Nordea Bank Abp · OMXHEX:NDA_FI
Nordea Bank Abp — Q1 2023 Earnings Presentation
43 slides from Nordea Bank Abp's earnings presentation, Apr 27, 2023
Slide 1: Debt investor presentation Q1 2023
Debt investor presentation Q1 2023
Slide 2: Disclaimer
Discla im er 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 3: Table of contents
Table of contents 1. Nordea first-quarter 2023 update 4 2. Credit quality 17 3. Capital and funding 26 4. Macroeconomy 38 3
Slide 4: 1. Nordea first-quarter 2023 update
1. Nordea first-quarter 2023 update 4
Slide 5: Nordea today: The largest financial services group in the Nordics
Nordea today The largest financial services group in the Nordics Business position - Universal bank with a 200-year history of supporting and growing Household* Small and medium- Large corporates Asset and wealth the Nordic economies sized companies and institutions management - Leading market posit
Slide 6: First-quarter highlights 2023
First-quarter highlights 2023 Execu t ive su m m a ry Strong profitability in slower market - Net interest income up 35%, net fee and commission income down 8% and net fair value result up 27% - Operating profit up 34% to EUR 1,480m Business volume growth driven by corporate lending - Corporate lend
Slide 7: Key financials
Key financials First -q u a rt er resu lt s 2023 Income statement and key ratios Q123 Q122* Q1/Q1 Q422 Q1/Q4 EURm Net interest income 1,765 1,308 35% 1,641 8% Net fee and commission income 765 829 -8% 785 -3% Net insurance result 46 35 31% 47 -2% Net fair value result 345 272 27% 396 -13% Other inco
Slide 8: Net interest income: slowing volume growth, increased deposit margins
Net interest income Slowing volume growth, increased deposit margins Year-over-year bridge, EURm • Net interest income up 35% +35% 1,765 66 90 • Lending volume growth driven 418 by corporate lending, but all 1,308 business areas contributing 63 - Corporate lending up 5% Q122 Volumes Margins Other FX
Slide 9: Net interest income sensitivity to policy rate increases
Net interest income Net interest income sensitivity to policy rate increases Sensitivity to +50bp parallel rate shift in policy rates • NII impact largely driven by 100 40 policy rates and pass-through ~350-400 ~300-350 - Expected higher policy rates in 130 2023 estimated to increase NII by 70 EUR ~
Slide 10: Net fee and commission income
Net fee and commission income High er p a ym en t a n d ca rd in com e p a rt ly offset t in g low er a sset m a n a gem en t in com e Year-over-year bridge, EURm -8% • Net fee and commission income 829 down 8% 41 5 8 12 12 • Savings fee income down due to 26 765 decrease in assets under management
Slide 11: Net fair value result: high customer activity
Net fair value result High customer activity Net fair value result, EURm +27% • Continued high customer risk 396 management activity 345 - Strong demand for FX and rate 118 hedging products 93 272 254 238 44 • Market-making up, driven by 64 12 1 4 rates and FX trading 28 266 241 234 220 206 -12 -14
Slide 12: Costs: continued additional investments
Costs Continued additional investments Year-over-year bridge, EURm +4% • Costs excluding regulatory fees 14 53 44 1,422 up 6%, in line with plan 1,370 57 • Continued additional investments in selected strategic areas: digital tech, other tech Q122 Underlying Additional IT Regulatory fees FX Q123 cos
Slide 13: 2025 financial target
2025 financial target Return on equity Nordea >13% 2025: The preferred financial partner in the Nordics Assumes CET1 requirement of 15–16%, including management buffer Creating the best omnichannel customer experience Supported in 2025 by Cost-to-income ratio Driving focused and profitable growth 45
Slide 14: Sustainability at the core: long term objectives
Sustainability at the core Our long term sustainability objectives supported by short term targets Our sustainability objectives CO2 Become a net-zero emissions bank by 2050 at the latest Gender balance 40-50% 50% reduction in emissions across investment and lending portfolios reduction in emissions
Slide 15: Further strengthened climate targets in our lending portfolio
Sustainability at the core Further strengthened climate targets in our lending portfolio Progress 40-50% reduction in financed emissions in our lending portfolio by 2030 1 -19% (2022) Sector Sub-sector Emissions Metric Base year Baseline Target Target Current status scope year AER, Shipping Vessels
Slide 16: Actively engaging to drive transition and capture growth opportunities
Sustainability at the core Actively engaging to drive transition and capture growth opportunities Channelling capital towards sustainable solutions Green and sustainability linked loans Nordea Asset Management • Facilitated EUR 73bn in Total volumes, EURbn Assets under management, EURbn sustainable
Slide 17: 2. Credit quality
2. Credit quality Nordea
Slide 18: Credit portfolio well diversified with strong credit quality
Credit portfolio Well diversified with strong credit quality Portfolio well diversified Analysis of high inflation and lower Ten segments with 8% of total across countries and segments disposable income impact by exposures significantly affected segment 0.0% Ship building EUR 25bn, 8% Significantly
Slide 19: Net loan losses and similar net result
Net loan losses and similar net result Strong credit quality in weaker economic conditions Net loan losses and similar net result Q1 2023, EURm 21 -2 19 • Total net loan result low at EUR 6 19m (2bp) - Low levels of both individual and 15 collective provisions - EUR 2m FV gain from Danish Individual
Slide 20: Impairments and provisioning coverage
Impairments and provisioning coverage Strong and stable portfolio credit quality Stage 2 and 3 loans at amortised cost, EURm • Stage 3 (impaired) loans unchanged from Q4 2022 at 0.80% 13,473 13,095 13,612 13,105 • Stage 2 loans slightly up: 2% q/q 12,786 Stage 2 • Coverage ratio for remaining stage
Slide 21: IFRS model update: macroeconomic assumptions for scenarios
IFRS 9 model update Macroeconomic assumptions for scenarios • Base scenario, 50% weight - High interest rates and elevated inflation continue to weigh on economic activity and push Denmark, Finland Baseline annual GDP growth, % and Sweden in mild recessions in 2023 however in Norway high energy pric
Slide 22: Real estate management industry: well-diversified portfolio of high quality
Real estate management industry (REMI)* Well-diversified portfolio of high quality CRE lending stable Diversified across countries 31,0 30,0 30,0 31,0 30,0 Finland Other • Well-diversified portfolio across 6,0 6,0 6,0 6,0 6,0 0% Nordic markets 17% Sweden 33% • 92% of exposure towards low-risk 25,0 2
Slide 23: Prudent LTV levels and interest coverage
Real estate management industry (REMI)* Pru d en t LTV levels a n d in t erest covera ge Moderate LTV levels for all Nordic countries 56% 55% • Moderate LTVs, resilient interest 54% 52% 53% 51% 53% coverage and low vacancy rates 50% 49% 47% • 97% of exposure with LTV below 65% • Average Interest Cov
Slide 24: Low levels of risk exposure
Real estate management industry (REMI)* Low levels of risk exposure Strong credit quality, with 98% in IFRS 9 No REA impact even from 2-notch stage 1 downgrade due to risk weight floors 100% RW floor • Only 1% of portfolio in stage 2 43 50% (higher credit risk) 7 30 6 • Less than 0.5% of portfolio 9
Slide 25: Cost of risk: loan losses settling below historical average
Cost of risk Loan losses settling below historical average Significant de-risking (EURbn) Mix change Focus on Nordic markets International and • Significant portfolio de-risking shipping, oil and - Increased share of household lending 327 313 327 313 offshore exposure 78 - Focus on our four Nordic h
Slide 26: 3. Capital and funding
3. Capital and funding Nordea
Slide 27: Significant buffer to capital requirements
Capital Significant buffer to capital requirements • CET1 capital ratio 15.7% - 4 percentage points above regulatory requirement, corresponding to a CET1 buffer of EUR 5.6bn Capital position and requirements (%) - Capital policy of 150-200bp management buffer above regulatory 4.2% requirement (MDA l
Slide 28: CET1 capital requirements
Capital CET1 ca p it a l req u irem en t s ~15% ~15% ~16% • Changes in Q1 2023 (Q4 2022) 1.5-2.0% ~13.5% 1.5-2.0% - CCyB increase to 1.3% (1.1%) 1.5-2.0% 1.5% ~12% 1.5-2.0% 1.7% - O-SII increase to 2.5% (2.0%) 1.6% 1.5-2.0% 1.3% 2.5% - P2R decrease to 0.90% (0.98%) 3.0% 0.2% 2.5% Capital policy 2.0%
Slide 29: Solid funding operations
Long term funding Solid funding operations Wholesale funding outstanding, EUR 196bn • Long term issuance 6% - EUR 7.6bn* in long term debt issued during Q1 CD&CP above 1Y 5% 3% 24% - EUR 6.6bn covered bonds and EUR 1bn in senior non- CD&CP below 1Y preferred format 1% 5% Green covered bonds Internat
Slide 30: Nordea global issuance
Long term funding Nordea global issuance 4% 1% 2 1 3% 1% 1%4% 1% 7% 8% 80% 92% 96% NOK SEK DKK (EUR 33bn eq.) (EUR 15bn eq.) (EUR 51bn eq.) 3% 17% 7% 26% 17% 11% 7% 20% 28% 18% 21% 7% 4% 67% 64% 79% 35% 17% 9% JPY GBP CHF 44% (EUR 1bn eq.) (EUR 3bn eq.) (EUR 1bn eq.) USD (EUR 18bn eq.) EUR (EUR 31bn
Slide 31: Enhanced focus on sustainable funding
Sustainability at the core Enhanced focus on sustainable funding Nordea’s green bond asset portfolio • Assets available for green funding totaling EUR 11.3bn Green buildings 5% 1% - EUR 5.4bn in NBAbp’s green bond asset portfolio 6% Nordea Mortgage subsidiaries - EUR 5.9bn available assets for green
Slide 32: Nordea Sustainable Linked Loan (SLL) funding framework
Sustainability at the core Nordea Sustainable Linked Loan (SLL) funding framework • Nordea SLL funding framework launched in 2022 Nordea Bank – SLL asset portfolio (EURm)* - The SLL funding framework allows issuance of bonds with reference to the impact of the SLLs on Nordea’s balance sheet in a use
Slide 33: Nordea covered bond operations
Covered bonds Nordea covered bond operations Nordea Eiendomskreditt Nordea Hypotek Nordea Kredit Nordea Mortgage Bank Four aligned covered bond issuers with complementary roles Legislation Norwegian Swedish Danish Finnish Cover pool assets Norwegian residential mortgages Swedish residential mortgage
Slide 34: Nordea recent benchmark transactions
Funding transactions Nordea recent benchmark transactions Issue Maturity Issuer Type Currency Amount (m) FRN / Fixed Callable date date Nordea Mortgage Bank Covered EUR 1,000 Fixed Feb-23 Feb-30 Nordea Bank Senior non-preferred EUR 1,000 Fixed to Float Feb-23 Feb-26 Feb-25 Nordea Hypotek Covered SEK
Slide 35: MREL and senior non-preferred target
Minimum requirements for own funds and eligible liabilities MREL and senior non-preferred target Solid buffers above current requirements for both subordinated Subordinated MREL and total MREL +3.1% 28.0% 26.6% 23.5% 22.4% 25.4% Final requirements set by Single 6.5% 6.3% 6.3% Resolution Board (SRB)
Slide 36: Senior non-preferred target
Own funds and bail-in-able debt position Senior non-preferred target Point of non viability Resolution Target by YE 2023: eligible SNP of ~EUR 13bn – Subordinated MREL 26.6% of REA as of Q1 23 (3.1 pp above the requirement) – Issuance plan to meet future subordination requirement EUR 12.0bn in SNP i
Slide 37: Strong liquidity position
Liquidity Strong liquidity position Liquidity buffer composition, EUR 122bn • Robust liquidity position Currency split Asset split - Liquidity coverage ratio (LCR) 161% 3% - Net stable funding ratio (NSFR) 116% 16% SEK Level 1 cash & central bank EUR 24% 36% Level 1 excl. covered bonds 10% USD Level
Slide 38: 4. Macroeconomy
4. Macroeconomy Nordea
Slide 39: Resilient economies are facing head-wind
Nordic economic development Resilient economies are facing head-wind GDP development Unemployment rate GDP, % y/y, Economic Outlook May 2023 • The Nordic economies have been among the best Country 2021 2022 2023E 2024E performing economies globally during the pandemic • However, on the back of surgi
Slide 40: Central banks not done yet
Nordic economies Central banks not done yet Policy rates Public balance/debt, % of GDP, 2023E (IMF) • Central banks have rapidly hiked interest rates to combat the high inflation • Norges Bank has hiked from 0 to 3.75% since autumn 2021, and are expected to continue until they reach 4.25% in Septemb
Slide 41: Households squeezed by high interest rates and inflation
Households Households squeezed by high interest rates and inflation Household debt Household savings Private consumption • Household savings have fallen drastically as consumption have returned to well above pre- pandemic levels • However, households are feeling the squeeze and purchasing power is c
Slide 42: Higher interest rates continues to cool off Nordic housing markets
Housing markets Higher interest rates continues to cool off Nordic housing markets Housing prices Households’ credit growth • Housing prices increased to record-high levels in all the Nordic countries in 2022 • However, with higher and increasing interest rates, risks are on the downside for housing
Slide 43: Contacts
Contacts Investor Relations Matti Ahokas Maria Caneman Juho-Pekka Jääskeläinen Head of Investor Relations Head of Debt IR and Ratings Senior IR Officer Mobile: +358 40 575 91 78 Tel: +46 10 156 50 19 Tel: +358 9 5300 64 35 Mobile: +46 768 24 92 18 Mobile: +358 40 550 91 11 matti.ahokas@nordea.com ma