cheuvreux pan-europe conference paris · 3/17/2010 · q107 q207 q307 q407 q108 q208 q308 q4/08...

Cheuvreux Pan-Europe Conference Paris 17 March 2010

Carl-Johan Granvik Group Chief Risk Officer

17 March Cheuvreux Pan-Europe Paris Conference2

Disclaimer

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.


General result trends – year-end report 2009

17 March Cheuvreux Pan-Europe Paris Conference4 10 February 2010

Telephone conference Year-end report 2009

4

Result highlightsEURm Q4/09 Q3/09 Chg % Q4/08 Chg % FY 09 FY 08 Chg %

Net interest income 1,299 1,321 -2 1,386 -6 5,281 5,093 4

Net fee and commission 463 437 6 390 19 1,693 1,883 -10

Net gains/losses 351 486 -28 325 8 1,946 1,028 89

Other income 45 33 36 150 153 196 -22

Total income 2,158 2,277 -5 2,251 -4 9,073 8,200 11

Staff costs -702 -670 5 -665 7 2,724 -2,568 6

Total expenses -1,219¹ -1,087 12 -1,150 6 4,512 -4,338 4

Profit before loan losses 939 1,190 -21 1,101 -15 4,561 3,862 18

Net loan losses -347 -358 -3 -320 -1,486 -466

Operating profit 592 832 -29 781 -24 3,075 3,396 -9

Net profit 447 626 -29 637 -30 2,318 2,672 -13

Risk-adjusted profit 533 729 -27 620 -14 2786 2279 22

¹ Including restructuring charges of EUR 64m


Strong income generation continues - particularly in customer areas

Net interest income – down 2% from high levels

Unchanged lending volumesContinued pressure on deposit margins while corporate lending margins continue to increaseLower contribution from Group Treasury

Continued positive trend in Net fee and commission income – up 6%

Savings commission continued the positive trend – up 11%Lending commission down 9% compared to a strong Q3

Net gains/losses remains high in customer areas

Customer driven capital markets activities continues to perform strongly Life & Pension released a strong result also in the fourth quarter

Total operating income, EURm

2,251 2,2772,158

Q4 2008 Q3 2009 Q4 2009

32


Expense growth well in line with expectations

Total operating expenses, EURm

1,1501,087

1,155

Q4 2008 Q3 2009 Q4 2009

Restructuring charges EUR 64m

32

Up 6% - when excluding restructuring costs of EUR 64mTotal expenses up 12% compared to previous quarterUnderlying cost growth in local currencies 3% compared to same quarter last yearReduced number of FTE’s, YoY -2%

1,219


Stable loan losses

320 356 358 347425

Q4/08 Q1/09 Q2/09 Q3/09 Q4/09

Gross loan losses Reversals Net loan losses

FI, 13%NO, 10%

SE, 11%

Other, 6%

SOSI, 6%

NEM, 11%

DK, 43%

Loan losses by area 2009

EURm

Net loan losses stable in the area of 55bps

Mainly corporate exposures in the Nordic region

In the later part of 2009 loan losses decreased somewhat in Finland and Sweden while Denmark and Norway slightly increased

Stable in New European Markets

Loan losses steam from a large number of smaller and medium sized exposures


Performing: Allowance established, payments madeNon-performing: Allowance established, full payments not made on due date

1 3892 212

835

2 234

1 639 1 868

Q4 2008 Q3 2009 Q4 2009

Performing Non-performing

Macro pressure easing - impaired loans gross up 7% in Q4 compared to 9% in Q3 and 19% in Q2

54% impaired loans are performing

Provisioning ratio continues to increase - 53% compared to 51% in Q3

Impaired loans, EURm

Impaired loans increases at a lower pace


Rating migration

Corporate rating migration Q409 / Q309

1% 0% 1%3%

8%6%

1% 1% 0% 0%0%

5%

10%

15%

20%

25%

30%

> -4 -4 -3 -2 -1 0 1 2 3 4 >4

Number of notches up- and down-rated

7% up-rated13% down-rated

Larger variance in credit quality in Q4 compared to Q3

Rating migration on total portfolio impacted RWA 6.9% in 2009 (4.3 % by end Q3 2009)

The change in Q4 mainly explained by a model change in the Retail portfolio

Corporate portfolio stable

80% unchanged


Nordea in a position of strength – preparing for new regulations


A very strong relative starting point – one of the strongest capital positions globally…

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Nordea # 4 out of 45 large global banks in Standard&Poor’s Risk-adjusted capital (RAC) analysis


Impact on Nordea

Nordea’s Tier 1 capital is expected to decrease by ~170 bps

Reclassification of Tier 1 hybrid capital (~105bps)

Changes in regulatory capital base adjustments (~65bps)

Requirements for market risk expected to be ~2-3x current levels

Nordea’s relatively small trading book dampens the impact on capital ratios

Other requirements are more uncertain

Effects from counterparty risk

Countercyclical PD adjustment

Pillar 1 Pillar 1

Tier 1

Tier 2

Tier 1

T1 hybrid

Tier 2

Trading bookOther (?)

0

5

10

15

20

25

Pillar 1 Capital base Pillar 1 Capital base

EURbnBasel II “Basel III”

Goneconcern

Goingconcern


Nordea’s position on new capital regulations

Nordea fully support regulatory efforts

Nordea is among global leaders in core Tier 1 and “going concern”capital

Increased cost of capital is expected

Capital regulations are expected to impact pricing

Nordea does not support the introduction of a leverage ratio


Nordea well prepared to adapt to new liquidity regulations

High quality liquidity buffer

Well diversified funding base

Strong funding name

High proportion of long-term debt issuance

30 days

Liquidity buffer e.g. government bonds

Stressed cash flows assuming e.g. run off deposits etc

12 months

Illiquid assets e.g. lending > 12 months, but also portion of <12 m lendingAssets

Liabilities Core funding e.g. wholesale funding > 12 months, retail deposits

Liquidity Coverage Ratio

Net Stable Funding Ratio


Observations on proposed new regulations

Nordea fully support regulatory efforts

Harsh parameter setting in the first proposal

Change of liquidity and funding structureSize and quality of liquidity buffer

Long term funding

Potential pricing implications on lending and derivatives

Short term lending likely to be penalised


On the journey towards Great Nordea


Great Nordea vision launched in 2007

Profit orientation

Ambitious vision & targets

Clear growth strategy

Strong customer oriented values &

culture

Nordea values become part of the DNA

Prudent risk managementEfficient capital management

Leading Nordic bankDouble risk adjusted profit in 7 years

“Profitable organic growth” strategy supported by Group initiatives


1,754 1,734

1,873

2,142

1,961 1,996

2,277

2,158

1,780

1,898

1,992

2,2792,251

1,957

2,359

1,914

Q1/

06

Q2/

06

Q3/

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Q4/

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Q1/

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Q4/

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Q2/

08

Q3/

08

Q4/

08

Q1/

09

Q2/

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Q3/

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Q4/

09

Total income, EURm

Strategy has delivered income growth and a solid capital and funding position


Strength of Nordea’s business model proven by low volatility in operating profit

183156

5938

1814

Nordea AverageEuropean

Peers

Quarterly variation operating profit*, %

* Calculation based on covariance of 12 quarters operating profits 2007-2009 ** Nordic peers: Danske Bank, DnB NOR, SEB, SHB, Swedbank

Nordic peers**

>250


Strengthening of our leading position in the Nordics

Capture potential in existing customers base Acquisition of new customers in Gold segmentSales activities and customer contacts at record levels - 100% more 360 degree meetings in the branch network

# Gold customers, 000

Strong inflow of customers in PB segment

Savings strategy successful – strong net inflow in 2009

# PB customers, 000

House-bank relationship strategy successful - increased market shares through increased share of wallets

Increase penetration of risk management products and capital market transactions – natural parts of the basic product offering

Total income CMB & Large, EURmCorporate

2007 2008

10,000 new Gold customers a month – main part new

Nordea customersHousehold

Private Banking

2009

10%

2008 2009

12%

2007

2008 2009

43%

2007

2,3592,474

2,603

7883

87

1,6051,981

2,291

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Resulting in delivery on long-term targets

Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q4/ 08 Q1/ 09 Q2/ 09 Q3/ 09 Q4/ 09

Rolling four quarters compared with FY 2006 EUR 1,957mLong-term target for average yearly growth

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Top quartile

TSR 2007-2009RAP – clearly on track to reach 2013 target

Best in class RoE 2007-2009Nordea has reported the highest average return on equity (RoE) of Nordic peers¹,

15.1%¹Nordic peers: Danske Bank, DnB NOR, SEB, SHB, Swedbank

42.3%

34.6%


Customer satisfaction improving versus competitors

Nordea

2007 2009

Peers

-0.6 3.9

71.267.6

70.6+0.9

- 3.6

CSI index (aggregate) 2007-2009*

71.5

*Corporate and high involvement customers, corresponding to Gold and Silver segment customers


Group strategy and initiatives 2010 – 2012 - Prudent growth


The Great Nordea framework 2010

Ambitious vision & targets

Strong customer- oriented values & culture

Profit orientation & prudence

Great Nordea visionStrategic target picture definedAmbitious financial targets remain

Values now part of the DNAImprovement on “Living the values”in focus

Part of our foundationContinued focus on cost, risk and capital


Journey towards Great - from “Profitable organic growth” via “Middle of the Road” to “Prudent growth”

Great Nordea

07 08 09 10 11 12

Middle of the road

Next generation of initiatives launched

Keep income growth momentum

Cost, risk and capital take the lead

Enable us to accelerate out of the crisis

Profitable organic growth Prudent growth

Organic growth strategy Next level strategy based on stronger position

Group initiatives launched to support the strategy


We confirm our organic growth strategy

Increase business with existing Nordic customers and

attract new customers

Supplement Nordic growth through

investments in New European Markets

Exploit global and European business lines

Take Nordea to the next level of operational efficiency, support sustained growth

Proactively elevate relationship customers to higher segments, attract new relationship customers and increase share of wallet

- with the focus on great customer experiences

Develop effective and low cost multi-channel distribution to relationship and non- relationship segments

Develop efficient and demand-driven value chains supported by strongly improved IT performance and product deliveries


Next generation of Group initiatives support “prudent growth”

Increase business with existing Nordic customers and attract new customers

Supplement Nordic growth through

investments in New European Markets

Exploit global and European business lines

Take Nordea to the next level of operational efficiency, support sustained growth

1. Future distribution2. New customer acquisition3. Growth plan Finland

6. Growth plan Poland

5. Customer-driven Markets business

4. Growth plan CMB Sweden

8. Product platforms7. Top league IT and operations

9. Infrastructure upgrade


Next generation of initiatives (1/2)Group initiative

Future distribution

New customer acquisition

CMB Sweden

Customer driven Markets business

Growth plan Finland

Objective

• Upgrade online offering and further migrate transactions from branches

• More advisor capacity in Nordic banking and private banking to increase number of new Gold and PB customers

• Comprehensive growth plan to firm up position in Finland, incl. relocation of branches and advisors to higher growth areas

• Strengthen Nordea’s position within Swedish Corporate Merchant Banking, including improved cash management offering

• Increase penetration of risk management products with existing Corporate customers

• Continue to build top position in Nordic Corporate Finance and Equity

• Gear up Gold customer acquisition

• Branch network optimization, including alignment of capacity to customer potential, new formats with increased advisory capacity and reduced share of other branch staff

• Expand branch network with 50 new branches, building on existing track record of growth programGrowth plan Poland

Growth initiatives


Next generation of initiatives (2/2)Group initiative Objective

• Comprehensive program to reduce IT cost and improve efficiency, incl. IT sourcing, lean IT

• More efficient cards and payments platforms to strengthen economies of scale and servicing as number of transactions grow

More advanced technology platform in Markets to meet new infrastructure requirements, new regulation and increasing customer demand

Top league IT performance

Product platforms

Infrastructure upgrade

• Improved IT resilience

• Offshore center in PolandEfficiency / foundation initiatives

• More efficient Finance process


Neutral effect from Group initiatives in 2010 – clearly positive in 2011-2012

2010 impact

One-off investments of EUR ~240m of which EUR ~140m accounted for as expenses in income statement

Impact on running cost neutral – including efficiency gain of EUR 60m

Total impact on 2010 results from initiatives expected to be neutral – including positive income effects

2011-2012 impact

Investments expected to be at approx. the same level as in 2010

Investments subject to market conditions and that 2010 investments delivers according to plan

Result effect is expected to be clearly positive

EUR 64m restructuring charge in Q42009

18

19

11

16

Restructuring charge

Restructuring CSO/tellers and Fionia Bank

Markets IT platform

IT restructuring charges

Growth plan Finland

2009 impact


Initiatives support long term target of doubling RAP in seven years…

Future distribution

New customer acquisition

CMB Sweden

Growth plan Finland

Growth plan Poland

Top league IT performance

Product platforms

Infrastructure upgrade

0500

10001500200025003000350040004500

2006

A20

07A

2008

A20

09A

2010

2011

2012

2013

Target

Risk adjusted profit EUR m

Customer driven Markets business

10% CAGR required


… and secure our strategic ambitions

Growth strategy

One operating model

Best relationship bank

…to secure sufficient income generation to create great customer experiences and long term value

…in markets where we operate – retaining existing and attracting new customers

…for everything we do in order to free up resources to serve customers


Nordea expects the macroeconomic recovery to continue in 2010 –development is still fragile and hence uncertainty remains

Nordea will pursue a prudent growth strategy, balancing opportunities and risks, and will invest in the future through several growth and efficiency initiatives

The result effect from initiatives will be neutral in 2010

Nordea expects cost growth for 2010 to be largely in line with growth rate in 2009 – including effects from growth and efficiency initiatives

Nordea expects risk-adjusted profit to be lower 2010 compared to 2009, due to lower income in Treasury and Markets

The credit quality continues to stabilise, in line with the macroeconomic recovery

Loan losses could remain at high level also in 2010 – difficult to forecast when loan losses will start to decline

Outlook 2010


Key messages

Strong 2009Solid business development in all areas – cost growth well in line with expectations

Continued execution of efficiency programmes

Continued stabilisation of credit quality and loan losses at expected levels

Nordea in a position of strength – preparing for new regulations

Group initiatives to support the growth strategy 2010 - 2012Prudent growth strategy carefully balancing opportunities and risks

Continuing the journey towards Great Nordea

cheuvreux pan-europe conference paris · 3/17/2010 · q107 q207 q307 q407 q108 q208 q308 q4/08...

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