Shipping, Offshore & Oil Services
London, February 7th, 2014
Hans C. Kjelsrud
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 •
Key messages
Nordea is a globally leading shipping and offshore bank with strong
long term relationships with major shipping and offshore companies
Operating profit after loan losses of EURm 195 in 2013 compared to
EURm 74 in 2012
Loan portfolio of EURb 11.4 representing 3.3% of Nordea’s total loans,
with shipping standalone representing 2.0%
Gradual recovery in major shipping segments expected from 2014,
based on higher global GDP growth and reduced deliveries of new
vessels
Loan losses in process of normalising
3 •
• Our business
• Financial results
• Shipping markets
• Offshore markets
• Cruise and ferry markets
• Risk management
Nordea Bank Russia Igor Bulantsev
Ari Kaperi
Group Risk
Management
Group CRO
Casper von Koskull
Wholesale Banking
Peter Nyegaard (COO)
Capital Markets
Services (CMS) Henrik B. Jespersen
Lennart Jacobsen
Retail Banking
Group Credit Control Klara Lise Aasen
International Units Anne-Margrethe Firing
Torsten H. Jørgensen
Group Corporate Centre
Group CFO
Banking Finland Topi Manner
Banking Baltics Inga Skisaker
Banking Sweden Hans Jacobson
Banking Norway John Sætre
Banking Denmark Anders Jensen
CIB Denmark Jørgen Høholt
CIB Norway Cato A. Holmsen
Nordea Finance Jukka Salonen
Group Legal Lena Eriksson
Group Credit Risk Jorma Timonen
Group Operational
Risk and
Compliance Anders M. Jørgensen
Group Market and
Counterparty Credit
Risk Niels N. Kjær
CIB Finland Olli-Petteri Lehtinen
Transaction
Products Mikael Bjertrup
Life & Pensions Snorre Storset
Asset Management Allan Polack
Savings & Wealth
Offerings Mads Kaagaard
Corporate Social
Responsibility Liisa Jauri
Gunn Wærsted
Wealth Management
Group Internal Audit
Eva-Lotta Rosenqvist
Shipping, Offshore &
Oil Services Hans Chr. Kjelsrud
CIB Sweden Johan Näs
Finance & Strategy Peter Lybecker
Concepts &
Operating Model Ellen Pløger
Segment CIB Claus Asbjørn Stehr
IT – Capital Markets Peter Lunding
IT – Wholesale
Banking Mika V. Häkkinen
Group Identity &
Communications
Claus Christensen
(acting)
Group Human
Resources
Henrik Priergaard
Markets - IB Svante Andreen/
Jan Rasmussen
Markets - FICC Mads G. Jakobsen
International
Private Banking Jhon Mortensen
Private Banking
Denmark Hans Henrik Klestrup
Private Banking
Finland Jukka Perttula
Private Banking
Norway Torsten Østensen
Private Banking
Sweden Anders Scherlund
Markets - Equities Gorm Praefke
Martin Persson
Strategy, Support
& Control Kerstin Winlöf
Operations Ossi Leikola
IT Christian Bornfeld
IT
Group Functions Tuija Pirttilä
Group Processes Erik Gjötterberg
Group Treasury Niklas Ekvall
Group Finance
& Reporting Frank Søllested
Group Strategy
& Business Control Johan Ekwall
Investor Relations Rodney Alfvén
Group Capital Andreas Green
(acting)
Group Workplace
Management Ove Hygum
Group IT Poul Raaholt
Banking Poland* Ossi Leikola
* Divested
Christian Clausen President and Group
CEO
5 •
February 2014
Group organisation
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1 890
2008 2013
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
Corporate income, EURm
1 010
1 350
2008 2013
67% 70% Cross-sell
ratio
CAGR
6%
Markets income, EURm
CAGR
10%
Operating income split
EUR 2.6bn
1: RaRoCar restated due to new allocation principles of Economic Capital, as implemented from
Q1 2013
Net interest income
43%
Fees & comm. 22%
Items at fair
value 35%
SOO 14%
WB 86%
Our business
• A globally leading industry bank
• A strong international brand name and robust historical returns
• Inherently cyclical and volatile markets
• Well diversified loan portfolio across segments, geography and clients
• Long standing relationships with the worlds leading shipping, offshore
and cruise companies
• Consistently ranked as a global leader in loan syndications
• Presence in all Nordic and key international markets
7 •
Our strategy
• Our strategy is global
• Core markets are Europe, North America and select countries in Asia
• Strong focus on risk management, capital efficiency, and profitability
• Broad relationships with large, transparent companies that own and
operate modern assets
• Market leadership built on strong industry and credit skills
• Leverage our relationship platform to grow products sales
• Our loans should generally be secured by 1st priority mortgages on
modern assets
8 •
Crude Tankers10 %
Product Tankers8 %
Chemical Tankers
7 %
Dry Cargo10 %
Gas - LPG3 %
Gas - LNG8 %
RoRo Vessels2 %
Container Ships1 %
Car Carriers7 %
Other Shipping3 %
Drilling Rigs11 %
Offshore Support Vessels
7 %
Floating Production
2 %
Integrated Oil Services
3 %
Cruise5 %
Ferries3 %
Export Credit Guaranteed
3 %
Miscellaneous (Property,
shares, cash)6 %
Source: Nordea 9 •
Diversified and balanced portfolio
Loan portfolio breakdown at 31/12/13 Lending to the public EURbn %
Total lending Nordea 342.5 100
Shipping 6.7 2.0
Offshore 2.3 0.7
Cruise/Ferries/Other 2.3 0.7
Shipping, Offshore and Oil Services Exposure EURbn
SOO Lending 11.4
SOO Undrawn commitments 1.9
SOO Derivatives 0.6
SOO Guarantees and letters of credit 0.8
Total exposure 14.6
Total: EUR 11.4bn
Competitive landscape
• Ship finance market dominated by European banks
• Number of competitors and lending capacity significantly reduced since
start of financial crisis
• New transactions executed on conservative structures
• Improved pricing environment
• New transactions generally priced in the range of 225 - 350 bps
• Recently seen high activity in financing from the public and private
capital markets, and increased investment from private equity
• Export credit agencies continue to be a meaningful provider of finance
for newbuilds
10 •
Maritime finance overview
11 •
Syndicated Loan Volume Maritime Industry USD bn Top 10 Bookrunners Shipping Loans in 2013
Source: Dealogic.
Syndicated Loan volume includes shipping & offshore industry
Rank Bookrunner Value $M No.
1 Nordea 4,144 29
2 DNB 3,176 24
3 Citi 2,834 13
4 Mitsubishi UFJ 2,742 7
5 Bank of America Merill Lynch 1,668 10
6 Wells Fargo 1,470 7
7 ING 1,339 10
8 Mizuho 1,262 10
9 JP Morgan 1,234 12
10 KfW 1,181 8 0
20
40
60
80
100
120
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
• Our business
• Financial results
• Shipping markets
• Offshore markets
• Cruise and ferry markets
• Risk management
Financial results
13 •
EURm 2009 2010 2011 2012 2013 2013 / 2012
Net interest income 285 299 324 290 267 -8 %
Net fee and commission income 48 54 81 64 55 -14 %
Net result from items at fair value 36 32 29 27 32 19 %
Total income incl. allocations 370 385 433 381 354 -7 %
Staff costs -20 -20 -25 -25 -24 -4 %
Other exp. excl. depreciations -29 -30 -40 -43 -40 -7 %
Total expenses incl. allocations -49 -50 -65 -67 -64 -4 %
Profit before loan losses 321 336 368 314 290 -8 %
Net loan losses -96 -45 -135 -240 -95 -60 %
Operating profit 225 291 233 74 195 164 %
Cost/income ratio, % 13 13 15 18 18 0 %
RAROCAR, % - - - 16 16 0 %
Risk-weighted assets (RWA) - - - 10 234 9 065 -11 %
Number of employees (FTEs) 98 102 96 87 87 0 %
Volumes, EURbn:
Total lending 12,9 13,7 13,9 13,0 11,4 -13 %
Total deposits 4,7 4,9 4,7 4,8 4,3 -10 %
Source: Nordea
Solid increase in loan margins
14 •
50
100
150
200
250
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Loan margin, bps
Source: Nordea
Loan losses in declining trend
15 •
-40
0
40
80
120
160
200
240
280
-40
0
40
80
120
160
200
240
280
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Bp
s
EU
Rm
Loan loss, individual Loan loss, collective Net loss, basis points
2005 – 2008:
Average loan
margins
~ 110 bps
2011 – 2013:
Average loan
margins
~ 210 bps
Source: Nordea
• Our business
• Financial results
• Shipping markets
• Offshore markets
• Cruise and ferry markets
• Risk management
8,6 %
9,6 %
8,6 %
5,8 %
4,0 % 4,1 %
2010 2011 2012 2013 2014E 2015E
Supply Demand
Shipping markets gradually returning to balance
17 •
Source: IMF
World GDP. Constant prices.
World export of goods. Volume.
Source: RS Platou
World production and trade 2010-2015 % change p.a World merchant fleet growth 2010-2015 % change p.a
5,2 %
3,9 %
3,1 % 3,0 % 3,7 % 3,9 %
14,1 %
6,2 %
2,9 % 2,7 %
5,1 % 5,4 %
2010 2011 2012 2013 2014E 2015E
World GDP World trade
Significant decline in orderbook
18 •
• Orderbooks peaked in 2008
• Reduced contracting of new
vessels since then
• Declining fleet growth in major
segments
• Limited new orders is key to
restore market balances
Source: Clarkson
Orderbook % of existing fleet
0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
Tanker Bulker Containership
00 10 01 02 03 05 06 07 08 14 09 11 12 13 04 96 97 98 99
Vessel values rebounding
19 •
Secondhand vessel values 5y old USDm
Source: Clarkson
0
20
40
60
80
100
120
140
160
180
VLCC Capesize Dry Bulk Panamax Containership
00 09 01 02 03 05 06 07 08 14 10 11 12 13 04
• Improvement in tanker and bulker
secondhand values last year
• Values closer to historical
averages
• Mid size containership values still
under pressure
Crude tanker – moderate overcapacity near term
20 •
• Volatility returned in 2H13 with
rate spike in 4Q
• Moderate overcapacity in near
term
• Gradual improvement from 2014
from rebound in oil demand and
lower fleet growth
Source: Clarkson
Orderbook 12% -
20
40
60
80
100
120
140
160
180
0
500
1 000
1 500
2 000
2 500
3 000
3 500
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Value MUSD
Freight Index
Freight Index - BDTI Value - VLCC 10Y Value - VLCC NB
Crude tankers freight rates and values (2001 – 2014)
Product tanker – favourable trade dynamics, high ordering
21 •
• Increased demand for oil products
• Growing distance between refinery
location and consuming regions
• Relatively high orderbook should
be offset by strong demand growth
and increased transportation
distances
Source: Clarkson
0
10
20
30
40
50
60
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Value MUSD
Freight Index
Product tanker freight rates and values. 2001 - 2013
Freight Index - BCTI Value - MR 45k. 10Y Value - MR 47k. NB
Orderbook 19%
Product tanker freight rates and values (2001 – 2014)
Dry bulk – improved from H213. Still China-dominated
22 •
• Rebound in freight rates in 2H13
• Demand growth expected to
exceed supply growth in 2014
and 2015
• Continued strong Chinese import
of commodities key to a healthy
dry cargo market
Source: Clarkson
-
20
40
60
80
100
120
140
0
2 000
4 000
6 000
8 000
10 000
12 000
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Value MUSD
Freight Index
Dry bulk carrier freight rates and values. 2001 - 2013
Freight Index - BDI Value - Capesize 10Y Value - Capesize. NB
Dry bulk freight rates and values (2001 – 2014)
Orderbook 20%
23 •
• Very limited exposure for Nordea
• Substantial overcapacity near term
in many sub-segments
• Modest consumer demand in
western economies, particularly
Europe, main reason
Containership – overcapacity lingers
Source: Clarkson
-
20
40
60
80
100
120
140
160
0
50
100
150
200
250
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Value MUSD
Freight Index
Freight Index Timecharter - Container Shanghai Containerized Freight Index
Value - 8.5-9.1k teu. 5Y Value - 8.5-9.1k teu. NB
Orderbook 22%
Containership freight rates and values (2001 – 2014)
• Modest orderbook and improved demand outlook
• Gradual improvement in freight rates expected in 2014 and 2015
24 •
• Strong long term prospects
• Short term softness as new vessels deliver ahead of supply expansion
• Increasing supply of LPG requiring transport
• Emergence of the United States as a major LPG exporter
• Industrialised segment with limited fleet growth
• Stable outlook near term and performance will depend on development in cargo
mix
Chemical tankers
Liquified Natural Gas - LNG
Liquified Petroleum Gases - LPG
Car carriers
Other shipping markets
• About our division
• Financial results
• Shipping markets
• Offshore markets
• Cruise and ferry markets
• Risk management
E&P spending growth moderating
26 •
• E&P spending growth to
moderate at 3%-5% p.a. next two
years
• Oil companies with limited free
cash flow expected to prioritize
dividend
• Proportionally higher spending
growth expected offshore (5% -
7% p.a)
Source: Rystad Energy (E&P) and EIA (Oil price)
30%
17%
23%
-11%
13% 14%
15%
5% 3,4 %
5,1 %
0
20
40
60
80
100
120
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E
USD/b E&P
E&P Spending Growth Oil Price
E&P spending and oil price. 2006-2015E. % change p.a. and USD/b
27 •
• Rig utilization remain strong for ultra deepwater
• Weaker markets expected for deepwater and midwater
• Oil companies show preference for modern units
• Rig rates have recently improved
• Middle East and Gulf of Mexico with incremental demand replacing standard
rigs with modern equipment
• Longer term uncertainty due to high newbuilding activity
Drillships and Semi Submersibles
Jack-up rigs
• High global rig utilization but shorter contracts and lower rates during 2014.
• Most drilling contractors have strong contract backlogs in the near term
Offshore drilling sector
Offshore drilling sector - dayrates
28 •
• Recent levels for UDWs at USD
500-525K down from USD 550-
600K
• Utilization remain strong for the
high end segment
• Deepwater and midwater rig
utilization expected weaker as
rigs “market down”
• Some idle rig capacity seen this
year in particular in SE-Asia
Source: IHS Petrodata
Ultra deepwater and deepwater rig rates. USD/d
Midwater and Jack-up rig rates. USD/d
0
100
200
300
400
500
600
700
Ultra-deepwater Deepwater
0
50
100
150
200
250
300
350
400
450
Jack-up >300ft Midwater
29 •
• Demand growth driven by deepwater fleet growth
• PSV segment should see improved earnings as rig fleet grows
• Positive outlook for high end segment where newbuild activity is low
• High activity supported by significant investment in subsea construction
segment as development of large oil and gas fields commences.
Platform supply vessel (PSV)
Anchor Handling Tug Supply vessels (AHTS)
Construction vessels
• Performance driven by high rig activity in many regions and increased field
developments
Offshore support vessels
• About our division
• Financial results
• Shipping markets
• Offshore markets
• Cruise and ferry markets
• Risk management
• Nordea’s exposure concentrate on major
operators on the northern European trade lanes
• Significant barriers to entry and a highly
concentrated supply side in respective regions
• Overall outlook is moderate and dependant on
continued improvement in Northern European
economies
31 •
• Industry dominated by three major players with
80% market share
• Sector has recovered from the impact of the
Costa Concordia grounding and has a positive
near term outlook
• Industry risks include general economic
conditions and consumer spending in particular
Cruises
Ferries
Cruise and ferries
• About our division
• Financial results
• Shipping markets
• Offshore markets
• Cruise and ferry markets
• Risk management
Risk management framework
• Credit Policy reviewed and approved annually by the Board of
Director’s Risk Committee, laying down principles for lending and
customers
• An overall cap on shipping and other segments exposure is set
• Main rule is secured lending limited to 75% of market value of modern
collateral vessels, protected by financial covenants
• Target a diversified Nordic and international credit portfolio with the
leading names in each segment
33 •
Managing throughout the shipping cycle
• Focus on our relationship strategy with leading companies within each
segment
• Tightened credit standards and dedicated workout and restructuring
team
• Increased frequency of stress tests for early detection of problems
• Accelerate against our collateral is always last resort, but we will not
hesitate to take firm action, if needed
• Increased activity in the secondary loan market has facilitated an early
exit in certain problem loans
34 •
Key messages
Nordea is a globally leading shipping and offshore bank with strong
long term relationships with major shipping and offshore companies
Operating profit after loan losses of EURm 195 in 2013 compared to
EURm 74 in 2012
Loan portfolio of EURb 11.4 representing 3.3% of Nordea’s total loans,
with shipping standalone representing 2.0%
Gradual recovery in major shipping segments expected from 2014,
based on higher global GDP growth and reduced deliveries of new
vessels
Loan losses in process of normalising
35 •
Shipping, Offshore & Oil Services
London, February 7th, 2014
Hans C. Kjelsrud