Danske Bank A/S
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Danske Bank A/S
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Hello, and welcome to Danske Bank conference call. [Operator Instructions] Just to remind you, this conference call is being recorded.Today, I'm pleased to present Claus Jensen. Please begin your meeting.
Thank you, operator, and welcome to Danske Bank's Q1 2020 pre-close call. I hope you are all well in this turbulent times. My name is Claus Ingar Jensen, and I am the Head of IR. With me, I have John Backman and Robin Løfgren from the IR team. And please note that this call is being recorded for compliance reasons, and the script used for the call will be published on the IR website after the call.In today's call, I will highlight relevant data and one-offs that you should be aware of before the start of the sign-in period on the 9th of April, ahead of the publication of our interim report for the first quarter of 2020 on the 30th of April. I will go through the P&L statement line by line and remark briefly on capital at the end. Afterwards, we will open up for a Q&A session.But before we start, I would like to briefly highlight the obvious. I will not commenting -- I will only be commenting on already disclosed information and one-offs as well as public available data. In this connection, I wish to stress that developments in specific indices may not always have the same effect on our performance. I will limit my response to follow-up questions, so as to not include any nonpublished information or qualitative remarks on performance in Q1.In addition, I would like to draw your attention to the company announcement #1 from the 16th of March, in which we announced our expectation for a negative impact on net profit for 2020, and simultaneously suspended our 2020 guidance due to the COVID-19 situation. In this connection, we quantitatively guided the market towards higher loan impairment charges and lower trading income; however, we have not quantified any of these effects. I would also like to remind you of the reclassifications concerning the group P&L that we announced in the annual report for 2019.With effect from Q1 2020, income from the hedging of assets under insurance contracts in the former SEB Pension Danmark is reclassified from net fee income to net trading income. Further, income from the health and accident business Danica Pension, is reclassified from other income to net fee income. Please remember these effects when forecasting individual line items. Further information can be found in note G41 on Page 175 of the annual report for 2019, and reclassifications will be published on the IR website before the publication of the interim report for Q1 of 2020.That said, let's start by having a look at the net interest income. Please remember that Q1 has 1 less interest day than Q4. Our usual guidance is for an NII impact of around DKK 30 million to DKK 40 million per day. During the quarter, the Norwegian and Swedish krona depreciated by 5.6% and 2.2%, respectively, on average against the Danish krone, while the pound sterling only depreciated by around 0.6% on average.On the funding side, we issued 3 benchmark instruments during Q1. The first one, a NOK 5 billion tap of a covered bond issue was issued on the 7th of January at a spread of 18, 1-8, basis points over 3-month Euribor. The second one, a covered bond of EUR 1 billion was issued on the 8th of January at a spread of 14, 1-4, basis points over 3-month Euribor. And the third one, a nonpreferred senior bond of GBP 750 million was issued on the 14th of January at a spread of 121 basis points over 3-month Euribor.Please also revisit Page 29 of our Q4 conference call presentation to see the redemption profile for the maturing funding.With regard to volume developments, we refer to public available sector statistics as the only externally available source of insight. We have nothing to add to this. Market rates have developed in opposite directions, especially towards the end of the quarter, with 3 months Nibor decreasing 18, 1-8, basis points, while the 3-month Stibor increased 19, 1-9, basis points on the basis of quarterly averages.As a response to the changes in market rates, we hiked the rate on Swedish 3-month mortgages by 12 basis points with effect from the 1st of March. This effect the front book immediately and the back book at the next interest reset, and it covers regular customers as well as our partnership agreements with Saco and TCO. No material price changes have been made for deposits in Sweden.In Norway, we cut the rate on 3- to 10-year fixed-rate mortgages on both the 3rd and the 6th of March. Rates were cut by 35 to 42 basis points in total, depending on the fixed income, as a response to changes in market rates. This rate cuts affects only the front book. Additionally, we have cut both lending and deposit rates for our customer -- for our partnership customers in Akademikerne by 7 basis points as a response to the changed market dynamics. Changes to lending rates will affect the front book from the 9th of March and the back book from the 20th of March, whereas changes to deposit rates will affect both front and back books from the 18th of May.On the 13th of March, the Norwegian central bank cut their official rate by 50 basis points to 1%. In response to this, we have announced a cut of 35 basis points on mortgage lending in Norway for all customers. This will affect the entire back book from the 5th of April and the front book from the 20th of March. Further, we have announced deposit rate cuts of 10 to 45 basis points depending on the product. This will affect the entire back book from the 25th of May.On the 20th of March, the Norwegian central bank cut their official rate by a further 75 basis points to 0.25%. In response to this, we have announced lending rate cuts of 40 basis points for our partnership customers in Akademikerne and 50 basis points for ordinary customers. This affects the front book from the 30th of March and the back book from the 5th of April. Further, we have announced deposit rate cuts of 5 to 50 basis points depending on the product. This will affect the entire back book from the 7th of June.On the 19th of March, the Danish central bank hiked their leading interest rate by 15 basis points to minus 0.6%. As a response to this, we have decided to hike deposit rates by 15, 1-5, basis points for Danish commercial customers from the 1st of April. The rate hike will also apply to Danish retail customers, which means that the previously announced introduction of negative deposit rates on the 1st of June will be at a rate of minus 0.6%. Of course, 0.6%. This concludes our messages on net interest income.Looking at fee income, please note that the Q4 included seasonal performance fees of DKK 350 million, which will not reoccur in Q1. Besides this seasonality, fee income at Danske Bank is, as always, dependent on market developments for our asset management business and activity levels for our banking operations. Markets have been turbulent during Q1, with a 10% decrease in the OMXC25 Index in Copenhagen and a 20% decrease in the S&P 500 Index, just to name a couple. At Banking DK, remortgaging activity was very high in 2019, but seems to have slowed as expected. Sector statistics show that Realkredit Danmark has seen DKK 17, 1-7, billion worth of early redemptions in Q1 against DKK 52 billion in Q4. As a rule of thumb, we typically earn around 50 basis points on remortgaging with the majority booked as fee income and the rest in the split between trading income and NII in that order.Please note that the actual effect is uncertain and some customers may have chosen to leave Danske Bank.Turning to trading income. Please note that we do not guide on this specific line item. As mentioned in the company announcement #1 from the 16th of March, the global financial markets were impacted by very high volatility in Q1, which may have had a negative impact on trading income in the quarter. We have also observed a significant widening of global credit spreads in general, and on Danish krone-denominated covered bonds specifically. For reference, the option adjusted spread on Danish 30-year callable bonds and 5-year noncallable bonds have widened by around 25 basis points and 20 basis points, respectively, now pricing at around 33 basis points and 10 basis points, respectively. As a further reference, the spread between Danish and German 10-year government bonds has widened by around 25 basis points.Please note that the trading income will be impacted by income from the auctions of Danish variable rate mortgage bonds for refinancing purposes. These auctions typically affect Q4 and Q1. And for Q1 2020, the auction size was slightly smaller than in Q1 2019, as customers more often choose fixed rate loans or longer-dated variable rate loans. For reference, income from the Q1 '19 auction amounted to DKK 145 million. Please also note that trading income includes the investment results from the health and accident business at Danica Pension. We have no specific comments on other income. This concludes our comments on the income lines.If we look at the cost line, please remember that Q4 '19 included many one-off items as well as standard seasonality with year-end bookings of costs. For Q1, we have not communicated any one-off items, and we have no specific comments to add on cost development during the quarter.With regard to loan impairment charges, we expect to see an effect from the significant worsening of the macroeconomic outlook because of the COVID-19 situation. On an exposure level, we cannot rule out that we may also see an impact from the significantly lower oil prices. Our preliminary assessment based on input from changes to model assumptions is that loan impairment charges are likely to increase due to more severe scenarios. For reference, our current downside scenario under IFRS 9 implies far lower impairments than, for instance, the adverse scenario in the EBA stress test, which is due to much milder assumptions.Since the lockdown of all Europe in March, the markets have had a significant focus on how regulators will allow for a more flexible interpretation of impairment rules and model scenarios under IFRS 9 due to the COVID-19 situation. In Denmark, the FSA published new guidelines on the 19th of March, which include more flexible conditions for credit facilities granted to customers with good credit ratings. For customers with weaker credit ratings, impairments will be increased if we assess that a customer's financial situation post COVID-19 will be unsustainable. With regard to the interpretation of the various macroeconomic scenarios, the Danish FSA on the 2nd of April published additional guidelines, including a recommendation to use the latest macroeconomic scenarios from the Danish central bank published on the 1st of April.Let me also direct your attention to interviews with the Head of the Danish FSA on Bloomberg and Risk.net yesterday and today that confirmed the general market observation that in a historical context, the Danish FSA adopts a stricter and more conservative approach than other jurisdictions. At present, we have no further guidance on the magnitude of loan impairment charges in Q1.On the noncore and tax line, we have no specific comments to add. And this concludes our comments on the P&L.As a final point, I would like to touch on capital. In the line -- in light of the COVID-19 situation, Denmark, Sweden, Finland and the U.K. have completely removed the countercyclical capital buffer, and Norway has reduced the countercyclical capital buffer from 2.5% to 1%. Consequently, our fully phased-in countercyclical buffer requirement will decrease to around 0.1%, a significant decrease from the level of Q4 2019, which was 1.7%. Our MREL requirement will see a decrease of roughly the same magnitude, all else being equal.Further, we have communicated that we are reassessing what we will propose for dividend for 2019. Any reduction in the dividend proposed for 2019 will increase our CET1 capital immediately after a new proposal is made. For reference, the previously communicated dividend proposal for 2019 amounted to DKK 7.3 billion, corresponding to around 1% of the CET1 capital ratio.As always, our capital position will be impacted by earnings, less 60% dividend accrual. The risk exposure amount is subject to growth, general market volatility and FX movements, as always. We have not communicated any extraordinary impact on the risk exposure amount in Q1.So this concludes our initial comments in this pre-close call. Before we move to the Q&A session, I would like to highlight that we enter our silent period on the 9th of April. Shortly, we will also start collecting consensus estimates with the contribution deadline on the 15th of April. And finally, we will publish our interim report for the first quarter on the 30th of April.Operator, we are now ready for the Q&A session.
[Operator Instructions] Our first question is from Jakob Brink from Nordea.
Just on cost cutting, to start. I think in connection with the Q4 report, you mentioned that you would come back with more qualitative data on the cost-cutting plan in May or after the Q1 report. Is that still the expectation or has COVID-19 changed that?
I don't know whether this has so much to do with the COVID-19 situation, but it's true that we have promised to come back in Q1 with some additional information on the transformation and the initiatives we are doing. We are, for now, looking into to what extent we have numbers available already now. But otherwise, I think we will make some comments around the more qualitative improvement that we have made in order to show progress. But it is, and it will probably be relatively modest what numbers we can show already now. I think that will be more relevant for the Q2 reporting.
Okay. And then on to trading income. I know you don't guide on that line. But could you just remind me how much exposure is that you have to Danish mortgages in your liquidity portfolio and general trading book? It seems like we're around DKK 200 billion or had around DKK 200 billion of fixed income exposure in Denmark at the end of Q4. But is that mortgage is all of it?
Without having the numbers in front of me, Jakob, I believe that there is a significant portion of the mortgages. But otherwise, I don't know whether Robin or John, you have the numbers on your mind or whether we can come back to you on that?
I was just trying to -- I mean, we had that same day as you profit [indiscernible] suspended your guidance. I think Danish loan mortgages took almost 2 points hit, which would then be around 2%, DKK 100 billion or DKK 200 billion. I mean that's, of course, a fairly sizable amount. Is that the trading income loss we're looking at? Or is -- I'm doing something wrong?
No. no, it is -- yes, I think you are missing the distinction between the different portfolios. We have the trading portfolio, we have the available-for-sale portfolio, and we also have the hold-to-maturity book. And there are mortgages in all of them. I would say, the more -- the longer duration mortgages are definitely within the hold-to-maturity book, whereas the trading book more reflects trading positions and is, of course, of a smaller size.
And more short duration as well in the trading book?
The trading book could potentially also be made up by longer duration. It's probably a combination. It fluctuates, depends very much on the customer flow we are seeing. So as you know, we are not running any proprietary trading anymore, but we are facilitating customer flow. And the trading book typically also reflects the type of consumer flow we are seeing.
Okay, fair enough. And then just on loan losses. Just so I understand your comment. You had this comment about EBA stress test versus your own negative. Could you just say that again? And what did you mean by what you said?
Well, I said a lot, I think. But when it comes to the EBA stress test, I was, first of all, referring to the guidelines from the Danish FSA, where the Danish FSA have recommended that banks should use the scenarios published by the Danish central bank the day before yesterday. And...
And also I mean you had -- your very initial comment about this was that when we look at your provision, it was...
If you -- well, we said that if you look into the report, if you look at the model sensitivity, as you can find it in the annual report, this is not reflecting a severe scenario. That was what I said. So...
This central bank's publication from 2 days ago, is that a severe scenario in your view?
I would say that is a severe scenario, yes, in different degrees because they have published a 3% downturn in GDP, a 5% and a 10% downturn. So I would say that is different degrees of being severe.
[Operator Instructions] Our next question is from Riccardo Rovere from Mediobanca.
Just to get back 1 second, Claus, on the previous question on your statement about EBA. From what you stated, I got it that you expect the level of provisions, the level of credit losses to be far lower than what the stress test of the EBA was incorporating. Just to be 100% sure, I got it correctly. Is that what you said?
Yes. I think you should see it in a way that the EBA stress test, although it's a little outdated now, it goes back to the end of 2018. The -- that scenario was a very severe scenario. And what we are doing now is we are recalibrating the model to include also more severe scenario. Previously, we have had a -- and that we're also going forward, we'll have an upside scenario, base scenario and a downside scenario. But the scenarios that were included in the Q4 report does not reflect a severe scenario, right? So it will be an assessment on our side on how much severe scenario to include?
All right. Okay, okay. And then if I may follow up 1 second on cost. All the guidance that you provided at the time of full year numbers, are they still somehow valid or some investments might eventually be delayed given the current conditions? How should we think about that?
No, I think that, as you know, Riccardo, we have suspended our outlook and our guidance. And the reason for suspending our guidance were the unprecedented uncertainty we have. This is a reference to impairments, and it's a reference to trading income. So that is another way to put it that it's difficult to blame the cost line or to have any other guideline.
[Operator Instructions] And we do have a follow-up question from the line of Jakob Brink from Nordea.
Just 1 question more, Claus. So on net interest income, we are seeing quite a few Nordic companies now, first of all, drawing down their revolving credit facilities. And I guess also, we must see some companies breaching covenants. Could you give us some update on what you're seeing in regards to increased loan demand and also pricing?
I think we have -- I would say, overall, we are extremely busy because we are doing our utmost to service our customers in this situation, and I think we have seen a lot of interaction with primarily larger corporates that are making sure that liquidity facilities are available. And we are also seeing a good inflow of new credit applications. I think this will come stepwise. I think that also, you can say, smaller companies, the SME sector will probably start to kick in now and perhaps later on maybe also on the retail side. So I can confirm there is a good activity. But of course, I can't comment on any pricing. It's, of course, quite clear that if we are granting loans onto government guarantees, these government guarantees will, of course, be reflected in the pricing structure. But otherwise, I don't have any specific comments on the pricing side. I can only confirm that we have good activity.
And our next question is from Mads Thinggaard from ABG.
I just have a bit -- a small question on your funding strategy. Now I've got the impression you're standing a bit on the sidelines these days with prices going up. And of course, you do get a bit of help on MREL requirements from the commercial buffer down. I mean how long can you stay on the sidelines? I mean what is kind of your horizon here?
I can't give you any exact date, but I can see we are in a very strong funding position due to what we have issued so far due to the fact that we are probably in an NPS world, one of the better capitalized banks in Europe. But -- and we have plenty of collateral that we can use for covered bond issuance. And as a last resort, we can also use that collateral for issuing bonds that we can use for different central bank facilities. So there are a number of defense lines, so to say, going forward that when we look at it right now, we feel that we are in a very comfortable situation. But of course, I cannot give you any day. It depends very much on how liquidity position is developing on a daily basis, and that is something we are monitoring. We have a strong liquidity position, and we have had that during the last 3 weeks, where we have been looking into this crisis. So there is no rush from our side to go to the market.
Okay, great. And then just another -- I mean on your risk consumption, and how COVID will -- I mean the kind of way it will affect. I mean in the start, you probably could tell a bit of how it will affect, I mean, counterparty risk and credit migration? Is that later on? Or how should we see this?
No. I would say, if we issue more loans now, of course, there would be the usual correlation between credit risk and the expansion in lending. But then I would say that high volatility is also an indicator for that market risk could go up, probably a little bit over time because market risk is based on a 60-day moving average. So when we're talking about Q1, that could have an effect. But as you can hear from the way we calculate it, it's probably not very significant.
And our next question is from Jacob Kruse from Autonomous.
I just wanted to ask the previous downside scenario. Did you -- I will try to find it. But did you give a GDP assumption there for what you expect in Denmark in that scenario? And secondly, just on your sensitivity to swap rates. Are you running -- or do you still have a sensitivity to Danish swaps rates with respect to nonperforming or impaired mortgages?
Yes, the answer to your last question is, no, we don't have any sensitivity here. And to your first question, we have not published the GDP number behind the present model assumption. You can say that if we apply a 100% downside scenario in that scenario, that would have an increase in the allowance account of DKK 2.4 billion. So you can indirectly see that this is not a severe scenario. But the exact GDP number inside that model is not something that we have disclosed.
And our next question is from Ebrahim Saeed from Deutsche Bank.
Apologies if I missed this in the opening remarks. But I just wanted to understand, there's obviously a lot of discussion especially amongst European -- on European regulators on how IFRS 9 can be flexed, if you will, to manage through this crisis. The Danish regulator had somewhat slightly different opinion or certainly the wording suggested so. I just wanted to get a sense of how do you -- what's your reading of this? How do you interpret that you might be required to implement these rules because there's obviously a procyclicality to them which can maybe yield a noneconomic outcome? So can you just give some guidance on that?
Yes, it's -- unfortunately, Ebrahim, it's very difficult to make any specific comments outside what I said before. You have probably read the interviews, articles with the Head of the Danish FSA. It confirms what we have -- what has been our interpretation for quite a long time that the Danish regulator is more conservative and having a more strict supervision on impairments in the Danish banking sector. And I think if you think that over into flexibility on IFRS 9, that should, everything else being equal, be an indicator that there is a smaller flexibility in this case compared to other jurisdictions. I think that's what market interpretation of the situation is right now.
So if you add someone with a 3-month payment holiday, if you will, then you would have to record that as a loss and then subsequently potentially reverse that? Is that how we should think about that? I mean assuming that they don't ultimately default.
Yes. But I think my comments was actually in 2 parts. The first one was on the model assumption in -- when it comes to IFRS 9. The other one was the flexibility on a more individual exposure level where the Danish FSA in their guidelines have confirmed that they have a flexible approach to the staging process if we are granting, you can say, extended credit facilities, override facilities or whatever to already good-rated customers. That should not be counted in as nonperforming loans. But it is, of course, a different approach when it comes to customers with a more weak credit rating. Their guidelines should be followed. But the flexibility is when it comes to the good-rated customers.
And our next question is from Sofie Peterzens from JPMorgan.
Here is Sofie from JPMorgan. I was wondering if you could just give a little bit more detail how we should think about the guarantee schemes that you have in Denmark. And I know you mentioned that you see a good deal of -- lot of applications. But how should we think -- if you can just give a little bit more details on the guarantee schemes that you have in place, that would be great.
Yes, we have a guarantee scheme for which the government will put up a 70% guarantee. So the remaining 30%, of course, in the banking system. And they have put up lines for both larger corporates and also SME customers, and these lines have been extended over the last couple of weeks. And -- I mean the market is still -- things have been moving so fast that we are still waiting for the exact guidelines on how this should be operated and practiced. So -- and -- so therefore, it's not possible for us to shed any light on how big a proportion of loans that we will provide with the government guarantee. That's far too early to say. But it's a 7% (sic) [ 70% ] government guarantee. And as you know, the Danish government has been very flexible. They have expanded the government support significantly over the last couple of weeks. And it's my interpretation that if there is a need for further expansion, they will probably do so. I think that's all I can comment on for the time being.
Okay. But the 70% guarantee you rank pari-passu with the government or you take the first loss?
That is also something that we are waiting for clarity around who is taking, so to say, the first loss or whether we are ranking pari-passu. So I'm sorry, I cannot answer in detail how that will work in practice.
Okay. And is there any max maturity on the government-guaranteed loan?
I'm not aware of that, no.
So is there an easier way where you could issue third year loan, which is government-guaranteed for 30 years or...
I wouldn't believe that we are talking about 30-year loans, right, because we are talking about credit facilities for corporates, right? And these are typically of a much shorter maturity. So I would not see this as a way to get a 30-year government-guaranteed funding.
Okay. And in terms of your capital, should we expect any impact from FX or New York or equity Tier 1? Or should we expect FX to largely have no impact?
You should expect FX to have a minor impact because in the spring of last year, we did an FX hedge of the credit risk in our rear number. Our credit risk were hedged, and that means that we have created kind of immunity to FX movements to some extent on the CET1, and we did that for the exposure we are having -- the credit risk we're having in Norwegian krone and in Swedish krona and also in euros and pound sterling. So -- and that was exactly with the aim of not being in a situation where you should see a negative impact. And thereby, you are reducing your FX volatility on the CET1 number.
Okay. And for how long is this in place? Or is it a rolling 12 months?
It's indefinitely. So it's something we have as a kind of balance sheet optimization for now.
Okay. And apologies, but I was a little bit late to the call so I missed, I think the details on net interest income, so I was wondering if you could just give me the sensitivity to rate hike? What's the net interest income sensitivity is?
Yes, we had a lot of information on the NII, but we didn't say anything around the interest rate sensitivity. But we can confirm the sensitivity that we talked about at the Q4 report, meaning that is DKK 1 billion if interest rates go up by 25 basis points across all the currencies where we are operating, and approximately DKK 700 million the other way if we see interest rates decline by 25 basis points across the currencies.
And how much of the DKK 1 billion is in Denmark?
If you look at the balance sheet, I would say, the Danish part of our operation is a little more than 50%. But again, the most sensitive part to our rate sensitivity for now is deposits -- due to the pricing of deposits for now. And as you probably know, Sofie, we have a strong deposit position in Danish krone. So there is, of course, a good part of our rate sensitivity related to the Danish krone deposits.
And our next question is from Martin Leitgeb from Goldman Sachs.
Just 2 questions from my side, please. And the first one, in terms of impairments. So thank you very much for the comments on IFRS 9 and how to think about the various models there. But I'm just wondering in terms of underlying asset quality as we head into the quarter and into the next quarter, is there anything out there in terms of data points, which would evidence that there's where the amount of stress building up in terms of stage-3 categorization? Or would that be more further down in the year? And the second question, just regarding the SME guarantee scheme. How comprehensive you think that is? So I think there's a definitional requirement that you need to evidence that you have lost 30% of the revenues in order to qualify. Is that broad enough to capture where most of the stress is? Or is it just basically one component and there's still a significant buildup of stress to be expected?
Yes, I think, of course, your last question is very difficult to answer because this is a completely unprecedented situation, and we have not been facing this before. So whether there will be somebody who is falling off the cliff because they are not qualified to take part in this -- the portion of that, I think there will always be someone who will be falling out here. But to what degree this loan facility is able to capture most of the distressed companies, I think we will have to see that going forward. I mean we are just finalizing the final procedures and rules for these arrangements. So this is still very early days to give any insight in how that works in the practice. And then you said whether there are any clear, whether there are -- the first question was around whether there are any -- was it that -- whether there was any indicators on stress in the system on the credit quality or could you please...
Yes, I was just wondering if you can share any -- if there's any comments you can share on the underlying asset quality, how it has evolved so far in the quarter. So I'm not sure in terms of what is out there in the public domain, whether in terms of unemployment, whether in terms of corporate defaults, whether there's anything which changed meaningfully, which you think might be worth highlighting at this stage for the first quarter?
We don't have any statistics to point to when it comes to defaults. But of course, we can hear from what you can read in the media that there are defaults coming in, especially in the leisure restaurant sector. And that's what we have seen so far. I think the latest number for unemployment is that unemployment in Denmark is up by 40,000. So I think you will probably find similar numbers in the other countries we're operating in, maybe with some variation of cost. But that is essentially what we have seen for now. And then, as I also alluded to during the call, this also that had -- significantly lower oil prices could also be having an impact on the oil-related exposure, of course.
Maybe to follow up on that oil exposure. Could you just share what your exposure to offshore is at this stage in terms of the AD?
Yes. We have disclosed approximately DKK 24 billion exposure into oil-related activities. And the offshore part of that, and that is where we have seen impairment charges over the last many years is somewhere between DKK 11 billion and DKK 12 billion in gross credit exposure by the end of Q4. And that is -- of course, if we're talking about geography, this is in Norway.
And our next question is from Riccardo Rovere from Mediobanca.
Just from an accounting standpoint, from one of your previous statement, do I get this right that the Danish FSA looks, how can I say, less inclined to allow you to use some kind of relaxation on IFRS 9 forbearance definition and all this kind of stuff? So that to say that in a Danish Bank, in general, should use, let's say, the more closest approach, let's say, to the normal IFRS 9 approach, I don't know how to call it.
I think we have -- I think there was one of the other questions also alluding a little bit to this, where I said that that the Danish FSA in the guidelines they have published, they include a more flexible approach to new or extended credit facilities granted to customers with a good credit rating. So that said, I think it means in practice that if you are extending credit facilities, which you can do in many different ways, that will not mean that you should see an increase in your nonperforming loans due to that. But of course, when it comes to customers with weaker credit ratings, this is, of course, going to be treated differently. So that is the comment we have made, and that's what we can see from the guidelines the FSA have published. And then the other question around the FSA's treatment were related to what we discussed on the model assumptions, where I said that the Danish FSA have recommended that we are using the latest macroeconomic scenarios from the Danish central bank that was announced the other day.
[Operator Instructions] And as there are no further questions, I will hand the word back to the speakers for any final comments.
Okay. Thank you, operator, and thank you all for the many good questions. Sorry if we haven't been able to answer everything in full, which is, of course, due to this situation we are in right now with a lot of uncertainty. If you have any further questions during the afternoon or the evening, you are, of course, welcome to call myself or John or Robin. We are not sitting together, but we are ready to answer your calls over the phone if needed. And then I will just wish you a very nice weekend, and goodbye.