Nordea Bank Abp · OMXHEX:NDA_FI
Nordea Bank Abp — Debt Investor Presentation (2022)
49 slides from Nordea Bank Abp's debt investor presentation, 2022
Slide 1: Debt investor presentation Q4 2021
Debt investor presentation Q4 2021
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: Table of contents
Table of contents 1. Nordea fourth quarter 2021 update 4 2. Credit quality 14 3. Capital and sustainability 21 4. Funding 25 5. Macroeconomy 38 6. Appendix 43 3
Slide 4: 1. Nordea fourth quarter 2021 update
1. Nordea fourth quarter 2021 update 4
Slide 5: The largest financial services group in the Nordics
The largest financial services group in the Nordics Household* Small and medium- Large corporates Asset and wealth sized companies** and institutions management Business position #1 #1 #1 #1 - Universal bank with a 200-year history of supporting and growing the Nordic economies - Leading market posi
Slide 6: Executive summary
Executive summary • Customer business volumes at all-time-high levels ➢ Mortgage volumes up 6% y/y, SME lending up 6% y/y and assets under management up 17% y/y • Strong profit growth, driven by 10% increase in income and tight cost control ➢ Net interest income up 7%, net fee and commission income
Slide 7: Group quarterly results Q4 2021
Group quarterly results Q4 2021 Income statement and key ratios Q421 Q420 Q4/Q4 Q321 Q4/Q3 EURm Net interest income 1,255 1,169 7% 1,226 2% Net fee and commission income 920 792 16 % 870 6% Net fair value result 247 217 14 % 224 10 % Other income 16 41 -61 % 24 -33 % Total operating income 2,438 2,2
Slide 8: Net interest income – strong growth in business volumes; some margin pressure
Net interest income – strong growth in business volumes; some margin pressure Year-over-year bridge, EURm Comments +7% • Net interest income up 7% 0 1,255 • Continued strong growth in business volumes 38 15 across Nordics 4 1,169 37 • Mortgage volumes up 6% and lending to SMEs up 6% • Mortgage margi
Slide 9: Net fee and commission income – further significant growth in savings fee income
Net fee and commission income – further significant growth in savings fee income Year-over-year bridge, EURm Comments +16% • Net fee and commission income up 16% 920 10 15 7 5 14 • Strong savings fee income: up 24%, supported by continued strong net inflows in assets under 107 792 management • Payme
Slide 10: Net fair value result – strong customer activity and asset valuations
Net fair value result – strong customer activity and asset valuations Net fair value result, EURm Comments • Net fair value result up 14% • Higher activity in customer areas +14% 370 20 • Investment valuations up in Treasury • Lower trading income in Markets 278 134 247 32 217 224 43 33 18 46 21 216
Slide 11: Costs – continued cost discipline
Costs – continued cost discipline Year-over-year bridge, EURm Comments -10% • Total costs down 10% due to lower restructuring and 1,218 IT costs and VAT refund 98 • Staff costs down 7%, driven by lower restructuring 1,101 costs, partly offset by higher variable pay related to 40 21 strong business p
Slide 12: 2022 financial targets surpassed one year ahead of schedule
2022 financial targets surpassed one year ahead of schedule FINANCIAL TARGET 2022 FY 2021 Cost-to-income ratio 50% 48% Return on equity >10% 11.2% Personal Banking C/I* ~50% 51% Business Banking C/I* ~45% 45% Large Corporates & Institutions Return on capital at risk ~10% 15% Asset & Wealth Managemen
Slide 13: New financial target for 2025
New financial target for 2025 FINANCIAL TARGET 2025 SUPPORTED BY Cost-to-income ratio Dividend policy Return on equity 60–70% payout ratio; 45–47% excess capital distributed >13% through buy-backs Loan losses Capital policy Assumes 150–200bp management CET1 ratio requirement Normalised ~10bp buffer
Slide 14: 2. Credit quality
2. Credit quality 14
Slide 15: Loan book – well diversified with strong credit quality
Loan book – well diversified with strong credit quality Portfolio well diversified Five segments with 1% of Updated analysis of COVID-19 across countries and total exposures still impact by segment segments significantly affected 0.1% Ship building EUR 3bn, 1% Significantly affected 0.1% Air transpo
Slide 16: Net loan losses and similar net result – buffer maintained for COVID-19 losses
Net loan losses and similar net result – buffer maintained for COVID-19 losses Net loan losses and similar net result Q421, EURm Comments • Net loan losses and similar net result EUR 56m (7bp) -30 -25 • Net loan losses at 81m, driven by strengthened 56 provisions for small number of specific items 1
Slide 17: Impairments and provisioning coverage – continued strong credit quality
Impairments and provisioning coverage – continued strong credit quality Stage 2 and 3 loans at amortised cost, EURm Comments • Stage 3 impaired loans further reduced to 1.28% from 1.36% in Q3 13,840 14,383 • Further decrease in stage 2 loans (3% q/q) 12,843 13,154 12,733 • Further increase in covera
Slide 18: IFRS 9 model update – macroeconomic assumptions behind scenarios used
IFRS 9 model update – macroeconomic assumptions behind scenarios used Baseline annual GDP growth, % Comments 5 • Economic forecasts from Nordic central banks and 4 3 European Central Bank (ECB) used as basis for 2 baseline scenarios 1 • Scenarios slightly more positive in Q4 than in Q3 0 -1 2020 202
Slide 19: Credit quality – portfolio significantly de-risked over past 10 years
Credit quality – portfolio significantly de-risked over past 10 years Historical loan loss ratios, bp Comments 56 • Track record of strong credit quality • Risk profile improved by divestments and reductions 31 in high-risk exposures 23 26 21 26 • Significant management judgement buffer built up in
Slide 20: Coverage ratios – solid provisioning coverage against potential losses
Coverage ratios – solid provisioning coverage against potential losses Coverage ratios Segments Segments Segments not significantly affected partially affected significantly affected by COVID-19 by COVID-19 by COVID-19 Avg. 61% Avg. 46% Avg. 41% 100 97 98 89 77 69 63 65 64 63 65 61 61 58 55 55 56 55
Slide 21: 3. Capital and sustainability
3. Capital and sustainability 21
Slide 22: Capital – strong position and share buy-back programme in progress
Capital – strong position and share buy-back programme in progress CET1 capital ratio development, % Comments 0.7 0.1 0.0 -0.5 -0.1 • CET1 capital ratio 17.0%, 6.8 percentage points above regulatory requirement* • CET1 capital up EUR 0.1bn following profit generation, 16.9 17.0 partly offset by OCI
Slide 23: Capital – significant buffer to capital requirements
Capital – significant buffer to capital requirements Capital position and requirements Comments • CET1 capital ratio 17.0%, 6.8 percentage points 6.8% above regulatory requirement 21.2% • Capital policy of 150-200bp above regulatory requirement 6.8% (MDA level) 17.0% • CET1 buffer of 6.8 percentage
Slide 24: Nordea has a long history of sustainability
Nordea has a long history of sustainability - Nordea continues to take steps towards the long term target of net zero by 2050 Nordea milestones 2021 milestones 2017: Inaugural green bond CO2 • Total green lending reached EUR 9.7bn 2018: Nordic co-founder of UNEP FI • ESG AuM EUR 195bn, ESG products
Slide 25: 4. Funding
4. Funding 25
Slide 26: Liquidity – solid position
Liquidity – solid position Liquidity buffer, EURbn Comments 130 • Robust liquidity position 107 104 104 105 106 112 106 • Liquidity buffer EUR 100bn 103 100 102 101 100 95 88 • Liquidity coverage ratio (LCR) 160% • Net stable funding ratio (NSFR) 111% • Deposits down 2% q/q Q218 Q318 Q418 Q119 Q219
Slide 27: Solid funding operations
Solid funding operations Long-term issuance 2021*, EUR 24.1bn Q4 issuance comments EURm AT1 T2 Senior non-preferred Senior preferred** Covered 4 000 • EUR 3.4bn in long-term debt issued during Q4 3 500 • Of which EUR 2.1bn covered bonds and EUR 1.3bn senior format 3 000 2 500 • EUR 182bn outstanding
Slide 28: Short-term funding – prudent and active management
Short-term funding – prudent and active management Comments Short-term issuance* 50 • Short-dated issuance remains an attractive funding 45 40 component for the Group 35 30 • Nordea has maintained issuance in the long-dated market 25 (>1 year) out of both the US and Europe 20 15 • Nordea has a well-
Slide 29: Long-term funding – Nordea’s global issuance platform
Long-term funding – Nordea’s global issuance platform 3% 1% 8% 2% 6% 6% 16% 73% 97% NOK 89% (EUR 13bn eq.) DKK SEK (EUR 56bn eq.) 6% 7% (EUR 35bn eq.) 35% 11% 18% 29% 59% 15% 19% 34% 45% JPY 52% 100% 5% (EUR 1bn eq.) 4% 42% GBP CHF 10% 9% (EUR 3bn eq.) (EUR 1bn eq.) EUR USD (EUR 31bn) (EUR 16bn eq.)
Slide 30: Green bonds
Green bonds Enhanced focus on green bonds Nordea Bank Abp’s green bond asset portfolio • 2017: green bond framework established and inaugural EUR 500m 5-year senior preferred green bond issued 10% • 2019: EUR 750m 7-year senior preferred green bond issued Green buildings • 2019: Danish green covered
Slide 31: Nordea covered bond operations
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 mortgages primarily Da
Slide 32: Nordea recent benchmark transactions
Nordea recent benchmark transactions Issue Maturity Issuer Type Currency Amount (m) FRN / Fixed Callable date date Nordea Eiendomskreditt* Covered, Green NOK 7,000 FRN Nov-21 Sep-26 Nordea Bank Senior non-preferred EUR 1,000 Fixed Nov-21 Nov-28 Nordea Bank Senior non-preferred USD 1,500 Fixed Sep-21
Slide 33: Balance sheet composition
Balance sheet composition Total assets EUR 570bn at end of Q4 2021 Cash and balances with Deposits by credit central banks institutions Loans to credit institutions Deposits and borrowings from the public Credit Loans to the public S&P Moody’s Fitch ratings CDs and CPs* Long-term issuer AA- Aa3 AA-
Slide 34: Well positioned to meet MREL requirements
Well positioned to meet MREL requirements MREL positions at end of Q4 2021 and requirements Comments • Nordea subordinated MREL ratio 4.5 percentage points above % REA +5.6% requirement (4.2 percentage points above % LRE requirement) 33.1% • Total MREL ratio 5.6 percentage points above % REA require
Slide 35: Senior non-preferred target remains unchanged
Senior non-preferred target remains unchanged Own funds and bail-in-able debt, EURbn Comments • Senior non-preferred (SNP) target of approximately Point of non viability Resolution EUR 10bn in total by end of 2023, taking into account: • future capital buffer requirements • management buffer for MRE
Slide 36: Maturity profile
Maturity profile Maturity profile, EURbn Comments EURbn 300 • Over past couple of years balance sheet maturity profile has become more balanced due to: 200 • Lengthening of issuance through balance sheet management 100 0 • Resulting in well-balanced structure in assets and liabilities in general, an
Slide 37: Liquidity coverage ratio
Liquidity coverage ratio Liquidity coverage ratio, % Comments 350% • Liquidity coverage ratio (LCR) of 160% 300% 250% • LCR compliant in USD and EUR 200% • Compliance reached through high-quality liquidity buffer and 150% management of short-term cash flows 100% 50% • Liquidity buffer EUR 100bn, inc
Slide 38: 5. Macroeconomy
5. Macroeconomy 38
Slide 39: Nordic economies – resilient economies back on track
Nordic economies – resilient economies back on track GDP development Unemployment rate Comments GDP, forecasts from Economic Outlook January 2022 • After the dramatic setback in 2020 due to the COVID-19 pandemic, the Nordic economies have all recovered. However, data points to a Country 2021E 2022E
Slide 40: Nordic economies – solid public finances, well-equipped for future
Nordic economies – solid public finances, well-equipped for future Policy rates Public balance/debt, % of GDP, 2021E Comments • Norges Bank increased its policy rate in September and December last year, and is expected to make further increases this year and in 2023. The policy rate in Sweden is exp
Slide 41: Households resilient
Households resilient Household debt Household savings Comments Private consumption • Household savings increased dramatically during the pandemic, largely due to a decline in spending, but have since returned to more normal levels as consumption has increased. Despite high debt levels, Nordic househ
Slide 42: Nordic housing markets hot during pandemic
Nordic housing markets hot during pandemic Housing prices Households’ credit growth Comments • Contrary to expectations, house prices have increased to record-high levels in all the Nordic countries during the crisis. This is not least because of unprecedented expansionary fiscal and monetary policy
Slide 43: 6. Appendix
6. Appendix 43
Slide 44: Personal Banking – continued strong mortgage and savings growth
Personal Banking – continued strong mortgage and savings growth Total income, EURm Comments +8% • Total income up 8% 929 919 848 878 912 • Continued strong mortgage activity: volumes up 6%, supported by market share growth across Nordics 569 573 556 535 561 • Mortgage margin pressure following Norwa
Slide 45: Business Banking – strong business momentum
Business Banking – strong business momentum Total income, EURm Comments +12% • Total income up 12% 688 617 640 647 637 • Lending volumes up 6%, driven by Norway and Sweden • High demand for green loans, with green volumes now 418 384 395 407 397 accounting for 4% of total lending • Net fee and commi
Slide 46: Large Corporates & Institutions – stable performance and normalising capital markets
Large Corporates & Institutions – stable performance and normalising capital markets Total income, EURm Comments +2% • Total income up 2% 620 • Net interest income up 9% 238 505 450 • High customer activity, increased lending volumes and high NCI offset 443 435 by lower result from trading 230 226 1
Slide 47: Asset & Wealth Management – record volumes and significant net inflows via all channels
Asset & Wealth Management – record volumes and significant net inflows via all channels Total income, EURm Comments • Total income up 31% +31% 346 • Assets under management up 17% to all-time high of EUR 318 20 293 294 19 411bn 265 19 19 17 • Net inflow of EUR 4.9bn (annualised growth 5%), with all
Slide 48: Significant investments in financial crime prevention
Significant investments in financial crime prevention Actions against money laundering Financial crime prevention spending, annual • We collaborate closely with all relevant authorities, including law enforcement and regulators, and encourage even closer collaboration on Employees EURm multiple leve
Slide 49: Contacts
Contacts Investor Relations Matti Ahokas Maria Caneman Juho-Pekka Jääskeläinen Head of Investor Relations Debt IR and ratings Senior IR Officer Mobile: +358 40 575 91 78 Mobile: +46 768 24 92 18 Mobile: +358 40 550 91 11 Tel: +46 10 156 50 19 Tel: +358 9 5300 64 35 matti.ahokas@nordea.com maria.cane