Jyske Bank A/S

CSE:JYSK

Q2-2025 Earnings Call

[Simon Falk, executive]

Hi, everyone. Thank you for joining us on Jyske Bank's conference call for the financial results for the second quarter of 2025. This is Simon Hagbart from Investor Relations speaking. 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'll open up for questions.

I'll now hand over to Lars.

[Lars Stensgaard Morch, executive]

Thank you, Simon, and welcome to all of you on this call. Much appreciated that you're taking the time to dial-in. We have had another solid quarter of 2025, building upon the positive momentum from recent quarters and growing earnings per share compared to the year before despite the significantly lower short-term interest rates. On the back of the positive development in the first half of the year, we are now targeting the upper end of our outlook for 2025. We continue to improve customer satisfaction in all areas.

In Q2, our private banking customer satisfaction was the highest in Denmark for the 10th consecutive year. Additionally, the satisfaction of corporate and business clients with 20-plus employees is also the highest and personal customer satisfaction is showing a very strong momentum, already reaching our 2028 target level with a top 3 position. The latter is a major progress compared to where we were a couple of years ago. The improved customer satisfaction has underpinned mortgage financing for personal clients, which reached the highest growth rates in several years as we continue to gain market share.

Additionally, assets under management have been resilient, reaching a new all-time high amid turbulent markets supported by healthy net inflows. Meanwhile, our credit quality remains solid. We booked reversals in Q2 while slightly increasing our post-model adjustments and reducing our stage 3 exposures. Lastly, our capital position improved further in the quarter following a very strong capital build, leaving significant excess capital versus our capital targets.

With that, let me hand over to you, Birger, for a walk-through of our financial results.

[Birger Krogh Nielsen, executive]

Thank you, Lars. And I would like just to start off with a little -- a kind of a busy slide, but nevertheless, an overall solid footprint in Q2 with good momentum in the group. Looking at the ratios, return on tangible equity, 11.5% and 11.3% for the first half. Cost income slightly above 50%, 51% here in Q2, but 49% for the first half. And looking at cost of risk, we saw reversals in the second quarter of 2 basis points. Earnings per share, steady going at DKK 20 in the quarter and the CET1 ratio stood at 16.3% during Q2, up from 15.7% in Q1, underpinned by lower risk. Looking at the left-hand side at the bottom, you can see that the earnings per share, DKK 20 return in Q2 is very much similar to what we've seen in the last 5 quarters, so 6 consecutive quarters with a steady earnings per share return.

Looking at the P&L at a glance. The NII was as expected due to lower policy rates. We still see solid fee income in the second quarter. Financial markets were positive due to the spread tightening and looking at the core expenses, they were on track, exclusive of one-offs due to the location shifts here in Copenhagen.

And finally, small reversals on impairments, underpinning solid quality in the credit book. And finally, net profit up 2% in the quarter to DKK 1.3 billion. At the right-hand side, you can see that volumes, as Lars said, AUM up in the second quarter after the turbulence and volatility we saw back in March in Q1. Mortgage, the mortgage book is up, driven by both personal and corporate customers by 1% in the quarter, whereas bank lending is more steady going.

Then moving on to the outlook. We have updated outlook for '25 given the performance we saw here in the first 2 quarters. And now we expect net profit to reach the upper or very upper end of DKK 3.8 billion to DKK 4.6 billion. And of course, that also applies to the earnings per share expectations, which now is in the upper end of the DKK 60 to DKK 73 interval.

Handing over to Lars and a few remarks on customer satisfaction.

[Lars Stensgaard Morch, executive]

Yes. When we look at the corporate clients and business clients in Jyske Bank, we have seen quite a development during the last couple of years. We came from a fairly solid #3 in the Danish market. During the integration process, when we integrated Handelsbanken into our operation, we saw a decline in customer satisfaction, which you normally do during those kind of processes due to the time consuming nature. Now time is back to fully concentrate on the day once they're in. And on top of that, a big number of different initiatives have strengthened the development so that we are now in a much stronger position than we were prior to the integration of Handelsbanken. For companies with 20 employees or more we are now, according to [indiscernible] #1 in Denmark.

Moving to the personal customer satisfaction. More or less the same picture, our starting point was a little bit weaker back in 2023. And we saw the same impact during the years that followed. And again, here, time is freed to the [indiscernible] and on top of that, a number of targeted initiatives, boot camps and a reorganization means that we are now back and we are actually back in a stronger position than we would have anticipated already now.

Moving to private banking. We've been in terms of customer satisfaction ranked #1 for 10 consecutive years. For now, we have the largest gap that we have ever had to #2 in the market. Obviously, this is important when it comes to retaining clients but it's also important in terms of building momentum with the clients that we have. And turning to the momentum, we can see that the development in asset under management as Birger alluded to, has been strong for quite a long time. We have seen that investments we saw a generally positive after a little bit more turbulent first half of the year.

We've seen strong inflow during also the second quarter here, predominantly from private banking customers and from personal banking customers a little bit more mixed on the institutional clients. But generally speaking, a strong inflow here. Again, on the lending to personal clients, mortgage lending, we've had 17 consecutive quarters with no growth. And now we've had 5 quarters with growth. And as you've seen -- as you can see here on the right-hand side, momentum has been building during the last couple of quarters. We connect this to a large extent to the higher customer satisfaction.

[Birger Krogh Nielsen, executive]

Yes. And then looking at the deposit margin. You can see a slide here which demonstrates that we saw this uplift in the 3 months carve rate from '22 until end '23 and then the reversal from a peak around 400 basis points down to now close to 200. And in the meantime, of course, as you look, you can see the light green showing the implied deposit margin, we have done our utmost, of course, to take advantage of the situation in the market. We have lifted the margin in the period until end '23. And then afterwards, we have tried to mitigate the negative implications from lower policy rates on our margin.

And just to demonstrate, we took off the interest rates on transaction accounts for private individuals back in April. So now it's a 0% account -- savings account for private individuals were reduced to both a quarter for amounts below DKK 0.5 million and 0.5 percentage therefore, amounts above DKK 0.5 million. On the corporate businesses, we also reduced margins or interest rates and deposits, transaction accounts to 0 in April. So we have done -- and on top of that, we have reduced the preferential rates. So we have done a lot of things in order to mitigate the implications from lower policy rates. And that, of course, brings us into a position where the ability to withstand further cuts will gradually become more limited as especially savings rates are close to 0, as you understand from my words here.

Turning then to the competitive landscape. We have shown this before, and I will not spend much time on it, but just rephrase what we have said before that after the agreement now or 15% tariff for European exports to the U.S. We still expect after this investigation done by the Danish National Bank back some months ago that the short-term effect would be fully manageable and the longer-term effects will be small, very small since trade patterns gradually, we shift. And so they will have very limited impact on Danish economy and therefore also on our customer base.

Then turning to the credit quality. It's the same message that we have told you several quarters now. We have a solid credit book. We have seen small reverse in Q2, where impaired customers have migrated to slightly better grades, and that has been the main trigger for the reversal here in Q2. And secondly, looking at post model adjustments, they are steady from Q1 to Q2, but up shy of DKK 100 million since the end of last year. And if I look at the write-offs, as you can see on the graph, they're very low here in the first half, 1 basis points. So as we see it now, there are no less over from former nonperforming loans in the book.

And finally, if I look at the Stage 3 exposures, those which are mostly impaired in our book, they are now down to 1% of total exposures from 1.2% a year ago and 1.1% a quarter ago. So all in all, a very solid performance so far and also a solid outlook for the rest for the year. Turning to capital. The EBA stress test in -- during the summer demonstrated our solid capital position. But on top of that, we have relatively high risk weights in our books. And looking at the Q2 numbers, they also underpinned the same conclusion with a level of 16.3% CET1 ratio up from 15.7% in Q1 and also, as you can see on the graph, slightly lower risk in the second quarter of this year.

And after the implementation of [ CRR 3 ] by first of January of this year. And given the current risk weights, we see no further significant impact from upcoming regulations, going forward. So we expect the target for the CET1 level to be at the lower end of 15% to 17% and that's the reason why we -- as we speak, pursue buybacks, we have a [ DKK 2.40 billion ] program up and running. We have bought back, as we speak, DKK 1 billion of those and on top of this, we will add another approximately 30% in dividend.

Yes, over to you, Simon.

[Simon Falk, executive]

Thank you, Lars. Thank you, Birger. We will now open up for questions.

[Simon Falk, executive]

[Operator Instructions] First question in line comes from the line of Mathias Nielsen from Nordea.

[Mathias Nielsen, analyst]

Thank you very much. I hope you can hear me now. I have 3 questions. One on guide, one on capital and one on lending growth. But if you take them one by one, I think it's going to be easier for you. So the first one on guidance, like looking at the guidance and comparing that to where consents were ahead of the Q2 numbers, it actually seems like you imply that consensus should come down for the second half of '25. Is that also how you see it? And related to this, we also hear a couple of peers being slightly more bearish about the Q-on-Q development on NII for Q3 compared to what we saw in Q2. Is that also how we should think about it for you? Or how should we think about that for you?

[Birger Krogh Nielsen, executive]

We are looking at the updated outlook for '25. I think we stand on, as we said, strong credit quality, decent [ fee ] development mitigated lower policy rates and positive financial market, as I mentioned. So those elements are all in good shape, and we have demonstrated that in Q1 and Q2. Moving into Q3 and Q4, as you said, yes, it's clear that there is more pressure now on NII. Then if we go back a few quarters since we have lowered the internal rates, deposit margins, et cetera. The deposit raised to a degree where we have used a lot of the tools that we have at hand. And so if you look at transaction accounts now at 0 and savings accounts up to 0.5 percentage point, of course, there is limited room to mitigate further movements on the policy rates if that were to happen in the second half of this year.

And of course, you still have geopolitical uncertainty and we still need to be confirmed in a strong activity also in the second half of this year, we have seen a very decent development, both on the investment side, but also on mortgages in Q1 and Q2. But of course, we need to see that also be replicated in the third and fourth quarter.

[Lars Stensgaard Morch, executive]

And if I could just add, Mathias. I think our guidance is now higher than it was yesterday. And we are confident with the new guidance, which is in the very upper end of the interval that we had yesterday. So I see no reason for you to look that differently at this. And then secondly, I think the things that we know now and the things that we can control ourselves when it comes to asset quality and initiatives, we are also confident on having those in place.

[Mathias Nielsen, analyst]

Great. On the capital side then like you say that the target is still at the low end of the 15% to 17% and that eventually mean that you need to pay out quite a lot over the coming period. So how should we think about that? Is it possible to go above 100% payout ratio? Or would you rather do it gradually where you reduce the capital over a number of years. So how should we think about that? What is your preferences from a strategic point of view?

[Lars Stensgaard Morch, executive]

What we've communicated thus far, is that we have a policy of paying out in cash dividend of 30% -- the result of the previous year. And on top of that, we'll pay out by buying back shares, so that we stay within the capital limits that we also have communicated of 15%. We have not communicated anything in relation to if that potentially could be above 100%, we would have to communicate on that a little bit later. But it stands clear and firm that 30% cash dividend, on top of that, we'll do share buybacks to the extent possible and within capital ambitions.

[Mathias Nielsen, analyst]

Okay. Then the last question on lending growth on bank lending looks a tad soft this quarter also in the light of that your customer satisfaction is actually coming up. So is it because customers are more price conscious? Or how should we think about the development on lending growth, if you just can go...

[Lars Stensgaard Morch, executive]

We should decompose it. So if you look at our lending across bank and mortgage lending, we have a positive development. It's the mortgage lending that is driving the development during the last year. And if you look at the reasons there are different reasons, looking at the personal client customer base, when we acquired Handelsbanken, most of their lending was basically bank-funded lending. And as they get new loans, they tend to migrate towards mortgage loans than traditional Danish mortgage loans instead. So there's a natural tendency of moving out of bank-funded products into mortgage -- the [ price ] of the mortgage institution. So that's what happens within the personal customer space.

Within the business customer space, we are not concerned with the development here in terms of volumes. What we see is we have a high customer satisfaction and improving. We see that the midsized customers, they stay with us with the churn rate that we have had the last year between 40 and 50 years. That's obviously a theoretical view. But basically, that's the low level of churn that we have.

Then what we've seen is a couple of industries, utility and financial institutions, we've not basically been losing customers, but a limited number of the largest ones is using our balance sheet a little bit less than they did a year ago, and -- or they did 2 quarters ago. And if you include also public institutions that more than explains the small decrease that we have had in the bank lending part. So it's not a loss of clients or a loss of future potential here. It's mainly a couple of industries that is cyclical, and is a little bit down at the moment in terms of their usage of our balance sheet. And on the personal customer basis, it's a migration towards mortgage lending instead.

[Simon Falk, executive]

Next question comes from the line of Asbjørn Mørk from Danske Bank.

[Asbjørn Mørk, analyst]

Sorry for coming back to net interest income. I just didn't really get the answer that you gave to Mathias earlier. Just looking at the sort of sequential move and the actual NII for Q2. If I look at your sort of lending deposit split on the banking side, it's the highest since Q4 '23, and if I look at your administration margin in the mortgage business, it's a record high. So I guess it's really the other NII that is causing sort of the decline which obviously makes sense considering the market -- money market rates movement.

But I guess if we look at the money market rate movement in Q3, obviously quite flat, but obviously it went down quite a lot during Q2. So just trying to understand what is sort of the impact going into Q3 Q-over-Q from this move all else equal, assuming that money market rates stay sort of where they are right now, just trying to understand the bridge into Q3 and how we should look at that versus also Q4 would be very helpful.

[Simon Falk, executive]

Yes. You are fully correct, Asbjørn. So what you saw -- basically, what we tried to allude to was the fact that we have been able to retain our deposit margin in the first half of the year to a very large extent. So what's been driving the negative development in NII has been other NII and that's likely to persist and what we were basically just saying that now we have not emptied our toolbox, but we have less tools going forward if rates continue to decline. So in terms of the deposit margin that we would expect a larger pressure in Q3 than we saw in Q2 and in Q1 given that we can't -- or we don't expect to lower the transaction accounts, for example, to below zero, so we basically have increased risk on our deposit margin.

In terms of the sequential move, we saw a negative development of DKK 30 million in Q1 that was partly -- we saw a positive effect from CRE repricing on the mortgage side in that quarter. And then in Q2 we saw a negative of DKK 34 million, so slightly more. But back then, we were -- yes, pricing transaction accounts down and also savings accounts, and we were reducing preferential deposit rates. So we would expect if rates continue to decline in Q3 versus Q2, we would expect a larger sequential drawdown than the DKK 34 million.

[Birger Krogh Nielsen, executive]

Simon, just sorry, just to clarify. Also, as I mentioned, we did change the accounts for transactions, both for private and corporate in April. So of course, there is also a full quarter effect in Q3 from lowering these rates for person and corporate clients.

[Asbjørn Mørk, analyst]

But is that assuming an incremental rate cut from the ECB? Or is it just assuming flat rates, policy rate from here?

[Birger Krogh Nielsen, executive]

But this was merely just to state the fact that we did make some changes and that had its impact from April. And so we'll have a full quarter effect on -- in our margin book, in Q3 -- for both private as well as corporates.

[Asbjørn Mørk, analyst]

I just want more on the flow risk. So the more than DKK 34 million drop in Q3, was that assuming a real cut or not?

[Simon Falk, executive]

That's assuming the way forward rates. Currently, I see a small decline in the 3-month CIBOR rate. But it's also taking into account the fact that we have seen half a year where rates have been continuing to decline in the first half of the year. And our bond portfolio, part of that is semiannual interest rate resetting. So that part of the portfolio should have -- of course, then you could always -- whether it actually has an impact on bonds, specifically, that depends whether we lend it out as bank loan or we place it in bonds. But like-for-like the rate on our bond portfolio should go down in July, given the half year of semiannual interest rate resetting.

[Asbjørn Mørk, analyst]

But is it then fair to assume if we -- I mean, the money market is pricing 94% likelihood that the ECB will not cut rates in September. So we assume that they are right, and we don't get a cut. Is it fair to assume that NII would pick up -- pickup in Q4?

[Simon Falk, executive]

I think it's difficult to -- I mean, if you -- it depends how the short -- but if rates just were flat from Q2, I can't see why we shouldn't be able -- if we saw some growth on the balance sheet at least, and that's not outweighed by margin pressure, then I agree that should be the case. But I would maintain that we still expect NII to bottom out at the beginning of 2026.

[Asbjørn Mørk, analyst]

Okay. Fair enough. Then on your -- on the AUM, you mentioned that you see quite nice growth from retail and private banking and less from the institutional side. Could you comment on how your margin is developing within the Asset Management business, so growing AUM 7%? What should we -- how should we think about the asset management income base?

[Simon Falk, executive]

Yes. Sorry, the income base of Asset Management?

[Asbjørn Mørk, analyst]

Exactly. So -- the margin -- the nominal margin that you make from the AUM?

[Simon Falk, executive]

Yes, in Q2 versus...

[Asbjørn Mørk, analyst]

Yes, or just going forward, but let's start with Q2 if this continues how we should model it?

[Simon Falk, executive]

Yes. So I think overall, some margin pressure is likely to remain. I think that's been the case for several years, and that's likely to continue to some extent. The quarter movements are usually a bit -- I mean, Q2, you have some yearly fees that are paid in Q2 and Q4. So there will be some swings from quarter-to-quarter, but I think the overall trend is likely to be some margin pressure.

[Asbjørn Mørk, analyst]

Okay. Fair enough. Then...

[Lars Stensgaard Morch, executive]

On the other side, Simon, I think the development that we are seeing now, which is, as Asbjorn, correctly states, predominantly from our private banking customers and private personal individuals that helps and where we see mix development is on the institutional where you normally have a lower income per AUM. So that helps us, the mix.

[Asbjørn Mørk, analyst]

Okay. That makes sense. Just final question, a little bit back to the first question from Mathias on the guidance. I get your point on NII coming down in Q3. But if I look at your -- the beat that you made today versus consensus, it's almost DKK 200 million. It's including DKK 60 million of one-off costs. I'm just trying to struggle -- I'm just struggling to see how you can sort of maintain the guidance, why you're not lifting the upper end? Is there something you're seeing or are you're just being conservative?

[Lars Stensgaard Morch, executive]

What I tried to state before was that with what we can see and what we can control when it comes to asset quality and what we see so far, we don't see any negatives that's going to impact the second quarter apart from what you just discussed in terms of interest rate levels, so it is an uncertainty, and you can call it conservative or how you would look at this. But I think we are confident with what we are saying today, which is very close to the 4.6%.

[Simon Falk, executive]

Next question in line comes from Jacob Hesslevik from SEB.

[Jacob Hesslevik, analyst]

So the first question is also on fees and assets under management. It developed quite nicely until end of June. But given the poor performance from Novo Nordisk, that's to name a few of the blue-chip names in the Danish market, how is the sentiment for Danish retail investors right now? And could we potentially see a backlash in the AUM development already in Q3?

[Lars Stensgaard Morch, executive]

Retail clients are buying Novo Nordisk shares to an extent that we've not seen before. But I think underlying to your question, obviously, these are 2 of the household names for Danish investors, and that could impact the sentiment and willingness to invest. So far, we've not seen that. We are seeing that our private banking customers and personal client customers, they have not dramatically changed their view and they basically behave as they did before, and they're buying up some of the Novo shares as in general the case across Denmark.

[Birger Krogh Nielsen, executive]

And if I look at the split between what is market driven and what is net inflow of new funds from customers in the first and especially the second quarter of this year, we are still on a very strong momentum in gaining new customers and funds. So I think that could be a very strong defense against what you alluded to here.

[Lars Stensgaard Morch, executive]

We could see that more clients opt to have the bank playing a bigger role in helping them doing the investments because the clients that have had advice from the bank would tend to have less of single shares and they would tend to come through this turmoil better. So there's also a business opportunity from our side.

[Jacob Hesslevik, analyst]

So you see this as an opportunity to maybe get back some clients move to [indiscernible], for example, by giving advice, et cetera?

[Lars Stensgaard Morch, executive]

Yes. And some of our own clients that have decided to a large extent, to invest themselves. That's also an opportunity here.

[Jacob Hesslevik, analyst]

Interesting. Then also, could you help me understand what drove the increase in the post model adjustments this quarter, in my world, interest rates are coming down, GDP growth for 2026 looks strong and unemployment is low in Denmark. So the increase can't be macro driven, in my view, at least, so what caused it? And I find it a bit silly when you had reversals in this quarter as well to increase your buffers?

[Birger Krogh Nielsen, executive]

Yes. Well, that's a good question. If you look at the first half, we saw an increase in our post-model adjustment of shy of DKK 100 million, as I mentioned, due to the fact that we in Q1 of this year, lifted our macroeconomic buffer because of uncertainty due to geopolitical uncertainty. In the second quarter of this year, there's been a shift in, I think, DKK 6 million or DKK 7 million, so we are moving around the DKK 1.9 billion mark in the second half. What has driven the change and reverse of impairments in the second half has been individual impairments. So the post-model adjustment was very steady going in the second quarter of this year.

I fully understand the reason for asking the question in terms of how we have to deal with this. It's 2 different methodologies. So on where we do the reversals here is basically on single clients where we put aside money for potential future losses and where we see that the clients come out better than anticipated. The post-model adjustments is, to a large extent, math on the entire portfolio.

[Jacob Hesslevik, analyst]

Yes. That's clear. But could you also give me any guidance on when we should expect these overlays to be released? Is it over the next 18 months? Or is it closer to the next 36 months?

[Birger Krogh Nielsen, executive]

If you look at it in a historic context, we have -- we built up the post model adjustments post COVID back in 2020 from DKK 600 million to DKK 1.6 billion and then up to, well, close to DKK 2 billion. And then you -- I have seen a few swings afterwards. And I have mentioned before, and I still think it fully applies that we can see some dynamics in these numbers. And you're right that if we put on a specific PMA charge or buffer, we need to see it move in one or another direction within typically 12 months.

So yes, there will be some swings to the buffers, which also has been the case because if you go back and look at our quarterly and the annual reporting, you can see that the buffers have shifted from different macro elements to process elements, et cetera. And of course, that still applies. If you ask me, if we could see a much lower level of PMAs, yes, we can see a lower level but much lower back to the level of pre-COVID is not what we expect within the coming few years.

[Lars Stensgaard Morch, executive]

And I think this is maybe a little bit Denmark specific here. So I think with the way that those cost model adjustment rules are implemented and dealt within the banks you would tend to see that the bank hold a little bit more on that line than in some other countries.

[Simon Falk, executive]

Next question comes from Namita Samtani from Barclays.

[Namita Samtani, analyst]

My first question, I just wanted your thoughts on Nykredit and Spar Nord. It's just that Nykredit had results last week, and they talked about gaining mortgage market share and they're yet to offer all the discounts to Spar Nord customers. I just wondered if that worried, you -- and how does your proposition compare? And are you able to compete?

[Lars Stensgaard Morch, executive]

Yes, good question. I'm confident that we can compete in this. Basically, nothing has changed apart from them having a task of integrating 2 banks on top of running the banks here and obviously, they will be successful in doing that. But the discounts that they have on their mortgages Spar Nord has had in the past also. So that's probably not going to change. And we are confident that we can compete with this, and we are doing it to a large extent already today.

[Namita Samtani, analyst]

And then just on the Novo Nordisk. Can I ask a question in a different way. Just from a perspective of the company actually impacts Denmark's GDP quite a lot, and I guess jobs as well. So from a top-down perspective, do you see that there's like a potential headwind, more for like lending, et cetera?

[Lars Stensgaard Morch, executive]

Not really. Obviously, if there's a meltdown in Novo Nordisk it will have an impact on the GDP. It will have an impact on certain geographies in Denmark. And one of the geographies where they have the headquarters, one of the geographies where usually strong. So that could potentially have an impact. But what we're looking at is a company that still earns quite a lot of money that still have new products released just yesterday, again, which holds significant promise for the future. So we've seen a growth in the company during the last couple of years, and we saw a projected growth. And the latter the projected growth is probably not going to happen. If what is a base case now and what the company has communicated is how it's going to develop, this will still be a large and strong company in Denmark.

If they should scale down, there's a lot of competence within one of the industries where Denmark in general is the strongest, and we believe that most of the people would be able to find new jobs. So -- and then on the new geographies where they are building new plants, is basically not Jyske Bank land through a large extent. So where the new investments are being done, families are moved to and so on, we don't have a lot of business. So we have it around Copenhagen where the job market is strong altogether, but we don't have it in [indiscernible] where they're building factories.

[Namita Samtani, analyst]

That's helpful. And just last question. The lending margins on bank lending, I think they're quite a lot better than I was expecting or compared to how CIBOR moved. I just wondered why that was the case?

[Simon Falk, executive]

Yes. We have a bit of a lag effect on some bank lending rates, that was the case on the way up, if you just compare it to a short like a CIBOR 3-month rate, we saw a significant margin pressure by bank lending margin pressure. And that's the reverse as rates come down, some of those fixed rate elements help in increasing versus CIBOR 3-month rate, at least the lending margin. Other than that, I think we haven't been very explicit in terms of what we are doing in terms of lending rates because they -- but you can see at least on the private client, it's a question of -- yes, there is a bit of a lag effect and also maybe we didn't fully pass through on the way up, and that's why we are not fully passing through the rate cuts on the way down.

Next question comes from Mathias Nielsen from Nordea.

[Mathias Nielsen, analyst]

I just had one follow-up question on the capital. If I heard you right, you said you were about to apply for the buyback given the time that it takes to get those awarded, should we then expect the buyback to be announced prior to the Q4 '25 results in February? Or how should we think about that?

[Birger Krogh Nielsen, executive]

Well, a good question. hopefully, you didn't hear me saying that we were applying because there's nothing that I can actually talk about. And so I can't give you any clear answer to whether we are in a process or not. But please bear in mind that we have a program now that is running until the end of January next year. And we have said formally that we want to be very predictable here to set of a program that is running throughout the normal calendar year, more or less. And I think that is what you can expect from us going forward.

[Lars Stensgaard Morch, executive]

So, for now, Mathias, we'll just be positive about the fact that we believe that it seems as if there will be room for buybacks.

[Mathias Nielsen, analyst]

Sure, sure. But like on that, I didn't really get the point on that. So like last year, you are quite clear saying like we should not expect anything more than once annually, and that should be in connection with the Q4 results or somewhere around that? Is that still the approach? How should I understand that?

[Lars Stensgaard Morch, executive]

So that is the guidance that we're also getting from the FSA that they would like banks in general to deal with this once a year and have a [indiscernible] in our position, probably a fairly substantial program and they would deal with that once a year. So we would stick to what we have communicated on that.

[Mathias Nielsen, analyst]

Sure. And then a technical one on that maybe. So like if, let's say, I'm not knowing if you are applying now or when you will apply, but let's say that you apply in a couple of weeks, would that then be based on what the actual CET1 ratio was at the end of Q2? Or would that be at based on an adjusted CET1 ratio based on your expectations for the remainder of the year? How is that in the process of...

[Birger Krogh Nielsen, executive]

Yes. The normal process is rather straightforward because you have to build on your actual numbers whenever you apply anything with the Danish FSA. So if we were to apply, as you say in a couple of weeks, that would be probably be based on our existing Q2 numbers. And then we will do a stress test as they require a harsh one and demonstrate to the extent what is the room for buybacks in a 3 years stress period.

[Simon Falk, executive]

Thank you, Mathias. It seems as if there are no further questions in line. We would like to thank you for participating in today's conference call. A recording of the call will be made available on our IR website in the coming days. Please do not hesitate to contact us if you have further questions. We appreciate your interest in Jyske Bank and wish you a nice day.