Nordea Bank Abp · OMXHEX:NDA_FI
Nordea Bank Abp — Q2 2013 Earnings Presentation
30 slides from Nordea Bank Abp's earnings presentation, Jul 17, 2013
Slide 1: Second quarter 2013 results
Second quarter 2013 results Strengthened customer relations, flat costs and higher capital International telephone conference 17 July 2013 Christian Clausen, Group CEO
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: Key message
Key message Nordea delivers on income initiatives, cost efficiency and capital Welcomed 23 000 new relationship customers Unchanged expenses for 11 consecutive quarters Pro forma Basel III core tier one ratio of at least 14.0% Continued stabilisation of credit quality Uncertain macroecon
Slide 4: Q2 2013 financial results highlights
• Q2 2013 financial results highlights • Delivering on the plan
Slide 5: Financial results Q2/13
Financial results Q2/13 EURm Q2/13 Q1/13 Change % H1/13 H1/12 Change % Net interest income 1 391 1 358 2 2 749 2 788 (1) Net fee and commission income 664 623 7 1 287 1 191 8 Net fair value result 416 444 (6) 860 955 (10) Total income1 2 490 2 506 (1) 4 996 5 016 0 Staff costs (753) (754) 0 (1 507)
Slide 6: Net interest income
Net interest income Net interest income development, EURm Comments NII up in quarter 1 415 — Lending margins are up 1 393 1 391 1 373 1 382 1 358 — Largely unchanged deposit margins — Improved NII in Group Treasury — One additional interest day Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 6•
Slide 7: Stable Net Interest Margin but lower volumes
Stable Net Interest Margin but lower volumes Blended net interest margin development, % Comments 1.5% Blended net interest margin up 2 bps in Q2/13 1.2% 107 bps Blended margin is unchanged in Retail Banking but 0.9% improved in Wealth Management and Wholesale Banking 0.6% Lending margins are u
Slide 8: Net fee and commission income
Net fee and commission income Net fee and commission income development, EURm Comments Continued strong trend 682 664 Increased savings and investments commissions 623 588 603 595 Increased M&A activity and strong equity customer activity Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 8•
Slide 9: Assets under Management
Assets under Management Assets under Management development*, EURbn Comments 223.3 219.2 Strong net inflow of 2.9bn in quarter 210.4 217.8 196.7 199.3 - Higher bond yields affects fixed income assets Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Net inflow, EURbn 3.1 2.9 2.6 2.2 1.2 -0.4 Q1/12 Q2/12 Q3/12 Q
Slide 10: Good demand for risk management products
Good demand for risk management products Net fair value development, EURm Comments Good demand in customer driven business High customer activity in the currency and fixed income areas Period of high volatility 160 220 132 155 128 108 303 310 289 288 272 269 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13
Slide 11: Flat costs for eleven consecutive quarters
Flat costs for eleven consecutive quarters Total expenses (excl. FX and variable pay)*, EURm Comments Expenses under solid control 1 172 1 131 1 170 1 139 1 158 1 128 1 129 1 140 1 157 1 128 1 120 Number of FTE’s down by more than 2% y-o-y Flat costs for 11 quarters - to remain flat for an add
Slide 12: Robust credit quality
Robust credit quality Total net loan losses, EURm Comments 263 Credit quality remains robust 236 241 215 203 198 1861) Stable underlying level of impaired loans 118 Provisioning ratio remained stable at 43% 112 A few individual provisions were made in CIB Credit quality remains solid in Fi
Slide 13: Denmark gradually improving
Denmark gradually improving House price index1 Loan losses net, EURm, Retail Banking Denmark 110 200 150 100 100 90 50 0 80 -50 70 -100 2006 2007 2008 2009 2010 2011 2012 2013 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Single-family houses Flats Collectively assessed Portfolio assessed no
Slide 14: Shipping credit quality is stabilising
Shipping credit quality is stabilising Ship values Loan losses net, EURm, Shipping MUSD 180 VLCC. 5 year old 80 Cape Bulker. 5 year old 70 150 Panamax 60 Containership. 5 year old 50 120 40 90 30 20 60 10 0 30 -10 0 -20 Jan-10 Jan-11 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan
Slide 15: Strong access to funding
Strong access to funding Long term funding, EURbn Comments 33 32 Strong diversified funding platform 29 Conservative liquidity management - LCR compliant - Liquidity buffer EUR 66bn 15 One of the lowest funding costs of any bank in Europe 2010 2011 2012 H1/13 LCR developments Long term senior
Slide 16: Risk weighted assets
Risk weighted assets Risk-weighted assets , EURbn* Comments RWA down EUR 6.7bn on previous quarter 183 185 182 181 - FX effects 180 179 168 168 - Decreased derivative exposures 162 Efficiency gains of EUR 2bn in quarter Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 * Basel 2.5 excluding
Slide 17: Core Tier 1 ratio +80 bps in Q2 due to profit generation and RWA efficiencies
Core Tier 1 ratio +80 bps in Q2 due to profit generation and RWA efficiencies Core Tier 1 ratio development, % 0.13% 0.27% 0.01% 0.15% 0.01% 0.20% 14.0% 13.2% Core Tier 1 Credit Quality Growth RWA efficiency FX effects & Profit net Core Tier 1 Core Tier 1 ratio Q1 2013 Other dividend deductions rati
Slide 18: Divestment of Polish operations
Divestment of Polish operations Improves Core Tier 1 ratio and increases return The transaction Divestment of Polish banking, financing and life insurance operations to PKO Bank Polska for EUR 694m. The rationale A rational structural change supporting our strategy to build the future relationship b
Slide 19: Delivering on the plan
• Q2 2013 financial results highlights • Delivering on the plan
Slide 20: 2015 plan – progress against our published goals
2015 plan – progress against our published goals Nordea market commitments Key initiatives and levers Strong capital generation Capital initiatives to maintain CT1 ratio and return of excess capital >13% to our shareholders Initiatives for income generation ROE target of 15% at a CT1 ratio >13% and
Slide 21: Pro forma CT1 ratio under Basel III
Pro forma CT1 ratio under Basel III Approx. Approx. 1.0 - 15.0 - 2.0% 16.0% Approx. Approx. Approx. 0.3% 0.5 - 14.0 - 1.5 - 2.0% 0.8% 1.0% 14.5% Approx. Approx. 15.5 - 0.5 - 1.0% 16.0% 14.0% Approx. 14.0 - 14.5% Q2/2013 Nordea Poland CRDIV RWA efficiency Proforma end Additional RWA Proforma end unti
Slide 22: New Regulation Expected to Increase RWA by ~EUR11-17bn
New Regulation Expected to Increase RWA by ~EUR11-17bn Regulatory Changes and RWA Impact, EURbn Comments Higher capital requirements for derivatives by introducing a capital charge for CVA risk for OTC contracts Derivatives cleared through a CCP will be subject to CVA and CCP ~6 CCP capital requ
Slide 23: Broad range of initiatives in place to mitigate regulatory effects
Broad range of initiatives in place to mitigate regulatory effects Initiatives Comments Applying for use of internal models, e.g. Advanced IRB Roll-Outs Nordea Bank Russia (application sent) International units (application sent) Review of corporate rating models – including segmentation,
Slide 24: Income holding up – challenging environment mitigated
Income holding up – challenging environment mitigated Total income, EURm Comments to key income related activities in Q2 Re-pricing Total lending margins +20 bps y/y (RB) 2 546 2 570 2 506 2 490 2 470 2 412 CIB/SOO/NBR lending margins +20 bps y/y (WB) New customers Over 22,000 new (externa
Slide 25: Costs in check – eleven quarters of flat costs
Costs in check – eleven quarters of flat costs Total expenses (excl. FX & variable pay1), EURm 1 172 1 131 1 170 1 139 1 158 1 128 1 129 1 140 1 1571 128 1 120 Underlying costs Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Avg. '15 1 Variable p
Slide 26: Cost initiatives progressing according to plan
Cost initiatives progressing according to plan – 45m of gross savings realised in Q2 (over 85m total in H1) Streamline • Optimisation of distribution mix, reduced cash-handling physical (RB) distribution • Right-sizing of Russian branch network, resulting in FTE reductions (WB) • Automating transact
Slide 27: Loan losses development in Q2 – decreasing in line with plan
Loan losses development in Q2 – decreasing in line with plan Actual loan losses, bps Comments The credit quality continues to be 30 robust 20 Loan losses still concentrated to two 10 specific areas, Denmark and Shipping – but credit quality stabilised 0 and improvements expected during (10) 2013
Slide 28: RoE – strong underlying business performance not fully compensating
RoE – strong underlying business performance not fully compensating for challenging macro environment and regulation Return on Equity, per cent Comments Income initiatives delivering YTD Q2 2012 – YTD Q2 013 Increased ancillary business, according to plan 0,2 0,2 0,8 Lower interest rates and h
Slide 29: Progress in summary
Progress in summary Progress on Nordea financial plan 2013-2015, in Q2 2013 CT1 ratio Core Tier 1 ratio +80 bps in Q2 to 14.0% P RWA RWA down over EUR 6bn in quarter P Income growth Income holding up (P ) Costs Underlying costs flat for 11th consecutive quarter P Loan losses Decreasing in
Slide 30: Second quarter 2013 results
Second quarter 2013 results Strengthened customer relations, flat costs and higher capital International telephone conference 17 July 2013 Christian Clausen, Group CEO