Swedbank's Third Quarter 2011 Results Presentation
32
Swedbank’s third quarter 2011 results Michael Wolf CEO Michael Wolf, CEO Göran Bronner, CFO Håkan Berg, CRO
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Swedbank's presentation of the third quarter 2011 results
Transcript of Swedbank's Third Quarter 2011 Results Presentation
Swedbank’s third quarter 2011 resultsMichael Wolf CEOMichael Wolf, CEOGöran Bronner, CFOHåkan Berg, CRO
Stable result but increased macro uncertaintyy
• Net profit of SEK 3 475m
• Core Tier 1 capital ratio of 15.1 per cent
• Return on equity of 14 4 per cent in Q3Return on equity of 14.4 per cent in Q3
• Pause in buy-backs
Profit for the period
2
Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Well prepared to meet increased uncertaintyp p y
• Increased macro uncertainty – lower growth
• Income pressure likely– Interest rates– Lower activity
• Intensified cost focusIntensified cost focus
• Strong position capital and liquidity
3
Increased cost of doing bankingPotential long-term effects
g g
• Lower leverageGovernments banks businesses and households– Governments, banks, businesses and households
• Reshaping of savings market
• Long-term regulatory changes– Demarcation line tax payers/shareholdersDemarcation line tax payers/shareholders– Cost of senior funding– Ring fencing of certain banking activitiesg g g– Increased cost for cross border banking
• Increased cost of doing banking will affect all stakeholders• Increased cost of doing banking will affect all stakeholders
4
Solid performanceRetail
p
• Improved NII2 400
2 800
Profit before impairmentsSEKm
• Stable asset quality
• Good cost control1 200
1 600
2 000
2 400
Good cost control
• High interest rate sensitivity0
400
800
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
• Transaction to relation (T2R)SEKm Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Net interest income 2 499 2 752 2 925 3 026 3 143
Net commission income 1 019 1 132 1 073 1 051 1 089
Total income 3 981 4 349 4 395 4 593 4 683
Total expenses 2 100 2 223 2 193 2 237 2 082
Profit bef impairments 1 881 2 126 2 202 2 356 2 601
Total impairments -3 136 5 5 106
5
C/I ratio 0.53 0.51 0.50 0.49 0.44
Turbulent market conditionsLarge Corporates & Institutions
SEKm Q1 11* Q2 11 Q3 11
Net interest income 850 884 778 1 100
Profit before impairmentsSEKm
of which LC & FI** 450 485 557
of which Capital markets 370 378 184
Commission income 505 412 399
f C & ** 300
700
of which LC & FI** 289 202 225
of which Capital markets 215 211 174
Total income LC&I 1 755 1 344 1 311
of which LC & FI** 781 731 827
-100
300
Q3 10 Q4 10 Q1 11* Q2 11 Q3 11
• Poor capital markets incomeof which LC & FI 781 731 827
of which Capital markets 943 589 415
Total expenses, excl variable pay 776 778 772
Variable staff costs 83 50 6
• Strong customer related income
Variable staff costs 83 50 6
Profit bef impairments 896 516 533
of which LC & FI** 514 473 594
of which Capital markets 364 31 -127
• Continued re-pricing
Increased volumes
Credit impairments -105 -19 -66
C/I ratio 0.49 0.62 0.59
• Increased volumes6
* Excluding Lehman one-off ,**Large corporates and Financial institutions
Stable developmentBaltic Banking
p
• Slowing deleveraging1 000
Profit before impairmentsSEKm
• Continued recoveries
• Increased activity400
600
800
Increased activity
• High interest rate sensitivity0
200
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
SEKm Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Net interest income 919 1 168 997 1 017 994
Net commission income 386 383 317 365 392
Total income 1 561 1 632 1 472 1 568 1 606
Total expenses 624 697 658 653 649
Profit bef impairments 937 935 814 915 957
C/I ratio 0.40 0.43 0.45 0.42 0.40
7
Solid core developmentGroup results
p
• Lower asset management and corporate finance fees
SEKm 9M 10 9M 11 Q2 11 Q3 11
Net interest income 11 802 14 124 4 740 4 857 corporate finance fees
• Negative funding related l ti ff t i T
Net commission income 6 987 6 837 2 244 2 292
Net gains and losses 2 043 1 025 511 259
Other income 2 254 3 011 860 782
valuation effects in Treasury
• Good cost control
Total income 23 086 24 997 8 355 8 190
Total expenses 13 052 13 060 4 345 4 331
Profit before impairments 10 034 11 937 4 010 3 859
– One-off cost of SEK 100m in Ukraine
Total impairments 3 524 -1 733 - 309 - 454
Profit for the period 4 694 10 779 3 452 3 475
– Cost increase in Ektornet
• Deposit growth
Return on equity, % 6.9 15.0 14.4 14.4
Cost-income ratio 0.57 0.52 0.52 0.53
Core Tier 1 capital ratio, %* 13.4 15.1 14.8 15.1 p gRisk-weighted assets, SEKbn* 560 497 509 497
Deposits and borrowings from the public 524 555 529 555
8
* Basel 2
Funding development Q3 Liquidity and funding
g p• SEK 60bn of long-term debt issued in Q3
D d f S db k h t t ti d• Demand for Swedbank short-term paper continued
• USD-funding need covered for more than 12 months
Long-term debt issued in Q3 Outstanding short-term debtSEKSEKm
50 000
60 000SEKm
Q2 11Q3 11
25 000
30 000
35 000
20 000
30 000
40 000
15 000
20 000
25 000
0
10 000
20 000
0
5 000
10 000
9
Domestic CP ECP USCP Yankee CDDomestic CB
Euro CB USD CB (144A)
Other CB Senior unsecured
Term funding at a slower pace going forwardLiquidity and funding
g p g g• Over SEK 600bn term funding issued since Q3 2009• Significantly lengthened maturities
100SEKbn
• All government guaranteed debt pre-funded
Term funding issuance
75
Average term funding issuance
Pre-funded term maturities
Average term funding need
50
25
0
2010
2010
2010
2010
2011
2011
2011
2011
2012
2012
2012
2012
2013
2013
2013
2013
2014
Q1
2
Q2
2
Q3
2
Q4
2
Q1
2
Q2
2
Q3
2
Q4
2
Q1
2
Q2
2
Q3
2
Q4
2
Q1
2
Q2
2
Q3
2
Q4
2
Q1
2
10
Conservative liquidity levels Liquidity
q y• Short-term funding mainly a tool for cash management
SEKbn
300
350SEKbn
200
250Other pledgeable and/or liquid assetsAdditional liquidity
Next 12-month term funding maturities
100
150
q yreserve assetsCentral bank deposits Commercial
papers/ Certificate of deposits and net interbank
0
50funding
11
Source: Swedbank 30 Sep 2011
Conservative liquidity levels Liquidity
q y• Short-term funding mainly a tool for cash management
M th 15 th f d d• More than 15 months pre-funded
SEKbn
300
350SEKbn
200
250Other pledgeable and/or liquid assetsAdditional liquidity
Next 12-month term funding maturities
100
150
Additional liquidity reserve assetsCentral bank deposits Commercial
papers/ Certificate of deposits and net interbank
0
50
net interbank funding
12
Source: Swedbank 30 Sep 2011
Uncertain regulatory demand – Swedbank well positionedCapital management – Core Tier 1 ratio
g y p• Still large regulatory uncertainty
regarding minimum CT1 ratio and different buffers
• Basel 3Excess capital (SEK 10.4bn)
15.1%
– CT1 ratio impact 100bp– LCR 212%– NSFR 92%
13%Extra buffer
due to prevailing circumstances(SEK 14.9bn) NSFR 92%
Risk appetite(ICAAP buffer,SEK 14.9bn)
10%
7%
Minimumrequirement(SEK 34.8bn)
13
Improvement but increased macro uncertaintyRisk highlights
p y
• Improved asset quality– Decreased impaired loans– Decreased impaired loans– Continued recoveries– Positive rating migration– Improved loan-to-value developments in Estonia, Latvia and Lithuania
• Increased macro economic uncertaintyIncreased macro economic uncertainty– World economy slowing– House market in Sweden slowing down
14
Net recoveries of SEK 441m in Q3Asset quality
• Continued recoveries in CEE– Positive development in the120
Credit impairments, SEKm
Positive development in the Baltic corporate portfolio
– Mortgage provisions in Ukraine
• Solid Swedish performance
-324
-441
-483
441
-972
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
15
Retail LC&I Baltic Banking Russia & Ukraine Other
Continues actions to ensure proactive risk managementp g
• Review of potentially exposed sectors in Retail and LC&IP ti k– Proactive work
– Ensure customers’ buffers
• Complementary stress tests shows strong resilience– Prudent mortgage lending in Sweden
• Ukrainian and Latvian mortgage books most exposed– Limited total impactLimited total impact
16
Focus on risk-weighted assetsg• Future focus areas
– Review of small and mid-sized 515SEKbn
RWA development
corporates Sweden– Advanced IRB4.8
8 0509 3510
• Potential regulatory development– Mortgages
-8.0509.3510
-4.8
505
-2.1
-2.2 497.1
500
4952011Q2
Volume (EAD)
Def inition change*
Rating migration
Other credit risk
Marketrisk
2011Q3
* Corporate size definition
17
* Corporate size definition
Swedbank’s resilience strongg
• Solid credit portfolio
• Strong capitalisation
• Resilient funding positionResilient funding position– No short-term funding dependence– Limited dependence on senior fundingLimited dependence on senior funding– Well matched USD funding– High quality covered bond poolg q y p
18
House price sensitivity of the cover pool Swedbank’s cover pool
p y p
• Resilient LTV-structure with an approximate 2-to-130%
Overcollaterlisation
an approximate 2 to 1 relationship between house price drops and cover pool 20%
25%OC
size 10%
15%
0%
5%
-15%
-10%
-5%
-20%
-15%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
19
House price drop
Appendix
20
Impaired loans decreasingAsset quality
p g
• Excluding FX effect down SEK 2.5bn in Q3
• Minor increase in Retail in Q3
SEK
4 362 1962 391 -4 088
-3 85335 770
40 132 40 32842 719 38 631
34 778
31 74740 000
45 000
SEKm
6 113
3 853
-3 031-1 078
-1 92629 657
30 669 28 743
25 000
30 000
35 000
5 840 Ukraine 63%
Share of impaired loans, gross
29 657
10 000
15 000
20 000
9 079
5 810
1 378 Russia 22%
Lithuania 15%
Lativa 23%
0
5 000
10 000
1 704400
4 532
9 079 Lativa 23%
Estonia 7.9%LCI 0.12%Retail 0.19%
21
Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q3 11
Loans past due 60 days – performance Q/QAsset quality
p y p
10
30
EURm
-50
-30
-10
-110
-90
-70
-150
-130
Q3
10Q
4 10
Q1
11Q
2 11
Q3
11
Q3
10Q
4 10
Q1
11Q
2 11
Q3
11
Q3
10Q
4 10
Q1
11Q
2 11
Q3
11
Q3
10Q
4 10
Q1
11Q
2 11
Q3
11
Q3
10Q
4 10
Q1
11Q
2 11
Q3
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
22
Provisions – well provided forAsset quality
p• Individual provisioning rates maintained• Work-out portfolios slowly decliningWork out portfolios slowly declining• Positive rating migrations
30 000SEKm
3 606
63.9%
62.7%25 000
30 000Provision ratios, % Q3 11
Retail 87
LC&I 103
21 068
18 49416 598 15 952
14782
3 2972 769 2 436
2 409
61.0% 60.0% 59.8%
15 000
20 000 Baltic Banking 54
Russia 62
Ukraine 67
G 6014782
2 099 4 3735 204
6 306
5 000
10 000
Group 60
1 449
0
5 000
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
23
Individual provisions Portfolio provisions Write-of fs, gross, cum f rom 2010 Provision ratio
Repossessed assetsAsset quality
p
SEKm
6 000
7 000
4 000
5 000
2 000
3 000
0
1 000
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Real Estate Residential Real Estate Commercial Passenger & Commercial Transport Shares Other
24
Credit impairments by categoryAsset quality
p y g y
2 000SEKm
1 000
1 500
120
500
1 000
- 500
0
- 324- 441
-1 000
500
- 483 - 972-1 500
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
25
Portfolio provisions Individual provisions Recoveries Write-offs net
Real estate prices – Sweden 2011pSingle-family homes Tenant owner rights
Purchase price / assessed tax value* 12M Δ Price (SEK) per Sqm* 12M Δassessed tax value
Jan/11 1,58 1% 21 909 8%
Feb/11 1,59 1% 22 074 7%
Mar/11 1,59 0% 22 004 7%
Apr/11 1,6 0% 21 884 5%
May/11 1 6 1% 21 584 4%May/11 1,6 -1% 21 584 4%
Jun/11 1,6 -1% 21 286 3%
Jul/11 1,58 -2% 21 196 1%
Aug/11 1,56 -2% 21 264 -1%
Sep/11 1,56 -2% 21 480 -1%
*3 months moving average
26
Source: Mäklarstatistik (www.maklarstatistik.se)
Real estate prices – Swedenp
2 500
3 000
120
140VolumeSingle-family homes - major cities
10 000
12 000
120
140
VolumeTenant owner rights - major cities
500
1 000
1 500
2 000
20
40
60
80
100
2 000
4 000
6 000
8 000
20
40
60
80
100
00
2007
-01
2007
-03
2007
-05
2007
-07
2007
-09
2007
-11
2008
-01
2008
-03
2008
-05
2008
-07
2008
-09
2008
-11
2009
-01
2009
-03
2009
-05
2009
-07
2009
-09
2009
-11
2010
-01
2010
-03
2010
-05
2010
-07
2010
-09
2010
-11
2011
-01
2011
-03
2011
-05
2011
-07
2011
-09
Total volume Stockholm (index) Gothenburg (index) Malmö (index)
00
2007
-01
2007
-03
2007
-05
2007
-07
2007
-09
2007
-11
2008
-01
2008
-03
2008
-05
2008
-07
2008
-09
2008
-11
2009
-01
2009
-03
2009
-05
2009
-07
2009
-09
2009
-11
2010
-01
2010
-03
2010
-05
2010
-07
2010
-09
2010
-11
2011
-01
2011
-03
2011
-05
2011
-07
2011
-09
Total volume Stockholm (index) Gothenburg (index) Malmö (index)
5 000
6 000
100
120
140VolumeSingle-family homes - by region*
( ) g ( ) ( )
8 0009 00010 000
140160180
VolumeTenant owner rights - by region*
1 000
2 000
3 000
4 000
20
40
60
80
100
1 0002 0003 0004 0005 0006 0007 000
20406080
100120140
00
2007
-01
2007
-03
2007
-05
2007
-07
2007
-09
2007
-11
2008
-01
2008
-03
2008
-05
2008
-07
2008
-09
2008
-11
2009
-01
2009
-03
2009
-05
2009
-07
2009
-09
2009
-11
2010
-01
2010
-03
2010
-05
2010
-07
2010
-09
2010
-11
2011
-01
2011
-03
2011
-05
2011
-07
2011
-09
Total volume Götaland (index) Svealand (index) Norrland (index)
01 000
020
2007
-01
2007
-03
2007
-05
2007
-07
2007
-09
2007
-11
2008
-01
2008
-03
2008
-05
2008
-07
2008
-09
2008
-11
2009
-01
2009
-03
2009
-05
2009
-07
2009
-09
2009
-11
2010
-01
2010
-03
2010
-05
2010
-07
2010
-09
2010
-11
2011
-01
2011
-03
2011
-05
2011
-07
2011
-09
Total volume (index) Götaland (index) Svealand (index) Norrland (index)
27
Source: Mäklarstatistik, Swedbank
* 20 larger geographically distributed cities excl Stockholm, Gothenburg and Malmö
( ) ( ) ( ) ( )
Real estate prices – Baltic countriesp1 616
1 2001 4001 6001 800
Tallinn
1 762
1 4001 6001 8002 000
Riga
939
200400600800
1 0001 200
598
200400600800
1 0001 200
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
Sep
-11
Nr.of deals EUR/m2
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/m2Source: Swedbank, Estonian Land Board Source: Swedbank
1 731
1 6001 8002 000
Vilnius
1 068
400600800
1 0001 2001 400
0200400
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
28
Source: Swedbank, State Enterprise Centre of Registers
Nr.of deals EUR/m2
Liquidity reserve*Liquidity and funding
SEKq y
SEKm
AAA-rating**Cash and holdings in central banks 190 843Deposits in other banks available overnight 759p gSecurities issued or guaranteed by sovereigns, central banks or multilateral development banks 32 854Securities issued or guaranteed by municipalities or Public sector entitiesCovered bonds 54 383 - Issued by other institutions 54 383 - Own issuedSecurities issued by non-financial corporatesSecurities issued by financial corporates (excl. covered bonds) 929Other
Total 279 768
*According to the template defined by the Swedish Bankers' Association
Additional liquid assets, Group 57 287Other, over-collateralisation in the cover pool 130 000
**100% f th iti i th li idit Q3 2011 t d AAA
Total 467 055
29
**100% of the securities in the liquidity reserve per Q3 2011 are rated AAA
Long-term funding Liquidity and funding
g g• Continued focus on covered bonds with Q3 issuance of SEK 60bn• Term funding of SEK 210bn issued first 9M 2011, with maturities of SEK 97bn
during the same periodduring the same period • Maturities for the remainder of 2011 amount to nominal SEK 69bn • Nominal figures term funding Q3 2011:
• Covered bonds SEK 58bn; Senior unsecured SEK 2bn
200200
Long-term funding maturity profile, SEKbn
100
150 Senior unsecuredGuaranteed bonds
100
150 Covered bonds
0
50
0
50
02011 2012 2013 2014 2015 2016 2017-
02011 2012 2013 2014 2015 2016 2017-
3030
Remaining government guaranteed debt Liquidity and funding
g g g• Exited the programme on 30 April 2010
• No issuance under the programme since summer 2009p g
• SEK 39bn of government guaranteed debt matured during the first nine months of 2011
• Maturities of SEK 41bn for the remainder of 2011
60
Maturity profile as per Q3 2011, SEKbn60
40 USDSEKEURCHFHKD20 HKDJPY
02011 2012 2013 2014
3131
Limited unsecured funding needLiquidity and funding
g
Lending to the public, less deposits, covered bond pool and retail bondsSEKbn200
100
150
50
100
-50
0
-100Q4
2008Q1
2009Q2
2009Q3
2009Q4
2009Q1
2010Q2
2010Q3
2010Q4
2010Q1
2011Q2
2011Q3
2011
32
