Nordea Bank Abp · OMXHEX:NDA_FI
Nordea Bank Abp — Investor Day (May 2015)
71 slides from Nordea Bank Abp's investor day presentation, May 27, 2015
Slide 1: Capital Markets Day 2015
Capital Markets Day 2015 1
Slide 2: Nordea Capital Markets Day
Nordea Capital Markets Day Shaping the future relationship bank London, 27 May 2015
Slide 3: 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 assuran
Slide 4: Agenda
Agenda Registration and coffee 08.30-09.00 ■ Shaping the future relationship bank Christian Clausen 09.00-09.20 ■ Financial plan and targets Torsten Hagen Jørgensen 09.20-09.40 ■ Risk management Ari Kaperi 09.40-10.00 Coffee break 10.00-10.30 ■ Retail Banking Lennart Jacobsen 10.30-10.50 ■ Wholesale
Slide 5: Shaping the future relationship bank
CEO Long term commitment, have a plan, future oriented continue on the road we have set out on, Shaping the future relationship bank Stable, trustworthy Christian Clausen President and Group CEO 5
Slide 6: Nordea has delivered on its 2015 plan
Nordea has delivered on its 2015 plan Commitments in 2015 plan Nordea has delivered (Q4 2012 vs. Q4 2014) Capital generation of EUR 4.9bn with 15.7% CET1 and 70% pay-out ratio P P ROE 11.6%, ~13% if CET1 at 13%, ancillary income +9% and costs -5%1 Loan losses at 15 bps, below 10 year average of 16 b
Slide 7: Strong Nordea track record
Strong Nordea track record Strong capital generation and stable returns at low risk1 Acc. dividend, EURbn Acc. equity, EURbn 39 37 34 31 29 26 20 18 15 12 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 CET 1 2 Ratio, % 5.9 15.7 1) CAGR 2014 vs. 2005, adjusted for EUR 2.5bn rights issue in 2009. E
Slide 8: Customer vision shaping the future relationship bank
Customer vision shaping the future relationship bank Customer vision for the future relationship bank Easy to deal with… …relevant and competent… Customer vision …anywhere and anytime… …where the personal and digital relationship makes Nordea my safe and trusted partner 8
Slide 9: Focused business priorities enable the vision
Focused business priorities enable the vision Nordea platform Business priorities 2016-2018 Pan-Nordic platform Simplify for scale and with scalability a forceful digital response Superior Nordic distribution power Expand on core strengths and global capabilities and drive cost and capital efficienc
Slide 10: Industry transformation drives need to simplify
Industry transformation drives need to simplify Three transforming industry drivers Balance sheet Operational Digitalisation regulation regulation ■ Paradigm shift ■ Increasing demands ■ Behaviour shifting fast ■ Mostly in place ■ Higher operational risk ■ Opportunity and threat ■ Increased efficien
Slide 11: Simplify for scale
Simplify for scale Simplification program – priorities and benefits 4-5 years of the journey remains Increased scale, efficiency and agility serving all customers from one common platform Reducing # of products and align data records Automating processes and increasing An end-to-end digital response
Slide 12: A forceful digital response
A forceful digital response Relationship banking is turning digital fast End-to-end digital response required 18 ■ Digital response required Mobile ■ Front-end solutions will not suffice Transactions ■ Automated end-to-end processes across Millions 8 the full value chain is a must 3 Branches ■ Consi
Slide 13: Expand on core strengths: a unique Nordic relationship base
Expand on core strengths: a unique Nordic relationship base Nordic large corporate relationships Nordic household relationships1 100% Nordea 80% ~10 Important relationships 60% Peer 3 Peer 4 ~7 Peer 2 Peer 5 40% Peer 1 ~4 ~4 ~3 20% 0% (60) (40) (20) 0 20 40 60 80 Nordea Peer 1 Peer 2 Peer 3 Peer 4 G
Slide 14: Expand on core strengths: capabilities on par with int'l peers
Expand on core strengths: capabilities on par with int’l peers Global capabilities in focus1 Business model and priorities ■ Leading Nordic platform integrating Markets Capital #1 Corporate bonds and loans equities, bonds, lending and risk #1 Nordic Equity Trading management ■ A return-driven cultur
Slide 15: Expand on core strengths: building the efficient business model
Expand on core strengths: building the efficient business model Free up resources through increased capital and cost efficiency From balance sheet to Capital competence and advisory Free up resources for efficiency intensive business model investments in simplification, compliance and operational ri
Slide 16: Maintain a low risk profile
Maintain a low risk profile Nordea ROE track record1, % Priorities ■ Sustain forward looking and 23.6 holistic risk appetite 22.4 21.5 framework 20.0 No quarter below 8%, 16 risk boundaries 19.1 18.1 18.0 every year above 11% across all risk types Close monitoring of 16.2 15.8 15.0 leading indic
Slide 17: Summary of priorities 2016-2018
Summary of priorities 2016-2018 Business priorities 2016-2018 and strategic targets Simplify for scale and One scalable common platform a forceful digital response Anywhere and anytime – efficient, agile and resilient Expand on core strengths Leading customer relations and drive cost and capital eff
Slide 18: Financial plan and targets
CFO Long term commitment, deliver on the Financial plan and targets financial plan Torsten Hagen Jørgensen Group CFO 18
Slide 19: Cost plan 2013-15 delivering the targeted 5% reduction
Cost plan 2013-15 delivering the targeted 5% reduction with all key elements contributing, but some unplanned events Cost efficiency clusters in 2015 plan Cost development 2013-2015 -5% P -6.7% Streamline physical distribution 5,040 ~250 Optimise advisory services P ~190 Reengineer processes P ~4,79
Slide 20: Nordea market commitments and financial priorities 2016-2018
Nordea market commitments and financial priorities 2016-2018 Market commitments Financial priorities Strong capital generation and Improved income mix & growth efficiency with return of excess capital to shareholders Continued cost efficiency ROE above the Nordic peer average Disciplined capital man
Slide 21: Continued cost efficiency
Continued cost efficiency Key cost drivers and initiatives 2016-2018 ■ Moderate salary drift Underlying ■ Premises and other external contracts, e.g., 1.5-2% cost drift procurement, linked to general inflation ■ Continue branch optimisation & remove manual cash handling Cost ■ Simplify & automate se
Slide 22: Management buffer reflects Nordea's diversified business
Management buffer reflects Nordea’s diversified business CET1 ratio build-up, % Management buffer designed to cover 1.5 0.5-1.5 Components Bps 14.7 0.8 FX volatility 0.7 (10% EUR weakening/historical vol. analysis) ~30-40 2.0 Pension risk (50bp decrease of discount rates) ~20 10.0 0.2 1.1 Countercyc
Slide 23: Earnings stability – the most stable bank in the Nordics
Earnings stability – The most stable bank in the Nordics Nordea and peers 2006-2015, % 150 Quarterly net profit volatility 83 46 25 32 17 Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Quarterly CET1 ratio 1.08 0.92 volatility¹ 0.50 0.54 0.36 0.21 Max Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 quarterly 0
Slide 24: Group financial targets 2016-2018
Group financial targets 2016-2018 Financial Targets - based on currently known regulatory requirements Dividend pay-out ratio Dividend policy of at least 75%1 Management buffer of 50-150 bps above Capital policy the regulatory CET1 requirement A total dividend RoE RoE above the Nordic peer average2
Slide 25: The RoE is targeted to be above the Nordic peer average
The RoE is targeted to be above the Nordic peer average throughout the period on a rolling 4 quarter basis Nordea & Peer average RoE development Weighting of Peer average Country share 13% of Nordea capital Weight in benchmark 12.4% DB 30% 12% DK 35% DNB 20% 11.8% 11% FI 20% SHB 15% NO 20% SEB 15% 1
Slide 26: Risk management
Risk management Ari Kaperi Group CRO 26
Slide 27: The least volatile Nordic bank
The least volatile Nordic bank Factors driving risk down Nordea vs. peers 2006-Q1 2015, % Quarterly net profit volatility 150 Large and diversified client base 83 Geographical diversification 46 32 25 Forward looking and holistic risk 17 management Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 27
Slide 28: Sound risk profile with low loan losses over the cycle
Sound risk profile with low loan losses over the cycle Nordea loan losses per quarter, bps Loan losses vs. peers, 10yr average, bps 30 20 49 10 0 (10) (20) 22 20 (30) 16 17 (40) 7 (50) (60) Q1/05 2005 Q1/07 2007 Q1/09 2009 Q1/11 2011 Q1/13 2013 Q1/15 2015 Peer 1 Nordea Peer 2 Peer 3 Peer 4 Peer 5 28
Slide 29: Risk management has delivered on its 2015 plan
Risk management has delivered on its 2015 plan Commitments in 2015 plan Nordea has delivered Loan losses has decreased continuously since 2013 P ■ Loan loss situation is expected to improve reflecting improved asset quality ■ Signs of impaired loans levelling off in Denmark Credit quality in Denmark
Slide 30: The credit portfolio is well diversified
The credit portfolio is well diversified Nordea credit portfolio, lending to the public excl. repos Other Public 5% 2% Sweden Denmark 30% 26% (10yr avg. Mortgage (10yr avg. Corporates 32bps) 41% 5bps) 48% (8yr avg. (8yr avg. 4bps) 21bps) Norway Finland 18% 21% (10yr avg. (10yr avg. Consumer 11bps) 1
Slide 31: Nevertheless we have exposure to cyclical areas
Nevertheless we have exposure to cyclical areas Russia LBO Largest loan loss EUR 18m, 6% of total loan losses 2008 Largest loan loss EUR 131m, 9% of total loan losses 2009 Current portfolio ~2% of total lending Current portfolio ~3% of total lending Net loan losses, bps 20 LBO 0 Baltics (20) Russia
Slide 32: Russia
Russia Loan loss and Operating profit, EURm How we manage the risk 200 ■ Managed under same frameworks as Nordic business ■ Specific risk appetite cap on 150 exposure Country concentration 100 CRE concentration cap ■ Specific credit instructions for 50 Russia. Dedicated credit team and experts ■
Slide 33: Baltics
Baltics Loan loss and Operating profit, EURm How we manage the risk 150 ■ Managed under same frameworks as Nordic business 100 ■ Sound exposure, business grown organically with strict customer 50 selection 0 ■ Specific credit instructions for Baltics (50) ■ Customers are reviewed annually or semi-an
Slide 34: Leveraged buyout (LBO)
Leveraged buyout (LBO) Loan loss and Operating profit, EURm How we manage the risk 400 ■ Stick to proven model, outlined in the LBO Industry Policy 300 ■ Pro-active monitoring of all companies in the LBO portfolio 200 ■ Close co-operation between all relevant internal stakeholders ■ Diversification
Slide 35: Shipping
Shipping Loan loss and Operating profit, EURm How we manage the risk 400 ■ Risk appetite cap on exposure ■ Extensive in-house shipping 300 expertise ■ Well defined, long-term 200 relationship strategy 100 ■ Business selection ■ Specific industry policy governing 0 shipping ■ Dynamic Credit Parameter
Slide 36: Market risk, no lossmaking quarter
Market risk, no lossmaking quarter Market risk P/L (incl. HtM and AfS portfolios), EURm How we manage the risk 600 ■ Specific risk appetite cap on exposure Market risk share of EC 500 Max loss per quarter 400 ■ Nordea Life and Pension is included in market risk framework 300 ■ Dynamic stop loss
Slide 37: Operational risk and Compliance
Operational risk and Compliance Risk levels are stable How we manage the risk Operational risk loss, 4-quarter rolling average EURm ■ Nordea’s operational risk framework is subject to continued 20 enhancements, with the ambition to strengthen the execution and control of risk processes 10 ■ Specific
Slide 38: Risk appetite clearly defines Nordea's risk taking boundaries
Risk appetite clearly defines Nordea’s risk taking boundaries Framework operational since 2011 Current Risk appetite framework ■ Facilitates holistic approach and increased ■ Single customer concentration risk awareness to ensure low earnings ■ Industry concentration Credit risk ■ Geographic concent
Slide 39: Summary
Summary Credit ■ High quality exposure ■ Stable portfolio ■ Strict management Cyclical areas ■ Well defined risk policies Loan losses expected to remain low Forward ■ Holistic risk appetite framework looking ■ Scenario analysis Proactive ■ Deep dives on oil, CRE etc. approach ■ Early warning system
Slide 40: Retail Banking
Retail Relation, multichannel, expertise, digitalisation Retail Banking Lennart Jacobsen Head of Retail Banking 40
Slide 41: Leading Nordic Retail Bank
Leading Nordic Retail Bank Broad distribution network Strong local market position2 Digital Contact centre Corporate Household Branches logons1 (m) calls1 (m) position position 156 134 3.3 1–2 2 183 215 1.6 1 2 87 6% 48 1.1 2 2 231 236 3.2 2–3 4 38 3 3–4 Total 695 633 9.2 Total 1 1 Balanced product
Slide 42: Retail Banking has delivered on its 2015 plan
Retail Banking has delivered on its 2015 plan Commitments in 2015 plan Retail Banking has delivered (2012 vs. 2014)1 Positive customer development +130,000 relationship customers Improving CSI2 P P Restructuring of branch network -158 (19%) branches -224 (48%) cash locations P Strong income generati
Slide 43: Strong financial development
Strong financial development Income Profitability EURbn Percent Cost / income 5.3 RoCaR ■ Non interest income +7% 4.9 ■ Margins1 +43 bps ■ Relationship customers +6% 14 12 2011 2014 10 Cost 8 EURbn 62 ■ FTEs down by ~2,000 (~10%)2 3.1 ■ 28% fewer branch locations 57 ■ Expansion of online capabilitie
Slide 44: Long term ambition to be #1
Long term ambition to be #1 In each of our markets Measured by Profitability RoCaR ahead of peer average #1 Customer satisfaction CSI #1 #1 #1 Employee satisfaction #1 ESI1 1) Employee Satisfaction Index 44
Slide 45: Priorities to strengthen the platform
Priorities to strengthen the platform Nordea platform Strategic focus areas 2016-2018 Pan-Nordic platform Advisory with scalability Anywhere and anytime Digital experience Superior Nordic distribution power and Tailored to customer needs global capabilities and preferences Actively managed business
Slide 46: Retail Banking – Household value drivers
Retail Banking – Household value drivers Business model optimisation Value drivers Financial impact Advisory interaction shift Income Cost Capital Digital Advise P P 10% ■ Shift to remote and digital >50% Remote ■ Improve customer relevance and share of wallet through analytics 90% <50% In-person Di
Slide 47: Retail Banking – Corporate value drivers
Retail Banking – Corporate value drivers Business model optimisation Value drivers Financial impact Cross sales to lending1 Income Cost Capital Non interest income Advise P P +22% ■ Revise customer segmentation to enhance quality of customer coverage ■ Drive cross sales through analytics powered cus
Slide 48: Summary
Summary HH Corp Income ■ Strengthen advisory mix ■ Drive cross sales Improved ■ Online sales and service model C/I ratio ■ Process automation and Cost simplification ■ Product portfolio clean-up ■ Business selection Capital Improved ■ REA house cleaning RoCaR ■ Well-diversified business Risk ■ Keep
Slide 49: Wholesale Banking
Wholesale leading, succesful relations, effective, corporate Wholesale Banking Casper von Koskull Head of Wholesale Banking 49
Slide 50: Wholesale Banking has a unique Nordic platform
Wholesale Banking has a unique Nordic platform Uniquely positioned relative to peers The leading Nordic wholesale bank Size and competencies = Relevance International competition Product dimension: Local competition Customer dimension: Multi-local presence = Intensity 50
Slide 51: Wholesale Banking 2011-2014 - performance and value drivers
Wholesale Banking 2011-2014 - performance and value drivers GDP growth Interest rates Volatility Capital markets regulation Market characteristics Low Low Low High Lending Income NII Fair Value Cost/Income Top line drivers -15% -5% -7% -15% +2 pp Pricing Fee & Comm. Cost REA Loan losses Value driver
Slide 52: Wholesale Banking has delivered on its 2015 plan
Wholesale Banking has delivered on its 2015 plan Commitments in 2015 plan Wholesale Banking has delivered (‘12 vs. ‘14) P ■ Achieved #1 market position ■ Balanced income mix Reposition the business P ■ One Nordic operating model Develop organisational platform ■ Improved capabilities at unchanged co
Slide 53: Successful Wholesale Banking journey
Successful Wholesale Banking journey 2011-2012 2013-2014 2015- Leveraging the platform Transforming the Business model business model & culture & culture WB formation WB formation WB formation Intensity & Relevance 53
Slide 54: Business priorities leveraging the platform
Business priorities leveraging the platform Nordea platform Strategic focus areas 2016-2018 Further leveraging Pan-Nordic platform customer franchise with scalability Strengthen wholesale banking capabilities Superior Nordic distribution power and global capabilities Effective capital management Act
Slide 55: Further leveraging customer franchise
Further leveraging customer franchise Leading Nordic Capital Market and Advisory Franchise Nordic Corporate Bonds Nordic IG Corporate Bonds Nordic HY Corporate Bonds Nordic Syndicated Loans 5 744 3 720 1 949 11 943 Nordic peer 3 902 Nordic peer 3 436 Nordic peer 1 397 Nordic peer 8 054 Nordic peer 3
Slide 56: Strengthen Wholesale Banking capabilities
Strengthen Wholesale Banking capabilities Leading Wholesale Banking platform Priorities ■ Support equity-related activities Capital Selective strengthening of international Bank markets distribution lending financing ■ Key additions to Investment Banking Improve competence pool in selected marke
Slide 57: Effective capital management
Effective capital management REA reduction (EURbn) Key initiatives 78 5 Management of low-yielding relationships -18 53 -11 Active business selection/ de-selection >50% Balanced business mix 2011 CRD IV 2014 2018 Efficiencies Bus. selection Capital hedging 57
Slide 58: Continued prudent risk management
Continued prudent risk management Diversified customer franchise Key messages Income 2014, % Other CIB DK 12% 16% Strong relationships, staying Russia close to the customer 12% CIB FI 13% SOO 15% More balanced income with higher CIB NO CIB SE 10% share of commission income 22% Well established proce
Slide 59: Summary
Summary ■ #1 wholesale bank in the Nordics Income ■ Capital markets financing and stronger advisory Maintain ■ Disciplined capital management #1 Capital Position ■ Business selection, capital-light solutions ■ Selective platform investments Cost ■ Operational streamlining and efficiency Return ■ Med
Slide 60: Wealth Management
Wealth Management Gunn Wærsted Head of Wealth Management 60
Slide 61: Wealth Management in brief
Wealth Management in brief Strong customer franchise Well diversified business Growing business Profit, EURm #1 Asset Management Int. 903 18% Denmark 32% 729 632 #1 Life & Pension Sweden 23% Finland Norway 18% 9% #1 Private Banking EUR 290bn AuM 2012 2013 2014 Leading Nordic wealth manager with glob
Slide 62: Wealth Management has delivered on its 2015 plan
Wealth Management has delivered on its 2015 plan Commitments in 2015 plan Wealth mgmt. has delivered (2012 vs. 2014) Colours Key Wealth Management value drivers Extra Colours 103 172 206 Income CAGR 9.1% P P 239 178 137 Key ambitions and initiatives Leverage the strength of a diversified business
Slide 63: Strong growth through consistently high flow
Strong growth through consistently high flow Assets under Management (AuM), EURbn Key growth initiatives in 2015 plan Growth through external distribution Acc. Flow Acc. Market appreciation GFD1 net flow, EURbn 4.8 290.0 1.9 2.2 2.5x 2012 2013 2014 Growth through bancassurance Market return premiums
Slide 64: Looking ahead: Well positioned to capitalise on trends
Looking ahead: Well positioned to capitalise on trends Trends Nordea wealth management platform Demographics Strong customer franchise Low yield environment Leading advisory and product capabilities Globalisation Well diversified business across markets and business lines Regulation Digitalisation E
Slide 65: Three strategic focus areas
Three strategic focus areas Nordea platform Strategic focus areas 2016-2018 Pan-Nordic platform Client Relationships with scalability Superior Nordic distribution power and Advice & Solutions global capabilities Actively managed business portfolio Efficiency with low volatility 65
Slide 66: A leading European asset manager
A leading European asset manager Scalable business model Platform AuM in AM, EURbn Cost/Income, % ■ Active management with leading Multi Assets capabilities ■ Cost level ~30% below European peers3 55 173.9 ■ Only European asset manager consistently on top 10 in 146.2 European Fund sales 2012-144 116
Slide 67: The #1 Nordic pension provider
The #1 Nordic pension provider Transition to capital efficient pension provider Platform Gross written premiums, EURbn Trad. MRP1 ■ Successfully transformed to market return company 7.6 ■ Focus on bancassurance with low distribution cost 6.7 1.0 5.9 5.6 1.2 ■ Product offering of strategic importance
Slide 68: The #1 Nordic private bank
The #1 Nordic private bank Increased private banking footprint Platform AuM in PB, EURbn AuM/Advisor, EURm ■ #1-2 position in each Nordic country, largest Nordic International private bank 84.4 77.3 ■ Well functioning referral model 61.0 69.4 ■ Cost/Income ratio 9pp below European peers1 133 ■ 110,0
Slide 69: High growth going forward, costs in control
High growth going forward, costs in control Net flow, % of AuM Cost/Income, % 61 55 52 >5% of AuM 4.7% p.a. 2016-2018 46 Costs in control Q1/11 Q1/12 Q1/13 Q1/14 Q1/15 2011 2012 2013 2014 69
Slide 70: Summary
Summary ■ #1 Wealth Manager in the Nordics ■ Well positioned to capitalize on trends Income ■ Track record of Nordic and International growth Maintain ■ Focusing on higher margin business #1 Margins ■ Leveraging advisory and solutions Position capabilities ■ Scalable, cost-efficient platforms Cost ■
Slide 71: Concluding remarks and Q&A
Concluding remarks & Q&A Concluding remarks and Q&A 71