Swedbank’s second quarter 2011 resultsMichael Wolf CEOMichael Wolf, CEOErkki Raasuke, CFOGöran Bronner, CRO

Continued underlying trendsy g

• Net profit of SEK 3 452m

• Core Tier 1 capital ratio of 14.8 per cent after buy-backs

• Return on equity of 14 4 per cent in Q2Return on equity of 14.4 per cent in Q2

Profit performanceProfit performanceProfit before impairmentsLehman contributionProfit for the period

2

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

Business area highlightsg g

Retail1 500

2 000

2 500SEKm Retail

- Improved result driven by higher NII

- Cost/income ratio 0.49 0

500

1 000

1 500

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

Large Corporates & Institutions- Good development in corporate 1 500

2 000SEKm Large Corporate & Institutions

Good development in corporate

lending

Slow trading quarter0

500

1 000

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11- Slow trading quarter

Baltic Banking

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

1 000

1 500SEKm Baltic Banking

- Solid operating profit

- Lower lending volumes -500

0

500

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

3

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

Prof it before impairments Prof it for the period

Delivering on our 2011 prioritiesg p

• Quality and efficiency

• Robust and low-risk balance sheet

• Customer focusCustomer focus

• Growth in selected segments

4

Positive NII trendNet interest income

• Higher Stibor and Euribor rates, increased margins • Trading result recorded mostly in NIITrading result recorded mostly in NII• Maturing government guaranteed funding

Retail LC&I Baltic Banking

Russia, Ukraine

Treasury, Other 4 740

3 799 3 980

4 527 4 527 101 34 20

1 017 -60

128 118

884

3 026

)

-315

(SE

Km

)

5

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

Underlying commissions stableNet commission income

y g• Increased payment commissions

Ch d l i LC&I d d l di d t b SEK 136• Changed accruals in LC&I decreased lending and guarantees by SEK 136m

1 000

1 200

SEKm

600

800

200

400

0

200

Payment processing

Asset management

Life insurance Brokerage and other securities

Corporate finance Lending and guarantees

Deposits Other commission income

6

p g g g

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

Valuation effects turnaround in Q2Net gains/losses on financial items, fair value

• Positive valuation effects in Group Treasury– Basis swaps– Fair valued lending & funding– Benchmark effect

L NGL f t di• Low NGL from trading822

574511

357

255

Treasury & OtherRussia & UkraineBaltic Banking

(SE

Km

)

Baltic Banking

LC&I

Retail

7

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

On target with flat costsExpenses

g• Lower number of employees

B k ti i i l i Ekt t i• Bank accounting principles in Ektornet increase expenses

4 423 4 590 4 384

0.57 0.550.58

0.52 0.52

4 423 4 238590 4 384 4 345 Total expenses

Cost-income ratio

(SE

Km

)

8

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

Volume developmentSecond quarter 2011 results

p• YTD stable lending and deposit volumes

L di i LC&I t i t th• Lending in LC&I turning to growth

• Continued de-leveraging in Baltic Banking

SEKbn Q2 Q/Q Δ YTD Δ Q2 Q/Q Δ YTD ΔLending Deposits

Retail private 584 4 6347 9 0

Retail corporate 297 0 2Retail corporate 297 0 2

LC&I 126 5 -4 57 -11 -17

B lti B ki 125 1 5 95 6 2Baltic Banking 125 -1 -5 95 6 2

Group 1 147 6 1 519 17 2

9

Term funding issuance according to planLiquidity & Funding

Issuance H1 2011 & maturities FY 2011• Majority of issuance in the domestic covered bond market (nominal SEKbn)

60

• Average maturity of wholesale funding, including short-term funding, 34 months (42 months for covered bonds) 0

20

40

60

(42 months for covered bonds)

• H2 maturities of nominal SEK 80bn, of which government guaranteed debt

-60

-40

-20

0

SEK 46bn

• Liquidity reserves further increased -100

-80

-60

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Decy g

10

Second quarter 2011 results

Income statementSEKm Q2 11 Q1 11 Δ Q2 10Net interest income 4 740 4 527 213 3 799

Net commission income 2 244 2 301 -57 2 395

Net gains/losses 511 255 154 822

Other 860 1 369 -509 756Other 860 1 369 509 756

Total income 8 355 8 452 -97 7 772

Total expenses 4 345 4 384 -39 4 423

Profit before impairments 4 010 4 068 -58 3 349

Total impairments - 309 - 970 661 1 091

Operating profit 4 319 5 038 -719 2 258

Tax expense 863 1 182 -319 672

Profit attributable to shareholders 3 452 3 852 - 400 1 567Profit attributable to shareholders 3 452 3 852 400 1 567

Return on equity, % 14.4 16.1 7.0

11

Asset quality improvement – increased macro riskRisk highlights

q y p

• Asset quality– Decreasing impaired loans– Decreasing impaired loans– Continued recoveries– Positive rating migration

• Macro economic uncertainty– European debt crisis– European debt crisis– World economy slowing

S db k’ ili t• Swedbank’s resilience strong– Capitalisation– Stress tests– Stress tests– Strong funding position

12

Net recoveries of SEK 324m in Q2Asset quality

• Stable CEE development– One-offs Estonia963

Credit impairments, SEKm

One offs Estonia– Adjustment in Latvia

• Solid Swedish performance• Solid Swedish performance120

324

-483

-324

-972

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

13

Retail LC&I Baltic Banking Russia & Ukraine Other

Well positionedFunding risk

p

• Board of Directors risk tolerance limitLiquidity survival horizon– Liquidity survival horizon

– Liquidity portfolio– Over-collateralisation requirementOver collateralisation requirement

• Liquidity reserve increased to SEK 203bn

• Covered bond availability increasing

USD f di d d l• USD funding dependence low

14

Strong capitalisationCapital management

g p

• As of 30 June the excess capital amounted to SEK 9bncapital amounted to SEK 9bn

• 2.86 per cent of total shares h d i Q2

Excess capital (SEK 9.2bn)

14.8%

repurchased in Q2

• Stress tests

13.0%Extra buffer

due to prevailing circumstances(SEK 15.3bn)

– ICAAP 2011– EBA

Risk appetite(ICAAP buffer,SEK 15.3bn)

10.0%

• Continued focus on capital efficiency

7.0%

efficiencyMinimum

requirement(SEK 35.7bn)

15

Appendix

16

Scenario: “Eastern slowdown – Western standstill”ICAAP 2011 – adverse scenario

S d

Triggers Outcome

• Chinese housing market collapses• The export led recovery in the US halts as

Asian demand dries up

Sweden• Negative GDP for three consecutive years, 2012-

2014 (a drop of 7% relative 2011)• Unemployment rate rises from 8 4% in 2010 to• US protectionism and US economic

pessimism turns world growth negative • US enters into a “Japanese” scenario• A weak EU is severely hit by falling

• Unemployment rate rises from 8.4% in 2010 to 16.9% in 2014

• Residential real estate price drop of 33% until 2014• Swedish krona strengthens 31% against the USD• A weak EU is severely hit by falling

demand in China and the US

g g• Interest rates remain low (treasury bill rate of 0.3%)

Baltic countriesAdverse scenario 2011 - GDP development

• 30% devaluation in Latvia and Lithuania early 2012, Estonia affected by contraction of external demand

• Negative GDP growth in all three countries during 2010

=100

)

100

105

110

115

120

Sweden, base caseSweden, adverseUS, base case

2011-2014 (drops of 9%-11% relative 2010)• Unemployment rates peak in 2013-2014: EE 19.5%,

LV 21.5%, LT 20.0%• Residential real estate price drops Trough in 2014

GD

P in

dex

(2

80

85

90

95

100,

US, adverseEU-27, base caseEU-27, adverse

17

• Residential real estate price drops. Trough in 2014 EE -24%, LV -15%, LT -21%

802010 2011 2012 2013 2014 2015 2016

Scenario model resultsICAAP 2011 – adverse scenario

Income statement (SEKm) 2010F 2011F 2012F 2013F 2014F 2015F 2016F Total 2011-2016

Profit before impairments 12 485 13 233 13 766 7 666 7 287 7 150 7 610 56 712p

Credit impairments 3 005 5 972 19 318 15 359 10 231 6 734 4 290 61 904Profit for the year 7 084 5 033 -5 696 -7 694 -2 944 146 1 971 -9 184

(SEKm) 2010F 2011F 2012F 2013F 2014F 2015F 2016FRisk-weighted assets,full Basel 2 541 327 519 839 524 279 464 569 434 894 413 542 399 855

Core Tier 1 capital 75 470 77 815 69 084 55 936 52 981 53 069 54 043Core Tier 1 capital ratio, % 13.94 14.97 13.18 12.04 12.18 12.83 13.52

• Core Tier 1 capital ratio troughs in 2013

• Low interest rates combined with lending volume decline during theLow interest rates combined with lending volume decline during the scenario period decrease NII and risk-weighted assets

18

NB: Not adjusted for the buy-back programme or any additional regulatory changes.

Macroeconomic assumptionsICAAP 2011 – base scenario and adverse scenario

pSweden Baltic countries

110

120GDP growth

130140

GDP growth

80

90

100

110

8090

100110120

2010 2011 2012 2013 2014 2015 2016

15%

20%Unemployment

20%

Unemployment

2010 2011 2012 2013 2014 2015 2016

0%

5%

10%

2010 2011 2012 2013 2014 2015 20165%

10%

15%

2010 2011 2012 2013 2014 2015 20162010 2011 2012 2013 2014 2015 2016

90

100

110Real estate price index

2010 2011 2012 2013 2014 2015 2016

110120130140150

Real estate price index

60

70

80

2010 2011 2012 2013 2014 2015 2016708090

100110

2010 2011 2012 2013 2014 2015 2016

19

Sweden, base case Sweden, adverse Estonia, base case Estonia, adverseLatvia, base case Latvia, adverseLithuania, base case Lithuania, adverse

Impaired loans decreasingp g

• Excl. FX effect down SEK 1.6bn in Q2

• Underlying decreases in all business areas in Q2

2 391-4 08840 132 40 328

42 719

40 000

45 000

SEKm

Ukraine 66%

Impaired loans as % of gross lending

6 113

4 362 196 2 391-3 853

-3 031-1 07829 657

35 77038 631

34 77831 747

30 66930 000

35 000

40 000

6 240

Russia 21%Lithuania 17%

Latvia 24%29 657

30 669

15 000

20 000

25 000

9 802

6 3831 407

Estonia 8.3%LC&I 0.17%Retail 0 17%

5 000

10 000

4464 836

9 802

20

Retail 0.17%0Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

1 555

Q2 11

Loans past due 60 days – performance Q/Qp y p

200

250

EURm

50

100

150

200

-50

0

50

-150

-100

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q

Estonia Latvia Lithuania RussiaUkraine

21

Provisions – well provided forAsset quality

p• Individual provisioning rates maintained

• Work-out portfolios slowly decliningWork-out portfolios slowly declining

• Positive rating migrationsSEKm

Provision ratios, % Q2 11

Retail 92

LC&I 125

4 1043 606

63.5%63.9%

62.7%25 000

30 000

LC&I 125

Baltic Banking 55

Russia 65

3 606

3 2972 769 2 436

61.0%60.0%

15 000

20 000

Ukraine 64

Group 6023 02821 068

18 494 16 59815 952

4 3735 204

6 306

10 000

1 449 2 0994 373

0

5 000

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

22

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

Individual provisions Portfolio provisions Write-of fs, gross, cum from 2010 Provision ratio

Repossessed assetsAsset quality

p

5 000

6 000

SEKm

4 000

5 000

2 000

3 000

0

1 000

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

Real Estate Residential Real Estate Commercial Passenger & Commercial Transport Shares Other

23

Credit impairments by categoryp y g y

9632 000

SEKm

963

1 500

120

500

1 000

0

- 324

-1 000

- 500

- 483 - 972-1 500

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

24

Portfolio provisions Individual provisions Recoveries Write-offs net

Real estate pricesp1 762

1 4001 6001 8002 000

Riga

1 616

1 2001 4001 6001 800

Tallinn

601

200400600800

1 0001 200915

200400600800

1 0001 200

0200

Jan-

05

Aug

-05

Mar

-06

Oct

-06

May

-07

Dec

-07

Jul-0

8

Feb-

09

Sep

-09

Apr

-10

Nov

-10

Jun-

11

Nr.of deals EUR/m2

0200

Jan-

05

May

-05

Sep

-05

Jan-

06

May

-06

Sep

-06

Jan-

07

May

-07

Sep

-07

Jan-

08

May

-08

Sep

-08

Jan-

09

May

-09

Sep

-09

Jan-

10

May

-10

Sep

-10

Jan-

11

May

-11

Nr.of deals EUR/m2Source: Swedbank, Estonian Land Board Source: Swedbank

1 731

1 6001 8002 000

Vilnius

1 074

400600800

1 0001 2001 4001 600

0200400

Jan-

05

Aug

-05

Mar

-06

Oct

-06

May

-07

Dec

-07

Jul-0

8

Feb-

09

Sep

-09

Apr

-10

Nov

-10

25

Source: Swedbank, State Enterprise Centre of Registers

Nr.of deals EUR/m2

Long-term funding Liquidity & Funding

g g• Continued focus on covered bonds with Q2 issuance of SEK 43bn• SEK 6bn in senior unsecured issuance during Q2 • Term funding issuance in the first half of 2011 totalled SEK 153bn, with maturities of

SEK 79bn during the same period • Maturities for the remainder of 2011 amount to nominal SEK 80bnMaturities for the remainder of 2011 amount to nominal SEK 80bn

Long-term funding maturity profile, SEKbn

150

200

Covered bonds 150

200

Senior unsecured

100 100

Guaranteed bonds

0

50

2011 2012 2013 2014 2015 2016-0

50

2011 2012 2013 2014 2015 2016-

2626

2011 2012 2013 2014 2015 2016

Remaining government guaranteed debt Liquidity & Funding

g g g• Exited the programme on 30 April 2010

• No issuance under the programme since summer 2009p g

• SEK 33bn of government guaranteed debt matured during the first six months of 2011

• Maturities of SEK 46bn for the remainder of 2011

Maturity profile as per Q2 2011, SEKbny p p ,60

40 USDSEKEURCHF

20 HKDJPY

2727

02011 2012 2013 2014

Limited unsecured funding needLiquidity & Funding

g

Lending to the public, less deposits, covered bond pool and retail bondsSEKbn

200

150

50

100

-50

0

-100

-50

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

28

2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011

Liquidity reserve*SEK

q ySEKm

Cash and holdings in central banks and deposits in other banks available overnight 90 723Securities issued or guaranteed by sovereigns central banks or multilateral development banks 57 327Securities issued or guaranteed by sovereigns, central banks or multilateral development banks 57 327Securities issued or guaranteed by municipalities or Public sector entitiesCovered bonds 53 711 - Issued by other institutions 53 711 - Own issuedSecurities issued by non-financial corporatesSecurities issued by financial corporates (excl. covered bonds) 1 089Other

Total 202 850* As defined by the Swedish FSA

Liquid assets outside Group Treasury organisation 65 000

Total 267 850

29