then as well. True, correct. Yeah. Okay. Thank you. Just the second question on, you talked about a positive noise from corporate credit demand, I think something we've been looking for a while. My question is, based on your conversations with your customers, how much buffer do you think that these companies need to the COVID-19 pandemic to start investing and borrowing? Will they need quarters or years? What do you think? It's a very good question. I think that when we talk to our customers today, I think that what we saw throughout the 2020, we all knew what happened when they started to buffer a lot of liquidity and have a lot of drawdown in all the banks and in Handelsbanken as well. We could see that definitely decreased throughout in the end of 2020. When we talk to the customer, I think that they as well as we wait to the society to open up again and to make sure that the wheels start moving forward. From that perspective, when we look in all our home markets, actually, we can see that there are a lot of discussions in the pipelines. From that, we take a lot of positive impulse to see that the demand will definitely increase as soon as we get away from this pandemic, so to speak. I feel positive, and I think that when we talk to the CEO of our home market, they do have the same feeling, so to speak, in their stomach when they talk to the customers. Many times we talk about the government support as a negative factor if they are going to be removed. I think there's a positive factor there around as well. When government support are being withdrawn, companies need to finance themselves independently, and when that happens and being removed, that increases the demand, most likely. When lockdowns are abating and when things move back to normal, we believe, first of all, we, from a restructuring perspective, are in a better situation to actually support and offer our corporate clients really good advice. Second, they're in need of more money and funding. Yeah, I can just add to that and say that This is not just the large corporate. I think that as well we can see the same wait and see, so to speak, when it comes to the SME companies as well. Again, I think from the dialogue that we have with those customers, I feel that the wait and see period, everyone hope that to be over because they need to make investments and so on. Yes. Okay. Thank you very much. Very comprehensive answer. Thank you. The next question comes from the line of Nick Davey from Exane. Please go ahead. Morning, everyone. Two questions, please. The first one, can I ask you to talk about the possible long-term impact of all this deposit growth you're seeing, which again, was quite sharp this quarter? I'm just thinking about possible opportunities here, either on the household side to convert to mutual funds or perhaps on the corporate side to charge more deep negative rates, possibly to issue less debt. Are there any of those opportunities which you think are compelling? The second question, which I think I asked for the second quarter in a row, is about Swedish house prices. I understand the structural dynamics of the markets and it's not a bubble question. Now that home prices are growing 20% year-on-year, the question really is one about your role in that kind of a market and how you think that level of price growth can be decelerated, whether you have a role to play in that. Thank you. Well, let me start in trying to address and most likely some other ones will jump in here as well. First of all, the long-term impact of the deposit growth. I think it's fair to say that when you look at the banking sector as a general, obviously most of us has had huge inflows into deposits, and that's obviously a telling story of the nature of our economies and the world we live in where there are tons of cash available and needed to be parked somewhere because the world is in lockdown. Obviously we don't foresee this as a long-term trend carrying on forever. Having said that, obviously we tend to be a bit better positioned in these senses and we are accumulating a bit higher ratios of that than many of our peers, being a really stable bank. As you're saying, on the household side and the retail side, these can be converted obviously to two parts. Savings is one obvious choice, obviously, moving them into rather fund savings. Most likely that's been part of the answer to the success recently. Second of all, obviously, we are a bank which have a bit higher ratio than the peers in capital market financing. Obviously we can use quite a lot of the deposits as well to decrease our financing cost as well. Two good components for us. Going to the Swedish house prices, as you say, obviously, we might have a structural imbalance in Sweden, which deems to keep on having the demand out there. Yes, we've seen hefty price increases and you can debate around the reasoning of that one being people adapting to the COVID and want bigger spaces to live in and want another house to live in, and they believe that they're going to work more from home, et cetera. Putting them aside, I think it's really important to stress that we don't change our behavior that much in this development. We keep on having our strict way, our strict view of our credit approval process. We want people who are very well capitalized, who are able to pay their cost. We want a strong collateral. I think for us, we like our clients. We want to be able to support the demand, but we don't change our behavior in it. Okay. Thank you. The next question comes from the line of Andreas Håkansson from Danske Bank. Please go ahead. Yeah. Good morning, everyone. On the NII, I'm looking in the bridge on page 27 in your fact book, or in the presentation rather. You sense that the net effect on margins and funding costs in Sweden was - 18. I look at you have actually reduced your funding quite significant. I think you had redemptions of some SEK 75 billion in the quarter, and you have only issued a part of that. There should have been quite some tailwind from funding. Could you tell us that number, the - 18, how much is margin pressure and how much is funding costs, if possible? I think, Andreas, we have to come back on that with a more detailed answer, actually. In general, yes, the volume of outstanding funding is impacted by the redemption. We had one of the large benchmark covered bond loans in Sweden in the quarter. That obviously entails some short-term impacts on that number when we have these redemptions. We'll have to come back with a more detailed answer. Big picture, you had SEK 19 million of lending volume contribution and - 18 of this net number. Would it be fair to believe that if I exclude the funding, you would have a negative delta between volumes and margins in the quarter? As we say in the segment Sweden, we have a rounded one basis point drop, if you want, of margin in the mortgage market in Sweden. That is obviously. Sure. There's other product We can take that later on. The second question- We take that later. Yeah. Yeah. Second question. On your SREP, someone else asked a question similar, and I just want to come back to it. Could you give us a best estimate? Should I think that a normalized SREP adding back your buffers is around 16% within region impact and so on, and then I should add 100-300 basis points and then compare that to the 20% and say that you have roughly 100 basis points above your requirement? How do you feel about that? I think you're reasoning quite a lot around what we want answers from the Swedish FSA around. What we can say is you're correct in that we want to be one to three percentage point above the SREP. The SREP, obviously, going forward, most likely will include countercyclical buffers. We don't know how quick they will be imposed. We don't know the levels they will come back to. What we can say is that pre-corona, they were at 1.9 percentage points to us. If you're making that math, obviously, 13.9 + 1.9 is 15.8, and we want to be one to three percentage points above that. That's a lot of assumptions in it. Sure. That's the reason why we're waiting for clarification from the Swedish FSA. Would it be fair to believe, given that you have quite a conservative board, that if they're going to take a decision in Q4 about your dividend, and if there's uncertainty around if and when the countercyclical buffer will come back, they're rather going to say that it's not a normal environment, so the one to three doesn't apply, or is that the wrong way of looking at it? I think it's fair to say that we have a conservative board, and we want to run the bank in the safest of fashion. We cannot go in advance of these kind of conclusions. Sure. I think you're making far too many assumptions in that conclusion. Yes, we have a conservative board. That's our job. Thanks very much for that. The next question comes from the line of Mats Torstendahl from SEB. Please go ahead. Yes, good morning. Thank you. Or good morning, I don't know. Two questions, if I may. Private banking volumes up 42% year-over-year. Could you shed some light on that? Is that primarily related to asset management growth, or could you comment on the number of client developments, so to say, have you added a lot of private banking clients or changed definition of being a private banking client, et cetera? The second, more U.K. model approval. Is there anything there that has progressed really? Thanks. Thank you, Mats. I can start with the question when it comes to the private banking business. We are running the private banking in the same way we have done for quite some time, actually. When you look at the increase on the new volumes, it also includes a lot of new customers as well. I don't have the exact figure on that, but that is how we can say that we definitely increase the private banking business and the volumes into our asset management. That is definitely a combination of all customers and new customers in this. Yes. We've said, obviously, that we're moving from a business model where we had private banking available at five places in Sweden, and we're moving to the county structure in Sweden where we will have private banking available in 20 to 25 places. We've come some way in that development, actually. We are improving our geographical footprint in private banking as well, which will obviously increase our competitive edge. Going to U.K., I read that question as a fairly broad question. Sorry, was it a question around the IRB model? Yeah. Okay. Sorry. Obviously, as we've said before, we are capitalizing our U.K. exposure now from the Swedish FSA's demand. The consequence of that one is that we are measuring our risk-weighted amounts by a standardized model, and then we're capitalizing ourselves with the Swedish buffers. That's obviously a very non-competitive position we're in right now. It's fair to assume that over time, the U.K. PRA and Swedish FSA will most likely need to converge their methods. When that happens is far too early to tell. Obviously we are in the most conservative position right now, and that obviously hurts our return on equity. We're putting a lot of focus in improving our efficiency and doing everything we can in order to produce as good return on equity as possible. Obviously it comes down to as well the capitalization level. We are in the process of applying for IRB method in U.K. It's far too early to tell. No progress during the quarter, so to say. No progress during the quarter. Sorry for a long answer. No. That's fine. Very good. Thank you. The next question comes from the line of Martin Leitgeb from Goldman Sachs. Please go ahead. Yes, good morning. My first question is just to follow up on some of the comments on mortgages in Sweden. I was just wondering, the combination of continued strong deposit inflow, rather subdued corporate lending growth at present, how do you think is mortgage pricing evolving in Sweden? Do you see it broadly stable, gradually edging lower? Is there a continued downward pressure? The point I'm trying to get is how should we think about NII progression in 2021? Is the combination of volume growth likely to be offset to some degree by margin pressure? The second question, I was just wondering on the 40% dividend accrual, just looking obviously at the comments earlier on capital at the 20% compares already giving a lot of headroom, even if one were to factor in the countercyclical buffer. What is the reason to keeping the payout ratio at 40% at present? Is there scope to potentially this year, next year, reverting back to some of the higher accrual levels? Thank you. Let me start, and then Lars, you can jump in as well. When it comes to mortgages, obviously, we don't have a guidance on what we believe is the correct margins going forward. Obviously we can see that the market is we've seen quite strong trends towards digitalization in the past, and we believe this will prolong, they will carry on. We are putting a lot of emphasis in that perspective ourselves. We're obviously seeing margin pressure coming from the new players who rather construct mortgage funds than using their balance sheet. That will most likely prolong, they can't grow forever because then the Swedish FSA will most likely have a view on that one. Obviously we've also seen that the banking package adoption to that one from the Swedish FSA has actually increased the capital demand a bit more on the smaller players. All in all, we can see that the margin pressure might been a bit bigger actually one year ago or so than it is at current. It's a bit back to Andreas' question as well, what comes from the financing component and what comes from the top-line price the client pays. A tricky question to us, but we like the market. We think we are competitive at the position we're in right now. When it comes down to the 40% dividend accrual, obviously the key component in all of this is that we want to run the bank at one to three percentage points above the regulatory demand. If it proves over time that we build capital if we're just paying a 40% dividend, then obviously we're in a good situation, and then we will make more cash available to be divided out to the shareholders. These things will be clarified over time. One to three percentage point is the constant one in this equation. Thank you. Are you able to say anything on NII progression, how we should think of NII progression in 2021? No, we never guide on the revenues, as you know. What we keep saying is that over time, when you think about NII progression in our bank, it's about flat around zero. Of course it can jump up and down as we've seen, but over time, it's all about volume development. Thank you very much. The next question comes from the line of Riccardo Rovere from Mediobanca. Please go ahead. Good morning. Good morning to everybody. Quick questions, if I may. When I look at your disclosure with regard to credit risk IRB, I notice that under the advanced approach, the risk weight on corporate goes down by roughly one percentage point in only three months, and I was wondering what is driving that. I'm not saying it should have gone up, seeing down, considering that the continent has remained more or less shut is a bit surprising to me. This is the first question. The second question I have with regard to your cost target of SEK 20 billion, it is without Oktogonen fine. Does that include any action that you're taking in the U.K., and is it including some kind of cost like travels, marketing, and these kind of things to get back to normal by the end of 2022? Forgive me for that, a quick one for Carina. Right at the beginning of the presentation, you were talking about capital. You stated this gives opportunity for growth, among other things. This is the words you mentioned. What does it mean, among other things? If you could clarify a little bit that. Thank you. I can start, and then I guess Lars and then Carl will continue. Yes, what I meant is that we are in a very good position when it comes to the capital situation we have. It gives us and it gives the board opportunities, definitely. As Carl said, we will get back to that. We have aspiration for growth. When we look at that and when I said that, it's mainly about organic growth in all our home markets where we are so that is what I meant. We are in a very good position. We are in a good spot looking moving forward in that perspective. To your question around the cost target, no, we haven't. Obviously, we will adapt to the situation post the COVID crisis, and we really like to get back to that situation. Most obviously, traveling cost will go up, for instance. We haven't made any assumptions of what the correct level on that is. We run a fairly dynamic bank now which we believe is adaptable to the circumstances. Obviously we run initiatives, but restricting traveling is not one of them. Riccardo, last year on your question on the corporate risk weight down in the quarter, as you say, in advance. Yes, you're right. You have seen that trend for quite a few quarters, and the reason is really that, as we talked about, we continue to gradually improve the quality of our portfolio towards lower and lower risk exposure. That is clearly reflected in the risk weight. Nothing special this quarter, so to speak. Obviously scaling out of the international markets is not the majority of our business, but that's one component which should all else equal improve the credit quality of the portfolio. Okay. Thank you very much. Okay. Thank you. Just a quick- I'm not sure I understood it correctly on the cost. The SEK 20 billion includes some sort of normalization of traveling. Do I get it right? Correct. Okay. Thanks. The next question comes from the line of Maria Semikhatova from Citigroup. Please go ahead. Yes. Hello. Thank you for the presentation. Just a couple of questions on the cost side. First of all, is there any update on the potential sale that you mentioned of card acquiring operation and accessory [strategy], and what would be the impact on your SEK 20 billion cost target in case you decide not to proceed with the sale? Secondly, on headcount in the Swedish operations, just wanted to clarify, as a result of restructuring, you changed some of the allocation of headcount across divisions. In Sweden, there was roughly 270 employees reassigned to other segments. When you previously guided that the restructuring of branches in Sweden would result in 1,000 fewer FTEs, did you include this reassignment with effectively net reduction of around 700 at the group level? Okay. Thanks for these questions, Maria. First of all, on the payment side, we don't have any other information to give at the present being. We will get back on information in due time on that perspective. When it comes to the FTE estimate and the FTE reduction, we don't have any reason to guide on anything else than 1,000 FTEs. It is true that we organization-wise has changed the way we work, and we moved some of the functions from obviously cutting down from five regional banks to one country operation. We've said to you that we will centralize and to bring on the efficiency in a few of the functional areas. That has caused a change of FTEs as a consequence, but no reason to change the 1,000 FTE component due to that. Understood. Just maybe a quick follow-up. You mentioned that you were replacing, effectively, consultants with your own headcount. Has that been already done, or you expect further increase from this? I think it's fair to say that that will be an ongoing job and task. Yes, definitely it has been done already to some extent. Just to clarify on the card acquiring operations. You do not disclose the contribution of this to your cost target, but can you confirm that the sale is included in the SEK 20 billion target by 2022? The review of the payment business, we can confirm that's included in the SEK 20 billion cost target. We can't comment any more than that. Understood. Thank you so much. I will now hand it back for any closing remarks. Okay. Thank you very much, and thank you very much for spending the time with us, and thank you for all very good questions. Well, have a really nice day. See you and hear from you again. Thank you. Bye-bye. Thank you. Thank you.