Slide 1: Interim report Q2 2008
Interim report Q2 2008 17 July 2008 Jan Lidén President and CEO
Slide 2: Continued solid results
Continued solid results • Continued solid results in all • Credit quality remains good and in business areas line with expectations – Net profit for the period Jan-Jun • The macro environment in the increased by 8 percent to Baltic states has deteriorated SEK 6 504m (6 022) compared with expectation
Slide 3: H1 2008 – best half-year so far
H1 2008 – best half-year so far Swedish Banking Baltic Banking International Banking Swedbank Markets SEKm SEKm SEKm SEKm 1 300 450 150 2,000 400 1 250 125 350 1 200 300 1,500 1 150 100 250 1 100 200 1 050 75 1,000 150 1 000 100 50 950 50 500 900 0 25 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1
Slide 4: Initiatives in line with our strategy
Initiatives in line with our strategy Sweden Baltics Ukraine and Russia • Structural initiatives – • Productivity improvement • Build-up of critical functions operation and branches • Cross-border capabilities and growth management • Channel management • IT management and • Grow distribution network
Slide 5: A slowing Swedish economy
A slowing Swedish economy • The Swedish economy has performed better than the EU average. However, GDP growth, CPI and other indicators show that the Swedish economy will grow more slowly in the next few quarters • Higher inflation, rising interest rates and weaker disposable income for households a
Slide 6: Baltic macro development weaker than expected
Baltic macro development weaker than expected • Economic slowdown in Estonia continues: GDP growth will slow to about 2% in 2008 and recover to 4% in 2009 if global economic developments improve and price growth slows • In Latvia growth will slow to about 1.3% in 2008 and 2009, the bottom of the cyc
Slide 7: Credit quality, Group
Credit quality, Group SEKm % 600 0.60 500 0.50 Loan losses, net 400 0.40 300 0.30 Loan loss ratio 200 0.20 *Loan losses, net = write-offs + 100 0.10 provisions - recoveries + change in 0 0.00 property taken over -100 -0.10 Q2-07 Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q3-07 Q4-07 Q1-08
Slide 8: Baltic banking overdues vs market
Baltic banking overdues vs market Estonia - overdue over 30 days / current Estonia - overdue over 60 days / current portfolio portfolio 3.0% 2.0% 2.5% 2.0% 1.5% 1.5% 1.0% 1.0% 0.5% 0.5% 0.0% 0.0% 31.12.05 30.06.06 31.12.06 30.06.07 31.12.07 30.04.08 31.12.05 30.06.06 31.12.06 30.06.07 31.12.07 30.04
Slide 9: Credit quality, Baltic Banking
Credit quality, Baltic Banking Loan loss ratio, net* Q4 07 Q1 08 Q2 08 H1 08 Estonia 0.58% 0.38% 0.55% 0.48% Latvia 0.63% 0.53% 0.73% 0.64% Lithuania 0.10% 0.25% 0.30% 0.28% Group level provision adjustment -0.18% Baltic Banking 0.28% 0.39% 0.54% 0.47% *Loan loss ratio, net = (changes in provisions
Slide 10: Accounting and valuation effects
Accounting and valuation effects Q2 Q1 Q4 Accounting and valuation effects, SEKm 2008 2008 2007 Swedbank Markets 0 – 187 – 40 Group Treasury, intra-group lending 419 – 253 20 Swedbank Mortgage 29 – 22 66 Group Treasury, liquidity portfolio –4 53 –5 (10)
Slide 11: Swedish Banking
Swedish Banking SEKm C/I-ratio • Continued strong corporate lending growth 5,000 0.7 • Mortgage lending growth has started to decline 4,500 0.6 • Overall stable lending margins 4,000 – Back book mortgage margin stabilizing. 3,500 0.5 New lending shows increasing margin 3,000 – Corporate margins are
Slide 12: Baltic Banking Operations
Baltic Banking Operations SEKm C/I-ratio • Strong and stable income 2,400 0.5 • Lending margins decreased as a 2,200 2,000 result of higher funding costs 0.4 1,800 • Deposit margins affected 1,600 1,400 0.3 negatively by decreasing local 1,200 interest rates and increased 1,000 0.2 competition 800 6
Slide 13: International Banking
International Banking • Annika Wijkström new head of SEKm International Banking • Strong net interest income development 100 • Continued strong economic growth in Ukraine and Russia but with high inflation 75 • Ukrainian Banking operations – Continued high lending growth – Higher costs due to operat
Slide 14: Swedbank Markets
Swedbank Markets SEKm 450 • Magnus Geeber new head of 400 Swedbank Markets 350 • Good development in fixed 300 income and FX trading despite 250 difficult conditions at times 200 • Stable market share in equity 150 trading and structured products 100 but lower market activity 50 0 • Increased activi
Slide 15: Swedbank lending and funding
Swedbank lending and funding Lending to the public, SEK 1,169bn Russia Ukraine 1% 1% Nordic; 3% Lithuania 5% Latvia Swedbank 5% Swedbank Group, excl. Estonia 7% Mortgage Swedbank Swedbank SEK 573bn Mortgage Mortgage 49% - Exclusively Swedish SEK 596bn mortgage lending Sweden 30% Distribution of Net
Slide 16: New capital adequacy target – mid-term
New capital adequacy target – mid-term • New target: The capital ratios will at least meet the level that at any given time is considered appropriate to maintain sustainable financial stability and develop operations. Considering full effect of Basel 2, the Tier 1 capital ratio is to be 8.5-9.0%. •
Slide 17: Group results
Group results Mikael Inglander CFO (17)
Slide 18: Profit for the period, EPS, ROE, Tier 1 ratio
Prof it for the period, SEKm Earnings per share, SEK Return on equity, % Tier 1 capital rat io, % 4 000 8.0 25.0 10.0 3 500 7.0 9.0 20.0 8.0 3 000 6.0 7.0 2 500 5.0 15.0 6.0 2 000 4.0 5.0 1500 3.0 10.0 4.0 3.0 1000 2.0 5.0 2.0 500 1.0 1.0 0 0.0 0.0 0.0 Q2- Q3- Q4- Q1- Q2- Q2- Q3- Q4- Q1- Q2- Q2- Q3-
Slide 19: Income statement, Group
Income statement, Group Q2 Q1 Q2 SEKm 2008 2008 % 2007 % Net interest income 5,295 5,241 1 4,591 15 Net commission income 2,374 2,180 9 2,552 –7 Net gains/losses on financial items at fair value 1,141 75 579 97 Other income 623 950 – 34 504 24 Total income 9,433 8,446 12 8,226 15 Staff costs 2,268 2
Slide 20: Net interest income change by business area
4,600 4,800 5,000 5,200 5,400 5,600 Net interest income SEKm Q1-08 5,241 Swedish Banking 11 Baltic Banking Operations 44 Baltic Banking 1 Investment International 72 Banking Swedbank 187 Markets Asset management and 2 Net interest income Q2-08 (Q1-08) Insurance Shared Services and other 151 Net inte
Slide 21: Swedish Banking, change in net interest income
Swedish Banking, change in net interest income Q2 2008 Q2 2008 SEKm vs Q1 2008 vs Q2 2007 Net interest income Q1 2008 2,982 Net interest income Q2 2007 2,905 Changes: Higher lending volumes 54 227 Unchanged lending margins 0.0 Decreased lending margins – 244 Higher deposit volumes 34 140 Decreased d
Slide 22: Baltic Banking, change in net interest income
Baltic Banking, change in net interest income Q2 2008 Q2 2008 SEKm vs Q1 2008 vs Q2 2007 Net interest income Q1 2008 1,575 Net interest income Q2 2007 1,377 Changes: Higher lending volumes 33 214 Decreased lending margins -92 -108 FX-effects, lending -5 11 Higher deposit volumes 14 78 Decreased depo
Slide 23: Net commission income, Group
Net commission income, Group Q2 Q1 Q2 SEKm 2008 2008 % 2007 % Payments 839 793 6 743 13 Lending 199 136 46 178 12 Brokerage 188 213 – 12 242 – 22 Asset management 945 950 –1 1,126 – 16 Insurance 71 68 5 80 – 11 Corporate finance 177 19 172 3 Other – 45 1 11 Total net commissions 2,374 2,180 9 2,552
Slide 24: Expenses
Expenses Q2 Q1 Q2 SEKm 2008 2008 % 2007 % Swedish Banking 2,239 2,255 – 1 2,330 –4 Baltic Banking 795 899 – 12 851 –7 International Banking 349 309 13 113 of which Ukrainian Banking 197 150 31 Swedbank Markets 585 456 28 499 17 Asset Management & Insurance 206 253 – 19 239 – 14 Other 256 268 – 4 92
Slide 25: Business areas
Business areas Swedish Baltic International Swedbank Asset Q2 08 vs Q2 07 Banking Banking Banking Markets Mgmt SEKm Q2 08 % Q2 08 % Q2 08 % Q2 08 % Q2 08 % Net interest income 2,971 2 1,531 11 441 476 61 27 13 Net commission income 1,057 -5 478 0 55 38 352 –8 432 – 15 Other income 425 12 405 18 132
Slide 26: Key figures
Key figures Jan-Jun Jan-Jun 2008 2007 Return on equity, % 18.7 19.5 Earnings per share, SEK 12.62 11.68 Equity per share, SEK 135.81 120.23 C/I ratio before loan losses 0.50 0.50 Loan loss ratio, net, % 0.12 0.03 Share of impaired loans, % 0.20 0.08 Tier 1 capital ratio, new rules, % 8.8 9.0 Tier 1
Slide 27: Continued solid results
Continued solid results • Continued solid results in all • Credit quality remains good and in business areas line with expectations – Net profit for the period Jan-Jun • The macro environment in the increased by 8 percent to Baltic states has deteriorated SEK 6 504m (6 022) compared with expectation
Slide 28: Appendix
Swedbank @ Appendix (28)
Slide 29: Exposure FAQ
Exposure FAQ • No direct US Sub-Prime exposure – Minimal indirect exposure through investments of EUR 23.4m in bonds issued by US mortgage institutions who, in their turn, have exposures towards US sub-prime • Total exposure to structured credits is minimal – Total commitments towards conduits or SI
Slide 30: Main Baltic macro indicators
Main Baltic macro indicators Real GDP growth CPI growth 15% 20% 10% 15% 10% 5% 5% 0% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 05 05 05 05 06 06 06 06 07 07 07 07 08 05 05 05 05 06 06 06 06 07 07 07 07 08 08 Est Lat Lit Est Lat Lit Consumer confidence Number
Slide 31: GDP growth components
GDP growth components 24% Components of GDP growth - Estonia 24% Components of GDP growth - Latvia 20% 20% 16% 16% 12% 12% 8% 8% 4% 4% 0% 0% -4% 2004 2005 2006 2007 Q108 -4% 2004 2005 2006 2007 Q108 -8% -8% -12% -12% households government investments households government investments net exports err
Slide 32: Baltic current account deficit
Baltic current account deficit Current account (% of GDP) Estonia 5% 40% 35% 0% Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 30% -5% 25% -10% 20% 15% -15% 10% -20% 5% -25% 0% Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 -5% -30% Est Lat Lit
Slide 33: Baltic consumer price index
Baltic consumer price index Latvia 35 Estonia 35 30 30 25 25 20 20 15 15 10 10 5 5 0 0 2005 2006 2007 2008 2005 2006 2007 2008 -5 -5 HICP, % HICP, % Energy, % Energy, % Food including alcohol and tobacco, % Food including alcohol and tobacco, % Core inflation, % Core inflation, % 35 Lithuania 30 25
Slide 34: Talibor, Rigibor, Vilibor, Euribor
Talibor, Rigibor, Vilibor, Euribor 14 12 10 8 % 6 4 2 0 jan-07 feb-07 mar-07 apr-07 maj-07 jun-07 jul-07 aug-07 okt-07 nov-07 dec-07 jan-08 feb-08 mar-08 apr-08 jun-08 3m Talibor 3m Rigibor 3m Vilibor 3m Euribor (34)
Slide 35: Asset quality and provisioning costs
Asset quality and provisioning costs Net loan losses Net loan losses by country 250% 30 25 Q2 08 Q1 08 2007 200% 20 Estonia 0.58% 0.38% 0.39% EURm 150% 15 Latvia 0.75% 0.54% 0.56% 100% 10 Lithuania 0.31% 0.25% 0.23% 50% 5 Group 0.55% 0.39% 0.40% 0% 0 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Net loan loss
Slide 36: Asset quality – overdue more than 60 days
Asset quality – overdue more than 60 days Overdue more than 60-days/12m old Overdue over 60-days/12m old 2,0% 2,0% portfolio portfolio 1,6% 1,6% 1,2% 1,2% 0,8% 0,8% 0,4% 0,4% 0,0% 0,0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 08 08 06 06 06 06 07 07 07 07 08 0
Slide 37: Baltic Banking lending by sectors
Baltic Banking lending by sectors Portfolio (EURm), June 2008 Portfolio growth (EURm), Q2 08 Individuals 8 621 43% 249 Real-estate 3 110 15% 176* mgmt * Retail & 1 803 9% 2 Wholesale Industry 1 801 9% 21 Transport 1 050 5% -26 Construction 580 3% -13 Other 3 181 16% 93 0 2 000 4 000 6 000 8 000 10 0
Slide 38: Estonian lending by sectors
Estonian lending by sectors Portfolio (EURm), June 2008 Portfolio growth (EURm), Q2 08 Individuals 3 685 45% 116 Real-estate 1 158 14% 28 mgmt Retail & 694 9% -5 Wholesale Industry 513 6% 18 Transport 308 4% -40 Construction 201 2% -4 Other 1 570 19% -17 0 1 000 2 000 3 000 4 000 -50 0 50 100 150 xx
Slide 39: Latvian lending by sectors
Latvian lending by sectors Portfolio (EURm), June 2008 Portfolio growth (EURm), Q2 08 Individuals 2 739 43% 38 Real-estate 1 052 17% 114* mgmt * Retail & 536 8% 0 Wholesale Industry 653 10% 28 Transport 287 5% 11 Construction 262 4% 6 Other 838 13% 13 0 1 000 2 000 3 000 4 000 -50 0 50 100 150 xx% -
Slide 40: Lithuanian lending by sectors
Lithuanian lending by sectors Portfolio (EURm), June 2008 Portfolio growth (EURm), Q2 08 Individuals 2 197 38% 95 Real-estate 899 16% 34 mgmt Retail & 573 10% 8 Wholesale Industry 636 11% -25 Transport 455 8% 3 Construction 116 2% -16 Other * 867 15% 97 * 0 1 000 2 000 3 000 4 000 -50 0 50 100 150 x
Slide 41: Mortgages
Mortgages • Standard mortgage product allows issue of 30 June 2008 Estonia Latvia Lithuania new loans with maximum LTV of 85% and loan-service ratio below 50%. Average portfolio LTV 59% 74% 61% • Mortgage portfolio LTV ratios have remained Average maturity 21y 23y 22y solid at 59% in Estonia, 74% in
Slide 42: Group lending by sectors – real estate
Group lending by sectors – real estate Estonia 6% 22% 15% Portfolio, June 2008 5% 9% 6% 9% Latvia 2% 13% 25% 15% 43% 15% 26% 10% 3% 16% 22% Construction Other Lithuania Individuals Transport 4% 4% 13% Industry Retail & Wholesale Real-estate mgmt 38% 5% Office Production&Warehouse Residential 41% Ret
Slide 43: Real estate portfolio
Real estate portfolio 2,5% Real estate management overdues* • As indicated by internal stress-tests 2,0% and portfolio analyses, real estate and 1,5% in particular residential real estate development is the most sensitive 1,0% sector in Baltic Banking portfolio. 0,5% ‘Sensitivity’ has started to app
Slide 44: Group lending by sectors – retail & wholesale
Group lending by sectors – retail & wholesale Estonia 32% 34% Portfolio, June 2008 5% 9% Latvia 43% 9% 26% 31% 35% 15% 3% 16% Construction Other Lithuania Individuals Transport 12% Industry Retail & Wholesale Real-estate mgmt 43% 19% Distributors Specialty retail Other 69% (44)
Slide 45: Group lending by sectors – transport
Group lending by sectors – transport Estonia 24% 23% Portfolio, June 2008 43% Latvia 5% 25% 28% 35% 9% 16% 41% 3% 9% 15% Construction Other Individuals Transport 10% Lithuania 1% Industry Retail & Wholesale 13% 4% 11% Real-estate mgmt Trucking Marine Terminals&Ports Other 85% (45)
Slide 46: Sectors under close watch
Sectors under close watch 2,0% Transportation overdues* Transportation 1,5% Trucking companies are facing problems due to increasing fuel prices and lagging freight rates. This global problem has 1,0% started to be reflected in Baltic Banking provisions 0,5% (especially in SME segments) since the be
Slide 47: Collateral breakdown
Collateral breakdown Baltic Collateral (EUR m) • Hansabank’s loan portfolio is adequately secured. Q2 08 % 2007 % • Private mortgage portfolio is fully covered by State 270 1% 273 1% family houses and apartments (as a rule Private real-estate 7,172 35% 6,660 33% owner occupied). Corporate real-estat
Slide 48: Regular process of outstanding loan review
Regular process of outstanding loan review • Portfolio quality improvement measures were introduced at the end of 2006 • Real estate sector growth is under control, with regular scrutiny of existing portfolio • Strengthened risk units – Increased number of people dealing with problem loans – Strengt
Slide 49: Credit quality management process
Credit quality management process 1. Proactive management of watch list clients – Private clients - communication on step-by-step actions to take before falling into overdues. Development of standard proactive solutions to ensure serviceability of the credit – Corporate clients - proactive communica