Swedbank Ab Class A · OMXSTO:SWED_A
Swedbank Ab Class A — Q2 2009 Earnings Presentation
35 slides from Swedbank Ab Class A's earnings presentation, Jul 17, 2009
Slide 1: Interim report January – June 2009
Interim report January – June 2009 17 July 2009 Michael Wolf, CEO Erkki Raasuke, CFO Göran Bronner, CRO
Slide 2: Following our set path
Highlights Following our set path • Strong focus on execution to maintain earnings capacity, financial strength • Asset quality developed in line with expectations • Risk-weighted assets reduced – improved capital ratios • Capacity adjustment plans initiated in all banking units • Strengthening of t
Slide 3: Swedbank maintains conservative view
Business environment Swedbank maintains conservative view • Real economy still deteriorating but the financial system has been stabilising • Increased currency risk in Latvia • Visibility improving slightly but still limited • Swedish FSA and Riksbank stress tests confirm aligned view of effects in
Slide 4: Enhanced organisational capability
Strategy Enhanced organisational capability • New governance structure at board and management levels now in place • Shared leadership – joint responsibility • Formalisation – to empower and accelerate decision making at the front line • More customer focused organisation • ONE Swedbank Markets and
Slide 5: Significant progress
Current focus areas Significant progress • Proactive work to decrease risk Asset Asset quality quality • Work-out units operational • Re-pricing of lending portfolios Earnings Earnings capacity capacity • Reducing capacity • Improve maturity profile Liquidity Liquidity and and funding funding • Prep
Slide 6: Resilient
Second quarter results 2009 Resilient SEKm 6 000 5 000 4 000 3 000 2 000 1 000 0 -1 000 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 -2 000 -3 000 -4 000 Profit before impairments and provisions Operating profit 6
Slide 7: Mixed development
Results by business area Mixed development Profit before impairments and provisions SEKm 3 500 Swedish Banking 3 000 Q1 09 Q2 09 Continued positive earnings trend, 2 500 2 000 limited impairment losses 1 500 1 000 Baltic Banking 500 0 Income under pressure, -500 extensive cost reductions -1 000 Sw e
Slide 8: Focus to enhance quality of NII
Net interest income Focus to enhance quality of NII SEKm 6 000 24 5 803 5 800 5 600 -257 5 400 -108 14 5 243 5 200 -230 -3 5 000 4 800 4 600 4 400 4 200 Q1 Q2 4 000 Net interest Swedish Baltic International Swedbank Asset Other Net interest income Banking Banking Banking Markets Management income 8
Slide 9: High volatility
Net gains and losses High volatility • Another strong quarter by Swedbank Markets • Valuation losses in connection with long-term funding SEKm Q2 09 Q1 09 Q2 08 Swedish Banking 80 100 179 Baltic Banking 253 285 205 International Banking 22 18 114 Swedbank Markets 877 1 221 118 Asset Management & Ins
Slide 10: Income statement
Second quarter results 2009 Income statement SEKm Q2 2009 Q1 2009 Change Net interest income 5 243 5 803 -560 Net commission income 1 970 1 374 596 Net gains/losses on financial items, fair value 710 1 711 -1 001 Other income 1 311 536 775 Total income 9 234 9 424 -190 Staff costs 2 289 2 335 -46 Pr
Slide 11: Adjusting capacity due to lower economic activity
Adjusting capacity due to lower economic activity • Number of full-time employees to decline: H1 09 H2 09 H1 10 Swedish Banking -163 0 -450 Baltic Banking -541 -690 -250 International Banking -236 -660 -670 Other +78 NA NA Total -862 -1 350 -1 370 11
Slide 12: Decreased risks and lengthened maturities
Liquidity & Funding Decreased risks and lengthened maturities • Liquidity at targeted level • Through state guarantee programme good access to the funding – US CP programme re-opened, new issuance Stress test of liquidity as of 30 June 2009 about USD 8bn 300 250 • New issuance to international cover
Slide 13: Total level of impaired loans as expected
Asset quality Total level of impaired loans as expected • Impaired loans increased by SEK 9 736m – Sweden and Estonia better than expected – Latvia, Lithuania and Ukraine continued weak development Q1 09 Q2 09 4 826 4 028 Quarterly change of impaired loans (gross, SEKm) 2 050 1 931 1 627 1 188 1 100
Slide 14: Provisions – increased visibility
Asset quality Provisions – increased visibility • Impairment losses on loans SEK 6 672m – Group collective provisions in Ukraine SEK 1 532m • Provision ratios – Sweden 95 % – Baltics 51% 63% – Ukraine 101% – Russia 64 % • Total provisions in the group currently SEK 18 778m • Write-offs of SEK 534m •
Slide 15: Provisions going forward
Asset quality Provisions going forward • Growth of impaired loans expected to level off during H2 2009 • Provision ratio over the cycle 30 – 50% • Provision ratio to decrease – when growth of impaired loans slows, and/or – when gaining better understanding of collateral value/ borrowers’ repayment c
Slide 16: Restructuring work – making progress
Asset quality Restructuring work – making progress • Structure and resources established – Work-out units increasing staff rapidly – 300 at end of August – Continuous internal work to separate problem loans – Action plans for every borrower – SPVs and special credit committees • Ukraine is a special
Slide 17: Repossessed assets in the Baltic countries – early stage
Asset quality Repossessed assets in the Baltic countries – early stage • Increase in real estate expected during H2 Estonia Latvia Lithuania SEKm SEKm SEKm 100 160 500 140 80 120 400 60 100 300 80 40 60 200 40 20 100 20 0 0 0 Other Equipment Transport Real estate Other Equipment Transport Real estat
Slide 18: Risk-weighted assets (RWA) – tangible results
Capital management Risk-weighted assets (RWA) – tangible results • RWA reduced by SEK 43bn during Q2 • Management actions – Non-recurring SEK 13bn – Decreased volumes SEK 20bn – Improved processes and collateral position SEK 10bn • Ambition to continue to reduce RWA over time – Focus on core custome
Slide 19: Resilient capital ratios despite high provisions
Capital management Resilient capital ratios despite high provisions % 18 16 15.2 15.0 15.4 Core tier 1 capital ratio Q1 9.37% 14 Result -29bp Capital adequacy ratio Dividend Insurance +14bp 12 RWA reduction +63bp 10 Other -2bp 8 Core tier 1 capital ratio 9.83% 6 Core tier 1 9.7 9.4 9.8 capital ratio
Slide 20: Summary
Summary • Strong measures taken to: – manage and lower the risk level in the bank – adjust the capacity to the prevailing global economic situation – take steps towards being self-sufficient in funding – improve our capital buffer • In H2 09 - focus on: – continuous efforts in our four focus areas a
Slide 21: Appendix
Appendix Swedbank @ 21
Slide 22: Balance sheet
Balance sheet Swedbank Group SEKm Jun 09 Dec 08 % Loans to credit institutions 122 605 128 536 -5% Loans to the public 1 275 996 1 287 424 -1% Interest-bearing securities 174 048 133 694 30% Shares and participating interests 71 757 60 182 19% - for which customers bear the investment risk 64 799 51
Slide 23: Corporate governance structure
Strategy Corporate governance structure Nomination Shareholders Shareholders Nomination Committee Committee General General meeting meeting Auditors Auditors Board Board of of Directors Directors Risk Risk && Capital Capital Remuneration Remuneration Audit Audit && Compliance Compliance Committee Co
Slide 24: Exposure FAQ
Exposure FAQ • The so-called Lehman exposure was USD 1 438m as of 2009-06-30 – The exposure consists of real estate loans to 52 borrowers, with collateral in 55 properties – 10 borrowers are in default – The aggregated nominal value of loans are well above the amount of the exposure – Updated analys
Slide 25: Exposure FAQ
Exposure FAQ • Private Equity related exposures is SEK 15.1bn – Nordic related LBOs – 99% Senior lending – Largest sector is health care, about 45% – Net impairment losses of SEK 247m during the second quarter • Lending exposure to shipping sector is SEK 19.7bn plus unutilised commitments of SEK 9.0
Slide 26: Maturity profile – long-term funding, 30 June 2009
Liquidity & Funding Maturity profile – long-term funding, 30 June 2009 • Average maturity profile of wholesale funding lengthened to 18 months • During H1 2009, Swedbank has issued SEK 190bn covered bonds and long-term government guaranteed debt • As of 30 June SEK 25bn of long-term funding, will ma
Slide 27: Funding under the Swedish guarantee programme
Liquidity & Funding Funding under the Swedish guarantee programme 5Y (total outstanding as of 30 June, SEK 306bn) 10% • During Q2, Swedbank has < 12 M 40% issued SEK 64bn of long-term 3-4Y debt under the Swedish 31% guarantee programme 1-2Y • Introduced USCP programme Long-term 2-3Y 2% Short-term du
Slide 28: Funding sources
Liquidity & Funding Funding sources • Core markets: Sweden and Scandinavia, Europe, USA, ASIA Swedbank Parent Company Swedbank Mortgage Funding programmes Limits Outstanding Total Funding programmes Limits Outstanding Total guaranteed outstanding guaranteed outstanding funding amounts funding amount
Slide 29: Recent Swedbank transactions
Liquidity & Funding Recent Swedbank transactions Government Guaranteed Issuer Rating Currency Maturity Spread Issue size Announcement Swedbank Aaa/AAA EUR 3Y +30 500m 17/6 2009 Swedbank Aaa/AAA USD 3.5Y +45 500m 17/6 2009 Swedbank Aaa/AAA USD 3.5Y +45 1bn 17/6 2009 Swedbank Aaa/AAA EUR 5Y + 68 1.5bn
Slide 30: Swedbank Mortgage, Q2 09, total loan portfolio
Swedbank Mortgage, Q2 09, total loan portfolio SEK 649bn (EUR 60bn), nominal amount • 100% lending – Swedish properties • More than 90% residential lending • Average LTV of 44% in Swedbank Mortgage (cover pool 43%) • 80% of the total lending book within a loan-to-value ratio below 50% Loan to value
Slide 31: Other lending to the public, Sweden, SEK 295bn
Other lending to the public, Sweden, SEK 295bn (excl. Swedbank Mortgage) SEKm 350 000 Real estate management 300 000 Other real Residential 250 000 Municipalities estate mgmt properties Other corporate lending 26% 22% Forestry and agriculture 200 000 Transportation Manufacturing Tenant-owned Constru
Slide 32: Appendix – Baltic Banking
Appendix — Baltic Banking Swedbank @ 32
Slide 33: Baltic Banking gross lending by sectors
Baltic Banking gross lending by sectors* Portfolio, June 2009 Portfolio growth, Q2 09 Individuals Mortgage Other 45% -108 Real estate 3 138 16% -54 mgmt** Retail & 1 495 8% -81 Wholesale EURm 8% Industry 1 516 -74 5% Transport 921 -62 2% Construction 427 -23 16% Other** 3 008 -43 0 2 000 4 000 6 000
Slide 34: Mortgage portfolio LTV
RLSR & LTV risk dimensions Mortgage portfolio LTV EE LV LT Average LTV: 2009-06-30 78% 104% 90% LTV > 100% 24% 54% 37% LTV 80% -100% 21% 15% 20% 34
Slide 35: Real estate prices continue to fall
Real estate prices continue to fall Distressed sales are driving the trend Market situation • Apartment prices down from peak level Riga 1800 1800 -53% in EE, -68% in LV, and -28% in LT 1500 1500 No of transactions • Fall from beginning of year : 31% in EE, 39% 1200 1200 EUR/m2 in LV, 10% in LT 900