Swedbank Ab Class A · OMXSTO:SWED_A
Swedbank Ab Class A — Q1 2009 Earnings Presentation
39 slides from Swedbank Ab Class A's earnings presentation, Apr 23, 2009
Slide 1: First quarter results 2009
First quarter results 2009 23 April 2009 Michael Wolf, CEO and Erkki Raasuke, CFO
Slide 2: We have initiated change
Reduce current risk levels 1. Secure asset quality by pro-active measures 2. Protect earnings capacity throughout the downturn 3. Funding strategy – improve liquidity and extend maturity profile We have initiated change 2
Slide 3: Secure asset quality
Secure asset quality • Prudent provisions due to low visibility • Intensified Financial Restructuring & Recovery (FR&R) activities • Proactive measures in Sweden • Short to medium term aim to decrease risk weighted assets in absolute terms Provision ratio expected to decline during 2009 3
Slide 4: Empowering the front-line
Decentralisation through formalisation • Shared leadership – joint responsibility • Implement committee structures at board and management level to ensure duality, integrity and accountability • Strong governance and formalisation processes Empowering the front-line 4
Slide 5: Determine the post-crisis position
Determine the post-crisis position Review of earnings’ capacity and goodwill Enhanced medium-term earnings Target improved ratings Secured funding capacity 5
Slide 6: Unique repositioning opportunity for Swedbank
Unique repositioning opportunity for Swedbank Unique customer base Dedicated staff The preferred partner for the many households, companies and institutions in Sweden, Estonia, Latvia and Lithuania A journey over 3‐5 years Strong relationship with Long history and the Swedish savings banks strong ma
Slide 7: Deteriorating economic environment affecting results
First quarter results 2009 Deteriorating economic environment affecting results • Main drivers behind the SEK -3.4bn operating profit – Prudent provisions due to low visibility and increasing impaired loans in Baltic Banking and Ukrainian Banking Operation – Impairment of intangible assets in Ukrain
Slide 8: Results by business area
Results by business area Result before impairments and provisions SEKm Swedish Banking 3 000 2 500 Q4 08 • Stable results, low impairment losses Q1 09 2 000 1 500 Baltic Banking 1 000 • Severe increase of impaired loans, 500 0 declining NII -500 -1 000 International Banking Sw edish Banking Baltic B
Slide 9: Income statement
First quarter results Income statement SEKm Q1 2009 Q4 2008 Change Net interest income 5 803 5 742 61 Net commission income 1 374 2 011 -637 Net gains/losses on financial items, fair value 1 711 1 244 467 Other income 536 1 349 -813 Total income 9 424 10 346 -922 Staff costs 2 335 2 340 -5 Profit-ba
Slide 10: Asset quality: Impaired loans
Asset quality Impaired loans • Increased covenant breaches, whilst level of impaired loans in Swedish Banking remained low • Sharp increase of impaired loans in Baltic and Ukrainian Banking Share of impaired loans Impaired loans by business area (gross, SEKm) 10% 9 000 Swedish Banking Baltic Banking
Slide 11: Asset quality: Provisioning
Asset quality Provisioning • Formation of additional collective 20 000 20 000 provisions of SEK 3.7bn • Total provisions of SEK 6.8bn 15 000 15 000 • Maintained provision ratio in Baltic Banking • Increased provision ratio in 10 000 10 000 Ukraine to 101% • Swedbank Group provision ratio at 64% 5 00
Slide 12: Earnings capacity: Net interest income
Earnings capacity Net interest income SEKm 302 6,000 113 • Highest ever net interest 5,800 5,742 5,803 income -207 -22 -125 5,600 • Improved lending margins and 5,400 reduced deposit margins in 5,200 Swedish Banking 5,000 • Reduced lending and deposit 4,800 margins in Baltic Banking 4,600 • Strong N
Slide 13: Earnings capacity: Net gains and losses
Earnings capacity Net gains and losses • Favourable market conditions provided good trading opportunities for Swedbank Markets • Net gains and losses related to Swedbank Mortgage (part of Swedish Banking) will continue to be volatile SEKm Q1 09 Q4 08 Q1 08 Swedish Banking 100 828 16 Baltic Banking 2
Slide 14: Liquidity & Funding: Strengthened position in challenging environment
Liquidity & Funding Strengthened position in challenging environment • Improved liquidity position • Active use of state guarantee • Ongoing efforts to strengthen programme SEK 227bn liquidity further • Action taken to extend maturity profile – Capital market funding over 1Y maturity, as of 31 Decem
Slide 15: Capital management: Actively manage risk weighted assets
Capital management Actively manage risk weighted assets • Improved documentation and processes • Increased focus on risk return • Declining lending volumes • Through the cycle methodology Development risk weighted assets (SEKbn) 720 700 680 660 640 620 600 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 15
Slide 16: Solid capitalisation following last year's rights issue
Capital management Solid capitalisation following last year’s rights issue 15.2 15.0 12.6 12.5 11.7 11.1 10.8 8.8 8.7 8.2 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 16
Slide 17: Summary
Summary • Economical challenges of historical dimensions • Strong measures taken in Q1 to address RWA and credit quality • Prudence in provisioning levels as impaired loans continue to increase but we expect it to level off during the year • Q2 focus will be to take firm control of our destiny in th
Slide 18: Appendix
Appendix Swedbank@
Slide 19: Balance sheet
Balance sheet Swedbank Group SEKm Mar 09 Dec 08 % Loans to credit institutions 141 996 128 536 10% Loans to the public 1 282 258 1 287 424 0% Interest-bearing securities 169 813 133 694 27% Shares and participating interests 59 484 60 182 -1% - for which customers bear the investment risk 52 551 51
Slide 20: Provisioning (P&L effect)
Provisioning (P&L effect) Q1 2009 Q4 2008 Change Change Specific provisions for individually assessed loan 2 423 832 1 591 191% Provisions for contingent liabilities, net 10 -6 16 -267% Provisions for collectively valued homogenous groups of loans with limited value and similar credit risk 126 34 92
Slide 21: Lehman Brothers
Lehman Brothers • Collateralised exposure related to Lehman Brothers is USD 1,350m – Collateral consists of 69 commercial real estate loans, secured by 55 properties – 9 loans were non-performing at March 31 – Aggregate notional value of assets well above book value of Lehman exposure • Additional s
Slide 22: Exposures FAQ
Exposures FAQ • Private Equity related exposures is EUR 1,425m in total – Nordic related LBO’s – 99% Senior lending – Largest sector is health care with 45% – Average size of single exposure is EUR 60m • Lending exposure to shipping sector is EUR 2,081m plus unutilised commitments of EUR 693m Tanker
Slide 23: Exposure FAQ
Exposure FAQ • Hedge Fund Exposure is EUR 94m – All collateralised • Total exposure to SIV’s and Conduits is EUR 8m • Total Exposure to CDO’s is EUR 2m 23
Slide 24: Low risk in interest-bearing securities (SEK 170bn)
Low risk in interest-bearing securities (SEK 170bn) Holding distributed by sector Geographic distribution of issuers Mortgage bonds, Other Baltics Other financial not covered 6% 6% US 2% corporations 4% 9% Central banks UK Other 29% 5% As of 31 March 2009, corporations Norway around 15% of the 8% 7%
Slide 25: Maturity profile – long-term funding
Maturity profile – long-term funding Swedbank AB, long-term maturity profile Swedbank Mortgage, long-term maturity profile SEK bn, nom (excl. Swedbank Mortgage) SEK bn, nom 120 120 100 100 80 80 60 60 40 40 20 20 0 0 2009 2010 2011 2012 2013 2014- 2009 2010 2011 2012 2013 2014- 25
Slide 26: Swedbank Mortgage, Q1 2009, total loan portfolio
Swedbank Mortgage, Q1 2009, total loan portfolio SEK 642bn (Euro 59bn) Loan to value (LTV) Lending SEKm 250 000 Commercial; 0.2% 200 000 Forest- & Agricult.; 6.2% Municipalities etc; 3.0% 150 000 Condominiums; 14.2% 100 000 Tenant Owners Assoc.; 11.4% 50 000 Multi-family houses; 4.9% SEK 6.5bn 0 Sin
Slide 27: Other lending to the public, Sweden, SEK 306bn
Other lending to the public, Sweden, SEK 306bn (excl. Swedbank Mortgage) SEKm 350 000 Real estate management Municipalities 300 000 Other real Other corporate lending estate mgmt 9% Residential Industry properties 250 000 Forestry and agriculture properties 26% 8% Transportation 200 000 Manufacturin
Slide 28: Appendix – Baltic Banking
Appendix — Baltic Banking Swedbank@
Slide 29: Asset quality
Asset quality Impairment losses Loan loss ratio % Q1 09 Q4 08 450 8% Estonia 3.31 1.32 400 7% 350 6% Latvia 14.13 3.70 300 5% Lithuania 6.00 0.77 250 4% 200 Baltic Banking 7.50 1.91 150 3% 100 2% 50 1% 0 0% Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Risk indicators EURm Loan loss ratio, % Q109 2008YE 2007YE Over
Slide 30: Asset quality by country
Asset quality by country Impairment loss dynamics pa Loan eloss t osses ratio 16% Estonia 14% EURm 250 12% 200 10% 150 8% 100 68 50 14 29 7 11 6% 0 4% Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 2% 0% Latvia Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 EURm 250 229 Est Lat Lit Baltic Banking 200 150 100
Slide 31: Overdue developments
Overdue developments 10% Overdues, EE Corporate 10% Overdues, LV Corporate 9,4% 10% Overdues, LT Corporate 8% 8% 8% 7,5% 6% 6% 6% 4,5% 4,0% 4% 4% 4% 5,2% 2,5% 2% 2% 2,9% 2% 0,9% 0,3% 0% 0% 0% Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 31-
Slide 32: Overdue loans – Swedbank Estonia and Latvia vs market
Overdue loans – Swedbank Estonia and Swedbank Latvia vs market Estonia - overdues over 30 days / current Estonia - overdues over 60 days / current 6% portfolio portfolio 6% 5% 5% 4% 4% 3% 3% 2% 2% 1% 1% 0% 0% dec-05 jun-06 dec-06 jun-07 dec-07 apr-08 jun-08 dec-08 feb-09 mar-06 sep-06 mar-07 sep-07
Slide 33: Baltic lending by sectors
Baltic lending by sectors* Portfolio (EURm), March 2009 Portfolio growth (EURm), Q1 09 Individuals Mortgage Other 45% -177 Real-estate 3 193 16% mgmt** 100 Retail & 1 576 8% Wholesale -145 EURm Industry 1 590 8% -89 Transport 983 5% -35 Construction 451 2% -86 Other*** 3 051 16% -191 0 2 000 4 000 6
Slide 34: Mortgage portfolio
Mortgage portfolio • All vintages are converging to the 7% EE Mortgage overdues > 30 days same level of overdues. Complicated 6% Overdues / Balance, % 5% to separate the effects of origination 4% quality from the downturn impact 3% 2% 1% 0% 0m 6m 12m 18m 24m 30m 36m 2005 2006 2007 2008 7% LV Mortgag
Slide 35: Mortgage portfolio quality indicators
Mortgage portfolio quality indicators • High risk concentration in mortgage Est Lat Lit* portfolios stays ~12% in Estonia LTV, total portfolio: Q1 09 69% 78% 79% and ~20% in Latvia, Lithuania. High LTV, total portfolio: Q4 08 67% 71% 70% risk is defined as all loans with loan LTV>80% 33% 46% 46% to
Slide 36: Corporate client portfolio
Corporate client portfolio • The effect of the downturn has shown a deterioration of Baltic Banking real estate, in particular residential development portfolio • Downgrades have led to provisions increase by EUR 116.6m in Q1 2009 (not including the additional collective provision) BB Rating 6 & 7 e
Slide 37: Baltic lending by sectors – real estate
Baltic lending by sectors – real estate Estonia Latvia 5% 3% 12% 16% 15% 24% 13% 22% 6% 28% 34% 22% Lithuania 5% 6% 13% 6% Office Production&Warehouse Residential Retail 40% 30% Land plots Other 37
Slide 38: Collateral breakdown
Collateral breakdown • Baltic Banking loan portfolio is adequately Baltic Collateral (EURm) secured Mar Dec • Private mortgage portfolio is fully covered 2009 % 2008 % with family houses and apartments (as a rule State 396 2 370 2 owner occupied) Private real-estate 7 481 37 7 321 36 • Commercial re
Slide 39: Volumes development
Volumes development Loan portfolio portfolio YoY % growth Estonia Latvia Lithuania Baltic Banking 90% 20 000 70% 15 000 50% EUR m 10 000 30% 5 000 10% 0 -10% ´06 ´07 ´08 Mar´09 ´06 ´07 ´08 Mar´09 ´06 ´07 ´08 Mar´09 ´06 ´07 ´08 Mar´09 Loan/Deposit ratio 300% 250% 200% 150% 100% 2006 2007 2008 Q109 Es