CEO presentation of Q4 2008 results
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Transcript of CEO presentation of Q4 2008 results
Interim report Q4 200812 February 2009
Jan LidénPresident and CEO
2© Swedbank
Content
• Fourth quarter 2008– Group– Business areas
• Comments on issues in focus– Credit quality– Liquidity and funding– Capitalization– Dividend
• Summary and conclusions
Profit trend
4© Swedbank
Fourth quarter 2008 – Group
• Profit for the period increased by 34% to SEK 3 318m (2 468 Q3), excl. impairment of goodwill
• Net interest income increased by +6% to SEK 5 742m (5 424)
• Net commission income decreased by 11% due to downturn in the stock market
• Increased provisions for loan losses, SEK 1 633m (812), of which Baltic Banking amounted to SEK 977m
• Impairment of goodwill in Ukraine amounted to SEK 1 403m
• The proposed dividend amounts to SEK 2.40 per preference share and SEK 4.50 per ordinary share.
Profit for the period, SEKm
* Excl. impairment of goodwill SEK 1 403m
5© Swedbank
** Including total subscribed capital
Fourth quarter 2008 – Group, cont.
• Successful share issue of SEK 12.4bn increases the tier 1 capital ratio to 10.7%
• Stronger liquidity due to larger funding volumes (with and without state guarantee)
• Prepared for tougher times
Tier 1 capital ratio, %
6© Swedbank
Business areasSwedish Banking• Continued lending growth, corporate lending
decreased due to cooperation with Kommuninvest
• Net interest income increased by 6%
• Continued focus on cost control and credit quality
Baltic Banking• Significant macroeconomic challenges
• Continued strong profit before loan losses
• Increased provisions for loan losses
• Focus on credit quality
Swedbank Markets• Growing customer trading and good risk
management entailed continued solid earnings
• Swedbank remains a leading player in the Swedish corporate bond market
• Market share in equities trading on Nasdaq OMX Stockholm increased
International Banking• Increased operating profit
• 18 new branches in Ukraine and two more in Russia during the period – focus on attracting deposits
• Good business development in the Nordic branches
• Impairment of goodwill
Comments on issues in focus
8© Swedbank
Credit quality – impaired loans are increasing
Share of impaired loansDistribution of lending
Sw edbank Mortgage
49%
Latvia6%
Estonia7%
Sweden75%
Other7%Lithuania
5%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08
Swedbank Mortgage Swedish Banking Baltic Banking Group
%
9© Swedbank
-500
-400
-300-200
-100
0
100
200300
400
500
Q1-
06
Q2-
06
Q3-
06
Q4-
06
Q1-
07
Q2-
07
Q3-
07
Q4-
07
Q1-
08
Q2-
08
Q3-
08
Q4-
08
-1.0
-0.8
-0.6-0.4
-0.2
0.0
0.2
0.40.6
0.8
1.0
0
200
400
600
800
1,000
1,200
Q1-
06
Q2-
06
Q3-
06
Q4-
06
Q1-
07
Q2-
07
Q3-
07
Q4-
07
Q1-
08
Q2-
08
Q3-
08
Q4-
08
0.0
0.5
1.0
1.5
2.0
2.5
-500-400-300-200-100
0100200300400500
Q1-
06
Q2-
06
Q3-
06
Q4-
06
Q1-
07
Q2-
07
Q3-
07
Q4-
07
Q1-
08
Q2-
08
Q3-
08
Q4-
08
-1.0-0.8-0.6-0.4-0.20.00.20.40.60.81.0
Credit quality – write-offs still low
Swedish Banking
Baltic Banking
Swedbank MortgageSEKm
SEKm
SEKm%
%
%
Loan losses, net Write-offs Loan loss ratio, net
Loan losses, net = write-offs + provisions –recoveries
10© Swedbank
Selected exposures – limited risk
• The secured exposure to Lehman is unchanged – USD 1 350m– 69 loans with 55 properties as underlying collateral– The collateral value is well above the exposure amount– Updated analysis shows that there is no further need of provisions
• Exposure to hedge funds – SEK 1.4bn– All exposure is secured
• Exposure to Conduits and SIVs – SEK 94m• Exposure to CDOs – SEK 183m• Exposure to Private Equity – SEK 15.1bn
– Nordic acquisition finance– 99% constitutes senior debt– Largest sector is health care, 45 %– Average loan amount is about SEK 650m
11© Swedbank
Low risk in interest-bearing securities (SEK 134bn)
As of 31 December, around 19 percent of the Group’s interest-bearing securities were valued using valuation models against around 81 percent as of 30 September and around 5 percent as of 31 December 2007
Holding distributed per sector
Mortgage bonds, covered
37%
Public sector21%
Banks15%
Other corporations
11%
Other financial corporations
9%
Mortgage bonds, not
covered7%
Holding distributed per currency
SEK73%
EUR16%
USD4%
NOK5%
LVL1%
LTL1%
EEK0%
GBP0%
Geographic distribution of issuers
Sweden73%
UK7%
Norway5%
USA5%
Baltics2%
Others8%
Accounting classification
Held for trading*
93%
Held-to-maturity
investments **Reclass-if ied as of
2008-06-306%
Held-to-maturity
investments ** Intitial
classif ication1%
* Recognised at fair value with changes in value through P/L.
** Measured at amortised cost
12© Swedbank
Liquidity for more than 1 year
Stress test of liquidity as of 31 Dec 2008
0
50
100
150
200
250
1W 2W 3W 1M 2M 3M 4M 5M 6M 9M 1Y
SEK
bn
31/12/2008 05/02/2009
Main assumption: No access to capital markets; no refinancing oflending to credit institutions, issued bonds or subordinated loans.
13© Swedbank
Prepared for tougher times
• Tier 1 capital ratio, 10.7 %• Solid liquidity• Closer evaluations of exposures deemed at higher risk• Continued focus on systematic work in the Baltics:
– Reinforcement of resources– Processes– Legal structures– Scenario planning
14© Swedbank
Group resultsMikael Inglander
CFO
15© Swedbank
Income statement, Group
SEKmQ4
2008Q3
2008 %Q4
2007 %Net interest income 5 742 5 424 6 5 259 9Net commission income 2 011 2 265 – 11 2 536 – 21Net gains/losses on financial items at fair value 1 244 – 109 386Other income 1 349 658 693 95Total income 10 346 8 238 26 8 874 17Staff costs 2 340 2 223 5 2 111 11Profit-based staff costs 262 235 11 522 – 50Other expenses* 2 300 1 855 24 1 893 22Total expenses 4 902 4 313 14 4 526 8Profit before loan losses 5 444 3 925 39 4 348 25Loan losses, net 1 633 812 238 Operating profit 3 811 3 113 22 4 110 – 7Tax 500 640 – 22 950 – 47Profit for the period 3 311 2 473 34 3 160 5Attributable to shareholders of Swedbank 3 318 2 468 34 3 108 7
* Excluding impairment of goodwill SEK 1 403m, Q4 2008
16© Swedbank
Income statement, Group
SEKmJan-Dec
2008Jan-Dec
2007 %Net interest income 21 702 19 157 13Net commission income 8 830 9 880 – 11Net gains/losses on financial items at fair value 2 351 1 691 39Other income 3 580 2 196 63Total income 36 463 32 924 11Staff costs 9 142 8 134 12Profit-based staff costs 950 1 658 – 43Other expenses* 7 993 6 927 15Total expenses 18 085 16 719 8Profit before loan losses 18 378 16 205 13Loan losses , net 3 156 619 Operating profit 15 222 15 586 – 2Tax 2 880 3 450 – 17Profit for the period 12 342 12 136 2Attributable to shareholders of Swedbank 12 290 11 996 2* Excluding impairment of goodwill SEK 1 403m, 2008
17© Swedbank
Business areas
2008 vs 2007, SEKm 2008 % 2008 % 2008 % 2008 % 2008 %Net interest income 11 840 1 6 448 14 2 171 89 1 555 32 76 – 8Net commission income 4 078 – 9 1 925 4 354 16 960 – 28 1 513 – 19Other income 2 349 59 1 040 – 17 407 530 – 30 209 – 10Total income 18 267 3 9 413 7 2 932 87 3 045 – 7 1 798 – 18Staff costs 4 282 – 0 1 801 – 12 846 80 1 094 – 7 414 – 3Other expenses 4 799 2 1 796 20 769 78 760 11 427 – 8Total expenses 9 081 1 3 597 1 1 615 79 1 854 – 0 841 – 5Profit before loan losses 9 186 6 5 816 11 1 317 99 1 191 – 16 957 – 26Loan losses, net 594 1 800 478 290 0 Operating profit 8 592 0 4 016 – 16 839 70 901 – 36 957 – 26Tax 2 156 – 11 367 – 19 261 231 – 39 224 – 30Profit for the period 6 436 4 3 649 – 16 578 54 670 – 35 733 – 25Attributable to Swedbank's shareholders 6 425 4 3 649 – 16 578 54 629 – 30 733 – 25Return on allocated equity, % 21.8 24.4 6.5 17.6 33.6* Excluding impairment of goodwill SEK 1 403m, 2008Ukrainian Banking Operations was consolidated July 2007
AssetMgmt
Int'l.Banking*
Swedish Banking
BalticBanking
Swedbank Markets
18© Swedbank
Net interest income, Swedish Banking
SEKmQ4 2008
vs Q3 2008Q4 2008
vs Q4 2007Net interest income Q3 2008 2 857Net interest income Q4 2007 2 927
Changes:Higher lending volumes 15 166Higher lending margins 247 197Higher deposit volumes 36Decreased deposit volumes – 40Decreased deposit margins – 81 – 103Other changes 32 – 193Total change 173 103Net interest income Q4 2008 3 030 3 030
19© Swedbank
Baltic Banking Operations, change in net interest income
SEKmQ4 2008
vs Q3 2008Q4 2008
vs Q4 2007Net interest income Q3 2008 1 667Net interest income Q4 2007 1 588
Changes:Higher lending volumes 104Decreased lending margins -24 -124Exchange rate effect, lending 67 89Decreased deposit volumes -61 -14Higher deposit margins 206 72Exchange rate effect, deposits 41 59Other changes -221 -99Total change 8 87Net interest income Q4 2008 1 675 1 675
20© Swedbank
Net commission income, Group
SEKmQ4
2008Q3
2008 %Q4
2007 %Payments 889 899 – 1 800 11Lending 129 194 – 34 162 – 20Brokerage 141 166 – 15 290 – 51Asset management 727 864 – 16 995 – 27Insurance 59 69 – 14 80 – 26Corporate finance 58 22 209 – 72Other 8 51 – 84 0 Total net commissions 2 011 2 265 – 11 2 536 – 21
21© Swedbank
Net gains and losses on financial items at fair value
SEKm Q4 2008 Q3 2008 Q2 2008 Q1 2008 Q4 2007 Q3 2007Swedish Banking 828 -126 179 16 116 1 Swedbank Mortgage open interest rate exposure 763 -172 29 -22 66 -129 MasterCard 101 89Baltic Banking 12 107 205 78 163 213International Banking 229 -6 114 22 30 42 Inefficiency in hedge accounting -126 -72 61Swedbank Markets 304 -210 118 244 137 167 Valuation of credit bonds 0 -217 0 -187 0 -60Asset Management & Insurance 1 -14 25 -15 -1 1Shared Service and Group Staff -156 139 512 -270 -31 -228 Derivatives Group funding 0 0 419 -272 21 -89Eliminations 26 1 -12 0 -28 0Total net gains and losses 1 244 – 109 1 141 75 386 196
22© Swedbank
Expenses
SEKmQ4
2008Q3
2008 %Q4
2007 %Swedish Banking 2 390 2 197 9 2 279 5Baltic Banking Operations 977 926 6 1 062 – 8International Banking* 557 315 77 302 84Swedbank Markets 500 398 26 530 – 6Asset Management & Insurance 182 200 – 9 230 – 21Other 296 277 7 123 Total expenses 4 902 4 313 14 4 526 8of which staff costs in: Swedish Banking 1 120 1 046 7 1 096 2Baltic Banking 453 483 – 6 587 – 23International Banking 257 213 21 173 49Swedbank Markets 261 227 15 333 – 22Asset Management & Insurance 107 99 8 138 – 22
* Excluding impairment of goodwill SEK 1 403m, Q4 2008
23© Swedbank
Key figures, Group
Jan-Dec2008
Jan-Dec2007
Return on equity, % * 17.1 18.9Earnings per share, SEK * 21.95 21.78Equity per share, SEK 111.54 131.96C/I ratio * 0.50 0.51Loan loss ratio, % 0.28 0.07Share of impaired loans, % 0.52 0.13Provision ratio for impaired loans, % 60 120Core tier 1 capital ratio, new rules, % 9.3 7.3Tier 1 capital ratio, new rules, % 10.7 8.5Capital adequacy ratio, new rules, % 14.8 12.7* Excluding impairment of goodwill SEK 1 403m, 2008
24© Swedbank
Summary
• Strong result
• Transparent, diversified balance sheet
• Improved capitalization and liquidity
• Focus on systematic work to manage the Group through more difficult times
25© Swedbank
Appendix
26© Swedbank
Shipping exposure• Exposure to shipping companies
amounted to SEK 20.4bn as of 31 December– Duration of the portfolio is 4 years– Average age of vessels is six years– Limited exposure to dry cargo (9%) and car
transports (2.7%)– Customers generally have long freight
contracts
Tanker33%
Ro-Ro, Container
&Bulk25%
Offshore42%
27© Swedbank
Maturity profile – long-term funding
0
20
40
60
80
100
120
2009 2010 2011 2012 2013 2014-
SEK
bn,
nom
. am
ount
0
20
40
60
80
100
120
2009 2010 2011 2012 2013 2014-
SEK
bn, n
om. a
mou
nt
Swedbank (excl. Swedbank Mortgage) Maturity profile Swedbank Mortgage, Maturity profile
28© Swedbank
Long-term funding 2008-2009
* As of 9 Feb 2009
SEK bn Swedbank Swedbank Mortgage
Debt to mature 2008 55 155Issued 2008 110 97
-of which guaranteed 61 0Debt to mature 2009 49 104
Issued 2009* 41 5-of which guaranteed 40 0
Swedbank Group - Long-term funding
29© Swedbank
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
<30% 30-50% 50-60% 60-75% 75-85% >85%
Småhus Flerfamiljshus (inkl Brf) Bostadsrätter
Mortgage lending, SwedenSEK 595bn
LTV
Lending
Funding
Average loan-to-value 46 percent. More than 50 percent of the total loan portfolio has a loan-to-value ratio of less than 30 percent.
LTV
Share of portfolio
Forest & Agriculture
6%
Single family homes60%
Commercial real estate
0%
Condiminiums15%
Multi-family homes2%
Tenant ow ners associations
14%
Public sector3%
CP26%
Covered Bonds68%
Equity6%
Funding
30© Swedbank
Renting of single-family homes
28%
Renting, industry
36%
Renting, other estate
9%Renting, other
industry8%
Tenant ow ners associationsr
19%
Other lending to the public, Sweden(excl. Swedbank Mortgage), SEK 309bn
Real estate management
SEKbn
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
Public sector
Other corporate lending
Forestry and agriculture
Transportation
Industry
Construction
Hotel and restaurant
Retail and w holesale
Real estate management
Individuals
31© Swedbank
Baltic Banking
32© Swedbank
Asset qualityNet loan losses
-100%0%
100%200%300%400%500%
Q1
07
Q2
07
Q3
07
Q4
07
Q1
08
Q2
08
Q3
08
Q4
08
0153045607590105
EU
Rm
Net loan losses NLL YoY % growth
0.98%0.58%1.61%0.77%
2008
1.91%0.77%3.70%1.32%Q4 08
0.35%Baltic Banking0.17%Lithuania0.51%Latvia0.33%Estonia
2007Net loan losses
0.98%0.29%
0.52%1.02%2.16%
1.32%2008
0.35%0.34%
0.33%0.31%0.57%
0.42%2007
1.91%0.73%
0.95%1.99%5.81%
2.95%Q4 08
incl industryincl real estate
Baltic Bankingincl private home loans
Private
Corporate
Net loan losses
5.75.5
15.1148.70.5%100.72007
40.18.7
27.0320.22.6%535.92008
4.87,28.2
102.20.3%41.5
2006
Total provisions, EURmOverdues >60 days, %
Total repossessed assets, EURmRecoveries, EURm
Write offs, EURm
Overdues >60 days, EURm
Risk indicators
33© Swedbank
Asset quality by country
Latvia
8 11 16
60
0
20
40
60
Q1 08 Q2 08 Q3 08 Q4 08
EURm
Estonia
7 11 14
28
0
20
40
60
Q1 08 Q2 08 Q3 08 Q4 08
EURm
NLL ratio – change in total provisions (both for performing and non-performing loan portfolio) and net write-offs against beginning of the year portfolio
Lithuania
3 412 11
0
20
40
60
Q1 08 Q2 08 Q3 08 Q4 08
EURm
Net loan loss dynamics
• Global recession has had a large negative impact on the Baltic economies. The impact is seen as a surge in net loan loss levels in Q4 2008 in Estonia and Latvia. Lithuania expected to follow with a time lag
• Downturn has particularly sharp impact on residential market.
Net loan losses
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08
Est Lat Lit Baltic Banking
34© Swedbank
Private portfolio risk profile
0%
10%
20%
30%
40%
1 2 3 4 5 6 7 8 9 10 11 12
EU
Rm
Q4 2007 Q4 2008
SME/SSE risk profile
0%
5%
10%
15%
20%
25%
A A- B B- C C- D D- E E- F
EU
Rm
Q4 2007 Q4 2008
Large corporate risk profile
0%
5%
10%
15%
20%
25%
30%
1 1- 2 2- 3 3- 4 4- 5 5- 6 6- 7
EU
Rm
Q4 2007 Q4 2008
* Risk exposure: on-balance + off-balance portfolio
Low riskNon-
performing
Low risk Non-performing
Credit quality of the loan book
• Well diversified portfolio dominated by retail exposures• Macro developments have triggered downgrades in all
segments: – Real estate sector drives downgrades in large
corporate segment (exposure > EUR 0.8m). Due to negative sentiment new lending is down, and the effect of downgrades cannot be balanced any more
– SME/SSE has been the first segment to react to downturn. Acceptable risk profile retained (45% of portfolio with PD<1%)
– Private portfolio has low risk profile (72% with PD<1%)
Low risk Non-performing
35© Swedbank
Overdue developmentRising overdues over 90 days have the most impact on rising NLL levels
Corporate, EE
0%
1%
2%
3%
4%
5%
dec-07 mar-08 jun-08 sep-08 dec-08
31-60 days 61-90 days over 90 days
Corporate, LV
0%
1%
2%
3%
4%
5%
dec-07 mar-08 jun-08 sep-08 dec-08
31-60 days 61-90 days over 90 days
Corporate, LT
0%
1%
2%
3%
4%
5%
dec-07 mar-08 jun-08 sep-08 dec-08
31-60 days 61-90 days over 90 days
Private, EE
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
dec-07 mar-08 jun-08 sep-08 dec-08
31-60 days 61-90 days over 90 days
Private, LV
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
dec-07 mar-08 jun-08 sep-08 dec-08
31-60 days 61-90 days over 90 days
Private, LT
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
dec-07 mar-08 jun-08 sep-08 dec-08
31-60 days 61-90 days over 90 days
* Overdues / current portfolio
36© Swedbank
Overdue loans – Swedbank Estonia and Swedbank Latvia vs market
Estonia - overdues over 60 days / current portfolio
0%
1%
2%
3%
4%
dec-
05
mar
-06
jun-
06
sep-
06
dec-
06
mar
-07
jun-
07
sep-
07
dec-
07
mar
-08
apr-
08
maj
-08
jun-
08
sep-
08
dec-
08
Rest of the market Swedbank Estonia (bank)
Estonia - overdues over 30 days / current portfolio
0%
1%
2%
3%
4%
dec-
05
mar
-06
jun-
06
sep-
06
dec-
06
mar
-07
jun-
07
sep-
07
dec-
07
mar
-08
apr-
08
maj
-08
jun-
08
sep-
08
dec-
08
Rest of the market Swedbank Estonia (bank)
Latvia - overdues over 30 days / current portfolio
0%1%2%3%4%5%6%7%8%9%
dec-
04
mar
-05
jun-
05
sep-
05
dec-
05
mar
-06
jun-
06
sep-
06
dec-
06
mar
-07
jun-
07
sep-
07
dec-
07
mar
-08
jun-
08
sep-
08
dec-
08
Rest of the market Swedbank Latvia (bank)
Latvia - overdues over 90 days / current portfolio
0%1%2%3%4%5%6%
dec-
04
mar
-05
jun-
05
sep-
05
dec-
05
mar
-06
jun-
06
sep-
06
dec-
06
mar
-07
jun-
07
sep-
07
dec-
07
mar
-08
jun-
08
sep-
08
dec-
08
Rest of the market Swedbank Latvia (bank)
Source: Bank of Estonia, FKTK of Latvia, Hansabank Group data
37© Swedbank
Baltic lending by sectors
536
1 018
1 678
1 721
3 092
3 241
0 2 000 4 000 6 000 8 000 10 000
Other*
Construction
Transport
Industry
Retail &Wholesale
Real-estatemgmt
Individuals
EU
Rm
-62
-18
-102
-127
-10
-68
-71
-150 -100 -50 0
Portfolio (EURm), December 2008 Portfolio growth (EURm), Q4 08
xx% - share of portfolio* Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans
3%
5%
8%
9%
15%
16%
44%Mortgage Other
38© Swedbank
Estonian lending by sectors
174
282
454
633
1 161
3 854
1 450
0 1 000 2 000 3 000 4 000
Other
Construction
Transport
Industry
Retail &Wholesale
Real-estatemgmt
Individuals
-28
-7
-52
-77
0
-49
-25
-100 -50 0 50 100 150
Portfolio (EURm), December 2008 Portfolio growth (EURm), Q4 08
48%
2%
4%
6%
8%
15%
18%
xx% - share of portfolio* Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans
39© Swedbank
Latvian lending by sectors
252
298
622
511
1 078
2 805
915
0 1 000 2 000 3 000 4 000
Other
Construction
Transport
Industry
Retail &Wholesale
Real-estatemgmt
Individuals
-6
3
-43
-13
4
-20
-58
-100 -50 0 50 100 150
Portfolio (EURm), December 2008 Portfolio growth (EURm), Q4 0843%
4%
5%
10%
8%
17%
14%
xx% - share of portfolio* Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans
40© Swedbank
Lithuanian lending by sectors
438
603
578
853
2 282
110
877
0 1 000 2 000 3 000 4 000
Other
Construction
Transport
Industry
Retail &Wholesale
Real-estatemgmt
Individuals
-28
-15
-7
-37
-14
0
-2
-50 0 50 100 150
Portfolio (EURm), December 2008 Portfolio growth (EURm), Q4 08
40%
2%
8%
10%
10%
15%
15%
xx% - share of portfolio* Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans
41© Swedbank
Mortgage portfolio
LT Mortgage overdues > 30 days
0%
1%
2%
3%
4%
5%
0m 3m 6m 9m 12m 15m 18m 21m 24m 27m 30m 33m 36m
Ove
rdue
s / B
alan
ce, %
2005 2006 2007 2008
EE Mortgage overdues > 30 days
0%
1%
2%
3%
4%
5%
0m 3m 6m 9m 12m 15m 18m 21m 24m 27m 30m 33m 36m
Ove
rdue
s / B
alan
ce, %
2005 2006 2007 2008
LV Mortgage overdues > 30 days
0%
1%
2%
3%
4%
5%
0m 3m 6m 9m 12m 15m 18m 21m 24m 27m 30m 33m 36m
Ove
rdue
s / B
alan
ce, %
2005 2006 2007 2008
• Due to the effects of crisis all vintages are converging to the same level of overdues. Complicated to separate the effects of origination quality from the downturn impact
* Part of loans issued backed by guarantee of the State insurance company
12%30%67%
EE
13%33%70%
LT*
12%LTV>100% (share of portfolio)38%LTV>80% (share of portfolio)71%LTV, total portfolioLV
© Swedbank
Corporate client portfolio
• From 2005 to 2008, new lending changed– New lending in 2006 and 2007 mainly went to
companies rated 4 or 5 (scale of 7)– In 2008, the downturn caused downgrades,
rating 5 real estate portfolio most affected– New lending in 2008 focused to high quality
borrowers, mainly ratings 1 to 3-. Volumes decreasing due to negative market sentiment
Large corporate risk profile
0%
5%
10%
15%
20%
25%
30%
1 1- 2 2- 3 3- 4 4- 5 5- 6 6- 7
mEUR
2007
2008
BB Rating 6 & 7 exposures
0 200 400 600 800 1 000 1 200
2008
2007
EURm
Commercial real estate
Production
Retailing
Transportation
Other
BB Total provisions, YTD
0 50 100 150 200 250 300 350 400 450
2008
2007
mEUR
Commercial real estate
Production
Retailing
Transportation
Other
43© Swedbank
Real estate portfolio• Real estate and in particular residential
development is the most sensitive sector in Baltic Banking portfolio
• Around 58% from total Real Estate portfolio are cash flow generating properties with good tenant mix. Baltic Banking has always strictly restrained from financing speculative type of properties
• Downturn has caused drop in residential market transaction volumes. As a result residential development portfolio (31% of total real estate portfolio) is demonstrating increase in overdue and default figures. Portfolio vulnerabilities are well understood and monitored, action plans set on a case by case basis
0
300
600
900
1200
1500
1800
Dec.04 Jūn.05 Dec.05 Jūn.06 Dec.06 Jūn.07 Dec.07 Jūn.08 Dec.08
No
of tr
ansa
ctio
ns
Tallinn Riga Vilnius
Apartment transaction volume development
44© Swedbank
Baltic lending by sectors – real estate
Portfolio, December 2008
Estonia
24%
6%
23%
29%
15%
3%
3%
18%
43%
5% 8%
8%
15%
Construction OtherIndividuals TransportProduction Retail & WholesaleReal-estate mgmt
Latvia15%
12%
22%
11%2%
38%
Lithuania13%
5%
31%
40%
6%5%
Office
Production&Warehouse
Residential
Retail
Land plots
Other
45© Swedbank
Collateral breakdown
100%
2%
4%
5%
18%
2%
38%
36%
2%
%
20,167
279
706
985
3,621
668
7,960
6,660
273
Dec 2007
1%370State
20,569
328
776
1,104
3,742
317
7,715
7,321
Dec 2008
100%
1%
4%
5%
18%
3%
39%
33%
%
Other collateral*
UnsecuredUnsecured corporate
Unsecured private
Corporate real-estate
Private real-estate
Guarantees
Total**
• Baltic Banking loan portfolio is adequately secured.
• Private mortgage portfolio is fully covered with family houses and apartments (as a rule owner occupied).
• Commercial real estate collaterals are revaluated at least once per year. Valuation is performed by independent experts.
• Full asset pledge, including tangible assets and current assets, is most common case for Corporate portfolio. Collateral position enhancement with owner guarantees and additional collateral is used for more risky customers and SME segments.
• The share of unsecured loans is insignificant: 5.4% (used for top ratings in corporate segment and consumer products in private).
Baltic Collateral (EURm)
*Other collateral is deposits, customer payments, vehicles, etc** Total loans including repos