Svenska Handelsbanken AB (publ) (OTCPK:SVNLF) Q2 2022 Earnings Convention Name July 15, 2022 3:00 AM ET
Firm Contributors
Carina Åkerström – President and CEO
Carl Cederschiöld – CFO
Peter Grabe – Head of IR
Convention Name Contributors
Magnus Andersson – ABG Sundal Collier
Maths Liljedahl – SEB
Andreas Hakansson – Danske Financial institution
Nicolas McBeath – DNB Markets
Omar Keenan – Credit score Suisse
Namita Samtani – Barclays
Rickard Strand – Nordea
Sofie Peterzens – JPMorgan
Riccardo Rovere – Mediobanca
Jacob Kruse – Autonomous
Robin Rane – Kepler Cheuvreux
Jens Hallen – Carnegie
Maria Semikhatova – Citibank
Piers Brown – HSBC
Operator
Good morning, and welcome to the Handelsbanken Q2 Report for the Second Quarter 2022. We’ll start by listening to our President and CEO, Carina Åkerström presenting the Q2 figures, along with the CFO of the corporate, Carl Cederschiöld. After that, we may have a brief break. After which we may have a Q&A session over a cellphone convention service, not due to this fact broadcast on this channel. You’ll find data on how you go online to the Q&A session at handelsbanken.com below the part IR, and knowledge was additionally included within the press launch that was printed along with the invitation.
This presentation, the Q&A session slightly shall be held in English, presentation [ph] in English. You are able to do so by logging into the phone convention service the place will probably be concurrently translated. And you discover the data on how to go online to that on handelsbanken.com below Investor Relations.
Now let’s start with the presentation. Carina, over to you.
Carina Åkerström
Thanks, Louise, thanks. And as soon as once more, good morning. A heat welcome to you all for this Q2 report from Handelsbanken.
Now we have a very good first quarter to report, the primary six — good six months with a document robust scenario of managed value growth and nearly nonexistent credit score losses. And the capital scenario is robust. Handelsbanken due to this fact, is nicely positioned to proceed to develop in a profitable method and with revenue in funding, deposits and asset administration. In case you look extra from a enterprise focus perspective on the numbers, an image is painted of a financial institution which could be very well-positioned and standing robust within the new international scenario, and the brand new market we’re now at the moment working in.
We’re rising in lending and deposits. We will see this within the internet curiosity earnings, which reached the very best stage thus far ever recorded. It is rising, as could be anticipated, in a financial institution like ours when market rates of interest go up. And in a market with a decline within the inventory exchanges, the Handelsbanken efficiency is above and past these of many different gamers in internet charges and commissions. The web stream out from the financial institution have been marginal and we have seen main actions available in the market total. Credit score losses are nearly nonexistent.
So our asset portfolio is continuous to be at a really top quality stage. Capital scenario stays comfortably robust and steady. And the prices are at the moment at a stage which we’re pleased with. They’re going up however in the best locations. All-in-all, the steadiness over the quarter signifies that the C/I ratios proceed to drop. And maybe probably the most rewarding level of all is the key adjustments we’re witnessing within the UK. After a few years of intensive work, UK is now delivering a really robust efficiency.
Let’s take a look at and sum up the primary quarter in comparison with — the primary six months, in comparison with the final 12 months. So that is January to June. Working revenue by percentages to C/I ratio dropping at 46%, earnings up by 2%, prices up by 1%. Revenue is pushed by a document robust internet curiosity earnings and internet charges and fee for the six months holding up nicely.
Once we see a drop within the inventory exchanges, that is to some extent, counteracted by the adverse valuation results which could be seen on the NFT line. So value bills going up by 1%, adjusted for nonrecurring gadgets, and on the identical time, we’re stepping up the tempo in our growth. And also needs to add while the general inflation typically seems to be dashing up in the course of the first six months, credit score high quality — asset high quality remained robust and credit score losses, as I discussed, are nearly nonexistent.
Let’s take a look at this quarter, in comparison with — 2022, we see internet curiosity earnings up by 5% between the primary two quarters, enhance in enterprise volumes and a constructive influence of the rising market rates of interest. Internet charges and commissions are dropping considerably, however it’s nonetheless holding up. NFT has an influence right here as nicely. So all-in-all the earnings is down by 2% from the earlier quarter. Bills unchanged adjusted for Oktogonen and foreign money results have elevated by 1% which could be defined by regular seasonal patterns.
The working revenue is a change of 5%. And that is excluding the valuation results I discussed on the NTF. The C/I ratio amounted to 46.6% and underlying credit score losses is in truth consisting of internet recoveries, however we’re making basic reserves on account of the present international scenario. Let’s proceed and take a look at our lending. We develop and we see a superb development in all of our markets. On the family lending facet, we see a steady enhance to the tune of 5%.
company lending, we see a very good growth, 11% in comparison with earlier 12 months. And for the primary 5 months of this 12 months, Handelsbanken was the key internet lending participant in Sweden when it comes to lending to corporates. It’s a well-diversified enterprise between property lending and working firms. And if we have a look at deposits, we see a superb development right here as nicely, by as a lot as 11% on the non-public facet. And on the company facet, we additionally see good growth. It is an necessary part within the financial institution’s enterprise. And within the present rate of interest scenario, it is necessary. For SEK1 of SEK4 invested in Sweden deposit went to Handelsbanken.
Let us take a look at financial savings regularly. We see a continued good growth. The energy and the robustness we have managed to realize and attain over a very long time, with internet inflows into the financial institution, as you see to the best of this slide. Actually, over greater than 10 years now, a median of 25% of the online inflows available in the market ended up in Handelsbanken. And progressively, we have elevated our market share. We’re now at a market share of 12.2%.
The market share of the online influx from the previous 12 months has been simply over 40%. So the financial savings enterprise is working nicely given the present macro economical scenario. The market sees outflows, however the financial institution internet flows have solely been impacted marginally. Now let’s try to sum this up. The place we’re at the moment in a session the place earnings is rising extra quickly than bills. C/I ratios trending downwards and our expectations, in fact, is for this to proceed.
Let’s take a look at our belongings and our asset high quality. As I discussed beforehand, credit score losses are nearly at zero with a steady portfolio, low-risk portfolio and as anticipated, no credit score losses. And this has been the scenario over the previous few years. The provisions we’re making linked to the reserves, partially associated to the pandemic, but additionally in fact, as a result of there may be quite a few uncertainties on the planet round us. So along with strong credit score course of, expert individuals working within the financial institution, and the reason above and past that’s defined by the precise identification of the portfolio.
Let’s zoom out to some extent and take a look at our residence markets and the scenario for the primary six months of the 12 months. Let’s start by Norway. We proceed the great development. We have achieved an all-time excessive on internet curiosity earnings, up by as a lot as 6% over the primary six months. Internet charges and commissions in Norway up by 5% regardless of the market turbulence there. And all-in-all, earnings is up by 6%. C/I ratio slightly below 38% and we now have a superb enterprise the place we’re additionally rising our growth focus to strengthen buyer conferences on the family and personal facet specifically.
After which Holland and Netherlands, we proceed to see glorious development right here as nicely. Lending, up by as a lot as 21% in comparison with final 12 months and earnings up by 16%. The C/I ratio continues to maneuver steadily downwards.
Let’s take a look extra carefully on the markets in Sweden and the UK. In Sweden, our largest market, right here, we proceed to see a steady enterprise growth with good key ratios, steady growth additionally in internet curiosity earnings. Households, mortgages, steady development, 5%. Company lending, rising by 10%, and with a superb combine, as I discussed earlier, between property and working firms.
Internet charges and commissions, impacted by the event on the inventory exchanges, however we’re holding on to our place and we’re constantly gaining market shares, as I discussed earlier.
The UK, nicely right here the key development — change is probably to be discovered there. We have had a protracted interval the place we have invested an excessive amount of time and effort, however we have seen a transparent momentum within the enterprise. And the tide seems to have turned. Revenue is up, prices are down and bills nonetheless quickly dropping. C/I ratio, which ended up at 57% in comparison with 73% a 12 months in the past. Working revenue within the UK is on the highest stage ever for the partial 12 months, 43%. And return on fairness as a lot as 14%.
We additionally see a quantity growth within the UK. It is starting to be an increasing number of seen. On the company lending facet, volumes are up. What we’re additionally doing within the UK and been doing for a interval is that among the company lending has been — I imply it’s type of hiding the final growth in lending. We strengthened our portfolio, in truth, by off-boarding to some extent. So all-in-all, we see glorious growth in all our residence markets, specifically contemplating the present macroeconomic scenario. We’re rising enterprise volumes. We see improved margin and maintaining bills at a very good stage.
Let’s take a look at our capital. Then I discussed initially that the capital scenario is great. CET1 ratio, 18.7%, 480 foundation factors above the regulatory requirement and 180 foundation factors over the financial institution’s goal vary. All-in-all we see robust growth in our enterprise to have the capability to satisfy the demand of our prospects thus putting the financial institution in a superb place. We’re nicely positioned within the new present scenario on the planet globally and available in the market, and we deal with continued development sooner or later. Over to you, Carl.
Carl Cederschiöld
Effectively, thanks, Carina. Then we’ll have a look at the event of the online curiosity earnings and we’ll begin with evaluating quarters, 2021 and 2022. And you may see that internet curiosity earnings is up 5%, additionally adjusted 5%. And in case you have a look at the slide, you see the totally different elements. And we see that we now have a powerful quantity development in our internet curiosity earnings, 2% up is what we see.
And we will observe that beforehand when we now have had good numbers, we now have had about SEK100 million in contribution to quantity development and now it is SEK145 million. So very robust development in the course of the quarter. Margins are up as nicely with the adjustments in curiosity however that is primarily from deposits and that is one thing that we see in all our markets. So we now have a powerful growth right here as nicely.
And the liquidity portfolio additionally provides SEK65 million to internet curiosity earnings. Now we have one other merchandise, and that’s NFT compared. And that’s one thing that’s related as nicely. However different gadgets are roughly negligible. And the event is robust over the quarter. Over six months interval, it is even stronger, up at 9%, adjusted at 7% and also you see the amount contribution 3% and margins 2% up, which signifies that we’re in a really robust momentum on this respect.
FX, currencies contributes to internet curiosity as nicely, evaluating the 2 years, and that’s additionally what we see the distinction between headline and the adjusted stage, 9% up. So robust growth with regards to internet curiosity earnings typically talking. And if we disregard growth within the UK, that is what we really feel is a very robust part of our report.
Then internet price and the fee earnings, extra typically talking, we all know that the inventory alternate growth has an influence, and that’s what we see right here, that we now have a sturdy scenario in internet price and fee earnings, with a rise over the primary six months in spite the inventory exchanges. And right here as nicely, you see the totally different elements. Financial savings representing about 70% and our financial savings commissions over the quarter are down 16%.
However you may see within the slide that if we examine six months intervals, we now have a powerful growth. And underlying this, we now have our capital below administration that’s declining lower than the markets. So we see much less of an influence from securities and we now have flows which are greater than available in the market.
Beneath cost charges, that’s what you see within the center, and right here, we see these days a constructive growth. And we additionally see that we’re shifting away from the COVID pandemic, and that is one thing that’s trending upwards, so which is nice. And different charges and fee, roughly flat.
After which bills, if we have a look at the event, we’ll begin with the six months interval, evaluating the primary six months to final 12 months, and we see prices up 3%. But when we glance to the left at these totally different steps, we see that we now have FX results up at 2%, which signifies that — nicely that brings us to 1%. That must be defined. After which we now have the Oktogonen, eradicating 1%. After which we now have 2%. And we see that we right here have a powerful growth with regards to growth bills, which is the place we’re investing sooner or later.
And on the identical time, we’re making underlying companies extra environment friendly. And that is one thing that we like. We wish to allow investments sooner or later similtaneously we turn into extra environment friendly. If we have a look at the quarter, it is even much less of a change. And right here as nicely, we will alter for FX and the Oktogonen. We see underlying bills up 1%. Underlying bills are up 1%, with differences due to the season, that is simply pure and it’s a very low enhance in bills. And nothing dramatical in any respect, with regards to bills. We proceed to speculate for the long run and we make our enterprise extra environment friendly.
And with that being mentioned, nicely, I hand again over to Carina.
Carina Åkerström
Effectively, thanks, Carl, after which if we’re to summarize, we now have a very good first six months in 2022. Now we have good development in our enterprise. The financial institution is well-positioned for the scenario that we’re in. NII document excessive, capital scenario is excessive and credit score losses nonexistent. So I’ve to say that we’re robust, steady and that this can be a very good feeling.
And with that being mentioned, nicely, I hand again over to Louis. After which we’re to conclude this broadcast and there shall be a brief break. After which in a few minutes, we’re going to have our Peter Grabe, Head of Investor Relations that can begin the phone convention. And details about tips on how to log in, you’ll discover below handelsbanken.com Investor Relations. So welcome to the Q&A session that shall be in English. Thanks.
Query-and-Reply Session
A – Peter Grabe
Howdy, and welcome again, everybody. We at the moment are prepared to start out the Q&A session. So operator, may we please have the primary query?
Operator
Thanks. And the primary query comes from the road of Magnus Andersson from ABG. Please go forward.
Magnus Andersson
Sure. Good morning. Beginning with NII, on margins and volumes there. To start with, after I have a look at this Slide 22, the place you may have the quarterly breakdown, the quarterly NII Bridge, I used to be simply questioning in case you may break down the SEK195 million there, internet impact on margins, funding prices and residential markets by market. It appears to be like like it’s a fairly massive share on the UK. However in case you might be a bit extra particular there. After which secondly, simply in case you may affirm that the minus SEK95 million you took in your liquidity portfolio from shifting it from Finland to the Netherlands, that it is included within the minus SEK19 million there in different.
Secondly on volumes, simply questioning in case you may say one thing concerning the sustainability of the robust company mortgage development in Sweden. And secondly, you repeatedly talked concerning the robust quantity development and good quantity development within the UK. It is the second quarter in a row, however I do not actually see it on Slide 18, at the very least within the Reality Guide. So I see the margin impact, I see the price impact within the UK driving earnings, however I do not actually see volumes there. In case you may say one thing has are available in in direction of on the finish of the quarter or the way you say that?
Lastly, simply on a extra strategic observe, I noticed you took a provision within the Finnish operations for potential future bills associated to the looming divestment there. Ought to we learn something into that in any respect? Why are you doing it this quarter? That is all for me.
Carl Cederschiöld
Okay. Thanks, Magnus. I am going to begin, after which I feel I am going to want some assist from Peter in a sec. However let’s begin then with the NII. What I can say concerning the margin growth within the NII is that if we break it down on a basic perspective, initially, within the markets, you may say that the Norwegian market, we nonetheless have not actually thorough follow-through in margins, and that is as a result of we now have discover intervals in Norwegian. In UK, as you say, we now have a powerful margin growth pushed by the deposit margins primarily.
In Sweden, we even have a reasonably good margin growth, under no circumstances within the magnitude as we do in UK, however however. And in Netherlands, we nonetheless do not see a margin enlargement, and that is clearly as a result of ECB being a bit in a while within the cycle vis-à-vis the opposite ones. However I am going to need to ask Peter to dig into the elements of the SEK195 million, which you have been asking for.
After which the liquidity portfolio impact, sure, the SEK95 million is within the different margin, the adverse SEK19 million. And what you may say about that’s that if we see ECB mountain climbing charges and go into constructive surroundings that SEK95 million will most definitely flip into constructive over time.
Then as you say, in quantity phrases, sure, we see robust quantity in Sweden. And looking out forward there, I imply, I feel there’s loads of pure traits, clearly, round proper now. However what we will say is that there are clearly a motive to be — motive to — there’s a danger that we see a bit much less of a credit score enlargement occurring, clearly sooner or later. However having mentioned that, I feel that on the company facet, clearly, they’ve a reasonably difficult market in funding themselves through the bond markets.
So we deem that we’re a financial institution who can assist positively our core purchasers and we shall be there — we’ll attempt to be there for them. And that is a very good scenario to be in. So I do suppose that we enter a section of the market the place we may, in relative phrases, take good market shares with regards to the company markets. As you say in UK, no, we do not see quantity development as of but in a very good magnitude. We nonetheless wrestle on the family lending there. However on the company facet, as Carina additionally alluded to within the press convention, is that we now have exited some volumes from an AML perspective. So you do not actually see the underlying development of the company lending development there.
So we now have a powerful pipeline and we really see some respectable development there as nicely on a gross stage. The provisioning in Finland, no, you should not learn any long-term penalties out of that one. That is simply one-offs, which we — after we know that one-offs will come, we provision for them instantly. So no long run penalties.
Peter Grabe
After which simply to get again to your first query concerning the margins and funding results per nation, we write explicitly within the report within the respective segments the magnitude, so you may simply discover the figures there.
Magnus Andersson
Sure, okay. Thanks very a lot.
Operator
And the following query comes from the road of Maths Liljedahl from SEB. Please go forward.
Maths Liljedahl
Sure, good morning. My follow-up there slightly bit on NII. We now see a steep fee hike. When do you consider that you’ll really want to present one thing to the consumer right here when it comes to deposits, i.e., when the speed impact abates? And I assume there’s just one fee hike within the present numbers. Then sure, we may follow-up on the buying and selling losses. I simply see that there is loads of fairly large enhance in derivatives within the quarter, as much as SEK55 billion. Is that in any method linked to hedges? Or ought to I learn something into that? We will begin there.
Carl Cederschiöld
Thanks, Maths. I feel clearly, there’s a lot shifting components proper now within the NII with regards to margins. And as you say, sure, within the early mountain climbing season we give pretty little to the purchasers. However I do suppose it is very, very onerous to reply that query simply purely on the magnitude, the worth we give to the purchasers on the deposits.
I do consider that with regards to the general margin perspective, on each lending and deposit facet, as I say, we have seen some enhance now from a number of years of really gradual downward strain which I feel is just not — it is positively not an outlier. It has thus far come through elevated deposit margins. However the way in which it can play out sooner or later, I feel will probably be a matter of the aggressive panorama, each in lending and in deposit phrases.
We clearly monitor fairly a little bit of deposits. So from simply demand and provide issue, one may argue if we have to hike it. However over time, we’ll play within the aggressive sphere. So we’ll alter to the degrees which we see. However my predominant conclusion is that it is not that on a margin stage we do not see — it is not that we see excessive ranges of margins right here. However I do suppose you may’t choose the deposit and the lending individually.
The NFT, no, you should not learn something within the elevated spinoff volumes there. Fairly, as we have mentioned, is that we see — we slightly — we divide the NFT into three elements, roughly. And you may see it on the Slide 25 within the pack that, initially, we clearly have a roughly markets and funding banking enterprise mannequin which is client-driven. And on the inexperienced bars on Slide 25, you may see that they moved down a contact this quarter, however no dramatic there.
Then second of all, we clearly have — initially, we provision for the life pension for the assured pension system. And that is included within the mild blue bars. And secondly, in these mild blue bars as nicely, it is included all of the hedging we do for all of the short-term lending, et cetera. And with the actions you have seen within the currencies now which does not transfer fully in tandem, that impacts that negatively this quarter.
And thirdly the liquidity portfolio, which is the pink bars then, which we now have damaged out on the best facet of the slide the place we embody the NII part in grey bars vis-à-vis the pink bars, the NFT part of the liquidity portfolio. And as you may see at the hours of darkness blue line there may be that it hits us fairly negatively this quarter. However each the pink bars and likewise the sunshine blue bars, we expect there’s — positively they may come again over time, the vast majority of them. So we see pretty little long-term penalties from it.
I feel that with regards to the derivatives, the amount will clearly be quite a bit affected from the market valuations. And when the actions turn into as large as they’re, they develop in measurement. So that you should not learn any long-term penalties into it.
Maths Liljedahl
Okay, thanks. Very clear.
Carl Cederschiöld
Thanks.
Operator
And the following query comes from the road of Andreas Hakansson from Danske Financial institution. Please go forward.
Andreas Hakansson
Thanks and good morning, everybody. Simply going again slightly bit to NII. We heard SEB yesterday discuss mortgage margins and the way in which they checked out it simply assume that every one mortgages have been funded with lined bonds. They mentioned that margins are happening sharply. However clearly, that is not the case. And I assume you may have some 45% of your mortgages funded with lined and the remainder are deposit funded. So may you inform us, in your precise funding value of mortgages, the place do you see that mortgage margins are going in the meanwhile?
Carl Cederschiöld
Effectively, I can attempt to begin after which, Peter please fill in. I feel that for a few years now, we have clearly seen — initially, we have seen a second the place banks are being extra within the mortgage market. So roughly all of our greater banks are specializing in the mortgage markets now. Then we have seen the brand new disruptors coming in, which fund themselves — which roughly dropped [ph] mortgages and so they fund themselves through the pension funds then.
I do suppose that, initially, what we have seen these days now’s that the funding value for the disruptors are being extra — it will increase greater than it does to the banks and the bigger banks. So clearly, we fund ourselves by — to a excessive diploma, lined bonds, but additionally deposits in that market and clearly senior funding as nicely. So we do suppose that from a margin perspective, I see little structural motive to consider that the margin strain should not abate, all else equal.
So I look pretty constructive really on the margin perspective with regards to the mortgages. And I do suppose that it’s going to, over time, the competitors ought to loosen a contact. And all else equal, the bigger banks ought to have a reasonably respectable place there. Then I need to go — allude to the reply to Magnus’ query earlier on that, what is going to find yourself on the lending facet vis-à-vis the deposit facet? I do not know.
Andreas Hakansson
Sure, honest sufficient. One other query. There’s been a lot noise within the final quarter about asset high quality, significantly associated to, I assume, each family actual property in Sweden, however specifically business actual property. Because you’re one of many greatest participant in each fields, may you inform us what you see and what you really consider is the proper determine?
Carl Cederschiöld
Sure. I imply, initially, I feel we will go to the Slide 27 within the pack. We have tried to interrupt down our publicity now. To start with, clearly, we enter a troublesome market now and I feel you actually must be humble in these cases, clearly. And what we have performed on Slide 27, we have damaged down the publicity we now have to the actual property. And clearly, sure, we’re an enormous financial institution with regards to lend to the actual property market.
As you may see there, we’re ranging from the underside. Kind of half of our lending is family mortgages. Then on prime of that one, we now have one other 11% vis-à-vis housing co-ops. So 60% of the lending base is in direction of households. After which on prime of that one, we now have roughly 30%, which is lending to corporates in actual property. And half of that’s business actual property, half of that’s residential actual property. And the consequence of that is that we solely have 12% left in lending to different corporates. And one of many key pillars, which we have at all times guided on with regards to our credit score coverage is that we love to do securitized lending.
And I do consider that whenever you look into this, I feel that the markets will face challenges. If it involves family, will probably be greater charges or greater inflation figures. So will probably be strained. In terms of the CRE and residential actual property, will probably be slightly about falling valuations on their portfolio, and it might be concerning the rental ranges, the vacancies. What we’re extraordinarily agency on and what we have at all times stood agency on is that we like good purchasers with strong money flows. In case you clearly have strong money flows, you might be seemingly to have the ability to pay your debt.
We just like the robust homeowners. If their money flows transfer into downside, we like them to have the ability to pitch in additional collateral. We love clearly low [indiscernible] ranges and that is why we’re populated in areas and we wish to lend to areas which we deem possible in that sense. After which clearly, we talked lots about securitized and low mortgage to worth. In order that’s actually the pillars of ours.
And I do suppose that what Carina was saying, the asset high quality we now have, we actually like this part. Clearly, you see that the actual property market are below pressure now. And you may clearly — it’s a matter of that the lending charges for them in the meanwhile are beneath the yields of their portfolio. And this must discover a stability over time. And that might have an effect on, clearly, the valuations of the portfolios. I feel a financial institution like us with a powerful stability sheet we now have, with the purchasers we like, we’re in a very good scenario to truly discover enterprise alternatives on this market. And we like — it’s these type of markets the place we usually have a tendency to truly enhance within the relative area.
So I do not know if you wish to add one thing, Carina or Peter there.
Carina Åkerström
No, I feel that you simply summed it up fairly nicely really. And I imply, you mentioned the whole lot. Once we stress this portfolio, we will see that we do have prospects with good margins. And from our perspective now, we will not see any adjustments within the close to time really.
Andreas Hakansson
Okay, thanks. That’s it for me.
Operator
And the following query comes from the road of Nicolas McBeath from DNB. Please go forward.
Nicolas McBeath
Thanks. First query on the company margins. Your friends yesterday made some upbeat feedback on the outlook for company lending margins given widening credit score spreads this 12 months. So do you share comparable optimism for company repricing? Sure, that is my first query, please.
Carl Cederschiöld
Hello, Nicolas. Thanks for the query. Sure, I imply, I feel on the company sector, the capital market has positively cooled off to fairly some extent. And I do suppose there is a danger, clearly, that you simply see the credit score demand as nicely cooling off on an absolute stage. However clearly, when the financing capabilities of the bond markets are going away, the relative demand on the financial institution financing are rising. And we’re in a very good scenario to assist that.
Now we have good capital scenario and liquidity scenario. So sure, I do consider that there’s clearly good motive to consider that the margins ought to enhance. As a result of clearly, in case you look — and that is very true with regards to the actual property market. In case you have a look at the financing value within the bond market vis-à-vis the financial institution market, I feel they’re at very, very excessive historic ranges. So that ought to, all else equal, clearly level to greater margins going ahead.
Nicolas McBeath
Thanks, after which one other query on mortgages and the NII. So wanting on the reactions after the Riksbank’s April fee hike, I feel your checklist costs have been elevated fairly rapidly. However then negotiated charges that you simply printed, they have been slower to extend. So what are you able to say concerning the timing of the repricing in your mortgage guide? How massive lag impact do you see from the speed hike? And do you anticipate continued tailwind to your Swedish internet curiosity margin based mostly on the April fee hike from maybe a delayed pass-through to mortgage debtors?
Carl Cederschiöld
I — please, Peter fill in, in case you — I do not suppose — we can’t play this as a robotic. We’ll clearly at all times play it from a aggressive perspective. We’ll alter after we suppose it is possible to regulate and accordingly to the aggressive panorama. I do not — however having mentioned that, I imply, I feel that the general margin growth now in Sweden is sort of constructive. Sure, it is pushed by the deposit facet clearly and we nonetheless see downward strain from the mortgage facet. However as I mentioned earlier on, I do suppose that wanting ahead, I do suppose it’s kind of extra constructive marginal panorama.
So I do not suppose — we will not information how we’ll behave ourselves going ahead. We’ll slightly adapt to the aggressive panorama.
Nicolas McBeath
Sure, positive. However I imply, not making an attempt to determine how you may behave going ahead, however simply in case your mortgage guide can be at an identical stage because it was by the tip of the quarter, would that provide additional tailwinds to your NII? Or is the influence from the speed hike in April. I imply how a lot of that’s mirrored within the Q2 NII?
Carl Cederschiöld
It is really pretty troublesome to quantify that, so I am afraid we’ll need to cross on that query and get again when we now have Q3, when we now have a full quarter after the beginning of fee hikes in Sweden. Then we’ll in all probability have a greater evaluation.
Nicolas McBeath
Okay, thanks.
Operator
The following query comes from the road of Omar Keenan from Credit score Suisse. Please go forward.
Omar Keenan
Good morning, all people. Thanks for making the time. My first query was on capital planning, please. So that you made a remark about business actual property and the truth that rental yields are at the moment beneath funding prices which could result in asset value falls. And I would actually agree with that assertion. I hoped you may give a little bit of a sensitivity as to what the influence of score migration is perhaps on the capital depth of the guide.
So if I have a look at the property firm’s danger weight it is 16% at the moment, and it was 22% in 2018. And I perceive that there is some LGD flows within the guide. However I hoped you may give us some sensitivities of what LGDs would possibly do. And in addition, extra typically, if we get some score migration, say, equal to a one notch downgrade on 20% of the guide, are you able to give us some indication of what that does to RWAs? And simply on a associated level, is there something you may inform us concerning the IRB overhaul? Thanks.
Carl Cederschiöld
Thanks for the questions. Effectively, initially, let me begin with the capital scenario. Sure, as you say, we’re in a very robust scenario there. We predict that is actually, actually good to enter the markets the place the demand may enhance. And with regards to the sensitivity on the capital, we have been making — we have been making an attempt to make a message to all of you for fairly a while now that our capital scenario is far, far more steady than it has been up to now. And the rationale for that one is, initially, clearly, pension system which we modified over the last years and with pretty good timing in really.
So with these fairness drops which we have seen, that will have been a headache had it been two years in the past. Then second of all, clearly, we now have now danger weight flooring or standardized fashions on roughly 70% of the portfolio. And that makes our common danger weightings on our portfolio a lot, a lot greater vis-à-vis our inner danger weights. So we may dwell with fairly excessive really danger migration or very excessive danger migration earlier than it actually hits on — earlier than it impacts the capital volatility.
And the IRB, we’re engaged on that one in UK positively. We work with a reasonably constrained PRA which is affecting the time schedule as nicely for it. So our greatest estimate is 2025 going into IRB. However as we have been highlighting as nicely, one should not anticipate us to go to a sophisticated IRB mannequin, slightly a basis IRB. However having mentioned that then, I feel it is extraordinarily spectacular in UK phrases to run a enterprise mannequin now, which we’re posting this quarter now 14% ROE below the risk-weighted belongings calculated on the PRA methodology and the capital ranges on the Swedish FSA perspective.
In order that’s clearly a very good scenario to be.
Omar Keenan
Is there any shade that you may give us when it comes to sensitivity within the business actual property guide? If we now have a discount in asset costs, at what stage that influence value pushed [ph] defaults?
Carl Cederschiöld
No, I do not suppose we will information on that sensitivity, no.
Omar Keenan
Okay, thanks.
Operator
And the following query comes from the road of Namita Samtani from Barclays. Please go forward.
Namita Samtani
Good morning. Thanks for the questions. I’ve acquired two, please. Firstly, when can we anticipate to listen to about extra capital returns, as a result of appropriate me, if I am mistaken, however there is a vital chunk of extra capital now, and the one headwind I can consider is the IRB mannequin adjustments, and there is really tailwinds such because the acquire from the Denmark gross sales? And secondly, wanting on the department numbers, they solely declined by two within the quarter, which I assume is lots lower than different quarters. So are we now performed with the vast majority of the department discount? Thanks.
Carl Cederschiöld
Thanks for the questions. Sure. To start with, clearly, sure, as you say, we now have a very good capital scenario, and we like that. We clearly enter fairly robust markets now the place with fairly excessive uncertainty on the demand stage. So we actually wish to be nicely capitalized within the scenario we go into. We positively — we’re at all times a financial institution who wish to run with the very best confidence and the very best stability ranges. And we do suppose that the markets we enter if the timing the place we must always play is unquestionably secure.
So it is a good scenario to have capital to have the ability to assist your core purchasers as nicely. The technicality is that, clearly, countercyclical buffers shall be reinferred. And once they’re totally loaded, that can add roughly 1.9 share factors. It’s going to add 1.7 share factors vis-à-vis a 12 months from now.
Then we now have on the constructive facet, clearly, sure, after we closed the Danish sale, we’ll get the money for that one, which is able to have an effect on it positively. And that can most definitely be between SEK20 billion and SEK25 billion in risk-weighted belongings dropping away at the very least. After which we now have the structural results the place the discussions are ongoing with the Swedish FSA and that is roughly hitting our capital ranges at the moment by 0.6 share factors.
And so we’re nonetheless shifting in direction of our goal vary. We wish to run the financial institution inside one to a few share factors below regular circumstances. However we actually do consider that the particularly excessive demand ranges we have seen really up to now now, it is a actually good scenario to be in them. And if we see as nicely UK shifting from contraction to enlargement, that is clearly going to be one thing as nicely being good to be nicely capitalized below.
Sure, you are most definitely appropriate, and we’re solely — that we’re dropping two branches this quarter. I really do not have the determine in my head. However as you say, you should not anticipate us to shut extra branches.
Carina Åkerström
And I feel that’s necessary to only add once more, I feel that could be a determination as nicely for the administration group in all our residence markets as nicely. So what we now have performed with the discount of the branches is to ensure that we’re positioned in these markets the place we will have a very good enterprise. So I feel that is what it’s best to learn into this. And I imply Sweden is a very good instance for that.
Namita Samtani
Okay, sorry, simply going again to the surplus capital query. Are you going to present us a timeframe of when you are going to come again when it comes to speaking to us when you are going to get again to your goal vary?
Carl Cederschiöld
Sure. I imply, clearly, after we shut the Danish deal, positively, then we get much more capital, it’s best to anticipate us to get again then and discuss it.
Namita Samtani
Good. Thanks very a lot.
Operator
The following query comes from the road of Rickard Strand from Nordea. Please go forward.
Rickard Strand
Hello, good morning. First off, a query on prices. You beforehand talked concerning the SEK3 billion of gross value financial savings that you’ve got focused. In case you may give us an replace the place you might be on these, how a lot continues to be within the making and what might be left, so to say? And in addition, a follow-up on that one. You beforehand additionally talked concerning the SEK1 billion of elevated IT spending over ’21 and ’22. We’re now within the second half of ’22, so in case you may give any taste into what you anticipate there within the coming years as nicely.
Carl Cederschiöld
Positive. Let me begin, after which Carina would possibly fill in as nicely. I feel the general message which we have been saying is that we thought the financial institution was operating a bit inefficiently a number of years in the past. So we would have liked to regulate that and we did some hefty plans really which then — the consequence of that one was this system round SEK3 billion value. So we come fairly far in that one. We have come a bit greater than SEK2 billion in that one. And the remaining half continues to be the reviewing of the additional enterprise and it is also some components within the Swedish total operation.
What we have additionally guided on then is that now after we come fairly far within the turnaround of the financial institution, we actually just like the positioning we now have. We do consider we’re in a agency scenario, each in Sweden, Norway, UK and Netherlands, and we actually wish to strengthen our perspective there. And that is the rationale why we have been highlighting that we might slightly steer ourselves on value to earnings ranges. So we expect it is much less related to speak about all of the gross elements these days within the P&L. Fairly, it’s best to see ourselves focusing on, strengthening our positioning in all of those residence markets and likewise work on the effectivity half.
And sure, we clearly spent an SEK1 billion for 2021 and 2022. We’ll clearly come again when we now have additional steerage to present on that one. However view us as steering in direction of value to earnings and we wish to create much more effectivity within the financial institution as we run it at the moment, but additionally make investments for the long run.
Rickard Strand
Okay. Thanks. Then a query on Swedish business actual property, the place you grew SEK10 billion within the quarter, it appears to be like like. Simply wish to hear in case you may say something concerning the limitations when it comes to your danger urge for food framework right here, if there’s loads of head room forward, or if there are any limitations there that makes you type of cautious to take part in any future quantity development there.
Carl Cederschiöld
As I mentioned earlier, I’ve observed that one in every of our friends are guiding to strict limits within the publicity in varied elements. We like good purchasers with robust money flows. We like robust homeowners. We like positions the place you may really discover low vacancies. We love to do securitized lending. And we love to do mortgage to values. So that is the credit score coverage we run. We do not steer ourselves on a portfolio composition or so. So we haven’t any type of fastened ceiling.
Rickard Strand
Okay, thanks.
Operator
The following query comes from the road of Sofie Peterzens from JPMorgan. Please go forward.
Sofie Peterzens
Sure, hello. Right here is Sofie from JPMorgan. So when it comes to your mortgage loss provision, they proceed to be very low, one foundation level. I used to be simply questioning tips on how to type of take into consideration the Stage 3 protection, which appears to type of be trending — proceed to development downwards and is now beneath 24%. And I additionally observed that the precise losses proceed to be a lot greater than the online credit score losses booked within the quarter and we now have seen this development now for a number of quarters. So I imply, at what level do you suppose you should type of enhance your provisions?
And the way a lot type of these overlay provisions do you continue to have that you may mainly take benefit to type of — sure, to attract on [ph] to cowl precise credit score losses. So that will be my first query. My second query can be across the Swedish FSA, IRB overhaul. In case you may type of give any impacts that you simply anticipate? Or are there any reclassifications of the portfolios that you simply’re anticipating and type of your ideas about after we ought to anticipate the influence and what magnitude. That might be my questions.
Carl Cederschiöld
Sure. Thanks, Sofie, for the questions. To start with, clearly, the mortgage loss, as you say, clearly, we now have a very low internet Stage 3 perspective. However I feel you should learn this within the context of, initially, we have been speaking fairly a very long time across the restructuring of the financial institution is pointing to a greater asset high quality. And we have been understanding various what we noticed earlier on as exposures with a bit of upper credit score danger in. So I feel we now have a structural development in direction of a greater asset high quality.
Then clearly, the online credit score losses, they’ve a part of, initially, clearly, the Stage 3 elements. However additionally they have then the elements of write-offs and recoveries. And each quarter, we see each a number of. And we have grown used to now — and I feel I have to say knock on wooden, however we now have grown used to for fairly some quarters now to see very, very low precise credit score losses. So clearly, then the write-offs and the recoveries are literally to greater absolute numbers. And we like that.
So I feel it is extraordinarily onerous to information on something. I do not suppose you — we see — we do not see something at the moment that are pointing to greater precise credit score losses. As Carina was saying, clearly, the macro local weather will most definitely have a danger of reducing even additional. And we do clearly enhance the add-ons to some extent as nicely. And please, Peter add one thing if you wish to.
Peter Grabe
No, I am simply referring to your query concerning the protection ratio in Stage 3, clearly, there are exposures shifting out and in of Stage 3. And relying on the collateral construction of that lending, the protection ratio varies over time.
Carl Cederschiöld
And to your second query, the IRB overhaul, sure, we haven’t any steerage to present you there. We’re nonetheless ready on the Swedish FSA and we’re working with that one. So the consequence of that one, we do not see any main penalties from it.
Sofie Peterzens
Do you suppose IRB overhaul may have a really restricted influence on Handelsbanken?
Carl Cederschiöld
Agree.
Sofie Peterzens
Okay, that was very clear. Thanks.
Operator
The following query comes from the road of Riccardo Rovere from Mediobanca. Please go forward.
Riccardo Rovere
Good morning, all people and thanks for taking my questions. I’ve a pair, if I’ll. On growth bills, they maintain — as an example, are trending slightly bit greater or at the very least remaining steady. Are we nearer to the height of those bills or these are alleged to proceed roughly as they’re for the foreseeable future? After which the second query I’ve is, once more, on credit score losses, if I’ll.
Earlier than you acknowledged that you simply see some pressure in the actual property market. However alternatively, you say you identified the LTVs in residential mortgages and in business actual property as being within the 50% area. Truly a contact decrease, if I bear in mind accurately. Contemplating this, do you suppose we must always — the market needs to be involved about actual property market to you? As a result of a 50% LTV would mainly indicate you would wish a drop, a collapse in actual property market earlier than denting into your asset high quality. May you share — would you agree with that? Thanks.
Carl Cederschiöld
Effectively, initially, on the event expense, as you mentioned, sure, we have clearly — over the last 12 months and this 12 months, we’re clearly seeing the development of elevated growth spending quite a bit. So that’s shifting in keeping with plan and that is what we have been guiding on. Going ahead then, clearly, the consequence on growth spend going ahead and into 2023, we might want to get again on. As a result of, clearly, as we are saying, we wish to put money into strengthening the positions within the marketplaces we’re in. We just like the scenario we’re in. So — however we’ll get again to that one on different quarters.
In terms of the credit score losses, sure, as you say, we now have a slide, I feel it is Slide 28 maybe. Sure, slide 28. As you say, we present the LTV there on the business actual property and the residential actual property in all of our markets. And as you say, they’re 50%, a really, very low part is above 75%. So sure — and I maintain coming again to that, the credit score coverage we now have. I imply we like good purchasers with robust money flows. We like robust homeowners. We like securitized lending. And we like low LTV. And that is many pillars of safety.
So initially, if they cannot pay their payments, then the homeowners in lots of instances really do enter the image. And that was the consequence after we moved via the pandemic. Then clearly, if that does not maintain both, we have in very, only a few instances, if any, misplaced actual cash and made actual credit score losses after we really took the collateral in hand.
So sure, I agree with you. To start with, the market ranges have to drop massively to ensure that the collateral to be decrease worth vis-à-vis the mortgage. However then alternatively, we now have ended up up to now, clearly, with conditions the place we now have took the collateral and positioned packages as an organization or so and offered it off and regained all of the publicity or a bit extra really.
Riccardo Rovere
Okay. Thanks, very clear. And if I’ll follow-up on one other subject. On capital return, now you — in some unspecified time in the future, you may be given regulatory approval for the sale of the Danish operations. Inform the market one thing about capital return. Will you wait to have accomplished, together with regulatory approvals, additionally the Finnish one or could finally give us a greater thought solely with Danish one?
Carl Cederschiöld
The way in which we’ll deal with it’s that when we now have the money within the financial institution for a part, we shall be clear the way in which we use the money. So we is not going to speculate on the result of Finland earlier than we now have any clear factor there. And clearly, I perceive you need the readability round when components of the part of the capital base. However I really do suppose we’re in such an unsure time as nicely with regards to {the marketplace}.
So we do not discover it difficult that we’ll most definitely shut, clearly, the Danish enterprise within the fourth quarter coming again then with a clear view tips on how to use the proceeds. And if we’re in a scenario at the moment, sure, in fact, we’re very nicely capitalized. However who is aware of the demand facet for bilateral lending for the following six months in a market the place the capital markets are actually constrained really there. So we’re in a very good scenario, however we’ll come again as quickly as we will.
Riccardo Rovere
Thanks, very reasonable reply. Thanks.
Operator
And simply to make you conscious, because of cut-off dates please restrict your inquiries to one by one. And we now have a query from the road of Jacob Kruse from Autonomous. Please go forward.
Jacob Kruse
Hello, thanks. So only a fast one on the sale of the Danish enterprise. So Jyske couldn’t take all the company guide. So I simply puzzled how has that been handled in Q2. Do you may have a stream again of company lending into the core from discontinued? Or is it simply accounted because it was and can we get any type of shift in Q3 or This autumn? Thanks.
Carl Cederschiöld
No, they’re nonetheless accounted on being up on the market, that part. So no, that can work out over time, the way in which we’ll deal with it between us and Jyske.
Jacob Kruse
And the way a lot NII do you suppose that shifts from discontinued into continued?
Carl Cederschiöld
We must get again on that one. We do not know. I do not know the reply to that query.
Jacob Kruse
Thanks.
Operator
And the following query comes from the road of Robin Rane from Kepler Cheuvreux. Please go forward.
Robin Rane
Sure. Good morning. So on the NGL losses therein and also you confirmed the slide the place you — so let me see the slide, slide 5, the acquire on the NII there with the counterpart of the loss on the NFT line, will the NII a part of that normalize as nicely, you suppose, over the following couple of quarters?
Carl Cederschiöld
Sure. I imply the — what is going to normalize on that image is most definitely the blue line. If charges transfer up in an absolute time period, clearly, the constructive facet on the NII will enhance with that one. So the grey bar will transfer up. However the financing value of it can additionally transfer up in an absolute time period. So the pink bars will enhance in scale as nicely. However the blue line ought to revert in direction of being barely adverse.
Robin Rane
Okay. However the absolute determine of NII this quarter, was that by some means elevated by this, would you say?
Carl Cederschiöld
No.
Robin Rane
Okay, all proper, thanks.
Operator
And the following query comes from the road of Jens Hallen from Carnegie. Please go forward.
Jens Hallen
Thanks, sure, and only a follow-up on the business actual property guide. And I do know you present loads of knowledge and collateral appears ample. One factor I’m wondering in case you may share with us is a few type of liquidity stress on your largest prospects. I imply, at what level does that service turn into a pressure? Do you consider bond market closures when stressing these exposures? And the way do you view that on the danger facet, not on a credit score danger, however as a liquidity danger for the business?
Carl Cederschiöld
To start with, I feel, two methods, and I do not know if I will reply your query fully now, however let’s attempt it out first. To start with, clearly, we clearly run a financial institution who play extraordinarily conservative with regards to the liquidity. Now we have in absolute phrases, we now have SEK1 billion — we now have SEK1,000 billion in liquidity reserves. And that is other than non-encumbered belongings. So — and we actually like that. We predict there is a danger of liquidity proceed being strained available in the market. So we will certainly play it extraordinarily conservative right here.
Then with regards to the utilization of RCF for ensures of that, we clearly noticed an enormous volatility in that within the first quarter, second quarter on the pandemic, the primary and second quarter of 2020. We do not in any respect see the magnitude as that at the moment. So we do not see any unstable part really within the drawdowns of liquidity from the CRE. We will not discuss from a market basic perspective there, I can solely discuss from the Handelsbanken perspective there.
Sorry, did we drop you right here? Do you hear me nonetheless?
Operator
Jens dropped sadly, so perhaps he’ll dial again in. Within the meantime, we will simply perhaps go to the following query, which is from the road of Maria Semikhatova from Citibank. Please go forward.
Maria Semikhatova
Hello, thanks. Only a fast query on as nicely, business actual property in Sweden. I see that your Stage 2 loans elevated by SEK3.8 billion over the quarter. It appears to be residential property firms in Sweden. Simply perhaps in case you may present a bit extra shade in your standards whenever you reclassify to Stage 2. If there may be something you may say what brought on this migration within the quarter.
Carl Cederschiöld
No. I imply Stage 1, Stage 2, initially, they’re model-driven. And clearly, that might — I feel we have to look into this and would possibly get again to you. However clearly, after we change the add-on as nicely for the geopolitical danger which may have a consequence right here. So we’ll look into your — please have a name with the IR individuals and we’ll see if we may also help you, however I am unable to reply that query proper now at the very least.
Operator
And we simply have one follow-up from Andreas Hakansson from Danske Financial institution. Please go forward.
Andreas Hakansson
Sure, hello. With respect to business actual property, there’s been a lot dialogue round it. And also you talked concerning the LTV that you’ve got of fifty% and the dangers associated to it. However in many of the CRE firms, you’d have loads of fairness, hybrid bonds after which the financial institution debt. May you inform us the place within the capital construction would you sit? And what must be while earlier than we begin to eat into the banks. And may you inform us slightly bit about your positioning inside that?
Carl Cederschiöld
Effectively, Peter, please help me on this one. However I imply, and I feel that is fairly a — let me reply this query like this. I feel at present, you may have extra historical past within the markets than I do, so you may maybe appropriate me, Andreas. However I do suppose the distinction between the financing value within the bond market now vis-à-vis the borrowing value from the financial institution system is most definitely at very historic highs.
However you may’t examine them as a result of they are a bit apple to pears, as a result of if we lend to an actual property firm, we do it collateralized. So it each it comes with a value to the money flows or a stamp obligation in some sense. And in addition, clearly, they should publish collateral. And that shall be a constraint on the score perspective on the bond packages. However with regards to the capital construction, I assume, we have to wipe out — clearly, you wipe out fairness, you wipe out the hybrids, you go down the senior after which we now have — then we have lent senior securitized.
So I assume that is appropriate, however I am my companions right here to help me. However that is the way in which I motive it.
Andreas Hakansson
Sure. So in case you return to the early ’90s, which was earlier than all our time actually, I imply then there have been no bonds or hybrid something earlier than. Weren’t then the banks doing all their lending as much as LTVs that have been considerably above or is {that a} large distinction now to then? Or how ought to we view it?
Carl Cederschiöld
No. I feel, clearly, initially, I really want to reveal that I wasn’t right here then. And I feel there’s been lots written about this, clearly. However I do suppose you may have some extent and I’ve seen it within the media as nicely, individuals highlighting this. Clearly, at the moment being, whenever you opened up the banking sphere, whenever you de-monopolized the enterprise mannequin, clearly, the banks have been chasing development. And clearly, they have been lending to very excessive LTV ranges, generally really greater than 100%.
I feel that we have grown lots. To start with, the financial institution’s grown used to, we do not wish to go above. However then second of all, clearly, the regulators have grown used to a banking system which is so massive now vis-à-vis the Swedish GDP and the society. So they should regulate it fairly robust. And that is the rationale, clearly, that we now have each a lot decrease LTV, but additionally a a lot greater capital stage and the whole lot in place. So I do not suppose you may examine the scenario at the moment in any respect with the ’90 disaster.
Andreas Hakansson
Okay, thanks very a lot.
Operator
And we simply had another query coming in from Piers Brown from HSBC. Please go forward.
Piers Brown
Yeah, good morning, all people. I am sorry for belaboring the purpose, however simply on property once more. I imply, are you able to inform us simply on a primary stage whenever you do your enterprise planning, what property value assumptions are you utilizing for Sweden? I imply, do you assume reasonable declines from right here? Do you assume costs stay flat? And in case you may share with us when you consider draw back eventualities, tail dangers, I do know a few of your friends printed their ICAP stress check assumptions. However may you inform us, whenever you do stress testing, what kind of draw back eventualities are you for property costs within the home market? Thanks.
Carl Cederschiöld
We flip via the pages right here.
Peter Grabe
However the data — you discover details about the eventualities in reporting. And in case you do not discover it, simply attain out and we’ll information you to it.
Carl Cederschiöld
And that is — and the rationale for that one is clearly that, initially, clearly, after we enter this, we enter this within the stress mannequin of the ECLs, clearly, each the bottom case and the upside and the downturn. After which we clearly calculate the ECLs. And as we have been saying all through the pandemic, we get pretty little correlation between macro elements and the result of the ECL. And the rationale for that one is that we have gone via loads of cycles with very low correlation to the credit score losses. And that is the rationale why we do the add-ons. And in addition, that is the rationale that you simply would possibly really ask that in your query that after we plan for our enterprise going ahead.
So clearly, the way in which we worth then the housing and the collateral and the whole lot, that is an enormous part in our determination across the credit score determination. And final data, you discover it on Web page 34 within the report, all of those assumptions.
Piers Brown
Okay. That is useful. Simply — I am simply considering again to final 12 months, we clearly had the EBA stress checks which have been performed on, I feel, 40% drawdown in Swedish business property costs. And I feel in that check, you confirmed a 3-year impairment fee of about 200 foundation factors. I imply, is that simply — ought to we simply fully ignore that? Do you suppose it is simply not related to the present context?
Carl Cederschiöld
I feel all the exterior stress checks performed on the financial institution do have a really excessive diploma of top-down perspective. And I can see the rationale why they should do this type of evaluation. However we clearly have been operating a enterprise mannequin and actually do run a enterprise mannequin the place we attempt to have little or no dependency between macro elements and credit score losses. So you’ll have to — I am not going to evaluate their consequence of that one, however we see little or no rationality in that after we do our inner modeling.
Piers Brown
Okay, that’s very useful. Thanks lots.
Operator
I now hand the decision again to the audio system.
Carina Åkerström
Okay. If that’s the finish of all of the questions, I thanks very a lot for taking part throughout this phone convention, and have a good time, and thanks for at the moment.
Carl Cederschiöld
Thanks, everybody.