Nordea Bank Abp · OMXHEX:NDA_FI
Nordea Bank Abp — Debt Investor Presentation (2021)
50 slides from Nordea Bank Abp's debt investor presentation, 2021
Slide 1: Debt investor presentation Q3 2021
Debt investor presentation Q3 2021
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 third quarter 2021 update 4 2. Credit quality 13 3. Capital, AML and Sustainability 22 4. Funding 27 5. Macroeconomy 40 6. Business areas – update 45 3
Slide 4: 1. Nordea third quarter 2021 update
1. Nordea third quarter 2021 update 4
Slide 5: The largest financial services group in the Nordics
The largest financial services group in the Nordics Household* Small and medium- Large corporates Asset and wealth sized companies** and institutions management Business position - Universal bank with leading market position in all four Nordic countries #1 #1 #1 #1 - Strong position in household, co
Slide 6: Executive summary
Executive summary • Continued strong growth in customer business volumes across Nordics ➢ Mortgage volumes up 6% y/y, SME lending up 9% y/y and assets under management up 21% y/y to all-time high of EUR 393bn • Strong result, supported by quality income growth and good cost management ➢ Net interest
Slide 7: Group quarterly results Q3 2021
Group quarterly results Q3 2021 Income statement and key ratios Q321 Q320 Q3/Q3 Q221 Q3/Q2 EURm Net interest income 1,226 1,146 7% 1,232 0% Net fee and commission income 870 729 19 % 878 -1 % Net fair value result 224 257 -13 % 278 -19 % Other income 24 23 4% 30 -20 % Total operating income 2,344 2,
Slide 8: Net interest income – continued strong growth in customer business volumes
Net interest income – continued strong growth in customer business volumes Year-over-year bridge, EURm Comments +7% • Net interest income up 7% (up 5% excl. Nordea 1,226 Finance Equipment) 27 0 19 48 • Continued strong growth in business volumes 1,146 40 across Nordics • Mortgage volumes up 6% and l
Slide 9: Net fee and commission income – further significant growth in savings fee income
Net fee and commission income – further significant growth in savings fee income Year-over-year bridge, EURm Comments +19% • Net fee and commission income up 19% 870 8 19 10 9 7 • Strong savings fee income: up 25%, driven by strong net inflows within all channels 106 729 • Continued recovery in card
Slide 10: Net fair value result – continued high levels of activity in customer areas
Net fair value result – continued high levels of activity in customer areas Net fair value result, EURm Comments • Continued high activity in customer areas, supported -13% by FX and equity trading 370 • Lower trading result driven by weaker markets 20 • Treasury supported by strong investment valua
Slide 11: Costs – continued cost discipline
Costs – continued cost discipline Year-over-year bridge, EURm Comments +1% • Underlying costs down, in line with plan 1,098 • Staff costs unchanged, adjusted for inclusion of 10 1,089 Nordea Finance Equipment and exchange rate 12 11 effects • Lower VAT refund than in Q3 2020 Q320 Underlying costs NF
Slide 12: We are committed to delivering on our 2022 financial targets
We are committed to delivering on our 2022 financial targets Cost-to-income ratio Capital policy 150-200bp 50% management buffer above regulatory CET1 requirement Return on equity Dividend policy 60-70% payout of distributable >10% profits to shareholders Excess capital intended to be distributed to
Slide 13: 2. Credit quality
2. Credit quality 13
Slide 14: Loan book – well diversified with strong credit quality
Loan book – well diversified with strong credit quality Portfolio well diversified Five segments with 1% of Updated analysis of COVID-19 across countries and total exposures still impact by segment** segments significantly affected 0.1% Ship building EUR 4bn, 1% Significantly affected 0.1% Air trans
Slide 15: Net loan losses and similar net result – continued strong credit quality
Net loan losses and similar net result – continued strong credit quality Net loan losses and similar net result Q321, EURm Comments • Net loan losses and similar net result amounting to net -18 reversal of EUR 22m (3bp) 22 -26 • Reversals of modelled collective provisions due to 4 improved credit qu
Slide 16: Further decrease in impaired lending
Further decrease in impaired lending Stage 2 and 3 loans at amortised cost, EURm Comments • Low levels of impaired (stage 3) loans further reduced due to economic upturn and active credit risk management 13,576 13,840 14,383 12,843 13,154 • Coverage ratio for impaired loans up to 45% • Stage 2 loans
Slide 17: All instalment-free periods now expired – almost all customers resuming normal servicing
All instalment-free periods now expired – almost all customers resuming normal servicing Customers granted instalment-free periods, 1000s Comments 43 • All COVID-19-related instalment-free periods now expired • 3.0% of customers classified as forborne or in default following expiry of their instalme
Slide 18: IFRS 9 model update – macroeconomic assumptions behind scenarios used
IFRS 9 model update – macroeconomic assumptions behind scenarios used Baseline annual GDP growth, % Comments 5 4 • Economic forecasts from Nordic central banks and 3 European Central Bank (ECB) used as basis for 2 baseline scenarios 1 • Scenarios more positive in Q3 than in Q2 0 -1 2020 2021 2022 20
Slide 19: Credit quality – portfolio significantly de-risked over past 10 years
Credit quality – portfolio significantly de-risked over past 10 years Historic loan loss ratios, bp Comments 56 • Track record of strong credit quality • Risk profile improved by divestments and reductions 31 in high-risk exposures 26 26 19 23 21 • Significant management judgement buffer built up in
Slide 20: Coverage ratios – well provisioned for potential losses
Coverage ratios – well provisioned for potential losses Coverage ratios Significantly Partially affected Non-significantly affected segments segments affected segments Avg. 62% Avg. 47% Avg. 37% 96 97 89 89 77 77 66 64 64 63 62 61 60 61 56 52 51 51 52 52 50 47 47 46 47 46 45 46 44 44 45 42 41 40 39
Slide 21: Lending split with low concentration in each sector and segment
Lending split with low concentration in each sector and segment Lending volumes per sector and segment (EURbn) and shares of total lending portfolio (%), 30/09/21 (excl. reverse repos and securities borrowing) Financial institutions 14.8 4.6% Shipping (total): 6.0 1.9% Crops, plantations and hunting
Slide 22: 3. Capital, AML and Sustainability
3. Capital, AML and Sustainability 22
Slide 23: Capital – capital position strong and share buy-back programme initiated
Capital – capital position strong and share buy-back programme initiated CET1 capital ratio development, % Comments 0.7 0.1 0.1 -0.5 -0.1 • CET1 capital ratio 16.9%, 6.7 percentage points -1.3 above regulatory requirement* • CET1 capital down EUR 1.7bn following buy-back 18.0 18.2 16.9 <2.0 approval
Slide 24: Capital – significant buffer to capital requirements
Capital – significant buffer to capital requirements Capital position and requirements Comments 6.6% • CET1 capital ratio 16.9%, 6.7 percentage points above regulatory requirement** • Capital policy of 150-200bp above regulatory requirement 6.7% (MDA level) • CET1 buffer of 6.7 percentage points cor
Slide 25: Significant investments in financial crime prevention
Significant investments in financial crime prevention Actions against money laundering Financial crime prevention spending, annual Employees EURm • We collaborate closely with all relevant authorities, including law 1,600 1,500 >1,500 >1,500 >1,500 >1,500 300 enforcement and regulators, and encourag
Slide 26: Sustainability at the core of Nordea’s strategy
Sustainability at the core of Nordea’s strategy Our targets Since the beginning of 2020 we have reduced our exposure to, and emissions associated with, climate-vulnerable sectors. We are working together with our customers to help drive a CO2 low-carbon economy and channelling investment into more s
Slide 27: 4. Funding
4. Funding 27
Slide 28: Liquidity – solid position
Liquidity – solid position Liquidity buffer, EURbn Comments 130 • Robust liquidity position 112 107 104 103 104 102 101 105 106 106 • Liquidity buffer over EUR 130bn 100 95 88 • Liquidity coverage ratio (LCR) 168% • Net stable funding ratio (NSFR) 114% • Deposits up 3% in local currencies q/q Q218 Q
Slide 29: Solid funding operations
Solid funding operations Long-term issuance 2021* EUR 20.7bn Q3 issuance comments EURm AT1 T2 Senior non-preferred Senior preferred*** Covered 4,000 • EUR 4.2bn in long-term debt issued during Q3 2021 3,500 • Of which EUR 1.1bn covered bonds and EUR 3.1bn senior format 3,000 2,500 • In addition, EUR
Slide 30: Short-term funding – prudent and active management
Short-term funding – prudent and active management Comments Short-term issuance* 70 • Short-dated issuance remains an attractive funding 60 component for the Group 50 • Nordea has maintained issuance in the long-dated short- 40 term market (>1 year) out of both the US and Europe 30 • Nordea has a we
Slide 31: Long-term funding – Nordea’s global issuance platform
Long-term funding – Nordea’s global issuance platform 1% 8% 2% 19% 2% 78% 100% NOK 89% (EUR 12bn eq.) DKK SEK (EUR 54bn eq.) 4% 6% (EUR 34bn eq.) 35% 28% 13% 12% 17% 59% 29% 42% 19% 52% 6% JPY 100% 41% 5% (EUR 1bn eq.) 17% GBP CHF 15% (EUR 3bn eq.) (EUR 1bn eq.) USD EUR (EUR 18bn eq.) (EUR 32bn) Cov
Slide 32: Green bonds
Green bonds Enhanced focus on green bonds Green bond asset portfolio • 2017: Green Bond Framework established and inaugural 0.1% EUR 500m 5-year senior preferred green bond issued 4.0% • 2019: EUR 750m 7-year senior preferred green bond issued 14.3% 23.7% • 2019: Danish green covered bond launched R
Slide 33: Nordea covered bond operations
Nordea covered bond operations Q3 2021 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 mortgages prim
Slide 34: Nordea recent benchmark transactions
Nordea recent benchmark transactions Issue Maturity Issuer Type Currency Amount (m) FRN / Fixed Callable date date Nordea Bank Senior non-preferred USD 1,500 Fixed Sep-21 Sep-26 Nordea Bank Tier 2 GBP 500 Fixed Sep-21 Dec-27 11.25NC6.25 Nordea Bank AT1 USD 1,000 Fixed Aug-21 Perpetual PerpNC8 Nordea
Slide 35: Balance sheet composition
Balance sheet composition Total assets EUR 615bn at end of Q3 2021 Deposits by credit Cash and balances with institutions central banks Loans to credit institutions Deposits and borrowings from the public Credit S&P Moody’s Fitch ratings Loans to the public Long-term CDs and CPs* issuer AA- Aa3 AA-
Slide 36: Well positioned to meet MREL requirements
Well positioned to meet MREL requirements MREL positions at end of Q3 2021 and requirements Comments • Nordea subordinated MREL ratio 3.4 percentage points above +4.7 requirement (1.5 percentage points above LRE requirement***) 32.1% • Total MREL ratio 4.7 percentage point above requirement (9.4 per
Slide 37: Senior non-preferred target remains unchanged
Senior non-preferred target remains unchanged Own funds and bail-in-able debt, EURbn Comments • Senior non-preferred (SNP) target of approximately Point of non viability Resolution EUR 10bn in total by end of 2023, taking into account: • future capital buffer requirements • management buffer for MRE
Slide 38: Maturity profile
Maturity profile Maturity profile, EURbn Comments EURbn 300 • Over past couple of years balance sheet maturity profile has become more balanced due to lengthening of issuance through balance sheet 200 management 100 • Resulting in well-balanced structure in assets and liabilities in general, 0 and b
Slide 39: Liquidity coverage ratio
Liquidity coverage ratio Liquidity coverage ratio, % Comments 350% • EBA Delegated Act on LCR in force, starting from October 2016 300% 250% • LCR of 168% 200% • LCR compliant in USD and EUR 150% • Compliance reached through high-quality liquidity buffer and 100% management of short-term cash flows
Slide 40: 5. Macroeconomy
5. Macroeconomy alge fle tly Nordea
Slide 41: Nordic economies – resilient economies back on track
Nordic economies – resilient economies back on track GDP development Unemployment rate Comments GDP, forecasts from Economic Outlook September 2021 • After the dramatic setback in 2020 due to the COVID-19 pandemic, the Country 2020 2021E 2022E Nordic economies have almost fully recovered • Vaccines
Slide 42: Nordic rates – Nordics well equipped to handle long-term consequences of COVID-19
Nordic rates – Nordics well equipped to handle long-term consequences of COVID-19 Policy rates Public balance and debt, % of GDP, 2021E Comments • Norges Bank increased its key rate in September this year, with a second increase likely in December. Policy rates in the euro area, Denmark and Sweden a
Slide 43: Households remain resilient
Households remain resilient Household debt Household savings Comments • Household savings have increased dramatically during the crisis, largely due to of a decline in spending. Despite high debt levels, Nordic households’ strong finances are expected to support economic growth as restrictions are l
Slide 44: Nordic housing markets heat up
Nordic housing markets heat up Housing prices Households’ credit growth Comments • Contrary to expectations, house prices have increased to record-high levels in all the Nordic countries during the crisis. This is not least because of unprecedented expansionary fiscal and monetary policy in support
Slide 45: 6. Business areas – update
6. Business areas — update alee pole: tly Nordea
Slide 46: Personal Banking – income lifted by strong savings and mortgage performance
Personal Banking – income lifted by strong savings and mortgage performance Total income, EURm Comments +10% • Total income up 10% 929 919 878 837 848 • Continued strong mortgage activity across countries: volumes up 6% 569 573 535 561 543 • Mortgage margin pressure partly offset by improved deposit
Slide 47: Business Banking – strong lending volume development
Business Banking – strong lending volume development Total income, EURm Comments +17% • Strong quarter with continued high business activity 640 647 637 617 543 • Lending volumes up 9% (5% excl. Nordea Finance Equipment) – strong growth in Norway and Sweden 395 407 397 352 384 • Broad-based growth i
Slide 48: Large Corporates & Institutions – stable performance amid lower activity and volatility
Large Corporates & Institutions – stable performance amid lower activity and volatility Total income, EURm Comments -8% • Total income down 8% 620 • Largely stable NII and NCI with high customer activity 505 475 443 238 435 • Lower NFV due to lower activity and volatility 225 226 137 230 226 • #1 po
Slide 49: Asset & Wealth Management – record volumes and significant net inflows via all channels
Asset & Wealth Management – record volumes and significant net inflows via all channels Total income, EURm Comments +28% • Total income up 28% 293 294 318 19 • AuM up 21% to all-time high of EUR 393bn 265 19 19 249 16 17 • Net inflow of EUR 4.1bn (annualised growth 4%), with all channels contributin
Slide 50: Contacts
Contacts Investor Relations Matti Ahokas Andreas Larsson Maria Caneman Carolina Brikho Head of Investor Relations Head of Debt Investor Relations Senior Debt IR Officer IR Officer Mobile: +358 40 575 91 78 Mobile: +46 709 707 555 Mobile: +46 768 24 92 18 Mobile: +46 761 34 75 30 Tel: +46 10 156 29 6