Swedbank's third quarter 2015 results

© Swedbank

Swedbank’s third quarter 2015 results Michael Wolf (CEO), Göran Bronner (CFO), Anders Karlsson (CRO)

Successful customer migration – southern region

2

Swedish Banking

Ratios Q3 15 Q2 15

ROE, % 19.0 18.9

C/I ratio 0.43 0.44

• Customer migration completed – 100 000 new customers

• Lower deposit margins

• Higher mortgage margins

• Mortgage loan volume growth

• Weaker income from asset management

• Solid asset quality

Volumes, SEKbn Q3 15 Q2 15 ▲ QoQ

Loans 1 059 1 050 9

Deposits 431 428 3

SEKm Q3 15 Q2 15 ▲ QoQ

Net interest income 3 404 3 281 123

Net commission income 1 717 1 916 -199

Other income 452 471 -19

Total income 5 573 5 668 -95

Total expenses 2 412 2 496 -84

Profit before impairments 3 161 3 172 -11

Credit impairments 35 48 -13

Market leader

• Loan volume growth


• Acquisition of retail portfolios - around 127 000 new customers

3

Baltic Banking

Ratios Q3 15 Q2 15

ROE, % (excl. one-off tax in Q2) 16.2 16.6

C/I ratio 0.39 0.40


Loans 129 126 3

Deposits 144 138 6


Net interest income 900 865 35

Net commission income 511 524 -13

Other income 155 147 8

Total income 1 566 1 536 30

Total expenses 605 611 -6

Profit before impairments 961 925 36

Credit impairments -2 -49 47

Tax 132 1 064 -932

Net profit 825 -91 916

Weaker result

• Lower NGL – Lower activity – Widening credit spreads

• Stable NII – Lower deposit margins – Loan volume growth from Q2


4

Large Corporates & Institutions

Ratios Q3 15 Q2 15

ROE, % (excl. one-off tax in Q2) 13.3 15.6

C/I ratio 0.44 0.43


Loans 182 182 0

Deposits 103 106 -3


Net interest income 865 862 3

Net commission income 509 491 18

Net gains and losses 315 576 -261


Total income 1 722 1 968 -246

Total expenses 766 842 -76

Profit before impairments 956 1 126 -170

Credit impairments 97 7 90

Good cost control – increased investment needs

5

Group results

SEKm Q3 15 Q2 15 ▲QoQ

Net interest income 5 811 5 704 107

Net commission income 2 736 2 842 -106

Net gains and losses 4 82 -78


Total income 9 234 9 315 -81

Total expenses 3 879 4 047 -168

Profit before impairments 5 355 5 268 87

Credit impairments 130 6 124

Other impairments 270 22 248

Tax 1 012 1 538 -526

Net profit 3 928 3 666 262

• Stable NII

− Mortgage volume growth

− Mixed margins

• Lower assets under management

• Lower NGL

− Lower activity

− Widening credit spreads

• Good cost development

• Strong asset quality Ratios Q3 15 Q2 15

ROE, % 13.5 13.4

Cost/income ratio 0.42 0.43

CET1 capital ratio, % 23.0 22.4

Strong capitalisation – no excess capital Capital

6

• CET1 capital ratio improved

− CET1 capital increase

− REA decrease

• SREP result in line with expectations

• Continued regulatory uncertainty

CET1 capital ratio, %

* Swedbank’s estimate based on SFSA’s announced capital requirements, including fully implemented buffers and Pillar 2 requirements

92

94

96

98

100

102

104

106

2013 2014 Q3 2015

NSFR

0

10

20

30

40

50

60

70

80

Average2014

Q115 Q215 Q315

Other

Senior unsecured debt

Covered bonds

Increased long-term funding activity

• Funding per Q3 2015, SEK 188bn

• NSFR at 104 per cent

7

Liquidity and funding

Net Stable Funding Ratio

Quarterly long-term funding issuance

SE

Kbn

P

er c

ent

Strong asset quality

8

Asset quality

Credit impairments, SEKm Q3 15 Q2 15 ▲QoQ

Swedish Banking 35 48 -13

Baltic Banking -2 -49 47

Large Corporates & Institutions 97 7 90

Swedbank Group 130 6 124

Ratios Q3 15 Q2 15

Credit impairment ratio, % 0.04 0.00 Share of impaired loans, gross % 0.35 0.36

Total provision ratio for impaired loans, % 58 55

Credit impairment ratio %

-0.40

-0.30

-0.20

-0.10

0.00

0.10

0.20

Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q313 Q115 Q315

Q&A Michael Wolf (CEO), Göran Bronner (CFO), Anders Karlsson (CRO)

Appendix

10

-0.40

-0.30

-0.20

-0.10

0.00

0.10

0.20

Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q313 Q115 Q315

0

5

10

15

20

25

0

20

40

60

80

100

120

140

160

2011 2012 2013 2014 Q3 2015

NSFR LCR CET1 capital ratio, Basel 3 (RHS)

Swedbank – a low-risk bank with strong capital base

11

• Low risk – a Board of Directors’ strategic priority – ensures access to funding markets and low funding costs

• Retail profile and four home markets a key feature – 86% of total loans originated in Sweden - Swedish mortgages account for 62% of total loans – 90% of total loans are collateralised (76% real estate and 14% other collateral)

• Strong capital position – Board of Directors’ decision to maintain a buffer above prevailing SFSA capital requirements to have operational flexibility – current buffer 340bp

• Conservative funding and liquidity position – survival horizon longer than 12 months assuming closed funding markets, NSFR 104% and LCR 135%

• Baltic operations self-funded – Loan-to-Deposit ratio < 100%

%

This is Swedbank

Liquidity & capital %

Source: Swedbank 30 Sep 2015

Credit impairment ratio %

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

Q3 10 Q3 11 Q3 12 Q3 13 Q3 13 Q3 15

Swedbank – strong and stable earnings capacity

12

• Four home markets – Sweden, Estonia, Latvia and Lithuania – Strong and stable economies – Market leading position in all home markets – Largest customer base in all home markets

• Retail profile ensures stable earnings with low volatility

• High cost efficiency – a strategic priority – ensures good profitability

• Stable earnings is first line of defence supporting low risk profile and strong capital position

SEKm

This is Swedbank


Profit before impairment

0.30

0.35

0.40

0.45

0.50

0.55

0.60

2010 2011 2012 2013 2014 YTD 201512 000

14 000

16 000

18 000

20 000

2010 2011 2012 2013 2014 Ambition2016

Acquistion of Sparbanken Öresund

Swedbank – market leading cost efficiency

13

• Best in-class cost efficiency – an executive management strategic priority • Strong dedication from executive management on cost and change management

− Integrated in corporate culture − Focus on straight-through-processing − Evolving household banking model – digitalisation trend

• Retail profile a key feature − Four home markets – Sweden, Estonia, Latvia and Lithuania – reducing complexity − Largest private and SME customer base − High degree of digitalisation in home markets

SEKm Total expenses

This is Swedbank


C/I ratio

4.50.2

-3.1

0.0

-3.3

-1.9 1.0

406.8

404.2

395

397

399

401

403

405

407

409

411

413

415

Q2 2015 Exposurechange

Ratingmigration

(PD)

LGDchanges

Other creditrisk

CVA risk Market risk Operationalrisk

Q3 2015

Increase Decrease

Reduced REA Capital

14

• REA net decrease of SEK 2.6bn

− Lower market risk

− FX fluctuations impact negatively

Risk exposure amount SEKbn

01 0002 0003 0004 0005 0006 0007 0008 0009 000

Loans net, SEKm

Shipping and Offshore

• Lending totalled SEK 28.3bn – Market activity slowed down compared

to Q1 15 and Q4 14 – Decreased origination

• Individual client action plans in place

• Clients now adapting to the lower oil price by cutting costs, postponing orders and setting up new financial structures

15

Asset quality

Shipping and Offshore

Negatively impacted by lower oil prices


SEKm

0

50

100

150

200

250

300

350

400

0 20 40 60 80 100 120 140 160 180 200 220 240 260 280 300 320 340 3650

10

20

30

40

50

60

70

80

90

100

Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116

Covered bonds Senior unsecured debt

Conservative funding position • LCR 135% (Swedish FSA definition FFFS 2012:6)

• NSFR 104% (Basel committee)

• Issued SEK 188bn of term funding YTD 2015

• Increased funding need to support loan growth

16


Term funding issuance – completed and planned

SEKbn


SEKbn

Days forward

Prefunded for more than 12 months

Survival horizon nominal amounts

0

50

100

150

200

2015 2016 2017 2018 2019 2020 2021-

Other

CHF

USD

EUR

SEK

0

50

100

150

200

2015 2016 2017 2018 2019 2020 2021-

Senior unsecureddebt

Covered bonds

17

Long-term funding maturity profile

Long-term funding maturity profile, by funding source



SEKbn SEKbn

Long-term funding maturity profile, by currency

Benchmark transactions YTD 2015 ● USD 750m, Perp. NC5 (2020), AT1, 5.50% - equity conversion

● USD 1bn 144a Senior, 5Y (2020), T+77bp (+ USD 400m 3Y (2018) T+65bp)

● EUR 1bn CB, 7Y (2022), Fixed MS-5bp

● GBP 500m CB, 3Y (2018 FRN, 3m £L+20bp

● GBP 300m Senior, 4Y (2019), Fixed G+80bp

● SEK 3bn, Senior 5Y (2020), Fixed/FRN, 3m Stibor + 50bp

● USD 1bn, RegS. CB 5Y (2020), Fixed, 3m $L + 37bp

● EUR 750m Senior 7Y (2022), Fixed, MS+45bp

100

120

140

160

180

200

220

05 06 07 08 09 10 11 12 13 14 15

Single-family homes

Real estate prices – Sweden 12 months development

18

Swedish housing and mortgage market

Single-family homes1 Tenant-owner rights2 Combined3

12M Δ

12M Δ

12M Δ

Oct 14 8% 15% 11%

Nov 14 13% 15% 14%

Dec 14 15% 15% 15%

Jan 15 11% 15% 12%

Feb 15 12% 17% 14%

Mar 15 13% 19% 15%

Apr 15 13% 20% 16%

May 15 13% 18% 15%

Jun 15 12% 19% 14%

Jul 15 14% 18% 15%

Aug 15 13% 19% 15%

Sep 15 14% 20% 16%

Source: Valuegard www.valuegard.se (Based on data from Mäklarstatistik), 1 HOXHOUSESWE, 2 HOXFLATSWE, 3 HOXSWE

House price index, Sweden3

2005=100

http://www.valuegard.se/

0200400600800

1 0001 2001 4001 6001 800

Jun-

05D

ec-0

5Ju

n-06

Dec

-06

Jun-

07D

ec-0

7Ju

n-08

Dec

-08

Jun-

09D

ec-0

9Ju

n-10

Dec

-10

Jun-

11D

ec-1

1Ju

n-12

Dec

-12

Jun-

13D

ec-1

3Ju

n-14

Dec

-14

Jun-

15

Vilnius

No. of transactions EUR/m2

0200400600800

1 0001 2001 4001 6001 800

Jun-

05D

ec-0

5Ju

n-06

Dec

-06

Jun-

07D

ec-0

7Ju

n-08

Dec

-08

Jun-

09D

ec-0

9Ju

n-10

Dec

-10

Jun-

11D

ec-1

1Ju

n-12

Dec

-12

Jun-

13D

ec-1

3Ju

n-14

Dec

-14

Jun-

15

Riga


0200400600800

1 0001 2001 4001 6001 800

Jun-

05D

ec-0

5Ju

n-06

Dec

-06

Jun-

07D

ec-0

7Ju

n-08

Dec

-08

Jun-

09D

ec-0

9Ju

n-10

Dec

-10

Jun-

11D

ec-1

1Ju

n-12

Dec

-12

Jun-

13D

ec-1

3Ju

n-14

Dec

-14

Jun-

15

Tallinn


Baltic countries Real estate prices

19

EUR/m2 /No. of transactions EUR/m2 /No. of transactions

EUR/m2 /No. of transactions

Source: Swedbank 30 Jun 2015

Swedbank's third quarter 2015 results

Investor Relations

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