Danske Bank A/S

Claus Ingar Jensen - IR Thomas Borgen - CEO Jacob Aarup Andersen - CFO

Jan Wolter - Credit Suisse Anton Kryachok - UBS Jakob Brink - ABG Willis Palermo - Goldman Sachs Daniel Do-Thoi - JPMorgan Jacob Kruse - Autonomous Martin Brandt - Carnegie Investment Bank Per Grønborg - SEB

Thank you, operator, and I thank you all for taking time to listen into this call today. Today I have with me the CFO, Jacob Aarup Andersen; and Head of IR, Claus Ingar Jensen.

Slide 1 please. In today's call, we have the pleasure of presenting Danske Bank's financial results for first quarter of 2017.

We aim to keep this presentation to around 50 minutes. After the presentation, we will open for a Q&A as usual.

Afterwards, feel free to contact our IR department if you have any more questions on your mind. Slide 2 please.

With a net profit of DKK5.5 billion for the first quarter of 2017, we had a good start to the year. We continued on a solid path as our earnings came in 12% higher than in the same period the year before.

The result for the first quarter represent a return on shareholders' equity of 14.4%, in other words well about our longer-term financial ambitious of at least 12.5%. Our Nordic universal banking model showed that it's robust and we’re making progress executing on our strategy.

During the period, we saw increased customer activity across all our Nordic business units. Long growth for the group was up 4% from this same period last year.

We saw particular good inflow of new business in Norway and Sweden with positive effects from new and existing partnerships agreements. Improved macro-economic conditions in Nordic regions also contributed to the positive trend.

Developments in the financial markets in the first quarter also had a positive effect on the customer activity. The rebound in activity we saw in the second half of last year continued as various geopolitician events continue to favor in Nordic markets.

The high activity level had a positive effect on trading income and fee income that was also benefited from good demand in our capital market position. Expenses rose from unusual low level in the first quarter of last year as we booked higher activity based expenses and also increased IT investments because of our focus on a strong compliance organization and the utilization.

Credit quality remains strong in the first quarter as in the preceding quarter, we booked a net reversal which of course had a positive effect on the financial results. Our capital position remains solid, the core capital ratio of 15.5% which is about our target efforts, its net of the total share buying back program of 10 billion we're currently executing.

All-in-all a good start to the year and we're maintaining our guidance for the full year of a net profit in the range of 17 billion to 19 billion. I will now turn the presentation over to Jacob, who will take you through the financial results in greater detail.

Slide 3 please. Thank you, Thomas.

Let's take a look at the main items of our financial results. Net interest income came in at DKK5.7 billion.

This was 9% increase over the level in the same period a year before and it was driven by lending growth of 4%. In Q1, there were two fewer interest days than in the preceding quarter.

Net fee income came in at 3.9 billion, which was 14% higher than last year, when fee income was low because of subdued investment activity, the increase came from all of our business units. Net trading income came in at 2.7 billion that’s up 68% due to strong client activity at C&I primarily in the beginning of the quarter.

Other incomes felt significantly from the level of last year when we benefited from the sale of domicile property in Copenhagen. Adjusted for the sale, other income was only down slightly.

Looking at operating expenses, they were up 8% to 5.7 billion from an unusually low level last year which saw one offs and low customer activity. In the first quarter of this year, expenses reflect high activity and investments related to compliance and regulatory requirements.

The cost income ratio came in at 45.3%, that’s a decline of 1 percentage point from the year before. Finally, we saw net reversals of loan impairment charges of 0.2 billion as a result of improved credit quality at business banking in particular.

Slide 4 please, in the first quarter we saw good developments that are two Nordic banking units, personal banking and business banking. The improvement in the results was based on a general rebound in customer activity from the low level last year and also inflows of new business in both Norway and Sweden in particular.

In Northern Island, lower UK rates and increased expenses had a negative effect on the underlying business. That said let's take a closer look at the three units.

Personal banking delivered good results with profit before loan impairment charges up 9% to 1.3 billion. Total income was 7% higher than last year, owing to improvements in all income lines.

In the first quarter of last year, both fee and training income were adversely affected by low customer activity. Expenses were up 6%, owing primarily to regulatory driven investments and higher customer activity.

Impairment charges were low and I’ll comment on this later. The return on allocated capital on personal banking was 20.6%.

Total lending volume was up 3%, owing to growth in Norway and Sweden were lending volume measured in local currency rose 13% and 15% respectively. These strong gains came early from our partnership agreements.

In Denmark where volume was almost stable, the trends toward higher mortgage lending and lower lending in conventional loan products continued. In Finland, volume was up 1%.

Looking at business banking, we made good progress in all markets. Lending volume measured in local currency was in all markets, most notably in Sweden, were gross of 11%, followed by Norway and Finland where it was up 6% and 5% respectively.

In Denmark excluding the increments [ph] on our mortgage banks lending gross 4%. Overall profit before loan impairment charges were up 9%.

Total income at business banking was 4% higher than in 2016 while customer activity in Denmark in particular was low. NII and fee income benefited from higher lending and generally improved customer activity.

Expenses were down 3% owing to efficiency measures and despite higher regulatory cost. Impairments charges showed a reverse in the quarter, which I’ll comment on later in this call.

The return on allocated capital was 18.2%. Finally, Northern Islands, where the result was adversely affected by the depreciation of the British pound, up in the UK referendum last year.

Lower interest rate and restructuring cost also reduced to the report of sale from the level in the same period last year. Total income fell 10%, but adjusted for the depreciation of the currency it was down 1%, despite an interest rate cut in the UK in August.

Expenses were up 8%, again adjusting for these change rate effects they were up 19% because of restructuring costs, underlying cost in Northern Ireland were broadly flat. The return on the allocated capital was 15.9%.

In comparison with the preceding quarter however, profit before our low impairment charges was up 26%, we are taking good progress in the underlying business. Slide 5 please.

So then let's have a look at the units that are more dependent on the capital markets. At corporate and institutions or C&I profit before impairments rose 84% over the level last year, when challenging market conditions cause client activity to be low.

The higher activity this year which came from early in the beginning of the quarter was fuel by a number of geopolitical events as in the second half 2016. All business areas and C&I took advantage of opportunities that rising from high client activity and income exceeded the level in Q4 by 30%.

Total income rose 50%, owing to improvements in all the income lines. Fee income benefited from intense issuance activities within debt capital markets and good corporate finance fees.

The expenses were up 10% because of higher activity and positive one-offs in the first quarter of 2016. Impairments, which by nature fluctuate at C&I, amounted to DKK1.1 billion, the charges were primarily against this exposure to the oil sector.

Despite high activity of C&I capital consumption remains stable and was down slightly from the level in Q1 to Q4 because of the lower market risk. Then at Wealth Management, profit before tax was up 3% at the unit likely other business units benefited from improved market conditions and higher customer activity.

Fee income was up 13% from the level last year, mainly because of an increase in assets under management and higher customer activity. Expenses were up 11% because of higher activity and restructuring costs.

Assets on the management were up 8% from the level at the end of the first quarter last year. In Q1 this year net sales from asset management and premiums amounted to 21 billion.

Slide 6, please. Moving on to expenses, total expenses for the first quarter amounted DKK5.7 billion, that’s up 8% from the level last year.

The increase reflects an unusually low level in Q1 last year when we saw positive one-offs and no customer activity. Expenses in the first quarter were affected by high activity base expenses.

The increase in expenses for IT was driven mainly by regulatory requirements, compliance and digitalization. The higher run rate in the first quarter is not the indicative of a changing trend and we confirm our outlook for the full year for expenses to be somewhat lower than in 2016.

Slide 7, please. The positive trend in credit quality continued in the first quarter and as in the preceding quarter we had a net reversal for the group.

The reversal in the first quarter was DKK0.2 billion against net a net reversal DKK0.1 billion in the same period in 2016. The loan loss ratio for the quarter excluding non-core was minus 5 basis points.

With the net reversal of DKK0.3 billion, Business Banking had the largest decline has the positive effects of increased collateral values in the commercial policy segment mainly in Denmark continued. Market conditions for the agriculture industry improved slightly and charges against this industry were unchanged in Q1.

At personnel banking charges were very low but higher than the preceding quarter all into a technical adjustment on individual impairments. The credit quality of the portfolio remains strong and stable.

In C&I, we booked the impairment charges of 0.1 billion in the first quarter, mainly against oil exposure as we continued to see difficult market conditions for subcontractors in the oil and gas institute. In the regional impairments against this industry amount to 0.2 billion.

Collective charges stood at 1.2 billion broadly unchanged from the preceding quarter. Slide 8 please.

Our capital position remains strong, with a reported common equity Tier 1 capital ratio of 15.5%, which was above our target range of 14% to 15%. This expected decline from 16.3% at the end of last year was cause by a full deduction of the 10 billion share buyback programs which amounted to 1.2 percentage point decline in quarter one.

The total capital ratio was 20.4%, net of the share buyback down from 21.8% that ended 2016. The real level fell 16 billion in the first quarter, that is owing mainly to the implementation of a new IRP model for resell exposure in Finland.

That effected an amount to 15 billion. The leverage ratio was 4.1% according to transitional rules and 4.0% when the new rules are fully phased in.

Finally, the share buyback for 10 billion in 2017 is progressing according to plan. As of the end of the week 16, we have bought back close to 10 million shares by presenting a gross value of 2.3 billion.

Slide 9 please. On the outlook I will be very short, as Thomas mentioned in the beginning of the call we are maintaining our outlook for net profit for 2017 to be in the range of 17 billion to 19 billion.

The individual components are all also unchanged. Slide 10 please.

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 email.

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

So first Jacob on the cost there, I understand that the guidance remains, but still when we look at the cost run rate in the first quarter it's yielding diver conversions severance bay, than that's still suggest we could end up close to the 2016 level. So if I just annualize the Q1 level without the viral comp than it's around 21.5 and then adding, what could be paid in bonuses over the year than we get closer to last year's level.

So if you could just give us what kind of factors we should take into account looking at the Q1 cost base in terms of unusually high costs, so that's my first question. And the second one is one fleet.

When we look at the first quarter, again, if we annualize that level and I know that's not right because there are seasonality every quarter, but then we still would end up 8% to 9% above the 2016 level, so it does look like a very conservative guidance when you talk about somewhat higher fees in 2016. So any color on that or are you just being conservative here or is there anything else that we should think about?

So that’s my second question. And the third one is just, if you could update us on the NII sensitivity now for 25 bip or higher bip, 100 bip short rates please.

Thank you.

Okay thanks Jan, good question, so I appreciate your urge to annualize lot of numbers here, do appreciate that. And you seem faster annualizing the cost than these so, we'll have a conversation around that.

If we start with the cost, it is correct, as I confirmed just a second ago, we're confirming our guidance on cost. The higher run rate for expenses in the first quarter does not change anything in terms of the outlook.

The high IT expenses are expected to somewhat smooth in the Q4 seasonality. Obviously, that smoothening is something to activity levels when we get to Q4, but as you may recall and as I also alluded to a little bit here Q1 last year was exceptionally low.

So there was smoothening of seasonality. When we look at the data from Q1 '16 to Q1'17 that’s around 400 million on the cost side and as you know around the 134 that was one-offs, the rest can be split whether to be even be between bonus, severance, IT and rents from the sales and lease back.

What we made very clear is that we have been investing fully here from the beginning of the year especially on the digitalization agenda on the regulatory projects, you know there are many regulatory projects in European banks at the moment, whether it's under compliance side, [indiscernible] side or GDP or et cetera. And so we will not point to any specific items that were too high and will be going down, but we obviously ahead a number matches towards the end of last year, which will be coming through during the year and at the same time we're saying that we have been -- we've not had the usual very low seasonality from the beginning of the year, which is definitely on purpose.

And so there is that confidence, so we reiterate that guidance and obviously we're still firm also on the 2018 bridge on the cost side. When we look the fees, you have a very good point, we have come off to a very good start in the fee side, which is as I also alluded to driven by all four business units, we actually see good activity levels across our four unit.

It is not just the CNI capital markets fees that we mentioned that real [ph] fees it's also both in business banking and personal banking. And we will be cautious in terms of just annualizing that effect, it's been a good very strong customer activity in this beginning of the year, you will have your own view on where customer activity goes, but its earlier days in the year, but we're very pleased to come up to a good start and I guess it confirms our decision to be positive on the fees for the year.

But beyond that I think it's very dangerous to start concluding a lot for the full year based on this first quarter. On the NII, I'll let Thomas to answer that one.

Our sensitivity on NII is based on the 25 basis points move up or down and that sensitivity for the moment would be around 700 million for 25 basis points up in short term interest rates and close to 500 million for 25 basis points down across all the currencies where we're operating in.

And then if could just -- to double check it out that guidance or indication includes any floored loans that the [indiscernible] or any other into bank rate or other than smart great place?

Yes, that’s correct.

Okay, that’s helpful. Many thanks.

Thank you so much for the presentation. I have two questions please, firstly, can you please shed a little bit more light on that strong fees that you had in the C&I division, how sustainable are those and what's were there, they are driving driver, please?

And secondly, just a question on your expansion strategy in the Swedish mortgage market, we've noticed that you've signed a deal with [indiscernible], so if you could guide us a little bit on how you are expecting that volumes to ramp up in the Swedish business? And also it would be also very helpful to understand the profitability of Swedish finding that are you doing in comparison to the Danish spreads that you are seeing?

And why do you find the Swedish market attractive? Is it the pricing?

Is it easier to paying volumes? Or is it the [indiscernible] on capital that is more attractive in that business?

Thank you so much.

Let me start on the fees and C&I, so if you look at C&I it's -- when we look at the fees and go back on a quarterly basis, the fees have been between 500 million and 700 million on a quarterly basis. The Q1 was very strong as you also alluded to.

What we said is it's very much capital markets driven, there has been a lot of activity in the first quarter, but we have also taking our fair share and we comment this is more than our fair share. But there has been a strong performance, it is TCM, is an important part here.

So there has been a lot of issuance activity in the north region and we have had a good TCM flow and market share there. Corporate finance activity has also been good which is another driver of fees here and then general equities business.

So I would say in general it's your classic [indiscernible] market business has been driving the delta, in delta in terms of the fees. And then obviously there is all the recurring fees coming out of C&I such as the transaction banking and such on.

So you look at classic capital market businesses. In terms of where that goes from here, it is market activity driven to a lot extent.

So I think most market participants would say that it looks like they are relatively benign market conditions. But you will probably be as big an expert as we are in terms of the forecasting where activity goes in the coming quarters.

But it's obviously a good start.

Thank you.

Okay, so to your second question, which is a more strategic character, you need to take a step back and put into perspective that we see ourselves as a Nordic universal bank. That means that we have now four very well functioning divisions working very efficiently in four markets and of course we have Northern Island somewhat on the signs.

And a couple of comments on that part is that, we have a very good platform in personal banking both in Norway, but you alluded to Sweden particular. But also there we have a relatively low market shift in a very well functioning market.

And of one our strategic levers to expand in a healthy fashion both quality wise and the profit wise, is to do it with partnerships. We have done that several years Norway, we started that late last year in suite with Sacco, and this year we will continue with Sacco, but also joined TCO.

That will commence or actually have to has commenced this was the April of this year. The Swedish market is now viewed as healthy in the sense that there is health in profit pure profit for all.

It’s a well functioned market and we are able to give our customers a very great value of propositions and we can see that by the feedback we get from our customers. Actually, we were for the second year voted as the best bank in Sweden.

If you look at the royalty profitability that will always move through times, but we can confirm that the profit we are getting in Sweden at personal bank in particular is good and it is not any profits which are high [indiscernible] markets, maybe slightly up both, but that could always change overtime, but it gives us a [indiscernible]effect and a good growth to utilize our capital in an efficient way. If we didn’t find it profitable we would not grow and that ten we'll leave this capital, other places or back to the shareholders.

I have two on the net interest income. So the first is actually getting back to Sweden.

As you said some of its been a month now since you made a good TCO can you say anything about the initial reactions -- I mean of course it seems like very big agreement or at least quite a big potential so good to interesting to hear bit more of the small details? And then secondly one of your competitors yesterday were outputs I guess the conclusion was that they felt more confident in regulation like Emerald [ph] and hence they could keep a lower of funding buffer.

How are you on the funding buffers going forward also with taking into consideration that the Danish Emerald proposal is out? Those were my questions.

Thank you.

I think it's fair to say that the TCO agreement has come off to a good start as we can see that the platform is working well and that our customers can onboard themselves digitally which is very important for the customer and ourselves. And when it comes to the concrete business volume number of clients, I will restrain on commenting on that, as we are in the quarter, but I think we have some experiences from the previous partnerships which makes us optimistic for the future.

But right now wait to see how it works, but so far so good.

And I got thing for the other question as well. I am pleased to hear that our competitors are feeling confident that’s good.

When we look at Emerald, yes we've obviously been in dialogue around the more clarity we have been receiving here in Denmark. Say we don’t have the full clarity yet.

As you also know there are some restrictions in Danish laws that are being worked on. So we are not in a particularly the particular hurry in terms of starting to change our funding strategy until we have the final clarity.

You can say it doesn’t make us more confident, we don’t think we have been particularly lacking confidence in terms of our funding buffer and the level we have calibrated our funding buffer us around will not change materially due to this. There was not a specific uncertainty in our funding buffers due to Emerald.

And we will wait until -- to get the final clarity on this, but I would echo the fact that things are moving in the right direction on Emerald, but it doesn’t really change our strategy on the funding side.

Okay, thanks.

The first one is when I look at the trading lines which has been quite strong for a few quarter in a row now even on a clean basis. Could you maybe point to how much that amount is sustainable going forward maybe looking at how it was in April.

And then related to that, I have also a question on cost. I appreciate there is a large part of the year-on-year inflation is related to other expenses and IT expenses, but then if the trading income remains as strong, is it fair to assume that the large part of the cost would follow and therefore it's difficult to have them down year-on-year?

Let's start on the trading income. I think it's a very fair question and as I can see where you are coming from.

If we go back in history, I think we have some years back, been trying to guide on the trading income and I think most of us banks have decided that it's a futile exercise. So we start doing it.

When you look at our business, obviously, the majority of our trading and income comes out of our market business, our FICC business and then as we are a business now that does not run proprietary risk but runs a client driven group, we will fluctuate with market activity. In terms of customer flow that it's what we will define our trading income.

So I will not sit here and venture into what is the right level, it is correct that we have delivered good results for now a number of quarters in our trading business we have previously said that we feel that the underlying earnings space of FICC business has improved, but we will not start venturing into what the normalized level is. It's been a good start to the year and we were pleased with that.

April, I will not comment on -- we never comment on the current quarter. And in terms of cost side, you raise a good point in terms of activity based expenses and you are right that the reason why our expenses are higher in Q1 is been nominally driven by this activity based expenses.

If our trading income continues at the levels of Q1 as it was implicate in your question, that will obviously have some sort of spillover effect on our activity based expenses, and that is the natural fact from the way that we also reward people for performance. I think most of you I hope would acknowledge that that is a good thing and therefore you will see some effect from that.

As we look into the rest of the year and as we look at the numbers here, we have obviously repeated our cost guidance and therefore that is from, but it's a good point you are raising. Thank you.

Thanks. Can I just follow up a quickly on cost and specifically on the waste management division, where I saw there was some changes during the quarter, the cost incomes remain quite high in the dividend?

Do you have any ambition of decreasing it from the cost base or is it more revenue, for higher revenues going forward?

Thank you, that’s a good question. So wealth is driven by two things, its activity based expenses there as well and there are some element of, certain element of the wealth organizations still being put into place and therefore there are some restructuring cost as we also try to highlight.

Going forward wealth is not a cost game for us, wealth is very much top line and scale game and therefore we're not running a specific cost agenda in wealth. Obviously all of our business have to be efficient, well we're not targeting certain cost information et cetera, on the wealth.

It has to be profitable growth.

I wanted to understand a little bit about the competitive dynamics environment in Sweden and certainly in Norway. We know that is British Bank launched you have been very much focused on expending the mortgage margin and this year in the conference call increasingly they are talking about they wanted to grow more in line with market after losing market share in the first quarter.

So my question is first, who is gaining market share in the first quarter, are you seeing Sweden to be a very easy market for you to grow into and how do you see that dynamic change going forward when the local Swedish banks are getting more competitive insight. And secondly in Norway do you see further main expansion potential on the retail side from the mortgage prices that were done early this year.

Thank you.

Okay thank you very much, I think Norway, Sweden, Denmark and Finland is characterized by good competition, with very competent players in all those markets. And Sweden there are many good players in the market making good offers to customers every day.

Rightly we have gained some market share during the Q1, also as we have reestablish the platform basically back in late 2015 into mid-2016. We are cautiously optimistic that we have a very good value proposition towards Swedish private clients and I think it’s been evidenced by their attracting -- actually and attracting way getting into Swedish market.

But we're bold on the competition taking place and it will be the customer's choices, but so far it looks good and I'm pretty confident that we will continue to grow in a healthy pace. When it comes to Norway, basically the same we've grown very fast couple of years, here we have had these partnerships for longer time, however the margin has been on the -- some contraction during particular '16, there seems to be some less compression taken place in Q1, and then we need to see how it looks going forward.

But again, Norway is a healthy competitive market, but I think I would not be surprised if there will be some margin expansions in the personal banking Norway and looking forward.

Two questions, first is on funding on Slide 27, if I look at that. The funding plan that you represent and sort of just assume you can maintain the Q1 spreads, I got to that it 200 million annualized tailwinds in funding costs that you'll carry over into 2018, just wanted to check is that the number you -- of the magnitude of the number that you recognize?

And secondly, in Sweden personal banking, I mean you are clearly growing your loan book three very nicely, but at the same time deposits and fee income have not really grown all over the last let's eight quarters or so, then I guess one way to interpret that is your struggling to make your customer see as a primary bank, is that a fair observation? And what's the potential to grow non-NII revenues in Sweden?

Thank you.

Yes, I can take the first question on tailwind on the funding side. If we assume that spreads are where they are, for the time being, which is they attractive at a low level.

We believe that we will have a tailwind of between 150 million and 200 million for 2017. And I think it's too pre-mature to discuss '18.

You can see the retention profile in our presentation. But there is a long time until '18.

So that’s why we cannot make any comments on how funding levels would be at that time.

And then back to your question in Sweden, we can see that the cross sales are coming on immediately on the basic products when they are onboard, but usually if we get this whole cross sales potential, it used to take six to nine months. And taking into account, [indiscernible] declines are just being onboard in Sweden.

So we expect the cross sales to reach the level of the back book. So we are very comfortable on that.

And cross sales is course both on the fee side and the deposit side. However, deposits may go at a slower pace and that’s also why we have applied to establish our funding institutions or mortgages institution in Sweden, and that application is with this we just have said.

We are looking forward to get that approved anytime soon now, and then we will start also issuing Swedish covered bonds as is common in Swedish markets.

Thanks. And can I just follow up on that, you mentioned the back book front book in terms of cross sales, can you just give us -- or efforts some numbers -- the number of products for a new customer than you're boarding versus those that have been with you for some time?

And secondly, would you expect the non-NII revenue to sort of pick up to [indiscernible] that you have in another market from here or is that just a structural difference in Sweden versus let's say Denmark? Thank you.

There is no structure differences in Sweden when it comes to -- let's use the word additional income compared to other markets. It's all the structure difference is, but not particular something I want to point out.

So overtime the cross sales should be as healthy in Sweden as in other markets. And when it comes to the number of products we don’t disclose that because that can be very misleading.

And we are also very cautious on having any particular targets when it comes to cross sales, because that can force conversion [ph] in a wrong direction. So we are always looking at the cost perspective, what is the cost meeting and then there will be one or several products each costing needs and then we optimize it, how the customer sees it.

So we don’t run it around with particular cost target in that perspective.

Just two questions on Sweden and Norway. If I look at the margins that you are making in personal banking in Sweden and Norway and this is I guess 2016, they are not that higher, they're bout 1.1% or 1% to loans on net interest income, which is below Swedish.

Is that a funding disadvantage that you have? And does that change with this new covered bond company?

Or is there other thing that I am missing, when I look at that? And my second question was on the volume growth, is there any limitation to how much we can take on given the FSA in Denmark being somewhat sensitive to excess growth in bank?

Thank you.

Let me start on the funding question. So when we look at the margin of us versus the Swedish peers that does not reflect a funding disadvantage, when you look at the levels that we Thomas alluded to a second ago, that we are in the last steps in terms of launching [indiscernible] mortgage credit banking institution in Sweden.

We are doing that in terms of the long term sustainable funding of this bank. We are not doing it to getting the funding advantage as we today funded the same levels as Swedish peers.

And also when we fund our Swedish mortgages. So what you are seeing is a mix of things, which amongst other things reflected the fact that, as you know we have gone over this, especially focused on this associates agreement especially with Sacco over the last year.

So for us the focus internally is on the risk adjusted returns on these mortgages, not on the hit line margins. We are adding a strong customer base with low expected losses and good cost and opportunities and that is more important for us than the hit line margin.

So the risk adjusted returns are good on these clients.

And to your second question no, of course [indiscernible] is not the limitation. What is the limitation is that customer satisfaction that we are able to handle the on boarding in an orderly fashion.

So each customer feels they are well taken care of and that we can get this service the quality of the cross sales rights. Secondly if that -- it continues to hire very high quality of portfolio as we have built up that so far we will continue to that.

And finally, that we remain a very solid balanced and critical bank, that means that we are very prudent on the capital possession. And then brackets I can say that we have a very good dialogue what has to say and we have the same interest at FSA to expand in a good and old fashion and that's happy today and that will also happen tomorrow?

I have a question regarding the last partnership agreement. You guys have the [Indiscernible] in Finland, this has been now running for a full quarter and I can't really see the pickup in lending numbers in personal banking Finland and then my second question is maybe a bit more technical is regarding real and decent internal rating base models.

So I assume when house prices in the Nordics, they rise, VA is also supposed to go down because the LGTs [ph] they go down. Do you guys have any sensitivity to that?

Those are my two questions?

Thanks Mart and let me start with the house prices and first of all when we run our setup here we run it through the cycle set up and therefore I can say it's an we are not hyposensitive to house prices as such and you just say the sensitivity you've seen over the last couple of years one of those sensitivities has been in terms of the reversing previous provisions as houses prices have gone up. In areas where house prices -- so we are probations have been reversed, falling particularly client segments where that has happened, further collateral increases are obviously good in terms of increasing the collateral backing the loans, but it does not have the mess should we've taken in terms of releasing additional [Indiscernible] or risk weighted assets.

We do not give sensitivities on the risk rate releases versus house price sensitivities. So I'll have to disappoint you on that but obviously there is a posted correlation which is completely correct.

And on your first question. There is a slight or -- it's just slightly difference between the agreement we have with [indiscernible] TCO in Sweden.

With TCO in Sweden we are an exclusive partner in [indiscernible] we are the preferred partner talking agreements. Secondly, their agreement has only started on covering what we call graduating segment actually that is the journey of customers just out of school or out of university.

So there will be a lower or let's call a lower growth in that market until we expand that agreement further to more much of a segment. But so far it started good with the used statement, but you should not expect the same growth in 2017 as we see in Norway or as we expect in Sweden.

Also the underlying growth in Finland is also much slower.

Okay, and thank you so much for your question. It's just a quick follow-up here now.

It seems like a sort of almost a proven strategy for you guys to expand your personal -- your retail books and through these unit agreements would it be unlikely to see any further agreements with new unions?

No, it would not be unlikely.

Okay, thank you so much.

Couple of questions from me as well. The [indiscernible] commissions specific portfolio fees from investment products and look at that line and take out the performance fees and the risk allowance we've had as the fluctuating part.

You saw it last year detailing from 15.81 [ph] in the first quarter, down to underline 1.4 in the fourth quarter. Now we're back above the Q1 last year, and any seasonality of what is the driver of this?

If I look at assets under management that does not really explain anything of this one. My second question is on the other income that now down to run rate 73.60 [ph] without any one of items.

Is this the new ran rate after the property divestment that we should expect, of course plus divestment cadence that probably will come down the road?

Hi William, sorry we were just on mute, and so your first question on the fees, you're right that we we're reporting a higher run rate here in Q1 and could if you compare to last year, specific technicality which we’re also highlighting in the slide around management fees where, one of our changes to our insurance products means somewhat higher management fees, which comes out of other income. But beyond that we have also, as you highlighted, we've also increased our margin on the AUM, but not as materially as it would look to those senses.

But beyond that also in the investment fees, we obviously took when we established new funds and one of things we highlighted is the fact that we're back to establishing new funds, amongst other in part of the banking segment. So generally, it is fair to say, there is slightly higher fees -- run rate fees compare to last year and such a good start to well, but I think some of these effects needs to be adjusted for.

On the other income in terms of run rate, we never really guided on other income to be fair, there was a lot of fluctuations here and a lot of things that go through. It is fair to say that, we're at a level now that this quarter has not reflected any major deposals or sales or these types of things.

So it is not far off from a normalized level here in the beginning of the year. So, but generally as you know we don’t guide for it, but it is not miles off where it should be on a quarter basis without any potential one offs.

Okay can I add, one small thing more, you hired an apartment [ph], have guided that the Q4 [indiscernible] cost should be materially lower this year, can you give us any hint about what sort of Q4 take off should we expect this year in cost.

Its early days sitting here in Q1, but I think what the IR departments has been guiding you too is that some of the effect we see in Q1 is a smoothing out effect, especially on the IT. Whether it is materially lower also depends on that how the activity levels are toward the end of the year.

But this does not mean that we eliminate the Q4 seasonality, we will always have that, but we're taking some of that off due to the Q1.

Thank you for your interest in Danske Bank and for your very good questions. As always, you are welcome to contact our IR department if you have more questions, as you have time to look further into the financial results.

A transcript of this conference call will be added on our website and IR app within the next few days. Thank you very much and have a nice afternoon.