© Nomura International plc

Overweight in a European context

September/October 2011

Nordic Banks

Chintan Joshichintan.joshi@nomura.com+44(0)20 7102 6597

ANY AUTHORS NAMED ON THIS REPORT ARE RESEARCH ANALYSTS UNLESS OTHERWISE INDICATED. PLEASE SEE ANALYST(S) CERTIFICATION(S) ON IMPORTANT DISCLOSURES BEGINNING ON PAGE 27

Valuation table

Note: Market prices as of 22 September closeSource: Company data, Datastream, Bloomberg, Nomura research 2

EUROPE Rec P/ E P/ BV P/ TBV Div Yld M.Cap Rec P/ E P/ BV P/ TBV Div Yld M.Cap22-Sep-11

Current Target +/- % 11E 12E 13E 11E 11E 11E (€ mn) Current Target +/- % 11E 12E 13E 11E 11E 11E (€ mn)Erste Bank Buy 17.50 31.0 77 7.8 6.4 4.4 0.5 0.7 4.3 6,618 Danske Neutral 67.00 102.0 52 14.1 6.4 5.0 0.5 0.6 2.4 8,384Raiffeisen Reduce 20.25 28.0 38 3.8 4.3 3.4 0.4 0.5 5.4 3,959 DNB Buy 55.50 100.0 80 6.7 6.3 5.8 0.8 0.8 7.5 11,472Austria 6.3 5.6 4.0 0.4 0.6 4.7 10,577 Nordea Reduce 49.98 69.0 38 7.6 6.9 6.2 0.8 1.0 6.0 21,747Dexia n/c 1.28 n.a n.a n.a 3.2 2.6 0.4 0.4 2,487 SEB Reduce 34.41 45.0 31 6.6 7.1 6.6 0.7 0.8 6.1 8,028ING Neutral 4.49 9.0 100 5.5 4.7 4.2 0.3 0.4 17,209 Swedbank Buy 68.90 138.0 100 5.9 6.7 6.1 0.8 0.9 8.6 7,150KBC Buy 13.69 37.0 170 2.7 2.6 2.4 0.4 0.4 6.6 4,898 SHB Buy 159.20 240.0 51 8.5 8.3 7.6 1.1 1.2 5.9 10,480SNS Reaal n/c 1.70 n.a n.a 2.8 1.8 1.5 0.2 0.2 1.8 490 Nordics 8.1 6.9 6.2 0.8 0.9 6.1 67,261Van Lans n/c 23.36 n.a n.a 12.1 7.3 6.1 0.6 0.6 4.4 798 BES Reduce 1.83 2.6 42 5.4 4.4 3.8 0.3 0.4 6.9 2,135BeNelux 2.9 3.1 2.9 0.4 0.4 1.4 25,882 BPI Reduce 0.61 1.0 65 3.6 3.5 3.1 0.3 0.3 11.1 601BNPP Buy 23.06 47.0 104 3.2 2.9 2.7 0.4 0.5 10.8 27,850 Portugal 5.3 4.1 3.5 0.3 0.3 8.0 4,048Credit Ag. Neutral 4.22 8.0 89 3.7 2.4 2.1 0.2 0.4 10.7 10,549 Banesto Buy 4.44 7.5 69 6.5 6.4 5.5 0.5 0.5 n.a 3,049Natixis Reduce 2.00 2.5 25 4.3 4.0 3.6 0.4 0.5 12.5 6,165 Bankia Reduce 3.65 4.2 15 25.3 19.2 8.0 0.4 0.4 n.a 6,324Soc Gen Reduce 15.31 28.0 83 3.6 2.6 2.3 0.3 0.3 11.4 11,878 Bankinter Reduce 3.61 2.9 -20 12.7 11.0 11.8 0.6 0.6 4.2 1,732France 3.5 2.9 2.6 0.3 0.4 11.1 56,442 Caixabank Neutral 3.18 4.5 42 10.1 8.2 6.7 0.6 0.6 4.8 11,979Aareal n/c 9.50 n.a n.a 5.3 3.8 3.3 0.3 0.3 568 Civica Buy 2.10 4.4 110 3.3 4.6 3.9 0.3 0.3 7.3 1,044CBK Neutral 1.55 3.5 125 4.4 2.7 2.9 0.3 0.4 7,944 Popular Reduce 3.22 3.7 15 10.2 11.8 8.7 0.5 0.5 5.9 4,513DBK Reduce 21.70 40.0 84 4.2 3.9 3.5 0.4 0.5 3.5 20,165 Sabadell Reduce 2.56 2.6 2 15.4 14.7 8.7 0.5 0.6 4.0 3,555Postbank Neutral 20.88 24.0 15 10.5 7.5 6.6 0.7 1.0 4,567 Spain - domestic 13.3 11.4 7.5 0.5 0.5 3.5 32,196Germany 5.2 4.1 3.8 0.4 0.6 2.1 33,245 BBVA Reduce 5.39 8.4 56 5.6 5.8 5.2 0.6 0.8 7.8 26,001Alpha Bank Buy 1.50 2.3 53 n.a 22.8 4.9 0.2 0.2 801 SAN Neutral 5.47 8.9 63 5.8 5.2 5.1 0.6 0.9 11.0 46,185Eurobank Neutral 1.07 1.6 50 n.a 77.6 5.0 0.2 0.3 592 Spain 8.0 7.3 5.9 0.6 0.8 7.9 104,382NBG Neutral 2.98 3.7 24 n.a 6.4 5.5 0.4 0.5 2,849 EFG I ntl Reduce 6.23 12.0 93 10.7 6.4 4.6 0.7 1.1 1.6 749Piraeus Reduce 0.55 0.7 27 n.a n.a 5.8 0.2 0.3 629 Julius Baer Buy 27.67 39.0 41 12.8 11.3 9.2 1.4 2.3 2.3 4,688Greece 16.9 5.4 0.3 0.4 4,871 Sarasin Neutral 25.45 40.0 57 9.2 7.3 n.a 1.1 1.2 4.3 1,076AI B n/c 0.04 n.a n.a n.a 0.3 n.a 0.0 0.0 20,520 Vontobel Reduce 22.20 33.0 49 6.9 5.7 n.a 0.9 1.0 6.8 1,183BKIR Neutral 0.07 0.3 356 n.a n.a n.a 0.1 0.1 2,049 Swiss Pvt. Bank 11.2 9.4 6.0 1.2 1.9 3.2 7,696I reland 0.2 0.0 0.0 22,569 CS Group Neutral 20.95 32.0 53 7.4 6.2 5.2 0.8 1.0 6.2 20,374BP Milano Reduce 1.29 1.2 -7 52.1 16.4 13.1 0.4 0.4 6.1 535 UBS Buy 9.66 18.0 86 7.1 5.4 4.3 0.8 0.9 30,340Popolare Reduce 1.15 1.2 4 7.8 7.5 5.6 0.2 0.2 2.6 2,030 Switzerland 7.7 6.2 4.8 0.8 1.1 2.6 58,410I ntesa Neutral 0.95 1.4 47 6.9 5.4 4.6 0.3 0.5 10.5 14,765 Barclays Buy 138.85 268.0 93 4.6 3.3 3.0 0.4 0.4 4.3 19,282Mediobanca Buy 5.50 6.9 25 12.8 8.3 6.9 0.7 0.7 3.1 4,736 Lloyds Group Neutral 32.51 40.0 23 16.4 4.7 3.9 0.6 0.6 6.2 25,214MPS Neutral 0.37 0.5 35 12.1 9.1 6.6 0.2 0.4 7.9 4,325 RBS Neutral 22.05 34.0 54 128.1 11.0 7.3 0.4 0.4 27,498UBI Banca Reduce 2.39 2.7 13 40.9 7.0 5.6 0.2 0.3 6.3 2,152 UK - domestic 55.9 6.7 5.0 0.5 0.5 3.3 71,993UC Group Buy 0.65 1.3 100 5.7 4.0 3.2 0.2 0.3 4.6 12,538 HSBC Buy 486.20 725.0 49 8.0 6.7 6.8 1.0 1.0 5.1 99,000BPER Neutral 7.88 6.9 -12 15.6 11.1 9.2 0.6 0.7 2.3 1,998 Stan Chart Buy 1288.50 1800.0 40 9.9 8.8 8.0 1.4 1.4 3.8 35,177Credem Neutral 2.68 3.3 23 8.2 7.5 6.8 0.5 0.6 6.7 891 UK 25.0 7.1 6.4 0.9 0.9 4.3 206,170I taly 10.4 6.3 5.1 0.3 0.4 6.7 43,971 Cont Europe 6.5 5.6 4.6 0.5 0.7 5.8 431,658

Pan Europe 12.5 6.1 5.1 0.6 0.7 5.3 637,828

Price Price

Nordic BanksExecutive Summary

4Source: Nomura research

Overweight despite threat of risk reversal

While a rally has not yet materialised, risk reversal remains the key threat to being Overweight on the Nordic banks. However, with the macro-political outlook for Europe having taken a turn for the worse, we believe that Nordic banks look set to outperform on a longer-term view, but also in the shorter term in the event of a further market correction. Much will depend on how policymakers resolve the seemingly binary outcome of the sovereign crisis affecting the sector.

Absolute upside potential and long-term outperformance

Barring a major house price correction in the Nordic countries, we believe that the Nordic banks are well placed to deliver absolute performance upside and relative outperformance over the longer run owing to the healthier economies in which they operate and stronger balance sheets.

The banks remain cautiously optimistic despite macroeconomic risk, but still well placed relative to their continental European peers

At our recent Annual Financial Services Conference, Nordic banks were cautiously optimistic, although they flagged risk from a deteriorating Nordic outlook. They expect margins to remain stable generally despite lower deposit margin expectations, as banks remain focused on improving ROEs across product lines. Banks are also focusing on keeping costs flat despite underlying wage inflation. Macro challenges notwithstanding, the banking environment in Sweden, Norway and Finland remains much better than continental Europe. We remain cautious about Denmark, where we expect normalisation to take a long time.

Upgraded SHB to Buy, retain Buy ratings on Swedbank and DnB NOR

We have a range of Buy ratings ranging from defensive to aggressive on Handelsbanken (SHB), upgraded from Neutral, Swedbank and DnB NOR. We remain Neutral on Danske because near-term risks are offset by longer-term prospects. We see a challenging outlook for the corporate sector relative to the retail sector and thus remain cautious about SEB and Nordea, on a relative basis, retaining our Reduce ratings on both stocks.

Lowering estimates to reflect the new reality

We cut our 2011-13 earnings estimates by 8%, and also cut our target prices by 11% on average for the Nordic banks. We expect rates to remain at current levels at least until mid-late 2012. We expect the top-line growth environment to remain challenging until 2013 and earnings growth to be driven by cost control. We see a risk to earnings from shipping and Baltic operations.

Nordic banks - We remain overweight in a European context

Executive Summary

Short-term relative positioningIT’S ALL ABOUT CONTINENTAL EUROPE

Nordic Banks in a European context

Source: Reuters, EBA, IMF, Nomura research

Using the EFSF to save the sovereigns means taking Italy and Spain out of the market for the next 1-3 years until they can show progress on their fiscal position. Refinancing needs for Italy and Spain for 2012-13 are EUR c1.1tn, and for GIIPS is EUR c1.3tn. This means the size of the EFSF will not be sufficient –increasing the size is not on the political agenda, though banks think it will be done when required. It will also necessarily lead to a recession in Europe as refinancing needs will have to be brought under control quickly. This also means that the rating of sovereigns like France, Belgium and Netherlands will come into question. Europe will have to necessarily see a downgrade.

Using the EFSF to save the banks involves pre-emptive/precautionary/ex-post recapitalisation. This involves putting in enough capital into the banking system to withstand a new regulation, moderate recession and GIIPS sovereign haircuts. For the 90 banks stress tested under by the EBA, this would imply a capital injection of EUR c675bn. Main issue with this step is that it risks a self fulfilling prophecy of Italy/Spain default. Second order recessionary effects will be on top.

Politically, this step means letting the sovereigns fend for themselves is effectively changing the complete DNA of the EMU as it stands now. Eurozone will become a monetary union with a default resolution regime. This will involve ring fencing the banking system from the sovereign default and recapitalising it so that it may continue to service the real economy.

6

Save the sovereigns (#3) Save the banks (#3/4)

1. Ahead of the curve – all works

out (very low)

2. The “GOOD muddle-through” base case (mid-

high)

3. The “BAD muddle-through”

(mid-high) 4. Disorderly default within

EU(low)

5. Partial/total fragmentation

(very low)

The future of Europe

Short-term relative performance driven by how the sovereign crisis plays out

Nordic banks in a European context

Source: Financial Times, IMF, Nomura research

Rules out any policy option beyond what has been agreed so far, making it difficult to increase EFSF size. Permanent mechanisms not to be accepted, if large or incalculable, and if foreign governments can trigger payment of guarantees – thus putting ESM as risk. Clearly puts eurobond at risk, though not bilateral aid. Creating a fiscal union may require a referendum in Germany down the line . Work around is possible and may be needed.

Enlargement of EFSF is a key positive catalyst and after recent local election possibility of it being passed have improved as FDP will tone down its anti-EU rhetoric. Momentum against the continued use of the ECB’s SMP is growing (Juergen Stark).

The eventual run-down of current EFSF/SMP balance will be a key catalyst. Greek default will be a material part of that run-down along with the ongoing refinancing requirements of GIIPS.

Points to consider in the future European political structure are:•Fiscal Union: Is EU, United States of Europe? If not then there cannot be full fiscal union. There will be a need for an EU level organisation to have a say/veto in the national budget making process, as argued by the Finns. The extent of the powers will depend on the depth of this crisis. If yes, then full fiscal union with accompanying eurobond is the obvious answer.

•Forced/Voluntary Exits: As argued by the Dutch, and could be a part of a partial fiscal union that is allergic to transfer of wealth. But not legally possible to force exit. And will open a can of worms for the private sector. Voluntary exits for a country that cannot “germanise” itself - Greece?

•Financial sector bankruptcy resolution structures: these include TARP (a fund to recapitalise the banking sector and ring fence its problems), Ringfence/Living wills (as the UK has suggested and may be adopted in time by others, particularly the latter in the event of a deep crisis), Bail in debt (forms an important plank of the ICB/ESM), Private sector participation (will be politically required)

•EMF: Already exists to some extent within the EFSF framework. But the future EMF will be an indispensable entity.

•Proper central bank: A central bank that can provide unlimited liquidity to sovereign and banking sector when required

•Eurobond: Important tool for a central bank but also the correct structure that can incentivise fiscal discipline

The choice appears to be between a fiscal/monetary/transfer union or introducing sovereign/financial bankruptcy resolution

… we are in a dangerous new phase … Fiscal policy must navigate between the twin perils of losing credibility and undercutting recovery … banks need urgent recapitalisation. They must be strong enough to withstand the risks of sovereigns and weak growth. This is key to cutting the chains of contagion … Europe must recommit credibly to a common vision, and it needs to be built on solid foundations—including, for example, fiscal rules that actually work.

Factors affecting decision -making in Europe

7

German constitutional court ruling

EFSF enlargement; Run-down is a catalyst

IMF’s assessment

Future political structure

Theme – Low GIIPS exposure

Note: Nordic banks ratio based on transition rules. Under Basel 3 there is minimal shortfall in the GIIPS default scenario and no shortfall under recession scenario except for Danske.Source: EBA, Company data, Nomura research

Nordic banks have low levels of exposure to peripheral European sovereign debt

8

Impact of various sovereign crisis scenarios relatively low

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GIIPS default (40% recovery)

Source: IMF GFSR Sep 2011, Nomura research 9

Theme – Sovereign debt

External Funding Sovereign CreditGross Net Primary General BIS Reporting Rating/Outlook

General General Balance Government External Banks' (notches aboveGovernment Government Funding Debt Held Funding (percent of (percent of depository Consolidated speculative grade

GDP Nominal Debt Debt3 Needs Abroad Needs 2011 GDP) institutions' International Claims /outlook)2011 2011 2011 2011 2012 2013 2012-13 2012-13 consolidated assets) on Public Sector (as of 8/31/11)

Australia 1067 22.8 7.7 -3.4 5.1 4.3 100 9.6 58 2.2 1.2 2.6 9 StableAustria 301 72.3 52.5 -1.3 9.2 9.4 56 55.5 13 15 4.5 10.6 10 StableBelgium 374 94.6 79.9 -0.3 22.2 21.8 165 58.2 63 22.7 7.8 12.9 9 NegativeCanada 1244 84.1 34.9 -3.7 18.6 17.3 447 16.2 361 18.5 9.9 3.1 10 StableCzech Republic 156 41.1 n.a. -2.7 11.7 12.1 37 11.2 27 16.6 14.1 3.3 6 StableDenmark 247 44.3 1.8 -2.6 10.8 10.1 52 17.9 31 14.7 3.7 4.7 10 StableFinland 191 50.2 -59.7 -1.5 8.3 8 31 39.1 7 6 2.3 8.9 10 StableFrance 1987 86.9 81 -3.4 20.8 20.2 815 50.3 343 16.8 4.3 7.4 10 StableGermany 2567 82.6 57.2 0.4 10.5 8.1 478 41.4 238 22.9 7.5 9.3 10 StableGreece 221 165.6 n.a. -1.3 16.5 14.9 69 91.3 31 28.3 12.4 18.2 -8 NegativeIreland 157 109.3 98.8 -6.8 13.9 14.9 45 60.8 20 24.6 2.8 6.4 2 NegativeItaly 1589 121.1 100.4 0.5 23.5 18.9 674 51.4 388 31.7 13.2 11.4 7 NegativeJapan 4143 233.1 130.6 -8.9 58.6 53.6 4648 15.1 4347 80.2 24.3 1.4 7 NegativeKorea 823 32 30.8 3.3 1 -0.1 7 3.8 7 5.7 4.2 3.2 5 StableNetherlands 607 65.5 30.6 -2.2 16 16.4 197 37.9 83 13.5 3.6 7 10 StableNew Zealand 119 35.3 7.8 n.a. 9.3 11.6 25 20.7 10 7.7 4.2 2.8 9 NegativeNorw ay 339 55.4 -161 9.3 -1 0.9 0 23.9 0 n.a. n.a. 8.1 10 StablePortugal 171 106 101.8 -1.9 22.3 21 74 53.3 37 24 7.2 12.4 0 NegativeSlovak Republic 69 44.9 n.a. -3.3 14.2 14.2 20 17.1 12 18.1 21.1 4.9 6 StableSlovenia 37 43.6 n.a. -4.8 8.2 5.7 5 29.7 2 10.3 7.2 6.3 8 NegativeSpain 1087 67.4 56 -4.4 20.6 19.4 435 28.4 252 24.2 7.4 6.2 8 NegativeSw eden 404 36 -20.8 0.3 3.6 0.5 17 12.6 11 6.4 2.4 4 10 StableUnited Kingdom 1755 80.8 72.9 -5.6 14.7 13.3 491 18.7 378 8.9 2 2.2 10 StableUnited States 10659 100 72.6 -8 30.4 29.1 6342 29.6 4465 7.7 5.4 3.4 9 Negative

GIP Total 549 189 88GIIPS Total 3225 1297 727GIIPS+F Total 5212 2112 1071

Banking System LinkagesDomestic Depository Institutions'Claims on General Government

Financing NeedsFiscal and Debt FundamentalsGross GeneralGovernment

Debt Maturing +Budget Deficit

Nordic banks relative performance

Source: Bloomberg, Datastream, Nomura research

Nordic banks have outperformed; Expect that to continue until….

10

FTSE Nordic banks vs SX7P Nordic banks vs FTSE Nordic banks index

Short-term positioning Nordic banks vs SX7P

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FTSE Nordics vs SX7P

We see the likelihood of relative outperformance over underperformance in the near term driven by the binary outlook that continental European banks seem to be pricing in. We believe that it will be difficult for euro-zone policymakers to find a solution quickly and the more drawn out the process is, the higher the risks are for a further market correction. Although we see the sector as inexpensive, we find it difficult to envisage a near-term rally for this reason. We are more inclined to being overweight Nordic banks even in the near term.

Nordic banks relative performance

Source: Bloomberg, Nomura research

Market timing

11

Earnings momentum 52 week price performance

52 week P/TB performance

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Long-term relative positioning and absolute upsideBetter fundamentals and attractive valuations

Nordic banks valuation

Note: Prices as of 21 September closeSource: Datastream, Company data, Bloomberg, Nomura estimates

In a stress scenario Swedish banks can manage an ROE of 2.5%, we estimate. This would imply trough valuations of 0.8x in a no growth environment and 0.85x in a return to long-term growth.

Thus there is potential further downside of 15-20% if the stressed scenario materialises. This implies that there is a lot of downside already in the price.

Given the c.50% upside risk to our target prices, and that in a more normalised environment we see upside to the top end of the valuation range of 1.4-2.3x, we see the risk/reward scenario as favourable.

Fundamental upside to our target prices

13

Nordic banks historical valuation Global banks valuationStress scenario-trough valuation of 0.8-0.85x in stress scenario

Recommendations table (and valuation multiples)

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Average (Swedish 4 + DnB)

ROE 13%, G 2.5%COE 10%

Trough valuationROE 2.5%, G 0%COE 10%

ROE 15%, G 2.5% COE 8%

Austria

Canada

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France

Germany

Hungary

India

Indonesia

Israel

Italy

JapanKorea

Malaysia

MexicoNorway Poland

Portugal

Romania

SingaporeSweden

Spain

UKUSA

R² = 0.7503

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ROE

Price/Book

Reporting Currency Price YTD EPS EPS vs. Div Yld Div Yld P/E PE TBVPS MCapRating 21-Sep Target Upside Rel % 11E 12E Cons 11E 12E 11E 12E 11E 11E EUR Bn Ticker

Nordea (SEK) REDUCE 52.80 69 31% 7.8% 6.3 7.0 -2% 5.5% 5.9% 8.4 7.6 50.3 1.05 24.6 NDA SSSEB REDUCE 35.29 45 29% -1.4% 5.8 4.9 -1% 6.2% 5.7% 6.0 7.2 41.8 0.84 9.1 SEBA SSSw edBank BUY 73.25 138 76% 13.8% 11.9 10.3 -5% 8.1% 8.1% 6.2 7.1 75.2 0.97 9.9 SWEDA SSHandelsbanken BUY 165.00 240 41% 12.4% 18.7 19.3 -1% 5.7% 5.8% 8.8 8.6 136.1 1.21 11.6 SHBA SSDnBNOR BUY 58.95 100 67% 7.6% 8.0 8.7 -2% 6.8% 7.4% 7.4 6.8 67.9 0.87 13.2 DNBNOR NODanske NEUTRAL 69.05 102 48% -12.2% 4.8 10.4 -6% 0.1% 0.1% 14.5 6.6 114.4 0.60 8.6 DANSKE DCNordic Average (MCap Wt) 49% 5.9% -3% 8.4 7.4 0.96 Continental European Banks 5.8 0.70 Pan European Banks 6.4 0.78

P/TB

Theme – Judging the downside

Source: Nomura estimates, Company data, Riksbank

Riksbank stress tests in the Financial Stability Report were more rigorous than the EBA test, testing for cumulative 6% drop in GDP (-4% and -2% in 2012e and 2013E).

We do not expect this scenario, but want to flag the strength of the Nordic banks in this scenario.

Assumptions include a 15% fall in pre-provision profits, and stressed loss rates in the various lending books.

All Swedish banks and DnBNOR remain profitable in the stress tests. Danske is the only bank under these conditions that loses money. And where we see more risk to capital ratios.

Riksbank stress test indicates resilience to adverse macroeconomic conditions

14

Loss assumptions – Riksbank stressed scenario Capital impact of stress test based on Riksbank parameters

Loss assumptions – Riksbank main scenario

13.5% 13.4% 12.1%10.3% 10.2%

8.7%

1.3% 1.5%1.4%

0.9% 0.8% 3.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

SHB Swedbank SEB DnBNOR Nordea Danske

Stressed CT1 +3years (Basel 2) Start CT1 (Basel 2)

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%

2011e

2012e

2013e

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2009

2010

2011e

2012e

2013e

Theme – Judging the downside

Source: Company data, Nomura estimates

Per bank capital impacts of the stress tests – Danske bank worst performing

15

SHB Nordea SEB

Swedbank DnBNOR Danske

13.8% 13.3%

6.6% 5.9%

2.0%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

CT1 Q211 Earnings LLP RWA impact

CT1 +3years

11.0% 10.2%

5.0% 4.3%

1.5%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

CT1 Q211 Earnings LLP RWA impact

CT1 +3years

13.5% 12.1%

4.8% 4.4%

1.8%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

CT1 Q211 Earnings LLP RWA impact

CT1 +3years

14.8% 13.4%

6.2% 5.7%

2.0%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

CT1 Q211 Earnings LLP RWA impact

CT1 +3years

11.2% 10.3%

4.5% 3.9%

1.5%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

CT1 Q211 Earnings LLP RWA impact

CT1 +3years

12.3%8.7%

6.1% 7.9%

1.7%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

CT1 Q211 Earnings LLP RWA impact

CT1 +3years

Theme – Which countries to be in for the long term

Source: “This time is different” – Rogoff & Reinhart, IMF, OECD, Bloomberg, EIU, Datastream, Nomura research

Low private and public sector leverage have the best growth prospects for banks

16

Public & Private sector debt, fiscal deficits Empirical relationshipsGDP growth mostly driven by leverage

(6.0%)

(4.0%)

(2.0%)

0.0%

2.0%

4.0%

6.0%

8.0%

1953

1955

1957

1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

(10.0%)

(5.0%)

0.0%

5.0%

10.0%

15.0%

20.0%

US real GDP change YoY US private sector debt change YoY

Lithuania

Mexico

Turkey

Latvia

Poland

IndiaBrazilHungary

Estonia

Czech RepulicFinland

Greece

Belgium

South Africa

Italy

South KoreaAustralia

France

Sweden

Spain

Austria

Ireland

JapanGermany

Canada

Norway UKNetherlands

Portugal

Denmark

Switzerland United States

0%

10%

20%

30%

40%

0% 25% 50% 75% 100% 125% 150% 175%

Pvt Debt to GDP in 2001 (IMF)

Pvt D

ebtC

AG

R fr

om 2

001

Bubble Size shows CAGR of Private Debt to GDP from 2001 to date. Bubbles in red indicate negative growth.R2 of regression is c0.5Scale: Lithuania 25%; Sweden 4%

•Historically (looking at last 300+ yrs) if govt debt to GDP is greater than 90%, then median GDP growth is affected to the extent of 1%.•Historically there has been strong correlation between initial leverage ratio and growth in leverage as can be seen in the graph on the bottom right•Govt debt to GDP – reflects sovereign risk as well as threat to growth from fiscal consolidation•Pvt debt to GDP – reflects potential to grow as well as risk from interest rate hikes•Banks performance => earnings => credit risk => GDP growth

Austria

BelgiumFrance

Germany

IrelandItaly

Netherlands

Portugal

Spain

Sweden

UK

DenmarkFinland

Average

United States

Poland

Czech Rep.

Switzerland

IndiaBrazil

MexicoNorway

30%

60%

90%

120%

150%

0% 25% 50% 75% 100% 125% 150% 175% 200% 225% 250%

Gov

t. De

bt to

GDP

201

2E (O

ECD)

Claims on Pvt. Sector to GDP 2009 / 10 (IMF)

Bubble Size = Cumulative 2011-12E budget deficit (EIU) Scale: Finland=3%; UK = 15%

Hig

h So

vere

ign

Risk

Low

Sov

erei

gn R

isk

Poorer Growth ProspectsBetter Growth Prospects

Theme - Nordic growth outlook worsens

Source: Datastream, Riksbank, Nomura research

Swedish banks have noted that the international slowdown is having a visible impact on the Swedish economy, and expectations are being reset to account for the country’s cyclically sensitive export sector, despite domestic economic fundamentals remaining strong.

This is reflected in the PMIs where Norway has shown more resilience than Sweden. Consumer confidence, which was already softening because of the hawkish monetary policy, is also being affected by the global slowdown.

The banks have cut their GDP estimates for the Nordic region, with Nordea having the most bearish outlook.

Growth outlook and rates expectations affecting earnings outlook for banks

17

Domestic fundamentals remain strong PMI - Manufacturing

Riksbank repo rate forecast and uncertainty bands

20

25

30

35

40

45

50

55

60

65

70

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11

Sweden

Norway

Eurozone

Theme - Nordic growth outlook worsens

Source: Company data, Nomura research

Growth outlook and rates expectations affecting earnings outlook for banks

18

Sweden Norway% 2010 2011 2012 2013GDP Growth 5.4 4.4 2.0 2.5 Private Consumption 3.4 1.9 1.9 2.1 Fixed Investment 5.9 7.6 4.2 4.2 Government consumption 2.0 1.1 0.6 0.9 Exports 10.6 8.1 6.0 7.2 Imports 12.3 6.4 4.9 7.3

CPI Inflation 1.3 3.1 2.7 2.8Unemployment rate 8.4 7.5 7.2 7.0Policy Rate* 1.25 2 2.75 3.5EURSEK* 9.06 8.70 8.70 8.70

GDP growth forecasts:Nordea 4.2 0.8 2.5SHB 4.2 2.0 2.6SEB 4.3 1.4 2.6

Policy rate forecasts:Nordea 2.00 1.50 2.00SHB 2.00 2.00 2.25SEB* 2.00 2.25 2.75

* End of period

Note: Table reflects data as of 9 September

% 2010 2011 2012 2013GDP Growth (Mainland) 2.1 2.3 2.4 2.5GDP Growth (Total) 0.3 0.8 1.8 2.2 Private Consumption 3.6 3.0 3.0 2.6 Fixed Investment -7.5 3.9 1.7 1.7 Government consumption 2.0 1.1 0.6 0.9 Exports -1.7 -1.7 4.1 3.6 Imports 9.0 5.5 1.1 3.7

CPI Inflation 2.2 2.2 2.2 2.2Unemployment rate 3.4 3.3 3.7 3.7Policy Rate* 2.00 2.25 3.00 3.75EURNOK* 7.90 7.60 7.60 7.60

GDP (mainland) growth forecasts:Nordea 2.6 2.5 3.0SHB 3.0 3.3 2.8SEB 2.6 3.1 3.1

Policy rate forecasts:Nordea 2.25 2.50 3.25SHB*SEB* 2.50 3.25 4.00

* End of period

Note: Table reflects data as of 9 September

Theme – Nordic growth outlook worsens

Source: Bloomberg, Nomura research

Resetting interest rate and growth expectations

19

EUR yield curve SEK yield curve

DKK yield curve NOK yield curve

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

3M 6M 1Y 2Y 3Y 4Y 5Y 7Y 8Y 9Y 10Y

15Y

20Y

25Y

30Y

30-Sep-10 31-Dec-1031-Mar-11 30-Jun-1120-Sep-11

0.0

1.0

2.0

3.0

4.0

5.0

3M 6M 1Y 2Y 3Y 4Y 5Y 7Y 8Y 9Y 10Y

15Y

20Y

25Y

30Y

30-Sep-10 31-Dec-1031-Mar-11 30-Jun-1120-Sep-11

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

3M 6M 1Y 2Y 3Y 4Y 5Y 7Y 8Y 9Y 10Y

15Y

20Y

25Y

30Y

30-Sep-10 31-Dec-1031-Mar-11 30-Jun-1120-Sep-11

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

3M 6M 1Y 2Y 3Y 4Y 5Y 7Y 8Y 9Y 10Y

15Y

20Y

25Y

30Y

31-Dec-10 31-Mar-11

30-Jun-11 20-Sep-11

Theme – Capital

Source: Riksbank

Banks should allow for higher capital requirement from upcoming new regulation.

Most issues are now resolved, with a broad expectation that the core tier 1 requirement will be 10-12% (with 12% including the counter-cyclical buffer in extreme overheating circumstances – which the banks are less concerned about).

Stricter capital requirements for local SIFIs based on their systemic importance are expected – Danish bank package 4 highlighted that the four largest banks will be subject to this, and that they will clearly be able to attract cheaper wholesale funding (in exchange for a higher capital requirement).

Transition rules to be extended to curtail return of capital at least until 2013 – we see this as affecting SHB the most.

Mortgage risk weighting likely to be raised – we expect to at least 10-12%, which would be more in line with Norway/Denmark

Minimum capital ratio of 15-16% by around 2013 – We estimate that this implies a core Tier 1 of 11.5-12.5% (7% minimum under Basel 3 +2.5% counter cyclical buffer + 2-3% Pillar 3 SIFI surcharge). FSA have indicated that it wants CT1 ratio of 10-12%.

Sweden’s Basel 3 proposals

20

Outcome of capital regulation taking shape SFSA proposals vs Basel 3

Mortgage risk-weights by country

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

Basel 3 Proposals SFSA Proposal

Total Capital ratio

Tier 1

Counter cyclical buffer

Pillar 3 Surcharge

Capital conservation buffer

Minimum CT1

Theme - Capital

Source: Company data, Nomura research

Banks should allow for higher capital requirement from upcoming new regulation. Sweden will be in a regulatory bucket with the UK and Switzerland to demand higher capital requirements than those required by the Basel 3 proposals.

Nordic banks Basel 2 core tier 1 ratios are between 11.0 and 14.8%. Impact of Basel 3 is relatively low in a European context ranging between 0 and 200bps.

Basel 3 pro-forma capital ratios are among the highest in the sector (range of 10.0% - 14.3%).

Nordic banks well capitalised in a European context

21

Nordic banks Q211 capital ratios and pro forma for Basel 3

Q211 - Reporting Ccy Swedbank SEB Nordea SHB Danske DnBNOR

Ord EquityTier 1 75,463 91,561 19,846 77,346 105,638 98,415

Non-equity Tier I 6,776 14,395 1,899 14,047 37,535 5,903

Tier 1 Capital 82,239 105,956 21,745 91,393 143,173 104,318

Total Capital 92,860 103,125 24,899 120,758 143,173 124,706

RWAs 509,326 678,402 179,860 523,841 860,293 876,626

Core Tier 1 ratio 14.8% 13.5% 11.0% 14.8% 12.3% 11.2%Core Tier 1 ratio - Transition rules 10.1% 11.5% 9.7% 8.5% 9.5% 8.6%Tier 1 ratio 16.1% 15.6% 12.1% 17.4% 16.6% 11.9%

Total capital tatio 18.2% 15.2% 13.8% 23.1% 16.6% 14.2%

Basel 3 Impact Guidance 0.5% 2.0% 1.0% 1.5% 1.2% 0.0%

Current CT1 Proforma for Basel 3 14.3% 11.5% 10.0% 13.3% 11.1% 11.2%

CT1 2013e 75,391 108,443 25,211 93,535 113,432 114,572

RWA 2013e 538,142 740,874 196,314 586,631 931,059 999,636

CT1 2013e (%) 14.0% 14.6% 12.8% 15.9% 12.2% 11.5%

CT1 2013e - Basel 3 13.5% 12.6% 11.8% 14.4% 11.0% 11.5%

Excess capital vs. 11% benchmark* 23,504 12,129 1,653 20,206 -157 4,612

Excess % market cap 27% 15% 7% 19% 0% 5%

Market cap 88,445 80,916 24,617 103,654 64,053 99,357

Note: Swedbank capital ratio include buybacks of SEK 10bn in 2013 (incl in excess capital) and SEK 6.1bn in 2010

Theme - Funding

Source: Bloomberg, Company data, Datastream, Nomura research

Renewed focus on funding, liquidity and systemic risk

22

USD basis swaps Funding split by type Utilisation and over/collateralisation

EUR SEK basis swap USD funding % total wholesale funding Nordic banks vs corporates CDS

-160

-140

-120

-100

-80

-60

-40

-20

0

20

40

60

01/2007 01/2008 01/2009 01/2010 01/2011

USD

basis

swap

SEK

EUR

GBP

NOK

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Nordea SHB Swedbank SEB Danske DnB NOR

USD funding % total wholesale (2010)

Not disclosed

-80

-60

-40

-20

0

20

40

60

80

01/2009 07/2009 01/2010 07/2010 01/2011 07/2011 0

50

100

150

200

250

300

NOK

MEO

Dans

keVO

LSW

EVO

TSE

BND

ADN

BSE

CCR

BND

TCA

BSC

VTD

CER

ISH

BER

ISC

ADO

EFU

M ELL

TEL

VTB

ELS

INV ST.

SWM TL

SSK

FAS

STS

AAT

CST

LFU

A

5 Yr

Sen

ior C

DS sp

read

s

73%66% 71% 66%

76% 80%

27%34% 29% 34%

24% 20%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Nordea SEB Swed SHB DNB DanskeUtilisation O/C

5% 5% 5% 4% 7% 6%

44% 47%35% 32%

42%35%

11%13% 32%

22%

22%

5%

5% 24%

22% 20%18%

29%14% 13%

12% 13% 9% 11% 14% 14%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Nordea SEB Swed SHB DNB Danske

Equity Subordinated Customer depositsCovered bonds Danish mortgage bonds Senior debtInterbank

Theme – Housing market slowdown

Source: Nomura research, Riksbank

House price growth in Sweden y-o-y has slowed significantly. Mortgage lending growth is lower and the 85% LTV cap was put in place in 2010.

Aspects of the slowdown have been welcome. There were concerns that household debt should not grow too quickly relative to GDP, and this should be more in line with GDP in future.

A high proportion of variable mortgages increases the effectiveness of monetary policy. Lower rates for longer increases the affordability of interest repayments of Swedish households.

If rate expectations continue to come down, we could expect an increasing proportion of variable loans in gross new lending.

House prices are coming off in Sweden – mild correction or bubble?

23

HPI for one/two dwelling buildings (y-o-y change) Monetary policy sensitivity

New mortgage loans by fixed interest period (%)

-10%

-5%

0%

5%

10%

15%

20%

Q2 2005 Q2 2006 Q2 2007 Q2 2008 Q2 2009 Q2 2010 Q2 2011

Sweden StockholmGothenburg Malmö

0

10

20

30

40

50

60

70

80

90

100

Variable rate Fixed rate < 5 years Fixed rate > 5 years

Japan

Sweden

USA

UK

CanadaDenmark

Norway

Euro Area

New Zealand

Australia

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00%

Sha

re o

f Var

iabl

e R

ate

Mor

tgag

es(%

)

Policy Rate (%)

Monetary Policy More Effective

Theme – Housing market slowdown

Source: Nomura research, Riksbank

Households are more indebted certainly, but the banks argue that their ability to service that debt is generally very good. The interest ratio is historically very low.

Combined wit the social safety net, this means that households are expected to be able to meet interest payments on their loans (even if they are affected by unemployment).

Owner occupation rate is low, and completed dwellings annually is lower than historical levels, which indicates there is fundamental support for housing demand.

No buy to let market, so no borrowing for speculation

Banks argue Swedish housing market is not a bubble

24

Housing investment as % of GDP Sweden dwellings completed (1975-2010)

Household debt and post-tax interest expenditure

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

multi dwelling1/2 dwellingmulti dwelling avg.1/2 dwelling avg.

0.0

2.0

4.0

6.0

8.0

10.0

12.0

0

20

40

60

80

100

120

140

160

180

Debt ratio

Interest ratio (secondary axis)

25Source: Riksbank, IMF, OECD, Nomura research

Global house price metrics

Theme – Housing market slowdown

0

20

40

60

80

100

120

140

160

180

03/1

9…

03/1

9…

03/1

9…

03/1

9…

03/1

9…

03/1

9…

03/1

9…

03/1

9…

03/1

9…

03/1

9…

03/1

9…

03/1

9…

03/1

9…

03/1

9…

03/1

9…

03/2

0…

03/2

0…

03/2

0…

03/2

0…

03/2

0…

03/2

0…

Hou

se p

rice

inde

x (2

005

= 10

0)

Sweden Japan IrelandNetherlands United States SpainAustralia UK AustraliaDenmark

Theme - Shipping

Source: Datastream, Nomura research

Banks maintain robust asset quality on their Shipping books

26

Baltic dry index Tanker price index

World steel production an indicator Cash flow based lending

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

01/2000 01/2002 01/2004 01/2006 01/2008 01/2010

BDICapesizePanamaxSupramaxHandymax

0

500

1,000

1,500

2,000

2,500

3,000

3,500

01/2000 01/2002 01/2004 01/2006 01/2008 01/2010

Clean tankerDirty tanker

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000

130,000

140,000

World steel productionBDI

Theme - Shipping

Source: Containerisation International, Clarksons, Drewry, Nomura estimates

Shipping sector issues seem supply driven – bulk segment worst affected

27

Container fleet forecasts

Bulker fleet forecasts

2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F

Global demand grow th (%) 14.3 14.8 10.0 10.8 12.7 5.4 -9.3 13.4 7.7 8.3 8.2Nominal supply grow th (%) 8.8 9.7 13.1 16.5 13.8 12.7 6.1 9.3 7.9 7.8 5.3+/- balance 5.4 5.1 -3.1 -5.8 -1.1 -7.3 -15.4 4.0 -0.2 0.5 2.9

Overall freight rates (US$/TEU) 1,663 1,821 1,822 1,610 1,755 1,856 1,251 1,719 1,593 1,645 1,728Change yoy (%) 24.2 9.5 0.0 -11.6 9.0 5.8 -32.6 37.3 -7.3 3.3 5.0

Multiple of change in rates/supply 4.4 1.9 (0.0) 2.0 (7.9) (0.8) 2.1 9.2 40.5 6.6 1.7

2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013FSupply grow th (%) 2.4 6.8 7.0 6.8 6.5 6.6 9.9 16.5 11.2 10.6 5.8Demand grow th (%) 6.8 8.4 8.8 7.7 7.0 2.3 -4.0 9.8 8.0 7.6 6.1Supply-demand imbalance 4.4 1.6 1.8 0.9 0.5 -4.3 -13.9 -6.7 -3.2 -3.0 0.3

Baltic Dry Index (annual avg) 2,626 4,515 3,353 3,197 7,096 6,326 2,606 2,750 1,423 1,619 1,894Change yoy (%) 129.4 71.9 -25.7 -4.7 122.0 -10.9 -58.8 5.5 -48.2 13.7 17.0

Multiple of change in rates/supply 29.5 43.9 (14.3) (4.9) 237.4 2.5 4.2 (0.8) 15.2 (4.6) 54.3

28

Any Authors named on this report are Research Analysts unless otherwise indicatedAnalyst CertificationI, Chintan Joshi, hereby certify (1) that the views expressed in this Research report accurately reflect my personal views about any or all of the subject securities or issuers referred to in this Research report, (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) no part of my compensation is tied to any specific investment banking transactions performed by Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company. Important DisclosuresConflict-of-interest disclosuresImportant disclosures may be accessed through the following website: http://go.nomuranow.com/research/globalresearchportal/pages/disclosures/disclosures.aspx . If you have difficulty with this site or you do not have a password, please contact your Nomura Securities International, Inc. salesperson (1-877-865-5752) or email grpsupport-eu@nomura.com for assistance. Online availability of research and additional conflict-of-interest disclosuresNomura Japanese Equity Research is available electronically for clients in the US on NOMURA.COM, REUTERS, BLOOMBERG and THOMSON ONE ANALYTICS. For clients in Europe, Japan and elsewhere in Asia it is available on NOMURA.COM, REUTERS and BLOOMBERG.Important disclosures may be accessed through the left hand side of the Nomura Disclosure web page http://go.nomuranow.com/research/globalresearchportal or requested from Nomura Securities International, Inc., on 1-877-865-5752. If you have any difficulties with the website, please email grpsupport-eu@nomura.com for technical assistance. The analysts responsible for preparing this report have received compensation based upon various factors including the firm's total revenues, a portion of which is generated by Investment Banking activities.Unless otherwise noted, the non-US analysts listed at the front of this report are not registered/qualified as research analysts under FINRA/NYSE rules, may not be associated persons of NSI, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account. Industry Specialists identified in some Nomura International plc research reports are employees within the Firm who are responsible for the sales and trading effort in the sector for which they have coverage. Industry Specialists do not contribute in any manner to the content of research reports in which their names appear.Marketing Analysts identified in some Nomura research reports are research analysts employed by Nomura International plc who are primarily responsible for marketing Nomura’s Equity Research product in the sector for which they have coverage. Marketing Analysts may also contribute to research reports in which their names appear and publish research on their sector. Distribution of ratings (Global)The distribution of all ratings published by Nomura Global Equity Research is as follows:49% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 41% of companies with this rating are investment banking clients of the Nomura Group*.40% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; 46% of companies with this rating are investment banking clients of the Nomura Group*. 11% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; 14% of companies with this rating are investment banking clients of the Nomura Group*.As at 30 June 2011.*The Nomura Group as defined in the Disclaimer section at the end of this report. Explanation of Nomura's equity research rating system in Europe, Middle East and Africa, US and Latin America for ratings published from 27 October 2008The rating system is a relative system indicating expected performance against a specific benchmark identified for each individual stock. Analysts may also indicate absolute upside to target price defined as (fair value - current price)/current price, subject to limited management discretion. In most cases, the fair value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as discounted cash flow or multiple analysis, etc.

STOCKSA rating of 'Buy', indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months.A rating of 'Neutral', indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months.A rating of 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months.A rating of 'Suspended', indicates that the rating, target price and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including, but not limited to, when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the company.Benchmarks are as follows: United States/Europe: Please see valuation methodologies for explanations of relevant benchmarks for stocks (accessible through the left hand side of the Nomura Disclosure web page: http://go.nomuranow.com/research/globalresearchportal);Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia, unless otherwise stated in the valuation methodology.

SECTORSA 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next 12 months.A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next 12 months.A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next 12 months.Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX 600; Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia.

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Explanation of Nomura's equity research rating system for Asian companies under coverage ex Japan published from 30 October 2008 and in Japan from 6 January 2009STOCKSStock recommendations are based on absolute valuation upside (downside), which is defined as (Target Price - Current Price) / Current Price, subject to limited management discretion. In most cases, the Target Price will equal the analyst's 12-month intrinsic valuation of the stock, based on an appropriate valuation methodology such as discounted cash flow, multiple analysis, etc.A 'Buy' recommendation indicates that potential upside is 15% or more.A 'Neutral' recommendation indicates that potential upside is less than 15% or downside is less than 5%.A 'Reduce' recommendation indicates that potential downside is 5% or more.A rating of 'Suspended' indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the subject company.Securities and/or companies that are labelled as 'Not rated' or shown as 'No rating' are not in regular research coverage of the Nomura entity identified in the top banner. Investors should not expect continuing or additional information from Nomura relating to such securities and/or companies.

SECTORSA 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation.A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation.A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation. Explanation of Nomura's equity research rating system in Japan published prior to 6 January 2009 (and ratings in Europe, Middle East and Africa, US and Latin America published prior to 27 October 2008)STOCKSA rating of '1' or 'Strong buy', indicates that the analyst expects the stock to outperform the Benchmark by 15% or more over the next six months.A rating of '2' or 'Buy', indicates that the analyst expects the stock to outperform the Benchmark by 5% or more but less than 15% over the next six months.A rating of '3' or 'Neutral', indicates that the analyst expects the stock to either outperform or underperform the Benchmark by less than 5% over the next six months.A rating of '4' or 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark by 5% or more but less than 15% over the next six months.A rating of '5' or 'Sell', indicates that the analyst expects the stock to underperform the Benchmark by 15% or more over the next six months.Stocks labeled 'Not rated' or shown as 'No rating' are not in Nomura's regular research coverage. Nomura might not publish additional research reports concerning this company, and it undertakes no obligation to update the analysis, estimates, projections, conclusions or other information contained herein.

SECTORSA 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next six months.A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next six months.A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next six months.Benchmarks are as follows: Japan: TOPIX; United States: S&P 500, MSCI World Technology Hardware & Equipment; Europe, by sector - Hardware/Semiconductors: FTSE W Europe IT Hardware; Telecoms: FTSE W Europe Business Services; Business Services: FTSE W Europe; Auto & Components: FTSE W Europe Auto & Parts; Communications equipment: FTSE W Europe IT Hardware; Ecology Focus: Bloomberg World Energy Alternate Sources; Global Emerging Markets: MSCI Emerging Markets ex-Asia.

Explanation of Nomura's equity research rating system for Asian companies under coverage ex Japan published prior to 30 October 2008STOCKSStock recommendations are based on absolute valuation upside (downside), which is defined as (Fair Value - Current Price)/Current Price, subject to limited management discretion. In most cases, the Fair Value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as Discounted Cash Flow or Multiple analysis etc. However, if the analyst doesn't think the market will revalue the stock over the specified time horizon due to a lack of events or catalysts, then the fair value may differ from the intrinsic fair value. In most cases, therefore, our recommendation is an assessment of the difference between current market price and our estimate of current intrinsic fair value. Recommendations are set with a 6-12 month horizon unless specified otherwise. Accordingly, within this horizon, price volatility may cause the actual upside or downside based on the prevailing market price to differ from the upside or downside implied by the recommendation.A 'Strong buy' recommendation indicates that upside is more than 20%.A 'Buy' recommendation indicates that upside is between 10% and 20%.A 'Neutral' recommendation indicates that upside or downside is less than 10%.A 'Reduce' recommendation indicates that downside is between 10% and 20%.A 'Sell' recommendation indicates that downside is more than 20%.

SECTORSA 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation.A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation.A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation. 

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Target PriceA Target Price, if discussed, reflect in part the analyst's estimates for the company's earnings. The achievement of any target price may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market, and may not occur if the company's earnings differ from estimates.  DisclaimersThis publication contains material that has been prepared by the Nomura entity identified at the top or bottom of page 1 herein, if any, and/or, with the sole or joint contributions of one or more Nomura entities whose employees and their respective affiliations are specified on page 1 herein or elsewhere identified in the publication. Affiliates and subsidiaries of Nomura Holdings, Inc. (collectively, the 'Nomura Group'), include: Nomura Securities Co., Ltd. ('NSC') Tokyo, Japan; Nomura International plc ('NIplc'), United Kingdom; Nomura Securities International, Inc. ('NSI'), New York, NY; Nomura International (Hong Kong) Ltd. (‘NIHK’), Hong Kong; Nomura Financial Investment (Korea) Co., Ltd. (‘NFIK’), Korea (Information on Nomura analysts registered with the Korea Financial Investment Association ('KOFIA') can be found on the KOFIA Intranet at http://dis.kofia.or.kr ); Nomura Singapore Ltd. (‘NSL’), Singapore (Registration number 197201440E, regulated by the Monetary Authority of Singapore); Capital Nomura Securities Public Company Limited (‘CNS’), Thailand; Nomura Australia Ltd. (‘NAL’), Australia (ABN 48 003 032 513), regulated by the Australian Securities and Investment Commission ('ASIC') and holder of an Australian financial services licence number 246412; P.T. Nomura Indonesia (‘PTNI’), Indonesia; Nomura Securities Malaysia Sdn. Bhd. (‘NSM’), Malaysia; Nomura International (Hong Kong) Ltd., Taipei Branch (‘NITB’), Taiwan; Nomura Financial Advisory and Securities (India) Private Limited (‘NFASL’), Mumbai, India (Registered Address: Ceejay House, Level 11, Plot F, Shivsagar Estate, Dr. Annie Besant Road, Worli, Mumbai- 400 018, India; SEBI Registration No: BSE INB011299030, NSE INB231299034, INF231299034, INE 231299034); Banque Nomura France (‘BNF’); NIplc, Dubai Branch (‘NIplc, Dubai’); NIplc, Madrid Branch (‘NIplc, Madrid’) and OOO Nomura, Moscow (‘OOO Nomura’).

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Important disclosures (cont’d)