cheuvreux pan-europe conference paris · 3/17/2010 · q107 q207 q307 q407 q108 q208 q308 q4/08...
TRANSCRIPT
Cheuvreux Pan-Europe Conference Paris 17 March 2010
Carl-Johan Granvik Group Chief Risk Officer
17 March Cheuvreux Pan-Europe Paris Conference2
Disclaimer
This presentation contains forward-looking statements that reflect management’s current views with respect to certain future events and potential financial performance. Although Nordea believes that the expectations reflected in such forward looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward- looking statements as a result of various factors.
Important factors that may cause such a difference for Nordea include, but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate, (iii) change in the regulatory environment and other government actions and (iv) change in interest rate and foreign exchange rate levels.
This presentation does not imply that Nordea has undertaken to revise these forward- looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided.
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General result trends – year-end report 2009
17 March Cheuvreux Pan-Europe Paris Conference4 10 February 2010
Telephone conference Year-end report 2009
4
Result highlightsEURm Q4/09 Q3/09 Chg % Q4/08 Chg % FY 09 FY 08 Chg %
Net interest income 1,299 1,321 -2 1,386 -6 5,281 5,093 4
Net fee and commission 463 437 6 390 19 1,693 1,883 -10
Net gains/losses 351 486 -28 325 8 1,946 1,028 89
Other income 45 33 36 150 153 196 -22
Total income 2,158 2,277 -5 2,251 -4 9,073 8,200 11
Staff costs -702 -670 5 -665 7 2,724 -2,568 6
Total expenses -1,219¹ -1,087 12 -1,150 6 4,512 -4,338 4
Profit before loan losses 939 1,190 -21 1,101 -15 4,561 3,862 18
Net loan losses -347 -358 -3 -320 -1,486 -466
Operating profit 592 832 -29 781 -24 3,075 3,396 -9
Net profit 447 626 -29 637 -30 2,318 2,672 -13
Risk-adjusted profit 533 729 -27 620 -14 2786 2279 22
¹ Including restructuring charges of EUR 64m
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Strong income generation continues - particularly in customer areas
Net interest income – down 2% from high levels
Unchanged lending volumesContinued pressure on deposit margins while corporate lending margins continue to increaseLower contribution from Group Treasury
Continued positive trend in Net fee and commission income – up 6%
Savings commission continued the positive trend – up 11%Lending commission down 9% compared to a strong Q3
Net gains/losses remains high in customer areas
Customer driven capital markets activities continues to perform strongly Life & Pension released a strong result also in the fourth quarter
Total operating income, EURm
2,251 2,2772,158
Q4 2008 Q3 2009 Q4 2009
32
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Expense growth well in line with expectations
Total operating expenses, EURm
1,1501,087
1,155
Q4 2008 Q3 2009 Q4 2009
Restructuring charges EUR 64m
32
Up 6% - when excluding restructuring costs of EUR 64mTotal expenses up 12% compared to previous quarterUnderlying cost growth in local currencies 3% compared to same quarter last yearReduced number of FTE’s, YoY -2%
1,219
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Stable loan losses
320 356 358 347425
Q4/08 Q1/09 Q2/09 Q3/09 Q4/09
Gross loan losses Reversals Net loan losses
FI, 13%NO, 10%
SE, 11%
Other, 6%
SOSI, 6%
NEM, 11%
DK, 43%
Loan losses by area 2009
EURm
Net loan losses stable in the area of 55bps
Mainly corporate exposures in the Nordic region
In the later part of 2009 loan losses decreased somewhat in Finland and Sweden while Denmark and Norway slightly increased
Stable in New European Markets
Loan losses steam from a large number of smaller and medium sized exposures
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Performing: Allowance established, payments madeNon-performing: Allowance established, full payments not made on due date
1 3892 212
835
2 234
1 639 1 868
Q4 2008 Q3 2009 Q4 2009
Performing Non-performing
Macro pressure easing - impaired loans gross up 7% in Q4 compared to 9% in Q3 and 19% in Q2
54% impaired loans are performing
Provisioning ratio continues to increase - 53% compared to 51% in Q3
Impaired loans, EURm
Impaired loans increases at a lower pace
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Rating migration
Corporate rating migration Q409 / Q309
1% 0% 1%3%
8%6%
1% 1% 0% 0%0%
5%
10%
15%
20%
25%
30%
> -4 -4 -3 -2 -1 0 1 2 3 4 >4
Number of notches up- and down-rated
7% up-rated13% down-rated
Larger variance in credit quality in Q4 compared to Q3
Rating migration on total portfolio impacted RWA 6.9% in 2009 (4.3 % by end Q3 2009)
The change in Q4 mainly explained by a model change in the Retail portfolio
Corporate portfolio stable
80% unchanged
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Nordea in a position of strength – preparing for new regulations
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A very strong relative starting point – one of the strongest capital positions globally…
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Nordea # 4 out of 45 large global banks in Standard&Poor’s Risk-adjusted capital (RAC) analysis
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Impact on Nordea
Nordea’s Tier 1 capital is expected to decrease by ~170 bps
Reclassification of Tier 1 hybrid capital (~105bps)
Changes in regulatory capital base adjustments (~65bps)
Requirements for market risk expected to be ~2-3x current levels
Nordea’s relatively small trading book dampens the impact on capital ratios
Other requirements are more uncertain
Effects from counterparty risk
Countercyclical PD adjustment
Pillar 1 Pillar 1
Tier 1
Tier 2
Tier 1
T1 hybrid
Tier 2
Trading bookOther (?)
0
5
10
15
20
25
Pillar 1 Capital base Pillar 1 Capital base
EURbnBasel II “Basel III”
Goneconcern
Goingconcern
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Nordea’s position on new capital regulations
Nordea fully support regulatory efforts
Nordea is among global leaders in core Tier 1 and “going concern”capital
Increased cost of capital is expected
Capital regulations are expected to impact pricing
Nordea does not support the introduction of a leverage ratio
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Nordea well prepared to adapt to new liquidity regulations
High quality liquidity buffer
Well diversified funding base
Strong funding name
High proportion of long-term debt issuance
30 days
Liquidity buffer e.g. government bonds
Stressed cash flows assuming e.g. run off deposits etc
12 months
Illiquid assets e.g. lending > 12 months, but also portion of <12 m lendingAssets
Liabilities Core funding e.g. wholesale funding > 12 months, retail deposits
Liquidity Coverage Ratio
Net Stable Funding Ratio
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Observations on proposed new regulations
Nordea fully support regulatory efforts
Harsh parameter setting in the first proposal
Change of liquidity and funding structureSize and quality of liquidity buffer
Long term funding
Potential pricing implications on lending and derivatives
Short term lending likely to be penalised
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On the journey towards Great Nordea
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Great Nordea vision launched in 2007
Profit orientation
Ambitious vision & targets
Clear growth strategy
Strong customer oriented values &
culture
Nordea values become part of the DNA
Prudent risk managementEfficient capital management
Leading Nordic bankDouble risk adjusted profit in 7 years
“Profitable organic growth” strategy supported by Group initiatives
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1,754 1,734
1,873
2,142
1,961 1,996
2,277
2,158
1,780
1,898
1,992
2,2792,251
1,957
2,359
1,914
Q1/
06
Q2/
06
Q3/
06
Q4/
06
Q1/
07
Q2/
07
Q3/
07
Q4/
07
Q1/
08
Q2/
08
Q3/
08
Q4/
08
Q1/
09
Q2/
09
Q3/
09
Q4/
09
Total income, EURm
Strategy has delivered income growth and a solid capital and funding position
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Strength of Nordea’s business model proven by low volatility in operating profit
183156
5938
1814
Nordea AverageEuropean
Peers
Quarterly variation operating profit*, %
* Calculation based on covariance of 12 quarters operating profits 2007-2009 ** Nordic peers: Danske Bank, DnB NOR, SEB, SHB, Swedbank
Nordic peers**
>250
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Strengthening of our leading position in the Nordics
Capture potential in existing customers base Acquisition of new customers in Gold segmentSales activities and customer contacts at record levels - 100% more 360 degree meetings in the branch network
# Gold customers, 000
Strong inflow of customers in PB segment
Savings strategy successful – strong net inflow in 2009
# PB customers, 000
House-bank relationship strategy successful - increased market shares through increased share of wallets
Increase penetration of risk management products and capital market transactions – natural parts of the basic product offering
Total income CMB & Large, EURmCorporate
2007 2008
10,000 new Gold customers a month – main part new
Nordea customersHousehold
Private Banking
2009
10%
2008 2009
12%
2007
2008 2009
43%
2007
2,3592,474
2,603
7883
87
1,6051,981
2,291
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Resulting in delivery on long-term targets
Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q4/ 08 Q1/ 09 Q2/ 09 Q3/ 09 Q4/ 09
Rolling four quarters compared with FY 2006 EUR 1,957mLong-term target for average yearly growth
1
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Top quartile
TSR 2007-2009RAP – clearly on track to reach 2013 target
Best in class RoE 2007-2009Nordea has reported the highest average return on equity (RoE) of Nordic peers¹,
15.1%¹Nordic peers: Danske Bank, DnB NOR, SEB, SHB, Swedbank
42.3%
34.6%
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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
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Group strategy and initiatives 2010 – 2012 - Prudent growth
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The Great Nordea framework 2010
Ambitious vision & targets
Strong customer- oriented values & culture
Profit orientation & prudence
Great Nordea visionStrategic target picture definedAmbitious financial targets remain
Values now part of the DNAImprovement on “Living the values”in focus
Part of our foundationContinued focus on cost, risk and capital
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Journey towards Great - from “Profitable organic growth” via “Middle of the Road” to “Prudent growth”
Great Nordea
07 08 09 10 11 12
Middle of the road
Next generation of initiatives launched
Keep income growth momentum
Cost, risk and capital take the lead
Enable us to accelerate out of the crisis
Profitable organic growth Prudent growth
Organic growth strategy Next level strategy based on stronger position
Group initiatives launched to support the strategy
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We confirm our organic growth strategy
Increase business with existing Nordic customers and
attract new customers
Supplement Nordic growth through
investments in New European Markets
Exploit global and European business lines
Take Nordea to the next level of operational efficiency, support sustained growth
Proactively elevate relationship customers to higher segments, attract new relationship customers and increase share of wallet
- with the focus on great customer experiences
Develop effective and low cost multi-channel distribution to relationship and non- relationship segments
Develop efficient and demand-driven value chains supported by strongly improved IT performance and product deliveries
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Next generation of Group initiatives support “prudent growth”
Increase business with existing Nordic customers and attract new customers
Supplement Nordic growth through
investments in New European Markets
Exploit global and European business lines
Take Nordea to the next level of operational efficiency, support sustained growth
1. Future distribution2. New customer acquisition3. Growth plan Finland
6. Growth plan Poland
5. Customer-driven Markets business
4. Growth plan CMB Sweden
8. Product platforms7. Top league IT and operations
9. Infrastructure upgrade
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Next generation of initiatives (1/2)Group initiative
Future distribution
New customer acquisition
CMB Sweden
Customer driven Markets business
Growth plan Finland
Objective
• Upgrade online offering and further migrate transactions from branches
• More advisor capacity in Nordic banking and private banking to increase number of new Gold and PB customers
• Comprehensive growth plan to firm up position in Finland, incl. relocation of branches and advisors to higher growth areas
• Strengthen Nordea’s position within Swedish Corporate Merchant Banking, including improved cash management offering
• Increase penetration of risk management products with existing Corporate customers
• Continue to build top position in Nordic Corporate Finance and Equity
• Gear up Gold customer acquisition
• Branch network optimization, including alignment of capacity to customer potential, new formats with increased advisory capacity and reduced share of other branch staff
• Expand branch network with 50 new branches, building on existing track record of growth programGrowth plan Poland
Growth initiatives
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Next generation of initiatives (2/2)Group initiative Objective
• Comprehensive program to reduce IT cost and improve efficiency, incl. IT sourcing, lean IT
• More efficient cards and payments platforms to strengthen economies of scale and servicing as number of transactions grow
More advanced technology platform in Markets to meet new infrastructure requirements, new regulation and increasing customer demand
Top league IT performance
Product platforms
Infrastructure upgrade
• Improved IT resilience
• Offshore center in PolandEfficiency / foundation initiatives
• More efficient Finance process
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Neutral effect from Group initiatives in 2010 – clearly positive in 2011-2012
2010 impact
One-off investments of EUR ~240m of which EUR ~140m accounted for as expenses in income statement
Impact on running cost neutral – including efficiency gain of EUR 60m
Total impact on 2010 results from initiatives expected to be neutral – including positive income effects
2011-2012 impact
Investments expected to be at approx. the same level as in 2010
Investments subject to market conditions and that 2010 investments delivers according to plan
Result effect is expected to be clearly positive
EUR 64m restructuring charge in Q42009
18
19
11
16
Restructuring charge
Restructuring CSO/tellers and Fionia Bank
Markets IT platform
IT restructuring charges
Growth plan Finland
2009 impact
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Initiatives support long term target of doubling RAP in seven years…
Future distribution
New customer acquisition
CMB Sweden
Growth plan Finland
Growth plan Poland
Top league IT performance
Product platforms
Infrastructure upgrade
0500
10001500200025003000350040004500
2006
A20
07A
2008
A20
09A
2010
2011
2012
2013
Target
Risk adjusted profit EUR m
Customer driven Markets business
10% CAGR required
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… and secure our strategic ambitions
Growth strategy
One operating model
Best relationship bank
…to secure sufficient income generation to create great customer experiences and long term value
…in markets where we operate – retaining existing and attracting new customers
…for everything we do in order to free up resources to serve customers
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Nordea expects the macroeconomic recovery to continue in 2010 –development is still fragile and hence uncertainty remains
Nordea will pursue a prudent growth strategy, balancing opportunities and risks, and will invest in the future through several growth and efficiency initiatives
The result effect from initiatives will be neutral in 2010
Nordea expects cost growth for 2010 to be largely in line with growth rate in 2009 – including effects from growth and efficiency initiatives
Nordea expects risk-adjusted profit to be lower 2010 compared to 2009, due to lower income in Treasury and Markets
The credit quality continues to stabilise, in line with the macroeconomic recovery
Loan losses could remain at high level also in 2010 – difficult to forecast when loan losses will start to decline
Outlook 2010
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Key messages
Strong 2009Solid business development in all areas – cost growth well in line with expectations
Continued execution of efficiency programmes
Continued stabilisation of credit quality and loan losses at expected levels
Nordea in a position of strength – preparing for new regulations
Group initiatives to support the growth strategy 2010 - 2012Prudent growth strategy carefully balancing opportunities and risks
Continuing the journey towards Great Nordea