Nordea Bank Abp · OMXHEX:NDA_FI
Nordea Bank Abp — Q1 2009 Earnings Presentation
45 slides from Nordea Bank Abp's earnings presentation, Apr 29, 2009
Slide 1: Quarterly report January – March 2009
Quarterly report January – March 2009 International telephone conference 29 April 2009
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: CEO Presentation
Nordea ” a 43 —— CEO Presentation
Slide 4: Strong start of the year
Strong start of the year Organic growth Cost management Support to customers Revenues up 5%* Expenses down 5% Total lending up 2% Q1 2008 Q4 2008 Q1 2009 Q1 2008 Q4 2008 Q1 2009 Q1 2008 Q4 2008 Q1 2009 Loan losses in line Risk-adjusted profit Strong capital base with guidance 54 Bps Up 21% Target 9%
Slide 5: Risk-adjusted profit
Risk-adjusted profit Accumulated risk-adjusted profit* Accumulated Risk-adjusted profit 27.0% since target introduced 27,0% January 1 2007 Strong result in Treasury operations and Nordea Markets the last two quarters 15,0% 15,3% 16,5% 12,6% 14,3% Up 21% compared to the fourth 8,4% 14,1% quarte
Slide 6: By applying the “middle of the road” the aim is to maintain the high business momentum
By applying the “middle of the road” the aim is to maintain the high business momentum Not reacting to the Over-reacting to the downturn Middle of the road situation 9 Unchanged lending 9 Focus on core customers – 9 Closing down growth growth selected new business initiatives opportunities 9 Unchang
Slide 7: Cost- risk- and capital management has taken the lead
Cost- risk- and capital management has taken the lead Costs 9 Accelerated ongoing efficiency programs – costs down in Q1 9 General right-sizing of staff – staff reduction during 2009 Profit orientation Risk Ambitious vision 9 Step up risk management – emphasising pro-activity and targets 9 Additiona
Slide 8: By applying the “middle of the road” we trust we can maintain the high business momentum
Growth strategy By applying the “middle of the road” we trust we can maintain the high business momentum 2009 priorities 2 251 2 279 Existing relationships 2 022 1 957 1 961 1 992 1 996 1 898 1 873 1 914 Grow share of wallet through 1 754 1 780 1 734 less capital-consuming products Selective custome
Slide 9: CFO Presentation
Nordea ” a 43 —— CFO Presentation
Slide 10: Result highlights
Result highlights EURm Q1 2009 Q4 2008* Chg % Q1 2008 Chg % Net interest income 1,356 1,386 -2 1,181 15 Net fee and commission income 381 390 -2 495 -23 Net gains/losses 515 325 58 284 81 Equity method 9 45 -18 Other income 18 20 19 Total operating income 2,279 2,166 5 1,961 16 Staff costs -665 -655
Slide 11: Underlying business trends
Underlying business trends Q1 2009 with unchanged Q1 2009 with translation unchanged EURm Q1 2009 Q4 2008 Chg % currencies Chg % translation currencies Chg % (compared with (compared with Q1 Q4 2008 excluding 2008) gain from NCSD) Total operating income 2,279 2,251 1 2,370 9 2,389 22 Total operating
Slide 12: Continued volume growth
Continued volume growth % Q1oQ4 Q1oQ1 Total Lending, excl. repurchase agreements 2(1) 5(12) – Nordic household mortgages 3(1) 1(7) – Nordic consumer lending 0(-1) 3(7) – Nordic corporates 1(0) 3(11) – New European Markets -3(0) 37(52) Total Deposits, excl. repurchase agreements 2(0) 6(12) – Nordic h
Slide 13: Net interest income – stable at record levels
Net interest income – stable at record levels Q1oQ4 Net interest income remained around record 1 386 EURm 1 296 1 356 levels – reported decrease entirely explained 1 181 1 230 by fewer banking days Despite the negative effect from heavy pressure on deposit margins – approx EUR 180m NII up 3% i
Slide 14: Change in net interest income
Change in net interest income EURm Q1oQ4 Q1oQ1 Volume driven Nordic markets local currencies 10 89 Corporate lending volumes 3 47 Household lending volumes 3 30 Corporate deposit volumes 3 7 Household deposit volumes 1 5 Margin driven Nordic markets local currencies -40 45 Corporate lending margins
Slide 15: Structural Interest Income Risk (SIIR)
Structural Interest Income Risk (SIIR) EURm, annualised effect on NII* Q1/09 Q4/08 Q3/08 Q2/08 Q1/08 Increasing market rates, 100bp 87 55 204 244 238 Decreasing market rates, 100bp 169 218 232 275 268 • SIIR for increasing rates slightly higher and SIIR for decreasing rates notably lower • Due to lo
Slide 16: Net fee and commission income stabilising
Net fee and commission income stabilising Q1oQ4 EURm Down 2% - up 2% in local currency 518 495 480 Savings-related commission down 11% Stabilising AuM - unchanged compared to previous 390 381 quarter following rebound late in the quarter Lending-related commission up 16% High Corporate Mer
Slide 17: Stabilising trend in asset under management
Stabilising trend in asset under management Q4/Q1 Net flows AuM, EURbn Minor decrease in AuM following falling asset values -1.0 0.5 Net inflow of EUR 0.9bn driven by sales 0.6 0.9 of retail funds and institutional products -2,3 Nordic Retail funds EUR 0.5bn Institutional clients EUR 0.2bn
Slide 18: Net gains/losses up 58% - record result in Capital Markets
Net gains/losses up 58% - record result in Capital Markets Q1oQ4 Strong result in Capital Markets EURm Maintained high activity level in customer 528 areas Increased demand for risk management products in volatile markets - mainly interest rate and FX- products 304 284 272 Result benefited f
Slide 19: Income growth in Nordea YoY, EURm
Income growth in Nordea YoY, EURm Customer operations 3.5% -5.7% 9.5% 69 111 16.2% -0.3% 187 2.5% -0.9% 3.4% 5 18 8.8%* 49 4.1% 67 80 2 279 1 961 Income Ytd Nordic IIB excl. New IPB&F Life Markets GCC and FX effects Income Ytd 08 Banking NEM European Backbone other 09 Markets *Growth in customer ope
Slide 20: Expenses in line with outlook
Expenses in line with outlook Q1oQ4 Down 5% compared to previous quarter – EURm 1,150 unchanged in local currencies 1,055 1,073 1,060 1,090 34 Cost/income ratio improved to 48%, 33 31 27 30 compared to 51% previous quarter – 54% 384 406 395 461 394 one year ago Measurements to manage cost down
Slide 21: Expense growth in Nordea (EURm)
Expense growth in Nordea (EURm) 1.4% -6.5% 2.0% 15 Underlying cost 0,9% 21 69 increase 6.5% 1.4% 9 2.1% 15 3.3% 2.1% 22 22 1 090 1 055 Expenses Wage Volume IT Other Variable Pension FX-effects Expenses Ytd 2008 increases driven development salaries expenses Ytd 2008 production costs 21
Slide 22: Falling number of employees
Falling number of employees 4 402 Q1oQ4 4 291 4 342 4 034 Down 1% or 355 FTEs 3 809 Nordic Markets -257 New European Markets +60 29 606 29 464 29 311 28 944 28 599 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Nordea excl. New European Markets New European Markets 22
Slide 23: Operating profit up 7%
Operating profit up 7% Operating profit, EURm 885 883 847 833 781 Q1oQ4 Despite high net loan losses operating profit up 7% from Q4 and down 6% compared to the level in Q1 2008 In local currencies profit before loan Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 losses increased by 11% to a new Profit before loa
Slide 24: High profitability
High profitability % 24,1 22,7 23,6 Return on equity of 13,9% (14.4% in Q4) 21,4 20,6 20,8 19,1 RaRoCar 24.1% (21.0% in Q4) 18,0 Nordic Banking 16% 15,3 13,9 IIB 28% 2005 2006 2007 2008 Q1/09 RoE * RaRoCar* * For comparison reasons two major non-recurring items have been excluded. For 2007 t
Slide 25: Continued good demand for Nordea issuance
Continued good demand for Nordea issuance During first quarter 2009 Nordea issued approx EUR 7.3 bn long-term funding Total long-term funding issued Covered bond issuance EUR 4,6bn (EURbn) Nordea Bank Denmark EUR 1.5 bn issuance 31 27 based on the Danish Act of Financial Stability (Oct 2008)
Slide 26: Successful outcome of the rights offering
Successful outcome of the rights offering Final outcome shows the aggregated total subscription level (including both with and without subscription rights) ended at slightly above 128% of total shares offered Since the rights-offering was clearly oversubscribed the underwriting guarantees was no
Slide 27: Nordea – one of the strongest banks in Europe
Nordea – one of the strongest banks in Europe Core Tier 1 capital ratio excluding transition rules Nordea compared with its 14,5 * European peer group, % 12,1* 10,4 10,0 9,7 9,1 8,9 8,8 8,6 8,3 7,8 7,6 8,0 7,3 7,2 7,2 6,6 6,5 6,5 6,0 5,8 Nordea Median Source: Public reports from respective banks Not
Slide 28: Capital position following capital measures
Capital position following capital measures Capital ratios for Q1/09 and Q4/08 including The core Tier 1 ratio and the Tier rights issue, % 1 ratio well above targets in 10,8 10,9 Nordeas capital policy 10,0 10,0 9,9 8,6 9,1 Target Following completion of rights 7,9 8,2 9.0 7,5 7,2 issue, the ca
Slide 29: Risk weighted amounts
Risk weighted amounts RWA end of period, EURbn Q1/Q4 214 218 213 201 190 194 188 Overall, RWA excluding transition rules 176 169 171 increased during the first quarter by 1.4%, driven by Increased credit exposure Rating migration below expectations Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Market risk d
Slide 30: Customer areas
30 Nordea ™ Customer areas
Slide 31: Nordic Banking by market in local currency
Nordic Banking by market in local currency Balanced growth between lending and deposits, YoY volume growth in% 15 15 11 10 10 10 9 6 6 7 Nordic Banking Denmark Finland Norway Sweden Lending Deposits YoY income and cost growth, % 38 12 5 4 5 4 4 4 1 Nordic Banking Denmark Finland Norway Sweden -16 In
Slide 32: CRO Presentation
Nordea ” : - ENE = ee CRO Presentation
Slide 33: Broad economic slowdown affect most sectors
Broad economic slowdown affect most sectors Unpresidented drop in GDP grow th 8% Major drop in GDP-growth and 6% business and consumer confidence 4% affects most markets and industries 2% 0% Despite a well-diversified lending 1994 1996 1998 2000 2002 2004 2006 2008 2010E -2% portfolio spread ove
Slide 34: Increased loan losses following economic slowdown in all markets
Increased loan losses following economic slowdown in all markets Q1oQ4 Loan losses, EURm Net loan losses EUR 356m or 54bps in Q1 476 407 320 356 Gross provisions 15% lower 140 121 152 Continued high provisioning both for 89 21 36 collectively and individually assessed loans -63 -51 as well as
Slide 35: Weakening economy affecting impaired loans
Weakening economy affecting impaired loans Impaired loans and recivables, EURm Increased gross impaired loans in first quarter 1 116 – up 33% to 100bps of total lending 835 515 576 680 68bps net of allowances 1 849 1 389 62% of the impaired loans are still performing 928 902 1 007 Q1/08 Q2/08
Slide 36: Approximately half of the credit portfolio is low risk
Approximately half of the credit portfolio is low risk – a few challenging areas… Total lending to public Q1 2009 EUR 274bn Commercial real estate Mortgage lending Construction Special Residential real estate attention Drybulk/Container Telecom operators areas; PE companies 19% Fin Institutions Balt
Slide 37: Shipping and offshore – 4% of total loan portfolio
Shipping and offshore – 4% of total loan portfolio Loan and receivables, EURbn 11.8 11.4 Container Well proven business model and Offshore and Oil services credit policy applied consistently for 9.1 Other shipping 15 years - focus on listed companies Gas tankers with strong track record Chemical t
Slide 38: Private-equity funds – 3% of total loan portfolio
Private-equity funds – 3% of total loan portfolio Portfolio well diversified between Total lending, EURbn industries and the Nordic markets – more 7.4 7.4 than 100 portfolio companies 6.7 High quality growth in 2008 with low leverage and to solid sectors Mainly senior debt – insignificant expo
Slide 39: Strategy for New European Market adopted to changed market conditions
Strategy for New European Market adopted to changed market conditions – 5% of total lending Total lending NEM EURbn 15.3 14.8 Lithuania Reduced lending volumes in first quarter – continued thorough credit approval process 9.8 Estonia • Proportion of lending past due has increased Latvia during the
Slide 40: Well provisioned Baltic portfolio - 3% of total lending
Well provisioned Baltic portfolio - 3% of total lending Corporate segment exposure Baltic countries Annualised Q1 loan losses 119bps of which 60% collective State; 7% State; 7% State; 3% Increased impaired loans in the Baltic Small local; countries, now amounting to EUR 256m or 2% Midsize 342bps
Slide 41: Largely secured lower risk real estate portfolio
Largely secured lower risk real estate portfolio Lending to real estate management per country 44% of the portfolio towards EURbn Q1/09 Commercial Residential End 2008 End 2007 low risk residential Sweden 13.4 44% 56% 13.5 14.9 Norway 8.5 72% 28% 7.7 8.6 counterparties Finland 6.6 49% 51% 7.1 7.0
Slide 42: High quality commercial real estate portfolio
High quality commercial real estate portfolio Commercial real estate lending EUR 19.9bn, geographic split Geographically well diversified Other 11% Denmark portfolio – limited exposure to 15% Danish market Finland Sweden 18% 29% 40 largest customer accounts for approx 40% of the portfolio Norway
Slide 43: Credit rating migration expected following economic downturn
Credit rating migration expected following economic downturn – minor down-rating so far Corporate rating migration Q109 / Q408 • Basel II will for the first time 85% be tested in a downturn 30% Down-rated Up-rated • Minor down-ratings so far but 25% expected to accelerate in 20% coming quarters 15%
Slide 44: Concluding remarks and outlook 2009
Concluding remarks and outlook 2009 Strong start of the year – record result in Markets Continued strong income momentum – high activity among customers Organic growth strategy adjusted – ‘Middle of the road’ Stringent cost management – expenses in line with outlook Net loan losses in Q1 i
Slide 45: Quarterly report January – March 2009
Quarterly report January – March 2009 International telephone conference 29 April 2009