Aktia published its earnings report for the third quarter today, and I have the company's CEO, Anssi Huhta, here with me for an interview. Welcome! Thank you. Let's get started. Thoughts on the third quarter. What would you highlight from it?

Well, perhaps starting with what we are really pleased with. That is, of course, our total assets under management, 18.2 billion. 124 million in net flows over about three quarters into private banking. I could use the term myself here already that there is a clear turnaround in that activity. This is supported by many components, NPS scores, and similar metrics. And then, of course, thinking about the life insurance company's unit-linked products. Them too. Went well. Customer satisfaction is at a very high level. In fact, employee satisfaction wasn't published just now, but employee satisfaction rose even further. So the team is truly committed, we are at a new record level again, and that is reflected in customer satisfaction, and from there it shows in our customer activities at the moment, that we are heading in the right direction, and there were a lot of positive foundational drivers.

And then, of course, many looked at the net interest income and its change, and there were timing components involved. Between Q2 and Q3 in terms of how it was distributed, meaning that in the long run, rising interest rates are a very good thing for Aktia and a group like ours. And the life insurance company's earnings made a somewhat similar movement as in Q1 due to the rapid interest rate movement, and that has a negative impact. But we are not worried about that, as it bounced back in Q2 and moved in a negative direction again. In Q3, let's see where it goes in Q4, and it is always the situation on a single day's cut-off point that determines it, and we remain confident about that.

You mentioned that there were these timing factors in the net interest income now in Q3. Why did it decrease? Could you elaborate on those a bit more?

Not really. There were. Perhaps one could look at it the other way around, that in Q2 there were sort of timing components that boosted Q2, and so on, which meant that it was weaker because of that—individual hedging portfolios that affected it. Then their timing essentially affected what Q3 looked like, but over time towards Q4 and beyond, rising interest rates are good for Aktia.

Yes, interest rates have indeed risen quite a lot. Now the 12-month Euribor is at around 3.5 roughly. So do you see that this is still a good level when we start considering the growth outlook for the loan portfolio? Naturally, this has impacts on consumers, it has impacts on companies and their willingness to borrow, should interest rates rise too high for you as well, for example. Third-quarter corporate sales were a bit softer than in previous quarters. So what do you see, are we still at an interest rate level that nevertheless enables economic growth to pick up?

Well of course, it has an impact, that goes without saying. And particularly in the retail customer business, and of course on the housing market. I believe it has quite a significant meaning. Of course, there are many other factors affecting consumer confidence components than just the interest rate, but it certainly has a slowing effect. Particularly on housing transactions, and regarding the corporate bank, we were affected by a few individual large loans, meaning that the business we predominantly do and where we want to focus—that is, the SME sector and specific product areas and portfolios within it—developed very well. I am not worried about that or our corporate bank's ability to generate growth. What I am worried about is, of course, the Finnish housing market situation. If I look at September compared to September of last year, I believe the number of housing transactions fell by 17 %. There is no very strong turnaround in sight even among that core customer group.

What is driving growth for us is private banking. Customers' mortgages are doing extremely well, and lending there is at a good level, but then premium. And let's put it this way, from there downwards in volume-based customer segments, lending is somewhat weak at the moment.

It feels like an interest rate level of just over 3 %. Historically speaking, however, it is reasonably moderate. Perhaps it is the uncertainty and volatility that hampers it above all in the short term.

And then this. After all, our environment is quite volatile in many ways. It probably affects people's mental state, whatever is happening in this world right now and at what rapid cycle. For example, this interest rate movement right now is exceptional.

Indeed, in asset management, net sales are nonetheless in the black for six quarters in a row. There, private banking clients picked up above all, so what do you see behind this? You already highlighted customer satisfaction and other things, but is it already showing this strongly in a single quarter, or how should one view this?

No, well, customer satisfaction was now an annual measurement, but I have known about it and been quite confident that it would turn around, if I look at the reflection of employee satisfaction on customer satisfaction that we have managed to turn around, I was quite confident that this would turn around. And now it turned around, and that shows in customers' willingness to invest more with us, their willingness to keep money with us. In other words, the reluctance to sell our products has halved, and the willingness to invest with us has doubled. Inevitably, that shows. There is a clear correlation. Whether we can call it a trend remains to be seen. But the core business looks good, and the same for premium customers looked very good, so I am pleased with that.

And I must admit, also the activity taking place abroad that we have talked about a lot, indeed it is now with our new hires in our target area, our number of customer meetings has doubled compared to last September, so I believe that too will have an impact on our business. Of course, there are movements in both directions in these, but now the components that I monitor to see if something will happen in the future, they look positive.

So domestic customers are not as excited about the housing market, but other markets certainly are.

Yes, that's how it is. That's how it is, the housing market is difficult. Extremely difficult in Finland at the moment.

What about you? International sales? You have indeed made investments there this year, opened new distribution partnerships, and also recruited your own sales personnel there. So would you share the Q3 news? Last quarter, however, you mentioned that sales have had an excellent start.

Yes, well, that is now visible in those meeting numbers. The number of institutional meetings has doubled in Central Europe compared to September of last year. That is the first indicator. Meaning we are meeting clients. Well, then it has also led to quite high-quality proposals now. Let's see how much of those materialize. Naturally, as we know, institutional sales processes are longer than those for retail clients, but extremely promising signals.

And I am truly pleased with this. If we look at this numerically, our number of clients has grown significantly, meaning they haven't just gone to the same clients, but more new ones have been added, and the number of our clients located in Europe has grown by tens of percents. Which naturally diversifies the portfolio for us and, on the other hand, reduces the risk of a single client concentration. Of course, we still have those too, but. This is a positive direction.

Yes, well, if there has been turbulence here in European fixed income markets, especially in emerging market fixed income markets now. If you look at the beginning of Q4, for instance, once again the rise in interest rates and also political uncertainty are quite high there. They have had quite an impact and weighed on asset values. So do you see that this increased uncertainty could negatively reflect on your international sales in the short term? Or could it even happen that this is seen as an entry point?

Well, it's always like this. That is a very good question, that I somehow always see that such movements have a negative impact anyway. They are also an opportunity, and we have a very high-quality, very high-quality fixed income team. A very high-quality organization doing this work. And then the client counterparty is nevertheless professional institutions, so their reaction provides these. Of course they react too, but this kind of. Short-term reaction is perhaps a bit different in nature than that of a retail customer. I am quite confident about that in that sense.

Yeah, well, then if we look at your cost side. There in Q3, it grows quite steeply, particularly in other expenses. And in addition, you booked some 4.4 million euros in restructuring-related one-off costs, so could you open up a bit more precisely where those one-off costs came from and, on the other hand, what then increased the other expenses there?

Yeah, there is now, and actually the term one-off cost is good. So there are individual project-like costs from restructuring. It relates to many individual components. We have, among other things. For example, there regarding the life company, one business line was concluded some time ago, and that caused so-called wind-down costs and so on, so these are one-off costs, project-like costs. There is no recurring cost increase. The cost level where we are, whether it is regarding personnel costs or IT costs, I am confident in that we have not had any cost jump, but these are individual costs, individual projects that have now been run down.

There on the side of other expenses. Is there any such more continuous cost level increase?

There is certainly no such continuous cost level increase. These are individual ones now. Now these accumulated or came so to speak inevitably. When projects end, those costs must be booked, they are there to be booked.

Yeah, let's take the always topical AI question at the end. When Nordic banks have been followed in the news, efficiency measures and the goals of these banks have of course been talked about a lot. The targeted decrease in personnel numbers, among other things, as a result of the efficiency benefits brought by AI. So how do you see your situation yourself? Do you have the possibility to improve cost efficiency in the coming years, for example, with the help of AI?

Yeah, we do. Actually, before this earnings call we had a personnel earnings call, and this matter was touched upon a bit there too. And I see the matter myself in such a way that we are indeed a growth company. We want to grow now in asset management and certain customer segments, and we have invested in AI. We will invest more in AI next year. Then someone asked what it means for us. Well, we have a few such areas where we definitely want to utilize it better. So we want to grow our topline.

So cost efficiency is one thing, that a bank of our size does not have customer service functions of thousands of people, and we want to use it for lead generation, new customer acquisition, the offerings made to the customer taking place there, more precise product offerings targeted to the customer, and this type of overall entity. We will invest a lot in getting more topline, and that is our direction, what we are doing. This is quite natural from the fact that our size, such huge back-office functions in larger groups, well our size class is quite controlled, and then the cost increase caused by them in actual total costs is relatively quite small, so that our costs are formed from other things. Or of course they cause costs, but let's say that the savings achievable from there are very marginal.

So an investor should not expect any significant decrease in personnel numbers in the coming years, even though.

No decrease in personnel numbers. But then of course one should assume that with the same crew one should be able to do more. That one must be able to expect. If we look at our personnel costs and what we think about the matter, with the same overall entity we should be able to do more and produce more. In that way one can think about this matter, that as the company grows the personnel number should not. We should stick to that we do not make any jumps, but automate there so that with the same crew a larger amount can be done.

That is clear. Thank you very much Anssi for the interview and good luck for the rest of the year!

Thank you.