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Transcript of Roadshow, Abu Dhabi
Abu Dhabi Roadshow18 March 2008
Mikael InglanderCFO
(2)
LatviaTotal population: 2.3mEmployees: 2,501Private customers: 0.8mCorp. customers: 53,000Branches: 77Typical market share: 30%
The leading bank in four small countries
SwedenTotal population: 9.2mEmployees: 8,750Private customers: 4.1mCorp. customers: 275,000Organisations: 120,000Branches: 459Typical market share: 25%
LithuaniaTotal population: 3.5mEmployees: 3,384Private customers: 3.0mCorp. customers: 78,000Branches: 128Typical market share: 30%
EstoniaTotal population: 1.3mEmployees: 3,227Private customers: 1.2mCorp. customers: 88,000Branches: 94Typical market share: 50%
• Supporting markets: Denmark, Finland, Norway, Russia,Ukraine, USA, Luxemburg, China, Japan and Spain
80%
6% 5% 5% 4%
Swed
en
Esto
nia
Latv
ia
Lith
uani
a
Oth
ers
Share of group lending
• Potential home markets: Russia and Ukraine
(3)
Strong position for profitability and growth
Ukraine and RussiaBalticsSweden
Stable base Growth and experience
Future growth and profitability
Swedbank is the leading bank in Sweden. Profitability is high and stable and the bank is consolidating its market shares in important segments in both the private and corporate sectors.
Swedbank has a small but growing presence in Ukraine and Russia. In the long term, a significant share of Swedbank’s growth will be generated in these markets.
The Baltic economies are experiencing strong economic growth that is expected to remain for many years. As the largest bank in the region, growing with the market ensures attractive earnings growth.
Share of profit 2007: 66%
Share of lending 2007: 80%
Share of profit 2007: 2%
Share of lending 2007: 2%
Share of profit 2007: 32%
Share of lending 2007: 16%
(4)
Swedbank, group overview
52%
32%
2%8% 8%
-2%-10%
0%
10%
20%
30%
40%
50%
60%
SwedishBanking
BalticBanking
InternationalBanking
SwedbankMarkets
AssetManagement & Insurance
SharedServices& Group
Staffs
Share of Group net profit 2007
(5)
2007 – A successful and eventful year
• Profit attributable to shareholders increased 10% to SEK 12bn– Net interest income increase by 20%– Net commission income increased by 11%
• Swedish Banking show a stable result, low risks and high return on equity
• Record result in Baltic Banking with balanced risks• Swedbank Markets’ results on same level as last year’s all time high
A successful year despite global credit turmoil and Baltic slowdown
(6)
Q4 2007 – Good development and strong results
• Good volume development in Sweden– Stable margins on new lending
• Continued strong results in Baltic banking– Economic slowdown align with expectations
• Strong finish of the year for Swedbank Markets– Success in fixed income trading and structured investment products in
Sweden and corporate finance in Norway
• Swedbank Ukraine continues to develop well
Profit increased 7% compared with Q4 2006
(7)
Solid profit development
*Loan losses, net = write-offs + provisions – recoveries + change in property taken over
-1,000
1,000
3,000
5,000
7,000
9,000
11,000
13,000
15,000
17,000
2000 2001 2002 2003 2004 2005 2006 2007-1,000
1,000
3,000
5,000
7,000
9,000
11,000
13,000
15,000
17,000
Profit before loan losses Capital gains EnterCard and KIABLoan losses, net* Operating profit (excl. capital gains)
SEKm SEKm
(8)
Minor direct effects from the credit turmoil
Valuation- and accounting effects, SEK MQ4
2007Q3
2007
Swedbank Markets – 40 – 60
Group Treasury, liquidity portfolio – 5 – 68
Group Treasury, intra-group lending 20 – 90
Swedbank Mortgage 66 – 129
(9)
Business volumes
84
13 24
334
102
19 31
289
398 401
0
100
200
300
400
500
Deposits,Sweden
Deposits,Baltics
AM funds,Sweden
AM funds,Baltics
Structuredproducts,
bondsDec, 2006 Dec, 2007
SEKbnSavings
919
425333
53 74 3477 100 61
390475
1,103
0
200
400
600
800
1,000
1,200
Lending,Group
Private,Sweden
Corporate,Sweden
Private,Baltics
Corporate, Baltics
Other
Dec, 2006 Dec, 2007
SEKbnLending
(10)
Credit quality, group
2000
2001
2002
2003
2004
2005
2006
2007
-0.080.000.080.160.240.320.400.480.560.64
Loan loss ratio, net Share of impaired loans
Share of provisions
%
(11)
Margins
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Q3-06
Q4-06
Q1-07
Q2-07
Q3-07
Q4-07
Estonia LatviaLithuania Sweden
% Lending
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Q3-06
Q4-06
Q1-07
Q2-07
Q3-07
Q4-07
Estonia LatviaLithuania Sweden
Deposits%
(12)
Swedish Banking• Continued stable earnings and high profitability• Strong corporate lending during Q4
– Total lending increased by 4% vs. Q3 and 14% during the full year
• Continued good deposit trend– Deposits increased by 3% vs. Q3 and 15% during
the full year• Share of new savings from households
increased to 18% (17% in Dec 06)• Rise in funding costs are gradually, but with
certain delay, passed on through higher lending rates
• Minor valuation effects as a consequence of the turmoil on the credit market
• Covered bonds as from Q2 2008• In agreement to sell 8 branches to savings
banks• Swedish economy still relatively strong.
0500
1,0001,5002,0002,5003,0003,5004,0004,5005,000
Q206
Q306
Q406
Q107
Q2 07
Q307
Q407
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Income Costs C/I-ratio
SEKm %
(13)
Baltic Banking Operations• Continued high profitability • Net interest income increased 7% vs. Q3• Lending growth in 2007 was 33%, the gradual
slowdown is expected to continue• Weak trading income due to market turmoil• Costs affected by
– Annual wage increases in Latvia and Lithuania, hits P&L as of October every year
– Investments in operational excellence project for increased productivity
– High marketing costs.0200400600800
1,0001,2001,4001,6001,8002,0002,2002,400
Q206
Q306
Q406
Q107
Q2 07
Q307
Q407
0.0
0.1
0.2
0.3
0.4
0.5
Income Costs C/I-ratio
SEKm %
(14)
Credit quality, Baltic Banking
Loan loss ratio, net (average portfolio)
-2.0%
-1.2%
-0.4%
0.4%
1.2%
2.0%
2002 2003 2004 2005 2006 2007
Estonia Latvia Lithuania Group
Share of impaired loans (12 month old portfolio)
0.0%
0.5%
1.0%
1.5%
2.0%
2002 2003 2004 2005 2006 2007
Estonia Latvia Lithuania Baltics Group
(15)
Decreasing Baltic lending growth
0%
10%
20%
30%
40%
50%
60%
07/D
ec
07/S
ep
07/J
un
07/M
ar
06/D
ec
06/S
ep
06/J
un
06/M
ar
05/D
ec
05/S
ep
05/J
un
05/M
ar
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000 Hansabank, Estonia
0%10%20%30%40%50%60%70%80%90%100%
07/D
ec
07/S
ep
07/J
un
07/M
ar
06/D
ec
06/S
ep
06/J
un
06/M
ar
05/D
ec
05/S
ep
05/J
un
05/M
ar
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000 Hansabank, Latvia
0%
10%
20%
30%
40%
50%
60%
70%
07/D
ec
07/S
ep
07/J
un
07/M
ar
06/D
ec
06/S
ep
06/J
un
06/M
ar
05/D
ec
05/S
ep
05/J
un
05/M
ar
0
1,000
2,000
3,000
4,000
5,000
6,000 Hansabank, Lithuania
0%
10%
20%
30%
40%
50%
60%
70%
07/D
ec
07/S
ep
07/J
un
07/M
ar
06/D
ec
06/S
ep
06/J
un
06/M
ar
05/D
ec
05/S
ep
05/J
un
05/M
ar0
2,0004,0006,0008,000
10,00012,00014,00016,00018,00020,000 Baltic Banking
0%
100
000000000000
0
10, Total lending, EURm YoY growth
(16)
Baltic macro development
Real GDP growth
0%2%4%
6%8%
10%12%
2005 2006 2007F 2008F 2009FEst Lat Lit
CPI growth
0%2%4%6%8%
10%12%
2005 2006 2007 2008F 2009FEst Lat Lit
• Economic slowdown in Estonia continues: GDP growth slows from ~7% in 2007 to ~5% in 2008; the bottom of the cycle is expected to be in Q2 2008
• In Latvia growth slows from ~10.5% to 6% in 2008, the bottom of the cycle is expected to be in H2 of 2008
• Slowdown in Lithuania started in Q4 2007: GDP growth will slow from 2007’s 8.7% to ~7.5% in 2008
• Weak domestic demand reduces imports and exports growth continues. Trade and current account deficits are falling. CPI will peak in Q1 2008. Long term GDP growth (6-7%) will be above EU average.
Source: Hansabank Market
(17)
Swedbank Markets
• Good end to the year despite the capital market turmoil
• Strong results in, above all, fixed income and FX trading, structured investment products and corporate finance fees First Securities
• Minor valuation effects due to market turmoil, SEK - 40m
• Continued market leader in corporate bonds, new issues in SEK
• Sustained growth and market leading position in structured products, sales grew by 39% in 2007.
050
100150200250300350400450500
Q106
Q206
Q306
Q406
Q107
Q2 07
Q307
Q407
Profit for the period attributable to shareholdersof Swedbank
SEKm
(18)
International Banking
• Continued strong lending growth in Ukrainian Banking, + 112% to SEK 11bn in 2007
• Loan loss ratio, net in Ukrainian Banking decreased after adjusting calculation method to Swedbank Group’s principles
• Annual lending growth in Russian Banking was 50% to SEK 10bn
• Following positive court rulings regarding VAT dispute in leasing operations, a reversal of SEK 60m was made in Russian Banking
• Lending in Nordic branches more than doubled in 2007, reaching SEK 13bn.
-100
-75
-50
-25
0
25
50
75
100
Q206
Q306
Q406
Q107
Q2 07
Q307
Q407
International Banking, profit for the periodof which Russian Bankingof which Ukrainian Banking Operations
SEKm
(19)
Income statement, group
SEKmQ4
2007Q3
2007 %Q4
2006 %Net interest income 5,259 4,806 9 4,303 22Net commission income 2,536 2,503 1 2,309 10Net gains/losses on financial items at fair value 386 196 97 908 – 57Other income 693 526 32 392 77Total income 8,874 8,031 10 7,912 12Staff costs 2,111 2,075 2 1,878 12Profit-based staff costs 522 337 55 302 73Other expenses 1,893 1,720 10 1,917 – 1Total expenses 4,526 4,132 10 4,097 10Profit before loan losses 4,348 3,899 12 3,815 14Loan losses 238 230 3 – 72 – 431Operating profit 4,110 3,669 12 3,887 6Tax 950 793 20 928 2Profit for the period 3,160 2,876 10 2,959 7Attributable to shareholders of Swedbank 3,108 2,866 8 2,913 7
(20)
Net interest income Q4-07 (Q3-07)
4,806
5,259
- 10
359
12
- 10
101
1
4,600
4,800
5,000
5,200
5,400N
et in
tere
stin
com
eQ
3-07
Sw
edis
hB
anki
ng
Bal
tic B
anki
ngO
pera
tions
Bal
tic B
anki
ng
Inve
stm
ent
Inte
rnat
iona
l B
anki
ng
Sw
edba
nk
Mar
kets
Sha
red
Ser
vice
s an
dot
her
Net
inte
rest
inco
me
Q4-
07
SEKm
(21)
Net interest income Swedish Banking, change
SEKmQ4 2007
vs Q3 2007Q4 2007
vs Q4 2006Net interest income Q3 2007 2,926Net interest income Q4 2006 2,943
Changes:Higher lending volumes 46 215Decreased lending margins – 81 – 306Higher deposit volumes 43 122Higher deposit margins 52 142Other changes – 59 – 189
Total change 1 – 16
Net interest income Q4 2007 2,927 2,927
(22)
Baltic Banking, change in net interest income
SEKmQ4 2007
vs Q3 2007Q4 2007
vs Q4 2006Net interest income Q3 2007 1,487Net interest income Q4 2006 1,126
Changes:Higher lending volumes 61 273Higher lending margins 14Decreased lending margins -10FX-effects, lending 4 12Higher deposit volumes 2 56Higher deposit margins 84 260FX-effects, deposits 2 6Other changes -66 -135Total change 101 462Net interest income Q4 2007 1,588 1,588
(23)
Net commission income, Group
0
1,000
2,000
3,000
4,000
5,000A
sset
man
agem
ent
Pay
men
ts
Bro
kera
ge
Lend
ing
Insu
ranc
e
Cor
pora
tefin
ance
Oth
er
2007 2006
SEKm
(24)
Expenses
SEKmQ4
2007Q3
2007 %Q4
2006 %Swedish Banking 2,279 2,208 3 2,327 – 2Baltic Banking 1,062 864 23 811 31International Banking 272 279 – 3 126 Of which Ukrainian Banking 163 134 22Swedbank Markets 560 416 35 535 5Other business areas 353 365 – 3 298 18Total expenses 4,526 4,132 10 4,097 10
of which staff costs in: Swedish Banking 1,096 1,093 0 998 10Baltic Banking 587 511 15 450 30International Banking 155 134 16 49 Swedbank Markets 351 225 56 345 2
(25)
Business areas
2007 vs 2006, SEKm 2007 % 2007 % 2007 % 2007 % 2007 %Net interest income 11,701 5,667 986 1,343 83 Net commission income 4,504 1,854 196 1,441 1,868Other income 1,473 1,252 97 773 232Total income 17,678 4 8,773 42 1,279 3,557 1 2,183 19Staff costs 4,296 2,044 405 1,239 425Other expenses 4,704 1,502 366 753 463Total expenses 9,000 3 3,546 32 771 1,992 3 888 31Profit before loan losses 8,678 5 5,227 50 508 1,565 0 1,295 13Loan losses 71 450 170 0 0 Operating profit 8,607 -2 4,777 49 338 1,565 -1 1,295 13Tax 2,413 455 70 427 320Profit for the period 6,194 4,322 268 1,138 975To Swedbank's shareholders 6,182 – 2 4,322 46 268 1,010 3 975 11Return on allocated equity % 23.2 31.2 6.9 24.2 57.0
AssetMgmt
Internat.Banking
Swedish Banking
BalticBanking
Swedbank Markets
(26)
Key figures
Jan - Dec, 2007
Jan - Dec, 2006
Return on equity, % 18.9 19.3Earnings per share, SEK 23.28 21.11Equity per share, SEK 131.96 116.37C/I ratio before loan losses 0.51 0.52Loan loss ratio, net, % 0.07 – 0.02Share of impaired loans, % 0.13 0.07Dividend, SEK* 9.00 8.25Tier 1 capital ratio, new principles, % 8.5 -Tier 1 capital ratio, transition principles, % 6.2 6.5 **Capital adequacy ratio, new principles, % 12.7 9.8 **
*according to Board of Directors’ proposal**according to old principles
(27)
Tier-1 ratio, Group
• Tier 1 ratio amounted to 8.5%
• Tier 1 ratio, according to transition principles, was 6.2%
• As of January 1, 2008, tier 1 ratio according to transition principles, increased by 31 bps due to the gradual implementation of Basel 2 regulations.
0123456789
10
Q1-
05
Q2-
05
Q3-
05
Q4-
05
Q1-
06
Q2-
06
Q3-
06
Q4-
06
Q1-
07
Q2-
07
Q3-
07
Q4-
07012345678910
Tier 1 ratio, Basel 2Tier 1 ratio, transition rulesTarget Tier 1 ratio
% %
(28)
2007 – A successful and eventful year
• Profit attributable to shareholders increased 10% to SEK 12bn– Net interest income increase by 20%– Net commission income increased by 11%
• Swedish Banking show a stable result, low risks and high return on equity
• Record result in Baltic Banking with balanced risks• Swedbank Markets’ results on same level as last year’s all time high
A successful year despite global credit turmoil and Baltic slowdown
(29)
Appendix
(30)
Group lending by sectors – Baltic BankingPortfolio, December 2007 Portfolio growth, Q4 07
546
1,111
1,692
1,736
3,012
8,282
2,786
0 2,000 4,000 6,000 8,000
Other
Construction
Transport
Industry
Retail &Wholesale
Real-estatemgmt
Individuals
0
34
42
111
82
452
231
0 250 500
42%
% - share of portfolio and portfolio growth
3%
6%
8%
9%
15%
10%
7%
39%
14% 20%
4%
3%
0%
(31)
Exposure FAQ• No direct US Sub-Prime exposure
– Minimal indirect exposure through investments of EUR 57m in bonds issued by US mortgage institutions who, in their turn, have exposures towards US sub-prime
• Total exposure towards structured credits is minimal– No commitments towards conduits or SIV’s of any kind– Negligible exposure towards CDO’s
• Swedbank holds a very small CDO trading stock for client trades in CDO’s which we have issued ourselves with mainly large Cap’s as underlying risk
• 80% of the tranches held are rated Aaa and 20% are rated A• Total holdings was EUR 27m at year end
– Exposure towards Mortgage Backed Securities is appr. EUR 719m• European Aaa and mainly residential• Held for EUR liquidity purposes and client trading
• Hedge fund exposure is appr. EUR 500m, all collateralized• Exposure towards private equity firms and their target companies is about
EUR 1 380m in total – Nordic related LBO’s
• In total, above mentioned exposures represent less than 1.6 % of total assets