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 can have a brief break. After which we can have a Q&A session over a telephone convention service, not due to this fact broadcast on this channel. You could find info on how you go surfing to the Q&A session at handelsbanken.com beneath 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 reasonably might be held in English, presentation [ph] in English. You are able to do so by logging into the phone convention service the place it will likely be concurrently translated. And you discover the knowledge on how to go online to that on handelsbanken.com beneath 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 just about nonexistent credit score losses. And the capital scenario is robust. Handelsbanken due to this fact, is properly positioned to proceed to develop in a profitable method and with revenue in funding, deposits and asset administration. Should 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 present working in.
We’re rising in lending and deposits. We will see this within the internet curiosity earnings, which reached the very best stage up to now ever recorded. It is growing, 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 online stream out from the financial institution had been marginal and we have seen main actions available in the market total. Credit score losses are just about nonexistent.
So our asset portfolio is continuous to be at a really prime quality stage. Capital scenario stays comfortably robust and steady. And the prices are at present at a stage which we’re pleased with. They’re going up however in the precise locations. All-in-all, the steadiness over the quarter signifies that the C/I ratios proceed to drop. And maybe essentially the most rewarding level of all is the most important 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 properly.
Once we see a drop within the inventory exchanges, that is to some extent, counteracted by the detrimental valuation results which could be seen on the NFT line. So value bills going up by 1%, adjusted for nonrecurring objects, and on the similar 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 just about 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 optimistic influence of the growing market rates of interest. Web charges and commissions are dropping considerably, but it surely’s nonetheless holding up. NFT has an influence right here as properly. 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 actual fact consisting of internet recoveries, however we’re making common reserves because of the present international scenario. Let’s proceed and take a look at our lending. We develop and we see a wonderful development in all of our markets. On the family lending aspect, 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 most important internet lending participant in Sweden when it comes to lending to corporates. It’s a well-diversified enterprise between property lending and working corporations. And if we take a look at deposits, we see a wonderful development right here as properly, by as a lot as 11% on the non-public aspect. And on the company aspect, we additionally see good growth. It is an vital part within the financial institution’s enterprise. And within the present rate of interest scenario, it is vital. For SEK1 of SEK4 invested in Sweden deposit went to Handelsbanken.
Let’s take a look at financial savings frequently. We see a continued good growth. The energy and the robustness we have managed to realize and achieve over a very long time, with internet inflows into the financial institution, as you see to the precise of this slide. The truth is, over greater than 10 years now, a median of 25% of the online inflows available in the market ended up in Handelsbanken. And regularly, 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 properly given the present macro economical scenario. The market sees outflows, however the financial institution internet flows have solely been impacted marginally. Now let’s attempt to sum this up. The place we’re at present in a session the place earnings is growing extra quickly than bills. C/I ratios trending downwards and our expectations, after all, is for this to proceed.
Let’s take a look at our property and our asset high quality. As I discussed beforehand, credit score losses are just about 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 in addition after all, as a result of there’s quite a few uncertainties on the earth 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 nice development. We have achieved an all-time excessive on internet curiosity earnings, up by as a lot as 6% over the primary six months. Web 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 just under 38% and now we have a wonderful enterprise the place we’re additionally growing our growth focus to strengthen buyer conferences on the family and personal aspect particularly.
After which Holland and Netherlands, we proceed to see glorious development right here as properly. 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 wonderful combine, as I discussed earlier, between property and working corporations.
Web 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, properly right here the most important development — change is probably to be discovered there. We have had an extended 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 aspect, volumes are up. What we’re additionally doing within the UK and been doing for a interval is that a few of the company lending has been — I imply it’s type of hiding the final growth in lending. We strengthened our portfolio, in actual fact, by off-boarding to some extent. So all-in-all, we see glorious growth in all our residence markets, particularly contemplating the present macroeconomic scenario. We’re growing enterprise volumes. We see improved margin and retaining 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 fulfill the demand of our prospects thus inserting the financial institution in a wonderful place. We’re properly positioned within the new present scenario on the earth globally and available in the market, and we concentrate on continued development sooner or later. Over to you, Carl.
Carl Cederschiöld
Nicely, thanks, Carina. Then we’ll take a look at the event of the online curiosity earnings and we’ll begin with evaluating quarters, 2021 and 2022. And you’ll see that internet curiosity earnings is up 5%, additionally adjusted 5%. And for those who take a look at the slide, you see the completely different parts. And we see that now we have a powerful quantity development in our internet curiosity earnings, 2% up is what we see.
And we will observe that beforehand when now we have had good numbers, now we 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 properly with the adjustments in curiosity however that is primarily from deposits and that is one thing that we see in all our markets. So now we have a powerful growth right here as properly.
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 properly. However different objects 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 quantity 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 properly, evaluating the 2 years, and that’s additionally what we see the distinction between headline and the adjusted stage, 9% up. So robust growth in terms of internet curiosity earnings typically talking. And if we disregard growth within the UK, that is what we really feel is a extremely robust part of our report.
Then internet payment and the fee earnings, extra typically talking, we all know that the inventory trade growth has an influence, and that’s what we see right here, that now we have a strong scenario in internet payment and fee earnings, with a rise over the primary six months in spite the inventory exchanges. And right here as properly, you see the completely different parts. Financial savings representing about 70% and our financial savings commissions over the quarter are down 16%.
However you possibly can see within the slide that if we examine six months durations, now we have a powerful growth. And underlying this, now we have our capital beneath administration that’s declining lower than the markets. So we see much less of an influence from securities and now we have flows which might be larger than available in the market.
Below fee charges, that’s what you see within the center, and right here, we see these days a optimistic 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 sweet. And different charges and fee, roughly flat.
After which bills, if we take 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 completely different steps, we see that now we have FX results up at 2%, which signifies that — properly that brings us to 1%. That must be defined. After which now we have the Oktogonen, eradicating 1%. After which now we have 2%. And we see that we right here have a powerful growth in terms of growth bills, which is the place we’re investing sooner or later.
And on the similar time, we’re making underlying companies extra environment friendly. And that is one thing that we like. We need to allow investments sooner or later concurrently we turn out to be extra environment friendly. If we take a look at the quarter, it is even much less of a change. And right here as properly, we will regulate 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 way, in terms of bills. We proceed to take a position for the longer term and we make our enterprise extra environment friendly.
And with that being stated, properly, I hand again over to Carina.
Carina Åkerström
Nicely, thanks, Carl, after which if we’re to summarize, now we 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 stated, properly, I hand again over to Louis. After which we’re to conclude this broadcast and there might 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 find out how to log in, you’ll discover beneath handelsbanken.com Investor Relations. So welcome to the Q&A session that might be in English. Thanks.
Query-and-Reply Session
A – Peter Grabe
Hey, and welcome again, everybody. We are actually prepared to start out the Q&A session. So operator, might 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 begin with, once I take a look at this Slide 22, the place you could have the quarterly breakdown, the quarterly NII Bridge, I used to be simply questioning for those who might 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 for those who might be a bit extra particular there. After which secondly, simply for those who might 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 for those who might say one thing in regards to the sustainability of the robust company mortgage development in Sweden. And secondly, you repeatedly talked in regards to 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 E-book. So I see the margin impact, I see the associated fee impact within the UK driving earnings, however I do not actually see volumes there. Should you might say one thing has are available in the 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 will begin, after which I feel I will want some assist from Peter in a sec. However let’s begin then with the NII. What I can say in regards to the margin growth within the NII is that if we break it down on a common perspective, to start with, within the markets, you possibly can say that the Norwegian market, we nonetheless have not actually thorough follow-through in margins, and that is as a result of now we have discover durations in Norwegian. In UK, as you say, now we 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 nonetheless. And in Netherlands, we nonetheless do not see a margin growth, 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 will need to ask Peter to dig into the parts of the SEK195 million, which you had been asking for.
After which the liquidity portfolio impact, sure, the SEK95 million is within the different margin, the detrimental SEK19 million. And what you possibly can say about that’s that if we see ECB mountaineering charges and go into optimistic atmosphere that SEK95 million will probably flip into optimistic 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 numerous pure tendencies, clearly, round proper now. However what we will say is that there are clearly a cause to be — cause to — there’s a danger that we see a bit much less of a credit score growth occurring, clearly sooner or later. However having stated that, I feel that on the company aspect, 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 help positively our core purchasers and we might be there — we’ll attempt to be there for them. And that is a extremely good scenario to be in. So I do assume that we enter a section of the market the place we might, in relative phrases, take good market shares in terms of 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 battle on the family lending there. However on the company aspect, as Carina additionally alluded to within the press convention, is that now we have exited some volumes from an AML perspective. So you do not actually see the underlying development of the company lending development there.
So now we have a powerful pipeline and we truly see some first rate development there as properly 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 — once 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 in regards to the margins and funding results per nation, we write explicitly within the report within the respective segments the magnitude, so you possibly can simply discover the figures there.
Magnus Andersson
Sure, okay. Thanks very a lot.
Operator
And the subsequent query comes from the road of Maths Liljedahl from SEB. Please go forward.
Maths Liljedahl
Sure, good morning. My follow-up there somewhat bit on NII. We now see a steep charge hike. When do you imagine that you’ll really want to offer one thing to the consumer right here when it comes to deposits, i.e., when the speed impact abates? And I suppose there’s just one charge hike within the present numbers. Then sure, we might follow-up on the buying and selling losses. I simply see that there is numerous fairly large enhance in derivatives within the quarter, as much as SEK55 billion. Is that in any means 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 elements proper now within the NII in terms of margins. And as you say, sure, within the early mountaineering season we give pretty little to the purchasers. However I do assume it is very, very laborious to reply that query simply purely on the magnitude, the value we give to the purchasers on the deposits.
I do imagine that in terms of the general margin perspective, on each lending and deposit aspect, as I say, we have seen some enhance now from just a few years of truly gradual downward stress which I feel isn’t — it is positively not an outlier. It has up to now come through elevated deposit margins. However the best way it’ll play out sooner or later, I feel it will likely 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 might argue if we have to hike it. However over time, we’ll play within the aggressive sphere. So we’ll regulate to the degrees which we see. However my important conclusion is that it isn’t that on a margin stage we do not see — it isn’t that we see excessive ranges of margins right here. However I do assume you possibly can’t decide the deposit and the lending individually.
The NFT, no, you should not learn something within the elevated spinoff volumes there. Reasonably, as we have stated, is that we see — we reasonably — we divide the NFT into three parts, roughly. And you’ll see it on the Slide 25 within the pack that, to start with, we clearly have a roughly markets and funding banking enterprise mannequin which is client-driven. And on the inexperienced bars on Slide 25, you possibly can see that they moved down a contact this quarter, however no dramatic there.
Then second of all, we clearly have — to start with, 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 properly, it is included all of the hedging we do for all of the short-term lending, et cetera. And with the actions you’ve got 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 now we have damaged out on the precise aspect of the slide the place we embrace the NII part in grey bars vis-à-vis the pink bars, the NFT part of the liquidity portfolio. And as you possibly can see at midnight blue line there’s that it hits us fairly negatively this quarter. However each the pink bars and in addition the sunshine blue bars, we expect there’s — positively they’ll come again over time, the vast majority of them. So we see pretty little long-term penalties from it.
I feel that in terms of the derivatives, the quantity will clearly be quite a bit affected from the market valuations. And when the actions turn out to be 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 subsequent 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 somewhat bit to NII. We heard SEB yesterday discuss mortgage margins and the best way they checked out it simply assume that each one mortgages had been funded with coated bonds. They stated that margins are taking place sharply. However clearly, that is not the case. And I suppose you could have some 45% of your mortgages funded with coated and the remainder are deposit funded. So might you inform us, in your precise funding value of mortgages, the place do you see that mortgage margins are going in the mean time?
Carl Cederschiöld
Nicely, I can attempt to begin after which, Peter please fill in. I feel that for a few years now, we have clearly seen — to start with, 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 assume that, to start with, what we have seen currently now could be 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, coated bonds, but in addition deposits in that market and clearly senior funding as properly. So we do assume that from a margin perspective, I see little structural cause to imagine that the margin stress should not abate, all else equal.
So I look pretty constructive truly on the margin perspective in terms of the mortgages. And I do assume 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 first rate 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 aspect vis-à-vis the deposit aspect? I do not know.
Andreas Hakansson
Sure, truthful sufficient. One other query. There’s been a lot noise within the final quarter about asset high quality, notably associated to, I suppose, each family actual property in Sweden, however particularly industrial actual property. Because you’re one of many largest participant in each fields, might you inform us what you see and what you truly imagine is the right determine?
Carl Cederschiöld
Sure. I imply, to start with, I feel we will go to the Slide 27 within the pack. We have tried to interrupt down our publicity now. To begin with, clearly, we enter a tricky market now and I feel you actually must be humble in these cases, clearly. And what we have accomplished on Slide 27, we have damaged down the publicity now we have to the actual property. And clearly, sure, we’re a giant financial institution in terms of lend to the actual property market.
As you possibly can see there, we’re ranging from the underside. Roughly half of our lending is family mortgages. Then on prime of that one, now we have one other 11% vis-à-vis housing co-ops. So 60% of the lending base is in the direction of households. After which on prime of that one, now we have roughly 30%, which is lending to corporates in actual property. And half of that’s industrial 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 all the time guided on in terms of our credit score coverage is that we love to do securitized lending.
And I do imagine that if you look into this, I feel that the markets will face challenges. If it involves family, it will likely be larger charges or larger inflation figures. So it will likely be strained. In relation to the CRE and residential actual property, it will likely be reasonably about falling valuations on their portfolio, and it might be in regards to the rental ranges, the vacancies. What we’re extraordinarily agency on and what we have all the time stood agency on is that we like good purchasers with strong money flows. Should you clearly have strong money flows, you’re doubtless to have the ability to pay your debt.
We just like the robust homeowners. If their money flows transfer into drawback, 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 loads about securitized and low mortgage to worth. In order that’s actually the pillars of ours.
And I do assume that what Carina was saying, the asset high quality now we have, we actually like this part. Clearly, you see that the actual property market are beneath pressure now. And you’ll clearly — it’s a matter of that the lending charges for them in the mean time are under the yields of their portfolio. And this must discover a steadiness 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 steadiness sheet now we 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 form of markets the place we usually have a tendency to truly enhance within the relative house.
So I do not know if you wish to add one thing, Carina or Peter there.
Carina Åkerström
No, I feel that you just summed it up fairly properly truly. And I imply, you stated every part. Once we stress this portfolio, we will see that we do have prospects with good margins. And from our perspective now, we won’t see any adjustments within the close to time truly.
Andreas Hakansson
Okay, thanks. That’s it for me.
Operator
And the subsequent 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 related 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 assume there is a danger, clearly, that you just see the credit score demand as properly 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 growing. And we’re in a very good scenario to help that.
Now we have good capital scenario and liquidity scenario. So sure, I do imagine that there’s clearly good cause to imagine that the margins ought to enhance. As a result of clearly, for those who look — and that is very true in terms of the actual property market. Should you take 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 larger 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 charge hike, I feel your listing costs had been elevated fairly rapidly. However then negotiated charges that you just printed, they had been slower to extend. So what are you able to say in regards to the timing of the repricing in your mortgage e book? How massive lag impact do you see from the speed hike? And do you count on continued tailwind to your Swedish internet curiosity margin primarily based on the April charge hike from maybe a delayed pass-through to mortgage debtors?
Carl Cederschiöld
I — please, Peter fill in, for those who — I do not assume — we can’t play this as a robotic. We are going to clearly all the time play it from a aggressive perspective. We are going to regulate once we assume it is possible to regulate and accordingly to the aggressive panorama. I do not — however having stated that, I imply, I feel that the general margin growth now in Sweden is sort of constructive. Sure, it is pushed by the deposit aspect clearly and we nonetheless see downward stress from the mortgage aspect. However as I stated earlier on, I do assume that wanting ahead, I do assume it’s kind of extra constructive marginal panorama.
So I do not assume — we won’t information how we’ll behave ourselves going ahead. We are going to reasonably adapt to the aggressive panorama.
Nicolas McBeath
Sure, certain. However I imply, not making an attempt to determine how you will behave going ahead, however simply in case your mortgage e book can be at an identical stage because it was by the top of the quarter, would that supply 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 truly pretty tough to quantify that, so I am afraid we’ll need to cross on that query and get again when now we have Q3, when now we have a full quarter after the beginning of charge 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 industrial actual property and the truth that rental yields are at present under funding prices which could result in asset worth falls. And I might definitely agree with that assertion. I hoped you can give a little bit of a sensitivity as to what the influence of ranking migration may be on the capital depth of the e book.
So if I take a look at the property firm’s danger weight it is 16% as we speak, and it was 22% in 2018. And I perceive that there is some LGD flows within the e book. However I hoped you can give us some sensitivities of what LGDs may do. And likewise, extra typically, if we get some ranking migration, say, equal to a one notch downgrade on 20% of the e book, are you able to give us some indication of what that does to RWAs? And simply on a associated level, is there something you possibly can inform us in regards to the IRB overhaul? Thanks.
Carl Cederschiöld
Thanks for the questions. Nicely, to start with, let me begin with the capital scenario. Sure, as you say, we’re in a extremely robust scenario there. We predict that is actually, actually good to enter the markets the place the demand might enhance. And in terms of 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 way, far more steady than it has been previously. And the explanation for that one is, to start with, clearly, pension system which we modified over the past years and with pretty good timing in truly.
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, now we 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 larger vis-à-vis our inside danger weights. So we might stay with fairly excessive truly 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 properly for it. So our greatest estimate is 2025 going into IRB. However as we have been highlighting as properly, one should not count on us to go to a sophisticated IRB mannequin, reasonably a basis IRB. However having stated 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 beneath the risk-weighted property calculated on the PRA methodology and the capital ranges on the Swedish FSA perspective.
In order that’s clearly a extremely good scenario to be.
Omar Keenan
Is there any coloration that you may give us when it comes to sensitivity within the industrial actual property e book? If now we have a discount in asset costs, at what stage that influence value pushed [ph] defaults?
Carl Cederschiöld
No, I do not assume we will information on that sensitivity, no.
Omar Keenan
Okay, thanks.
Operator
And the subsequent query comes from the road of Namita Samtani from Barclays. Please go forward.
Namita Samtani
Good morning. Thanks for the questions. I’ve received two, please. Firstly, when can we count on to listen to about extra capital returns, as a result of right me, if I am fallacious, however there is a important chunk of extra capital now, and the one headwind I can consider is the IRB mannequin adjustments, and there is truly tailwinds such because the achieve from the Denmark gross sales? And secondly, wanting on the department numbers, they solely declined by two within the quarter, which I suppose is loads lower than different quarters. So are we now accomplished with the vast majority of the department discount? Thanks.
Carl Cederschiöld
Thanks for the questions. Sure. To begin with, clearly, sure, as you say, now we have a extremely 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 properly capitalized within the scenario we go into. We positively — we’re all the time a financial institution who need to run with the very best confidence and the very best stability ranges. And we do assume that the markets we enter if the timing the place we should always play is certainly protected.
So it is a good scenario to have capital to have the ability to help your core purchasers as properly. The technicality is that, clearly, countercyclical buffers might be reinferred. And after they’re absolutely loaded, that can add roughly 1.9 share factors. It’ll add 1.7 share factors vis-à-vis a 12 months from now.
Then now we have on the optimistic aspect, clearly, sure, once 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 probably be between SEK20 billion and SEK25 billion in risk-weighted property dropping away at the very least. After which now we have the structural results the place the discussions are ongoing with the Swedish FSA and that is roughly hitting our capital ranges as we speak by 0.6 share factors.
And so we’re nonetheless shifting in the direction of our goal vary. We need to run the financial institution inside one to 3 share factors beneath regular circumstances. However we actually do imagine that the particularly excessive demand ranges we have seen truly previously now, it is a actually good scenario to be in them. And if we see as properly UK shifting from contraction to growth, that is clearly going to be one thing as properly being good to be properly capitalized beneath.
Sure, you are probably right, and we’re solely — that we’re dropping two branches this quarter. I truly haven’t got the determine in my head. However as you say, you should not count on us to shut extra branches.
Carina Åkerström
And I feel that’s vital to only add once more, I feel that may be a resolution as properly for the administration crew in all our residence markets as properly. So what now we have accomplished with the discount of the branches is to make it possible for we’re positioned in these markets the place we will have a extremely good enterprise. So I feel that is what you need to learn into this. And I imply Sweden is a extremely good instance for that.
Namita Samtani
Okay, sorry, simply going again to the surplus capital query. Are you going to offer us a time-frame 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, once we shut the Danish deal, positively, then we get much more capital, you need to count on 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 in regards to the SEK3 billion of gross value financial savings that you’ve got focused. Should you might give us an replace the place you’re on these, how a lot continues to be within the making and what might be left, so to say? And likewise, a follow-up on that one. You beforehand additionally talked in regards to the SEK1 billion of elevated IT spending over ’21 and ’22. We’re now within the second half of ’22, so for those who might give any taste into what you count on there within the coming years as properly.
Carl Cederschiöld
Positive. Let me begin, after which Carina may fill in as properly. I feel the general message which we have been saying is that we thought the financial institution was operating a bit inefficiently just a few years in the past. So we would have liked to regulate that and we did some hefty plans truly which then — the consequence of that one was this system round SEK3 billion price. 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 elements within the Swedish total operation.
What we have additionally guided on then is that now once we come fairly far within the turnaround of the financial institution, we actually just like the positioning now we have. We do imagine we’re in a agency scenario, each in Sweden, Norway, UK and Netherlands, and we actually need to strengthen our perspective there. And that is the explanation why we have been highlighting that we might reasonably steer ourselves on value to earnings ranges. So we expect it is much less related to speak about all of the gross parts these days within the P&L. Reasonably, you need to see ourselves focusing on, strengthening our positioning in all of those residence markets and in addition work on the effectivity half.
And sure, we clearly spent an SEK1 billion for 2021 and 2022. We are going to clearly come again when now we have additional steerage to offer on that one. However view us as steering in the direction of value to earnings and we need to create much more effectivity within the financial institution as we run it as we speak, but in addition make investments for the longer term.
Rickard Strand
Okay. Thanks. Then a query on Swedish industrial actual property, the place you grew SEK10 billion within the quarter, it appears to be like like. Simply need to hear for those who might say something in regards to 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 stated earlier, I’ve seen that one among our friends are guiding to strict limits within the publicity in varied parts. We like good purchasers with robust money flows. We like robust homeowners. We like positions the place you possibly can truly 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 have no form 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 find out how to form of take into consideration the Stage 3 protection, which appears to form of be trending — proceed to development downwards and is now under 24%. And I additionally seen that the precise losses proceed to be a lot greater than the online credit score losses booked within the quarter and now we have seen this development now for just a few quarters. So I imply, at what level do you assume it’s good to form of enhance your provisions?
And the way a lot form of these overlay provisions do you continue to have that you may principally take benefit to form 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. Should you might form of give any impacts that you just count on? Or are there any reclassifications of the portfolios that you just’re anticipating and form of your ideas about once we ought to count on the influence and what magnitude. That might be my questions.
Carl Cederschiöld
Sure. Thanks, Sofie, for the questions. To begin with, clearly, the mortgage loss, as you say, clearly, now we have a extremely low internet Stage 3 perspective. However I feel it’s good to learn this within the context of, to start with, 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 now we have a structural development in the direction of a greater asset high quality.
Then clearly, the online credit score losses, they’ve a part of, to start with, clearly, the Stage 3 parts. However in addition they have then the parts of write-offs and recoveries. And each quarter, we see each just a few. And we have grown used to now — and I feel I must say knock on wooden, however now we 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 larger absolute numbers. And we like that.
So I feel it is extraordinarily laborious to information on something. I do not assume you — we see — we do not see something as we speak that are pointing to larger precise credit score losses. As Carina was saying, clearly, the macro local weather will probably have a danger of reducing even additional. And we do clearly enhance the add-ons to some extent as properly. And please, Peter add one thing if you wish to.
Peter Grabe
No, I am simply referring to your query in regards to 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 have no steerage to offer 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 assume IRB overhaul can 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 instance, are trending somewhat bit larger or at the very least remaining steady. Are we nearer to the height of those bills or these are presupposed 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 just see some pressure in the actual property market. However alternatively, you say you identified the LTVs in residential mortgages and in industrial actual property as being within the 50% area. Truly a contact decrease, if I bear in mind appropriately. Contemplating this, do you assume we should always — the market must be involved about actual property market to you? As a result of a 50% LTV would principally indicate you would want 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
Nicely, to start with, on the event expense, as you stated, sure, we have clearly — over the past 12 months and this 12 months, we’re clearly seeing the development of elevated growth spending quite a bit. So that’s shifting in accordance 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 need to spend money on 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 relation to the credit score losses, sure, as you say, now we have a slide, I feel it is Slide 28 maybe. Sure, slide 28. As you say, we present the LTV there on the industrial 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 now we 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 to start with, if they can not pay their payments, then the homeowners in lots of instances truly do enter the image. And that was the consequence once 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 once we truly took the collateral in hand.
So sure, I agree with you. To begin with, the market ranges must drop massively to ensure that the collateral to be decrease worth vis-à-vis the mortgage. However then alternatively, now we have ended up previously, clearly, with conditions the place now we have took the collateral and positioned packages as an organization or so and bought it off and regained all of the publicity or a bit extra truly.
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’ll 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 best way we’ll deal with it’s that when now we have the money within the financial institution for a part, we might be clear the best way we use the money. So we won’t speculate on the result of Finland earlier than now we have any clear factor there. And clearly, I perceive you need the readability round when elements of the part of the capital base. However I truly do assume we’re in such an unsure time as properly in terms of {the marketplace}.
So we do not discover it sophisticated that we are going to probably shut, clearly, the Danish enterprise within the fourth quarter coming again then with a clear view find out how to use the proceeds. And if we’re in a scenario as we speak, sure, after all, we’re very properly capitalized. However who is aware of the demand aspect for bilateral lending for the subsequent six months in a market the place the capital markets are actually constrained truly 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, on account of closing dates please restrict your inquiries to one by one. And now we 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 the entire company e book. So I simply questioned how has that been handled in Q2. Do you could 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 form 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 best way we’ll deal with it between us and Jyske.
Jacob Kruse
And the way a lot NII do you assume 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 subsequent 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 achieve on the NII there with the counterpart of the loss on the NFT line, will the NII a part of that normalize as properly, you assume, over the subsequent couple of quarters?
Carl Cederschiöld
Sure. I imply the — what is going to normalize on that image is probably the blue line. If charges transfer up in an absolute time period, clearly, the optimistic aspect on the NII will enhance with that one. So the grey bar will transfer up. However the financing value of it’ll additionally transfer up in an absolute time period. So the pink bars will enhance in scale as properly. However the blue line ought to revert in the direction of being barely detrimental.
Robin Rane
Okay. However the absolute determine of NII this quarter, was that one way or the other elevated by this, would you say?
Carl Cederschiöld
No.
Robin Rane
Okay, all proper, thanks.
Operator
And the subsequent query comes from the road of Jens Hallen from Carnegie. Please go forward.
Jens Hallen
Thanks, sure, and only a follow-up on the industrial actual property e book. And I do know you present numerous knowledge and collateral appears ample. One factor I ponder for those who might share with us is a few form of liquidity stress to your largest prospects. I imply, at what level does that service turn out to be a pressure? Do you consider bond market closures when stressing these exposures? And the way do you view that on the chance aspect, not on a credit score danger, however as a liquidity danger for the industrial?
Carl Cederschiöld
To begin with, I feel, two methods, and I do not know if I’ll reply your query fully now, however let’s attempt it out first. To begin with, clearly, we clearly run a financial institution who play extraordinarily conservative in terms of the liquidity. Now we have in absolute phrases, now we have SEK1 billion — now we have SEK1,000 billion in liquidity reserves. And that is other than non-encumbered property. 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 in terms of 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 as we speak. So we do not see any unstable part truly within the drawdowns of liquidity from the CRE. We will not discuss from a market common 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 possibly he’ll dial again in. Within the meantime, we will simply possibly go to the subsequent query, which is from the road of Maria Semikhatova from Citibank. Please go forward.
Maria Semikhatova
Hello, thanks. Only a fast query on as properly, industrial 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 corporations in Sweden. Simply possibly for those who might present a bit extra coloration in your standards if you reclassify to Stage 2. If there’s something you possibly can say what triggered this migration within the quarter.
Carl Cederschiöld
No. I imply Stage 1, Stage 2, to start with, they’re model-driven. And clearly, that might — I feel we have to look into this and may get again to you. However clearly, once we change the add-on as properly 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 help you, however I can not 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 industrial actual property, there’s been a lot dialogue round it. And also you talked in regards to the LTV that you’ve got of fifty% and the dangers associated to it. However in many of the CRE corporations, you’d have numerous 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 somewhat bit about your positioning inside that?
Carl Cederschiöld
Nicely, 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 this time, you could have extra historical past within the markets than I do, so you possibly can maybe right me, Andreas. However I do assume the distinction between the financing value within the bond market now vis-à-vis the borrowing value from the financial institution system is probably at very historic highs.
However you possibly can’t examine them as a result of they seem to be 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 likewise, clearly, they should submit collateral. And that might be a constraint on the ranking perspective on the bond applications. However in terms of the capital construction, I suppose, we have to wipe out — clearly, you wipe out fairness, you wipe out the hybrids, you go down the senior after which now we have — then we have lent senior securitized.
So I suppose that is right, however I am my companions right here to help me. However that is the best way I cause it.
Andreas Hakansson
Sure. So for those who 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 had 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, to start with, I really want to reveal that I wasn’t right here then. And I feel there’s been loads written about this, clearly. However I do assume you could have some extent and I’ve seen it within the media as properly, individuals highlighting this. Clearly, at the moment being, if you opened up the banking sphere, if you de-monopolized the enterprise mannequin, clearly, the banks had been chasing development. And clearly, they had been lending to very excessive LTV ranges, generally truly larger than 100%.
I feel that we have grown loads. To begin 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 explanation, clearly, that now we have each a lot decrease LTV, but in addition a a lot larger capital stage and every part in place. So I do not assume you possibly can examine the scenario as we speak 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 if you do your corporation planning, what property worth assumptions are you utilizing for Sweden? I imply, do you assume reasonable declines from right here? Do you assume costs stay flat? And for those who might share with us when you concentrate on draw back eventualities, tail dangers, I do know a few of your friends printed their ICAP stress check assumptions. However might you inform us, if 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 info — you discover details about the eventualities in reporting. And for those who do not discover it, simply attain out and we’ll information you to it.
Carl Cederschiöld
And that is — and the explanation for that one is clearly that, to start with, clearly, once 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 components and the result of the ECL. And the explanation for that one is that we have gone via numerous cycles with very low correlation to the credit score losses. And that is the explanation why we do the add-ons. And likewise, that is the explanation that you just may truly ask that in your query that once we plan for our enterprise going ahead.
So clearly, the best way we worth then the housing and the collateral and every part, that is an enormous part in our resolution across the credit score resolution. And final info, 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 had been accomplished on, I feel, 40% drawdown in Swedish industrial property costs. And I feel in that check, you confirmed a 3-year impairment charge of about 200 foundation factors. I imply, is that simply — ought to we simply fully ignore that? Do you assume it is simply not related to the present context?
Carl Cederschiöld
I feel the entire exterior stress checks accomplished on the financial institution do have a really excessive diploma of top-down perspective. And I can see the explanation why they should do this sort 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 components and credit score losses. So you’ll have to — I am not going to evaluate their end result of that one, however we see little or no rationality in that once we do our inside modeling.
Piers Brown
Okay, that’s very useful. Thanks loads.
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 as we speak.
Carl Cederschiöld
Thanks, everybody.
