Nordea Bank Abp · OMXHEX:NDA_FI
Nordea Bank Abp — Investor Day (2011)
28 slides from Nordea Bank Abp's investor day presentation, Jan 1, 2011
Slide 1: Enhanced profitability focus
Enhanced profitability focus Fredrik Rystedt, Group CFO
Slide 2: Update on Q3 results; Financial targets
• Update on Q3 results • Financial targets
Slide 3: Key messages
Key messages • Robust customer business… • Customer driven revenues up q-o-q • Stable increase in lending volumes – healthy margin development • Underlying costs are down 3% q-o-q • …but financial turmoil affects Q3 result • Increased volatility and increased spreads in the interest markets • Lower
Slide 4: Financial result – Q3 2011
Financial result – Q3 2011 Jan - Sep Jan - Sep EURm Q3/11 Q2/11 Chg. Chg. 11 10 Net interest income 1 379 1 326 4% 4 029 3 794 6% Net fee and commission income 582 623 -7% 1 807 1 538 17% Net fair value result 111 356 -69% 1 011 1 333 -24% Other income 19 37 -49% 96 162 -41% Total income 2 091 2 342
Slide 5: Total income dropping from turbulent financial markets - underlying customer income stable
Total income dropping from turbulent financial markets - underlying customer income stable 2,342 115 -251m or -11% 89 52 2,091 24 2,062 29 Q2 2011 Challenging Equity and Lower Life fees, Other Income net of Income growth Q3 2011 market interest rate incl. reversals short term effects conditions posi
Slide 6: Positive trend in net interest income
Positive trend in net interest income Total net interest income, EURm • Modest increase in corporate and mortgage lending volumes • Somewhat improved lending and deposit margins • Positive contribution from Group Treasury 6•
Slide 7: Expenses under good control
Expenses under good control Total expenses, EURm • Expenses decreased 3% q-o-q • Restructuring costs of EUR 171m • Reduction of staff will enable Nordea to keep costs unchanged for a prolonged period of time 7•
Slide 8: Continued good credit quality
Continued good credit quality Total net loan losses, EURm • Loan losses 14bps of lending, 16bps excluding Danish Deposit Guarantee Fund • Increase in Denmark – continued elevated levels in Shipping • Improving levels in Norway and Finland 8•
Slide 9: Update on Q3 results; Financial targets
• Update on Q3 results • Financial targets
Slide 10: Roadmap for 15% RoE
Roadmap for 15% RoE Assumptions: 15 1 Interest rates and 1 macroeconomic environment 11 2 normalises Flat cost for a prolonged period of time Improved cost-income ratio to < 48% Moderate RWA growth Starting Improved Capital Other Target point C/I ratio efficiency 10 •
Slide 11: Normalised market conditions
Normalised market conditions Euribor 3m Interest rates & margins Germany 10y T-Bond Sweden 10y T-Bond Short- and long-term average interest rates Per cent 6.0 Normalised levels: 5.0 4.0 Short-term Long-term 3.0 rates 2-4% rates 3-5% 2.0 1.0 0.0 2007 2008 2009 2010 2011 Blended margin; average lendin
Slide 12: Normalised market conditions
Normalised market conditions Growth in volumes & net fair value Customer-driven net fair value, EURm Business volumes (lending+deposits) growth – normalised 4-6% +5% Per cent 1 380 13,7 12,5 1 173 1 155 935 975 6,9 5,4 5,5 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 ann. European stock market
Slide 13: Income sensitivity analysis
Income sensitivity analysis EURm 100bps higher interest on total capital 250 20bps higher deposit margins 300 10bps higher lending margins 300 5% higher lending volumes 150 5% higher deposit volumes 125 5% higher AuM volumes 50 13 •
Slide 14: What it takes to reach the income growth
What it takes to reach the income growth Illustrative • Market interest rates ~ 100bps higher rates • Re-pricing to reflect true cost of capital 0.8-1.0bn and liquidity ~15 bps on lending margins • Market growth in lending and deposits Stable market shares • Increased share of wallet in prioritised
Slide 15: Cost initiatives for flat costs
Cost initiatives for flat costs • Number of employees in the Nordics down approx. 2,000 or 6% of number of Staff FTEs, further decreases expected during 2013 from natural turnover reduction • Contact policy adjustments in the branch network • Reduce no of branches and branches with manual cash handl
Slide 16: Expected changes in RWA from new regulation and internal measures
Expected changes in RWA from new regulation and internal measures will allow for modest growth in business volumes EURbn (5-7) 13-18 180 (16-20) ~170 RWA Q3 2011 Regulatory Credit portfolio Models and RWA before impact management process growth refinements 16 • 16
Slide 17: RWA development and management initiatives
RWA development and management initiatives Credit portfolio Models & process Regulatory impacts management refinement • CRD III (Basel 2.5) • Portfolio composition • Advanced IRB roll-out • Market risk in trading reviews • Foundation IRB for book • Move to capital Standardised portfolios • CRD IV (B
Slide 18: Current view on capital policy
Current view on capital policy Basel 3 standard Swedish • The RoE target assumes a 11% regulator CT1 ratio (indicative) • The capital policy will be reviewed when more regulatory certainty • The CT1 level will vary over the 2.5% counter cyclical buffer CET1 cycle, but 11% is prudent for our capital
Slide 19: Funding strategy – to secure Nordea funding at all times
Funding strategy – to secure Nordea funding at all times Stable and consistent issuance strategy 2% • One of few remaining European 7% banks with a AA-rating 10% • Close to match funded on a 15% 48% behavioural basis – in line with 17% funding strategy • Active funding programs in deep, liquid marke
Slide 20: Capacity to increase cover pool size in Nordea
Capacity to increase cover pool size in Nordea Finland Norway Sweden Denmark September 2011 Nordea Issuer Nordea Bank Finland Nordea Hypotek Nordea Kredit Eiendomskreditt Swedish mortgages and Cover pool assets Finnish mortgages Norwegian mortgages Danish mortgages public sector Covered bond rating
Slide 21: Liquidity management – size and composition of buffer
Liquidity management – size and composition of buffer 62bn • Liquidity buffer has close to trebled since 2007 – highly rated bonds 36% • The size and the contents are aligned with future liquidity risk regulation through LCR alike metric 35bn • A fully LCR compliant buffer would add 43% 23bn 62% app
Slide 22: Allocation of cost, capital and funding in the Group
Allocation of cost, capital and funding in the Group Continuous monitoring and adjustments based on opportunities Segment and business Resource allocation strategic outlook and based on RaRoCar profitability outlook with caps on cost, capital and funding Allocated capital (Q3 11) High Retail Banking
Slide 23: Allocation of capital per business area
Allocation of capital per business area Allocated capital (Q3 11) Economic capital coverage • Credit risk Retail Banking • Market risk Pillar 1 • Operational risk Wholesale Banking • Concentration risk Wealth • Interest rate risk in Management the Banking Book GCC (incl • Real estate risk • Internal
Slide 24: The bridge between EC and Equity
The bridge between EC and Equity EURbn Nordea aligns its EC according to a 27 Pillar 1 plus Pillar 2 approach 24 4.9 21 RWA x 11.0% 11% of RWA (CT1 target) RWA x 9.5% 18 4.0 Life Life 2.8 15 RWA x 8% 12 25.1 20.2 9 17.5 14.6 6 3 0 Pillar 1 risks Pillar 2 incl. EC Capital buffer incl. CT1 Basel-relat
Slide 25: Group and Business Area RaRoCar targets
Group and Business Area RaRoCar targets Target Share of group • Based on Group 21% (15% RoE) forecasted future Economic Capital Retail Banking 21-23% • Assuming full distribution of funding cost Wholesale Banking 21-25% • Assuming full distribution of sub debt cost Wealth Management > 35% Treasury >
Slide 26: Further alignment of RaRoCar to RoE
Further alignment of RaRoCar to RoE Business unit Risk- • Full cost allocation to Business units adjusted profit vs. • Full funding cost allocated, including Group Net profit Liquidity premia • Further alignment between RWA & EC Economic Capital (Pillar 1) for credit risk, e.g. International vs. Leg
Slide 27: Key messages
Key messages 15% ROE target will be reached in a normalised macroeconomic environment Sound and stable liquidity and funding position Further refinement of the Group’s resource allocation process Further alignment of RaRoCar to RoE 27 •
Slide 28: Enhanced profitability focus
Enhanced profitability focus Fredrik Rystedt, Group CFO