Leading Indicators of Russian Banking Sector Risks : Methodology and Examples
Öhman Russian Banking Seminar - Nordea · 2015-05-07 · Öhman Russian Banking Seminar 26...
Transcript of Öhman Russian Banking Seminar - Nordea · 2015-05-07 · Öhman Russian Banking Seminar 26...
Öhman Russian Banking Seminar 26 November 2009
Thomas NeckmarHead of New European Markets
Profitable organic growth in solid segments
Nordea - one of few foreign banking partners
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Nordea - the leading bank in the Nordic and Baltic Sea region…
SwedenSwedenBranches 329Customers 3.6 millionEmployees, FTE’s 4,497Total lending EUR 62.9bnMarket rank 2-3
Branches 329Customers 3.6 millionEmployees, FTE’s 4,497Total lending EUR 62.9bnMarket rank 2-3
•Incl. Polish Life customers
NorwayNorwayBranches 124Customers 0.8 millionEmployees, FTE’s 1,842Total lending EUR 41.7bnMarket rank 2
Branches 124Customers 0.8 millionEmployees, FTE’s 1,842Total lending EUR 41.7bnMarket rank 2
DenmarkDenmarkBranches 297Customers 1.6 millionEmployees, FTE’s 4,960Total lending EUR 68.8bnMarket rank 2
Branches 297Customers 1.6 millionEmployees, FTE’s 4,960Total lending EUR 68.8bnMarket rank 2
FinlandFinlandBranches 313Customers 3.1 millionEmployees, FTE’s 5,091Total lending EUR 50.1bnMarket rank 1
Branches 313Customers 3.1 millionEmployees, FTE’s 5,091Total lending EUR 50.1bnMarket rank 1
EstoniaEstoniaBranches 22Customers 101,000Employees, FTE’s 362Total lending EUR 2.4bnMarket rank 3
Branches 22Customers 101,000Employees, FTE’s 362Total lending EUR 2.4bnMarket rank 3
Nordea home marketsNordea home markets
LatviaLatviaBranches 22Customers 86,000Employees, FTE’s 454Total lending EUR 3.0bnMarket rank 3
Branches 22Customers 86,000Employees, FTE’s 454Total lending EUR 3.0bnMarket rank 3
LithuaniaLithuaniaBranches 21Customers 118,000Employees, FTE’s 317Total lending EUR 2.1bnMarket rank 4
Branches 21Customers 118,000Employees, FTE’s 317Total lending EUR 2.1bnMarket rank 4
RussiaRussiaBranches 49Customers 50,000Employees, FTE’s 1,545Total lending EUR 3.5bnMarket rank 27
Branches 49Customers 50,000Employees, FTE’s 1,545Total lending EUR 3.5bnMarket rank 27
PolandPolandBranches 158Customers 580,000*Employees, FTE’s 1,619Total lending EUR 4.1bnMarket rank 13
Branches 158Customers 580,000*Employees, FTE’s 1,619Total lending EUR 4.1bnMarket rank 13
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…with a solid position in five east European countries – NEM account for 6% of Nordea Group revenues
Value creation through profitable organic growth – maintained moderate risk profile
Loyal to long-term strategy and core customers - continued focus on prudent banking and firm credit policies
New European Markets Total income, EURm
108 121
123177
110105
Jan-Sep 2008 Jan-Sep 2009
Baltic Russia Poland
341
401
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New European Markets continue to be an important part of Nordea’s long-term strategy…
Profit orientation – cost, risk and capital
Ambitious vision and targets
Clear growth strategy
Strong customer- oriented values and
culture
Great Nordea
Increase business with existing Nordic customers and attract new customers
Exploit global and European business lines
Take Nordea to the next level of operational efficiency to support sustained growth
Supplement Nordic growth through investments in New European Markets
Despite turbulent times – the journey towards Great Nordea continues
Cautious speed mirroring prevailing market conditions
Focus on cost, risk and capital
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…with a clear focus in the short-term
Pro-active risk management
Profitable growth in selected segments Nordic and international corporates
Best local corporates in attractive segments
Municipalities and state entities
High income earners
Employees of corporate customers
Young people with high potential income
Firm cost management and increased operational efficiency
Innovative multichannel distribution and high usage of e-services
Full product range and standardised customer concepts with successful track record and procedures aligned with the Nordea Group
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Russian macroeconomic situation and banking sector trends
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Economy still dependent on export of raw materialsGDP contraction of around 7% 2009 – but positive monthly growth in last three months
Inflation falling from high levels, but upward pressure from increasing prices for gas and other utilities and services
Central Bank lowering discount rate, supporting banks and the corporate sector
Russian Ruble strengthened
Positive trend for direct investments from early 2009
Expected GDP growth of 1.5% in 2010 and 3% in 2011 given current oil price
Severe Russian economic downturn – pressure easing GDP
Inflation
Clear signs of recovery in banking industry…
Lending growth close to zero in H1, positive trend in Q3
High activity in solid sectors (oil and gas, telecom, electric energy industry and some others)
Growing NPL in H1, declining NPL growth rate in Q3
Share of retail lending declined since September 2008
State banks “obliged” to increase lending at refinancing rate + 3%Increasing deposits from state-owned companies
EURbn 2006 2007 2008 Jun-Aug 2009
TOTAL ASSETS (LIABILITIES) 376,9 543,3 756,6 764.9
% GDP 51,9 60,8 67,5
EQUITY 49.0 72.1 102.9 113.3
% GDP 6,3 8,1 9,2
% to assets of the banking sector 12,1 13,3 13,6
CORPORATE LOANS 170,0 252,1 337,7 345.8
% GDP 29,8 37,1 39,8
% to assets of the banking sector 57,5 61,1 59
INDIVIDUALS LOANS 50,8 80,2 108,4 98.8
% GDP 7 9 9,7
% to assets of the banking sector 13,5 14,8 14,3
DEPOSITS FROM INDIVIDUALS 102,8 139,3 159,4 180.1
% GDP 14,2 15,6 14,2
0
200
400
600
800
1 000
1 200
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
GDP (bln.EUR) GDP forecast (EUR)T otal Asset s (Liabilit ies) of banks (bln.EUR) T otal Assets (Liabilit ies) of banks forecast (bln.EUR) Corporate Loans (bln.EUR) Corporate Loans forecast (bln.EUR)Individuals Loans (bln.EUR) Individuals Loans forecast (bln.EUR)
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…backed by massive state support – none of the major banks has collapsed
Capital injections in the form of subordinated loans and guarantees of unsecured loans
Changed regulations - decreasing banks’ mandatory reserves
Guarantees issued by Central bank to compensate possible losses on interbank market
Raised turnover of REPO-operations with the Central Bank - list of underlying securities extended
State guarantees for selected corporates
Deposit Insurance Agency capitalised EUR 4bn
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…with a clear consolidation trend
Number of banks continues to decline Increasing asset concentration in the banking sector, mostly because of larger share of state-owned banks
1 29
9
1 25
3
1 18
9
1 13
6
1 10
8
1 09
4
1 08
3
1 08
0
1 07
8
76,5%
80,6%81,7% 81,3% 81,4% 81,6%
75,0%73,8%73,3%
0
200
400
600
800
1000
1200
1400
1600
1800
31.12.04 31.12.05 31.12.06 31.12.07 31.12.08 31.03.09 30.06.09 31.07.09 31.08.0960,0%
65,0%
70,0%
75,0%
80,0%
85,0%Number of banks TOP-50 share in total assets, %
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Nordea Russian operations
Nordea Bank Russia – a full service bank…The Bank possesses all the necessary banking licenses and provide a full range of financial products and services to corporate customers, households, and financial institutions.
Account servicesCash managementPaymentsNet BankLendingLeasingFactoringDeposits
MortgageCar loansConsumer lendingDepositsCardsNet Bank
Correspondent accountsSyndicationsFX-tradingCustody servicesBond issues
Arrangement of bond issuesTrade and Project financeCapital Markets Products
Corporate customers
Household customers
Financial institutions
Internet tradingBrokeragePaymentsPrivate banking
…with an attractive position in 15 regionsCurrently the Bank’s sales network comprises 49 full-service branches and mini-offices in 15 regions of Russia.
Samara
Sankt-Petersburg
MoscowArkhangelsk
Yaroslavl
LipetskBelgorod
Stary Oscol Voronezh Penza
Rostov VolgogradSaratov
EkaterinburgChelyabinsk
Novosibirsk
Highly integrated part of Nordea group…
2006 2007 2008 2009
Nov 2006 Agreement signed
to purchase 75.01% of JSB
Orgresbank
March 2007 Deal finalized – remaining part owned by top managers and
EBRD
May 2009 JSB Orgresbank
100% consolidated –
increased equity
June 2009 Changed name to OJSC Nordea Bank – transfer
of bank licenses
Coordination of all activities with NEM Management, through steering committee, ExCom and Board of Directors
Setting up information flows and reporting routines
Integration of credit processes:
Credit memo
Powers to act
Coordination of operations with Group Treasury
Nordic team transferred from IMB, product line updated
Priority areas for integration since acquisition in November 2006…
…and integration continues at high speed
Finance
Credit
Market and operational risks
Treasury
IT
HR
Capital Markets Products
…with continued strong performance 5 star top rating as most reliable bank in Russia – Forbes 20 March 2009
Strong inflow of solid new customers # 8 in rating of most profitable banks
# 18 in rating Corporate lending # 27 in terms of total assets – up from # 77
Assets, bEUR
1,2
2,3
3,8
4,44,2
0,8
4,1
4,6
2,9
2,0
0,9
0,0
1,0
2,0
3,0
4,0
5,0
1Q20
07
2Q20
07
3Q20
07
4Q20
07
1Q20
08
2Q20
08
3Q20
08
4Q20
08
1Q20
09
2Q20
09
3Q20
09
Operating profit, mEUR
6,1
12,5
22,1
39,7
7,911,1
14,1
9,8
32,4
5,7
37,4
-
5
10
15
20
25
30
35
40
45
1Q20
07
2Q20
07
3Q20
07
4Q20
07
1Q20
08
2Q20
08
3Q20
08
4Q20
08
1Q20
09
2Q20
09
3Q20
09
Loan portfolio, bEUR
0,4 0,5 0,8 1,11,6
2,1
3,03,6 3,7 3,4 3,5
0,3
0,3 0,30,3 0,3
0,2
0,1
0
1
2
3
4
5
1Q20
07
2Q20
07
3Q20
07
4Q20
07
1Q20
08
2Q20
08
3Q20
08
4Q20
08
1Q20
09
2Q20
09
3Q20
09
Corporate Loans, bEUR Retail Loans, bEUR
0,4
0,8
1,72,2
3,3
3,8
1,2
0,5
4,03,7 3,7
30,8 34,1 38,0 39,5 41,6 42,6 43,6 43,9
6,36,3
6,4 6,76,7 6,7 6,6 6,5
0
10
20
30
40
50
60
1Q20
08
2Q20
08
3Q20
08
4Q20
08
1Q20
09
2Q20
09
3Q20
09
31.1
0.20
09
P ersonal Customers 000' Corporate Customers 000'
37,1
*** - Total Customers
40,444,4
46,2 48,3 49,3 50,2 50,4
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Credit portfolio
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Unchanged thorough credit approval process – lending volumes largely unchanged 2009
2007 2008 End Sep 2009
Poland Russia Latvia Estonia Lithuania
New European MarketsTotal lending, EURbn
9.8
15.3 15.0
Credit assessment principles, credit policies, credit organisation as well as top management largely unchanged for the last 9 years
Main lending principlesCash flow based
Corporate customer target lists, households with medium and above income level
Max 10 years for corporate customers, up to 40 years for housing loans (18 years average)
Transparency (ownership, finances, operations)
Specific requirements for debt servicing and repayment levels
Buffers or hedging required for interest rate fluctuations and FX risks
Unified Nordea Group rating system
Strengthened Russian positionBank 31.12.2006 30.06.2007 31.12.2007 30.06.2008 31.12.2008 30.06.2009 31.08.2009
Sberbank 29.73% 27.39% 30.77% 30.35% 30.07% 31.22% 31.76%Alfa bank 3.76% 3.67% 3.44% 3.48% 3.33% 2.87% 2.67%UniCredit bank (former IMB) 1.95% 1.95% 2.02% 2.30% 2.40% 2.18% 2.09%Promsvyaz bank 1.68% 1.87% 1.87% 2.05% 1.92% 1.83% 1.81%Raiffeisenbank 1.82% 2.33% 2.27% 1.97% 2.00% 1.66% 1.62%MDM-bank 1.84% 1.86% 1.36% 1.32% 1.18% 1.07% 1.45%Uralsib 1.94% 1.83% 1.56% 1.56% 1.38% 1.02% 1.02%Nordea Bank (Orgresbank) 0.20% 0.23% 0.41% 0.67% 0.99% 0.93% 0.98%Absolut Bank 0.54% 0.58% 0.65% 0.67% 0.63% 0.53% 0.51%Swedbank 0.18% 0.25% 0.27% 0.28% 0.34% 0.33% 0.33%Citibank 0.50% 0.47% 0.26% 0.29% 0.23% 0.22% 0.26%
Bank 31.12.2006 30.06.2007 31.12.2007 30.06.2008 31.12.2008 31.03.2009 30.06.2009 31.08.2009Sberbank 36.90% 35.14% 31.89% 31.77% 31.29% 31.23% 31.74% 32.01%Raiffeisenbank 1.46% 1.17% 2.19% 2.13% 2.34% 2.37% 2.29% 2.23%Uralsib 1.90% 1.97% 2.08% 2.10% 2.06% 2.12% 2.10% 2.20%UniCredit bank (former IMB) 1.19% 1.38% 1.58% 1.77% 1.96% 1.98% 1.86% 2.04%Alfa bank 1.13% 1.41% 1.61% 1.74% 1.88% 1.92% 1.94% 1.94%Promsvyaz bank 0.66% 0.84% 1.08% 1.32% 1.34% 1.31% 1.30% 1.80%Absolut Bank 0.43% 0.55% 0.80% 1.06% 1.25% 1.31% 1.27% 1.27%MDM-bank 0.93% 1.21% 1.15% 1.05% 1.00% 0.99% 0.94% 1.25%Citibank 0.83% 0.81% 0.74% 0.76% 0.86% 0.92% 0.96% 0.97%Nordea Bank (Orgresbank) 0.04% 0.10% 0.18% 0.22% 0.26% 0.27% 0.27% 0.27%Swedbank 0.02% 0.02% 0.04% 0.07% 0.13% 0.15% 0.15% 0.15%
Market share retail lending
Market share corporate lending
19
Majority of corporate lending towards solid segments
Other materials11%
Energy20%
Metals/Mining18%
Retail trade5%
Transport9%
Telecom3%
Other 15%
Real estate12%
Household7%
Sector split RussiaTotal lending EUR 3.5bn Large share of exposure towards
companies on the Russian government’s list of 295 strategically important entities
Limited Household lending -insignificant exposure towards car leasing and consumer credits
Gross impaired loans in Russia increased 10% to EUR 44m in Q3 –growth rate in Q2 43% and Q1 42%
Majority of impaired loans refer to Retail trade, Consumer staples, Construction and Household lending
Total allowances EUR 33m
Coverage ratio 75%
Solid collateral position covering the non-provisioned exposures
115
73
4534
123
736062
26
92
Q3 08 Q4 08 Q1 09 Q2 09 Q3 09
Gross impaired loans Total allowances
Bps
Key trends – Russian credit marketLoan interest rates* (according to the methodology of the Central Bank of Russia "loans granted to non-financial organizations)
NPL dynamics by sectors
Currency denominations of the loans and deposits in the sector
Corporate loan repayment schedule (as of September 1)
0,0
40,0
80,0
120,0
<1 month 1-3 month 3-6 month 6-12month
1-3 years >3 years
Foreign currency Local currency
bEU
R
4,5% 4,8%
4,2%
2,1%1,5%1,3%1,3%1,4%1,4%
1,3%1,4%
0%
1%
2%
3%
4%
5%
6%
7%
31.1
2.04
31.1
2.05
31.1
2.06
31.1
2.07
31.0
3.08
30.0
6.08
30.0
9.08
31.1
2.08
30.0
6.09
31.0
7.09
31.0
8.09
Corporate Retail T otal,%
74% 70%53% 53%
88% 88%76% 69%
26% 30%47% 47%
12%24% 31%
12%
0%
20%
40%
60%
80%
100%
31.12.08 31.08.09 31.12.08 31.08.09 31.12.08 31.08.09 31.12.08 31.08.09
local currency (RUR) foreign currency
Retail deposits Corporate deposits Retail credits Corporate credits
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Clear direction for Russian operations
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Nordea short term focus – cost, risk and capitalMonitoring and supporting existing customers
New lending customers - only well-known names with strong credit rating
Nordea has relationships with a number of strong companies; world-leading in their respective field
Pro-active risk management
Strict control of capital usage
Streamline organizational structure – align with the rest of the group
Development of the IT infrastructure and system support
Strengthen Nordea brand – targeted marketing campaign and retail promotion
Strong emphasis on corporate business
Further develop relations with 295 companies from the governments list of strategically important entities - ensure good quality of credit portfolio
Prioritized industries:
Oil and Gas
Energy and Telecoms
REMI
All industries of targeted Nordic customers
Implement ambitious business plan for Nordic and International companies
Increase cross-selling of non-credit product and services
Intensify ECA-covered financing
Average margins high in a European comparison
Retail Business – low banking product penetration
Full service bank – core products in place
Improved processesRetail credit processes redesigned in line with Nordea procedures
Segmentation principles
360 degree meetings – further development of CRM technology
1-1 contact policy
Multichannel distributionActive usage of Contact Centre and Net Bank
Training system for retail staff
Knowledge transfer on branch network is completed, new concept is under development
Preparing for Retail expansion if and when visibility clears
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Concluding remarks
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Concluding remarks
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Strengthened position in Russia – operating profit up more 70%
Firm cost management and increased operational efficiency
Pro-active risk management – prudent credit approval process
High quality Russian portfolio – focus on top-tier 295 local companies and Nordic entities
Macro pressure easing - still a long way to recovery
Unchanged long-term strategy – short-term focus on cost, risk and capital
New European Markets – an important part of the journey towards Great Nordea
The leading Nordic bank,acknowledged for its people, creating superior
value for customers and shareholders.