DNB Bank ASA

OSE:DNB

Earnings Call Transcript 2020-Q4

[Thomas Midteide, executive]

Good morning, and welcome to DNB's presentation of the fourth quarter results. Today, we have prepared somewhat an extended presentation, a mini Capital Markets Day. We will give you an update on financial ambitions on Norwegian macro, on customer activities and a few other strategic topics. The next 80 minutes, you will meet CEO, Kjerstin Braathen; CFO, Ottar Ertzeid; Head of Corporate Banking, Harald Serck-Hanssen; and Head of Personal Banking, Ingjerd Blekeli Spiten.

You are welcome to ask us any questions you must have. You can use the form underneath this very picture. And to kick it all off, I will give the stage to Kjerstin.

[Kjerstin Braathen, executive]

Thank you, Thomas, and a very warm welcome to all of you to this presentation of our fourth quarter numbers and the full year results for 2020. As Thomas was saying, we are giving an extended presentation here today. We will give you an update on our financial targets towards 2023. And we will share our thoughts on how we position ourselves to continue to create value for our customers, our shareholders and society at large.

Our #1 priority remains to help our customers navigate through this challenging environment, as has been the case for the past 12 months. And while we still experience that customers within a select few sectors are still severely impacted by the situation, we increasingly also experience our customers across many sectors engaged with us in order to discuss opportunities and abilities for future growth.

At our last quarterly presentation, I believe I used the word normal to describe what the activities throughout the quarters felt like. So if I should add a flavor to this quarter, I would actually use the word optimistic. We have continued to see a high level of activity throughout the fourth quarter. And indeed, our earnings in this quarter of 2020 are higher than that of the same quarter the prior year. Our CFO will give you further details into our quarterly numbers, but let me share some comments with you on the full year results 2020. We like to highlight the resilience in our business. And I believe this can also be seen given our results in 2020. Our total revenue for the year is up by 2.8% compared to the prior year.

A few details. Net interest income is negatively impacted by reduced key policy rates, but it is positively impacted by profitable growth across all of our business areas. The area that is growing the most is actually our SME sector, with a growth of 8.3%. Commission and fees, we've seen an improved performance and higher results in all categories but one. The category that has a reduced result is money transfer and banking services, and this is directly related to COVID. And the fact that people aren't traveling, they're not using their credit cards abroad.

In other sectors, we see a high activity. Take real estate brokerage as an example, with growing house prices and a high level of activity, their results are 6% higher than 2019. Asset management that we've talked about as one of our key strategic areas, we see a record level of assets under management, an attractive level of sales during the year, which leads to the results in this area being up by 12%. Given the fact that our revenues for the year grows faster than our costs, our pretax operating profit before impairments are up by 4%.

Impairments in 2020 was higher than normal, with the majority of the impairments being taken in the first half of the year as we announced early in the year. And this leads to the results after impairments coming in 21% lower than 2019. So for the year, a return on equity of 8.4%, impacted by the profits after impairments, but also impacted by the fact that we have held a high level of capital during the year due to also withholding the dividend for 2019. 8.4%, clearly below our targeted level of minimum 12%, but a number for a year like 2020, that shows resilience.

A few weeks ago, the authorities gave clarity as to their expectations on dividend. And based on a robust and resilient capital position, the Board has decided to make use of the authority that they were given by the general assembly and pay a dividend of NOK 8.4 per share for the year 2019. They have further decided to ask the upcoming general assembly for a new authority to consider paying a dividend per share of up to NOK 9 for the year 2020. This will only be considered after the end of December when we expect dividend conditions to return to normal.

The dividend for 2019 is fully in line with our dividend policy. It is 53% of the net result for the year, and it is a nominal increase compared to the dividend paid for 2018. It is further fully in line with the expectations from the Norwegian authorities. We are encouraged to see that after the systematic work of building capital for years alongside a resilient business, enables us to fully deliver on our dividend policy in a year where the world has been impacted by a global pandemic.

Our financial targets stand firm. We like our financial targets to be ambitious, but we also like them to be at level that we can deliver -- that the business can deliver over time. No doubt the pandemic has made the environment more challenging, but it is temporary in nature. And it does not impact the way we think about our desired level of performance going forward.

We reiterate that return on equity is our most important target. Due to the pandemic, it will be challenging to meet in the short term and it is ambitious, but we do believe it's realistic to meet towards the end of 2023. We continue to target a cost base that should be less than 40% of our revenue as a key performance indicator to support our ambitions to deliver return on equity.

For capital, we assume a full buildup of the countercyclical buffer gradually over time, which would lead to the expected level from the FSA to be 17.1%. And our dividend policy remains firm. We target to pay more than 50% cash dividend on every year's results and have an ambition to increase the nominal payment per share per year. So the remainder of my time and my colleagues' time here today will be to talk about how we position our business to deliver. And I will address the Norwegian macro and how we maneuver the parts of our business where the change happens the fastest.

The Norwegian society has shown its resilience in handling the pandemic. It's due to several reasons, but there's a couple of unique factors with the Norwegian economy. We are one of the world's leading digital economies. And the Norwegian people have an unusual high level of trust in authorities. So the digital nature of the economy has enabled many businesses to run their operations relatively normal under these conditions.

The reduced need to physically interact has further reduced the risk of spreading of the virus. And the trust in authorities has led to people being loyal towards restrictions being impacted and these restrictions having an effect. Norway has experienced an increase in cases during this winter as most European countries. But we're still at low levels compared to what we see in many of our neighboring countries.

No doubt this is challenging for some of the businesses. But the overall economic impact of the local lockdown situations today are less than what we saw during the spring of 2020. The Norwegian economy saw a sharp recovery after the drop we experienced in the second quarter last year. We do expect the recovery to continue, however, at a somewhat slower pace. After a contraction of 3.4% last year, our economists now expect a growth of 3.8% this year and 3% next year. And the recovery has been further fueled by a 0 key policy interest rates.

Consumers have seen their mortgage costs substantially go down. They've seen house prices raising, and this has contributed to a growing consumer confidence. People are feeling good about their economy, and they're comfortable spending. The nature of the recovery has led to the Central Bank signaling that they do expect to start hiking rates again as from next year.

In aggregate, a total of 4 rate hikes are expected towards the end of 2023. And we do see several economists actually expecting the rate hikes to start already this year. Our unemployment is currently at 4.3%. This is a level that is higher than we saw prior to the pandemic, but it's still a much lower level than we see in most European countries. The level is expected to continue to reduce as we move forward and getting people back to work is really one of the top priorities, both for businesses and for the authorities.

Investments across sectors is an important driver for the economy. And last year, as was expected, even prior to the pandemic, we saw a reduction of investments into the petroleum sector. The uncertainty with the pandemic led to more lower investments also across other sectors. Now with vaccines into the market and a growing optimism, we do see a growing positivity among businesses and expect to start seeing investments growing again also from the mainland economy.

So after a contraction of 4% last year, we do expect to see growing investments from the Mainland economy of 1.3% this year and 2.9% next year. So despite optimism and despite having several vaccines in the market, we should acknowledge that the level of uncertainty today is still higher than normal. We have, for years, talked to you about the stabilizing factors in the Norwegian economy. And indeed, during the year 2020, you have seen these stabilizing factors at work. More importantly is to state out that in the event the development should be more negative than what is believed to be the likely scenario, the Norwegian authority continues to have ample room to maneuver in such a situation.

Everything we do is about putting our customers first. We value their trust, and it is encouraging to see that their level of trust in us has actually increased over the past year. At the same time, we're very aware that we need to continue to deliver on their increasing expectations and continuously changing expectations in order to continue to merit the trust and keep the viability of our business model.

We've talked to you about our investments and activity into building cloud-based customer platforms. This is ongoing with a high activity, producing new features and products and services. And it is motivating to see that we have 3 out of the 5 top financial applications in Norway. One of the new features in our saving applications Spare this year is that it's now open to the broader public and not only to DNB bank customers. This is particularly interesting, we believe, in an area that attracts so much increased interest with a steep growth in savings agreements. And close to 40% of our savings agreements is now sold through Spare, which is the largest saving app in the Norwegian markets.

And my colleague in, Ingjerd, who's Head of our Personal Banking area will talk more about our customer activity and distribution in her presentation later on. Technology is increasingly important for our business. The ability to move fast and develop fast is increasingly important to our business. And these -- this is the mindset that lies under our strategy and the direction we work in with regards to technology.

So let me leave you with 3 messages on technology. We gradually modernize our core. We're not looking for a single Big Bang replacement, but we gradually modernize, we decouple our systems, and we build API layers on top. We're also pleased to see that our ongoing focus and work to improve stability is yielding results. And I remember talking to a hotel owner once, and he said to me, you won't benefit from putting a piece of luxury chocolate on the pillow if your guests actually find someone else's hair in the shower the next day.

So for us, our shop needs to be open. It needs to be open 24/7, 365 days a year. Secondly, we scale our -- and accelerate our transition over to the cloud. We reduce our number of systems on-premises, and through that, improve our ability to digitize end-to-end across value chains.

The last point that I'd like to mention is about culture, people and competence. We are integrating technology into our business. First step in 2019 was to organize parts of the IT organization into the business areas. Second step this year has been to fully turn around the technology -- or last year, fully turn around the technology organization, working agile at scale in teams that has an end-to-end responsibility for the areas they work in. And we continue to strengthen the engineering culture and competence within the organization.

We play a proactive role in the transition to a more sustainable future. For natural reasons, the current debate mostly revolves around the threats to our planet. But it is important to note that sustainability is about more than the climate. And we have highlighted ambitions in 4 areas in our strategy of sustainability.

The responsibility is clearly defined within group management, but we think about and we work with sustainability as an integrated part of our business. So all areas are responsible for initiatives, for delivering on activities and targets related to one common strategy. So I'll make comments on a couple of areas we've highlighted under sustainability.

We support the authorities in the fight against financial crime. The work related to AML is prioritized very high on our agenda, ensuring compliance is our license to operate. So we continue to work hard and build more competence, and we continue to apply technology in order to improve our processes. Secondly, we align our business to support the Paris Agreement, and we do this through our various roles.

First of all, our own operations have been climate neutral since 2014. So now we are increasingly focused on measuring the indirect impact of our business. As an investor and a lender, we set guardrails for the type of businesses and companies we'd like to support. And as a lender and adviser, we integrate ESG into our customer dialogue and into our credit processes.

There has been a clear shift in the amount of capital that is looking for sustainable investment opportunities. And as you can see from the illustrations, the market is growing fast in this area. And our activities related to sustainable financing across the various products is growing even faster. And I have a strong sense that we've moved from a push to a pull in the past 12 months. Now we increasingly have customers coming to us asking for our advice and help with regards to fund the future growth in more sustainable areas, with regards to funding the transition that they're currently ongoing. And we find these dialogues developing and we produce new products and services through that cooperation with our customers.

And I'll just leave you with one short example. And this is for a customer Odfjell, where we raised the first sustainably linked bond in the Nordics and the first one in shipping globally. This bond financing is actually linked to the company's ambitions to half their carbon -- half the carbon footprint of their fleet by 2030, a structure that benefits the company, a structure that benefits the business and a structure that benefits society.

And my colleague, Harald, from corporate banking will talk more about the opportunities that we see in this area later on the stage. So to sum up, our financial ambitions stands firm. The Norwegian economy provides a strong backdrop to our ability to deliver ahead, and we are well positioned to deliver on our financial ambitions. And to talk more about how we can deliver on the ambitions, I'll leave the floor to our rock-solid CFO, Ottar.

[Ottar Ertzeid, executive]

Thank you, Kjerstin. I will first comment on our fourth quarter results and then on our financial ambitions towards 2023 and how we are going to achieve them. Starting with the fourth quarter results. We have repeatedly highlighted the importance of resilience in earnings over time. And we are just happy to present today a strong set of results for the fourth quarter.

Total income increased 1% from the same quarter of the previous year despite NOK 1.66 billion in negative mark-to-market effects from basis swaps and U.S. dollar additional Tier 1 capital. Profit for the quarter is positively affected by low tax rate for the quarter, reflecting a lower full year tax rate than previously estimated.

Fourth quarter return on equity, thus came in at 8.9% despite mark-to-market adjustments, nonrecurring costs, impairment provisions and higher equity due to deferred dividends. Let's take a closer look at loan and deposit development. The healthy loan growth continued for personal customers with 2.8% and SMEs did 8.3% for the full year.

In the fourth quarter the Norwegian kroner strengthened 10% versus the U.S. dollar combined with strong debt capital markets and originate and distribute activity large corporate loan volume thus declined in Norwegian kroner terms. Total loan growth for the full year was 2.1%. The heads of Corporate Banking and Personal Banking will elaborate on profitable growth opportunities. We maintained our guiding of around 3% to 4% loan growth going forward.

The healthy growth in deposits continued with more than 8% for personal customers, close to 20% for corporate customers and more than 14% in total for the full year. The deposit to loan ratio thus strengthened further to 65% compared to 58% a year earlier. The strong development for deposits will be increasingly valuable with the forecasted policy rate hikes by the Norwegian Central Bank.

And now on to margin development. Net interest margin increased 1 basis point to 1.39% in the quarter, reflecting a healthy underlying development. Volume-weighted combined spreads are stable despite these and net interest margins being negatively impacted by portfolio mix effects also this quarter, partly the decreased deposit to loan ratio and partly personal customers becoming a larger part of the total loan book.

Spreads are also impacted by the 11 basis point average increase in the NOK money market rate from the previous quarter. Moving on to net interest income. Higher average loan and deposit volumes increased net interest income by NOK 98 million in the quarter. Lower funding costs increased NII by NOK 28 million reflecting our attractive funding terms and increased deposit-to-loan ratio. Seasonally higher activity increased NII by NOK 27 million from amortization effects and fees. While improved spreads contributed with an increase of NOK 24 million.

A stronger Norwegian kroner currency reduced NII by NOK 6 million. In total, net interest income increased 1.9% from the previous quarter. Next, let's take a look at commission and fees. The strong performance in commission and fees continued in the fourth quarter with one exception due to COVID. Commission and fees decreased 5% from the fourth quarter of '19 but increased 5% from the previous quarter. Real estate broking shows seasonal fluctuations and increased more than 10% from the same quarter the previous years, reflecting the strong housing market.

Investment banking fees were 1.7% lower than the record fourth quarter of '19. Debt capital market loan fees were down, while equity capital markets and brokerage fees increased. Investment banking fees increased 45% from the third quarter with all product areas contributing to the growth. Asset management fees increased almost 6% from the third quarter and more than 10% from the same quarter the previous year.

The healthy growth reflects positive net inflow and all-time high assets under management. Money transfer and banking services are still significantly impacted by the COVID situation, particularly the profitable use of international cards and currency ATM withdrawals. Fees were 40% lower than the fourth quarter of '19 and 13% lower than the third quarter. Fees from the sale of insurance products were NOK 11 million lower than the third quarter due to a minus NOK 29 million one-off adjustment related to the acquisition of KLP Bedriftspensjon. Fee from defined contribution pension and nonlife insurance, both increased.

Overall, commission and fees have developed more positively than expected with exceptional money transfer and banking services, which are still materially impacted by COVID restrictions. Other operating income from DNB Live and from associated companies increased substantially. The net financial result from DNB Live increased NOK 269 million from the third quarter, driven by high returns, also making it possible to reverse charges made in the first quarter.

Let's go on to costs. Operating costs in the fourth quarter are affected by nonrecurring items and seasonally high activity. A NOK 400 million permission was made for the possible administrative fine announced on December 7. Ordinary salaries increased NOK 93 million and include the annual wage settlements in Norway, effective May and July. IT expenses were seasonally high with NOK 68 million increase from the third quarter. Restructuring expenses increased NOK 50 million to NOK 52 million, mainly related to cost initiatives in units outside Norway.

Variable pay increased NOK 48 million, reflecting higher commission and fee income. Increased depreciation expenses reflect seasonally higher IT investments. In the third quarter, we stated that pension expenses were approximately NOK 30 million higher than normal due to high return on the compensation scheme related to the closed defined benefit plan. In the fourth quarter, the pension expenses were approximately NOK 60 million higher than normal due to a positive return on the same compensation scheme.

This effect has been hedged and a corresponding gain of NOK 101 million is recognized in gains on financial instruments. Other expenses in the quarter reflect seasonally higher activity. And now asset quality. Impairment provisions in the quarter totaled NOK 1,250 million. For personal customers, we saw net reversals in stage 1 and 2 and NOK 139 million in total. The reversals are primarily within consumer finance in stage 1 and 2, caused by lower exposure and positive credit migration.

Norwegian households are doing better than expected. The more negative development for personal customers provisioned for in the first quarter of '20 has not materialized. The personal customer nonperforming portfolio is actually lower than before the pandemic. For corporate customers, impairment provisions totaled close to NOK 1.4 billion. The oil and offshore segment account for almost all of this with NOK 1.34 billion. Stage 1 and 2 provisions decreased as customers migrated to stage 3 while stage 3 provisions totaled close to NOK 1.5 billion in the oil and offshore segment and close to NOK 1.8 billion for corporate customers in total.

The provisions in the oil and offshore segment were primarily within offshore and driven by increased provisions for customers already in stage 3. Offshore now constitutes only 1.4% of our exposure, down from 1.8% a year earlier, but remains the most challenging segment. In other corporate customer segments, the development was stable in the quarter and better than our initial COVID expectation, impairment provisions totaled NOK 48 million.

Exposures in Stage 2 and 3 are reduced in both stages, and the overall portfolio is robust and well diversified. The tax rate for the quarter was 10.3%, reflecting our full year tax estimate with lower taxes outside Norway than previously estimated. For 2021 and '22 the expected tax rate is reduced from 23% to 22%.

To sum up the quarter, underlying operating performance was strong. Return on equity came in at 8.9% despite the impairment provisions, mark-to-market effects, nonrecurring costs and higher equity due to deferred dividends. The cost income ratio was 48.8% in the quarter, but adjusted for the mark-to-market effects on AT1 and basis swaps and the NOK 400 million possible fine, the cost income ratio was 40.8%. Year-to-date, the cost income ratio was 41.5%.

Earnings per share came in at NOK 3.28 for the quarter and NOK 12.04 for the full year. This concludes the fourth quarter part of my presentation. Now I will take you through our financial ambitions.

At the Capital Markets Day, 15 months ago, we presented our financial ambitions towards 2022. With the overriding target of a return on equity above 12% at capital level above expected future supervisory expectation, a cost income ratio below 40%, and the dividend policy with a payout ratio above 50%. Then COVID-19 hit and the continued positive development towards achieving these ambitions was temporarily affected by the pandemic in 2020.

The Norwegian Central Bank cut the policy rate by 150 basis points to 0. The subsequent customer repricing, reduced net interest income with approximately NOK 5 billion annually with full effect from the second quarter. The government measures to contain the spread of the virus reduced customer activity, particularly within money transfer and banking services, and this impacted net commission and fees negatively in 2020.

On the other hand, there were some positive effects on operating expenses, particularly from deferred IT development and traveling. Impairment provisions were significantly higher than normal in 2020 as a consequence of the pandemic and increased challenges for the offshore sector. Return on equity in 2020 was also impacted by higher average equity as a consequence of deferred dividend payment. Return on equity for the full year thus came in at 8.4%.

Despite the temporary financial effects of COVID-19, we expect a continued positive development and reaffirm the financial ambitions towards 2023 as the CEO stated. We are highly committed to delivering on the overriding target of return on equity above 12% by the end of 2023. Several factors will contribute to achieving more than 12%. We expect higher growth in income than costs or positive jaws.

Growth in net interest income and commission and fees will be the main drivers for the income growth. Various cost initiatives will curb wage and other cost inflation and contribute to a lower growth rate for costs. These positive jaws will contribute to a cost income ratio below 40% and increased return on equity. A reduction in cost of risk from the high level in 2020 will also increase return on equity. Capital efficiency and paying out excess capital will continue to be a high priority through positive jaws, low cost of risk and efficient use of capital, we will deliver a return on equity above 12%.

And now let's take a look at each contributing element. Growth in net interest income will be a key element. The Central Bank forecast 4.8% household credit growth this year and 4.4% in both '22 and '23. As the Head of Corporate Banking will elaborate on, you also see profitable growth opportunities in the SME and large corporate areas. Going forward, we expect a loan growth of around 3% to 4% annually.

Norges Bank forecasts increase the Norwegian kroner policy rate by 25 basis points, slightly more than 12 months from now, followed by 3 more 25 basis point hikes every 6 months with a full percentage point increase in total during the forecast horizon of '22 and '23.

Historically, a 25 basis point hike in the policy rate and subsequent customer repricing has increased net interest income by approximately NOK 1 billion annually. Based on the current funding levels, we expect costs for increased MREL volumes in '21 to '23 to be in line with back book cost for maturing senior debt. We thus expect net interest income growth driven by profitable volume growth and from next year, also by NOK rate hikes.

The second main driver for income growth is commission and fees. A continued healthy innovation economy with a rebound after COVID will support growth in commission and fees. In total, we expect an annual growth of around 4% to 5%, which is substantiated by the development in recent years. And also in line with expected long-term growth in nominal GDP. The commission and fee growth rate may be temporarily higher after COVID.

Commission and fees from money transfer and banking services are expected to bounce back post COVID, particularly the use of cards internationally. Our nonlife insurance joint venture, Fremtind is the second largest player in the Norwegian market for personal customers. Fremtind has now integrated systems and aligned products and prices and we are well positioned for profitable growth, both in commission and fees and profit from associated companies. The Head of Personal Banking will elaborate on this later on.

The strongest contributions to growth in commission and fees are expected from asset management, defined contribution pensions and investment banking services. I will now take you through each of these 3.

Within asset management, a high savings rate in Norway, DNB's strengthened position in the Norwegian retail mutual fund market and our data savings app Spare will contribute to growth. Our Head of Personal Banking will elaborate on this. Within defined contribution pension, the strong growth continues, with 14% cumulative average growth rate the last 5 years. The high growth rate reflects a combination of new pension agreements and natural growth of the portfolio of approximately NOK 10 billion each year.

The new owned pension account was introduced in Norway from the first of this month, allowing each individual to have all defined contribution pensions in one account and to select their pension provider. This is expected to increase interest in pension savings, and we are well positioned with our strong position in both the personal customer and corporate customer market. Lower fee level on owned pension accounts is expected to reduce commission and fees from later this year with full effect next year.

We expect to compensate this by volume growth and improved pricing for risk products. Commission and fees from investment banking will be supported by increased originate and distribute activity in the corporate banking area. We have achieved solid progress within investment banking and see potential for further increasing market share in the Nordics and in certain sectors in Norway, for example, investment banking services within commercial real estate.

We see growth opportunities in debt capital markets, equity capital markets and M&A, particularly within sustainable finance and ESG-driven transactions. Moving on to costs. Costs in 2020 are impacted by a NOK 169 million legal compensation related to the DNB-Norges mutual fund case and by NOK 400 million due to the mentioned possible administrative fine. These are partly offset by temporary lower activity due to the COVID-19 situation.

Due to COVID, IT development costs in 2020 were approximately NOK 250 million lower than normal. Costs related to traveling and events were approximately NOK 100 million lower in 2020 than we expect going forward. Our cost income ratio of close to 40% has been achieved by income growth combined with cost initiatives, to contain cost inflation, while allowing for investments in compliance and technology.

This will also be our recipe for achieving a cost income ratio below 40% going forward. At the Capital Markets Day, 15 months ago, we targeted cost initiatives totaling NOK 500 million to NOK 700 million in 2020 and NOK 1.50 billion to NOK 2 billion towards 2022. Actual realized cost measures in 2020 totaled approximately NOK 700 million. Remaining cost initiatives totaled NOK 500 million to NOK 650 million, both this year and next year.

This includes full year effects of initiatives implemented during 2020. The cost measures going forward can be grouped into 4 categories: structural changes amount to NOK 100 million to NOK 200 million and include the effects of simplifying the legal structure on group level and outside Norway; automation or digitalization, primarily of credit processes in real estate broking and customer service is expected to save NOK 200 million to NOK 300 million; distribution initiatives are expected to contribute with NOK 450 million to NOK 550 million, mostly from digitalization and the retail area. This includes reduced cash handling, commercial lease agreements and procurement savings. IT cost savings are expected to contribute NOK 350 million to NOK 450 million.

The cost initiatives will contain cost growth and improve jaws, improved cost income and increase return on equity. The fourth element, which should contribute to return on equity above 12% is lower cost of risk. Impairment provisions in 2020 were higher than normal. With the improved and solid Norwegian macro backdrop, we expect lower cost of risk going forward. The portfolio has been further rebalanced in 2020 with personal customers increasing to 51.3% and SMEs to 23% of the total portfolio.

The portfolio has also been rebalanced within large corporates with reduced exposure to cyclical industries. We thus expect lower impairments going forward than the historical average shown here from 1997. But please bear in mind that impairments will vary from quarter-to-quarter.

The Head of Corporate Banking will elaborate further on asset quality. Moving from the numerator in the ROE fraction to the denominator or capital. The leverage ratio at year-end increased to 7.1%, well above Nordic peers and above the supervisory expectation of 6%. From year-end 2020, the systemic risk buffer requirement for Norwegian Bank increased from 3% to 4.5%, but is only applied to Norwegian exposures. The net effect for DNB is an increased capital requirement of 20 basis points.

The Norwegian FSA has decided to keep DNB's Pillar 2 requirement unchanged in 2021 at 1.8%, minimum, NOK 19.4 billion. NOK 19.4 billion corresponds 2% at year-end '20. The FSA all kept DNB's Pillar 2 guidance unchanged in '21 at 1%.

From year-end 2020, DNB's capital requirement is thus 15% and the supervisory expectation 16%, including the Pillar 2 guidance. The Norwegian Central Bank in December stated that it expects to give advice to increase the countercyclical buffer requirement again with effect in '22 from today's 1%. And expects the countercyclical buffer to return to the maximum level of 2.5% at some point in time. In our capital planning, we assume full Norwegian countercyclical buffer and capital expectation is plus 17.1%.

The capital target will be to operate above this supervisory expectation, including full countercyclical requirement and with some headroom. We do not quantify a specific number for this headroom. It will vary with currency effects and other short-term fluctuations in the actual ratio.

We will also consider expected future capital requirements. The actual capital level at year-end was 18.7%. The capital headroom of 270 basis points above the supervisory expectation is at an all-time high. The 160 basis points above the capital target is higher than we expect to operate it going forward. The high capital level, together with return on equity will ensure capacity for both growth and payout.

With regard to payout, our dividend policy stands. Excess capital will be distributed through cash dividends and share buybacks. The dividend policy includes a payout ratio above 50% in cash dividend and an ambition of increasing dividend per share every year. We will prioritize to deliver on the dividend policy of more than 50% in cash dividends before considering share buybacks. As mentioned earlier, the Board of Directors has decided to use the authorization to pay a dividend for 2019 of NOK 8.4 per share. The ex date for this dividend will be 2 weeks from now, February 24.

We thus fully deliver on the dividend policy, including the ambition of increasing dividend per share every year. The 2019 dividends equals 30% of profits for 2019 and '20, and is thus fully in line with the recommendation from the Norwegian Ministry of Finance. We are happy that the Ministry of Finance acknowledge the strong position of the Norwegian economy and Norwegian banks by applying a higher payout percentage than Europe in general. The Board of Directors will ask the AGM for authorization to distribute NOK 9 per share in dividend for 2020 between October 1 and next year's Annual General Meeting, in line with our dividend policy.

The NOK 9 per share has been deducted from the capital ratio. To sum up my presentation, delivery on the dividend policy demonstrates that we are committed to deliver on our financial ambitions. Growth in net interest income and commission and fees will drive a higher growth in income than costs.

Costs will be contained by cost initiatives to drive the cost income ratio below 40%. The forecasted policy rate hikes from the Central Bank, positive jaws, low cost of risk and capital efficiency will contribute to return on equity above 12%. Thank you for your attention. I now leave the floor to our Head of Corporate Banking, Harald. The stage is yours.

[Harald Serck-Hanssen, executive]

Thank you, Ottar. Ladies and gentlemen, I hope you are safe and sound wherever you may be in these extraordinary circumstances. In my presentation, I will demonstrate that we have a well-diversified and robust loan book. I will also show you that I'm confident that we will be able to maintain profitable growth across a number of segments of the corporate banking area. And finally, I will take a deep dive into our renewable portfolio and explain to you why DNB is so well positioned to take advantage of the transition to a greener economy. But first, some numbers.

The chart to the left illustrates a continued profitable growth in lending volumes despite the impact of COVID-19 and indeed, a record high growth in deposit volumes. And the latter is important for several reasons. Firstly, with SME deposits up 16% for the year, increased volumes will contribute positively to NII as soon as we see an uptick in the Norwegian policy rate. Secondly, it shows that many or perhaps most of our clients have ample liquidity to withstand continued restrictions. And finally, it illustrates that DNB is perceived to be a safe haven in times of uncertainty.

The chart in the middle demonstrates that our return on allocated capital dropped sharply in the first quarter of 2020. But since then, profitability has increased steadily quarter-by-quarter. And based on normalized losses, the return on allocated capital in the fourth quarter of last year is back to the pre-COVID-19 level of 14%. The chart to the right shows that our track record of steadily increasing operating profit before losses suffered a small setback in 2020, mainly, as Ottar pointed about, driven by the effects of reduced Norwegian interest rates.

But based on the fourth quarter results and the activity that we now see, I am optimistic that we are back on our usual growth path. On this slide, you can see that we have a well-diversified loan book and that the portfolio quality has been, what I would call, remarkably stable over the last year. The pie chart shows that the sector most exposed to the pandemic, namely hotel management, cruise and tourism, represents only about 1% of the bank's total exposure at default. We do have close to 0 exposure to the airline industry, while our lending to hotel properties is limited to strong Nordic players with less than 3% of the lending classified as high risk.

And the clients we have in the cruise industry are the large players with a strong balance sheet and, this is important, approximately 50% of our lending to this industry is covered by export credit agency guarantees. So the bulk of the provisions in 2020 come from the oil-related industries. So let me take you through this portfolio in a little bit more detail.

As a part of our continuous effort to reduce DNB's risk on cyclical industries, the share of oil-related exposure has been reduced by 50% over the last 5 years. At the same time, we see that through higher margins and strong cross-selling, our oil-related income actually remains virtually the same. As you will see from the fact book, we have succeeded in containing losses on E&P as well as oil service. So this basically leaves us with offshore, which is mainly rigs and supply vessels.

The offshore portfolio dropped by another NOK 2.4 billion in the fourth quarter, and is now down to 1% -- sorry, 1.4% of DNB's EaD. The outlook for this sector remains uncertain, but with the oil price approaching $60 or even moving beyond that, we see increased investor appetite. And we do expect to see a deeper structural change in the offshore industry, with debt conversion, consolidation and scrapping of older tonnage.

As I said, 15 months ago at the Capital Markets Day in London, continued profitable growth in the SME segment remains a key objective. And despite the effects of the pandemic, we achieved strong growth also in 2020. And I would dare to say that we deepened our relationship with our SME customers. 40% of new businesses in Norway now put their trust in DNB as their banking partners when they start up. Having SMES, together with large corporates, has helped us improve cross-selling to the SME segment even further. Income from IBD and FICC is up by a total of 10%. New pension sales are up by 50%, and the sale of nonlife insurance has grown substantially.

And using the experience we've had over the last few years on the large corporate side, we've also introduced, what I would call, capital efficiency measures, such as the use of export credit agency guarantees for the larger SME commitments. To strengthen our position further, we have now enhanced our physical presence at 11 key locations in Norway. These 11 so-called financial hubs offer a complete range of services across retail banking, markets, wealth management as well as corporate banking.

At the same time, we have made good progress towards modernizing our most important digital channels, including the move to cloud-based online bank. I would also like to take this opportunity to highlight our car financing and leasing business, DNB Finance, which had a record year in 2020. Simultaneously, they have expanded the Nordic footprint with a new setup in Finland. We expect continued profitable growth from this business division, both through organic growth and from selective acquisitions. It's also interesting to note that in Norway, more than 40% of our car portfolio are now electric vehicles. And thus, the energy transition that we see is accelerating the business opportunities also in this area.

Another important achievement last year was the acquisition of a controlling interest in Norway's third largest ERP company, Uni Micro. This will give us close to 10% market share in the Norwegian ERP market with a state-of-the-art accounting software. The acquisition is not only providing income from day 1, but it will also increase our competitiveness towards the important SME clients.

Because we have, for some time, seen that the SMEs are looking for more integrated solutions. And this provides a combined offer of banking and accounting services. Furthermore, by partnering with the largest alliance of savings bank in Norway, we are well positioned to use our combined power of distribution to grow the market share further. I also believe that by adding accounting services to our product range, we will increase traffic on our digital platforms, thus stimulating additional cross-selling. A key element in the management of our large corporate portfolio is the originate and distribute model, which over time has enabled us to grow revenue more than we increase the use of capital.

And during 2020, we've continued to develop new channels of distribution, both to enhance our syndication capacity and to develop the universe of nonbank distribution partners that will not compete with us for the nonlending business. As Ottar pointed out, we did see a reduction in drawn volumes on the large corporate portfolio towards the end of last year. This was mainly due to a strengthening of the Norwegian kroner and the successful completion of several large syndications.

Going into 2020 -- sorry, 2021, we see a number of interesting growth opportunities and growth platforms for our large corporate business. We see good potential to continue our profitable growth in Sweden on the back of an increasing client base and indeed a very competent organization. We will also seek selective growth opportunities in Denmark and Finland within industries where DNB has a strong track record and strong expertise. In terms of industry sectors, we see the greatest opportunities in health care, tech, seafood and most importantly, within much of the value chain related to the green transition.

So you may ask why is DNB so well positioned to take advantage of the transition to a low carbon economy? If I take you back to the days before the oil, Norway's industrial position was a result of access to cheap hydropower. And more recently, Norwegian companies have been in the forefront of developing both solar power and offshore wind. We now see Norwegian companies such as Equinor, Aker and Hydro, increasingly investing in the energy transition, while leading shipping companies, such as Wilhelmsen and Fred. Olsen, are developing vessels servicing the offshore wind installations.

Access to cheap renewable energy is also fueling large investments in other parts of the value chain. Such as battery factories and green hydrogen. And on top of that, we already financed large parts of the Norwegian transport system. And we are, therefore, well placed to benefit from the new business opportunities arising from the government plans for electrification of this nationwide infrastructure. So all of these elements of the green shift that I mentioned will provide exciting business opportunities for DNB.

Our portfolio in renewable energy now stands at around NOK 50 billion. Hydropower remains the main contributor, but wind and solar power are growing fast. With a strong appetite in capital markets for green transactions, we turn the capital around very quickly. I think it's about 1.5 years on the renewable energy side. And thus, as you can see from the donor to the right, we already enjoy 50% nonlending income. So DNB already plays a key role in advising and enabling clients across different industries in their transition to a more sustainable economy.

And just to give you a couple of examples. In 2020, DNB markets were involved in green and sustainability-linked debt transactions amounting to a total of almost NOK 100 billion, which is up by 60% from 2019. And at the same time, we raised some NOK 12 billion in equity transactions for the green and sustainable market. And we have set ambitious targets for DNB's contribution to a sustainable future, with the targets of arranging at least our and NOK 450 billion for the renewable energy industry and at least NOK 130 billion for green real estate by 2025.

And I am very confident when it comes to reaching these targets as well as our ability to show increasingly profitable growth as a result of the energy transition. So to sum up, what we've seen this year demonstrates that we have a resilient and robust corporate portfolio. We have a number of strong platforms for future profitable growth. And DNB is well positioned to both contribute to the green transition and to take advantage of the many business opportunities this will provide across the entire value chain. Thank you for your attention. And now have the pleasure of leaving the floor to the Head of Personal Banking, the one and only Ingjerd Blekeli Spiten.

[Ingjerd Cecilie Hafsteen Spiten, executive]

Thank you, Harald.

[Harald Serck-Hanssen, executive]

Thank you.

[Ingjerd Cecilie Hafsteen Spiten, executive]

And good morning, everybody. I really hope that you are able to concentrate a bit more. Because I've really been looking forward to bringing you up-to-date on what we have been working on and our achievements over this past year. My presentation will be in 3 parts and connect closely to what I've talked to you about previously. We will remain focused delivering profitable growth through our market-leader position. Secondly, being a digital leader has proven to be more important than ever this year. And finally, by being even more strategic in how we work with affiliated companies, we will realize additional profitable growth across our portfolio.

It's been an extraordinary year. Our performance is strong, and I'm impressed by how the organization has quickly adapted to challenges caused by COVID-19. Our lending and deposit portfolio is still about twice and 4x as large as Pillar 2 with approximately the same number of branches that they have. Our highly resilient distribution model, a strong digital offering, combined with very skilled people, has ensured that we have been able to stand closely by our customers through 2020.

In fact, we have talked to more customers than ever. And the customer satisfaction index is higher now than it was in the beginning of the COVID year. And high customer satisfaction is the foundation of future growth. I'm very confident to see that our growth in mortgages this challenging year has been even better than it was in 2019. We have maintained our market lead despite being front-runner on sustainable pricing in a 0 interest rate environment. Our mortgage portfolio is highly robust and resilient as we move forward, with 98% and the 75% loan to value and the portfolio is still very flexible with a floating interest rate of more than 90%.

Due to our high credit quality, we once again experienced the year with consistently low losses, and I foresee this continuing. Now on to deposits for what has been a remarkable year. We see growth in all areas and segments from current and savings account to mutual funds. And what's interesting is that the fastest-growing segment is a younger age group, which bodes well for the future. We see almost 10% growth in deposits, which is in line with our strategy of being the customer's preferred universal bank. And deposits gives also a very good foundation to encourage more long-term savings with us.

For assets under management, we see a strong 24.2% growth. This is a result of proactive communication and sales effort to help customers select long-term saving alternatives. And during last year, we managed to sell twice as many firm savings agreements as we did in 2019. This underlines the success we have had in moving customers to a broader range of saving alternatives. Our market leader position in saving and pensions across all products and customer segments gives us a unique opportunity to exploit synergies across the DNB group.

The newly launched pension system for private sector now gives employees more control of their own pension savings. For the first time, we will have a direct communication channel from personal banking into DNB's corporate pension customers. These corporate customers will now be able to access their own pension accounts from our highly efficient digital platforms, the Spare app and our web portal dnb.no. By merging the corporate and personal offerings into one place, our marketing will be much more relevant for new customer grips and thereby generate awareness of our broad range of products and high class digital solutions.

As presented at our last Capital Markets Day, we used our marketing power to stimulate public dialogue with the international award-winning campaign, #girlsinvest. And we have continued the marketing through 2020 and have definitely kept a high level of attention from women, to increase their number of mutual fund savings agreements with us by 33%. But we haven't forgotten the men. They also continue to find our savings and investment offerings very attractive. And last year, men increased the number of mutual fund savings agreements by 27%.

I also need to bring to your attention the sales results we see through the Spare app. Almost 1/3 of all savings agreements in mutual funds in 2020 were made through this app. This year, it further increased. And year-to-date, almost 40% of all mutual fund savings agreements were done in the Spare app. Needless to say, having such a solid mobile platform will be a strong asset for us going forward.

COVID-19 accelerated traffic to our digital channels, reaffirming that our long-term strategy of building dominant digital platforms is even more relevant in a post-COVID world. As a Tier 1 bank, having world-class digital distribution channel has been both necessary and important to meet customer expectations and to boost sales. Three out of top finance apps in Norway are from DNB, if we include Vipps. And we have experienced a continuous increase in customer satisfaction of our digital portals.

The new mobile bank continues to exceed our expectations. And 67% of digital customers now use the mobile channel, and we see higher engagement than ever. Our web portal, dnb.no, is among the top 10 most visited Norwegian websites, and it's constantly developed to increase engagement, traffic and sales even further.

Our investment in data is also starting to pay off, and we see promising results in many areas. The machine learning models analyze customer data daily. These predictive models help to identify customers with higher probability of purchase. This gives financial advisers much better quality leads with a higher chance of closing the sale.

One example is that we have used advanced segmentation rules, including transaction data to identify potential new customers who do not currently have unsecured credit with us. By doing that, we have significantly raised our performance and lifted conversion rate from 3% using traditional segmentation rules to 20% when using advanced data models.

Another example is how we are capitalizing on data investments is our new pension campaign. We actually saw an 8-fold increase in downloads of the Spare app when using personalized video to explain individual pension. As a result, the number of Spare users is so far, in '20 -- in this year is actually up by 24% in only 1.5 months. As a result, growth number -- personalized and event-driven CRM triggers more engagement and sales, and we are still in the early phase.

We are constantly developing and improving our distribution model. Most sales are still hybrid sales, partly digital, supported by humans. Since 2015, we have more than half the number of branches, and this has been possible due to our consistent investment in self-service and chat bot solutions. During the same period, we have also reduced the number of FTEs by 28% and increased our mortgage portfolio by 22%. In line with our expectations, 29% of digitally submitted refinancing mortgage applications were handled automatically, with the high quality we need from our automated solutions.

We also see for the first time, a substantial reduction of 16% in the number of service requests to the call center. The increase in digitalization, of course, provide greater efficiency. But just as important is to refocus human competence on more complex and value-adding tasks in a very competitive Norwegian market. And attracting and retaining the best available talent in all subject matters is very important for us to keep our competitive power also in a more digitalized world.

Now onto other income areas. I am confident that we will see substantial results in nonlife insurance sales during 2021. In March 2020, at the same time as COVID-19 impacted Norway, our advisers started using the nonlife sales solution from Fremtind. At the same time, the number of service support inquiries and claims exploded as a result of the immediate travel restrictions from the Norwegian government and the fact that we are one of Norway's major providers in travel insurance. Our technical team in India was also affected by lockdown.

But nevertheless, we were able to launch the new online desktop solution from Fremtind late June 2020. And from last summer, all new customers were onboarded to Fremtind solution. In parallel, we transferred existing customers on individual due date or to Fremtind infrastructure to leverage the better platform and capabilities they have. We are now done with 70% of the customer migration, and we'll have completed this process during second quarter.

This year, we will work to integrate insurance offer in the mortgage customer journey and develop a sales solution in the mobile bank. And we foresee a complete technical integration by year-end. And why am I telling you this? Because a complete technical solution and migration is key to see significant results going forward. At the merger, it has already been a success for us. We see increased profitability for nonlife also for 2020. More than 90% of customers renew their insurance on a more advanced pricing scheme. And with a conversion rate of close to 50% on given offers, we are very optimistic in nonlife insurance going forward.

Now on to Vipps. Our partner company, has experienced a strong increase in e-commerce volume during the course of 2020. The need for e-commerce solutions grew dramatically due to the pandemic and Vipps, with it's easily accessible solutions, well-established platform and popular brand has been a natural choice for Norwegian merchants. As the founder of Vipps, we got a head start with Vipps users. As a result, our market share for accounts and cards in Vipps is 33%.

Our strategic and commercial ambitions are closely aligned with this partnership. When Vipps succeeds, DNB succeeds. When talking about 2020, it would be remise of me not to present how positively surprised we have been to see the strong continuing development in the housing market. Our 100% owned real estate broker has really delivered with creativity, flexibility and adaptability.

Have we been able to lift all brokers on to the digital solutions necessary to deliver COVID-proof brokerage services, and the results have been clear to see. 7.7% growth in income, 32% growth in profit and sales per broker has increased by 17%. This sets the bar for 2021. The new, more digitalized way of working will continue to increase efficiency and profitability in our DNB real estate business.

So to sum up my part. Our focus on delivering profitable growth will continue. We will ensure digital leadership and utilize data in a more sophisticated way to strengthen our digital and omnichannel capabilities. And finally, leveraging strategic partnership and affiliated DNB group companies will add additional profitable growth across our portfolio. Thank you very much for listening to me. And then I leave the floor for the Q&A.

[Thomas Midteide, executive]

Thank you so much, again. We will commence the Q&A session in a few seconds. We just had to reshuffle the stage first. [Operator Instructions]. Due to the circumstances, Rune Helland, Head of Investor Relations, will ask the questions on your behalf. We usually have a large crowd in this auditorium, and we miss you a lot and hope to welcome you back next quarter. Rune Helland had his birthday yesterday, and we celebrated with pepperoni pizza and the Board's decision on dividends. So on average, a great present from DNB to Rune. I think we are all set. So Rune, I'll hand it over to you.

[Rune Helland, executive]

Thank you, Thomas, and also you to all of you sending in questions. I will try now to do this by topic, so we will start with the return on equity. We have Andreas Hakansson from Danske who asks target a 12% ROE target towards the end of 2023, which I guess, means full year 2024. How do you expect the development to look like from 2020 to 2024?

[Kjerstin Braathen, executive]

Well, I think this was quite detailed outlined in our CFO's presentation with regards to the elements that we need to build upon in order to approach delivery of our 12% return on equity target. A combination of delivering profitable growth across the business areas, growing our fees and commissions in excess of the 3% to 4% volume growth development, more normalized impairments and an efficient deployment in use of our capital, including delivering -- distributing excess capital to our shareholders.

Driving this as a backdrop is obviously also the Norwegian macro economy with the expected 4 rate hikes towards the end of 2023. So I guess, that's the flavor that we can add to the development from here until the end 2023.

[Rune Helland, executive]

One follow-up question from Sofie Peterzens from JPMorgan. If there are no rate hike, will you still achieve a 12% ROE?

[Kjerstin Braathen, executive]

I think what we've clearly stated is that we need our contribution from all of these elements. In order to deliver, again, stating that the Norwegian economy has fared well compared to most, if not all, other countries during the pandemic. Again, underlining the stabilizing factors that we've talked about being at work in the Norwegian economy in the last year, a contraction of 3.4% versus what we believed could have a much poor turnout during the spring of 2020.

The resilience and the consumer confidence and the activity in all remainder areas as well as the Norwegian authorities ability to maneuver if the development should turn out to be more negative than we expect. All in all, we believe that this provides a very solid backdrop. But goes without saying, the 0 key policy rate last year had a material impact on our net interest income. And so would rates have when they stop moving in the other direction that we do believe is the most likely scenario.

[Rune Helland, executive]

Thank you. Moving over to NII. A question from Namita Samtani from Barclays. Loan growth in 2020 came out at 2% below the 3% to 4% target, but this is mainly due to the corporate lending being weak. Going forward, would you forgo loan growth in the corporate book and therefore, the overall 3% to 4% growth target given the importance of profitability?

[Kjerstin Braathen, executive]

I think for growth, we talk about are expectations and what we believe to be sustainably over time, a 3% -- 3% to 4% growth annually. And this certainly still remains the case. So let's look -- let's take a look at the various parts. I mean, personal customers came in at 2.8%, stronger than the year before. SMEs came in at or even above, I'd say, our expectations with 8.3% growth, which leaves large corporates. And in large corporates, we look at the trend over some more time. As we've talked to you about many times, we focus very hard on the originate to distribute model. That is actively also using the capital markets in order to increase the turnover of our capital and improve the profitability in our operations.

I'm sure you noted Harald's comments saying that we have reduced our book in the oil-related sector by 50% in the past 5 years, while at the same time maintaining our revenues at the same level. This is how we work towards profitability. It was a slower start to the year with the uncertainty in the second quarter. We were mindful of keeping the capacity if the development should turn out more negative as it looked for a while. And the second half, it's been an extremely active capital market.

We want to keep the pressure on originate to distribute, focus on profitability, but are very confident with the pipeline we see going into the year and the opportunities we see in the large corporate. So 3% to 4% is certainly what we expect for this year.

[Rune Helland, executive]

Thank you. Moving over to cost. We have a question from Johan Ekblom, UBS and also from Nick Davey from BNP Paribas. How should we think about costs for 2021 and 2022 on top of the gross cost savings and underlying inflation? What level of investment should we consider impacting the overall cost level?

And from Nick, how do you expect cost to develop in absolute terms?

[Ottar Ertzeid, executive]

I think I tried to quite clear guidance on changes and elements in the level you saw in the fourth quarter, partly the nonrecurring items and partly the seasonal effects. So by combining those, I think we tried to give a quite good estimate what it is likely to look for going forward. At the same time, it's important to say that we focus on implementing the cost initiatives. I also addressed in my presentation, partly in 2022 and partly in 2023.

[Rune Helland, executive]

And just a follow-up question from Sofie Peterzens. Should we expect any restructuring costs in 2021 to '22 from ongoing cost initiatives?

[Kjerstin Braathen, executive]

I think we constantly look at our business, and we try to tweak -- do tweaks and increase efficiency across all areas. I think fourth quarter is an example of that, where we have restructured partly in international offices. We have reorganized our technology business. The overall layer we have tweaked and say that we are looking to move into the future with our employees. We're building the competence and reskilling them to the needs of the future.

But there will be occasionally restructuring costs if we find that as an opportunity and deem that the best way to realize on those potential of efficiency. But we don't foresee us going back to the magnitude of restructuring costs that we saw during the years of '15 and '16.

[Rune Helland, executive]

Very good. Moving over to capital and dividend from a question from Namita. Do you believe you have excess capital based on a CET requirement of 17.1% and additional headroom required for future regulatory capital changes and market-driven CET1 flotations?

[Ottar Ertzeid, executive]

We -- the 17.1% includes the full countercyclical buffer requirement. Norway -- we should likely not be implemented until 2023 at the earliest. And we stated that we need some headroom above that. And we also try to say that actual headroom we have now is higher than we would typically operate with under normal conditions. So I think with regard to future capital requirements, we will have the CRD II, CRD V implemented in Norway in 2021 with a slightly less a small positive effect. And we do not expect a material effect from the so-called Basel IV later on either.

[Rune Helland, executive]

On dividend. Joakim Svingen from Arctic. Regarding the dividend per share of NOK 8.4 for 2019, have you had a dialogue with the FSA? Or is this to be conducted in the next 2 weeks?

[Kjerstin Braathen, executive]

We have had a dialogue as specified in the letter from the Ministry of Finance. Again, it's the Ministry of Finance that is the deciding body on the topic of dividend. And what is decided by our Board is fully in line with their expectations. They have also outlined expectations for a dialogue, but we have a dialogue anyway with the FSA, and we have had that as well in the preparation of these results and the distribution.

[Rune Helland, executive]

Very good. And just last question on share buyback from Sofie. Can you please confirm your long-term target of -- she said, 4% of buybacks in 2021.

[Ottar Ertzeid, executive]

The Board has each asked -- each has asked for an authorization to buy back own shares. And they have stated they intend to do so this year as well. So this will be some flexibility, which will be there at all times. I tried to emphasize in my presentation today that we will give a priority to deliver on the cash dividend part of the dividend policy, including the more than 50% and also increasing dividend per share. And give priority to deliver on that.

So we do not give any specific guidance of the level of actual buyback we plan going forward. It will depend on growth opportunities and business opportunities we see.

[Rune Helland, executive]

Okay. Thank you, Ottar and Kjerstin. That concludes this short Q&A session. There will be more room for Q&As in the conference call, which is due 1:30 CET later this afternoon. Thank you so much for watching this broadcast and have a fantastic day.