Slide 1: Interim Report Second Quarter 2008
Interim Report Second Quarter 2008 International telephone conference 22 July
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: Q2 2008 in short
Q2 2008 in short 9 High business activity and record results from customer areas 9 Continued strong delivery from growth initiatives – execution continues according to plan 9 Volatile and weakened financial markets 9 Credit quality remains solid 9 Strong capital position 9 Stable and well-diversifie
Slide 4: High business activity and strong results from customer operations
High business activity and strong results from customer operations Second quarter strongest ever in customer areas Revenues, operating profit and risk-adjusted profit Revenues driven by NII – up 18% H1/H1 The strong volume growth continues – total lending up 16%, excl. reversed repos Total
Slide 5: Continued strong delivery from growth initiatives
Continued strong delivery from growth initiatives Selected global New European Existing Nordic customers and new customers and European Markets business lines Household strategy Private Banking Corporate strategy Based on strong Selective growth competencies strategy • Migration to • Added advisory
Slide 6: Higher operating income
Higher operating income YoY Operating income, EURm Total income up 3% 3 953 3 830 Net interest income up 18% Net commission income down 6% Net gains/losses down 23% H107 H108 6
Slide 7: Cost growth maintained at same level as in 2007
Cost growth maintained at same level as in 2007 Cost increase YoY Up 6.4% - unchanged level compared to last year 6,4% 6,4% Close to half of the cost increase related to investments in growth areas Staff costs up 9% Number of employees up 7% FY 2007 H108/H107 7
Slide 8: Strong and broad funding base in Nordea
Strong and broad funding base in Nordea Total external funding EUR 275bn Competitive edge from leading Nordic market position and strong and broad deposit base Covered Domestic Bonds Fixed 19% Nordea operates in 2nd and 4th Income largest covered bond markets in 2% Europe (Denmark and Sweden) No
Slide 9: Ambitious targets
Ambitious targets Long term financial targets Target 2007 H108 TSR (%) In the top quartile of # 3 of 20 # 5 of 20 European peer group Risk adjusted profit (EUR m)¹ Double in 7 years² 15% 14.1%³ RoE (%) In line with top Nordic peers 19.7% 16.0% Capital structure policy Policy Dividend payout-ratio >
Slide 10: Risk-adjusted profit
Risk-adjusted profit Accumulated risk-adjusted profit Accumulated risk-adjusted profit 14.1% 14,7% 15,1% since target was introduced 1 January 14,1% 12,3% 2007 Growth in risk-adjusted H108/H107 down 1% 8,3% Growth in risk-adjusted profit in customer areas up 5% H108/H107 2,8% Target to doubl
Slide 11: Outlook for 2008
Outlook for 2008 Uncertainty has increased Nordea expect lending growth to be lower in the remaining part of the year, but still at a high level. Corporate lending margins are expected to increase further Nordea still expects customer operations to deliver according to plan Nordea expects to
Slide 12: CFO Presentation
Nordea ” a 43 —— CFO Presentation
Slide 13: Income statement summary
Income statement summary EURm H108 H107 Chg % Net interest income 2,411 2,047 18 Net fee and commission income 1,013 1,083 -6 Net gains/losses on items at fair value 482 629 -23 Equity method 4 19 Other income 43 52 -17 Total operating income 3,953 3,830 3 Staff costs -1,278 -1,177 9 Other expenses
Slide 14: Income statement summary
Income statement summary EURm Q2/08 Q1/08 Chg % Net interest income 1,230 1,181 4 Net fee and commission income 518 495 5 Net gains/losses on items at fair value 198 284 -30 Equity method 22 -18 Other income 24 19 26 Total operating income 1,992 1,961 2 Staff costs -634 -644 -2 Other expenses -406 -
Slide 15: Robust volume growth continues in all segments
Robust volume growth continues in all segments % YoY Q2oQ1 Total Lending, excl. repurchase agreements 16% 4% – Nordic household mortgages 9% 2% – Nordic consumer lending 12% 3% – Nordic corporates 17% 4% – New European Markets 85% 17% Total Deposits, excl. repurchase agreements 10% 4% – Nordic house
Slide 16: Net interest income
Net interest income YoY EURm Up 18% 1 230 1 181 Strong increase in lending and deposit 1 143 1 092 volumes 1 043 Lending up 16% Deposits up 10% Continued strong growth in Corporate lending across the Nordic region and from most sectors Up 20% Improved corporate margins and some improve
Slide 17: Change in net interest income
Change in net interest income EURm YoY Q2oQ1 Volume driven 191 31 -Lending volumes 149 26 -Deposit volumes 42 5 Margin driven 40 16 -Lending margins -21 5 -Deposit margins 61 11 Orgresbank 40 5 Other, net 93 -3 Total 364 49 17
Slide 18: Structural Interest Income Risk (SIIR)
Structural Interest Income Risk (SIIR) EURm, annualised effect on NII* Q2/08 Q1/08 Q4/07 Q3/07 Q2/07 Increasing market rates, 244 238 235 246 249 100bp Decreasing market rates, 275 268 267 277 279 100bp SIIR slightly higher, but relatively stable over time. Underlying position has been affected
Slide 19: Net fee and commission income
Net fee and commission income YoY EURm Down 6% 548 Savings-related commission down 16% 531 526 495 518 AuM down 12% - weak equity markets and lower risk appetite among customers Lower transaction activity Margin decrease - shift from equity-related to fixed income-related funds Continued
Slide 20: Net gains/losses on items at fair value
Net gains/losses on items at fair value YoY Down by 23% or EUR 147m EURm Still limited negative valuation effects related to the credit market turmoil 629 Approx. EUR 50m in H1 (EUR 20m in Q2) Revenues in treasury operations negatively 482 affected by a position towards lower interest rates
Slide 21: Net gains/losses – focus on handling customers risk
Net gains/losses – focus on handling customers risk EURm YoY 320 300 Net gains/losses in customer areas 288 275 270 263 almost unchanged 220 Customer-driven capital markets 186 170 operations continued to perform strongly 120 78 70 50 Volatile financial markets provided good 16 9 business oppo
Slide 22: Income growth in Nordea (EURm)
Income growth in Nordea (EURm) 1.1% -2.7% 9.5%* 0.7% 43 1.5% 0.2% 27 -103 9 -2.1% 2.6% 57 -81 -1.0% 100 -40 -0.5% 3.2% 3.4% -18 129 3 953 3 830 Inco me Lending New Transactio n Savings Capital Other A sset Listed/No n Interest Ekspo rt- Inco me H1/07 Euro pean acco unts acco unts M arket M gmt and l
Slide 23: Expenses
Expenses YoY EURm 1,073 1,073 1 100 1,055 Up 6% - driven by investments in growth 1,008 993 1 000 29 27 33 areas 25 25 900 Staff costs up 9% reflecting increased 429 384 406 800 391 372 number of employees, investments in 700 growth areas and wage inflation 600 644 634 FTEs up 7% of which NEM
Slide 24: Expense growth in Nordea (EURm)
Expense growth in Nordea (EURm) 1.5% -2.5% 3.0% 30 -50 6.4% 60 4.7% -0.3% -5 93 2128 2 000 Expenses H1 Wage increases Variable salaries Investments in Volume driven Efficiency gains Expenses H1 2007 grow th areas production costs 2008 incl. Russia 24
Slide 25: Number of FTEs
Number of FTEs 4 051 32 500 YoY 3 813 3 506 Up 7% or 2,100 FTEs 3 180 2 970 30 000 New European Markets +1,050 Nordic Markets +1,050 27 500 Approx. 4,250 recruited FTEs Approx 2,600 FTEs have left 28 994 28 595 25 000 28 215 28 148 27 893 Q2oQ1 22 500 Up 600 FTEs New European Markets +
Slide 26: Cost/income ratio
Cost/income ratio % 70 64 63 60 Increased to 54% in H1 60 56 53 54 Impacted by market volatility 52 52 50 Cost/income in Nordic Banking 48% in H1 (50%) 40 30 20 10 0 2002 2003 2004 2005 2006 2007 H107 H108 26
Slide 27: Net profit
Net profit EURm 900 YoY 816 800 761 764 * Profit before loan losses unchanged 687 693 700 Net profit down 9% 600 Shift in net loan losses approx. 5%-points 500 Higher tax rate approx. 3%-points 400 300 200 100 0 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 * For comparison reasons the refund from the Finni
Slide 28: High profitability
High profitability % H108 25 23,6 21,4 22,7 Return on equity of 16% (19.5%) 20,6 20,7 19,1 Net loan losses of EUR 57m compared to 20 18,0 recoveries of EUR 41m the same quarter 16,0 last year 15 Higher tax Higher equity 10 RaRoCar 20.7% (24.1%) - high level despite market turmoil 5 Nordi
Slide 29: Unchanged risk-adjusted EPS
Unchanged risk-adjusted EPS 0,7 0,6 0,58 0,53 0,5 0,46 0,46 0,4 0,3 0,2 0,1 0,0 EPS, EUR EPS, risk adjusted, EUR H107 H108 29
Slide 30: Strong balance sheet – reflecting the business profile
Strong balance sheet – reflecting the business profile Loans to the public financed by deposits from the public and EUR 128 bn in wholesale funding, including covered bonds Wholesale funding approximately 65% long term financed and 35% short term Equity EUR 17.2bn end June Total Assets, EURbn
Slide 31: Strong and broad funding base in Nordea
Strong and broad funding base in Nordea Total external funding EUR 275bn Covered Domestic Fixed Bonds Competitive edge from leading 19% Income Nordic market position and strong 2% and broad deposit base Nordea Nordea operates in 2nd and 4th EMTN/bond 7% Public largest covered bond markets in dep
Slide 32: Focus on securing attractive funding
Focus on securing attractive funding Total issuance of short and long term funding, EURm 150,000 Total wholesale funding approx. EUR 120,000 128bn (approx. EUR 60bn covered 90,000 bonds) – 65% long-term financed 60,000 The proportion of long term funding has increased 30,000 Issuance of a 3 ye
Slide 33: Increases in RWA due to volume growth
Increases in RWA due to volume growth EURbn 214 205 201 194 189 176 190 RWA incl. transition rules EUR 177 176 171 214bn, up 6,4% since Q1 Strong corporate lending Market risk slightly higher Approval of IRB Retail will reduce RWA with 10-12% Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 RWA incl transition
Slide 34: Strong capital position
Strong capital position Reported Tier I ratio 7.0% Tier I ratio Tier I ratio excl. transition rules 8,3 7,9 7.9% 7,0 7,0 Strong capital position based on stable profit generation and expected approval of the IRB Retail portfolio as well as considering Pillar II regulations. New capital targe
Slide 35: Customer areas
35 Nordea ™ Customer areas
Slide 36: Operating profit by markets
Operating profit by markets Banking Banking Banking Banking New European Denmark Finland Norway Sweden Markets EURm Q208 Chg Q208 Chg Q208 Chg Q208 Chg Q208 Chg Total income 484 11% 442 2% 233 17% 451 5% 107 67% Total expenses -217 4% -191 1% -117 5% -241 4% -55 45% Profit before loan losses 267 18%
Slide 37: New European Markets
New European Markets Poland Latvia Estonia Lithuania Russia EURm Q2/08 Chg Q2/08 Chg Q2/08 Chg Q2/08 Chg Q2/08 Chg Total income 36.7 72% 17.0 36% 9.1 24% 9.0 91% 38.3 101% Total expenses -19.6 33% -6.3 40% -4.7 21% -4.1 42% -19.0 89% Profit before loan losses 17.1 158% 10.7 34% 4.4 28% 4.9 171% 19.2
Slide 38: Financial Institutions and Shipping Oil services & International
Financial Institutions and Shipping Oil services & International Financial Shipping, Oil Institutions services & International EURm Q208 Chg Q208 Chg Total income 95 -1% 74 16% Total expenses -44 0% -11 -15% Profit before loan losses 51 -2% 63 24% Operating profit 51 -2% 64 23% Q208 Q207 Q208 Q207 R
Slide 39: Product areas
Nordea ™ Product areas
Slide 40: Capital Markets Products, product result
Capital Markets Products, product result EURm Up 15% despite challenging market 250 conditions 209 High market volatility provided good 197 200 182 190 business opportunities Focus on risk-management products to 150 142 corporate customers continued Strongest contribution from foreign- 100 e
Slide 41: Savings products and Asset Management, product result
Savings products and Asset Management, product result EURm Income and product result down due to 120 lower AuM and average margins 110 Income margins down 13bps to 56bps 100 106 Lower activity level – transaction income down 90 98 89 Shift in asset types – from equity to fixed 80 income (42%
Slide 42: Income development Asset Management
Income development Asset Management Index development 20% 15% 10% 5% -6% 0% -5% -24 -10% -15% -6% -20% nov-07 jan-07 mar-07 jan-08 mar-08 maj-07 jul-07 sep-07 maj-08 jul-08 -25 Nordic MSCI -11,8% average H108 Europe MSCI -11,4% average H108 World MSCI -8,8% average H108 -4% 438 -18 -7% -29 -2% -7 -2
Slide 43: Net inflow in Asset Management in Q2
Net inflow in Asset Management in Q2 Net flows AuM, EURbn Net inflow in AuM of EUR 0.5bn Strong inflow in Nordic Private Banking 0.5 -1.3 -1.0 EUR 1.7bn in -1.7 Net outflow from Retail funds EUR -2.0 1.1nb AuM down 12% compared to Q207, EUR 146bn Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Nordic Retail f
Slide 44: Life and Pension, product result
Life and Pension, product result Premiums up 47% compared to Q207 EURm Premiums in Sweden up 75% - new product 100 launches 90 Poland and Denmark also contributed strongly – 91 premiums up 120% and 48% respectively 80 Product result down 16% compared to 70 Q207 67 60 Negatively affected by
Slide 45: CRO Presentation
Nordea ” : - ENE = ee CRO Presentation
Slide 46: Well diversified lending portfolio
Well diversified lending portfolio Share of total lending, EUR 270bn Well-diversified lending mix measured by customer segments and industry Mortgage 32% Corporate portfolio – stable industry split over time Corporate 56% Total corporate lending per industry, EURbn Household Change Public Volume
Slide 47: Loan losses
Loan losses Loan losses, EURm 151 140 121 Net loan losses EUR 57m recorded in the 101 98 first half year 36 Loan loss ratio of 5 basis points 21 Both reversals and new provisions lower -13 -6 than last quarters -28 Credit quality in the well diversified lending -85 portfolio remains strong –
Slide 48: Largely stable impaired loans
Largely stable impaired loans Impaired loans and recivables, The overall credit quality remains strong EURm Modest increase in impaired loans Increase in impaired loans explained by increases in 488 524 515 576 in the Baltic countries – from very low levels 542 Majority of impaired loans are
Slide 49: Impaired loans and total allowances
Impaired loans and total allowances EURm Q2 2008 Q1 2008 Q4 2007 Q3 2007 Q2 2007 Q1 2007 Impaired loans, gross, individually 1,478 1,443 1,432 1,459 1,468 1,465 assessed Allowances for individually assessed 547 562 603 632 659 668 loans Impaired loans, net, individually assessed 931 882 830 827 809
Slide 50: Impaired loans
Impaired loans EURm. End of Q2/08 Gross Allowances* Net Personal customers 436 118 318 Manufacturing 320 142 178 Trade and services 237 89 148 Other companies 46 33 13 Real estate management 94 17 77 Renting, consulting and other services 150 72 78 Agriculture and fishing 37 12 25 Construction 80 33
Slide 51: Total market risk (VaR) increased somewhat since year end
Total market risk (VaR) increased somewhat since year end EURm 30 Jun, 08 31 Mar, 08 31 Dec, 07 Value at Risk (VaR) level in Nordea’s trading and Total risk, VaR 82.1 60.1 58.9 investment activities increased Interest rate risk, VaR 95.6 63.4 57.2 somewhat Equity risk, VaR 10.7 4.6 32.9 The VaR
Slide 52: Well diversified lending exposure also in the Baltics..
CRO Well diversified lending exposure also in the Baltics.. Share of total lending, EUR 270bn Total lending in the Baltic countries Baltics Other accounts for 2.5% of Nordea’s loan 2% 8% DK 25% portfolio SE Nordic related lending accounts for 27% FI 25% of corporate portfolio 19% NO 17% Well div
Slide 53: ..loan losses remained at very low levels
..loan losses remained at very low levels Loan losses in basis points of total Baltic lending Insignificant individual loan losses in H1 Impaired loans of EUR 80m - increased from very low levels, EUR 29m 10 Impaired loans in relation to total lending 1.01% Collective allowances for the Balt
Slide 54: Q2 2008 in short
Q2 2008 in short 9 High business activity and record results from customer areas 9 Continued strong delivery from growth initiatives – execution continues according to plan 9 Volatile and weakened financial markets 9 Credit quality remains solid 9 Strong capital position 9 Stable and well-diversifie
Slide 55: Interim Report Second Quarter 2008
Interim Report Second Quarter 2008 International telephone conference 22 July