Slide 1: Third quarter 2013 results
Third quarter 2013 results Delivery on income, costs and capital International telephone conference 23 October 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 Delivering on income, costs and capital Income in local currencies is up 3% vs. Q3 2012 (up 1% in reported numbers) Costs are down somewhat (down 3%) Loan losses are down 26% (down 28%) Operating profit is up 15% (up 12%) Improved Core Tier 1 ratio by 2.2 %-points to 14.4%
Slide 4: Q3 2013 financial results highlights
• Q3 2013 financial results highlights • Delivering on our targets
Slide 5: Financial results Q3/13
Financial results Q3/13 Excl. Fx Excl. Fx EURm Q3/13 Q2/13 Change % Q3/12 Change % 2013 YTD 2012 YTD Change %* Change %* Net interest income 1 386 1 391 0 1 393 (1) 3 4 135 4 181 0 Net fee and commission income 652 664 (2) 595 10 12 1 939 1 786 9 Net fair value result 346 416 (17) 377 (8) (9) 1 206
Slide 6: Net interest income
Net interest income Net interest income development, EURm Comments Strict volume discipline 1 393 Blended margin up 2 bps vs. Q2/13 1 382 1 391 1 386 1 358 Increased NII in business areas Lower net interest income in Group Treasury due to effect of buy backs in Q2 Negative impact from FX,
Slide 7: Net Interest Margin
Net Interest Margin Blended net interest margin development, % Comments 1,5% Blended net interest margin up 2 bps in Q3/13 1,2% 109 bps Slightly lower deposit margins 0,9% Improved lending margins in most areas 0,6% Lower levels in Retail Banking Sweden 0,3% Low lending demand but volumes
Slide 8: Net fee and commission income
Net fee and commission income Net fee and commission income development, EURm Comments Continued good trend in savings operations 682 664 652 Increase by 18% y-o-y 623 595 Assets under Management at record high Seasonally lower transaction fees Brokerage, securities issues and custody Cr
Slide 9: Assets under Management
Assets under Management Assets under Management development*, EURbn Comments 223.8 227.8 All time high level of EUR 228bn 210.9 218.3 219.7 High net inflow of EUR 2.4bn Good momentum in the financial markets Return generates EUR 5.7bn vs. Q2/13 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Net inflow*, EURb
Slide 10: Net Fair Value
Net Fair Value Net fair value development, EURm Comments Low volatility generated low activity levels Very slow activity in July and August – more normal levels 442 444 in September 416 377 132 155 346 128 108 113 310 289 288 269 233 Q3/12 Q4/12 Q1/13 Q2/13 Q3/12 Customer areas Other areas 10 •
Slide 11: Flat costs for twelve consecutive quarters
Flat costs for twelve 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 1 144 1 140 1 157 1 128 1 120 1 132 Flat costs for twelve quarters Flat costs for an additional five quarters Cost initiative
Slide 12: Improved credit quality
Improved credit quality Total net loan losses*, EURm Comments 263 Credit quality improving to 20 bps (22 bps) 236 241 215 203 198 186 Losses stable in Denmark and down in Shipping 171 Credit quality remains solid in Finland, Norway, Sweden 112 and the Baltics Solid credit quality in CIB but
Slide 13: Stable situation in Denmark
Stable situation in Denmark House price index and Consumer confidence* Loan losses net, EURm, Retail Banking Denmark 110 Single-family houses 200 100 Flats 90 150 80 100 70 2006 2007 2008 2009 2010 2011 2012 2013 50 10 Consumer 0 5 confidence 0 -50 2008 2009 2010 2011 2012 2013 -5 -100 -10 Q3/11 Q4/
Slide 14: Improved market conditions in Shipping
Improved market conditions in Shipping Ship values* Loan losses net, EURm, Shipping 80 70 60 50 40 30 20 10 0 -10 -20 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Collectively assessed Individually assessed *Source: Clarkson Comments Comments Ship values seem to be bottoming out Provisi
Slide 15: Strong access to funding
Strong access to funding Long term funding, EURbn Comments 33 32 73% long-term funded 29 Issuance of EUR 19bn which is more than the redemptions for 2013 19 Conservative liquidity management - LCR compliant - Liquidity buffer EUR 66bn One of the lowest funding costs of any bank in Europe 201
Slide 16: Risk weighted assets
Risk weighted assets Risk-weighted assets , EURbn* Comments RWA decreased EUR 2.0bn 183 185 182 RWA efficiency initiatives 181 179 FX effect of EUR 0.6bn 168 168 Decreased derivative exposures 162 160 Strict volume discipline Largely unchanged credit quality Q3/11 Q4/11 Q1/12 Q2/12 Q3/12
Slide 17: Core Tier 1 ratio + 220bps due to profit generation and strict volume discipline
Core Tier 1 ratio + 220bps due to profit generation and strict volume discipline Core Tier 1 ratio development, % 0.91% 0.70% 0.45% 0.02% 14.4% 0.20% 12.2% Core Tier 1 ratio Credit Quality Growth FX effects & RWA efficiency Profit net Core Tier 1 ratio Q3 2012 Other dividend Q3 2013 17 •
Slide 18: Business areas deliver on our targets
Business areas deliver on our targets Key results, EURm Q3/13 Q2/13 Chg % Chg %* Q3/12 Chg % Chg %* Retail Banking Total income 1 318 1 329 (1) 0 1 331 (1) 2 Total expenses (724) (747) (3) (2) (755) (4) (2) Positive trend on lending margins Net loan losses (107) (95) 13 13 (184) (42) (41) Strong
Slide 19: Delivering on our targets
• Q3 2013 financial results highlights • Delivering on our targets
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: CT1 requirements/Capital policy building blocks
CT1 requirements/Capital policy building blocks Basel III Capital Ratio Targets Capital Ratio The regulatory implementation of the Countercyclical buffer has increased somewhat Targets — However, too early to draw any conclusions on level and timing The details on Pillar 2 and SRB should still b
Slide 22: CT1 ratio 13.4% with CRD IV and new Norwegian risk weights
CT1 ratio 13.4% with CRD IV and new Norwegian risk weights 0,10% 15 – 16% 0,90% 14,40% 13,40% Q3 2013 New Norwegian risk CRDIV Q3 2013 Basel III Fully Pro forma end 2015 * weights loaded * Does not include future earnings and growth 22
Slide 23: Strong capability to generate capital
Strong capability to generate capital Core Tier 1 capital , EURm Comments Doubled the capital base in 7 years 21 961 22 975 Increased core tier 1 ratio from 6.8% to 14.4% 20 677 19 103 17 766 14 313 12 821 11 689 2006 2007 2008 2009 2010 2011 2012 Q3/13 Dividend payout Anticipated dividend, EUR
Slide 24: Income holding up – challenging environment mitigated
Income holding up – challenging environment mitigated Total income (excl. FX), EURm Comments to key income related activities in Q3 Re-pricing Total lending margins +18 bps y/y (RB) CIB/SOO/NBR lending margins up approx. 25 bps y/y (WB) New customers Continued strong inflow of household cu
Slide 25: Cost reduction allows us to invest
Cost reduction allows us to invest 100.0% 0.5% 0.1% 99.7% 2.5% 0.3% 3.7% Cost base Q3/12 Gross cost Cost inflation Mandatory IT Other Cost base Q3/13 savings (Reg./Compl.) infrastr./Customer proposition Investments* * Assuming 50% capitalisation rate 25 •
Slide 26: Cost initiatives – approx. 140m of gross savings realised YTD
Cost initiatives – approx. 140m of gross savings realised YTD Many initiatives to deliver better than expected in the future Streamline • Optimisation of distribution mix – incl. reduction in number physical of branches and reduced cash-handling (RB) distribution • Right-sizing of Russian branch net
Slide 27: Regulations a key cost driver
Regulations a key cost driver Liikanen Coherence of Structural Reform legislation Recovery & Resolution Shadow Banking Banking Union for FMIs ELTIF Solvency II MiFID II / MiFIR MMFs Basel III Banking Benchmarks Living Investor Compensation CRD IV / CRR Recovery & Resolution Regulation Wills schemes
Slide 28: Loan losses development in Q3 – decreasing as expected
Loan losses development in Q3 – decreasing as expected Actual loan losses, bps Comments The credit quality is improving 30 Loan losses still concentrated to two 20 specific areas, Denmark and 10 Shipping – but credit quality stabilised 0 and improvements expected during (10) 2014 (16) (20) Los
Slide 29: RoE – strong underlying business performance not fully compensating
RoE – strong underlying business performance not fully compensating for challenging macro environment and regulation RoE, per cent Comments Strong re-pricing of lending margins Q3 2012 – Q3 2013 Increased ancillary business 0.4 Lower interest rates and higher 0.3 shareholders’ equity main offs
Slide 30: Progress in summary
Progress in summary Progress on Nordea financial plan 2013-2015, in Q3 2013 CT1 ratio Core Tier 1 ratio 14.4% P RWA RWA down EUR 2bn in quarter P Income growth Income holding up (P ) Costs Underlying costs flat for 12th consecutive quarter P Loan losses Decreasing in line with plan P RoE
Slide 31: Third quarter 2013 results
Third quarter 2013 results Delivery on income, costs and capital International telephone conference 23 October 2013 Christian Clausen, Group CEO