Slide 1: Third Quarter Report 2012 Press and analyst conference
Third Quarter Report 2012 Press and analyst conference Christian Clausen, President and Group CEO
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements that reflect management’s current views with respect to certain future events and potential financial performance. Although Nordea believes that the expectations reflected in such forward-looking statements are reasonable, no assurance
Slide 3: Key messages: New Normal plan delivers on cost, capital and income
Key messages New Normal plan delivers on cost, capital and income • Unchanged costs through 2012, excluding FX effects • Cost/income ratio 51% YTD (54% 9m 2011*) • Improved RoE to 11.4% YTD (10.6% 9m 2011*) • Core Tier 1 ratio improved to 12.2% • Loan losses at 27 bps YTD (20bps 9m 2011) • Income in
Slide 4: Key messages: Progress in building the future bank business model
Key messages Progress in building the future bank business model • New Normal plan delivers on cost, capital and income • Retail Banking: Advice based distribution model, improved capital efficiency • Wholesale Banking: Developed relations, focus on adding high value at right price • Wealth Manageme
Slide 5: Financial highlights; Building the future bank business model
• Financial highlights • Building the future bank business model
Slide 6: Financial result – Q3/12
Financial result – Q3/12 EURm Q3/12 Q2/12 Change % Q3 YTD 12 Q3 YTD 11 Change % Net interest income 1,441 1,462 -1 4,323 4,029 7 Net fee and commission income 605 611 -1 1,812 1,807 0 Net fair value result 377 494 -24 1,340 1,011 33 Other income 46 39 18 131 96 36 Total income 2,469 2,606 -5 7,606 6
Slide 7: Net interest margin under pressure
Net interest margin under pressure Net interest margin (excl. liquidity buffer and repo rates) • Net interest margin is down 4bps to 105bps in Q3, (107bps YTD) 105bps • Strong pressure on deposit margins • Lower interest rates • Fierce competition • Slight increase in asset margins in Q3 • Unchanged
Slide 8: Net interest margin under pressure since 2004
Net interest margin under pressure since 2004 Average lending and deposit margin 8•
Slide 9: Increased lending and deposit volumes
Increased lending and deposit volumes Total lending vs Total deposits, EURbn • Low demand for corporate credit • Strong demand for corporate bonds • Still relatively high demand for mortgages • High inflow of deposits from corporate and institutions – flight to quality • Funding gap under strict con
Slide 10: Assets under Management at all time high
Assets under Management at all time high Wealth Management AuM, EURbn • Assets under Management at 0,9 all-time-high of EUR 210.9bn • Inflow of 2.7bn in Q3 7.7 • Strong inflow in Retail funds and Institutional Clients 1.2 • Strong investment performance 187.4 gives added value to our customers • 80%
Slide 11: Expenses under solid control
Expenses under solid control Total expenses, EURm • Decrease by 2% in local currencies q-o-q • Number of FTEs down 1% q-o-q 11 •
Slide 12: Credit quality
Credit quality Total net loan losses, EURm • Broadly in line with long-term risk appetite • Low loan losses in Norway, Sweden and Finland • Continued elevated levels in Denmark and Shipping • Effects from stricter rules in Denmark • Lower individual provisions • Increase in collective provisions 12
Slide 13: Strong access to funding
Strong access to funding Long-term funding, EURbn • EUR 25bn issued in long-term funding • Of which 54% senior, 40% covered and 6% Tier two • Redemptions for 2012 are Nordea covered bonds spreads vs EUR 15bn European governments Spread vs MS (bps) • Improved spreads • Nordic covered bonds benefiting
Slide 14: Strong capital generation
Strong capital generation Core Tier 1 capital, EURm • Tier 1 capital is up by 86% since 2006 • CAGR of 9% after dividend and adjusted for rights issue 14 •
Slide 15: Risk Weighted Assets under strict control
Risk Weighted Assets under strict control Risk-weighted assets (RWA), EURbn* • RWA decreases EUR 2bn due to decreased credit risk and market risk • Further improved quality in liquidity buffer • RWA optimisation reduces RWA by EUR 0.5bn • In total limited effect from rating migration * Basel II excl
Slide 16: Improved Core Tier 1 ratio
Improved Core Tier 1 ratio Core Tier 1 capital ratio, % (excl. Hybrids)* • Improved ratio by 40 bps since Q2 2012 due to • Strong profit generation • Decreased RWA • Improved CT1 ratio by 220 bps since Q2 2010 • Lending growth of 17% • Full dividend to shareholders * Basel II excluding transition ru
Slide 17: Financial highlights; Building the future bank business model
• Financial highlights • Building the future bank business model
Slide 18: The relationship strategy has been instrumental to Nordea
The relationship strategy has been instrumental to Nordea Execution of the relationship strategy 2007/2008 2008/2009 2010/2011 2011/2012 Profitable Middle of Prudent New organic the road growth Normal growth Generating Balancing “Supporting Focus on resources cost, risk and customers to restoring to
Slide 19: … and it continues to drive performance …
… and it continues to drive performance … Relationship strategy Performance in New Normal Close and lifelong Capital efficiency relationships with customers = Focus on right Funding customers/projects efficiency Capital efficient solutions Many products per customer Diversification/lower risk Liquid
Slide 20: … and Nordea’s position continues to be one of strength
… and Nordea’s position continues to be one of strength 2011/2012 Continued to grow the number of core customer relationships New Normal Continued to deliver plan top league ROE As we are Focus on executing the New One of the strongest ratings Normal plan, restoring in the sector Nordea’s position R
Slide 21: The relationship strategy; a superior model for working together with customers
The relationship strategy; a superior model for working together with customers in the new environment Customer’s benefits … stability; a Confidence in … holistic advice … one provider of bank on both bank’s ability … in best interest … all services… sunny and rainy days Know Advice Service Commit t
Slide 22: Customer driven business model
Customer driven business model 94% customer-related, only 6% from risk handling of customer transactions Total income, Q3 2012, % • Customer driven business model ideally suited for the New Normal Customer margins and fees Risk handling of customer transactions 22 •
Slide 23: Customer relationship activities in quarter
Customer relationship activities in quarter “ Household customers Each working day, more than 5,000 people visited a • Close to 21,000 new, externally acquired, Gold, Nordea branch and received a Premium, and Private Banking customers in the comprehensive overview of their ” quarter; 65,000 YTD pers
Slide 24: Customer relationship activities in quarter: Corporate customers
Customer relationship activities in quarter Corporate customers • Provided a total of EUR 190bn of lending “ Our customers want the most suitable funding in the current ” • Participated in raising EUR 6.7bn of capital to climate - we make it possible clients in bond markets (as bookrunner) • Arrange
Slide 25: The New Normal plan continues to deliver: cost efficiency
The New Normal plan continues to deliver In terms of cost efficiency Group FTE development Total expenses, EUR million 25 •
Slide 26: Delivering on cost efficiency
Delivering on cost efficiency Cost to serve a customer (cost / customer) (EUR) Business volumes / FTE (EURm) Number of customers per FTE (Nordea Group) Total income / FTE (EURt) Key figures 26 •
Slide 27: The New Normal plan continues to deliver: capital efficiency
The New Normal plan continues to deliver In terms of capital efficiency • Reduced RWA by more than EUR 9bn since beginning of 2011 due to improved efficiency * Basel II excluding transition rules 27 •
Slide 28: Retail Banking: Core customer relationships
Retail Banking: Core customer relationships Key achievements in quarter Retail Banking – Key results EURm YTD YTD Growth • Implementing Banking Operating Model 12 11 • E.g. Advice and service-focused branch Total operating income 4,134 3,899 6% network Operating profit 1,365 1,142 20% • Focus on pro
Slide 29: Wholesale Banking: Advice in focus
Wholesale Banking: Advice in focus Key achievements in quarter Wholesale Banking – Key results EURm YTD YTD Growth • Focus on core customer relationships, share 12 11 of business and fee-based income Total operating income 2,132 1,876 14% Operating profit 1,227 1,165 5% • Alignment of the Wholesale
Slide 30: Wealth Management: Capital efficient solutions
Wealth Management: Capital efficient solutions Key achievements in quarter Wealth Management – Key results EURm YTD YTD Growth • Life & Pensions customers move to more 12 11 capital-light products Total operating income 1,036 927 12% • 75% of GWP in capital light products in Q3 to be compared with 5
Slide 31: Key messages: New Normal plan delivers on cost, capital and income
Key messages New Normal plan delivers on cost, capital and income • Unchanged costs through 2012, excluding FX effects • Cost/income ratio 51% YTD (54% 9m 2011*) • Improved RoE to 11.4% YTD (10.6% 9m 2011*) • Core Tier 1 ratio improved to 12.2% • Loan losses at 27 bps YTD (20bps 9m 2011) • Income in
Slide 32: Third Quarter Report 2012 Press and analyst conference
Third Quarter Report 2012 Press and analyst conference Christian Clausen, President and Group CEO
Slide 33: Third Quarter Report 2012 Analyst conference
Third Quarter Report 2012 Analyst conference Fredrik Rystedt Group CFO and Ari Kaperi Group CRO
Slide 34: Change in net interest income
Change in net interest income Change, EURm Q-o-Q Y-o-Y Volume-driven NII 0 172 Lending -2 146 Deposits 2 26 Spread-driven NII -14 233 Lending 17 492 Deposits -31 -259 Spread costs -12 -130 GCC, including Treasury -5 47 Other 10 -28 Total -21 294 34 •
Slide 35: Lending, volumes and margins
Lending, volumes and margins Lending volumes EURbn Q3/12 and development q-o-q Margin* development q-o-q Household Corporate Banking Denmark Banking Finland Banking Norway 0% 0% 0% 0% -5% Banking Sweden Corp & Inst Banking -3% Shipping Change in local currencies *Excluding full liquidity premia 35 •
Slide 36: Deposits, volumes and margins
Deposits, volumes and margins Deposit volumes EURbn Q3/12 and development q-o-q Margin* development q-o-q Household Corporate Banking Denmark Banking Finland Banking Norway Banking Sweden 0% 1% -4% -1% 11% Corp & Inst Banking 3% Shipping Change in local currencies *Excluding full liquidity premia 36
Slide 37: Net commission income remains at high levels
Net commission income remains at high levels Total net fee and commission income, EURm • Down 1% • Increased lending commission • Decreased commissions on payments, cards, savings and investments 37 •
Slide 38: Net fair value
Net fair value Total net result from items at fair value, EURm • Continued high demand in customer areas • Negative valuation changes in liabilities accounted for at fair value 38 •
Slide 39: Net loan losses quarterly by country – excluding Shipping
Net loan losses quarterly by country – excluding Shipping • Still certain overleveraged Danish household and agriculture customers EUR 145m behind the provisions EUR 46m • A limited number of individual provisions in the EUR 8m other countries EUR -17m 39 •
Slide 40: Net loan losses Denmark – excluding Shipping
Net loan losses Denmark – excluding Shipping 40 •
Slide 41: Underlying stabilisation in Denmark
Underlying stabilisation in Denmark House prices, index = 2006* Forced sales* Number of bankruptcies* Loan losses net, Retail Banking Denmark * Source: Danmarks Statistik 41 •
Slide 42: Shipping loan losses and impaired loans
Shipping loan losses and impaired loans Shipping Net loan losses, EURm Shipping Net impaired loans, EURm EUR 558m EUR 54m • Further deterioration of collateral • Gross impaired loans down 4% q-o-q values • Need for additional loan loss provisions 42 •
Slide 43: Challenges remained within Shipping
Challenges remained within Shipping Ship values Shipping orderbook as % of existing fleet 180 90% VLCC. 5 year old Tanker Bulker Cape Bulker. 5 year old Containership 150 Panamax Containership. 75% 5 year old 120 60% 90 45% MUSD 60 30% 30 15% 0% 0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan
Slide 44: Impaired loans and allowances
Impaired loans and allowances Impaired loans, EURm Total allowances, EURm Collective Collective Non-performing Non-performing Collective Non-performing Individual Individual Individual Performing Performing Performing • 58% of impaired loans are • Collective provisions increased in performing Denmar
Slide 45: Impairment rate gross, basis points
Impairment rate gross1, basis points • Impairment rate gross increased to 181bps. • Still Danish household and agriculture customers behind the increases (new impaired volume approx. EUR 410m), to a large extent explained by the clarified and stricter impairment rules introduced by the Danish FSA. •
Slide 46: Highest increase of impaired loans in collaterised loan books
Highest increase of impaired loans in ”collaterised” loan books Change in impaired loans %, Index 100 = Q3 2011 250 Nordea total, provisioning ratio 41% 225 Shipping, 200 provisioning ratio 35% Agriculture, 175 provisioning ratio 30% 150 Real estate, provisioning ratio 36% 125 Household, provisionin
Slide 47: Third Quarter Report 2012 Analyst conference
Third Quarter Report 2012 Analyst conference Fredrik Rystedt Group CFO and Ari Kaperi Group CRO