Avanza Bank Holding AB
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Good day, and thank you for standing by. Welcome to the Avanza Bank Interim Report January-March 2023 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Rikard Josefson. Please go ahead.
Okay. Thank you very much, and a warm welcome to everybody listening in today. Summarizing the first quarter of 2023, you can say it was a quarter with turmoil, we saw risk appetite back, we saw interest reinvestments, we saw stock market picking up a little bit. And of course, the quarter was also affected by the banking turmoil that started in the U.S.
During this period, of course, we got a lot of questions, and I think it's paying off, our low-risk balance sheet, our short duration on our liquidity portfolio. And during the times of the crisis in the U.S., we saw everyday net inflows. So we believe that the faith from our customers is absolutely still there.
Going forward, I think it's going to be still a macro environment that will be very much affected by what will happen to interest rates, will inflation keep coming down. And having said that, I must say that the Swedish household has been able to manage the crisis a bit better than I expected, at least from last summer going forward.
Strong this quarter is I think that we had SEK 17 billion in net inflows, which shows that the customers are prioritizing their savings even though you have to spend a lot of money on other things. And also, I think it's a strong sign that the monthly savings of SEK 1.5 billion is still SEK 1.5 billion. I think we peaked last year at SEK 1.6 billion. So it's a marginal effect. So that's clear evidence that people are trying to save. And also it's quite obvious at these times that people who saved during the good years are really more comfortable in the times we are living in.
So the need for savings has actually proven more than ever given the circumstance to do that we are living in right now. We also see that our pension business is developing quite nicely, and we have premiums being paid in every month at a rolling 12-month basis of SEK 345 million. So the net inflow is, in my opinion, a strong indicator that we are on a good track with Avanza.
Sometimes we talk a lot when we talk to the outside world about fund customer and equity customers. So this is a new picture that we brought into the conference call today, which shows that we have almost 700,000 clients invested in both equities and mutual funds. And that is, of course, from a business perspective, good because then we have 2 places where we can manage the customers' money, but it also shows that the customers are diversifying, not going all in, in a few stocks, that lot of people that own a few stocks also of mutual funds. So from a diversification perspective, this is quite good.
And the number of clients invested in both mutual funds and equities are actually growing month by month. And we think that's a very strong thing and good news. We also, during the quarter, brought in 41,000 clients, which is up from the previous quarter quite a lot, and that shows also that the interest for saving is still solid in the Swedish environment.
We actually picked up a few market shares when it comes to number of transactions on Stockholm Stock Exchange. So we have 19.1% of all trades are going through the Avanza platform. We lost a little bit when it comes to turnover, but that's usually because we are not -- we do not do the institutional trading that some of the larger banks are doing. So it's the left side of the slide that's important for me and that we have increased, is actually a good sign that people are appreciating trading stocks at our platform.
During the quarter, we launched 2 actively managed funds in what we call our buy concept, one with ARK Invest and Cathie Wood and that created a lot of emotions because either you are a fan of ARK Invest and Cathie Wood's disruptive strategy or you think she is totally crazy. But we think it's up to the customers to take that decision.
And we also advise our customers to have a 7-year time horizon investing in the fund. And we also advise our customers to have not put all the money in a high-risk fund that this is actually is. But we've been very appreciated by our clients, and we have gathered quite a nice AUM in the fund. We also developed, in collaboration with Circulus, an -- global -- with Coeli, we launched our first Article 9 fund, and I will come back to that a little bit.
But we also develop Savings Targets as a function, and we have had that before. But now you can share Savings Target with friends and families, you actually can online, in real time, save together with your friends. And we can also see that customers who use the Savings Targets tool on the platform are saving more and also are more persistent in saving every month. So that has been also very appreciated by our clients.
For our equity interested clients, we also, during the quarter, launched 1,000 stock analyses with collaboration with Morningstar and that's for the more into-the-market customer has been very, very appreciated to get even more information about what equities to buy or to sell. So that has been a good sign for our more equity trading clients.
Of course, social, environmental and sustainabilities for us as the world as all the companies is very, very important. We have done a lot of things in the last couple of years. And we also, during the quarter, improved our sustainability information on the platform. And as I said before, we launched the first Article 9 fund that's also been appreciated by the client. And our goal is, of course, to be the #1 platform for customers who care about their -- way they're investing their money from a sustainability perspective.
And we, of course, as a company wants to increase the ESG score when it comes to savings as a total, and we will continue to improve the sustainability part of the company, giving our customers more and more information so that they can take their own decisions, how they want to invest their money but also with the perspective of how your money from a sustainability perspective will be used, so to speak.
I think we are very well positioned for the future. As we often talk about these calls, the underlying structural reasons for savings is quite obvious, especially in these days. And the society is more -- it's more about if it's to me, it's up to me. We have a 6.4% market share in Sweden. So the growth opportunities in Sweden are extremely good in my opinion.
And lastly, I would also like to comment that Peter Stromberg, our Head of our Product & Tech Department, left the company and we have hired Anders Karlsson with a great experience from NASDAQ, Handelsbanken, at the latest Klarna, who will lead our Product & Tech team, which is a sure bet for me that our innovation and our development capacity will even increase going forward. And with those words, I would like to turn over to Anna.
Thank you, Rikard, and good morning, everyone. Once again, I'm proud to say that we report our second strongest quarter ever in terms of results. Market conditions improved during the quarter, which led to increased customer activity. And of course, compared to the first quarter last year, increased market rates contributed to higher NII.
Operating income for the quarter consequently improved both compared to Q4 and Q1 last year. Operating expenses increased according to plan by 6% compared to last quarter and 16% compared to last year. The increase from last year is related to the change of the backoffice system and that we capitalize some of those expenses in the first quarter 2022. We are comfortable with our cost guidance with a cost cap of SEK 1,160 million for 2023.
Net profit for the quarter ended up at SEK 501 million, given an operating margin at 67% and the return on equity at 38%. The somewhat lower tax rate refers to a higher share of revenues generated within the pension company. Altogether, this gives an earnings per share of SEK 3.20 for the quarter.
Operating income increased by 2% compared to Q4. Net brokerage income, net currency-related income and fund commissions increased due to increased customer activity and higher average fund capital, while NII and under income decreased.
Since the first of January, we pay interest on deposits. The interest expense related to this was SEK 95 million in the quarter compared to SEK 8 million in Q4. The average interest rate on deposits during the quarter was 0.66%. There are different rates on different accounts and for different customer segments.
Towards the end of February, we also made our savings account available to all customers and the volume has doubled during the quarter, ending up at almost SEK 7 billion. And as of today, we paid SEK 260 million.
Interest income increased mainly as a result of higher return on surplus liquidity, thanks to a higher average [indiscernible] rates. Even though the volume of surplus liquidity decreased, as customers invested more in securities.
Surplus liquidity was an average over SEK 5 billion lower in Q1 compared to Q4. Looking at the mortgage portfolio, the 75 bps policy rate increased from November took effect 1st of February, and the February policy rate tax was postponed to May 1.
Our mortgage is the only one in the market directly linked to the policy rate, meaning it could make it look less competitive if we would raise the rates immediately in this environment, whereas we now have Sweden's cheapest mortgage for our private banking customers.
Regarding margin and NIM, we have seen increased volumes during the quarter. However, these volumes are within the lower interest rate buckets and only marginally increased the income from this product. The average interest rate on internally financed lending was SEK 3.16 this quarter. And as you know, the Riksbank decision will be published later this week and how we will act on that decision is yet to be decided. Brokerage income increased due to higher volumes and number of notes as well as higher gross brokerage income per brokerage-generating turnover. Higher customer activity was also reflected in the increased currency-related income and turnover in foreign securities increased from 11% to 14% of brokerage-generating turnover in the quarter.
The fund capital in the quarter increased, whereas income per SEK of fund capital continued to fall to 28.7 bps from 29.2 bps at year-end. This is a result of an increased share of capital in index funds, which was close to 41% at the end of the quarter.
And as I said before, net inflows in the quarter were strong. This also accounts for the net inflow to funds, which was nearly SEK 7 billion. Other income decreased mainly due to lower activity in our Avanza market's products and in corporate finance as well as lower income from stock lending.
Related to the first quarter, SEK 26 million was refunded to customers for stock loans, which is already withdrawn in our income line.
Looking at costs, operating expenses increased by 6% compared to last quarter, mainly due to higher personnel costs as a result of already communicated salary increases of 4% as of the 1st of January. Marketing expenses, which are seasonally higher at the beginning of the year, also increased. This was also a result of our 2 fund launches in the quarter.
Compared to the first quarter last year, operating expenses increased by 16%, which as said, is related to the change of the backoffice system, where we capitalized expenditure last year as well as higher number of employees.
Referring to costs, we have had a few questions regarding prepaid expenses, and this implies unexpected higher cost in 2023. And therefore, I just want to clarify that these costs are included in our cost guidance, which remains unchanged and we are comfortable that we will keep our costs under the given cap of SEK 1,160 million.
The cost to savings capital ratio increased to 17 basis points due to increased expenses, but also as a result of 3% lower savings capital than a year ago. It is important for us to be able to give our customers a competitive offering, which is why high cost efficiency is a priority. Our long-term target remains a cost to savings capital ratio of maximum 12 bps over time.
And we are, of course, to some extent, concerned that we are above that long-term target, but we are convinced that investing in further growth will take us there. However, as previously communicated, we are, during this year, consolidating the operations and stick to our people plan we assessed last year, meaning we will not expand number of employees in 2023, even though it may fluctuate a bit over the quarters due to natural turnover.
While at the same time, it's important to understand that we will continue to invest in our customer offering and our platform to maintain the high customer satisfaction and continue to grow. Our capitalization is naturally very strong given our low-risk business model. The leverage ratio increased to 5.6% in the quarter, meaning deposits can grow by SEK 27 billion without falling short to the 3.9% requirement and without taking any other measures into account.
The leverage ratio is, in other words, well above regulatory requirements, and we see no need to issue additional Tier 1 capital from a regulatory perspective. On the other hand, from a capital efficiency perspective, this is something we will come back to once market conditions have improved.
To conclude and what has been emphasized in this quarter in relation to the bank turmoil in the U.S., Avanza has a very low-risk balance sheet. This is not something that just happened by chance, but is carefully considered and the strategic choice made many, many years back.
Avanza is self-financed through equity and customer deposits, deposits which are widely spread across a very large number of households and whereof the majority is covered by the government deposit guarantee. Also, surplus liquidity is mainly invested in AAA-rated covered bonds at Riksbank and with Nordic banks.
All of Avanza's assets have high liquidity and the significant share of the assets is held in accounts and is disposable immediately or on the following business day if needed.
Looking closer to the interest-bearing securities, 93% have an interest rate duration of maximum 3 months. The resilience in our business model makes us able to report our second strongest quarterly results ever in this macro environment with a return on investment of 38%. I would also say that the strong net flow seen during this period is proof of our customers' belief in the market and in Avanza.
The development of our customer offering, together with our cost cautiousness and strong results make me confident, Avanza is very well positioned for the future.
And with that, I would like to open up for questions.
Absolutely. Fire away.
[Operator Instructions] And the first question comes from the line of Andreas Hakansson from Danske Bank.
On the deposit side, you are increasing your rates as we see. A few questions there. One is that we saw a decline in deposits as you said, you had money flowing into market-related savings. Could you tell us what was the net versus other banks? Did you also see a stabilization there or did you have outflow inflows from other banks into your deposits, if we start there?
I wouldn't say we had any outflows from the deposit side as we did in the fall where other banks were paying significantly higher interest rates. So I would say that the net inflows was net inflows and the outflows were absolutely on a normal level.
Okay. And if I look on what you're offering, you have your own savings accounted to [ SEK 60 million ] today. And then you have -- you offer a range of external savings accounts?
Yes.
I would assume, and maybe you can confirm that the revenues you get from these external accounts is just a couple of basis points distribution fee so the profitability should be much less than what you get in your own savings account where you can take the deposits in place in the interbank market. So I'm wondering why do you continue to offer these external accounts and why not let [ new ] and adjust of your own savings account?
I would say that it's a good question, but we want to keep that relationship with external savings accounts because we're coming from times with very, very low interest rates where we were actually losing money when we had deposits on the balance sheet because we didn't charge negative interest rates. So we think that's something that might come back in the future, so we want to have that opportunity.
Okay. Then another question just on your client numbers, it seems like your private banking clients are shrinking for bit, was it down 6% in the quarter? Is that -- what is driving that? I mean we understand that people were moving some deposits on it, but have they left entirely? And in that case, what's the reason for that?
They have been downgraded within -- well, to other classes. So...
Okay. So they have not left the bank, it's just that they lost the money.
No. they speculated away from the money so they would not...
No, from time to time, we make a review of the customers and the different premium profits.
And the next question comes from the line of Jacob Hesslevik from SEB.
So another question on interest rates. I mean I can see that on deposits, it's up to 0.7%. Should we expect a linear increase going forward now from the rate hike, meaning that the NII delta more or less is gone?
It is too early to say, as I mentioned, it's all about the competitive environment and how our customers will act. So we will get back to that.
Yes. We will see how we will do because we probably get 50 basis points up on the steering rate on Wednesday, and we have not taken any decision how to act because we do that with customer satisfaction, competitive environment, client demands, et cetera, et cetera, and we will communicate when we have taken that decision.
But they're expected to be net positive at least on the next 50 bps, we should -- was this a top level as good as it's going to get?
I will say that you have to wait for the answer on that question when we communicate how we will act during this interest rates increase.
Okay. On inflows, I mean, in the statistics, you can see that the inflow from private banking is quite moderate at just SEK 2.8 billion during the quarter. What is the view from the private banking clients I mean the outflow has stopped, but it's not very strong numbers directly?
I would say that the private banking clients are putting in money. Usually, we have a few clients that can vary over quarter because sometimes we can have clients who put in a few hundred million and that comes from time to time. So I think that I'm satisfied with we have developed our private banking. And as yourself said, we had outflows of cash, and I think we're seeing some of that cash coming back.
Okay. And is that -- have they communicated anything that's due to your increasing the interest rate for the private banking clients or is it because they want to invest in the markets?
I would say both. I think some of the money is back in putting on our savings account because we pay decent interest rates and that. And of course, private banking clients like all clients have been having a larger risk appetite in investing more in equities and mutual funds during the quarter.
And the next question comes from the line of Patrik Brattelius from ABG SC.
A few questions from my side. I continue on with the NII development. So given the interest rate hike we saw in February, should one believe that, that will have a higher positive effect on earnings compared to the one we saw in November or do you intend to give an equal share to the customer there? How should we think?
I would say that, as I previously said, we will take that decision when we know how the Riksbank will act on Wednesday, if it's going to be 50 basis points, which I think is the consensus of the market. So we are -- that's work in progress, but you will -- we will communicate that when we're taking that decision. That's all I have to say around that.
Okay. Keeping on the subject a little bit more granularly, if we break it down over the month here. So if we look at the NII, was it higher when you entered the Q1 compared to how you ended Q1, given the development of interest rates and deposits during the quarter?
We can see that deposits have gone down. And as we have said, it's because of people have started to reinvest, if that was what you meant.
We started the quarter -- on average, I think our deposits was SEK 5 billion less in Q1 than in Q4. And of course, that affects the NII. But the reason for that is that when you look at the deposit base, you look at the 1st of January and you look at the last of March. And at the end of the quarter, you got a lot of dividends being paid out, which made the deposit rates to pick up a bit. But during the quarter, you had an average of SEK 5 billion less. And of course, that affects the NII negatively on the deposit side.
Yes. But at the same time, the market rates have moved up. So on the -- and I was wondering then if that development trumps the lower deposit base?
I would say that looking at the bond portfolio, for example, it was -- it has gone down almost SEK 4 billion, and that has, of course, an effect on the total NII.
Okay. And the last question would then be if you were able to provide us with a detailed NII bridge sequentially quarter-by-quarter where you break down how much the deposits and the NII is impacted also by lending and liquidity portfolio, please?
More detail than we have done now, you mean?
Yes. Yes. Perhaps a table or a chart that would be very helpful. And is that something you can comment on where you see the largest movement during the quarter?
I would say that how we have presented it in this quarter, we are a little bit more transparent than we have been. And we think if too much detail is given into all the different customer and account classes. So we have decided to that this transparency that we have disclosed now is what we will do further on as well, I would say. But to get an idea when it comes to the different customer groups and the -- how much deposits are within each group, you can look at the savings -- overall savings capital within these -- well, within these customer groups and get at least quite a good idea.
I understand. And my last question is then leaving this topic and going over to cost. Last year, it grew by 20% and now you reiterate your guidance from Q4 report of approximately 12.5% yearly cost growth despite the strong cost pressure within the system. Where do you find these cost efficiencies that you didn't find last year given that the world has now changed with higher inflation pressure, apart from the hiring less new staff?
Well, the cost increase this year is that we didn't fulfill our people plan in 2022. If we manage to do that, we will have higher expenses for staff, and I would say then you have the inflation and the guidance of 4% wage increase, which is -- I would not be surprised if it ends up a little bit over that. And then, of course, it's -- IT licenses has gone up, some of our U.S. suppliers have taken the chance given the inflation to increase prices, especially in IT licenses and some IT costs.
So I would say that we are working with our efficiency quite a lot, and we have made a few big launches in this quarter, which also, of course, behind that is a lot of work. So given that, I would say that our cost is very well under control, and we stick to our guidance.
And the next question comes from the line of Nicolas McBeath from DNB.
So I'll try again on the NII. So would it be possible to quantify where your NII is at this point or by the end of Q1 at an annual basis taking into account full repricing of your securities at the current interest rate level and also taking into account the flagged increases to your mortgage rates from May? That's my first question, please.
I would say that -- you mean the policy increase in February have not affected, obviously, the quarter fully.
Exactly. So could you say where the current NII would be on an annual basis taking into account full repricing of your liquidity portfolio and also the changes to the mortgage rates?
No, we cannot comment on that. We give the interest rate sensitivity.
Okay. Then could you say something about how much deposits have moved into your savings account? You mentioned in the report that you see some -- yes, some movements of your -- within the -- from transaction deposits to savings deposits by the end of the quarter. Could you quantify how much that is?
Yes, the volume has almost doubled during the quarter, ending up at almost SEK 7 billion and was SEK 3.5 billion at year-end.
Okay. And then in hindsight, do you think -- how do you think about your decision to increase deposit rates broadly in January following the rates hike in November last year? Given that it seems like you've taken a different approach after the February rates hike by the Riksbank, is your assessment now that increasing deposit rates so broadly on most accounts is not in the best interest for Avanza shareholders?
I think it's in the best in terms of Avanza clients and I think that's the long-term target. And I think that we're getting a lot of feedback from our clients, which are very appreciated about the interest rates increases we have seen. So that's always something you have to balance between 2 things and that's something we do every time. We change the interest rates as we will do when we get the decision this Wednesday. But in hindsight, I think we took the right decision for our clients.
But given that you didn't do similar deposit rate increases after the February rates hike, I mean, something must have changed in your approach to how to react to the rate hikes or...
It's a lot to do with competitors -- how the competitive environment looks like. If you look, for example, right now, if you deposit your cash on Landshypotek, they pay, I think, [ SEK 2.9 ]. So there is a competitive environment now when it comes to deposit accounts, which the customers clearly have fund. You can also see on another perspective, Nicolas, also because talking to people within the industry, you see also a lot of amortization of mortgage loans at the moment. So the consumers are saving on accounts to buffer up and they're amortizing mortgage loans.
Okay. And then a question on cost. As you mentioned just recently, your cost to savings ratio is above the target, actually quite well above the target. And yes, taking into account your cost guidance now, it doesn't seem like it's going to decline significantly in the foreseeable future, at least not this year. So could you comment on how you see the cost to savings coming down towards the target? What's -- do you have any concrete plan scenario for how to get there? Or should we think that the target is not really that high of a priority in the foreseeable future and that you'd rather prioritize to invest and try to improve the platform?
I would say that to invest and improve the platform is, of course, very, very high up on the agenda for Avanza, but we are concerned with the cost targets, and we don't like that number of 17 basis points. But of course, we also have a belief that up to 2025, we need a few good years in the soft market and we have not seen that in '22 or not that much in '23. So of course, there is a limit to this down the road, but I don't know exactly when that is.
So basically hoping that we're going to get very strong stock market increases to drive up the volumes on the platform rather than having some kind of internal measures to address the cost base, so how we should think about it?
In the short-term, we totally are betting that the markets will come back, maybe not in '23, but at least in '24, and that will increase the savings capital and the relatively 17 basis points will start going down again. But of course, we are more on the side investing in growing the savings capital, growing number of clients, keep the customer satisfaction high. .
But at some point in time, of course, if the market will go like this for 5, 6, 7 years, we have to take some type of measurements around the cost situation. But we have -- I think that this year, we are actually -- when we budgeted our cost for 2023, the cost increase was 9%, but then we came in, in '22, much lower than we had guided for on the cost side. So that meant that the cost increase became 12% from a percentage perspective. But I think the cost target of -- a bit over SEK 1.1 billion, we are very comfortable that we're going to keep that cost target.
Okay. And then final question on product development. So I mean I appreciate you continue to introduce new funds like the ARK fund in the quarter, but could you say something about the direction of your product development vision for the next couple of years? So should we expect more of the same like we've seen in the past couple of years, more like evolution, adding more to the current products, improving functionality to the interface? Or do you still think it's possible to create revolution like Avanza, I guess, has done in the -- yes, in the past, like adding products which are more kind of disrupting nature adding new type of mortgages, new type of mutual funds? Or how do you think about your vision for the next couple of years for new products?
I think if we had any revolutionary things in our back pocket, I wouldn't tell you, Nicolas, you know that. But I think that from just a broad answer to your question is that we are -- it's more evolution than revolution, but also that I think that we have -- what we have done now, which has been appreciated by clients, is that, for example, the equity analysis from Morningstar, we have invested in more information, call it, decision-making tools, much better information about mutual funds, which funds are increasing, holdings [indiscernible] equity and are decreasing in another.
I think that type of information and decision-making tools is going to increase going forward, especially also when it comes to the sustainability area where our customer wants more and more information. So I think that that's an area that we have to improve and that we will improve.
And the next question comes from the line of Rickard Strand from Nordea.
A lot of questions on NII. So I thought I'll break in with some on brokerage income instead. Looking at the brokerage turnover per day in relation to brokerage AUM, it looks like the margin there is up from 8.4 bps in Q4 to 9.0 bps in Q1. I was just wondering if you could give some more color to the main drivers of this improvement in brokerage margin and whether you see this as a sustainable or temporary in the quarter?
I would say that that's always related to the risk appetite because what happens in, so to speak, boring or bad markets is that professional clients, the private banking clients, the group guidance stands for a larger share of trading. When that number picks up, like it did in Q1, its customers who have higher brokerage classes that pays a bit more for the trade and that relatively speaking, become a larger part.
So it's very difficult to have an opinion about the future because it's, I would say, 100% correlation with the stock market and the risk appetite by the broad customer groups, which are a bit more in and out of the market since the private banking and pro traders, they constantly trade and they pay less.
And since we've seen quite a lot of market turbulence during the quarter, could you elaborate a bit on what it looked like in the beginning of the quarter versus the end, which could be an indication of the way forward?
I think it's been a volatile quarter from -- you had the banking crisis and the beginning of the year started very strongly, so a lot of people going into the market. And I would say just a reflection of it is that it's -- normally, you can say that the markets are good. You know that brokerage every day is on a high level or a low level.
But now we have seen variations during a week from one day, a lot of trading; next day, maybe 20%, 30% down; and then the third day, up again. So the volatility is also shown in the brokerage income when you look at on a daily basis.
And then on the cross-border trading, which was up to 14% in Q1 versus 11% in Q4. Was this driven by any particular events or more sort of an indication of improved general risk appetite and sentiment among your clients?
I think you gave the answer yourself. I think it's just more trading, more risk appetite. And I think also there are always stocks in the U.S. from time to time that are traded a lot like Tesla, for example.
The next question comes from the line of Maria Semikhatova from Citi.
A couple of questions. Let me first start saying that we actually appreciate your additional disclosure on cost of deposits, just analysts always want more. I know if you can comment on cost of deposits, if you take into account changes as of end of the quarter versus the 66 basis points that you had in first quarter?
Did you say compared to last quarter because we paid -- the cost for deposits were SEK 95 million for -- during Q1, and we started to pay interest on deposits on the 1st of January and then we've done [indiscernible] to the savings account during the quarter?
Yes, because a lot of changes came from March. If you could comment, let's say, what was the cost of deposits in March versus the full quarter? So that would give us a starting point before the next rate hike, and then we make our own assumptions.
We haven't disclosed that, but when you can -- you can think like this, we introduced the savings account from the mid or end of February, and then we have seen an increased part of that. So of course, looking at the savings account, we have seen increased costs during the end of the quarter than in the beginning of the quarter, of course, and taking into account a higher rates on that account type.
Okay. Well, good. And then maybe on the volumes, customer deposits came down. Now they're around 13% of savings capital. I think the most recent historical minimum was around 11%. You also mentioned that there were some dividend payments coming into deposits towards the end of the quarter. Do you get a sense of, let's say, the amount of deposits, which are currently kind of waiting to be invested? And what do you think is kind of a reasonable level of share of deposits as a percent of savings capital in the current rate environment?
I think that's a very good question. But I think that normally over the last couple of years, most of our deposits have been money on the sidelines, so to speak, waiting to be invested. How customers will act now when you can actually get interest rates on accounts, I think it's too early days to see because we also saw during the quarter, a slight increase in money market funds that's doing a comeback in the market right now.
So it's a good question, but I don't dare to have an opinion about it because it's a new landscape for -- especially for people who went into the market, let's say, the last 10 years, that's a new environment with interest rates. So we as follow, we can see if we're going to have more cash on a long-term basis from customers or not. But primarily, most of our clients are interested in investing their money at some point in time.
Understood. And I would appreciate if you could maybe comment, you mentioned that, of course, your pass-through for the following hikes depends on competition, and you mentioned some other players offering higher rates on the savings account.
But if we talk about the scale accounts for the majority of your customer base for base clients, I believe that one of the largest banks is already offering 1.5% versus your 25 basis points for the base customer. Is your position with this product is so strong kind of given your unrivaled market position, you don't look at, let's say, large players, or you seeing signs of increasing competition for this product as well?
No, we're not seeing any increased competition due to that some players are paying higher interest rates and tax wrappers because it's still not quite so smart to have long-term cash in the tax wrappers because that should be invested. And if you need that money, cash, for the long-term, that's the reason solely we have our savings account where you can get from today 2.6% interest rate.
So if you're going to keep cash for a long period of time, don't do it in a tax wrapper but don't take money in and out of tax wrappers because then you have a negative tax effect. But if you sell stocks for, let's say, SEK 100,000, and say, "I'm going to keep this SEK 100,000 for the foreseeable future," then it's a good idea to take it out and put it on the savings account. So I wouldn't say that the competition in the tax wrappers is something that's notable from a client's perspective.
That's very clear. And just maybe a final question on net inflows. We saw quite strong in the first quarter. But contribution from new customers was quite low, 13% of total. And if I calculate it per customer, it's, let's say, lower than in recent quarters. Just wanted to check, if you think this is a reflection of, let's say, increased expenses for Swedish savers? Or there is a slightly different profile of customers that you acquired during the quarter?
No, I think the profile is the same. It's still young customers. And then, of course, if you look at customers from -- and that's why I think the SEK 17 billion is a strong number because I think, of course, the households are struggling a bit. And usually, when the market starts picking up a bit, we always see existing clients putting in more money on the platform. We have seen that over the years as a general trend.
And I think to have an idea about this for 1 quarter, it's far too early days to take any conclusions on that. I think it's important that we've got 41,000 new clients and people will start saving over time. And together with SEK 17 billion in net inflows, I think these are 2 strong numbers for the quarter given the macro environment.
And the next question comes from the line of Ermin Keric from Carnegie.
The first one would just be on the savings accounts you have now. The capital that's come into there, could you say from which account it's coming from? Is that from other sales accounts, is it from savings plus account or is it from the tax wrappers or are there more general kind of investment accounts?
I think from all types of accounts. I think they come both from savings account plus partners. I would say it's from the -- from tax wrappers, there are also money coming in, I think, there's people who think they have a long-term let's say, are you going to keep cash for a long period of time because I don't believe the market. And it's -- so it's just from all the places that you mentioned, it's coming in.
Great. And then you just mentioned it briefly, but could you tell us anything about the demand for money market funds?
No, I've been wrong in this question because I thought that the money market funds would be growing in popularity quite a lot given the interest rate environment. But I think we increased from like SEK 2.5 billion to SEK 4 billion in money market funds or something like that during the quarter?
Yes, [indiscernible] to SEK 5 billion, I think so.
Yes. So it's not very large genre. But I had been expecting more of that, actually. But we will see what the future holds around that. But it's an interesting observation to see what our customers will do. I thought that it would grow more in the first quarter than it did. But I think that customers are still a bit skeptical to money markets fund in the sense what happened in March 2020, where some of the high-yield funds had to close for taking out money and I think that is a memory that some customer has.
Great. And then the last question would be on the customer intake being so strong in Q1. Have you seen that you're able to sort of get into any new pocket? Or is it just a strong equity markets at the start of the year that caused that quite strong inflow compared to the previous quarter?
No, I would say it's a normal customer they look the same, but I would say and hopeful I'm right in this is that the crisis that we are in, make it harder for people to save, but more obvious is that you need to save. So I think the households are really understanding how difficult it is to go into an inflation economy like we have right now with no savings. And I mean I saw a survey that like 50% of the population can't handle an extra expense of SEK 13,000.
And I think that people don't want to be in that bracket, so to speak. So I think that savings is extremely important at these times. And we can -- I think a lot of the customers we added during the quarter are probably people who have taken the decision to start saving.
And the next question comes from the line of Alex Medhurst from Barclays.
Just one very quick follow-up on NII, if that's okay. Can you give us the average interest rate on savings product for Q1 this year and also Q4 last year, please?
It was the 0.66% this quarter.
Sorry, on the savings product, specifically the 2.6% headline rate at the moment [indiscernible] the average this quarter and the previous quarter?
Yes. We have done a few increases this quarter and we started -- we -- I don't have the average, but we started the year with 1.5% and then we increased it on 10 February on to 2% And then again, well, twice or to 1.1% and 1.3%. And then we are at 1.6% today. We increased it today. You mean -- 2.6%.
And the next question comes from the line of Enrico Bolzoni from JPMorgan.
So my first question is, in the past, you mentioned the full year results that you were possibly considering also an expansion to move to other countries or other geographies. Can you give some update there? How do you see the opportunity? I think you mentioned that M&A was a potential way of doing so?
That's my first question. And then the second question was, again, related to cost. I appreciate your guidance and you reiterated it. But what in your mind should be, let's say, the underlying organic cost growth for a business of this kind or cost reduction. If, for example, you have to assume the saving capital had to remain flat. In other terms, because of the investment you've done, are you actually reducing some cost line that is not visible to us or actually simply everything continues to go up because of inflation or because of other variables?
On the first question, what I have said that we are open for international expansions and probably do that in M&A activity. But that is basically, as I said before, if opportunity knocks on the door. And at the moment, there are new opportunities knocking at the door. So that's not -- our main strategy is still growing the company within Sweden. When it comes to cost, I think it's very difficult to have an understanding about the future because we -- what will happen to the inflation and so forth?
And then as you know, most of our costs, I think, over 70% is staff-related. This year, we're not increasing number of staff, we are increasing staff cost due to wage inflation and that we were not as many people as we were supposed to be last year, we will see if we managed to hire those people this year since our people plan are flat.
But to -- and then our cost -- since our costs are also much related to staff, it's also about ambitions what we want to do, but not increasing of this year which is, of course, long-term, good for our cost because we have to work with our internal efficiency a bit more, we have to work with straight to processing, we have to make our backoffice more efficient and so forth, but it's very hard at these times to have a long-term view of the cost increase should be [ 24%, 25%, 26% ] for a company like Avanza. We will come back to that as we always do when we release the Q4 numbers, and then we will talk about how we will guide for cost for 2024, but of course, has to do with our ambition, macro environment, what we think about opportunities and so forth. But I cannot give you a better answer than that today.
And the next question comes from the line of Jacob Kruse from Autonomous. Dear speakers, please accept my apologies, it looks like Jacob Kruse line is not answering to us. There are no further questions at this time, and I would like now to hand the conference over to Rikard Josefson for any closing remarks.
Okay. Thank you, as always, for very interesting questions, and I wish you all a very good week. Thank you.
That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.