Swedbank Ab Class A · OMXSTO:SWED_A
Swedbank Ab Class A — Q3 2023 Earnings Presentation
73 slides from Swedbank Ab Class A's earnings presentation, Oct 26, 2023
Slide 1: Investor presentation Q3 2023
Slide 2: Disclaimer
● Certain statements made in this presentation are forward ● None of Swedbank AB or any of its directors, officers or looking statements. Such statements are based on current employees nor any other person accepts any liability expectations and are subject to several risks and uncertainties whatsoev
Slide 3: This is Swedbank – contents
This is Swedbank 4 Sustainability 12 Quarterly financial update 17 Asset quality 27 Capital considerations 36 Liquidity and funding 40 Cover pool data 47 Swedish and Baltic economy 54 Swedish housing and mortgage market 59 Appendix 64 © Swedbank 3
Slide 4: This is Swedbank
© Swedbank
Slide 5: Key financial targets and track record
30 16.1 14.7 13.2 13.3 8.9 20 20 Earnings per share, SEK 0 10 18.9 17.6 18.6 19.4 Return on equity, % 11.5 0 -20 Cost to income ratio 0.43 0.54 0.44 0.38 0.40 Credit impairment 26 ratio, bps 3 1 9 8 340bps buffer CET1 capital ratio, % 17.5 18.3 17.8 16.3 17.0 75 50 50 50 50 Dividend per share, SEK D
Slide 6: Swedbank franchise at a glance
~82% of loan book Mortgages Savings Insurance Payment Swedbank Swedbank Swedbank franchise Loan-to-deposits CET1 capital buffer Hypotek Robur Insurance Mobile App Internet bank LCR NSFR ~14% of loan book Partnership Branches with 58 Customer 143 in Sweden Impairment ratio Savings centre 83 in the Ba
Slide 7: Vision and business purpose
• By providing guidance on your terms • By helping you to be more sustainable • By supporting you in a proactive way • By making the difficult simple An attractive workplace for An efficient, profitable and A standardised, scalable employees with a culture based compliant bank and financial and stab
Slide 8: Status of authority investigations
● No ongoing investigations from Swedish authorities ● Estonian prosecutor – money laundering or criminal activity in Swedbank AS, maximum fine EUR 16m ● Ongoing investigations by U.S. authorities – DoJ, SEC and DFS New York – Settlement with OFAC in Q2 2023 resulting in a fine of SEK 37m ● Individu
Slide 9: Shifting focus - four clear business priorities
Shifting focus - four clear business priorities Leverage proven business model and pricing strategy Grow share of wallet for existing customers Grow business in prioritised segments Improve availability and operational excellence 2019 2020 2021 2022 2023 2024 2025 © Swedbank
Slide 10: Strategic direction and priorities
● Strategic Direction ● Prioritising business growth and profitability ● Strengthened governance ● Supporting customers’ sustainable transition and compliance ● Strengthening focus on core business ● Four clear business priorities ● Positive operational jaws and maintained low risk ● Capital calibra
Slide 11: Financial and business targets
No. of advisory Swedish private ≥1.0m in total 2025 meetings segment (280k 2021) Swedish midsized ~16% 2025 Corporate corporate segment2) (~13% 2021) market shares Latvia and Lithuania 25-30% 2030 corporate lending (~20% Q2 2022) Customers with Baltic private Double the long-term savings segment num
Slide 12: Sustainability
© Swedbank
Slide 13: Biodiversity, green advisory and regulatory
Biodiversity Green Advisory ● Analysing targets in the GBF1 to identify what ● In collaboration with Hemma4, our private is most relevant for our operations, to customers can now get free energy maximise impact calculations, advice on how to reduce energy ● Developing method to calculate biodiversit
Slide 14: Carbon neutrality and interim target setting
Task Force on Climate related 2050 Financial Disclosures Carbon neutrality and interim target setting Reporting according to recommendations since 2018 2040 Net-Zero Banking Alliance Carbon neutral investments by Swedbank Robur1) 2030 targets set and published in November 2022 Climate Action 100+ (S
Slide 15: 2030 financed emission targets
● Mortgages: reduce the financed emission intensity by 39 per cent (kgCO2e/m2) ● Commercial real estate: reduce the financed emission intensity by 43 per cent (kgCO2e/m2) ● Oil & gas1): reduce the absolute financed emissions by 50 per cent (tCO2e) ● Power generation: reduce the financed emission int
Slide 16: Green and social assets
Green buildings Clean transportation Green assets Renewable energy 1.2 0.0 2.6 Pollution prevention and control 1.8 1.1 4.0 0.2 Sustainable management of living natural resources Social 4.9 assets Sustainable water and wastewater management 70 67 59 61 53 47 48 Social assets Employment generation 45
Slide 17: Quarterly financial update
© Swedbank
Slide 18: Q3 2023 highlights
Total income, SEKbn QoQ +2% 20 TOTAL SEK 18.5bn 15 INCOME 10 5 0 ● Return on equity of Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 19.3 per cent Total expenses, SEKbn QoQ -3% ● Cost/Income ratio 0.30 8 TOTAL SEK 5.6bn 6 EXPENSES 4 ● Credit impairment ratio 0.07 per cent 2 0 Q3 2022 Q4 2022 Q1 2023 Q2 20
Slide 19: Income statement Q3 2023
▲ ● Net profit SEK 9.1bn Net interest income 12 901 12 768 1% Net commission income 3 862 3 811 1% ● Return on equity Net gains and losses 652 524 24% 19.3 per cent Other income 1 053 1 069 -2% ● Cost/Income ratio 0.30 Total income 18 468 18 173 2% Total expenses 5 562 5 717 -3% of which provision f
Slide 20: Lending volumes by segment
QoQ +0.3% QoQ -0.1% +12 1 181 1 180 1 183 1 803 11 1 815 1 808 3 0 -2 -6 Q2 2023 Q3 2023 Q3 excl. FX QoQ +1.1% 628 631 621 Q2 2023 Swedish C&I Baltic Group Q3 excl. FX FX Q3 2023 Banking Banking Functions Q2 2023 Q3 2023 Q3 excl. FX © Swedbank 20
Slide 21: Deposit volumes by segment
QoQ -1.5% QoQ -1.7% 716 -12 704 709 1 298 2 1 286 1 278 -10 -1 -3 -8 Q2 2023 Q3 2023 Q3 excl. FX QoQ -1.4% 582 574 577 Q2 2023 Swedish C&I Baltic Group Q3 excl. FX FX Q3 2023 Banking Banking Functions Q2 2023 Q3 2023 Q3 excl. FX © Swedbank 21
Slide 22: Net interest income
QoQ +1.0% ● NII increase – Baltic Banking deposit +133 margins and lending 12 768 39 195 140 12 901 volumes -86 -155 – C&I lending margins – Day count and FX ● Partially offset by Business-driven NII – Higher funding cost due to -7 deposit migrations and proactive wholesale funding ● Year-on-year, Y
Slide 23: Net commission income
QoQ +1.3% ● Stable cards and payments +51 ● Asset management higher due to global 68 17 3 862 3 811 stock market -9 -26 performance, FX and day count ● Securities & Corporate Finance seasonally lower Q2 2023 Cards & Asset Securities & Other Q3 2023 Payments Management Corporate Finance © Swedbank 23
Slide 24: Net gains and losses
● Strong Fixed income and FX trading with high client activity 34 129 ● Positive revaluation 652 effects in Treasury 46 -90 533 Client trading Bond inventories Funding Liquidity Other Total NGL (Treasury) portfolio © Swedbank 24
Slide 25: Other income
QoQ -1.5% ● Higher income from savings banks and Other Associates lower from Entercard Net insurance ● Net insurance decrease 1 069 1 053 driven by revaluations 843 875 and higher claims 775 435 463 415 422 398 250 265 171 194 261 384 325 235 282 117 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 © Swedban
Slide 26: Expenses
QoQ -2.7% ● Expenses seasonally lower Underlying expenses Administrative fine and provision C/I ratio – According to plan 0.38 0.37 – Inflation headwind likely 0.35 0.31 0.30 to continue into 2024 6 410 5 602 890 5 717 5 562 5 185 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 © Swedbank 26
Slide 27: Asset quality
© Swedbank
Slide 28: Credit impairments
● Updated macro forecasts – Worsened scenario ● Stage migrations 831 – From rating migrations ● Post model adjustments -158 – Partial release to meet rating & stage migrations -265 347 201 -263 Macro scenarios Rating & stage Post model Individual Other Total credit migrations adjustments assessments
Slide 29: Commercial real estate exposure
● Managing balance sheets 10% − Divestments of properties 8% 7.2% 7.2% 7.2% 7.4% 7.8% − Restructurings 6.9% 6.9% 7.0% 6% − Capital injections − Bond buy-backs 4% Q2 21 Q3 21 Q4 21 Q1 22 Q3 22 Q4 22 Q1 23 Q2 23 − Cancelled dividends − CAPEX reductions Interest Coverage Ratio (ICR)2) 2.9x (3.3x) − Int
Slide 30: Property management lending
● Focus on strong cash flows and collateral ● Continuous dialogue with 84 customers 10% SEK 102 301bn 81% ● Average LTV 9% 18 − Property management, 39 53 per cent • Non-residential, 52 per cent Sweden Residential Baltics Commercial • Residential, 54 per cent Norway & Finland Industrial & Warehouse
Slide 31: Property management loans by country
Sweden Sweden Estonia Estonia SEK Latvia SEK Latvia 90bn Lithuania 211bn Lithuania Norway Norway Finland Finland Loans carrying Loans carrying amount, SEKbn 89.9 84.3 0.1 0.2 0.0 0.0 5.4 amount, SEKbn 211.1 158.7 15.0 3.3 8.4 19.4 6.5 Average loan-to- Average loan-to- value 54% 54% n.a.1) n.a.1) n.a
Slide 32: Loans by stage
1 806 1 804 1 798 1 810 1 810 5.5 6.0 6.7 7.0 7.1 100% 6 6 6 6 5 100% 98% 2.1 2.1 2.3 2.0 80% 2.1 96% 124 138 168 183 60% 94% 189 2.9 3.1 3.3 2.0 2.4 40% 92% 90% 1 676 1 660 20% 1 624 1.4 1.5 1.7 1.7 1.9 1 615 1 623 88% 0% Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 20
Slide 33: Corporate lending by sector and stage
Agriculture, forestry, fishing 3.4 ● Property management Manufacturing 2.4 stands for 16 per cent of Public sector and utilities 2.1 Construction 1.3 total loans1) Retail and wholesale 2.5 Transportation 0.8 Shipping and offshore 0.4 Hotels and restaurants 0.4 Information and communication 1.2 Finan
Slide 34: Swedish mortgage portfolio and underwriting criteria
● Full recourse (very limited debt forgiveness possibilities) Swedbank’s underwriting criteria ● No securitisation (on balance sheet), no sub-prime market, no 3rd – In the repayment ability calculation, the interest party origination rate used is the higher of 6 % or the 5Y fixed mortgage interest r
Slide 35: Mortgage LTV and credit losses
20 20 16 16 92% of portfolio below 70% LTV 12 12 ● Average loan-to-value of 57 8 8 per cent 4 4 0 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 100 LTV per cent 0.50% 1000 ● Increasing over due loan 0.40% >60 days, per cent, LHS >60 days, SEKm, RHS
Slide 36: Capital considerations
© Swedbank
Slide 37: CET1 capital ratio and buffer
● CET1 capital ratio buffer ~370bps1), target of Buffer of ~ 370bps1) 100-300bps 15.0% 18.7% 1.8% 2.6% 19.4% 23.0% 12.0% ● REA increased by SEK 18.9bn to SEK 838bn 4.1 Pillar 2 Guidance ● CRE risk weight floor 0.5 2.5 Leverage ratio req. & P2G moved from Pillar 2 to 4.2 1.6 (3.5%) Pillar 1 – increas
Slide 38: MREL requirements
MREL requirements, % of REA 2) …met by, % of REA 39.8% ● Policy on implementation of 28.5% Eligible liabilities BRRDII requirements 11.8 0.5 2.5 from 1 Jan 2024 P2G 1 published by Swedish CCB 3.1 Subordinated eligible National Debt office OSII buffer 2.7 liabilities Systemic 13.2 (NDO) 18 Oct 20212)
Slide 39: Regulatory developments and Basel IV
● New guidelines to be fully ● The SFSA has imposed an add- ● Includes amendments to the phased in by end of 2021 on related to the ongoing review frameworks for calculating according to EBA decision of IRB models in the Pillar 2 credit risk, CVA, market risk and requirement, as part of its SREP ope
Slide 40: Liquidity and funding
© Swedbank
Slide 41: Liquidity position, LCR and NSFR
159% Liquidity Coverage Ratio 50 6 37 11 2 121% 282 Net Stable Funding Ratio 254 350 307 >2Y Survival horizon Cash and balances with central banks SEK EUR USD OTHER Sovereigns, central banks or multilateral development banks1 Municipalities or public service entities Extremely high quality covered b
Slide 42: Balance sheet composition
SEKbn Assets SEKbn Liabilities SEKbn Liabilities (comparison) 2 000 2 000 CET1 2 000 AT1 + Tier 2 Senior non-preferred debt Lithuania Latvia Senior preferred debt Estonia 1 500 1 500 1 500 Other corporate lending, Sweden & other Nordic countries Deposits 1 000 1 000 1 000 Other private, Sweden Swedi
Slide 43: Deposits and loan-to-deposit ratio
Transaction accounts On-demand savings Term savings +39% Private Corporate 1 259 1 298 1 278 704 704 1 131 608 42 95 572 920 954 29 35 345 43 44 320 536 493 317 288 2018 2019 2020 2021 2022 Q3 2023 Q4 2022 Q3 2023 Q4 2022 Q3 2023 Private SME 200 LTD-ratio Corporate 180 88% 88% 92% Total 142% 82% 160
Slide 44: Funding profile and maturities
SEKbn Strong funding profile ● LCR 159% (EU 2015/61) 1 400 Outstanding volumes ● NSFR 121% (CRD2) 1 200 Q3 2022 Q3 2023 1 000 ● Issued SEK 144bn of long- 800 term funding YTD Q3 2023 600 400 200 0 Covered bonds Senior preferred SNP Short-term Deposits programmes SEKbn Issued, long-term debt SEKbn Ma
Slide 45: Credit ratings
● On July 12 2023, Moody’s affirmed Swedbank’s ratings and wrote that they reflect the bank's strong credit quality, with a focus on low-risk Swedish mortgages, and solid capitalisation. ● On June 20 2023, Fitch Ratings affirmed Swedbank's Long-Term Issuer Default Rating (IDR) 'AA-' and Viability Ra
Slide 46: Funding programmes and formats
● Senior preferred, senior non-preferred and covered bond format ● Major / opportunistic currencies ● Bullet format, FRN or Fixed ● EUR 20m equivalent minimum size ● Listing is optional ● Program formats available: – Senior unsecured debt (preferred/non-preferred): GMTN, potentially USD 144a format,
Slide 47: Cover pool data
Swedbank is a labeled issuer of the ECBC Covered Bond Label Foundation (www.coveredbondlabel.com ) © Swedbank
Slide 48: Cover pool summary
Swedbank is a labeled issuer of the ECBC Covered Bond Label Foundation (www.coveredbondlabel.com ) Rating, S&P / Moody’s AAA / Aaa Repayment structure 7 Total pool size SEK 1 104.5bn – Amortising 77% Geographic distribution Sweden 100% – Interest only 23% Current OC-level 195% Weighted average seaso
Slide 49: Cover pool asset types and geography
Swedbank is a labeled issuer of the ECBC Covered Bond Label Foundation (www.coveredbondlabel.com ) Geographical distribution. Sweden. per cent 30 Sep Type of assets in the pool, per cent 30 Sep (based on loan volume) 2023 (based on loan volume) 2023 North 6.8 Residentials 91.8 Norrbotten county (BD)
Slide 50: Cover pool LTV distribution
Swedbank is a labeled issuer of the ECBC Covered Bond Label Foundation ● Weighted average LTV on property level 53% (www.coveredbondlabel.com ) LTV distribution per property1 LTV distribution by volume1, 2 30% 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% 00-10 10-20 20-30 30-40 40-50 50-60 60-70
Slide 51: LTV per property type
Swedbank is a labeled issuer of the ECBC Covered Bond Label Foundation (www.coveredbondlabel.com ) WA LTV per property type1 Percentage of the pool Average LTV per loan type 120% 120% 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% Substitute Single-family Tenant Tenant Multi-family Commercial Fores
Slide 52: Over-collateralisation
Swedbank is a labeled issuer of the ECBC Covered Bond Label Foundation (www.coveredbondlabel.com ) House price sensitivity of the cover pool ● Current OC-level of 195% 220% Q3 2023 ● 2% legal minimum requirement 200% Q3 2022* 180% Min req. 2% ● Can withstand a severe house price drop 160% and still
Slide 53: The Covered Bond Act
The Covered Bond Act entered into force on July 1, 2004, with most recent amendments effective as per July 8, 2022, and is over-sighted by the Swedish FSA. Its main characteristics are: Dual recourse to the issuer and cover pool Dynamic, regulated pool of assets, frequently monitored by the Sw
Slide 54: Swedish and Baltic economy
© Swedbank
Slide 55: Swedish economy key indicators
Key economic indicators1, 2022-2025 Most recent 2022 2023F 2024F 2025F Real GDP (calendar adjusted) -1.0 (Q2) 2.8 -0.5 -0.4 2.0 • Kingdom of Sweden rated CPI growth, average 6.5 (Oct) 8.3 8.6 3.8 1.4 Aaa/AAA/AAA CPIF growth, average 4.2 (Oct) 7.7 6.1 2.4 1.4 Unemployment rate (15-74), % of labor for
Slide 56: Inflation, krona, loan growth and interest rates
Inflation heading down The krona weakens Headline inflation (CPI) and with fixed interest rate (CPIF) Krona (SEK), US dollar (USD), euro (EUR) and trade-weighted 14.0 index (KIX) 12.0 12 135 10.0 11 130 8.0 125 10 6.0 120 4.0 9 2.0 115 8 0.0 110 -2.0 7 105 -4.0 6 100 2012 2014 2015 2016 2018 2019 20
Slide 57: Baltic economies key indicators
Key economic indicators1, 2020-2024 Most recent 2022 2023F 2024F 2025F Real GDP Estonia -2.9 (Q2) -0.5 -2.0 2.0 3.0 Latvia -1.1 (Q2) 2.8 0.3 1.7 2.8 Ratings CPI growth, annual rate Lithuania Estonia 0.7 (Q2) 1.9 -0.3 1.5 2.3 • Republic of Estonia: A1/AA-/A+ 4.2 (Sep) 19.4 9.8 4.3 2.4 Latvia 3.4 (Sep
Slide 58: Economic sentiment in the Baltics
Economic sentiment Confidence indicators, sa, index represents deviations from long term average (=0) Estonia Latvia Lithuania 30 20 20 20 30 20 20 10 10 10 20 10 10 0 0 10 0 0 0 0 -10 -10 -10 -10 -10 -10 -20 -20 -20 -20 -20 -20 -30 -30 -30 -30 -30 -30 -40 -40 -40 -40 -50 -40 -50 -40 -50 -50 Sep-20
Slide 59: Swedish housing and mortgage market
© Swedbank
Slide 60: Housing price developments
Price developments flats and single family houses1) Valueguard index (2005 Jan = 100) 350 300 250 200 150 100 24 2007 2008 rates (in Annual growth 2009 percent) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 14 4 -6 -16 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20
Slide 61: Housing transactions and prices
● Housing market transactions remain lower than normal in October ● Seasonally adjusted prices continues down in October Housing market transactions Housing prices Housing transactions Seasonally adjusted housing prices: Oct 2021 - Oct 2023 20000 (Monthly change in %) 2 18000 16000 1 14000 0 12000 1
Slide 62: Mortgage growth and household debt service costs
● Mortgage volume growth rate declines ● Mortgage interest rates increase as the central bank policy rate is hiked ● Household debt service costs are rising Mortgage loan growth, housing prices and interest rate Household interest expenses percent of disposable income percent index 18 7.0 320.0 16 6
Slide 63: Population growth and household balance sheets
● Population grows while new housing stalls ● Balance sheets among households remain solid Population growth slows Strong household balance sheets Completed housing and population growth, no. of persons and housing, 1978-2022 Household loans as percentage of asset and income 80000 160000 195% 45% 70
Slide 64: Appendix
© Swedbank
Slide 65: Sustainability history and milestones
Launched fund Swedbank’s first Swedbank is the first First SRI mutual fund Swedbank acquired First listed Nordic Headquarters in investing in Group-wide savings bank launched – a majority stake in bank to receive ISO Stockholm received companies with sustainability report established in excluding se
Slide 66: Climate transition and TCFD lending exposure
Lending to TCFD material groups, SEKm 400 000 350 000 300 000 Support the increased investment need in the transition to a low carbon economy 250 000 200 000 150 000 Identify, measure and monitor transition and physical climate risks 100 000 50 000 Increase climate change awareness and enhance trans
Slide 67: ESG ratings
As per Q3 Bloomberg Gender Equality Index 75 CDP C Dow Jones Sustainability Index 76 EY SHE Index Sweden 82 Fair Finance Guide 70 FTSE4Good ESG Rating 4.2 ISS Corporate Rating C (Prime) MSCI ESG Rating AA Sustainalytics ESG Risk Rating 20.6 S&P ESG Rating 76 © Swedbank 67
Slide 68: Macro scenarios and probability weightings
Positive scenario Baseline scenario2 Negative scenario 2023 2024 2025 2023 2024 2025 2023 2024 2025 ● Probability weightings Sweden GDP (annual % change) 3 -0.7 0.9 2.2 -0.7 -0.2 2.3 -1.1 -6.6 0.7 ● 66.6 per cent for baseline scenario Unemployment (%) 7.5 8.1 8.2 7.5 8.2 8.3 7.7 10.4 11.3 House pric
Slide 69: IFRS 9 impairment stages
Initial recognition, or no Significant increase in Evidence of impairment significant increase of credit risk credit risk Stage 3 loans Stage 1 loans Stage 2 loans Impairment amounting to Impairment amounting to lifetime expected credit lifetime expected credit losses Impairment amounting to losses
Slide 70: Liquid assets and LCR composition
SEKm Level 1 assets 641 459 Cash and balances with central banks 1 282 273 Securities issued or guaranteed by sovereigns, central banks or MDBs and international organisations 2 306 971 Securities issued or guaranteed by municipalities public sector entities 2 355 Extremely high quality covered bond
Slide 71: Funding programmes and limits
Swedbank AB 100% owned Swedbank Mortgage AB Program Limit Program Limit Long Term Long Term Global MTN USD 40bn Domestic Benchmark CB Unlimited*** USD Senior (144a / Reg.S) USD 15bn EMTN CB EUR 25bn AUD Senior** AUD 10bn Norwegian Benchmark CB Unlimited*** NSV (stand alone doc.) AUD Covered bonds**
Slide 72: Long-term funding issuance
ISIN Product Tenor Currency Amount, mn Type Spread Value date Maturity date XS2443485565 SNP 5Y EUR 750 Fixed MS+73 February 17, 2022 February 17, 2027 XS2465622459 SP 3Y USD 850 Fixed T+82 April 4, 2022 ● The table excludes volumes April 4, 2025 XS2465622707 SP 3Y USD 400 FRN SOFR+91 April 4, 2022
Slide 73: Investor relations contacts and financial calendar
Annie Ho Magnus Alvesson Matilda Hellman Q4 Interim report 24 Jan 2024 Head of Investor Relations Equity & Credit Rating Equity & Credit Rating Annual report 22 Feb 2024 Mobile: +46 703 43 78 15 Mobile: +46 706 10 33 41 Mobile: +46 730 59 77 52 AGM 26 March 2024 annie.ho@swedbank.com magnus.alvesson