Swedbank New York and Boston roadshow, September 24 26, 2007 - - PowerPoint PPT Presentation

Swedbank

New York and Boston roadshow, September 24 – 26, 2007 Mikael Inglander, Chief Financial Officer

2

Latvia

Total population: 2.3m Private customers: 0.7m

• Corp. customers: 47,000

Branches: 76 Typical market share: 30% GDP growth 2006: 11.5%

The leading bank in four small countries

Sweden

Total population: 9.0m Private customers: 4.1m

• Corp. customers: 262,000

Organisations: 120,000 Branches: 472 Typical market share: 25% GDP growth 2006: 4.4%

Lithuania

Total population: 3.4m Private customers: 2.9m

• Corp. customers: 73,000

Branches: 127 Typical market share: 30% GDP growth 2006: 7,4%

Estonia

Total population: 1.3m Private customers: 1.2m

• Corp. customers: 84,000

Branches: 96 Typical market share: 50% GDP growth 2006: 11.2%

Supporting markets: Denmark, Finland, Norway, Russia, Ukraine, USA, Luxemburg, China, Japan and Spain

84% 6% 5% 4% 1%

Sweden Estonia Latvia Lithuania Others

Share of group lending Potential home markets: Russia and Ukraine

3

Swedbank overview

Shared and New Operations Swedbank Markets Baltic Banking Swedish Banking

Retail and corporate banking in Sweden. Retail and corporate banking, including asset management, in Estonia, Latvia and Lithuania. Corporate banking in Russia. Investment and merchant banking in Sweden, Norway and New York. Banking branch in Shanghai.

Asset management and Insurance

Asset management and life insurance, Sweden. IT development and IT

• perations, common support

functions. Nordic branches, rep.

• ffices in Tokyo and Kiev.

Share of Group’s net profit attr. to shareholders (Jan-Jun 07), %

52 32 9 8

• 1
• 10

10 20 30 40 50 60

Swedish Banking Baltic Banking Swedbank Markets Asset Mgmt & Insurance Shared and New Operations

4

Strong position for profitability and growth

Russia and Ukraine Baltics Sweden

The Baltic economies are experiencing strong economic growth that is expected to remain for many years. As the largest bank in the region, growing with the market ensures Swedbank an attractive earnings growth.

Stable base Growth and experience Future growth and profitability

Swedbank is the leading bank in Sweden. Profitability is high and stable and the bank is gaining market share in important segments such as retail mortgages and deposits. Swedbank has a small but growing presence in Russia and Ukraine. Long- term, a significant share of Swedbank’s growth will be generated in these markets.

Attractive employer Customer satisfaction Profitability

Swedbank’s average annual growth of earnings per share the last 5 years was 16.5 percent. The peer group average was 15.5 percent. Swedbank had the highest increase in customer satisfaction in Sweden during

• 2006. Customer satisfaction in the Baltics

is rising from an already high level. In Sweden, Swedbank is ranked as the most attractive employer in the financial services sector*. In the Baltics we have been able to attract the best talent for a long period of time.

* According to Universum

5 10 15 20 25 2001 2002 2003 2004 2005 2006 60 62 64 66 68 70 72 2001 2002 2003 2004 2005 2006

5

Norway Sweden Finland Russia Ukraine Estonia Denmark Latvia Lithuania

Excellent long-term growth potential in Ukraine

• Acquisition of TAS-Kommerzbank was

completed July 9th

• Ukraine is expected to have a continued

high GDP growth

• Under penetrated banking market

– Retail loans/GDP, cards, current accounts

• Clear strategy focusing on retail- and SME

segments

Source: EIU, Global Insights World Overview, broker reports

High Growth Potential

0% 5% 10% 15% 20% 25% 30% 2 000 4 000 6 000 8 000 10 000 12 000 GDP / Capita Retail Loans / GDP (%)

Ukraine Latvia Lithuania Estonia Lithuania Estonia Hungary Hungary Poland Slovakia Czech R. Czech R. Slovakia Poland Latvia

2000 2005

2005 2000

6

Expansion to Russian retail market

• Swedbank given green light to resume Russian banking operations
• The already successful corporate banking will be complemented by

retail banking services

– The Russian retail market has a substantial growth potential, strong GDP growth and increased demand for traditional retail banking products such as mortgages, cards and savings products

• Leverage on our experience in fast growing markets
• Initially, branches in prime locations in Moscow and St. Petersburg
• ATMs, telephone and Internet banks
• Profitable organic growth.

7

Market position – home markets

8

Operating profit according to IFRS as of Q1, 2004

Swedbank profit trend

750 1500 2250 3000 3750 4500 5250 6000

Q 1

• 2

Q 2

• 2

Q 3

• 2

Q 4

• 2

Q 1

• 3

Q 2

• 3

Q 3

• 3

Q 4

• 3

Q 1

• 4

Q 2

• 4

Q 3

• 4

Q 4

• 4

Q 1

• 5

Q 2

• 5

Q 3

• 5

Q 4

• 5

Q 1

• 6

Q 2

• 6

Q 3

• 6

Q 4

• 6

Q 1

• 7

Q 2

• 7

250 500 750 1000 1250 1500

Operating profit Total assets Operating profit incl. capital gains

Sale of EnterCard Sale of KIAB Operating profit SEK m Total assets SEK bn

9

• The return on equity shall exceed the average of all other large, publicly listed Nordic

banks*. (Current status: RoE 19.5 percent for Jan-June 2007 > peers)

• Swedbank will maintain sustainable growth in earnings per share exceeding the average for

comparable banks. (Current status: has out-grown peers last 5-year period)

• Operational efficiency is measured as the relation between costs and income, the C/I-ratio.

The long-term goal is that the group’s C/I ratio before loan losses will be less than 0.50. (Current status: C/I-ratio amounts to 0.50)

• The tier 1 capital ratio will average 6.5 percent. (Current status: Tier 1 stands at 6.7 percent

prior to completion of TAS acquisition)

• The dividend, excluding one-offs, will amount to around 40 percent of after-tax earnings.

(Current status: Dividend ratio for 2006 was 40 percent)

Group financial objectives

* The comparable banks are SEB, SHB, Nordea, Danske Bank and DnB NOR

10

Positioning strategy

Service Leadership

Results-oriented Open Innovative Committed Accessible Uncomplicated Proactive Values Customer perception

11

Strategic focus – Sweden

• Effectively leverage on Sweden’s largest customer base and interface

– Retain high market shares in key product areas – Utilize potential in growth segments in retail and corporate sectors

• Pension savings
• Cash management
• Credit cards
• Leasing / administrative services
• Private banking
• FX, interest rate derivatives
• Non-life insurance
• Maintain excellent asset quality
• Pursue and increase cost efficiency

12

Strategic focus – Baltics

• Capture market growth opportunity

– Convergence towards EU average will continue during many years – Sustainable lending growth will be well above EU average level for many years – Large potential in up coming savings market – Many other financial services are yet immature

• Pursue favourable revenue and cost trends
• Minimizing risks and maintaining organizational flexibility

– Maintain excellent asset quality, Readiness for slowdown, Operational excellence

• Manage challenging macro scenario

13

Summary Q2 2007 (Q1 2007)

• Continued improved results: SEK 3,112m (2,910 in Q1 2007)

– Earnings per share increased 7% compared with Q1 2007 – Net interest income was up for the fifth consecutive quarter – For the first half year, earnings per share rose 19 percent

• Swedish Banking: SEK 1,484m (1,632)

– Continued strong volume growth in both lending and deposits – Lending margins under pressure – Higher costs partly driven by one-off investments

• Baltic Banking: SEK 1,180m (995)

– Yet another record result – Good development across the board – Continued slowdown of credit growth, although the overheating risks in the economies persist

• Swedbank Markets: SEK 236m (313)

– Continued positive business volume development – Equities and corporate finance had a good quarter, while profits in fixed income decreased

• TAS-Kommerzbank acquisition completed July 9th.

14

Business volumes, savings

9 3 16 5 10 15 20 25 Deposits, Sweden Deposits, Baltics AM funds, Group

Growth Q2-07, SEKbn

SEKbn 313 93 446 100 200 300 400 500 Deposits, Sweden Deposits, Baltics AM funds, Group

Balance, June 2007

SEKbn

15

Business volumes, lending

38 14 12 6 5 10 20 30 40 50 Lending, Group Private, Sweden Corporate, Sweden Private, Baltics Corporate, Baltics

Growth Q2-07, SEKbn

SEKbn 66 95 362 449 1,000 200 400 600 800 1,000 Lending, Group Private, Sweden Corporate, Sweden Private, Baltics Corporate, Baltics SEKbn

Balance, June 2007

16

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Q1- 06 Q2- 06 Q3- 06 Q4- 06 Q1- 07 Q2- 07 %

Lending

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Q1- 06 Q2- 06 Q3- 06 Q4- 06 Q1- 07 Q2- 07

Deposits

%

Margins

Market interest rates increased substantially during the quarter. Margins expected to decrease during Q3 due to market rates falling back Lending margin in Baltic Banking increased by 5 bps during Q2

Estonia Latvia Lithuania Sweden Estonia Latvia Lithuania Sweden

17

Swedish Banking

• Continued strong volume growth
• Lending margin pressure in all segments
• Higher asset management- and payment

volumes boosts commission income

• Switch-over costs due to change in

suppliers of cash handling and non-life insurance

• Staff costs affected by periodization

effects

• Swedbank’s market share of the

households’ total net new savings increased to 17 percent during the first 6 months (16).

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 Income Costs C/I-ratio SEKm %

18

Baltic Banking

• Another all time high quarter

– Earnings grew 19 percent to SEK 1,180m (995) – Cost/income ratio was 0.40

• Continued credit growth slow-down…
• … but overheating risk still persists

– Anti inflation plans implemented in Latvia – Signs of soft landing in Estonia

• Good growth of savings volumes
• Staff increase to meet demand of

personal service, partly temporarily summer staff

• Credit quality still very good.

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 0.0 0.1 0.2 0.3 0.4 0.5 0.6 Income Costs C/I-ratio SEKm %

19

Decreasing Baltic lending growth

0% 10% 20% 30% 40% 50% 60% 07/Jun 07/Mar 06/Dec 06/Sep 06/Jun 06/Mar 05/Dec 05/Sep 05/Jun 05/Mar 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

Hansabank, Estonia

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 07/Jun 07/Mar 06/Dec 06/Sep 06/Jun 06/Mar 05/Dec 05/Sep 05/Jun 05/Mar 1,000 2,000 3,000 4,000 5,000 6,000

Hansabank, Latvia

0% 10% 20% 30% 40% 50% 60% 70% 07/Jun 07/Mar 06/Dec 06/Sep 06/Jun 06/Mar 05/Dec 05/Sep 05/Jun 05/Mar 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

Hansabank, Lithuania

0% 10% 20% 30% 40% 50% 60% 70% 07/Jun 07/Mar 06/Dec 06/Sep 06/Jun 06/Mar 05/Dec 05/Sep 05/Jun 05/Mar 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000

Baltic Banking

Total lending, EURm YoY growth

20

Income statement, Group

SEKm Q2 2007 Q1 2007 % Q2 2006 % Net interest income 4,591 4,501 2 4,029 14 Net commission income 2,552 2,289 11 2,353 8 Net gains/losses on financial items at fair value 579 530 9 786 – 26 Other income 504 473 7 410 23 Total income 8,226 7,793 6 7,578 9 Staff costs – 2,016 – 1,932 4 – 1,791 13 Profit-based staff costs – 409 – 390 5 – 412 – 1 Other expenses – 1,699 – 1,615 5 – 1,699 Total expenses – 4,124 – 3,937 5 – 3,902 6 Profit before loan losses 4,102 3,856 6 3,676 12 Loan losses – 102 – 49 108 116 Operating profit 4,000 3,807 5 3,792 5 Tax – 856 – 851 1 – 938 – 9 Profit for the period 3,144 2,956 6 2,854 10 Attributable to Swedbank's shareholders 3,112 2,910 7 2,786 12

21

Net interest income, by business area

SEKm Q2 2007 Q1 2007 % Q2 2006 % Swedish Banking 2,909 2,950 – 1 2,850 2 Baltic Banking Operations 1,496 1,324 13 962 56 Baltic Banking Investment – 95 – 104 – 113 Swedbank Markets 295 399 – 26 358 – 18 Asset Management and Insurance 24 19 26 5 Shared Services and New Operations – 44 – 79 – 33 Eliminations 6 – 8 Total net interest income 4,591 4,501 2 4,029 14

22

Loan losses, Group

• Credit quality still excellent on all

markets

• Increase in reported loan losses,

but from very low levels

• Impaired loans stable
• Group’s low risk profile confirmed

by Basel II, which indicates a reduction of RWAs of approx. 30 percent.

• 200
• 100

100 200 300 400 500 Q1-03 Q2-03 Q3-03 Q4-03 Q1-04 Q2-04 Q3-04 Q4-04 Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07

• 0.10
• 0.05

0.00 0.05 0.10 0.15 0.20 0.25 Loan losses Loan loss level SEKm %

23

Key figures

Jan - Jun, 2007 Jan - Jun, 2006

Return on equity, % 19.5 18.5 Earnings per share, SEK 11.68 9.81 Equity per share, SEK 120.23 105.78 C/I ratio before loan losses 0.50 0.53 Loan loss ratio, net, % 0.03 – 0.02 Share of impaired loans, % 0.08 0.09 Provision ratio for impaired loans, % 185 187 Tier 1 capital ratio, % 6.7 6.5 Capital adequacy ratio, % 10.0 10.0

24

All business areas improved their results for the first six months 2007

• Continued increase of Group results, up 19 percent to SEK 6,022m

(5,056 first 6 months 2006)

• Group cost/income ratio amounted to 0.50
• Strong development of business volumes
• Continued very good credit quality on all markets.

25

Summary - Strong position for profitability and growth

• A leading bank in Sweden, Estonia, Latvia and Lithuania
• Strong and stable earnings in Sweden set to continue

– Effectively leverage on Sweden’s largest customer base and interface

• Capture growth potential in Baltic Business

– Set to continue although at a slower pace

• Long-term growth potential in Ukraine and Russia.

26

Appendix

27

Exposure FAQ

• Minimal exposure towards sub prime

– Swedbank has invested about USD95m in two mortgage institutions with a marginal exposure in US subprime

• Minimal exposure towards structured credits

– Swedbank holds a very small CDO trading stock (no proprietary trading). The CDOs are built on about 125 underlying companies well diversified both with regards to geography and industry – No off balance structured credit exposure

• Hedge fund exposure is about SEK4.5bn, all collateralized
• Exposure towards private equity owned companies (incl. subsidiaries) is

about SEK10bn, all towards top rated local Nordic private equity firms. Exposures have extensive covenant packages

• No conduits or SIVs.

28

Funding and liquidity FAQ

• Excellent access to funding during recent market turmoil

– Strategy is to develop and maintain a well diversified and broad investor base in all core markets. Long term target of funds raised outside Sweden should be around 50 percent.

• Well diversified funding base with diversified sources of funding

– Deposit surplus in parent bank, Swedbank is market leader in deposits – Capital markets funding, mainly to finance mortgage lending, is mostly programme financed, 9 percent is from interbank funding

• Domestic mortgage bonds, US CP, CDE and ECP, EMTN programmes
• Conversion of mortgage bonds to covered bonds (AAA realistic) during H1 2008

– Funding of Baltic operation in ”hard currency” is performed by Group Treasury

• Conservative view at liquidity risk, continuously revised
• Substantial liquidity reserves, both at Group level and legal reserves in

Baltic operations.