Slide 1: Third quarter report 2011 Press and analyst conference
Third quarter report 2011 Press and analyst conference Christian Clausen, President and 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 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 Total short term Income growth Q3 2011 market interest rate incl. reversals effects from conditions positio
Slide 6: Financial highlights / Business areas / Adapting to the New Normal
• Financial highlights • Business areas • Adapting to the New Normal
Slide 7: Positive trend in net interest income
Positive trend in net interest income Total net interest income, EURm 1 379 1 321 1 299 1 310 1 365 1 324 1 326 • Modest increase in corporate and 1 235 1 249 mortgage lending volumes • Somewhat improved lending and deposit margins • Positive contribution from Group Treasury Q3/09 Q4/09 Q1/10 Q2/10
Slide 8: Assets under Management affected by turmoil
Assets under Management affected by turmoil Net fee and commission income, EURm 618 623 602 • Lower savings commission due to 582 538 lower assets under management 525 and weak equity markets 463 475 437 • Seasonal effects on transaction related commission income Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10
Slide 9: Good customer driven flow, whilst short term negative effects from financial turmoil
Good customer driven flow, whilst short term negative effects from financial turmoil Net result from items at fair value, EURm • Good demand in customer driven activities 197 311 199 • Increased volatility and credit 102 307 spreads 254 242 237 233 • Negative valuation effects in our holdings • Accr
Slide 10: Expenses under good control
Expenses under good control Total expenses, EURm 171 • Expenses decreased 3% q-o-q 1 270 1 265 1 275 1 242 1 219 1 164 1 186 1 196 • Restructuring costs of EUR 171m 1 087 • Reduction of staff will enable Nordea to keep costs unchanged for a prolonged period of time Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/1
Slide 11: Restructuring charges
Restructuring charges • Total restructuring charges EUR 171m • Related to the reduction of employees in the Nordic countries • To be able to reach anticipated cost efficiency and profitability in the New Normal plan • Close to 80% of the restructuring charges relates to employees expected to leave t
Slide 12: Continued good credit quality
Continued good credit quality Total net loan losses, EURm • Loan losses 14bps of lending, 358 16bps excluding Danish Deposit 347 Guarantee Fund 261 • Increase in Denmark – continued 245 242 elevated levels in Shipping 207 166 • Improving levels in Norway and Finland 118 112 Q3/09 Q4/09 Q1/10 Q2/10 Q
Slide 13: … and improved rating migration
… and improved rating migration Corporate re-rated Exposure at Default (%) • Rating migration continued positive in 88% corporate portfolio (1.0% vs 2.4% in Down-rated Up-rated Q2) 4.6% 7.4% • Average risk weight down from 4,1% 3,2% 55.5% to 54.5% 2,2% 0,8% 0,5% 0,2% 0,5% 0,2% 0,1% 0,3% • 7.4% of th
Slide 14: Lending portfolio at stable levels
Lending portfolio at stable levels Total lending, EURm 333 • Mortgages are up 2% q-o-q 322 325 314 314 303 • Corporate lending volumes are up 292 1% q-o-q 283 278 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 14 •
Slide 15: Capital position
Capital position Risk-weighted assets (RWA), EURbn • Increase in Risk-weighted assets following volume growth 214 213 220 182 180 183 • Continue positive rating migration in corporate portfolio (1.0% vs. 2.4% in Q2) Q1/11 Q2/11 Q3/11 • Improved asset efficiency Transistion rules Fully implemented Ba
Slide 16: Financial highlights / Business areas / Adapting to the New Normal
• Financial highlights • Business areas • Adapting to the New Normal
Slide 17: Retail Banking result
Retail Banking result EURm Q3/11 Q2/11 Chg • Lending volumes up 1% Total income 1 410 1 388 2% • 153 branches transformed into new Total expenses -769 -832 -8% format. Total of 403 branches Net loan losses -99 -98 1% • Expenses down 8% driven by strict Operating profit 542 458 18% cost control – sub
Slide 18: Wholesale Banking result
Wholesale Banking result EURm Q3/11 Q2/11 Chg • Solid customer trend Total income 520 657 -21% • Short term affects from turbulent Total expenses -202 -227 -11% financial markets Net loan losses -16 -14 14% • Stable loan loss situation Operating profit 302 416 -27% 18 •
Slide 19: Wealth Management result
Wealth Management result EURm Q3/11 Q2/11 Chg • Assets under Management -7% Total income 268 331 -19% due to turbulent markets Total expenses -182 -185 -2% • 65% of investment composites Net loan losses 0 -3 outperformed its benchmarks last 36 months Operating profit 86 143 -40% • Positive financial
Slide 20: Financial highlights / Business areas / Adapting to the New Normal
• Financial highlights • Business areas • Adapting to the New Normal
Slide 21: The financial crisis destroyed massive value and raised a big question
The financial crisis destroyed massive value and raised a big question Nordea vs. EURO Stoxx Bank index; market cap development (2007 – Sept 2011) 140 120 Big question: 100 How can we avoid 80 this from ever 60 -65% happening again? 40 20 0 1.1.07 1.5.07 1.9.07 1.1.08 1.5.08 1.9.08 1.1.09 1.5.09 1.9
Slide 22: Business models were tested - some failed, some were robust
Business models were tested - some failed, some were robust Nordea peer group*; market cap, year end; EURbn 2007 2008 2009 2010 2011 (Oct. 17) 1. Santander 92.5 1. Santander 54,0 1. Santander 95,2 1. Santander 66,0 1. Santander 52,2 2. Unicredit 75,9 2. BBVA 32,4 2. BNP Paribas 66,2 2. BNP Paribas 5
Slide 23: The journey continues… Execution of the relationship strategy
The journey continues… Execution of the relationship strategy 2007/2008 2008/2009 2010/2011 2011/2012 Profitable Middle of Prudent New organic the road growth Normal growth Generating Balancing Supporting Focus on resources cost, risk and customers to restoring to invest in capital – accelerate ROE
Slide 24: Benefits of the relationship strategy
Benefits of the relationship strategy Satisfying customer needs Focus on most attractive customers • Safety and stability • Most profitable • “Someone who cares” • Highest potential • Full range of advice • Most satisfied and loyal • Customer needs driven • High efficiency in service innovation Capi
Slide 25: What New Normal is
What New Normal is Execution of a focused relationship strategy Creating a sustainable business model Generating top league ROE Target: 15% ROE in a normalised macro- economic environment
Slide 26: Banks have no choice but to focus on increasing ROE’s
Banks have no choice but to focus on increasing ROE’s 1. ROE in top-league 5. Increased 2. Low funding business costs momentum 4. Great 3. Competitive Customer bank Experiences
Slide 27: Welcome to Capital Markets Day 2011
Welcome to Capital Markets Day 2011 Nordea’s strategy and financial targets from Group Executive Management Christian Clausen Fredrik Rystedt Michael Rasmussen Casper von Koskull Gunn Wærsted President & Group CEO Group CFO Head of Retail Banking Head of Wholesale Banking Head of Wealth Management V
Slide 28: 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 29: Third quarter report 2011 Press and analyst conference
Third quarter report 2011 Press and analyst conference Christian Clausen, President and Group CEO