Capital markets day 2008 - Erkki Raasuke

8/8/2019 Capital markets day 2008 - Erkki Raasuke

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Baltic Banking

Mr Erkki Raasuke

Head of Baltic Banking

Capital Markets Day

Kiev, 5 March 2008

Swedbank 2

Agenda

Overview of the market

Present situation

Baltic Banking: looking at 2008


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Overview of the market

Swedbank 4

Baltics macro development

Long-term economic growth is

supported by:

Attractive initial conditions

Prudent governance and strong

institutions

Significant investment in capitalstock and human capital

Open and flexible economies

Short-term unsustainable growthcaused by:

EU accession and convergence

Excessive inflow of debt capital

Real GDP growth

4%

6%8%

10%12%14%

2005 2006 2007F 2008FEst Lat Lit

CPI growth

2%4%6%8%

10%12%

2005 2006 2007F 2008FEst Lat


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Swedbank 5

Baltics macro development Signs of slowdown

All three countries are followingthe expected path of aneconomic cycle:

Estonia is clearly in the slowdownphase (expected to reach low pointduring H108 with slow recoveryduring H208)

Latvia passed the turning point inQ3 (expected to reach bottomH2 08 with slow recovery during2009)

Lithuania reached its peak in Q3(the bottom of current cycleexpected in 2009. The economiccycle in Lithuania will probably beflatter than in Estonia and Latvia)

GDP real growth

4%

6%

9%

11%

13%

15%

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Estonia Latvia Lithuania

Consumer confidence

-20

-15

-10

-5

0

5

10

15

01-05 04-05 07-05 10-05 01-06 04-06 07-06 10-06 01-07 04-07 07-07 10-07 01-08

Estonia Latvia Lithuania

Present situation


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Swedbank 7

Financial performance

Net profit(EURm)

463

175 205323

2004 2005 2006 2007

Cost-income ratio

44%

49%49%

40%

2004 2005 2006 2007

Return on equity

27%

22%23%

30%

2004 2005 2006 2007

Number of employees

6,576 7,058

9,2038,216

2004 2005 2006 2007

Lending (EURm)

14,1588,899

5,697

18,877

2004 2005 2006 2007

>20%ROE on actual equity


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Swedbank 9

Asset quality and provisioning cost

-0.06%-0.17%Group level provision adjustment

0.35%0.28%Baltic Banking

0.23%0.09%Lithuania

0.56%0.61%Latvia

0.39%0.57%Estonia

2007Q4 07

*Loan loss ratio, net = (changes in provisions + net write-offs) / credit portfolio atthe beginning of the period

Loan loss ratio, net*

Share of non-performing loans*

0.68%0.53%Baltic Banking

0.76%0.50%Private

0.63%0.56%Corporate

Dec 07Jun 07

*Share of non-performing loans = the volume of 60 days overdues /12m old portfolio

Upon the Hansabank acquisition in2005, Swedbank made a generalprovision of about SEK280m. In Q42007, SEK70m of this was released

The provision was partly madebecause Swedbank at the time didnot have full insight intoHansabank's risk and creditsystems and processes and thusmade an extra provision forpotential bad loans

Since then the systems andprocesses have improved and havealso been aligned with Swedbank's

Baltic Banking: looking at 2008


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Swedbank 11

Baltic Banking

Goal is to be a clear leader in each Baltic market

Biggest growth in volumes (in absolute terms)

Highest profit (in absolute terms)

Highest level of customer satisfaction

Swedbank 12

Baltic Banking priorities 2008

Build efficient organization and reduce complexity

Build new organization model

Increase operational efficiency

Improve employee productivity Build capabilities to work with data

Grow core businesses

Corporate banking - manage through the cycle

Retail lending - improve credit selection and risk-based pricing

Daily banking - strengthen our client offerings

Investment management - build cross-border operating model


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Swedbank 13

Build new organization model in Baltic Banking

Goal is to build a regional banking organization which leverages oncross-border capabilities

Building future cross-border operating model for Swedbank Group,starting where value is most easily gained - Baltics

Best practices and innovation rolled out quicker

Leverage from experience of same business areas of three countries

Clear decision making and execution authority

Talented people can maximize their potential

Priorities in 2008

Define new organizational model in Baltic Banking by May 2008

Implementation period from June to December

New organizational model is expected to be fully functional in 2009

Swedbank 14

Increase operational efficiency

Grow business while improving efficiency

Priorities in 2008 First pilots in mortgage, debit cards run in 2007; corporate

lending, consumer finance and current account/payments tobe rolled out in 2008

Develop operational performance measurement system

Clear internal targets for savings in monetary terms, quality,lead time, FTE reduction, customer satisfaction have beenestablished


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Swedbank 17

Grow core businesses Daily banking

Priorities in 2008

Develop daily banking business concept and strengthen our clientofferings

Develop Customer Relationship Management concept

Increase customer activity

Core focus product - deposits

maintain or increase current market share

Swedbank 18

Grow core businesses Investment management

Priorities in 2008

Build cross-border business model in life insurance andasset management

Build standardized advisory process in retail

Increased focus on investment management in privatebanking segment

Particularly in Latvia and Lithuania


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Swedbank 19

Summary

Short-term challenges

Credit quality

Operational efficiency

Building capabilities going forward

Cross-border operating model

Business processes for more mature markets

Committed to fulfilling medium-term goals

Swedbank 20

Additional material


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Swedbank 21

Macro figures*

-1.1-1.2-1.1-1.6-2.4EU27

0.0-0.5-0.5-0.6-0.5Lithuania

1.210.7-0.3-0.4Latvia

0.0-1.823.82.3Estonia

General governmentbalance (ESA95), % of GDP

-0.9-0.9-0.9-0.8-0.7EU27

-10.0 (Q4 07)-11.3-12.2-12.8-9.6-5.9Lithuania

-14.7 (Q4 07)-11.5-15.5-22.3-21.1-11.2Latvia

-12.2 (Q407)-6.5-8-12-13.4-8.1Estonia

Current and capital account balance, % of GDP

6.8 (Dec 07)6.66.87.17.98.7EU27

3.9 (Dec 07)4.74.64.35.68.3Lithuania

5.4 (Dec 07)6.56.55.96.99Latvia

5.3 (Dec 07)65.555.97.9Estonia

Harmonizedunemployment level, %

9.9 (Jan 08)4.885.7**3.72.7Lithuania

15.8 (Jan 08)6.512.510.1**6.56.7Latvia

11 (Jan 08)3.86.56.6**4.44.1Estonia

Consumerpricegrowth, %

5.6 (Q3 07)2.42.42.931.8EU27

7.9 (Q4 07)6.57.58.7**7.77.9Lithuania

9.6 (Q4 07)6.5610.511.910.6Latvia

4.5 (Q4 07)65711.210.2Estonia

Economic growth, %

Latest data2009f2008f2007f20062005

*Estonian, Latvian and Lithuanian forecast by HBM; EU27 forecastby EC (Autumn 2007 forecast)

**foractualdatain 2007

Swedbank 22

Main export sectors - Estonia

30%

9%7%11%4% 8%

12%5%

4%6%

17%18%

6%9%

11%

40%45%31%

12%10%9%

0%

20%

40%

60%

80%

100%

2003 2005 2007

F oo d, b ev erag es , to ba cc o e tc Min eral p rod uc ts

Chemicals Plastic, rubber, wood etc

Textiles, footwear Machinery and equipment

Metals + other

Main export sectors - Latvia

12% 15%

30% 28%

25%17%

9% 4%6% 7%

9%7%

9% 23%

0%

20%

40%

60%

80%

100%

2003 2005 2007

F oo d, b ev erag es , to ba cc o e tc M in eral p ro du ct s

Chemicals Plastic, rubber, wood etc


Metals + other

Main export sectors - Lithuania

17%

20%27%

27% 22% 35%

13%11%

14%

7%7%

9%9%

10%12%

15%10%

8%

11%11% 6%

0%

20%

40%

60%

80%

100%

2003 2005 2007

F oo d, b ev erag es , to ba cc o e tc Min eral p rod uc tsChemicals Plastic, rubber, wood etc


Metals + other

N/A

Export sectors


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Swedbank 23

EE 53%47%

44% 56%

37% 63%

Private loans

Corporate loans

LV

LT

11%6%

38%

32%

13%

7%11%

34%

41%

7%

9%8%

40%

31%

12%

23%

7%

29%

22%

14%

5%

12%

15%

45%

11%

15%

2%

11%

5%

38%

38%

5%3%

Office

Production & warehouse

Residential

Retail

Land plots

OtherCommercial real estate Transport

Capital goods Retail

Other

December 2007Commercialreal estate

Documents

Capital markets day 2008 - Erkki Raasuke