Dnb ASA

OTC:DNBBY

Earnings Call Transcript 2018-Q4

[Thomas Midteide, executive]

Good morning, everyone, and welcome to DNB's Extended Q4 Presentation. Since we did not see any demand for a Capital Markets Day in November, we have extended the Q3 (sic) [ Q4 ] presentation today, and we'll also give you a few highlights on the road -- about our road to above 12% ROE.

Our CEO, Rune Bjerke, was supposed to be here today and present his 49th DNB quarter. Unfortunately, he cannot join us due to a medical situation in his family. So he will be back on roadshows very soon and will also be back for the first quarter and his 50th quarter later.

But just like the Norwegian-led Manchester United, we have some super subs on the bench. They are well paid and eager to run. And we have, today, our center forward, Ottar Ertzeid, Head of DNB Markets, who will step in for Rune today.

We have most of the general management here today, so you may absolutely talk to them during the lunch. And we have also Head of Investor Relations, Rune Helland, present. So you can also grill him later today.

This is the agenda, and we have many views on the webcast as well. Welcome to you as well. So we'll start with Ottar and head on with the agenda, and we will obviously have a Q&A session later. So Ottar, the stage is yours.

[Ottar Ertzeid, executive]

Thank you, Thomas, and welcome to this extended fourth quarter presentation. Today, we present our results from London for the first time ever, symbolizing that not all banks are fleeing the city in these uncertain times.

As mentioned, I'm a short-notice stand-in for CEO, Rune Bjerke, today. Due to family reasons, he was, unfortunately, prevented from attending today's presentation of our strong quarterly results.

Today, I will touch upon some highlights from 2018 and shed some light on the road ahead. 2018 was a strong year for DNB. Return on equity ended at 11.7%, up from 10.8% last year. We are well on our way to reaching the target of above 12% ROE. And please keep in mind that we have more than doubled our equity base since the financial crisis and have, at the same time, maintained a double-digit ROE. We are now at capital plateau level and are well positioned for future regulatory regimes.

Adjusting our underlying ROE using peer average equity, we get a return on equity of 17.6%. It's no excuse, but a strong signal that DNB is a well-capitalized bank.

Our strong capital position ensures a high payout capacity. We deliver on our ambition of increasing cash dividend per share every year. The proposed dividend per share for 2018 is NOK 8.25, an increase of 16%. The payout ratio for 2018 is 73%, including the full effect of the ongoing share buyback program of 1.5%. This will be completed by the annual general meeting in April, where we will ask for a new proxy of 3.5%. As we have said before, we will continue to pay out excess capital either through cash dividends or using share buybacks.

Our financial ambitions remain firm. However, we adjust our core equity Tier 1 ratio ambition to 16.8% at year-end 2019, following the announced increases in the countercyclical buffer requirements. However, the expected removal this year of the Basel I transitional floor will give a reduction in risk-weighted assets. This reduction will neutralize the increased core equity Tier 1 ratio requirement, and the nominal capital base is thus expected to be stable. As we have stated before, we thus expect no capital relief stemming from the removal of the Basel I transitional floor.

Our overwriting target stands. It is still to reach a return on equity above 12%. Looking back, there is no doubt that we have delivered on our financial ambitions. The focus in 2013 was all about building capital. In 2016, return to our long-term dividend policy as we reached the capital plateau level 1 year ahead of schedule. We have succeeded in building a strong platform towards the SME segment. Since 2014, we have grown annually by more than 7% in this segment. And please keep in mind that the return on capital in the SME segment in 2018 was 18.2%.

We have reduced the cyclical part of the large corporate portfolio by more than NOK 120 billion since 2016. The rebalancing act is now largely completed. The cumulated loan loss provisions from 2016 ended up to be less than NOK 10 billion, far less than the guided maximum of NOK 18 billion. Our main priority now is to reach the ROE target.

Today, we highlight 4 factors that will give us tailwind in reaching this target. The first factor is the growth in the -- sorry, this is not working. Can you please move one back? Yes. The first factor is the Norwegian economy. The activity in the economy has picked up. Unemployment rate is now expected to fall towards 3.5%, half the rate in European Union. The petroleum investments are stabilizing at a high level and expect a high activity in this sector going forward. The Central Bank of Norway's key policy rate is expected to increase towards 2021, and the first rate hike is expected already next month. The increasing policy rate reflects a strong development in the Norwegian economy as such and adds flexibility to DNB's ability to increase margins.

The second factor that will give us tailwind in reaching the ROE target is related to the rebalancing of our business mix. The return -- the reduction of the cyclical part of the Large Corporate portfolio has freed up capital for profitable growth opportunities. Net loans in the Large Corporates segment has decreased by 8% annually since 2016, while the personal customer segment has increased by 5% and the SME segment by 6.4% annually.

In addition, we see that return on allocated capital in the Large Corporates segment has improved from 4.5% in 2016 to 13.2% in 2018 and is thus now above the 12% hurdle.

The third factor is the upward trend in capital-light income. Commissions and fees are up 10.2% from 2017 or 4.5% adjusted for the reclassification of guarantee commissions. The increase is mainly driven by strong performance in investment banking, asset management and money transfer services. I'm very proud that we have maintained a strong investment banking performance despite challenging market conditions. We will continue to put a lot of emphasis on this business also going forward. Continued momentum in commissions and fees will play an important role in achieving the ROE target.

And last but not least, the fourth factor is related to new ways of doing business. By the creation of Vipps, Fremtind and Luminor, we have demonstrated the power of building strategic positions with partners. Vipps has become Norway's #1 in payments and identification solutions. Fremtind will give DNB access to nonlife insurance products to the lucrative SME segment in combination with a stronger market position and increased scale, innovation and development capacity. The merger between Nordea's and DNB's Baltic divisions in Luminor was a win-win situation for both parties and has created value for both. Going forward, we will continue to leverage partnerships as a way of doing business.

I will now leave the floor to our CFO, Kjerstin. Thank you.

[Kjerstin Braathen, executive]

Thank you, Ottar, for being an excellent stand-in for our CEO. And a very good morning to you, ladies and gentlemen. Ottar has talked us through the broader picture and the underlying fundamentals that will enable us to deliver going forward. My task will now be to dig a little bit deeper into the quarterly numbers.

And let me start by saying that through 2018, we've seen several strong trends contributing to our results, and this is equally what we are seeing in the fourth quarter as well.

So first, a couple of highlights on the segments, if I can make this work. There we are. There is a solid performance on each of the customer segments, but the main drivers vary somewhat. Personal customers and SMEs obviously very positively impacted from the repricing that we carried through in the fourth quarter, whereas on large customers, it's really the investment banking and the fee side that is one of the main drivers.

Personal customers NII up by close to 4%, an equally strong increase in other income due to solid growth in revenue from transactional business that you'll also see in the money transfer area. We continued to grow our business also in the fourth quarter. And all in all, our personal customer arm ended at 3.3% growth for the year, which we are very satisfied with.

The SME story of the positive jaw increase continues, 3.6% increase in net interest income. A solid cost control also for this quarter leads to a further widening of the jaws as we like to see.

Large Corporates, Ottar elaborated on that. Obviously, the journey with rebalancing and transforming or increasing the return on allocated capital, that has been a very important priority for us. This quarter, also a good growth in net interest income, but an even stronger growth from other income that is up by close to NOK 380 million, where investment banking is the main contributor.

Growth for the year, as you can see, in 3.6%, which is, I would say, spot on in terms of what we've been guiding for. We've talked about stronger growth in personal customer and SME than Large Corporate, and this is also exactly the picture that we are seeing. Our expectations going forward is equally for a 3% to 4% growth, mainly the same mix as we have seen.

Life insurance, I would also like to mention briefly, a strong result quarterly of NOK 525 million. It is impacted by a positive development in the stock price of the Oslo Stock Exchange. But even without the Oslo Stock Exchange, we have a result of NOK 375 million, which is a strong underlying result for the business, showing a good development on the defined contribution and the capital-light part of the business.

Moving on to the margins. NIM, obviously here also you can see the repricing, up by 8 basis points from the previous quarter. If we look at the picture 12 months ago, it's up by 11 basis points. So there's a strong trend.

Looking at the volume-weighted margins, you do not see the same development. It's more of a flattish picture. And this is quite as expected because when we look at the weighted margins, we take into account the underlying fluctuation or in this case, the increase of the NIBOR. And as we've said before, we are relatively neutral when it comes to movements short term in the NIBOR, but it does shift the profitability in between our segments. But as expected, we see a more flattish development of volume-weighted spreads.

When you think of our NIM going forward, there is a couple of factors to keep in mind. One, a further positive contribution from the repricing, where approximately 2 out of 3 months in the fourth quarter were positively impacted. Secondly, there is an increased cost from the resolution fund of NOK 350 million for the year. Further, in the short term, funding costs are expected to be stable. But with the widening spreads that we've seen lately, if this persists, we will expect to see some effect of an increased funding costs in the longer term. And then short term, our expectations for margins is that they will remain relatively stable.

NII up by 5% and a solid increased contribution to our results by NOK 459 million. Several drivers are important to mention. First and foremost, what we've talked to is the repricing. And the repricing, you can see in 2 elements on the bridge that we're showing. One is the increased net interest from lending and deposits. And the second element that shows an increase in revenue from our equity base is also related to the repricing. So if you take the 2 first elements in the bridge, you have a rough estimate of what has been the positive impact from the repricing. The other element that I would like to highlight, which is also very positive is an uptick in activity. And this can be seen from the increased revenue from amortization and fees, meaning customers are actively refinancing, and we are booking fees from new transactions. The remaining bulk mainly in other net interest income is composed by our interest on the nonperforming portfolio as well as the revenue from liquidity management and treasury. This will vary from quarter to quarter with moving -- with some movement between the stages. But this quarter, that was also a good contribution.

So NII -- oh, they're moving it for me, now they thought I was done. NII going forward will be impacted by the same elements that I alluded to for the margin, namely the resolution fund, a further positive impact from the repricing, but I also urge you to keep in mind the 2 less interest days that we have in the first quarter compared to the fourth.

And then I'm over to the fees and commissions, which is really, in our view, one of the strong points for the quarter. We're up by 19% from the same quarter last year, and fourth quarter '17 was not a bad quarter for us. And in fees and commissions, all of the areas are showing a positive contribution, but I would like to highlight the strongest ones.

Firstly, investment banking. Ottar mentioned investment banking, and we have a broad -- we have broadened our activity in investment banking across products and geographies, and this is yielding results. The strongest contributor this quarter is through cooperating with our large corporate arm, doing larger transactions with underwriting and credit broking distributing in the market, to banks and to other institutions. M&A is also another strong contribution this quarter. And as you know, capital markets have been challenging. So this makes the results even better because equity markets and debt markets have been more volatile, but a strong contribution with more than 35% increase compared to the fourth quarter last year and strategically in the direction that we have -- are working for.

Secondly, I would like to highlight money transfer and banking services, also a 30% increase compared to the same quarter last year. And it's not a single contributor. In fact, I would like to highlight 3. Firstly, across all of the customer segments, our teams are working hard to reprice cash management deals, reprice payment transactions to retail customers as this has been historically not sufficiently priced, I would say. Secondly, we're streamlining value chain, simplifying and through that, substantially reducing the cost to our third-party suppliers in this area. And thirdly, there's one large transaction that represents approximately NOK 25 million in the money transfer this quarter.

Thirdly, asset management, up by 11%. We're booking performance fees of NOK 112 million in the fourth quarter. And booking that type of a performance fee in the markets that we've been through in the latter half of the year is also something that we find satisfying.

Real estate is a positive contributor as well as life insurance. So overall, a very, very strong quarter, I would say, for the capital-light products and fees and commissions.

Coming on to the financial income. The picture is more volatile, and you've seen that it has been throughout the year, and there is a lesser contribution in this area than previous quarter of NOK 187 million. But what is important for us is that we see an increase in what we would call the quality revenues in this category, and that is related to hedging activity from clients somewhat better from trading. So you can see what we've classified here as customer and trading revenues is up from NOK 575 million to NOK 600 million. So the negative movement stems from one thing as a category, and that is market-to-market movements. We've communicated the basis swaps. The 81 is a positive, but a particularity this quarter is a negative market-to-market on our bond portfolio as well as the CVA/DVA that is related to the widening spreads. But bear in mind that a negative market-to-market now due to widening spreads. The widening spreads also leads to a higher revenue on these papers going forward.

Over to costs. The quarterly -- and I need it one back, please. The quarterly cost picture is up by more than NOK 800 million, but is substantially impacted by a nonrecurring cost of more than NOK 500 million. This cost is mainly related to impairment and depreciations of leasing contracts and systems. If we look outside of the nonrecurring, the costs are up through a higher activity level on IT, which we have expected and communicated. You also know that we've had very low restructuring costs throughout the year. And this quarter, we are booking some restructuring costs related to changes in our operating model in Singapore as well as Poland. And lastly, a very high activity level in investment banking and asset management drives the major part of the salary and personnel increase. But given where we are in the year, I thought it more interesting to look at the cost development for the year. If you can change it for me, please. The broad picture for the cost development from '17 to '18 is a flat development of cost. What's important is the underlying shift in the cost picture. And if you look at the elements in the bridge to the right, what you are seeing is that our efforts to increase the efficiency in the bank through automating, using more robotics as well as lower restructuring costs, have made the necessary room to make needed investments into compliance and operating risk. In addition to these areas, we're also investing in new competence in areas related to the new banking world, and we also have a slight uptick on the IT side. Going forward, there is further potential on the automation and digitization of our core processes that we have talked -- spoken about. And we will have investments also going forward across these categories, but we do not expect any major shifts in our investment costs. The main message is thus that we remain committed to delivering on our target towards 2019 of a cost base of less than 40% than our revenue.

Losses are low equally for the quarter, NOK 235 million in aggregate, but indeed, it must be said to be a very low figure for a portfolio of our size. Personal banking, slight uptick, but still a very low number. SMEs down by NOK 100 million from the second quarter. And Large Corporate this quarter with a net loss, [ at ] NOK 45 million. So there are underlying movements that are not visible in the net numbers. But this quarter, that is mainly related to some further losses being booked in the offshore sector and write-backs that we have seen in the shipping sector. Not to talk about any industry trends, these are more name-specific movements that are representing these losses and/or write-backs.

The overall situation looks very solid, 94% of our portfolio in stage 1, and we do not see any industry pattern that causes concern. That being said, the offshore sector is still challenging, and we are working through it, but feel comfortable with the reserves that we have in aggregate towards that sector. And again, bear in mind that the losses will vary from quarter to quarter.

We have a very solid capital position after years of capital buildup, as Ottar also alluded. This gives us the necessary room to grow and have profitable growth across our operations, but also to deliver on our dividend policy. 16.4 is the number for the quarter. And as you can see, according to Basel III, our core equity ratio would have been 17.2, increasingly relevant, as we do expect a removal of the Basel I floor for the year. And you can easily see that this would give us the capacity to absorb the increased countercyclical buffer without making any larger adjustments.

We like to show the leverage ratio because it's a better number to compare between peers, and you see a strong -- a strengthening of the leverage ratio to 7.5%.

We would like to share with you some elements that are expected to impact our capital ratio in the fourth quarter -- first quarter. You should be familiar with the elements we're talking about. Firstly, IFRS 16, our estimate is currently an impact -- a negative impact of 8 basis points. And secondly, on the strategic investments, the merger with the savings banks on our nonlife insurance business, approximately a 30 basis points impact in the first quarter. Further effects in the second quarter, our life insurance business is proposing a dividend of NOK 1.4 billion up to the parent, and we estimate a positive effect of 15 basis points. A further positive, upon closing the sale of Luminor to Blackstone or partial sale of 30 basis points and the remainder of the merger of the nonlife business of a negative 10 basis points.

Though it was the quarter I should focus on, I've also decided to sum up with some ratios showing the development year-on-year basis.

Looking at the profits for the year, you can see that we are up 11.4% in '18 compared to '17.

Looking at our earnings per share, however, you can see that the trend is even stronger. And here, we are up by 13.4%. And the underlying message here is the importance of our share buyback tool and how this creates value through optimizing the capital base along the year, but also then through reducing the share base and increasing the value per shareholder.

As Ottar very clearly stated, our main goal is the ROE, and targeting an ROE above 12%. A nice tick-up from '17 to '18 from 10.8% to 11.7% sends a clear message that we are on track. But we also promise to give an update on the road map that we laid out for you in our ROE bridge on the Capital Markets Day. And yes, the message is that we are well on our way, but the composition of the various elements and the road map that we laid out have varied somewhat as to be expected. Some areas have been better. Some areas have been more difficult than anticipated. But highlighting where we have seen the headwinds, I would like to mention what we included in core banking on the financial revenue side from trading, where there's been a structural trade, and also somewhat slower activity on interest rate hedging. On the strategic income side, we are a bit delayed, I would say, when it comes to nonlife insurance, where we've now taken structural efforts in order to move that ahead. And lastly, some headwind on the capital side. Obviously, we've added 30 basis points to our capital base that -- which raises the bar of delivering the 12%.

Coming on to the tailwinds, and we have several. I would like to start with the volume and margin development as well as money transfer and banking services on the fee side. Strategically, investment banking is somewhat volatile, but clearly a strong year, as well as for asset management, where the underlying growth in the savings market is important, and Ingjerd will talk more about that later on.

Lastly, I think on the tailwinds, obviously, a strong macro and very low losses is important for us, and the strategic partnerships that also Ottar talked about is an increasingly important part of our business. So we see the contribution from Vipps and the merger between Vipps and BankAxept as an integrate part of our business.

Going forward and our outlook for '19 and '20. Again, ROE above 12%, the most important. We've always talked to it about being an ambitious target, and it still is. But we do believe that it is within reach, well supported by a strong macroeconomic environment. As an important driver to that, obviously, efficient operations and a cost income below 40%, but a continued growth momentum across our businesses of 3% to 4% per year as well as expectations of stable tax rate.

The next presenter you will listen to today is our Chief Technology Officer. And I know you often think about IT as cost, and so do I, but we also think about it as something way more importantly. IT and the use of technology is an increasingly strategic important part of our business. And increasingly, in addition to focusing on the costs, we are focused on what we're actually getting out of this money, and that is important. And going forward, we will strive to give you a better insight on how this is developing. And this is what we are endeavoring to start with today.

So I would like to thank you for your attention, and welcome Alf Otterstad to the stage.

[Alf Otterstad, executive]

Thank you, Kjerstin, and good morning to everyone. Let's see. The pace of change in the market demands that we continually launch and evolve our digital customer offerings. Our track record shows that we have been a digital leader for an extended period of time. We were early on Internet banking and early on mobile.

As the timeline illustrates, the last years have increased the pace and extend our customer offerings. We get more IT for our investments now compared to only a couple of years ago. We have invested recently in customer experience and growing the business through new digital channel offerings. This includes 2 mobile banks serving the SME and personal customers segments, in addition to a successful savings site. At the same time, we have been automating processes for fully digital experiences and back-office efficiency. Examples of this includes credit automation, customer on-boarding and chatbots.

Staying ahead in this manner is made possible through maintaining a healthy spending balance between running the bank and new development, and this approach is working. We have seen an explosive growth in terms of digital touch points from 70 million in 2010 to more than 350 million in 2018, the majority of which have been through our mobile channels. At the same time, we are investing in technology for the future. This includes building big data, customer insight and cloud platforms, securing the bank through compliance initiatives and executing on our IT security road map and core simplification to make sure we are fit for the future.

So how do we go about ensuring that our core is fit for the future? We see wholesale core renewal as neither required as the current core already supports a rich and highly automated digital setup that most banks are targeting. Nor do we see it particularly desirable as this is complicated, risky and expensive. And frankly, we do not see any great package solutions in the market. This being said, we do recognize that the future will be even more demanding. Therefore, we have built and launched our most important new channels in the cloud. Increase the pace of core encapsulation through APIs, partnered with Nordic API Gateway, an accelerator providing us with faster access to data sources, made possible through PSD2 and open banking. And finally, to achieve full business agility, we will need to increase the level of automation and decoupling within the core.

Our Foundry partnership with 11:FS is an example of this. Together, we have taken the initiative to address the lack of truly modern architected solutions in the market. The solution is still under development. And shortly, we will address the -- assess the Foundry's ability to address unsecured credit area, but also with a potentially much broader applicability across the core. However, business agility is more than just technology. We are also addressing culture and ways of working.

Our experience from the development of Vipps, which actually was delivered with agile setup in less than 6 months, showed us that change in culture and ways of working is a prerequisite for digital banking. Technology is no longer a back-office competence, but is now a core part of our business. So joint business and technology agile teams will become the norm.

Our existing pilots with these joint teams have demonstrated the cycle of improvement that we now would like to extend to other areas of the bank. This will include increasing the engineering competency both within DNB and with our partners and ensuring a higher level of automation for improved efficiency.

Accordingly, we see an upside over and above the pace of delivery that we have discussed earlier. To realize this change, we have an end-to-end transformation program focused on extending the use of agile ways of working across our business segments and IT. The expected outcome of this program will be to create an engaged and technology-oriented workforce at all levels of the bank, to achieve faster time to market and to improve productivity, where research has shown a potential for a boost in developer productivity averaging 25%.

So in summary: one, we have significantly increased the pace of new customer offerings; two, we will evolve our core over time; and three, we see a further potential for higher productivity and improved time to market.

So with that, please welcome Ingjerd on stage. She will tell you more about how we use technology to deliver great customer value. Thank you.

[Ingjerd Cecilie Hafsteen Spiten, executive]

Thank you, Alf, and good morning, ladies and gentlemen. My name is Ingjerd, and it's the first time I'm addressing -- I have the pleasure of addressing this audience. After holding leading positions in Telenor and Microsoft, it has been a great experience for me returning to DNB 1 year ago as Head of Personal Banking. The organization's ability to adapt and meet the fast-evolving market and customer requirements really impresses me. And today, I will give you a deeper summary of 2018 and elaborate on the journey ahead for the personal banking segment.

As you know, we are by far the largest player in the Norwegian market. The pie on the left shows that our lending portfolio is about 3x as large as our closest competitor, while the pie on the right shows that our deposit portfolio is about 5x as large.

To keep this position and continue delivering profitable growth, the key is to have satisfied customers. And the very good news is that our Q4 customer satisfaction survey shows an all-time high despite the fact that we lifted interest rates during this quarter.

2018 was a good year, and I'm proud of how we have found our way through our competitive business environment. What's even more important is that I believe we have created a robust platform for continued growth.

For 2018, we see consistent and profitable growth in the mortgage portfolio. The volume growth is more than 3% over the past 12 months, a sustainable growth. At the same time, our mortgage portfolio still holds very, very low risk. Our collateral position is solid. And as the pie shows, when categorizing mortgages based on marginal LTV contribution -- distribution of our total portfolio of NOK 753 billion, only 2.5% of this portfolio is about 75%.

Continuing to deliver profitable growth is the main focus for us going forward. Profitable growth is also the target for our deposit and savings portfolio. Norwegians are comfortable with self-service solutions, and in particular, for savings. 96% of savings agreements were sold through automated solutions in 2018. This is a great fundament for efficient and profitable sales. Our savings app, Spare, launched in 2016, has really become a solid contributor to savings.

25% of new mutual fund customers make their first purchase in the Spare app. And currently, more than 10% of total mutual fund sales are made through the app, steadily increasing. What is also very interesting is that the customer group using Spare is both younger and more gender-balanced than we have seen in the past. We expect a buoyant market going forward. This is because the Norwegian government has facilitated the launch of new products, such as pension savings and stock savings schemes. And the Central Bank of Norway has announced expectations for an increased saving ratio of Norwegian households, with almost 7% towards 2022. And with very good digital solutions in combination with growing market, I strongly believe we are well positioned to take our reasonable and profitable share of this expected growth.

When it comes to NII, our overall financial performance is in line with our ambitions. We have navigated our way through a highly competitive landscape in 2018. We have also been able to increase our net interest income level by targeting profitable growth, and that is the strategy for us going forward as well.

In the future, we will focus on keeping the deposit-to-loan ratio at a healthy level. And the flexibility we have in the mortgage portfolio with more than 90% floating interest rates is important to meet these expectations.

Competition is fierce, but increasing interest rates give potential for explore more strategic pricing. We are building an advanced model -- new model for automated mortgage pricing, and this model will give us more precise tools to predict correct pricing for the various customer segments, and it will be piloted during this year.

To meet market expectations, we will continue to develop and launch new attractive products both within deposits and mortgages. An example of such a product is the green mortgage we launched in August 2018.

We also have an untapped potential in the consumer finance market. During 2017, as part of our corporate responsibility strategy, we narrowed down and cleaned up our consumer finance product portfolio and held back over marketing. But going forward, we will, in a responsible way, be more proactive to meet customer needs for consumer finance products.

And then to insurance. With the merger with SpareBank the new company, Fremtind, will become the second-largest nonlife insurance provider for personal customers in Norway, enabling economies of scale. Following this partnership, we expect nonlife insurance to be an even stronger contributor to the other income in the future. Our short-term ambitions addresses on previous CMDs remain the same, but long-term ambitions will become bolder as this merger gives us a fundament for continued and profitable growth. The merger has been received with enthusiasm in DNB, giving us the ability to compete at the highest level in the insurance space.

In earlier presentations, we have presented the solution for automated mortgages that we have developed during the last years. We are one of the first banks, possibly the very first, to make secure lending fully automatic. This is possible as Norway's public sector is becoming more and more digital. And we are able to utilize the public APIs in our own solutions, making the mortgage process really efficient. And as you can see, on the left, 80% of mortgage applications are now submitted digitally by our customers, soon achieving our ambitious goal that we had of 85%. An over-time analysis shows that the time required to process mortgage applications have halved since we started, from more than 3 hours per application to 1.5 hours today. These are formative changes to fundamental functions in every bank -- within any bank. And therefore, we have invested a lot of time educating and retraining our employees during 2018. The effects are now starting to show, and we will cost -- reduce costs accordingly.

As previously stated, our customers really prefer self-service. This is backed up by analysis, which shows that more than 60% of customers go online first when seeking answer to their service requests. This made clear that our digital service capability is an urgent development area. And in the last quarter of 2018, we really intensified these efforts to meet the customer needs. This will enable us to reduce the number of staff needed to answer customer requests in the long run.

The new chatbot, Aino, was launched in October last year and is the most visible part of this effort. And as you can see, just 2 months after the release, Aino is already answering 17% of all incoming inquiries to the contact center. In only 2 months, Aino has become our most efficient customer service employee, and that's amazing.

In addition to the chatbot, we have prioritized smaller quick fixes to free up time for advisers and improve our customer journey.

And finally, it was a fantastic day for me, 14th of January this year, to launch our new mobile bank. For the second time for me in DNB, the first time was 11 years ago when I was DNB's first Head of Mobile Banking. With this launch, we are strengthening our position as digital frontrunner. It is the state-of-the-art user experience, built in the cloud with all the necessary capabilities for flexibility and speed. The new mobile bank make us ready for exploring possibilities provided by PSD2. Our long-term ambition is to be the preferred channel for daily banking services in Norway for all Norwegians, also non-DNB customers. This mobile bank is -- will be the heart of the future relationship with the customers. In only 3 weeks, half of our active customers are already using the new mobile bank. And on average, these customers visit the mobile bank more than once a day, and I expect this to increase alongside the launch of new customer-friendly services. This gives us a very dynamic interface to communicate with our customers.

So that was the personal segment in brief. To sum up, 2018 was a good year. We delivered sustainable and profitable growth. And even more important, we have a robust platform to continue this growth and embrace the future.

So with this, I will give the floor to my good frenemy, which always challenge us to have the best user experience and most favorable products, Rune Garborg.

[Rune Garborg, executive]

Thank you very much. Good morning, everybody. I'm going to tell you about the fastest-growing brand in Norway, and I'm going to present the new combination because this is a new combination of wallet, of infrastructure and ID solution. So we now cover the whole value chain with our payment product.

Vipps was launched by DNB in 2015. It started as a peer-to-peer service, just replacing account number with mobile number. Today, 75% of the Norwegians are using Vipps, and Vipps was recently ranked as the most recommended and most appreciated brand in Norway, both in the young segment but also in the overall population. The brand is built on simplicity. And for the future of Vipps, it's all about boosting growth and making the solutions even simpler.

Now Vipps is available in many payment situations, e-com, invoice, in-app, sports and clubs, organizations and so on. And we will soon make Vipps available everywhere by launching Vipps in-store. In 2016, the fee-based transactions was 6% of the total. It increased to 17% in 2017. And so far this year, the fee-based transactions represented about 30% of the transactions.

In 2018, the growth in peer-to-peer transaction was almost 50%, still 4 years -- almost 4 years after the launch. But more important, the growth space -- the growth in fee-based transaction was 130%. At the same time, we reduced the cost on peer-to-peer transaction by 50% just by switching from international schemes to account-to-account service. The income from fee-based transactions and the cost reduction is going to give us pace and more power to invest in technology in the future. But the most important change in 2018 was the merger with BankAxept and BankID. BankID is Norway's most used ID solution with the highest security level. 90% of the population in Norway are using BankID almost every week, for tax forms, for banking, signing contracts and so on. Everybody uses BankID. BankAxept, at the other hand, is Norway's only national scheme with the lowest transaction price in the Nordics and perhaps in the world. 90% of merchants are using BankAxept scheme. This explains why the merger is that important. We now have the whole value chain for ID and payment, and we have almost every customer and merchant as customers. Almost every merger and end-user are now customer of BankID, Vipps and BankAxept. And this gives us an even stronger position for growth in fee-based transactions.

Our 3 main priorities are e-commerce, invoice and in-store. These 3 areas will give us a strong increase in fee-based transaction and even stronger increase in the future and simplify the customer experience.

First of all, I'm going to talk about e-com. Growth in Vipps e-commerce was 152% from 2017 to 2018. This shows the consumers' appreciation of Vipps and the simplicity of the solutions and, of course, the strength of the brand. To further boost growth, there are 3 key drivers to succeed: one is to remove passwords in Norway. And that sounds a little bit optimistic, but we really think that is possible. We will use the technology from BankID to remove usernames and passwords in Norway. On average, every email address in Norway has 30 passwords. Think about that. Removing all the passwords, just using your finger to sign in, that's going to be the new solution. We already have the easiest check-in in the market. And if you win the log-in, you will also win the check-in -- checkout.

When Vipps is available in the checkout, 30% use Vipps. Last week, a retailer called Jula signed up for Vipps. 40% of the transactions are already on Vipps. We already have the customers through BankAxept and our market share of 90%, and now we're going to take a larger part of the merchant. We're going to recruit more merchants in e-com in 2019. But the most important thing to be competitive in this market is the customer experience. Take a look at the check-in and checkout experience with Vipps.

[Presentation]

[Rune Garborg, executive]

Our second priority is invoice. In 2019, we will remove more invoices, paper invoices in Norway than in the 10 last years combined. 30 -- 40% of the invoices in Norway are paper-based, perhaps in the most digital country in the world, but only 8% of the population wants to receive a paper invoice.

So let me show you the Vipps invoice payment experience. Let's start with the Vipps digital invoice, and I'll try to comment here. You just log into Vipps with your finger, then you push the payment button. And there you can see the invoice. You enter pay. And finish. The invoice is paid. I can see that you're not too impressed by that, but that's really a fast payment. The account number, the OCR number, everything is taken away. It's hidden. It's just as secure, but it's a very easy payment. But still some merchants insist to send paper invoices. But we can make it easy for the customer anyway. This is an example of invoice from Klarna. You just take a picture, and Vipps will find your account number. So first, you will find your account number. You confirm the account number. Next, it will find your OCR number. And at the end, you can just enter the amount, press pay, and the paper invoice has become digital.

So how will we succeed? You just saw the easiest customer experience. We are letting the customer decide. And most important, we are using the invoices [indiscernible] digital invoices from the banks and increasing the number of users using that product. So we're increasing the number of digital invoice payers from 1.2 million to 2.7 million only by updating the app. And at last, we have -- we now have the merchants on board.

Our third priority is in-store. We have 3 key drivers to succeed within the in-store mobile payments. The 3 big retailers have 50% of the transactions. And for BankAxept, we already have agreements with 90% of the market. In 2019, we aim to make Vipps available in 40% of the shops in Norway. The most crucial factor in in-store is the pricing. The merchants simply won't accept pricing that is higher than today card payment. And as I mentioned, that's probably the lowest prices in the world. The national payment scheme in Norway has the most cost-effective solutions. You need to have low prices to get the distribution. And the national scheme and the -- the last thing is the simplicity, the consumer experience. We are now launching QR code this year, and this will simplify several payments situations. And in addition to the big retailers, we will also expand to sports and clubs and offer QR codes in any payment situation.

The last thing I'll talk about is our ambition to expand to new countries. We now have partnership with Alipay. And together, we have agreed on a standard international QR code. When we look at Alipay's presence in the world, we are extremely optimistic. This can give all Vipps users the opportunity to use Vipps in Europe and perhaps worldwide and to make Vipps an international player. The first international expansion is to Finland. Soon, we will make Vipps available in Spain. And the standard QR code will allow different mobile wallets to use the same QR code as seen as with Vipps, Alipay and e-PASI. This is from a test we just made in Finland. This partnership is extremely important for us since we believe that the customers will demand one payment solution and not a lot of different QR standards. This is one of many important collaborations we are going to do, and we'll soon present new and strong partnership for expanding outside Norway.

The merger between Vipps BankAxept and Vipps gives us a unique position to export technology. Norway is one of the few countries that has succeeded with wallet ID and [ domestic scheme ]. On the right side you can see the -- how mature the market for ID is in Norway. Everybody are using BankID, as I told. The same picture -- we have the same picture on the left side with mobile wallets. The penetration of mobile wallets in the Nordics are 70%, 80%. And this makes our products very attractive to export to other countries. So what now we have a lot of interest and ongoing dialogues with both wallet and ID and we hope soon to present new results from that effort.

To sum up, Vipps is in a unique position, offering mobile payments, ID and payment infrastructure. This will be crucial to succeed in e-commerce, in-store and with the paper invoices. We experienced a lot of interest for our technological platform and our market insight. Our product and platform is now ready to be exported outside Norway.

Thank you very much for your attention.

[Thomas Midteide, executive]

Thank you all. We will now open up for questions.

We have left the Oslo-based analytics back in Oslo. So [indiscernible] Thomas and Johan, we miss you too. But you are able to enter your questions into a new fancy digital system. And as we have the Aino chatbots on our web page, we have Rune Helland, the question bot here in the audience. He will actually ask the questions you type in. It's amazing how technology works. And he has promised to ask the questions you actually have sent in. So if you could be so kind to use the microphone because we have about 300 people following us on the web. And we'll start off with the questions here in this audience. And we'll start with Jan Walters in the middle of the audience.

[Jan Wolter, analyst]

Jan Wolter, Crédit Suisse. If I could move to the Q4 numbers and ask you a little bit around that, if possible. So first on the very strong performance that you did have overall, especially on the fee side there. What can we say or you say about the IBD business, the fees there that you took in, both what you called credit broking, so syndicated loans as well as well as the other corporate finance business? Was it partly a catch-up effect where you booked the deals in Q4 which could have been booked earlier? Or was it a majority of new mandates? So that's the first question, the dynamics there. And whether or not you feel that you took a lot of market share from other players, non-Nordic or Nordic, if that's sort of the rationale as well. So that's the first question. And then a detail on the buyback program, I think you asked for 3.5% buyback mandate. Does that include the hedging program as well, the usual 50 bps? So just to get clarification on that. And then the repricing on the mortgage book. I think you said something around NOK 200 million in the quarter. Is that only on the mortgage book? Or was that also any meaningful part on other books? And will we see the same dynamic in the first quarter, but naturally lower because there is only one extra month of incremental repricing in Q1?

[Ottar Ertzeid, executive]

With regard to the IBD, you're correct in assuming it was partly a catch-up from a slow September, but it was also reflecting diversifying of the business due to our investments over the last few years, particularly in the M&A area, as our CFO already touched upon. And it also reflects the change in the business model we aimed for over the last few year towards a more originate and distribute model providing high debt-charge market income in the fourth quarter.

[Kjerstin Braathen, executive]

And I think to -- one more point we can give you is to describe our position in distribution because increasingly we also see other players than banks being interested in taking on credit. And one data point for the fourth quarter is that half of the amount that we distributed was to non-banks. So that's a clear picture that shows the transition in this area. I don't think we can say that investment banking is completely insulated from capital markets activity in its whole, but the whole thinking has been to build a broader, both geographic span and product span. And that will enable us to get more out of a good market. And the solidity in tying this closely to the large corporate strategy is really, I think, what is paying off. On the buybacks, our intention is to ask for 4% in total. So the 3.5% does not include the percentage points, the 0.5 percentage point we need for the trading. So the 4% is to have room and flexibility. It doesn't mean that we necessarily intend to spend all of it, but is a flexibility to make sure that we are able to optimize on the capital situation throughout the year, but this is then a new application for the general assembly in April. On the repricing, you're quite right. We roughly say that NOK 200 million is the impact in the fourth quarter. That stems both from the repricing in the personal customers and SMEs. And broadly, you can think 2 months out of 3, it was effective in the fourth quarter, so it's another month in the first quarter. But bear in mind the 2 lesser days, that has an impact.

[Jan Wolter, analyst]

If I could ask one final question there on the capital and the removal of the floor. So there will be an impact on your reported Core Tier 1, 80 basis point increase, is that correct? And then when you're saying that you don't expect the capital -- the increased capital requirement or rather you expect it to be absorbed by this, then you're talking about the 30, 35 basis points of higher requirement for the countercyclical buffer. So is it fair to say that your actual buffer to the reg requirement will increase by in the area of 50 points? So you get 80 and lose 35 or something like that? Or are we missing anything here, other components?

[Kjerstin Braathen, executive]

The picture today is that the requirement is 15.3. And then we have an additional approximately 40 basis points. That becomes effective from the increase in the countercyclical buffer. And then you're quite right. We have currently an 80 basis points headroom if you look at the Basel III number. And it's 40 basis points that is going into the absorption of the countercyclical buffer. With regards to the remaining buffer, I think our main statement is that we don't expect any material reliefs from the transition to a regime without a floor. And this is in view of the clear signals being sent by our FSA that they will look clearly on the models and other elements and are looking for the removal not to lead to a reduced solidity within the banks. So I think the most important thing that we're saying is that you should not expect a material relief from a removal of the floor.

[Thomas Midteide, executive]

Okay. I think we have Bruce Hamilton from Morgan Stanley. Right-hand side.

[Bruce Hamilton, analyst]

Yes, 2 questions. One on funding. You alluded to also an increase in funding cost for all banks. Can you just remind us of your kind of your issuance plans to cover off MREL and how we should think about the pressure that puts on NII versus obviously some of the positive drivers? And then secondly on Vipps, I mean it sounds -- from a strategic standpoint, it sounds like a phenomenal business, but can you help us think through the revenue and profitability and how that drives -- I mean, its huge value? But us analysts always want some financials.

[Kjerstin Braathen, executive]

I'll start off on the funding. Our broad funding plan for the year is to raise in the area of NOK 110 billion, NOK 115 billion across our business. And we anticipate to start funding the MREL to what's the second half of the year, and I think we talked about NOK 20 billion to NOK 25 billion of MREL. Of course, the development and funding costs will depend on the situation in the market and the spreads at the time, but the MREL funding is thus back-ended in 2019. What I would like to add is that we recently received an upgrade from S&P, Moody's? S&P to AA. And obviously, relatively speaking, we have a relatively strong position in terms of funding. I think you've seen a very big difference in terms of how this market has actually impacted the various banks. So we feel comfortable on that. For Vipps, I'll leave it to you, Rune.

[Rune Helland, executive]

First of all, we need to increase the growth in fee-based transactions. But we will, of course, also launch several new products like credits for e-com and different payment situations. And it's also a question about the customer data and the value of the customer data and how we can capitalize on that. So I think those 2 areas, the credit and the customer data, are the most promising as we see it now. But there are also -- we're also looking into creating Vipps as a marketplace and expand the possibilities. It's all about growing. You need to have market shares in those most important areas, and then you can add more products and services.

[Kjerstin Braathen, executive]

I would like to just add from an ownership perspective that the cash flow in Vipps is meaningful, as Rune has alluded to. There is cash flows on the agreements related to BankAxept. There is existing cash flow on BankID, which is used by 90% of the Norwegian population. So there is definitely a meaningful cash flow. But then if you're aware, Vipps is strategically important, the future positioning and the growth. So it's also a company that we do expect to invest. And I would say there's been even more important focus on strengthening their position. And the payments markets, if you look across Europe, it's been the most active M&A market this year. And a distinct difference between Europe and the Nordics is that it's no longer the banks who are actually backing the major payments players in Europe. And I think most analysts are talking about the revenue -- potential revenue drain that they fear losing from that. So for us, using our efforts for amongst others, the mobile banking platform that Ingjerd has talked about, but also being a material owner in Vipps and positioning ourselves strategically and chasing the growth and the strength in this play that is obviously going on, I would say, is priority #1, but it's going to be hard for you to see through the cash flow. I understand that.

[Thomas Midteide, executive]

Let's have a question in the back, please.

[Ronit Ghose, analyst]

It's Ronit from Citigroup. I have 2 questions, please. One on NII and one on the mortgage process. On NII, so the quarter-on-quarter more than half of NII increase is -- if I look in your fact book and the Other line, so when you split it out from NII from loans, NII from deposits and other, and you talked about sort of improvement in NPLs or provisions helping. I'm just wondering, is this like a new base? Or is this simply an extra NOK 300 million that goes away in the next quarter? Or is it as simple run rate, that NOK 1 billion or so in the NII for Other? And the second clarification I have was about the mortgage processes. 80% digital applications. For someone who just went through a mortgage last year, it sounds amazing. I spent months getting a mortgage. 1.5 hours sounds amazing. Can you just clarify what exactly does that mean? When you say 80% is digital, how much of the kind of end-to-end process the client experiences to right to the processing side is really digital, without sounding skeptical?

[Kjerstin Braathen, executive]

I'll address the first, and Ingjerd can do the second. You're quite right, the Other NII is a big element in our total net interest income and increasingly so in '18 after reclassifying the net interest from our liquidity management that was previously a part of our financial income. So that is something that has increased the contribution from the Other NII. Then there is dispositions and measures in treasury that is a category that may fluctuate somewhat from quarter to quarter. But probably the element that is the hardest to assess is the one from the nonperforming portfolio, because as the portfolio -- if part of the portfolio moves from a stage 2 to a stage 3, you take all of the net interest income with you. So there has been some movement from second to third that takes it out of the general margin base and puts it into Other NII, but a large part of Other NII, we would say is recurring. But there will be some volatility related to the markets in terms of liquidity management and fluctuations between the stages, the healthy and the nonperforming portfolio.

[Ingjerd Cecilie Hafsteen Spiten, executive]

Yes. And when it comes to the mortgage process, you're totally right. Either the customers find a way themselves. As I say, Norwegians are very self-served, which means they go in and just apply digitally. Or we guide them to the application. We are using the public APIs to get all the customer -- the public information with regards to the customers. That is coming directly from governmental registers. So then that application is finalized. When it comes in, we have, of course, a lot of credit scoring in the process. So it's between 18% and 15% today goes all automatic through the process -- 8% and 15%. And then the rest falls out of different rules that we have and need manual handling to actually verify or get more information from the customer. And that is the time I'm referring to 1.5 hours down from 3, which means that -- and I think that -- so we are -- now we are tuning our models and trying to get the fully automatic grade up, but it will still be very much need for the good advisers to actually control those which is not directly straight through.

[Thomas Midteide, executive]

Okay. Then I think we'll fire up the question box on the first row.

[Rune Helland, executive]

First question here is from Riccardo from Mediobanca. "How will DNB loans pricing change react to further rate hikes in Norway?"

[Kjerstin Braathen, executive]

Well, as I'm sure Riccardo will know, it's difficult to talk about future pricing, but the underlying fundamentals in the economy is strong, and the rate hikes are expected as a result of a very strong economic development. And an increase in Central Bank pricing, another one expected in March, is likely, again, I would say, to be followed by a rational behavior by banks, as we saw this time around. We decided this time to be the first mover. I think the market was well prepared. It was communicated across from politicians and senior economists that the rate increase was expected to be transferred. That needs to happen for this to take an effect in the economy, and there was close to an immediate response from basically all of the banks in the market. And obviously, a repricing would always depend on the market situation and where we are, but I think the best we can say is that what we have previously seen in the last rate hike is a good reference point for what to expect.

[Rune Helland, executive]

A couple of questions from Johan Ström from Carnegie. "Can you explain the fluctuation in Other NII and any nonrecurring items here? And second, how should we think about the dividends from DNB Life, [ La Lieb and Frem ] going forward?

[Kjerstin Braathen, executive]

Other NII, I think we covered in a previous question. But just in order to repeat what is in the Other NII, it is the interest from the nonperforming portfolio. It is the interest from liquidity management as well as short-term deposits that we receive and place with central banks as well as some elements from treasury. A large part of it is recurring business, but there will be fluctuations in this category from quarter to quarter. Life insurance companies increasingly paying dividend. We were very pleased one year ago when they for the first time in 10 years paid a dividend. At that time, 75% of the result. This year, the proposal is close to 100% with NOK 1.5 billion of dividend being paid out. And we have a long-term ambition in the life insurance business to have a solvency ratio around 140%. And given the nature and the expectation of development in this business, there is reason to believe if the markets hold up that there will be a high ratio of dividend payments going forward. This in view of the nature of all of the growth happening in this company is a capital-light growth. We talked to a transition from defined benefit to defined contribution, and this is still what we're seeing. And we've reached the tipping point, if you look to commission and fees, where these are matching each other. And we're starting to see the positive effect from defined contribution outweighing the negative from the conversion of defined contribution over to paid-up policies. So the situation in the life insurance company looks good. We expect the company to be in a position to pay a very decent dividend going forward and over time even potentially distributing capital back to the shareholders. As I would also like to add, they did for the first time in December, where we optimized the capital structure and replaced equity with responsible loan, and the company paid extraordinary dividend, the NOK 1.5 billion, up to the parent.

[Rune Helland, executive]

Couple of questions from Jan Erik Gjerland from ABG. "How should we look at your income from associates going forward as well as new cost run rates as you move people to the new nonlife?"

[Kjerstin Braathen, executive]

Income from associates have been fluctuating. I mean, the main contributors in income from associates are obviously -- Luminor as one, Vipps as another and our ownership share in Visa and Export Finance. Luminor has been delivering more or less on track, with a slight lesser contribution in the fourth quarter than third. But as you're well aware, we are selling a little more than half of our share with an expectation to close this deal in the second quarter. And we believe Luminor has a strong market going forward, and the development of the results there has been promising. With Visa, this quarter it's a particularity that the volatility is related to the development in the share price, so it's not related to the underlying performance in Visa, but there is a negative effect from the share price. And Vipps is also one of the contributors, contributing less this quarter compared to the last quarter. Fremtind is obviously an important part of this business going forward. I don't think they've said anything specific about the coming results, but the pro forma results 2018 of the merged entity was NOK 1.8 billion, and our ownership share will be 35% in this company. So this is a meaningful share, and we obviously have very high expectations for Fremtind going forward. Number of employees moving to Fremtind, roughly 200 is going to move at various times in the completion of the merger. In terms of cost development, I think the overall ambition and target for us is to focus on the less than 40%, and I think that's the main message.

[Rune Helland, executive]

Couple of questions on costs from Christopher Adams, Kepler Cheuvreux. "You described NOK 506 million as nonrecurring costs. Can you please provide some more details on this figure? What cost [ leverage ] do you expect for 2019? Besides depreciation, IT accounted for the largest increase in costs from the previous quarter. How do you see this cost item developing in 2019?"

[Kjerstin Braathen, executive]

Nonrecurring is, as I stated during the presentation, mainly related to impairments and depreciations of leasing contracts and systems. There's a couple of other elements, but really that's the major chunk of it. And we assess our balance sheet and the value on our balance sheet on an annual basis. A year ago, we took a write-down on a goodwill related to Cresco. This year it was related to again leasing contracts and systems. I would say, overall, we have a very conservative approach when it comes to activating investments on our balance sheet, which makes our balance sheet very robust. When it comes to costs in 2019, again, we stick very firmly to our target of the total cost base of less than 40%. And we've said on several occasions that it is important for us to have a relative target and not a nominal target. We need to be able to invest in areas where we see a higher profitability even though the cost income ratio is higher than 40. And again, our most important target is the return on equity above 12%. And I think as you can see, especially from this quarter, investment banking is a very strong contributor to that, but again, the cost-income ratio, if you look at investment banking on an isolated basis, will be higher than 40%. So it's all about balancing the total cost base to move in the right direction towards a target of delivering on the 12%. IT cost in fourth quarter, I think we've mentioned throughout the previous quarters this year that we had a slightly lower activity on IT and an expected and increased activity in the fourth quarter, which we have indeed had. More importantly, I think it is to look at the broader base where the slight uptick in IT costs shows that we basically absorbed all of the drop-down costs from the investments made in the previous year. We have also made investments in other area competence related to operative compliance, competence related to data governance and data management. But if we specifically talk about IT and those investments, we don't expect any major upticks, but our focus on making the right investments and improving the productivities, as Alf alluded to.

[Rune Helland, executive]

And a question to Ingjerd from the Thomas Svendsen of Nordea. "The number of staff within personal banking was up somewhat 1% from Q3. Should we expect this number to decline through 2019 as a result of the digitalization of organization? Or should we take a longer view on this effect?"

[Ingjerd Cecilie Hafsteen Spiten, executive]

I think I said that in the presentation as well. As we see -- we see that our new digital solutions and also automated solutions for customer requests is really taking effect. So we will be less people going out of 2019 than it is today.

[Rune Helland, executive]

Very good. We do also have a question from Hans Frederick [ Klaussen ]. He's asking, "now that DNB have reached their capital targets and reached a payout ratio above 50% for the second year in a row, is it time to consider quarterly dividend payments once again?"

[Kjerstin Braathen, executive]

We -- quarterly dividends is something that we could consider, but it's not been an active discussion. I think more importantly, for us, is really to deliver on our dividend policy overall of more than 50% increasing nominal and having the buybacks as a tool to optimize throughout the year. And I think we've shown in the recent years when we've actively used that as a tool that it works to use that as a tool to optimize throughout the year. So probably, most likely scenario is a continuation of annual dividend.

[Rune Helland, executive]

Okay. I think that concludes the Q&A session. We have prepared some lunch for you here in London outside. Riccardo in Milano and [indiscernible] in Oslo I hope you get lunch as well. Thank you so much for spending these few hours with us today, and we wish you all a very happy and prosperous day. Thank you.

[Kjerstin Braathen, executive]

Thank you for coming.