Danske Bank Aktie

Good morning, everyone. Welcome to the conference call for Danske Bank's financial results for the first 9 months of 2026. My name is Claus Ingar Jensen, and I'm Head of Danske Bank's Investor Relations. With me today, I have our CEO, Carsten Egeriis; and our CFO, Cecile Hillary. We aim to keep this presentation to around 25 minutes. And after the presentation, we will open up for a Q&A session as usual. Afterwards, feel free to contact the Investor Relations department if you have any more questions. I will now hand you over to Carsten. Slide 2, please.

Thanks very much, Claus. Good morning, and thank you for joining us for our Q3 Conference Call, where I'm pleased to share the highlights of Danske Bank's financial results for the first 9 months. We delivered a solid third quarter, supported by good customer activity and continued execution of our strategy. Core income grew 9% year-on-year alongside disciplined cost management and strong credit quality. Let me start with our customers. The Nordic operating environment remains supportive of commercial activity.

Corporate lending grew by more than 5% year-on-year, supporting market share gains across the Nordics. Deposits also remained strong and within Asset Management, customers added more than DKK 5 billion of net inflows during the quarter with contributions both from private banking and from mass retail. Credit demand, as reflected in volumes was slightly affected by seasonal effects, while fair value movements in Realkredit Danmark bonds also impacted lending volumes.

But against that backdrop, the overall commercial performance remained resilient. This activity translated into solid financial results. Our return on equity for Q3 came in at a record high 15.1% and the cost-to-income ratio of 43.9%, tracks well within our full year guidance of below 45%. And credit quality remains strong with net reversals of impairments. We also maintained a strong capital position. Our CET1 capital ratio increased to 17.2%, reflecting strong capital generation after dividend accrual.

The confirmed Pillar 2 release reduced regulatory requirements by 40 basis points, in line with previous communication. Given the solid financial performance in Q3, we have also narrowed our net profit guidance for the full year to a range between DKK 24 billion and DKK 25 billion, driven by an improved outlook for loan impairment charges, which we now expect to be no higher than DKK 600 million. So overall, the quarter shows continued strategic execution supported by resilient customer activity. And despite a seasonally slower quarter, we're confident in our trajectory and the performance of our franchise going forward.

Please turn to Slide 3. Let me turn to the performance of our business units. The key message here is that customer activity remains resilient across the group. All 3 business units delivered income above the level a year ago and each generated returns above its 2026 target. The broad-based performance gives us confidence in the strength of our franchise and in the progress we're making against our strategic priorities. In Personal Customers, good activity and deposit margin effects supported income, while continued strong credit quality also contributed to a ROAC of 40%.

Total income was just under DKK 5 billion, significantly above the level a year ago. And nominal lending was up 1% year-over-year and stable compared to Q2, while deposits remained strong, growing 4% from last year, which should also be seen in light of the positive net inflow to assets under management. Business Customers continue to build momentum, higher customer activity, growing fee income and progress in our corporate offering supported both income and volume growth, with ROAC increasing to 23%. Total income reached DKK 3.8 billion with growth in both lending and deposits, reflecting continued strength in business relationships.

In Large Corporates & Institutions, we saw continued strength across lending, asset management, financing and also advisory activities. Our debt capital markets franchise also benefited from constructive bond issuance activity and ROAC remained strong at 22%. Total income was DKK 4.7 billion, above the level a year ago. Lending was stable quarter-on-quarter, reflecting seasonal effects, while deposits increased 3%. Relative to the same period last year, lending and deposits were up 5% and 13%, respectively.

So in summary, across the 3 businesses, this is a solid and a sustained performance. It reflects our strong customer franchise. It reflects our continued momentum and also our attractive profitability across the group. And then Slide 4, please, and I'll hand it over to Cecile.

Thank you, Carsten. Looking at the income statement, Q3 was another quarter of solid financial performance with good momentum in our core income lines, continued cost management and strong credit quality. For the first 9 months, total income was supported by growth in net interest income and fee income, underpinned by customer activity and higher volumes. Trading income was affected by market volatility, while income from our insurance business has performed well in the context of changing interest rate expectations.

Other income normalized after the DKK 231 million one-off in Q2. Compared with Q2, NII grew 3%, primarily driven by deposit margin expansion and fee income was stable. Both trading and insurance income were affected by volatile market conditions. Costs remain in line with our guidance and reflect our continued focus on efficiency driven by our tech and AI investments. Credit quality continues to be strong with a well-provisioned portfolio and net reversals of impairments in Q3. Overall, the quarter shows resilient earnings quality where NII further benefited from the rate hike. Fee income continues to be strong and costs are under control.

I will now go through the key lines in more detail. Slide 5, please. Turning now to net interest income. We delivered a solid performance with NII up 4% year-on-year, supported by improved volumes and the contribution from our structural hedge. The quarterly development was also positive with higher rates supporting an improvement in deposit margins. Alongside the positive volume trend, this underpinned the resilience of our net interest income. The other category primarily reflects treasury's internal fund transfer pricing allocations. Importantly, these allocations have no impact on net interest income at group level.

Our structural hedge was impacted by higher short-term rates in Q3, but this was partly countered by higher income from our shareholder equity base, which remains unhedged and benefited from higher Central Bank rates. The notional of the structural hedge, including bonds and derivatives was kept stable in Q3 at around DKK 190 billion. And as such, the structural hedge remains a key stabilizing feature of our NII profile. Finally, we have updated our interest rate sensitivity. All else equal, a 25 basis point increase in rates would add approximately DKK 400 million to NII in year 1, DKK 350 million in year 2 and DKK 100 million in year 3. A 25 basis points decrease will lead to an impact of around minus DKK 550 million in year 1, minus DKK 250 million in year 2 and minus DKK 100 million in year 3.

The revised sensitivity reflects the current balance sheet composition. For example, corporate lending facilities have pushed the NII benefit slightly further out in year 2. Note, however, that the combined upside is the same total of DKK 850 million over 3 years as previously communicated. So in summary, we see the NII trajectory as solid. Customer volumes are contributing positively. And with the recent rate hikes, this supports our income trajectory.

And finally, to address questions about expectations for NII for the full year, we reaffirm our expectation of NII to be slightly above DKK 38 billion for full year 2026, driven by continued volume growth and based on current market implied rates, which do not include another hike until late in the year. Slide 6, please. Turning to fee income. This was a solid quarter despite typical Q3 seasonality. For the first 9 months, net fee income increased by 14%. Importantly, the growth was broad-based across all 4 fee categories. Investment fees were the largest contributor, driven by higher assets under management from consistently positive net inflows together with rising asset prices.

Everyday banking fees were supported by continued demand for FX and cash management solutions. Lending and guarantee fees were driven by higher customer activity, particularly due to corporate credit demand. Capital markets fees were underpinned by a good performance from our DCM and advisory franchise. Compared with the second quarter, net fee income was broadly stable at DKK 4.1 billion. Lending and guarantee fees declined mainly due to seasonality, including lower refinancing volumes for adjustable rate mortgages.

This was mitigated by investment fee income, which remained a strong driver. Overall, the fee income development demonstrates the breadth of customer activity across our franchise and the benefit of a diversified fee base even in a seasonally slower quarter. Looking towards Q4, we expect the current trend to continue. However, given recent market volatility, we expect Q4 performance fees to be well below the historical average of around DKK 400 million. These developments relates to fixed income funds performance given current volatility in fixed income markets.

Slide 7, please. Turning to trading income. The result was lower year-over-year and quarter-over-quarter, reflecting both softer customer activity and negative fair value effects in group treasury. Net trading income for the first 9 months was DKK 1.5 billion, down 37% from the same period last year. The main driver was a lower result in LC&I, where customer activity in secondary fixed income markets remained subdued. For the third quarter, net trading income was DKK 397 million. We saw better customer activity in FX trading, but this was more than offset by lower income from fixed income trading in what is also a seasonally slower quarter.

The quarter was also affected by unrealized market value adjustments, together with other balance sheet movements in group treasury, which created negative accounting effects. These items fluctuate from quarter-to-quarter and do not reflect the corresponding change in business activity. Finally, as far as Q4 trading income is concerned, if the current market conditions persist, we expect trading income to be in line with Q3, all things equal. In addition, there are typically seasonal effects leading to lower customer activity in trading at the end of the fourth quarter.

I will now move on to the expense line. Slide 8, please. Turning to expenses. Our cost trajectory remains in line with our full year guidance with a Q3 cost-to-income ratio of 43.9%. Year-on-year, expenses were slightly higher, mainly due to staff costs, including severance and performance-based compensation. This was more than offset by lower FCRP and remediation costs, showing continued progress in reducing legacy cost items and allowing from increased investments in tech and AI in line with our plans.

Quarter-on-quarter, this trend was confirmed. And despite higher investment spend, the underlying cost development remains well controlled. We continue to make targeted Forward '28 investments in our digital and technology platform. These investments support AI-enabled growth and overall enhance our efficiency and resilience. Overall, we reaffirm our full year 2026 cost outlook of DKK 26 billion to DKK 26.5 billion, with a cost-to-income ratio expected to be below 45%. The message remains centered around increased efficiency and continued investments in strategic priorities.

I will now move on to asset quality. Slide 9, please. Turning to asset quality. The picture remains strong. Our diversified and stable credit portfolio continues to perform well, whilst we remain prudently provisioned given the macro and geopolitical environment. In Q3, further improvement in credit quality led to a net reversal of DKK 200 million. With a year-to-date level of impairment charges at DKK 65 million, we have revised our full year impairment guidance from around DKK 1 billion to no more than DKK 600 million, corresponding to approximately 3 basis points cost of risk. Macroeconomic charges remained modest in the quarter. Our scenarios continue to reflect elevated uncertainty, including geopolitical risks, trade tensions and market volatility so that we capture the potential impact of a more severe and prolonged adverse environment.

Postmodel adjustments stood at DKK 5.2 billion with a reallocation of provisions towards agriculture given additional political tail risks. We continue to take a prudent approach in light of potential disruptions and uncertainty. The total overlay of around 30 basis points is equivalent to almost 4 years of normalized cost of risk. Overall, asset quality continues to support the earnings profile and capital generation of the bank. I will now move on to capital. Slide 10, please. Turning to capital. Our position remains strong. Our CET1 ratio increased by 20 basis points during the quarter to 17.2%, driven by retained earnings after the accrual of dividend.

Capital generation continued to be strong at 302 basis points annualized. Our total capital ratio increased to 21.3%, further supported by the issuance of a DKK 5 billion equivalent AT1 transaction to a broad Nordic investor base in Q3. Risk exposure amounts were broadly stable at DKK 847 billion. Lower credit risk exposure was countered by higher market risk REA that mainly reflected interest rate volatility. Following the formal SREP review of the resolved legacy cases, our CET1 capital requirement has been reduced by around 40 basis points to 14.3% as previously guided.

This means that our management buffer to the regulatory requirements has improved to around 300 basis points. We continue to manage capital prudently. Our capital framework already includes an REA buffer of more than DKK 110 billion to absorb the transition and implementation of our IRB models. And that buffer has been recently reviewed in close alignment with our regulator, the Danish FSA. Looking ahead, our CET1 trajectory remains consistent with the glide path to move gradually towards our stated CET1 target of around 16% in 2028. This allows us to finance our growth plan and deliver on our capital distribution agenda.

So in summary, the third quarter demonstrated strong capital generation, stable balance sheet management and continued ability to deliver on both growth and distribution. Slide 11, please. Finally, turning to the financial outlook for 2026. We have narrowed our net profit guidance to a range of DKK 24 billion to DKK 25 billion, corresponding to a return on equity above 14%. The revised guidance is a result of impairment charges now expected to be no higher than DKK 600 million to reflect the quality of our credit portfolio.

We continue to expect total income to be somewhat above DKK 59 billion, supported by higher core banking income from strong customer activity, growing volumes and the effects of recent policy rate hikes. We continue to see good commercial momentum across our businesses. We expect operating expenses to be in the range of DKK 26 billion to DKK 26.5 billion. This reflects our focus on growth, tech and AI investment and cost management. We expect our cost-to-income ratio to be below 45% for full year 2026. Slide 12, please, and back to Claus.

Thank you, Cecile. Those were our initial comments and messages. We are now ready for your questions. Please limit yourself to 2 questions. And if you are listening to the conference call from our website, you are welcome to ask questions by e-mail. A transcript of this conference call will be added to our website within the next few days. Operator, we are ready for the Q&A session.

[Operator Instructions] We will now begin with our first question. This is from Gulnara Saitkulova from Morgan Stanley.

So the first question on capital headwinds and tailwinds. So you recently published a press release reaffirming your capital framework, including the DKK 110 billion plus REA buffer for IRB model implementation. And clearly, we've seen some sizable capital headwinds emerging from model reviews at the Nordic peers. So I wanted to understand how much comfort we should take from your announcement that the existing buffer fully capture the potential impact of all outstanding model reviews, including those that have not yet received the final regulatory approval? And could you provide some more color on which material reviews are still outstanding, the expected timing and whether there are any additional capital headwinds and tailwinds that investors should consider as we look towards 2028?

Yes. Thank you very much. No, I think on the REA and modeling side, we're very comfortable with our position. We have the buffer that was mentioned. And that buffer, in fact, has been updated regularly over the last few years as we have been updating our model frameworks and applications and in line with regular reviews from the Danish FSA. We continue to work on the various different model applications. Some have been approved and some are still in pipeline, but all of them have been sort of regularly discussed with the regulators. So again, we feel very comfortable with the REA buffer that we have in place today.

And another question on deposit mix shift. You previously highlighted the gradual shift towards high-yielding savings products. Could you elaborate on what's driving that mix shift? Is it primarily customers optimizing their balances within Danske Bank? Or are you seeing increasing competitive pressure on deposit pricing? And looking ahead in Q4 and beginning of 2027, how should we think about the pace of that migration and the implications for deposit betas, particularly across the Personal Customers, Business Customers and LC&I?

Thank you for your question, Gulnar. Actually, let me clarify things on the deposit side. I mean the first thing to say is that we continue to see good growth on our deposit stock. Obviously, we guided in April towards a growth of 1% to 2% on the deposit side, we've seen deposits actually stronger, right? I mean year-on-year, actually, we've seen more around the sort of 7%. So the first thing to mention is obviously the strength that we see in our deposit development.

The second thing to say is that clearly, we have benefited from the rate hike. Clearly, in Q3, the June hike is fully embedded. And obviously, in Q4, the September hike will also play a part in NII development. The deposit beta that we have seen so far has been lower than our expectations. Now of course, over time, especially if we've got more rate hikes, December, et cetera, things might obviously evolve. But so far, it's been lower, but that is captured in our NII sensitivity.

Then to address the deposit mix shift, we actually don't see currently evidence of mix shift appearing in any material way. As a matter of fact, and you'll see that in our fact book, the time deposits that we have as a proportion to our deposits remains fairly low, including in our Personal Customer sector. So of course, it could change. Of course, it could evolve. But right now, we're not seeing any evidence of any material shift. And certainly, we're not seeing any impact in our numbers either.

We'll now take our next question. This is from Shrey Srivastava from Citi.

Two, please, from me. The first is on the fee print. I note that despite the substantially stronger fee print today, you have not upgraded your guidance on core banking income. And I assume that means you haven't upgraded your guidance on fees. Can you explain why that is? Could you break down the components of the fee beat, which you expect to recur, which you expect not to?

And the second question is on the negative in this quarter from short-term rates and the structural hedge. In connection with the move from bonds to swaps, have you altered the sort of duration characteristics of the replicating portfolio at all? When can we expect to see sort of positive quarter-on-quarter development here with the interest rate assumptions from your economists?

Thanks very much. Let me take the fee question, and then I'll let Cecile talk around the bonds to swaps and the associated duration dynamics. On the fee print, as you say, we printed a solid Q3 fee print, both quarter-on-quarter, given typical seasonality in Q3, but also certainly year-on-year. And we see good momentum in all fee lines. The Q4 specific question when we talk about how we think about the fee line in Q4 is that, in general, you should see it as we continue to see momentum in all the core fee lines, general banking, investment fees, financing fees.

However, what we also note is that there is a fee component that we have, which is related to our fixed income hedge funds, which will be impacted as it looks today from the movements in spreads the last couple of months. So last year, I think we printed around DKK 900 million fee related to fixed income hedge funds. The average is somewhere between DKK 400 million to DKK 500 million if we look at the last many years. And given how fixed income has moved in the last few months, we expect the current fees associated with that particular asset class to be well below the average. So that is the dynamic, but you should think about that all other fee lines and the core trajectory and momentum, we feel very comfortable with.

Okay, let me take -- I'll take the second question on the structural hedge. So the shift from bond to swaps is gradual. So we still hold a majority of bonds in our structural hedge portfolio in any case. But it doesn't change the duration of the structural hedge, which remains around 3 years. And I'll obviously remind you that we also have a loan hedge, which also remains around 2 years.

The notional doesn't change either for the bond and derivative hedge, which is at DKK 190 billion. And again, what I would say is that it's a significant lift to income in 2026. Then given the current rate environment, the effect tails off next year and the year after. I will remind you as well that clearly the structural hedge impact is fully baked into the NII sensitivity that we give you.

And so the negative on the structural hedge quarter-on-quarter to do with the swap component...

Well, so this year, no, I wouldn't focus on it. I mean obviously, on a quarterly basis, given the various maturities and when they roll off, it can be slightly positive or slightly negative, but you shouldn't focus on that. I mean overall, for the year, it remains a strong positive.

We will now take the next question. This is from Namita Samtani from Barclays.

My first one, just a follow-up on the structural hedge. Can I just confirm it's going to be a neutral impact in 2027 and 2028? And then secondly, it looks like on personal lending, that is growing below the market, and it looks like total personal lending was flattish quarter-on-quarter. So I just wondered whether it's an active decision to not engage in competition, which could impact margins? So any color here would be great.

Thanks, Namita. On the lending question, if you adjust for the fair value impacts related to the Realkredit Danmark bonds, we see a slight growth quarter-on-quarter in RD lending and also slight growth on the bank lending side. And so we're fully focused on competing in the mortgage space and see relative good momentum. If we also look at it over the last couple of years, relative good momentum in that space. But clearly, we're also very cognizant of where we want to play and where we want to compete.

And to your point, we -- and you also see that in margins, we're maintaining margins in that space despite the very heavy competition. So it's an important product for our customers. We continue to focus on delivering a strong value proposition including on the mortgage side. And again, we do see growth in both the mortgage, lending products. Do you want to comment on the structural hedge?

Yes, I'll take the structural hedge. So the way we look at structural hedge and not all banks present it in the same way, right? But the way we look at the structural hedge income is as a net impact. And in terms of the net impact, it was positive this year. It still is positive this year in the current rate environment. But given market implied rates, it will be negative next year and the year after. But again, this is fully baked into our NII sensitivity. Clearly, we are geared to higher rates.

And obviously, we see positive impact net-net from deposit margins impact as well as structural hedge combined and equity -- shareholder equity investments as well. On a combined basis, clearly, we remain positively geared to rates. But to answer specifically your question on the structural hedge, Namita, this is indeed going to be a negative contribution next year and the year after.

We'll now take the next question. This is from Sofie Peterzens from Goldman Sachs.

Here is Sofie from Goldman. So my first question would be around your costs. So you had already a 44% cost-to-income ratio in the first 9 months of this year. You upgraded the cost-to-income ratio target for 2026. How should we think about the upside risk to your 2028 cost income target of below 43%? And yes, if you could just talk about that. And then my second question would be like how should we think about excess capital deployment given that we saw a 40 basis points decline in your requirements, you have more excess capital. Like what's the priority for you after growth? Is it share buybacks or special dividends or M&A? And if it's M&A, what could potentially be of interest?

Thank you. Let me start with the capital question, and then I'll let Cecile comment on the upside risk to cost versus '28 plan. On the capital side, as part of our strategy refresh in Q1, we gave an updated capital plan and updated expectations on where we're going to stand with capital, including the Pillar 2 release that we announced today. That is very much in line with what we've already said.

And the plan is to get to a 16% CET1 at the end of '28. The priority for us is to grow organically. We have a plan with a 3% to 4% growth rate on the lending side of things. We continue to execute on that plan. We also, as part of the plans earlier this year, updated our dividend policy to 60% to 70% dividend, and we also committed to extra capital distribution above and beyond that. So I would say, Sofie, very much the capital plans, including what you see here in Q3 is very much in line with what we already communicated and the strategy remains the same, both in terms of first priority around growth and then around the distribution commitments that we've already made.

And let me take, Sofie, your question on the cost-to-income ratio and trajectory towards 2028. And in summary, this trajectory is exactly as planned. So we are confident with delivering the cost-to-income ratio in '28 of up to and no greater than 43%. So that's still very much holds. We continue to see good trajectory when it comes to general cost management, but also the AI investments that we are doing right now and the benefits that we are seeing already in 2026, the one that we're expecting in 2027 and therefore, the linear trajectory to the DKK 2 billion run rate in terms of benefits from these AI investments by 2028, we see them progressing and materializing in time. So in summary, we are confident about our cost-to-income ratio trajectory towards 2028 and the guidance we gave.

Next question today is from Andreas Hakansson from Nordea.

Cecile, I just -- I heard you said that the trading in Q4 is going to be more similar to Q3. And I was just looking at consensus that's looking for probably over DKK 900 million for the fourth quarter. So I'm just -- if you have that lower trading and your NII sensitivity is a little bit lower, what is it, DKK 50 million lower by 25 bps and we had 2 hikes. And on Shrey's question, it didn't sound like you wanted to committed to higher fees in the fourth quarter. So what's really driving the upgraded guidance apart from loan losses? Is it anything else or actually being a bit softer on revenues?

No. Look, we continue to see very good development in core banking income. Just to be a bit more precise on the fee income line, Carsten mentioned, I will reiterate that we actually see very good momentum across all 4 categories of the fee income lines, right? Investment fees, obviously, daily banking activities as well as financing fees and capital markets. And we expect these in Q4, all things being equal, we expect that fee income coming from these 4 categories should be higher than Q3. This is our expectation.

This is what we are seeing in terms of the commercial momentum. The performance fees is a separate topic, right? The performance fees is obviously linked to the fixed income funds and the fixed income funds performance. And there, currently, we expect an amount which is again well below the average, which is around DKK 400 million, right, compared to obviously DKK 900 million last year. However, we still see again that the core banking lines together, so NII and fee income will drive total income. Insurance income is developing well -- well in line with our expectations. And trading income, of course, I need to reiterate, will depend on the development in markets in Q4. If it stays the same, it will be as we've guided. If it improves, clearly, it could be better.

Okay. Then a second question. Looking at Swedish retail, and maybe it's for Carsten. I mean we track the monthly data in Sweden, and you haven't really seen any loan growth in Swedish retail for a long time. It's normally shrinking. But a couple of years ago, you said that you want to steer the Swedish retail bank more towards mass affluent and so on. So is that shrinkage -- do you -- is it planned? And or how successful are you to move over to more wealthier clients?

Yes. No, thanks very much for that. Of course, we'd always like to see more growth, but it is absolutely right. You've understood it right that our strategy has been and continues to be to reposition the Swedish business towards a more mass affluent private banking focus including rolling out the value proposition that we've also been rolling out in Denmark, including Panorama, including the Aladdin investment tools, including the financial system in the mobile bank, including strengthening advisory. That's the primary focus.

Today, what we're seeing is that we are increasing the inflow in number of customers in our chosen and focused segments. We also see growth in, for instance, the investment and managed funds side of things. And that is exactly what we're trying to do is to increase the share of wallet and the profitability, focused on those customer segments. And that does mean that there are certain pockets of the customer segments where we're less focused, and that does, of course, impact the growth on the mortgage side. But having said that, we're also very much focused on wanting to continue to be competitive on the lending side, and that will also be a continued focus.

We'll now take the next question. This is from Martin Gregers Birk from SEB.

Two questions. The first one on NII. If I strip out the DKK 92 million one-off base effect from last quarter, strip out the FX effect and also the day effect, I guess, underlying NII is only up by DKK 80 million Q-on-Q in Q3. So could you please help me walk through sort of your own NII assumptions for the coming 2, 3 quarters since, I don't know, I sit back with a feeling that it's perhaps a little bit slower out of the starting blocks than I had expected.

And then last question also on NII or loan growth, I guess, -- and I guess this is just a follow-up on one of the past questions. If you take your Danish Personal Customers loan growth and if you adjust for the fair value adjustments, your current growth rate is close to 1/3 of what the market is currently growing. What are sort of the priorities here? I guess your -- sorry, your 39% return on allocated capital, you can't grow new lending on that return ratio. So is this going to be -- are you happy with it and then happy with a pure margin business, if I can put it on a needle?

Yes. Thanks a lot, Martin, for the questions. Look, first of all, on NII, we feel very good about the NII momentum and the trajectory. And if I look at the last couple of years, I think actually, we've been in our own internal views and guidance that we've been given, been pretty close to the guidance and the forecast that we've given. And that's because we feel very comfortable about understanding the dynamics of our business, the growth of our business and the underlying NII. So rather than maybe small one-offs quarter-to-quarter here and there, again, I look back at the several many last quarters, and we felt very comfortable and good about both the guidance and the actual delivery NII.

And we're guiding to NII slightly above DKK 38 billion. we continue to feel good about that given the trajectory. You see the bridge in the presentation. I think the NII continues to be robust when you look quarter-on-quarter, driven both by volumes and margins. And there, again, I think important to look at it not just quarter-on-quarter, but also year-on-year. On the loan growth question, this is, of course, specific again to PC Denmark. It is true that we're not growing as fast as the market in the mortgage space. But it is also true that we're really focused on building a strong value proposition, particularly focused on the mass affluent and private banking space.

There, of course, some of the key metrics to look at is the fact that we're taking market share on the investment side, and we're #1 in Denmark on the investment side and also see really good momentum there that we've seen strong growth on the deposit side at the same time as seeing more funds flow into the asset management side of things, very strong increase in the daily banking, everyday banking that our customers do with us.

We're seeing, again, increased inflows in customers in our chosen segments. So we believe we're taking market share on that front as well. Lending is, of course, an important product. And as I mentioned earlier in the call, we, of course, compete on that, and we price selectively in our chosen market segments, but it is just one product as a part of a much broader franchise where, as you will know, the large income and profitability drivers are very substantial when you take in the savings, the investments and the everyday banking fee side of things.

All right. And then maybe just a last question. I guess the lesson for 2026 has been that loan growth on a group level, it doesn't really cost you anything in terms of risk exposure amount. You're now cruising into a headroom of close to 300 bps and even with a 100% payout ratio over the coming year. And how do you see that trajectory heading down to 16%?

Yes. So I mean, you should see it as we previously guided on 3% to 4% lending growth, and we continue to feel good about that forecast. So you should see the REA dynamics moving. Of course, it's always depending on mix and on asset quality and so forth, but you should see that as moving in a way that it sort of supports that will get to the 16% CET1 in 2028.

I think it's very difficult to comment because REA is a mix of, again, customer dynamics, asset quality, customer mix. As you all know, a lot of the growth has been driven in the last couple of years by LC&I. We spoke about that in the speech, 13% year-on-year growth. That's typically investment grade, lower REA relative Consuming business, just to give one example. So it really depends on the dynamics, but you should see the REA growth moving somewhat in line with lending growth. Do you want to comment, Cecile, on any one of these?

I'll just comment briefly indeed on the capital trajectory. I mean it is true, obviously, that we have a large buffer of 300 basis points, larger than the management buffer of 150 to 200 basis points that we've guided towards. Whilst I would say that the regulatory capital risk or headwinds, et cetera, is reducing, right? We've actually seen the materialization of reduction of Pillar 2, et cetera. So if anything, we've got what I feel is a very good level of clarity towards 2028.

When it comes to capital, just to let you know that the 300 basis points management buffer in part is covering from some of our AT1 deficit, which is, of course, deliberate. We don't want to have outstanding extra capital if we can avoid it. So some of this 300 basis points covers AT1. And the glide path remains the same towards the 16% 2028 target whilst we expect, as Carsten was mentioning, it will be -- therefore, it will allow us to maintain our capital distribution policy alongside our growth objectives.

And the next question today comes from Riccardo Rovere from Mediobanca.

Just one. When I look at your financial statements, your balance sheet, and I sum up all the various assets that should generate credit risk. So loans to banks, loans to customers, loans at fair value and investment securities held to maturity or through other comprehensive income, the balance sheet, if the numbers I have in front of me are kind of correct, is up almost DKK 70 billion. And the credit risk RWA under IRB standardized and counterparty risk is down DKK 4 billion in the quarter. Can you elaborate how this can be possible? Is there a rating migration? PMAs are unchanged. So it looks like the risk profile you see in general unchanged. How can it be?

Yes, yes. It was absolutely yes, Riccardo. So thank you for the question. I would say a good observation, particularly in a short time frame since we released our results this morning. The -- so our data and system -- the main sort of evolution because obviously, we have indeed increased on the credit exposure, whilst you see, in fact, a stabilization of REA, which includes, in fact, a reduction of credit risk REA with a slight increase of market risk REA, which is obviously due to the current market.

So why do we see this credit risk REA reduction? This is because our data and systems become better over time with the investments that we are doing in our digital capabilities that allows us to be more precise and more accurate in calculating these REAs. And that explains the last few months, in particular, explains why we've seen this reduction. Clearly, I mean, taking a step back, the quality of our portfolio obviously supports that.

Sorry, Cecile, is this a matter of better allocating the collaterals?

So better calculations, more accurate data, allowing us to effectively remove some buffers linked to uncertainty in calculations. That's how I would [indiscernible].

We'll now take our next question and this is from Alexander Vilstrup-Jørgensen from DNB Carnegie.

I have 2. So first, on competition within your various segments. How do you see the competition in the sector, both within PC, BC and LC&I? Should we expect pressure on lending margins from here? Or do you see pricing discipline improving? That would be my first question.

Thanks for that. Look, I think I would describe competition as being strong and intense competition. In fact, as has been the case, I think, from the last many years. So I wouldn't -- my observation is not that there was anything specific to call out that's changed in Q3 or even the last few quarters. I think the pricing discipline is relatively robust in the sense that there is a focus also from our competition and in general in the market of ensuring that we meet and exceed cost of capital and meet return targets that are there. I said earlier in the year that we expected margins to be roughly flat. That's also what we've seen. And so yes, I mean, nothing particularly new to report, continues to be intense, but also, I think, continues to be relatively disciplined.

Okay. Moving over to my second question. It relates to your Northern Irish business. Would you ever consider divesting your Northern Irish business over time? I can see that in your 2028 strategy, you outlined ambitions for PC, BC and LC&I across the Nordic markets, but you provide a little detail on the Northern Irish business. So given that the business appears somewhat outside your broader Nordic strategic focus, how do you see its role in the group going forward?

Yes. Look, I mean, we really like our Northern Irish business. It's a very strong business, strong profitability, very well diversified, very long deposits and a strong team there. It is a business that sits on our one platform and has all the benefits of sitting on our one platform, and that's an important consideration.

Look, I've also said before that it is, of course, not part of our core Nordic strategy. And therefore, we'll ongoing, of course, look at whether there is or could be a better owner of that business, but we like the business, and we continue to invest in it.

We will now take the next question. This is from Isobel Hettrick Bernstein Autonomous.

It's Isobel from Autonomous Research. So my questions actually focus on your announcement last week that you're enabling your Business Customers to connect their AI agents to your platform and access their banking data. So my first question is, what drove this development? Was it client interest? And do you have plans to roll it out to the retail customers? And then my second question is more broadly, what risks do you see from customers using AI agents regarding deposit stickiness, brand loyalty? And do you have any plans to mitigate potential impacts here?

Yes. No, thanks for that. And obviously, this is a hot topic to say the least and developments are just going so fast. On the MCP side, yes, it is something that our customers demand. And again, just for everybody on the call, giving them access to our premium APIs via MCP, so they can use their own agentic tools to read their own data is something that's increasingly important and customers can themselves make their own user interfaces and tools using that data for treasury management, cash management purposes and so forth.

And we, of course, want to enable that for our customers. We don't immediately have plans on the Personal Customer side, but I could easily see that, that is where the market is going as well. Obviously, there are premium APIs, APIs available. But in terms of consumer customers building their own user interfaces, having access to their data, to some extent, they can do that already, but doing it with agentic tools, you could also imagine could be something that will happen.

And certainly, we're very much looking at both risks and opportunities in terms of how sort of intermediation and disintermediation from agentic capabilities will play out. And we're investing very heavily in the space, and we'll continue to look at both how we can support our customers and continue, of course, to build competitive advantage and strengthen our value proposition to our customers.

And we have one more question. The last question today is from Hari Sivakumaran from KBW.

Can I ask a question on Danica? We've had a couple of good quarters. I'm just wondering how much of that is kind of operational improvement and how much of that may be kind of volatility driven? And then also on 4Q costs, just the full year guidance implies a bit of a range. So just maybe some color on where it may end up in 4Q.

Yes. On Danica, it is very much driven by ongoing improvements in the health and accident area, which has previously been a significant challenge for the whole sector and also for us. We've significantly improved our operational capabilities around the management, both proactively and reactively on the health and accident claims, and seeing improved operational management, but also improved trends around that.

So I would very much put the main sort of drivers down to health and accident. Then at the same time, of course, the investment results swings as per market. But we actually have, in fact, seen pretty strong investment results as we look at those year-to-date. And then maybe on the cost guidance, Cecile?

Yes, on the cost guidance, so indeed, we've given a guidance of between DKK 26 billion to DKK 26.5 billion for the year with a cost-to-income ratio below 45%. I'm not going to refine the guidance further, but I'll say 2 things. One, our cost management plan is going exactly as we anticipated at the beginning of the year. So there is nothing that we feel is out of our forecast. That's the first thing I would say. And secondly, of course, we have in mind our trajectory towards the cost-to-income ratio of up to and no greater than 43% in 2028, and we intend to be firmly going in that direction. But beyond that, I'm not going to make any other comments.

All right. Thank you very much, everyone, for your interest in Danske Bank. We really appreciate it. Thanks for your questions. As always, please do reach out to Investor Relations if any other questions. Thanks a lot. Take care.

Good afternoon, and welcome to the Danske Bank Q3 2026 Pre-close Call. My name is Claus Ingar Jensen, and I'm Head of Investor Relations. In addition, Olav Jorgensen and Nicolai Tverno from our IR team are also on the call. Please note that this call is being recorded for compliance reasons, and the script used for this call will be published on the Investor Relations website after the call. Given that we conduct this call via Teams, please be aware that if you want to ask questions, you must log on via the Teams app or your browser. If you participate via a telephone line, the IR team will be available for questions after the call.

In today's call, I will highlight relevant public data and macroeconomic trends in our markets. I will go through the major P&L lines and comment on capital at the end. Afterwards, we will open for a Q&A session. For the sake of good order, I would also like to highlight the following. I will only answer questions related to already disclosed information as well as publicly available information unless otherwise noted. In connection with this, I wish to highlight that developments in specific indices may not always have the same effect on our performance.

Firstly, I would like to give a brief comment on the most recent macroeconomic development in our markets based on the Nordic outlook published in early September by our macro research team. The economies have proved resilient with solid labor markets despite high uncertainty and as higher energy prices have led to inflationary pressure. In our house view from Danske Bank Macro Research, we expect the ECB and the Danish Central Bank to hike by a total of 100 basis points in 2026, including the hikes in June and September that have already been done and then 2 additional hikes of 25 basis points in October and December. Focusing on the Danish economy, the solid economic development is expected to continue with around 4% GDP growth in 2026 with continued strong support from the pharmaceutical sector.

Employment levels and growing disposable incomes is supporting household finances. However, consumer sentiment continues to be low. Housing market activity continues to be solid, although there are signs that the activity and house prices in the Copenhagen area are slowing.

Now let's have a look at net interest income. The hikes from ECB in June and September were included as part of our full year NII guidance of slightly above DKK 38 billion. And the hike that occurred in September is not expected to have an impact on our Q3 number. Keep in mind that the contribution to deposit margins in Q3 from the June hike will be partly countered by effects from our deposit hedge given the higher short-term rates. As a reminder, the deposit hedge was increased gradually during last year such that our bond and derivatives portfolio account for around DKK 190 billion in addition to our loan hedge. The effects I just highlighted are included in our overall sensitivity guidance. While the majority of our sensitivity is related to euro and Danish kroner, we don't see policy rate tailwinds for NOK and SEK in the third quarter. Keep that in mind when applying our overall group sensitivity, which we reiterated at our Q2 release and is estimated as a positive effect of around DKK 450 million per 25 basis points hike. However, note that there are typically price lags in the few months after a rate hike.

In addition, we estimate a year 2 and year 3 up and down effect of DKK 300 million and DKK 100 million, respectively. Regarding recent volume development, we refer to public sector statistics released on the 25th of September. The sector data showed solid Danish volume trends continuing. Please keep in mind that sector development is not an indication of how our volumes necessarily have developed with the retail lending growth typically more muted when we look at our lending book growth overall. When it comes to deposits, we are starting to see a gradual shift to higher saving rate products where we pass through more of the rate hikes to customers. All else equal, this churn will have an impact on deposit margins. Please note that the third quarter has 1 more interest day compared to the second quarter. The day effect is estimated to be around DKK 75 million.

As always, please be mindful of currency fluctuations in the markets where we operate. During the third quarter and as of last Friday, SEK has depreciated by around 2% against the Danish kroner, whereas NOK has appreciated more than 3.5%. Pound sterling has been roughly flat. Looking at funding costs, we note that the 3-month CIBOR has increased by almost 25 basis points, NIBOR with almost 10 basis points, while STIBOR has been roughly flat, all based on quarterly averages. This will, all else equal, add some pressure to lending margins until facilities are fully reset. And with respect to our wholesale funding costs, we expect an increase relative to Q2 with the transactions we have executed in the third quarter. We have now issued a total of DKK 85 billion so far during 2026, well in line with our full year funding plan of DKK 90 billion to DKK 110 billion of debt issuance across instruments. This includes a multi-tranche Scandi currency AT1 in the middle of August, equivalent to DKK 5 billion. Please visit danskebank.com, the debt section for further details on terms and pricing for our issuance.

And then turning to fee income. In respect to fee income, we will start by noting that the development is, as always, subject to conditions in the financial markets, refinancing activity and the general activity level among our customers. Furthermore, please be mindful that Q3 always has an impact from seasonally lower activity during the summer. Corporate activity is generally solid and recent PMI statistics also encouraging and consumer spending is also improving slightly despite the bearish consumer sentiment according to recent data from Statistics Denmark. Both factors are continuing to underpin our everyday banking fees. With respect to investment fees, we note that this line is naturally impacted by the development in asset under management as well as the investment activity among our customers.

In respect of fees generated from refinancing -- or from financing, we note that most Realkredit Danmark refinancing auctions for adjustable rate mortgages does not take place in the third quarter. Therefore, we expect income from refinancing fees in Q3 to be immaterial and lower relative to Q2. Finally, concerning fee income from capital markets activity, we note that primary market activity has seen some impact from the recent volatility. ECM activity has been subdued and similar to activity fees. This will all else equal, be affected by lower seasonal activity.

Now turning our focus to trading income. Please note that customer-driven trading income, primarily in LC&I is impacted by a continued reduced level of customer activity and the market sentiment, which has been cautious and seasonally slower summer activity. Danica's results are always subject to developments in the financial markets and in the health and accident business. We have no specific comments to other income. And while we reiterate our outlook on cost for full year expenses of up to DKK 26 billion to DKK 26.5 billion in 2026, we expect the Q3 cost level to be in line with Q2, reflecting commercial activity and investment spend. We have no specific comments to credit quality in the third quarter. As such, we reiterate full year loan impairment guidance of around DKK 1 billion. We have no -- any comments in respect to tax, and we have no one-offs relevant for the third quarter.

And then capital. In respect to REA, we expect credit risk REA to reflect the trend in lending volumes. We also note that market risk REA remains subject to the volatility, which we have seen in the financial markets, including changing interest rate expectations. Also, please note that the anticipated Pillar II relief related to resolved legacy case has been formally reviewed as part of the supervisory review and evaluation process. As previously guided, this will reduce our CET1 requirements by around 40 basis points and will be reflected in the third quarter numbers.

This concludes our initial comments. Before we move to the Q&A session, I would like to highlight that we begin our silent period on Thursday, the 8th of October. We will shortly start to collect consensus estimates with a contribution deadline on Thursday, the 8th of October. Please note that we published our Q3 interim report on the 29th of October at 7:30 a.m. CET and that the Q3 conference call for investors and analysts will take place at 8:30 a.m.

We are now ready for the Q&A session. [Operator Instructions]

I can see that we have a question from Andreas.

Sorry, I missed the first couple of minutes, but just on the NII, I was a bit interested in hearing that one of your peers talked about an impact of -- negative impact on NII in the upcoming quarter from repricing of Danish mortgages. And today, I was looking at some news in Denmark where you have this new campaign, you call it Toprente which seems like you are hiking deposit rates a fair bit in various durations. Could you tell us a little bit on what we should expect on both an asset and liability side from these movements that we've seen in media?

I think when it comes to pricing of the traditional mortgage loans, the big players in Denmark have adopted a different pricing policy at least for now. I know that there are some banks who have been repricing their back book and some banks, including us, have repriced the front book for certain products and for certain customer segments. So that explains why I didn't have the same comment as the bank you are referring to. Secondly, on deposit pricing, as I also mentioned during the call, we have seen a shift starting towards products with high interest rates, term deposits and other saving products. And this is an area where we have also done some repricing. I mean, if you go back a couple of quarters, the maximum interest rate you could get on the so-called Danske Toprente, which is our prime term deposit loan was 1.85%. Now it's 2.35%.

So that's an area where we have passed through some or all of the rate increases we have seen so far. But there are no rate hikes on other products. We have a product called Danske Indlan, which is a kind of hybrid saving products where we have maintained the interest rates. But there are also products within Private Banking segment where we have -- where there is an automatic reset when interest rates are going up. And these customers have, of course, also benefited from higher rates. I think that's the short answer, Andreas.

And just a follow-up on the first question then. You said that you repriced your front book. And could you tell us how much lower would the front book margin be compared to the back book? And how quickly would that reprice?

Well, I think that we have repriced the front book of specific products. And that has happened gradually over the first half of the year. So we are probably now in a situation where there isn't that much of a difference between front book pricing for the different mortgage banks in Denmark. But I'm not able to provide you with any indication on how that will migrate into the back book over time.

Then I think we have a question from Sofie.

So just going back on the shift into the savings products. Is there -- like could you give us any magnitude how do you think about like what share of your deposits potentially move to this product?

I'm not able to give you any third quarter numbers, as you probably can imagine. But if you look at the fact book, we have a table there called 175, where you will see term deposits for our personal customers business unit. And there, you will see that already from the first quarter into the second quarter, it went up by around DKK 3 billion, and I would expect that to go up even further in the third quarter. That is the total of term deposits we have. So it also includes what we have in Sweden and in Finland. However, the vast majority will be the product that I referred to before.

Okay. That's very clear. And then you mentioned that the refinancing mortgage fees are going to be material this quarter.

Not material.

Yes, not material. Could you just remind us how much the refinancing fees were in the second quarter?

I think the refinancing fee in the second quarter were close to DKK 100 million.

Okay. And then my last question. We've seen some noise around the big farmers and agricultural sector in Denmark. How should we think about the potential asset quality? Or is it a nonissue like yes, any color you can add here?

Well, whether it's going to be a nonissue, well, of course, I can't say. But as you know, because you have followed Danske Bank for a while, Sofie, there has always been a little bit of volatility for the agricultural exposure for many reasons, higher, lower, I would say, volatility on input and output prices, diseases, tariffs, which we now experience from China, the ban of exporting products to Russia, just to mention a few. I think there is -- the current issue in Denmark is a combination of 2 things. First of all, that the lower output prices and the second one being that with the new government, there will be new rules implemented for pig breeding, and that has caused a lot of protests in Denmark and could, of course, also over time be an issue for earnings among the pig producers in Denmark. I think that is what the issue is about.

We have a very well-provisioned book in agriculture. We have 2.2% of our credit exposure to agriculture. 14% of that is to pig breeding. The other part is for different types of agricultural production. We have PMAs of DKK 800 million against agriculture. So this is not something that keeps us awake at night. But of course, we keep monitor the development. And please also remember that the exposure we have in Danske Bank is, to a large extent, collateralized exposure from Realkredit Danmark lending to the, I would say, the bricks and mortar among the farmers.

Okay. That's very clear.

And then Riccardo, please go ahead.

Yes. Just a quick one. If I understand it correctly, on asset quality, at some point, you stated that you have not much to add and you continue to have this DKK 1 billion guidance for the full year. Are you kind of referring what you have in mind when you say this kind of statement, do you have in mind the first half of what we have seen or the second quarter in terms of asset in terms of provisions? And on PMAs, how should we thinking about them? They remain fairly stable. It's still a fairly large amount. I mean, asset quality over the past several quarters has been fairly strong. So how should we think about all these things?

Well, I think the comment I made were, of course, related to the third quarter where we haven't seen any -- or don't expect to see any deterioration in the credit quality. And we are -- and -- but we still keep our full year guidance of around DKK 1 billion. And in respect to the PMAs, of course, we assess the PMAs on a quarterly basis. If you go back in time, you will see that there has been some reclassification where we have moved PMAs from one type of exposure to another. We have also reduced our PMAs that are coming from a level which is much higher than what you can see right now. But I would say, overall, the market is characterized by very strong credit quality. And that is something we have repeated for a couple of quarters. And that is why we don't have anything more to add for the third quarter.

Okay. Thank you so much for your questions. If there are no further questions, I would thank you for your participation.

I have one question.

Okay. We are ready.

Yes. So just one question regarding your structural hedge. So we've seen 3-year swap rates increasing lately. And I was just wondering how we should see the contribution from your structural hedge to your net interest income in the coming quarters.

Well, I think it's -- in general, it's working as it should. It's a hedge. We will, over time, see a positive -- a continued or higher positive contribution from lending margins. In general terms, of course, the magnitude depends very much on pass-through and so on, whereas the impact or the effect in the hedge goes the other way. So in that way, it actually works quite fine, meaning that over time, the contribution from the hedge will go down if interest rates continues to go up. I think that's the dynamics we see, and that is very much as expected.

Okay. If that was the last question, thank you so much for your participation, and have a very nice afternoon. Goodbye.

Good morning, everyone. Welcome to the conference call for Danske Bank's financial results for the first half of 2026. My name is Claus Jensen. I'm Head of Danske Bank's Investor Relations. With me today, I have our CEO, Carsten Egeriis; and our CFO, Cecile Hillary. We aim to keep this presentation at around 25 minutes. And after the presentation, we will open up for a Q&A session as usual. Afterwards, feel free to contact the Investor Relations department if you have any more questions. I will now hand over to Carsten. Slide 2, please.

Thanks, Claus. And I would also like to welcome you to our Q2 conference call where I'm pleased to share the highlights of Danske Bank's financial results for the first 6 months of the year. Q2 was another strong quarter for Danske Bank. We delivered solid earnings. We continue to build commercial momentum, and we executed with discipline against our strategic priorities. Commercial momentum is broad-based and encouraging as customer activity remained healthy across the Nordic franchise. Corporate lending grew 6% year-on-year, which is especially encouraging because it is translating into market share gains across the Nordics. And that tells us that our relationship-led model and sector expertise are resonating with corporate clients.

We also continue to see positive momentum in Asset Management with an increase of 24% since last year, supported by net inflows of almost DKK 15 billion in Q2. Our financial performance is strong and high quality with core income up 7% year-on-year with a Q2 net profit of DKK 6.2 billion, corresponding to a return on equity of 14.8%. This is above our 2026 target level and also consequently is the strongest quarterly result for Danske Bank in 20 years from an ROE perspective. Our Q2 cost-income ratio was 43%, reflecting strong operating leverage, continued cost discipline and progress versus the 45% target for 2026, which we now expect to be below 45%.

An important message today is that our growth is broad-based and high quality. Customer activity, volume growth across business units and resilient margins are all contributing while credit quality remains strong. And this gives us confidence in the sustainability of earnings. The CET1 ratio of 17% remains strong. Our capital generation remains a clear strength, as we continue to generate capital while growing the balance sheet and accruing for the new dividend policy announced in Q1. Given the stronger income outlook from higher commercial activity and policy rates, we have raised our '26 net profit outlook from DKK 22 billion to DKK 24 billion, to DKK 23 billion to DKK 25 billion. And we remain focused on profitable growth, disciplined cost management, strong credit quality and attractive shareholder returns.

So in short, Q2 demonstrates a stronger franchise, profitability that's ahead of target levels, and a continued capital flexibility, and we're really well positioned for the remainder of the year. I'll now give a few comments on the business units performance, and then I'll hand over to Cecile for the financials. Please turn to Slide 3. So, moving from the group overview to our business units. The main message is that momentum is broad-based. Across the 3 business units, we're seeing high customer activity. We're seeing good volume development, and we're seeing resilient income generation. In Personal Customers, the trend remains constructive. Customer activity is healthy, and we continue to see growth in lending, and deposits and also in retail investments.

And that tells us we're maintaining relevance with households in their everyday banking needs as well as in larger financial decisions. Income has continued to move in the right direction, supported by customer engagement and a strong deposit base. And importantly, profitability remains very robust, and credit quality continues to be a clear strength. Business customers is also showing good commercial traction and strong growth. The underlying trend is one of deeper relationships. So customers are using more of our solutions, including everyday banking, cash management and broader financing products.

Lending and deposits both point to continued activity in the SME and corporate client base. Fee income is also developing well, which reflects the value of our platforms and advisory capabilities. Overall, this is a business where relationship depth is increasingly translating into earnings momentum. In LC&I, activity remains solid, particularly in lending and advisory-related areas. We continue to support large clients across the Nordics with financing, capital markets access and strategic advice. Deposits in this segment can be more seasonal and more sensitive to client liquidity management. So quarter-to-quarter movements should be interpreted in that context. Overall, client demand and activity levels remain supportive and returns are tracking well against our ambitions.

So the takeaway is that the franchise is performing consistently across segments. We're seeing customers engage with us across products and channels, and that is supporting volumes, income and returns. This breadth of momentum gives us confidence in the growth agenda and in our ability to continue delivering against our 2026 targets. And importantly, the execution of our Forward '28 strategy continues to deliver strong results, and we're able to invest in the technology and AI platform that position us well for the future, as we also detailed at our strategy update in April. In particular, AI investments and their expected outcomes are progressing as planned. And then please go to Slide 4, and then I'll hand over to Cecile.

Thank you, Carsten. Let me now turn to the income statement. Q2 was a strong quarter with good momentum in our core income lines, continued cost discipline and strong credit quality. For the first half, total income was supported by growth in net interest income and fee income, underpinned by customer activity and higher volumes. Trading income was affected by market volatility while other income benefited from the DKK 231 million one-off in Q2. Compared with Q1, NII remained resilient as volume growth offset lower equity base income and slightly higher funding costs. Fee income improved within almost all fee categories, and both trading and insurance recovered from a volatile first quarter.

Costs remain in line with our guidance and reflect disciplined execution. Credit quality continues to be strong with a well-provisioned portfolio and sustained below-cycle cost of risk. Overall, the quarter shows resilient earnings quality and good operating control. I will now go through the key lines in more detail. Slide 5, please. Turning to net interest income. We delivered a solid result in the first half with NII up 3% year-over-year. The key message is that the trajectory remains resilient, supported by positive volume development, constructive margin trends and the stabilizing contribution from our structural hedge.

Looking at the year-on-year bridge, the improvement reflects solid credit demand, while the structural hedge continued to provide an important offset, keeping in mind the 4 rate cuts we saw in the first half of last year. This is the balance we look to achieve, benefiting from underlying franchise momentum while maintaining stability through disciplined balance sheet management. Q2 again showed a solid NII trajectory. Volume contribution remained supportive, and the margin development was broadly consistent with our expectations. The other line includes treasury allocation effects while we also had a non-recurring correction, so I would not read that as a change in the underlying trend. Adjusting for this correction, NII was up 1% from Q1.

Our structural hedge was impacted by higher short-term rates in Q2, and we also saw lower income from the shareholder equity base following the March and May payouts. The notional of the structural hedge including bonds and derivatives was kept broadly stable in Q2 at around DKK 190 billion. And as such, the structural hedge remains the key feature of our NII profile. Finally, our NII sensitivity is unchanged. For a 25 basis points upward move, the year on impact is approximately plus DKK 450 million with additional impact in years 2 and 3 of around plus DKK 300 million and plus DKK 100 million, respectively, all else equal. The actual effect will naturally differ depending, for example, on pricing decisions and customer behaviors.

So, in summary, we see the NII trajectory as solid. Customer volumes are contributing positively. And with the recent rate hike in mind, this supports our raised income expectations for 2026 with a view to addressing questions about expectations for NII for the rest of the year. We now expect NII to be slightly above DKK 38 billion for full-year 2026 driven by continued volume growth and based on current market-implied rates. Slide 6, please. Turning to fee income. This was a strong quarter. Net fee income was up 13% year-on-year and 4% quarter-on-quarter, driven by customer activity and continued momentum in our investment offering. In daily banking, we continue to see good demand for our One-Corporate platform and cash management solutions.

The continued growth in house bank mandates is an important indicator of the depth and relevance of our corporate relationships. Lending and guarantee fee income benefited year-on-year from higher customer activity and continued corporate credit demand. Quarter-on-quarter, the lower contribution was mainly linked to the timing of refinancing auctions of adjustable-rate mortgages rather than a change in the underlying customer trend. Capital markets fees also contributed positively, supported by good activity across businesses during the quarter. Investment fee income remained a strong driver, supported by growth in assets under management, positive net sales and rising asset prices both year-on-year and quarter-on-quarter.

Overall, the fee income development demonstrates the breadth of customer activity across the franchise and the benefit of a diversified fee base. Slide 7, please. Turning to trading income. The quarter was affected by slightly lower customer activity in secondary markets and positive valuation effects in Group Treasury. In LC&I, the year-on-year development was primarily driven by lower customer activity in fixed income. Quarter-on-quarter, however, we saw an improvement in fixed income customer activity, but this was offset by lower activity in FX and equities. In group functions, the movements mainly reflect unrealized market value adjustments on cross-currency swaps and other balance sheet movements.

These items create accounting volatility in Group Treasury and should be viewed separately from the underlying customer franchise. The key message is that the trading income line was impacted by market activity and valuation effects in the quarter. Our broader commercial momentum and customer activity remained visible in the core income lines. I will now move on to the expense developments. Slide 8, please. Turning to expenses. Our cost trajectory remains in line with the full-year guidance, and the Q2 cost-to-income ratio was 43%. This reflects continued cost discipline while we keep investing in the capabilities needed for growth. Year-on-year, expenses were higher, mainly due to staff costs, including performance-based compensation. This was partly offset by lower FCRP and remediation costs, showing continued progress in reducing legacy cost items.

Quarter-on-quarter, the increase was primarily driven by higher resolution fund fees, reflecting the higher deposit base. Even including that effect, the underlying cost development remains well controlled. We continue to make targeted Forward '28 investments in our digital and technology platform. These investments support AI, future growth and efficiency. At the same time, group FTEs were down by around 250 compared with Q1. For the first half, the cost-to-income ratio was 44.4%, and we reaffirm our full-year 2026 cost outlook of DKK 26 billion to DKK 26.5 billion. Based on the performance so far, the cost-to-income ratio is now expected to be below 45%.

Overall, the message is disciplined cost execution, continued investment in strategic priorities, including tech and AI, and improving operating efficiency. I will now move on to asset quality. Slide 9, please. Turning to asset quality. The picture remains strong. Our diversified and low-risk credit portfolio continues to underpin credit performance, and we remain prudently provisioned given the macro and geopolitical backdrop. In Q2, impairment charges were below-cycle at DKK 0.3 billion. We maintain our full-year impairment guidance of around DKK 1 billion, corresponding to approximately 5 basis points cost of risk. This reflects both the quality of the portfolio and our disciplined approach to risk management.

Macroeconomic charges remain modest. At the same time, our scenarios continue to reflect elevated uncertainty including geopolitical risks, tariffs and trade tensions so that we capture the potential impact of a more severe and prolonged adverse environment. Post-model adjustments stood at DKK 5.2 billion, including model-related releases of DKK 160 million in Q2. We continue to take a prudent approach in light of potential disruptions and uncertainty. The total overlay of around 30 basis points is equivalent to almost 4 years of normalized cost of risk. Overall, asset quality continues to support the earnings profile and capital generation of the bank.

I will now move on to capital. Slide 10, please. Our capital generation remains very strong, underpinning the CET1 ratio of 17% at the end of Q2. That 17% level should be seen in the context of the DKK 5 billion payout at the beginning of the quarter and the additional accrual we have taken following the revised ordinary dividend policy announced in April. Risk exposure amounts increased by DKK 11 billion quarter-on-quarter to DKK 848 billion. The increase was mainly driven by higher lending-related credit risk, REA, reflecting continued commercial activity and balance sheet growth. This was partly offset by lower market risk REA, as the interest rate volatility we saw in Q1 moderated during the quarter.

With respect to the CET1 requirements, we saw a slight reduction in Q2, primarily due to the reduction in the systemic risk buffer related to commercial real estate exposures. As a result, our CET1 headroom stands at around 240 basis points which gives us a comfortable management buffer in excess of our target of 150 to 200 basis points.

As a reminder, we expect DKK 3.5 billion of Pillar 2 relief, equivalent to around 40 basis points that relates to our solved legacy cases. This is expected prior to year-end 2026, subject to annual supervisory processes. Looking ahead, our trajectory remains consistent with the glide path we have communicated.

We aim to be at around 17% by the end of 2026. And at our stated CET1 target of around 16% by 2028. This keeps us positioned to support growth and execute our capital distribution plan. So in summary, the quarter demonstrates strong capital generation, disciplined balance sheet management and continued ability to deliver on both growth and distribution. Slide 11, please. Finally, turning to the financial outlook for 2026. We are raising our expectations and now expect net profit in the range of DKK 23 billion to DKK 25 billion, corresponding to a return on equity of around 14%. The upgrade is solely driven by stronger income expectations. We now expect total income to be somewhat above DKK 59 billion, supported by higher core banking income from stronger customer activity, growing volumes and the effects of recent and expected policy rate hikes.

At the same time, we continue to see good commercial momentum across the franchise, and our priorities remain consistent with our financial ambitions. We continue to expect operating expenses to be in the range of DKK 26 billion to DKK 26.5 billion. This reflects our continued growth ambitions and investment spend and the same sustained focus on cost management. Overall, we now expect the cost-to-income ratio to be below 45% for full year 2026. We also continue to expect loan impairment charges to be around DKK 1 billion. This reflects the continued strength of the credit portfolio and disciplined underwriting across the bank. Slide 12, please, and back to Claus.

Thank you, Cecile. Those were our initial comments and messages. We are now ready for your questions. Please limit yourself to 2 questions. If you are listening to the conference call from our website, you are welcome to ask questions by e-mail. A transcript of this conference call will be added to our website within the next few days. Operator, we are now ready for the Q&A session.

[Operator Instructions] We will now go ahead with our first question. This is from Shrey Srivastava from Citi.

I guess I'm just focused around the sustainability of some of this improved income going forward into '27 and '28. If I look at current consensus expectations, they're around DKK 59 billion in income for '26. And if we were to assume that this reflected what you previously were thinking, it looks like consensus for net interest income is pretty much in line with what you've said, which leads me to believe that the upgrade is more fee-driven. So just looking at the breakdown of the guidance upgrades, between the various lines. Is that the case? Is it mainly fee-driven? And if not, how come the increase in higher market rates has not translated into a greater increase in your net interest income expectations?

Yes. So, let me take your questions. So I'll take -- I'll start with indeed the total income, right? The revised guidance to somewhat above DKK 59 billion. And I can confirm that really that revised guidance is driven by the core banking income, right? So that's NII, and that's fee income. So where -- let me take both separately. Firstly, starting from NII. So you've seen the half year that we've had. And obviously, I can confirm that the correction quarter-on-quarter doesn't affect the half year, right? So we start obviously with a strong quarter, which was defined in particular, by slightly higher volumes that we expect, in particular, in corporate lending. So that's what we looked at for H1.

And of course, we had at the end of the half year, the rate hike. And then looking forward, 3 items specifically will impact NII in the second quarter. I mean one is obviously the recent rate hike that we've had and also the September one that is embedded in market-implied rates. The second aspect is the continued volume growth. So here are our assumptions on the volume growth. We obviously start with where we are at the end of June, which clearly -- were clearly, as I mentioned, we saw slightly higher volume growth than our assumptions, so obviously a good thing, all the profitable growth.

And what we apply is our assumptions of 3% to 4% lending growth and 1% to 2% deposit growth going forward for the rest of the year, probably at the higher end of these ranges. So that's on growth. And then thirdly, obviously, don't forget that we've got 3 extra days in H2. Separately, there are a few other effects, but I would say they're less material on the NII. For instance, on the deposit margin, we've had a slightly lower pass-through than we're necessarily assuming at the outset. But let's see, obviously, how this continues, particularly with competitive dynamics and the like. But obviously, that is also a slight effect. So that's effectively what drives our NII guidance to slightly above DKK 38 billion.

Then on the fee income, we see our fee income as a very resilient, driven by all 3 businesses. And really all categories of fee lines, if you look at it year-on-year, have actually grown. So very resilient, very solid fee income line. And obviously, Carsten commented on the growth in AUM that you've that is very, very significant. And on that, I would say, we absolutely see this as very sustainable going forward. And of course, don't forget that we've got also an element of seasonality when it comes to performance fees in the fourth quarter, though obviously, I wouldn't use Q4 of last year as necessarily the right template.

It was exceptionally strong. So I think you should look at it in a normalized fashion. So I think I've given you some of the elements on the NII and fee income. As far as the guidance for other income lines, I would say this is not changing versus where we were when we gave the full year guidance.

So can I just -- is the right way to read that this is basically just taking into account a higher base effect from the first half. All the other assumptions are unchanged and you're also expecting some deposit margin compression to offset the higher rates.

Obviously, clearly, we'll have to see what volume growth does, right, both on the lending and deposit side. As I've mentioned, I've mentioned the assumptions that I'm using right now. Of course, we'll have to see how this develops in the second half, given the strength we've seen in the first half. But yes, and then, of course, the 3 extra days and then the slightly additional effects from pass-throughs, et cetera.

We'll now take our next question. This is from Namita Samtani from Barclays.

The first question I have is, it doesn't look like you're experiencing a lot of lending margin pressure just based on the NII bridge that you present, and it looks like some of your peers really are. So I just wondered what you're seeing in the market. And why is it that it seems that you're experiencing a lot less lending margin pressure than your peers? And my second question is the hedge was negative this quarter, but do you expect that for the rest of the year, the hedge income will offset this negative headwind. I just noticed you didn't call out the hedge as being one of the growth drivers of NII this year, but mainly volumes and rate hikes.

Thanks a lot, Namita, I'll take the first one, and then I'll hand over the hedge question to Cecile. I think just on the competitive situation, more generally, I mean, we continue to see a competitive environment in the Nordics across all markets. So that's the first thing I would say. But I would not say that there is anything in particular in this quarter and not in the last quarters that is sort of markedly different in terms of the competitive environment.

And therefore, as you can also see on our NII bridge and page margins, frankly, are relatively stable, and there is, of course, a little bit of moving parts between deposit and lending margins. And obviously, we also look at the overall NIM. But yes, we see margins as pretty stable, reflecting what is a competitive environment, and frankly, has been for a longer period of time. That's how I would characterize what we see.

And let me take your hedge income question, Namita, and things haven't changed. So as I mentioned, when we gave the full year guidance and again at the end of Q1, the hedge income is a significant and important contribution to our NII. And it is a lift compared to last year, right? So 2026 structural hedge income provides a lift versus 2025. Now of course, as rates and market-implied rates increase, that lift is a little bit reduced all things being equal.

However, it still provides a lift. So let me comment now on the development that we're seeing quarter-on-quarter. I wouldn't read too much into the development in quarter-on-quarter. One of the reasons is that clearly, you've got rollovers and maturities. So it's not -- structural hedge income is not necessarily linear from one quarter to another. Also, in this instance, right, you had the effect of obviously a slightly lower equity base from the distribution of the dividends. You had as well, slightly higher funding costs coming from the short-term rates. But overall, Namita, definitely a strong contribution from the structural hedge income again in '26 versus '25.

This is from Sofie Peterzens from Goldman Sachs.

This is Sofie from Goldman Sachs. So just going back to net interest income, it's very helpful that you've given the guidance that it's going to be slightly above DKK 38 billion in 2026. But could you maybe just discuss how we should think about like the quarter-on-quarter tailwinds and of the net interest income that we saw in Q2? Any of the items that will reverse next quarter that we should just be mindful of? And also your rate sensitivity guidance, like I know you give very detailed guidance. Should we expect that tailwind to kind of fully materialize in the second half of the year and then continue to materialize next year. So if you could maybe just discuss a little bit the quarter-on-quarter net interest income evolution and what we should be mindful of kind of items outside of volumes?

And then the second question, there were some headlines a month ago or so about Danske wanting to make some acquisitions in Sweden. So maybe if you could just update us on your thinking around M&A and kind of the capital priorities. Do you prioritize bolt-ons over kind of share buybacks and special dividends?

Sure. Thanks, Sofie. Look, on the NII piece, I think we've given some pretty detailed guidance on expectations for the year. And I think quarter-on-quarter, in the second half, you should just expect sort of a gradual growth towards that NII, clearly, Q4 being slightly higher than Q3. And, no, you shouldn't think that there's any specific moving parts that you should be cognizant of, and the rate sensitivities, we've given no changes to those given in the presentation.

On M&A, look, I think it's a consistent message from my side, and that is that we're fully focused on our inorganic strategy, and we prioritize growth and continue to see good growth momentum, but we're also looking to see if there are inorganic opportunities, and particularly, Sweden is an interesting market from our side. However, there is nothing concrete, and it's obviously subject to the right targets and strategic fit. So I hope that sort of answers the questions.

And maybe just if I can touch on one aspect that you mentioned. Again, there is nothing in the NII for the first half that we would call out as nonrecurring. The nonrecurring item is purely from Q1 to Q2, so it doesn't shift into the second half of the year.

Okay. That's very clear. And just maybe on M&A, would you consider any M&A outside of the Nordics?

No. I mean, we have a Nordic focus and a Nordic strategy. I see that highly unlikely.

We will now take our next question. This is from Mathias Nielsen from Nordea.

Most of my questions have been asked already, but I still have one on trading income. And I know it's a bit detailed, question maybe, but just a bit puzzled about the normalized trading income you have talked about being around DKK 3 billion. And then when you look over the past years, it's been -- for the last 4 quarters been around DKK 2 billion. And this quarter, we also see being like basically in line with expectations, consensus expectations, while all your peers have basically been beating expectations. So what is going on, on this trading income, like what are we missing on the other side? Or what are you missing internally? Is there anything that has changed from the DKK 3 billion to a lower run rate? Or how should we think about that?

No. I think -- thanks No, not -- obviously, as we've said before, Q1 was a soft quarter, and clearly, if you sort of annualize Q2, you're closer towards the DKK 3 billion, but still below the DKK 3 billion. I think right now and probably also since we did the strategy update, we have taken a little bit of risk off the table, but with better returns. And clearly, our sort of trading franchise very much focused on supporting client activity. So I wouldn't say that we're changing sort of the view that an annualized level of DKK 3 billion is directionally right, but it's probably slightly below that given what we've seen in the last couple of years since we did the strategy update.

Okay. And then on the trading income, maybe if you could say something like back in history, it used to be like quite sensitive to the mortgage spreads in Denmark. That seems like you have eliminated that so like what is actually driving the -- and the trading income, like if you can give a bit of a split of customer activities versus the market making? And what you have on the books? And how that plays out?

But I mean, that's exactly right. I mean, that's exactly what we have been doing is optimizing our trading inventory to support customer activity, not least also after the quite significant interest rate moves we saw back in the summer of '22 and the subsequent risk reward on the mortgage side of things. I mean, the business model is focused on supporting customer activity, customer flows with a predominant income drivers being the fixed income and the FX side of the business.

We will now take our next question. This is from Riccardo Rovere from Mediobanca.

One, if I may. Cecile, when you mentioned that post model adjustments account for 30 basis points of the book, you are taking into account the whole DKK 5.2 billion that you show in your slide. But in 2019, so before COVID, and before overlays and post model adjustment started to exist. Statistical provisions were already at DKK 4 billion. Isn't it more -- wouldn't it be more prudent to say that the overlays that you are actually using amounts to DKK 1.2 billion? So the difference between the DKK 5.2 billion and the DKK 4 billion that existed already in 2019. So it would be covering, I don't know, 1 year, 1.5 years of your credit -- normalized credit risk.

Well, let me -- thank you, Riccardo. Just I would make 2 comments on that. The first one is that our credit risk obviously remains extremely strong. And obviously, our business now is different from what it was 5 to 10 years ago. So that's the first point. And really, when I say 4 years, I mean, it's purely because we guide to 8 basis points cost of risk, and we've got this effectively 30 basis points right stock of PMAs. But then the second more substantial comment is that through our models, right?

And that is something that is obviously aligned with all the development around model that banks and not just us, right, have been doing across Europe, including with our regulators, right, we aim to embed more of the sensitivities and the actual coverage, right, in the model itself, right? So the PMAs themselves are indeed an overlay. I don't want to go too much into semantic. And again, I wouldn't read too much into the 30 basis points and the full year, but it was just to give you a sense of what we feel is the prudency of our approach.

And maybe a quick follow-up, if I may. On risk-weighted assets go up or credit risk, if I understand it go up by DKK 15 billion, which more or less matches the increase in the book. I mean I'm talking -- looking at the overall book in the balance sheet, okay, on a consolidated basis, which is up a little bit more than that. So it looks fairly large, the increase in credit risk RWA. I was wondering what's behind that, if you could shed a little bit of light.

Yes, absolutely. No, that's very straightforward. I mean, actually, on REA, it's really driven in a large majority by the growth in our lending. That's really what increases or as a matter of fact, market risk has slightly decreased quarter-on-quarter. So we've seen, as I mentioned, lending growth. Lending growth probably a little bit above what we even expected at the beginning of the year, but that's profitable growth and high-quality growth. As I mentioned, right, quarter-on-quarter, we've seen growth in our corporate segments, in particular, of 1.5% just for that quarter, right, and just short of 1% in personal customers. So obviously, that was reflected in REA. And I would say it's completely aligned with what our growth strategy is in the context of Forward '28.

The new production doesn't have higher risk weight than the back book.

No. The risk of the new production and the characteristics of the production is completely aligned with the rest of our book, and our underwriting criteria, et cetera, have not changed.

We'll now take our next question. This is from Max Jacob Kruse from Bernstein Autonomous.

Max Jacob from Autonomous. I guess just a bit of a left-field question, but the -- can I ask the Finnish business, it seems to be very much out of focus. It's relatively large. Could you just talk a little bit about what your strategy is there? You have a clear strategy for Sweden, Denmark. I'm a little bit unclear on what the plan is for the Finnish business. Is that core? Or is it something you might consider disposing of? Or other initiatives you're doing at the moment?

Jacob, thanks a lot. Finland is very much part of our core strategy. We also clearly said when we did our Forward '28 strategy that we're focused on building a leading wholesale bank and corporate bank across the Nordics, and then, a leading personal and private bank in Denmark and in Finland. So, we are very clear that Finland is incorporated in all sort of our strategic ambitions, if you will. So Finland is very much at the core of our strategy. We have a full-service retail, commercial and investment bank in Finland.

And clearly, the Finnish market is a little bit more sluggish. But from a market positioning perspective, we've been performing pretty well and taking market shares, both in fact, on the personal side and seen good market share gains on the mortgage side, but also on the corporate side in BC and LC&I, and we're clearly also one of the top wholesale banks in Finland and have also been involved in a lot of the relevant transactions that have gone on in Finland. So we continue to focus on Finland and invest in Finland.

We will now take the next question. This is from Martin Gregers Birk from SEB.

Just following up on the questions on NII. I appreciate that you have your DKK 450 million sensitivity out there. But as far as I understand that, that's a sort of a parallel shift in all markets that you are exposed to. But currently, we see a steepening in the short end of the curve. I would assume that the deposit beta for the first 25, 50, maybe even 75 bps is going to be very low, leading you to materially undershoot or overshoot on your current NII sensitivity. And given that current market is pricing in another 2 hikes by now, how would you see your NII moving on these different -- these first 2, 3 hikes?

Yes, absolutely. Martin, thank you for your questions. I will limit my comments on 2026 because obviously, we don't provide any guidance beyond '26. You should see our sensitivity table as correct, right, and as appropriate. I mean, not just -- it's not just a theoretical type. It is definitely validated by the businesses, right? So the plus DKK 450 million for rate -- 1 rate hike of 25 basis points in year 1. And obviously, it's linear. If you add other rates, so the 1 that we're looking at, obviously, is one in September, right? So we're not looking at further hikes in future years at this stage.

You're right to point out that it is for a parallel shift. We've seen a slightly steepened short end of the curve. But that also obviously increases some of the funding costs on the structural hedge. There's the elements, obviously, of the equity base that's slightly lower, which you have to take into account. The deposit beta has been indeed a bit lower than necessarily our pass-through assumptions. But I think if you take the short end of the curve, the deposit beta, you compound all these effects, this is not a material impact on the NII. So really, you should rely on the sensitivity table, which we feel is a very good guide to what you should expect.

Okay. And could you please elaborate on what kind of deposit beta do you assume in those sensitivities, especially for the first couple of hikes?

I'm sorry, Martin, but we don't disclose this.

Okay. All right. That's fair enough. Second question goes on loan growth. If you perhaps could elaborate a little bit more on loan growth. You see -- on a divisional basis, you see anything from 1% to 10% loan growth? It seems to be a bit all over the place. And if you go into just focusing in on the 1% in the Danish retail bank, it seems to deliver quite a pickup in the quarter, both Q-on-Q and year-on-year lending, while you have sort of a flattish development in all the other divisions. Could you please help me to unpack what's up and down in this?

Thanks, Martin. No, I think the loan growth is actually very much as we expected. I mean, we gave an overall sort of loan growth 3% to 4%. And we said we'd see most of the loan growth coming from the corporate area and more muted growth in the retail banking area, and that's exactly what we're seeing. And we continue, as we look to the rest of the year, we actually continue to feel that, that is probably the right assumption and guidance to have e.g., that we continue to see a pretty strong pipeline and fairly robust demand on the corporate side with the housing market having picked up a little bit in Q2, and therefore, also supporting growth. So I think you should still see sort of as slightly higher growth on the corporate side and slightly lower growth on the retail side.

Okay. But on the retail bank, what's the dynamics here? I mean, out of a sudden in the Danish retail bank, you see a pretty nice jump Q-on-Q. You see a Global Private Banking that is not really delivering anything. You don't really see anything out of Finland. You don't really see anything out of Sweden. Should we read anything into this? Or is this just quarterly bumps?

No. I mean, so the dynamic is -- well, first of all, on the private banking, we see actually a very good dynamic more generally with investments and AUM up quite significantly and with strong customer flow. And there, I don't think you should put too much into quarter-on-quarter lending. It's a bit more volatile. But I mean the underlying private banking franchise and performance is looking good again as also seen by the investment flows and customer flows. And then, on the lending quarter-on-quarter, it is right. As I mentioned, that mortgage demand has picked up in Q2. So that's why you're seeing sort of a pretty healthy movement between Q2 versus Q1, but still at relatively low growth levels.

And, operator, I think we are ready for the last question.

Question comes from Alexander Vilstrup-Jørgensen from DNB Carnegie.

So first, could you comment on your current hedge composition? How big is your loan hedge, for instance? And do you expect your hedge to have a positive impact next year? Second, do you still maintain your soft guidance for net income from insurance business of around DKK 1.4 billion to DKK 1.6 billion a year?

Yes. Thank you. Just on Danica, we still maintain that guidance. But currently, we're looking at the higher end of that guidance. And then you want to talk about the hedge?

Yes. I'll take the hedge composition. So the hedge is -- continues to be comprised from 2 parts, right? So one is what we typically call the bond and now derivative hedge, which is DKK 190 billion. As you know, we started in January, given the improvement of an establishment of hedge accounting capabilities in that respect. We started to use derivatives in our structural hedge. Out of this DKK 190 billion, around 10% is now comprised of derivatives, and effectively as bonds roll out, we replaced them partly with derivative, and we think that the portfolio will continue to be comprised of both. We've kept the notional of the structural hedge stable as I had guided, and we see ourselves as well hedged.

And the second part of the structural hedge is indeed the loan hedge, and that loan hedge is a bit above DKK 200 billion. It's a short average life, whereas the bond and derivative hedge, is call it, 3-year average life, a bit above 3 years. The loan hedge is more around a 2-year average life. That loan hedge is not a perfect hedge. There is some optionality given some of the products involved there. But obviously, it's an integral part of the structural hedge. So I wouldn't call out major changes either in the size or the composition of the hedge, apart again from this rollout of the derivatives, which is obviously a positive thing when it comes to the execution.

Then you asked me about the profile of the hedge. And again, the profile of the hedge is not different from what I had mentioned at the full year, and then, again reiterated in Q1, which is that the structural hedge income will be a lift in 2026 versus 2025, but then especially given market implied rates and where rates are, it will tail off, and it will come down somewhat. We'll continue to provide benefits, but will come down somewhat in '27 and beyond. And then of course, we have to see what happens with rates going forward.

Thank you very much, everyone, for your interest in Danske Bank and for your questions this morning. And as always, please do reach out to our Investor Relations department if any other questions. Thanks a lot, and have a great summer.

Good afternoon, and welcome to the Danske Bank Q2 2026 Pre-close Call. My name is Claus Ingar Jensen, and I'm Head of Investor Relations. With me, I have Olav Jorgensen and Nicolai Tvern from our IR team. Please note that this call is being recorded for compliance reasons, and the script used for this call will be published on the Investor Relations website after the call. Given that we conduct this call via Teams, please be aware that if you want to ask questions, you must log on via the Teams app or your browser. If you participate via a telephone line, the IR team will be available for questions after the call.

In today's call, I will highlight relevant public data and macroeconomic trends in our markets. I will go through the relevant P&L lines and comment on capital at the end. Afterwards, we will open for a Q&A session. And for the sake of good order, I would also like to highlight the following. I will only answer questions related to already disclosed information as well as publicly available information unless otherwise noted. In connection with this, I wish to highlight that developments in specific indices may not always have the same effect on our performance.

Before going through the income lines, I would like to start with a brief comment on the most recent macroeconomic development based on our Nordic outlook published in early June. Looking at the euro area, we expect that the pressure from energy prices is likely to push inflation higher and dampen growth somewhat. However, we expect the overall impact on the economy to be considerably more moderate than in 2022. In our house view from Danske Bank Macro Research, we expect the ECB to hike by a total of 50 basis points in 2026, including the hike we saw last week and then cut the deposit rate back to 2% by summer 2027. We expect the Swedish Central Bank to follow ECB. For the Nordic region, the outlook is overall stable, but the picture is mixed as growth remains solid in Denmark and the recovery is more pronounced in Sweden given improving fundamentals, while Norway and Finland are expected to see a bigger impact on growth and inflation.

Focusing on the Danish economy, the solid macroeconomic development is expected to continue with more than 3% GDP growth in 2026. There continues to be growth in employment and growing disposable incomes could lead to higher consumer spending, although consumer sentiment is still very low and the savings rate is high. Housing market continues to be strong, both nationwide, but especially in the Copenhagen area, albeit with some signs of slowing down lately.

Now let's have a look at net interest income. Let me briefly highlight our expectations concerning Central Bank policy rates. It should be noted that the vast majority of our short-term NII sensitivity doesn't materialize until we see the actual rate hike, not ahead of a hike based on the market expectations, which, on the other hand, would lead to higher short-term funding costs, e.g. related to our structural hedge. As such, we expect very limited and practically negligible impact in Q2 from the rate hike that was announced on the 11th of June. Regarding recent volume developments, we refer to public sector statistics released on the 1st of June. The sector data showed healthy credit demand as private lending increased 3% year-over-year and corporate lending increased 6% year-over-year.

Please note that Q2 has 1 more interest day compared to Q1. The day effect is estimated to be around DKK 75 million, DKK 75 million. As always, please be mindful of currency fluctuations in the markets where we operate. During Q2 and as of this week, NOK and pound sterling appreciated a bit more than 2% and 1%, respectively, while Swedish krona was roughly flat against Danish krone. Looking at funding costs, we note that the 3-month CIBOR has increased by around 13, 1-3 basis points, NIBOR with 32 basis points and STIBOR with 5 basis points during the quarter, all based on quarterly averages. This will, all else equal, add some short-term pressure to lending margins due to the timing of repricing of mainly corporate credit facilities.

In terms of wholesale funding in Q2, we have issued almost DKK 65 billion year-to-date, well in line with our full year funding plan of DKK 90 billion to DKK 110 billion of debt issuance across instruments. Please visit danskebank.com, the debt section for further details on terms and pricing of our issuance.

Finally, we reiterate the interest rate sensitivity given that the Q1 2026 interim report released. We estimate a positive effect of around DKK 450 million per 25 basis points hike. In addition, we estimate a year 2 and year 3 up and down effect of DKK 300 million and DKK 100 million, respectively, related to our structural hedge. Please note that by far most of our sensitivity relates to DKK and euro in that order. In respect of fee income, we will start by noting that the development is always subject to conditions in the financial markets, refinancing activity and the general activity level among our customers. Everyday banking fees will likely benefit from healthy corporate activity and somewhat improving consumer spending despite the very low consumer sentiment according to the recent data from Statistics Denmark.

With respect to investment fees, we note that this line is naturally impacted by the development in assets under management as well as the investment activity among our customers. In addition, we highlight the significant volatility in financial markets in March 2026, which could affect the investment appetite of our customers. In respect to fees generated from financing, we expect refinancing fees from adjustable rate mortgages in Realkredit Danmark in the second quarter to be approximately at the same level as in Q1 of 2026, which amounted to around DKK 100 million. Finally, concerning fee income from capital markets activity, we note that primary markets activity has seen some impact from the recent volatility, especially ECM activity has been subdued.

Now turning our focus to trading income, where please note that customer-driven income, primarily in LC&I is impacted by the level of customer activity and market sentiment. Danica's results are always subject to developments in the financial markets and in the health and accident business. For other income, we expect to book a positive one-off of around DKK 0.2 billion related to provisions for guarantees as part of the previous Personal Customers Norway transaction, which can now be released. The one-off will be booked at the other income line.

In respect to costs, we have no specific comments regarding the quarterly development. We reiterate our outlook for full year expenses of up to DKK 26 billion to DKK 26.5 billion in 2026. For loan impairment charges, we have no specific comments to credit quality in the second quarter. As such, we reiterate our full year loan impairment guidance of around DKK 1 billion. We do not have any comments with respect to tax, and we do not have other one-offs than the one mentioned earlier under other income. On capital, please note that the extraordinary dividend of DKK 5 billion paid subsequent to our Q1 release will be reflected in our CET1 ratio and account for around 60 basis points. In addition, our revised ordinary dividend policy now results in a 70% dividend accrual. Furthermore, the capital ratios in Q2 will reflect a catch-up of accrual of the 10% higher dividend range, which was not implemented in Q1. All together, that takes the pro forma Q1 CET1 ratio to around 17%.

In respect to REA, we expect credit REA to reflect growing lending volumes, particularly in the corporate segment. We also note that market risk REA is subject to the volatility, which we have seen in the financial markets.

This concludes our initial comments in this pre-close call. Before we move to the Q&A session, I would like to highlight that we begin our silent period on Friday, the 26th of June, and we will shortly start to collect consensus estimates with a contribution deadline on Monday, the 29th of June. Please note that we published the Q2 interim report on the 17th of July at 7:30 a.m. CET and that the Q2 conference call for investors and analysts will take place at 8:30 a.m.

We are now ready for the Q&A session. [Operator Instructions] I can see Sofie Peterzens. Please go ahead, Sofie.

So just my first question was on Danica. Could you -- like how should we think about the contribution? Because it has been very, very volatile. So is it fair to assume that it's a bit more normalized? And what would you -- or if you could remind us what a normalized level for Danica is?

Yes. I think I can reiterate what we have said previously that Danica's normalized contribution to our financial result is between DKK 1.4 billion and DKK 1.6 billion per annum. And you're right, it has been volatile for -- mainly due to some volatility on the health and accident business. But we have no further comments on the development in Q2 other than that it is subject to financial market development. And in respect to the health and accident business, as you have noted with what we said in connection with the full year results, we expect to see that being more stable this year. And as such, I would not expect any surprises from the health and accident business in Danica in this quarter.

But is there any seasonal patterns that we should be mindful of?

No, not for the insurance business.

Okay. That's clear. And then my second question would be on net interest income. Clearly, you're not going to see much benefit from the rate hikes.

No, not...

But is it still fair to assume net interest income will be up quarter-on-quarter?

I would say the drivers behind higher NII in the quarter could, of course, be the impact from volume. But the rate hike in isolation will not contribute to the NII in the second quarter.

Okay. And then my final question was your CEO was on TV last week talking about M&A opportunities. I realize you can maybe not comment, but maybe if you could just summarize like what he has said and what the potential targets could be.

Yes. We have also noted there was some interest around what Carsten said at the people's meeting last week. He essentially just repeated what he has been saying to analysts and also to investors. But the message that we would be open for M&A and especially with a focus on Sweden is not something new. That is something that we have stated for quite a long time now. I think the reason why it became a topic last week was because this has apparently escaped the Danish media's attention, and it was new to financial journalists that we are having this kind of statement. But from an IR, from a disclosure perspective towards the market, this is not different to what Carsten have said to investors and analysts in the past.

And just to be clear, there is nothing on the table as of now.

No. So I think the key message, we focus on organic growth, but we are open to do inorganic growth with a focus on Sweden within specific areas. I think that is what we have said a number of times.

That's very clear.

Okay. It doesn't seem as there are any more questions. So thank you for listening in. Thank you for your questions, Sofie, and I wish you a warm and beautiful weekend, and you know where to find us if you have any follow-up questions. Thank you.

Good morning, everyone. Welcome to the conference call for Danske Bank's financial results for the first quarter of 2026. My name is Claus Ingar Jensen, and I'm Head of Danske Bank's Investor Relations. With me today, I have CEO Carsten Egeriis; and our CFO, Cecile Hillary.

The presentation today will be extended as it will include an update on our Forward '28 strategy. We aim to keep this presentation at around 35 minutes. After the presentation, we will open up for a Q&A session as usual. And afterwards, feel free to contact the IR department if you have any more questions.

I will now hand over to Carsten. Slide 2, please.

Yes. Thank you, Claus. And I would also like to welcome you to our conference call where I am pleased to share the highlights of Danske Bank's financial results for Q1 and present an update on our Forward '28 strategy.

Let me start with the key messages for the quarter. So we've had a solid start to 2026 driven by clear commercial momentum across our focus areas and supported by constructive Nordic operating environment despite the market volatility that we've seen.

On the numbers, net profit was DKK 5.7 billion, and this corresponds to a 13.1% return on equity. And our cost/income ratio was 45.8%, broadly in line with our around 45% 2026 target.

Activity levels were strong. Total lending grew around 4% year-on-year, supporting market share gains across the Nordics, and we delivered around DKK 6 billion of net inflows in asset management in the first quarter of 2026. And then for the remaining 2 years of our Forward '28 strategy period, we're raising our financial ambitions. So for 2028, we target a return on equity above 14.5%; total income around DKK 63 billion and cost/income ratio no greater than 43% with a new CET1 capital ratio target of around 16%.

And then finally, reflecting our strong capital position and updated capital framework, we're announcing an extraordinary dividend payment of DKK 5 billion, equivalent to DKK 6.14 per share. And this, alongside a revised ordinary dividend policy of 60% to 70% of net profit.

Cecile and I will go through the Q1 results briefly, and then we will comment much more on the strategy update and then, of course, take questions.

Slide 3, please. So turning to our business units. We saw good customer activity across segments in the first quarter, driving higher loan and deposit volumes overall. At personal customers performance was stable, supported by core income from higher volumes and an increase in daily banking activity. ROAC remained above target, reflecting disciplined costs and continued efficiency despite fairly modest volume growth.

At business customers, we saw a stronger quarter with solid lending and deposit growth translating into higher income. ROAC also remained above target, helped by lower costs and loan impairment reversals that underscore the quality of the portfolio. And then at large corporates and institutions, activity levels were good and volumes continued to grow, but total income was impacted by seasonality and performance fees.

As a result ROAC declined slightly, also reflecting somewhat higher allocated capital. So overall, the picture across business units is consistent. We see healthy customer demand. We see good volume momentum and returns that remain at or above target at PC and BC. And then with LC&I performance reflecting a strong underlying franchise impacting by timing effects only.

And then Slide 4, please, and I'll hand it over to Cecile.

Turning to the income statement. Total income was broadly stable year-on-year, supported by solid core income. Net interest income increased versus Q1 last year and reflected higher volumes, while fee income also grew year-on-year on the back of strong underlying customer activity.

Quarter-on-quarter, total income declined, mainly reflecting seasonality after a very strong Q4, particularly in performance-related fees. In addition, trading income and income from insurance activities were impacted by volatile financial markets, driving negative valuation effects in the quarter.

On costs, operating expenses increased slightly year-on-year, reflecting inflation and investments, but declined quarter-on-quarter, mainly due to seasonal effects in performance compensation and lower severance costs.

Overall, the cost development remains in line with our full year guidance. Credit quality remained very strong with small net reversals of impairments. As a result, net profit for the quarter was DKK 5.7 billion.

Slide 5, please. Turning to core banking income. The underlying trajectory remains solid, driven by higher business volumes and continued customer activity. Net interest income remains resilient, adjusted for the DKK 200 million nonrecurring tax benefit in Q4 and despite fewer interest days in the quarter, NII increased by around 1%, supported by continued growth in lending and deposit volumes and contributions from the structural hedge.

Lending margins were impacted primarily by timing effects with competitive pricing pressure also continuing to weigh on margins. During the quarter, we increased the notional amount of the structural hedge by around DKK 10 billion to approximately DKK 190 billion while NII sensitivity remains unchanged, providing a stable earnings profile going forward.

Fee income declined quarter-on-quarter as expected, following a record level of performance fees in Q4. Underlying trends remain healthy with strong daily banking activity, sustained demand for corporate cash management and solid lending and guarantee fees while capital markets activity was subdued due to financial market volatility.

Slide 6, please. Turning to trading income and costs. Trading income quarter-on-quarter reflects higher underlying customer activity in LC&I, though it was impacted due to the volatility in financial markets. This volatility and the interest rate movements had a negative impact at group treasury from unrealized market value adjustments, primarily related to cross-currency swaps and bond portfolio investments held for liquidity management purposes.

On expenses, costs were lower quarter-on-quarter, mainly due to seasonality, including lower performance-based compensation and lower severance costs. This improvement is consistent with what we typically see in the first quarter. More broadly, cost discipline remains strong, and we continue to deliver structural cost takeouts in line with plan.

As a result, we reaffirm our full year '26 cost outlook with a range of DKK 26 billion to DKK 26.5 billion corresponding to a cost-to-income ratio of around 45%. Slide 7, please. Turning to credit quality and capital. Asset quality remained very strong in the quarter. We recorded net reversals of impairment charges of DKK 26 million, reflecting a well diversified and well provisioned portfolio that is supported by stable customer fundamentals.

Full year impairment guidance, however, remains unchanged at around DKK 1 billion, corresponding to around 5 basis points cost of risk. Our macro scenarios remain prudent, reflecting ongoing geopolitical uncertainty, including tariffs and trade tensions. Cost model adjustments were maintained at DKK 5.4 billion, equivalent to around 30 basis points and provide significant downside protection.

On capital, we continue to generate strong capital during the quarter. The reported CET1 capital ratio was 17.7%, before the impact of our announced DKK 5 billion extraordinary dividend payment, which pro forma will take our CET1 capital ratio to 17.1%. Risk-weighted assets increased by DKK 11 billion net of the previously announced impact of the conglomerate directive, primarily driven by higher lending volumes and market risk related to financial market volatility.

Capital requirements were broadly stable, leaving CET1 capital ratio headroom of around 290 basis points, underscoring our continued capital strength and flexibility. Slide 9, please, and back to Carsten.

Yes. Thanks, Cecile. Let me turn to the update on our Forward '28 strategy, and this remains our framework for delivering growth and improved profitability. So as we communicated in June '23, the strategy is built around 3 priorities. So first, growth in focus segments. We're targeting leadership positions as a leading wholesale and business bank in the Nordics and as a leading retail bank in Denmark and Finland by growing share of wallet and market share with the most attractive customer segments.

Second, disciplined capital allocation and cost focus. Capital is directed to the most profitable areas that meet our hurdle rates, while we continue to drive productivity cost takeouts and the execution of our technology and our AI strategy.

And then third, strong capital generation with low risk. We aim to generate capital consistently over time while maintaining low and stable risk levels through the cycle.

And these priorities have not only supported our '26 targets, set in '23, but they also enable us to guide for returns and capital distribution above these levels.

And on capital distribution for the period '23 to '26, we saw dividend potential above DKK 50 billion with an ambition for further distribution subject to capital levels and market conditions, including share buybacks and special dividends, we're now at DKK 70 billion, well above what we communicated in 2023.

Slide 10, please. Let me briefly summarize where we stand and also where we're heading. So starting with performance today, I'm pleased to see that we are delivering above our targets on all key metrics. Based on that, we're raising our ambition for 2028, return on equity above 14.5%; cost/income ratio, no greater than 43% and CET1 around 16%.

And to accelerate the transition to our new capital framework and supported by our strong capital position, we're making an extraordinary dividend payment of DKK 5 billion. At the same time, we revised our ordinary dividend policy to a payout ratio of 60% to 70% of net profit, providing greater predictability and confidence in future distributions.

And looking ahead to the period from '26 to '28, this framework supports dividend potential of above DKK 55 billion with an ambition for additional distributions. And any further payout will be determined by capital position, by growth opportunities and prevailing market conditions.

But the key message is clear, strong capital generation remains a core pillar of our equity story. And so overall, this captures what we are focused on, delivering today, staying on track for 2026 and then building a stronger and an even more profitable Danske Bank towards 2028 and beyond.

Slide 11, please. Let me briefly focus on how we're driving profitable above-market growth across the group. The starting point is that growth is selective and disciplined. We are allocating capital to segments where we see structural demand, strong customer activity and returns that are clearly above our hurdle rates.

And you can see this reflected in the key financials on the slide, where growth in income, lending and assets under management is consistently above underlying market growth. And it is growth that balances volumes and market shares with improving profitability and capital efficiency.

As such, we're delivering profitable growth in our chosen segments with a clear focus on deepening share of wallet and increasing non-NII income. Across the group, this focused approach is clearly supporting higher profitability and structural ROE uplift.

So the key message here is that our growth agenda, it's financially selective. It's above market and it includes significant growth opportunities that are a critical enabler of the returns and cost improvements that we're targeting towards '28.

And then Slide 12, please. Let me also briefly turn to execution because this slide here shows that Forward '28 is already delivering results across the board. Since 2023, we've made tangible progress across all business units and importantly, that progress is visible in returns and efficiency, not just activity.

Starting with PC, the focus on the affluent and the private banking segments. Housing and advisory excellence is delivering higher productivity stronger asset growth and ROAC in line with target. And then the rollout of Panorama and adviser upskilling are clear contributors.

At business customers, execution is centered on scaling acquisition of mid-corporates through targeted sales campaigns and digital flows. And this is driving solid lending growth and strong fee momentum while maintaining capital discipline, supporting our ROAC ambitions.

And then at LC&I, deeper engagement with institutional clients, financial sponsors and asset managers is driving stronger income momentum with lower consumption of capital to support ROAC even as we have continued to invest in platforms and capabilities.

Across the group, digitalization, automation and AI are key enablers supporting both growth and structural efficiency. So overall, the execution progress we've delivered since 2023 provides a solid foundation, and it gives us great confidence that we can further accelerate business momentum as we move towards our 2028 ambitions.

And then Slide 13, please. Let me also briefly highlight the strategic focus areas that will sustain this momentum and allow us to scale the business towards 2028. Starting with PC. The priority is to continue to deepen engagement and improve efficiency. We will continue to grow within the Affluent and Private Banking segments by scaling our Panorama digital advisory tool in Finland and also in Sweden, which remains part of our Nordic strategic focus.

We are advancing the investment experience with strong product offerings and advisory capabilities as a key entry point to win fuller customer relationships. And then at the same time, we're leveraging AI to drive more proactive engagement and to improve digital journeys, adviser workflows and service efficiency.

At BC, the focus remains on accelerating growth in prioritized segments and we're scaling acquisition of mid-corporates and small businesses while further strengthening our one corporate bank through expanded platform coverage and AI-enabled onboarding, servicing and credit decisioning.

And then at LC&I, we're reinforcing advisory as a differentiator, deepening sector leadership and continuing growth in capital markets and sustainable finance as well as focusing on areas such as defense and digital asset opportunities. And we are also expanding Nordic institutional capabilities across lending, asset management and servicing supported by simplified platforms and AI.

For all 3 business units, all of the above underpins improved profitability and cost efficiency. Across all areas, the common theme is its scalable, it's platform and then it's AI-enabled growth. And together, these priorities ensure that the execution progress that we have already delivered translates into continued momentum towards 2028 ambitions.

Slide 14, please. Then let me also turn to the strategic investments that we've made in digital and in technology because these are critical enablers of our strategy. Since 2023, we have executed consistently in line with our One Platform strategy.

And the result is a technology foundation that is increasingly modern, agile, secure and efficient and importantly, also unified across the bank. And we now think about and deliver technology in a far more integrated way than before. And that's what allows us to support the commercial momentum across our business units.

And the progress is really tangible on 3 fronts. So if you look at our customers, we have launched the Panorama advisory tool. We've upgraded mobile banking app, and we've scaled our digital platform, Panorama to more than 140,000 business customers.

If you take our engineers, we built our critical data products. We've advanced our data platform, and we've rolled out a transformational bank-wide AI strategy and road map, making us a leading Nordic Gen AI bank on the Evident AI.

And then as for our future, core technology modernization is significantly advanced. Cloud migration is accelerating and is now over 30% of applications that have moved to public cloud since 2023 and this is already translating into measurable outcomes.

So more than 20% improvement in technology productivity, also a higher developer throughput and then a far more scalable cost base. And we're not done. Our 2028 targets are ambitious above a 2x increase in technology productivity, a 5x increase in developer throughput and a more than 25% services productivity.

And AI is a key accelerator that will take us there. And this is the platform in which the next phase of profitable above-market growth will be built. And then Slide 15, please. Let's also look a little bit at our AI and technology ambition and how we really think about this as a key accelerator of our strategy.

So our starting point is strong. We are completing the foundational work. We are executing on our bank-wide AI strategy as we have built scalable AI foundations also with an integrated risk and compliance framework and have started AI enablement across priority domains in software development, in credit and in service and critically also have embedded AI into our culture and our ways of working.

And the results are visible. We have approximately a 95% developer adoption of Gen AI coding assistance. We have agentic AI incorporated into our corporate credit processes with now an approximately 40% faster processing time.

And we have an AI-enabled customer service capability in the mobile bank, which is now delivering an approximate 75% first-time resolution rate. So this foundation allows us to scale AI across the bank and importantly, to increase both our ambition and our pace.

And we're moving beyond individual productivity tools like Copilot and chatbots into really enterprise-wide and transformative applications that can fundamentally reshape how we do core banking.

And that means deploying Agentic AI to boost growth in focus segments through instant personalized advice to increase speed via agent-to-agent interactions and through shifting to a more efficient operating model powered by human agent collaboration.

And our financial ambitions also reflects this. By 2028, we expect an approximate DKK 2 billion in annual productivity benefits from AI and technology, and this is driving an approximately 3.5 percentage points of cost income improvement.

This is where our investments convert into structural efficiency and to durable competitive advantage, a core enabler of the Forward '28 ambition. And then please turn to Slide 17, and then I'll hand over to Cecile.

Thank you, Carsten. Let me briefly summarize our 2028 targets, which build on our strong delivery in 2025. We delivered 13.3% ROE in 2025, broadly in line with the 13% target for 2026, and we now raise our ambition to above 14.5% ROE by 2028.

On efficiency, the cost-to-income ratio was 45.5% in 2025, consistent with the around 45% target for 2026, and we are targeting a further improvement to no greater than 43% by 2028.

Our capital position remains strong. We ended 2025 at a 17.3% CET1 capital ratio, and we guide towards a normalized level of around 16% by 2028, while maintaining a prudent management buffer.

On loan impairment charges, our planning assumption remains around 8 basis points of loan losses in 2028 despite a lower level in 2025. Finally, on shareholder returns, we highlight our dividend potential of above DKK 55 billion for '26 to '28, facilitated by a revised dividend policy of 60% to 70% of net profit. We have distributed around DKK 70 billion already since June 2023.

To conclude, 2025 confirm that we are on track with our Forward '28 strategy. Our 2026 guidance is reaffirmed, and the new 2028 targets raised our ambition with a strong focus on efficiency, capital strength, risk and shareholder returns.

Slide 18, please. Let me briefly walk through how we are strengthening our financial position over the coming years as we move towards our 2028 targets. Firstly, we are focused on sustainable income growth across segments and markets, targeting around DKK 63 billion in total income. This will be driven by continued growth in our focus segments across the Nordics, building on strong momentum at LC&I and within the mid-corporates, private banking and affluent segments.

We are deepening our customer relationships with a clear focus on growing ancillary income. Secondly, we are working towards a lower cost base through efficiency and automation with an expected 2.5 percentage points improvement in the cost-to-income ratio to no greater than 43%.

This will come from continued cost management and a productivity increase via our tech and AI transformation program. Thirdly, we continue to deliver strong capital generation. We are optimizing the CET1 capital ratio to around 16% towards 2028. Capital planning and allocation will support growth, regulatory resilience and capital distribution.

So overall, sustainable income growth, a structurally lower cost base and disciplined capital management. Slide 19, please. Our top line growth towards 2028 will be diversified, supported by a stable macroeconomic environment across the Nordics. We expect total income to increase from around DKK 57 billion in '25 to around DKK 63 billion by '28.

This growth will come from a balanced contribution of net interest income and fee income. Trading and insurance income are expected to recover to more normalized levels. Our income trajectory assumes 3% to 4% annual lending growth and 1% to 2% deposit growth.

Despite recent interest rate volatility, our main assumption, which you will find on Slide 27, is short-term rates of approximately 2% going into 2028.

Growth is anchored in clear commercial drivers across the group. At personal customers, we expect continued volume growth, particularly in Denmark and Finland, alongside a higher share of wallet through our enhanced advisory.

At business customers, we will continue to capture market share with mid-corporates, driving both lending and ancillary income. At LC&I, the focus remains on becoming the house bank for more customers and deepening institutional relationships across the Nordics.

Slide 20, please. Let's focus on our cost trajectory towards 2028. We will continue to deliver operating leverage through structural cost management while investing in growth and digital capabilities. Since 2023, we have improved the cost-to-income ratio by around 3 percentage points, moving from 48.6% in '23 to 45.5% in '25, despite inflationary pressures.

This reflects the normalization of financial crime prevention and remediation costs and ongoing structural cost management. Looking ahead, we expect a further 2.5 percentage point improvement in cost efficiency from '25 to '28, taking the cost-to-income ratio to no greater than 43%.

This will be driven by productivity initiatives and structural efficiencies with technology and AI contributing around DKK 2 billion in financial benefits in '28.

Importantly, while we plan to increase investments by approximately DKK 500 million annually over the period, this comes on top of the 30% investment ramp-up already announced in '23. These additional investments will be deployed through a disciplined stage-gating approach, ensuring clear returns, tight prioritization and full alignment with our cost-to-income ambitions.

In absolute terms, total costs will increase moderately from DKK 25.8 billion in '25 to no more than DKK 27 billion by 2028. Overall, the cost program will support improved profitability while preserving capacity for investing in growth.

Slide 21, please. Let me turn to capital. We have a strong capital position and continue to generate high levels of capital supported by a resilient earnings and risk profile.

Since we resolved our legacy issues, the balance sheet has been materially derisked giving us flexibility to optimize capital while supporting growth and shareholder distributions. We are introducing a new CET1 target of around 16%. This reflects an expected CET1 requirement of approximately 14% in 2028 and implies a prudent buffer above regulatory requirements.

The requirement benefits from around DKK 3.5 billion of Pillar 2 relief equivalent to around 40 basis points that relates to our resolved legacy cases. This is expected prior to year-end '26, subject to the annual supervisory processes.

To accelerate the transition to the new CET1 target, we are announcing an extraordinary dividend payment of DKK 5 billion. We expect to end '26 at around 17% CET1, followed by a gradual step down towards the new circa 16% target by 2028. The capital glide path pace will depend on REA growth from lending activities. Our capital generation capacity of above 275 basis points per year on average supports our distribution expectations.

As a result, we are also revising our ordinary dividend policy to 60% to 70% of net profit, supporting a steady, predictable distribution profile. Based on current assumptions, this implies a dividend potential in excess of DKK 55 billion over the period with additional distributions subject to capital levels, growth and market conditions.

As the CET1 capital ratio normalizes, we will continue to support an efficient capital structure through AT1 and Tier 2 issuance, ensuring balance sheet resilience and funding flexibility. In summary, our updated capital framework reflects confidence in our earnings power and risk profile. It reflects our dual focus on growth and the return of capital to shareholders.

Slide 22, please. As we have shown on the previous slide, we are delivering strong underlying performance with solid income momentum, continued cost discipline and a robust capital position.

Our final slide today pulls those elements together and shows how they translate into higher profitability towards '28 measured through return on equity. We start from 13.3% ROE in 2025. From here, income growth is a positive contributor, driven by focused growth across our core franchises. That is complemented by cost efficiencies with productivity gains from technology and AI more than offsetting inflation and the cost of growth and strategic investments. Finally, we expect an impact from normalized loan impairment charges from the low level in '25 in addition to capital efficiency improvements as we move towards a more normalized capital position.

Taken together, these elements support our ambition of an ROE above 14.5% by 2028. With that, I will hand over to Carsten to wrap up on our 2028 ambitions. Slide 23, please.

Thank you, Cecile. And let me now close by pulling the story together. So what we've laid out today is about strengthening our position as a focused Nordic leader with strong profitability and leading digital solutions and doing so in a way that is sustainable and that's disciplined.

And by 2028, we target a return on equity above 14.5%, income around DKK 63 billion, a cost-to-income ratio no greater than 43% and a CET1 around 16%. And we're supporting that with a DKK 5 billion extraordinary dividend, a 60% to 70% dividend payout policy and a dividend potential above DKK 55 billion in '26 to '28 with further distribution subject to capital levels, growth and market conditions. And together, this underpins a clear and a disciplined path to sustainable growth, strong shareholder returns and long-term value creation. And then with that, we'll conclude our presentation. And Claus, I hand it over to you to facilitate questions.

Those were our initial comments and messages. We are now ready for your questions. Please limit yourself to 2 questions. If you are listening to the conference call from our website, you are welcome to ask questions by e-mail. A transcript of this conference call will be added to our website within the next few days. Operator, we are ready for the Q&A session.

[Operator Instructions]

We will now take the first question from the line of Shrey Srivastava from Citi.

My question revolves around the level of conservatism in your plan, you assume basically flat 3-month interest rates in 3 of your 4 geographies. You actually have cuts in Norway and on top of that, you're assuming 1% to 2% deposit growth per annum, which lags your experience last year and lags what the Danish system is doing. So I just want to get your sense on how much prudence is baked into this plan and what range of scenarios this plan could withstand?

Yes. No, thanks for that. Look, I mean, first of all, on rates, clearly, it's very uncertain right now in terms of where rates are going and market expectations this year have a couple of rate increases and then perhaps those increases being offset by decreases the year after.

So we've sort of thought about this when we think about '28 targets as rates that are somewhere above 2%. Clearly, that may change. But then at the same time, it really depends on the nature of those rate increases and whether they come to offset inflationary pressures and the like, which is currently what we're seeing, which would then offset some business activity.

So I think it's very difficult to say exactly how the movements will be '26 into '27. But over time, as we look out towards '28, we feel that these assumptions are prudent, are realistic. And again, our growth assumptions, 3% to 4% growth on asset and 1% to 2% growth on deposit support the kind of growth levels we've seen on average over the last 2, 3 years while also being able to grow faster than market.

And our clear ambition is to grow faster than market. So clearly, if we see growth that's higher than those levels, then we should be able to outperform on a relative basis in the Nordics.

And perhaps if I can add as well, Shrey is when we look at our Q1 results, actually, we feel that they're really on track, and they put us exactly in the right line when it comes to the guidance that we've given, including obviously the guidance for '26. That's the first point I would make.

The second point I would make is on rates. I think you have to obviously consider the following points. One is that the rate volatility, which is obviously currently still temporary. We'll see where it goes. What was higher in the 1- to 3-year segment than at the short end. And clearly, we're more impacted at the short end.

Secondly, when you think about deposits as well on the liability side, what really matters there is the Central Bank hikes, right, which obviously are captured in the NII sensitivity table. And of course, we haven't seen this, and it remains to be seen whether they will take place.

If they do, then again, you have our NII sensitivity table. And then, of course, going forward, if the rate volatility, the financial markets and geopolitical events were to persist, clearly, it's not just impact on rates and obviously, on NII, we have to also consider impacts on volumes, impact on growth and more broad potential consequences there. And these are also elements that lead us to reaffirm our guidance, reaffirm our targets, and we strongly feel that these are the correct ones.

Just a very quick follow-up. What do your cost of risk targets bake in for any release of your management buffer?

So we haven't included any assumptions around releasing post-model adjustments. So we've only sort of used a normalized 8 basis points of loan loss rate, which is similar to what we also had when we presented the plan back in '23. And then I would add to that, that, look, obviously, it's an uncertain environment right now.

I've said before and I'll say again, we're probably at the higher end of post-model adjustment levels if you sort of look through the cycle. But at the same time, I think in times like this, it's incredibly uncertain to say whether or not and at what pace those post-model adjustments may be reduced. And obviously, it could also go the other way. So we have not included any change in those in the assumptions.

We will now take the next question from the line of Namita Samtani from Barclays.

My first one, could you help us understand what the hedge will be contributing to income in 2028? Or can you just give us a sense of what the hedge is going to be doing then?

And my second question, just on Norway, Danske only has 8% market share in corporate. Do you think that's enough to be scalable to have a presence in Norway? Would you think about any potential M&A here? Or how do you think about the 8% market share?

Let me take the Norway question, and then I'll ask you, Cecile, to do the hedge contribution to income in 2028. We do feel that 8% is a reasonable scale. I mean we've run the corporate and institutional business as a Nordic platform, and we're one of the leading players in Norway on many areas in the corporate and institutional space.

And in fact, we've been growing faster than market over the last couple of years, taking market share and we continue to have a strategy where we want to grow and expand in Norway. So that's the first thing.

Whether there are inorganic opportunities, we would be interested in looking at inorganic opportunities, I would say, across the Nordics in our chosen market segments and that would include Norway, and it's something that we continually look at, but it's not something that we've included in any assumptions within the plan and within the '28 ambitions. Cecile, do you want to comment, please?

Yes. And let me take the structural hedge contribution, Namita. So the -- as you know, I guided towards a slightly higher hedge contribution in 2026. In '27, the hedge contribution will be equivalent to the '26 level. And then on 2028, it will start, obviously, under the current rate assumptions, right? But because of the roll-off of the hedge reinvestment in slightly lower rates going forward, it will start to tail off a bit.

But again, just to be clear, this won't be a very dramatic impact, but that's the profile of our hedge. And I will confirm that it remains between 3 and 3.5 year average life.

We will now take the next question from the line of Johan Ekblom from UBS.

Just if I could follow up on Shrey's question in terms of conservatism in the plan, right? I mean all of the targets are set at a minimum ROE of 14.5% and a maximum cost income of 43%, et cetera. When you think about the potential levers for better or worse, for that matter outcomes. What are the key drivers that can create a different result? Is it predominantly a revenue environment that is better or worse? Or are there any other factors that you'd like to highlight?

And then secondly, maybe a little bit analogous to Namita's questions on Norway. Where are we in terms of the Swedish retail, right? I mean -- I think we presented the plan in 2023, you said you wanted to see a marked improvement in performance in Swedish retail within the scope of this plan. Could you give us an update, maybe on where we are because it's hard to see that real progress in terms of volumes or profitability for that matter?

Yes. Thanks for that, Johan. I think, look, I mean, the levers are -- the levers you mentioned, but let me elaborate just briefly clearly, clearly with economies in the Nordics that we currently have growing somewhere between, let's say, 1.5% to close towards 3%, I mean, Denmark right now, we have somewhere between 2.5% and 3%.

With economies growing at that range -- within that range, and if that continues on the back of quite a large investment cycle that I believe we're entering into, driven by defense, by energy, by technology.

Clearly, there is an upside case, right, where that growth delivers well, and that should be very supportive to our business, which clearly is 2/3 SME, large corporate and institutional and where we have a very strong position with our customers, where we're leading on Prospera in terms of customer satisfaction and where we've shown that we can take market share.

So clearly, that's an opportunity, and we will take advantage of that opportunity if the market growth is better than expected, but we've decided to stay at the 3% to 4% level because we believe that, that is prudent and realistic.

And then on the productivity side, you'll have noticed in the ambitions that we've set, for example, for technology productivity that we say above, for example, 2x technology productivity. And that is because it is still uncertain exactly how much productivity we can drive over time with the technology benefits and the investments we're making in AI, but clearly, Johan, there is a potential that we can deliver further productivity over time on the back of these tools, we're optimistic with what we've seen. The assumptions that we've added in the plans are the ones you see here.

But we're also signaling that it could be better. Then on Sweden retail, absolutely, Sweden has been a focus of ours to reposition that business to be a more focused private banking, mass affluent business. That was part of sort of our 2023 narrative repositioning for Forward '28.

We've been doing that, we do see early signs of improvement. If you look year-on-year, we see signs of improvement on lending and assets under management and also customer flows. And therefore, we also see improving signs of profitability but also very realistic that it will take time. But we like the business, we like the business opportunity.

We are really focused on growing in Sweden across all business lines, and we also want to continue to have the optionality to grow inorganically and Sweden is for certain, not different there and neither is the retail opportunity in in Sweden.

So that's how we think about the Swedish business going in the right direction. It will take time, but we'll continue to invest. Here, it's important again to notice -- to remind everybody that we have one platform. So as we make investments in Denmark and in Finland, those investments are scalable and cost efficient as we go into Sweden, and we also like that positioning.

Maybe just a follow-up on your first answer. I mean when we think about productivity improvements from AI and technology more generally, as you said, there is uncertainty of how much can be achieved, we're early days in the AI era.

But what you put into this plan, does that include kind of full implementation of what you see as a reasonable base case today? Or are there further benefits beyond 2028, even on what you're seeing today, if that makes sense.

Well, I think for certain, there's opportunities beyond '28. And so our plan continues to be a plan that builds on the progress that we've seen where the above 14.5% target in '28 is a stepping stone, but certainly not harvesting the total opportunity that we see over time in terms of improved profitability and growth.

And no doubt that we believe that over time, cost/income ratios and profitability can be improved further beyond '28, but right now for '28, if you ask me that question, then we believe currently that we're capturing the benefits that we see.

But as I said, no doubt as coding tools change, it seems by the -- by the week, if not by the day, there could be further opportunity.

Let me give you perhaps a little bit more details on where we see the benefits and maybe that will help you also frame your view in that context. So firstly, I would say that we obviously continue to invest, right, continue to invest in a significant manner, right, in this tech and transformation program and AI tools, in particular, and obviously, we're raising our investments from DKK 4 billion last year to DKK 4.5 billion. And investments will stay at around this DKK 4.5 billion throughout the period until 2028.

These investments, which obviously some have already taken place, and they're in train, allow us indeed to size this tech and AI benefits to DKK 2 billion run rate in 2028. This is not a hockey stick by the way. It's actually fairly linear, and we'll see some of these run rate savings to a fairly significant level in 2027 already.

They obviously embedded in our plans. What do they consist of? They consist of about 3/3 roughly. There's a large 1/3 that is actually around our developer productivity. And this is as much internal through our developer workforce as also regarding some of external suppliers that provide this developer transformation tools.

And obviously, we capture them through our KPIs as well in technology and services. Another 1/3 is around frontline tools. What is it? It's things like our AI chatbot, which is progressing fairly significantly as well as our adviser productivity tools. We've talked about Panorama. We've got another tool called CRM. These are developing as well.

And we use them, in particular, in our private banking and affluent segments, but also in business customers. We also have now banker productivity tools, which we're rolling out at speed and piloting currently with a view to do scaling including in our LC&I franchise.

And then finally, the third sort of category is everything to do with back and middle office as well as general enterprise productivity and things like our business and corporate credit tool, which we're now rolling out in business customers as well as other Gen AI tools, including in our risk departments, including in our legal department and many others.

And taken all together, this allows us to size the run rates of these productivity benefits to this DKK 2 billion that you see in 2028, which again, as I mentioned, is also somewhat linear throughout the plan.

We will now take the next question from the line of Sofie Peterzens from Goldman Sachs.

It's Sofie from Goldman Sachs. So just going back on the inorganic growth opportunities. How should we think about like potentially transformational deal for Danske? Or are you more interested in kind of bolt-on acquisitions? Or would you consider something that would kind of transform Danske and maybe make Danske a little bit more European bank. And then would you also consider kind of selling your Northern Irish businesses?

And then my second question would be on the payout, you have guided very helpfully on dividends, but how should we think about future share buybacks? Is it fair to assume that the current level of share buybacks will continue? And then the final, just a follow-up question. Related to the growth target you have given, should we expect any restructuring costs to come?

Thanks, Sofie. Let me take the first one. On inorganic and how you should think about it and what will be transformational for Danske. Look, first of all, what we believe is truly transformational is our ability to continue to really accelerate, augment everything we do, both internally and towards our customers with technology.

And so the most transformational opportunity we see for Danske to continue to really double down on our focused Nordic strategy and to invest heavily in technology and AI to really transform the customer experience and to transform our processes and we have so much opportunity there.

Then in terms of sort of inorganic acquisition opportunities, probably most likely bolt-on opportunities. Again, it's not something that's included in our plan, but it's something that we're continually looking at. And clearly, we have sort of challenger positions in Norway and in Sweden, and #3 position in Finland, but where there is much more opportunity to grow it's really looking at bolt-on inorganic opportunities throughout the main focus areas of corporate, institutional and retail banking across our chosen market areas.

Then on payouts and share buybacks, Cecile, maybe you want to comment on that. And then I think there was also a question on severance and cost targets.

Absolutely. So on the payout, I mean beyond ordinary dividend policy of 60% to 70%, indeed, we are clearly -- we have an ambition for further distribution. This will continue to include a combination of dividend and share buyback. I mean clearly, as we move away from the 1x price to book the share buyback become net-net less interesting. However, they still have a role to play. So I think we'll continue to look at it in the same vein going forward.

Secondly, when it comes to cost target, whether it's the cost envelope itself, the DKK 26 billion to DKK 26.5 billion this year, up to DKK 27 billion by 2028. All the cost-to-income ratio, circa 45% this year, no greater than 43% in 2028. These are fully baked, right? So they include all costs, including where appropriate any restructuring costs.

We will now take the next question from the line of Mathias Nielsen from Nordea.

So my first question, that's mainly for you, Carsten, I recall that you over for a couple of years now have said that you didn't see any reason why Danske shouldn't be able to deliver a return on equity on par with the best in the Nordics. And you're obviously making a big step towards that with the target that you set out today, yet you're not still there, at least not in my numbers. So how long should we wait before we see Danske performing a bit with a return on equity on par with the best in the Nordics?

Thanks, Mathias. Look, what you've seen over the last couple of years is a consistent improvement in our profitability through growth and improving cost/income ratio.

The plan I have is a growth plan. It's an investment plan, but we're also very diligent on how we think about driving productivity, so that become even more competitive.

We see that we've delivered consistently on the commitments that we've made. We're committing to above 14.5%, as you say, that gets us closer to the targets that have been given, you could say, by the most profitable banks in the Nordics and '28 for me -- for us is a milestone, but also a stepping stone. And we believe that, as I've said before, and I will continue to commit to that, that we can have profitability in line with the absolute best in the Nordics, but I won't give you an exact date, Mathias.

Understood. If I may follow up on like on the assumptions, like you also call it a growth strategy, but like at least when I look at your assumption, there seems to be at least something of in my opinion, like you have real GDP growing like 2%, you have inflation of 2%.

And then you say that we are going into a large investment cycle and yet you expect lending growth of 3% to 4% and deposit growth of 1% to 2%, like there seems to be something a bit on the cautious side there. And it's a bit the same when I look at your cost guidance, you're implying that the cost CAGR from '25 to '28 could be up to 1.5%, while you, on the other hand, also say like you see massive productivity gains from AI and tools like those investments that you're making on the cost side, is the benefit of those things is that just coming after '28. Is that how we should think it? So like the years after '28 is going to be much better than the years towards '28? Like how should we think about those assumptions, like it seems to be a little bit off in my opinion.

Look, Mathias, I think on the cost side, first of all, as you can see over the period, we're offsetting inflation with efficiencies. That's already pretty good. I think if you look at historically, ability to absorb inflation and drive productivity.

Then the second part is that we're investing significantly in the business in the future, and we really think long term about our business and the investment levels are at the highest level that they've ever been.

And if you also look at sort of the amount strategic development investment within that, it is, by far, the highest ever been, and we're going to maintain those high level of investments.

So therefore, I think you're right in saying that there will be future further opportunity to improve cost income ratio as we continue to deliver these investments and as we continue to truly embed AI across our main processes in the bank, which takes time, not so much because the technology isn't there, but because it takes time to actually industrialize it, embed it, it takes time to get, of course, the regulator on board.

It takes time to ensure that you do it and deploy it in a way that's credible and safe. So yes, it takes some time, but I think we're already seeing not just beyond '28, but actually also in the next couple of years that we can deliver the efficiencies, and that's why we're actually able to offset inflation with efficiencies.

And then look, on the growth side, what you've seen in the last couple of years, overall is that 3% to 4% growth is actually growth that's slightly higher than market, right? I mean, look, again, year-on-year, Danske Bank, both on NII and on fees. We have the highest growth rates year-on-year among any and all Nordic banks if you normalize for acquisitions that have been done in other places, right? So we believe that trajectory for growth in our business is strong.

We believe that we're growing faster than market in many of our areas. And the plans that we've set out, we believe, prudently reflect right now market conditions, market expectations. But as I said, if growth would end up being higher, we will take our fair share of that.

And likewise, what I would add is both on the cost-to-income ratio, which is very balanced between the income side and the productivity side and the return on equity, which is balanced across income, efficiency and capital normalization. We, of course, have opportunities if things develop better than we're assuming under the plans and you have all our assumptions, but we also have levers to use as a result, both on the cost side and on the return side in order to face any unexpected market event or geopolitical events that we may face in the next several years. So it goes both ways, of course, that yes.

We will now take the next question from the line of Martin Gregers Birk from SEB.

Coming back to capital, I appreciate your comments on your Pillar 2 requirement. But still, how do we see AT1 issuances and payout that corresponding CET1? And what are the thoughts on your commercial real estate buffer and potentially lower DSIB buffer over the course of the remaining years of the strategy period? That's my first question.

Yes. Thank you very much, Martin. Look, on the capital side, obviously, as we normalize towards 16%, you can expect over the next 3 years, the normalization as well of AT1 issuance and Tier 2 issuance. These funding costs are obviously fully baked into our plan. And if I can -- and then of course -- there's 2 things to consider, right? I'm sure you're obviously thinking about costs and how they will materialize, right, in our plan.

Some of it is that, obviously, the quantities of AT1 and Tier 2 will be higher. At the same time, the refinancing costs versus where the outstanding instruments were issued was also previously higher, right? So you've got to net the 2 against each other.

Net-net, it adds a little bit of cost to the tune in 2028 of a couple of hundred million. But having said that, again, it's fully absorbed in the plan. So that is on the AT1 and Tier 2 issuance.

Then when it comes to the CRE buffer. So as you can see, the normalization and the reduction of our CET1 risk requirement towards an estimated 14% in 2028 is based on 2 elements. The first element is the release of what I would call the sort of legacy Pillar 2 sort of buffer that is expected at the end of the year linked to probation, linked to some legacy cases, and that accounts for half of it, so that's 40 basis points.

The other half is -- relates to the increase in the growth that obviously we've got under our plans. And obviously, reminding you that our Pillar 2 is a nominal amount. So obviously, as we grow, then it becomes proportionately smaller.

We have not included any release or any assumption of CRE buffer, the systemic risk buffer, obviously, on our business customers sort of division in the plans, it's not included, and it's not included because obviously, it's still highly uncertain with the various discussions that have taken place.

Okay. And then maybe a more sort of holistic question. When you look towards 2028, and when you look towards the phasing in of floors and you're going to have significantly less viability in risk weights going forward and also going to perform much better in stress test. Why shouldn't Danske Bank in terms of your CET1 guidance looks much like -- much more like a European or a core European U.K. bank rather than a Nordic bank at 16%?

Look, I think first things first, right, Martin, that we're obviously -- we obviously are Nordic bank and regulated by the Danish FSA and overseen by college of supervisors, which include the Nordic regulators. And as you know, our actually minimum requirements and overall CET1 is not too dissimilar to the other Nordic banks.

So I would say for now, that is the assumptions that we're basing on that we're in a regulatory environment where those are sort of the levels. So therefore, you cannot directly compare it to European level regulated banks because there are slightly different rules, as you know, both on capital and modeling and risk densities and things like that.

So we, today, for 2028, we come with our best view, obviously, also having discussed these with our Danish regulator on a prudent capital level, a prudent capital trajectory, if you will, that we're very comfortable with and that we also believe that our regulators are comfortable with. And by the way, that we also think is quite aligned with what we see in the Nordic banking region.

We will now take the next question from the line of Alexander Vilstrup-Jørgensen from DNB Carnegie.

Yes. Most of them have already been answered. So just a few follow-ups from my side. So for many quarters, we have seen a gradual runoff in your hold-to-collect bond portfolio. So I'm just wondering, will the loss of your bond portfolio ever be fully unwinded and released into NII.

So just to clarify, the question is on the whole-to-collect portfolio, the bond portfolio that we hold, whether that time will be released back into NII. I think that's the question, Cecile.

Yes. Let me explain a bit how we think about it. And obviously, that's in large parts clearly relates to our structural hedge. So the way we think about our structural hedge is in terms of what it includes is there's 2 parts, right? One is what we call particularly a structural hedge, right, which include the bond and now derivative part.

And the other part is the loan hedge, right? So the loan hedge is something in the order of DKK 200-plus billion. It's a shorter duration, it's about 1.5 year average life. And of course, we manage it according to the usual ALM practices, right, and transforming obviously, to floating, the balance sheet to floating rate. Then you've got the structural hedge itself.

So the structural hedge itself used to be only bonds, right, up until the end of last year, and it was a mix of [indiscernible] bonds. And obviously, it follows a Caterpillar strategy whereby the bonds that roll off were reinvested into new bonds to achieve roughly the sort of 3.5-year average life. Now at the beginning of this year, as I mentioned several times last year, we started using derivatives, obviously, under hedge accounting capabilities to manage the volatility.

And also to be a little bit more precise, really benefit from obviously a very liquid derivative market. That doesn't mean that we are going to stop using bonds. But all things being equal, it means that we'll use a little bit more derivatives. In fact, we've done so. We still primarily use have bonds, right, just as a stock. But I don't expect that they will roll off to a point where we won't have any more. So don't expect massive change there, but all things being equal, it will reduce somewhat.

Okay. So do we believe consensus fully reflects the positive net interest income contributions from your structural hedge?

Absolutely, absolutely. Yes, it's all been included.

So if you just turn to your income from insurance business. When do you expect the insurance result from health and accident to breakeven?

Yes. So I mean the result on health and accident is roughly breakeven, in fact, in Q1. So we feel pretty comfortable that, that business is now on track to get more sustainably to breakeven. Notwithstanding, obviously, the dependencies always are on fluctuations in claims, driven by societal dynamics. But we're roughly breakeven in Q1, and we feel good about the trajectory there.

And of course, the impact of the insurance result of Danica result this year was actually linked to the investment side of things and really linked to, frankly, the market volatility that we've seen. Most of it obviously is expected to normalize. And as a matter of fact, we continue to guide in a normalized context, which, again, we're expecting to Danica results in the range of DKK 1.4 billion to DKK 1.6 billion for the year.

I think we are coming to an end. So operator, can we have the last question, please?

We will now take the last question from the line of Jacob Kruse from Autonomous.

So I just had a couple of questions. Firstly, on the growth numbers that you have, the relatively low lending growth and deposit growth, how do they compare to the discussions you have with your regional business managers. Are they also operating against those kind of targets? And then secondly, on the capital, the 16% level. If I think about the glide path there, should we assume that to be somewhat linear.

So you start the year at 17.7% and then for the next 3 years, I guess, you have a reduction of 60 basis points or so per year. And that's how we can sort of try to frame our own assumptions?

And then just finally, if I may. On the cost side, you talked a lot about the AI and the opportunities from technology. Are you already seeing -- are you seeing a sort of reduction in supplier cost when it comes to IT services as they get more efficient? And do you see a material staff impact as a part of this plan?

Thanks, Jacob. On the growth side, look, I'm not going to go into detail with what our regional different growth targets are. But what I can say is that our ambition and our targets and our belief is that we can grow faster than market and take market share.

And that is ultimately what we're looking at is how do we get more customers into the bank, how do we grow profitably with those customers and how do we make sure that we do better than competition.

On the cost supplier costs, yes, we are seeing that and we are, of course, including that in all our discussions with partners and vendors and expectation that we see cost reductions on the back of AI.

And because we have such good experience with what we're seeing in our own bank, and that's across software development life cycle across how we use tools and banking discussions around how we use assistance to be more productive when we prepare for customer meetings in terms of the assistance tools we're rolling out for customers in the personal bank.

So we feel that we have a pretty good understanding of what these tools can do and the efficiencies that they can deliver. And those discussions are certainly brought into all vendor discussions. And yes, and we do see that those costs are coming through. We will, of course, continue to push for that as well.

Then on your question around FTE. Look, overall, we're not setting any FTE targets. But as I've said before, we do expect gradually over time will be less people in the bank. You all see that year-over-year in our own numbers that despite quite solid growth and again, faster growth than market. We've been able to absorb that growth while still reducing head count. So we are becoming more productive. We are able to do more customer meetings and so on and so forth with less people.

And then on the capital side and the 16 -- circa 16% target in the end of 2028, so the -- obviously, a CET1 ratio of 17.7% at the end of Q1, '26. If you take into account the pro forma DKK 5 billion dividend that takes it to 17.1%, then obviously, we'll have capital generation this year. We're expecting to be at circa 17% CET1 at the end of this year, then -- so 17%, 16% at the end of 2028.

And as you point out, it will be exactly linear roughly, right? So that indeed is the glide path. I mean, of course, if we see a bit more growth or a bit less growth, et cetera, I mean, things might normalize just a little bit differently, but I mean assume a linear glide path. And at this stage, this is also what we're looking at.

Very good. Thanks, everybody. Really appreciate your questions and interest in Danske Bank as always. And as always, you also know that you are welcome to contact our IR department if you have any questions and look forward to see many of you over the coming weeks. Thanks very much.

Good afternoon, everybody, and welcome to the Danske Bank Q1 2026 Pre-Close Call. My name is Claus Ingar Jensen, and I'm Head of Investor Relations. With me, I have Olav Jorgensen and Nicolai Tverno from our IR team. Please note that this call is being recorded for compliance reasons, and the script used for this call will be published on the Investor Relations website after the call. Given that we conduct this call via Teams, please be aware that if you want to ask questions, you must log on via the Teams app or your browser. If you participate via a telephone line, the IR team will be available for questions after the call.

In today's call, I will highlight relevant public data and macroeconomic trends in our markets. I will go through the relevant P&L lines and comment on capital at the end. Afterwards, we will open up for a Q&A session.

For the sake of good order, I would also like to highlight the following. I will only answer questions related to already disclosed information, as well as publicly available information unless otherwise noted. In connection with this, I wish to highlight that developments in specific indices may not always have the same effect on our performance.

Before going through the income lines, I would like to start with a brief comment on the most recent macroeconomic development based on our Nordic outlook published in early March. Concerning the euro area, we continue to see that the base case for growth is better than expected. In addition, the labor market is resilient, and inflation, back below 2% target. For the Nordic region, the outlook is positive as we expect broad improvement in our latest Nordic outlook. The 2026 GDP forecast was increased to 3% from 2.7% for Denmark and for Sweden to 2.8% from 2.6%.

Focusing on the Danish economy, the solid economic development is expected to continue. Unemployment is low, and growing real wages is expected to drive domestic growth despite a sustained lower consumer sentiment. Housing market activity continues to be strong, both nationwide, but especially in the Copenhagen area.

Now let's have a look at net interest income. Let me briefly highlight our expectations concerning Central Bank key policy rates. Geopolitical turmoil and higher energy prices would lead to higher inflationary pressure. The ECB also acknowledged this at the meeting on the 19th of March, keeping policy rates unchanged while citing new uncertainty and commitment to their data-driven approach.

Forward rates have recently been repriced substantially. The market has gone from pricing in around 10 basis points caught by early 2027 to now pricing more than 2 hikes of each 25 basis points before the end of 2027 -- sorry, '26. Our in-house view from Danske Bank's macro research, updated as recently as this morning, reflects this accordingly in their revised expectations, now calling for 2 25 basis points rate hikes from the ECB to take their policy rate to 2.5% by the end of 2026. This could subsequently be reversed in 2027. However, the policy rate trajectory is particularly uncertain.

Note that the observed changes in forward rates are not expected to materially impact NII for the first quarter. For reference, we highlight that in Q4, we had a nonrecurring benefit to the NII line of around DKK 0.2 billion as part of the ordinary tax assessment. Regarding recent volume developments, we refer to public available sector statistics released on the 26th of March.

In terms of lending volumes, we note that overall credit demand has improved slightly in the beginning of Q1. Please note that Q1 has 2 fewer interest days compared to Q4. The day effect is estimated to be around DKK 65 million to DKK 70 million. As always, please be mindful of currency fluctuations in the markets where we operate. During Q1, Norwegian kroner appreciated roughly 5%, while Swedish kroner and pound sterling were roughly flat against Danish kroner as of the 31st of March.

Looking at funding costs. We note that CIBOR has been roughly flat, while NIBOR and especially STIBOR have increased during the quarter, STIBOR by around 12 basis points and NIBOR by around 3 basis points, all based on quarterly averages.

In terms of wholesale funding, in Q1, we have issued around DKK 42 billion, well in line with our full year funding plan of between DKK 90 billion and DKK 110 billion of debt issuance across instruments. We have simultaneously redeemed around DKK 20 billion in Q1. Of noteworthy funding transactions, we recently issued a new $500 million perpetual non-call 7 AT1 transaction that despite a volatile market backdrop, saw significant investor demand following us to obtain a coupon of 6.6% equivalent to a reset spread of U.S. treasuries plus 255 basis points. Please visit danskebank.com, the debt section, for further details on pricing and terms for our issuance.

Moreover, we reiterate the interest rate sensitivity given at the Q4 interim report release, which is an approximately DKK 650 million negative impact per 25 basis points [indiscernible] across all currencies. Correspondingly, per 25 basis points hike, we estimate a positive effect of around DKK 450 million. In addition, we estimate a year 2 and year 3 up and down effect of DKK 300 million and DKK 100 million, respectively, related to our structural hedge. Please note that by far, most of our sensitivity relates to DKK and euros, in that order.

In respect of fee income, we will start by noting that the development is, as always, subject to conditions in the financial markets, refinancing activity and the general activity level among our customers. Everyday banking fees continues to benefit from healthy corporate activity and somewhat improving customer sentiment.

With respect to investment fees, we note that this line is naturally impacted by the development in assets under management, as well as the investment activity among our customers. In addition, we highlight the significant volatility in financial markets in March 2026, which could affect the investment appetite of our customers and impact asset under management. Also, please note the seasonality around performance fees which are booked in Q4 and where we saw a record performance fee booking in Q4 last year of DKK 0.9 billion in asset management.

In respect of fees generated from financing, we expect refinancing fees of adjustable rate mortgages in Realkredit Danmark in Q1 to be approximately DKK 50 million lower than in Q4. As a reference, in Q4 '25, it amounted to around DKK 160 million. Finally, concerning fee income from capital markets activity, we note that primary markets activity has been somewhat impacted from the recent volatility. Especially, ECM activity has been subdued.

Now turning focus to trading income. Please note that customer-driven trading income, primarily in LC&I, is impacted by the level of customer activity in Q1. And then turning to Danica. Danica's results are always subject to developments in the financial markets and in the health and accident business. The investment result in Q1 is naturally subject to the rate and spread development, given the current financial market turmoil. Note that in Q1 of '25, we booked a negative one-off on net income from insurance of around DKK 0.2 billion related to a higher provision for a legacy life insurance product.

Also, we highlight for reference that net income from insurance in Q4 of '25 included a one-off related to model calibration for past years following an FSA order of negative DKK 0.2 billion. The soft guidance for normalized net income from insurance business remains unchanged.

We have no specific comments to other income. And for costs, we have no specific comments regarding the quarterly development in costs. We reiterate our outlook for full year expenses of up to between DKK 26 billion and DKK 26.5 billion in 2026.

Turning to loan impairments and credit quality. We have no specific comments to credit quality in the first quarter, but I want to emphasize that despite the uncertainty from the war in the Middle East, we don't see any immediate impact on our credit portfolio, and our macro scenarios already capture a severe downturn scenario. As such, we reiterate full year loan impairment guidance of around DKK 1 billion. We do not have any comments with respect to tax, and we don't have any comments -- in respect to one-offs, we do not expect one-offs in Q1.

In respect to -- then, jumping to capital. In respect to the REA, we expect credit REA to reflect growing lending volumes, particularly in the corporate segment. We also note that the market risk REA is subject to the volatility which we have seen in the financial markets.

Finally, the implementation of the conglomerate directive has led to around DKK 4 billion REA increase in credit risk REA related to our insurance business. Regarding capital, as shown in the release of our Q4 results, the additional distribution outside of already accrued 60% related to the ordinary dividend policy has been fully reflected in the reported Q4 CET1 ratio.

This concludes my initial comments in this pre-close call. And before we move to the Q&A session, I would like to highlight that we begin our silent period on the ninth of April. We will shortly start to collect consensus estimates with a contribution deadline on Wednesday, the eighth of April.

Please note that we published the Q1 interim report on the 30th of April at 7:30 a.m. CET and that the Q1 conference call for investors and analysts will take place at 8:30 a.m. The call, alongside presentation of financial results for the first quarter -- we will, as previously mentioned, provide an update on the Forward '28 strategy, including updated financial targets for 2028.

We are now ready for the Q&A session. [Operator Instructions] And I can see that Mathias is ready with a question. Please go ahead, Mathias.

So it's more like in terms of guidance, if I remember and recall right, you used the assumption around 2% when you set the full year guidance in connection with the Q4 report. How would you think about like updating the guidance based on rate assumptions already at Q1? Is that something that we should expect now, given that you say that the in-house view is now reflecting 2 rate hikes and the bond market is pricing something looking like 2, 3 rate hikes this year? How is the process historically been around such things like that? I know you can't comment on the future, but in the past, how has your way of working around those things worked?

Yes. I think we can just say we have a pretty pragmatic view on this. We will keep an eye on where things are moving. And if we see any material impact on the current outlook, then we will, of course, adjust and comment after Q1. That is what I can say for now, Mathias.

Okay. That's at least something.

And then Jacob Kruse?

I guess [indiscernible].

I think, Jacob, the line is breaking up somewhat. I hardly hear you. Now you disappeared.

Okay. Apologies.

Can -- are you on the line, Jacob? Apparently not. I think we have lost him. Is there any more comments? Or questions? If not, I thank you for your participation -- oh, I think Tarik is having a comment. Yes.

Just a quick one from [ practical reasons ]. So on the Q1, how you proceed with the update on capital? And some targets will be the same as Q4, same time? Or you will have like an adhoc event around that?

No, we will have an extended conference call in the morning, where we will do a more condensed presentation of the Q1 result in order to reserve ample time for Carsten Egeriis and Cecile Hillary to comment on the strategy update. So it will take place as usual at 8:30 CET a.m. And then it will be followed up with a -- with this -- a presentation in the afternoon or a roundtable event where investors and analysts will have the opportunity to ask questions, follow-up questions to the CEO. And then there will be a roundtable event for investors only in the afternoon. And that's the way we will present the Q1 result and the strategy update.

It's -- the roundtable event is quite similar to what we normally do with Q4. But because of the strategy update, we have decided to postpone it to Q1 this time. And then the following week, we will be in London, where we have invited -- and I think you have received the invitation already -- analysts for a breakfast presentation, and then there will be investor meetings during the day in London. And we will then have also, activities in New York. So that is the setup for the day, Tarik.

Okay.

And Jacob, I can see that you are back?

Yes. Let me try again. Can you hear me now?

Yes.

Great. I just wanted to ask if you have -- if you could say anything about pricing in the -- in particular, in the Danish market on your products. Have you -- is there anything you would highlight or anything that has been done that might affect Q1?

No, not really. Because what we have done so far has been a repricing of the front book of the housing loans in Realkredit Danmark. And so I would not -- I don't think that will have any material impact, to be honest, on the Q1 result because it will take quite a long time, given the long duration of the book, before you will see any material effect here.

And just on that, would it be fair to assume much of that comes through after 1 year? Or is it more like 3 to 5 years?

Well, I would say it's very difficult to give a specific day on this. Because the rollover goes on very slowly in the portfolio, and there can, of course, also be additional pricing actions in the market in that period. So that's very difficult to say, when it will have any impact on the back book. It will come gradually. That's also what we have seen back in time.

Okay.

And then I think, Namita. Please go ahead, Namita.

I'm just a bit confused, the -- so on the CET1, the conglomerate directive, that DKK 4 billion increase in credit risk. What exactly is that? Because I thought in the third quarter, you took something for Danica and that was going to reverse. So how do these two elements coexist?

It's -- they are, of course, very much linked because part of the conglomerate directive is now that the exposure we are having to Danica is now being risk-weighted. Before, it came as a deduction in our capital ratios. So it is essentially the deduction you have seen in the capital ratio of close to DKK 4 billion, which leads to a DKK 4 billion increase in REA. And so -- yes?

The net-net, it's neutral?

Yes, it should be. Yes, agree.

Okay. Perfect. And secondly, I was just looking at the refinancing data, like the mortgage refinancing data, the system data. And it looks down year-on-year in January and February. I was just wondering why that was the case? Like, I thought people kept remortgaging in Denmark and things like that?

I think what you are referring to here is not so much remortgaging, but more refinancing. And I don't know what the data you're looking at, where they are coming from. Are you sure it's remortgaging? Because remortgaging has been kept at a very low level because of quite stable long-term rates.

No, it's probably refinancing.

Yes, yes. And there, you can say refinancing, there are seasonality in refinancing. That's also why we that we are trying to remember calling this out on these pre-close calls. So -- but there are -- some of the loans where you have refinancing, not every year, but every second year. And that will, of course, also impact the development as we see it. But otherwise, I would say the development has been towards more adjustable rate mortgages. That is what we have seen on the front book. So that should, over time, lead to more refinancing activity than we have seen in the past. Not much, but slightly more.

Okay. That was perfect.

You're welcome. Any more questions? If not, I would thank you for your participation, and thank you for your questions. And you know where to find us if you have additional questions before we go into silent. So just wish you a happy weekend. Bye.

Good morning, everyone. Welcome to the conference call for Danske Bank's financial results for 2025. My name is Claus Jensen, and I'm Head of Danske Bank's Investor Relations. With me today, I have our CEO, Carsten Egeriis; and our CFO, Cecile Hillary. We aim to keep this presentation to around 20 minutes. And after the presentation, we will open up for a Q&A session as usual. Afterwards, feel free to contact the Investor Relations department if you have any more questions.

I will now hand over to Carsten. Slide 1, please.

Thanks, Claus, and I would also like to welcome you to our conference call, where I'm pleased to share the highlights of Danske Bank's financial results for 2025. Although the geopolitical situation overall continues to be challenging, the macroeconomic backdrop for our customers and thus our business in the Nordics continued to be stable and slightly improving during the year. This is clearly reflected in our financial results as 2025 has been a year of solid performance for Danske Bank. Measured in terms of profit before impairment charges, 2025 represented the best result ever.

Net profit for the year came in at DKK 23 billion, equivalent to a robust return on equity of 13.3%. The result was based on improved income due to higher customer activity and furthermore evidenced by positive volume development. I'm pleased to see that despite the sale of our personal customer business in Norway and several rate cuts during the year, we were able to maintain net interest income at the same level as in 2024. The slightly lower net profit in 2025 was solely due to a more normalized but still a low level of loan impairment charges compared to net reversals in 2024.

When comparing to the preceding quarter, core income came in better as a result of higher NII from an increase in lending and deposits and significantly higher fee income based on growth across all fee categories and in particular, from record high performance fees within Asset Management. Operating expenses came in line with expectations and credit quality remains strong. And as a result, net profit for Q4 amounted to DKK 6.3 billion, up 14% from the preceding quarter. And Cecile will comment on the details of the financial results later in this call.

Let me talk about our strategy execution. It remained on track. And as we continue to see robust commercial momentum and invest in our business also as laid out in our strategy plan. During 2025, the scaling of our digital and our GenAI technological capabilities across the bank has been in focus, and we are now starting to see tangible results in our workflows, leading to improved productivity. And I'm really looking forward to presenting a more comprehensive update with our strategy update in connection with the presentation of our Q1 results on the 30th of April. And then I would like to comment on our capital distribution.

Based on our strong earnings and our solid capital position, I'm pleased to announce the distribution of the full net profit for 2025. Ordinary dividend will account for 60% in accordance with our dividend policy. In addition, we propose an extraordinary dividend of 20%, taking total dividend per share to DKK 22.7 and a new share buyback program of DKK 4.5 billion in total, a payout ratio for 2025 of 100%. And then finally, on the financial outlook for 2026, which Cecile will elaborate on later, we expect a net profit of between DKK 22 billion to DKK 24 billion, driven by growing core banking income from continued efforts to drive commercial momentum.

And then let me continue with the performance on the business units, and that's Slide 2, please. At personal customers, the financial performance has been solid with total income up 2% relative to the same quarter in 2024 and up 3% quarter-on-quarter. The performance was based on good customer activity that led to higher lending and deposit volumes, up 1% and 5%, respectively, relative to the level in 2024. The uplift in activity and volumes came from all our Nordic businesses, driven in particular by private banking and also home loans in Denmark and Sweden.

In the Private Banking segment, 2025 was a year of strong momentum based on the continued execution of our strategic priorities. The investment business was supported by strong net sales, which helped lift assets under management to record high levels with Danske Invest retail funds reclaiming the market leader position in Denmark. In the housing market, activity improved in 2025. In Sweden, lending increased 1% in local currency with improving momentum towards the end of the year. The better traction in Sweden came from higher customer activity supported by a strengthened customer offering.

In Denmark, housing market activity also improved in 2025, especially in the larger cities. Total lending was stable year-on-year, but our bank home loan product, Danske Bolig Fri grew another 12% compared to the preceding quarter and 44% year-on-year. The product now accounts for more than DKK 70 billion in lending, and the positive development is a testament to our flexible loan offering and ability to cater to the changing customer preferences. Furthermore, total income in Q4 was supported by a 14% increase in fee income, driven primarily by high refinancing activity for adjustable rate mortgages and by investment fee income.

Costs came in higher in Q4 due to expected higher seasonal expenses, which explains the higher cost/income ratio. And then Slide 3, please. At business customers, 2025 was a year of solid financial performance based on strong customer activity that continued throughout the year. Total income was up 8% compared to the same quarter in 2024 and 5% quarter-on-quarter. And this was driven primarily by a positive development in net interest income based on a strong uplift in volume and activity-driven fee income. Lending as well as deposit volumes were up 5% based on growth in all countries. The increase in business momentum reflects the continued execution of our growth agenda as we welcomed new corporate customers. And as a result, we gained market share across all four Nordic countries. Return on allocated capital as well as cost/income ratio were in line with our targets.

The increase in ROAC was supported by reversals of loan impairment charges on the back of continued strong credit quality. Business customers continues to be a key strategic focus for us. And in 2026, we will continue to strengthen our advisory capabilities, for instance, by investing in analytics to generate leads for advisers and improving the One Corporate Bank digital platform. And then Slide 4, please. Turning to our large corporate and institutions business. We are pleased that our continued focus on advisory solutions for our customers and our sustained efforts over the years to improve our business offering have shown positive results in 2025. Thanks to strong execution and customer focus, 2025 was a record year for LC&I. Firstly, we continue to see strong volume growth with corporate lending up 14% from the level in the fourth quarter of 2024, which supported a 15% increase in NII.

Deposits, which by nature are more volatile, have seen a healthy overall trajectory, but also sizable fluctuations related to large corporate transactions. Secondly, in line with our strategy of growing our Nordic footprint, we are expanding our One Corporate Bank concept in the Nordic region. In 2025, we continue to win new house bank mandates within daily corporate banking. And in addition, 2025 has been an exceptionally strong year for our investment solutions. Assets under management grew 16% relative to last year and reached all-time high. Besides higher asset prices, we have successfully been able to grow net inflow and add new customer mandates within the institutional as well as the private banking segment. The impressive investment performance in asset management enables us to recognize performance fees of DKK 0.9 billion, up 27% from last year, which was already a year of strong performance. And then with respect to profitability and cost efficiency, the strong performance in 2025 has enabled LC&I to deliver significantly better compared to our targets.

And then with that, let me hand over to Cecile for a walk-through for our financial results for the group, and that is Slide 5, please.

Thank you, Carsten. 2025 was a year of solid financial performance. Net profit for the group came in at DKK 23 billion compared to DKK 23.6 billion the year before. Total income improved mainly due to a 3% increase in fee income, reflecting increased customer activity and strong performance in asset management. NII was unchanged as the positive effects from increased volumes and a positive contribution from our structural hedge were able to mitigate lower rates. Operating expenses were in line with the level in 2024. Loan impairment charges came in at a more normalized but still low level, whereas we had net reversals in 2024. The results for Q4 came in at DKK 6.3 billion, up 14% from the level in the third quarter, mainly due to higher core income. NII benefited from positive volume effects. When excluding the tax-related contribution, NII was up 2%. Fee income was up 39% quarter-on-quarter as all fee income categories contributed positively with performance fees in asset management as the single most important source of fee income in the quarter.

Trading income saw a decline in Q4, mainly due to seasonally lower customer activity in fixed income markets. Income from insurance activities was impacted by a model recalibration for the health and accident business that led to a net negative effect of DKK 200 million. The impact follows the annual update of model parameters as well as adjustments following an inspection by the Danish FSA. When looking at the net financial results in isolation, we saw a positive development from a better investment results. We continue to focus on repricing, preventive care and reactivation initiatives in the health and accident business to improve the financial outcome of insurance contracts and respond to current market trends related to long-term illnesses. Operating expenses came in higher in Q4 due to year-end seasonality related to performance compensation and severance costs. And finally, as credit quality continues to be strong, loan impairment charges were kept at a very low level.

Slide 6, please. Let us take a closer look at the key income lines, starting with net interest income. NII for the full year remained stable as the headwind from deposit margins due to lower Central Bank rates was mitigated by an increase in lending and deposit volumes as well as improved lending margins and a positive contribution from the structural hedge, which grew to circa DKK 180 billion at the end of Q4. Relative to the preceding quarter, NII increased more than 4%, supported by a DKK 200 million tax-related effect. As interest rates were stable during the quarter, the impact from margins was insignificant; however, NII benefited from a continually positive development in volumes, particularly evident on the corporate side, whereas the impact from the structural hedge was similar to that in Q3.

With respect to the deposit margin development, as I mentioned in Q3, the increase observed in Q3 relates to changes to our funds transfer pricing framework implemented in Q2 with the objective of allocating NII from the structural hedge to the business units. It is important to note, it is not driven by changes to customer pricing and does not impact group NII. Our NII sensitivity remains unchanged quarter-on-quarter. With respect to the outlook for 2026, we expect NII to grow, supported by stable rates and structural growth, particularly within lending. The outlook is, as always, subject to markets and balance sheet developments. Now let us turn to fee income. Slide 7, please. In 2025, fee income amounted to over DKK 15 billion, corresponding to a 3% increase compared to 2024.

This represents a record high level for Danske Bank based on high customer activity and strong performance in asset management throughout the year. Relative to the third quarter, fee income was up 39% in Q4, mainly driven by sustained strong performance in asset management that led to record high performance fees, up 40% from the same quarter in 2024. In addition to higher performance fees, fee income was supported by continued growth in assets under management with positive net sales for all categories of clients. AUM ended the year at an all-time high of over DKK 1 trillion. Income from financing had a positive effect in Q4, driven by higher corporate activity and a seasonally solid refinancing activity at Realkredit Danmark. Within our Capital Markets business, fee income in Q4 benefited from a continuation of good DCM momentum and a rebound in activity in ECM.

Next, let us look at net trading income. Slide 8, please. Overall, we have seen a stable development for trading income in 2025. With positive value adjustments in treasury, the headline number was up 8%. Stable customer activity, mainly within fixed income, further contributed to the results. In Q4, trading income came in lower due to seasonally lower customer activity at the end of the year. This concludes my comments on the income lines. Let's turn to expenses. Slide 9, please. Looking at the development for the full year, operating expenses are in line with our full year guidance of up to DKK 26 billion. We have managed our cost base as expected and mitigated the impact of inflation, which supported a slightly improved cost-to-income ratio of 45.5%. Relative to the level last year, costs were in line as the intended structural cost takeouts and the lower contribution to the resolution fund mitigated the impact of wage inflation and performance-based compensation.

The relatively modest increase in digital investments in 2025 should be seen in the light of the significant ramp-up we made in 2024. Furthermore, we executed structural cost takeouts within our Financial Crime Prevention division. Going forward, ongoing efficiency in that division will mainly come from technology improvements with a limited reduction stemming for post-resolution rightsizing. Relative to the preceding quarter, Q4 costs were impacted by year-end seasonality, including performance-based compensation, severance costs and investments in our tech transformation. We intend to maintain the same focus on cost discipline in 2026 whilst continuing to invest in our digital and commercial agenda in line with our growth strategy. Accordingly, we expect expenses in the range of DKK 26 billion to DKK 26.5 billion in 2026.

Slide 10, please. Turning to our asset quality and the trend in impairments. Throughout 2025, our well-diversified and low-risk credit portfolio benefited from a benign macroeconomic environment, particularly in Denmark, with sustained low unemployment, real wage growth, improving household finances as well as strong corporate balance sheets. In Q4, our strong credit quality underpinned another quarter of low impairment charges amounting to DKK 35 million, which took full year charges to DKK 294 million, equivalent to 2 basis points of our loan portfolio. Actual single name credit deterioration remains modest, and we continue to benefit from modest stage migration. Charges related to our macro models were negligible in the quarter, and we continue to apply both the downturn and a severe downturn scenario.

With reduced external uncertainties in the commercial real estate sector, including lower and stable rates, our post-model adjustments review resulted in net releases of DKK 300 million in Q4. Although the PMA buffer has overall been reduced, we have bolstered the buffer related to global tensions further, and we continue to apply a prudent approach to cater for potential risks and uncertainties that are not captured through our macroeconomic models. We will continue to review the PMA buffer sector by sector going forward. I would also like to emphasize that our impairment guidance for 2026 of around DKK 1 billion remains below our normalized level but is not predicated upon significant PMA releases. Slide 11, please. Our capital position remains strong and has consistently been supported by a healthy capital generation throughout the year.

At the end of Q4, the fully phased-in CET1 ratio was 17.6% when including the effects from the adoption of the new conglomerate directive that took effect on January 1. Furthermore, the ratio includes the full deduction of the additional 40% distribution of the net profit for 2025 announced this morning in addition to the already accrued dividend of 60%. The increase in risk exposure amount in Q4 relates to higher operational risk REA, which as per normal practice, is subject to an end-of-year calibration that reflects a higher top line and profitability as well as lending-related credit risk REA. We continue to operate with a healthy buffer to the regulatory requirements as we steadily execute towards our capital target of above 16%. We will provide more detail on our capital trajectory with our strategy update in connection with the presentation of our Q1 results.

With that, let me turn to the final slide and outline our financial outlook for 2026. Slide 12, please. We expect total income to be around DKK 58 billion. This will be driven by growing core banking income and the continued commercial momentum and growth that we see in our markets. Income from trading and insurance activities remain subject to financial market conditions. We expect operating expenses in the range of DKK 26 billion to DKK 26.5 billion in 2026, reflecting our growth ambitions and continued investment spend alongside a sustained focus on cost management. Cost-to-income ratio is expected to be around 45%, in line with the target for 2026 announced at our strategy launch. We expect loan impairment charges to be around DKK 1 billion below our normalized loan loss ratio as a result of continued strong credit quality. We expect net profit to be in the range of DKK 22 billion to DKK 24 billion. Slide 13, please, and back to Claus.

Thank you, Cecile. Those were our initial comments and messages. We are now ready for your questions. Please limit yourself to two questions. If you are listening to the conference call from our website, you are welcome to ask questions by e-mail. A transcript of this conference call will be added to our website within the next few days.

Operator, we are ready for the Q&A session.

[Operator Instructions] We will now take the first question from the line of Gulnara Saitkulova from Morgan Stanley.

So my questions are on NII evolution. You saw a negative contribution from the structural hedge this quarter as well as the strong positive contribution from other income. Could you walk us through the key drivers behind the higher contribution in other income? And how should we think about it going forward? And looking ahead to 2026, how should we think about the main moving parts of NII, including the expected impact for structural hedge?

And my second question also on NII. You mentioned that NII expected to grow in 2026. Based on current visibility, do you think the consensus estimates for this year NII are appropriately calibrated or the market may be over or underestimating the outlook?

Thanks for that. Let me take the first more general question, and then I'll hand over to Cecile for the other income and the moving parts on NII evolution, including the structural hedge question. I think overall, we're guiding to higher core income. So we expect to see an increase both in NII and in fees and the higher -- the total income we've guided to around DKK 58 billion. So I think you can sort of roughly calibrate that against current consensus. Cecile, do you want to talk about the moving parts of other income and then the structural hedge?

Yes. No, absolutely. So obviously, beyond these effects that Carsten mentioned, I'll talk about the structural hedge and then I'll talk about the other income. On the structural hedge, look, the lift that you've seen year-on-year is obviously the one to focus on. I wouldn't focus too much on the quarterly effect in the sense that, look, we've got obviously a roll-off from our bond portfolio and those roll-offs happen in different quarters, right? So you might have slight ups and slight down in one quarter. But the overall effect for the year is the one to focus on, which leads me to talk about the structural hedge for 2026, and then I'll take the other income question. So the structural hedge for 2026. We will continue to provide lift. So year-on-year, you can expect a positive contribution from the structural hedge.

I would note as well that you've seen that we've increased the structural hedge notional from DKK 170 billion as at end of Q3 to DKK 180 billion. So that's on the structural hedge. On the other income, and you can see indeed the other, including treasury of DKK 262 million from Q3 to Q4. Look, this is mainly the tax effect of DKK 200 million. And then the remainder -- so obviously, that tax effect is by definition a one-off, right, which you shouldn't assume going forward. And then the rest is a treasury effect. And obviously, we see ups and downs mainly down to the sort of market value impact of derivatives year-on-year. That's typically linked to the hedging we do on the cross-currency side. So that's on the other income.

So obviously, again, 2026 in terms of your expectations, you should see an NII that is slightly up compared to the 2025 results overall.

We will now take the next question from the line of Shrey Srivastava from Citi.

Two for me, please. The first is, I believe you were at DKK 150 billion notional in Q2, and now you're at DKK 180 billion. So you've increased the size of the hedge quite significantly. Could I ask first for the rationale for this? And secondly, do you have a target notional for the structural hedge in terms of a percentage of stable and operational deposits? Or how do you think about it? And my second one is you've obviously done fairly well in large corporates. You've had double-digit loan growth for the year. And you previously remarked how you maintain -- you remain below your natural market share in certain segments. Can you talk a bit about what specific areas you expect to drive growth in the future?

Yes. Thanks for that. Let me take the second question, and I'll hand over to Cecile for the for the question on the hedge increase and the target hedge and rationale. On the loan growth side of things, and now I talk across the sort of corporate banking business, so both our business customers and our large corporate institutions business. Our strategy is to continue to build a leading Nordic wholesale bank and a leading bank for business customers with more complex needs. That was the strategy we launched back in June '23. And we've seen solid growth and continued market share gains in those segments. And it's really all about how we bring to life our total One Corporate Bank and institutional platform, utilizing our strong product factories, utilizing our strong advisory capabilities and combined with our strong digital and technology platforms.

And really, when you look at all the Nordic countries, we still believe that we have plenty of growth opportunities. Our market shares continue to be relatively small outside of Denmark. So we have much more opportunity to grow across Norway, Sweden and Finland. And then at the same time, we also believe that with a strong and growing economy in Denmark, we have opportunity to continue to grow there as well. And I think just again, in terms of like whether there are sectors, industries, et cetera, I mean, I would say it's pretty broad-based growth we've seen. There is no question that we believe that we're going into one of the larger investment cycles of our time, driven by energy transition, by defense, by the changes happening in technology. But at the same time, also, again, a pretty robust and healthy Nordic economy more generally. So broad-based growth, but clearly also some pockets of extra opportunity.

Cecile?

Great. So I'll take the -- your structural hedge question, Shrey. So you've asked two questions. One about the rationale for increasing the hedge to DKK 180 billion in Q4? And then secondly, what is the target notional. So on the rationale, well, look, the structural hedge is well, exactly what it says, which is there to really hedge our stable deposits and liabilities. You've seen the increase on the deposit side, particularly in the retail sector, which is obviously part of our stable deposit base and the strong performance there, right, with 5% year-on-year on the deposit side in the PC sector. That increase in deposits and that stability allows us to continually look at the size of our structural hedge notional and that has led to the increase alongside our objective to be hedged for NII and provide the NII stability or NII uplift that you can expect in the current rate environment. So that hedging focus on the one hand and also the trajectory of our deposits explain where we are.

On the target notional, look, I think at DKK 180 billion for the bond portfolio, we are well hedged. Having said that, I would also point out that we obviously have a loan hedge portfolio in addition to the bond hedge portfolio. The loan hedge portfolio is about DKK 200 billion. I would also point out that, that loan hedge portfolio has got some optionality. It's not as perfect a hedge as the bond hedge portfolio, which itself has a 3.5-year average life, but these are the details I can give you. So going forward in terms of the target notional, we're pleased with DKK 180 billion. Where will the trajectory go? Look, I'm not calling for any increase at this stage, although we may see some modest increases in 2026, but it will be either stable or potentially slightly increasing. We also have to see the trajectory on our deposits, of course.

We will now take the next question from the line of Sofie Peterzens from Goldman Sachs.

This is Sofie from Goldman Sachs. So my first question would be, we have elections in Denmark, if I'm not mistaken, in the second half of the year. There has been some noise in the local press about, I think one of your ministers is kind of suggesting that maybe the fees that the banks are charging are too high. Do you see any risk for any fee caps to potentially be introduced in Denmark? And what could that potentially mean for Danske Bank? And then my second question would be on price competition.

We saw, I think, last week, both Nykredit and Danske cutting some of the pricing on the mortgage products. Could you just walk us through the competitive environment? What does these price cuts that you announced last week mean? And how should we think about the margin evolution in 2026?

Sure. Thanks for that. I don't expect that there will be any intervention in terms of sort of price or usually caps. I mean the discussions in -- by the Business Minister has been around competition and increasing transparency and increasing ease of moving bank accounts. And those are all things that, in fact, we support in Danske Bank. So we continue to deliver very competitive products, continue to focus on how to make it even more transparent and easy to move banks. So we're not concerned about any intervention in terms of caps or the like. On the price competition in mortgages, we, in fact, continue to be very focused on competing in the segments where we believe that we can differentiate for our customers.

And the mortgage market in Denmark is an important market in the sense that it's an important product for our customers, and we continue to be focused on delivering sort of a broad banking relation for our customers. And therefore, we have chosen to -- on a more sort of focused and targeted competitive approach to lower pricing on some of the fixed rate interest-only mortgage products. And we don't -- again, keep in mind, this is a relatively small pocket of the -- of our overall lending. And therefore, we don't see that this will impact margins. We -- looking into '26, I think at a very high level, we continue to believe that margins, and I'm talking overall now margins across deposits and lending will be fairly stable.

We will now take the next question from the line of Tarik El Mejjad from Bank of America.

I just want to come back on your growth opportunities and with a focus on Sweden. In the past, you've been giving some snippets on -- hints on where you would grow. Can you tell us a bit where -- how do you see the corporate actually competitive environment in Sweden and how a franchise like yours can actually fit within this competition? And then second question on capital return. I know you will present all this with Q1. So it's more on the on the way you would think about distribution, not the quantum.

A few banks now have moved into -- start to distribute the ongoing earnings earlier, like by executing buybacks earlier, which shows as well of confidence on earnings delivery. Is that something you would consider? Or it will be, let's say, '26 earnings with execution in '27? So just to understand whatever distribution you announced with Q1 results, how quickly this could be implemented?

Thanks. Let me take the first one and then, Cecile, I hand over to you for the capital return dynamics and distribution dynamics. On Sweden, we have, over the last few years, increased our market share steadily across all of corporate banking and the institutional business for that matter as well. And we have seen since the launch of the new strategy, a larger inflow of new cash management customers than what we had targeted back when we launched the strategy. This is a very focused part of our strategy is to grow our customer base to get new cash management customers in and then again, to deliver our total One Corporate Bank for our clients in Sweden.

The customer intake is really broad-based. There is some customers that are growing and therefore, need a second or third bank, and there are also some customers where we become their first bank. And also when I look at sector and industry, it's broad-based. We've continued to invest in advisory capabilities and talent in Sweden as well as continue to invest, of course, in our One Corporate Bank platform, which, of course, benefits all of our customers. So we see our strategy working. We see it in the market share. We see it in the activity. We see it in the customer satisfaction, where we're also strongly positioned on the Prospera customer satisfaction, not only by the way, in Sweden, but also across the Nordics.

So let me take your question, Tarik, on the capital return and the distribution. And let me outline how we view our regular capital distributions. Indeed, in terms of split, it's a 60-20-20. That's in line with last year, 60% ordinary dividend and 20% extraordinary dividend, 20% share buyback. As far as the rhythm of this regular capital distributions are concerned, they're annual. And really, this is not something that we've got any plan to change at this stage.

We will now take the next question from the line of Mathias Nielsen from Nordea.

Congratulations on the strong end to '25. So my first question goes a bit about cost and cost inflation. Like obviously, it seems a bit high in Q4, but I also understood the comments about compensation and seasonality. But you also guide for a bit higher cost inflation next year of between 0.5% and 2.5%. Is there anything that has changed there? And like how should we think about the point in time where we start to see productivity from AI investments and so on offsetting the investments, so to say, so like you get back on that?

And then secondly, related to this and maybe a bit on private banking in general, it seems to lag a bit on the cost income target versus where you want to be. It also seems like the lending growth is a bit subdued compared to what we see in the other segments. Is there anything structurally that is not well working at personal customers yet? Or is it just a matter of time? Or how should we think about that before that is also on the same trajectory as we see in the other segments that you have?

Thanks for that. Let me start by personal customers. In fact, since we launched our strategy, we see the following sort of really positive momentum, and that is we see customer inflow in private banking. We see customer inflow in the personal customers with more heavy advisory needs, and we typically segment those as customers with potential wealth above DKK 1 million that really require not just the product set, but also the advisory capabilities. So we see customer net flow in those areas inflow. And we also see market share gains on the investment side, and we overtook -- again, we took our first position as the largest investments market share in Denmark, which, of course, also has a very close link to the fact that both our private banking and the higher end of the personal customer segments are doing more business with us.

We're also seeing increased insurance, Danica insurance penetration into those customer segments. And you see that really reflected, of course, in the solid fee income progress. Where we'd like to see more progress is on the mortgage side and is on the sort of mass retail flows. And there, you're right, it is something that takes a little bit longer. There's both sort of rebuilding reputation, continually being out there in the market from a marketing and positioning perspective. But we believe that our digital and technology platform, all the investments we've made, both on Panorama, which is our sort of comprehensive advisory platform to our mobile banking platform, including the housing portal in the mobile bank to our rollout of, for example, our AI chatbots, which provide a better customer experience.

All those things, we believe, position us to be able to increase not only the growth in the focus segments, but also in the mass retail. Just a comment on cost, and then I'll also ask Cecile to comment on it. It is true that you see slightly higher costs into '26. '26 will be the largest investment year we've had. So we are investing heavily in our business, in technology, in advisory, in digital. At the same time, we are seeing beginning impact on productivity. I mean we've seen impact from productivity over the last few years, but we're seeing increasing impact of productivity as we roll out various different AI solutions. It is also something we'll talk a little bit more about when we get to our strategy update. So important to say we're investing heavily in the business. We are seeing productivity. We're also seeing continued benefits from lower costs on financial crime and other remediation. But perhaps, Cecile, you also want to comment on the costs.

Yes. Let me comment on the -- on the cost, Mathias, and I'll take your questions, which were about 2025 and Q4 specifically. And then, of course, the outlook into 2026, and I'll try and unpack a bit this guidance as well to give you more information there. So on the 2025 side, clearly, we're pleased to have ended the year on expenses in line with our guidance of under DKK 26 billion at DKK 25.85 billion as we guided all along.

And as we guided as well in the last quarter, Q4 would be higher. You can see that we've had an increase of about DKK 350 million versus Q3 with respect to the staff costs, including severance and performance-based compensation, which obviously allow us to adapt our workforce to the new skills that we require and the new services that our clients also expect from us as well as beyond the staff costs, obviously, the investments, including digital investments, which you can see as well of above DKK 270 million, which we've done quarter-on-quarter. So as Carsten mentioned, our growth and our transformation strategy obviously require these investments, but also these staff costs, particularly when it comes to severance and performance-based compensation. So that's Q4.

Now let me talk a little bit more about 2026 and our cost outlook. So you will see that we've provided effectively a dual guidance. One, we reiterate our circa 45% cost-to-income ratio. for 2026, which is the same as we guided at the launch of our strategy. So that hasn't changed. And then we gave a further range of DKK 26 billion to DKK 26.5 billion in terms of the cost outlook because we thought it would be helpful to effectively range bound the lower and upper bound of our costs for the year. So let me give you a little bit more insight into this cost range. So firstly, you can assume an inflation headwind around our cost from 2025 of about 3%. That inflation headwind will be fully mitigated by the efficiencies under the 428 strategy from our investments, which Carsten was mentioning.

And as Carsten mentioned, we will go into these efficiencies and the tech and AI impacts, in particular, a little bit more during our Q1 update on the strategy side as well on 30th of April. Then beyond this inflation headwind of 3% mitigated by efficiencies, we, of course, have costs linked to our growth. So we assume growth in the business. But the rest is really investments, digital, including tech and AI as well as nondigital. And the approach that we have, which is why we wanted to show this range is a stage-gating approach. So effectively, depending on the momentum in the business, we will adjust our costs and our investments to be within this DKK 26 billion to DKK 26.5 billion and obviously meet our cost/income ratio target as well.

Maybe just a follow-up on the Personal Banking. So when we look at the cost income like moving a bit above where you want to be, do you see that as an income issue or mainly a cost issue? How -- didn't really come across like Super clear, what is the delta to reach the target from your perspective?

Yes. No, absolutely. Look, a couple of things I would say. I mean, firstly, obviously, I would point you to the ROAC, which is extremely strong in that business. I mean you can see that it's actually above our target. And in terms of run rate in the fourth quarter ended up at 31%. So we're obviously very pleased with the profitability in that segment, which is led by all the initiatives and outcomes that we've seen, including in private banking that Carsten went through earlier.

When it comes to the cost to income, look, we are investing, obviously, heavily in that area. These investments are clearly digital. We've upgraded our mobile app. For instance, we've provided some very significant tools that are already showing a very good amount of traction in terms of our relationship advisers and the tools that they have for their clients. And we will continue to invest. And that obviously is something that we're doing with an eye on the overall group costs, as I mentioned earlier, and again, on the ROAC of the area.

We will now take the next question from the line of Martin Gregers Birk from SEB.

Just coming back to one of the last questions on volume growth and especially volume growth in this quarter and perhaps zooming in on large customers and also business customers, a quarter where you should have had quite decent benefit from FX. And it seems like Q-on-Q volume growth is fairly muted and it sort of breaks the trend from the previous three quarters. What's happening in this quarter specifically? And then also coming back to asset coming in -- talking about asset quality. Your impairment guidance is for lower than your normalized next year.

I appreciate that you have reduced PMAs by roughly DKK 1.3 billion over the recent two years, but the DKK 5.4 billion still seems relatively high, both in Nordic and in a European banking context. Where would you see this go? Or what is it normalized level for this given your positive outlook on impairment charges?

Thanks for that. I think on the volume growth Q4, on BC, in fact, we continue to see growth quarter-on-quarter. So pretty solid continued momentum. It's true that in LC&I, Q4 was more flattish, but it's not something that concerns us. I mean we -- when we look into 2026, we believe that pipeline and activity looks good. And again, of course, the stable Q4 is on the back of a growth rate of 14% year-on-year. On the asset quality, we see very solid asset quality. And as you also see in the staging, very solid sort of trends in Stage 2 and 3. So it is true that although we do have a little bit of release on the post-model adjustment side, it is still a high level of post-model adjustments that we have.

If I sort of look at it through the cycle, that is very much driven, of course, by continued macro and geopolitical uncertainty. But as I've also said before, you should expect those PMAs to come down gradually as we get more certainty and visibility. That's, in fact, also what you've seen, particularly in commercial real estate as inflation and rates have come down and that, that has normalized more. So again, yes, continued view that it is on the higher end and that with the current economic environment, our base case, you should expect that to continue to come down somewhat. But again, also being very clear that there is an exceptional amount of geopolitical uncertainty. And therefore, we're also being cognizant of that, which is reflected in the PMAs.

And you wouldn't say that the volumes development that you see in Q4 is a function of particularly one player increasing its appetite on Swedish SME and corporate markets. I didn't hear that, sorry.

No, no, I wouldn't say that.

Operator, can we have the last question, please?

We will now take the last question from the line of Riccardo Rovere from Mediobanca.

Two, if I may. The first one is on the capital target. You technically have more than 16%. That is unchanged, but your common equity Tier 1 ratio stays more or less in line with the rest of the Nordic bank anywhere between -- in the range of 17.5%. So I was wondering how should we read the more than 16% because I would guess that this is interpreted at maybe 16.5%, but your common equity is way ahead of that.

The second question I have is not clear to me if you have -- if your guidance on losses includes the use of PMAs or some of the use of PMAs in '26. And then if I may, a final one, the new conglomerate direction gives you some more headroom or some regulatory advantage in -- for bolt-on acquisitions in the asset management or insurance space eventually?

Yes. I mean just a short comment on the last one. It's not something that we are looking at actively. Of course, we have a life insurance company in Denmark. But otherwise, it's not something that we're actively looking at, but there could be benefits in the future from accounting, but it's not something we're focused on. On the loss guidance, the loss guidance excludes any changes for post-model adjustments and the loss guidance of DKK 1 billion, much in line with last year is our best view given kind of the benign macro environment that we're looking into and the benign asset quality that we're seeing. And then Cecile, maybe you can comment on the capital targets.

Yes, absolutely. So on the capital targets, obviously, Riccardo, it hasn't changed, right? So it's still above 16%, and we're not going to -- we're not planning to change it at this stage. You are right that at a CET1 of 17.6%, we obviously have excess capital, which is something that we've obviously discussed and it's a regular topic of discussion with analysts and investors alike. We are planning to address this topic and the glide path when it comes to our capital in the context of our Q1 results. So that will be on the 30th of April.

So I will ask you to bear with us until then. But look, I mean, I think in terms of capital, obviously, we benefit from a very strong capital generation year-on-year. That's been the case certainly since we launched our strategy, and we've been constantly quarter-on-quarter hovering between the sort of 250 and 300 basis points annualized capital generation, which is obviously a positive thing. So the 17.6%, just to confirm, obviously includes fully loaded, so the impact of the conglomerate directive as well. And I will also -- just one last thing. Obviously, you know that our capital requirement is 14.8%, right, on the risk side. So above 16% is obviously the target.

Okay. Well, thank you very much, everyone, for your interest in Danske Bank and your questions. Much appreciated. And as always, please reach out to Claus and our IR department if you have any other questions. Thanks very much.

Good afternoon, and welcome to Danske Bank's Q4 2025 Pre-Close Call. My name is Claus Ingar Jensen and I'm Head of Investor Relations. With me, I have Olav Jørgensen and Nicolai Tvernø from our IR team. Please note that this call is being recorded for compliance reasons, and the script used for this call will be published on the Investor Relations website after the call. Given that we conduct this call via Teams, please be aware that if you want to ask questions, you must log on via the Teams app or your browser. If you participate via a telephone line, the IR team will be available for questions after the call.

In today's call, I will highlight relevant public data and macroeconomic trends in our markets. I will go through the relevant P&L lines and comment on capital at the end. Afterwards, we will open for a Q&A session.

For the sake of good order, I would also like to highlight the following: I will only answer questions related to already disclosed information as well as publicly available information, unless otherwise noted. In connection with this, I wish to highlight that development in specific indices may not always have the same effect on our performance.

Before going through the income lines, I would like to start with a brief comment on the most recent macroeconomic development based on our Nordic outlook published in early December. In the Euro area, we have seen growth prospects through 2025 being better than expected despite the tariff announcements and geopolitical uncertainty. In the Nordics, we expect the decent growth trajectory to improve further in 2026, for example, driven by rising real incomes and investments.

Looking at the Danish economy, Q4 reflected another solid economic backdrop with a sustained low unemployment and growing real wages. Consumer confidence remains low, however, which, on one hand, is putting a damper on the propensity to spend but on the other hand, leaves a potential for improved growth if and when household starts increasing their consumption. Overall, growth is expected to pick up in 2026 driven by exports and investments with still very solid employment rates and government fiscal spending.

Now let's have a look at the net interest income. Please note that as part of the ordinary tax assessment for 2024 concluded in conjunction with SKAT, the Danish tax authorities, we expect a nonrecurring benefit to the NII line of around DKK 0.2 million -- sorry, DKK 0.2 billion booked in Q4.

Let me now briefly highlight the relevant changes to Central Bank policy rates. Given the last ECB cut was in June, you should not expect any direct quarterly impact in Q4. We expect that the ECB to keep the policy rate unchanged at 2% in 2026. In Sweden, Riksbanken lowered their policy rate by 25 basis points to 1.75% in September, and now it is also expected that Riksbanken will maintain unchanged rates until the end of 2026.

Norges Bank reduced the policy rate from 4.25% to 4% in September with a cut in 2026 widely expected. Regarding recent volume developments, we refer to public sector statistics released on the 6th of January this year. In terms of lending volumes, we know that overall credit demand has been more or less stable during Q4. Please note that Q4 has the same number of interest days as Q3. The day effect is estimated to be around DKK 65 million to DKK 70 million. As always, please be mindful of currency fluctuations in the market where we operate.

During Q4, Swedish kroner had appreciated around 2% against the Danish kroner, while Norwegian kroner depreciated around 1% and pound sterling ended Q4, roughly flat versus the Danish kroner.

Looking at funding costs, we note that NIBOR has roughly been flat while STIBOR and NIBOR have decreased during the quarter. CIBOR lowered by around 19 basis points, 1-9 and NIBOR lowered by around 10 basis points, all based on quarterly averages.

In terms of wholesale funding, we have issued around DKK 90 billion, 9-0 billion, somewhat above our full year funding plan of DKK 60 billion to DKK 80 billion of debt issuance across instruments, an indication of our growing balance sheet and credit demand as well as some prefunding of our 2026 funding plan. Please visit danskebank.com, the debt section for further details on terms and pricing of our issuance.

Moreover, we reiterate the interest rate sensitivity given the Q3 interim report release, which is approximately DKK 650 million negative per 25 basis points cut across all currencies. Correspondingly, per 25 basis points hike, we estimate an effect of around DKK 450 million. In addition, we estimate a year 2 and year 3 up and down effect of DKK 300 million and DKK 100 million, respectively, related to our structural hedge. Please note that by far most of our sensitivity relates to DKK and euro in that order.

And in respect to fee income, we will start by noting that the development is always subject to conditions in the financial markets, refinancing activity and the general activity level among our customers. Throughout the year, we have benefited from the diversification of our fee income, including our everyday banking fees, which continues to benefit from healthy corporate activity.

With respect to investment fees, we note that this line is naturally impacted by the development in asset under management as well as the investment activity among our customers. Note, the seasonality concerning performance is in asset management, which are booked in Q4. For reference, we booked performances of DKK 0.7 billion in Q4 2024, and on average, DKK 0.5 billion for the last 2 years.

In respect to fees generated from financing, we expect refinancing fees in Q4 to be slightly higher than Q3. As a reference, in Q4 of '24, it amounted to around DKK 135 million.

Finally, concerning fee income from capital markets activity, our LC&I franchise has recently successfully won leading mandates on landmark transactions. However, we note that primary market activity in the fourth quarter broadly has been relatively subdued, especially concerning ECM and M&A.

Now turning our focus to trading income. Please note that customer-driven trading income primarily in LC&I is expected to be impacted by usual customer activity in Q4, which tend to be lower towards the end of the year. And then our income from insurance activities, Danica's results are always subject to the development in the financial markets and in the health and accident business.

Following an FSA order received on the 1st of September 2025 related to claim patterns for long-term illness in the health and accident sector, we have strengthened our model calibration for the past years. This will lead to 2 effects. Firstly, a net negative P&L effect of around DKK 200 million, DKK 0.2 billion in Q4 resulting in our full year income expectations being below our guidance of DKK 1.4 billion to DKK 1.6 billion for normalized net insurance income.

Secondly, related to a correction of past year's model calibration is a capital impact on the group CET1 ratio of around minus 10 basis points. For other income, we reconfirm the lower run rate for other income seen in previous quarters in 2025 due to lower contribution from asset finance activities. Please be reminded that in Q4 of '24, the sale of the personal customers business in Norway to Nordea included the management of 15 Danske Invest or Horisont funds which had a positive effect on other income of DKK 0.2 billion.

And then moving to costs. Please be mindful of the expected higher seasonal costs occurring in the fourth quarter and our continued investment spend. For the full year, we thus expect total cost to be just shy of DKK 26 billion.

And then impairments and credit quality. We have no specific comments in respect to the fourth quarter as we reiterate full year loan impairment guidance of no more than DKK 600 million. We do not have any comments with respect to tax. And in respect to one-offs, the around DKK 200 million net impact related to Danica's model provision will be booked as a one-off in Q4. Outside this effect, we do not expect any other one-off items for Q4 of '25.

And this concludes my comments on P&L, and so let's move to capital. Regarding capital, the EU conglomerate directive has been adopted into Danish law and will apply from the 1st of January 2026. As such, we expect the communicated temporary CET1 reduction of around 40 basis points evidenced in Q3 still to be reflected in the reported end of quarter numbers in Q4 such that the temporary impact will continue to be reflected until our Q1 release. However, fully phased-in capital ratios will be available in our Q4 financial disclosure, reflecting the reversal of the previously guided 40 basis points.

And as I mentioned earlier, the incremental health and accident model provision in Danica are expected to have an additional minus 10 basis point impact on the group's Q1 -- sorry, Q4 CET1 ratio.

In terms of risk exposure amount, you should also be mindful around the standard procedure in Q4 of calibrating operational risk REA which will likely lead to an impact from this year's net profit level. For reference, the REA increase observed in Q4 of '24 and Q4 of '23 was DKK 4 billion and DKK 6 billion, respectively. Furthermore, the 3-year average net profit used for the operational risk calibration is with our current guidance expected to be higher than the preceding periods.

Besides that, we do not have any specific comments on REA other than noting that market risk remains subject to volatility in the financial markets and that our growing lending volumes all else equal, would result in higher credit risk REA.

Finally, in respect to our CET1 ratio and similar to the same period of last year, the intended additional distribution outside our already accrued 60% related to the ordinary dividend policy will be fully deducted in our Q4 ratios. For reference, the additional deduction we saw in Q4 of '24 was around 120 basis points.

This concludes our initial comments in this Pre-Close call. Before we move to the Q&A session, I would like to highlight that we begin our silent period on the 15th of January. We will shortly start to connect consensus estimates with a contribution deadline on Thursday, the 15th. Please note that we publish our annual report on the 5th of February at 7:30 a.m. CET and that the Q4 conference call for investors and analysts will take place at 8:30 a.m.

We are now ready for the Q&A session. [Operator Instructions] Thank you.

I can see we have a question from Sofie.

So just 3 quick questions. So we saw some news around CRE risk rights in Denmark. As far as I can see, there was no kind of decision made by the government. Is that correct? Or -- and if so, do you expect the decision to come anytime soon?

Yes. You're right. Your observation is correct. There are no decisions made for the time being. The proposal is still on the table of the minister. So -- and we do not know exactly when we will have some clarity on what will happen here.

Okay. That's very clear. And then just a clarification. The minus 40 basis points on capital. So that's unchanged compared to Q3 2025, right?

Yes. That is correct. As the conglomerate directive takes effect on the 1st of Jan. And as our full year result reflects the status on the last day in the year, it will not be adjusted until you will see our Q1 disclosure material. So that is correct.

And then a question, the U.S. corporate provision ended now in December, is that in any way going to have an impact on your Q4 numbers?

Sorry, can you -- what kind of provision...

The U.S. corporate probation after the [indiscernible] it ended in December. Is that going to have any impact on your numbers?

No, sorry, I missed it. I thought you said provisions, but you said probation. No, there would be no effect from the end of the probation period.

Okay. And then last question, we've seen some headlines in the Danish press around kind of potential fee gaps. Anything you can comment here?

Sorry, can you repeat? Some comments around Danish what?

Like that -- I think it was your Finance Minister that he was saying that banks are overcharging on fees. I think last week, there was also an article in the local press around the fees and banks recharging SMEs. I guess you have elections in 2026. So do you see any pressure to deliver the fees? Or are there any discussions in the background around kind of that could have an impact on your fee income line in 2026?

I think the [ counts ] actually started on the annual meeting for Danish banks during the last part of 2025. And I think -- it seems to be the perception among politicians at least among some politicians that there isn't enough competition, and that's why they are discussing whether there should be any political initiatives on bank's fee income for certain services.

But this is some initial discussions. And as you rightly mentioned, it's election year. It will take quite a while before -- this eventually is something that is coming through and will impact the banks. So there is nothing new here. And I would not expect -- while it's difficult to predict around the future. But as I said, and you said it's election year. So the question is whether there will be anything to be discussed in this session in the parliament before the election. I doubt it, but let's see.

And Namita.

Just a quick one on the net interest income. Why are you prefunding 2026 wholesale funding?

Well, I would say it's not unusual that we do some prefunding. We would like to take if there are any opportunities we can look into from different sectors, different currencies, different markets, and that's something we have done before. So it's the standard procedure that from time to time, we do prefund if there are any good opportunities for us. So I don't think you should put anything more into that.

You have any more questions? Doesn't seem to be the case. Thank you very much for your participation. And as I said previously, more than welcome to contact IR if you have any additional questions. So I wish you a nice afternoon. Goodbye.

Good morning, everyone. Welcome to the conference call for Danske Bank's financial results for the first 9 months of 2025. My name is Claus Ingar Jensen, and I'm Head of Danske Bank's Investor Relations. With me today, I have our CEO, Carsten Egeriis; and our CFO, Cecile Hillary. We aim to keep this presentation to around 20 minutes. After the presentation, we will open up for a Q&A session as usual. Afterwards, feel free to contact the Investor Relations department if you have any more questions.

I will now hand over to Carsten. Slide 1, please.

Thanks, Claus. And I would also like to welcome you to our conference call where I'm pleased to share the highlights of Danske Bank's financial results for the first 9 months of 2025. This period saw a solid financial performance rooted in our strategic priorities as outlined in our 428 strategy. Net profit for the first 9 months came in at DKK 16.7 billion, equivalent to a return on equity of 12.9% for the first 9 months and 12.6% for the third quarter.

On the macroeconomic front, the Nordic region shows promising growth, aligning closely with structural rates. And despite some downward revisions of GDP growth for Denmark, the economy remains strong. The supportive low interest rates set by central banks in Europe are contributing positively to the business environment we are operating in. And our achievements can be attributed to a good performance across core income lines, prudent cost management and while maintaining strong credit quality.

We are pleased with the increased commercial momentum that we saw during the first 9 months. This is in particular evident from an uplift in lending and deposit volumes of 4% and 3%, respectively. The positive traction for lending is mainly due to higher customer activity in the corporate segment, whereas the increase in deposits is driven by the retail segment where our customers favor savings over spending. Our asset management business continues to grow, reaching an all-time high of more than DKK 950 billion in assets under management, bolstered by strong net sales in both the private banking and institutional segments. Credit quality continued to be strong and was supported by favorable macroeconomic conditions.

For the first 9 months, the loan loss ratio amounted to 2 basis points, unchanged from the preceding quarter, and the PMA buffer is kept largely unchanged. And then just a few comments when comparing to the preceding quarter. Core income came in slightly better. NII was unchanged as a combination of lending growth and the contribution from our structural hedge had a positive effect that offset the impact of lower market rates. Fee income was higher due to a positive development in asset prices and continually strong momentum for net sales across all channels within asset management, which resulted in a solid increase of 6% in assets under management. We, therefore, maintain our guidance range from net profit of between DKK 21 billion and DKK 23 billion. However, we now expect net profit to be at the upper end of that range. The expectation is driven by better NII and an improved outlook for loan impairment charges, which we now expect to be no more than DKK 0.6 billion.

And then Slide 2, please. At Personal Customers, we saw a stable financial performance supported by deposit growth and healthy customer activity while managing the impact of policy rate cuts on deposit margins in the first 9 months of the year. In Q3, total income was supported by an 8% increase in fee income that reflected a positive uplift across all fee categories. Net interest income also benefited from an updated hedge -- our updated hedge allocation framework, and Cecile is going to talk about that a little bit later. We continue to see strong credit quality and prudent cost management, which support our 2026 financial objectives and the trajectory on cost income and return on allocated capital is in line with our 2026 targets.

In terms of lending, the development in home loans generally remained stable, reflecting a somewhat subdued housing market when looking across the Nordic countries as a result of cautious consumer sentiment. In Denmark, housing market activity has gradually risen and total home loans in PC Denmark grew modestly as the lending volume of our bank home loan product, Danske Bolig Fri, increased by another 11% in Q3 and is now up more than 35% year-on-year. This is also a reflection of changed customer preferences with customers substituting the more conventional Realkredit Danmark mortgage product by bank home loans, which highlights our ability to offer flexible loan products through a rate cycle. And then simultaneously, we've adapted our pricing and our holistic advice to serve our customer needs and enhance Realkredit Danmark's competitiveness.

And then finally, while deposit volumes are typically affected by increased summer spending, we continue to see elevated cash savings and an overall 2% deposit growth year-on-year. And then additionally, our commercial traction within Private Banking was underpinned by another quarter of higher net sales and inflow to investment products. And this, in turn, drove assets under management to record high levels and again shows our ability to expand offerings and support customers' financial planning regardless of the market environment.

Slide 3, please. At Business Customers, we see the momentum building and our financial performance reflected continued progress on our commercial priorities. Core banking income was up 3% in the third quarter relative to the same quarter last year, supported by solid fee income driven by higher everyday banking fees, including FX activity as well as finance-related fee income growth. Total income quarter-on-quarter was supported by stable fee income despite typical seasonality and NII benefited from the updated treasury allocation framework. Our growth agenda was supported by improved credit demand and our efforts to expand our customer base, resulting in increased market shares across all 4 Nordic countries. And this was underpinned by the growth in lending volumes of 1% quarter-on-quarter and then 4% year-on-year, which again was largely broad-based across industries.

With a sustained focus on diligent cost management, the cost-income ratio continues to be in line with our 2026 target and the robust credit quality and benign level of impairments further supported profitability with profit before tax increasing 3% quarter-on-quarter and in line with our 2026 targets. Our strategy execution has been encouraging and clearly highlights the business potential, and we continue to focus on improvements to our digital offerings, coupled with targeted advisory services to support customers efficiently across the region, where complex solutions are in demand from our customers across the Nordics.

And then Slide 4, please. In our Corporate and Institutional franchise, we saw a strong financial result for the first 9 months of the year. Total income was up 8% year-on-year as we continue to leverage our strong balance sheet to the benefit of our corporate and institutional customers and saw strong customer demand for our investment solutions. In addition, we focus on executing our strategy to be the leading Nordic wholesale bank. Importantly, our leading solutions in product areas such as loan capital markets, debt capital markets and cash management see solid customer demand and help us continue to attract new corporate customers outside Denmark, in turn, delivering on our strategy.

Total income was up 1% relative to the second quarter, driven by solid customer activity in our markets area alongside continually strong credit quality. And this helped us generate a return on allocated capital of 25%, well ahead of our 2026 target. And then we continue to grow our corporate lending book. We saw lending growth of 12% year-on-year and 4% quarter-on-quarter. We were also very proud that as the only Nordic bank, Danske Bank was mandated as joint global coordinator in the largest ever capital raising transaction in the Nordic countries. Operating expenses, they grew 2% relative to the second quarter as we continue to invest in the business and selectively add competencies as needed to drive our advisory offering and execute the strategy. And then assets under management grew 6% in the third quarter relative to the preceding quarter to a record high level of DKK 954 billion, primarily driven by strong net sales across channels and also a robust investment performance.

And then with that, let me hand over to Cecile for a walk-through of our financial results for the group, and that's on Page 5, please.

Thank you, Carsten. As Carsten just mentioned, our financial performance was solid in the first 9 months of the year. Net profit for the group came in at DKK 16.7 billion and was down 5% year-on-year, firstly, due to the loan impairments line and secondly, from lower insurance income. NII remained stable as the impact of rate cuts was mitigated by the growth we saw in volumes and the contribution of our structural hedge. Fee income benefited from higher customer activity and the growth of assets under management. The result for the third quarter came in at DKK 5.5 billion, up 1% from the level in the second quarter, mainly due to lower loan impairment charges. Total income was slightly down as income from both trading and insurance activities decreased from strong levels in the second quarter. This decline was partly mitigated by stronger fee income, thanks to the rebound in customer activity in the third quarter.

Trading income saw a decline in Q3, mainly due to valuation adjustments in group treasury and a one-off in Q2. Trading income from customer activity at LC&I was on par with the level in Q2. Income from insurance activities came in lower in the first 9 months of 2025 compared to the year before, partly due to an increase in provisions in the first quarter. In the third quarter, the result was lower due to return on investments and the results of the health and accident business. We continue to focus on repricing, preventive care and reactivation initiatives to improve the financial outcome of insurance contracts and respond to current market trends related to long-term illnesses. Operating expenses were almost unchanged relative to the same period last year as well as the preceding quarter. And finally, as Carsten mentioned, credit quality remained strong with a net reversal in the third quarter.

Slide 6, please. Let us take a closer look at the key income lines, starting with net interest income. Overall, NII remained stable both year-on-year and quarter-on-quarter despite the impact of lower rates on deposit margins. When comparing net interest income, not only with the same period last year, but also with the preceding quarter, NII has benefited from a continually positive development in lending volumes, particularly evident on the corporate side. The growth in deposit volumes contributed to NII year-on-year with a stable quarter-on-quarter level. In addition, our deposit hedge has helped to mitigate the impact of rate cuts on deposit margins and the lower return on shareholders' equity. In this context, please be aware that as part of our ongoing focus on asset and liability management, we have increased our bond portfolio hedge slightly to approximately DKK 170 billion.

With respect to deposit margins, the increase that can be observed relates to changes to our fund transfer pricing framework implemented in the second quarter with the objective of allocating NII from the structural hedge to the business units according to their contribution. It is important to note that these are not driven by changes to customer pricing and do not impact group NII. Our NII sensitivity, which was updated in the second quarter, remains unchanged. With respect to expectations for the full year, I would like to highlight that they are based on the current rent environment with forward rates as of the end of September and subject to balance sheet developments. We consider the current market view and consensus on NII to be a good indication for the full year of 2025.

Now let us turn to fee income. Slide 7, please. Our fee income grew by 2% relative to last year. Adjusted for a nonrecurring item from last year and the divestment of PC Norway, fee income was up 3%. The increase mainly came from everyday banking transactions due to higher activity among existing as well as new customers. Relative to the second quarter, fee income was up 3% in the third quarter, driven by higher investment activity among our customers and the recovery from the sentiment we saw in the second quarter. Investment fees benefited from increasing asset prices and continued growth in assets under management with positive net sales for all types of clients. Income from financing had a positive effect in the third quarter, driven by higher corporate activity, whereas fee income from everyday banking and capital markets transactions declined slightly from the second quarter due to summer seasonality. However, the somewhat muted transaction activity in ECM and M&A was offset by continually good primary activity in DCM and LCM.

Next, let us look at net trading income, Slide 8, please. Net trading income increased 12% from the level in the same period last year. The increase was mainly due to positive market value adjustments in group treasury, partly offset by xVA adjustments. Trading income at LC&I improved from the level in the same period last year due to higher customer activity. In Q3, customer activity at LC&I held up well despite the third quarter being a seasonally slower quarter. Net trading income was down 27%, mainly due to the positive one-off item booked in the second quarter as well as valuation adjustments made in group treasury. This concludes my comments on the income lines.

Let's turn to expenses. Slide 9, please. Looking at the cost development for the first 9 months, our focus on cost management and improved efficiency continues to yield the expected results. Operating expenses are in line with our full year guidance of up to DKK 26 billion. And at 45.6%, the cost-to-income ratio is progressing towards our 2026 targets. Relative to the level last year, costs were in line as structural cost takeouts and the planned reduction in costs for the financial crime plan mitigated the impact of wage inflation and performance-based compensation. The relatively modest increase in digital investments should be seen in the light of the significant ramp-up we made last year. Relative to the preceding quarter, costs were down by 1%, mainly due to lower costs related to financial crime prevention, which continued the trajectory towards a lower run rate by year-end according to plan. While the cost discipline and trajectory during the year have been encouraging, we continue to expect full year expenses to end close to the guided level given higher quarterly costs in Q4 due to seasonality.

Slide 10, please. Let us take a look at our credit portfolio and the trend in impairments. Credit quality continued to be strong, underpinned by a well-diversified and low-risk credit portfolio. The macroeconomic environment remained benign with increasing employment and steadily improving household finances. Consequently, impairments continue to be below the normalized level. In the third quarter, credit deterioration related to a few single name exposures was offset by workout cases. In combination with the update of our macroeconomic models, we saw a small net reversal for the quarter. The update of the macroeconomic models included a small revision to the weighting of our scenarios towards a slightly more balanced approach with the upside scenario now weighted at 25%, the base case scenario at 50% and the downside and severe downside scenarios combined at 25%.

In addition, we have kept our PMA buffer unchanged at DKK 5.7 billion. The decreases in PMAs for CRE and agriculture have been reallocated to global tension. We continuously keep our macroeconomic scenarios under review in conjunction with the PMA buffer. Given the strong asset quality we saw in the first 9 months, we have lowered our full year guidance for loan impairment charges from around DKK 1 billion to no more than DKK 0.6 billion.

Slide 11, please. Our capital position remained strong in the third quarter and was further supported by another quarter of solid capital generation post dividend accrual and lower REA as a result of lower market risk. At the end of Q3, the reported CET1 capital ratio was unchanged compared to the preceding quarter at 18.7% despite a temporary impact from Danica of around 0.4 percentage points due to the call of a Tier 2 instruments. We continue to operate with a healthy CET1 buffer versus the regulatory requirements now at 390 basis points, and we intend to progress steadily in the coming years towards our stated capital target of a CET1 capital ratio above 16%. The ongoing share buyback program we announced in February is being executed and will continue to provide support throughout the year.

Now let us turn to the final slide and our financial outlook for 2025. Slide 12, please. As previously mentioned by Carsten, we reiterate our outlook for net profit to be in the range of DKK 21 billion to DKK 23 billion. However, we now expect net profit to be in the upper end of that range. For total income, we continue to expect slightly lower income this year than in 2024. Income will be driven by lower albeit resilient net interest income and will be supported by our focus on fee income. We will continue to drive the commercial momentum and growth in line with our financial targets for 2026. Income from trading and insurance activities remain subject to financial market conditions.

We continue to expect operating expenses of up to DKK 26 billion, reflecting our focus on cost management and cost-to-income targets for 2026. We have revised our full year guidance for loan impairment charges of around DKK 1 billion due to continually strong credit quality. We now expect loan impairment charges of no more than DKK 0.6 billion. And finally, our financial targets for 2026 also remain unchanged, subject to our current economic and market expectations.

Slide 13, please, and back to Claus.

Thank you, Cecile. Those were our initial comments and messages. We are now ready for your questions. Please limit yourself to 2 questions. If you are listening to the conference call from our website, you are welcome to ask questions by e-mail. A transcript of this conference call will be added to our website within the next few days.

Operator, we are ready for the Q&A session.

[Operator Instructions] And our first question today comes from the line of Shrey Srivastava from Citi.

Two for me, please, one bigger picture and one sort of more technical. I want to ask about recent M&A activity that you've seen in the Danish market and how it affects your view on the competitive landscape across your various business areas and how you're changing your strategy in response to that, if at all? That's the first.

And the second one is you -- it's going back to your comment on the deposit hedge. You've been increasingly using derivatives to manage the interest rate risk in the banking book. And it says in your report that you begin to -- you expect to begin use of derivatives in a hedge accounting format in the first half of next year. Can we get some more color around this decision and what sort of impacts we can expect to see, if at all, and the rationale?

Thanks for that. I'll take the first one, and then I'll hand the second one over to Cecile. M&A landscape in Denmark, we've obviously seen the news this week of the Sydbank and Arbejdernes Landsbank merger. I think this is very much in line with -- not speaking to the specific merger, but the consolidation and acceleration of consolidation is very much in line with what we have been expecting. And I've said before that particularly the changes around the competition landscape on Realkredit related to the Totalkredit decision some time ago would make it more interesting, beneficial to consolidate. And so this is very much in line with that.

We don't see any change to our strategy. We're focused on continuing to deliver our strategy, growing with our customers, taking market share. We're investing in technology. We're investing in advisory services, and we believe that we have a very good focus strategy and position in the Danish market. And yes, so no changes in strategy.

Cecile, do you want to take the deposit hedge question?

Yes, absolutely. So in terms of the deposit hedge, Shrey, currently, it includes the bond hedge, the loan hedge, but we don't use yet derivatives. That's in plan indeed for next year. So let me unpack these different components. The deposit hedge or structural hedge, obviously, as we call it, includes a bond hedge, which, as I've just mentioned, has increased this quarter from DKK 160 billion to DKK 170 billion, really reflecting the continued stability and strength of our deposit base. That bond hedge is -- has got an average life of about 3, 3.5 year average life and obviously provides the NII support that we're aiming for.

In addition, there is a loan hedge, which is about DKK 200 billion. That loan hedge is not a perfect hedge from the point of view of deposit hedge in the sense that there are several durations. There is also a little bit of optionality with respect to certain loans, but we still see that as obviously a good hedge when it comes to providing NII support. Going forward, our intention is indeed, and we're very progressed in our capabilities now to use derivatives in order to affect our structural hedge. And those derivatives would be, as we would expect, hedge accounted, meaning that effectively, they will not create sort of mark-to-market volatility precisely because they will be effectively hedging our deposit book.

Having -- so what will it do? It provides additional liquidity and additional ease effectively of reinvesting the deposit hedge. However, what it doesn't do is it does -- it's not necessarily in itself going to increase the hedge. Effectively, the way it would be managed is that derivatives would slowly replace part of the bond portfolio that we currently have in place. So that's to give you a little bit more detail on this hedge.

Your next question today comes from the line of Namita Samtani from Barclays.

My first one, do you expect net interest income to grow into 2026 now? And could you explain me how you think about the structural hedge going into 2026? Do you still expect it to be accretive?

And my second question, in Danica, there was a health and accident provision in Q4 of last year. Will the same happen again in the fourth quarter?

Thanks, Namita. In terms of NII, we'll come with an updated guidance as part of year-end. So I think I'll keep my focus today on the quarterly results. But as you've seen, NII has stayed pretty stable and rates have now stabilized. And at the same time, we continue, of course, to have a strategy where we're focused on growing our balance sheet, including our lending. And I think, again, you could probably think about the hedge accretion as being close to neutralizing as rates now are stabilizing at 2%. But again, we'll update on '26 NII outlook as part of year-end.

And then on Danica, we do do model updates every year on the health and accident, and we continue to do that. And there is no question, as you've seen that the health and accident continues to be under some level of pressure, but it's too early to say what the quarterly updates will show, but we continue to be focused on one, improving the operational management, which includes particularly being much more proactive towards our customers in terms of how we can help them. And then at the same time, of course, it is also correlated with health trends and that includes mental health illness trends, which still are quite high in Denmark.

Could I just have a follow-up? The fourth quarter '25 NII, do you still expect that to be flattish versus the third quarter?

I would say at this stage, of course, again, we don't want to give an outlook on Q4. But again, there is still some remnants of impact of the reducing interest rates that we've seen earlier and that offset by the volume growth that we're seeing. So we continue to feel good about the level of NII that we're seeing in Q3 into Q4. That's probably the way I would formulate it.

I would guide you to for -- if you want to think about the NII for the full year, actually, we find that consensus and market expectations are actually pretty accurate.

Your next question comes from the line of Sofie Peterzens from Goldman Sachs.

Yes. It's Sofie from Goldman Sachs. So the first question would be the risk-weighted asset decline that we saw. Should we expect any further risk-weighted asset declines to come? And how should we think about any further kind of capital headwinds or tailwinds in the coming quarters? And related to that, kind of given that you have the U.S. corporate probation coming to an end this year, is there anything that you think would restrict Danske from distributing over 100% of profits in 2026? What is the FSA's general thoughts around over 100% distribution? So if you could kind of comment around that.

On the first one, REA decline, there's a particular sort of larger movement, if you will, on market risk. This tends to move a little bit up and down depending on market. So I wouldn't say that we should see any particular movements on REA and more think about REA as a function of growth. So no particular sort of movements expected either way.

And then on U.S. probation, I think I've earlier said that we have before distributed over 100% of capital also in line with the sale of, for example, the Norwegian retail business. So that is not a constraint in itself. But we will update on the capital strategy and distribution strategy as part of our Q1 results where we're also planning to give an update on, obviously, both '26, but also financial metrics targets for '28.

Okay. That's clear. And just going back to the risk-weighted asset growth. In the fourth quarter, should we expect any increases from the operational risk?

Not major. I mean, you're right, we do update it every year. And as you know, we're on standardized and it's a little bit of a function of income. And as you know, income has been pretty stable year-on-year. So I wouldn't see it as anything material. There will always be some movements, but nothing material.

Your next question comes from the line of Tarik El Mejjad from Bank of America.

Two questions, please. First, on the corporate growth. Can you maybe shed some light on what sectors or what area is growing because you're posting quite a healthy growth here and came a bit of a positive surprise.

And the second one is on the cost of risk. I mean you had releases without PMA releases. And I want to understand if there is a particular specific area where you had some releases on some files? Or is it just a structurally lower cost of risk?

Yes. Tarik, thanks for that. On corporate growth, it's broad-based. We've been looking at exactly that question. And there are no particular sectors driving that. One would have thought, okay, maybe the defense side, the energy side. In fact, I think that those growth opportunities are yet to come at larger scale. And in fact, the growth we're seeing at this stage is, yes, pretty broad-based. And again, broad-based, but also driven by the fact that we see that we're taking market share in corporate lending across the Nordics in line with our strategy.

Cost of risk, nothing particular. Look, we've kept the PMA stable, as you've seen. And PMAs, I would say, are still at the higher end of what you would sort of expect through the cycle. A large part of it, as you can see in the breakdown also sort of linked with general macro uncertainty. If you look at sort of the actual flows in -- through stage 1, 2, 3, I think nothing particular that we would call out. We continue to see strong asset quality and sort of stable flows.

And if I can maybe add to that. The release and the impairment line that you see, indeed, obviously without any changes to the PMAs other than some redistribution from the CRE and agriculture line into global pensions is really linked to 2 different things as well. So one, actually, if you look at the various divisions, we actually saw net reversals both in LC&I and BC. So obviously, some strong workout cases there and some recoveries. Net-net, positive in PC, but frankly, very minimal. So all in all, clearly, a very strong asset quality all around.

And then some moderate impact from the IFRS 9 models, where we have made a few changes just to obviously reflect economic assumptions, number one. And also the weighting of the scenarios has slightly changed to be more balanced with a sort of 50% base case instead of 55%, 25% upper case and 25% combined severe downside and downside cases.

Okay. Can I squeeze in a very quick follow-up on the other and treasury line, this is more for our models, to be fair. I want to understand what's the big negative there just for the future period?

Is that on the trading income line that you mentioned?

Yes.

Yes, yes. So on the trading income line, there are 2 reasons why this came down quarter-on-quarter. And again, just to be clear, this is not linked to LC&I. So the first one is the one-off in Q2, which was the sale of the export finance shares, which I think we mentioned in Q2. The second thing is, as you mentioned, indeed, is treasury effectively market valuation adjustments. What it is there is as part of our hedging. So obviously, these are not open positions, but purely hedging of both interest rates and currency and FX risk.

We obviously use derivatives. These derivatives are held at fair value in the center. So in this case, obviously, in treasury. And clearly, they will fluctuate according to rates and FX considerations in the market. And sometimes they go up, sometimes they go down, and this is effectively what it comes to. So I will reiterate, this is not due to any economic loss, and there is always some fluctuations up and down throughout quarters.

Your next question today comes from the line of Mathias Nielsen from Nordea.

Congrats on the strong underlying results this quarter. So the first question goes like if we take a step back and look a bit into the next year, like if you were to highlight the top 3 priorities like both strategically and financially into '26, which 3 things would you then highlight as the most important?

And secondly, maybe related to this, when I look at the lending growth in LC&I, it clearly looks like you're getting to a strong business momentum there. It also looks like the business customer segment is starting to look stronger and stronger and pretty strong as well.

And then lastly, like when do we see the personal customers? I know it's always easier to get business momentum with the big clients because you're closer to them than the small clients. But when should we expect the personal client segment to get even more on fire compared to where we see today?

Thanks, Mathias. Look, as we look into '26, it's really about continuing on our Forward '28 strategy. we said that we wanted to be the leading wholesale bank in the Nordics, a leading bank for SMEs across the Nordics with sort of more complex needs and then a leading private bank and personal bank in Denmark and Finland. And we continue to invest in both advisory capabilities and in technology and to ensure that we can really deliver a leading bank across those priority segments and focused customer groups. So that's what '26 and out to '28 is all about.

There's no question that since the presentation of our strategy in June '23, technology has moved quite significantly in terms of what we're seeing in artificial intelligence more broadly. So no question that is a huge focus is how can we accelerate and augment our existing strategy by investing further in artificial intelligence and using technology to position us even stronger. To be more specific, we're also investing in capital markets and advisory capabilities in Norway and Sweden across our Private Banking segments. And as you've seen here in Denmark, Mathias very heavily in our technology digital solutions where we're investing heavily in both our district platform for corporates and in our mobile bank for Personal Customers.

Your question on Personal Customers and when do we see as much clear green shoots and clear blue water in terms of acceleration and business growth. Look, I would say on the one hand side, on Personal Customers, where I would call out strong traction is private banking and investments. You see us taking market share on the investment side in Denmark. That's closely linked with also good traction in Private Banking, where, in fact, we're also increasing customer inflow. We're investing in our family office in that area as well and see good traction.

And then it does take longer to move the needle on the broader retail segment. Our focus is really on the customers that require more advisory-heavy solutions. And we do see customer inflows in those segments. And we continue to, again, invest in, for example, the housing, the mortgage area, where we believe that we need to do more. So hopefully, that's helpful and gives you a few examples of what we're doing.

If I may, let me add, you asked for obviously financial objectives. And obviously, Carsten gave you the sort of strategic and financial combined. I would add that one of certainly my key objectives and the group's key objectives is also to ensure that the group is efficient, right? So our focus on cost will remain and our focus on cost-to-income ratio. And that focus on ensuring that we balance obviously the need to be efficient and the need to continue to invest, both of which obviously can enhance each other. So that's on the priorities.

On the PC side, the other thing I would add to what Carsten mentioned is that I am pleased to see that on the housing front, on the financing on the housing front, we have stabilized volumes. That's particularly the case in Denmark. And we have done that whilst protecting profitability, right, and returns. And given the competitive situation that we operate in, the fact that we managed as we obviously endeavor to do to continue to balance, obviously, the competitive pressure we're seeing on the RD side with our progress that has been extremely significant on the bank lending side and protect, as I mentioned, profitability has been pleasing to see.

So just to wrap all your things you set up, like the way I understand it is like there's still some way to go to -- to get to the peak performance of how much you can actually deliver after what -- in turnaround after all this AML cases. Is that fairly understood that you're not at a fully up running state yet?

We absolutely see plenty of unrealized potential, not least in the PC segment, but certainly also in the corporate segments where we're still punching below our weight across the Nordic countries. We still have a challenger position in many areas in those countries and have much more opportunity to again grow market share.

[Operator Instructions] We will now take the next question -- and the next question comes from the line of Martin Gregers Birk from SEB.

Just continuing along the lines of Personal Customers, I guess your Q3 numbers is perhaps implicitly also another testament to your successful Danske Bolig Fri. Do you guys see a limit to that story? And when does that dilute RD too much? That would be my first question.

Then the second question goes back to the M&A story that is unfolding in the Danish space. You have a [ Sydbank ] that is increasingly talking to large customers being attractive, you have a Nykredit which has beefed up their own bank balance sheet after acquiring Spar Nord. [ Sydbank ] now that is also getting a balance sheet that allows them to tap into this segment. Do you feel increased competition from this? And when is -- when sort of does your role as a big brother in the Danish banking market? Or let me rephrase this, when are sort of the little brothers in the Danish banking market becoming too big and that forces you to act?

Thanks, Martin. I think on DBF, Danske Bolig Fri, so the bank lending side and then the Realkredit side. Look, I see this very much as being able to offer our customers a broad range of products based on both market situation. So where rates have been, it's been interesting to take out a bank loan given the increased flexibility around that. So I think we're very much focused on being able to offer the broad palette of products and services and then letting customers decide. So I see that we can both continue to grow in Danske Bolig Fri, but certainly also have a lot of focus on growing the Realkredit side of things.

And as you all know from Denmark, we're investing really heavily again in improving our Realkredit offering, both digitally with the housing universe with giving customers faster turnaround on decisions with giving them more clarity on how much they can borrow as well as making targeted price adjustments where we think it's interesting. So again, much more opportunity there.

M&A story, competition, is there competition? Yes. Is that -- is it a very competitive market environment out there? For sure. I think we've been able to show that we can grow and take market share in that. I'm not concerned about the consolidation in the Danish market. I welcome that consolidation. We have a strong strategy, which we think is very competitive, very compelling. And with the pace of change that we're moving and the investments we're moving with, we think that we can continue to grow in the market.

Can we have the last question, please?

Your last question today comes from the line of Jacob Kruse from Autonomous.

So just 2. So firstly, you talked about being a challenger in some of the other markets. How do you view your sort of nonorganic growth opportunities there? I think there's been clearly a lot of activity going on. And with respect to, I guess, it's the 13th of December where you come off the probation period. Does that immediately change something? Or what's the time line there?

And then secondly, just on the -- you mentioned on the structural hedge, this replacement going into derivatives and an increase in liquidity. Will that have any effect on your NII or P&L?

Thanks, Jacob. I think, as I've also mentioned before, that the Nordic markets, particularly Sweden, would be an interesting market to look at nonorganic and we'll continue to do so. There is nothing sort of relevant at this stage. We continue to be focused on our organic strategy, but we certainly are continuing to scan the market and looking at opportunities on the nonorganic side as well. But again, very important to underline within the focus segments that I also mentioned before in terms of where our strategy focus is.

No, I don't think that the post probation changes -- I mean, it changes that we will update our capital situation and distributions situation because we've always said that we would be carefully looking at legacy excess capital during this period. And so we'll have that discussion. And again, our preference is that we grow and use our capital to grow at interesting return levels, but we'll also look at other opportunities.

And then, Cecile, do you want to just talk about the hedge piece?

Yes, I'll take the hedge piece, and thank you for your question, Jacob. Just to confirm, the inclusion of derivatives is effectively going to help us manage more effectively the reinvestment of the hedge. In itself, it doesn't add additional NII or it could, but I would say, marginally just because of the additional liquidity, the additional ease of effectively targeting a certain point, I guess, in the curve. So I would say any additional uplift due to derivatives specifically is more marginal.

But just to take a step back, right, with the deposit hedge, the bond hedge and the loan hedge combined, we expect to continue to get a very good lift in the coming years, particularly next year before, as Carsten mentioned, in horizon, a few more years tailing off, right? But I mean, the lift will continue to be there to NII.

Okay. Thank you very much, everybody, for your interest in Danske Bank. Very much appreciate the questions. And as always, please do reach out to Investor Relations and Claus, if you have any questions.