Handelsbanken Large Cap Seminar - Nordea · 1/1/2012 · Handelsbanken Large Cap Seminar 10...
Transcript of Handelsbanken Large Cap Seminar - Nordea · 1/1/2012 · Handelsbanken Large Cap Seminar 10...
Handelsbanken Large Cap Seminar 10 September 2012
Fredrik Rystedt Chief Financial Officer
Disclaimer
2 •
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 can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of various factors.
Important factors that may cause such a difference for Nordea include, but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate, (iii) change in the regulatory environment and other government actions and (iv) change in interest rate and foreign exchange rate levels.
This presentation does not imply that Nordea has undertaken to revise these forward-looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided.
• Nordea’s focused business model
• New Normal – the way to build the future bank model
• Key messages
4 •
Nordea in brief (Aa3 / AA- / AA-)
11 million customers - 9 home markets
- Approx. 10.5 million personal customers - 500,000 corporate customers, incl. Nordic Top 500
Distribution power - More than 1,000 locations in total - 6.6 million Netbank customers
Financial strength - EUR 9,3bn in income (2011)
- EUR 709bn of assets - EUR 27bn in equity capital - AA credit rating
- Core Tier 1 capital ratio of 11.8%
EUR ~28bn in market cap - One of the largest Nordic corporations
- A top-10 European retail bank
Nordea’s home markets Nordea is the largest financial service group in the Nordic and Baltic Sea region.
Nordea’s focused and prudent business model
5 •
Well diversified and balanced model
Relationship banking is key
Very risk focused
Resources efficiently used on core business
Fully integrated model across countries and business units
The Nordics and its structure as the home market
Retail Retail Retail Retail
Wholesale Wholesale Wholesale Wholesale
2009 2010 2011 H1/12
Customer driven
6 •
Total income per area, %
Capital Markets risk management result of risk in
customer transaction
Customer driven business model 96% customer-related, only 4% from Risk Management
Wealth Management Wealth Management Wealth Management Treasury
Treasury Treasury
Wealth Management
Treasury
7 •
• Household relationship customers up 42% since 2007
• Generates more income
• More satisfied customers
• And better risk control
Strengthened household customer relationships
1 900
2 100
2 300
2 500
2 700
2 900
3 100
3 300
Number of Gold and Private Banking customer, millions
Total relationship customers
- Leading Nordic Wholesale Banking platform
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-20 0 20 40 60 80 100 120
Important relationships*
Greenwich Quality Index**
Nordea
Peer 1 Peer 2
Peer 3
Peer 4
Important relationships are banks that are considered important to all domestic and international services. The Greenwich Quality Index reflects a [normalised composition] of all quantitative scores shown on a scale from 0 to1,000. Deviations from the mean value.
* **
8 •
Successful customer relationship strategy
Successful customer relationship strategy - Swedish corporate customers as an example
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4743
3333
2011 2010 2009 2008
686264
56
2010 2011 2009 2008
59
474438
2011 2010 2009 2008
Lead Relationships (%)
Product Cross-sell Effectiveness (%)
Share Strategic Thinking (%)
Source: Greenwich Associates Large Corporate Banking surveys
The 1 or 2 most important bank or house bank used for
domestic and/or international services
The average number of products bought from the bank divided by the average number
of products used by its customers
With which bank customers share their strategic thinking
10
Risk focus and diversification An integrated and centralised risk and capital management function as well as credit portfolio composition
Geography
Products
Industry
Integrated and centralised risk management framework
• Risk awareness is incorporated in the business strategies • Clear risk, liquidity and capital management frameworks, including policies and instructions for different risk types, capital adequacy, capital structure and renumeration
• Nordeas credit portfolio is well diversified both in terms of industry sector and geography
Household 44%
Real estate 13%
Other, public and org 9%
Other financial institutions
4%
Industrial commercial services
4%
Consumer staples 4%
Shipping 4%
Retail trade 4%
Other 13%
Public Sector 1%
11
56% corporate lending and 44% household 85% of the portfolio in the Nordic countries
Credit portfolio by sector, EUR 350bn
Nordic countries and Poland, Baltics
and Russia 91% EU countries
4%
USA 1%
Latin America 1%
Asien 1%
Other OECD 0%
Other non OECD 2%
Other 9%
Credit portfolio by country, EUR 350bn
Nordic countries and Poland, Baltics and Russia. EUR 320bn Denmark 96.9 Sweden 88.3 Finland 55.6 Norway 57.6 Poland 6.8 Baltics 8.6 Russia 5.9
With its inherent diversification strength Q2 2012
-60
-50
-40
-30
-20
-10
0
10
20
H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 12
Bps
… generates low credit losses over the business cycle
12 •
Credit risk appetite 25bps
Loan loss ratios, Q1/02 – Q2/12
13 •
Nordea’s business model has proven highly effective…
Total operating income, EURm
• Low volatility in earnings due to diversification in terms of geography, industry sectors and products
• Main focus on traditional banking • Universal and diversified banking
model • Customer-driven capital markets
operations
• The model has proven resilient on income and profitability
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Total operating income 2001 - 2011 (EURm)
Net interest income Net commission income Trading income Other income
… with one of the most stable profit development among banks
Profit before tax development through the financial crisis (Indexed) Index = 100
in Europe
Nordea
European peers**
Nordic peers*
* Nordic peers: Danske Bank, DNB, SEB, SHB, Swedbank
** Aggregate of a selected number of banks in the European peer group: BBVA, BNP Paribas, Commerzbank, Erste, Intesa, KBC, Santander, SocGen, UniCredit
-80
-60
-40
-20
0
20
40
60
80
100
120
Q1
2007
Q2
2007
Q3
2007
Q4
2007
Q1
2008
Q2
2008
Q3
2008
Q4
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
15 •
…which gives strong capital generation…
Core tier 1 capital, EURm
• Continued strong profit generation
• Generated capital of EUR 6.9bn since 2006* • In addition distributed EUR 6.3bn
to shareholders
• Strong capital generation gives good flexibility
*Adjusted for rights issue
16 •
…which together with strict RWA control…
182 180
183
185
182 181
Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12
Risk-weighted assets (RWA), EURbn*
• RWA decreases due to: • Improved credit quality • Decrease in market risk
• FX increases RWA
* Basel II excluding transition rules
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… generates a clear increase in Core tier 1 ratio
Core tier 1 capital ratio, % (excl. hybrids)*
* Basel II excluding transition rules
• Increase despite continued business growth • Lending growth of 16% • RWA reduction of 2%
• Focus on capital efficiency gives result
• Improved ratio by 180 bps since Q2/10
18 •
CRD IV and IAS 19 impact offset by RWA efficiency and roll-outs
• CRD IV impact on RWA by EUR 14bn • CVA • Asset value correlation
• IAS19 calculated at end 2011
• Roll-outs and efficiency effects RWA by EUR 19bn
Core tier 1 ratio impact
11.8%
1.0%
0.2%
1.1%
11.7%
19 •
Nordea Group is LCR-compliant
49
56 61
56 58 62 64
60
68
Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12
Liquidity buffer, EURbn
• Nordea is LCR compliant on a Group level • LCR of 144% • LCR compliant in all
currencies
• Nordea has increased cash and balances with central banks by EUR 13bn to be well prepared for turbulent markets
20 •
Overall stable credit quality
245
207
166
242
118 112
263
218 217
Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12
Total net loan losses, EURm
• Continued low loan losses in Norway, Sweden and Finland
• Elevated levels in Denmark and Shipping
Individual 1,782
Individual 2,043
Individual 2,240
Collective 674
Collective 562
Collective 453
Q2/11 Q1/12 Q2/12
Performing 2,633
Performing 3,473
Performing 3,743
Non-performing 2,049
Non-performing 2,195
Non-performing 2,632
Q2/11 Q1 /12 Q2/12
21 •
Impaired loans
Impaired loans, EURm Total allowances, EURm
* Performing: Allowance established, payments made * Non-performing: Allowance established, full payments not made on due date
• Impaired loans increased to 164bps (147bps) of loans
• Increase to a large extent due to clarified and stricter rules in Denmark introduced by Danish FSA
• Stable development in other countries • 59% of impaired loans performing
• Total allowances in relation to impaired loans decreased to 42% (46%)
• Individual allowances has been stable at a level of 35%
• Nordea’s focused business model
• New Normal – the way to build the future bank model
• Key messages
New Normal – the way to build the future bank business model
• Ensure continued great customer experiences • Product innovation and enhancements • Further focus on advisory bank concept • Mitigate impact on customers from regulations
• Ensure sufficient RoE to secure access to capital and attractive funding
• Customer and product and advice related activities • Cost efficiency • Capital efficiency
• Approx. 100 projects ongoing
23 •
34 169 33 844 33 068 32 557
31 988
Q2/11 Q3/11 Q4/11 Q1/12 Q2/12
1 275 1 242 1 266 1 276 1 290 171
Q2/11 Q3/11 Q4/11 Q1/12 Q2/12One-off restructuring charge
The New Normal plan continues to deliver in terms of efficiency
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Capital efficiency Funding / liquidity efficiency Cost efficiency
Group FTE development
Total expenses, EUR million
RWA development, EUR billion Liquidity premia – status update
Purpose • Align internal pricing with true cost/value of funding and liquidity • Enhance understanding of product and customer profitability
Principles • Calculated at contract level • Reflect the characteristics of the contract, e.g. maturity • Based on Nordea’s cost of funding curve Status • “Granular liquidity premia” allocated to business areas, but not below • Pilots are carried out in a number of areas to assess impact • Roll-out across most business units planned for Q1 2013
185,1
9,5 6,9
3,7
3,9
8,7
181,3
Q4/
10
Cre
dit q
ualit
y
Gro
wth
FX e
ffect
s an
d ot
her
Base
l 2.5
RW
A in
iativ
es
Q2/
12
63
11
95
56
16
96
Retail Banking: Execution of New Normal
25 •
Retail Banking – Key activities Retail Banking – Key results
• Execution of the New Normal plan with increasing focus on the most profitable customer relationships and segments
• Sharper business selection and pricing
• Capital discipline through RWA efficiency initiative
• Continued development of the efficient distribution strategy
• Firm cost containment, by strong focus on centralisation, digitalisation and process automation
• Constant attention on maintaining a high customer satisfaction
C/I %
RaRoCaR %
RWA EUR bn *
EURm H1/12 H1/11 Growth
Total operating income 2,746 2,565 7%
Total operating expenses -1,526 -1,617 -6%
Operating profit 949 678 40%
H1/2011 H1/2012
* Increase related to changes in risk weights on mortgage in Poland
31 21
74
32 22
72
Wholesale Banking: Execution of New Normal
26 •
Wholesale Banking – Key activities Wholesale Banking – Key results
• Increased intensity and relevance in all interactions with customers
• Focus on core customer relationships, wallet share and fee-based income
• Alignment of the Wholesale Banking value chain to improve customer service experience and drive efficiency
• Adapting to the new regulatory framework – what and how we do business with our customers
• Strict internal resource management
EURm H1/12 H1/11 Growth
Total operating income 1,455 1,379 6%
Total operating expenses -468 -431 9%
Operating profit 820 866 -5%
H1/2011 H1/2012
C/I %
RaRoCaR %
RWA EUR bn
191,1 199,8
Wealth Management: Execution of New Normal
27 •
Wealth Management – Key activities Wealth Management – Key results
EURm H1/12 H1/11 Growth
Total operating income 697 661 5%
Total operating expenses -385 -369 4%
Operating profit 311 292 7%
• On-going business model efficiency initiatives in Private Banking • Migration of lower net value customers to Retail
• Continued front-line lean program
• Launch of new support organisation, aiming to increase # customers/FTE
• Implementation of new, comprehensive capital model to further improve RWA efficiency
• Continued focus on cost reduction and efficiency in Asset Management • 3 funds closed and several funds
reengineered H1
• Migration of Life & Pensions customers to more capital light products • 75% of GWP in capital light products in Q2,
69% in Q1 and 59% 2011
C/I %
RWA EUR bn
AuM EUR bn
H1/2011 H1/2012
3,5 3,8
56 56
• Nordea’s focused business model
• New Normal – the way to build the future bank model
• Key messages
Key messages
29 •
• Nordea’s customer driven business model delivers • Significant improved customer relationships and stregthened market positions • Stable revenue growth • Solid credit quality • Strong capital generation
• New Normal plan continue to delivers efficiency • On costs • Capital • And funding and liquidity
Handelsbanken Large Cap Seminar 10 September 2012
Fredrik Rystedt Chief Financial Officer