Sydbank 2010 1 Disclaimer This presentation has been prepared - - PDF document

Sydbank 2010

1

Disclaimer

This presentation has been prepared solely for use at this presentation. By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations. This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of Sydbank A/S (the “Company”), in any jurisdiction or an inducement to enter into investment activity. No part of this presentation, nor the fact of its di t ib ti h ld f th b i f b li d i ti ith t t it t i t t distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This presentation has been prepared solely for use in connection with the presentation of the Company. The information contained in this document is strictly confidential and is being provided to you solely for your information and cannot be distributed to any other person or published, in whole or in part, for any purpose It may not be reproduced redistributed passed on or published in whole or in part to any other person for any purpose Failure to comply with this and

• purpose. It may not be reproduced, redistributed, passed on or published, in whole or in part, to any other person for any purpose. Failure to comply with this and

the following restrictions may constitute a violation of applicable securities laws. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Company or any of their respective affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation. This presentation is only for persons having professional experience in matters relating to investments and must not be acted or relied on by persons who are not Relevant Persons (as defined below). Solicitations resulting from this presentation will only be responded to if the person concerned is a Relevant Person. This presentation is not an offer of securities for sale in the United States. Neither the presentation nor any copy of it may be taken or transmitted into United States, its territories or possessions or distributed, directly or indirectly, in the United States, its territories or possessions, except to qualified institutional buyers as defined in Rule 144A under the U.S. Securities Act of 1933, as amended (the “Securities Act”) or outside the United States in reliance on Regulation S under the Securities Act. Any failure to comply with this restriction may constitute a violation of the United States securities laws.

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Agenda

• 1. Executive summary
• 2. Danish macro economy
• 3. Overview of Sydbank

3 O e e

• Sydba
• 4. Financial performance
• 5. Credit risk

6 ECOFIN Stress Test

• 6. ECOFIN Stress Test
• 7. Capital management
• 8. Liquidity management – funding
• 9. Outlook 2010

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Agenda

• 1. Executive summary
• 2. Danish macro economy
• 3. Overview of Sydbank

3 O e e

• Sydba
• 4. Financial performance
• 5. Credit risk

6 ECOFIN Stress Test

• 6. ECOFIN Stress Test
• 7. Capital management
• 8. Liquidity management – funding
• 9. Outlook 2010

4

Executive summary

• The Danish economy is stabilizing and the Danish housing market shows

signs of improvement

• Sydbank is the fourth largest bank in Denmark with a market share of approx 5%

Sydba s e ou a ges ba e a a a e s a e o app o 5%

• Sydbank’s Moody’s ratings are at the top of the list among Danish

and Nordic banks

• Strong financial performance
• Diversified loan book. No single sector concentration
• Sydbank showed great strength in the ECOFIN Stress Test
• Strong capital structure – core capital ratio of 13.1% and core capital ratio

excl hybrid core capital of 11.5% as at 31. Dec. 2009 – the capital base was excl hybrid core capital of 11.5% as at 31. Dec. 2009 the capital base was strengthened by a share issue in September 2009

• No government hybrid core capital and no state guaranteed funding required

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Agenda

• 1. Executive summary
• 2. Danish macro economy
• 3. Overview of Sydbank

3 O e e

• Sydba
• 4. Financial performance
• 5. Credit risk

6 ECOFIN Stress Test

• 6. ECOFIN Stress Test
• 7. Capital management
• 8. Liquidity management - funding
• 9. Outlook 2010

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The Danish economy is heading out of recession

Fast downturn – Fast downturn – steady upswing teady upswing

• GDP contracted by 5.1% in 2009…
• but slow positive growth rates in H2
• …but slow positive growth rates in H2
• GDP growth at around 1-1.5% in 2010
• Tax cuts and record low rates expected to boost private consumption in 2010

Tax cuts and record low rates expected to boost private consumption in 2010

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Economic structures relatively sound

• Total public deficit less than 3% of GDP in 2009 and expected at around 5%

in 2010 – one of the lowest in EU

• According to the rules of the growth and stability pact, Denmark will probably

g g y p p y need to improve public balances by around 0.5% of GDP each year for the period 2011-2013 – just like Germany

• Current account show healthy surplus around 4% of GDP in 2009 and 2010

Current account show healthy surplus around 4% of GDP in 2009 and 2010

• Unemployment show signs of stabilization around 7.5% (EU definition)
• Inflation is close to Eurozone average. Expected around 2% in 2010

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The Danish housing market is stabilizing

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Agenda

• 1. Executive summary
• 2. Danish macro economy
• 3. Overview of Sydbank

3 O e e

• Sydba
• 4. Financial performance
• 5. Credit risk

6 ECOFIN Stress Test

• 6. ECOFIN Stress Test
• 7. Capital management
• 8. Liquidity management - funding
• 9. Outlook 2010

10

Sydbank’s history

Ownership: – > 5%: Nykredit and ATP – 149,000 shareholders

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Market position

• 382,000 customers

– About 8% are corporate clients

• Market share of approx 5% of the Danish market

pp – Market share of 6-7% of the Danish corporate market – Market share of 4-5% of the Danish retail market 113 branches in Denmark incl ding 3 branches in

• 113 branches in Denmark including 3 branches in

Germany and private banking operations in Graasten

• In addition Sydbank has a subsidairy bank in
• St. Gallen, Switzerland
• Approx 2,400 employees
• Market cap EUR 1 6bn
• Market cap EUR 1.6bn

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Rating

• Moody’s current ratings of Sydbank are as follows: A1 (long-term debt),

P-1 (short-term debt) and C+ (financial strength)

Bank Count untry Rating ng O Outlook BFSR *) Syd Sydbank DK A1 Stable C+ ( (neg. ou

• utlook
• ok)

Jyske Bank DK A1 Stable C+ (neg. outlook) Ringkøbing Landbobank DK A1 Negative C+ (neg. outlook) Nordea Danmark DK Aa2 Stable C Danske Bank DK Aa3 Stable C Spar Nord DK A2 Stable C- FIH DK Baa3 Stable D- (neg. outlook) Amagerbanken DK Baa3 Stable E Amagerbanken DK Baa3 Stable E+ Nordea AB S Aa2 Stable C+ (neg. outlook) Svenske Handelsbanken S Aa2 Stable C+ (neg. outlook) DnB NOR N Aa3 Stable C (R) SEB S A1 Negative C- Sparbanken Nordnorge N A1 Negative C- (neg. outlook) Swedbank S A2 Negative D+ (neg. outlook)

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* Bank Financial Strength Rating

Strategic objectives

• Sydbank aims to remain independent
• Sydbank aims to be present nationwide through the establishment of

branches and through ongoing extension of the Bank’s electronic availability g g g

• Abroad, Sydbank aims to expand its presence in Northern Germany

and its private banking activities on the basis of Sydbank (Schweiz) AG and PBI (Denmark) and PBI (Denmark)

• Sydbank aims to win market shares

– eg in relation to corporate clients and private banking

• Sydbank aims to participate in the consolidation of the Danish banking sector

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Agenda

• 1. Executive summary
• 2. Danish macro economy
• 3. Overview of Sydbank

3 O e e

• Sydba
• 4. Financial performance
• 5. Credit risk

6 ECOFIN Stress Test

• 6. ECOFIN Stress Test
• 7. Capital management
• 8. Liquidity management - funding
• 9. Outlook 2010

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Income statement

EUR EUR 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 1H 1H 2009 2009 1H 1H 2010 2010 EUR EURm 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 1H 1H 2009 2009 1H 1H 2010 2010 Core income excl trading income 270 308 341 412 446 220 223 Trading income 145 177 200 156 170 86 97 Total core in Total core income come 414 485 540 567 616 306 320 Costs and depreciation 248 272 295 333 331 173 172 Core Core earn earnings b s before i e impairment airment 166 213 245 234 285 133 148 g p Impairment of loans and advances etc 9

• 23
• 76

73 161 76 85 Core Core e earnings nings 157 236 321 161 124 58 63 Profit/(Loss) on investment portfolios 19 23

• 26
• 52

58 28 17 Profit before non-recurring Profit before non-recurring items items 176 259 295 109 182 86 80 Non-recurring items, net

• 16

7 22 12

• Profit

Profit before before contribution contribution to to the the Danish anish Profit Profit before before contribution contribution to to the the Dan Danish sh Contingency Committee Contingency Committee 176 275 303 131 194 86 80 Contribution to the Danish Contingency Committee

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60 29 35 Profit before tax Profit before tax 176 275 303 109 134 57 45 Tax 51 72 73 28 29 14 11 Profit for Profit for the the period period 125 203 229 81 105 43 34

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Balance sheet

EURbn EURbn 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 1H 2009 1H 2009 1H 2010 1H 2010 Loans and advances at amortised cost 7.2 8.8 10.0 11.1 10.0 10.12 9.9 Loans and advances at fair value 1.0 1.0 1.2 1.8 1.7 1.7 0.9 (reverse repo transactions) Deposits and other debt 5.8 6.7 8.9 10.1 9.2 9.6 8.7 Bonds issued 0.9 1.3 1.4 1.4 1.2 1.4 1.2 S b di t d it l 0 4 0 5 0 5 0 6 0 4 0 5 0 4 Subordinated capital 0.4 0.5 0.5 0.6 0.4 0.5 0.4 Shareholders' equity 0.7 0.8 0.9 1.0 1.2 1.0 1.3 Total assets 13.3 15.4 17.7 20.9 21.2 21.5 20.7 Guarantees 1.8 2.0 1.4 1.3 1.6 1.3 1.7 Post- Post-tax ax prof profit t as % of as % of average average sh shareh areholders'

• lders' equ

equity ty 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 Ave Average 01-09 01-09 Sydbank 13.7 12.1 16.5 17.0 19.9 16.7 26.2 8.8 9.6 15.61 Jyske Bank 10.3 8.0 17.4 18.0 19.2 22.2 17.8 9.6 4.1 14.07 Spar Nord Bank 3.5 6.4 11.8 14.2 17.8 24.8 17.5 2.3 2.9 11.24 Group 1-3 total* 12 8 12 0 15 4 16 1 16 3 17 2 14 2

• 2 4
• Group 1-3 total

12.8 12.0 15.4 16.1 16.3 17.2 14.2

• 2.4
• * An average of the following three groups of Danish financial institutions:

Group 1: Danish financial institutions with working capital ≥ EUR 6.7bn Group 2: Danish financial institutions with working capital ≥ EUR 1.3bn and ≤ EUR 6.7bn Group 3: Danish financial institutions with working capital ≥ EUR 33.6m and ≤ EUR 1.3bn 17

Interest margin 1983-2009

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Agenda

• 1. Executive summary
• 2. Danish macro economy
• 3. Overview of Sydbank

3 O e e

• Sydba
• 4. Financial performance
• 5. Credit risk

6 ECOFIN Stress Test

• 6. ECOFIN Stress Test
• 7. Capital management
• 8. Liquidity management - funding
• 9. Outlook 2010

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Credit management

• Sydbank uses top-down centralized management
• Sydbank applies IRB approaches to manage the credit risk (the advanced IRB

approach as regards retail clients and the foundation IRB approach as regards g g corporate clients)

• Corporates/SME’s are the largest part of the client base
• Mortgage loans are outsourced to Nykredit/Totalkredit and DLR

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Credit exposure by industry

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Losses and impairments – Danish banks

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Impairments

Impairment nt a and p provisions ns ( (excl c cont ntri ribution t to the D Dani nish C Cont ntingenc ncy C Committee) EURm Q1 2008 2008 Q2 2008 2008 Q3 2008 2008 Q4 2008 2008 Q1 2009 2009 Q2 2009 2009 Q3 2009 2009 Q4 2009 2009 Q1 2010 2010 Q2 2010 2010 Impairment of loans and advances etc

• 3

1 13 62 36 40 38 46 43 42 Sydbank Group

Impairment ratio for Impairment ratio for the year the year (excl (excl contri contribu bution tion to the Danish to the Danish Contingency Contingency Committee) Committee)

Impairment ratio for the period

• 0,02%

0,01% 0,10% 0,43% 0,26% 0,30% 0,30% 0,34% 0,34% 0,33% Accumulated impairment ratio 0,86% 0,82% 0,89% 1,00% 1,20% 1,25% 1,31% 1,54% 1,86% 1,86%

2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 Ave vera rage ge 01-09 01-09 Sydbank 0.5 0.6 0.6 0.4 0.1

• 0.2
• 0.7

0.5 1.2 0.33 Jyske Bank 0.3 0.5 0.5 0.4 0.1

• 0.3

0.0 0.7 1.8 0.44 Spar Nord Bank 1.6 1.7 0.9 0.6 0.2

• 0.4
• 0.3

0.4 1.2 0.66 Group 1-3 total* 0.4 0.3 0.4 0.1

• 0.03
• 0.07
• 0.02

0.96

• * An average of the following three groups of Danish financial institutions:

Source: Annual reports

g g g p

p

Group 1: Danish financial institutions with working capital ≥ EUR 6.7bn Group 2: Danish financial institutions with working capital ≥ EUR 1.3bn and ≤ EUR 6.7bn Group 3: Danish financial institutions with working capital ≥ EUR 33.6m and ≤ EUR 1.3bn

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Losses by sector and industry

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Agenda

• 1. Executive summary
• 2. Danish macro economy
• 3. Overview of Sydbank

3 O e e

• Sydba
• 4. Financial performance
• 5. Credit risk

6 ECOFIN Stress Test

• 6. ECOFIN Stress Test
• 7. Capital management
• 8. Liquidity management - funding
• 9. Outlook 2010

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ECOFIN Stress Test

• As all major European banks, Sydbank was subject to the Euro-wide stress testing exercise. The

stress test was conducted with a mandate from the EU Council of Ministers of Finance (ECOFIN) and coordinated by the committee of European Banking Supervisors (CEBS) in cooperation with European Central Bank (ECB), the Danish Financial Supervisory Authority (FSA) and Danmarks Nationalbank.

• The stress test aimed to asses the overall strength of the EU banking system sector and the

individual bank’s ability to absorb further possible shocks on credit and market risks, including sovereign risk sovereign risk.

• Sydbank excelled in stress test by,

– showing great resilience to adverse developments – insignificant exposure to rising interest rates on government bonds – sufficient Tier 1 capital and capital base

• Further the test results complements the bank’s risk management procedures and regular stress
• Further, the test results complements the bank s risk management procedures and regular stress

testing programmes under the Pillar 2 framework of the Basel II and CRD requirements.

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ECOFIN Stress Test

• The important findings of the stress test were

as follows; – Under the shock of the adverse scenario, the estimated consolidated Tier 1 ratio the estimated consolidated Tier 1 ratio would increase to 13.4% in 2011, compared to 13.1% at the end of 2009 – A further shock to the government bond g market would only impact the estimated Tier 1 ratio negatively by 0.2 percentage point Thi t t Ti 1 b ff f 7 2

• This equates to a Tier 1 buffer of 7.2

percentage points above the agreed threshold

• f 6%, equivalent to DKK5.8bn (EUR779m /

Market Cap. EUR1.6bn)

• Overall Sydbank showed great strength in the

stress test. The conservative and prudent approach by the bank has insured that the bank is well equipped to withhold in further

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bank is well equipped to withhold in further adverse developments in the financial markets

Note: Sydbank has reported zero exposures to PIIGS

Agenda

• 1. Executive summary
• 2. Danish macro economy
• 3. Overview of Sydbank

3 O e e

• Sydba
• 4. Financial performance
• 5. Credit risk

6 ECOFIN Stress Test

• 6. ECOFIN Stress Test
• 7. Capital management
• 8. Liquidity management - funding
• 9. Outlook 2010

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Capital management

Capital Capital Capital Capital EURm 31.Dec. 2009 % of RWA 1H 2010 % of RWA Adequate capital base/solvency need 942 9.0 940 9.0 Buffer capital 388 3.7 389 3.7 Internal capital target 1,330 12.7 1,329 12.7 F it l 257 2 5 312 3 0

Adequate capital Adequate capital base/solvency base/solvency need: need: Regulatory solvency requirement of 8% of RWA

Free capital 257 2.5 312 3.0 Capital base (Tiers 1+2) 1,587 15.2 1,641 15.7

+ precautionary buffer of 1% of RWA Buffer capital: Buffer capital: The additional capital which Sydbank finds necessary to have in order to protect shareholders against losses protect shareholders against losses Internal capital Internal capital target: target: The level of capital Sydbank wishes to have at its disposal Free ca Free capital: ital: The difference between the capital base and the internal capital. p p p May be used to assume new risks Capital base (Tiers 1+2): Capital base (Tiers 1+2): The actual capital that Sydbank has at its disposal

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Capital management

B k B k k II

• Ban

ank pac package age II II: : – Sydbank has decided not to make use of the possibility of receiving government hybrid core capital – No senior issues with government guarantee will be made No senior issues with government guarantee will be made

• During 2009 Sydbank has prepaid supplementary capital (Tier 2) amounting to approx EUR 147m

(DKK 1,095m)

• No new supplementary capital has been raised

pp y p

• Instead a share issue of net EUR 155m (DKK 855m) was successfully completed on 15 September

2009

• The share issue was concluded via an accelerated book-building with the new shares representing

g p g approximately 9.99% of the share capital prior to the issue

• As per 30. June 2010 Sydbank had a core capital ratio of 13.5% and core capital ratio excl hybrid

core capital of 11.9%

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Solvency

G EUR 2008 2009 1H 2009 1H 2010 Group EURm 2008 2009 1H 2009 1H 2010 Risk-weighted items 10.014 10.470 9.997 10.445 Core capital (excl hybrid core capital) 936 1.207 990 1.239 Core capital 1.083 1.374 1.136 1.407 Capital base 1.475 1.587 1.382 1.641 Core capital ratio (excl hybrid core capital) 9 3 11 5 9 9 11 9 Core capital ratio (excl hybrid core capital) 9,3 11,5 9,9 11,9 Core capital (Tier 1) ratio 10,8 13,1 11,4 13,5 Solvency (total capital) ratio 14,7 15,2 13,8 15,7

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Agenda

• 1. Executive summary
• 2. Danish macro economy
• 3. Overview of Sydbank

3 O e e

• Sydba
• 4. Financial performance
• 5. Credit risk

6 ECOFIN Stress Test

• 6. ECOFIN Stress Test
• 7. Capital management
• 8. Liquidity management - funding
• 9. Outlook 2010

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Funding strategy

• Sydbank aims to maintain a balanced relationship between growth in the loan

book and growth in the deposits

• Sydbank aims to maintain a strong deposit base as its core funding source
• Sydbank aims to maintain a strong deposit base as its core funding source
• The deposit base is primarily based on Danish funding
• Short term/interbank funding is based on Danish and foreign funding
• Short term/interbank funding is based on Danish and foreign funding
• Sydbank intends to be a more frequent issuer in the coming years in the long

term euro market

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Liquidity management – short-term liquidity risk

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Liquidity management – 12-month liquidity Liquidity management 12 month liquidity

(no access to capital markets)

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Liquidity management – structural liquidity risk

* Li idit ti (D it LT F di S b L E it )/G L * Liquidity ratio = (Deposits + LT Funding + Sub.Loan + Equity)/Gross Loans

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Funding structure – long-term funding

• EUR 4bn GMTN programme
• Approximately 15 private placements and 2 benchmark issues
• Both Tier 1, Tier 2 and senior notes are issued
• Mainly European investors

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Agenda

• 1. Executive summary
• 2. Danish macro economy
• 3. Overview of Sydbank

3 O e e

• Sydba
• 4. Financial performance
• 5. Credit risk

6 ECOFIN Stress Test

• 6. ECOFIN Stress Test
• 7. Capital management
• 8. Liquidity management - funding
• 9. Outlook 2010

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Outlook 2010

• Modest positive growth in the Danish economy
• Unchanged to moderate growth in loans and advances
• Core income excl trading income is expected to remain unchanged or to rise
• Core income excl trading income is expected to remain unchanged or to rise

slightly

• Trading income is projected to remain unchanged or to decline slightly
• Budgeted reduction in staff of almost 100
• The level of costs is expected to remain largely unchanged
• Core earnings in the region of EUR 255-282m (DKK 1.9-2.1bn) before impairment
• f loans and advances

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Outlook for 2010

• Unchanged or declining impairments
• Investment portfolio earnings will depend on financial market developments
• Contribution to the Private Contingency Association – guarantee commission
• Contribution to the Private Contingency Association – guarantee commission

EUR 28m (DKK 210m) + share of further losses in the Financial Stability Company

• f up to EUR 21m (DKK 156m)
• Tax 25%

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