ABG Sundal Collier Holding ASA (ABG) Earnings Call Transcript

I am Kristian Fyksen, and I will take you through the highlights, the market update and an update from our business areas before opening up for questions through the Teams function for raising those. Before going into the presentation, a couple of highlights from the quarter. This is the strongest third quarter for ABG Sundal Collier on record, reflecting the strength of our Nordic platform. Q3 revenues are NOK 594 million, up 25% from the corresponding quarter last year with reported EPS up 16% and adjusted EPS adjusted for write-offs in the quarter, up 30% from the corresponding quarter. Year-to-date, revenues are NOK 1.7 billion, up some 19% so far this year. The contributions from the quarter are broadly based across business areas, geographies and products. And in addition, we have also had an important quarter in terms of other developments in the group. As you are all aware, we announced the Nordnet partnership on the private banking business, combining our respective strengths into the private banking universe, which we'll launch in 2027. The response from the market has been very encouraging, and we are very much looking forward to continue working with Nordnet to launch that venture in 2027. We have also announced that Sverre Tyrhaug will take over the role as CEO during fourth quarter this year, looking forward to having Sverre on board shortly. Looking ahead and into the fourth quarter, we have a well-diversified pipeline across products and geographies again. And our focus is serving our clients in the best possible way going into the fourth quarter, as always. Let me then turn to the numbers and bring the presentation up on the screen. As mentioned, year-to-date revenues of -- slightly above NOK 1.7 billion. We have a pretax margin so far this year of 20.6%, almost similar to the last year. And as mentioned, the diluted EPS is up some 16% to NOK 0.47 so far this year. If we adjust for the after tax or net of tax write-off related to the current private banking platform, the adjusted EPS for the quarter is up 30% compared to the corresponding quarter last year, also showing the leverage in our operating model. Moving to the macro and market backdrop on the next page. We have had a relatively stable quarter in the equity markets with indices on strong levels, slightly up, supporting the transaction activity, including on IPOs within the ECM space. The long-term interest rates are up both in the U.S. and Europe with credit spreads widening slightly towards the quarter end, which is, to a certain degree, impacting the short-term activity in the DCM part of the business. If we then look at market volumes on next page, ECM volumes are significantly up quarter-over-quarter. That being said, there are a few very large transactions driving this, but it's an underlying positive trend in the ECM part of the market. When it comes to debt capital markets, it's up quarter-over-quarter, and it's relatively stable last 4 quarters from record levels, meaning that the DCM volumes continues at a high pace, which is positive for the business. When it comes to the M&A volume measured in numbers of transactions, it is slightly down from the corresponding quarter last year. However, it's still at an okay level, and we continue being very active in the M&A space, although market could be stronger. Moving then to corporate financing and our results in the quarter. Corporate financing is so far this year, up 28%. As you will see, it's slightly down from the third quarter last year, but still at strong levels in a seasonably relatively silent quarter. We have done a number of transactions across ECM and DCM and across geographies and industries, including 3 IPOs completed in Stockholm in the quarter, a number of large placements on the ECM side and also a number of very large transactions on the DCM side, as you will see in the table to the right. Moving to the M&A and advisory part of the business. Q3 revenues are up significantly, close to doubled from similar quarter last year and year-to-date, up 31%. This is driven from all geographies, all areas, including and notably from our Project Finance business. We have in the quarter concluded several large and important transaction, including Eurowind Energy, Viva Wine Group and also the take private of Elektroimportoren. And we continue seeing the strength of our M&A platform, both measures in size of the transaction, but -- and also a number of transactions in the quarter and also in our pipeline. Looking at brokerage and research, Q3 revenues and year-to-date are close to stable, continues at a high level. It's another strong quarter in Norway with growth against tough comparables in the third quarter last year. Our U.S. franchise continues to gain momentum following key hires and higher client activity that we have initiated. And we see also strong performance in the Swedish program trading with like-to-like commissions up 23% year-over-year. And in sum, as I mentioned, strong performance at a high pace in our brokerage and research business. Next, on headcount. The increase in headcount is strategically driven and focused on investment banking, main explanation being the acquisition of FIH Partners, where integration is going very well. We have record results so far in Denmark, and we have one joint team covering Denmark from our new offices. So that is very promising and again, explains the majority of the change in headcount compared to last quarter. And again, this is strategically driven and part of our long-term plan to grow investment banking revenues overall. In terms of revenue per head, so far this year, up some 15% to NOK 5 million per head. Operating costs year-to-date, NOK 1.4 billion with compensation ratios at 57% year-to-date. The compensation part of the operating costs are driven by increase in revenue as it should be. When it comes to non-compensation cost, they are reflecting the consolidation of FIH Partners, where we also, as previously mentioned, expect synergies going forward, general cost inflation across the board and technology cost raising faster than general cost inflation. So that explains the cost development. In addition to that, in the third quarter, the costs includes approximately NOK 20 million in write-offs from discontinuing our current private banking platform following the launch of the Nordnet joint venture. When the private banking joint venture with Nordnet is launched in 2027, our consolidated cost base will be reduced by the current annual underlying run rate of approximately NOK 50 million where thereafter, over 50% share of the joint venture's net profit will be presented as income from equity accounted investments in our numbers going forward. To summarize the quarter, our strongest third quarter to date with revenues up 25%, very solid M&A and advisory performance with contributions across all areas within that business, several large ECM and DCM transactions completed in the quarter, including 3 IPOs. We have another all-time high in Denmark, demonstrating the strength of our platform following the combination with FIH Partners. We have seen a positive response to the partnership between ABG Private Banking and Nordnet. And as mentioned, we are entering the fourth quarter with a solid and diversified platform with the focus for the entire group to serve our customers in the best possible way going into the fourth quarter. So with that, thank you for attending, and let me open for any questions from the audience.

We have not received any questions. It seems like everything is clear so far.

Okay. Thank you very much for joining us this morning. Have a good day. Thank you.