Nordea – the leading Nordic bank…
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Transcript of Nordea – the leading Nordic bank…
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Nordea efter den finansiella krisen Falun2 September 2010
Rodney AlfvénHead of Investor Relations
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Nordea – the leading Nordic bank…
Corporate lending % % Share of Group income (size of bubbles)
Finland21%
Norway15%
Denmark25%
Sweden23%
Global Other
Group¹10%
New E
uropea
n Marke
ts
6%
1) Shipping, Oil Services & International, Financial Institutions, International Private Banking and Group Functions
A unique customer baseApprox. 7.7 mill. household customers in programmes, 0.7 mill. active corporate customers
Strong distribution powerApprox. 1,400 branches of which 270 in NEM
Financial strengthEUR 20.5bn in tier 1 capital Tier 1 ratio 11.1% excl transition rules
Market capitalisationEUR 28bn
DiversificationNo single market accounts for more than one quarter of Nordea’s incomeHousehold lending %
3
29.7
0 10 20 30 40 50 60 70 80 90 100
Allied Irish Banks
Bank of Ireland
Commerzbank
Swedbank
SEB
Erste
KBC
Danske Bank
SHB
DnBNOR
Intesa Sanpaolo
Nordea
Societe Generale
RBS
BBVA
Unicredit
Barclays
Lloyds
BNP Paribas
Santander
…and one of the larger banks in Europe
EURbn
Source: ThomsonReuters Datastream
4
Macro economic stabilisation in the Nordic region
Growth rates expected to be solid in the Nordic countries
In 2010, all Nordic countries are expected to have:
Positive growth rates
Modest inflation
Relatively strong public finances
Improvements in labour markets
GDP growth, %, y/y
Source: Nordea Markets
08 09 10 11 12-8
-6
-4
-2
0
2
4
6
-8
-6
-4
-2
0
2
4
6 % y/y % y/y
Finland Norway Denmark Sweden
Public finances, % of GDP
08 09 10 11 12-10.0
-7.5
-5.0
-2.5
0.0
2.5
5.0
-10.0
-7.5
-5.0
-2.5
0.0
2.5
5.0 % of GDP % of GDP
USA
Euro area
Denmark
Finland
Sweden
Norway +12-18%
5
Continued strong customer business
Q2 2009 Q1 2010 Q2 2010
Q2 2009 Q1 2010 Q2 2010
Q2 2009 Q1 2010 Q2 2010
Impaired loans
Income in Corporate segment
Income in Household segment
Q2 2009 Q1 2010 Q2 2010
Number of Gold customers
Q2 2009 Q2 2010 Q2 2010
Lending volumes
Q2 2009 Q1 2010 Q2 2010
Total income
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Result highlights
EURm H1/10 H1/09 Chg % H2/09 Chg %
Net interest income 2,484 2,661 -7 2,620 -5
Net fee and commission income 1,013 793 28 900 13
Net result from items at fair value 887 1,109 -20 837 6
Other income 80 75 7 78 3
Total income 4,464 4,638 -4 4,435 1
Staff costs -1,388 -1,352 3 -1,372 1
Total expenses -2,350 -2,206 7 -2,306 2
Profit before loan losses 2,114 2,432 -13 2,129 -1
Net loan losses -506 -781 -35 -705 -28
Operating profit 1,608 1,651 -3 1,424 13
Net profit 1,182 1,245 -5 1,073 10
Risk-adjusted profit 1,194 1,524 -22 1,262 -5
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1,305 1,2991,235 1,249
1,321
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10
EURm
Net interest income held up well in H1 2010, despite the low interest rate level
Solid trend in customer operations continues
Lending and deposit volumes up
Margins stable
Remains subdued by the low interest rate levels
Lower contribution from Group Treasury
Slight increase in average funding cost when maturing long-term funding was prolonged at higher market rates
8
% change in unchanged currency Q2oQ1June 2010 /
June 2009
Total Lending, excl. reversed repurchase agreements 2 4
–Nordic household mortgages 2 9
–Nordic consumer lending 1 7
–Nordic corporates 2 0
–New European Markets 4 1
–FID and Shipping 3 -3
Total Deposits, excl. repurchase agreements -1 -1
–Nordic households 2 3
–Nordic corporates 1 1
–New European Markets -2 -6
–FID and Shipping 4 -19
Underlying volume trends
9
Interest rate sensitivity- 3 components
Structural interest income risk (SIIR)
Reflecting the effect on NII from re-pricing gaps*
Dynamic effects on net interest income
Changes in deposit margins – mainly transaction accounts
Market risk in the interest-bearing investment portfolios
Market risk has an immediate effect on the net result from items at fair value
Increased market rates, 100 bps Q2/10 Q1/10
EURm
Annualised positive impact on Net interest income, approx.
430 450
Non-recurring negative impact on Net result from items at fair value, approx.
-230 -100
* Accumulated mismatch between assets and liabilities with an interest rate duration of less than 12 months, with the assumptions that non-maturity accounts are re-priced immediately following a interest rate change, without effecting margins
10
412
463 475
538
437
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10
EURm
Strong net fee and commission income
Higher income contribution from corporate advice
Continued strong performance in the savings area
High activity in capital markets
11
468
-91
425413
-82
358452
-135
346358
-97
261316
-128
245
58
4827
29
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10
Gross loan losses Danish guarantee scheme
DK, 42%
OTHER, 2%NEM, 17%
SOSI, 6%
SE, 0%
NO, 4%
FI, 29%
Loan losses by area Q2 2010
EURm
Credit quality improving during 2010
Net loan losses down to 36 bps in H1 2010 (55 bps last year)
30 bps individual (42 bps)
6 bps collective (13 bps)
140 bps in the Baltic countries (166 bps)
Excluding guarantee scheme provisions, net loan loss ratio down to 32 bps (51 bps)
Decreased loan losses in most areas
Impaired loans gross down 1% in Q2 52% of impaired loans performing
Reversals Net loan losses
12
Strong capital position maintained –and strong funding despite challenging quarter
9.2 9.2 9.010.3 10.1 10.0
Q2/09 Q1/10 Q2/10
Transition rules Fully implemented Basel II
Core tier 1 capital ratio (excl. hybrids), % Core tier 1 ratio 10.0%
High volume increase but stabilising rating migration affect RWA
EUR 20.9bn of long-term funding issued in H1 2010
In June, after several weeks of no market supply, Nordea reopened the senior unsecured market
22 23
31
20.9
2007 2008 2009 H1 2010
Total long-term funding issued, EURbn
13
Basel III – the answer to the financial crises
14
The crises was built up during a long time period
70
75
80
85
90
95
93 95 97 99 01 03 05 07
32%
34%
36%
38%
40%
42%
Share of Home mortage debtin total non federal debt
Construction spending as % of GDPleft scale
70
75
80
85
90
95
93 95 97 99 01 03 05 07
32%
34%
36%
38%
40%
42%
Share of Home mortage debtin total non federal debt
Construction spending as % of GDPleft scale
Source: Bloomberg
4
5
6
7
8
9
10
96 98 00 02 04 06 08
6.2
6.4
6.6
6.8
7
7.2
7.4
Mortgage Bankers FRM 30y
New home sales (in log)right scale
4
5
6
7
8
9
10
96 98 00 02 04 06 08
6.2
6.4
6.6
6.8
7
7.2
7.4
Mortgage Bankers FRM 30y
New home sales (in log)right scale
New home sales and 30-year mortgage rates Construction as a % of GDP and weight of mortgage debt in the US
15
Total Issuance of Structured Finance by Region (US$bn)
0
500
1000
1500
2000
2500
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
U.S Euro Area Asia
0
500
1000
1500
2000
2500
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
U.S Euro Area Asia
Source: BIS
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Total leveraged loans – including Finance Leveraged Buyouts
Source: Datastream
0
50
100
150
200
250
T1 99 T1 00 T1 01 T1 02 T1 03 T1 04 T1 05 T1 06 T1 07
Total Leveraged Loans
Loans to Finance Leveraged Buy-outs
0
50
100
150
200
250
T1 99 T1 00 T1 01 T1 02 T1 03 T1 04 T1 05 T1 06 T1 07
Total Leveraged Loans
Loans to Finance Leveraged Buy-outs
US$ bn by quarter
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Leading to “super-profit” in financials
0
50
100
150
200
250
300
1973 1977 1981 1985 1989 1993 1997 2001 2005 2009
Financials
All
Financials' super-profits
0
50
100
150
200
250
300
1973 1977 1981 1985 1989 1993 1997 2001 2005 2009
Financials
All
Financials' super-profits
Source : Datastream
Profits relative to nominal GDP in Europe(base 100 = Q1 1973)
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Losses and write-downs
Rescue packages
Bail-outs
Capital injections State-sponsored
hybrid capital
Fiscal stimulus packages
Funding guarantees
Rate cuts Liquidity injections
The financial crisis – impact and response
Funding problems
Capital problems
Regulatory initiatives for ”Never again”
Some clarity
Capital Liquidity Systemic risk Remuneration
2007 2008 2009 2010
Response
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Broad agreement in July 2010 on Basel III changes and implementation plan
Nordea anticipates final details towards the end of the year – including new proposal on NSFR and capital buffers
Uncertainty remains high – questions around NSFR and leverage ratio
Increased cost of capital expected, likely to impact pricing to customers
?Oct 2010July 2010 Dec 2010 Dec 2012 Jan 2018
Basel release of details for 2012 and new
proposals for 2018
Basel Oversightbody, broad agreement
Basel Committee meeting Implementation
capital regulation+ LCR
Implementation leverage ratio +
NSFR
G20 meeting
Test/observation phase for leverage
ratio + NSFR 2013-2017
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Capital position strong, for regulations and growth
Limited impact from capital base adjustments
Tier 1 hybrids assumed to be replaced by new tier 1 capital types
Uncertainty on capital buffers Nordea assessed to be in a good position
Leverage ratio Netting approach for derivatives
Nordea assessed to be above threshold of 3%
Nordea’s capital ratios well above targets and current regulatory threshold
9.010.0
11.8
Core Tier 1 ratio(excl. hybrids)
Tier 1 ratio Capital ratio
Transition rules Fully implemented Basel II
10.011.1
13.2
11.5
9.08.0
Capital ratios H1 2010, %
Targets Threshold
21
Liquidity – changes in right direction, but proposal still conservative and challenging for the industry Changed parameters for Liquidity Coverage Ratio, LCR
Broader definition of qualifying assets in liquidity buffer
Milder stress scenarios
But internal covered bonds still not eligible, despite high quality and central bank eligibility
Prolonged observation phase for Net Stable Funding Ratio, NSFR Observation phase 2013-2017, final version from 2018
Still challenging for the industry given the size of the funding gap relative to funding market capacity
Uncertainty remains high around the final regulation and the implementation
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Journey to Great Nordea
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Great Nordea framework
Profit orientation & prudence
Ambitious vision & targets
Strong customer- oriented values &
culture
Growth to free up resources to improve customer satisfaction
Growth to create value to our shareholders
Without this as the foundation, there is no bank – through the cycle
Need to set targets to be able to reach the goals
Motivation to perform extraordinarily
Nine countries, and everything different
Common values and platform to form one team
Rationale
Clear growth strategy
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-60
-50
-40
-30
-20
-10
0
10
20
H1
2002
H2
2002
H1
2003
H2
2003
H1
2004
H2
2004
H1
2005
H2
2005
H1
2006
H2
2006
H1
2007
H2
2007
H1
2008
H2
2008
H1
2009
H2
2009
H1
2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
Bps
Strong credit management – moderate creditrisk appetite over the cycle
Credit risk appetite 25 bps
Profit orientation and prudence
Loan loss ratio
25
%
Source: Swedish Riksbank, Standard & Poor’s
0
1
2
3
4
5
6
7
8
9
10
Nor
dea
HS
BC
DnB
NO
R
Dex
ia
SE
B
Sw
edba
nk
SH
B
KB
C
San
tand
er
Bar
clay
s
Cre
dit S
uiss
e
Cre
dit A
gric
ole
Soc
iété
Gén
éral
e
LBB
W
Uni
Cre
dit
Inte
sa S
anpa
olo
Dan
ske
Ban
k
Deu
tsch
e B
ank
BN
P P
arib
as AIB
Bay
eris
che
LB
UB
S
Citi
grou
p
Strongest capital position among a selected group of major international banks
Risk-adjusted capital ratios
Profit orientation and prudence
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One of the most stable profit development among banks in Europe
Profit before tax development through the financial crisis (Indexed)
Index = 100
* Calculation based on covariance of 13 quarters operating profits 2007 – Q2 2010** Nordic peers: Danske Bank, DnB NOR, SEB, SHB, Swedbank
Profit orientation and prudence
-40
-20
0
20
40
60
80
100
120
140
07Q1
07Q2
07Q3
07Q4
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
Nordea
European peers
Nordic peers
27
Delivery on long-term targets
Top quartile
Total shareholder return1 Jan 2007- 16 Aug 2010
Risk-adjusted profitrolling 4 quarters development
2007 – Q2 2010
RoE 2007 – Q2 2010
Nordea has reported one of the highest average return on equity (RoE) of Nordic peers¹, 14.4%
¹Nordic peers: Danske Bank, DnB NOR, SEB, SHB, Swedbank
41.4%
25.5%
Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10
Rolling four quarters compared with FY 2006 EUR 1,957mLong-term target for average yearly growth
Ambitious vision & targets
0.0
-100
-80
-60
-40
-20
0
20
Alli
ed Ir
ish
Ban
ks
RB
S
Ban
k of
Irel
and
Com
mer
zban
k
Lloy
ds
KB
C
Uni
cred
it
Soc
iete
Gen
eral
e
Sw
edba
nk
SE
B
Inte
sa S
anpa
olo
Bar
clay
s
Dan
ske
Ban
k
Ers
te
BB
VA
BN
P P
arib
as
San
tand
er
Nor
dea
DnB
NO
R
SH
B
28
Strong customer-oriented values and culture –become part of DNA
Foundation:Profit orientation and
prudent cost, risk and capital management
A Great European Bank,acknowledged for its people, creating
superior value for customers and shareholders
Great customer experiences
It’s all about people One Nordea team
Values
2929
Customer satisfaction improving versus competitors
Nordea
2007 2009
Peers
-0.6 3.9
71.267.6
70.6+0.9
- 3.6
CSI index (aggregate) 2007-2009*
71.5
*Corporate and high involvement customers, corresponding to Gold and Silver segment customers
Values
30
Prudent growth strategy – Group initiatives andstrong business development
31
We continue on the journey to Great and to deliver on our long-term target
Great Nordea
07 08 09 10 11 12
Middle of the road
Keep income growth momentum
Cost, risk and capital take the lead
Enable us to accelerate out of the crisis
Profitable organic growth Prudent growth
Organic growth strategyNext level strategy based
on stronger position
Group initiatives launched to support the strategy
Next generation of initiatives launched
32
Benefits of universal relationship banking –clearly in focus for the growth
Why relationship banking?
Satisfying customer needs … … while focusing on the most attractive customer groups
Capital efficiency through full customer wallet …
… at a low risk
• Safety and stability
• “Someone who cares”
• Full range of advice
• Customer needs driven innovation
• Most profitable
• Highest potential
• Most satisfied and loyal
• High efficiency in service
• Balanced and diversified business mix, e.g., lending and deposits
• Complemented by, e.g., capital-efficient asset management products
• Low losses, eg, Gold customers with automated credit scoring
• Knowing and being close to Corporate customers
• Diversification from Corporate and Household mix
Growth strategy
33
Trustworthy brand name
Quality of people
Demand-driven products
Proximity Customer base
Capital position
You need the right platform
One customer team
One value chain
Great customer experiences
Foundation: Profit orientation and prudent cost, risk and capital management
It’s all about people One Nordea team
A great European bank,
acknowledged for its people, creating superior
value for customers and shareholders
Customer-oriented values
Growth strategy
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Nordea has built the platform
One customer team
Customer base
Capital position
Trustworthy brand name
Quality of people
One value chain
Great customer experiences
Foundation: Profit orientation and prudent cost, risk and capital management
It’s all about people One Nordea team
A great European bank,
acknowledged for its people, creating superior
value for customers and shareholders
Customer-oriented values~ 8 m household
customers in programmes, 0.5 m corporate
One of strongest capital and funding positions in Europe
~6,000 PBAs, SRMs and RMs trained in -09
Nordea brand stronger than ever
1400 branches (160 Corporate), contact centres and netbank
E.g., top Morningstar ratings, No 1
Greenwich rating
Proximity
Demand-driven products
Growth strategy
35
Prudent growth strategy supported by next generation of Group initiatives
Increase business with existing Nordic customers and attract new customers
Supplement Nordic growth through
investments in New European Markets
Exploit global and European business lines
Take Nordea to the next level of operational efficiency, support sustained growth
1. Future distribution
2. New customer acquisition
3. Growth plan Finland
6. Growth plan Poland
5. Customer-driven Markets business
4. Growth plan CMB Sweden
8. Product platforms7. Top league IT and operations
9. Infrastructure upgrade
Growth strategy
36
Solid trend accelerated in 2010 – up 7.2% from one year ago
110,000 new Gold and Private Banking customers in H1 2010 – more than 70% new customers in Nordea
Improved market share in all countries
Significant increase of number of pro-active customer meetings
Continued strong customer demand in household segment – increased volumes with stable margins
Total income in household segment up 5%
Household strategy delivery: Value proposition attracts customers in premium segments
2,6902,812
2,885
Q2 2009 Q1 2010 Q2 2010
Number of Gold customers, ‘000
0.3
0.1 0.1
0.2
DK FI NO SE
Lending market share increase, %
37
136 139144
Q2 2009 Q1 2010 Q2 2010
Increased business confidence - lending volumes up 4% in H1 2010
Continued strong demand for risk management products
Improved market share in Corporate Banking - strategy to build house-bank relations proven successful
Corporate strategy delivery: High activity – income up 7% in H1
Corporate lending, EURbn
0.1 0.1
-0.1
0.1
DK FI NO SE
Lending market share increase, %
38
315342
372
Q2 2009 Q1 2010 Q2 2010
Strong income growth in Corporate Merchant Banking (CMB)
Strengthened market position – increased share of wallet
Improved position in capital markets Leading arranger of Nordic syndicated loans
Participation in execution of main Nordic transactions
New area established – Corporate Merchant Banking and Capital Markets
Ensure that all service and product competences of Nordea reach the large corporate customers
Headed by newly recruited – Casper von Koskull
Nordea’s relationship banking approach further strengthened
Total income CMB, EURm
39
Concluding remarks
40
Key messages
We are delivering according to our plan
Credit quality improving – impaired loans decreased in second quarter
More clarity with the agreement around Basel III, but some uncertainty remains
Continued strong customer business Income from corporate customers up 7% and from household customers up 5% in H1
Increased lending, deposits and AuM volumes
Solid inflow of new customers – increased market shares in all markets
Positive development in corporate finance business – relationship banking approach further strengthened
Focus on prudent growth and the execution of the Group initiatives On track in all areas