Dnb ASA

OTC:DNBBY

Earnings Call Analysis

Strong Q3 performance with significant growth and strategic acquisitions ahead.

In a robust third quarter, DNB reported a profit of NOK 12.2 billion, marking a 22.5% increase in earnings per share to NOK 7.83. Net interest income rose by 2% driven by a 1.6% increase in lending volumes, particularly robust in personal and large corporate segments. The acquisition of Carnegie is anticipated to enhance revenue by 45% and total fee income by 30% by 2025. The company maintains a strong capital position with a core Tier 1 capital ratio at 19%. Looking ahead, DNB expects stable growth while managing costs effectively, including a reduction of 500 employees.

Strong Financial Performance Boosts Confidence

In the latest earnings call, DNB showcased an impressive third-quarter performance, reporting a net profit of NOK 12.2 billion, which translates to earnings per share of NOK 7.83. This represents a robust increase of 22.5% compared to the same quarter last year. The return on equity for the quarter stood at a solid 18.9%, supported by a stable cost-income ratio of 32.5%. Such performance provides a strong foundation for sustenance of their dividend policy, giving investors confidence in the company’s profitability.

Lending and Fee Income Drive Growth

The results were primarily driven by a consistent increase in lending activities and a surge in fee-generated income. Total lending volumes rose by 1.6% across all segments, with notable growth seen in personal customers (up 0.8%) and large corporate clients (up 4.7%). Fees and commissions climbed to all-time highs, with a notable 11.1% increase year-over-year, driven by robust performance in asset management and investment banking services. This trend indicates a strong market presence and diversification of revenue streams that should be attractive to investors.

Strategic Acquisition to Enhance Growth Potential

DNB recently announced its acquisition of Carnegie, a leading Nordic investment bank and asset manager, which is expected to boost revenue synergies significantly. Management expects this transaction to create an additional NOK 1 billion in net profit by 2025. The rationale for the acquisition lies in enhancing DNB's regional influence and service offerings, with anticipated revenue growth from the Nordic area expected to improve total fee income by 30%. This strategic move indicates DNB’s commitment to expanding its foothold and remains a key development for investors to watch.

Economic Context Remains Favorable

The broader economic indicators provide a favorable backdrop for DNB's operations. Unemployment rates have remained low at 2%, and while inflation has been rising, it is expected to peak at 2.3% by 2026. Furthermore, there are signs of a stable recovery in various sectors, particularly in renewable energies. The positive economic outlook supports a favorable operating environment for lending and fee-generating services, aligning well with DNB's growth strategy.

Focus on Cost Control Amidst Growth

Despite the growth in profit and revenue, DNB has made considerable efforts in cost management. Total operational costs remain stable, and the bank is actively working to improve cost efficiency through automation. Additionally, the bank has initiated a reduction of 500 full-time employees, aiming to improve efficiency further. This proactive approach to managing costs, while simultaneously expanding operations, reflects DNB's strategic foresight and adds an additional layer of financial security for investors.

Robust Portfolio Performance and Risk Management

DNB’s portfolio quality also reflects resilience, with 99.3% classified in stages 1 and 2, indicating low levels of risk. The bank reported marginal losses, demonstrating effective risk management amidst the competitive landscape. With stable margins and a strong capital position with a Tier 1 capital ratio of 19% and a leverage ratio of 6.3%, DNB continues to exemplify prudence in its approach, reassuring investors about the soundness of its operational strategy.

Looking Ahead: Guidance and Market Strategies

Looking forward, DNB has not revised its lending growth target, expecting to maintain a 3% to 4% growth trajectory despite the increasing competition in the sector. The anticipated growth in fees from the Carnegie acquisition and the ability to leverage synergies across Nordic markets are significant positives for the company's growth outlook. Investors should monitor these developments closely as DNB progresses into the next quarters, especially in light of the changing economic conditions.

Earnings Call Transcript 2024-Q3

[Even Westerveld, executive]

Welcome, everyone, to the presentation of the third quarter results for DNB. And welcome also everyone who follows us online on the screen.

For security, we have a fire exit on your left, in the front and also in the back, and there are no fire drills planned for today. I'm sure those of you who read Norwegian newspapers have seen that we put a lot of time and effort into creating secret cover names for our secret projects in DNB, but this project has the rather ordinary name of Q3, although the results are anything but ordinary. And our CEO will now go through the headlines; and CFO, Ida Lerner, will present the details afterwards.

So Kjerstin, the floor is yours.

[Kjerstin Braathen, executive]

Thank you so much, Evan, and a very good morning to all of you, and welcome to this results presentation.

I remember when we presented our second quarter results, we highlighted that there had been a shift in sentiment and a shift in customer activity in our business throughout the quarter with a very strong end towards the end of the second quarter. This sentiment has continued all the way throughout the third quarter and is reflected in the numbers that we delivered today. And we are grateful to see that an increasing number of customers trust us with their business and an increasing number of customers increase the business they trust us with in a quarter, where the Norwegian economy continues to show resilience.

Return on equity for the quarter comes in at a solid 18.9%. During the quarter, we recognized a gain from the merger between Fremtind and Eika, our non-life insurance company, of NOK 716 million. Adjusted for that, the return on equity for the quarter is 18%. Overall, driven by solid growth across segments, stable margins and low losses. Net interest income is up by 2% compared to the previous quarter by 2.6% compared to the same quarter last year. Lending volumes overall, 1.6% across segments with a particularly strong momentum in personal customers and large corporates. We experienced a high activity in the housing market throughout the quarter and see an increasing number of customers also choosing DNB when they're looking to change their bank.

We delivered an all-time high third quarter in fees and commissions, up by 11.1% from the third quarter last year. And the key drivers yet again are asset managements and investment banking from a very solid and well-diversified fee platform.

The portfolio remains robust, well diversified, if anything, a slight tick to the better with 99.3% of the portfolio in Stage 1 and 2, and losses are what I would define as marginal for the quarter. Capital is solid at 19%. Profit for the period comes in at NOK 12.2 billion, with a solid and healthy uplift in earnings per share to NOK 7.83 per share, which is an increase of 22.5%. Year-to-date earnings per share are NOK 21.2 per share, comfortably supporting our ability to deliver on our dividend policy.

A few comments on macro, which is a continued development in line with what we communicated during our previous earnings release. The economy continues to move in the direction of a soft landing. And the start to the year has been stronger than what was expected at the outset.

The Central Bank has conducted a new regional survey amongst business leaders in the month of September, and the results from this continued to show a stable and slightly increasing optimistic outlook. Construction is still low in terms of activity and shows a slow pickup. Servicing-related businesses have a stable outlook expectations, whereas the servicing industry towards oil and gas shows an increased positive sentiment. In aggregate, they expect to invest somewhat less during the year of '24, but expect to increase their investments in 2025.

Unemployment remains low, 2% steady throughout these years with inflation increasing and interest rates growing. And a slight increase is expected towards the end of the year, but it's expected to peak at 2.3% in 2026. So we're talking still very, very low levels of unemployment. Inflation numbers in September came out a little bit lower than the Central Bank anticipated, but inflation remains above the targeted level from the Central Bank. And are expected to continue to decrease in the time to come, however, at a slower pace than we have seen so far. Overall, the picture remains very healthy for the economy. But bear in mind that Norway is a small and open economy and that we are impacted by what happens outside of our country.

A few highlights this quarter from our customer segments when we, for the first time, report 3 segments in total. Personal customers, we see a very high activity level and a healthy growth of 0.8%, with more than NOK 7 billion being added to our mortgage book in new volumes. We have looked back and had to go all the way to 2017 in order to find an equally strong third quarter in terms of growth. Our customers continue to sign up for new savings agreements. If you look at the number of savings agreements, they're up by 8.7% during the last year. Costs in this area are down compared to the previous quarter, pretax profit up by 10% compared to the last quarter, demonstrating a very strong performance from the team.

Business customers Norway is being reported for the first time, and our strong position in this area is underpinned by net profits of NOK 4.1 billion. We see a healthy growth across regions and across activity areas with the exception of construction, which remains low, where we see smaller signs of indicating a pickup, but still a slow activity this quarter. Other operating income is up, which means we deliver an increasing number of services to our customers in this area. Key drivers are pension and a continued strong cooperation and activity with DNB markets.

In large corporates, lending grows by 4.7%, NII by 7% from the previous quarter, high level of activity and new businesses in areas such as renewables, such as manufacturing and seafood and overall, a high activity level of refinancings during the quarter. We continue to serve our customers with cross-sells and products from many activities within the bank. Pensions, a very active quarter in terms of hedging and FX as well as capital raise in the bond market. And the operating income this quarter is at par with the same quarter last year, but then we had a very meaningful contribution from a market-to-market adjustment on shares we were sitting on from companies that had been restructured. So also a strong quarter in large corporates on the operating income side.

Pretax profit in DNB markets came in at NOK 1 billion, a very high-quality revenue mix. We always look for the customer-related revenue, and the customer-related revenue in DNB market is up by 23% compared to the same period last year. During the years, we have consistently communicated our ambition to grow our fee base more than our volumes and lending-based activity. And 2 areas we have identified, particularly to be key drivers of this growth, and these are Investment Banking and Asset Management, and adding all the customer revenue in DNB Markets and revenue from Asset Management, you can see the growth that has been delivered this quarter compared to the 2 prior years with third quarter, where we delivered 25% growth in revenues.

Further to the right, you can see assets under management and how we've consistently grown our asset base that we have under management and the aggregate growth for the past 2 years is 41% in this area. I wanted to particularly highlight these 2 that has a very solid growth momentum on its own, but these two are also the two particular areas that we strengthened with the acquisition that we announced yesterday. As many of you have heard, we announced the agreement to acquire all the outstanding shares in Carnegie. Carnegie is a Nordic leading investment bank and asset manager and jointly, we will hold the #1 position in the Nordics. We view this to be a perfect match for DNB and Carnegie DNB to be the perfect match for them and very much for us in line with the strategy we have communicated of growing fees and also growing our Nordic presence.

In the discussions we've engaged in over the past years, we've been increasingly found both cultural similarities and complementary business activities even more than we anticipated at the outset. So this, we strongly believe will strengthen our offering to customers, both in terms of geography, in terms of products and in terms of industry expertise. We are excited about the opportunities that lie ahead. But even at the outset, this will increase our revenue base from the Nordic area by 45% in terms of fees. The rationale for the transaction is primarily based on revenue synergies and the value of the strategic positions that we enter into.

The next steps for us now will be to apply for the relevant regulatory approvals, and we hope to close during the first half of '25. We are jointly excited about the opportunity to serve our customers better from this new platform we will have from joining forces, but also looking at the fee-based revenue in total, just joining forces will increase the total fee income in DNB by 30%.

So with those remarks, I will leave the floor to Ida.

[Ida Lerner, executive]

Thank you, Kjerstin. Thank you, and welcome to everyone here and to those of you listening in.

I would now like to go through the third quarter results in a bit more detail. Loan volumes are up 1.6%, driven by increased customer activity across all 3 different customer segments. We note a good momentum in the personal customer segment with an increase of loan volumes of 0.8%, driven by a stronger activity in the real estate market in addition to refinancing activity. The volumes in business customers Norway increased by 0.3%. And in Large Corporates and International, we saw a strong uptick of growth of 4.7%. It was a strong customer activity across the board in large corporates, but I would like primarily to put focus on the increase we saw in renewable energy as well as in the future and technology business area.

Deposit volumes are down by 4.1%. In personal customers, this is completely in line with seasonal effects. And in business customers Norway, this is also a seasonal effect related to the public sector. In large corporate area, there is a decrease, which is more related to a customer-specific outflow of deposits that are in low margin as you can also see on the increase in deposit spreads on the next slide. We continue to maintain a strong deposit to loan ratio in the customer segment of 72.7%. And as communicated earlier, we expected the muted growth in the first half of this year and an increase in activity in the second half of this year, which is something you can also see in our numbers presented today.

Net interest margin was up by 1 basis points in the quarter to 190 basis points, driven by an increase in other NII. The combined spreads in the customer segments were down by 1 basis points, affected by increased money market rates, but also continued strong but rational competition in Norway. Net interest income increased by NOK 312 million, up 2%. Effects from spreads, treasury and interest on equity reduced NII by a total of NOK 65 million in the quarter. Volumes and FX increased NII by NOK 37 million and 1 additional interest day added NOK 127 million. Amortization effects and the increased activity that we saw increased NII by another NOK 70 million, driven by high refinancing activity. In addition, NII was positively impacted by a number of other items totaling NOK 143 million.

The third quarter was characterized by high customer activity. And in FICC, the customer-related income was actually all-time high. We continue to benefit from a robust and well-diversified fee platform, resulting in an all-time high third quarter result in net commission and fees. Net commission and fees comes in at NOK 3 billion, up 11.1% from the corresponding solid third quarter we saw last year. Real estate broking was up 1.6%. We noted increased income in the residential real estate broking business, but this was somewhat offset by lower activity in the commercial real estate brokerage.

Investment Banking services was up by 19.1%, representing an all-time high third quarter results. There was a particularly strong contribution from debt capital markets in the quarter. Asset management and custodial services was up by 27.6%. There was continued growth in asset under management, up NOK 208 billion, and we noted positive net inflow both from retail as well as institutional customers in the quarter. In addition to that, as Kjerstin pointed to, we continue to see an increase in number of savings agreements in our portfolio.

Guarantee commission was up 18.9%, driven by a continued increase in demand for trade finance products. Money transfer and banking services was stable, down 2.7%. We noted continued high transaction and international travel activity, but this was somewhat offset by increased volume-related cost, which is annualized and therefore, affects the third quarter results. Sale of insurance products was up by 5%, where we saw a continued strong contribution from non-guaranteed pensions, also as Kjerstin pointed to.

Moving on to costs, which were stable quarter-on-quarter. We noted lower marketing, travel and training costs, all in line with lower activity in the quarter. IT costs were down also in line with the higher activity related to IT costs in the second quarter due to the integration of Sbanken. The increase in employers national insurance as well as ordinary salaries are related to the annual salary increase, which is now being implemented. Cost effectiveness is always high on our agenda, and we continue to actively manage our cost base through increased automation, but also through the recently announced reduction of 500 full-time employees.

Now over to the portfolio quality, which remains robust and well diversified with 99.2% of the portfolio in stage 1 and 2. For personal customers, which accounts for a bit more than 50% of our portfolio, remains strong. We are not seeing any negative developments or movements in that portfolio. For business customers Norway, impairment provisions totaled NOK 147 million. The portfolio is robust and well diversified. There are no structural changes in the portfolio or general negative migration to note, but these are customer-specific situations in Stage 3.

For LCI, we noted net reversals of NOK 12 million. The portfolio is robust and well diversified and shows no signs of structural changes. We remain comfortable with the credit quality in the portfolio, but please bear in mind that losses will vary from quarter to quarter.

Now moving on to capital. Our core Tier 1 capital remains strong at 19%, with a 220 basis points headroom to the regulatory expectation. The core Tier 1 capital ratio was positively impacted by profit generation, but this was offset by increased risk exposure amount from volume growth as well as currency effects. Leverage ratio remained strong at 6.3%, well above the regulatory requirement of 3%. With a core Tier 1 capital ratio of 90% and a leverage ratio of 6.3%, our capital position remains strong and enables us to continue to deliver on our dividend policy as well as make the acquisition of Carnegie.

Summing up. We deliver a strong set of results across the board. Return on equity came in at 18.9%. Earnings per share at NOK 7.83, an increase of 14.6% from the previous quarter. Our cost income ratio is at 32.5%.

And with that, I would like to thank you for your attention and open up for a Q&A as well as extending an invitation to our Capital Markets Day on the 19th of November in London.

[Even Westerveld, executive]

Thank you so much, Ida and Kjerstin. We'll open for questions from the audience. And I have a microphone wandering around in the audience for those who are -- Jan Erik, first out from ABG.

[Jan Gjerland, analyst]

Jan Erik Gjerland, from ABG. Congratulations with the Carnegie transaction yesterday. It looks like a good transaction for you, I would say.

And if I could start with that, you mentioned that income synergies should be the main reason why you should sort of increase the net profit line for a run base of NOK 1 billion for 2025. But when I look at all the capital transaction I've seen in the marketplace over the last couple of years, it seems like both you and Carnegie has been off the spot. So it means that even though you are expecting more to sell more products through Carnegie branch in Sweden, Denmark and Finland, there seems to be some dissynergies in Norway, at least.

So could you just shed some light into the income dyssynergies and the potential cost synergies because there must be someone. You mentioned on the call yesterday that was 850 DNB market employees and some 850 in Carnegie. So are you certain that you need all of those 1,700 people in place? So how should we think about the cost synergies versus the income synergies under these synergies in Norway? That's the first question.

[Kjerstin Braathen, executive]

Thank you, Jan Erik. I'll start, and I'll leave it to Ida to take you through in more detail the elements impacting the NOK 1 billion base for the price. The clear message from us is that the main rationale is related to revenue synergies and a strengthened strategic platforms. I would again remind you that, that goes across investment banking, it goes across asset management, it goes across wealth management and it goes geographically across both Sweden, Denmark and Finland, where we have an activity. So part of these revenue synergies is also considered, of course, in cooperation jointly with our corporate banking venture, where we have the tradition for growing and developing the business together.

We have also clearly said that there is some cost synergies to be expected, but this is not the main rationale, nor have we any concrete plans to realize them in the short term, which is why we're saying we now look forward to jointly join forces. And then as in every business, we will look at how can we increase efficiency, where can we do that? Where do we see the fastest, most rapidly growing potential? There is not a set deadline on that. But in any merger, as we see this to be between DNB markets and Carnegie, there is, of course, an opportunity also to take out some efficiency.

[Ida Lerner, executive]

And when looking at -- I'll just give you a bit more details in terms of how we get to the NOK 1 billion that we communicated yesterday as the full year expected net income of 2025. First of all, you need to annualize the year-to-date income that they have of NOK 535 million that leads you to NOK 713 million. In addition to that, there is an annualization of the effects of the recently acquisitions that have been made by Carnegie. [indiscernible] is one of them that is expected to add a further NOK 100 million.

In addition to that, we have seen that there are some nonrecurring cost that has been the fact during the last few quarters, which is related to restructuring, but also IT cost that is expected to be nonrecurring, which adds up to NOK 125 million. And on top of that, we expect an increase in wealth management income, the more recurring part of the business as well as an increase in activity related to the capital markets, which should add a further NOK 75 million, again, pointing to that this is also in our view, fairly conservative estimates.

[Even Westerveld, executive]

Thank you. A follow-up question?

[Jan Gjerland, analyst]

Thank you. Since you did not have any limitation, I continue. The net interest income seems to be very strong. And if you could point to some of the issues there. The first one is the margin side on the volume. You had sort of increased your volume side, as you pointed to in the second half of this year. But you have given some margins away. Is that a normal churn we should expect going forward from taking such volumes in the mortgage side?

Secondly, on the NII, SMEs or the Norwegian business corporate has been very strong growing for many, many, many years, but it's now coming sort of to a slower growth, what has happened? And finally, on the large corporate side, the volume seems to be quite upwards. Is it outside Norway? Or it's inside Norway, you have been growing? Then on the deposit fees, still the NII seems to have been changed this quarter. So could you just shed some light to, is this the new level going forward? Or was it a one-off?

[Even Westerveld, executive]

Yes. Thank you. You can pass the mic to Thomas for the...

[Kjerstin Braathen, executive]

Yes. Hand the mic over. Thank you. Overall margins, I would say fairly stable. Volume weighted down 1%, NIM -- not 1%, 1 basis point. NIM is up by 1 basis points. We've added NOK 7 billion of volume to our mortgage book. There is a slight change in margins. But overall, a margin pressure that is clearly manageable and somewhat decreasing also throughout the quarter. But competition is fierce, that we have a competitive offering, both across the quality and characteristics of our products as well as our pricing and are not concerned about the current margin pressure in that book.

The SMEs, as you have well pointed out, we've taken market shares consistently for years. There is really one major change related to the volume development this year, and that is in housing construction. That has gradually come off the book, and there's basically no activity currently in the market. If we adjust for that, we see a growth in development in this business, which is very much in line with what we have experienced previously. We are seeing cautious signs that this will pick up. We needed to pick up at some stage. That's important for the housing prices. It's important for the global offering of houses in the market.

We see an increased interest to test new projects. We see an increased interest in new financings. But so far, nothing major has materialized on the books during this quarter. Growth in large corporates, main areas for growth, renewable, manufacturing, seafood, 2/3 of the growth is in Norway or the Nordics and 1/3 outside of the Nordics. Deposits, there is a decrease in deposits, but very stable margins. We would characterize what we see across personal customers and business corporate Norway for more seasonal variations.

The highest decrease comes in large corporates, which is more related to volumes that are put out on offer on a regular basis, where we are continuously adjusting that for them to be profitable for us compared to alternative funding. Thus, we weren't competitive on all of these volumes. But as you can see with the marginal reduction in NII given that the NII in large corporate grows by 7% compared to 4.7% growth in lending.

Guarantee fee...

[Even Westerveld, executive]

Can you repeat the question? Yes, the microphone just behind you.

[Jan Gjerland, analyst]

The deposit guarantee fee is down some NOK 70 million this quarter?

[Ida Lerner, executive]

Yes. It is. I don't have any further information on that apart from that. Sorry, we'll have to come back to that.

[Even Westerveld, executive]

Thank you, Jan Erik. And Thomas Svendsen from SEB.

[Thomas Svendsen, analyst]

Two questions. When we look at personal customers and business customers Norway deposit margins, it seems to -- for both segments, seems to have sort of flattened out. Are there any drying forces or changes that could change this over the next couple of quarters? Or is stability the best estimates there?

[Kjerstin Braathen, executive]

I think this is a representative picture for what we are seeing now. We have seen some rational behavior, I would say, from customers looking to increase the return they're getting on deposits, moving them over to saving accounts or more longer-term positions on business corporates Norway. And we still continue to actively advise our customers on deposit placing as well as the acquisition of savings agreements. But again, the level of activity in this area has somewhat leveled off. And it's always hard to say what the future will bring, but we are in a more stable interest rate environment. So that gives reason to believe that this activity will and should, to a certain extent, continue because we like our customers to be rational and make as much money on their -- as they can on their savings, but that we are in a more sort of stable territory ahead of us than we've seen during the past year.

[Thomas Svendsen, analyst]

Okay. And question number two, you highlight Carnegie as a tool for further Scandinavian growth. Dose those also goes for lending and corporate lending? And could we see you increase the pace there and probably increase your group target of 3% to 4% lending growth?

[Kjerstin Braathen, executive]

We do not have any new sort of guiding or information on target. So that remains 3% to 4%. But we have grown our Nordic activities also on the lending side, outside of Norway more than the rest of the activity in the previous years. We have doubled the revenue from our Swedish and Nordic activities outside of Norway during the past 5 years. So it's been already a clear strategy to grow that activity across both DNB markets and corporate banking, and this will continue. We have a strengthened platform.

But what we're also very focused on in large corporates is to actively use the originate to distribute model, where we increased the turnover of capital. We typically see also that from an industry point of view, we are complementary. We have stronger expertise in the more asset-heavy businesses, whereas Carnegie has their strength in the more asset-light activities. So yes, lending and corporate banking is a part of it, but not necessarily sort of accelerating the group as a whole, but it gives broader and more diversified tool to serve customers better.

[Even Westerveld, executive]

Thank you. You can pass the mic to Roy Tilley from Arctic.

[Roy Tilley, analyst]

I have 2 questions. Firstly, on personal customers Norway. You're starting to grow a bit more as you kind of hinted to in Q2 as well. Just wondering, you say that activity is up. We've seen that elsewhere as well. Is this increase just broader market activity? Or are you doing something different now compared to earlier this year? So that's the first question.

And secondly, just a more technical one on NII. I see that your interest on subordinated loan capital is down roughly NOK 300 million in the quarter, but the volume seems to be flat, what's the driver there? And secondly, you seem to have roughly NOK 8 billion in AT1 capital that you currently are using. Is that prefunding or what's the reason there?

[Kjerstin Braathen, executive]

I'll leave the 2 latter to Ida and comment on personal customers. Yes and yes. Yes, there is an increase and pickup in the market sentiment and growth, not materially translating into a growth overall for household, but related to acquisition of new houses. That has been more active. And yes, we have done a lot also to, of course, improve our offering on Sbanken that was integrated in the second quarter, having freed up a lot of resources and activity, having worked on that and having worked on the repricings and all of the other moving bits and pieces that we have had during the past year has basically been freed up to focus on sales and new business activity.

So markets better. We have refocused and sharpened our team in terms of new business, and we continuously improve the quality also of our offering, and that has yielded results. So performance-wise, this is a much, much stronger quarter in a relative perspective than second quarter was.

[Ida Lerner, executive]

And on NII, I'm not sure if I'm accurately answering your question. But if you're looking at other NII, there is an increase in NII coming from risk management as well as the reduced guarantee levy fund. And on the treasury side of the NII income stem, you'll see an increase in terms of funding activity and also NII coming from a long-term funding perspective. I'm not sure if that answered your question.

[Roy Tilley, analyst]

Yes and no. I was looking in the fact book on [ Note 125 ], just the interest on subordinated loan capital. That was NOK 700 million last quarter and NOK 400 million now. So you're paying NOK 300 million less for your subordinated debt. I was just wondering why...

[Ida Lerner, executive]

I think I'll have to come back to that later on. In terms of AT1, yes, we have taken up AT1s, and there is a AT1 in November, but we haven't made a decision on that in terms of a call.

[Roy Tilley, analyst]

Just a follow-up. When did you do the AT1, just how much did it impact this quarter?

[Ida Lerner, executive]

No, that was done during the spring.

[Even Westerveld, executive]

Thank you so much. Any questions from our online viewers? Okay, if you could pass the microphone.

[Unknown Analyst]

We have 3 questions, 2 questions from Magnus Sundal from Borea. How large part of the personal market deposits are at 0 or close 0 interest rate? And second question, corporate lending growth seems to come from bank insurance and portfolio management to a large extent. Can you elaborate on what's going on there?

[Ida Lerner, executive]

Sorry, the last part of the question?

[Unknown Analyst]

Corporate lending growth seems to come from bank insurance and portfolio management to a large extent. Can you elaborate on what is going on there?

[Kjerstin Braathen, executive]

Thank you. What we give is the split in personal customers in terms of deposits, how much is on current accounts and transaction accounts and savings accounts. And the split there, even though there's been some move, it's roughly 25% transaction account, current accounts and 75% saving accounts. So no larger movements in the mix there. In terms of corporate lending growth, it's not primarily bank and insurance. It's also renewable. That is split across both wind and sun projects that have scaled and started, it is also manufacturing and seafood. So it's more of a diversified growth and just bank and insurance, which is also a part of it, but nothing in particular that we can highlight going on in that sector in itself.

[Even Westerveld, executive]

Very good. Thank you. And then we have a question from Sofie Peterzens, JPMorgan. Could you please remind of capital headwinds to come, including Basel IV, potential new risk weight floors and anything else?

[Ida Lerner, executive]

Yes, of course. As you know, there is a proposal from the NFSA of increasing the risk floors for the real estate as well as for commercial real estate or mortgages and the commercial real estate. That -- we haven't seen a decision on that from the Ministry of Finance. And the market seems to anticipate that, that will not be approved. But again, we don't have any news on that. And therefore, that's also something that we take into account could affect the core Tier 1 capital going forward, which would, in that case, mean 80 basis points for us.

In addition to that, there is a one-off effect from CRR3, if that's being implemented from the 1st of January, that we haven't quantified, but said that that's minimal in terms of the overall effect. There are some positive elements, and there are some negative elements. In addition to that, when looking at capital and potential headwinds or tailwinds, we have the annual SREP process, where we -- which happens on an annual basis, and we get a response from the NFSA and the DNB college of the Pillar 2 requirements as well as Pillar 2 guidance that usually comes in November, and that's something that we expect will come then as well. And the other element that affects capital is also the continuous focus that and scrutiny that the NFSA do of our IRB models, but that's an annual process, and we don't have any further news in relation to that.

[Even Westerveld, executive]

All right. I don't have any further questions. That has to be a really, really short one, Jan Erik.

[Jan Gjerland, analyst]

I'll just take 1 out of the 3 then. You mentioned the 500 people you're [ allowing ] to leave you. Could you get some more timing on it as well as how much it will cost?

[Ida Lerner, executive]

We have said that, that is expected to be finalized at the end of first quarter next year. And we haven't got an assessment of potential one-off costs, but we'll come back to that later on when we have that probably in connection with the Capital Markets Day.

[Even Westerveld, executive]

Thank you. So today, there is a conference in the area outside. So we will have the press meet us in another area this time. So you go out to the left and then all the way up the white staircase. There will be time for interviews with the press. And thank you for joining today, also for you joining online.

[Kjerstin Braathen, executive]

Thank you.