Slide 1: Swedbank's second quarter 2012 results
Swedbank’s second quarter 2012 results Michael Wolf, CEO Göran Bronner, CFO Håkan Berg, CRO
Slide 2: Solid performance with unchanged business strategy
Solid performance with unchanged business strategy • Low growth environment • Good execution on focus areas • Competitive position continue to improve • Mobile banking supports cash smart transformation 2
Slide 3: Retail: Stable development
Retail Stable development SEKm Q2 11 Q1 12 Q2 12 Q/Q • Repricing Net interest income 3 012 3 407 3 404 -3 Net commissions 1 294 1 261 1 248 - 13 • Deposit margins pressure Total income 4 789 5 123 5 138 +15 Total expenses 2 430 2 342 2 345 +3 • Good asset quality Profit before 2 359 2 781 2 793 +12
Slide 4: Baltic Banking: Structural recovery continued
Baltic Banking Structural recovery continued SEKm Q2 11 Q1 12 Q2 12 Q/Q • Growth in lending book in euro Net interest income 1 017 912 870 -42 Net commissions 365 371 378 +7 • Lower Euribor affected NII Total income 1 566 1 452 1 430 -22 Total expenses 649 620 588 -32 • Good underlying activity Prof
Slide 5: Large Corporates & Institutions: Weaker trading activity
Large Corporates & Institutions Weaker trading activity SEKm Q2 11 Q1 12 Q2 12 Q/Q • Continued growth in Large Net interest income 884 887 825 -62 - of which LC/FI* 444 652 666 +14 Corporate NII Net commissions 334 434 346 - 88 Net gains and losses 20 648 316 -332 • Lower capital market activity Tot
Slide 6: Cost reduction according to plan
Cost development Cost reduction according to plan • Target to reduce costs by SEK 1bn 2012 • Staff cost -173m and consultancy costs -172m year on year Cost trend (SEKm) H1 2011 H1 2012 YTD Total expenses 9 000 8 664 -336 Variable staff costs 275 397 + 122 Compensation to Savings Banks 271 311 +40 Un
Slide 7: Strong capitalisation – continued focus
Capital position Strong capitalisation – continued focus RWA development SEKbn 505 • Core Tier 1 ratio of 16.6 percent • RWA down SEK 9bn in quarter 500 - Volume increases +7.4 - Update SME portfolio -10.9 - Positive rating migration Sweden/Baltics 494.6 495 - Increased risk European banking system
Slide 8: Liquidity and funding: Continued conservative stance
Liquidity and funding Continued conservative stance • Continued high issuance of long-term debt, SEK 41bn during Q2, total SEK 97bn during H1 • SEK 17bn in maturities for the remainder of 2012 • Funding plan of around SEK 120bn for full year • Awaiting new regulatory landscape of capital and funding
Slide 9: Group results: Solid quarter
Group results Solid quarter SEKm Q1 12 Q2 12 Q/Q YTD • Stable NII Net interest income 5 208 5 252 +44 10 460 - Repricing lending Net commissions 2 405 2 346 -59 4 751 - Lower funding cost Net gains and losses 759 455 -304 1 214 - Shrinking deposit margins Other income 809 844 +35 1 653 Total income
Slide 10: Risk highlights: Stable asset quality
Risk highlights Stable asset quality Credit impairments Q1 Q2 • Still high credit quality in Sweden (SEKm) Retail 24 100 • Further improvements in Baltics LC&I 14 54 – Provision releases for Latvian mortgages Baltic Banking -134 -204 Estonia -78 -25 • Exit costs Ukrainian retail portfolio Latvia -21
Slide 11: ICAAP: 2012 ICAAP Scenario
ICAAP 2012 ICAAP Scenario – Deep recession without recovery Triggers Outcome • Europe enters into deep • Sharp GDP drop with no recession recovery (10-15% from 2011 level) • Limited possibilities for fiscal stimulus • Severe drop in house prices • European bank runs (25-37% from 2011 level) • Credit
Slide 12: High capitalisation even in extremely stressed scenario
ICAAP High capitalisation even in extremely stressed scenario • Revenue decrease 31 percent • Credit impairments SEK 64bn over 5 year • Scenario effects on Core Tier 1 ratio -165bp • Well above 12% Core Tier 1 ratio at low point even in extremely stressed scenario in new regulatory environment 12
Slide 13: Credit portfolio – Retail
Credit portfolio – Retail Corporate Retail portfolio will drive capital efficiency Total portfolio SEK 227bn Segments excl. Swedbank Volume Secured Mortgage and Swedbank Finance (SEKbn) (%) Agriculture 6.3 81 Manufacturing 10.8 84 Swedbank Mortgage AB Public sector and utilities 4.8 90 90 Leasing (S
Slide 14: Q&A
Q&A
Slide 15: Appendix
Appendix Swedbank @ 15
Slide 16: Mortgage loans, gross margin (3 months)
Mortgage loans, gross margin (3 months) % 6 5 Net margin 4 The gross margin should cover: 3 Cost of liquidity ~0.3% Administrative costs ~0.3% Credit impairments ~ 0.03% 2 Tax (26.3% on profit before tax) 1 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Gross margin Swedbank's funding cost Stib
Slide 17: Large Corporates & Institutions: Weaker trading activity in Q2
Large Corporates & Institutions Weaker trading activity in Q2 SEKm Q2 11 Q3 11 Q4 11* Q1 12 Q2 12 Net interest income 884 756 845 887 825 of which LC & FI** 444 519 563 652 666 of which Markets 440 237 282 235 159 Commission income 334 317 269 434 346 of which LC & FI* * 221 241 261 278 278 of which
Slide 18: Cost management: Cost target 2012
Cost management Cost target 2012 • Target to reduce underlying costs by SEK 1bn 2012 SEKbn 20 18.4 18 17.1 - 0.4 16.1 16 - 0.4 - 0.5 14 12 10 8 6 4 2 0 Total expenses 2011 Variable staf f costs Restructuring costs Compensation to Underlying costs Cost target 2012 (af ter restatements) Savings Banks
Slide 19: Core balance sheet structure
Liquidity and funding Core balance sheet structure Assets Liabilities SEKbn SEKbn 2 000 2 000 1 800 Interbank loans 1 800 Amounts owed to credit and repos institutions 1 600 1 600 Other assets* Other liabilities** 1 400 1 400 Government guaranteed debt 1 200 1 200 Senior Estonia CEE lending 1 000 Ot
Slide 20: Conservative liquidity levels
Liquidity and funding Conservative liquidity levels • Short-term funding mainly a tool for cash management • More than 12 months pre-funded SEKbn 350 350 300 300 Additional pledgeable 250 and/or liquid 250assets Next 12-month term funding maturities 200 200 1 Liquidity reserve, securities 150 CP / C
Slide 21: Long-term funding maturity profile
Liquidity and funding Long-term funding maturity profile • FY 2012 maturities amount to nominal SEK 86bn − of which SEK 17bn for the remainder of 2012 Long-term funding maturity profile SEKbn 200 Government guaranteed debt Senior unsecured 150 debt Covered bonds 100 50 0 2012 2013 2014 2015 2016 201
Slide 22: Remaining government guaranteed debt
Liquidity and funding Remaining government guaranteed debt • Exited the programme on 30 April 2010 • No issuance under the programme since summer 2009 • Remaining outstanding debt of SEK 36bn maturing during 2013 and 2014 Maturity profile as per Q2 2012 SEKbn 40 JPY CHF 20 USD SEK EUR 0 2013 2014 So
Slide 23: Over-collateralisation
Liquidity and funding Senior unsecured debt strategy • Limited need given Swedbank’s balance sheet structure • Secure OC level • Affected by the bank’s liquidity needs House price sensitivity of the cover pool 35% 30% 25% OC 20% 15% Over-collateralisation 10% 5% 0% -5% -10% -15% -20% 0% 5% 10% 15% 2
Slide 24: Liquidity reserve
Liquidity and funding Liquidity reserve According to the template defined by the Swedish Bankers' Association SEKm Cash and holdings in central banks 132 028 Deposits in other banks available overnight 270 Securities issued or guaranteed by sovereigns, central banks or multilateral development banks
Slide 25: Swedish mortgage market
Swedish housing and mortgage market Swedish mortgage market • No securitization (on balance sheet) • No sub-prime market • No 3rd party origination • No buy-to-let market • 70% home ownership1 • Rental market is regulated – First hand contracts difficult to obtain – Rents need to be negotiated with
Slide 26: Real estate prices – Sweden 12 months development
Swedish housing and mortgage market Real estate prices – Sweden 12 months development Single-family homes1 Tenant-owner rights2 Combined3 12M Δ 12M Δ 12M Δ Jul/11 0% 6% 2% Aug/11 -2% 3% -1% Sep/11 -3% 1% -2% Oct/11 -4% -1% -3% Nov/11 -5% -4% -5% Dec/11 -7% -4% -6% Jan/12 -4% -2% -4% Feb/12 -4% -1% -
Slide 27: Real estate prices – Baltic countries
Baltic real estate prices Real estate prices – Baltic countries Tallinn Riga 1800 1 800 1600 1 600 1400 1 400 1200 1 200 1000 1 000 800 800 600 600 400 400 200 200 0 0 Jan-10 Jan-11 Jan-12 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jul-09 Jul-10 Jul-11 Jul-05 Jul-06 Jul-07 Jul-08 Jan-05 Jan-06 Jan-07 Jan-08
Slide 28: Impaired loans decreasing
Asset quality Impaired loans decreasing • Decreased SEK 1.7bn • Continued progress in corporate loan restructuring SEK bn 45 2.4 40.3 40 35 Share of - 4.1 - 3.9 impaired 30 - 3.0 loans, gross - 1.1 -1.9 25 -3.9 20.4 20 -2.7 Ukraine 75% - 1.7 4.9 Russia 11% 15 0.6 41 Lithuania 12% 10 Latvia 17% 5.9 5
Slide 29: Loans past due 60 days – performance Q/Q
-80 -60 -40 -20 0 -100 20 EURm Q2 11 Q3 11 Q4 11 Asset quality Estonia Q1 12 Q2 12 Q2 11 Q3 11 Latvia Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Lithuania Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Ukraine Q4 11 Loans past due 60 days – performance Q/Q Q1 12 Q2 12 Q2 11 Q3 11 Q4 11 Russia Q1 12 Q2 12 29
Slide 30: Provisions – well provided for
Asset quality Provisions – well provided for SEKm 30 000 25 000 Provision ratios, % Q2 12 65.0% 63.7% Retail 79 20 000 60.0% 59.8% 61.5% 2 436 LC&I 155 2 409 15 000 15 952 Baltic Banking 56 14 782 2 435 2 478 12 821 2 040 Russia 60 10 000 11 915 10 951 Ukraine 74 Group 64 5 000 0 Q2 11 Q3 11 Q4 11 Q
Slide 31: Credit impairments by business area, SEKm
Asset quality Credit impairments by business area, SEKm 300 172 -174 -324 -441 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Retail LC&I Baltic Banking Other (Russia/Ukraine) 31
Slide 32: Shipping and offshore + private equity
Credit portfolio – Large Corporates & Institutions Shipping and offshore + private equity • Lending exposure to shipping and offshore sector SEK Shipping and Offshore 25.5bn plus unutilised commitments of SEK 5.5bn Tanker 24% – Portfolio duration 4-5y – Average fleet age 7y – Other represents ro/ro
Slide 33: Shipping and offshore portfolio – exposure mainly in USD
Credit portfolio – Large Corporates & Institutions Shipping and offshore portfolio – exposure mainly in USD (79%), minor exposures in riskier segments Shipping and offshore portfolio by currency (in USDm) Shipping and offshore portfolio by subsegment SEK JPY Cruise 0% 1% 1% Container 5% RORO NOK 8%
Slide 34: Credit portfolio – Agriculture retail
Credit portfolio – Agriculture retail • Segmentation Definitions – Corporate Agriculture: Businesses that derive their main income from agricultural activities Private: – Private Investments: Private individuals who own Residential tagricultural properties for living or investment 20% purposes Agric
Slide 35: 2012 ICAAP scenario – Deep recession without recovery
ICAAP 2012 ICAAP dcenario – Deep recession without recovery 105 GDP - Index 105 Real Estate prices - index 100 95 95 85 90 75 85 65 80 55 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 Sweden Estonia Latvia Lithuania Sweden Estonia Latvia Lithuania 3.0% Interest rates – 3m 14 FX scenari
Slide 36: 2012 ICAAP – Main scenario results
ICAAP 2012 ICAAP – Main scenario results SEK bn Net Interest Income • NII decreases by 39% throughout the 30 20.7 scenario 20 10 12.6 0 2011 2012 2013 2014 2015 2016 • Credit Impairments total SEK 64bn Credit impairments over the scenario period SEK bn 30 23.4 20 10 0 2011 2012 2013 2014 2015 2016 -
Slide 37: 2012 ICAAP – Income statement
ICAAP 2012 ICAAP – Income statement Total Income statement (SEKbn) 2011 2012 2013 2014 2015 2016 2012 - 2016 Total net interest income 20.7 19.5 16.7 14.2 13.0 12.6 75.9 Total income 34.7 31.8 34.0 25.4 24.3 24.1 139.6 Total expenses 20.9 17.6 18.7 18.0 18.0 17.8 90.1 Profit before credit losses 13.
Slide 38: 2012 ICAAP – Credit impairments
ICAAP 2012 ICAAP – Credit impairments EAD 2011 Acc. loss ratio Credit impairments (%) (SEKbn) 2012 2013 2014 2015 2016 2012 - 2016 Total 1,384.4 0.6 1.8 1.5 0.9 0.5 4.6 of which LC & I 309.8 0.5 2.3 2.0 0.8 0.6 5.4 Retail 950.8 0.3 1.2 1.0 0.7 0.3 3.2 Estonia 52.5 1.2 2.5 2.2 1.8 1.7 6.6 Latvia 30.6
Slide 39: 2012 ICAAP Main adverse scenario results: Capital assessment
ICAAP 2012 ICAAP Main adverse scenario results Capital assessment RWA & Capital (SEKbn) 2011 2012 2013 2014 2015 2016 RWA 492.3 489.5 504.1 433.9 395.2 365.0 RWA inc 15% mortgage riskweight * 565.3 552.2 557.1 482.4 442.6 414.4 RWA inc regulatory effects ** 588.1 575.0 557.1 482.4 442.6 414.4 Core T