JYSKY (JYSKY) Q3 2026 Earnings Report, Transcript and Summary

Hi, everyone. Thank you for joining us on Jyske Bank's conference call for the financial results for the third quarter of 2026. I am Simon Hagbart from Investor Relations. With me, I have Jyske Bank's CEO, Lars Morch; and CFO, Birger Nielsen. Lars and Birger will walk you through our prepared remarks. Afterwards, we will open up for questions. I will now hand over to Lars.

Thank you, Simon. I'll start with some highlights, and then Birger will take you through some of the details. First of all, our earnings per share, which is important for Jyske Bank, is up 14% year-on-year, exclusive value adjustments. This is supported by both internal and external factors, most notably a good business momentum and higher interest rates. Earlier, we have said that we expected to be able to close the deal with Formuepleje by the 2nd of November, and I'm happy to say that this is still our plan. Thirdly, we have seen a good and strong acceleration in mortgage loans during the last year. And during the last quarter, we are up 9% compared to third quarter last year. Also internally, we have seen again, and we'll get back to this, a further improvement of the customer satisfaction across segments in Jyske Bank.

Thank you, Lars. Looking at the performance in Q3 at the left-hand side, you can see a decent return, EPS return of DKK 21 in Q3, slightly below Q3 last year, which had a very high trading income in that quarter. In the middle section, you can see at the bottom that we are on target towards our '28 goals with a return on tangible equity of 11.1% and a cost/income ratio of 49%. Looking at the top end of the section, net interest income was up 4% higher volumes and higher margins, especially on deposits were the drivers behind the 4% growth. Net fee and commission income is up 11% over the quarter, higher AUM, higher activity, a larger number of transactions and also especially refinancing of mortgages was high here in the third quarter. Core expenses up 1% over the quarter, still a focus point for us to keep strong momentum on cost management. On the right-hand side, you can see that the AUM grew 12% year-over-year and 2% on the quarter. Continued growth due to financial markets, which were positive and a net inflow of new customers. On the mortgage side, in the second -- third quarter, 2% up Q-over-Q, primarily driven by private mortgages -- and on the lending side, for bank lending, it was up 1%, leasing up 1% as well. And if we exclude the transfer of mortgages to the balance sheet of Jyske Realkredit, we see an uplift of bank lending of 3% in the quarter. Deposits were flat after several quarters of a very strong growth. Going into the end of '26, we've upgraded our guidance here on the 12th of October, and now we guide for DKK 78 to DKK 87, comparably DKK 4.7 billion to DKK 5.2 billion net profit.

Thanks a lot, Birger. And as I said before, we still expect to close the deal by the 2nd of November. The acquisition is in line with our focus on private wealth management and our aim to grow AUM. This is one of the largest independent wealth managers in Denmark. It's a capital-light business model, and it further strengthened our development in Aarhus and Copenhagen, which are the 2 largest cities in Denmark. We already have growth in those areas and within this segment, but it will further strengthen our position. We also see a potential to deepen banking relationships with the investors of Formuepleje today. We will keep you updated on the strategy on Formuepleje going forward. But as we have already said, we expect this to be EPS positive from '28. And in due course, we will inform you more about the strategy here.

Looking at the forward rates, as you can see, during the course of Q3 this year, forward rates have increased by 0.8 percentage points after the 2 rate hikes in June and September and the market also expects a possible hike here in December and possibly also further hikes during the course of '27. Looking at our customers, so far, they have fully risk-wise managed the higher funding costs, which is certainly very positive. The pass-through rate, looking at the deposit margin, has been relatively limited here after the June and September rate hikes, i.e., we see higher margins on deposits, as you can see on the graph. And going forward, it, of course, very much depends on market conditions, but we expect higher pass-through rates in accordance with what we saw back in '23, where at a start was very high market discipline. But later on, of course, there was no expected challenge as rates went higher. And the sensitivity is more or less unchanged, DKK 700 million year 1 with a 100 basis point shift and DKK 900 million from year 2 onwards due to the delayed higher return on our liquidity portfolio. Looking at the top line, our net interest income, we saw an uplift of 4% Q-o-Q. And we started out in Q1 with the lowest level as expected. And since then, we've grown steadily in Q2 and now even more in Q3. And of course, it's a combination of the full effect of the June hike and higher volumes, as I referred to earlier on. The September hikes and potential further hikes will add, of course, to NII in Q4 and going into '27. And it also is dependent naturally upon the volume development in the group. When we look at the fee and commission income line, we've actually grown 12% year-over-year in Q3. And if we take the longer horizon and look at it from 2020 onwards, we've seen an annual growth of 8%, and that also applies after the inclusion of Handelsbanken back in '22. The specifics for Q3 relates to AUM and custody fees up 21% due to higher AUM, as I said before, positive financial markets and net inflow of new customers, but also a much higher mortgage refinancing in Q3, a slight shift in the seasonality between Q3 and Q4. And finally, we've seen fee expenses going up 9% year-over-year, partly due to issuance of bonds, but also positively speaking, due to higher business volumes and business activity in the quarter.

Thanks a lot, Birger. Looking at customer satisfaction, which is one of our areas that we focus on in our strategy, we've seen a positive development since we announced the strategy, and we continue to see a positive development here. Looking at the Net Promoter Score, we see the positive development across personal banking, private banking and business and corporate banking. This is part of the reason why we have turned a negative customer development into a very strong and net positive customer development on personal clients. And it's also part of the reason why customers want to do more business with Jyske Bank. And turning to more business, and personal mortgage loans, we have seen over the quarters a turnaround here from being in negative territory to being in a very positive territory and with even stronger growth rates here again in Q3. We are now up 9% year-on-year quarter 3 to quarter 3 last year.

Yes. And then finally, looking at the capital position of the group, CET1 is 15.7% in Q3, stable from Q2. And if we look at the buildup of CET1 in Q3, it relates to 0.4 percentage points due to retained earnings, of which the 84% are reserved for dividends and buybacks. And then looking at the upcoming regulation and especially the output floor when we talk about Basel IV fully phased in, you can see that at the outset now we have DKK 27 billion in a buffer from a REA perspective, reflecting relatively conservative IRB risk weights here in Q3, and we can further improve our risk weights before output floor will be a binding constraint when it's fully implemented. When it comes to model implementation, we implemented our new corporate IRB model back in Q4 of last year. And we, of course, have an ongoing constructive and very positive dialogue with the FSA regarding the last models that need to be updated.

Yes. Thank you, Birger. Thank you, Lars. We will now open up for questions. [Operator Instructions] And the first question in line comes from Martin Birk from SEB.

A couple of questions on NII from my side. Well, I guess the sunshine story has been deposit pricing. What kind of beta are you currently seeing on deposits? And what should we expect for the coming 50 bps in terms of deposit pricing? That will be my first question. And then second question, could you please also help us with the NII walk into Q4? I suspect there's going to be some seasonality in that number. And also on NII going out a little bit longer, you still have a consensus NII that is implying a DKK 500 million, DKK 600 million pickup between now and 2028. What do you think about that consensus number?

Yes. So firstly, on deposit betas, they are clearly below what we normally assume in our interest rate sensitivity as of yet. However, it's -- at some point, I assume that we will see changes to some of the deposit products that haven't repriced yet. So I would still assume that we -- in the coming quarters overall, should see something close to our overall interest rate sensitivity over the coming quarters and years. Secondly, on Q4 versus Q3, we saw a quite healthy development here in Q3 Q-on-Q with 4% growth on NII. I wouldn't expect that to repeat fully in Q4, given that we only see or we have a large portion of bonds with semiannual interest rate resetting. So I would expect a slightly lower growth in -- or somewhat lower growth in Q4 and then continued growth in Q1. But of course, that depends on the rate development. If short-term interest rates start flattening out, that will also have an impact on the growth rate. And lastly, of course, volumes will also have an impact on the trajectory. On 2028 versus 2026, we -- I mean, if you do the math according to our interest rate sensitivity based on forward rates, of course, we would be significantly higher. Also, we are in a good development in terms of volumes, which also should help. So yes. I agree that hopefully, we will be able to show a positive NII development in 2027, especially but also in 2028. So overall, we should see significant NII growth from 2026 to 2028.

All right. Very clear. And then maybe just a final question. I guess this is for you, Lars, and this is in order to keep a tradition at bay here. You reversed DKK 50 million, you still book roughly DKK 120 million in your post-model adjustments. You're now at 4x normalized cost of risk. Your Stage 3 loans are at record lows. Could you please explain to me why?

Yes. Thanks a lot, Martin. We are, in general, happy about the book and where we are. So basically, nothing has changed on that. There are specifics every quarter that we need to take into account. And you would see that line go up and down and hopefully moves down during quarters in the future. So basically, as I've said before, we are around 1.9, which we've been for quite some time. It is not given by nature that, that cannot move from here. As of now, as you allude to and I agree to, we are in a very solid position here. And obviously, at the current moment is solid and does not need to go higher.

Lars, what does it take for you to Birger to reverse DKK 250 million or DKK 250 million or DKK 500 million of that buffer, and then tell Simon to write that profit upgrade?

So this number comes not from Birger, but it comes from the organization, which has a rigorous process of going through a potential risk to the credit book. And there are several iterations on a process like this. But there are some of the risks here that we could hope improves. And then we will obviously take the number down here. For instance, agriculture could -- when we get more information, could move in the right direction, and then we'll obviously revert some of the money.

We continue our discussions on that.

Thank you, Martin. Next question in line comes from Alexander Vilstrup-Jørgensen from DNB Carnegie. Alexander Vilstrup-Jørgensen: Maybe on your IRB models. So given the recent announcements from some other Nordic banks, do you expect any similar issues with your own IRB models?

As I said, we -- at the outset, we are actually relatively conservative when it comes to the risk weights compared to peers in the Nordics. And as also alluded to, we have actually a positive REA buffer of DKK 27 billion that can be -- we can take advantage from going forward if we are able to manage the modeling properly in the next 1 or 2 or 3 years. We are very certain and very -- see a very constructive dialogue with the FSA. And as I said, the latest model was implemented in Q4 of last year, and I think we can stay on that track going forward. Alexander Vilstrup-Jørgensen: Okay. Maybe on competition in the sector. So how do you see the competition in the sector overall, both on the retail and corporate side? And should we expect any pressure on lending margins from here? Or would you see pricing discipline improving?

Yes, it's a very good question. And obviously, as it leads into the future, it's difficult to be 100% certain what will happen. But what I can say is that we've said earlier that we felt 4, 5 quarters back in time, the competition to be much harder on both price and on credit standards, most probably within commercial property. I think what we've seen recently is a more normalized pattern. So I'm actually a little bit positive towards the development here. I think what we are seeing is things that from our perspective, to a large extent, make sense, both from a profitability perspective and a credit risk perspective. So cautiously optimistic as to this is getting into a situation where it is just, so to say, normal hard-fought competition that seems rational. Alexander Vilstrup-Jørgensen: Okay. Maybe on bank lending, I can see that it grew some 1.2% in the quarter. So would you be comfortable seeing bank lending grow at around the same level in the coming quarters? Or should it be maybe even higher?

I think when you look at bank lending in Jyske Bank, you always need to take into account that we see a movement towards mortgage loans, which will, for a start, basically take the number or the development into negative territory. But what we are seeing is a better and better pipeline on business and corporate clients. So I'm actually also cautiously optimistic here of a fairly good development during the next quarters. Alexander Vilstrup-Jørgensen: Okay. Maybe just one last question on your 2028 targets. So they are based on a steady-state policy rate of 1.75%. Now we're at a high level and we're looking into further rate hikes. Shouldn't this speak for revised targets?

You're correct that we are -- in the autumn of '24 when we launched the strategy, expected the rates to be different from the level you see at present and the uptick in rates were not predicted from our side 2 years ago. And I think we also have alluded to this before in the dialogue with you in the market that in due course, of course, we reconsider the financial targets and also the strategy in general.

Next question in line comes from Feyi Awofala from PGIM.

Kind of my first question has been answered already on IRB. So thanks for clarifying that. Just next question, in terms of how you see fee income evolving over the next coming quarters, especially with rate hikes maybe driving a bit of mortgage -- remortgage activity, that obviously feeds into the fee income line. How can we expect that to evolve? And what kind of assumptions do you have at higher rates for that activity?

For now, we haven't assumed that this will spark a remortgaging wave or anything like that, similar to what we've seen in 2022 to a minor extent and especially 2019. Currently, we are still within what we have seen in terms of rate levels, what we have seen in recent years, and we're not seeing signs of a pickup in remortgaging activity. Overall, we see activity levels at somewhat normal. Currently, we are not seeing high activity levels, but we are not seeing low activity levels as we did in 2024. So I would assume 2026 could be a good baseline looking into 2027. Of course, adding the fact that we have seen a positive volume development, especially on the AUM side, which will, of course, have a positive spillover effect on next year.

And just quite interesting, what makes you so confident that this volume baseline will continue? I kind of understand that you're saying it's going to continue, but why? Just that kind of demand pulls in at higher rates.

Well, that's a very good question. I think what we've seen in the former quarters is that we've been able to attract new customers that add to the fee line and transaction in general. And secondly, also that we've seen in the Danish market a relatively decent price performance for property, both private individual properties as well as corporate property. So in general, if prices are steady or slightly upward ticking, that implies a decent turnover and return on that line for us. And that's what we've been seeing for several years now. So I think overall, we are relatively optimistic when it comes to the general sentiment in the Danish market activity in the Danish market. And if you look at the macro picture, I think also it's fair to say that the outlook and the decent -- the latest development has been -- has shown a decent growth. So overall, we are still rather positive when it comes to the economy in Denmark.

Yes. And then lastly, maybe we should mention, but I'm sure you are aware of this, but the Formuepleje will hopefully close soon. And then, of course, that will have a significant positive impact on our fee income development.

Next question in line comes from Anders Hornbak from Danske Bank.

Two questions from my side, please. I understand that mortgage lending on nominal annual growth if we take into account the increased interest rates, that is growing in line with the market. But it seems like on bank lending, you lost market share and you have a very popular mortgage -- flexible mortgage product. Could you perhaps elaborate a little bit about what has changed? What has improved your competitive position versus in the past year? And the second question goes on the IRB framework. When can we expect you to fully live up to EBA guidelines and the model is cleared?

Yes. I think, Anders, thanks a lot. Good questions. I think it's basically 2 different stories here. The one on the mortgages where our view is that we -- when it comes to personal clients, are winning market share here, and we are net winning customers in personal banking. And if we look across the lending that we do out of Personal Banking, it certainly also turned around from a couple of years ago where we were losing clients and volume. So here, we are growing now and I think with a strong momentum. What has been, and I've seen you've also alluded to that recently, where we have not been winning market share is when it comes to the larger SME clients where basically, we've kept our customers and is in good shape here and losing no good clients, winning some. But we have not been as hard in the competition on new commercial property, for instance, as some of our competitors. And that is basically what moves volume in this segment short term. We were taken a little bit by surprise by how hard that was fought in terms of prices and to some extent, also credit willingness. As I said in one of the previous answers here, we think that is being somewhat normalized at the moment. And we think we will fare better also in that segment going forward. Then I think underlying, you should see that we have a different movement from the other banks where some of the other banks have a movement from mortgage product to bank loans. We have the other movement here. So generally, I would look at lending combined when it comes to us and comparing to the market. So basically combining the mortgage, or in Danish, and the bank loans, and compared to market development from here.

And when it comes to the second question, regarding the IRB models and the dialogue with the FSA and EBA guidelines, you're quite right that we are not fully compliant with the EBA guidelines today. And we also have a risk density that's relatively high compared to peers. We have presented, well, naturally a model project for the FSA and we are fully transparent with them. We have an ongoing dialogue, and we apply and implement models on a sequential basis. And we've been doing that, as I said, latest, we implemented last year a new corporate model. And we will finalize within the next very few years, the full project of being EBA compliant.

Do you see any risk that there could be last-minute cancellation of approval? Or are we talking about smaller adjustments?

Well, of course, the new model is a cumbersome task that every bank knows that. So of course, there are risks related to an application with the FSA and a dialogue with them, but I think we are on a good footing and in a constructive dialogue as far as we can see.

Thank you, Anders. Feyi, it seems as if your hand is raised. Do you have another question?

Yes. Just kind of one more question that less -- being slightly less active in new CRE development and lending towards that. Is that intentional? Or is that something that has just naturally happened and maybe you're just not being as competitive in other areas? This is a conscious pullback?

It has been a conscious decision from our side. We had in our strategy that we basically had the composition of the mortgage book that we would like to see, and we would like not to see a larger share that is commercial real estate related. This means that what we have been taking care of as first priority is to make sure that we are keeping good clients, and we are focusing on the long-term relationships in that area. And this has also meant that for new clients, we've not been fighting as hard as some of our competitors in that segment. Our view has been, and we might be wrong, that some of the pricing and some of the credit standards have been outside normal competition or normal standards and some of them is not sustainable. So we have not had the same hunger after new CRE lending, stand-alone lending. And we also wanted to make sure that we're also giving the good price and credit standards to the current clients here. And we thought it wouldn't make sense, and it would be ROE-wise negative for us to fight harder for new volumes in that space.

It seems as if there are no further questions in line. Thank you for participating.