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DNB Bank ASA
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Hello, and welcome to the DNB earnings call of Q4. [Operator Instructions]
I will now hand you over to your host, Head of Investor Relations, Rune Helland, to begin today's conference. Thank you.
Thank you so much, and thank you all for calling in, and welcome to the fourth quarter analyst call. Here in Oslo, we are almost the full Executive Board, with the CEO, Kjerstin Braathen; CFO, Ottar Ertzeid; Head of Corporate Banking, Harald Serck-Hanssen; Head of Personal Banking, Ingjerd Cecilie Hafsteen Spiten. We have Head of People, Kari Bech-Moen; Credit Risk Officer, Ida Lerner; and we also have Head of Wealth, Hakon Hansen; and DNB Liv, Anders Skjvestad. Ottar will start the conference, giving you the -- just the 3, 4 minute review of the quarter, and then we will open up for questions.
Please, Ottar.
Thank you, Rune. The Norwegian economy continues to perform well, and we expect that to be the case also going forward with the growth around normal or trend levels in the innovation economy. This provides a solid backdrop for DNB for the performance both in the fourth quarter of 2019 and also going forward into 2020 and beyond. For the year 2020, we saw positive development for DNB continue, driven by profitable top line growth. For the full -- total income was up 8.9% compared to the previous year. For the full year, return on equity came in at 11.7%, close to our 12% target. Profit for the period increased 5.9%, and earnings per share is 6.2%, having the positive effect also from the share buybacks.
For the year 2019, we proposed a 9.1% increase in dividend per share to NOK 9 per share, implying a cash payout of 57%, in line with our dividend policy and also delivering on our ambition of a nominal increase every year in dividend per share. We, today, announced another 0.5 percentage point share buyback adding to the 3, ones we have previously announced and then extending the total program to 2%. The total payout will thus be 78% for the year 2019.
For the fourth quarter in isolation, return on equity was reported at 10.4%, excluding the negative mark-to-market effects from the basis swaps and AT1, which we have previously informed about, and the return on equity was exactly 12%, in line with our financial target. For the quarter, NII increased almost 8% and 3.6% from the previous quarter, despite the increased resolution fee of NOK 169 million recognized in the quarter, reflecting the full year 2019. The growth in commissions and fees are unchanged for the quarter compared to the same quarter the previous years, but for the full year, up 4.4%, in line with the guiding we provided at the Capital Markets Day with an ambition of annual growth between 4% and 5%.
Asset quality remained solid. Impairments for the period at NOK 178 million, with NOK 360 million in increased impairments in mainly the offshore segment and reversals within shipping. The stage 3 portion of the portfolio continued to decrease down to 0.8% of the total. Capital shows our strong development. The new regulations from the regulators imply a capital requirement at year-end of 17.1%, including Pillar 2 guidance of 100 basis points, while the actual level we now have is 18.6% after deducting all the announced share buybacks. The leverage ratio of 7.4%, it confirms that we are very solid in all respects. So I think that is a short sum up of the year and the quarter.
Can we open up for questions, please?
[Operator Instructions] We have a question coming from the line of Riccardo Rovere from Mediobanca.
One question, if I may. Would you be able to guide us through the -- any foreseeable increase in the capital requirement over the past, let's say -- over the next, sorry, 12 months, commercial real estate and so on? And can you please clarify whether your -- the polish on your management buffer on top of the minimum capital requirement, whether this is a firm number? Or it might eventually be subject to any change?
Thank you, Ricardo. As Ottar stated, the known changes to our capital requirements is only related to the risk inflation buffer that will mean a 10 basis points increase in the capital requirement by the year-end 2020. This is the change that we know of. We have said that we would like to take some time now to gain experience from the new regime. We are very comfortable with our capital situation the way it is today, but we're also aware that the authority has -- the Department of Finance has instructed the FSA to look through the Pillar 1 and Pillar 2 layer as well as the Pillar 2 guidance. We have not made any changes to the targeted level that we stated during our Capital Markets Day of 17.9% as an ambition, but the 17.1% number includes our Pillar 2 buffer of 100 basis points that we previously referred to as the management buffer.
We've also talked throughout the day about expected changes in the coming quarter. We have already completed the second part of the Fremtind merger. That will cost approximately 10 basis points of capital. We have an option to increase our ownership in Fremtind by an additional 5 percentage points, which is another 10 basis points. And the Norwegian krone has been quite volatile, sort of weakening into the year, which, as of today's numbers, would mean a 20 basis point lower capital level than the one you see towards the year-end.
I think I would only like to add the that we feel that the FSA is consistent in its message, continuing to say that they are satisfied with the level of capitalization with Norwegian banks and are looking for this to be upheld through the transition from one regime to the other.
Right. If I may, just a quick follow-up. The possibility of increasing the stake in Fremtind, is it something that is still to be decided? Or is something that you would love to do, if you could?
This is an option we have. So it's fully in our option to conclude on that. Obviously, we can't announce firmly until we have formally decided, but the rationale when we started the merger of this business being a higher ROE business than most of our other business still stands. And we're very pleased so far with our experience and the operation into the non-life insurance market.
Next question is coming from the line of Jan Erik Gjerland.
I have 2 questions. The first one is about costs. If we put all of this lovely one-off costs, which you should have taken in the previous quarters back, it looks like you could have a sort of a decent growth going forward. But you have had a very strong cost per employee growth. What should we think about the salary growth and the bonus distribution into 2020 when it comes to costs? If you could shed some light to that?
On wage inflation across the Norwegian markets, the expectation is for this to be more or less in line with previous wage inflation in the area slightly above 3%. And so that is something to be factored in. When it comes to variable compensation, there are no structural changes, and this is related to the activity and the performance of the business throughout 2020 as previously. We have talked to a cost or a wage pressure in certain areas related to technology and security in some areas where we see that when we need to hire new people, the average cost of these are higher than the ones that we are able to let go. However, the effect of that is not material compared to the general wage inflation, which should be the main assumption when it comes to estimating this part.
When it comes to the pension, as you've seen, that is a variable element related to the compensation, well, since transitioning from defined benefit to defined contribution. And that will depend on the general performance in the capital markets.
But the latter is sort of hedged from the first of January now in 2020. So will that have any big impact going forward? Or is it so that the volatility that is hedged and not the actual amount of money that you have to spend on it?
It's the actual -- it's an actual hedge from a bottom line perspective, but the hedge will hit the market to market and financial instrument line. So you will still see the impact on the cost.
Okay. The cost will vary, but then you will have a similar opposite effect on the financial income line?
Correct.
Okay. I do now understand it. Then on number of people, you have sort of had a sort of a quite flattish development since 2 years back now, but an uptick every fourth quarter. Is that something -- how should we look at the full-time employees going forward? Is all of those people who have been sort of not being found a place to be in the new corporate banking going out the door? Or should we see that also continue to be a part of the bank into 2020?
I think we have areas where we need less people and we have other areas where we invest and need more people. Overall, it's relatively stable, with a slightly reducing trend. And we haven't set specific targets on the number of people going forward. Again, this will depend on the activity on the business and how this develops. We are effectively taking the effect of efficiency measures. For example, taking out up to 200 people in the distribution in the personal customers sector throughout 2019. Equally, there has been people taken out from corporate banking from the restructuring in the autumn, but we've also strengthened other areas of the bank. And what you will see is the net effect. So we will make sure to shift the competence towards new areas, but we're also continuously realizing efficiency measures in areas, and with the effect of people actually exiting.
Finally, on the loan off-line and the offshore provisioning here. Is this provisioning due to the -- any negotiation, which took part in the fourth quarter? Or is that something you just had done to strengthen your book because you see something coming up in 2020? And how should we read the future negotiations towards the second round of sort of the offshore and supply vessel side when it comes to negotiation on lightening or easing in the debt?
I would suggest that Harald comments on offshore and...
Yes. I can tell you, we haven't made any changes to the underlying assumptions going forward. So the slight increase that you see in the fourth quarter is based on what I would say, 1 or 2 companies specific incidents that are not related to restructuring.
But they were in Stage 3 already? Or was they in Stage 2?
That were in the Stage 3.
And in terms of looking into the future, we could also say that, as we've indicated before, this is, of course, a segment that we follow very closely, but we are very comfortable with the provisions we've taken in this segment.
The next question is coming from the line of Sofie Peterzens.
Here is Sofie from JPMorgan. So -- there is some -- or I think the Norwegian Central Bank has suggested that there is some risk of a rate increase, potentially later this year. So I just wanted to get your view on a potential rate hike in Norway? And if you could remind us what your sensitivity is -- the 25 basis points higher rates. Will it still be around NOK 1 billion? Or is the rate sensitivity different?
It's correct that Norway Central Bank still has some upward bias with regard to their policy rate. They have a 40% probability of another 25 basis point hike later this year. However, we believe that the main scenario in exchange rate will be the outcome, the coming 3 years. But you're correct that there is an upward bias. So should, for example, real estate prices continue to increase? Or the reasoning -- you should all know that reasoning a lot, that could contribute to such a rate hike. On the other side, we expect that lower investment growth, for example, will pull down the activity growth slightly, and that overall interest rates will remain unchanged.
With regard to rate sensitivity, the main effect will only appear when we change customer rates. So when you refer to NOK 1 billion, that's the effect when we adjusted the customer rate. Unless we adjust the customer rate, we will not see that NOK 1 billion. The rate sensitivity without any customer rate adjustment is very small.
Okay. That's very clear. And in terms of kind of asset quality, there has been a quite big default in one of the Norwegian retail shops earlier this week. How should we think about kind of future cost of risk or even more, kind of forward cost of risk in 2020? Is it fair to assume that we could see a little bit higher cost of risk year-on-year? So if you could just give us your view on 2020 cost of risk?
Just to start by commenting on the default that you are referring to because we have confirmed a customer relationship to this sports chain that has announced bankruptcy, but we've also confirmed that we are well covered for our exposure under the name. We are not giving a specific guidance when it comes to cost of risk going forward. But again, we have -- are very comfortable with our portfolio. The amount that we have exposed under stage 3 is, again, reduced and is now less than 0.8% of the total exposure. We see a good macroeconomic picture going forward, a somewhat less growth in the Norwegian GDP, but still at levels which are considered to be normal or so-called trend growth.
Then over to industry trends. And in that area, which we've already commented on, it is the offshore-related sector, which is still challenging. There is no change. There is still a structural oversupply that needs to be fixed. We do see some operational improvement with certain players getting better contracts. But at the same time, you can also see, we see capital markets being somewhat less willing to take on that type of exposure. But the current impairments we have reflect our view and our exposure to the sector. When it comes to retail, we do not see that in the same way as an industry trend. There are certain areas in retail and trade that is doing quite well. If you look at furniture sales, companies working with consumers who are refurbishing and changing their homes, they're performing very well, whereas areas like sports and consumer technology has been more challenged.
But here, it's more about how the individual companies are able to adapt to ongoing trends, such as the online trade and the increasing, I would say, interest from consumers in terms of how products are being produced, and what's the profile of the various companies. That sector, overall, consists of 2.6% of our portfolio. We do follow it very closely, but close to 90% of it is classified as low and medium risk. So we've stated our mathematical average for losses. So on the basis of that and a very strong portfolio and a solid economy, I think I can't say much more than guide you towards making your best estimates on the basis of that.
Okay. That's clear as well. And then just a final question on your fees. You had very high investment banking fees in the fourth quarter. How sustainable are these? And how should we think about the investment banking fees in 2020?
The fees in the fourth quarter in 2019 reflects a broad-based success in most areas. It's the DCM, ECM and M&A, so all over, all products. And also in all geographical areas. So the improvement is very broad-based. And we are very satisfied with that. We have made a conscious investment into this area, working closely together with corporate banking, and our progress in this area was recently also recognized by -- we are now being ranked #1 in Norway by customers in this area. Of course, we have defined this as one of the areas we highlighted at the Capital Markets Day in November, when we guided for our ambitions of 4% to 5% annual growth in total fees and commissions.
But of course, there will be quarterly and seasonal fluctuations in this area. And there is, of course, also market fluctuations, which will impact performance throughout the year.
The next question is coming from the line of Riccardo Rovere.
One is a kind of a conceptual one. I'm a bit surprised you decided to propose another 0.5% buyback. I'm just wondering, what's the point of returning capital paying 1.3x the equity. The share price -- if the share price traded well below book, I would understand that. Wouldn't it be much more efficient just to pay out cash dividends? And on the back of that, probably you're doing it because, let’s say, you believe the stock is worth more than the current price? I hope so. I hope this is what you think. But that said, wouldn't it be much more efficient just to pay out cash dividends rather than a buyback at the current prices? And the second question I have is in property management. Do you see any risk there that might eventually arise in the future and we don't see right now?
I'll start with the first one. Announcing an additional 0.5 percentage point buyback is something that we believe is completely in line with our dividend policy, where we have said that our strategy consists of a combination of cash dividend and buybacks, cash dividend above 50%, and with a commitment to increasing the nominal cash payout per share per year. Additionally, the share buyback is a more flexible tool that we evaluate and use throughout the year, where we can also factor in how the business has developed, the rate of the growth, currency fluctuations and other potential elements to be considered. We do believe that the levels is in nowhere such that we should stop buying shares, saying that we still think it's attractive for owners to continue to buy. But the most important thing for me to say is that we do not have an opportunistic approach to this. We do not try to target -- to trade more on days where levels are low and less when they're high. This is a consistent part of our dividend and capital payout policy.
But of course, at certain levels, we would have to take a view if it's too expensive, but I would say we're still far from the levels where that would be a relevant consideration. When it comes to property management, are you thinking of commercial real estate risk? Or were you specifically...
Yes. Yes. Yes, of course, I'm thinking about that. Yes, of course, sorry.
With the backdrop we have in the economy, we are comfortable with our portfolio in commercial real estate and do not see a likely scenario will that -- where that will be increasingly challenging going forward. We have limited our exposure in commercial real estate to maximum 10% of our exposure. And it's an area where we're way more active in arranging, financing and distributing it in addition to taking exposure on to our own book. I mean, there are always risks involved. And we've just talked about the retail sector that we are not very concerned about. But of course, there are trends in trade, and we see the development in other countries. And if there should be an acceleration of challenges in the trade segment, this could impact, for example, shopping malls, which is why we have a very consistent strategy in this area, where we more than halved our exposure to shopping malls in recent years and sort of actively manage our commercial real estate portfolio to factor in our view on consideration for the likely and more unlikely scenarios going forward. But all in all, I mean, that's an area that we're comfortable with and take comfort from how we see the economy going forward.
Next question is coming from the line of Jacob Kruse.
So just 2 questions. First, to follow-up on the investment banking fee question, do you -- when you look at your competitors and your market share gains, do you sense that you are operating where -- in the landscape where your competitors are not quite as active as they have been historically? And that lets you take share? Or is this more getting pulled up by broader market moves? And my other question was just on NII. How much -- if I start with Q4, how should I think about the resolution fund fee for next year? And given what you have priced to clients so far, the repricing you talked about, how much would that add in your estimate currently for next year or for this year?
I'll answer the investment banking, and then Ottar can comment on NII. Investment banking, yes, we are definitely taking market share. We are taking market share in a market that is very competitive. And at the same time, benefiting from increased capital markets activity, also down into the more midsized segment in Norway where we've definitely strengthened our position. In a world where scale is increasingly being talked about in investment banking as a necessary edge and where you see the larger players dominating, we feel that we have a very attractive position, being more of a niche player with a very strong position in our home market as well as targeted efforts into specific segments and geographies such as the energy sector, such as renewables, such as commercial property, if we look at the Nordic constants. And in this area, we have been, over several years now, investing to strengthen our presence both geographically, New York, London, Stockholm, and as well across products where we most recently added convertible bonds as an additional product.
We have worked systematically to strengthen our position, defending our #1 position on equities in Norway, but also getting a dominant share of our equity analysts topping the Nordic scale on the best analysts recently. And for the first time, also taking the #1 position in corporate finance in Norway. So we see in all areas that the work that we have put down and invested into over years is paying off in terms of gaining market share and improving returns on revenue over time, which is also what is supporting what we expect going forward in this area.
With regards to the resolution fee, our best estimate is the 2019 number. The calculation here is somewhat difficult because it's a total fee being calculated for the country, and that country bill is then allocated within banks. It means that it's too early for us to make any other forecast than the fee we have charged for -- have been charged for in 2019.
And the repricing that you've done so far?
The repricing that we've done, we haven't -- we don't have additional elements to announce when it comes to repricing. The various phases of repricings have been announced in connection with the raising rates of the central banks. Most of that effect is factored in, but we still have the effect of approximately half of repricing to be expected into the first quarter. But of course, I know you do, but bear in mind that we've done several repricings throughout the years, which does give us a tailwind into the year when it comes to the margin level as well as the volumes.
The next question is coming from the line of Jan Erik Gjerland.
To follow-up then, on the net interest income, the MREL you have been granted now. So how should we look about MREL and the funding cost situation? Should we expect funding costs to increase from here? Or we should just expect it to be high. I know that you had some prefunding in the light of 2019, which you talked about after the Q3 numbers. How should we look upon that into the first half of '20? Is it so that funding costs have increased again into Q1 and then decreased in the second quarter? Or is it sort of an ever-increasing momentum into 2020 and '21 from here?
It's correct that we pre-funded close to NOK 60 billion in not in senior bonds in November and December because then their grandfather, Andrea [indiscernible], so it -- we can include that. And the MREL requirement of EUR 157 billion, is then more than covered by the senior funding on our balance sheet at year-end. This means that we have NOK 33 million approximately prefunding -- extra cost in the fourth quarter.
Going forward, we don't expect an increase in funding costs based on our assumption that we have applied to, however, the bank becoming the ultimate parent company of the group, and assuming that will go through, we expect no increase in MREL costs going forward.
Okay. Second question, on your very strong lending margin, especially in the personal customer area, could you shed some light into if there were any mix effect when it comes to margins? If you have been growing into kind of -- different kind of products, either high LTVs or consumer lending? Or that you have seen that the competition for low LTVs have been weak, et cetera? So we can understand where you actually gathered and won ground in the Q4 numbers.
I think the -- there is no mix effect to talk about in the fourth quarter numbers. What you would see is a -- over time, is a reducing mix effect from the fact that the volumes in unsecured financing has been in runoff while we've reached -- while we've changed our strategy and again, positioning ourselves to start to build that up again, which we believe that we are in a position to do. So there's probably more of a mix effect historically than what you've seen in the fourth quarter.
Okay. When you look at the ROE then in the Personal Banking area, it is on the allocated capital, at least 14.5% and stayed about this level. Is it so that you need to run this at a 15% level to make the 12% for the group? Or is it so that you can live with the 12% and be competed down to those levels going forward? And how do you see the markets playing on the competition for the moment?
We don't sort of play different return levels for the various parts of our business. I think our approach in order to do profitable business for the group, that's more on the marginal level. That new business needs to do -- needs to meet the hurdle, but we're also focused on the customer profitability and looking at the relationship overall. So I think this goes for personal customers as well as it goes for the other areas. When it comes to the competitive environment that is fierce, and we're focused on having competitive prices for our various products. And given the growth that we see across areas, both lending and deposits and other areas, we believe that we have competitive products and prices.
The next question is coming from the line of Maria Semikhatova from Citibank.
Some follow-up questions. First of all, on unsecured credit. Can you maybe share with us what's your ambition in terms of growth and in which areas you would like to grow? The other question on expenses. We've seen that there was a big drop in the trading expenses on property and premises in the fourth quarter. I just wanted to check what's driving that? And if it's a new sustainable level? And just finally, one technical question. You had impairment losses for the oil and gas in offshore segment in the fourth quarter. But I believe there was some modest offset, driven by improved macro assumptions on the performing book. Just maybe if you could quantify how much was -- of the impact for impairment in the fourth quarter?
With regards to consumer finance, you are quite right that we have communicated a revised strategy and that we are, again, increasing our activity and targeted levels in this area. For years, we have not taken our share of the growth in this market, and that has been quite willingly. As we have seen that our approach was more in line with the direction that we also feel the regulator is going, and that we would like to market and sell these products to the customer on a need basis and not so much through push sales. We do believe that we have a very good competitive position. We do believe that we have every opportunity to gain market share going forward. At the same time, we don't expect this market to grow at the same pace that it has done historically. So I think we're going to need some time before this will have a meaningful impact, both on rates and volumes, but we are expecting to see improved performance going forward.
The second question was...
Second -- your second question was on...
On the -- yes, pertains to some properties and premises.
In the fourth quarter?
Yes.
Yes, there was a netting all around. Around NOK 74 million of costs were taken out of the cost and other operating income line. So they have a -- so the costs were unusually low in that area in the fourth quarter, and net other income was similarly NOK 74 million lower.
And then you had a question on changes to our macro estimates and impact on IFRS 9?
Yes, for oil and gas and offshore segment.
We are not sort of -- I think we are giving the overall picture on migration. And overall, there is a slight positive migration throughout the portfolio that leads to some improvements in stage 2. There are no material changes to our factors related to the macroeconomic outlook. And beyond that, we're not specific as to how much in which sector.
Next question is coming from the line of Ulrik Zurcher from Danske Bank.
One question on the risk-weighted assets, and I'm going to relate it to Page 21 in your presentation, where you actually get a 40 bps tailwind from repayments of NPL portfolio and increased impairments, also from the NPL portfolio. These are very impressive numbers. Do you have more to go on here? Or can it go the other way? Or what's going on there?
With regard to repayment on nonperforming portfolio, we have been building down the, what we call the restructuring portfolio for quite a long time. And if you look at the [ factors ], you will see that, that has continued both throughout 2019 and also in the fourth quarter. So this gives a meaningful contribution to [ order rates ] under the new CRD IV regime. And then the same applies with regard to increased impairments. With our high capital level, we get an extra effect from that, with the 1,250% risk weight on the difference between LTDs and provisions. So when we increased provisions in stage 3, as we did in the fourth quarter, that gives a positive effect on risk-weighted assets.
But should we assume that this -- now your risk-weighted assets over lending, for example, like, would that remain pretty stable now? Or how does that develop?
I think in the -- when we had the floor effect until year-end, the floor get more stability and actually than the CRD IV or Basel III provides. So with both III and CRD IV, we will see more fluctuations in risk-weighted assets than we had under the rules with the floor effect. So that's the effect of the floor. So there will be more variations going forward.
The next question is coming from the line of Truls Roysland from SEB.
Two quick questions from me. The first one is, what was the performance fee on asset management this quarter? And the second is on cost. I'm referring to Page 12 there, you've mentioned the kind of one-offs, that's one-off for Q4, but not for the full year. But then you also talked about kind of initiatives, investments for the -- your gross cost-saving program. Is it possible to quantify that?
To start with the cost initiatives. Our best estimate is the information we provided at the Capital Markets Day. If you look at the materials there, you'll find a slide on that topic. So those estimates still apply. And part of the restructuring and initiatives we are taking in the fourth quarter, like the Shanghai brands, some of the real estate brokerage offices being closed down are part of those cost initiatives. They gave some impairments and restructuring costs in the fourth quarter, but will, long term, provide a positive effect.
And when it comes to performance fees, I don't think they were...
The performance fees were very low in 2019, down NOK 127 million from the year before.
The next question is coming from the line of Jan Erik Gjerland.
Just 2 questions left from my side. On the same slide, 21, which was pointed earlier today. The share buyback announcement of 1.5% in the Q4 of 40 bps, does those not include the 50 lost basis points? Or is it just an error in the writing here?
No, the slide is fully correct. The lost 50 was taken in the third quarter when we announced the first buyback in connection with our third quarter report. Those...
Okay. So this is still a -- okay. No, I understand. The last 1.5 percentage points, sorry, around the same. Then the safety margin on the loss came before the SME portfolio, never seen that before. But of course, you should never start to wondering about what you consider. So you've won 30 basis points on the SME then you lost them. So how should we read this into their thinking about Pillar 1 and Pillar 2 on the March look up, so to speak, on what we should think?
I think you should more look in the context of what the CEO mentioned earlier that the regulators have communicated that they would like to have capital levels at approximately the levels we are. And the fact that they introduced an increased safety buffer for the LGDs in the regional portfolio. It's actually much than just SME supporting factor. I think you have to view all of this in a totality. I think that's their thinking.
The next question is coming from the line of Riccardo Rovere.
Something similar to what Jan Erik just asked. The buffer on the LGD on the SME portfolio is a way to, let's say, to reduce your capital from a, let's say, Basel III perspective. But do regulators look at a leverage ratio that is moving toward -- pretty fast toward 8%. Now if I remember correctly, it's 7.4%, 7.5%. Do they look at the fact that the equity -- regardless what happens to your common equity, that the equity keeps going up?
They definitely look at their leverage ratio. They have stated several times, and often, that this is a key measure that they look upon. So they -- I think the progress in that area should be positive. 7.4% is a strong number, it would have been 7.5% under the former rules. So at the same level as the year before.
Yes. Yes, but -- No, no, I understand that. But they would be okay with that number going to 8% or maybe above 8%. So there is no limit for that?
I think it's important what Ottar previously confirmed, and they've been quite consistent as have we, when it comes to the overall view that they have and how we understand this. When it comes to the level of capital, they are comfortable with the level of capitalization of Norwegian banks, but they are looking for this level to be upheld during the transition from one regime to another. And of course, our constraining factor is the core equity Tier 1, but we've also taken out that increasingly, they are talking about nominal capital and hence, put importance to the leverage ratio. We do not have any signal that they are looking to increase the real capital level in the banks. They continue to give an impression that they are comfortable, that they're more mindful of the transition from one regime to the other.
We currently have no more questions coming through.
[Operator Instructions]
If there is no more questions, I would like to thank you for all the good questions, and hope you'll have a great day going forward. Thank you.
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