Nordea Bank Abp · OMXHEX:NDA_FI
Nordea Bank Abp — Q2 2009 Earnings Presentation
47 slides from Nordea Bank Abp's earnings presentation, Jul 21, 2009
Slide 1: Second Quarterly Report 2009 International telephone conference
Second Quarterly Report 2009 International telephone conference 21 July 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 performance continues
Strong performance continues Income up 4% Expenses up 2% Solid gap income and cost growth 13 14 2 Q2 2008 Q1 2009 Q2 2009 Q2 2008 Q1 2009 Q2 2009 Q2/Q1 H1/H1 Q2/Q2 Strong capital base Loan losses 57 bps (*) Risk adjusted profit up 4% Tier 1 Capital well above target Target 9% Q2 2008 Q1 2008 Q2 2009
Slide 5: Total operating income up 4% Q2/Q1 and 18% Q2/Q2
Total operating income up 4% Q2/Q1 and 18% Q2/Q2 A new record income level Total income, EURm 2 359 Performance in accordance with strategic 2 279 plans 1 992 Continued strong momentum in customer areas Income from corporate customers up 1% - strong trend in customer-driven capital markets o
Slide 6: Sustainable income growth
Sustainable income growth Total income, EURm 2 359 2 279 2 251 Strong execution of the 2 142 organic growth strategy 1 9921 996 1 957 1 961 Robust business model 1 898 1 914 1 873 Capturing the potential in 1 780 1 754 1 734 Nordea’s customer base Growth initiatives have delivered CAGR of
Slide 7: Continued focus on cost management – expenses in line with outlook
Continued focus on cost management – expenses in line with outlook Total operating expenses, EURm Total expenses up 2% compared to previous quarter 1 073 1 090 1 116 Underlying cost growth 6% in local currencies Cost/income ratio 47% - 54% one year ago 51% in Nordic Banking Continued execu
Slide 8: Profit before loan losses up 5% Q2/Q1 and 35% Q2/Q2
Profit before loan losses up 5% Q2/Q1 and 35% Q2/Q2 Profit before loan losses, EURm New record level 1 243 1 189 Strong income generation provides ability to absorb loan losses even in a stressed 919 scenario In the middle of the worst recession in modern times Nordea over delivers compared to
Slide 9: Net loan losses – in line with outlook statement
Net loan losses – in line with outlook statement Net loan losses EUR 425m and EUR 378m excluding the one-off provision in relation to Net loan losses, EURm a legal claim, contested by Nordea 57bps in Q2 (excl the legal claim) - broadly 57bps in line with level in Q1 54bps 50 bps excl Danish gu
Slide 10: Outlook
Outlook Risk-adjusted profit expected to be higher than in 2008 – previous outlook risk-adjusted profit was expected to be unchanged Cost growth is expected to be slightly lower than in 2008 – unchanged from previous outlook Since global and Nordic economies have contracted clearly beyond gene
Slide 11: CFO Presentation
Nordea ” a 43 —— CFO Presentation
Slide 12: Result highlights
Result highlights EURm Q2/09 Q1/09 Chg % Q2/08 Chg % H1/09 H1/08 Chg % Net interest income 1,305 1,356 -4 1,230 6 2,661 2,411 10 Net fee and commission 412 381 8 518 -20 793 1,013 -22 Net gains/losses 594 515 15 198 200 1,109 482 130 Other income 48 27 78 46 0 75 47 60 Total income 2,359 2,279 4 1,9
Slide 13: Underlying business trends
Underlying business trends Q2 2009 with H1 2009 with unchanged unchanged translation EURm Q2 2009 Q1 2009 Chg % Chg % translation currencies Chg % currencies (compared with H1 (compared with 2008) Q1 2009) Total operating income 2,359 2,279 4 2,349 3 4,856 23 Total operating expenses -1,116 -1,090 2
Slide 14: Continued volume growth
Continued volume growth % change in local currency Q2oQ1 Q2oQ2 Total Lending, excl. reversed repurchase agreements 0 7 – Nordic household mortgages 2 7 – Nordic consumer lending 1 4 – Nordic corporates -2 4 – New European Markets -1 52 Total Deposits, excl. repurchase agreements -1 8 – Nordic househ
Slide 15: Nordic Banking by market in local currency
Nordic Banking by market in local currency Balanced growth between lending and deposits, YoY volume growth in% 14 13 10 11 10 5 5 6 4 0 Nordic Banking Denmark Finland Norway Sweden Lending Deposits 15
Slide 16: Net interest income – holding up well despite pressure on deposit margins
Net interest income – holding up well despite pressure on deposit margins EURm Minus 4% in Q2/Q1 and up 6% Q2/Q2 1 386 1 356 1 296 1 305 Pressure on deposit margins from lower 1 230 interest rates – the negative impact is levelling off – minus EUR 60m in Q2 vs minus EUR 180m in Q1 Continued in
Slide 17: Nordic markets net interest income development (EURm)
Nordic markets net interest income development (EURm) 5.9% -9.2% 24.8% 120 -24.3% 187 -2.1% 491 502 0.7% 2,024 15 1,983 Net interest Deposit Deposit Lending Lending Low er return Net interest income Jan- margins volumes margins volumes on allocated income Jan- Jun 2008 capital, FX Jun 2009 effects a
Slide 18: Change in net interest income
Change in net interest income EURm Q2oQ1 H1oH1 Volume driven Nordic markets local currencies -2 135 Corporate lending volumes -6 69 Household lending volumes 2 51 Corporate deposit volumes 0 13 Household deposit volumes 2 2 Margin driven Nordic markets local currencies -58 11 Corporate lending margi
Slide 19: Strong servicing of corporate customers
Strong servicing of corporate customers Continued high business activity with Corporate lending growth - Nordic markets corporate customers - 4.7% 4.7% overall financing volumes have 0.4% -0.4% 0% 6,0 increased in H1 0,4 0,4 114,2 An increasing part of 108,2 108,2 new financing is taking place t
Slide 20: Net fee and commission income up 8% - breaking the negative trend
Net fee and commission income up 8% - breaking the negative trend from last year Net fee and commission, EURm A clear rebound of savings-related 518 commissions - up 7% AuM up 9% - gradual recovery of equity market and 412 changed savings pattern of household customers 381 Net inflow of EUR 2.
Slide 21: Strong increase in assets under management – trend shift
Strong increase in assets under management – trend shift Net flows AuM, EURbn Inflow of EUR 2.8bn in combination with 2.8 asset appreciations increased AuM 9% 0.5 to EUR 137bn 0.6 Highest quarterly inflow in more than two years 0.9 Strongest inflow within Nordic Private -2,3 banking, Instituti
Slide 22: Net gains/losses up 15% from record level
Net gains/losses up 15% from record level Explained by execution on corporate Net gains/losses, EURm strategy – further penetration of the 528 524 customer base and strengthened relations have led to more customer business High demand within risk management services – both fixed income, FX and 2
Slide 23: Income growth in Nordea YoY, EURm
Income growth in Nordea YoY, EURm 7.1% -5.5% 218 279 17.3% 10.8% 5.0% 427 4 638 2.3% -0.2% -0.9% 9 34 2.8% 89 1.1% 109 42 3 953 Income Ytd Nordic IIB excl. New IPB&F Life Markets GCC and FX effects Income Ytd 08 Banking NEM European Other other 09 Markets 23
Slide 24: Expense growth in line with guidance
Expense growth in line with guidance EURm 1 150 1 060 1 090 1 116 Total expenses up 2% compared to 1 073 34 31 37 previous quarter 33 30 Underlying cost growth 6% in local 461 394 392 406 395 currencies Cost/income ratio 47% - 54% one year ago 665 687 634 635 655 50% in Nordic Banking Cont
Slide 25: Expense growth in Nordea (EURm)
Expense growth in Nordea (EURm) 1.4% -6.7% 3.2% 30 68 142 1.5% 2.1% 33 3.7% 2.1% 44 45 2 206 2 128 Expenses Wage Volume IT Other Pension FX-effects Expenses Ytd 2008 increases driven development expenses Ytd 2009 production costs 25
Slide 26: Reduced number of employees
Reduced number of employees Q2oQ1 4 402 4 291 4 342 4 344 Down 145 FTEs or 1.5% 4 034 New European Markets flat Nordic Markets -145 Down 500 FTEs since year end 29 606 29 464 29 311 29 166 YoY 28 944 Up 2% or 530 FTEs New European Markets +310 Nordic Markets +220 Q2/08 Q3/08 Q4/08
Slide 27: Despite lower economic activity and higher net loan losses – operating profit only down 2%
Despite lower economic activity and higher net loan losses – operating profit only down 2% Profit before loan losses, EURm 1243 1189 1101 Profit before loan losses up 5% from Q1 919 936 Strong operational efficiency Recovery for net fee and commission income and strong result in the capital ma
Slide 28: High profitability
High profitability % 24.1 24.4 22.7 23.6 Return on equity of 12.0% (13.9% in Q1) 21.4 20.8 19.1 RaRoCar 24.4% (24.1% in Q1) Nordic Banking 17% 15.3 13.9 IIB 30% 12.0 2006 2007 2008 Q1/09 Q2/09 RoE * RaRoCar* * For comparison reasons two major non-recurring items have been excluded. For 2007
Slide 29: Competitive funding position
Competitive funding position S & P L on g S & P S ho rt B BVA AA A -1+ S an ta n d er AA A -1+ Stable rating – low CDS-spread B N P P a r ib a s AA A -1+ N ord e a AA - A -1+ SHB I n t e s a S a n p a o lo AA - AA - A -1+ A -1+ Liquidity buffer of EUR 48bn as of end Q2 D nB N O R AA - A -1 D an
Slide 30: 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 European peer group, % 10.3 8.1 Median Nordea Source: Public reports from respective banks Note: Ratios are based on latest reported figures and adjusted for subsequent capital
Slide 31: Capital position following capital measures
Capital position following capital measures Capital ratios, % Core Tier 1 10.3%, up 30bps Ratios in 2009 incl rights issue Increased retained earnings 10.9 11.2 10.3 9.9 10.0 9.9 Slightly low risk weighted 9.1 9.2 9.3 8.5 8.2 Target amounts, despite migration 7.5 9.0 Tier 1 ratio well above
Slide 32: Risk weighted assets
Risk weighted assets RWA end of period, EURbn Q2/Q1 214 218 213 201 190 194 188 192 Overall, RWA excluding transition rules 176 169 171 170 unchanged at EUR 170bn despite corporate rating migration Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 RWA incl transition rules RWA excl transition rules Slightly h
Slide 33: CRO Presentation
Nordea ” : - ENE = ee CRO Presentation
Slide 34: Loans and receivables by industry and sector
Loans and receivables by industry and sector EURbn Q209 Share of lending EURbn Q408 Share of lending Real estate 35.5 12.8% 35.5 13.4% Financial institutions 21.2 7.6% 16.5 6.2% Industrial commercial services 15.0 5.4% 15.5 5.8% Well diversified Consumer staples 12.8 4.6% 12.9 4.9% Retail trade 10
Slide 35: Contracting economies affecting the loan portfolio
Contracting economies affecting the loan portfolio Impaired loans and recivables, EURm Impaired loans gross – up 19% to EUR 3,534m or 118bps of total lending 1,585 55% of the impaired loans are still performing 1,116 576 Largest increases in consumer durables, 1,849 1,949 902 shipping and offs
Slide 36: Increased loan losses following economic slowdown in all markets
Increased loan losses following economic slowdown in all markets Net loan losses EUR 425m in Q2, 57bps Loan losses, EURm 476 516 excluding one-off provision - broadly in line 407 425 320 356 with outlook 152 Continued high provisioning both for 121 89 36 collectively and individually assessed lo
Slide 37: Approximately half of the credit portfolio is low risk
Approximately half of the credit portfolio is low risk – no new areas of concern Companies owned by Private Equity Total lending to public Q2 2009, EUR 278bn funds – 3% of total lending Commercial real estate Mortgage lending Well diversified between industries Construction Residential real esta
Slide 38: Shipping and offshore – 4% of total loan portfolio
Shipping and offshore – 4% of total loan portfolio Loans and receivables, EURbn 11.8 11.3 11.2 Container Well-proven business model and Offshore and Oil services credit policy applied consistently for Other shipping 15 years - focus on listed companies Gas tankers with strong track record Chemical
Slide 39: Private-equity fund owned companies – 3% of total loan portfolio
Private-equity fund owned companies – 3% of total loan portfolio Portfolio H1 2009, EUR 7.4bn Total exposure EUR 7.4bn unchanged Communication Well diversified portfolio – more than 100 and IT 7% Other portfolio companies 19% Food Products, 99% senior debt – insignificant exposure Human Health
Slide 40: 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 14.9 Lithuania Reduced lending volumes – continued thorough credit approval process 9.8 Estonia • Workout units in place in the Baltic countries Latvia • Proportion of lending p
Slide 41: Well-diversified Baltic portfolio - 3% of total lending
Well-diversified Baltic portfolio - 3% of total lending Corporate segment exposure Baltic countries Annualised Q2 loan losses 214 bps of which EURbn 1.9 44% collective 7% Gross impaired loans in the Baltic countries State increased 63% to EUR 418m - corresponding to 550 bps of total lending 1.5
Slide 42: Baltic lending portfolio
Baltic lending portfolio Majority of impaired loans refers to YTD Q2 Lending EURbn Impaired loans medium-sized local corporates and State & Municipalities 0.3 0.0% mortgages Nordic & International corp 1.0 0.6% Large part of portfolio, EUR 3.2bn Large local corporates 1.6 1.2% or 42%, virtually
Slide 43: Largely secured lower risk real estate portfolio
Largely secured lower risk real estate portfolio Lending to real estate management per country 45% of the portfolio towards EURbn Commercial Residential Q2 2009 End 2008 End 2007 Sweden 43% 57% 13.3 13.5 14.9 low risk residential Norway 70% 30% 8.2 7.7 8.6 counterparties Finland 50% 50% 6.7 7.1 7.
Slide 44: High quality commercial real estate portfolio
High quality commercial real estate portfolio Commercial real estate lending EUR 19.6bn, geographic split Geographically well diversified Other portfolio – limited exposure to Danish 9% Denmark 16% market Sweden Finland 29% 17% 40 largest customers accounts for Norway approx 40% of the portfolio
Slide 45: Credit rating migration expected following economic downturn
Credit rating migration expected following economic downturn – minor down-rating so far Down-ratings reflecting Corporate rating migration Q209 / Q109 economic development 15% of the corporate customers 80% 30% have migrated downwards in Q2 Down-rated Up-rated 5% of the corporate customers 25%
Slide 46: Concluding remarks
Concluding remarks Record performance in second quarter 2009 Total income Profit before loan losses and risk-adjusted profit Key financial targets even above long-term targets Strengthening of customer relations – both on household and corporate High operational efficiency – wide gap bet
Slide 47: Second Quarterly Report 2009 International telephone conference
Second Quarterly Report 2009 International telephone conference 21 July 2009