Danske Bank A/S

Good morning, everyone. Welcome to the conference call for Danske Bank's financial results for the first half of 2025.

My name is Claus Ingar Jensen, and I am Head of Danske Bank's Investor Relations. With me today, I have our CEO, Carsten Egeriis; and our CFO, Cecile Hillary.

We aim to keep this presentation to around 20 minutes. And after the presentation, we will open up for a Q&A session as usual.

Afterwards, feel free to contact the Investor Relations department if you have any more questions. I will now hand over to Carsten.

Slide 1, please.

Thanks, Claus, and I would also like to welcome you to our conference call. So with a net profit of DKK 11.2 billion, equivalent to a return on shareholders' equity of 13%, our financial performance for the first half of the year was solid and it met our expectations of delivering sustainable growth and income in line with our financial targets for 2026.

The macroeconomic backdrop in the first half year was strong, primarily in Denmark, measured by all key economic indicators and the outlook of plus 3% GDP growth this year looks healthy. Despite the high level of geopolitical turmoil and the low consumer sentiment, the resilient macro economy not only supported our everyday business with customers, but also it helped ensure continually high credit quality.

The result was based on continued growth across our business. Activity with our corporate customers, in particular, was high and led to an increase in lending, which was up by 5% compared to last year.

This supports our progress towards our financial targets for 2026. Deposits increased 3% in the same period, mainly in our large corporate and retail business.

Seen in isolation, the second quarter saw deposits in our retail business grow by 3%, reflecting consumer prudence in a time of market uncertainty. The positive development in lending activities have led to an improved market share for corporate lending across all Nordic countries.

In addition, we executed on other parts of our Nordic growth strategy by expanding our cash management business, for example. We've also continued to invest in technology in line with our Forward '28 strategy.

The result was slightly lower relative to the same period of last year, mainly due to a lower result in our insurance business and from loan impairment charges moving from net reversals to small charges. When adjusting for the income related to PC Norway, core income lines increased 1% compared to last year, as they benefited from volume growth and higher customer activity.

Operating expenses were stable on the back of prudent cost management and improved efficiency. And the cost/income ratio was in line with our target level of 45%.

And then just a few comments when comparing to the preceding quarter. The results came in slightly lower, mainly due to an expected small increase in loan impairment charges.

For the core income lines, NII benefited from strong volume trends within our corporate business and continued benefit from our structural hedge, whereas fee income was mainly impacted by reduced refinancing activity and increasingly cautious investment sentiment. And I'm pleased to see that towards the end of the quarter, investment activity was recovering.

Credit quality, as I just mentioned, continued to be strong and was supported by favorable macroeconomic conditions. For the first 6 months, charges of DKK 0.3 billion remained below cycle and well inside our guidance for the full year of around DKK 1 billion.

As such, we maintain our net profit outlook for the full year and our financial targets for 2026. We've now reached the midpoint of our target period, and we are planning to make an update on targets beyond 2026 in connection with our financial results for Q1 next year.

And then Slide 2, please. In personal customers, the financial performance was supported by deposit growth and healthy customer activity.

This was, however, offset by the impact from rate cuts on deposit margins and a decline in fee income caused by reduced investment appetite, which reduced the intra-quarter fee contribution as well as seasonally lower refinancing fees at Realkredit Danmark. We continue to see strong credit quality and prudent cost management, which supports our 2026 financial objectives, and we maintained return on allocated capital in line with our 2026 targets.

In terms of lending, the development in home loans was generally stable, reflecting a somewhat subdued housing market when looking across the Nordics, which remains affected by low consumer sentiment. In Denmark, house prices are rising and the market has begun to return to a more normalized level of activity.

Total home loans in PC Denmark grew slightly as our bank home loan product, Danske Bolig Fri, grew another 10% in Q2, mitigating a decline in lending volumes at Realkredit Danmark. The flexibility of our offerings continues to benefit our customers in the current environment, and we've continued to adapt our pricing and holistic advice to serve our customers' needs.

As part of our focus on market share at Realkredit Danmark, we've implemented various initiatives in the first half of the year to increase our competitiveness, including recent pricing adjustments and digital enhancements in our mobile banking app. And then finally, in addition to the 3% overall deposit growth, our commercial traction within private banking was underpinned by higher net sales and inflow to investment products.

And this correspondingly drove AUM higher by quarter end. And this again shows our ability to expand offerings and support customers' financial needs regardless of the market environment.

And then Slide 3, please. In business customers, the financial performance reflected the continued progress on our commercial priorities.

In the first half, core banking income was up 2% relative to the same period last year, supported by solid growth in lending on the basis of improved credit demand and our efforts to expand our customer base. Looking at our commercial performance, we've managed to increase market shares across all 4 Nordic countries through the execution of our focused growth strategy.

And this was underpinned by growing lending volumes, up 1% quarter-on-quarter and 4% year-on-year, reflecting good traction across all our Nordic markets. Total income quarter-on-quarter was impacted by the 4 rate cuts we've seen so far this year.

Additionally, the timing of refinancing auctions impacted our fee income. Even with this in mind, the cost/income ratio continues to be in line with our 2026 goal based on prudent cost management, while we continue to invest in and build our business to continue to increase profitability towards the 2026 targets.

We remain focused on our strategy execution and business potential. We made further improvements to our digital offerings, and we launched upskilling programs in sales and advisory services to enhance our advisers' ability to support customers efficiently across the regions, where what I see is that complex solutions are in demand from our customers more than ever.

And then Slide 4, please, LC&I. In the first half of the year, our Corporate and Institutional franchise achieved a solid financial result from a stable development delivered in an uncertain geopolitical environment.

Throughout a period characterized by volatility in the financial markets, we continue to provide balance sheet, market making and risk management solutions to our corporate and institutional customers. We continue to execute our strategy to be the leading Nordic wholesale bank, and we successfully attracted new corporate customers outside Denmark and improved our market position, for instance, within cash management and primary debt markets.

Total income was up 8% relative to the second quarter last year, driven by solid customer activity, and this also helped us generate a return on allocated capital ahead of our 2026 targets. Our strong commercial momentum was also evident from our lending growth with volumes growing 10% year-on-year and 6% quarter-on-quarter, and we participated in several landmark lending transactions.

Alongside the positive development in volumes, the observed increase in market share for corporate lending volumes adds to the positive trend. Fee income was affected by financial market volatility in the second quarter, as customers took a slightly more cautious approach.

Relative to Q1, the line came in 2% lower in the second quarter. And then AUM grew 3% in the second quarter relative to the preceding quarter.

The increase in asset prices towards the end of the quarter further supported the increase. And in addition, net sales to new customers were strong in both the Institutional and Private Banking segments.

Trading income in the second quarter was lower due to lower customer activity in the secondary fixed income market. And then with that, let me hand over to Cecile for a walk-through of our financial results for the group, and that's Slide 5, please.

Thank you, Carsten. As Carsten just mentioned, we saw a solid financial performance in the first half of the year.

Net profit for the group came in at DKK 11.2 billion, down 2% year-on-year, mainly due to lower net income from insurance business and higher loan impairment charges. NII remained stable as the impact from rate cuts have been mitigated by increased volumes and benefits from our structural hedge.

The result for the second quarter came in at DKK 5.5 billion compared to DKK 5.8 billion in Q1 due to higher loan impairment charges and a higher tax expense. Total income, however, was stable relative to the preceding quarter, supported by resilient NII and higher income from insurance business.

The decline in fee income, which I will come to later, was primarily due to lower refinancing activity for mortgage loans and lower investment activity among our customers. Trading income improved from the level last year due to higher customer activity and positive valuation effects.

In the second quarter, income was only slightly lower despite lower customer activity from increased market uncertainty. Income from insurance activities in the first half of the year came in lower than the year before, mainly due to increase in provisions in Q1.

Operating expenses were almost unchanged relative to the same period last year as well as the preceding quarter. And finally, as Carsten mentioned, credit quality remains strong with loan impairment charges coming in at a low level and well within our full year guidance.

Slide 6, please. Let us take a closer look at the key income lines, starting with net interest income.

Overall, NII remained stable both year-on-year and quarter-on-quarter despite the impact on deposit margins from lower rates. When comparing net interest income, not only with the same period last year, but also with the preceding quarter, NII has benefited from a continually positive development in volumes, particularly evident on the corporate side.

In addition, our deposit hedge has mitigated the impact from rate cuts on deposit margins and the lower return on shareholders' equity. In this context, please be aware that as part of our ongoing focus on asset and liability management, we have slightly increased our bond portfolio hedge to approximately DKK 160 billion.

With respect to expectations for the full year, I would like to highlight that they are based on the current rate environment with forward rates as of the end of June and subject to balance sheet development. While we have revised our NII sensitivity guidance for the next 25 basis points of cuts following the repricing actions taken so far, we reiterate the guidance set out at the beginning of the year of NII being above DKK 35 billion for the full year of 2025.

Now let us turn to fee income. Slide 7, please.

Compared to last year, fee income was stable. However, adjusted for a nonrecurring item from last year and the divestment of PC Norway, fee income was up 2%.

An increase in fee income from everyday banking and capital markets activities was able to offset a small decline in fees from lending and investment activities. Relative to Q1, fee income was down 7% in Q2, as volatile financial markets in April had an adverse effect on customer activity.

A more cautious sentiment among both corporate and retail customers impacted income from investment products as well as capital markets and accounted for approximately half of the decline in fee income in Q2. As Carsten mentioned, investor sentiment turned more robust towards the end of the second quarter, which in combination with strong net sales had a positive impact on assets under management.

Fee income driven by lending activities accounted for the other half of the decline, mainly due to lower refinancing auctions of variable rate mortgages in the second quarter. When looking at our fee income from everyday banking activities, I am pleased that we continue to see a good momentum driven by solid corporate activity.

Fee income for these activities increased 3% against the preceding quarter as well as the year before. Next, let us look at net trading income.

Slide 8, please. Trading income increased 26% from the level in the same period last year.

The better results came from higher customer activity at LC&I and positive market value adjustments in treasury, partly offset by xVA valuation adjustments. In Q2, net trading income was only slightly down relative to Q1.

Customer activity was negatively impacted by volatile market conditions. However, there were a one-off gain from the sale of the bank's holding in Norwegian financial services provider, Export Finance and positive value adjustments in group treasury.

This concludes my comments on the income lines. Let's turn to expenses.

Slide 9, please. Looking at the cost development for the first half year, I am pleased to report that our focus on cost management and improved efficiency continues to yield results.

Operating expenses are in line with our full year guidance of up to DKK 26 billion and at 45.4%, the cost-to-income ratio is progressing towards our 2026 target. Relative to the level last year, costs were down 1%, as structural cost takeouts mitigated the impact from wage inflation, performance-based compensation and the planned investment ramp-up.

Relative to the preceding quarter, costs were up by 1%, including slightly higher investments and costs related to financial crime prevention. Please note that the normalization of financial crime prevention costs is being executed according to plan despite a minor increase in the second quarter.

Slide 10, please. Let us take a look at our credit portfolio and the trend in impairments.

Credit quality continued to be strong, underpinned by a well-diversified and low-risk credit portfolio. The macroeconomic environment remained benign with increasing employment and steadily improving household finances.

Consequently, impairments of DKK 0.2 billion in Q2 remained below the normalized level. Charges were related to a few single name exposures.

The sustained geopolitical and economic uncertainties resulting from tariffs, had an impact on consumer and business sentiment. We have, therefore, reviewed our already prudent approach to enhance the robustness of the scenarios applied for impairment purposes.

This now includes a downturn scenario in addition to the existing severe downturn scenario. Overall, we saw reversals related to our macro models of around DKK 70 million in the quarter.

In addition, we have kept a significant PMA buffer, where some of the cyclical sectors have been reviewed in light of our single name provisioning. We saw around DKK 0.2 billion of releases in the second quarter.

Our global tension buffer has been maintained after the ramp-up in Q1. We will continue to review our macroeconomic scenarios in conjunction with the PMA buffer.

Given the current state of our strong asset quality, we remain comfortable with the full year guidance for impairment charges. Slide 11, please.

Our capital position remains strong and was further supported by another quarter of solid capital generation post dividend accrual. At the end of Q2, the reported CET1 ratio increased to 18.7%, up from 18.4% in Q1 and 17.8% at the end of 2024.

Risk exposure amounts ended the quarter largely flat, reflecting stable credit risk REA and despite the financial market volatility. We continue to operate with a healthy CET1 buffer versus the regulatory requirements, now increasing to more than 400 basis points, and we intend to progress steadily in the coming years towards our stated capital target of a CET1 ratio above 16%.

The ongoing share buyback program we announced in February is being executed and will continue to provide support throughout the year. Now let us turn to the final slide and our financial outlook for 2025.

Slide 12, please. As previously mentioned, we reiterate our outlook for net profit to be in the range of DKK 21 billion to DKK 23 billion.

For total income, we continue to expect slightly lower income this year compared to 2024. The income will be driven by lower, albeit resilient net interest income and supported by our focus on fee income.

We will continue our efforts to drive commercial momentum and growth in line with our financial targets for 2026. Income from trading and insurance activities remain subject to financial market conditions.

We continue to expect operating expenses of up to DKK 26 billion, reflecting our focus on cost management and cost-to-income target for 2026. We maintain our guidance for loan impairment charges to be around DKK 1 billion as a result of continued strong credit quality.

And finally, our financial targets for 2026 also remain unchanged, subject to our current economic and market expectations. Slide 13, please, and back to Claus.

Thank you, Cecile. Those were our initial comments and messages.

We are now ready for your questions. Please limit yourself to 2 questions.

If you are listening to the conference call from our website, you are welcome to ask questions by e-mail. A transcript of this conference call will be added to our website within the next few days.

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

So my first question is on the fee income. It has been relatively soft this quarter.

How should we think about the fee income for the coming quarters? Do you see scope for recovery in areas like asset management, card activity or advisory in the second half of the year?

And what are the strategic areas for you that you are most focusing on, on the fee income front? And can you comment on the current state of your investment banking pipeline?

Thanks for that. On the fee income, it's a little bit softer than we had expected.

But if you really sort of break down the fee income lines, we continue, in fact, to see strong trajectory and growth on sort of the everyday banking cash management fee income. And really, what has driven the slightly softer fee income in Q2 is 2 things.

One is the investment side of things, where clearly, April was a difficult month, but then we saw improvement into May and June. And so to your question around sort of looking forward, AUMs ended at record high from our perspective towards the end of the period and therefore, we see a good momentum on the investment side.

The other sort of softer spot was the lending fees associated with refinancing activity in the Realkredit space, particularly PC, and that is driven by lower auction activity in Q2. So we feel confident with our overall sort of strategy and focus on fee income coming from everyday banking across the corporate space, and we do expect that the investments will pick up and therefore, strengthen the fee trajectory.

We do think that second half of the year is likely to see more activity in the capital markets. Pipeline looks pretty solid.

Q3, keep in mind, is typically a little bit slower month because you've got July, August holiday period in it. But I mean, for second half, overall, we believe that advisory and capital market fees should pick up.

And again, also that we should see continued solid growth. Strategy-wise, our key focus continues to be what it has been in sort of what we presented in our strategy to really focus on being a leading wholesale bank in the Nordics on developing our leading business on the SME side across the Nordics and then retail and private banking in Denmark, Finland with a focus on continuing to really help the -- our clients that have more sort of complex needs across the board, and we see that strategy working both in terms of increased market shares, but also increased share of wallet and again, also seeing that come through in the fee activity in the everyday banking.

And the second question, can I ask on the capital allocation? So you have a very solid buffer above the requirements of more than 4% and also solid buffer above your target.

Can you remind us your latest thoughts when deciding on whether to use excess capital for dividends, buybacks or M&A? What are your key priorities there for you?

Yes. So on the capital side, again, we continue to generate healthy capital and clearly a strong CET1 of 18.7% here in -- at the end of the first half.

We continue to be focused on distributing in-year earnings, as previously said. And then as I mentioned in the speech, we'll do an update as part of Q1 next year, where we'll focus on updated financial targets, give an update on the strategy.

And there, we'll also give an update on capital distribution strategy. As you all know, we've sort of had a view that, let's call it, legacy capital that we've sort of waited to look at exactly how we sort of look at that capital until we are finalized with the observation period from the DOJ, which ends at the end of this year.

And I'll again say that our first priority is to continue to grow our business, and we see good progress on that. And then we'll also look at if there's opportunities for other potential distributions from a capital perspective, if we don't see that growth coming as expected.

The first one, on your guidance, the numbers are the same, but it seems from the wording, the mix has shifted a little bit to higher NII and lower fees going forward. Is that fair?

And you've previously stated this greater than DKK 35 billion NII figure for the year. If anything, that's looking a little bit prudent now.

So do you think consensus of about DKK 35.5 billion is okay? Or is that a little bit prudent as well?

That's my first.

Yes, sure. Yes, you're right.

We have changed the wording slightly in the guidance exactly as you state. And the reason for that is clearly because fees is a little bit weaker in Q2.

Clearly, when we did the outlook, we weren't expecting financial markets to turn out the way they did in Q2. But aside from the financial markets and the impact that had on AUM and capital market fees, we continue to be very positive on our strategy, including the fee side of things.

So we're not changing anything in terms of how we look at fees and the opportunities around that, but we've just changed the wording to reflect basically what we've seen in Q2. And then I think on the NII guidance, yes, we continue to feel good about the above DKK 35 billion.

I mean we see -- as we had also previously guided and expected that strong volume growth as well as the structural hedges is somewhat offsetting the margin pressure coming from lower rates. So I think we'll just stick to continuing to say above DKK 35 billion.

But again, we continue to feel good about the trajectory and the way that, that's playing out.

Cool. And my second then, the increase in NII sensitivity for a move downwards in rates.

Am I correct in assuming that's because of a lot of your deposits, particularly the on-demand saving fees reaching close to 0 lower bound now? If you could just provide a bit of commentary around the increase there?

Yes. No, absolutely, Shrey.

Let me take that. In fact, in the NII sensitivity table, you will notice 3 changes compared to Q1.

The first one is the one you point out, which is obviously with a 25 basis points decrease in year 1. The sensitivity has increased to minus 650 from minus 500.

And you're absolutely right. I mean, as we approach the 0 bound, clearly, the ability to pass through the rate changes to deposits is decreasing.

So that explains it. You will see the sort of second change is that in year 1, plus 25 basis points, a slight decrease to plus 450 from plus 500 on the way up.

And there, I would say this is minor. This is more about rounding, and I wouldn't read too much into it, but I just thought I'd point it out for completeness sake.

And then finally, in year 3, you'll see that the sensitivity up and down, has slightly decreased -- has decreased to plus and minus 100 from plus and minus 200. And there, this is really purely a function of the investments of our deposit bond hedge and the way that effectively it's rolling over and obviously provides NII stability in that respect.

Really, one main one is on the volume growth. There were some divergent trends between different Nordic that reported now.

And I want to understand how much sustainability you see in a very strong point on volumes this quarter. And maybe you can take us through what was the key moving parts and how you see the outlook from here?

Sure. Thanks, Tarik.

Look, on the volume growth, actually, both on the sort of SME business, Business Customers and the LC&I business, we see a broad-based robust growth, slightly higher on the LC&I space, but again, also across the BC space. And as I also mentioned, we see that we're growing faster than market across our Nordic businesses in line with the strategy we have.

We've been investing in advisory capabilities. We've been investing in digital capabilities and really been focused on increasing share of wallet and doing more with our customers across the corporate space from small to large.

And in fact, if you think about it, our base case is that interest rates will continue to come down a little bit and inflation will normalize. And again, we would expect more clarity and less volatility than we've seen in the second half -- the first half as a base case.

I'm not saying that we couldn't see more volatility. But as a base case, you could say that first half has been exceptional volatile and with a very high level of uncertainty.

So if anything, if I think about looking forward with a sort of base case view and of course, accepting that lots of things can happen that the environment should be supportive for continued growth. Also, when you look at sort of Europe in general and the Nordics and how we're thinking about spending on defense, on infrastructure, on green transition, I think there is a lot to be said that the environment should be supportive for continued growth.

So that's how we think about it. And I would say it's pretty broad-based as well, sector-wise and country-wise.

I mean I think you commented slightly on this, but if you take the Q2, there's been a significant pickup in the second part of the quarter or the volatility in the early part of the quarter was also beneficial for your activity?

So I mentioned specifically on the investment side that it was picking up towards the end of Q2. But I would say, in general, also sort of business activity looking pretty solid as we end Q2 and look into the second half of the year.

And so the only thing I was just pointing out is that clearly, we should remember that Q3 is always a bit slower. But in general, ending Q2 with really robust activity levels and a robust pipeline.

And I think in general, with sort of a background that's conducive to robust activity.

If I may, I'll start on the fee income line so -- especially on the investment fees. So for me, it's a bit tricky to see how the AUM developed within the quarter.

Of course, we know the market performance, but even when adjusting for that, it seems like the investment fees was a bit on the soft side despite that your AUM actually grew a bit faster than the market as far as I see it. Is there anything underlying that has moved on the flow within the quarter?

Or is it some underlying margin pressure that we see during the quarter that is pushing the result down on the fee income from investments, if I may start on that one?

No. I think on the fee -- how you should think about the fee income related to AUMs and investments is several things.

First of all, clearly, AUM were down going into April and in fact, also early stage May and then picked up significantly, right? I mean, let's remember that you look at the S&P 500 Index, I think it was the fifth highest fall in the S&P 500 since the Second World War that we saw early April, just to remind ourselves of that.

So AUM then -- and then, of course, the rally was significant the other way coming into May and into June. So one is this timing difference.

Then in terms of the flows, we actually saw growth both in institutional and in retail flows during the second quarter. More growth in institutional than retail, but still growth in both segments.

So average margins will reflect the mix between institutional and retail. But in general, margins are still holding up on a relative basis at same levels.

I wouldn't say that there is any particular sort of margin compression. So that's how you should think about it, and that's also why we're signaling that we feel good about going into the second half, both with the absolute AUMs but also with the actual net sales or net flows that we've seen.

And just to add...

Was it back-end loaded? How should we think about it?

Yes, you should think about it that way. So just to give you an example, what's partly driving the lower fee income in investments and PC is that, for example, you had lower brokerage fees in April because customers were more careful.

They were staying a little bit on the sidelines. That's also partly what you see in the deposit growth is that some retail investors were a little bit more careful.

So exactly as you'd say, you should think about that the net sales was back-end loaded Q2.

Then on my last question before I'll jump back in the queue. On the deposit hedge, would it still be fair to expect that you will see some tailwind from that somewhat into '26?

Is that still a fair assumption given the changes you have made to the deposits and sensitivities?

Sure. Yes, let me take that.

I mean, obviously, we continue to see a really good traction and good positive contribution to NII from our deposit hedge. You've seen that on the back of obviously stability, our stability and developments in deposit base as well as obviously, the continued activity in terms of hedging to provide NII stability, we've slightly increased our deposit hedge notional to DKK 160 billion from DKK 150 billion as well.

We absolutely see a positive contribution that is starting obviously this year and will increase into next year. So that is something that will continue to help NII.

Just 2, if I may. I was looking at Page 3 of your report.

And I noticed that the deposits are down quarter-on-quarter and are down also in the semester. The bonds issued by Realkredit Danmark are down to quarter -- especially quarter-on-quarter.

Other issued bonds are down quarter-on-quarter and also in the semester and also sub debt are down quarter-on-quarter and on the semester too, while repo deposits are up significantly in the quarter and in the semester, while on the asset side, everything seems to be kind of stable, actually growing a little bit. So why is the funding mix changing?

And has this any impact on NII in the quarter? The fact that you had -- you seem to have less medium- to long-term funding, which I suppose is going to cost you more and more short-term funding, which is deposit, I guess.

The other question I have is, Carsten, you mentioned the DKK 35 billion, but you're running at DKK 9 billion in Q1, running at DKK 9 billion in Q2. We're getting closer and closer to the end of the easing cycle.

The deposit hedge seems to be functioning fairly well. What should happen?

Or why should the second part of the year be definitely weaker than the first one, if the easing cycle is coming closer and closer to an end? Is there a timing effect that we should consider or anything?

Thank you. I'm not sure I completely got everything on funding mix, but I'll let Cecile comment a little bit on kind of how we think about funding mix short term versus long term.

Just on your questions on NII. So again, I think we'll keep to above DKK 35 billion.

I think your specific question is why could second half be lower than first half? Look, I think the moving parts are that we've clearly had some rate cuts, which haven't flown completely through the system, right, during the first half.

Currently, we do expect a further rate cut in the second half, and then that will be offset by both the hedge, which Cecile talked about before and then volume growth. And we'll see exactly how those dynamics play out.

Let me address the topic on the funding mix. Look, we're not seeing any significant funding mix.

So you shouldn't assume that anything is going on there. We still assume between DKK 60 billion and DKK 80 billion of wholesale funding to be issued this year.

Obviously, we're well within that. Now it is fair to say that obviously, the strength of our deposit base means that all things being equal, the wholesale funding tends to be -- and certainly, the needs are a bit lower than they would otherwise.

That is a fair point. But I mean, it is insignificant.

And I would say from an overall funding cost perspective, I really don't think that there's anything that you should focus on there.

If I may supplement, Cecile, here. If you go to Page 37, Riccardo, in our investor presentation, you will see the complete changes in our funding mix.

And there is no significant changes, as Cecile also said. And please bear in mind, in respect to your comments around the RD funding, RD is completely ring-fenced in this respect.

So any changes in the RD balance sheet will be automatically reflected in the issued RD bonds. There will always be fluctuations on the repo side.

But net-net, the repo position only contributes to a small part of the whole funding, at least if you're looking -- sorry, at the changes over the quarter.

I appreciate many of them have been answered already, but I just had one, and it would be really helpful to hear more on the legislation and regulation you noted in your report, in particular around the CRR3 output floors that will not apply for Danish subsidiaries to Danish groups. So I was just wondering, do you think that, that will have any impact on the competitive dynamics in Denmark?

Or is there anything else in regulation that can change sort of your relative position there?

No. I mean, as I see it, 2 things.

One is that we have already front-loaded the CRR3 impact. And so we're running with all that included in how we run our business today and how we compete today.

And you could say that the level field discussion around what you do at country level versus EU level is a good example of how it plays out here because we actually front-loaded it much earlier in Denmark, and that has over some time historically created some unlevel playing field, you could say, but we've been able to navigate through that and compete with that nonetheless. So I don't see any changes in the competitive dynamics as such.

And then, of course, there is the 2032, 2033 questions around Basel IV. That's obviously a long time in the future, lots of political and regulatory discussions around that ongoing.

We're obviously keeping a close eye. There is plenty of time to adapt to how that plays out.

I do note, however, that there is a very, very strong focus on European competitiveness and regulatory simplification. So we obviously all hope that this will play out in a way that we continue to see level playing field with U.S.

and other regulatory environments, but let's see.

The first one is on the full-time employees. You sort of have hiked now for the second time in a quarter, mainly in the business units, this time in personal customers, last time in large corporates.

What kind of levels should we expect going forward? Is this sort of this level you want to be at?

Or should we be thinking about you coming below the 20,000 employees some 1 to 2 years down the road? Or is this sort of a continuation of your sort of -- improving your operation on the business side?

Yes. No, thanks very much.

Look, if you look at sort of year-on-year, as you point out, we have invested in advisory capabilities in front office and also in the technology space and then reduced headcount in financial crime and compliance, as also planned anticipated and discussed previously. I think you'll see a continued sort of normalization in the compliance, financial crime space, and you'll see continued investments as part of this growth strategy that we have.

I think medium term -- a bit more difficult to say, but I think medium term -- and that's why I don't put exactly a year on it. Medium term, I would think it's likely that productivity opportunities with AI and so forth will be not only supportive for growth and freeing up time for front office and advisory, but also be supportive to streamline more in the back and middle office.

But I think for now, you should think about FTE as being just short term, roughly flat, where one thing offsetting the other.

And maybe just one thing I would add is there's obviously 2 ways we look at FTE. One is with respect to costs.

And there, very clearly, we are executing really our cost program and are managing our expenses exactly according to plan. So there's nothing that changes there.

And secondly, in terms of FTEs, and you mentioned particularly PC, you mentioned LC&I, we're obviously investing in areas where having the right level of human expertise is important. And in PC, relationship managers, but also in our private banking, wealth managers, obviously, are an important component of our strategy, but also in LC&I, in certain investment banking areas, some regional capabilities as well.

We've made some senior hires and some team hires to ensure that we continue to compete and we continue to grow.

Has the increase come to the end of the quarter? Or has it been throughout the quarter, so to speak.

So we understand the staff cost versus sort of growth in these FTEs?

No. Look, again, I think second quarter was not material growth, but you should think about it throughout the quarter and the second half, you should also think about there's no -- we don't have any large sort of hiring plans.

We also don't have any large areas where we're looking at the contrary, but the kind of additions again coming in more in the advisory areas and the reductions coming more in the compliance financial crime space, but you shouldn't think about it as being particularly concentrated in 1 month.

Okay, clear. The second question is about further on the cost because you have been managing your costs quite well on especially other items where it's coming -- creeping down, I could say.

So you hiked your IT expenses just a little bit, and I think you pointed to that should be temporarily higher. So where should we point to the other costs now with severance pay coming down with solution fees stabilization around the 80.

Is it more to come on other costs now? Is it -- or is it just lower activity that have driven that cost a little bit down in this quarter?

So look, I think in terms of costs, I'd make a few comments, right? I mean there's some headwinds and then there is obviously also some tailwinds, right?

I mean on the headwind, I mean, we continue obviously to see some pressures in terms of wages, wage inflation, some performance-based compensation and bonuses, as you'd expect. Those are being clearly managed.

And certainly, in terms of tailwinds on the cost side, we continue to execute on our financial cost program. So there, there's obviously the investments in technology, et cetera, which you've seen actually in the course of this quarter, but that's exactly as planned, and there's always some small up and small down there.

But really from a financial cost perspective, we continue to see an attrition of the costs. I mean, they were obviously in the sort of DKK 2.1 billion a few years ago.

This year, we're expecting financial crime costs to be around DKK 1.7 billion and then hopefully, some further attrition, although at some point, obviously, it's going to tail off in the coming year or 2. So that's being executed to plan.

Then in terms of investments, we mentioned that, obviously, our investments were increasing to about DKK 4 billion a year. That is still the case.

Now clearly, it's not exactly linear. So you'll see some more or less according to quarters, but I mean it is completely on plan, and you should expect to see this DKK 4 billion this year as was originally expected.

So as I say, there's really nothing to be seen there. I mean it's broadly linear, but obviously, you always see quarter-on-quarter some small changes based on the timing of investments or other factors.

I mean there's nothing to report on other costs. I think you mentioned severance, et cetera.

I mean there's really nothing to report there. So everything is in line with plan.

And operator, can we have the last question, please?

One of your peers talked about there being aggressive competition in the corporate space yesterday and also described business banking in Denmark as being very, very competitive. So just wanted to see what you were seeing there.

And then my other question, just on your IFRS 9 scenarios. I think you've changed it now to include a severe downside scenario.

And also, I think just in terms of the mix of kind of the base upside and the downside scenarios, that mix has changed slightly sort of more tilted towards the downside. So just if you could explain why you made that change.

Yes. Thanks.

So look, on the competitive environment and kind of what we see in corporate lending, I think the -- there is a competitive environment, but I wouldn't describe it as sort of markedly different in the second quarter. I mean we continue to see healthy competition, but I'm not sure I see certainly from our perspective.

My view on this is that we very much keep a pretty consistent credit and underwriting and risk appetite through the cycle. That's very important for our clients, and it's very important for us that we don't sort of have knee-jerk reactions and big changes in how we look at risk and underwriting and credit parameters in general.

Clearly, there could be exceptions based on certain sectors and so forth through the cycle. But we have not changed anything in our underwriting and risk appetite approach.

And yes -- and again, we don't see a marked difference in the competitive environment, but it is strong. IFRS 9, I mean, what we did -- so we didn't change the downside scenario as such.

We added a scenario between base case and downside because our downside scenario was a quite extreme downside scenario. And having sort of looked at what others do, we decided to add a scenario between our base case and downside to be a little bit more -- to be able to be a bit more nuanced and maybe also a bit more reflective of something that's in between, say, a severe scenario and a base case scenario, currently base case, of course, being a sort of a GDP growth scenario where Nordic growth is somewhere between 1% and 3-plus percent, all depending on which country.

So that's why we did it a fourth scenario to kind of be a middle scenario between the base and the downside. All right.

Well, thank you very much, all of you for your interest in Danske Bank as always, and for all your questions. Much appreciated.

And as always, please contact our Investor Relations department if you have other questions. Thanks very much.