Nordea Bank Abp · OMXHEX:NDA_FI
Nordea Bank Abp — Nordea — Investor Day (October 2019)
62 slides from Nordea Bank Abp's investor day presentation, Oct 25, 2019
Slide 1: Nordea – A Strong and Personal Financial Partner
Nordea – A Strong and Personal Financial Partner Capital Markets Day London, 25 October 2019
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 assuran
Slide 3: Agenda
Agenda Opening remarks Torbjörn Magnusson 09.00 – 09.15 ▪ Nordea – A Strong and Personal Financial Partner Frank Vang-Jensen 09.15 – 09.55 ▪ Financial plan and targets Christopher Rees 09.55 – 10.15 Break 10.15 – 10.30 ▪ Wholesale Banking Martin A Persson 10.30 – 10.50 ▪ Commercial & Business Bankin
Slide 4: Nordea – A Strong and Personal Financial Partner
Nordea – A Strong and Personal Financial Partner Capital Markets Day Frank Vang-Jensen, President & Group CEO 25 October 2019
Slide 5: Nordea enters a New Phase
Nordea enters a New Phase Optimise Drive Create Great Operational Income Growth Customer Efficiency Initiatives Experiences Execution & Accountability A Strong and Personal Financial Partner 5
Slide 6: Nordic-focused bank – a strong foundation to build on
Nordic-focused bank – a strong foundation to build on 6 Group financial performance must improve
Slide 7: Nordea in the New Phase
Nordea inthe New Phase
Slide 8: Three key priorities to succeed and meet the financial targets
Three key priorities to succeed and meet the financial targets Optimise Drive Create Great Operational Income Growth Customer Efficiency Initiatives Experiences 8
Slide 9: All levers to be used to optimise operational efficiency
All levers to be used to optimise operational efficiency Strong cost culture Leadership and accountability Costs rather than cost programmes C/I ratio Simplified processes 50% Fewer people and organisation 9
Slide 10: Drive income growth initiatives – time to take back lost ground
Drive income growth initiatives – time to take back lost ground Leverage on business and Increase cross-selling by being sales momentum proactive with customers Income C/I ratio Readiness for tactical Investing in our core segments 50% M&A bolt-ons 10
Slide 11: Long-term success by creating great customer experiences
Long-term success by creating Nordea is personal great customer experiences and local with a Nordic mindset A bank A Safe for every need and Trusted – Financial Anywhere & Partner Anytime Strong advisory The leading capabilities Nordic bank with for corporates a sustainable and private offering cust
Slide 12: The New Phase is about execution
The New Phase is about execution Full Clear Simplified accountability targets and governance to the business priorities areas structure 12
Slide 13: Financial targets
Financial targets Cost/income ratio in FY22 Return on equity in FY22 50% >10% Capital policy from 2020 Dividend policy from 2020 60-70% pay-out of distributable 150-200 bps profits to shareholders.¹ management buffer Excess capital intended to be distributed above the regulatory CET1 requirement to
Slide 14: A new business plan for improved performance
A new business plan for improved performance Wholesale Banking New strategic direction with considerable capital and cost reductions ROCAR¹ Commercial & Business Improve customer experience, cost and capital efficiency in focus C/I Banking Personal Banking Improve customer experience and firm cost m
Slide 15: Optimising capital allocation and investments to drive higher Group return by 2022
Optimising capital allocation and investments to drive higher Group return by 2022 Other Asset & Wealth Management 4% Capital allocation governed by ROCAR 8% Personal outlook and growth prospects Banking 33% Commercial & Business 25% Share of Banking Group capital Business development and investment
Slide 16: Nordea in the New Phase
Nordea in the New Phase Optimise Drive Create Great Operational Income Growth Customer Efficiency Initiatives Experiences Execution & Accountability A Strong and Personal Financial Partner 16
Slide 17: Financial plan and targets
Financial plan and targets Capital Markets Day Christopher Rees, Group CFO 25 October 2019
Slide 18: We have a strong financial foundation to build on
We have a strong financial foundation to build on Solid capital position AA rating (CET1 Ratio 15.4% Q319 AA (AA- by all 3 rating agencies) and RAC¹ ratio 11.6% Q219) Strong liquidity position Solid credit quality (NSFR 110%² and LCR 188% Q319) Proven capital Diversified business and generation capa
Slide 19: Weak financial performance in recent years calls for an accelerated financial plan
Weak financial performance in recent years calls for an accelerated financial plan Return on equity vs peers Indexed total shareholder return Nordea 10.8 Peer average 91 Nordea, R4Q 8.0 77 Peer average, R4Q Q215 Q216 Q217 Q218 Q219 Q215 Q216 Q217 Q218 Q219 Relative RoE Peers (weighting): DB (30%), D
Slide 20: Financial targets
Financial targets Cost/income ratio in FY22 Return on equity in FY22 50% >10% Capital policy from 2020 Dividend policy from 2020 60-70% pay-out of distributable 150-200 bps profits to shareholders.¹ management buffer Excess capital intended to be distributed above the regulatory CET1 requirement to
Slide 21: Gross cost reductions exceed investments and inflation
Gross cost reductions exceed investments and inflation Cost changes by end 2022 2-3% CAGR ~-5% CAGR For 2020, we expect ~4,900 to reach a cost base 700-800m below EUR 4.7bn C/I 50% We plan to continue delivering annual net cost reductions beyond 2020 Cost 2019 Inflation IT & Investments Gross Gross
Slide 22: Delivery of 700-800m gross cost reduction
Delivery of 700-800m gross cost reduction Fewer people until 2022 700-800m ▪ Majority of the planned reductions in head office and central functions People ▪ Reduction in number of external consultants ▪ Nearshoring Staff Reduced IT spend ▪ Outsourcing ▪ Continued decommissioning, automation and clo
Slide 23: Intensified business activity and customer focus start to show results
Intensified business activity and customer focus start to show results Household lending (EURbn) Market share Swedish mortgages 20 % Share of market growth +3-4%¹ Back book 14 % +3% 160 14 % 151 146 147 -5 % 2016 2017 2018 Q319 Jun Sep Dec Mar Jun Sep Dec Mar Jun Aug 17 17 17 18 18 18 18 19 19 19 Co
Slide 24: Increased clarity under the SSM
Increased clarity under the SSM October 2018: Today: 1 January 2020: Single Supervisory Further clarity attained SREP¹ enters into force Mechanism (SSM) entry ▪ Permission for continued use ▪ Stable foundation, of internal models predictability and level ▪ Comprehensive assessment playing field ▪ Fi
Slide 25: New capital policy and uses of capital
New capital policy and uses of capital Capital policy from 2020 150-200 bps management buffer above the regulatory CET1 requirement Uses of capital Organic growth ~15% 150-200 bps 1.3% 60-70% dividend pay-out ratio For 2019 Nordea targets a dividend of EUR 0.40 per share 3.0% Management buffer Maxim
Slide 26: The path to exceed 10% return on equity in 2022
The path to exceed 10% return on equity in 2022 Expected return on equity development 2019 to 2022 Drivers of profitability Positive momentum on >10% lending volumes Income impact Net flow in AuM Net cost reduction ~8% WB repositioning helping on both profit and capital Stable credit quality Sep 19
Slide 27: Financial targets
Financial targets Cost/income ratio in FY22 Return on equity in FY22 50% >10% Capital policy from 2020 Dividend policy from 2020 60-70% pay-out of distributable 150-200 bps profits to shareholders.¹ management buffer Excess capital intended to be distributed above the regulatory CET1 requirement to
Slide 28: Break
Slide 29: Wholesale Banking
Wholesale Banking Capital Markets Day Martin A Persson, Head of Wholesale Banking 25 October 2019
Slide 30: Wholesale Banking
Wholesale Banking KEY MESSAGES All-time-high customer satisfaction Reduce capital consumption New strategic direction 30
Slide 31: Wholesale Banking overview
Introduction to Wholesale Banking Wholesale Banking overview Large corporate and institutional customer segments 10Y EUR interest rate Complex Daily banking 1,2 0,8 WB CBB CBB 0,4 LC&I BB BBD 0 Oct 14 Oct 15 Oct 16 Oct 17 Oct 18 Oct 19 -0,4 Selected capabilities Wholesale Banking capital requirement
Slide 32: All-time-high customer satisfaction with leading advisory and product services
Introduction to Wholesale Banking All-time-high customer satisfaction with leading advisory and product services Prospera overall performance1 #1 Nordic DCM franchise Award-winning Transaction Banking Rank 2018 2017 Best Bank for Cash Best Trade Finance Nordea 6 387 Management in the Bank Nordics in
Slide 33: Return improvement needed
Wholesale Banking in the Nordea Group Return improvement needed Income Cost Capital 1,555m -957m 7,852m 18% 19% 30% Share of Group income Share of Group cost Share of Group capital (Last 12 months) (Last 12 months) (Q3 2019) ROCAR Cost/income ratio 6% 62% 33 Note: WB ROCAR excl items affecting compa
Slide 34: New strategic direction for Wholesale Banking
Strategic direction for Wholesale Banking New strategic direction for Wholesale Banking Reduce low-return assets Capital optimisation Capital optimisation EUR 1.5bn ~1.5bn ECEC / 8bnREA / ~8bn REA reduction reduction Streamline Markets business model Simplification Complexity reduction TotalTotal co
Slide 35: Zooming in on the new strategic direction
Strategic direction for Wholesale Banking Zooming in on the new strategic direction ▪ Reduce low-returning on-balance sheet commitments Reduce low-return assets ▪ Review of sub-segments ▪ Increase active capital reallocation ▪ Targeting 25% EC reduction Streamline Markets business model ▪ Product re
Slide 36: Reality check
Strategic direction for Wholesale Banking Reality check Corporate economic income Markets capital and income dynamics 8% Complex 17% 15% 31% 61% 49% Advanced 59% 37% Basic 24% Customer turnover: < 1 bnEUR 1-5 bnEUR > 5bn EUR EC Income 36
Slide 37: Wholesale Banking
Wholesale Banking TARGET 2022 All-time-high customer satisfaction ROCAR ~10% Reduce capital consumption New strategic direction 37
Slide 38: Commercial & Business Banking
Commercial & Business Banking Capital Markets Day Erik Ekman, Head of Commercial & Business Banking 25 October 2019
Slide 39: Commercial & Business Banking
Commercial & Business Banking KEY MESSAGES Stable business and good momentum – With potential to improve We know what works – thanks to our customers – Free up time to increase customer intensity Improve operational efficiency – Develop digital-intense customer service model 39
Slide 40: Stable business with well-diversified portfolio and further potential
Introduction to Commercial & Business Banking Stable business with well-diversified portfolio and further potential Good franchise serving our ~550k corporate customers… …with potential for more Complex Market position² People-intense model BUSINESS BANKING¹ Digitally supported People-intense being
Slide 41: Commercial & Business Banking in the Nordea Group
Commercial & Business Banking in the Nordea Group Our starting point Income Cost Capital 2,142m -1,148m 6,525m 25% 23% 25% Share of Group income Share of Group cost Share of Group capital (Last 12 months) (Last 12 months) (Q3 2019) Income per FTE¹ Cost/income ratio ROCAR Underlying ROCAR increase 20
Slide 42: Leverage our franchise to strengthen market position
Strategic direction for Commercial & Business Banking Leverage our franchise to strengthen market position BUSINESS BANKING Continue to do business selection, pricing, cross-selling Protect and develop our and customer acquisitions business model for complex customer needs Improve Continue to levera
Slide 43: Key drivers to make it easier to do it right in a resource-effective way
Strategic direction for Commercial & Business Banking Key drivers to make it easier to do it right in a resource-effective way Simplifying instructions Increase operational efficiency Increase Solve the basics with scalable time with solutions customers Automation of credit processes Improve with mo
Slide 44: Commercial & Business Banking
Commercial & Business Banking TARGET 2022 Stable business and good momentum – With potential to improve Cost/income ratio¹ We know what works – thanks to our customers ~45% – Free up time to increase customer intensity Improve operational efficiency – Develop digital-intense customer service model 4
Slide 45: Personal Banking
Personal Banking Capital Markets Day Sara Mella, Acting Head of Personal Banking 25 October 2019
Slide 46: Personal Banking
Personal Banking KEY MESSAGES Relationship business built on an omni-channel model Improved cost efficiency and scale benefits Profitable growth targeted within all key business lines 46
Slide 47: Strong foundation, but need to improve customer satisfaction and profitability
Introduction to Personal Banking Strong foundation, but need to improve customer satisfaction and profitability Strong foundation… …with potential for more… …showing good traction already Market position1 Organic growth in market share in Sweden • ~340 branches Mortgage new sales market share2 • Con
Slide 48: Focus to improve cost efficiency
Personal Banking in the Nordea Group Focus to improve cost efficiency Income Cost Capital 3,458m -1,976m 8,831m 41% 28% 40% 33% 23% 17% Share of Group income Share of Group cost Share of Group capital (Last 12 months) 32% (Last 12 months) (Q3 2019) ROCAR Cost/income ratio 12% 57% 48 Note: All financ
Slide 49: Highly appreciated mobile bank being rolled out
Strategic direction for Personal Banking Highly appreciated mobile bank being rolled out – increased sales and service in focus Increase in digital usage Great customer experiences Share of Digital savings High ratings in App stores for new mobile bank2 online meetings advisory sessions +12% +108% 2
Slide 50: Leveraging our relationship business model to achieve profitable growth
Strategic direction for Personal Banking Leveraging our relationship business model to achieve profitable growth Deliver great customer Home 65% experience for key life events Relationship business model driving Daily Highly competent advice cross-selling, banking Savings – in person and digital gre
Slide 51: Examples of actions within key areas to generate profitable growth in 2020
Strategic direction for Personal Banking Examples of actions within key areas to generate profitable growth in 2020 ▪ Digital mortgage application process and mobile self-service Maintain strong ▪ Strong local presence combined with high nationwide availability business momentum Home ▪ High proactiv
Slide 52: Key drivers to improve cost efficiency, while protecting business momentum
Strategic direction for Personal Banking Key drivers to improve cost efficiency, while protecting business momentum Leverage common digital platforms Increase service Redesigning the branch network model efficiency Operational efficiency as Automating and simplifying processes a discipline Increase
Slide 53: Personal Banking
Personal Banking TARGET 2022 Relationship business built on an omni-channel model Cost/income ratio¹ Improved cost efficiency and scale benefits ~50% Profitable growth targeted within all key business lines 53 1. Excl distribution agreement
Slide 54: Asset & Wealth Management
Asset & Wealth Management Capital Markets Day Snorre Storset, Head of Asset & Wealth Management 25 October 2019
Slide 55: Asset & Wealth Management
Asset & Wealth Management KEY MESSAGES Leverage strong platform for continued growth – turnaround in net flows 2019 Profitable and globally competitive asset manager Integrated wealth manager with clear growth strategy and plan for improved sales productivity 55
Slide 56: Net flow turnaround in 2019 driven by growth in international Asset Management and Private Banking
Introduction to Asset & Wealth Management Net flow turnaround in 2019 driven by growth in international Asset Management and Private Banking… Net flow Key drivers EURbn, 2013-2019¹ ▪ Blockbuster products in institutional and wholesale distribution 11 ▪ New markets – Americas ▪ Deeper relationships w
Slide 57: Where we serve customers through own distribution and Group channels
Introduction to Asset & Wealth Management …where we serve customers through own distribution and Group channels External distribution Internal distribution Asset Management Wealth Management Rest of Group¹ AuM Institutional Wholesale Private Life & Pensions Q3 2019, EURbn distribution distribution B
Slide 58: Strong performance with potential to improve further
Asset & Wealth Management in the Nordea Group Strong performance with potential to improve further Income Cost Capital 1,601m -755m 2,140m Asset Management 55% 19% Life & Pensions 26% 15% 8% Private Banking 18% Share of Group income Share of Group cost Share of Group capital (Last 12 months) (Last 1
Slide 59: Strategic focus to diversify product range and client base to cater for growth
Strategic direction for Asset Management Strategic focus to diversify product range and client base to cater for growth ▪ Continuity, trading platform upgrade, alpha reviews Continue strong investment performance and product lifecycling ▪ Expand in Americas through partnerships, pension funds Increa
Slide 60: Strategic focus to grow and build an efficient franchise
Strategic direction for Wealth Management Strategic focus to grow and build an efficient franchise Increase Private Banking market share ▪ Growth in Norway and Sweden Grow within occupational pensions ▪ Expand value proposition for corporate segment Grow digital savings and strengthen sales ▪ Saving
Slide 61: Asset & Wealth Management
Asset & Wealth Management TARGET 2022 Leverage strong platform for continued growth – turnaround in net flows 2019 Cost/income ratio¹ Profitable and globally competitive asset manager <40% Integrated wealth manager with clear growth strategy and plan for improved sales productivity 61 1. Incl distri
Slide 62: Three key priorities to succeed and meet the financial targets
Three key priorities to succeed and meet the financial targets Optimise Drive Create Great Operational Income Growth Customer Efficiency Initiatives Experiences 62