Nordea efter den finansiella krisen falun 2 september 2010 rodney alfv n head of investor relations
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Nordea efter den finansiella krisen Falun 2 September 2010 Rodney Alfvén Head of Investor Relations. Nordea – the leading Nordic bank…. A unique customer base Approx. 7.7 mill. household customers in programmes, 0.7 mill. active corporate customers. Global Other Group ¹ 10%. Norway 15%.

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Nordea efter den finansiella krisen falun 2 september 2010 rodney alfv n head of investor relations

Nordea efter den finansiella krisenFalun2 September 2010 Rodney AlfvénHead of Investor Relations


Nordea the leading nordic bank
Nordea – the leading Nordic bank…

  • A unique customer base

    • Approx. 7.7 mill. household customers in programmes, 0.7 mill. active corporate customers

Global Other Group¹

10%

Norway

15%

Finland

21%

  • Strong distribution power

    • Approx. 1,400 branches of which 270 in NEM

Sweden

23%

6%

Denmark

25%

New European Markets

  • Financial strength

    • EUR 20.5bn in tier 1 capital

    • Tier 1 ratio 11.1% excl transition rules

  • Market capitalisation

    • EUR 28bn

  • Diversification

    • No single market accounts for more than one quarter of Nordea’s income

Household lending %

Shipping, Oil Services & International, Financial Institutions, International Private Banking and Group Functions


…and one of the larger banks in Europe

EURbn

Source: ThomsonReuters Datastream


Macro economic stabilisation in the nordic region
Macro economic stabilisation in the Nordic region

GDP growth, %, y/y

  • Growth rates expected to be solid in the Nordic countries

  • In 2010, all Nordic countries are expected to have:

    • Positive growth rates

    • Modest inflation

    • Relatively strong public finances

  • Improvements in labour markets

Public finances, % of GDP

Norway +12-18%

Source: Nordea Markets


Continued strong customer business
Continued strong customer business

Income in Corporate segment

Income in Household segment

Total income

Number of Gold customers

Lending volumes

Impaired loans



Net interest income held up well in h1 2010 despite the low interest rate level
Net interest income held up well in H1 2010, 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

EURm


Underlying volume trends interest rate level


Interest rate sensitivity 3 components
Interest rate sensitivity interest rate level- 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

* 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


Strong net fee and commission income
Strong net fee and commission income interest rate level

  • Higher income contribution from corporate advice

  • Continued strong performance in the savings area

  • High activity in capital markets

EURm


Credit quality improving during 2010
Credit quality improving during 2010 interest rate level

EURm

  • Net loan losses down to 36 bps in H1 2010 (55 bps last year)

    • 30 bps individual (42 bps)

    • 6 bps collective (13 bps)

    • 140 bps in the Baltic countries (166 bps)

  • Excluding guarantee scheme provisions, net loan loss ratio down to 32 bps (51 bps)

  • Decreased loan losses in most areas

  • Impaired loans gross down 1% in Q2

    • 52% of impaired loans performing

Reversals

Net loan losses

Loan losses by area Q2 2010


Strong capital position maintained and strong funding despite challenging quarter
Strong capital position maintained – interest rate leveland strong funding despite challenging quarter

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

Total long-term funding issued, EURbn



The crises was built up during a long time period interest rate level

Construction as a % of GDP and weight of mortgage debt in the US

New home sales and 30-year mortgage rates

Source: Bloomberg



Total leveraged loans – including Finance Leveraged Buyouts

US$ bn by quarter

Source: Datastream


Leading to “super-profit” in financials Buyouts

Profits relative to nominal GDP in Europe

(base 100 = Q1 1973)

Source : Datastream


The financial crisis impact and response
The financial crisis – impact and response Buyouts

2008

2009

2010

2007

Losses and write-downs

Regulatory initiatives for ”Never again”

Some clarity

Funding problems

Capital problems

Response

  • Capital injections

  • State-sponsored hybrid capital

  • Fiscal stimulus packages

  • Capital

  • Liquidity

  • Systemic risk

  • Remuneration

  • Rescue packages

  • Bail-outs

  • Funding guarantees

  • Rate cuts

  • Liquidity injections


Broad agreement in July 2010 on Basel III Buyoutschanges and implementation plan

  • Nordea anticipates final details towards the end of the year – including new proposal on NSFR and capital buffers

  • Uncertainty remains high – questions around NSFR and leverage ratio

  • Increased cost of capital expected, likely to impact pricing to customers

?

Basel Oversightbody, broad agreement

Basel Committee meeting

G20 meeting

Implementation capital regulation+ LCR

Implementation leverage ratio + NSFR

Basel release of details for 2012 and new proposals for 2018

Test/observation phase for leverage ratio + NSFR 2013-2017

Dec 2012

July 2010

Oct 2010

Dec 2010

Jan 2018


Capital position strong for regulations and growth
Capital position strong, for regulations and growth Buyouts

  • Limited impact from capital base adjustments

  • Tier 1 hybrids assumed to be replaced by new tier 1 capital types

  • Uncertainty on capital buffers

    • Nordea assessed to be in a good position

  • Leverage ratio

    • Netting approach for derivatives

    • Nordea assessed to be above threshold of 3%

  • Nordea’s capital ratios well above targets and current regulatory threshold

Capital ratios H1 2010, %

TargetsThreshold

11.5

9.0

8.0


Liquidity – changes in right direction, but proposal still conservative and challenging for the industry

Changed parameters for Liquidity Coverage Ratio, LCR

Broader definition of qualifying assets in liquidity buffer

Milder stress scenarios

But internal covered bonds still not eligible, despite high quality and central bank eligibility

Prolonged observation phase for Net Stable Funding Ratio, NSFR

Observation phase 2013-2017, final version from 2018

Still challenging for the industry given the size of the funding gap relative to funding market capacity

Uncertainty remains high around the final regulation and the implementation


Journey to great nordea
Journey to Great Nordea conservative and challenging for the industry


Great nordea framework
Great Nordea framework conservative and challenging for the industry

Rationale

  • Without this as the foundation, there is no bank – through the cycle

Profit orientation & prudence

  • Need to settargets to be able to reach the goals

  • Motivation to perform extraordinarily

Ambitious vision & targets

  • Nine countries, and everything different

  • Common values and platform to form one team

Strong customer- oriented values & culture

  • Growth to free up resources to improve customer satisfaction

  • Growth to create value to our shareholders

Clear growth strategy


Strong credit management moderate credit risk appetite over the cycle

Profit orientation and prudence conservative and challenging for the industry

Strong credit management – moderate creditrisk appetite over the cycle

Loan loss ratio

Credit risk appetite 25 bps


Profit orientation and prudence conservative and challenging for the industry

Strongest capital position among a selected group of major international banksRisk-adjusted capital ratios

%

Source: Swedish Riksbank, Standard & Poor’s


One of the most stable profit development among banks in europe

Profit orientation and prudence conservative and challenging for the industry

One of the most stable profit development among banks in Europe

Profit before tax development through the financial crisis (Indexed)

Index = 100

Nordea

European peers

Nordic peers

* Calculation based on covariance of 13 quarters operating profits 2007 – Q2 2010

** Nordic peers: Danske Bank, DnB NOR, SEB, SHB, Swedbank


Delivery on long term targets

Ambitious vision conservative and challenging for the industry& targets

Delivery on long-term targets

Risk-adjusted profitrolling 4 quarters development 2007 – Q2 2010

Total shareholder return1 Jan 2007- 16 Aug 2010

41.4%

25.5%

Top quartile

RoE 2007 – Q2 2010

Nordea has reported one of the highest average return on equity (RoE) of Nordic peers¹, 14.4%

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


Strong customer oriented values and culture become part of dna

Values conservative and challenging for the industry

Strong customer-oriented values and culture –become part of DNA

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

Foundation:

Profit orientation and

prudent cost, risk and capital management


Customer satisfaction improving versus competitors
Customer satisfaction improving versus competitors conservative and challenging for the industry

Values

CSI index (aggregate) 2007-2009*

2007

2009

+0.9

71.5

70.6

Nordea

- 3.6

71.2

Peers

67.6

3.9

-0.6

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

29


Prudent growth strategy group initiatives and strong business development
Prudent growth strategy – Group initiatives and conservative and challenging for the industrystrong business development


We continue on the journey to great and to deliver on our long term target
We continue on the journey to Great and to deliver on our long-term target

Middle of the road

Profitable organic growth

Prudent growth

Great Nordea

10

07

08

09

11

12

Next level strategy based on stronger position

Organic growth strategy

  • Keep income growth momentum

  • Cost, risk and capital take the lead

  • Enable us to accelerate out of the crisis

Group initiatives launched to support the strategy

Next generation of initiatives launched


Benefits of universal relationship banking clearly in focus for the growth

Growth strategy long-term target

Benefits of universal relationship banking –clearly in focus for the growth

Why relationship banking?

Satisfying customer needs …

… while focusing on the most attractive customer groups

  • Safety and stability

  • “Someone who cares”

  • Full range of advice

  • Customer needs driven innovation

  • Most profitable

  • Highest potential

  • Most satisfied and loyal

  • High efficiency in service

Capital efficiency through full customer wallet …

… at a low risk

  • Low losses, eg, Gold customers with automated credit scoring

  • Knowing and being close to Corporate customers

  • Diversification from Corporate and Household mix

  • Balanced and diversified business mix, e.g., lending and deposits

  • Complemented by, e.g., capital-efficient asset management products


You need the right platform

Quality of long-term targetpeople

One value chain

A great European bank,

acknowledged for its people, creating superior

value for customers and shareholders

Customer base

Proximity

Great customer experiences

It’s all about people

One Nordea team

Customer-oriented values

Foundation: Profit orientation and prudent cost, risk and capital

management

Capital position

Demand-driven products

One customer team

Trustworthy brand name

Growth strategy

You need the right platform


Nordea has built the platform

A great European bank, long-term target

acknowledged for its people, creating superior

value for customers and shareholders

Great customer experiences

It’s all about people

One Nordea team

Foundation: Profit orientation and prudent cost, risk and capital

management

Growth strategy

Nordea has built the platform

~6,000 PBAs, SRMs and RMs trained in -09

Quality of people

One value chain

Customer base

Proximity

1400 branches (160 Corporate), contact centres and netbank

~ 8 m household customers in programmes, 0.5 m corporate

Customer-oriented values

Capital position

Demand-driven products

One of strongest capital and funding positions in Europe

One customer team

E.g., top Morningstar ratings, No 1 Greenwich rating

Trustworthy brand name

Nordea brand stronger than ever


Prudent growth strategy supported by next generation of group initiatives

Growth strategy long-term target

Prudent growth strategy supported by next generation of Group initiatives

Increase business with existing Nordic customers and attract new customers

Exploit global and European business lines

Supplement Nordic growth through investments in New European Markets

1. Future distribution

6. Growth plan Poland

2. New customer acquisition

3. Growth plan Finland

4. Growth plan CMB Sweden

5. Customer-driven Markets business

7. Top league IT and operations

8. Product platforms

9. Infrastructure upgrade

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


Household strategy delivery: Value proposition attracts customers in premium segments

  • 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%

Number of Gold customers, ‘000

Lending market share increase, %


Corporate strategy delivery: High activity – income up 7% in H1

Corporate lending, EURbn

  • 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

Lending market share increase, %


Nordea’s relationship banking approach further strengthened

  • Strong income growth in Corporate Merchant Banking (CMB)

  • Strengthened market position – increased share of wallet

  • Improved position in capital markets

    • Leading arranger of Nordic syndicated loans

    • Participation in execution of main Nordic transactions

  • 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

Total income CMB, EURm


Concluding remarks
Concluding remarks strengthened


Key messages
Key messages strengthened

  • We 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 business

    • Income 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 initiatives

    • On track in all areas


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