swedbank's interim report q1 2012

8/2/2019 Swedbank's Interim Report Q1 2012

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Swedbank Interim report January-March 2012 Page 1 of 45

First quarter 2012Compared with fourth quarter 2011

The result for the quarter amounted to SEK 3 425m (965)

Earnings per share before dilution amounted to SEK 2.21* (0.88) andearnings per share after dilution amounted to SEK 2.20* (0.88)

The return on equity was 14.0 per cent (3.9) The cost/income ratio was 0.48 (0.57)

Net interest income increased by 5 per cent to SEK 5 208m (4 967)

Profit before impairments increased by 29 per cent to SEK 4 768m (3 709)

Swedbank reported net credit impairments of SEK 172m (net recoveries of174)

The core Tier 1 capital ratio was 15.9 per cent according to Basel 2 (15.7per cent on 31 December 2011). The core Tier 1 capital ratio according toBasel 3 was 14.9** per cent (14.7 per cent on 31 December 2011).

First quarter 2012Compared with first quarter 2011

The result for the period amounted to SEK 3 425m (3 852)

Earnings per share before dilution amounted to SEK 2.21* (2.47) andearnings per share after dilution amounted to SEK 2.20* (2.47)

The return on equity was 14.0 per cent (16.1)

The cost/income ratio was 0.48 (0.53)

Net interest income increased by 16 per cent to SEK 5 208m (4 501) Profit before impairments increased by 17 per cent to SEK 4 768m (4 068)

Swedbank reported net credit impairments of SEK 172m (net recoveries of972)

* The calculation of earnings per share is specified on page 40.

** Swedbanks estimate based on current knowledge of future regulation.

0500

1 0001 5002 0002 5003 0003 5004 0004 5005 000

Q1-2011

Q2-2011

Q3-2011

Q4-2011

Q1-2012

SEKm

Profit for the quarter

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Q1-2011

Q2-2011

Q3-2011

Q4-2011

Q1-2012

SEK

Earnings per share before dilution*

0.0

2.04.06.08.0

10.012.014.016.018.020.0

Q1-2011

Q2-2011

Q3-2011

Q4-2011

Q1-2012

%

Return on equity

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Q1-2011

Q2-2011

Q3-2011

Q4-2011

Q1-2012

%

Core Tier 1 capital ratio, Basel 2


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CEO Comment

2012 began positively with a major liquidity boost fromthe ECB and political agreements between the EMUcountries to gradually reduce their debts. This clearlyimpacted the financial markets early in the quarter,leading to a higher risk appetite. Renewed concernsabout the debt situation, especially in Spain during the

latter part of the quarter, again increased uncertainty inthe financial markets.

Focus on customer satisfaction and operationalefficiencyFor Swedbank the year began strongly, with focus oncustomer relations and operational efficiency. We arecurrently well ahead regarding compliance with the newregulatory requirements. This puts us in a good positionto grow with our current customers and to add newbusiness.

To strengthen customer satisfaction within Retail, wehave decided to introduce a new tool that will make iteasier to systematically track what our customers likeand do not like about the bank. We have used the sametool in the Baltic countries with good results. In theprocess, we have become better at responding to ourcustomers and adapting our services, which in turn hasled to higher customer satisfaction in internal andexternal surveys. We have also received several awardsfor our service in the Baltic countries.

Good business development in Sweden and NorwayBecause of the focus on risk-adjusted return withinLarge Corporates in recent years, lending volumesdeclined during parts of 2010 and 2011. Since mid-year2011 volumes have risen again, at the same time thatthe price of risk has become more relevant. Moreover,

activity in the corporate bond market has increased, andSwedbank has been one of the most active advisors inSweden and Norway. Our ability to sell corporate bondsto major investors and through our retail network hasbeen an important reason for our improved position. Theinvestment banks business development wassuccessful in the quarter, especially in Norway.

The lending margin on new mortgages stabilised inSweden during the first quarter. We have seenconsiderable activity among SMEs in Sweden, with ahigh number of new business enquiries. A slightadjustment in pricing was made for this segment. As aresult of the higher capital requirements announced in

autumn 2011, we expect continued price adjustments.Baltic Banking is continuing its stable development. Ourstrong deposit base and balance between deposits andlending make us sensitive to interest rates, whichreduces net interest income when interest rates godown, as they did during the first quarter this year.Stable macroeconomic conditions in the region have notyet caused our lending margins to rise again. With thecrisis in mind, many companies and private customersare choosing to amortise their debts and use theirsavings as finance.

Continued work to cut costsMeasures to cut costs in the bank are continuing asplanned. The goal is to reduce expenses in 2012 by onebillion kronor, excluding variable remuneration,compared with the previous year. We have begun tosee results from the restructurings announced in thefourth quarter 2011. Large Corporates & Institutions has

reduced its staff. Operations in Russia and Ukraine arebeing further reduced following the previouslyannounced decision to gradually exit the retail segment.Expenses are being slashed within Group Staffs asdemand for the resources it built up to manage the crisishas declined. Within Group Business Support, work isunder way to cut costs e.g. in IT operations andmaintenance. We have also launched a review of ourproduct range with the goal of reducing complexity andthe number of products. In addition, we have limitedproduct development costs and are giving priority toregulatory driven projects as well as investments in ourdigital channels.

Good credit quality

Credit quality remains high. In Sweden we have lowcredit impairments and in the Baltic countries wereported recoveries for the sixth consecutive quarter,although they were lower than before. In Ukraine, wehave allocated collective provisions of SEK 200m in thequarter, since we see increased risks in our retailportfolio.

We are continuing our efforts to improve financialtransparency. At the moment we are working on ourinternal capital assessment together with the SwedishFinancial Supervisory Authority and hope to be able topublish the results in connection with the next interimreport. The stress test will ensure that the bank can

handle highly negative scenarios. To do so, it isimportant to be sufficiently capitalised and remainprofitable. In a stressed 5-year scenario, about threefourths of the bank's protection comes from our earningcapacity and one fourth from our capital.

OutlookThe macroeconomic outlook remains uncertain with arisk of recession in Europe. This makes it difficult toprovide accurate earnings guidance. We are planningfor a weak scenario and focusing on costs. Our aim is toreduce costs in 2012 by about SEK 1bn, excludingvariable staff costs, compared with 2011. Net interestincome will be positively affected by maturing state

guaranteed funding, at the same time that lower interestrates could affect net interest income negatively. TodaySwedbank is acting from a position of strength. Westand ready when our customers want to do morebusiness.

Michael Wolf

President and CEO


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Table of contents

Page

Financial summary 4

Overview 5

Market 5

Important events during the quarter 5

First quarter 2012 compared with fourth quarter 2011 5

Result 5

First quarter 2012 compared with first quarter 2011 6

Result 6

Credit and asset quality 6

Funding and liquidity 7

Capital and capital adequacy 8

Market risk 9

Operational risks 10

Other events 10

Rating events during the period 10

Events after 31 March 2012 10

Business areas

Retail 11

Large Corporates & Institutions 13

Baltic Banking 15

Asset Management 17

Group Functions & Other 18Eliminations 20

Financial information

Group

Income statement, condensed 22

Other comprehensive income, condensed 23

Balance sheet, condensed 23

Statement of changes in equity, condensed 24

Cash flow statement, condensed 25

Notes 35Parent company 41

Signatures of the Board of Directors and the President 44

Review report 44

Contact information 45

More detailed information can be found in Swedbanks fact book,www.swedbank.com/ir, under Financial information andpublications.
http://www.swedbank/sehttp://www.swedbank/sehttp://www.swedbank/se


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Financial summaryIncome statement Q1 Q4 Q1SEKm 2012 2011 % 2011 %

Net interest income 5 208 4 967 5 4 501 16

Net commissions 2 405 2 291 5 2 456 -2

Net gains and losses on financial items at fair value 759 559 36 255

Other income 809 839 -4 1 369 -41

Total income 9 181 8 656 6 8 581 7

Staff costs 2 440 2 651 -8 2 467 -1

Other expenses 1 973 2 296 -14 2 046 -4

Total expenses 4 413 4 947 -11 4 513 -2

Profit before impairments 4 768 3 709 29 4 068 17

Impairment of intangible assets 0 1 960 0

Impairment of tangible assets 40 170 -76 2

Credit impairments 172 -174 -972

Operating profit 4 556 1 753 5 038 -10

Tax expense 1 127 790 43 1 182 -5

Profit for the period from continuing operations 3 429 963 3 856 -11

Profit for the period from discontinued operations, after tax 0 4 0

Profit for the period 3 429 967 3 856 -11

Profit for the period attributable to the shareholders of

Swedbank AB 3 425 965 3 852 -11

Q1 Q4 Q1Key ratios and data per share 2012 2011 2011

Return on equity, % 14.0 3.9 16.1

Earnings per share before dilution, SEK1)

2.21 0.88 2.47

Earnings per share after dilution, SEK1

2.20 0.88 2.47

Cost/income ratio 0.48 0.57 0.53

Equity per share, SEK1)

82.04 84.40 82.39

Capital quotient, Basel 2 2.37 2.37 2.34

Core Tier 1 capital ratio, %, Basel 2 15.9 15.7 14.9

Tier 1 capital ratio, %, Basel 2 17.4 17.2 16.2

Capital adequacy ratio, %, Basel 2 18.9 18.9 18.7

Capital quotient, transition rules 1.54 1.54 1.63

Core Tier 1 capital ratio, %, transition rules 10.4 10.2 10.4

Tier 1 capital ratio, %, transition rules 11.3 11.2 11.2

Capital adequacy ratio, %, transition rules 12.3 12.3 13.0

Credit impairment ratio, % 0.05 -0.05 -0.29

Share of impaired loans, gross, % 1.67 1.87 2.28

Total provision ratio for impaired loans, % 65 62 61

1) The number of shares and the calculation of earnings per share are specified on page 40.

The key ratios are based on profit and shareholders equity allocated to shareholders of Swedbank.

Balance sheet data 31 Mar 31 Dec 31 MarSEKbn 2012 2011 % 2011 %

Loans to the public 1 213 1 211 0 1 174 3

Deposits and borrowings from the public 604 562 7 524 15

Shareholders' equity 95 98 -3 96 0

Total assets 1 889 1 857 2 1 745 8

Risk weighted assets, Basel 2 495 492 0 519 -5

Risk weighted assets, transition rules 759 757 0 747 2

Risk weighted assets, Basel 1 977 969 1 953 3


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Overview

MarketThe risk of a more severe global slowdown that washanging over the last quarter of 2011 diminished in thefirst quarter. Huge liquidity injections from the ECB andpolitical agreements between the EMU countriespositively impacted the financial markets. Concerns

about Spain's debt situation have increased lately,however, which has led to renewed uncertainty in thefinancial markets.

Leading economic indicators such as the purchasingmanagers index and corporate orders rose marginallyduring the first quarter, but show that the Swedisheconomy has stabilised after weakening significantlyduring the fourth quarter 2011, when seasonally andcalendar adjusted GDP fell by slightly over 1 per centfrom the preceding quarter.

Previously strong, export-led growth in the Balticcountries has slowed due to the weak global economy.This was particularly true of the last quarter of 2011.Instead, higher domestic demand contributed to GDPgrowth. Declining unemployment and rising wages areleading to higher consumer spending at the same timethat business investment has started to accelerate.

The Riksbank cut its repo rate in February by anadditional 25bp to 1.5 per cent. This means it has cutthe rate by 50bp since December 2011. While the riskpicture has changed since then, it is not unlikely we willsee another rate cut in 2012, since the underlyinginflation rate is still low despite high crude oil prices. TheSwedish krona continued to appreciate against the euroduring the first quarter, but was largely unchangedagainst the US dollar.

The Stockholm stock exchange (OMXSPI) rose by 10per cent during the first quarter. The Tallinn stockexchange (OMXT) rose by 13 per cent, the Vilnius stockexchange (OMXV) by 5 per cent and the Riga stockexchange (OMXR) by 5 per cent.

Important events during the quarterDuring the quarter Swedbank changed how transactionswith the savings banks are reported. The change has noeffect on the result, but raised both revenue andexpenses for 2011 by SEK 530m. Comparative figureshave been restated. For more information, see page 25.

A number of reorganisations and transfers betweenbusiness areas were implemented during the quarter.Comparative figures have been restated. For moreinformation, see below under each business area.

First quarter 2012Compared with fourth quarter 2011

ResultProfit before impairments increased by 29 per cent toSEK 4 768m (3 709). The increase was due to higherearnings, at the same time that costs decreased. The

largest part of the profit improvement was in LargeCorporates & Institutions (LC&I) and Retail.

The quarterly result attributable to the shareholdersamounted to SEK 3 425m (965). The fourth-quarter

result was charged with goodwill impairment totallingSEK 1 930m. Credit impairments amounted to SEK172m (net recoveries of 174). The return on equity was14.0 per cent (3.9). The cost/income ratio was 0.48(0.57).

Profit beforeimpairments

by business area Q1 Q4 Q1

SEKm 2012 2011 2011Retail 2 781 2 418 2 198

Large Corporates &

Institutions 1 267 708 1 596

Baltic Banking 832 801 800

Asset Management 183 148 193

Group Functions & Other -295 -364 -738

Total excl FX effects 4 768 3 711 4 049

FX effects 0 -2 19

Total 4 768 3 709 4 068

Income for the first quarter rose by 6 per cent to SEK9 181m (8 656). Net interest income, net commission

income and net gains and losses on financial items atfair value all rose. Changes in exchange rates, primarilythe appreciation of the Swedish krona against the euro,Latvian lats and Lithuanian litas, reduced reportedincome by SEK 14m.

Net interest income increased by 5 per cent to SEK5 208m (4 967). Net interest income in the fourth quarterincluded SEK 102m in net one-off revenue (SEK 206mfrom the settlement with Lehman Brothers less SEK104m for a one-off adjustment and an accrual change).Repricing of lending within Retail and LC&I affected netinterest income positively. In addition, the cost of state-guaranteed funding decreased by SEK 112m during thequarter. Within Retail, lower Stibor rates affected netinterest income on deposits negatively. Lower Euriborrates and lower lending volumes within Baltic Bankingalso had a negative effect on net interest income.

Net commission income increased by 5 per cent to SEK2 405m (2 291), mainly due to higher income fromcorporate finance. Payment commissions decreased bySEK 68m due to seasonally lower commission incomeduring the first quarter.

Net gains and losses on financial items at fair valueincreased by 36 per cent to SEK 759m (559) due tobetter trading-related results within LC&I. Net gains andlosses on financial items at fair value decreased by SEK

121m within Group Treasury (Group Functions & Other).A one-off correction related to an outstandingsubordinated loan negatively affected the result by SEK250m.

Expenses decreased by 11 per cent compared with theprevious quarter to SEK 4 413m (4 947). The fourthquarter 2011 included expenses of SEK 330m for staffrestructurings in 2012 in Sweden and the Balticcountries. The fourth quarter also reflected seasonallyhigher expenses. Variable staff costs increased to SEK208m (47).


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Expense analysisGroup Q1 Q4 Q1SEKm 2012 2011 2011

Retail 2 342 2 486 2 415

Large Corporates &

Institutions 713 837 738



Group Functions & Otherand Eliminations 538 683 503

Total excl FX effects 4 413 4 959 4 497

FX effects -12 16

Total 4 413 4 947 4 513

of which variable pay 208 47 146

of which expenses for

compensation to Savings

Banks 152 138 129

of which non-recurring

expenses 0 330 0

The number of full-time employees decreased duringthe quarter by 237, to 16 050. The reductions weremainly in Baltic Banking and in Ukraine.

Credit impairments of SEK 172m were posted duringthe first quarter, compared with net recoveries of SEK174m in the previous quarter. The credit impairmentsare primarily attributable to Ukraine, while BalticBanking reported net recoveries.

The tax expense amounted to SEK 1 127m (790),corresponding to an effective tax rate of 24.7 per cent(45.1). The higher effective tax rate during the fourthquarter 2011 was due to non-deductible goodwill write-downs in the Latvian operations.

First quarter 2012Compared with first quarter 2011

ResultProfit before impairments increased by 17 per cent toSEK 4 768m (4 068). During the first quarter 2011Swedbank received one-off revenue of SEK 716m froma settlement with the Lehman Brothers bankruptcyestate. Stronger net interest income and net gains andlosses on financial items at fair value affected the resultpositively.

Profit for the period attributable to the shareholdersdecreased by 11 per cent to SEK 3 425m (3 852). Creditimpairments amounted to SEK 172m (net recoveries of972). The return on equity was 14.0 per cent (16.1). Thecost/income ratio was 0.48 (0.53).

Income increased by 7 per cent to SEK 9 181m (8 581).Net interest income increased primarily in Retail andGroup Treasury (Group Functions & Other). Net gainsand losses on financial items at fair value increased inLC&I and Group Treasury, while commission incomedecreased by 1 per cent during the year. Changes inexchange rates, especially the Swedish kronas declineagainst the euro and the Baltic currencies, increasedreported income by SEK 35m.

Net interest income increased by 16 per cent to SEK5 208m (4 501). The factors that positively affected netinterest income were somewhat higher interest rates inSweden and repricing of lending. Moreover, the fee for

the state-guaranteed funding decreased by SEK 212mdue to maturing state-guaranteed funding. Smallerlending portfolios in Baltic Banking as well as in Russiaand Ukraine affected net interest income negatively.

Net commission income was down 2 per cent to SEK2 405m (2 456). The decrease was mainly the result oflower commission income from asset management,securities trading and lending, while income from

corporate finance rose.Net gains and losses on financial items at fair valueincreased by 198 per cent to SEK 759m (255). LC&Ireported higher net gains and losses on financial itemsat fair value due to stronger trading related income.Group Treasury reported a higher result, mainly due tonegative funding-related valuation effects in the firstquarter 2011.

Expenses decreased to SEK 4 413m (4 513). Staffcosts decreased by SEK 89m and consulting costsdecreased by SEK 76m. Variable staff costs rose toSEK 208m (146).

Since 1 July 2010 Sweden pays parts of its variableremuneration in the form of shares. This remuneration isaccrued as an expense until the shares are settled. As aresult, variable remuneration allocated to employeesduring the period differs from the recognised amount.During the quarter recognised variable remunerationwas SEK 208m. A more detailed analysis of variableremuneration is provided on page 13 of the fact book1.

The number of full-time positions has decreased in oneyear by 1 096, including 615 in Ukraine, 273 in Retailand 287 in Baltic Banking.

Credit impairments of SEK 172m were reported for the

first quarter (net recoveries of 972). The creditimpairments are primarily attributable to Ukraine, whilethe Baltic countries reported net recoveries. In the firstquarter 2011 net recoveries were reported in BalticBanking, Russia and Ukraine.

The tax expense amounted to SEK 1 127m (1 182),corresponding to an effective tax rate of 24.7 per cent(23.5). In the medium term the effective tax rate isestimated at 21-22 per cent.

Credit and asset qualitySwedbanks credit and asset quality further improvedduring the first quarter 2012. The Swedish operations

continued to post low credit impairments. The creditportfolio in the Baltic countries is well provisioned forand continued to report recoveries during the quarter,though slower than before. In Ukraine a collectiveprovision of SEK 200m was allocated due to theelevated risks in the retail portfolio. As a whole,Swedbank feels that turbulent global conditions to datehave not had a major impact on its balance sheet.

Swedbanks total lending increased by SEK 3bn to SEK1 169bn during the first quarter 2012. Lending to privatecustomers in Sweden continued to grow, butsignificantly below the average annual rate in the lastten years. Lending in the Baltic countries, Russia and

1More detailed information can be found in Swedbanks fact book,www.swedbank.com/ir, under Financial information and publications.
http://www.swedbank/sehttp://www.swedbank/se


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Ukraine continued to decline, but corporate lending inEstonia has begun to stabilise.

The stable or positive trend in housing prices in majorBaltic cities continued during the first quarter 2012. Theaverage loan-to-value ratio was 74 per cent in Estoniaon 31 March (75 on 31 December 2011), 145 per cent inLatvia (149) and 92 per cent in Lithuania (96). WithinBaltic Banking the share of the mortgage portfolio

exceeding current market value was SEK 6.1bn (6.3).The average loan-to-value ratio in Swedbank Mortgagewas 62 per cent (60) on 31 March, calculated byproperty level (46 per cent by loan level).

Impaired loans decreased by a total of SEK 2.7bnduring the first quarter to SEK 22.1bn and includedevery business area. The decrease was partly due to aslower inflow of new impaired loans during the periodand partly to certain large corporate commitments thatare no longer impaired. Write-offs also contributed to thedecrease in impaired loans.

The stabilisation of loans past due by more than 60days continued during the first quarter 2012. Privatemortgage loans within Baltic Banking past due by morethan 60 days continued to decrease. Within the Retailbusiness area, private mortgage loans past due by morethan 60 days rose during the first quarter but remain atvery low levels.

Credit impairments, netby business area Q1 Q4 Q1

SEKm 2012 2011 2011

Retail 24 216 5

Large Corporates &

Institutions 14 4 -105

Baltic Banking -134 -117 -382Estonia -78 -55 -9

Latvia -21 158 -135

Lithuania -35 -232 -238

Other 0 12 0

Group Functions & Other 268 -277 -490

Russia -65 -269 -171

Ukraine 333 9 -319

Other 0 -17 0

Total 172 -174 -972

Credit impairments totalled SEK 172m (net recoveries ofSEK 174m) during the first quarter. Credit impairmentswithin Retail and LC&I remain very low and are relatedto a few corporate commitments. Recoveries in theBaltic countries and Russia were largely related to alimited number of corporate commitments. After furtherreviews of the portfolios and a continued elevated risklevel in Ukraine, additional provisions of SEK 200mwere deemed necessary for lending to private personsas well as for a few large corporate commitments.

Repossessed assets in the Group decreased by 2 percent to SEK 6 248m during the first quarter. Ektornetrepossessed properties valued at SEK 524m, themajority of which were in Latvia and Lithuania. Duringthe first quarter Ektornet sold assets with a book valueof SEK 436m, the majority of which were in Finland.

For more information on Ektornet, see page 20.

Assets taken over andcancelled leases

by business area 31 Mar 31 Dec 31 Mar

SEKm 2012 2011 2011

Retail 6 44 11


Estonia 8 9 32

Latvia 121 117 166

Lithuania 70 90 194

Group Functions & Other 6 043 6 115 3 711

Russia 10 10 5

Ukraine 282 286 290

Ektornet 5 751 5 819 3 416

Sweden 312 305 268

Norway 89 102 116

Finland 374 709 751

Estonia 592 569 498

Latvia 1 903 1 721 1 083

Lithuania 675 448 223

USA 1 409 1 522 276

Ukraine 397 443 201

Total 6 248 6 375 4 114

Swedbanks exposure to counterparties in Greece,Ireland, Italy, Portugal and Spain continued to decreaseduring the first quarter, largely due to a reduction inderivative exposures related to Italy. The exposurestotalled SEK 556m as of 31 March 2012 (SEK 763m asof 31 December 2011), of which SEK 4m related toGreece. Participation in the Greek debt swap during thefirst quarter had minimal impact on earnings, sinceSwedbank had already written down 70 per cent of itsholding of Greek government bonds.

GIIPS exposure

31 Mar 2012

SEKm Greece Ireland Italy Portugal Spain Total

Bonds 4 3 122 26 10 165

of which soveriegn 4 122 26 10 162

of which held to maturity1

4 100 26 5 135

Loans (money market

and certificates) 14 86 100

Loans (committed credit

facilities) 0

Derivatives net2

30 20 104 154

Other3

0 22 115 137

Total 4 33 178 26 315 556

2Derivatives at market value taking into account netting and collateral agreements.

Considering the bank's internal risk add-ons for counterparty risk at potential

future change in prices, the derivative exposures amount to: Ireland SEK 63m,

Italy SEK 434m and Spain SEK 294m. Total SEK 791m.3

Includes trade finance and mortgage loans.

1Current market values are below the carrying amounts by approximately SEK 22m.

Funding and liquiditySwedbank continued to see strong demand fromdomestic and international debt investors during the firstquarter. There has been a clear trend among investorsto seek out financially strong geographical areas, whichbenefits Sweden. The bank has capitalised onopportunities in the capital markets to issue three publicbenchmark bonds, of which two in EUR and one inUSD. This is in addition to issues in, among other, theSwedish covered bond market.

Swedbank has issued a large volume of long-term

funding in the last two years in order to build up itsliquidity reserves, pre-finance impending maturities andextend the average maturity of all its capital marketfunding. As a result, the bank did not need to participatein the extraordinary liquidity support provided by the


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European Central Bank in December and February(LTRO).

Swedbank has now entered a phase where its maturinglong-term funding is significantly lower than in recentyears. Total maturing long-term funding in 2012amounts to a nominal SEK 86bn. The bank estimatesthe volume of long-term debt it will issue in 2012 at SEK100-120bn, compared with SEK 254bn issued in 2011.

During the first quarter 2012 Swedbank issued a total ofSEK 56bn in long-term debt instruments, of which SEK30bn was covered bonds and SEK 24bn was seniorunsecured debt.

The percentage of senior unsecured funding isdetermined by the banks liquidity needs, but is alsoaffected by changes in housing prices and their impacton overcollateralisation in the cover pool. Swedbankintends to increase its presence in the senior financingmarket in Europe and the US. Covered funding in theform of covered bonds will remain the core ofSwedbanks funding strategy, since the Swedishmortgage business is the source of the large part of thebank's financing needs.

At this point Swedish banks have no restrictions on howmuch of their balance sheets may comprise funding inthe form of covered bonds (in Swedbanks case, itscover pool accounts for just over one third of thebalance sheet). Consequently, Swedbank will decide onthe right level of funding in the form of covered bondsbased on what is most cost-effective for the bank, takinginto account the liquidity risk mentioned above.However, Swedbank is confident that it is well-preparedif the applicable rules should change, largely thanks toits low structural demand for senior funding.

Swedbank manages its liquidity so that it can handle

long periods of stress in the capital markets whenaccess to new financing would be limited. At present thebank would be able to manage if the capital marketscompletely shut down for well over 12 months. Thisapplies to the Groups total liquidity as well as liquidity inspecific currencies such as USD and EUR. Short-termliquidity is being adjusted to reach a Liquidity CoverageRatio (LCR) of over 100 per cent.

Issued long-term debt Q1

SEKbn 2012

Covered bonds 30

of which SEK 17

of which EUR 3

of which USD 10

Senior unsecured bonds 24

Structured retail bonds (SPAX) 2

Total 56

The average maturity of all capital market fundingarranged through the banks short- and long-termprogrammes was 35 months as of 31 March 2012. Theaverage maturity of covered bonds was 42 months. Theaverage maturity of long-term funding issued during thefirst quarter was 46 months.

During the quarter Swedbank issued a five-year, USD1.5bn covered bond by tapping its funding programme,which primarily targets US investors. The bank has alimited demand for USD, since its lending in USD is low.To reduce liquidity risk in USD, Swedbank as of 31

March 2012 had covered its USD needs for more than12 months in advance.

Short-term funding continued to rise during the firstquarter 2012, to SEK 133bn, mainly due to increaseddemand from foreign investors. Swedbanks short-termfunding needs are limited, however, because of whichreserves with central banks were about as large as of31 March 2012 as the total volume of short-term funding

within the programmes and in the interbank market.Swedbanks liquidity reserve within Group Treasury,which is reported in accordance with the SwedishBankers Associations guidelines, amounted to SEK254bn on 31 March 2012. In addition to the liquidityreserve, liquid securities in other parts of the Groupamounted to SEK 68bn. The liquidity reserve andliquidity coverage ratio (LCR) will fluctuate over timedepending on the maturity structure of the banksoutstanding securities.

On 15 February 2012 the ratings agency Moody'splaced Swedbank and 114 other financial institutions inEurope on review for downgrade. According to Moodys

preliminary indication, Swedbanks long-term and short-term credit ratings could be downgraded by one notch,to A3 and P-2 respectively. Many large investors withshort investment horizons have strict rules on how muchthey can place with counterparties with credit ratingsbelow P-1. For that reason, a downgrade of Swedbanksshort-term credit rating would probably trigger the lossof a large part of the bank's short-term funding. Thebiggest impact is expected to be on its US short-termprogrammes. Since Swedbank has little structuraldemand for short-term funding, such a loss would nothave a material effect on the banks liquidity position orability to meet its short- and long-term paymentobligations. The short-term funding is used primarily as

a tool for the bank's cash management. The bank iscurrently holding discussions with Moodys and expectsto receive a clarification on this issue in May 2012.

For further information on Swedbanks funding andliquidity, see the fact book.

Capital and capital adequacyThe core Tier 1 capital ratio according to Basel 2strengthened during the first quarter 2012 to 15.9 percent on 31 March (15.7 per cent on 31 December 2011).

Core Tier 1 capital increased by SEK 1.5bn from thebeginning of the year to SEK 78.8bn. Profit for the year

(after the anticipated dividend) explains the increase.The risk weighted amount increased by SEK 2.3bn ornearly 0.5 per cent from the beginning of the year toSEK 494.6bn. Credit risks were largely unchanged. Theincrease in risk weighted assets within householdexposures was offset by reductions in institutionalexposures. The risk weighted amount for market risksrose by SEK 2.9bn during the quarter, mainly due toincreased interest rate risk. Operational risks werepractically unchanged.


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Risk-weighted assets by

business area 31 Mar 31 Dec 31 Mar

SEKbn 2012 2011 2011

Retail 212 219 227

Large Corporates &

Institutions 135 129 146


Estonia 39 41 45

Latvia 33 33 45Lithuania 27 28 30


Group Functions & Other 46 39 23

Group Business Support 4 1 1

Treasury 20 15 2

Russia 6 6 7

Ukraine 8 9 9

Ektornet 7 7 4

Other 1 1 0

Total risk-weighted assets 495 492 519

The core Tier 1 capital ratio according to Basel 3 was14.9 per cent (14.7) according to Swedbanks estimate

based on prevailing knowledge of future regulations.Swedbank continuously monitors updates of draftregulations and makes regular assessments of theirpossible impact on the banks capital requirements andcapital structure.

The effect of new regulations on the Core Tier 1 capitalratio

15.9 -1.0

- 0.4

14.5

10%

11%

12%

13%

14%

15%

16%

Q1 2012 Basel 3 IAS 19 Q1 2012including

Basel 3 andIAS 19

Retailmortgage

risk-weights

Internalmeasures

(IRBAdvancedand other)

Swedbank estimates that the Basel 3 regulations willnegatively affect its core Tier 1 capital ratio by 1.0percentage point when introduced in 2013.Amendments to the accounting standard related withpensions (IAS 19), which are scheduled to go into effect

in 2013, could have a negative effect of about 0.4percentage points, estimated as of 31 March 2012.Swedish supervisory authorities are conducting a reviewof risk weights for mortgage lending. The outcome of thereview is uncertain, but an increase in Swedbanksaverage risk weight for mortgage lending to a level of10-15 per cent would reduce the core Tier 1 capital ratioby 1.0 1.9 percentage points. In addition, Swedbankbelieves that the introduction of an advanced internalrating-based approach (AIRB) and certain modelupdates for SMEs will partly offset the negative effect ofthe higher risk weights on mortgage lending. Approvalfrom the Swedish Financial Supervisory Authority to useAIRB is expected in 2013 at the earliest.

As part of its preparations for future capitalrequirements, Swedbank has built up a capital base,which in terms of size and quality ensures that the bankis well-prepared and gives it flexibility in designing its

future capital strategy. The 2012 Annual GeneralMeeting granted the Board of Directors a mandate toissue debt instruments which can be converted toshares in times of stress. Swedbank is monitoring themarket for these instruments and awaiting clarification ofthe rules before finally deciding whether to utilise thismandate.

Market risk

Swedbank measures market risks those of a structuralnature and those that arise in trading operations with aValue-at-Risk (VaR) model.

The table below shows Swedbanks VaR*) performanceduring the year.

VaR by risk category

31 Mar 31 Dec

SEKm Max Min Average 2012 2011

Interest risk 114 (158) 76 (103) 94 (125) 101 91

Currency rate risk 10 (29) 3 (3) 6 (8) 3 7

Stock price risk 11 (9) 6 (5) 8 (6) 9 5

Diversification0 0 -21 (-12) -21 -19Total 114 (151) 69 (108) 87 (124) 92 84

Jan-Mar 2012 (2011)

*) VaR here excludes market risks within Swedbank Ukraine aswell as strategic currency rate risks. For Swedbank Ukraine,VaR is misleading because of the illiquid and undevelopedfinancial markets in Ukraine. Regarding strategic currency raterisks, a VaR measurement based on a time horizon of one dayis not relevant.

-120

-100

-80

-60

-40

-20

0

12-01-02

12-02-02

12-03-02

SEKm

Market risks in Swedbank in VaR, allocated to risk-takingunits

Group Treasury

Large Corporates & Institutions

Swedbank Group

-40

-30

-20

-10

0

1020

30

40

12-01-02

12-02-02

12-03-02

SEKm

Swedbank trading, daily result and VaR

Daily results Swedbank Trading VaR

For individual risk types, VaR is supplemented with riskmeasurements and limits based on sensitivity tochanges in various market prices. Risk-taking is alsomonitored with stress tests.

An increase in all market interest rates of onepercentage point as of 31 March 2012 would havereduced the value of the Groups assets and liabilities,including derivatives, by SEK 565m, compared with a


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decrease of SEK 987m as of 31 December 2011. Thiscalculation includes the portion of the banks depositsassigned a duration of between two and three years.The decrease in the value of positions in Swedishkronor would have been SEK 382m (-656), whilepositions in foreign currency would have decreased invalue by SEK 183m (-332).

With an interest rate increase of one percentage point,

the Groups net gains and losses on financial items atfair value would have decreased by SEK 77m as of 31March 2012, compared with a decrease of SEK 434mas of 31 December 2011.

Operational risksThe operational risk level remains elevated. Swedbankis facing structural changes and the need to moderniseits IT infrastructure. This is an area where the bank isworking actively to consolidate and improve efficiencies.An important part of this work is to move the secondarycomputer centre, which will be completed during thesecond quarter of this year.

Swedbank is more dependent on manual processesthan desirable in the long term. Work is under way tosimplify the processes and increase the degree ofautomation in critical areas.

External factors such as new regulations and regulatorychanges, the macroeconomic uncertainty andtechnological developments are also contributing to theelevated risk level. As a major financial institution,Swedbank, as well as its customers, is exposed to whitecollar crime, where we are seeing an increase inInternet-related attacks. Swedbank is carefullymonitoring developments and has systems and routinesin place to identify and manage threats against the bank

and our customers.At the end of the quarter Swedbank detected an error inthe system for reporting customers mutual fundtransactions to the Swedish Tax Agency. The error,which was quickly corrected, affected slightly over100 000 customers. For the customers, the error meansthat they cannot submit their 2012 tax information bytext message.

Other eventsSwedbanks Annual General Meeting (AGM) on 27March elected Charlotte Strmberg as a new member ofthe Board of Directors. Current Board members Olav

Fjell, Ulrika Francke, Gran Hedman, Lars Idermark,Anders Igel, Pia Rudengren, Anders Sundstrm, KarlHenrik Sundstrm and Siv Svensson were re-elected.Lars Idermark was re-elected as Chair of the Board ofDirectors.

The AGM resolved to pay a dividend to theshareholders for the financial year 2011 of SEK 5.30 perpreference share and SEK 5.30 per common share.

The AGM authorised the Board of Directors to resolve toacquire the bank's own shares. Decisions to repurchaseshares are permitted only if the Board determines thatthe banks long-term core Tier 1 capital ratio exceedsthe desired level and after the new capital requirements

have been clarified.The AGM granted the Board of Directors a mandate toissue convertible debt instruments, which can beconverted to shares in times of stress. Not more than100 000 000 new common shares can be issuedthrough the conversions, or a corresponding numberthrough bonus issues, new share issues, conversions ofconvertibles, share splits, reverse splits or similarcorporate events.

The AGM also resolved to reduce the share capital andimplement a bonus issue in order to cancel the banksholding of repurchased own shares.

Ratings events during the periodOn 15 February 2012 Moodys placed 114 Europeanfinancial institutions on review for downgrade, inconnection with which Swedbank AB and SwedbankMortgages long-term A2 ratings and short-term P-1ratings were also put on review for downgrade. Thereason for the possible downgrade is the potentiallynegative impact on the Swedish economy of slowergrowth in the EU and that Swedish banks are notimmune to the difficulties facing the global financialmarkets. Moodys stated that it may thereforedowngrade on a number of rating factors such aseconomic stability, business model and risk positioning,

as well as liquidity, profitability and capital. Theobservation period for the Swedish banks is expected toconclude in May.

Events after 31 March 2012Swedbank Robur is taking over management rights tothe Folksam LO funds, whose assets undermanagement amount to about SEK 40bn. The capitalhad already been managed by Swedbank Robur. Thedifference now is that all fund administration will behandled by Swedbank Robur.

The transfer is conditional on the approval of theSwedish Financial Supervisory Authority and possibly

other authorities.


11/45


Retail

Continued positive income trend

Efficiency improvements produce lower costs

Income statement

Q1 Q4 Q1SEKm 2012 2011 % 2011 %

Net interest income 3 407 3 244 5 2 918 17

Net commissions 1 261 1 259 0 1 314 -4

Net gains and losses on financial items at fair value 50 59 -15 43 16

Share of profit or loss of associates 202 159 27 170 19

Other income 203 183 11 168 21

Total income 5 123 4 904 4 4 613 11

Staff costs 892 937 -5 942 -5

Variable staff costs 42 14 22 91

Other expenses 1 385 1 509 -8 1 429 -3

Depreciation/amortisation 23 26 -12 22 5

Total expenses 2 342 2 486 -6 2 415 -3

Profit before impairments 2 781 2 418 15 2 198 27Credit impairments 24 216 -89 5

Operating profit 2 757 2 202 25 2 193 26

Tax expense 708 532 33 576 23

Profit for the period 2 049 1 670 23 1 617 27


Swedbank AB 2 045 1 668 23 1 613 27

Non-controlling interests 4 2 100 4 0

Return on allocated equity, % 26.5 25.7 28.5

Credit impairment ratio, % 0.01 0.09 0.00




Full-time employees 4 920 4 946 -1 5 193 -5

During the quarter Swedbank changed how transactions with the savings banks are reported. The change has no effecton the result; but effects net interest income, net commissions as well as other expenses. The retail operations of theNordic branches have been transferred from Large Corporates & Institutions to Retail. In addition, a number of productand staff functions were transferred to Group Functions & Other, including coordination responsibility for the Swedishinsurance operations. Comparative figures have been restated.

Development January-MarchThe Swedish economy seems to have stabilised slightlyafter weakening in late 2011. This was mainly true ofdomestic demand, and specifically of householdfinances. There is still considerable uncertainty,however, and developments could quickly take a turn for

the worse.Profit for the quarter increased by 27 per cent year-on-year to SEK 2 045m, mainly due to improved netinterest income and lower expenses.

Net interest income rose by 17 per cent compared withthe same period in the previous year, primarily as aresult of the repricing of mortgages and corporatecredit. The lending margin on new mortgages stabilisedduring the first quarter. Deposit margins were underpressure from lower interest rates. Interest ratesensitivity is highest with respect to current accounts,which represent nearly one fifth of the total depositvolume.

Household deposits decreased by 1 per cent during thefirst quarter, while the corporate volume decreased by 3per cent, with small businesses and the public sector

accounting for the biggest decreases. Swedbanksshare of household deposits was 23 per cent (23 percent as of 31 December 2011), while its share ofcorporate deposits was 16 per cent (16).

The slowdown in the mortgage lending market

continued at the start of 2012. Volume growth fell on anannual basis to 5 per cent, against 8 per cent a yearearlier, and housing prices declined by 1 per cent fortenant owned apartments and 4 per cent for single-family homes in the last 12-month period. In recentmonths prices have again begun to climb. Swedbanksmortgage lending volume increased by 1 per cent. Itsshare of mortgage growth in January-February was 11per cent and its share of the total mortgage market was26 per cent (26 per cent as of 31 December 2011).

Corporate credit demand improved during the quarterand lending volume rose by 2 per cent.A slightadjustment in pricing was made for this segment. As aresult of the higher capital requirements announced inautumn 2011, we expect continued price adjustments.The bank's market share was 17 per cent (17 per centas of 31 December 2011).


12/45


The loan-to-deposit ratio was 251 (244).

Net commission income decreased by 4 per centagainst the same period in 2011. The weak stockmarketlast autumn adversely affected net commission incomedue to lower assets under management.

The relationship with customers continues to improvethanks to our distinctive offerings, which are closely

linked to ongoing advisory services. In total, 15 per centof the bank's private customers now take advantage ofa service concept, as do 23 per cent of customers in thesmall business, non-profit, and forestry and agriculturesegments. Customers who have selected a serviceconcept use more of the bank's products and servicesand report higher satisfaction.

Expenses decreased by 3 per cent from the previousyear. Continuing efforts to improve cash handling andinternal processes have helped to reduce costs. Thevolume of cash decreased by 10 per cent during thequarter and has fallen by more than one third in the lastthree years. One third of branches no longer handle

cash. Staff and consulting costs decreased as a resultof continued work with generation and competencechange. Expenses fell by 6 per cent from the previousquarter, mainly because SEK 62m was expensed foremployee restructuring during the fourth quarter 2011.The number of employees was reduced by just over 30during the quarter. The cost/income ratio was 0.46(0.52).

The result for the Swedish insurance unit amounted toSEK 120m (57), an increase of 110 per cent year-on-year. Assets under management amounted to SEK103bn (100).

The levels of credit impairments and impaired loansremain low. The share of credit impairments was 0.18per cent (0.19).

During the quarter two branches were merged intolarger units as part of the ongoing review of the retailnetwork.

Retail, Swedbanks dominant business area, is responsible for all Swedish customers except for large corporates andfinancial institutions. Banking services are sold through Swedbanks own branch network, the Telephone Bank, theInternet Bank and the savings banks distribution network. The business area also includes a number of subsidiaries aswell as the retail operations in Denmark, Norway and Finland.


13/45


Large Corporates & Institutions

Good business activity and earnings

Strong performance and increased market shares for bond issues

Positive results from cost overhaul

Income statementQ1 Q4 Q1

SEKm 2012 2011 % 2011 %

Net interest income 887 1 051 -16 823 8

Net commissions 434 269 61 420 3

Net gains and losses on financial items at fair value 648 224 366 77

Share of profit or loss of associates 6 -5 1

Other income 5 -5 727 -99

Total income 1 980 1 534 29 2 337 -15

Staff costs 294 422 -30 313 -6


Other expenses 303 379 -20 334 -9


Total expenses 713 831 -14 739 -4

Profit before impairments 1 267 703 80 1 598 -21Impairment of intangible assets 0 17 0

Credit impairments 14 4 -105


Tax expense 430 252 71 446 -4



Swedbank AB 823 430 91 1 257 -35

Non-controlling interests 0 0 0


Credit impairment ratio, % 0.02 0.00 -0.14



Cost/income ratio 0.36 0.54 0.32Full-time employees 1 038 1 076 -4 1 114 -7

During the quarter the retail operations of the Nordic branches were transferred from Large Corporates & Institutions toRetail. In addition, a number of product and staff functions were transferred to Group Functions & Other. Comparativefigures have been restated.

Development January-MarchThe first quarter saw an increased risk appetite andoptimism in the financial markets. Interest rate concernseased in the eurozone and a settlement was reachedamong lenders on a restructuring of Greek governmentbonds. Another round of loans from the ECB as part ofits Long-Term Refinancing Operation (LTRO) gave

European banks access to financing at 1 per centinterest for three years. The yields on long-termSwedish government bonds remained on a continuedlow level, despite a slight increase at the end of thequarter.

Profit for the quarter amounted to SEK 823m (1 257), adecrease of 35 per cent compared with the same periodin 2011. The first quarter 2011 included one-off revenueof SEK 716m from the settlement with the LehmanBrothers bankruptcy estate.

Net interest income increased by 8per cent against thesame period 2011. Repricing of lending contributed

positively, and net interest income for large corporatesamounted to approximately SEK 650m, up 51 per centyear-on-year.

Net interest income decreased by 16 per cent comparedwith the previous quarter. The fourth quarter 2011included one-off interest income of SEK 206m related toloans assumed from Lehman Brothers. Net interestincome for large corporates rose by 16 per cent from theprevious quarter. Lending decreased by SEK 1bn fromthe beginning of the year to SEK 133bn. Deposits rose

by SEK 12bn to SEK 74bn.

The performance in the large corporate sector waspositive during the first quarter and business activitywas good in most sectors. A high level of corporatebond issues led to several major transactions at thesame time that the customer-oriented business modelresulted in good business growth together with otherparts of the bank. Tighter requirements from authorities,including on capital adequacy and liquidity, contributedto rising loan margins for the market in general.

Net commission income rose by 3 per cent year-on-year. Compared with the previous quarter, net

commission income rose by 61 per cent. The Norwegiancorporate finance operations in particular reportedhigher activity and earnings during the quarter, withcontributions from advisory services for new issues andM&A activity.


14/45


Net gains and losses on financial items at fair valueincreased by 77 per cent compared with the sameperiod of 2011 and by 189 per cent compared with theprevious quarter, mainly due to better earnings in fixedincome and currency trading. Advice on interest ratederivatives also contributed to solid earnings, as lowinterest rates led to a high level of business activity andcontinued demand in the area. The result for equitytrading also increased during the first quarter. An

increased risk appetite and more optimistic sentiment inthe equity market led to higher liquidity. The leadingOMXS30 index rose. The bank was able to capitalise onmarket fluctuations during the quarter, which contributedto solid earnings in the area.

During the quarter business activity and the volume ofbond issues was high. Swedbanks total share of theSEK bond market (excluding government bonds)reached around 26 per cent during the period, making itthe market leader. In the corporate segment the bankraised its share to 21 per cent and was the secondlargest player in SEK. In Norway its share of thecorporate segment grew to15 per cent, makingSwedbank the fourth largest player in NOK. The bank

also improved its market shares in currencies, mainly forcustomer-oriented solutions, where it maintained a highlevel of activity during the quarter, at the same time thattotal turnover in the market declined.

Total expenses decreased by 4 per cent year-on-year.The cost analysis and operational changes launchedduring the second half of 2011 have paved the way forincreased cost efficiencies and improved results.

Expenses decreased by 14 per cent compared with theprevious quarter. Non-recurring costs of SEK 166mwere booked in the fourth quarter for employeerestructuring among other things. The provision forvariable staff costs increased by SEK 93m from theprevious quarter due to a higher risk-adjusted result.

In late 2011 Swedbank was given a mandate to arrangeIntrum Justitias MTN programme and was one of twoissuing institutions for the first bond issue in March2012. The bank also served as a financial advisor andresponsible bank in the bond issue by the real estatecompany Klvern. In Norway Swedbank was one of twoissuers to arrange a bond issue by Tele2

Large Corporates & Institutionsis responsible for large corporates, financial institutions and banks as well as fortrading and capital market products. Operations are carried out by the parent bank in Sweden, branches in Norway,Denmark, Finland, the US and China, and through the trading and capital market operations in subsidiary banks inEstonia, Latvia and Lithuania.


15/45


Baltic Banking

Lower Euribor puts net interest income under pressure

Growing number of active customers

Increased deposit volumes


SEKm 2012 2011 % 2011 %

Net interest income 912 901 1 997 -9

Net commissions 371 380 -2 317 17

Net gains and losses on financial items at fair value 63 84 -25 55 15

Other income 106 156 -32 102 4

Total income 1 452 1 521 -5 1 471 -1

Staff costs 188 221 -15 199 -6

Variable staff costs 20 5 5

Other expenses 379 461 -18 414 -8

Depreciation/amortisation 33 32 3 33 0

Total expenses 620 719 -14 651 -5

Profit before impairments 832 802 4 820 1

Impairment of intangible assets 0 1 913 0 Impairment of tangible assets -2 21 5

Credit impairments -134 -117 15 -382 -65

Operating profit 968 -1 015 1 197 -19

Tax expense 77 71 8 126 -39

Profit for the period 891 -1 086 1 071 -17


Swedbank AB 891 -1 086 1 071 -17

Return on allocated equity, % 14.5 -18.9 13.9

Credit impairment ratio, % -0.45 -0.37 -1.17




Full-time employees 4 109 4 257 -3 4 396 -7 During the quarter a number of product and staff functions were transferred to Group Functions & Other, includingcoordination responsibility for the Baltic insurance operations. Comparative figures have been restated.

Development January-MarchAs expected, GDP growth slowed in the Baltic countriesin late 2011 in line with a weaker global outlook. Duringthe fourth quarter 2011 GDP grew by 4.5 per cent inEstonia, 5.7 per cent in Latvia and 4.4 per cent inLithuania compared with the same period in 2010. TheBaltic economies have become more resilient toexternal shocks, and although a further slowdown isanticipated in 2012 the three countries are expected tomaintain positive growth as exports and domesticdemand continue to increase. Unemployment has fallenand incomes have gradually begun to rise at the sametime that inflation is retreating. In addition, corporateproductivity and competitiveness have risen.

Profit amounted to SEK 891m for the first quarter of2012, compared with SEK 1 071m a year earlier. Thedecrease was mainly due to lower net recoveries, whichamounted to SEK 134m (382) in the first quarter.

Income decreased by 1 per cent in local currencycompared with the previous year, mainly due to lowernet interest income. Net interest income fell by 9 percent in local currency. Lower market rates and

continued lending portfolio amortisation had a negativeimpact on net interest income, while increased depositvolumes had a positive impact. Compared with theprevious quarter, net interest income increased by 3 percent in local currency.The fourth quarter 2011 net

interest income was charged with SEK 47m due to aone-off accounting adjustment. A change in the internalcapital allocation affected net interest income positivelyby approximately SEK 50m compared with the fourthquarter 2011.

Despite improvements in the Baltic economies, lendingvolumes continued to decrease during the first quarter.This was mainly due to continued uncertainty in theglobal markets and persistent deleveraging in manysectors. Lending volumes in local currency decreasedby 7 per cent compared with 31 March 2011 and by 2per cent compared with the previous quarter. Thelargest year-on-year decrease in the lending portfoliowas in Latvia (-12 per cent), followed by Estonia (-6 percent) and Lithuania (-5 per cent). The largest volumedecrease came from the corporate segment, despitethat new sales activity was strongest in this segment.The loan portfolio is expected to continue to shrink inthe near future in all three countries as new lending isnot yet able to cover the effect of amortisations and theongoing work-out process. Although there is a strongpipeline for new corporate lending, it has notmaterialised in terms of actual demand due to global

economic uncertainty. Swedbanks market share inlending was 27 per cent as of 29 February (27 per centas of 31 December 2011).


16/45


Deposits increased by 9 per cent year-on-year andremained almost flat from the previous quarter in localcurrency. Compared to last year, the positive trend isevident in all three Baltic countries, in both private andcorporate segments. Swedbanks deposit market sharewas 29 per cent as of 29 February (29 per cent as of 31December 2011). The loan-to-deposit ratio was 120 percent (121 per cent as of 31 December 2011).

Net commission income increased by 17 per cent inlocal currency compared with the same period a yearearlier. Last years first quarter result was negativelyaffected by a fine of EUR 4m (SEK 35m) related to cardfees in Latvia. Excluding the fine, net commissionincome increased by 5 per cent in local currency. Theincrease was mainly driven by higher commissionincome from payment services. This reflects a largernumber of active customers and more customertransactions. The number of active customers increasedby 175 000 since the first quarter 2011 to slightly over2.4 million.

Expenses decreased by 5 per cent in local currencyfrom the previous year, primarily due to lower IT andother expenses. Fixed staff costs decreased by 6 percent during the period as the number of full-timeemployees was reduced by 287 from the previous year.The cost/income ratio was 0.43 (0.44). Cost efficiency

remains a high priority in an environment of slowergrowth.

Net recoveries amounted to SEK 134m, compared withSEK 382m for the first quarter 2011. Credit recoverieswere generated in the corporate portfolios in all threecountries, while the private portfolios in Latvia andLithuania posted additional impairments. Impairedloans, gross, continued to decline in the first quarter and

amounted to SEK 15bn (SEK 21bn on 31 March 2011).The improvement in portfolio quality was mainly due toratings upgrades and increased collateral values; inaddition write-offs have contributed to lower impairedloans.

The result for the Baltic insurance units amounted toSEK 90m for the first quarter 2012, an increase of 55percent year-on-year. Assets under managementamounted to SEK 3.3bn (3.5).

Baltic Banking will continue to strengthen its customer-oriented business model in 2012 in order to transition tothe next-generation banking model. This is based onelectronic channels for basic banking services andfewer branches, which will be used mainly to advisecustomers with more complex needs.

Baltic Bankinghas business operations in Estonia, Latvia and Lithuania. The banks services are sold throughSwedbanks own branch network, the Telephone Bank and the Internet Bank.


17/45


Asset Management

Increased inflow in equity funds

Fund consolidations as planned


SEKm 2012 2011 % 2011 %Net interest income 4 0 0

Net commissions 374 380 -2 403 -7

Net gains and losses on financial items at fair value 5 -1 -5

Other income 0 2 -2

Total income 383 381 1 396 -3

Staff costs 93 113 -18 91 2

Variable staff costs 11 9 22 14 -21

Other expenses 84 99 -15 86 -2

Depreciation/amortisation 12 12 0 12 0

Total expenses 200 233 -14 203 -1

Profit before impairments 183 148 24 193 -5

Impairment of intangible assets 0 30 0

Operating profit 183 118 55 193 -5

Tax expense 46 29 59 48 -4

Profit for the period 137 89 54 145 -6


Swedbank AB 137 89 54 145 -6



Full-time employees 271 286 -5 282 -4

Fund assets under management, SEKbn 474 446 6 477 -1

Discretionary assets under mangement, SEKbn 274 271 1 255 7

Total assets under mangement, SEKbn 748 717 4 732 2

During the quarter responsibility for one staff function was transferred to Group Functions & Other. Comparative figureshave been restated.

Development January-MarchVolatility in the financial markets diminished during thefirst quarter, which affected fund flows, with inflows toequity funds and outflows from fixed income funds.During the period the total inflow to Swedish funds wasSEK 6.8bn, which included an inflow of SEK 27bn toequity funds and SEK 3.4bn to mixed funds as well asan outflow of SEK 21.3bn from fixed income funds andSEK 2.3bn from other funds.

The total gross inflow to Swedbank Roburs funds wasSEK 21.6bn, while the net flow was SEK -1.4bn. Mixedfunds had the biggest inflow at SEK 1bn.

The consolidation of similar of near-similar funds iscontinuing according to plan, the biggest of which is theupcoming merger of five public savings funds intoAllemansfond Komplett.

Quarterly profit amounted to SEK 137m, which is slightlylower than the same period in 2011, but an increase of54 per cent compared with the fourth quarter 2011.

Commission income decreased slightly compared withthe same period in the previous year due to the weakmarket during the second half of 2011. Although the

equity markets recovered during the first quarter,average assets under management are lower than thesame period 2011. Income from institutional assetmanagement excluding Swedbank Roburs fundsamounted to SEK 30m. During the fourth quarterperformance fees of SEK 25m were posted for the full-year 2011.

Total assets under management at the end of the periodamounted to SEK 748bn, compared with SEK 717bn atthe beginning of the year. The market share measuredas assets under management was 23.4 per cent (23.5).

Expenses decreased by 1 per cent compared with the

previous year, mainly due to the lower number ofemployees. Compared with the fourth quarter, expensesdecreased by 14 percent. During the fourth quarter SEK16m was expensed for employee restructuring.

During the quarter Swedbank Robur received a numberof awards. In Finland, MorningStar named RobursAmerica Fund the best in the category US Large-CapEquity Funds. The ratings agency Lipper (ThomsonReuters) named Roburs Small Cap Nordic fund thebest in the category Equity Nordic over a three-and10-year perspective.

Asset Managementcomprises the Swedbank Robur Group and its operations in fund management, institutional anddiscretionary asset management. Asset Management is represented in Swedbanks four home markets.


18/45


Group Functions & Other


SEKm 2012 2011 % 2011 %

Net interest income -1 -221 100 -225 -100

Net commissions -46 -14 -9

Net gains and losses on financial items at fair value -7 193 -204 -97

Share of profit or loss of associates 0 1 0

Other income 507 562 -10 428 18

Total income 453 521 -13 -10

Staff costs 765 920 -17 776 -1


Other expenses -198 -233 -15 -215 -8


Total expenses 748 883 -15 731 2

Profit before impairments -295 -362 -19 -741 -60

Impairment of intangible assets 0 0 0

Impairment of tangible assets 42 149 -72 -3

Credit impairments 268 -277 -490

Operating profit -605 -234 -248

Tax expense -134 -94 43 -14

Profit for the period from continuing operations -471 -140 -234


Profit for the period -471 -136 -234


Swedbank AB -471 -136 -234

Full-time employees 5 712 5 722 0 6 161 -7

As of the first quarter 2012 Russia, Ukraine and Ektornet are reported under Group Functions & Other. In addition, anumber of product and staff functions have been transferred to Group Functions & Other. Comparative figures have beenrestated.

Development January-March

Group Functions & Other comprises the bank's groupfunctions (including Group Business Support) as well asRussia, Ukraine and Ektornet.

Income for Group Functions & Other consists of netinterest income, which mainly comes from GroupTreasury, Russia and Ukraine, as well as net gains andlosses on financial items at fair value from GroupTreasury. Other income mainly consists of revenue fromthe savings banks as well as sales revenue fromEktornet. The expenses are mainly attributable to GroupBusiness Support.

Expenses for Group Functions & Other increased by 2

per cent compared with the previous year to SEK 748m(731). Expenses, excluding the net of servicespurchased and sold internally, decreased marginally.The decrease was mainly due to lower consulting costs,which were reduced by SEK 42m, as well as lower staffcosts, mainly due to the lower number of employees inUkraine. Group Functions & Other comprises a total of5 712 full-time positions.

Group Business SupportGroup Business Support (GBS) comprises theSwedbank Groups business support units. GBS alsoprovides services to the savings banks.

In GBSsmodel, revenue from Swedbanks customers isposted by each business area and GBS receivescompensation to cover its expenses. External revenuefor GBS largely comes from the savings banks, primarilyfor IT services.

GBSs strategy is to improve the bank's productivity byreducing complexity, cutting lead times, capitalising oneconomies of scale and better utilising availablecompetence. GBS was established in 2011 andcurrently consists of around 3 000 employees in GroupIT, Group Products and Group Shared Services inSweden, Estonia, Latvia and Lithuania.

GBS is focusing in 2012 on reducing the number ofproducts, concentrating the range of internal services,shortening wait times for the bank's customers,concentrating operations within GBS by consolidatingthem in fewer locations, and increasing the use ofoutsourcing. Work in these areas was begun during the

first quarter and will gradually be implemented in 2012and going forward.

Expenses for GBS mainly consist of staff, consultingand computer costs for IT maintenance anddevelopment. GBS will cut costs, principally by reducingspending on consultants, slashing the number ofsuppliers and implementing workforce reductions. In2011 the operations now included in GBS reportedexpenses of SEK 4 854m (excluding internally soldservices). Expenses amounted to SEK 1 152m for thefirst quarter 2012 (1 116). The increase was mainly dueto higher staff and IT costs.

Group IT manages all of Swedbanks IT operations anddevelopment. In addition to developing and improvingapplications, Group IT is involved in a project toestablish a new computer centre. The cost cuts withinGroup IT pertain to a temporary reduction in IT


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development in 2012 as well as a more long-termreduction in expenses to manage the Group's ITsystems. Group IT had 1 415 employees, of whomaround 60 per cent are in Sweden and 40 per cent inthe Baltic countries. Total expenses amounted to SEK686m (679) during the first quarter. The increase waslargely due to higher consulting costs for developmentservices.

Group Products (GP) comprises the product units forlarge parts of Swedbank. The goal is to supply thebusiness units with the products they need so that theycan focus on their customers. Group Insurance (lifeinsurance operations in Sweden and the Baltic countriesas well as non-life insurance in the Baltic countries) andGroup Lending (commercial, consumer and real estatecredit as well as leasing) were established during thefirst quarter. GP also includes from previously GroupCards (card issuance and payment processing in theNordic and Baltic regions), Group Payments & CashManagement (Swedbanks solutions for payments andcash management), Group Mobile Payments(established in 2011 and the most expansive unit, whichis developing solutions to strengthen Swedbanksposition in day-to-day payments), Group TransferAgency (responsible for managing the purchase andsale of funds shares) and Group Trade Finance(manages risks and liquidity for export and importtransactions as well as factoring). Group Products had1 003 employees and total expenses of SEK 489m(522) during the first quarter 2012. The decrease wasmainly due to lower costs for consultants and temporarystaffing.

Group Shared Services (GSS) assists Swedbanksbusiness units with retail, property, physical security, HRadministration, purchasing and training services. GSShad 576 employees and total expenses of SEK 99m

(93) during the first quarter 2012.

Group TreasuryGroup Treasury is responsible for the banks funding,liquidity and capital planning, including internal controland pricing.

Allocation of capital to the business areas is determinedby the stress tests conducted annually as part of thebank's Internal Capital Adequacy Assessment Process(ICAAP). The aim of the process is that the businessareas will largely reflect similar businesses driven on anindependent basis and the risk profile of each operation.

Funding and liquidity are priced in an internal pricingsystem, where the most important parameters in termsof costs are maturity, interest fixing periods, currencyand the need for liquidity reserves. Swedbank is during2012 engaged in a project to fine-tune control of internalrate setting. Among other things, more accurate pricingfor liquidity reserves will be allocated to the businessareas.

Treasurys result over time will be nearly nil, with theexception of earnings from market risk that may arisethrough debt- and liquidity management. The fee paid tothe National Debt Office for the state guaranteedfunding is expensed by Treasury. Between quartersthere could be volatility in the reporting of financial

instruments, mainly due to changes in valuation effectsin accounting.

Net interest income during the first quarter amounted toSEK -77m, compared with SEK -399m for the same

period in 2011. The improvement was partly because ofthe fee for state guaranteed funding decreased by SEK212m from the first quarter 2011 and partly because thebank's actual funding costs are more accuratelyreflected in theinternal rate setting. Compared with thefourth quarter 2011, net interest income rose by SEK236m, of which SEK 112m is attributable to lower feesfor the state guaranteed funding. Furthermore, Treasuryhad higher net interest income from funding and liquidity

management. The so-called nose and tail effects inSwedbank Mortgages funding operations was nearly nilduring the quarter, but contributed positively by aboutSEK 40m compared with the fourth quarter. The changein the capital allocation to the business areas affectedTreasurys net interest income negatively, mainly due tothe allocation to Baltic Banking.

Risk hedging by Group Treasury is generally achievedwith financial instrument hedging, which can give rise tovolatility in reporting between quarters. Net gains andlosses on financial items at fair value amounted to SEK7m during the first quarter 2012, compared with SEK128m in the fourth quarter 2011. The liquidity portfoliocontributed positively to the quarterly result, whilevaluation effects in basis swaps and other derivativesnot subject to hedge accounting were negative. Inaddition, the quarter included a one-off correctionrelated to outstanding subordinated loans, whichnegatively affected the result by SEK 250m.

Expenses within Group Treasury mainly consist of staffand IT costs. Total expenses amounted to SEK 70m forthe first quarter 2012, down SEK 14m from the sameperiod in 2011. Group Treasury had 60 full-timeemployees.

Russia and UkraineThe process of exiting the retail operations in both

Russia and Ukraine is progressing according to plan.During the quarter the remainder of the Russian privateportfolio was sold, and the loan portfolio will betransferred to the buyer during the second quarter 2012.

The result in Russia amounted to SEK 54m (189) for thequarter. Net interest income amounted to SEK 64m, adecrease of 31 per cent compared with the same periodin 2011, mainly due to amortisations of the performingpart of the loan portfolio. Since the beginning of the yearthe Russian loan portfolio has decreased by 11 per centin local currency.

Total expenses in Russia decreased by SEK 33m

compared with the same period in 2011 due to thecontinued focus on costs. The number of full-timeemployees in Russia has been reduced since thebeginning of the year from 174 to 160.

Credit quality was stable during the quarter. Impairedloans in Russia decreased by 45 per cent. Netrecoveries of SEK 64m were the result of continuedrestructuring of the impaired loans.

The result in Ukraine amounted to SEK -325m (365) forthe quarter. Net interest income was SEK 62m, adecrease of 35 per cent compared with the same periodin 2011, mainly due to amortisations in the performingpart of the loan portfolio. Since the beginning of the year

the Ukrainian loan portfolio has decreased by 10 percent in local currency.

Total expenses in Ukraine decreased by SEK 14mcompared with the same period in 2011 due to a


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continued cost focus. The number of full-timeemployees in Ukraine has been reduced since thebeginning of the year from 1 037 to 888.

Impaired loans in Ukraine decreased by 7 per cent.In Ukraine credit impairments increased and amountedto SEK 333m for the first quarter, primarily due toadditional collective provisions of SEK 200m for lendingto private customers as well as for a few large corporate

commitments.EktornetEktornet manages and develops Swedbanksrepossessed assets to recover as much value aspossible.

The value of repossessed assets decreased during thequarter to SEK 5 751m.

Assets taken over 31 Mar 31 dec

SEKm 2012 2011

Sweden 308 305

Norway 89 102

Finland 374 709Estonia 557 569

Latvia 1 903 1 721

Lithuania 675 448

USA 1 361 1 415

Ukraine 397 443

Total properties 5 664 5 712

Shares 87 107

Total 5 751 5 819

During the quarter properties were acquired for SEK524m, at the same time the properties with a book valueof SEK 436m were sold with an aggregate capital gainof SEK 54m. The large part of these sales was inFinland.

The result for the period amounted to SEK -69m (-8).The result includes operating income of SEK 98m (51)and direct property and hotel expenses of SEK 84m

(26). As a result, net operating income amounted toSEK 14m (27). Depreciation amounted to SEK 28m(23), the large part of which related to the properties.

The takeover phase is expected to continue in 2012,primarily in Latvia. At the same time sales efforts areintensifying and the volume of repossessed assets isexpected to decrease during the year.

Eliminations


SEKm 2012 2011 % 2011 %

Net interest income -1 -8 88 -12 92

Net commissions 11 17 -35 11 0

Net gains and losses on financial items at fair value 0 0 0

Other income -220 -214 -3 -225 2

Total income -210 -205 -2 -226 7

Staff costs 0 -9 0

Variable staff costs 0 0 0 Other expenses -210 -196 -7 -226 7

Depreciation/amortisation 0 0 0

Total expenses -210 -205 -2 -226 7

Group eliminations mainly consist of eliminations of internal transactions between Group Functions and the otherbusiness areas.

Group Functions & Othercomprises, in addition to the Group Functions, Russia, Ukraine and Ektornet. The GroupFunctions operates across the business areas and serve as strategic and administrative support for them. The GroupFunctions are Group Business Support, Accounting & Finance (including Group Treasury), Risk (including Compliance).Corporate Affairs, HR and Legal. The Group Executive Committee and Internal Audit are also included in GroupFunctions.


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Financial information - contents

Group Page


Statement of comprehensive income, condensed 23




Notes

Note 1 Accounting policies 25

Note 2 Critical accounting estimates 26

Note 3 Changes in the Group structure 26

Note 4 Business segments (business areas) 27

Note 5 Net interest income 29

Note 6 Net commissions 30

Note 7 Net gains and losses on financial items at fair value 30

Note 8 Other expenses 31

Note 9 Credit impairments 31

Note 10 Loans 32

Note 11 Impaired loans etc. 32

Note 12 Assets taken over for protection of claims and cancelled leases 33

Note 13 Credit exposures 33

Note 14 Intangible assets 33

Note 15 Amounts owed to credit institutions 34

Note 16 Deposits from the public 34

Note 17 Debt securities in issue 34

Note 18 Derivatives 35

Note 19 Financial instruments carried at fair value 35

Note 20 Pledged collateral 36

Note 21 Capital adequacy 37

Note 22 Risks and uncertainties 39

Note 23 Related-party transactions 39

Note 24 Swedbanks share 39

Parent company


Statement of comprehensive income, condensed 41




Capital adequacy 43

More detailed information can be found in Swedbanks fact book,www.swedbank/se/ir, under Financial information andpublications.
http://www.swedbank/sehttp://www.swedbank/sehttp://www.swedbank/se


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Income statement, condensedGroup Q1 Q4 Q1SEKm 2012 2011 % 2011 %

Interest income 14 121 14 360 -2 12 075 17

Interest expenses -8 913 -9 393 -5 -7 574 18

Net interest income (note 5) 5 208 4 967 5 4 501 16

Commission income 3 156 3 097 2 3 195 -1

Commission expenses -751 -806 -7 -739 2

Net commissions (note 6) 2 405 2 291 5 2 456 -2

Net gains and losses on financial items at fair value (note 7) 759 559 36 255

Insurance premiums 429 346 24 367 17

Insurance provisions -271 -212 28 -253 7

Net insurance 158 134 18 114 39

Share of profit or loss of associates 208 155 34 171 22

Other income 443 550 -19 1 084 -59

Total income 9 181 8 656 6 8 581 7

Staff costs 2 440 2 651 -8 2 467 -1

Other expenses (note 8) 1 743 2 019 -14 1 822 -4


Total expenses 4 413 4 947 -11 4 513 -2

Profit before impairments 4 768 3 709 29 4 068 17

Impairment of intangible assets (note 14) 0 1 960 0

Impairment of tangible assets 40 170 -76 2

Credit impairments (note 9) 172 -174 -972


Tax expense 1 127 790 43 1 182 -5




Profit for the period attributable to the

shareholders of Swedbank AB 3 425 965 3 852 -11


Profit for the period from discontinued operations 0 3 0

Non-controlling interests 4 2 100 4 0

Profit for the period from continuing operations 4 1 4 0

Profit for the period from discontinued operations 0 1 0

Earnings per share, total operations, SEK1

2.21 0.88 2.47

after dilution1

2.20 0.88 2.47

Earnings per share, continued operations, SEK1

2.21 0.88 2.47

after dilution1

2.20 0.88 2.47

Earnings per share, discontinued operations, SEK1

0.00 0.00 0.00

after dilution1 0.00 0.00 0.00

Equity per share, SEK 82.04 84.40 82.39

Return on equity, % 14.0 3.9 16.1Credit impairment ratio, % 0.05 -0.05 -0.29

1) The number of shares and the calculation of earnings per share are specified on page 40.


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Statement of comprehensive income, condensedGroup Q1 Q4 Q1SEKm 2012 2011 % 2011 %

Profit for the period reported via income statement 3 429 967 3 856 -11

Exchange differences, foreign operations

Gains/losses arising during the period -273 -1 310 -79 -194 41

Reclassification adjustments to income statement,

net gains and losses on financial items at fair value -1 0 0

Hedging of net investments in foreign operations:Gains/losses arising during the period 140 1 138 -88 71 97

Cash flow hedges:

Gains/losses arising during the period -429 304 -264 63

Reclassification adjustments to income statement,

net interest income 73 77 -5 101 -28

Share of other comprehensive income of associates 18 -18 -3

Income tax relating to components of other comprehensive income 57 -396 24

Other comprehensive income for the period, net of tax -415 -205 -265 57

Total comprehensive income for the period 3 014 762 3 591 -16

Total comprehensive income attributable to the

shareholders of Swedbank AB -415 -205 -265 57

Non-controlling interests 4 3 33 4 0Balance sheet, condensed

Group 31 Mar 31 Dec 31 MarSEKm 2012 2011 % 2011 %

Assets

Cash and balance with central banks 169 795 164 307 3 11 297

Loans to credit institutions (note 10) 98 373 97 195 1 198 682 -50

Loans to the public (note 10) 1 212 564 1 211 454 0 1 173 981 3

Interest-bearing securities 151 678 138 311 10 149 628 1

Financial assets for which customers bear the investment risk 103 014 95 747 8 102 071 1

Shares and participating interests 8 400 2 015 4 457 88

Investments in associates 3 261 3 111 5 2 835 15

Derivatives (note 18) 88 697 103 726 -14 60 558 46

Intangible fixed assets (note 14) 13 702 13 799 -1 15 707 -13Investment properties 3 788 3 910 -3 2 243 69

Tangible assets 4 580 4 383 4 3 672 25

Current tax assets 1 401 2 083 -33 1 306 7

Deferred tax assets 820 872 -6 1 099 -25

Other assets 19 046 7 531 9 245

Prepaid expenses and accrued income 9 153 8 371 9 7 750 18

Group of assets classified as

swedbank's interim report q1 2012

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