The leading Wholesale Bank in the Nordic countries · 2015. 5. 7. · • Decline in the exports to Russia might prolong the downturn, as Russia is one of the largest export partners

The leading Wholesale Bank in

the Nordic countries

Bank of America Merrill Lynch Annual Banking and Insurance CEO Conference

Casper von Koskull, Head of Wholesale Banking

October 2, 2014

Disclaimer

This presentation contains forward-looking statements that reflect management’s current views with respect to certain future events and potential financial performance. Although Nordea believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of various factors.

Important factors that may cause such a difference for Nordea include, but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate, (iii) change in the regulatory environment and other government actions and (iv) change in interest rate and foreign exchange rate levels.

This presentation does not imply that Nordea has undertaken to revise these forward-looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided.

2 •

The relationship bank business

model has delivered

14

3

0

96

161

225

106

3

1

144

163

163

153

111

175

80

70

127

127

127

233

170

0

163

82

115

103

172

206

239

178

137

117

204

208

204

199

178

211

157

155

182

185

186

242

206

134

206

159

182

Primary Colours Extra Colours

4 76

116

154

Chart Colours 166

166

166

191

191

191

127

127

127

204

102

0

0

96

161

119

154

188

Nordea has a unique position in the Nordics…

Note: Illustration excludes, Baltic's (406,700 total customers) and Russia (67,000 total customers)

1: Ranking in Nordic region

Sweden

Norway

Finland

Denmark

Relationships

(m)

Market

position

Superior customer franchise Global capabilities on par with

international peers1

#1-2

Total

Nordea 10.5 #1 #1

Capital Markets

Asset

Management

Life &

Pension

Private Banking

#1

#1

#1

#1

Retail Customers Corporates & Institutions

4.1 #2-3

1.0 #2

3.2 #1-2

1.8 #2

#1-2

#2

#1

Market

position

…with a resiliant relationship bank business model

Nordea is the most

diversified Nordic bank…

…with low-volatility

earnings growth…

…and low funding costs

Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5

Largest market contribution1


Earnings volatility2 Funding cost3

Nordea Peer 1-18

Notes:

1) Credit portfolio by geographical area

2) Net income volatility 2008-2013. Compared to Nordic peers

3) Five year Senior CDS spread. Compared to European peers

5 •

Headline lower line

Sub-head line

Single medium chart axis

Right content border

Slide bottom border

Left border Right border Left content border

Comment text box top

Content and chart border

Small chart axis

Sub-head line

Small chart top

Small chart axis

Left and right small lower comments top border

Single medium chart toptop

Heading

Primary chart colours

Sub-head

Content lines (Non-Nordea)

Small chart top

76 116 154

166 166 166

64 64 64

163 82

115

239 178 137

119 154 188

175 80 70

233 170

0

217 217 217

Page numbers 166 166 166

Secondary chart/diagram colours (Non-Nordea)

185 205 229

217 217 217

Other chart and ornamental colours

239 241 204

211 157 155

204 102

0

127 127 127

82 82 82

217 217 217

Comments 76 116 154

166 166 166

Q2/14 financial results

EURm Q2/14 Q1/14 Chg % H1/14 H1/13 Chg %

Net interest income 1,368 1,362 0 2,730 2,749 (1) 3

Net fee & commission income 708 704 1 1,412 1,287 10 13

Net fair value result 356 411 (13) 767 860 (11) (10)

Total income* 2,456 2,501 (2) 4,957 4,996 (1) 2

Total expenses** -1,196 -1,237 (3) -2,433 -2,523 (4) (1)

Profit before loan losses 1,070 1,264 (15) 2,334 2,473 (6) (3)

Net loan losses -135 -158 (15) -293 -384 (24) (22)

Operating profit** 1,125 1,106 2 2,231 2,089 7 10

Operating profit 935 1,106 (15) 2,041 2,089 (2) 1

Net profit from continuing

operations 716 840 (15) 1,556 1,583 (2) 1

Return on equity** (%) 12.0 11.4 +60 bps 11.7 11.3 +40 bps -

REA (EURbn) 152 159 -7 bn 152 n.m. - -

CET1 capital ratio (%) 15.2 14.6 +60 bps 15.2 14.0 +120 bps -

Cost/income ratio** (%) 48.7 49.5 -80 bps 49.1 50.5 -140 bps -

* Includes other income

** Excluding restructuring charge of EUR 190m in Q2/14

6 •

Headline lower line

Sub-head line



Slide bottom border




Small chart axis

Sub-head line

Small chart top

Small chart axis



Heading


Sub-head


Small chart top

76 116 154

166 166 166

64 64 64

163 82

115

239 178 137

119 154 188

175 80 70

233 170

0

217 217 217



185 205 229

217 217 217


239 241 204

211 157 155

204 102

0

127 127 127

82 82 82

217 217 217

Comments 76 116 154

166 166 166

Improved return in Business Areas

RETURN DEVELOPMENT YTD, GROUP AND BUSINESS AREAS

GROUP

H1/13 H1/14

14% 15%

-1%

-3%*

INCOME

COSTS

RaRoCaR

RETAIL BANKING

-1%

-4%

INCOME

COSTS

RaRoCaR

WHOLESALE BANKING

-1%

-6%

INCOME

COSTS

RaRoCaR

WEALTH MANAGEMENT

9%

2%

INCOME

COSTS

RaRoCaR

H1/13 H1/14

13% 14%

H1/13 H1/14

14% 15%

H1/13 H1/14

25%

30%

ECONOMIC CAPITAL ECONOMIC CAPITAL ECONOMIC CAPITAL ECONOMIC CAPITAL -1% -6% -2% -4%

7 •

* Excluding restructuring charge in Q2/14

Banking Russia and Finland 14

9 •

Banking Russia operations

COMMENTS

• Limited share of Group operations

• 3% of income

• 2% of credit exposure

• Majority of lending is towards large

Russian corporates

• 600 Nordic customers

• Largest sector exposure

towards materials, real estate,

utilities, energy and

construction

• Largest currency exposure

towards USD (66%)

• RUB exposure funded locally via

deposits, USD and EUR exposure

funded via the Group

• Maturity of USD and EUR

funding has been prolonged

BANKING RUSSIA OPERATIONS

Nordea Bank

Russia Total

% of

Group Total

Lending corporates 5.6 3.0

Lending households 0.5 0.3

Total lending 6.1 1.8

Impaired loans gross 0.023 0.3

Q2 2014, EUR BILLION

Nordea actions regarding sanctions

10 •

• Task force in place since March 2014

• We monitor the development closely

• As of mid July, sanctions were extended from individuals and entities to specific

sectors – adding complexity

• Nordea follows OFAC (US), EU sanctions and Sectoral sanctions in all entities

• For non-sanction entities, business continues with existing customers

• No intention to increase business or market share

• Nordea is fully compliant with all regulatory requirements that apply to our operations

11 •

COMMENTS

• Finnish economy in undergoing the longest

downturn in 150 years

• Central and local government deficits

are large challenges

• Decline in the exports to Russia might

prolong the downturn, as Russia is one of

the largest export partners

(8% of exports)

• There are however some positive trends

which could have a positive impact on

exports

• Pending large structural reforms regarding

social and health services, municipal

reforms and pension reform aiming at

raising the retirement age

Longest downturn in 150 years

Positive trends emerging

Index 2007=100

The Finnish economy is experiencing a slow GDP growth…

12 •

STABLE HOUSEPRICE DEVELOPMENT

Indexed

…but underlying fundamentals are stable

UNEMPLOYMENT SHOW A DECLINE

BANKRUPTCIES SHOW A DECLINE EXPORTS EXCL. RUSSIA ARE ROUGHLY UNCHANGED

Source: Nordea Markets and Macrobond

502

321 293 277

0

100

200

300

400

500

600

1993 1997 2001 2005 2009 2013

0

96

161

225

106

3

1

144

163

163

153

111

175

80

70

127

127

127

233

170

0

163

82

115

103

172

206

239

178

137

117

204

208

204

199

178

211

157

155

182

185

186

242

206

134

206

159

182


13 76

116

154

Chart Colours 166

166

166

191

191

191

127

127

127

204

102

0

0

96

161

119

154

188

Finnish large corporates are in good shape

SALES AND EBIT DEVELOPMENT*, EURm

Source: Nordea Markets

*Nordea coverage excluding TeliaSonera and financials.

COMMENTS

• Finnish corporates have

experienced a muted environment

for a number of years

• Negative sales growth since

Q1/13

• Corporates have adjusted

operations and been

successful in maintaining

profitability

• Gearing moderately up, back to

pre-crisis levels

46%

37%

29%

36%

42% 45%

2008 2009 2010 2011 2012 2013

NET GEARING*, %

0

1 000

2 000

3 000

4 000

5 000

30 000

34 000

38 000

42 000

46 000

Q1/2008 Q1/2010 Q1/2012 Q1/2014

Sales, left axis EBIT, right axisSales EBIT

Q2/14 Q2/08 Q2/12 Q2/10

14 •

Finnish credit portfolio remains stable

PD development COMMENTS

Loan losses, Banking Finland, EURm

• 20% of Nordea's total loan portfolio

• Average Corporate PD has gone down

as new lending is increasingly to better

rating classes

• Household average PD has increased

slightly over the last two years

• All in all, loan losses are at moderate

levels

• Loan loss ratio of 16 bps in Retail

Banking Finland, in line with the Group

• Losses mainly relate to corporate

segment

• A handful cases are being addressed

in CIB

2011Q1

2011Q2

2011Q3

2011Q4

2012Q1

2012Q2

2012Q3

2012Q4

2013Q1

2013Q2

2013Q3

2013Q4

2014Q1

2014Q2

Corporate Household

12 14

10

1

21

14 13

8

14

22

6

20

Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14

15 •

Improving fundamentals in Finnish operations

AVERAGE CORPORATE LENDING MARGINS, BPS COMMENTS

• Improved lending margins

• Our large corporate customers

increasingly acquire financing from

capital markets

• Nordea #1 in corporate bond

market

• Nordea is market leader in all wealth’s

business areas

• #1 in Investment Funds

• #1 in Life & Pensions

• #1 in Private Banking

2008 2009 2010 2011 2012 2013 2014

CIB Finland Retail Banking Finland

22

17

8

7

6

5

4

4

4

Nordea Markets

Pohjola

Danske

SEB

RBS

Swedbank

Handelsbanken

Deutsche

UBS

FINNISH CORPORATE BONDS 2013, MARKET SHARE %

The leading Wholesale Bank

in the Nordic countries

14

16

0

96

161

225

106

3

1

144

163

163

153

111

175

80

70

127

127

127

233

170

0

163

82

115

103

172

206

239

178

137

117

204

208

204

199

178

211

157

155

182

185

186

242

206

134

206

159

182


17 76

116

154

Chart Colours 166

166

166

191

191

191

127

127

127

204

102

0

0

96

161

119

154

188

The leading Nordic Wholesale Bank for corporate and

institutional customers

Key 2013 Wholesale Banking facts

#1 or #2 position in each of the Nordic countries

Total income EUR 2,606m

Operating profit EUR 1,455m

Cost/income ratio 34%

RaRoCaR 15.1%

Lending volume EUR 89bn

Approximately 6,000 employees

Operating income split

EUR2.8bn EUR 2.6bn

Net interest

43%

Items at fair

value 35%

Net fee &

comm. 22%

CIBSE 20%

CIBDK 19%

CIBFI 13%

CIBNO 9%

SOO 14%

Russia 10%

Other 14%

0

96

161

225

106

3

1

144

163

163

153

111

175

80

70

127

127

127

233

170

0

163

82

115

103

172

206

239

178

137

117

204

208

204

199

178

211

157

155

182

185

186

242

206

134

206

159

182


18 76

116

154

Chart Colours 166

166

166

191

191

191

127

127

127

204

102

0

0

96

161

119

154

188

Nordea Wholesale Banking strategic positioning

Strategic positioning

A leading position built

on local presence and

global scale, resulting in

deep customer

understanding and

competitive solutions

Customer dimension:

Multi-local presence = Intensity

Pro

du

ct

dim

en

sio

n:

Siz

e a

nd

co

mp

ete

nc

ies

= R

ele

va

nc

e

International

competition

Local

competition

0

96

161

225

106

3

1

144

163

163

153

111

175

80

70

127

127

127

233

170

0

163

82

115

103

172

206

239

178

137

117

204

208

204

199

178

211

157

155

182

185

186

242

206

134

206

159

182


19 76

116

154

Chart Colours 166

166

166

191

191

191

127

127

127

204

102

0

0

96

161

119

154

188

Nordic Wholesale Banking value creation should deliver

systematic “Alpha” versus industry performance

RaRoCaR*

Income Op. Ex. Funding cost Loan Losses

= Capital

_ _ _

- A profitable customer

mix

- Leading cross-sell

ratio and profitable

product mix

- Pricing

discipline/Business

selection

- Nordic scale

- Cost efficiency

programme

- 1 of 3 banks in

Europe with AA rating

- Geographical and

sector diversification

- A sound and strong

risk culture

- Business selection

and capital efficiency

program

*Risk adjusted Return on Capital at Risk

0

96

161

225

106

3

1

144

163

163

153

111

175

80

70

127

127

127

233

170

0

163

82

115

103

172

206

239

178

137

117

204

208

204

199

178

211

157

155

182

185

186

242

206

134

206

159

182


20 76

116

154

Chart Colours 166

166

166

191

191

191

127

127

127

204

102

0

0

96

161

119

154

188

Leading customer franchise and profitable product mix

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

(40) (20) 0 20 40 60 80

Imp

ort

an

t re

lati

on

sh

ips

Greenwich Quality Index - Difference from average*

Nordea

Peer 2 Peer 1

Peer 3

Peer 4

Peer 5

Large corporates evaluation of quality and

relationship*

*Greenwhich Associates survey “Large Corporate Banking – 2013”

CAGR

12%

Leading Nordic Capital Markets Operation

#1 bookrunner in

Nordic corporate

bonds

#1 Nordic bank in

Nordic ECM

#1 bookrunner in

Nordic

syndicated loans

Most Award

Winning Equity

Broker Nordics

Leading Nordic

FX and interest

rate derivatives

franchises

Income, EURm

2013 2012 2011 2010 2009 2008 2007 2006 2005

0

96

161

225

106

3

1

144

163

163

153

111

175

80

70

127

127

127

233

170

0

163

82

115

103

172

206

239

178

137

117

204

208

204

199

178

211

157

155

182

185

186

242

206

134

206

159

182


21 76

116

154

Chart Colours 166

166

166

191

191

191

127

127

127

204

102

0

0

96

161

119

154

188

Nordea Wholesale Banking outperforms on cross-sales

74%

57% 55% 53%

45% 42%


Product Cross-Sell Effectiveness – Nordics* Product Cross-Sell Effectiveness – Sweden*

*Greenwhich Associates survey “Large Corporate Banking – 2013”

69% 64%

55%

45% 45%

34%


0

96

161

225

106

3

1

144

163

163

153

111

175

80

70

127

127

127

233

170

0

163

82

115

103

172

206

239

178

137

117

204

208

204

199

178

211

157

155

182

185

186

242

206

134

206

159

182


22 76

116

154

Chart Colours 166

166

166

191

191

191

127

127

127

204

102

0

0

96

161

119

154

188

Active business selection to maximise net interest margin

CIB lending margin development

Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214

+17 bps

Some positive pricing effects are expected

— Lending portfolio turnover, i.e. still some refinancing

of 2006/2007 credits

— Capital markets products as new regulation comes

into effect

Comments

0

96

161

225

106

3

1

144

163

163

153

111

175

80

70

127

127

127

233

170

0

163

82

115

103

172

206

239

178

137

117

204

208

204

199

178

211

157

155

182

185

186

242

206

134

206

159

182


23 76

116

154

Chart Colours 166

166

166

191

191

191

127

127

127

204

102

0

0

96

161

119

154

188

Cost initiatives to further improve cost efficiency

Wholesale Banking total cost development, EURm

237 221

245 228 229

210

237

213 218

Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214

C/I ratio of 34%

Continuous streamlining/simplification of processes

WB cost efficiency programme 2014 - 2015

Comments

0

96

161

225

106

3

1

144

163

163

153

111

175

80

70

127

127

127

233

170

0

163

82

115

103

172

206

239

178

137

117

204

208

204

199

178

211

157

155

182

185

186

242

206

134

206

159

182


24 76

116

154

Chart Colours 166

166

166

191

191

191

127

127

127

204

102

0

0

96

161

119

154

188

Increased capital efficiency – lower REA

Wholesale Banking REA development, EURbn

77.9

65.4

59.0 58.0

2011 2012 2013 2014 H1

-25%

Strong Wholesale Banking track record

Customer targeted initiatives

Production environment

Increase RaRoCaR and sustain business

momentum

Comments

0

96

161

225

106

3

1

144

163

163

153

111

175

80

70

127

127

127

233

170

0

163

82

115

103

172

206

239

178

137

117

204

208

204

199

178

211

157

155

182

185

186

242

206

134

206

159

182


25 76

116

154

Chart Colours 166

166

166

191

191

191

127

127

127

204

102

0

0

96

161

119

154

188

39.9 39.0

H1 13 H1 14

15

19

H1 13 H1 14

CIB delivers on income, costs and capital

Income, EURm

REA, EURbn

Expenses, EURm

Lending volumes, EURbn

Loan Losses, EURm

RaRoCar, %

214

211

H1 13 H1 14

336 348

262 299

173 134

H1 13 H1 14

NII

NCI

Fair value

95

80

H1 13 H1 14

36.8

30.9

H1 13 H1 14

A direct consequence of the strategy

Headline lower line

Sub-head line



Slide bottom border




Small chart axis

Sub-head line

Small chart top

Small chart axis



Heading


Sub-head


Small chart top

76 116 154

166 166 166

64 64 64

163 82

115

239 178 137

119 154 188

175 80 70

233 170

0

217 217 217



185 205 229

217 217 217


239 241 204

211 157 155

204 102

0

127 127 127

82 82 82

217 217 217

Comments 76 116 154

166 166 166

26 •

665

665

726

787

1,062

1,086

1,215

1,295

1,561

1,603

Peer

Peer

Peer

Peer

Peer

Peer

Peer

Peer

Peer

Nordea

243

263

318

373

384

496

593

680

811

1,358

Peer

Peer

Peer

Peer

Peer

Peer

Peer

Peer

Peer

Nordea

The strengthened Investment Banking

organisation with integrated advisory capabilities

within debt and equity has paid off

Nordea Investment Banking is the leading Nordic

provider in capital markets activities; bonds,

equities and syndicated loans

Nordic ECM Q2 2014, EURm

Nordic Corporate Bonds Q2 2014, EURm

Comments

Nordic Syndicated Loans Q2 2014, EURm

Nordea is benefitting from the capital market trends due to the significant investments done during the last few years

1 136

1 234

1 240

1 618

1 673

1 907

2 667

2 795

3 062

6 179

Peer

Peer

Peer

Peer

Peer

Peer

Peer

Peer

Peer

Nordea

0

96

161

225

106

3

1

144

163

163

153

111

175

80

70

127

127

127

233

170

0

163

82

115

103

172

206

239

178

137

117

204

208

204

199

178

211

157

155

182

185

186

242

206

134

206

159

182


27 76

116

154

Chart Colours 166

166

166

191

191

191

127

127

127

204

102

0

0

96

161

119

154

188

Outlook for the coming period

Market Dynamics: Active! – but short visibility

INCOME

Growth picking up

somewhat

Margins – some

downward pressure

likely

Events presently fuelling

fee income / potential NII

growth

Challenging conditions

for FICC

EXPENSES

Delivering on cost

efficiency programme

CAPITAL

Strict business

selection

Focus on “capital light”

products

Continued model

improvements

Credit Quality

Norway – positive

Denmark – positive

Finland – negative/stable

Sweden – consistent

positive

RaRoCaR

Positive market trend

Nordea Wholesale

Banking’s position

Positive impact on

RaRoCaR

?

The leading Wholesale Bank in

the Nordic countries

Bank of America Merrill Lynch Annual Banking and Insurance CEO Conference

Casper von Koskull, Head of Wholesale Banking

October 2, 2014

Documents

The leading Wholesale Bank in the Nordic countries · 2015. 5. 7. · • Decline in the exports to Russia might prolong the downturn, as Russia is one of the largest export partners