Swedbank Investor presentation

Transcription

1 Swedbank Investor presentation April 2018

2 Disclaimer Certain statements made in this presentation are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance, express or implied, by the forward looking statements. Factors that might cause forward looking statements to differ materially from actual results include, among other things, regulatory and economic factors. Swedbank AB assumes no responsibility to update any of the forward looking statements contained herein. No representation or warranty, express or implied, is made or given by or on behalf of Swedbank AB or its directors, officers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation. None of Swedbank AB or any of its directors, officers or employees nor any other person accepts any liability whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of Swedbank AB, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision. 2

3 Table of contents Executive summary 4 1. Swedbank overview 5 2. Quarterly financial update Capital considerations Liquidity and funding Cover pool data Swedish and Baltic economy Swedish housing and mortgage market Appendix 69 3

4 Executive summary Strong financial position Sweden s largest retail bank with a leading position in our three Baltic home markets ROE target of at least 15% Strong asset quality! Solid liquidity and funding position survival horizon more than 12 months One of the best capitalised banks in Europe* with significant buffers to both MDA and Loss absorption trigger levels Dividend policy of 75% - for six consecutive years *According to EBA stress test 2016 Swedbank Q (Q4 2017) High customer activity! ROE: 15.4% (14.4%) Top 10 shareholders 1. Sparbanksgruppen, 10.4% 2. Folksam, 7.0% 3. AMF, 5.5% 4. Alecta, 4.7% 5. Swedbank Robur, 3.9% 6. Sparbanksstiftelser, 3.4% 7. BlackRock, 2.5% 8. Vanguard, 2.5% 9. Norges Bank, 2.1% 10. SEB Fonder, 1.8% Swedish owners, 61.2% Int l owners, 39.8% Sweden Our four home markets Cost/income ratio: 0.39 (0.42) CET1 capital ratio: 24.8% (24.6%) with requirements of 22.0% (fully loaded CRD IV) Leverage ratio: 4.7% (5.2%) Credit impairment ratio: 0.03% (0.08%) Total credit impairment provision ratio: 0.35% ( ** ) Share of Stage 3 loans, gross: 0.70% ( ** ) Liquidity and funding: LCR: 140% (EU 2015/61), NSFR: 110% Credit ratings: AA-(S)/AA-(S)/Aa2(S) from S&P/Fitch/Moody s ** Due to IFRS9 introduktion Estonia Latvia Lithuania Mar

5 This is Swedbank 1. Swedbank overview

6 Swedbank Low-risk, cost efficient and well capitalised This is Swedbank Large and diversified customer base Leading retail bank in our 4 home markets 7m PRIVATE CUSTOMERS Focus on Mid-corp and SME segments 18% corporate lending market share in Sweden 600k CORPORATE CLIENTS Stable profitability Return on equity target of at least 15% 15.4% Low risk Credit impairment ratio 0.03% Market-leading cost efficiency Cost income ratio 39% Solid capitalisation 280bps buffer to regulatory requirement 24.8% Mar

7 Market leading position in our home markets This is Swedbank Loans (private)* Loans (corporate)* Deposits (private) Deposits (corporate) Payments** Funds 23% 17% 21% 19% 36% 21% SWEDEN 77% 83% 79% 81% 64% 79% ESTONIA 46% 54% 37% 63% 45% 43% 41% 42% 55% 57% 59% 58% LATVIA 31% 69% 17% 83% 32% 68% 15% 85% 50% 50% 42% 58% LITHUANIA 34% 66% 18% 82% 40% 60% 23% 77% 49% 51% 37% 63% * Excluding the Swedish National Debt Office and repurchase agreements ** BankGiro for Sweden, domestic payment transactions (Estonia, Latvia, Lithuania) = Swedbank 7

8 Strong financial position Low risk Stable earnings Market-leading cost efficiency Liquidity and capital ratios (%) Profit before impairments (SEK bn) Total expenses (SEK bn) NSFR LCR CET1 ratio, CRDIV (RHS) Disposal one-off 0 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Credit impairment (bps) Return on equity (%) Cost / income ratio (%) -10 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q Acquisition one-off This is Swedbank Cap Source: Swedbank Fact book Q

9 Stable and profitable business mix - retail bank profile This is Swedbank Total income Net Interest Income Net Commission Income 100% 90% 80% 70% NII NCI NGL Other 86% of total loans in Sweden 51% Swedish mortgages Baltic banking very profitable 10% of Group lending Sweden s largest fund manager (SEK1.2trn AuM) 5 th largest card acquirer & 10 th largest card issuer in Europe 60% 50% 20% of Group operating profit, FY2017 Other 13% 40% 30% 20% 10% 0% Lending and deposits 63% 2017 Total income Asset Management 11% Payment, Cards 9% Treasury, Trading and Capital Markets 4% Source: Swedbank Fact book 4Q

10 Swedbank strategy Strategy An available full-service bank Low risk Sustainability and customer value through a responsible core business Offering based on customer need and expectations High cost efficiency 10

11 Key priorities Strategy Customer Interaction Savings Lending & Payment Seamless omni-channel customer journey Regain market share through high-quality digital savings offer Fully-digital mortgage process Proactive, tailor-made product offers and advice Increase focus on pension savings Enhance corporate relationships with our improved cash management solution One financial access point for customers Customer-centric Financial Planning Platform Most convenient payments solutions for consumers 11

12 Digitalisation cost and income opportunities 90% of our customers are happy or very happy with our digital services Strategy Increase revenue via digital banking Improve cost and sales efficiency Customers increasingly connected via our digital channels Higher transaction volumes More cross-selling opportunities Further potential in manual to digital sales transformation 100% 80% Digitally active customers 47% Customers w ithout Internet bank agreement 29% Connected customers (less than monthly usage) 24% 60% 40% 20% 0% Payments Savings & pensions Digital sales Lending Manual sales Insurance Note: Data relates to Swedish Banking 12

13 Recent strategic achievements Strategy Launched in Sweden Already operating in the Baltics Fully digital consumer lending SmartID launched in the Baltics Enables faster transaction process for customers Digital customer identification and authorisation Meniga investment Data aggregation platform Fintech partnership PayEx acquisition Integration and new launches begun Enhanced merchant omnichannel payment solutions Improving sustainability offerings Nordic Swan Ecolabel - five labelled funds Improving sustainability offerings Retail channels Positive AuM inflows 13

14 Swedbank creates value Strategy % 30 SEK 14 Return on Equity >15% target Q Return on equity (LHS) CET1 capital ratio (LHS) Dividend per share (RHS) % Common Equity Tier 1 ratio One of the highest among European banks 24.8% Dividend per share 75% payout ratio for 6 th year in a row SEK Mar

15 Quarterly financial update 2. Quarterly financial update

16 Swedish Banking Good loan volume growth Quarterly financial update SEKm Q1 18 Q4 17 QoQ Net interest income Net commission income Other income Total income Total expenses Profit before impairments Credit impairments Ratios Q1 18 Q4 17 ROE, % C/I ratio Volumes, SEKbn Q1 18 Q4 17 QoQ Loans Deposits Net interest income Continued mortgage loan volume growth and slightly higher margins Corporate loan volume growth Higher resolution fund fee Net commission income Lower stock market related income Strong mutual fund inflows Other income Good activity in life insurance business EnterCard and life insurance one-offs in Q4 Solid asset quality Mar

17 Baltic Banking Diversified loan volume growth Quarterly financial update SEKm Q1 18 Q4 17 QoQ Net interest income Net commission income Other income Total income Total expenses Profit before impairments Credit impairments Ratios Q1 18 Q4 17 ROE, % C/I ratio Net interest income Lending growth to both households and corporates Mixed margins Net commission income Cards and asset management income seasonally lower Positive FX effects Stable asset quality Volumes, SEKbn Q1 18 Q4 17 QoQ Loans Deposits Mar

18 Large Corporates & Institutions Stable result Quarterly financial update SEKm Q1 18 Q4 17 QoQ Net interest income Net commission income Net gains and losses Other income Total income Total expenses Profit before impairments Credit impairments Ratios Q1 18 Q4 17 ROE, % C/I ratio Volumes, SEKbn Q1 18 Q4 17 QoQ Loans Deposits Stable net interest income Net commission income Lower asset management, brokerage and custody incomes Net gains and losses Positive FX effects CVA adjustment effects Increased customer interest rate hedging activity Loan loss reversals Mar

19 Group results High customer activity SEKm Q1 18 Q4 17 QoQ Net interest income Net commission income Net gains and losses Other income Total income Total expenses Profit before impairments Credit impairments Other impairments Tax Net profit Loan volume growth strengthened net interest income, mitigating higher resolution fund fee and fewer days Seasonally lower asset management income and cards income FX effects and high customer activity impacted net gains and losses positively Total expenses according to plan Solid asset quality Quarterly financial update Ratios Q1 18 Q4 17 ROE, % C/I ratio CET1 capital ratio, % Mar

20 Capital Strong capitalisation no excess capital Quarterly financial update CET1 capital ratio, % 24.6% 23.9% 24.6% 24.8% 22.0% CET1 capital increased by SEK 1.4bn Positive effect from net profit of SEK 1.7bn excl. dividend Negative effect from IAS19 of SEK 0.1bn IFRS 9 implementation reduced CET1 capital by SEK 0.4bn Q Q Q Q CET1 capital ratio requirement REA increased by SEK 2.4bn Buffer of around 280bps - above minimum requirements Mar

21 Capital Increased Risk Exposure Amount (REA) Quarterly financial update REA, SEKbn Q Credit risk Market risk CVA risk Operational risk Increase Decrease Other Q REA increased by SEK 2.4bn Increased credit exposures offset by model adjustment in Baltic Banking Higher market exposures IFRS 9 implementation reduced REA by SEK 0.7bn Mar

22 Group Solid asset quality Quarterly financial update Credit impairments, SEKm Q1 18 Q4 17 QoQ Swedish Banking Baltic Banking Large Corporates & Institutions Swedbank Group Resilient asset quality in all business segments IFRS 9 effects Ratios Q1 18 Q4 17 Credit impairment ratio, % Share of Stage 3 loans, gross % 0.71 * Total credit impairment provision ratio, % 0.35 * * n.a. Mar

23 Capital fully loaded CRD IV 3. Capital considerations

24 Pillar 1 Pillar 2 Composition of Swedbank s CET1 and total capital ratio requirements Capital fully loaded CRD IV 280bp Automatic MDA Restrictions 22.0% 2.0% 6.9% 1.8% 2.5% 1.4% 3.0% 24.8% 13.5% 11.4% 27.8% 2.0% 8.6% 2.3% 2.5% 1.4% 3.0% 3.5% 4.5% 4.5% Swedbank CET1 Requirements Swedbank CET1 Capital Ratio Swedbank Total Capital Requirements 31.2% 16.3% 14.9% Swedbank Total Capital ratio Systemic Risk charge in Pillar 2 25% REA Mortgage Floor Individual Pillar 2 charge Capital Conservation Buffer Countercyclical buffer (2.0%) Systemic Risk Buffer Min. Additional T1 and T2 capital Minimum CET1 Requirement Available Distributable Items Swedbank AB (parent comp) FY 2017 Share premium reserve Retained earnings Available distributable items** Change due to IFRS Dividend* Comprehensive income, Q other 105 ADI Q * paid out in March 2018 ** Based on fully audited numbers ** The calculation of the ADI is based on the Annual report, why this exercise as per Q should be seen as an example based on changes during the year. Mar

25 Proposal from the Swedish FSA to move Pillar 2 risk-weight floor for mortgage loans to Pillar 1 Capital fully loaded CRD IV Systemic Risk charge in Pillar 2 Automatic MDA Restrictions 14.8% 2.0% 1.2% 2.5% 1.6% 3.0% 180bp Pillar 2 Pillar % 5.0% 11.6% 20.6% 18.6% 2.0% 5.5% 1.6% 2.5% 1.6% 3.0% 15.1% 3.5% Individual Pillar 2 charge Capital Conservation Buffer Countercyclical buffer (2.0%) Systemic Risk Buffer Min. Additional T1 and T2 capital 4.5% 4.5% Minimum CET1 Requirement New Proposal CET1 requirements New Proposal Swedbank CET1 Capital Ratio New Proposal Total Capital Requirements New Proposal Swedbank Total Capital ratio Mar

26 Regulatory uncertainty remains Capital fully loaded CRD IV Basel proposal largely as expected Awaiting final details from EU and then Swedish regulator on new standardised approach Likely long phasing in period potentially until 2027 Comfortable buffers to current capital requirements Feel great comfort in our capital generation capacity No need to review current dividend policy on the back of the proposal Swedish FSA proposal to move the 25% mortgage loan risk-weight floor from Pillar2 to Pillar1 IFRS 9 Limited impact on CET1 capital ratio of 6bps as per 1 Jan, 2018 Mar

27 MREL needs in line with expectations no imminent issuance plan Capital fully loaded CRD IV Requirements for 2018 set and published by the Swedish National Debt office (NDO) on 20 December % based on Total liabilities + Own funds 34.8% based on Risk Exposure Amount (REA) Transition period until 1 Jan, 2022 Already in compliance with current senior unsecured debt outstanding Issuance need to the equivalent of around SEK 88bn in subordinated MREL eligible securities to meet requirement by 1 Jan 2022 Sweden to adopt EU insolvency law Expected by year end Loss absorption amount Swedbank MREL requirements, SEKbn 128 Swedbank total capital *Nominal amount, ** Based on FY 2016 numbers 88 Recapitalisation amount 117 Senior unsecured debt >1Y** Based on proposal from Swedish FSA Loss absorption Recapitalisation amount*** amount*** *** Based on proposal from Swedish FSA to move the 25% risk-weight floor from Pillar2 to Pillar1 Mar

28 Asset portfolios low risk Group loan book* Q1 2018, total SEK 1 529bn Loan distribution Asset quality Hotels and restaurants, Retail Shipping and offshore, Transportation Manufacturing Other corporate lending 8% 7% Sweden Other property management Residential properties Agriculture and forestry 15% 30% 70% Private Corporate Baltic banking Household loans (90% mortgages) 70% 45% 55% Private Corporate Tenant ow ner associations * Loans to the public excl. loans to credit institutions and SNDO Mar

29 Liquidity and funding 4. Liquidity and funding

30 Core balance sheet structure SEKbn Assets Lithuania Latvia Estonia SEKbn Liabilities CET1 Suppl. capital Senior unsecured debt Simplified balance sheet Liquidity and funding Other corporate lending, Sweden & other Nordic countries Deposits 800 Other private, Sweden Swedish mortgage loans Covered bonds 0 Q Q Mar

31 Covered bond strategy Liquidity and funding Covered bond strategy Sweden SEK bn 100% 90% Swedish households financial assets SEKbn % % % EUR/USD SEK bn 50% 40% 30% Other 20% 10% SEK 20-50bn 0% <5Y 3-7Y >7Y Maturity, years Deposits, cash and retail bonds (LHS) Pension savings and mutual funds (LHS) Total financial assets (RHS) Equities (LHS) Other financial assets (LHS) Mar

32 Senior unsecured debt strategy Liquidity and funding SEKbn* 60 Senior unsecured debt maturity profile Senior unsecured debt *Nominal amount Mar

33 Conservative funding position LCR 140% (EU 2015/61) Liquidity and funding NSFR 110% (Basel committee) Issued around SEK 40bn of term funding in Q Plan to issue around SEK 145bn in 2018 Term funding issuance completed and planned Prefunded for more than 12 months SEKbn SEKbn 100 Covered bonds Senior unsecured debt 90 Planned, covered bonds Planned, senior unsecured debt Survival horizon Days forward Mar

34 Long-term funding maturity profile Liquidity and funding Long-term funding maturity profile, by funding source SEKbn Senior unsecured debt Covered bonds 200 Long-term funding maturity profile, by currency SEKbn Other GBP USD EUR SEK Mar

35 Private placements active in both covered bonds and senior unsecured debt Liquidity and funding All major currencies Bullet format, FRN or Fixed EUR 10m equivalent minimum size Sweet spots: Senior: 2.5-5Y Covered: 3-8Y Longer tenors also possible Open to larger placements with smaller investor groups Open to tap existing bonds Listing is optional FRN s (SEK and EUR) issued with a strike adjustment spread * Program formats available: Senior unsecured debt: MTN, NSV and potentially USD 144a format Covered bonds: MTN, RCB and Norwegian CB program *Spread added to the coupon to avoid negative coupon fixings. Bond issued above par to compensate for this. The above par value reflects the NPV of the adjusted spread 35

36 Liquidity reserve According to the template defined by the Swedish Bankers' Association Liquidity and funding Cash and holdings in central banks Deposits in other banks available overnight 505 Securities issued or guaranteed by sovereigns, central banks or multilateral development banks Securities issued or guaranteed by municipalities or public sector entities Covered bonds Issued by other institutions Own issued Securities issued by non-financial corporates 180 Securities issued by financial corporates (excl. covered bonds) 600 Other Total SEKm 1) Including loans to the Sw edish Ntional Debt Office 2) 95% of the securities in the liquidity reserve per Q are rated AAA. The rating requirement is AA-. Assets included in the liquidity reserve should comply w ith the follow ing: - assets shall be under the control of the Treasury function in the bank - assets can not be encumbered - market values are used for the assets - only unencumbered securities receiving 0-20% risk w eight under the standardised approach to credit risk of the Basel II framew ork can be included - securities received in reverse repo transactions shall be included in the liquidity reserve and securities used as collateral for repo transactions shall be excluded Mar

37 Rating Liquidity and funding On 20 April 2018, Moody s upgraded the rating of Swedbank AB (Swedbank) to Aa2 from Aa3. The upgrade reflects Moody's expectations of the bank's issuance of additional loss-absorbing debt in response to bank-specific MREL (Minimum Requirements for own funds and Eligible Liabilities) requirements set by the Swedish resolution authority. At the same time Moody s placed the high trigger AT1 ratings of Swedbank AB on review for downgrade as there will be negative pressure on these if the Swedish FSA adopts the current proposal to move the risk-weight floor for mortgages from pillar II to pillar I. November 24, 2017, S&P affirmed the rating of Swedbank at AA-/A-1+, with a stable outlook. The rating reflect Swedbank s strong business position, given the market-leading retail position, strong revenue performance, and efficiency, as well as prudent management and strategy. S&P also assess the capital and earnings as strong, reflecting the strong earnings capacity. The stable outlook on Swedbank resilient earnings and capital as Sweden's economy benefits from improvements in Europe's economic environment and the domestic housing market adjusts to higher volumes and stricter amortization requirements. May 26, 2016, Fitch upgraded the rating to AA- from A+, with a stable outlook. The main drivers behind the upgrade are: Execution of the low risk strategy including conservative risk-returns and underwriting standards, strong retail franchise and continued strong capitalisation. Short Long SACP 1 Short Long BCA 1 Short Long VR 1 Swedbank A-1+ AA- a+ P-1 Aa2 a3 F1+ AA- AA- Swedbank Mortgage A-1+ AA- - P-1 Aa Covered bonds - AAA Aaa Standalone Rating S&P (Stable) Moody's (Stable) Fitch (Stable) Apr

38 Swedbank is a labeled issuer of the ECBC Covered Bond Label Foundation ( ) 5. Cover pool data

39 Cover pool data 1 Rating, S&P / Moody s AAA / Aaa Total pool size SEK 928.6bn Geographic distribution Sweden 100% Current OC-level 79.6% Weighted average seasoning 2 Average LTV 3, 4 66 months WA LTV on property level (Max LTV) 49% Non-performing loans 5 None Repayment structure 7 Amortising 68% Interest only 32% Average loan size SEK Number of loans outstanding Number of borrowers Number of properties Swedbank is a labeled issuer of the ECBC Covered Bond Label Foundation ( ) Fixed /Floating interest loans 6 Fixed 29.3% Floating 70.7% Dynamic pool 1 As per 31 Mar, sector loans not included 3 Index valuation as per Dec, Maximum LTV: Residential 75%, Commercial 60%, Forest and Agriculture 70% 5 Past due loans > 60 days are not eligible for the cover pool 6 Floating interest loans < 365 days 7 Property level of cover pool Yes Mar

40 Cover pool data Swedbank is a labeled issuer of the ECBC Covered Bond Label Foundation ( ) Type of loans 31 Mar (based on loan volume) 2018 Residentials 92.0% of w hich Single-family housing 57.0% of w hich Tenant ow ner rights 20.9% of w hich Tenant ow ner association 9.4% of w hich Multi-family housing 4.7% 0.7% Commercial 0.8% Forest & Agricultural 6.5% 100.0% Population, Dec 2017 (thousands) Sw eden Stockholm, county Västra Götaland, county (incl. Gothenburg) Skåne, county (incl. Malmoe) Geographical distribution, Sw eden, per cent 31 Mar (based on loan volume) 2018 North 6.5 Norrbotten county (BD) 1.4 Västerbotten county (AC) 2.4 Västernorrland county (Y) 1.5 Jämtland county (Z) 1.2 Middle (including Stockholm) 44.0 Dalarna county (W) 2.0 Gävleborg county (X) 2.1 Värmland county (S) 2.0 Örebro county (T) 2.5 Västmanland county (U) 2.4 Uppsala county ( C) 4.1 Södermanland county (D) 2.1 Stockholm county (including Stockholm) (AB) 26.8 South (including Göteborg and Malmö) 49.5 Västra götaland county (Including Göteborg) (O) 17.9 Östergötland county (E) 4.2 Jönköping county (F) 3.5 Halland county (N) 4.1 Kronoberg county (G) 2.1 Kalmar county (H) 2.9 Skåne county (including Malmö) (M) 12.8 Blekinge county (K) 1.4 Gotland county (I) Mar

41 Cover pool loan-to-value distribution Weighted average LTV on property level 49% Swedbank is a labeled issuer of the ECBC Covered Bond Label Foundation ( ) LTV distribution per property 1 LTV distribution by volume 1, 2 30% 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% % loans of 0.7% of the cover pool are excluded as they are either guaranteed by a Swedish municipality or the government and have therefore no LTV assigned to them. 2 LTV distribution as defined by the Association of Swedish Covered Bond Issuers ( Mar

42 Cover pool loan type and loan-to-value distribution Swedbank is a labeled issuer of the ECBC Covered Bond Label Foundation ( ) WA LTV per property type 1 Percentage of the pool Average LTV per loan type 120% 120% 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% Single-family homes Tenant owner rights (apartments) Tenant owner associations Multi-family housing Commercial Forestry & Agricultural Total all types 1 0% 1 excluding public sector loans of 0.7% Mar

43 Over-collateralisation Strong resilience to house price changes 90% 80% 70% 60% 50% House price sensitivity of the cover pool OC, Q118 Min req. 2% Current OC-level of 79.6% 2% legal minimum requirement Swedbank is a labeled issuer of the ECBC Covered Bond Label Foundation ( ) Can withstand a severe house price drop and still be able to issue AAA-rated covered bonds 40% 30% 20% 10% 0% 0% -5% -10% -15% -20% -25% -30% -35% -40% -45% -50% House price drop Mar

44 Overview of the Swedish covered bond legislation The Covered Bond Act The Covered Bond Act entered into force on July 1, 2004 and is over-sighted by the Swedish FSA. Its main characteristics are: Dual recourse to the issuer and cover pool Dynamic, regulated pool of assets, frequently monitored by the Swedish FSA via appointment of an independent inspector Regulated valuation of cover pool assets which remain on the balance sheet The cover pool may consist of certain mortgage credits, public credits and supplemental assets. There is no requirement to segregate mortgage and public credits. Maximum LTVs: Residential 75%, Agricultural 70%, Commercial 60% Loan-to-value ratios and other limitations Maximum 10% commercial loans and 20% supplemental assets in cover pool Regular monitoring of the property values, revaluation of property prices in case of significant drop (generally interpreted as 15% drop) The S.O. Act amended, effective as of 21 June 2016, requires that the nominal value of the cover pool shall, at all times, be at least two per cent. higher than the aggregate nominal value of the liabilities relating to the covered bonds.. Regional constraint on collateral assets (Mortgage - EEA, - OECD) Matching requirements Benefit of a priority right over the cover pool Administration in event of bankruptcy The cover pool value shall always exceed the aggregate value of claims (including derivatives) A sound balance in terms of FX, interest rates and maturities must be achieved. It is deemed to exist when the present value of the cover pool at all times exceed the present value of liabilities (including derivatives), even on a stressed basis. Present value cover must hold even after 1% upward and downward shift in the yield curve and a 10% change in the currency Non-performing assets in the cover pool which are more than 60 days overdue must be disregarded for the purposes of the matching tests Holders of covered bonds and relevant derivative counterparties benefit from a priority claim over the cover pool should the institution be declared bankrupt and rank pari passu ahead of unsecured creditors and all other creditors of the institution in respect of assets in the cover pool The registered assets in the cover pool, the covered bonds and any relevant derivative contracts are required to be maintained as a unit and kept segregated from other assets and liabilities of the bankruptcy estate of the institution. The administrators-in-bankruptcy are then required to procure the continued timely service of payments due under the covered bonds and any relevant derivative contracts Source: 44

45 Swedish and Baltic macro 6. Swedish and Baltic economies

46 Sweden - Strong growth gradually slowing Key economic indicators 1, Most recent E 2018F 2019F Real GDP (calendar adjusted) 3.3 (Q4) CPI growth, average 1.9 (Mar) CPIF growth, average 2.0 (Mar) Unemployment rate (15-74), % of labor force 6.3 (Feb) Savings ratio (households),% Real disposable income (households) Kingdom of Sweden rated Aaa/AAA/AAA Swedish and Baltic macro Sources: Statistics Sweden & Swedbank Research 1 Annual percentage growth in percent unless indicated otherwise. 2 Seasonally adjusted and smoothed Domestic demand drives growth Sentiments remain elevated Feb

47 The Swedish economy Households remain cautious Housing investments to be replaced by other investments Percentage points of GDP Swedish and Baltic macro Overall investments are trending higher Exports have recovered Feb

48 The Swedish economy, cont. Strong labour market developments Solid public finances % of GDP Swedish and Baltic macro Budget balance forecast debt (Maastrict), rhs forecast Sources: Swedbank Research & Macrobond. Dampening inflation Weak krona Feb

49 The Swedish credit market Lending to households slows Interest rates remain low; while margins are stable Swedish and Baltic macro A gradual tightening of monetary policy Quantitative easing formally ended in Market pricing Swedbank forecast Outcome Riksbank forecast December 2018 Sources: Swedbank Research & Macrobond Feb

50 Baltics continued growth albeit at slower rates Key economic indicators 1, Swedish and Baltic macro Most recent E 2018F 2019F Real GDP Estonia 5.0 (Q4) Latvia 4.2 (Q4) Lithuania 3.9 (Q4) CPI growth, average Estonia 2.8 (Mar) Latvia 2.2 (Mar) Lithuania 2.7 (Mar) Unemployment rate (15-74), Estonia 5.3 (Q4) % of labor force Latvia 8.1 (Q4) Lithuania 6.7 (Q4) Ratings Republic of Estonia: A1/AA-/A+ Republic of Latvia: A3/ A-/A- Republic of Lithuania: A3/ A-/A- 1 % growth rate unless indicated otherwise, Y/Y growth for the most recent data Real economic growth peaked in 2017 Unemployment is declining 50

51 Estonia: Growth to slow after peak Economic growth expanded in the fastest pace in five years in 2017 Swedish and Baltic macro Domestic demand and export the main drivers Export and manufacturing output accelerate 51

52 Latvia: Solid growth to continue Supported by strong confidence, pro-cyclical fiscal policy, rapid wage growth, global tailwinds Swedish and Baltic macro Sharp cyclical pick up in growth to moderate in 2019 Sentiments are strengthening 52

53 Lithuania: GDP growth will revert to potential Weaker household consumption and export growth, but investments to pick up Swedish and Baltic macro Growth has peaked and start to ease Capacity constrains will limit export growth 53

54 Swedish housing and mortgage market 7. Swedish housing and mortgage market

55 The decline in prices is not unexpected Strong price increases in recent years due to high demand and limited supply Supply has increased on the back of a surge in housing investments Stricter borrowing criteria both by lenders and authorities Swedish housing and mortgage market Home prices and macroprudential measures

56 Price developments have varied across the country and type of housing Swedish housing and mortgage market Price increases, and recent falls, have been most pronounced in the Stockholm area Prices of apartments most volatile; single-family houses are holding up better The decline in housing prices slowed in the first quarter of 2018 Price developments flats and single family houses 1) Trends and average house prices, March ) Tenant owner rights 1 month 3 months 12 months SEK/sqm 2) Sweden total 0.0% +1.7% -8.6% Greater Stockholm -0.1% +1.7% -10.3% (85 109) Greater Gothenburg -0.4% +0.4% -6.8% (56 777) Greater Malmoe +0.3% +1.4% -5.6% (29 540) Single-family homes 1 month 3 months 12 months SEK 2) Sweden total 0.0% +3.8% -1.8% Greater Stockholm +0.4% +1.9% -6.7% Greater Gothenburg -0.6% +1.5% -2.4% Greater Malmoe +0.5% +5.8% +0.7% ) Source: Valueguard (HOX index) 2) Source: Mäklarstatistik, monthly average transaction prices (central city area) 56

57 New amortization requirement caused market distortions Transactions rose in January and February; slowed in March Housing prices bounced back in January; fell again in February and March Continued market adjustments expected following the new amortization requirement The decline in prices slowed down in Q1 57

58 Household borrowing dampens while financing costs remain low Mortgage volume growth benefitting from new housing supply, housing turnover and higher mortgage amounts by existing borrowers Housing financing costs at historically low level Reasonable to expect some slowdown from last year s 7.4% market growth; February growth was 7.2% Mortgage loan growth and housing prices Low mortgage costs Swedish housing and mortgage market 58

59 Structural foundation for the housing and mortgage market Swedish housing and mortgage market Full recourse (very limited debt forgiveness possibilities) No securitisation (on balance sheet), no sub-prime market, no 3 rd party origination Restricted buy-to-let market limited speculation 64% home ownership Rental market is regulated Transparent credit information (credit information agency, ly available information regarding income, debt, payment track record etc. Consumer credit legislation requires affordability calculations including stress test of higher interest rate and conservative cost of living Strong social security and generous unemployment benefit system 59

60 Household fundamentals support the housing market Swedish housing and mortgage market Population growth and urbanisation trends continue Solid labour market developments Solid balance sheets among households Construction lags population growth Solid labour market Strong household balance sheets 60

61 Overall indebtedness among Swedish households remains low Swedish housing and mortgage market Of appr. 4 million households less than 50% carry a mortgage Median debt-to-income ratio of mortgage holders less than 300% Less than 15% of mortgage holders have a debt to income ratio of more than 600% Debt ratios of Swedish households Distribution of debt ratios in 2016 Total debt as % of gross income 100% 80% 60% 40% 20% 0% Source: Riksbank > No mortgages No. of households w/ mortgages >700 Source: Riksbank Total debt as % of post tax income 61

62 The Swedish economy underpins the housing market Fiscal policy will be supportive and public debt is at a historic low level Monetary policy to remain expansionary Economic growth expected to continue at solid rates despite weakening housing investments Swedish housing and mortgage market Expansionary fiscal policy Gradually tightened monetary policy Slowdown in growth from high rates % of GDP %points Budget balance forecast debt (Maastrict), rhs forecast Sources: Swedbank Research & Macrobond Market pricing Swedbank forecast Outcome Sources: Swedbank Research & Macrobond 62

63 Swedbank s exposure to the Swedish residential property market Swedish housing and mortgage market Swedbank has a low risk residential property portfolio Origination discipline and profitability have been prioritised over volume Engagement in low risk projects with well-known residential property developers will continue 63

64 Swedbank has a low-risk residential property portfolio Swedish housing and mortgage market Real estate lending, net loans in Sweden, SEKbn Total real estate portfolio 17 Of which: Residential property development Private mortgages: SEK 770bn, average LTV 55% Tenant owner associations ( TOA ): SEK 109bn SEK 99bn existing TOA, average LTV 39% SEK 10bn TOA under construction Property management: SEK 193bn, average LTV 58% SEK 67bn in residential property management (rental apartment properties) SEK 125bn in other property management Construction SEK 16bn SEK 7bn residential property development SEK 9bn infrastructure, groundwork, craftsmen Swedbank has pursued a low risk strategy by tightening origination standards, and prioritising price and risk over volume growth Bulk of assets in low risk segments Average LTVs in lower ranges Residential property developer exposures of SEK 17bn Mar

65 1% 4% 7% 10% 13% 16% 19% 22% 25% 28% 31% 34% 37% 40% 43% 46% 49% 52% 55% 58% 61% 64% 67% 70% 73% 76% 79% 82% 85% 88% 91% 94% 97% 100% Private mortgages a low risk portfolio Low average LTVs (55% in back book, March 2018) Low historic losses (0.02% on average during the last 25 years) About 73% of total loans to single family homes Swedbank has grown, but at a slower rate than the market Swedish housing and mortgage market Growth YoY but lower than the market Loan growth in % Loan growth Swedbank Loan growth market High diversification Loans net 1) by geography 26% 27% SEK 770bn Stockholm region Malmö region < inhabitants 7% 28% 12% Gothenburg region > inhabitants Only 1% above 75% LTV Loans 1) to Private Mortgage by (sliced ) LTV-bucket SEKbn 86% with LTV <50% 99% with LTV <75% 1) As of 31 March

66 1% 5% 9% 13% 17% 21% 25% 29% 33% 37% 41% 45% 49% 53% 57% 61% 65% 69% 73% 77% 81% 85% 89% 93% 97% >100% Tenant Owner Associations low leverage Total loan portfolio SEK 109bn, of which SEK 10bn is construction loan for new development: 50-80% of the tenant owner rights needs to be pre-sold before start, and 100% before final financing When the construction is finalised about 60% of construction loans will be repaid through equity from the TOA members Low historic losses (average 0.17% over the last 25 years). Losses of which to an absolute majority occurred during the 1990 s Swedish housing and mortgage market Growth, but lower than the market Portfolio reflects market Average LTV of only 39% Loan growth in % Loans net 1) by geography 30% 13% SEK 109bn 36% Loans 1) to Tenant Owner Associations by LTV-bucket 4 SEKbn 95% with 99.7% with LTV <50% LTV <75% % 11% 1 0 Loan growth Swedbank Loan growth market Stockholm region Malmö region < inhabitants Gothenburg region > inhabitants 1) As of 31 March

67 Residential property developers - low exposure Total loan portfolio of SEK 17bn, mainly to the larger listed construction firms, with which Swedbank has long-term relations SEK 10bn of the loans are related to tenant-owner rights projects 90% of these projects will be finalised in 2018 and 2019 SEK 7bn of the loans are related to other construction activities On average 87% of the apartments are pre-sold Swedish housing and mortgage market Tenant-owner rights related construction loans 1) the risk is highly mitigated 24% By location 1) 4% 10% 5% Stockholm region Malmö region < inhabitants 57% Gothenburg region > inhabitants Finalisation year 2) 38% 10% SEK 10bn % Average % pre-sold by finalisation year ) As of 31 March 2018, 67 2) Share of committed exposure

68 1% 4% 7% 10% 13% 16% 19% 22% 25% 28% 31% 34% 37% 40% 43% 46% 49% 52% 55% 58% 61% 64% 67% 70% 73% 76% 79% 82% 85% 88% 91% 94% 97% 100% Residential property management stable cash-flow generation Swedish housing and mortgage market Total loans of SEK 67bn towards residential property management companies Financing of rental apartment properties Well-known companies with solid finances and high collateralization Strong and stable cash-flow generation, no speculation and low vintage risk Slower growth in Loan growth, in % Loan growth Swedbank Regional cities dominate Loans net 1 ) by geography 25% 41% Stockholm region Malmö region < inhabitants SEK 67bn 19% 8% 7% Gothenburg region > inhabitants Average LTV of 54% Loans 1) to Residential property management by LTV-bucket SEKbn 87% with LTV <50% 99.8% with LTV <75% 1) As of 31 March

69 Appendix

70 Swedbank largest retail bank in our four home markets This is Swedbank Sweden Population 10.1m Private customers 4.1m Corporate customers Organisations Branches 205 Cards 4.2m Number of card purchases 296m Digitally active customers* 2.9m Latvia Population 2.0m Private customers 0.9m Corporate customers Branches 34 Cards 1.0m Number of card purchases 37.9m Digitally active customers* 0.5m Estonia Population 1.3m Private customers 0.9m Corporate customers Branches 34 Cards 1.1m Number of card purchases 48.8m Digitally active customers* 0.5m ~86%* * Share of loan book ~10%* Lithuania Population 2.9m Private customers 1.5m Corporate customers Branches 61 Cards 1.7m Number of card purchases 36.4m Digitally active customers* 0.7m Source: Swedbank Factbook Q * Number of customers that have made a payment, transfer, application, investments or lending activity in the last month 70

71 Swedbank low-risk bank with strong capital base Low risk a Board of Directors strategic priority ensures access to funding markets and low funding cost Retail profile and four home markets a key feature Around 86% of total loans originated in Sweden - Swedish mortgages account for 50% of total loans 90% of total loans are collateralised (77.6% real estate and 12.3% other collateral) Strong capital position Board of Directors decision to maintain a buffer above prevailing SFSA capital requirements to have operational flexibility current buffer around 280bp Conservative funding and liquidity position survival horizon longer than 12 months assuming closed funding markets, NSFR 110% and LCR 140%* Baltic operations self-funded loan-to-deposit ratio < 100% * From Q the Liquidity Coverage Ratio (LCR) is calculated in accordance with the Commission Delegated Regulation (EU 2015/61) of 10 October 2014 (also, see Fact book, page 57) NSFR LCR* CET1 ratio, CRDIV (RHS) Liquidity & capital, % This is Swedbank Q Credit impairment ratio, bps Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Mar

72 Swedbank strong and stable earnings capacity This is Swedbank Four home markets Sweden, Estonia, Latvia and Lithuania Strong and stable economies Market-leading position in all home markets Largest customer base in all home markets Retail profile ensures stable earnings with low volatility High cost efficiency a strategic priority ensures good profitability Stable earnings support a low risk profile and a strong capital position Profit before impairments, SEKbn 10 One-offs from disposals Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Mar

73 Swedbank market leader in cost efficiency This is Swedbank Best-in-class cost efficiency an executive management strategic priority Executive management strongly focused on cost and change management Integrated in corporate culture Focus on straight-through-processing Evolving household banking model digitisation trend Retail profile a key feature Four home markets Sweden, Estonia, Latvia and Lithuania reduce complexity Largest private and SME customer base High degree of digitisation in home markets Total expenses, SEKm Acquisition of Sparbanken Target 18 C/I ratio, % Mar

74 Focus on sustainable business Improved sustainability scores Dow Jones Sustainability Index Swedbank Robur wins Sustainable actor of the year award Sustainable actor of the year Swedbank Robur won Söderberg & Partners Sustainable actor of the year award. It was noted that Swedbank Robur promted companies to become better at sustainability, by making its voice heard at both general meetings and in nomination committees. Stronger Environmental Management System (EMS) ISO Swedbank is included in The Sustainability Yearbook 2018 The Sustainability Yearbook Swedbank s upgraded Environmental Management System was certified with the new and more rigorous standard ISO14001:2015. The Sustainability Yearbook lists the world s most sustainable companies in each industry as determined by their score in RobecoSAM s annual Corporate Sustainability Assessment. Green bonds Swedbank taking the lead Swedbank ran the books of 7 green bond deals, a total volume of USD 528m in the first quarter of Through the dedicated work of Swedbank s Large Corporates & Institutions, we have taken a substantial lead in the market both with regards to the number of deals and volumes issued. On March 22 Swedbank successfully issued its second green bond, a SEK 2 billion, senior unsecured 5 year bond, which will contribute to a more sustainable society as well as contribute to tackle climate change. Eligible green assets Renewable energy Energy efficiency Sustainable management of living natural resources Pollution prevention and control Clean transportation Sustainable Development Goal SDG7 and SDG13 SDG7, SDG11 and SDG13 SDG15 SDG6 and SDG11 SDG9 and SDG11, SDG13 Sustainability Indicators: towards the 2030 Agenda Swedbank has developed a new methodology, Sustainability Indicators, to review the progress towards the UN 2030 Agenda for Sustainable Development. The aim is to support the business looking at ESG (environmental, social, governance) criteria and help to identify weaknesses and strengths in Sweden and the Baltic countries. Progress towards UN SDGs, % of benchmark* Estonia Latvia Lithuania Sweden Sustainable medium-term grow th (SDGs #4, 8, 9) Social inclusion (SDGs # 1, 3, 5, 10) Environmental protection (SDGs # 6, 7, 11, 12, 13) Governance and institutions (SDGs # 16, 17) Dow nw ard/stable trend during last 5 years (4 years for governance) * Benchmark is 90 or 10th percentile of the EU 28 in In total 40 indicators covering 14 from 17 SDGs, aggregated to four pillars. Traffic lights - Sw eden: >90% for green, 70-90% for yellow 0-70% for red; Baltics: >80% for green, 60-80% for yellow, 0-60% for red. 74

75 Our objective Strategy Daily banking is fully digital 100% self service Meet our customers with relevant offerings, in our own or external channels Data and knowledge automation to foresee needs, provide proactive offering and advice. This will generate loyalty as well as increased sales Have an attractive financial platform for customers and 3rd party suppliers, providing valueadded and competitive edge Branches attract new customers - build the brand and increasingly focus on corporate customers 75

76 Sweden the dominating home market Total lending to the public amounts to SEK 1 574bn (as per Q1 2018), out of which around 86% is originated in Sweden Estonia makes up 48% of total lending in the Baltics This is Swedbank Lending distributed by countries Sweden 85.7% SEK 1 350bn Estonia 4.8% Swedish Mortgage loans (private+corp) Latvia 2.2% Other corporate (incl. LC&I, Sweden) Lithuania 3.2% Other* 4.1% * Mostly Norway and Finland Mar

77 No automatic sanctions for breaching the Pillar 2 capital requirements Capital fully loaded CRD IV It is particularly important that FI has the possibility of giving due consideration to the specific situation in which a firm in financial stress finds itself For example, certain risks included in the assessment of the Pillar 2 basic requirement might have materialized, which might mean there are no longer grounds for requiring the firm to hold capital for them. 22.0% 10.6% It ought to be positive for financial stability that a firm has the possibility to restore its capital without the firm necessarily becoming subject to priory specified and automatic legal restrictions. In other words, firms are hence given the possibility of re-establishing their capital in a strained situation without automatic restrictions on distributions or, depending on the size of the capital shortage, a formal resolution phase being activated." Hence a firm may freely choose the most suitable way of restoring the capital in that specific situation. For example, the firm is not obliged to halt or limit dividends or interest payments on Tier 1 capital contributions, if the firm can identify other and more appropriate ways of restoring the capital sufficiently quickly. Automatic MDA Restrictions 11.4% Swedbank CET1 Requirements Pillar 2 CET requirement Pillar 1 CET1 requirement Mar

78 Wholesale funding profile Liquidity and funding Q % or SEK 293bn of wholesale funding < 12 months, SEK 404bn placed with central banks Average maturity for covered bonds, 39 months Average maturity for senior unsecured bonds, 32 months Outstanding wholesale funding, SEK 902bn Q Q Maturity profile of outstanding wholesale funding 6% 16% % 0-3M 3-12M >1-5Y >5Y Covered bonds Senior unsecured Structured retail bonds Short-term programmes 61% Mar