H d l b k N di L C S iHandelsbanken Nordic Large Cap Seminar14 September 2010

Michael Wolf, CEO

Progress continued throughout Q2g g

• Net profit of SEK 1.6bn

• Improved credit quality

• Term funding YTD higher than full year maturitiesTerm funding YTD higher than full year maturities

• Strengthened capitalisation to 12.7 per cent Core Tier 1 l t b b k Ti 2 b dapproval to buy back Tier 2 bonds

2

Business achievements – highlights in Q2 g g

• Higher mortgage new sales market shares in Sweden

• Increased corporate activity

• Continued strong deposit trendContinued strong deposit trend

• Retail’s tailored service concept well received

3

Result by business area

Q2 updateSEKm Profit before impairments

RetailSolid credit quality, higher customer activity 1 000

2 000

SEKm

Q1 10

Q2 10

Large Corporates & InstitutionsGood credit quality, repricing continues, slower trading -1 000

0

Baltic BankingImproving asset quality, stabilised NII, Estonia back to profit

-2 000Retail Large

Corporates & Institutions

Baltic Banking

Russia & Ukraine

Asset Management

Ektornet

back to profit

Russia & UkraineStabilising credit quality, continued restructuring i R i

Institutions

2 000

SEKmOperating result

Q1 10

in Russia

Asset ManagementStable earnings

0

1 000Q2 10

g

EktornetRepossessed properties valued at SEK 1 010m, intake slower than the plan

-2 000

-1 000

Retail Large Baltic Russia & Asset Ektornet

4

intake slower than the plan Retail Large Corporates &

Institutions

Baltic Banking

Russia & Ukraine

Asset Management

Ektornet

Pressure decreasingNet interest income

g

5 000

SEKm

4 0233 79962 89

4 000

4 500Retail LCI Baltic Banking Russia

& UkraineGroup Treasury

and Other

-34 4162 -89

-204

3 000

3 500

2 500

3 000

1 500

2 000

500

1 000

NII Q1 10

5

0NII Q1 10 NII Q2 10

Commissions back to pre-crisis levelsNet commission income

p

• Positive trend from Q1 2009

• Market leader in cards and payments

• Growth driven by Asset Management

SEKNet commission income*

2 500

3 000

SEKm

1 500

2 000

0

500

1 000

0Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10

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* Excl non-recurring items

Term funding ahead of planLiquidity & Capital management

g p• YTD, SEK 150bn in term funding of

which around SEK 50bn during the d t 456Total long-

Outstanding wholesale funding (nom SEKbn )

second quarter

• SEK 60bn in remaining term funding maturities to roll or replace in 2010

397459

173

456

Total long-

Total long-term, non-guaranteed

maturities to roll or replace in 2010

• YTD around SEK 95bn of central bank repos and guaranteed funding has been

180

108

174

89Central bank

term, guaranteed*

redeemed

• Average maturity of wholesale funding further extended to 25 months

116

87

108

112Total short-term, non-

repos

further extended to 25 months (38 months for covered bonds)

61

97

280Total short-

term, guaranteed***

guaranteed**

Q2 2010

* Issued with more than 12 months maturity, government fee of 83bp** Including interbank deposits*** Issued with less than 12 months maturity government fee of 50bp

61guaranteed*** Q1 2010Q4 2009

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*** Issued with less than 12 months maturity, government fee of 50bp

Q2 developmentAsset quality

p

• No impact of European sovereign debt crises

• Further stabilisation/improvement in the Baltic countries

• Continued improved risk profiles on both the assetContinued improved risk profiles on both the asset and liability side

S db k’ ili tl i d• Swedbank’s resilience vastly improved– ICAAP

I t l t t t– Internal stress tests– Stress test of the Committee of European Banking Supervisors

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Asset quality

Credit impairments significantly reduced• Sweden very low levels

S ll i i R i d

p g y

8 000

SEKm

• Small recoveries in Russia and Ukraine

• Baltic countries

6 672

6 1216 000

7 000

• Baltic countries – Few new problems– Property prices stabilising/increasing

5 003

4 000

5 000

– Insolvency and debt restructuring laws– Positive trend likely to continue 2 210

2 000

3 000

963

0

1 000

2 000

-1 000

0

Q2 09 Q3 09 Q4 09 Q1 10 Q2 10

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Retail LCI Baltic Banking Russia & Ukraine Other

Significant progress made – still work to be done5Y CDS spreads

g p g400

300

350

200

250

150

50

100

030/12/2005 30/06/2006 31/12/2006 30/06/2007 31/12/2007 30/06/2008 31/12/2008 30/06/2009 31/12/2009 30/06/2010

Swedbank SEB Handelsbanken Nordea Danske Bank DnB NOR

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Source: Datastream

Swedbank SEB Handelsbanken Nordea Danske Bank DnB NOR

Will lending margin pressure decrease?g g p

• Swedbank has re-priced a larger part of liabilities compared to peerspeers

Source: SEB Enskilda Equity Research

Nordic banks long term funding broken down by time of issuance (based on ~3,000 bonds)

Portion of pre-, post and mid-crisis funding matters

The two extremes: Swedbank has only 30%

pre-crisis funding and 50% mid crisis funding80%

100%

120%

Handelsbanken has 60% pre-crisis funding and ony around 20% mid-crisis funding

0%

20%

40%

60%

0%

Sw edbank DnB NOR Nordea SEB Danske BankHandelsbanken

Pre-crisis Mid-crisis Post-crisis

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EQUITY RESEARCH 10

Basel 3 impact on Swedbank post July amendments*p p y

• NSFR is more or less in-line with proposed future minimum requirements, and LCR is well ahead of minimum requirementsand LCR is well ahead of minimum requirements

• Core Tier 1 capital expected to decrease less than 4%, and RWA expected to increase less than 2% compared with Basel 2to increase less than 2% compared with Basel 2

• Swedbank has a leverage ratio with a substantial margin to the proposed minimum level of 3%minimum level of 3%

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*Preliminary calculations

Summaryy

• NII pressure decreasing

• Improved risk profiles on both the asset and liability side

• Term funding ahead of planTerm funding ahead of plan

• Resilience vastly improved

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New insolvency law in Latvia yLegal protection proceedings Insolvency proceedings

of legal entitiesInsolvency proceedings

of private persons

NOVELTIESNOVELTIES• LPP plan = business plan• Diminished possibility to use LPP in bad faith, to delay time• Debtor should be able to make factually all payments under agreements

• Debtor’s property should be enforced in 6 months• Simplified procedure to cancel appointment of administrator, also with participation of secured

• Debtor’s property should be enforced in 6 months• Simplified procedure to cancel appointment of administrator, also with participation of secured creditors• Possibility to restructure obligations of our clients by reaching an agreement that the client will make concrete payments to theall payments under agreements

concluded with bank• Additional requirement to quality of the LPP plan – money flow, substantiation of incomes etc.• ‘Easier’ to initiate LPP

with participation of secured creditors• Administrator by agreement with bank is entitled to sell property without auction, also the company as a whole

an agreement that the client will make concrete payments to the bank. Other creditors will not be entitled to ask enforcement of this pledge• Possibility to check agreements concluded by debtors 3 years before proclamation of insolvency

• Easier to initiate LPP as a whole

SWEDBANK’S VIEWSWEDBANK’S VIEWPositiveImprovement of speed and efficiency of proceedings

PositiveImprovement of speed and efficiency of proceedings

NegativeEfficiency of proceedings depends on the court practice.Amendments which are crucial for Swedbank:proceedings efficiency of proceedings Amendments, which are crucial for Swedbank:

– If total liabilities exceed LVL 100th (EUR 142th), insolvency procedure lasts 3.5 years– If total liabilities do not exceed LVL 100th (EUR 142th), insolvency procedure lasts 2 years. Client has to repay the

d t f th l th t h i d ft th l funsecured part of the loan that has remained after the sale of collateral covering 30% of his/her official income, but not less than LVL 60 (EUR 85) per month (i.e. 1/3 of min salary)

Neutral (in total)Th l id iti lti t th i ti l ti f i l di b t it ffi i ill d d h i fThe new law provides many positive novelties to the existing regulation of insolvency proceedings, but its efficiency will depend on mechanism of

implementation. In total the law changes are not expected to change the trend in credit impairments.

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