Swedbank’s second quarter 2013 results

Michael Wolf, CEO Göran Bronner, CFO Håkan Berg, CRO

Stable results continue

• Stable NII – Stable deposit and lending margins

– New lending mortgage margins

10-15bp below stock margins

– Increased new mortgage lending

market share

• Solid asset quality

2

Retail

SEKm Q2 12 Q1 13 Q2 13 ▲ Q/Q ▲ Y/Y

Net interest income 3 362 3 332 3 367 35 5

Net commissions 1 531 1 589 1 536 -53 5

Total income 5 352 5 377 5 312 -65 -40

Total expenses 2 411 2 406 2 398 -8 -13

Profit before

impairments 2 941 2 971 2 914 -57 -27

Impairments 102 55 37 -18 -65

ROE, % 26.3 27.9 28.1

C/I ratio 0.45 0.45 0.45

Continued improved market position

• Improved NII – Increased volumes and margins

• Stronger commission income – Higher corporate finance fees in

Norway

• Higher quality profit

• Costs under control

• Impairments – SEK 56m related to IT systems

3

Large Corporates & Institutions

SEKm Q2 12 Q1 13 Q2 13 ▲ Q/Q ▲ Y/Y

Net interest income 750 783 851 68 101

Net commissions 396 419 523 104 127

Total income 1 601 1 814 1 926 112 325

Expenses excl variable

staff costs 640 646 730 84 90

Variable staff costs 120 88 104 16 -16

Profit before

impairments 841 1 080 1 092 12 251

Impairments 57 74 150 76 93

ROE, % 10.3 16.7 14.5

C/I ratio 0.47 0.40 0.43

Focus on efficiency and risk adjusted returns

• Stable NII – Intensified focus on repricing

• Stronger commission income – Increased customer activity

– Increased income from fund

management

• Continued recoveries

• Latvia approved for euro

4

Baltic Banking

SEKm Q2 12 Q1 13 Q2 13 ▲ Q/Q ▲ Y/Y

Net interest income 868 742 763 21 -105

Net commissions 394 388 445 57 51

Total income 1 448 1 281 1 378 97 -70

Total expenses 594 586 593 7 -1

Profit before

impairments 854 695 785 90 -69

Impairments -200 -66 -41 25 159

ROE, % 15.0 12.6 13.4

C/I ratio 0.41 0.46 0.43

• Stable NII – Stable deposit margins

– Lower margins new mortgage

lending

• Stronger commission income

• NGL impacted by buy-backs

and valuation effects

• Stable expenses

• Continued good asset quality

• Increased Other impairments

Stable earnings

5

Group results

SEKm Q2 12 Q1 13 Q2 13 ▲Q/Q ▲Y/Y

Net interest income 5 035 5 353 5 409 56 374

Net commission income 2 339 2 388 2 525 137 186

Net gains and losses 577 557 296 -261 -281

Total income 8 788 9 082 8 979 -103 191

Total expenses 4 171 4 043 4 126 83 -45

Profit before impairments 4 617 5 039 4 853 -186 236

Credit impairments -49 60 88 28 137

Other impairments 128 85 372 287 244

Tax 1 047 976 913 -63 -134

Profit from continuing ops. 3 491 3 918 3 480 -438 -11

ROE continuing

operations, % 14.6 15.3 14.1

C/I ratio 0.47 0.45 0.46

CET 1 ratio, % (Basel 3) 15.1 16.4 17.2

Excess capital building

• IRB Advanced

– On schedule

• 13 – 15 % CET 1 ratio

• Waiting for regulatory clarity

– Resolution regime

– CRD IV implementation

– Leverage ratio/corporate risk

weights?

6

Capital

Changes B3 CET1 ratio Q1-Q2

15,4%

16,4%

0.1% 0.3%

0.2% 0.1% 0.1% 17.2%

Q4 2012 Q1 2013 Profit (cont.

operations)

IAS 19 Other CET1

RWA Changes B3 effects

Q2 2013

Continued strong credit quality

• Continued high asset quality

in Sweden

• Slower net recoveries in

Baltic Banking

7

Credit impairments, SEKm Q2 12 Q1 13 Q2 13

Retail 102 55 37

Large Corporates & Institutions 53 74 94

Baltic Banking -204 -70 -43

Estonia -25 -54 -36

Latvia -197 4 18

Lithuania 18 -20 -25

Swedbank Group -49 60 88

* Russia and Ukraine reported as discontinued operations.

30,7

10,1

0

5

10

15

20

25

30

35

Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13* Q2 13*

SEKbn Impaired loans

2013 ICAAP – Swedbank Group resilience confirmed

• In 2013 ICAAP, Swedbank’s CET 1 ratio strengthened throughout the

scenario period, despite a scenario with a sharp contraction followed

by an extended downturn with slow recovery.

• The stress test in Swedish Riksbank’s latest stability report concludes

that Swedbank is the only Swedish bank with a positive result in the

scenario period.

8

Swedbank’s second quarter 2013 results

Q & A

Appendix

Loans past due 60 days – performance Q/Q

11

-250

-200

-150

-100

-50

0

50

Q2

12

Q3

12

Q4

12

Q1

13

Q2

13

Q2

12

Q3

12

Q4

12

Q1

13

Q2

13

Q2

12

Q3

12

Q4

12

Q1

13

Q2

13

EURm

Estonia Latvia Lithuania

Provisions – well provided for

12

Provision ratio, % Q2 13

Retail 70

LC&I 41

Baltic Banking 52

Group 54

* Russia and Ukraine reported as discontinued operations

11 915 10 951

9 934

7 077

4 429 4046

2 478 2 040

1 774

1 545

1 420 1399

65% 64% 65% 62%

57% 54%

0

5 000

10 000

15 000

20 000

25 000

Q1 12 Q2 12 Q3 12 Q4 12 Q1 13* Q2 13*

SEKm

Individual provisions Portfolio provisions Provision ratio

Corporate portfolio drives capital efficiency

13

Credit portfolio - Retail

Segments excl. Swedbank

Mortgage and Swedbank Finance

Volume

(SEKbn)

Secured

(%)

Agriculture 6.0 81

Manufacturing 8.8 69

Public sector and utilities 4.4 93

Construction 4.5 81

Retail 9.0 86

Transportation 2.0 79

Shipping 0.1 95

Hotels and restaurants 3.2 88

Information & communication 1.0 46

Finance and insurance 1.7 65

Property management 51.2 97

Professional service 6.7 67

Other 5.5 72

Total 104.1 87

94

23

104

Total portfolio SEK 221bn

Swedbank Mortgage AB

Swedbank Finans AB

Other

16

6

4

26 25 24

23 26

0

10

20

30

Q2-12 Q3-12 Q4-12 Q1-13 Q2-13

SEKbn Shipping and Offshore

Offshore Tanker Other

14

Credit portfolio – Large Corporates & Institutions

• Exposure to Shipping & Offshore sector was SEK

26bn plus unutilised commitments of SEK 8bn.

– Portfolio duration 4-5y

– Average fleet age 7y

– Strong employment profiles

3.5% 12.5%

Shipping and offshore

0 5 10 15 20 25

SEK

EUR

USD

NOK

JPY

Shipping and offshore portfolio by currency

Q2-13

Q1-13

0,5

7,1

1,6

4,2

1,3

2,1

0,5

2,4

0,5

2,1

0,8

1,1

2,1

0 2 4 6 8

Cruise

Drilling & exploration

Oil service

Supply

Accommodation

Floating production

Chemical

Product

Crude oil

Gas (LNG/LPG)

Dry bulk

Container

RORO

Shipping and Offshore portfolio by subsegment

Q2-13

Q1-13

Agriculture

15

• Segmentation definitions

– Corporate Agriculture: Businesses that

derive their main income from Agricultural

activities

– Private Investments: Private individuals

who own agricultural properties for living or

investment purposes

• Lending exposure to Agriculture

SEK 63.8bn

– Corporate Agriculture: (58%)

• Agriculture 45%

• Forestry 13%

– Private Investments (42%)

• Residential: 20%

• Forestry: 22%

Corporate: Agriculture

45%

Corporate: Forestry

13%

Private: Forestry

22%

Private: Residential

20%

Credit portfolio

0

200

400

600

800

1 000

1 200

1 400

Q2 2013

0

200

400

600

800

1 000

1 200

1 400

Q2 2013

Core balance sheet* structure

16

Liquidity and funding

CEE lending

Estonia

Other corporate

lending, Sweden &

other Nordic countries

Other private, Sweden

Swedish

mortgage loans

Senior

Covered

bonds

Deposits

CET1

Suppl. cap

Government guaranteed debt

Assets Liabilities SEKbn SEKbn

* Simplified balance sheet

Q2 2013 Q2 2013

0

20

40

60

2013 2014 2015 2016 2017 2018 2019-

Senior unsecured debt

-10%

0%

10%

20%

30%

40%

50%

0% -5% -10% -15% -20% -25% -30% -35% -40% -45% -50%

OC, Q213

Senior unsecured debt strategy

17

*Nominal amounts

• Limited need given Swedbank’s balance sheet structure

• Secure OC

• Fund liquidity reserves

Senior unsecured debt maturity profile

SEKbn*

Over-

colla

tera

lisation

House price drop

House price sensitivity of the cover pool

Liquidity and funding

0

20

40

60

80

100

120

Covered bonds Senior unsecured

Lower funding needs

• LCR 129% (Swedish FSA definition FFFS 2012:6)

• NSFR 95%

18

Liquidity and funding

Term funding issuance – completed and planned

SEKbn*

*Nominal amounts

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

Domestic CP

ECP/CD USCP Yankee CD French CD Finnish CD

Q4 12

Q1 13

Q2 13

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

Domestic CB

Euro CB USD CB (144A)

Other CB Senior unsecured

FY 2012

Q1 13

Q2 13

Conservative funding plan

19

Long-term debt issued

• Issued SEK 68bn of term-funding YTD of which SEK 29bn in Q2

• Term funding plan in 2013 of SEK 120bn, full-year maturities of SEK 86bn

Liquidity and funding

Outstanding short-term debt SEKm SEKm

*Nominal amounts

0

50

100

150

200

2013 2014 2015 2016 2017 2018 2019-

Government guaranteed debt

Senior unsecured debt

Covered bonds

20

Long-term funding maturity profile

• FY 2013 maturities amount to nominal SEK 86bn, of which SEK 12bn remain

20

Long-term funding maturity profile

Liquidity and funding

SEKbn

Liquidity reserve

21

1 95% of the securities in the liquidity reserve per Q2 2013 are rated AAA

According to the template defined by the Swedish Bankers' Association

2 84% of the additional liquid assets fulfill the Liquidity Reserve definition by the Swedish Bankers’ Association except

from that they are held outside the Treasury department. 3 82% of the additional assets are rated AAA

Liquidity and funding

SEKm

Cash and holdings in central banks 199 879

Deposits in other banks available overnight 351

Securities issued or guaranteed by sovereigns, central banks or multilateral development banks 31 058

Securities issued or guaranteed by municipalities or public sector entities 397

Covered bonds 54 981

- Issued by other institutions 54 981

- Own issued

Securities issued by non-financial corporates

Securities issued by financial corporates (excl. covered bonds) 2 405

Other

Total1

289 071

Additional liquid assets, Group2, 3

30 726

Prolonged survival horizon

22

Liquidity and funding

SEKbn

Days forward

0

50

100

150

200

250

0 20 40 60 80 100 120 140 160 180 200 220 240 260 280 300 320 340 360

0

50

100

150

200

250

300

Assets Liabilities

Assets held for sale

Interest-bearing securities

Lending to the public

Loans to credit institutions

Cash and balances with central banks

Deposits and borrowings from the public

Amounts owed to credit institutions

Debt securities in issue

Limited need for USD-funding

23

SEKbn

• USD-funding need covered for more than 12 months

• Issued USD 1bn of covered bonds (144a) and USD 1bn of senior (144a) YTD 2013

Liquidity and funding

0

50

100

150

200

250

300

350

400

Next 12-month term funding maturities

CP / CDs and net interbank funding,

SEKm

0

50

100

150

200

250

300

350

400

Additional pledgeable and/or liquid assets

Liquidity reserve, securities

Liquidity reserve, central bank deposits,

SEKm

Conservative liquidity levels

• Short-term funding mainly a tool for cash management

• More than 12 months pre-funded

24

SEKbn

Liquidity and funding

1 As defined by the Swedish Bankers’ Association

1

1

Asset encumbrance

25

Liquidity and funding

Encumbered assets - distribution by type of liability (row) and asset (column)

SEKm

Government

debt

instruments

Central banks

and

supranational

debt

instruments

Covered

bonds

Debt

instruments

issued by

credit

institutions

Securities

issued by

corporate and

other issuers ABS

Mortgage

loans Cash Total

of w hich

received

collateral

(off-

balance)

Central bank funding

Intraday settlement 2 154 9 132 11 286 7 856

Repurchase agreements 1) 21 343 12 735 34 078 12 183

Derivative 2) 475 722 8 186 9 383 85

Covered bonds 3) 497 628 497 628

Retained covered bonds issued

Other 4) 763 401 1 164

Total 23 972 22 589 763 497 628 8 587 553 539 20 124

Financial assets pledged for insurance policy holders 109 954

Unencumbered assets - additional assets available for secured funding

SEKm

Government

debt

instruments

Central banks

and

supranational

debt

instruments

Covered

bonds

Debt

instruments

issued by

credit

institutions

Securities

issued by

corporate and

other issuers ABS

Mortgage

loans Cash Total

of w hich

received

collateral

(off-

balance)

Securities 5, 6) 27 261 11 820 69 658 12 253 8 328 1 003 130 323 25 065

Cover pool over collateralisation 7) 227 036 227 036

Cover pool eligible assets 8)

Total 27 261 11 820 69 658 12 253 8 328 1 003 227 036 0 357 359 25 065

1) Repoed securities.

2) Collateral posted under CSA agreements, gross (3-year, SEKm,

High: 21 572, Low : 11 054, Average: 13 995).

3) Of w hich accrued interest of assets in the cover pool, SEK 2

133m as of 30 June 2013.

4) Collateral pledged in securities lending activities and w ith

exchanges.

5) Reversed repos are included.

6) All type of securities, including securities non pledgeable at

central banks, of w hich 80% are rated AAA, 1% are rated below

A- and 8% are not rated.

7) Of w hich accrued interest of assets in the cover pool

overcollateralisation, SEK 987m as of 30 June 2013.

8) Securities received as collateral in for example reversed repo

transactions that; either have (encumbered) or have not

(unencumbered), been used as collateral by Sw edbank.

Swedish mortgage market

• No securitisation (on balance sheet), no sub-prime market, no 3rd party origination, insignificant

buy-to-let market

• 70% home ownership1

• Rental market is regulated

• Transparent credit information (credit information agency, www.uc.se)

– Publicly available information regarding income, debt, payment track record etc

• Consumer credit legislation requires affordability calculations including stress test of higher interest

rate

• Very limited debt forgiveness possibilities (full recourse)

• Strong social security and generous unemployment benefit system

26

Swedish housing and mortgage market

1 Source: Boverket, 2011

Real estate prices – Sweden 12 months development

27

Swedish housing and mortgage market

Single-family homes1 Tenant-owner rights2 Combined3

12M Δ

12M Δ

12M Δ

Jul/12 0% 4% 1%

Aug/12 2% 4% 3%

Sep/12 2% 5% 3%

Oct/12 1% 6% 3%

Nov/12 3% 7% 4%

Dec/12 4% 7% 6%

Jan/13 3% 7% 5%

Feb/13 4% 7% 5%

Mar/13 3% 7% 5%

Apr/13 2% 8% 4%

May/13 4% 8% 5%

Jun/13 4% 10% 6%

Source: Valuegard www.valuegard.se (Based on data from Mäklarstatistik), 1 HOXHOUSESWE, 2 HOXFLATSWE, 3 HOXSWE

Baltic countries

28

Real estate prices

Source: Land book database Source: Swedbank, Estonian Land Board

Source: Swedbank. State Enterprise Centre of Registers

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

Jan-0

5

Jul-05

Jan-0

6

Jul-06

Jan-0

7

Jul-07

Jan-0

8

Jul-08

Jan-0

9

Jul-09

Jan-1

0

Jul-10

Jan-1

1

Jul-11

Jan-1

2

Jul-12

Jan-1

3

Tallinn

Nr.of deals EUR/m2

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

Jan-0

5

Jul-05

Jan-0

6

Jul-06

Jan-0

7

Jul-07

Jan-0

8

Jul-08

Jan-0

9

Jul-09

Jan-1

0

Jul-10

Jan-1

1

Jul-11

Jan-1

2

Jul-12

Jan-1

3

Riga

Nr.of deals EUR/m2

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

Jan

-05

Jul-05

Jan

-06

Jul-06

Jan

-07

Jul-07

Jan

-08

Jul-08

Jan

-09

Jul-09

Jan

-10

Jul-10

Jan

-11

Jul-11

Jan

-12

Jul-12

Jan

-13

Vilnius

Nr.of deals EUR/m2

Mortgage loans, gross margin (3 months)

29

The gross margin covers:

Cost of liquidity ~0.2%

Administrative costs ~0.3%

Credit impairments ~ 0.03%

Tax (22 % on profit before tax)

Net margin

0

1

2

3

4

5

6

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

%

Gross margin Swedbank's funding cost Stibor 3 months Swedish Riksbank's repo rate