Nordea Bank Abp · OMXHEX:NDA_FI
Nordea Bank Abp — Q3 2014 Earnings Presentation
31 slides from Nordea Bank Abp's earnings presentation, Sep 30, 2014
Slide 1: Second Quarter Results 2014
Second Quarter Results 2014 Investor presentation
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: Nordea is building the future relationship bank
Nordea is building the future relationship bank Income holding up despite continued macro headwind, low interest rates and low volatility Capital gain of EUR 378m related to sale of Nets Cost programme delivering according to plan 5% decrease in 2015 vs. 2013 in local currencies on-track L
Slide 4: Q3 2014 financial results highlights
Q3 2014 financial results highlights 14
Slide 5: Financial results
Financial results Q3/14 Q2/14 Chg % Q3/14 Q3/13 Chg % EURm YTD YTD Net interest income 1,396 1,368 2 4,126 4,135 0 3 Net fee & commission income 667 708 -6 2,079 1,939 7 10 Net fair value result 291 356 -18 1,058 1,206 -12 -11 Total income* 2,754 2,456 12 7,711 7,422 4 7 Total income** 2,376 2,456 -
Slide 6: Net interest income
Net interest income NET INTEREST INCOME DEVELOPMENT, EURm COMMENTS 1,386 1,390 1,362 1,368 1,396 • Lending volumes up 1% in local currencies • Unchanged deposit volumes • Unchanged blended margin • One additional interest day • Lower funding costs Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 6•
Slide 7: Net interest margin and volumes
Net interest margin and volumes BLENDED NET INTEREST MARGIN DEVELOPMENT COMMENTS 1.09% 1.09% 1.08% 1.07% 1.08% • Blended net interest margin unchanged • Lending margins up • Deposits margins down Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 • Lending volumes in local currencies up 1% LENDING AND DEPOSIT VOLUMES*,
Slide 8: Net fee and commission income
Net fee and commission income NET FEE AND COMMISSION DEVELOPMENT, EURm COMMENTS 652 703 704 708 667 • Continued strong trend in savings 172 180 194 162 171 Lending commissions • Lower seasonal activities in corporate advisory business 145 148 147 160 Payments & cards 150 • Write-down of deferred acq
Slide 9: Continued strong momentum in savings
Continued strong momentum in savings AUM DEVELOPMENT, EURbn COMMENTS 254.5 • Assets under Management above 13.7 EUR 250bn for the first time • Doubled the base since 2008 14.0 • All businesses contributed with 226.8 positive net inflow • Strong interest among Nordic and International customers • Net
Slide 10: Net fair value
Net fair value NET FAIR VALUE DEVELOPMENT, EURm COMMENTS 411 • Low volatility 346 333 356 • Challenging market conditions 170 291 92 123 81 • Underlying FICC franchise sound 63 252 241 264 223 228 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Customer areas Other areas 10 •
Slide 11: Expenses under solid control
Expenses under solid control TOTAL EXPENSES*, EURm COMMENTS 1,283 1,234 1,237 1,196 1,172 • Costs are down 2% in local currencies y-o-y • Down 5% in EUR • Cost programme delivering according to plan • 5% decrease in 2015 vs. 2013 in local currencies on-track Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 * Excluding
Slide 12: Improved credit quality
Improved credit quality TOTAL NET LOAN LOSSES, EURm COMMENTS 236 241 198 • Losses continued down to 12 bps 186 180 171 158 135 • Below 10 year average 112 • Continued improvement in Denmark • Improved trend in CIB Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 • No new trends in other areas I
Slide 13: Underlying fundamentals are stable in Finland
Underlying fundamentals are stable in Finland UNEMPLOYMENT SHOWS A DECLINE STABLE HOUSEPRICE DEVELOPMENT, indexed 600 500 502 400 321 300 293 277 200 100 0 1993 1997 2001 2005 2009 2013 EXPORTS EXCL. RUSSIA ARE ROUGHLY UNCHANGED BANKRUPTCIES SHOW A DECLINE 13 • Source: Nordea Markets and Macrobond
Slide 14: Finnish credit portfolio remains stable
Finnish credit portfolio remains stable PD DEVELOPMENT, BANKING FINLAND COMMENTS • 20% of Nordea's total loan portfolio • Average Corporate PD has gone down as new lending is increasingly to better rating classes Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 • Household average PD has 11 11 11 11 12
Slide 15: Update on Russia
Update on Russia • Solid profitability and strong credit quality • Task force in place since March 2014 • We monitor the development closely • As of mid July, sanctions were extended from individuals and entities to specific sectors – adding complexity • Nordea follows OFAC (US), EU sanctions and Se
Slide 16: Risk exposure amount
Risk exposure amount RISK EXPOSURE AMOUNT, EURbn* COMMENTS 179 • REA unchanged on previous quarter 168 168 162 160 159 • Efficiencies of EUR 1.8bn in the 155 152 153 quarter • Improving credit quality • Growth mainly related to derivatives Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 • FX e
Slide 17: CET 1 ratio up 40 bps
CET 1 ratio up 40 bps COMMON EQUITY TIER 1 RATIO DEVELOPMENT, % 0.41% 15.6% 15.2% -0.13% -0.14% 0.18% -0.09% 0.12% Common Equity FX Growth Other Credit quality Efficiencies Profit net Common Equity Tier 1 ratio Q2/14 dividend* Tier 1 ratio Q3/14 *Net profit basis for dividend distribution, assuming
Slide 18: Return coming from improved efficiency
Return coming from improved efficiency RETURN DEVELOPMENT YTD, GROUP AND BUSINESS AREAS GROUP RETAIL BANKING WHOLESALE BANKING WEALTH MANAGEMENT RaRoCaR RaRoCaR RaRoCaR RaRoCaR 14.4% 29.3% 13.8% 14.3% 14.0% 13.8% 24.4% 13.2% YTD/13 YTD/14 YTD/13 YTD/14 YTD/13 YTD/14 YTD/13 YTD/14 IMPACT ON… IMPACT O
Slide 19: 2015 plan update
2015 plan update 14
Slide 20: The 2015 plan – an update
The 2015 plan – an update Nordea market commitments Key initiatives and levers Strong capital generation and Capital initiative to improve the CET1 ratio increased payout ratio in 2014 and 2015 while maintaining a strong capital base Initiatives for income generation To reach a ROE of 13% at the req
Slide 21: Strong capability to generate capital
Strong capability to generate capital COMMON EQUITY TIER 1 CAPITAL*, EURm COMMENTS Dividend payout (accrued dividend for 2014 YTD) • CET 1 capital 23 112 23 759 20 677 21 961 Doubled the capital base in 7 years 19 103 17 766 12 821 14 313 • CET 1 ratio improved from 6.8% to 11 689 15.6% 2006 2007 20
Slide 22: Nordea confirmed as one of the safest banks globally
Nordea confirmed as one of the safest banks globally First Swedish domiciled bank to issue AT1 instrument Record low coupons Second ever investment grade AT1 issuance 22 •
Slide 23: Cost initiatives - approx. 350m of total gross savings realised
Cost initiatives - approx. 350m of total gross savings realised* Savings of approximately EUR 50m in Q3/14 Actions • Reduced cash-handling and Branch locations Streamline distribution • Optimise processes & reduce overlap in CIB and SOO • Automating transaction and reporting processes Reengineer pro
Slide 24: RoE – strong underlying business performance
RoE – strong underlying business performance +1.5% 12.7% -1.2% Lending Capital margins increase Ancillary Interest income rates Lower costs FX Volumes Other 11.5% Lower 11.2% loan losses 2013 YTD Business External 2014 YTD performance factors Excluding restructuring charge in Q2/14 and IT impairment
Slide 25: Progress in summary
Progress in summary PROGRESS ON NORDEA FINANCIAL PLAN 2015 IN Q3/14 CET1 capital ratio • CET 1 capital ratio up 40 bps to 15.6% P • Risk Exposure Amount Total efficiencies of EUR 26bn of which 2bn in the quarter P Income growth • Income holding up (P) Costs • Cost programme delivering according to p
Slide 26: Building the future relationship bank
Building the 14 future relationship bank
Slide 27: Three transforming drivers for the banking industry
Three transforming drivers for the banking industry Balance sheet Operational Digitalisation regulations regulations Mostly in place More to come Behaviour changing P SIMPLIFICATION 27 •
Slide 28: Increasing operational regulations require efficient processes
Increasing operational regulations require efficient processes COMMENTS MAD KYC AML • Granular data on customers and transactions FATCA MiFIR • Higher requirements on storing, monitoring and reporting MAR • High complexity and costs FTT MiFID II PRIPs Counter Terrorist Financing 28 •
Slide 29: Mobile trend on daily transactions accelerates further
Mobile trend on daily transactions accelerates further TRANSACTIONS, BRANCHES VS MOBILE, MILLIONS/QUARTER COMMENTS • 1,000 new customers started Mobile 16 using our mobile bank every day in Q3 2014 • Transactions in Mobile Bank 8 increased 90% YoY • Steady decrease of manual 4 transactions, down 20%
Slide 30: Overview of financial impacts
Overview of financial impacts • The annual IT development spend is expected to be on average approx. 30-35% higher the next 4-5 years, compared with 2014 • An increased share of the Group’s total IT development portfolio to be allocated to the Simplification Programme over the course of the next 3-5
Slide 31: Second Quarter Results 2014
Second Quarter Results 2014 Investor presentation