Nordea Bank Abp · OMXHEX:NDA_FI
Nordea Bank Abp — Nordea — FY2008 Earnings Presentation
50 slides from Nordea Bank Abp's earnings presentation, Feb 10, 2009
Slide 1: Year-end Report 2008 International telephone conference
Year-end Report 2008 International telephone conference 10 February 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: Highlights from 2008
Highlights from 2008 Nordea continues to deliver despite extreme market turbulence and economic downturn Income up 4% - driven by strong growth in net interest income and robust income from the customer-driven capital markets operations Lending volumes up 17% in local currency. Strong increase
Slide 5: Full year result 2008
Full year result 2008 EURm FY 2007 FY 2008 Chg % Net interest income 4,282 5,093 19 Net fee and commission income 2,140 1,883 -12 Net gains/losses on items at fair value 1,209 1,028 -15 Equity method 41 24 -41 Other income 214 172 -20 Total operating income 7,886 8,200 4 Staff costs -2,388 -2,568 8
Slide 6: Ambitious targets
Ambitious targets Long term financial targets Target 2007 2008 TSR (%) In the top quartile of # 3 of 20 # 2 of 20 European peer group Risk adjusted profit (EUR m)¹ Double in 7 years² 15% 16.7%³ RoE (%) In line with top Nordic peers 19.7% 15.3% Capital structure policy Policy Dividend payout-ratio >
Slide 7: Risk-adjusted profit
Risk-adjusted profit Accumulated risk-adjusted profit Accumulated Risk-adjusted profit 16.7% since target introduced January 1 2007 16,7% 14,7% 15,1% 14,6% 18.5% excluding Danish State guarantee 12,3% fee 14,1% 8,3% Up 2% in 2008 – 7% in Q4/Q4 2,8% Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q4/08 Roll
Slide 8: Outlook for 2009
Outlook for 2009 Sharp macroeconomic slowdown in the Nordic countries during the latter part of the autumn – GDP expected to be negative in 2009 Nordea is preparing for a challenging year – firm attention on cost, risk and capital Focus on doing more business with existing customers and on sel
Slide 9: By applying the "middle of the road" we aim to maintain the high business momentum
By applying the “middle of the road” we aim to maintain the high business momentum Not reacting to the Over-reacting to the Middle of the road downturn situation 9 Unchanged lending 9 Focus on core customers – selected 9 Closing down growth growth new business opportunities initiatives 9 Unchanged g
Slide 10: By applying a "middle of the road approach" balancing growth opportunities and risk
By applying a “middle of the road approach” balancing growth opportunities and risk Top priorities… …in the context of Great Nordea • Maintain strong AA rating as Profit orientation – 9 Will take the competitive advantage cost, risk and capital lead Ambitious vision and targets 9 The strategy • Cont
Slide 11: Cost-, risk- and capital management takes the lead
Cost-, risk- and capital management takes the lead Costs 9 Accelerate ongoing efficiency programs – not least in branch offices 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 Ad
Slide 12: The EUR 3bn capital raise is a pro-active step to best position the bank
The EUR 3bn capital raise is a pro-active step to best position the bank – middle of the road approach Rationale Maintain position as one of the stronger banks in Europe Pro-actively establish an additional capital cushion in light of reduced visibility in the market and economic outlook Provide fle
Slide 13: Capital raising allows us to maintain our organic growth strategy
Capital raising allows us to maintain our organic growth strategy – however we will adjust the speed Increase business with existing Exploit global and Supplement Nordic Nordic customers and attract new European growth through customers business lines investments in New European Markets Manage risk
Slide 14: 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 Nordea Group income development, EURm Existing relationships 2251 1996 2022 Grow share of wallet through 1934 1899 1959 1914 1961 1992 1996 1873 less capital-consuming 1759 1785 1
Slide 15: CFO Presentation
Nordea ” a 43 —— CFO Presentation
Slide 16: Income statement summary
Income statement summary EURm Q4/08 Q3/08 Chg % Net interest income 1,386 1,296 7 Net fee and commission income 390 480 -19 Net gains/losses on items at fair value 325 221 47 Equity method 45 -25 Other income 105 24 Total operating income 2,251 1,996 13 Staff costs -655 -635 3 Other expenses -461 -3
Slide 17: Adjusted for FX effects volume growth continues
Adjusted for FX effects volume growth continues % YoY Q4oQ3 Total Lending, excl. repurchase agreements 7% -3% (4%)* – Nordic household mortgages -1% -5% (1%) – Nordic consumer lending 6% -2% (5%) – Nordic corporates 6% -3% (3%) – New European Markets 56% 4% Total Deposits, excl. repurchase agreement
Slide 18: Net interest income up 19%
Net interest income up 19% YoY Strong increase in lending and deposit EURm 1 386 1 296 volumes 1 230 1 143 1 181 Lending to public up 8% - 17% in local currency Deposit volumes up 4% - 12% in local currency Corporate lending up 11% reflecting strong demand across sectors – up 19% adjusted fo
Slide 19: Change in net interest income
Change in net interest income EURm YoY Q4oQ3 Volume driven 433 46 -Lending volumes 371 41 -Deposit volumes 62 5 Margin driven 220 37 -Lending margins 157 94 -Deposit margins 63 -58 Orgresbank 85 13 Other, net 73 -6 Total 811 90 19
Slide 20: Structural Interest Income Risk (SIIR)
Structural Interest Income Risk (SIIR) EURm, annualised effect on NII* Q4/08 Q3/08 Q2/08 Q1/08 Q4/07 Increasing market rates, 55 204 244 238 235 100bp Decreasing market rates, 218 232 275 268 267 100bp • SIIR for decreasing rates slightly lower, change in SIIR for increasing rates • Underlying posit
Slide 21: Net fee and commission income down 12%
Net fee and commission income down 12% YoY EURm Savings-related commission down 18% - 526 495 518 affected by weak equity markets 480 AuM down 20% compared to one year ago 390 Lending-related commission up 12% Corporate Merchant Banking and Shipping and Oil services Q4oQ3 Down 19% Weak t
Slide 22: Net outflow from Asset Management due to market depreciation
Net outflow from Asset Management due to market depreciation YoY Net flows AuM, EURbn Lower AuM following falling asset values and limited outflows 0.5 -1.0 -1.7 0.6 Net outflow EUR -2.0bn - compensated by net inflow into saving deposit -2,3 accounts of EUR 4.7bn Nordic Retail funds EUR -4.5bn
Slide 23: Net gains/losses – Q4 strongest quarter ever
Net gains/losses – Q4 strongest quarter ever YoY Net gains/losses down 15% EURm 350 Solid result in customer areas driven by 300 304 300 284 272 strong activity within capital markets 250 products 200 181 Limited impact from market turmoil 150 Risk management products in the fixed income and
Slide 24: Income growth in Nordea YoY (EURm)
Income growth in Nordea YoY (EURm) Customer operations 72.6% -38.8% 73 -22.2% 197 80 -84.6% 21.9% 30.7% 96 75 11 6.4%* 6.8% 74 78 103 4.0% 409 8 200 7 886 Income FY Nordic Shipping Financial New IPB&F Life Markets Treasury FX effects Finnish Income FY 07 Banking Institutions European Backbone operat
Slide 25: Cost in line with target
Cost in line with target EURm 1,150 1,073 1,055 1,073 1,060 Up 7% - in line with target 34 29 33 27 30 Approx half of the increase related to 461 investments in growth areas – FTE’s up 429 384 406 395 8% incl. acquisition of Roskilde Bank and Svensk Kassaservice 644 634 635 655 615 Q4/07 Q1/08 Q
Slide 26: Expense growth in Nordea (EURm)
Expense growth in Nordea (EURm) 1.5% -1.4% 1.8% 59 -57 6.7% 2.8% 70 113 2.7% -0.5% -21 4 338 108 4 066 Expenses Wage Variable Investments in Volume driven Restructuring FX-effects Expenses 2007 increases salaries grow th areas production and one-off 2008 costs and expenses FTEs 26
Slide 27: Number of FTEs
Number of FTEs YoY 4 402 4 297 Up 7% or 2,287 FTEs 4 051 3 813 New European Markets +900 3 506 Nordic Markets +1,400 Approx. 3,600 recruited FTEs Approx 2,100 FTEs have left 29 606 Q4oQ3 29 464 28 944 28 595 28 215 Up 250 FTEs New European Markets +105 Nordic Markets +145 Q4/07 Q
Slide 28: Net profit
Net profit EURm 764 YoY 687 693 655 637 Net profit down 15% Shift in loan losses Q4/07 * Q1/08 Q2/08 Q3/08 Q4/08 * For comparison reasons the refund from the Finnish deposit guarantee system in Q4 2007 of EUR 120m reported as Other income has been excluded. 28
Slide 29: High profitability
High profitability 2008 23,6 22,7 % 20,6 21,4 20,8 Return on equity of 15.3% (19.7%) 18,0 19,1 Net loan losses of EUR 466m compared to recoveries of EUR 6m the same period last 15,3 year RaRoCar 20.8% (23.6%) - high level despite market turmoil Nordic Banking 23% IIB 42% 2005 2006 2007 200
Slide 30: Despite the difficult environment Nordea continue to have access to new funding at attractive prices
Despite the difficult environment Nordea continue to have access to new funding at attractive prices Nordea continues to benefit from being a well recognised AA-rated bank with Total long-term funding issued prudent liquidity management and a (EURbn) conservative business profile 31 27 During 20
Slide 31: A fair, transparent market solution to existing share holders
A fair, transparent market solution to existing share holders Capital strengthening will be executed through; Underwritten rights offering to raise approximately EUR 2.5bn - representing ~20% of market capitalisation Proposal to halve the dividend payment to 19% of net profit which will increa
Slide 32: Main rationale - keep position as one of the strongest banks in Europe
Main rationale - keep position as one of the strongest banks in Europe Core Tier 1 capital ratio excluding transition rules Nordea compared with its European peer group, % 10,4 10,0 9,2 8,9 8,7 8,2 8,0 7,8 7,8 7,8 7,4 7,2 7,2 6,9 6,8 6,5 6,5 6,4 6,2 Nordea Tier 1 capital ratio excluding transition r
Slide 33: Proposal to reduce dividend
Proposal to reduce dividend Dividend payout, EURm 2008 dividend to be paid in 2009 proposed to be reduced to 19% of 1 297 ~ 42% net profit as part of capital strengthening No change to long-term dividend policy (>40% of net profit) Proposal will strengthen core Tier 1 519 ~ 19% capital through
Slide 34: Risk weighted assets
Risk weighted assets RWA end of period, EURbn YoY 214 218 213 205 201 Increased RWA incl transition rules 190 194 171 176 169 driven by increased lending volumes Approval to use IRB models for the Retail credit portfolio Reduced RWA with approx 14% Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 RWA affected
Slide 35: Improved capital position following capital measures of EUR 3bn
Improved capital position following capital measures of EUR 3bn Capital ratios pro forma end 2008 excl. transition rules, % 13.5 Sizeable improvement in core New targets capital 10.8 11.5 10.0 Tier 1 above new capital 9.0 targets to create financial flexibility 11,7 8,2 9,0 Nordea’s capital po
Slide 36: Reported capital position - revised capital targets
Reported capital position - revised capital targets Tier 1 ratios Tier I ratio excl. transition rules 9.3% 9,3 8,3 7,4 As part of entering the new Basel II 7,0 regime new targets for Tier 1 and total capital have been established The new policy is that Tier 1 and total capital should be 9% and
Slide 37: Customer areas
37 Nordea ™ Customer areas
Slide 38: Nordic Banking by market in local currency
Nordic Banking by market in local currency Balanced growth between lending and deposits, YoY volume growth in% 21 17 16 14 13 14 12 10 8 6 Nordic Banking Denmark Finland Norway Sweden Lending Deposits YoY income and cost growth, % 20 9 7 6 7 6 5 5 3 -1 Nordic Banking Denmark Finland Norway Sweden In
Slide 39: CRO Presentation
Nordea ” : - ENE = ee CRO Presentation
Slide 40: Broad economic slowdown affect most sectors
Broad economic slowdown affect most sectors Unprecedented drop in GDP growth Major drop in GDP-growth and 7,0% 6,0% business and consumer confidence 5,0% will affect most markets and 4,0% industries 3,0% 2,0% Despite a well-diversified lending 1,0% portfolio spread over four largely 0,0% equally
Slide 41: Increased loan losses following economic slowdown in all markets
Increased loan losses following economic slowdown in all markets Net loan losses EUR 466m full year 2008 Loan losses, EURm 476 Loan loss ratio of 19 basis points - excluding 320 Danish scheme 17bps (EUR 44m) 151 140 152 Fourth quarter 52bps – 45 bps excluding Danish 121 89 scheme 21 36 -6 Sh
Slide 42: Impaired loans up from low levels – increased focus on risk management
Impaired loans up from low levels – increased focus on risk management Impaired loans and recivables, EURm Impaired loans up 55% from low levels 841 680 Individual allowances increased in several 508 515 576 1 394 sectors 923 928 902 1 007 Net collective allowances of EUR 54m were made in 2008
Slide 43: Well diversified corporate portfolio
Well diversified corporate portfolio Corporate portfolio by industry, EURbn End 2007 End 2008 Well-diversified Real estate 36,8 28% 35,5 23% Financial institutions 10,5 8% 16,3 11% lending mix measured Industrial commercial services 15,4 12% 15,5 10% by customer segments Consumer staples (food, ag
Slide 44: Largely secured lower risk real estate portfolio
Largely secured lower risk real estate portfolio Lending to real estate management per country Approximately 1/3 of the EURbn End 2008 Commercial Residential End 2007 Sweden 13,5 44% 56% 14,9 portfolio towards low risk Norway 7,7 72% 28% 8,6 counterparties - municipalities, Finland 7,1 49% 51% 7,0
Slide 45: Shipping – increased focus on risk and capital
Shipping – increased focus on risk and capital Focus on listed companies with Total exposure, EURbn 12.9 13.4 strong track record Other 10.5 10.8 9.8 Liners Increased risks in certain sectors Gas tankers Chemical tankers (dry bulk and container) where Crude tankers Nordea has underweight exposur
Slide 46: Well structured exposure towards companies owned by private-equity funds
Well structured exposure towards companies owned by private-equity funds Portfolio well diversified between Outstanding loans industries and the Nordic markets – more EURbn 7,4 than 100 portfolio companies 6,7 High quality growth in 2008 with low leverage and to solid sectors Mainly senior deb
Slide 47: Credit rating migration expected following economic downturn
Credit rating migration expected following economic downturn – minor down-rating so far Corporate rating migration Q408 / Q407 • Basel II will for the first time be tested in a downturn 56% 30% • Minor down-ratings so far but Down-rated Up-rated expected to accelerate in 25% coming quarters 20% 16%
Slide 48: New European Markets affected by sharp economic slowdown
New European Markets affected by sharp economic slowdown Total lending NEM, EUR 15.3bn • Specific loan losses increased in the Baltic countries and Russia - net loan losses 47bps in Lithuania 2008 16% Poland 26% • Collective allowances for the Baltic countries Estonia 14% EUR 109m or 134bps of total
Slide 49: Concluding remarks
Concluding remarks Solid performance despite financial turmoil and economic recession Strong income momentum also in the fourth quarter Cost, risk and capital management takes the lead Continuation of the successful organic growth strategy – reducing the growth rate with strong focus on exec
Slide 50: Year-end Report 2008 International telephone conference
Year-end Report 2008 International telephone conference 10 February 2009