Nordea Bank Abp · OMXHEX:NDA_FI
Nordea Bank Abp — Debt Investor Presentation (September 2018)
64 slides from Nordea Bank Abp's debt investor presentation, Sep 12, 2018
Slide 1: Debt investor presentation Q2 2018
Debt investor presentation Q2 2018 The Euromoney / ECBC Covered Bond Congress 2018, Munich
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 Nordea overview Covered bond section Nordea in brief 4 Nordea Mortgage Bank 31 Financial results highlights 10 Nordea Eiendomskreditt 41 Capital 15 Nordea Hypotek 51 Macro 18 Nordea Kredit 55 Funding 22 Appendix 59 3
Slide 4: Nordea in brief
Nordea in brief 4
Slide 5: The largest financial services group in the Nordics
The largest financial services group in the Nordics Household market Corporate & Institutional position* market position** #1 #1 Business position - Leading market position in all four Nordic countries - Universal bank with strong position in household, corporate and wealth management - Well diversi
Slide 6: Nordea is the most diversified bank in the Nordics
Nordea is the most diversified bank in the Nordics A Nordic-centric portfolio (98%) Lending: 47% Corporate and 53% Household Russia Outside Nordic Public Sector 1% 1% Other 1% Household (Denmark) 13% 14% Sweden 29% Denmark Shipping and offshore 29% 3% Retail trade 3% Consumer staples Household (Finl
Slide 7: Re-domiciliation of the parent company to Finland
Re-domiciliation of the parent company to Finland • The re-domiciliation will be carried out by way of a cross-border reversed merger through which Nordea Bank AB (publ) will be merged into a newly established Finnish subsidiary • Nordea Board of Directors has on 25 October 2017 signed the merger pl
Slide 8: Re-domiciliation process according to plan
Re-domiciliation process according to plan ECB grants Nordea temporary ECB grants banking licence to permission for continued use of Nordea Holding Abp internal models Expected re-domiciliation 15 Mar 29 Jun 23 Aug 27 Jun 17 Aug 1 Oct 2018 Finnish FSA sets Nordea Swedish FSA approves the AGM decisio
Slide 9: Nordea's sustainability work, further enhanced from 2015
Nordea’s sustainability work, initiated more than 15 years ago, further enhanced from 2015 Nordea’s publicly stated commitments, examples Enhanced ESG focus from 2015 • The UN Environment Program Finance Initiative • Business Ethics & Values Committee established (2015) • The UN Global Compact • New
Slide 10: Financial results highlights
Financial results highlights 10
Slide 11: Improved customer satisfaction and business momentum
Improved customer satisfaction and business momentum • Stabilising trend in NII • Positive signs in volume development in most sectors • Strong trend in corporate advisory service Delivering on the cost targets Strong credit quality Capital ratios at all-time-high Major improvements in compliance 20
Slide 12: Nordea Group
Nordea Group EURm Q218 Q118 Change QoQ Change QoQ Q217 Change YoY Change YoY (local currency) (local currency) Net interest income 1,073 1,053 2% 2% 1,175 -9% -7% Net fee and commission income 800 770 4% 5% 850 -6% -4% Net fair value result 260 441 -41% -39% 361 -28% -25% Other Income 408 51 21 Tota
Slide 13: Strong asset quality
Strong asset quality Total net loan losses*, EURm Comments • Collective provisions related to potential impacts of sanctions to Russia 135 129 127 • Write-backs in Nordic franchise 113 106 • Gross impairment rate (stage 3) also down 79 71 59 40 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 13 * Total
Slide 14: Planned acquisition of Gjensidige Bank
Planned acquisition of Gjensidige Bank – strategic partnership with Gjensidige Forsikring Gjensidige Bank – a growing, profitable and digital bank RoE >10% EUR 4,840m customer assets 12% CAGR (2015-2017) Acquisition summary* • Price NOK 5,500m** • EUR 25m annualised cost synergies by 2022 • RoI ~16%
Slide 15: Capital
Capital 15
Slide 16: Nordea estimated CET1 and own funds requirement Q2 2018
Nordea estimated CET1 and own funds requirement Q2 2018* Comments • As part of the re-domiciliation process, Nordea will migrate from the Swedish FSA framework to the harmonised ECB capital requirement’s framework • Nordea is currently in dialogue with the ECB to establish future capital requirement
Slide 17: ECB temporary permission for continued use of internal models
ECB has granted Nordea temporary permission for continued use of internal models SREP from the Swedish FSA (in force until SREP from ECB) New model applications sent During the transition Late The forecast Q4 2018 CET1 ratio decreases to ~15.5% and similarly reduced CET1 capital 2019 requirement to
Slide 18: Macro
Macro 18
Slide 19: Prospering Nordic economies
Prospering Nordic economies GDP development Unemployment rate Comments GDP forecast, % • The Nordics are enjoying an economic tailwind. While the Country 2015 2016 2017 2018E 2019E synchronized global recovery raise exports, the Denmark 1.6 2.0 2.2 1.8 1.7 accommodative monetary polices support dome
Slide 20: Household debt remains high, but so is private and public savings
Household debt remains high, but so is private and public savings Household debt Household savings Public balance/debt, % of GDP, 2018E Comments 10 8 • In all countries, apart from Denmark, household debt continues to rise somewhat faster than income. Meanwhile, households’ savings rates remain at h
Slide 21: House price development in the Nordics
House price development in the Nordics House prices Household’s credit growth Comments • Recent quarters have shown stabilisation in the Swedish and Norwegian housing markets, while prices continue to rise in Denmark and to some extent also in Finland • In Sweden house prices declined during H2 2017
Slide 22: Funding
Funding 22
Slide 23: Key Principles to preserve market capacity
Key Principles to preserve market capacity Securing funding while maintaining a prudent risk level • Appropriate balance sheet • Diversified wholesale funding matching; maturity, currency sources: and interest rate • Instruments, programs, • Prudent short term and ✓ ✓ currency and maturity structura
Slide 24: Solid funding operations
Solid funding operations Long- and short-term funding, gross volumes, EUR 188bn YTD long-term issuance as of Q2 2018, gross volumes, EUR 17.5bn**** Short term funding EURm Covered Senior unsecured Senior non-preferred 15% 5 000 Subordinated debt 5% 4 500 4 000 Senior non-preferred Domestic covered 3
Slide 25: Changes to funding programs due to the re-domiciliation to Finland
Changes to funding programs due to the re-domiciliation to Finland Comments • Nordea will establish corresponding funding programs for the new company in Finland (Nordea Bank Abp), i.e. Short term programs: Long term programs: USCP, USCD EMTN ECP GMTN FCP Structured note programs LCD Samurai (shelf
Slide 26: Nordea's global issuance platform
Nordea’s global issuance platform 1% 10% 2% 1% 4% 89% NOK 84bn 100% 93% (EUR 9bn eq.) DKK 379bn SEK 319bn (EUR 51bn eq.) (EUR 30bn eq.) 52% 3% 22% 37% 48% 24% 78% 49% 8% GBP 2bn 54% (EUR 2bn eq.) JPY 250bn 11% (EUR 2bn eq.) 22% 92% EUR 39bn CHF 2bn USD 20bn (EUR 2bn eq.) (EUR 17bn eq.) Covered bond
Slide 27: Nordea covered bond operations
Nordea covered bond operations Four aligned covered bond issuers with complementary roles Nordea Nordea Nordea Nordea Mortgage Eiendomskreditt Hypotek Kredit Bank Legislation Norwegian Swedish Danish/SDRO Finnish Cover pool assets Norwegian residential mortgages Swedish residential mortgages primari
Slide 28: Nordea benchmark transactions last 12 months
Nordea benchmark transactions last 12 months Amount Issue Maturity Issuer Type Currency FRN / Fixed (m) date date Nordea Bank AB Senior unsecured* EUR 500 30 Jun 2017 30 Jun 2022 Fixed 1 000 27 Sep 2017 27 Sep 2027 Fixed Nordea Bank AB Senior unsecured EUR 1 000 27 Sep 2017 27 Sep 2021 FRN Nordea Hy
Slide 29: SNP, TLAC and MREL expected timeline
SNP, TLAC and MREL expected timeline Planned re- domiciliation Interim TLAC expected Final TLAC TLAC to be applied to be applied 2018 2019 2020 … 2022 SNDO* MREL SNDO determined MREL applied Nordea’s SRB MREL SRB MREL Preparations for handover to SRB requirement expected to be decided during Q3 EU C
Slide 30: Summary of Nordea SNP, TLAC and MREL
Summary of Nordea SNP, TLAC and MREL Comments Current senior bonds available for potential refinancing in SNP format • Nordea will ensure 2019 and 2022 TLAC compliance given the GSIB classification EURbn 39 • Nordea aims to use own funds and SNP to cover the minimum TLAC requirement once fully imple
Slide 31: Nordea Mortgage Bank
Nordea Mortgage Bank alee foe: tly Nordea
Slide 32: Nordea Mortgage Bank Plc – overview
Nordea Mortgage Bank Plc – overview Q2 2018 • 100% owned subsidiary of Nordea Bank AB - the largest Nordic financial institution • Operates as a mortgage credit institution with the main purpose of issuing covered bonds • Licensed by the European Central Bank to issue covered bonds according to the
Slide 33: Cover pool key characteristics
Cover pool key characteristics Q2 2018 Cover pool summary Pool notional EUR 20.1bn Outstanding Covered Bonds EUR 18.3bn Cover pool content Mortgage loans secured by residential property. Loans guaranteed by public sector Geographic distribution Throughout Finland with concentration in urban areas As
Slide 34: Cover pool key characteristics (2)
Cover pool key characteristics (2) Q2 2018 Cover pool balance by loan category Cover pool balance by region Summer houses North/ East /Mid 2% Finland Multi-family Public sector housing 17% 1% 6% Greater Helsinki Area Single-family 43% South Finland houses 16% Tenant owner 44% units 47% West Finland
Slide 35: Loan To Value (LTV)
Loan To Value (LTV) Continuous distribution where each loan can exist in multiple buckets Q2 2018 Weighted Average LTV – Unindexed 50.2% LTV buckets Nominal (EURm) % Residential Loans >0 - <=40 % 15 309 76,84% >40 - <=50 % 2 102 10,55% >50 - <=60 % 1 535 7,71% >60 - <=70 % 976 4,90% Total 19 922 100
Slide 36: Loan structure
Loan structure Q2 2018 Rate type Repayment 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% Floating rate Amortising 50% 97,8% 97,9% 98,0% 98,0% 98,1% 98,1% 50% 95,1% 95,0% 95,0% 95,1% 94,8% 94,6% Fixed rate Bullet / interest only 40% 40% 30% 30% 20% 20% 10% 10% 0% 2,2% 2,1% 2,0% 2,0% 1,9% 1,9% 0% 4,9% 5,0
Slide 37: Underwriting criteria
Underwriting criteria Q2 2018 • Residential mortgage loans • Nordea’s credit decision is based on the borrower’s repayment capacity and collateral is always taken • Collateral must be in the form of mortgages in real estate or in shares in housing companies • Repayment ability of borrowers is calcul
Slide 38: Finnish covered bond framework
Finnish covered bond framework Q2 2018 • Legal framework • Finnish Covered Bond Act (statute 688/2010) • Registration • Collateral assets remain on the balance sheet of the issuer • Covered bonds, collateral and relevant derivative contracts are entered in a separate register • Limit on LTV ratio –
Slide 39: Finnish covered bond framework (2)
Finnish covered bond framework (2) Q2 2018 • Bankruptcy remoteness and preferential claim • Isolation of registered collateral assets, registered derivatives from all other assets and liabilities of the insolvent issuer • Holders of covered bonds together with counterparties of registered derivative
Slide 40: Nordea Mortgage Bank – outstanding benchmark covered bonds
Nordea Mortgage Bank – outstanding benchmark covered bonds Q2 2018 Breakdown by ISIN ISIN Currency Amount (EURm) Maturity Coupon XS0965104978 EUR 1 500 2018-08-28 1,375 XS1014673849 EUR 1 500 2019-01-14 1,25 XS0778465228 EUR 1 500 2019-05-03 2,25 XS0874351728 EUR 1 250 2020-01-15 1,375 XS1204134909
Slide 41: Nordea Eiendomskreditt
Nordea Eiendomskreditt Habe foe: tly Nordea
Slide 42: Nordea Eiendomskreditt – overview
Nordea Eiendomskreditt – overview Q2 2018 • A 100% owned subsidiary of Nordea Bank AB • The purpose of the Issuer is to acquire and provide residential mortgage loans and finance its activities mainly through issuance of covered bonds • Loans in Nordea Eiendomskreditt (NE) are originated by Nordea B
Slide 43: Cover pool key characteristics
Cover pool key characteristics Q2 2018 Cover pool summary Pool notional NOK 109.8bn Outstanding Covered Bonds NOK 87.1bn Cover pool content Mortgage loans secured by Norwegian residential collateral Geographic distribution Throughout Norway with concentration to urban areas Asset distribution 100% r
Slide 44: Cover pool key characteristics (2)
Cover pool key characteristics (2) Q2 2018 Cover pool balance by loan category Weighted Average LTV – Indexed 100% 90% Summer houses 80% Regulatory limit 75% 3% 70% Tenant owner units Regulatory limit 60% 26% 60% 49,9% 50% 48,2% 45,4% 40% Single family houses 30% 71% 20% 10% 0% Single-family houses
Slide 45: Cover pool – geographic distribution
Cover pool – geographic distribution Q2 2018 Fylke Loan balance Region Akershus 17,27 % East Aust-Agder 1,56 % South Buskerud 4,20 % East Finnmark 0,46 % North Hedmark 1,93 % East Hordland 11,00 % West Møre og Romsdal 7,53 % West Nordland 2,00 % North Oppland 3,69 % East Oslo 23,23 % East Rogaland 4
Slide 46: Loan to Value (LTV)
Loan to Value (LTV) Each loan is reported in the highest bucket Q2 2018 Weighted Average LTV – Unindexed 50.3% LTV buckets Nominal (NOKm) % Residential Loans >0 - <=40 % 30 684 27,94% >40 - <=50 % 18 218 16,59% >50 - <=60 % 23 440 21,35% >60 - <=70 % 21 441 19,52% >70 - <=80 % 16 033 14,60% Total 10
Slide 47: Loan structure
Loan structure Q2 2018 Rate type Repayment Repayment 100% 100% 90% 90% 80% 80% 70% 70% 62,6% 65,0% 64,8% 60% 67,7% 67,2% 67,0% 60% 50% 97,7% 98,3% 98,3% 98,5% 98,4% 98,3% Amortising 50% 40% Floating rate 40% Bullet / interest only* 30% Fixed rate 30% 20% 20% 37,4% 35,0% 35,2% 32,3% 32,8% 33,0% 10% 1
Slide 48: Underwriting criteria
Underwriting criteria Q2 2018 Affordability • Customers ability to service its commitment out of its cash flow/income is critical • Repayment ability of borrowers is calculated using stressed scenarios. Customers must manage 5 percentage points increase on interest rate on all debt • Scoring of reta
Slide 49: Norwegian covered bond framework
Norwegian covered bond framework Q2 2018 • Legal framework • Norwegian Financial Institutions Act (2007) • Registration and independent inspector • A mortgage credit institution shall for each cover pool establish a register of loans, interest rate contracts and foreign exchange contracts, substitut
Slide 50: Covered bonds – outstanding volumes
Covered bonds – outstanding volumes Q2 2018 Breakdown by ISIN ISIN Currency Amount (NOKm) Maturity Coupon (%) NO0010647241 NOK 12 195 2019-06-19 FRN NO0010692767 NOK 2 380 2019-06-19 3,05 NO0010703531 NOK 13 015 2020-06-17 FRN NO0010741903 NOK 114 2020-06-17 1,75 NO0010729817 NOK 11 000 2021-06-16 F
Slide 51: Nordea Hypotek
Nordea Hypotek alee foe: tly Nordea
Slide 52: Cover pool key characteristics
Cover pool key characteristics Q2 2018 Cover pool summary Loans in cover pool SEK 522.8bn Outstanding covered bonds SEK 312.5bn Cover pool content Mortgage loans secured by residential or commercial property. Loans to public sector Geographic distribution Throughout Sweden with concentration to urba
Slide 53: Cover pool key characteristics (2)
Cover pool key characteristics (2) Q2 2018 Cover pool balance by loan category Cover pool balance by region* Commercial Public East 3% sector Sweden 2% 14% Multi-family houses North 14% Sweden Greater 9% Stockholm Single 39% family West houses Sweden Tenant 53% 16% owner units 28% Greater Gothenburg
Slide 54: Loan To Value (LTV)
Loan To Value* (LTV) Q2 2018 Weighted Average LTV – Unindexed 57.7% LTV buckets Nominal (SEKm) % Residential Loans >0 - <=40 % 350 628 70,49% >40 - <=50 % 57 929 11,65% >50 - <=60 % 45 389 9,12% >60 - <=70 % 33 017 6,64% >70 - <=80 % 10 469 2,10% Total 497 431 100% Weighted Average LTV - Indexed 50.
Slide 55: Nordea Kredit
Nordea Kredit 55
Slide 56: In brief
In brief Profile Portfolio Founded 1993 Mortgage loans, nom. value (Q2 2018) DKK 386.1bn Number of employees (FTEs) (H1 2018) 109 Market share (Q2 2018) 14.2% Portfolio by type of loan: Profit before tax (H1 2018) DKK 873m Cost-income ratio (H1 2018) 11.8% 27% 41% 46% Capital ratio (of which Tier 1)
Slide 57: Loan portfolio and market share
Loan portfolio and market share Loan portfolio by property category Portfolio by loan type 2% 100% Owner occ. dwellings & holiday 11% 8% 6% 6% 6% homes 21% 12% 26% 26% 26% Private rental housing 25% 25% 75% 9% 21% ARM 1-2Y Total Commercial properties 27% 27% ARM 3-10Y 24% 26% 27% DKK 386.1bn 50% 20%
Slide 58: Asset quality
Asset quality Arrears (Owner occupied dwellings and holiday homes)1 Loan-to-value (LTV) overall average 73% 0,5% 71% 0,4% 69% 67,9% All mortgage banks (including Nordea Kredit) 67% 0.21% (last 0.20%) 0,3% 65% 63,2% 63% 0,2% 61,8% 61% 60,4% 60,2% 60,2% 0,1% 59% Nordea Kredit 0.17% (last 0.16%) 57% 0,
Slide 59: Appendix
Appendix 59
Slide 60: Status on our transformation
Status on our transformation • ECB has granted banking licence to Nordea Bank Abp Re-domiciliation • The merger is planned to be effected 1 October 2018 • 750,000 household customer accounts in Finland have migrated onto the new core banking platform • New savings and deposit accounts being opened o
Slide 61: Pro forma following re-domiciliation – Nordea Bank Abp
Pro forma following re-domiciliation to Finland planned for 1 Oct – Nordea Bank Abp Pro forma income statement Jan-Jun 2018 Pro forma balance sheet 2018-06-30 Pro Forma Pro Forma Nordea Bank AB Nordea Bank Abp Nordea Bank AB Nordea Bank Abp EURm EURm Operating income Assets Interest income 1 987 1 9
Slide 62: Pro forma following re-domiciliation – Nordea Group
Pro forma following re-domiciliation to Finland planned for 1 Oct – Nordea Group Pro forma income statement Jan-Jun 2018 Pro forma balance sheet 2018-06-30 Pro Forma Pro Forma EURm EURm Operating income Assets Interest income 3 546 3 546 Cash and balances with central banks 33 690 33 690 Interest ex
Slide 63: Liquidity Coverage Ratio
Liquidity Coverage Ratio Liquidity Coverage Ratio Comments 350% • EBA Delegated Act LCR in force starting from October 2016 300% • LCR of 147% 250% • LCR compliant in USD and EUR 200% • Compliance is reached by high quality liquidity buffer and management 150% of short-term cash flows 100% • Nordea
Slide 64: Contacts
Contacts Investor Relations Rodney Alfvén Andreas Larsson Axel Malgerud Carolina Brikho Head of Investor Relations Head of Debt IR Debt IR Officer Roadshow Coordinator Nordea Bank AB Nordea Bank AB Nordea Bank AB Nordea Bank AB Mobile: +46 722 35 05 15 Mobile: +46 709 70 75 55 Mobile: +46 721 41 51
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