Resurs Holding AB (publ)

STO:RESURS

Earnings Call Transcript

[Nils Helge George Carlsson, President & CEO]

[Interpreted] I would like to say good morning, and welcome to the Resurs Holdings Q3 Presentation 2021. You will meet today me, Nils Carlsson, the CEO; and also our CFO, Sofie Tarring Lindell. And those of you who are sitting behind screens at home or in the office, I would like to say a particular welcome to you because we're streaming this so that more can participate. We have had a very eventful and exciting quarter that we now have behind us. As late as 1 month ago, we had the Capital Market Day that was -- had many visitors, a great success, many people there on site that could meet with us, and it was really exciting. And if you could not participate, you can look at the film on our website, and there is also an extensive Q&A. Let's look at the highlights for Q3 2021. We had a lending growth of 3%. And if we exclude the sold NPL sales, the loan book growth was 5%. We also improved our operating profit 2%. And if we exclude the one-offs, those activities, the operating profit was up 13%. And we're particularly happy about the fact that with this quarter, you can see that we have growth in all our markets. And that is something that we will tell you more about today during today's presentation, and it's also something that is very positive. Solid, our insurance operations, had an improved technical result in Q3 with 13%, which is very gratifying and very stable performance. We do have a very stable capital ratio of 17.3%, which means that we're very strong when it comes to the capital position that we have in the bank. Apart from that, in Q3, we see that we have improved the credit loss level. It's now at 2.2%. The cost of risk gets an improvement compared to last year and also compared to previous quarter. And the Board has taken the decision that we are to dissolve the credit provision that we decided on beginning of the pandemic. Apart from that, well, we have -- or the Board has convened an extraordinary meeting on the 2nd of November, where we have a proposal to have a dividend of SEK 3 per share. And there is also a proposal to distribute the shares in Solid to the Resurs shareholders. More about that later on. Those were the highlights. Then if we look at, well, some of the things that we talked about during our Capital Market Day. What we did was that we talked about the trends in the markets when it comes to consumers. And we also talked about what we believe as to where the banking market is headed, we believe, in technology. We believe that if we have good solid technology, we can have amazing customer experiences. And that is something that is very important to us. And we also believe that sustainability is something that will become even more important in our business model and also for our customers. And we have surveys that have been made by our retailers, for example, where we see that responsibility and sustainability, those are very important, somewhere between 2 and 5 in their wish list. And that is what we see. We also see that there's a lot of talk about open banking. We have the EU PSD2 directive that is underway, has been so for some time. And this is we look at. And we look at other things like income verification, which is something that we see that our customers are using to a great extent. There's a lot of talk about real-time data ecosystems. And these are some buzzwords, but I do believe that most of us, we do want to have that information here and now. We want that real-time information about payments, for example, and also other things when it comes to information and data. But also, the accessibility to us as a bank, that we're easily available, that's part of the ecosystem. And this is something that we're going to develop. And that is also something that we'll see in the road map that we talked about during our Capital Market Day, and I'll show it to you here today as well. And that was a bit of a picture as to where we are.And then if we look at the loan book and we do so over time, we can go back to 2016 and look at the different Nordic countries where we have activities. What we see in this slide is that we have a very stable, nice development in Sweden. We have a plus 9% compared to last year. And we see that we have a very stable curve with nice demand in Sweden, a good position. And that is something that benefits us, and we're gaining market share in Sweden as well. And then if we look at the Danish market, you see that there was a little downturn. We see that in the curve. And the situation in the last year has been a bit more difficult. The pandemic perhaps hit Denmark more severely with lockdowns, et cetera, and that had an effect on our results. But now we see that it's headed upwards again, and that is what we saw last month of Q3, which is very positive. And we also now start with loan consolidation in Denmark, and that has had an impact on the figures as well. The Norwegian market has been difficult. And you see that in this slide. Since 2018, we have had this type of a curve on the loan book in Norway. And the last year, we see that it's been even more difficult with the pandemic and debt registry, et cetera. But nevertheless, we have a positive outlook when it comes to Norway. Things will improve. And we see that in this curve as well, that we've stopped that downwards trend in the loan book. And we also see that we have much better new sales today compared to the last 3 years, and that is also something that is very positive. But nevertheless, minus 14% compared to previous year in the loan book. And that, of course, has had an impact on our total figures. In Finland, well, that has also been kind of a challenging market in the last year with temporary rules legislation from government agencies concerning marketing. But those are now not applicable anymore, and that has an impact. And last year, we have had a very nice development in Finland, as you can see, plus 10% compared to last year. So the message with this slide is that we can see that we now begin to see growth in all our markets, which is very, very positive.I promised to show you something having to do with our road map, and this is a slide from the Capital Market Day a month ago. We have 3 focus areas in the bank, and we talk about tech acceleration, customer obsession and working together. And these are 3 very simple, basic focus areas, but they're very important to us in order for us to be able to deliver on our targets. And here, you see a few samples from 2021 and what will happen up until 2024. Tech acceleration, of course, is about creating this amazing tech platform to simplify customer experiences. We have delivered this year already when it comes to mobile payments. For example, we've started to use open bank, and customers are using open banking. And we also have a new B2B platform for the corporate segment that is completely cloud-based and that will give us a competitive edge. And we have launched our Success Program this year where we want to capture more business from existing retailers. And last but not least, we have, for example, subscription solutions that we've launched this year. And customer obsession, that has to do with solutions close to the customers, customer touch points, and we want to be good at those interfaces where customers meet us. We've launched apps in other countries. And this is also about working much more with clusters and the different types of sectors and specialized solutions for those sectors. Working together, that is something that we work with internally to create a Nordic organization. I've talked about this before. Here, we also have working agile with customer development. And we wanted to be simple to deal with. We want to have straightforward interfaces, et cetera. In 2022, we will start to launch parts of the platform that we have introduced earlier that we bought, that we have invested in, and we're going to start to put those services in the cloud. And we're also going to continue to launch various things these next few years. The idea with this slide is to give you an idea of what's going to happen in the next quarters, the next years within Resurs Bank. And this, we're buying a new banking system and investing in something like that. Well, that's nothing far away in the future, but as a matter of fact, something where we already today start to deliver, and it's important to be able to show that. So these are a few highlights from the future road map where we've actually already this year started to deliver in 2021. The Board, as you know, have made a decision about new financial targets, and these targets will be applicable as of 2022. And there are 4 of them, so fewer than before. But we believe that these reflect in an excellent way the activities, and it is also something that will help improve over a period of time shareholder value. For example, improved profit growth over year -- 10%, improved C/I ratios at 35% is what we would like to see, and we'll work very hard to get there. We also see our capital ratios and the buffer that we want to have, that it will be somewhere between 150 and 300 basis points. And last but not least, we want to be able to distribute 50% of the profit to shareholders. So 4 kind of simple financial targets and something that is easy to understand and easier to understand than the previous targets that we have been working with. If we summarize Q3, we see that we have a new large customer, NLTG. I'll talk some more about that soon. You can think about what this acronym could mean. But what we have seen in Q3, well, many things. We have improved our product organization. We have a much shorter time to market. We have a much more agile working method in the organization. And we see these effects. We see, for example, that we have these effects in the Nordic markets, and things have improved in that respect. In Q3, we also have made one of the biggest investments of the bank. We have decided to invest in the core banking system that is completely cloud-based. And this will give us amazing opportunities in the future, much more flexible opportunities to test things. And it will be much quicker to the market, and the customer interface will be much simpler as well. So this will increase efficiencies internally and also externally towards customers. And this is something that we will be working with for the next few years. And well, you did see this product road map where we have this included in this quarter. And I assume you have seen the press release about our sustainable work as a society. And this is a package that we're working with and will be working with for the next few years, working with the sustainability. And it's not just about the environment and that footprint. It's also about how we can contribute in society with a finance school, helping young individuals, working with sustainable credit granting so that we have balance in our activities for the bank and also for the end customer so that we have a situation where we did not lend money to people who cannot afford it. And that is the Resurs society. And we have also been working, of course, with Solid, and we're going to continue to work with the ambition to list the company in Q4. We'll have an extraordinary meeting on November 2 where a decision will be taken. Then if we look at the different business areas that we have. If we look at Payment Solutions, our retail activities, the loan book is down 1% in the quarter. But we do see a very positive and stable demand in Sweden. We have about 11% market share, retail in Sweden. And we see that bigger retailers, they have been doing very well the last year. And of course, that has had an impact on our margins, for example, in Sweden. We also see step by step that all markets are improving, talking retail, and we see increased demand. We could see that in the curves that we looked at a couple of minutes ago, looking at the loan book. And what we still have as a bit of a challenge is our card activities where we see that things aren't really back. We are not yet back to the levels that we had before the pandemic. And here, we have been working with a new credit card strategy and we will continue to do so, making sure that we'll see more of an effect from our cards. They will be rebranded from Supreme Card to Resurs Card, for example, and we're going to add new functionality. And hopefully, this will lead to our card activities improving a lot. And of course, this will also be impacted by restrictions being removed in the Nordic countries. We have, this period, been working with what we refer to as clusters and partner success programs. And this has to do with -- and I've touched upon that already. It's about activating smaller customers. We want to be relevant as a bank also for smaller customers and not just for the big giants, if I can use that expression. And we've been successful in doing this, and that is something that we can see today as well. In this quarter, we also have started with subscription solutions together with Fairown. And we have launched partnerships that we have had with Komplett previously. We've launched that in Sweden as well. And this is something that also contributes in a very nice way to our activities. But we do believe in subscription solutions. We think that is something we'll see more of in the future. I did mention NLTG. And here, we have the 4 very well-known brands: Ving, Tjäreborg, Spies and Globetrotter, which means that it's a big e-commerce customer that we now have working with Resurs, and we're going to continue to work with them and work a lot with them in the next quarter to give them better payment solutions. The travel industry is a sector that has had a hard time during the pandemic, and we hope that people will now start to travel more and then they will also need to have better customer touch points than they have today. So that is something that we will be working with a lot to improve the customer journey that you have within Ving or Tjäreborg, for example. And this is incredibly exciting, and I think this is evidence that we have a high quality in what we offer. Then if we continue with the next, it's Consumer Loans, where we have growth of 5% on our loan book. And we still see very strong demand in Sweden. We have a strong position, and we focus a lot on making available our services. It should be easy for customers to manage the credits that they have with Resurs Bank. I did mention before, for example, open banking. And we see that more than 50% of our customers, they do use the income verification, which makes it a lot easier for the customer, saves time when applying for credit, and at the same time, we also get internal efficiency. So this is one example as to how we make the bank more efficient internally in Norway. And we did see that looking at the loan book slide before, we now have a more stable development. So that downturn has been stopped, which is very positive. And we also see nice new sales. And this is something we think is incredibly positive, something we have been waiting for. And we have a positive outlook on, well, the coming period. Then looking at the Danish activities. We have started to offer in Denmark loan consolidation. And we see that, that has an effect in the market and the customers. And this is also what is now beginning to show in the Danish business. Denmark has been impacted by the pandemic, and that is something we have noticed as well on margins and also lower income -- interest income. And then we have Finland, also part of our Nordic activities in Consumer Loans. And here, we have had a number of temporary rules, temporary legislation in Finland. But we have had very nice developments in Finland in the last few years with nice growth and a bit less the last 1.5 years. But now with those rules being stopped, then things begin to look more positive again. And we have -- before I hand over to our CFO, we have Solid Insurance, stable performance, technical result up 13% over this period. And premiums earned also up 9%. And we have prepared for the collaboration with Wästgöta Finans that I'm sure that you're aware of. They're going to start to offer different types of loan insurance for their customers, and this is a very good product. We have -- with Solid Insurance, we've also continued the collaboration that we have with Power in Denmark. And primarily when it comes to product insurance, it's something that we have launched. And in talking about Power, we now have that collaboration in all our Nordic countries. And to conclude, the process for listing Solid Insurance, that is a process that will continue, and we're working very intensely with that process. And we have the ambition to have -- this extraordinary meeting on November 2 and then the ambition is to be able to list Solid on NASDAQ in Q4. And that was a brief summary. Now I'm going to hand over to our CFO, please.

[Sofie Tarring Lindell, CFO & Head of IR]

[Interpreted] Thank you very much. Good morning, everyone. I hope that you can hear me well both in this room and online. First, I'm going to tell you a little bit about the numbers starting here with the loan book development. You see that it was up compared to last year by 3%. It now amounts to SEK 32 billion. We've had a few sales of NPL portfolio over the past year in December 2020 and June 2021. And if you take that out, you see that the growth would be 5% excluding the sold NPL portfolios. We have excellent developments in Finland and Sweden. We're struggling a little bit more in Denmark and in particular, in Norway. And just as Nils mentioned, if instead we compare with the previous quarter and the end of June, we see that we've had a 3% growth here as well, and the loan book has grown by SEK 800 million. And the truly gratifying factor is that all markets are showing growth, so stable growth in the Norwegian market and in the Danish as well, where we see a positive trend and development. And it's worth commenting that we saw this in particular towards the final part of the quarter, and therefore, the income is not quite keeping up yet in the numbers. And as Nils has mentioned already, an important part of our journey to transformation is to grow -- increase our growth and our income. And we have the road map that Nils showed you. It's very central as an element to us to ensure that we have continuing growth. Moving on to have a look at our income. As you can see, revenues -- or income down by 9% compared to previous year, totaling SEK 826 million. And the reason for the lower income is mainly due to the loan book in Norway and also lower lending and lower interest income in Denmark as a result of larger loans and the mix effect within Payment Solutions, which we've mentioned before. We also have net financial transactions, which really consist of the return from the solid placement of investment capital amounting to SEK 4 million for the quarter. However, that's SEK 15 million lower than last year since Q3 last year saw an excellent recovery from the beginning of the pandemic. So the impact was to the tune of SEK 15 million compared to last year. If we compare to Q2, however, we are down income by 2%, mainly due to a lower net interest income. And if we look at the total NBI margin, it amounted to 9.7%, a minor drop compared to Q2 and Q1. As a result of the strong growth, however, towards the end of the quarter, we end up at this level. But the NBI margin dropped compared to last year. It's down 1.1%. It's linked to Payment Solutions, where we have large-scale partnerships in Sweden which have performed very strongly indeed, impacting the margin. But in Consumer Loans as well, we have a lower risk in the total portfolio. But I'm going to tell you a little bit more about these components when we look at the individual segments in a few moments. Let's have a look at the expenditure side. Our costs are under control. And as you can see, not -- if we exclude the nonrecurring items for the quarter, costs are down by 2%, SEK 324 million in total. The IPO-related cost for Solid is SEK 15 million for the quarter, and our assessment is that the total nonrecurring costs will end up somewhere in the area of SEK 40 million, SEK 45 million. And the assessment currently is that the remaining costs will come in Q4. The C/I ratio amounts to 38.8%, an improvement compared to Q2, entirely due to seasonality and the holiday period. Compared to last year, we see a drop related to lower income level. And so it is very important, therefore, for the C/I ratio as well that we get underway with continued growth and more income. About 80% of our costs are fixed, i.e., we can add volume without having to increase cost. So it's very important to scale up and get the growth going to benefit the C/I ratio. But in parallel, we're also working on digitalization to further improve the efficiency of our operations and ensure that the customers can help themselves and enhance the customer awareness and improve efficiency, as I mentioned. Looking at credit losses and cost of risk. And as you will have seen before, we have an excellent development in credit loss levels. And the underlying quality of our portfolio, it is high. It's developing in a positive direction. And if you look here at the numbers, this is excluding the dissolution of the nonrecurring provision linked to the pandemic. With them, we would have had 1.2%, but now it's 2.2%. And we see improvement both in Payment Solutions and in Consumer Loans across all our markets. And as Nils mentioned, since we have not seen any drop in payment capacity amongst our customers nor do we consider that there's a significant risk, it was decided by the Board of Directors to dissolve the extra credit provision, so we have a positive nonrecurring effect to the tune of SEK 75 million. All in all, excluding nonrecurring items, a nonrecurring impact to the tune of about SEK 60 million, SEK 15 million negatively for the IPO and SEK 75 million in the positive direction, we see a drop in operating profit of 13% as a result of a drop in income. But if we add the nonrecurring effect, we would have seen a growth by 2% for the operating income. And since Q1, we have an underlying increase in operating income -- operating profit. Let's have a look at the segments then and the financial development. As you see in Payment Solutions, the loan book was down by 1% as a result of the fact that the Swedish market and the large partners have performed very well. But we've had a slightly tougher situation in the other Nordic markets and in credit cards. A positive factor is that if we compare with Q2, we see that the growth is to the tune of 2% during the quarter, and we also see a gradual improvement in all our Nordic markets. And as Nils mentioned, even though it's not entirely visible in credit cards as of yet, we see that the number of transactions during the quarter is up and positive signs, therefore, in credit cards as well. The NBI margin was down by 0.7 percentage points compared to the previous years as a result of the fact that the large partners are doing very well. We're still trying to push the Nordic markets with higher margins and some sectors of industry where we've had higher margins, and some of those have suffered during the pandemic. We're compensating to some extent due to lower credit loss levels. But all in all, the risk-adjusted NBI margin dropped by 0.3 percentage points. Moving on to look at Consumer Loans. And here, we had a growth of 5%. It's hampered somewhat by the Norwegian market which has seen a negative development compared to last year. However, if we compare with the previous quarter, Q2, we saw growth by 3% and growth in all our markets. And as I mentioned earlier, growth has in particular been seen towards the final part of this quarter. The NBI margin compared to last year, down by 1.4 percentage points, mainly due to the fact that we have a lower risk in our portfolio, both due to the fact that we have a more restrictive credit assessment process in the beginning of the pandemic to ensure that we can contribute to enhanced profitability. But we're also stepping up in ticket size, so we're offering larger loans. And when we do this, we have a lower credit risk. And so an impact on income, but over time, also lower credit loss levels. The credit loss level, as you can see here, with the dissolution of the SEK 75 million in provisions, mainly in consumer loans, of course and if we put that back, we would have been at 2.2% in this quarter. So even -- so 2.2%. Even then, we would have seen a drop by 0.4% compared to last year in credit losses. Let's then have a look at Solid. As Nils mentioned, revenue is up by 9% in premiums earned. And in particular, within assistance, the segment which has both focused on market-related insurance but we also have travel insurance, which -- where we've seen a real improvement. The secondhand market in cars has developed, and there's an opening up in travel insurance-related product. Technical result, up by 13%. And the combined ratio improved by 0.4 percentage points as a result of higher income, lower claims and continued good cost control. As you can see in this slide, the operating profit is down by 2% as a result of the investment portfolio I mentioned earlier and that Q3 last year saw very strong development. And that is the impact we're seeing here. And what about the capital position then? As Nils mentioned and as you know, we have a strong and stable capital situation with a total capital ratio of 17.3% and a CET1 ratio of 15.2%, well exceeding both the regulatory requirements and our internal targets. We have an assessment that suggest that there will be a strengthening of the requirements in the future, both from the Swedish financial supervisory agency but also from other components. But when and the extent to which they will be enhanced is not known yet, so we choose and prefer an additional margin until we know more about the facts and how they will -- this will impact us.As you know, we will also have the contracyclical buffer requirements for Sweden, Norway and Denmark. There have been signals already, and this will enhance the requirements. From Q2 2022, they will gradually be reintroduced. But once we have the strength and capital requirements and we have more information, if that should exceed the buffer of 150 to 300 points, we will, if necessary, ask the Board to take action. We will have to get back to you on that. And then, by way of conclusion, we have a well-diversified funding. And you can see that in this slide. We've continued in August. We issued bonds in total SEK 700 million in Sweden and Norway combined. And there's a great interest when we choose to issue bonds. We have a strong and stable liquidity situation and an LCR of 224% during the quarter. And here, I'd like to hand the floor back to you, Nils, for the final words.

[Nils Helge George Carlsson, President & CEO]

[Interpreted] Thank you very much. Thank you, Sofie. I'll ask you to stay around with us. By way of conclusion, as you have heard, we've had a very interesting and -- quarter with a lot of things happening. We had a Capital Market Day. You've been able to read in numerous press releases that we've sent out events within the bank in particular, such as the fact that we have a very large new partner, NLTG. In the next period, we're going to -- coming up, we're going to be talking about and working on better margins, growth and better profitability. That's our focus. And this is, of course, something we will focus on also during the fourth quarter of this year. We will implement cooperation together with Ving and Spies and Globetrotter, et cetera. But hopefully, we will also be able to see the first signs of the major investment we've resolved to make in a new core bank platform, over SEK 500 million we decided to invest over a number of years moving into the future. We also see that all markets are now opening up, loosening the restrictions relating to COVID-19. And you'll remember the picture I showed you of our loan book in all the Nordic markets. We expect a gradual improvement across the board. And as Sofie explained, we actually have growth in all our markets in the lending component, and that's very positive. We also very much look forward to the Extraordinary General Meeting of Shareholders on the 2nd of November, the invitation and the notice of convening the EGM has been sent out; SEK 3 per share in cash dividend; and also, the IPO listing of Solid for the upcoming period. Our ambition is to proceed with the listing in Q4. And now I'd like to open up for Q&A. We will conclude the actual presentation. And we're translating this as well, so if you have questions, you're very welcome to put your questions now. Thank you.

[Operator]

[Operator Instructions] The first question comes from Robin Rane from Kepler Cheuvreux.

[Robin Rane, Equity Research Analyst]

My first question is on the net interest margin. How do you see the trend there? We have seen for some quarters a negative trend. When you do your financial planning, do you expect it to turn positive anytime soon or just at least stabilize? Or do you expect it coming down given the higher prevalence of larger partners and also larger consumer loans? So that's my first question.

[Nils Helge George Carlsson, President & CEO]

[Interpreted] There is turbulence in the room. I could only catch part of your question. But if I understand you correctly, it's about the margins development. Did I get you right?

[Robin Rane, Equity Research Analyst]

[Interpreted] Yes, exactly. Would you like me to repeat it?

[Nils Helge George Carlsson, President & CEO]

[Interpreted] Yes, go ahead. If you could repeat it in Swedish, that would be great.

[Robin Rane, Equity Research Analyst]

[Interpreted] No problem. I was just wondering about the margins trend. What's your perception there and your planning? Will you be able to see it turn up during the next while? Or will it continue down as a result of the fact that you have larger loans and larger partners taking up a bigger part of the lending by Payment Solutions?

[Nils Helge George Carlsson, President & CEO]

[Interpreted] Well, we don't give guidance on margin developments at all, generally. But what we can say is what I've already explained, the impact on -- margin pressure comes from the Swedish operations in particular, where larger partners have done extremely well, very strong development. And we haven't quite had time to build up a lower segment and activate other customers to compensate for the loss in margins that we see as a result. In Denmark. We see loan consolidation impacting the margins, amongst other things. So our hope and the work we're putting in right now is about improving the margins. And that's really the aim of the road map that we showed you, generally speaking. So our aim is to stabilize the drop in margins but also to enhance the margins over time. But it's a pressure on margins we see across the board and for the entire sector in fact, and that's really the answer I can give you.

[Robin Rane, Equity Research Analyst]

[Interpreted] Okay. At the beginning of last year, you reduced the risk in Consumer Loans -- in consumer lending. And now that you've put back the extra provision made, are you planning to step up the risk level?

[Nils Helge George Carlsson, President & CEO]

[Interpreted] Well, over an extended period, we've actively reduced the risk level, and we're going to be very cautious. That remains our ambition in the future because we're still in a fairly uncertain position in the market. So that's really our stance here.

[Robin Rane, Equity Research Analyst]

[Interpreted] Okay. And one final question relating to the SEK 500 million investment. Have you shown anywhere how it's going to be distributed on the cost base and over time?

[Nils Helge George Carlsson, President & CEO]

[Interpreted] No, we have not. However, it's going to be over a longer period, and it's not going to impact the bottom line to any real extent. We'll be activating most of the investment we're planning to make. That's the setup. But we will get back to that in upcoming quarters and years, of course, because that's one of our biggest investments, of course. But in particular, this is something which is going to have a very positive impact on our marginal income and competitiveness.

[Operator]

[Operator Instructions] We have no further questions from the phone line. So I will pass back to the speakers in the room.

[Unknown Executive]

[Interpreted] We have questions here in the room. [ Emil ] from DNB.

[Unknown Analyst]

[Interpreted] I'm wondering about your new cloud-based bank platform. Could you explain a little bit more precisely the fact that it is cloud-based. How is that a competitive edge for you?

[Nils Helge George Carlsson, President & CEO]

[Interpreted] Well, we are in a situation -- we have been in a situation in the bank over the past few years where we have several different bank systems across the Nordic countries. And this is something which is highly inefficient, both internally in our operations and also towards customers on the outside world. It's very costly to operate several different bank systems. A cloud-based bank system gives us a much higher flexibility. It is a lot easier to roll out changes and amendments that will have an impact on all the markets at the same time. We can act more rapidly, time to market. Many retailers today are very anxious to try out things. As I mentioned on my second slide in my presentation, for example, there are a lot of buzzwords in the market right now, trends in banking and retail, et cetera. And what all of the retail market is doing and where they're headed with their payment solutions, the retailers are very anxious to be able to try out. And if you're stuck in an old banking system right now, you're not perhaps always able to try out and offer that possibility. So it's very practical and very clear step, which I believe many of our customers will be able to benefit from in very near future. So precisely, it has to do with internal efficiency movements, being more cost-efficient, by having one single bank system, but also being able to offer very competitive trying-out opportunities and much more rapid in time to market. Those are some of the features.

[Unknown Executive]

[Interpreted] Nicolas from DNB as well.

[Nicolas McBeath, Analyst]

[Interpreted] A follow-up question to the previous question -- an earlier question on the loan margins. Could you quantify a little bit what the margins look like in the new loans in Consumer Loans you issued compared to the average across the loan book?

[Nils Helge George Carlsson, President & CEO]

[Interpreted] No. We see that there is a difference in the Norwegian operations, for example. And there, we've had a swap of customers because we lost such volume in lending, and we've been -- it's been replaced by customers with lower margin and lower interest rate. That obviously impacts us. But the difference, the gap is not something we give guidance on.

[Nicolas McBeath, Analyst]

[Interpreted] Okay. And another related question. The fact that you've reduced your risk level and you've moved the, say, 10% of most risk-prone customers, when do you expect this to be seen in underlying credit quality? And could you quantify approximately what you expect this is going to give in terms of impact in normalized credit losses?

[Sofie Tarring Lindell, CFO & Head of IR]

[Interpreted] We already see the impact. You see that the credit loss level is lower both in Q2 and Q3. So we're seeing the impact, but we're not quantifying above and beyond that.

[Unknown Executive]

[Interpreted] Jens from Carnegie.

[Jens Hallén, Research Analyst]

[Interpreted] I thought I'd look at the payments margins a little bit more. We've been talking about this for quite some time now. And the fact that large customers -- we're 18, 19 months into the COVID pandemic. And so if you compare Q2 to Q3, why is there such an impact? I'm probably looking for the floor. When are we going to hit the floor? If you don't want to talk future, perhaps you could at least give us a little bit more information about the Q3 impact compared to Q2 at least. Why is there such a tension? Why is there such a difference?

[Nils Helge George Carlsson, President & CEO]

[Interpreted] Yes. It's an excellent question. Good question. Thank you. But that's one of our challenges. We have large brands in Sweden doing extremely well. They're very strong. We do not always have the ability to compensate this with better margin on lower customer segments. And that's also why we've started this program on customer success, to try and ensure better margin levels, generally speaking. This is clearly one of our challenges.

[Sofie Tarring Lindell, CFO & Head of IR]

[Interpreted] And their share is growing and growing. That's what we've seen over the past 18 months that we've not been able to fully compensate. So now even between Q2 and Q3, relatively speaking, they are growing more than the average size in the loan book.

[Jens Hallén, Research Analyst]

[Interpreted] So just to make sure I understand you correct. I can understand the impact on the margin. And if it continues in this manner, the margin might drop a little bit more. But if you look at the net interest income in absolute numbers, in kronor, does this mean that the loan book on smaller customers is reducing? So that in absolute numbers, you're seeing lower income?

[Sofie Tarring Lindell, CFO & Head of IR]

[Interpreted] Yes.

[Jens Hallén, Research Analyst]

[Interpreted] Very good. And then a little bit about the future to try and understand the situation. That loan book on smaller customers, is it almost at the level where it's so small that it's going to have a smaller and smaller impact, so say, in Q4, at the beginning of next year, in terms of the kronor, you should be through it?

[Sofie Tarring Lindell, CFO & Head of IR]

[Interpreted] Yes. That's our full focus, of course. That's why we're starting clusters and partner success programs, so that we can activate the small ones. And if you look at the Nordic markets, we do not have partners of the same magnitude, not as big in terms of partners. So we do expect to see an impact there.

[Jens Hallén, Research Analyst]

[Interpreted] I'm jumping around a little bit. On capital, you mentioned there's a lot of uncertainty. Yes. But what's your perspective on this? Does everything have to be written in stone before you make your decisions? You can have a conservative approach, of course. You'll get 2% in contracyclical buffer requirements on the book or for the group as a whole possibly. You can add an additional systems level to guidance. So where are you now? 600 points over. What does it take?

[Sofie Tarring Lindell, CFO & Head of IR]

[Interpreted] The countercyclical buffer -- it's really quite obvious. Yes, the countercyclical buffer, they've already stated that it's gradually going to be reintroduced by Q2. What we see in the Pillar 2 guidance in the Swedish financial supervisory authority such as that we're looking for decisions, we don't know if they'll come. To what extent will they impact us, we don't know the actual provisions. It's still unknown. And we have an ambition to increase our growth. So we'd like to wait and see where we end up before we make any further decisions for the future.

[Jens Hallén, Research Analyst]

[Interpreted] Okay. And a question on costs. I'm jumping back and forth just to make sure that you're keeping up with me. The SEK 500 million, yes, we know about that amount. We'll have to see over the next few quarters or years how it's going to be implemented in the investment. But if we look at the underlying costs, this is something that has stood out a bit as far as you're concerned. They continue downward. What's your thinking? Would you like to give any sort of guidance or indication in one way or another on what we can expect for 2022 and '23 cost excluding major investments?

[Nils Helge George Carlsson, President & CEO]

[Interpreted] I can go first, and then I'll give the floor to Sofie. We have a new financial C/I ratio of 35%. It's impacted by the fact that the income side is struggling to keep up to the extent we'd like it to. It's impacting the C/I ratio in a negative manner. But we have a fairly good cost agenda as far as I'm concerned. We see what's happening. We see it's coming down. But the relation between income and cost is where we see the impact, and it can be a little bit tough to have a look at occasionally. I come from Småland. I believe I am quite good at keeping tabs on cost. Our ambition is to reduce the cost and become even more efficient obviously. And that's something which underpins the decision to create one single bank system. This is not disconnected, as you might like to suggest, from the large investment. It's all about reducing our cost a great deal more, in fact, in the longer term. That's the purpose. That's the aim. And we believe that we have a fairly well-founded argument, in fact, in favor of that development materializing.

[Jens Hallén, Research Analyst]

[Interpreted] Okay. Can I just add a little claim here and see if Sofie would like to comment on that when she answers the other part of the question? So by way of a guess, for 2022, you talked about 80% in fixed costs approximately. So the marginal impact with higher volume is quite small. You say you have a fairly good cost base already at this stage. So in the short term -- so short term, so say, 2022, before you see the impact from the new IT system. Do you have the impression that this is a fairly good base to use for 2022 without any real major up or down -- turns in any direction?

[Sofie Tarring Lindell, CFO & Head of IR]

[Interpreted] Yes. I believe that's a good perspective. As I mentioned earlier, we have to step up a little bit in marketing, but we also see efficiency improvement opportunities in some parts of the operation. So you can expect some fluctuations as we move forward. But overall, we're fairly satisfied with our cost level. So we want to add volume more than anything.

[Jens Hallén, Research Analyst]

[Interpreted] I don't know if anyone else would like to have a question. Otherwise, I have one more, in fact.

[Sofie Tarring Lindell, CFO & Head of IR]

[Interpreted] Go ahead.

[Jens Hallén, Research Analyst]

[Interpreted] Priority loans -- so-called priority loans in Norway, 2 questions is -- with collateral. One, do you need to make any amendments to the systems to make that work? And secondly, quite a lot of actors are offering priority loans. Well, it's been on and off in Norway really, you could say. What's your edge? Those are my 2 questions, the edge for you in priority loans and the system adaptation.

[Nils Helge George Carlsson, President & CEO]

[Interpreted] Very minor system changes to offer priority loans up to 600,000 with collateral in Norway, and we see that many of our competitors use this. They offer it successfully. We have not been doing it, but we believe we can also be very successful. It's not about us having to be unique always. We have to be able to offer this as a product. The Norwegian market, that's really where we've been fairly open and transparent both at the Capital Market Day and today. This has been our struggling area. But we have reached new sales levels which we haven't seen over the past 3, even 4 years, in fact. It's a very positive development. And when we start offering priority loans, now we hope that we are on par with all the competitors. So it's a way of strengthening us. It's not just about being unique. It's also about what you can offer.

[Unknown Executive]

[Interpreted] We have no further questions over the phone line.

[Nils Helge George Carlsson, President & CEO]

[Interpreted] Excellent. Well, then we will close this presentation. Thank you to all of you here and those of you at the -- behind the screens and everyone who's shown an interest in Resurs Bank. Thank you very much to all.