barclays global financial services conference, fredrik rystedt nordea, new york, 13 september 2010
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Barclays Capital 2010 Global Financial Services Conference New York, 13 September 2010
Fredrik RystedtGroup CFO
2
Disclaimer
This presentation contains forward-looking statements that reflect management’s current views with respect to certain future events and potential financial performance. Although Nordea believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward- looking statements as a result of various factors.
Important factors that may cause such a difference for Nordea include, but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate, (iii) change in the regulatory environment and other government actions and (iv) change in interest rate and foreign exchange rate levels.
This presentation does not imply that Nordea has undertaken to revise these forward- looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided.
3
Macroeconomic stabilisation in the Nordic region
Growth rates expected to be solid in the Nordic countries – strong growth in H1 10
In 2010, all Nordic countries are expected to have:
Positive growth rates
Modest inflation
Relatively strong public finances
Improvements in labour markets
GDP growth, %, y/y
Source: Nordea Markets
Public finances, % of GDP
08 09 10 11 12-10.0
-7.5
-5.0
-2.5
0.0
2.5
5.0
-10.0
-7.5
-5.0
-2.5
0.0
2.5
5.0 % of GDP % of GDP
USA
Euro area
Denmark
Finland
Sweden
Norway +12-18%
[GDP H1 to be inserted]
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q409 10
-10.0
-7.5
-5.0
-2.5
0.0
2.5
5.0
7.5
-10.0
-7.5
-5.0
-2.5
0.0
2.5
5.0
7.5% y/y GDP % y/y
Sweden Denmark Norway Finland
4
Continued strong customer business
Q2 2009 Q1 2010 Q2 2010
Q2 2009 Q1 2010 Q2 2010
Q2 2009 Q1 2010 Q2 2010
Impaired loans
Income in Corporate segment
Income in Household segment
Q2 2009 Q1 2010 Q2 2010
Number of Gold customers
Q2 2009 Q1 2010 Q2 2010
Lending volumes
Q2 2009 Q1 2010 Q2 2010
Total income
5
Result highlights
EURm H1/10 H1/09 Chg % H2/09 Chg %
Net interest income 2,484 2,661 -7 2,620 -5
Net fee and commission income 1,013 793 28 900 13
Net result from items at fair value 887 1,109 -20 837 6
Other income 80 75 7 78 3
Total income 4,464 4,638 -4 4,435 1
Staff costs -1,388 -1,352 3 -1,372 1
Total expenses -2,350 -2,206 7 -2,306 2
Profit before loan losses 2,114 2,432 -13 2,129 -1
Net loan losses -506 -781 -35 -705 -28
Operating profit 1,608 1,651 -3 1,424 13
Net profit 1,182 1,245 -5 1,073 10
Risk-adjusted profit 1,194 1,524 -22 1,262 -5
6
1,305 1,2991,235 1,249
1,321
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10
EURm
NII held up well, despite the low interest rate level
Solid trend in customer operations continues
Lending and deposit volumes up
Margins stable
Remains subdued by the low interest rate levels
Lower contribution from Group Treasury
Slight increase in average funding cost when maturing long-term funding was prolonged at higher market rates
7
% change in unchanged currencyQ210/
Q110
Q210/
Q209
Total lending, excl. reversed repurchase agreements 2 4
– Nordic household mortgages 2 9
– Nordic consumer lending 1 7
– Nordic corporates 2 0
– New European Markets 4 1
– FID and Shipping 3 -3
Total deposits, excl. repurchase agreements -1 -1
– Nordic households 2 3
– Nordic corporates 1 1
– New European Markets -2 -6
– FID and Shipping 4 -19
Underlying volume trends
8
Interest rate sensitivity - 3 components
Structural interest income risk (SIIR)
Reflecting the effect on NII from re-pricing gaps*
Dynamic effects on net interest income
Changes in deposit margins – mainly transaction accounts
Market risk in the interest-bearing investment portfolios
Market risk has an immediate effect on the net result from items at fair value
Effect from higher market rates, 100 bps Q2/10 Q1/10
EURm
Annualised positive impact on Net interest income, approx. 430 450
Non-recurring negative impact on Net result from items at fair value, approx.
-230 -100
* Accumulated mismatch between assets and liabilities with an interest rate duration of less than 12 months, with the assumptions that non-maturity accounts are re- priced immediately following a interest rate change, without effecting margins
9
412
463 475
538
437
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10
EURm
Strong net fee and commission income
Higher income contribution from corporate advice
Continued strong performance in the savings area
High activity in capital markets
10
Net result from items at fair value, EURm
198 221
325
515
594
486
351
548
339
Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10
Nordic Banking and Institutional & International BankingTotal net fair value result
Strong demand for risk management products remains
Capital markets activities in customer areas¹ continues to perform well, although down 4% from strong first half last year
Market volatility increased corporate demand for fixed income and FX products
Continued strong Life & Pensions results
Lower contribution from Group Treasury and Capital Markets unallocated
¹ Nordic Banking and Institutional & International Banking
² Including one-off of EUR 50m – Nordito and PBS
2
11
EURm
687 702 687 701
392 382471 438 445
670
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10
Staff costs Other expenses
1 116 1 087
1 2191 164
Expenses in line with outlook
1 186Cost management remains firm
Increase in Q2 related to Group initiatives and currency effects
Total expenses up 6% compared to same quarter last year
Up 1% adjusted for currency effects
12
Basel III – broad agreement on changes and implementation plan
13
Broad agreement in July 2010 on Basel III changes and implementation plan
Nordea anticipates final details towards the end of the year
Uncertainty remains high – questions around NSFR and leverage ratio
In good position for regulation and buffers, above leverage ratio threshold
Liquidity changes in right direction, but still challenging for the industry
Increased cost of capital expected, likely to impact pricing to customers
Oct 2010July 2010 Dec 2010 Dec 2012 Jan 2018
Basel release of details for 2012 and new
proposals for 2018
Basel Oversight body, broad agreement
Basel Committee meeting Implementation
capital regulation + LCR
Implementation leverage ratio +
NSFR
G20 meeting
Test/observation phase for leverage ratio +
NSFR 2013-2017
14
Strong capital position maintained – and strong funding despite challenging quarter
9.2 9.2 9.010.3 10.1 10.0
Q2/09 Q1/10 Q2/10
Transition rules Fully implemented Basel II
Core tier 1 capital ratio (excl. hybrids), %
Core tier 1 ratio 10.0%
High volume increase, but stabilising rating migration, affect RWA
EUR 20.9bn of long-term funding issued in H1 2010
In June, after several weeks of no market supply, Nordea reopened the senior unsecured market
22 23
31
20.9
2007 2008 2009 H1 2010
Total long-term funding issued, EURbn
15
Journey to Great Nordea
16
Great Nordea framework
Profit orientation & prudence
Ambitious vision & targets
Strong customer- oriented values &
culture
Growth to free up resources to improve customer satisfactionGrowth to create value to our shareholders
Without this as the foundation, there is no bank – through the cycle
Need to set targets to be able to reach the goalsMotivation to perform extraordinarily
Nine countries, and everything differentCommon values and platform to form one team
Rationale
Clear growth strategy
17
One of the most stable profit development among banks in Europe
Profit before tax development through the financial crisis (Indexed)
Index = 100
Profit orientation and prudence
-40
-20
0
20
40
60
80
100
120
140
07Q1
07Q2
07Q3
07Q4
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
Nordea
European peers*Nordic peers**
* Aggregate of a selected number of banks in the European peer group: BBVA, Commerzbank, Erste, Intesa Sanpaolo, KBC, Santander, UniCredit
** Nordic peers: Danske Bank, DnB NOR, SEB, SHB, Swedbank
18
%
Source: Swedish Riksbank, Standard & Poor’s
0
1
2
3
4
5
6
7
8
9
10
Nor
dea
HSB
C
DnB
NO
R
Dex
ia
SEB
Sw
edba
nk
SHB
KB
C
Sant
ande
r
Bar
clay
s
Cre
dit S
uiss
e
Cre
dit A
gric
ole
Soc
iété
Gén
éral
e
LBBW
Uni
Cre
dit
Inte
sa S
anpa
olo
Dan
ske
Ban
k
Deu
tsch
e Ba
nk
BN
P P
arib
as AIB
Bay
eris
che
LB
UBS
Citig
roup
Strongest capital position among a selected group of major international banks
Risk-adjusted capital ratios
Profit orientation and prudence
19
Delivery on long-term targets
Top quartile
Total shareholder return 1 Jan 2007- 16 Aug 2010
Risk-adjusted profit rolling 4 quarters development
2007 – Q2 2010
RoE 2007 – Q2 2010Nordea has reported one of the highest average return on equity (RoE) of Nordic
peers*, 14.4%*Nordic peers: Danske Bank, DnB NOR, SEB, SHB, Swedbank
41.4%
25.5%
Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q4/ 08 Q1/ 09 Q2/ 09 Q3/ 09 Q4/ 09 Q1/ 10 Q2/ 10
Rolling four quarters compared with FY 2006 EUR 1,957mLong-term target for average yearly growth
Ambitious vision & targets
0.0
-100
-80
-60
-40
-20
0
20
Allie
d Iri
sh B
anks
RBS
Ban
k of
Irel
and
Com
mer
zban
k
Lloy
ds
KB
C
Uni
cred
it
Soc
iete
Gen
eral
e
Sw
edba
nk
SEB
Inte
sa S
anpa
olo
Bar
clay
s
Dan
ske
Ban
k
Ers
te
BB
VA
BN
P P
arib
as
San
tand
er
Nor
dea
DnB
NO
R
SH
B
20
Strong customer-oriented values and culture – become part of DNA
Foundation:Profit orientation and
prudent cost, risk and capital management
A Great European Bank,acknowledged for its people, creating
superior value for customers and shareholders
Great customer experiences It’s all about people One Nordea team
Values
2121
Customer satisfaction improving versus competitors
Nordea
2007 2009
Peers
-0.6 3.9
71.267.6
70.6+0.9
- 3.6
CSI index (aggregate) 2007-2009*
71.5
*Corporate and high involvement customers, corresponding to Gold and Silver segment customers
Values
22
Prudent growth strategy – Group initiatives and strong business development
23
We continue on the journey to Great and to deliver on our long-term target
Great Nordea
07 08 09 10 11 12
Middle of the road
Keep income growth momentum
Cost, risk and capital take the lead
Enable us to accelerate out of the crisis
Profitable organic growth Prudent growth
Organic growth strategy Next level strategy based on stronger position
Group initiatives launched to support the strategy
Next generation of initiatives launched
24
Nordea has built the platform
One customer team
Customer base
Capital position
Trustworthy brand name
Quality of people
One value chain
Great customer experiences
Foundation: Profit orientation and prudent cost, risk and capital management
It’s all about people One Nordea team
A great European bank,acknowledged for its people, creating superior
value for customers and shareholders
Customer-oriented values~ 8 m household
customers in programmes, 0.7 m corporate
One of strongest capital and funding positions in Europe
~6,000 PBAs, SRMs and RMs trained in -09
Nordea brand stronger than ever
1,400 branches (160 corporate), contact
centres and netbank
E.g., top Morningstar ratings, No 1
Greenwich rating
Proximity
Demand-driven products
Growth strategy
25
Prudent growth strategy supported by next generation of Group initiatives
Increase business with existing Nordic customers and attract new customers
Supplement Nordic growth through
investments in New European Markets
Exploit global and European business lines
Take Nordea to the next level of operational efficiency, support sustained growth
1. Future distribution2. New customer acquisition3. Growth plan Finland
6. Growth plan Poland
5. Customer-driven Markets business
4. Growth plan CMB Sweden
8. Product platforms7. Top league IT and operations
9. Infrastructure upgrade
Growth strategy
26
Solid trend accelerated in 2010 – up 7.2% from one year ago
110,000 new Gold and Private Banking customers in H1 2010 – more than 70% new customers in Nordea
Improved market share in all countries
Significant increase of number of pro-active customer meetings
Continued strong customer demand in household segment – increased volumes with stable margins
Total income in household segment up 5%
Household strategy delivery: Value proposition attracts customers in premium segments
2,6902,812
2,885
Q2 2009 Q1 2010 Q2 2010
Number of Gold customers, ‘000
0.3
0.1 0.1
0.2
DK FI NO SE
Lending market share increase, %
27
136 139 144
Q2 2009 Q1 2010 Q2 2010
Increased business confidence - lending volumes up 4% in H1 2010
Continued strong demand for risk management products
Improved market share in Corporate Banking - strategy to build house-bank relations proven successful
New area established – Corporate Merchant Banking and Capital Markets
Ensure that all service and product competences of Nordea reach the large corporate customers
Headed by newly recruited – Casper von Koskull
Corporate strategy delivery: High activity – income up 7% in H1
Corporate lending, EURbn
0.1 0.1
-0.1
0.1
DK FI NO SE
Lending market share increase, %
28
Rating distribution
0%
2%
4%
6%
8%
10%
12%
14%
16%
6+ 6 6- 5+ 5 5- 4+ 4 4- 3+ 3 3- 2+ 2 2- 1+ 1 1-
Rating
EAD
(%)
06.2010 12.2009
Improved average risk weights following growth focused to stronger corporates
Decreases during 1H 2010Increases during 1H 2010
29
Increase in corporate lending margins
Corporate lending margins, average in the lending book, %
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10
Banking Denmark
Banking Norway
Nordic Banking total
Banking Finland
Banking Sweden
30
Concluding remarks
31
Key messagesWe are delivering according to our plan
Credit quality improving – impaired loans decreased in second quarter
More clarity with the agreement around Basel III, but some uncertainty remains
Continued strong customer businessIncome from corporate customers up 7% and from household customers up 5% in H1
Increased lending, deposits and AuM volumes
Solid inflow of new customers – increased market shares in all markets
Positive development in corporate finance business – relationship banking approach further strengthened
Focus on prudent growth and the execution of the Group initiativesOn track in all areas
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