Nordea Bank Abp · OMXHEX:NDA_FI
Nordea Bank Abp — Debt Investor Presentation (February 2023)
41 slides from Nordea Bank Abp's debt investor presentation, February 2023
Slide 1: Debt investor presentation Q4 2022
Debt investor presentation Q4 2022
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 and full-year 2022 update 4 2. Credit quality 18 3. Capital and funding 25 4. Macroeconomy 36 3
Slide 4: 1. Nordea fourth-quarter and full-year 2022 update
1. Nordea fourth-quarter and full-year 2022 update 4
Slide 5: The largest financial services group in the Nordics
Nordea today The largest financial services group in the Nordics Business position - Universal bank with a 200-year history of supporting and growing Household* Small and medium- Large corporates Asset and wealth the Nordic economies sized companies and institutions management - Leading market posit
Slide 6: Executive summary
Fourth-quarter highlights 2022 Executive summary Strong corporate lending driving continued growth in business volumes - Corporate lending up 9% y/y and mortgage volumes up 3% y/y. Assets under management up 5% q/q Income and operating profit growth - Net interest income up 31%, net fee and commissi
Slide 7: Fourth-quarter results 2022
Key financials Fourth-quarter results 2022 Income statement and key ratios Q422 Q421 Q4/Q4 Q322 Q4/Q3 EURm Net interest income 1,641 1,255 31% 1,407 17% Net fee and commission income 812 920 -12% 816 0% Net fair value result 417 247 69% 264 58% Other income 28 16 14 Total operating income 2,898 2,43
Slide 8: Full-year results 2022
Key financials Full-year results 2022* Income statement and key ratios FY22 FY21 FY/FY EURm Net interest income 5,664 4,925 15% Net fee and commission income 3,336 3,495 -5% Net fair value result 1,258 1,119 12% Other income 75 81 Total operating income 10,333 9,620 7% Total operating expenses excl.
Slide 9: Continued volume growth and increased deposit margins
Net interest income Continued volume growth and increased deposit margins Year-over-year bridge, EURm • Net interest income up 31% +31% 3 1,641 69 • Lending volume growth driven 360 by corporate lending, but all 1,255 92 business areas contributed - Corporate lending up 9% Q421 Volumes Margins Other
Slide 10: Net interest income sensitivity to policy rate increases
Net interest income Net interest income sensitivity to policy rate increases Sensitivity to +50bp parallel rate shift in policy rates • NII impact is largely driven by 100 40 policy rates and pass-through ~350-400 ~300-350 - Expected higher policy rates in 130 2023 are estimated to increase NII 70 b
Slide 11: Higher payment and card income partly offsetting lower asset management income
Net fee and commission income Higher payment and card income partly offsetting lower asset management, brokerage and advisory income Year-over-year bridge, EURm -12% • Net fee and commission income 920 down 12% 84 • Savings fees down following 20 19 2 1 812 22 lower assets under management - Assets
Slide 12: High customer activity
Net fair value result High customer activity Net fair value result, EURm +69% • Continued high customer 417 hedging activity - Good demand for FX and rates 116 products 295 282 247 61 8 1 264 41 • Market making up, driven by FX 2 43 26 and rates trading • Treasury up, driven by tighter 273 260 sprea
Slide 13: Increased cost pressure and additional investments
Costs Increased cost pressure and additional investments Year-over-year bridge, EURm +12% 1,230 • Higher costs driven by additional 16 33 58 investments, non-comparable 50 1,101 38 items and higher regulatory fees - Increased investment in financial crime prevention capabilities and IT infrastructur
Slide 14: 2025 financial target
2025 financial target Return on equity Nordea >13% 2025: The preferred financial partner in the Nordics Assumes CET1 requirement of 15–16%, including management buffer Creating the best omnichannel customer experience Supported in 2025 by Cost-to-income ratio Driving focused and profitable growth 45
Slide 15: Sustainability at the core
Sustainability at the core Our long-term sustainability objectives supported by short-term targets 2050 long-term objective: Become a CO2 net-zero emissions bank by 2050 at the latest 2030 mid-term objective: 40-50% 50% reduction in emissions across investment and lending portfolios by 20301 reducti
Slide 16: Further strengthened climate targets
Sustainability at the core Further strengthened climate targets • Sector targets for emission reduction set – To support the objective to reduce Sector emission reduction targets by 2030 carbon emissions by 40-50% across Shipping Residential real estate Oil & gas lending and investment portfolios by
Slide 17: Actively engaging to drive transition and capture growth opportunities
Sustainability at the core Actively engaging to drive transition and capture growth opportunities • Financed emissions down Channelling capital towards sustainable solutions around 15% compared to 2019 Green and sustainability linked loans Assets under management Total volumes, EURbn Share of ESG Au
Slide 18: 2. Credit quality
2. Credit quality Nordea
Slide 19: Well diversified with strong credit quality
Credit portfolio Well diversified with strong credit quality Portfolio well diversified Analysis of higher energy costs, high Ten segments with 8% of total across countries and segments inflation and lower disposable exposures significantly affected income impact by segment 0.0% Ship building EUR 26
Slide 20: Strong credit quality amid weaker economic conditions
Net loan losses and similar net result Strong credit quality amid weaker economic conditions Net loan losses and similar net result Q4 2022, EURm • Total net loan result low at EUR 59 51 8 59m (7bp) 11 - New provisions mainly for SME customers, no specific industry 40 concentration - Increased colle
Slide 21: Strong and stable portfolio credit quality
Impairments and provisioning coverage Strong and stable portfolio credit quality Stage 2 and 3 loans at amortised cost, EURm • Stage 3 impaired loans further reduced, to 0.81% from 0.88% in Q3 • Stage 2 loans down 6% q/q 12733 13473 13095 13612 12786 • Coverage ratio for remaining stage 3 Stage 2 po
Slide 22: Macroeconomic assumptions for scenarios
IFRS 9 model update Macroeconomic assumptions for scenarios • Base scenario, 50% weight - High interest rates and record levels of energy prices Baseline annual GDP growth, % trigger a recession in all Nordic countries except Norway in 2023, which is supported by high energy prices. Weak growth will
Slide 23: Real estate management industry: well diversified with high quality
Real estate management industry (REMI) Well diversified with high quality Distribution of REMI property types, Distribution of REMI by probability of • Diversified portfolio EUR 31bn* default (PD), EURbn* • Nearly two-thirds of portfolio Hotels 29 consists of resilient office and Industrial 3% Q4 20
Slide 24: Loan losses settling below historical average
Cost of risk Loan losses settling below historical average Significant de-risking (EURbn) Mix change Focus on Nordic markets International and • Significant portfolio de-risking shipping, oil and - Increased share of household lending 327 313 327 313 offshore exposure 78 - Focus on our four Nordic h
Slide 25: 3. Capital and funding
3. Capital and funding Nordea
Slide 26: Significant buffer to capital requirements
Capital Significant buffer to capital requirements • CET1 capital ratio 16.4% - 5.3 percentage points above regulatory Capital position and requirements (%) requirement, corresponding to a CET1 buffer of EUR 7.7bn 5.4% - Capital policy of 150-200bp 20.8% management buffer above regulatory 5.3% requi
Slide 27: Solid funding operations
Long Term Funding Solid funding operations Long term issuance 2022, EUR 32.8bn EURm Covered Senior preferred** SNP • Issuance Q4 8,000 - EUR 4.7bn in long term debt issued during Q4 6,000 - EUR 3.8bn covered bonds and EUR 0.9bn in senior 4,000 format 2,000 - Long term funding 73% of total funding at
Slide 28: Nordea global issuance
Long-term funding Nordea global issuance 4% 1%1 2 3% 2% 1%5% 1% 7% 8% 92% 78% 96% SEK NOK DKK (EUR 14bn eq.) (EUR 31bn eq.) (EUR 50bn eq.) 3% 15% 7% 26% 14% 9% 22% 20% 28% 23% 20% 8% 67% 55% 80% 4% 34% 18% JPY GBP CHF 44% 6% (EUR 1bn eq.) (EUR 2bn eq.) (EUR 1bn eq.) USD (EUR 18bn eq.) EUR (EUR 29bn)
Slide 29: Enhanced focus on sustainable funding
Sustainability at the core Enhanced focus on sustainable funding Nordea’s green bond asset portfolio • Assets available for green funding totaling EUR 13bn Green buildings 5% 1% - EUR 5.4bn in NBAbp’s green bond asset portfolio 6% Nordea Mortgage subsidiaries - EUR 7.6bn available assets for green c
Slide 30: Nordea sustainability-linked loan funding framework
Sustainability at the core Nordea sustainability-linked loan funding framework • Nordea SLL funding framework launched in 2022 - The SLL funding framework allows issuance of bonds with Nordea Bank – SLL asset portfolio (EURm)* reference to the impact of the SLLs on Nordea’s balance sheet in a use-of
Slide 31: Nordea covered bond operations
Covered bonds 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 mortgage
Slide 32: Nordea recent benchmark transactions
Funding transactions Nordea recent benchmark transactions Issue Maturity Issuer Type Currency Amount (m) FRN / Fixed Callable date date Nordea Mortgage Bank Covered, Green EUR 1,000 Fixed Nov-22 Dec-25 Nordea Hypotek Covered, Green SEK 6,000 Fixed Nov-22 Nov-27 Nordea Eiendomskreditt Covered NOK 1,0
Slide 33: MREL and senior non-preferred requirement
Minimum requirements for own funds and eligible liabilities MREL and senior non-preferred requirement Solid buffers above current Subordinated MREL requirements for both subordinated and total MREL +3.9% 26.9% Final requirements set by Single 26.6% 5.8% 22.6% 21.7% 24.6% Resolution Board (SRB) 5.6%
Slide 34: Senior non-preferred target
Own funds and bail-in-able debt position Senior non-preferred target Target by YE 2023: eligible SNP of ~EUR 13bn Point of non viability Resolution – Subordinated MREL 26.6% of REA as of Q4 22 (3.9 pp above the requirement) – Issuance plan to meet future subordination requirement EUR 11.1bn in SNP i
Slide 35: Strong liquidity position
Liquidity Strong liquidity position Short term funding outstanding (EURbn), Q4 2022* • Robust liquidity position 16 14 - Liquidity coverage ratio (LCR) 162% 12 - Net stable funding ratio (NSFR) 116% 10 8 14.4 - Liquidity buffer EUR 114bn 6 13 4 7 2 6.4 0.9 • Short term issuance 0 ECP London CD Frenc
Slide 36: 4. Macroeconomy
4. Macroeconomy Nordea
Slide 37: Nordic outlook pressured by higher inflation, interest rates and energy prices
Nordic economic development Nordic outlook pressured by higher inflation, interest rates and energy prices GDP development Unemployment rate • The Nordic economies recovered quickly from the GDP, % y/y, Economic Outlook January 2023 pandemic and showed signs of overheating last year Country 2021 202
Slide 38: Interest rates set to peak in 2023
Nordic economies Interest rates set to peak in 2023 Policy rates Public balance/debt, % of GDP, 2023E (IMF) • Central banks have rapidly hiked interest rates to combat the high inflation • Norges Bank has hiked from 0 to 2.75% since September 2021, and are expected to continue until they reach 3.75%
Slide 39: Households pressured by high interest rates and inflation
Households Households pressured by high interest rates and inflation Household debt Household savings Private consumption • Household savings have returned to more normal levels since the pandemic as consumption has increased • However, households are now feeling the squeeze and purchasing power is
Slide 40: Higher interest rates is cooling off hot Nordic housing markets
Housing markets Higher interest rates is cooling off hot Nordic housing markets Housing prices Households’ credit growth • Housing prices increased to record-high levels in all the Nordic countries during the pandemic • However, with higher and increasing interest rates, risks are on the downside fo
Slide 41: Contacts
Contacts Investor Relations Matti Ahokas Maria Caneman Juho-Pekka Jääskeläinen Head of Investor Relations Head of Debt IR and Ratings Senior IR Officer Mobile: +358 40 575 91 78 Tel: +46 10 156 50 19 Tel: +358 9 5300 64 35 Mobile: +46 768 24 92 18 Mobile: +358 40 550 91 11 matti.ahokas@nordea.com ma
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