Nordea Bank Abp · OMXHEX:NDA_FI
Nordea Bank Abp — Debt Investor Presentation (October 2019)
55 slides from Nordea Bank Abp's debt investor presentation, Oct 24, 2019
Slide 1: Debt investor presentation Q3 2019
Most Financial impressive Issuer of the year Financial Institution Debt investor presentation Q3 2019 Borrower
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 quarterly update 4 2. A new phase – Strategic direction and financial targets 15 3. Capital 27 4. Funding 30 5. Macro 42 Appendix: Business Areas – Strategic direction 46 3
Slide 4: 1. Nordea quarterly update
1. Nordea quarterly update | tp ele: tly Nordea
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 (97%) Lending: 45% Corporate and 55% Household Crops, animal husbandry Utilities and public 2% services Russia Other Oil, gas and offshore 3% Other sectors 1% 2% 1% Household (Denmark) 8% Retail trade 14% Denmark 1% 26% Wh
Slide 7: Q3 2019 results summary
Q3 2019 results summary • Improving Net interest income and Net commission income compared to previous quarter, coming from higher business volumes • Increasing market share on mortgages in all countries • EUR 3.7bn inflow in Assets under Management (5% annualised) • Net fair value under pressure du
Slide 8: Nordea enters a new phase
Nordea enters a new phase • New plan to significantly improve operating performance • New financial targets • Return on Equity above 10% in 2022 • Cost to Income ratio of 50% in 2022 • Expect to reach a cost base of below EUR 4.7bn in 2020 • Management buffer of 150-200 bps above capital requirement
Slide 9: Group financial highlights third quarter 2019
Group financial highlights third quarter 2019 Income statement, EURm Q3 2019 Q3 2019 Q2 2019 Q3/Q2 change Q3 2018 Q3/Q3 change excluding local curr. local curr. IAC* excl. IAC excl. IAC Net interest income 1,083 1,083 1,071 2% 1,123 -1% Net fee and commission income 756 756 743 2% 703 9% Net fair va
Slide 10: Mortgage lending - growth rates picking up
Mortgage lending - growth rates picking up Mortgage lending Denmark – QoQ growth rate Mortgage lending Finland – QoQ growth rate 0.7% 0.8% 0.5% 0.4% 0.3% 0.3% Q418 Q119 Q219 Q319 -0.3% -0.3% Q418 Q119 Q219 Q319 Mortgage lending Norway* – QoQ growth rate Mortgage lending Sweden – QoQ growth rate 1.6%
Slide 11: Assets under Management – net inflow continues
Assets under Management – net inflow continues Flow, EURbn Comments 3.8 3.7 • Net inflow of EUR 3.7bn, corresponding to 5% of AuM annualised 1.0 • AuM is underlying at all-time-high level • Strong investment performance, 88% of composites -0.6 outperforming benchmarks YTD -2.8 Q318 Q418 Q119 Q219 Q3
Slide 12: Solid underlying asset quality
Solid underlying asset quality Total net loan losses*, EURm Comments • Underlying net loan losses EUR 49m • Additional provisions; • EUR 229m following ECB dialogue 331 • Collective model upgrade EUR 53m 79 71 282 61 59 44 40 42 Outlook 30 • Our expectation for the coming quarters is that net loan l
Slide 13: AML topics
AML topics AML topics for Nordea • The Danish FSA started looking into our processes in 2015 and handed it over to the Danish Public Prosecutor in 2016. Investigation not yet concluded – The ‘troika laundromat’ is a complex of allegations which has been covered by Nordea in the Baltics media on seve
Slide 14: Significant investments to combat financial crime
Significant investments to combat financial crime Actions against money laundering Significant build-up • We collaborate closely with all relevant authorities including law Employees EURm enforcement and regulators and encourage to even closer collaboration on 1,600 300 multiple levels as financial
Slide 15: 2. A new phase – Strategic direction and financial targets
2. A new phase – Strategic direction and financial targets 15
Slide 16: Nordea enters a New Phase
Nordea enters a New Phase Optimise Drive Create Great Operational Income Growth Customer Efficiency Initiatives Experiences Execution & Accountability A Strong and Personal Financial Partner 16
Slide 17: All levers to be used to optimise operational efficiency
All levers to be used to optimise operational efficiency Strong cost culture Leadership and accountability Costs rather than cost programmes C/I ratio Simplified processes 50% Fewer people and organisation 17
Slide 18: Drive income growth initiatives – time to take back lost ground
Drive income growth initiatives – time to take back lost ground Leverage on business and Increase cross-selling by being sales momentum proactive with customers Income C/I ratio Readiness for tactical Investing in our core segments 50% M&A bolt-ons 18
Slide 19: Long-term success by creating great customer experiences
Long-term success by creating Nordea is personal great customer experiences and local with a Nordic mindset A bank A Safe for every need and Trusted – Financial Anywhere & Partner Anytime Strong advisory The leading capabilities Nordic bank with for corporates a sustainable and private offering cust
Slide 20: The New Phase is about execution
The New Phase is about execution Full Clear Simplified accountability targets and governance to the business priorities areas structure 20
Slide 21: Gross cost reductions exceed investments and inflation
Gross cost reductions exceed investments and inflation Cost changes by end 2022 (EURm) 2-3% CAGR ~-5% CAGR For 2020, we expect ~4,900 to reach a cost base 700-800 below EUR 4.7bn C/I 50% We plan to continue delivering annual net cost reductions beyond 2020 Cost 2019 Inflation IT & Investments Gross
Slide 22: Delivery of EUR 700-800m gross cost reduction
Delivery of EUR 700-800m gross cost reduction Fewer people until 2022 EUR 700-800m ▪ Majority of the planned reductions in head office and central functions People ▪ Reduction in number of external consultants ▪ Nearshoring Staff Reduced IT spend ▪ Outsourcing ▪ Continued decommissioning, automation
Slide 23: Intensified business activity and customer focus start to show results
Intensified business activity and customer focus start to show results Household lending (EURbn) Market share Swedish mortgages 20 % Share of market growth +3-4%* Back book 14 % +3% 160 14 % 151 146 147 -5 % 2016 2017 2018 Q319 Jun Sep Dec Mar Jun Sep Dec Mar Jun Aug 17 17 17 18 18 18 18 19 19 19 Co
Slide 24: The path to exceed 10% return on equity in 2022
The path to exceed 10% return on equity in 2022 Expected return on equity development 2019 to 2022 Drivers of profitability Positive momentum on >10% lending volumes Income impact Net flow in AuM Net cost reduction ~8% WB repositioning helping on both profit and capital Stable credit quality Sep 19
Slide 25: New capital policy and uses of capital
New capital policy and uses of capital Capital policy from 2020 150-200 bps management buffer above the regulatory CET1 requirement Uses of capital Organic growth ~15% 150-200 bps 1.3% 60-70% dividend pay-out ratio For 2019 Nordea targets a dividend of EUR 0.40 per share 3.0% Management buffer Maxim
Slide 26: Business area targets 2022
Business area targets 2022 Wholesale Banking Commercial & Business Banking All-time-high customer satisfaction Stable business and good momentum – With potential to improve Reduce capital consumption We know what works – thanks to our customers – Free up time to increase customer intensity New strat
Slide 27: 3. Capital
3. Capital 27
Slide 28: Common Equity Tier 1 ratio development
Common Equity Tier 1 ratio development Q319 vs Q219 Comments • CET1 capital ratio increased by 60 bps • Management buffer 110 bps 110 bps 0.6 0.2 0.1 0.1 150-200 bps 15.4 14.8 14.3 ~13.0 Capital and dividend policy from 2020 • Management buffer 150-200 bps above regulatory CET1 requirement Q219 FX &
Slide 29: Capital position and requirement
Capital position and requirement Capital position and requirement Comments 110 bps • CET1 ratio of 15.4% and total capital ratio of 20.0% in Q319 150-200 bps • Regulatory CET1 requirement including transitional Pillar 2 estimated at ~13.0% 14.3% in Q319 3.0% 1.3% 11.3% • From Q319 the systemic risk
Slide 30: 4. Funding
4. Funding 30
Slide 31: Diversified balance sheet
Diversified balance sheet Total assets EUR 586bn Cash and balances with Deposits by credit central banks institutions Loans to credit institutions Deposits and borrowings from the public Loans to the public CDs and CPs* Short-term funding Credit S&P Moody’s Fitch ratings Short-term A-1+ P-1 F1+ Cove
Slide 32: Solid funding operations
Solid funding operations Long-term issuance YTD Q319, gross volumes, EUR 18.8bn* incl. AT1 High-level issuance plan for 2019 EURm AT1 T2 Senior non-preferred Senior unsecured** Covered • Full year 2019 long-term funding issuance expected around EUR 20bn 4 500 (excl. capital instruments and Nordea Kr
Slide 33: Short-term funding – prudent and active management
Short-term funding – prudent and active management Comments Short-term issuance • Short-dated issuance remains an attractive funding component EURbn 70 • A well-diversified investor base from Asia to USA 60 • Each program has its niche contribution 50 40 • Total outstanding short-term funding EUR 35
Slide 34: Long-term funding – Nordea’s global issuance platform
Long-term funding – Nordea’s global issuance platform 2% 17% 1% 1% 11% 2% 80% NOK (EUR 14bn eq.) 86% 100% SEK DKK (EUR 35bn eq.) (EUR 55bn eq.) 3% 3% 5% 31% 29% 12% 30% 40% 38% 66% 48% 88% JPY 71% (EUR 2bn eq.) 25% CHF GBP (EUR 1bn eq.) 11% USD (EUR 2bn eq.) (EUR 18bn eq.) EUR (EUR 38bn) Covered bon
Slide 35: 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/SDRO Finnish Cover pool assets Norwegian residential mortgages Swedish residential mortgages prima
Slide 36: Nordea recent benchmark transactions
Most Nordea recent benchmark transactions Financial Issuer of impressive Financial the year Institution Borrower Issue Maturity Issuer Type Currency Amount (m) FRN / Fixed Callable date date Nordea Bank Senior non-preferred EUR 1,000 Fixed Jun-18 Jun-23 2,250 Fixed Nordea Bank Senior non-preferred S
Slide 37: MREL requirements
MREL requirements Single Resolution Board (SRB) methodology Nordea MREL requirement • Transitional MREL requirement of 7.1% of TLOF to be updated in Q1 2020 Market confidence CBR -125 bps • MREL requirement based on SRB methodology expected to be charge decided during Q1 2021 P2 • Eligible instrumen
Slide 38: Senior non-preferred issuance plan
Senior non-preferred issuance plan Own funds and bail-in-able debt, EURbn Comments • Planned total SNP issuance of EUR ~10bn to be issued before end of Point of Non Viability Resolution 2022* • SNP issuance plan to be reviewed in Q1 2020 in connection with the publication of SRB MREL policy on Banki
Slide 39: Maturity profile
Maturity profile Maturity profile Comments EUR bn • The balance sheet maturity profile has during the last couple of years 300 become more balanced by 200 • Lengthening of issuance and focusing on asset maturities 100 • Resulting in a well balanced structure in assets and liabilities in general, 0 a
Slide 40: Liquidity Coverage Ratio
Liquidity Coverage Ratio Liquidity Coverage Ratio Comments 350% • EBA Delegated Act LCR in force starting from October 2016 300% • LCR of 188% 250% 200% • LCR compliant in USD and EUR 150% • Compliance is reached by high quality liquidity buffer and management 100% of short-term cash flows 50% 0% •
Slide 41: Nordea’s sustainability work further enhanced from 2015 – deepened green focus
Nordea’s sustainability work further enhanced from 2015 – deepened green focus Enhanced ESG focus from 2015 Deepened green bond focus • Business Ethics & Values Committee established (2015) • Green Bond Framework and Inaugural Green Bond issuance (2017) • New Corporate Values Framework (2017) • Seco
Slide 42: 5. Macro
5. Macro 42
Slide 43: Diverging Nordic economies
Diverging Nordic economies GDP development Unemployment rate Comments GDP forecast, % • Increased global uncertainty is playing out to different degrees in the Country 2017 2018 2019E 2020E 2021E Nordic economies. Sweden and Finland have already taken a hit from the slowdown. Conditions in Denmark a
Slide 44: 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, 2020E Comments • Household debt continues to rise somewhat faster than income in Norway, Finland and Sweden. Denmark continues to move in the opposite trend, though from
Slide 45: House price development in the Nordics
House price development in the Nordics House prices Household’s credit growth Comments • Swedish and Norwegian house prices are picking up after a period of stabilization. Prices continue to rise in Denmark, but are still at a low level. The Finnish housing market remains stable and is expected to r
Slide 46: Appendix: Business Areas – Strategic direction
Appendix: Business Areas – Strategic direction 46
Slide 47: New strategic direction for Wholesale Banking
Strategic direction for Wholesale Banking New strategic direction for Wholesale Banking Reduce low-return assets Capital optimisation Capital optimisation EUR 1.5bn ~1.5bn ECEC / 8bnREA / ~8bn REA reduction reduction Streamline Markets business model Simplification Complexity reduction TotalTotal co
Slide 48: Zooming in on the new strategic direction
Strategic direction for Wholesale Banking Zooming in on the new strategic direction ▪ Reduce low-returning on-balance sheet commitments Reduce low-return assets ▪ Review of sub-segments ▪ Increase active capital reallocation ▪ Targeting 25% EC reduction Streamline Markets business model ▪ Product re
Slide 49: Leverage our franchise to strengthen market position
Strategic direction for Commercial & Business Banking Leverage our franchise to strengthen market position BUSINESS BANKING Continue to do business selection, pricing, cross-selling Protect and develop our and customer acquisitions business model for complex customer needs Improve Continue to levera
Slide 50: Key drivers to make it easier to do it right in a resource-effective way
Strategic direction for Commercial & Business Banking Key drivers to make it easier to do it right in a resource-effective way Simplifying instructions Increase operational efficiency Increase Solve the basics with scalable time with solutions customers Automation of credit processes Improve with mo
Slide 51: Examples of actions within key areas to generate profitable growth in 2020
Strategic direction for Personal Banking Examples of actions within key areas to generate profitable growth in 2020 ▪ Digital mortgage application process and mobile self-service Maintain strong ▪ Strong local presence combined with high nationwide availability business momentum Home ▪ High proactiv
Slide 52: Key drivers to improve cost efficiency, while protecting business momentum
Strategic direction for Personal Banking Key drivers to improve cost efficiency, while protecting business momentum Leverage common digital platforms Increase service Redesigning the branch network model efficiency Operational efficiency as Automating and simplifying processes a discipline Increase
Slide 53: Strategic focus to diversify product range and client base to cater for growth
Strategic direction for Asset Management Strategic focus to diversify product range and client base to cater for growth ▪ Continuity, trading platform upgrade, alpha reviews Continue strong investment performance and product lifecycling ▪ Expand in Americas through partnerships, pension funds Increa
Slide 54: Strategic focus to grow and build an efficient franchise
Strategic direction for Wealth Management Strategic focus to grow and build an efficient franchise Increase Private Banking market share ▪ Growth in Norway and Sweden Grow within occupational pensions ▪ Expand value proposition for corporate segment Grow digital savings and strengthen sales ▪ Saving
Slide 55: Contacts
Contacts Investor Relations Rodney Alfvén Andreas Larsson Maria Caneman Carolina Brikho Head of Investor Relations Head of Debt IR Senior Debt IR Officer Roadshow Coordinator Nordea Bank Abp Nordea Bank Abp Nordea Bank Abp Nordea Bank Abp Mobile: +46 722 35 05 15 Mobile: +46 709 70 75 55 Mobile: +46
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