Swedbank Ab Class A · OMXSTO:SWED_A
Swedbank Ab Class A — Q3 2012 Earnings Presentation
46 slides from Swedbank Ab Class A's earnings presentation, 2012
Slide 1: Swedbank's third quarter 2012 results
Swedbank’s third quarter 2012 results Michael Wolf, CEO Göran Bronner, CFO Håkan Berg, CRO
Slide 2: Reduced tail risk but weaker economic outlook
Reduced tail risk but weaker economic outlook • Low growth/low interest rate environment will remain • Sweden benefits from strong financials • Regulation drives: – Asset repricing – Increased savings competition – Debt capital markets 2
Slide 3: Excellent financial strength – enables investments
Excellent financial strength – enables investments • Strong cost management • RWA efficiency helps to improve competitive position • Improved relative funding spreads – more work do be done ROE 13.7% CT1-ratio LCR 144% C/I 0.47 17.3%* NSFR 94% Increased investments in advisory and digital channels *
Slide 4: Solid capitalisation level
Solid capitalisation level • CT1-ratio 17.3 percent (Basel 2) • Confirmed low risk level - ICAAP • Low lending growth expected in foreseeable future 4
Slide 5: Retail: Stable development
Retail Stable development SEKm Q1 Q2 Q3 Q/Q • Deposit margins pressure Net interest income 3 407 3 404 3 447 +43 Net commissions 1 261 1 248 1 269 + 21 • Repricing lending Total income 5 123 5 138 5 209 +71 Total expenses 2 342 2 345 2 357 +12 • Solid asset quality Profit before 2 781 2 793 2 852 +5
Slide 6: Large Corporates & Institutions: Improved profitability trend
Large Corporates & Institutions Improved profitability trend SEKm Q1 Q2 Q3 Q/Q • Continued growth in Large Net interest income 887 825 852 +27 - of which LC/FI* 652 666 689 +23 Corporates NII Net commissions 434 346 379 +33 Net gains and • Lending growth 648 316 341 +25 losses Total income 1 980 1 4
Slide 7: Baltic Banking: NII hurt by lower interest rates and FX
Baltic Banking NII hurt by lower interest rates and FX SEKm Q1 Q2 Q3 Q/Q • Lower Euribor affected NII Net interest income 912 870 755 -115 Net commissions 371 378 360 -18 • Negative FX effect Total income 1 452 1 430 1 273 -157 Total expenses 620 588 553 -35 • Small lending growth in EUR Profit befo
Slide 8: Group results: Profitable quarter
Group results Profitable quarter SEKm Q2 Q3 Q/Q YTD • Stable NII Net interest income 5 252 5 263 +11 15 723 - Shrinking deposit margins Net commissions 2 346 2 381 +35 7 132 Net gains and - Continued repricing 455 568 +113 1 782 - Negative FX impact losses Other income 844 839 -5 2 492 Total income
Slide 9: Cost reduction ahead of plan
Cost performance Cost reduction ahead of plan • Target to reduce costs by SEK 1bn 2012 • Staff costs -441m and consultancy costs -208m year on year Cost trend (SEKm) YTD 2011 YTD 2012 YTD Total expenses 13 452 12 662 -790 Variable staff costs -348 -581 Compensation to savings banks -392 -457 Restruc
Slide 10: Relative funding spreads – Senior unsecured 5Y
Liquidity & Funding Relative funding spreads – Senior unsecured 5Y BPS Spread vs SEK 3m Stibor 140 120 100 80 60 40 20 0 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 SWED 02/09/2017 Average other major Nordic banks* * SEB, Nordea, Handelsbanken and Danske Bank 10
Slide 11: Reduced RWA – continued focus
Risk weighted assets Reduced RWA – continued focus RWA development SEKbn 495 • RWA down SEK 10bn in quarter - Positive P/D changes - FX effect 490 485.4 + 4.2 - 5.9 • Focus remains 485 - 4.2 480 - 3.3 475.5 475 - 0.7 470 2012 Q2 Volume Rating Credit risk Other Market risk 2012 Q3 (EAD) migration FX-
Slide 12: Strong capitalisation in new regulatory environment
Capital position Strong capitalisation in new regulatory environment • Core Tier 1 ratio, 30 September 2012 % 18 17 -1.2% 16 17.3% - 0.7% 15 15.4% 14 13 12 11 10 9 8 7 Q3 2012 Basel 3* IAS 19 Q3 2012 including Retail mortgage Internal measures Basel 3 and IAS 19 risk-weights (IRB Advanced) * Estimat
Slide 13: Stable asset quality
Risk highlights Stable asset quality Credit impairments (SEKm) Q2 Q3 • Continued high credit quality in Retail 100 69 Sweden LC&I 54 -35 Baltic Banking -204 -18 • Exit costs Ukraine continues Estonia -25 2 • Macro outlook continues to Latvia -197 8 weaken Lithuania 18 -28 Group Functions & 350 188 O
Slide 14: Enhanced focus on crisis portfolio workout
Asset quality Enhanced focus on crisis portfolio workout • Impaired loans decreased SEK 2.4bn in Q3 to SEK 18bn • Vast majority of impaired loans from crisis portfolio SEK bn 35 31.7 30 25 20 18.0 18.0 Ukraine 15 3.9 0.6 Russia 35 Lithuania 10 5.2 Latvia 5 2.7 Estonia 0.3 LC&I 0 1.9 Retail Q1 11 Q2
Slide 15: Now launching the iPad app!
Now launching the iPad app! • 1.1 million users! • 250.000 new users since June • 20 million “balance-shakes” since June • 10 % of all online equity trades within the mobile • Improved equity trade functions • Better economical overview • First step of next generation Internet Bank 15
Slide 16: Q&A
Swedbank Q&A
Slide 17: Appendix
Appendix Swedbank@ 17
Slide 18: Mortgage loans, gross margin (3 months)
Mortgage loans, gross margin (3 months) % 6 5 Net margin 4 The gross margin should cover: 3 Cost of liquidity ~0.2% Administrative costs ~0.3% Credit impairments ~ 0.03% 2 Tax (26.3% on profit before tax) 1 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Gross margin Swedbank's funding cost Stib
Slide 19: Large Corporates & Institutions: Improved profitability trend
Large Corporates & Institutions Improved profitability trend SEKm Q3 11 Q4 11* Q1 12 Q2 12 Q3 12 Net interest income 756 845 887 825 852 of which LC & FI** 519 563 652 666 689 of which Markets 237 282 235 159 163 Commission income 317 269 434 346 379 of which LC & FI* * 241 261 278 278 311 of which
Slide 20: Cost target 2012
Cost management Cost target 2012 • Target to reduce underlying costs by SEK 1bn 2012 SEKbn 20 18.4 18 17.1 - 0.4 16.1 16 - 0.4 - 0.5 14 12 10 8 6 4 2 0 Total expenses 2011 Variable staf f costs Restructuring costs Compensation to Underlying costs Cost target 2012 (af ter restatements) Savings Banks
Slide 21: Core balance sheet structure
Liquidity and funding Core balance sheet* structure Assets Liabilities SEKbn SEKbn 1 400 1 400 Government guaranteed debt Senior 1 200 1 200 Estonia CEE lending Covered bonds 1 000 Other corporate 1 000 lending, Sweden & other Nordic coun. 800 800 Other private, Sweden 600 600 Swedish 400 400 Deposi
Slide 22: Conservative liquidity levels
Liquidity and funding Conservative liquidity levels • Short-term funding mainly a tool for cash management • More than 12 months pre-funded SEKbn 400 400 350 350 Additional pledgeable 300 and/or liquid300 assets Next 12-month term 250 2501 funding maturities Liquidity reserve, 200 securities 200 CP
Slide 23: Relative funding cost in focus and improving
Liquidity and funding Relative funding cost in focus and improving • Funding plan 2012 completed • Increased liquidity buffers • LCR 144%, NSFR 94% • Broadened and deepened investment base Term funding issuance – completed and planned SEKbn Covered bonds Senior unsecured 70 60 50 40 30 20 10 0 Q311
Slide 24: Relative funding cost in focus and improving
Liquidity and funding Relative funding cost in focus and improving • Funding plan 2012 completed • Continued conservative stance enhances liquidity buffer Long-term debt issued SEKm Outstanding short-term debt SEKm 30 000 70 000 60 000 25 000 50 000 20 000 Q1 12 40 000 Q1 12 15 000 Q2 12 Q2 12 Q3 12
Slide 25: Relative funding cost in focus and improving
Liquidity and funding Relative funding cost in focus and improving • Funding plan 2012 completed • Continued conservative stance enhances liquidity buffer SEKbn Term funding issuance 120 Term funding issuance 100 Average term funding issuance 2010-2011 Average funding plan, rolling 12 months 80 Aver
Slide 26: Long-term funding maturity profile
Liquidity and funding Long-term funding maturity profile • FY 2012 maturities amount to nominal SEK 86bn − of which SEK 9bn for the remainder of 2012 Long-term funding maturity profile SEKbn 200 Government guaranteed debt Senior unsecured 150 debt Covered bonds 100 50 0 2012 2013 2014 2015 2016 2017
Slide 27: Limited need for USD-funding
Liquidity and funding Limited need for USD-funding • USD-funding need covered for more than 12 months • Issued USD 1.5bn of covered bonds (144a) YTD 2012 SEKbn 180 Other assets & liabilities, incl positions in 160 derivatives (off-balance) Interest-bearing securities 140 Lending to the public 120 Lo
Slide 28: Remaining government guaranteed debt
Liquidity and funding Remaining government guaranteed debt • Exited the programme on 30 April 2010 • No issuance under the programme since summer 2009 • Remaining outstanding debt of SEK 37bn maturing during 2013 and 2014 Maturity profile as per Q3 2012 SEKbn 40 JPY CHF 20 USD SEK EUR 0 2013 2014 So
Slide 29: Over-collateralisation
Liquidity and funding Senior unsecured debt strategy • Limited need given Swedbank’s balance sheet structure • Secure OC • Fund liquidity reserves • Structural subordination? Senior unsecured debt maturity profile House price sensitivity of the cover pool 35% Senior unsecured debt SEKbn 30% 100 000
Slide 30: Liquidity reserve
Liquidity and funding Liquidity reserve According to the template defined by the Swedish Bankers' Association SEKm Cash and holdings in central banks 213 310 Deposits in other banks available overnight 301 Securities issued or guaranteed by sovereigns, central banks or multilateral development banks
Slide 31: Asset encumbrance
Liquidity and funding Asset encumbrance Distribution by type of liability and asset Central banks Debt • What is “right” level of asset and instruments Securities Government supranational issued by issued by encumbrance? debt debt Covered credit corporate and Mortgage SEKm instruments instruments bo
Slide 32: Swedish mortgage market
Swedish housing and mortgage market Swedish mortgage market • No securitization (on balance sheet), no sub-prime market, no 3rd party origination, no buy-to-let market • 70% home ownership1 • Rental market is regulated • Transparent credit information (credit information agency, www.uc.se) – Publicl
Slide 33: Real estate prices – Sweden 12 months development
Swedish housing and mortgage market Real estate prices – Sweden 12 months development Single-family homes1 Tenant-owner rights2 Combined3 12M Δ 12M Δ 12M Δ Oct/11 -4% -1% -3% Nov/11 -5% -4% -5% Dec/11 -7% -4% -6% Jan/12 -4% -2% -4% Feb/12 -4% -1% -3% Mar/12 -4% 1% -3% Apr/12 -2% 2% -1% May/12 -2% 3%
Slide 34: Real estate prices – Baltic countries
Baltic real estate prices Real estate prices – Baltic countries Tallinn Riga 1800 1 800 1600 1 600 1400 1 400 1200 1 200 1000 1 000 800 800 600 600 400 400 200 200 0 0 Jan-05 Jan-06 Jan-09 Jan-10 Jan-07 Jan-08 Jan-11 Jan-12 Jul-06 Jul-07 Jul-08 Jul-10 Jul-11 Jul-05 Jul-09 Jul-12 Jan-05 Jan-07 Jan-09
Slide 35: Loans past due 60 days – performance Q/Q
-80 -60 -40 -20 0 -100 20 EURm Q3 11 Q4 11 Q1 12 Asset quality Estonia Q2 12 Q3 12 Q3 11 Q4 11 Latvia Q1 12 Q2 12 Q3 12 Q3 11 Q4 11 Lithuania Q1 12 Q2 12 Q3 12 Q3 11 Q4 11 Ukraine Q1 12 Loans past due 60 days – performance Q/Q Q2 12 Q3 12 Q3 11 Q4 11 Q1 12 Russia Q2 12 Q3 12 35
Slide 36: Provisions – well provided for
Asset quality Provisions – well provided for SEKm 30 000 25 000 65.0% 63.7% 65.2% 20 000 59.8% 61.5% Provision ratios, % Q3 12 2 409 15 000 Retail 77 14 782 2 435 2 478 12 821 2 040 LC&I 148 11 915 1 774 10 000 10 951 9 934 Baltic Banking 56 Russia 64 5 000 Ukraine 82 Group 65 0 Q3 11 Q4 11 Q1 12 Q2
Slide 37: Corporate Retail portfolio will drive capital efficiency
Credit portfolio – Retail Corporate Retail portfolio will drive capital efficiency Total portfolio SEK 230bn Segments excl. Swedbank Volume Secured Mortgage and Swedbank Finance (SEKbn) (%) Agriculture 6.4 85 Manufacturing 10.8 70 Swedbank Mortgage AB Public sector and utilities 4.7 91 91 Leasing (S
Slide 38: Shipping and Offshore
Credit portfolio – Large Corporates & Institutions Shipping and Offshore Shipping and offshore - structure SEKbn 11.6% 30 -1.6% • Lending exposure to shipping and offshore sector of 23 24 24 26 25 5 SEK 25.1bn plus unutilised commitments of SEK 20 6.2bn 6 – Portfolio duration 4-5y – Average fleet ag
Slide 39: Credit portfolio – Agriculture retail
Credit portfolio – Agriculture retail • Segmentation Definitions – Corporate Agriculture: Businesses that derive their Private residents main income from agricultural activities 20 % – Private Investments: Private individuals who own Agriculture 44 % agricultural properties for living or investment
Slide 40: 2012 ICAAP Scenario – Deep recession without recovery
ICAAP 2012 ICAAP Scenario – Deep recession without recovery Triggers Outcome • Europe enters into deep • Sharp GDP drop with no recession recovery (10-15% from 2011 level) • Limited possibilities for fiscal stimulus • Severe drop in house prices • European bank runs (25-37% from 2011 level) • Credit
Slide 41: High capitalisation even in extremely stressed scenario
ICAAP High capitalisation even in extremely stressed scenario • Revenue decrease 31 percent • Credit impairments SEK 64bn over 5 year • Scenario effects on Core Tier 1 ratio -165bp • Well above 12% Core Tier 1 ratio at low point even in extremely stressed scenario in new regulatory environment 41
Slide 42: 2012 ICAAP scenario – Deep recession without recovery
ICAAP 2012 ICAAP dcenario – Deep recession without recovery 105 GDP - Index 105 Real Estate prices - index 100 95 95 85 90 75 85 65 80 55 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 Sweden Estonia Latvia Lithuania Sweden Estonia Latvia Lithuania 3.0% Interest rates – 3m 14 FX scenari
Slide 43: 2012 ICAAP – Main scenario results
ICAAP 2012 ICAAP – Main scenario results SEK bn Net Interest Income • NII decreases by 39% throughout the 30 20.7 scenario 20 10 12.6 0 2011 2012 2013 2014 2015 2016 • Credit Impairments total SEK 64bn Credit impairments over the scenario period SEK bn 30 23.4 20 10 0 2011 2012 2013 2014 2015 2016 -
Slide 44: 2012 ICAAP – Income statement
ICAAP 2012 ICAAP – Income statement Total Income statement (SEKbn) 2011 2012 2013 2014 2015 2016 2012 - 2016 Total net interest income 20.7 19.5 16.7 14.2 13.0 12.6 75.9 Total income 34.7 31.8 34.0 25.4 24.3 24.1 139.6 Total expenses 20.9 17.6 18.7 18.0 18.0 17.8 90.1 Profit before credit losses 13.
Slide 45: 2012 ICAAP – Credit impairments
ICAAP 2012 ICAAP – Credit impairments EAD 2011 Acc. loss ratio Credit impairments (%) (SEKbn) 2012 2013 2014 2015 2016 2012 - 2016 Total 1,384.4 0.6 1.8 1.5 0.9 0.5 4.6 of which LC & I 309.8 0.5 2.3 2.0 0.8 0.6 5.4 Retail 950.8 0.3 1.2 1.0 0.7 0.3 3.2 Estonia 52.5 1.2 2.5 2.2 1.8 1.7 6.6 Latvia 30.6
Slide 46: 2012 ICAAP Main adverse scenario results
ICAAP 2012 ICAAP Main adverse scenario results Capital assessment RWA & Capital (SEKbn) 2011 2012 2013 2014 2015 2016 RWA 492.3 489.5 504.1 433.9 395.2 365.0 RWA inc 15% mortgage riskweight * 565.3 552.2 557.1 482.4 442.6 414.4 RWA inc regulatory effects ** 588.1 575.0 557.1 482.4 442.6 414.4 Core T