First Quarter Result 2010 Telephone conference 28 April 2010 - - PowerPoint PPT Presentation

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First Quarter Result 2010 Telephone conference 28 April 2010 - - PowerPoint PPT Presentation

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First Quarter Result 2010 Telephone conference 28 April 2010 Disclaimer This presentation contains forward-looking statements that reflect managements current views with respect to certain future events and potential financial performance.

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First Quarter Result 2010 Telephone conference

28 April 2010

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28 April 2010 Telephone conference 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.

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28 April 2010 Telephone conference 3

Strong first quarter results

Q1 2009 Q4 2009 Q1 2010 Q1 2009 Q4 2009 Q1 2010 Q1 2009 Q4 2009 Q1 2010 Q1 2009 Q4 2009 Q1 2010

Loan losses 37bps Total income up 7% Total expenses down 5%* Risk-adjusted profit up 27%

Q1 2009 Q4 2009 Q1 2010

Operating profit up 48%

Q1 2009 Q4 2009 Q1 2010

Return on Equity 11.3%

*Down 2% - adjusting for restructuring expenses in Q4 and changes in exchange rates

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28 April 2010 Telephone conference 4

885 883 847 781 833 818 832 592 878 895 978 932 1.078

Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Operating profit Loan losses Write backs

Operating profit high and stable

Operating profit, EURm

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28 April 2010 Telephone conference 5

Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10

Rolling four quarter compared with FY 2006 EUR 1 ,957m Long-term target for average yearly growth

2%

  • 100
  • 80
  • 60
  • 40
  • 20

20 Allied Irish Banks RBS Bank of Ireland Commerzbank Lloyds KBC Swedbank SEB Unicredit Societe Generale Intesa Sanpaolo Erste Group Barclays Danske BBVA BNP Paribas DnBNOR Nordea Bank Santander SHB

Top quartile

TSR 2007 - Q1 2010 Risk-adjusted profit

  • on track to reach 2013 target

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

38.9% 38.0%

Continued delivery on long-term targets

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28 April 2010 Telephone conference 6

Nordea expects the macro economic recovery to continue in 2010, but

the development is still fragile and hence uncertainty remains

Excluding currency effects in 2010, cost growth is expected to be

broadly in line with 2009 – including the effects from growth and efficiency initiatives

As previously stated, risk-adjusted profit is expected to be lower in

2010 compared to 2009, due to lower income in Treasury and Markets

However, net loan losses in 2010 are likely to be lower than in 2009.

Credit quality continues to stabilise, in line with the macroeconomic recovery

Outlook 2010

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28 April 2010 Telephone conference 7

First Quarter Results

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Result highlights

EURm Q1/10 Q4/09 Chg % Q1/09 Chg % Net interest income 1,235 1,299

  • 5

1,356

  • 9

Net fee and commission income 475 463 3 381 25 Net result from items at fair value 548 351 56 515 6 Other income 45 45 27 67 Total income 2,303 2,158 7 2,279 1 Staff costs

  • 687
  • 702
  • 2
  • 665

3 Total expenses

  • 1,164
  • 1,219
  • 5¹
  • 1,090

7² Profit before loan losses 1,139 939 21 1,189

  • 4

Net loan losses

  • 261
  • 347
  • 25

356

  • 27

Operating profit 878 592 48 833 5 Net profit 643 447 44 627 3 Risk-adjusted profit 678 533 27 747

  • 9

¹ Down 2% - adjusting for restructuring expenses in Q4 and changes in exchange rates ² Up 3% – adjusting for changes in exchange rates

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28 April 2010 Telephone conference 9

Underlying business trends

EURm

Q1 2010 Q4 2009 Chg % Q1 2010 with unchanged translation currencies (compared with Q4 2009) Chg % Q1 2010 with unchanged translation currencies (compared with Q1 2009) Chg % Reported change%

Total operating income 2,303 2,158 7 2,252 4 2,239

  • 2

1 Total operating expenses

  • 1,164
  • 1,219
  • 5
  • 1,129
  • 7
  • 1,119

3 7 Profit before loan losses 1,139 939 21 1,123 20 1,120

  • 6
  • 4

Operating profit 878 592 48 866 46 865 4 5

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28 April 2010 Telephone conference 10

1,356 1,321 1,299 1,235 1,305

Q1/09 Q2/09 Q3/09 Q4/09 Q1/10

EURm

Net interest income – down 5% from high levels

Remains subdued by the low interest

rate levels

Underlying increase in customer

  • perations – volumes and margins

Decrease in Group Treasury Negative impact from day count

Total lending up 4% Continued increase in corporate

lending margins

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28 April 2010 Telephone conference 11

% change in local currency Q1oQ4 Q1oQ1 Total Lending, excl. reversed repurchase agreements 2% 2%

– Nordic household mortgages

2% 9%

– Nordic consumer lending

3% 8%

– Nordic corporates

2%

  • 5%

– New European Markets

  • 3%
  • 4%

– FID and Shipping

4%

  • 7%

Total Deposits, excl. repurchase agreements 0%

  • 2%

– Nordic households

2% 4%

– Nordic corporates

  • 2%
  • 5%

– New European Markets

  • 12%

4%

– FID and Shipping

  • 5%
  • 37%

Underlying volume trends

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28 April 2010 Telephone conference 12

Q1oQ4 YoY Volume driven Nordic markets local currencies 12 10 Corporate lending volumes 2

  • 22

Household lending volumes 9 29 Corporate deposit volumes Household deposit volumes 2 Margin driven Nordic markets local currencies 10

  • 86

Corporate lending margins 14 58 Household lending margins 5

  • 19

Corporate deposit margins

  • 3
  • 42

Household deposit margins

  • 7
  • 83

Lower return on allocated capital, FX effects and other

  • 70
  • 1

Nordic Banking

  • 48
  • 77

Institutional & International Banking 5 18 Other, incl. Group Treasury

  • 21
  • 62

Total

  • 64
  • 121

Change in net interest income

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28 April 2010 Telephone conference 13

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 immediately effect

  • n the line net result from items at fair

value

Increased market rates, 100bps Q1/10 Q1/09 EURm Net Interest Income, approx 450 400 Net result from items at fair value, approx

  • 100
  • 250

Total annualised income effect 350 150

* Accumulated mismatch between assets and liabilities with an interest rate duration

  • f less than 12 months, with the assumptions that non-maturity accounts are re-

priced immediately following a interest rate change, without effecting margins

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28 April 2010 Telephone conference 14

381 437 463 475 412 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10

EURm

Positive trend continues - Net fee and commission income up 3%

Strong performance in savings area Asset management commissions

up 6% from a strong Q4

Lending commissions up 8% Payment commissions up 7% Commission expenses for state

schemes largely unchanged at EUR 51m

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28 April 2010 Telephone conference 15

Asset under Management at record level

Q1/09 Q2/09 Q3/09 Q4/09 Q1/10

Nordic Retail funds European Fund Distribution Nordic Private Banking International Private Banking Institutional customers Life & Pension

3.1 0.9 2.8 2.9 3.5

AuM EUR 169bn Up 7% or EUR 11.2bn in Q1 Net inflow EUR 3.1bn – 8%

annualised

Increased market shares

Net flows AuM, EURbn

157 126 158 169

2007 2008 2009 Q1 2010

Asset under Management (AuM), EURbn

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28 April 2010 Telephone conference 16

Net result from items at fair value, EURm

284 198 221 325 515 594 486 351 548

Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10

Nordic Banking & IIB Total Net gains/losses

Strong demand for risk management products

Capital markets activities in

customer areas continues to perform

Underlying corporate demand for fixed

income and FX products stabilising

High demand for credit bonds from

institutional clients Increase in Group Treasury Continued strong Life & Pensions

results

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28 April 2010 Telephone conference 17

EURm

665 670 702 687 394 392 382 471 438 687

Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Staff costs Other expenses 1 090 1 116 1 087 1 219 1 164

Total expenses according to plan

Underlying expenses down 2% -

adjusting for restructuring expenses in Q4 and changes in exchange rates

Up 3% compared Q1 2009

Underlying staff costs up 1% in Q1

Number of employees increased by 130

Cost/income ratio improved to 51%

(56%)

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28 April 2010 Telephone conference 18

Risk Weighted Assets

188 192 198 172 179 171

Q1/09 Q4/09 Q1/10 RWA incl transition rules RWA excl transition rules

Risk Weighted Assets (RWA), EURbn

RWA excluding transition rules up 4.5%

during Q1

Corporate lending growth Market and operational risk FX-effects Significant slowdown in rating migration

Minor changes in average risk weights

during Q1

Corporate portfolio stable at 61% Retail portfolio stable at 16% Institution portfolio decreased to 21% (23%)

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28 April 2010 Telephone conference 19

Capital ratios at expected levels

10.1 7.8 9.3 9.2 10.0* 10.3 Q1/09 Q4/09 Q1/10 Transition rules Fully implemented Basel II

Core Tier 1 capital ratio (excl. Hybrids)

10.14 10.35 0.13 0.02 0.21 0.16 0.15

Core tier1 Q4 09 Prudent growth FX-effectsOperational & Market risks Profit Other Core tier 1 Q1 10

Capital ratios slightly down in Q1

Increase in net profit not fully

compensating for increase in RWA Core Tier 1 ratio 10.1% Tier 1 ratio 11.2% - well above

target in Nordea's capital policy

*Pro forma for the first quarter 2009

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28 April 2010 Telephone conference 20

Strong funding and liquidity position

Total long-term funding issued (EURbn) 22 23 31 10.4

2007 2008 2009 Q1 2010

Continued strong demand for Nordea long-term

debt issuance

EUR 3.7bn in Swedish and international covered

bonds

EUR 1.9bn net issuance covered bonds in

Denmark

EUR 1.5bn 7-year senior bond USD 1.25bn 10-year 144a bond USD 3.5bn extendible short-term note In addition a EUR 1bn dated lower tier 2

69% long-term funding - up from 61% in Q4 Increased average maturities in funding

portfolio

Liquidity buffer EUR 49.4bn end of Q1

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Credit quality

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Stable and well diversified lending portfolio

Total lending up 4%

2% adjusted for reversed repos and

currency effects 55% corporate lending - no sector

accounting for more than 13% of total lending

Limited changes between sectors -

no new areas of concern

Commercial real estate 7% of total lending

– mainly large high quality customers

Shipping and offshore 4% of total lending

– limited exposure towards high risk segment

Baltic countries 3% of total lending

163 159 87 24 27 27 165 97 101 Q1 2009 Q4 2009 Q1 2010 Corporate* Mortgage Consumer

Total lending to public, EURbn

274 282 292

* Including lending to public (EUR 4.2bn in Q1)

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407 516 440 358

  • 51
  • 91
  • 82

356 425 346 481 97

  • 135

261 358 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Gross loan losses Reversals Net loan losses DK, 44% OTHER, 1% NEM, 13% SOSI, 7% SE, 5% NO, 9% FI, 21%

Loan losses by area Q1 2010

EURm

Solid credit situation

Net loan loss ratio 37bps (52bps)

26bps individual (40bps) 11bps collective (12bps) 166bps in the Baltic countries (338bps)

Lower loan losses mainly found in

Denmark, Sweden and the Baltic countries

No losses occurred related to the

Danish guarantee scheme (EUR 29m)

Net loan losses continue to stem from a

large number of smaller and medium- sized exposures rather than a few large

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28 April 2010 Telephone conference 24

Performing: Allowance established, payments made Non-performing: Allowance established, full payments not made on due date

1 849 2 372 1 116 2 377 1 868 2 076

Q1 2009 Q4 2009 Q1 2010

Performing Non-performing 946 1 385 486 838 1 502 921

Q1 2009 Q4 2009 Q1 2010

Individual allowances Collective allowances

Impaired loans, EURm Total allowances, EURm

Growth in impaired loans continues to level out

Impaired loans gross up 5% to EUR

4,453m or 140 bps of total lending – 4% in local currencies

7% in Q4, 9% in Q3 and 19% in Q2 53% impaired loans are still performing Total allowances increased 9% to EUR

2,423

Provisioning ratio continues to increase -

54% compared to 52% in Q4

Collective allowances increased 10% to

EUR 921m – 38% of total allowances

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Baltic countries - proactive risk management remains in focus

Lending past due Nordea Q1/10 (Q409) Total market Q1/10 (Q409) Estonia (60 days) 3.49% (3.13%) 6.37% (6.13%) Latvia (90 days) 7.62 (7.99%) 17.68% (16.99%) Lithuania (60 days) n/a% (10.41%) n/a% (19.38%)

Source: Central bank data

Q1 2010

Lending EURbn Impaired loans Q1 Impaired loans Q4 State & Municipalities 0.4 0% 0% Nordic & International 0.9 0.4% 0.3% Large local corporates 1.7 2.9% 2.7% Consumer credits 0.3 6.4% 6.1% Mortgages 2.5 8.3% 7.6% Small local corporates 0.1 11.1% 8.8% Midsized local corporates 2.0 18.1% 15.6% Total Baltic countries 7.8 8.3% 7.3%

Net loan losses 166bps (338bps)

Current recession continue to affect

credit quality and not least collateral values Gross impaired loans continue to

increase – EUR 641m or 822bps

  • f total lending

Increase related to a few well

collateralised mid-size companies that is still performing Proportion of lending past due

still clearly below market average

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28 April 2010 Telephone conference 26

Rating migration

Corporate rating migration Q110 / Q409

0% 0% 1% 2% 5% 3% 1% 1% 0% 0% 0% 5% 10% 15% 20% 25% 30% > -4

  • 4
  • 3
  • 2
  • 1

1 2 3 4 >4

Number of notches up- and down-rated

88%

Down-rated Up-rated

8% 5%

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Successful start of the Prudent growth strategy

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Moving from “profitable organic growth” via “middle of the road” to “prudent growth”

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

  • f the crisis

Profitable organic growth Prudent growth Organic growth strategy Next level strategy based

  • n stronger position

Group initiatives launched to support the strategy Next generation of initiatives launched

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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 distribution
  • 2. New customer acquisition
  • 3. Growth plan Finland
  • 6. Growth plan Poland
  • 5. Customer-driven Markets business
  • 4. Growth plan CMB Sweden
  • 8. Product platforms
  • 7. Top league IT and operations
  • 9. Infrastructure upgrade
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28 April 2010 Telephone conference 30

Risk adjusted profit, EURm

1,957 2,279 2,786 3,914 2,239 2006 2007 2008 2009 2010 2011 2012 2013

Group initiatives to support long-term target of doubling Risk-adjusted profit in seven years

Future distribution New customer acquisition CMB Sweden Growth plan Finland Growth plan Poland Top league IT performance Product platforms Infrastructure upgrade Customer driven Markets business

10% CAGR required

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28 April 2010 Telephone conference 31

Activities related to the initiatives are well on track and have started in all areas

Future distribution

  • 10 branches transformed to new branch format
  • Number of 360-degree advisory meetings up 60% in new format
  • Time spent on direct customer interaction up 6%

Growth in number of customers

  • Steady inflow – 37,500 new Gold and Private Banking customers

Growth Plan Finland

  • More than 130 new advisors and specialist recruited
  • Total income in Nordic Banking Finland up 2%
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28 April 2010 Telephone conference 32

Activities related to the initiatives are well on track and have started in all areas

Growth Plan Corporate Merchant Banking (CMB) Sweden

  • Increased share of wallet – cash management mandates won

Growth Plan Poland

  • Preparatory work develops according to plan for new branch openings in the

latter part of 2010

  • Dedicated teams formed to capture potential in local large cap – first deals

closed Efficiency and foundation

  • A renewed IT-contract with IBM paving the way to efficiency gains and a

stronger IT foundation

  • Lean IT project proceeding according to plan
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28 April 2010 Telephone conference 33

Key messages

Strong result

Income up 7% Underlying expenses down 2% Loan losses 37bps (52bps) Operating profit up 48%

Risk-adjusted profit up 27% - on track toward long-term target Increased inflow of new customers – confirms the positive trend

12.500 new Gold and Private Banking customers per month – of which 70% new

customer in Nordea Focus on Prudent growth and next generation of growth initiatives

Activities related to the initiatives are well on track and have started in all areas