Swedbank Investor presentation

Transcription

1 Swedbank Investor presentation November 2017

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 62 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 five consecutive years *According to EBA stress test 2016 Swedbank Q (Q2 2017) Stable result ROE: 15.0% (15.6%) Top 10 shareholders 1. Sparbanksgruppen, 9.5% 2. Folksam, 7.1% 3. Alecta, 4.8% 4. AMF, 4.6% 5. Swedbank Robur, 4.1% 6. Sparbanksstiftelser, 4.0% 7. BlackRock, 2.4% 8. Vanguard, 2.4% 9. SEB Fonder, 2.1% 10. Norges Bank, 1.9% Swedish owners, 58.6% Int l owners, 41.4% Sweden Our four home markets Cost/income ratio: 0.37 (0.38) CET1 capital ratio: 23.9% (24.6%) with requirements of 21.6% (fully loaded CRD IV) Leverage ratio: 4.7% (4.8%) Credit impairment ratio: 0.06% (0.10%) Share of impaired loans: 0.55% (0.53%) Total provision ratio for impaired loans: 45% (45%) Liquidity and funding: LCR: 145%, NSFR: 109% Credit ratings: AA-(N)/AA-(S)/Aa3(S) from S&P/Fitch/Moody s Estonia Latvia Lithuania Sep

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% YTD Low risk Credit impairment ratio 0.08% YTD Market-leading cost efficiency Cost income ratio 38% YTD Solid capitalisation 230bps buffer to regulatory requirement 23.9% Source: Swedbank Fact book 3Q 2017, Annual Report

7 Market leading position in our home markets Loans (private)* Loans (corporate)* Deposits (private) Deposits (corporate) Payments** Funds This is Swedbank 23% 17% 21% 19% 37% 21% Sweden 77% 83% 79% 81% 63% 79% Estonia 34% 53% 47% 45% 66% 55% 58% 42% 41% 59% 58% 42% Latvia 69% 31% 83% 17% 69% 31% 85% 15% 50% 50% 58% 42% Lithuania 66% 34% 82% 18% 61% 39% 77% 23% 51% 49% 63% 37% * Excluding the Swedish National Debt Office and repurchase agreements ** Bank Giro for Sweden, domestic payment transactions (Estonia, Latvia, Lithuania) Source: Swedbank Fact book 3Q 2017 Swedbank Other 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) This is Swedbank Credit impairment (bps) Return on equity (%) Cost / income ratio (%) Sep

9 Stable and profitable business mix - retail bank profile This is Swedbank Total income Net Interest Income Net Commission Income 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% NII NCI NGL Other % of total loans in Sweden 50% Swedish mortgages Baltic banking very profitable 10% of Group lending 19% of Group operating profit, YTD 2017 Sweden s largest fund manager (SEK1.2trn AuM) 5 th largest card acquirer & 10 th largest card issuer in Europe Lending and deposits 62% Other 14% Asset Management 10% Payment, Cards 9% Treasury, Trading and Capital Markets 5% Source: Swedbank Fact book 2Q 2017 and YE 2016 report 9

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 Jun

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 Strategic achievements - YTD 2017 Strategy Launched in Sweden Already operating in the Baltics Fully digital consumer lending Retail channels Positive AuM inflows Strategic co-operation with Kepler Cheuvreux Enhanced equity capabilities Personal finance app for customers Mina Tjänster Fintech partnership SmartID launched in the Baltics Enables faster transaction process for customers Digital customer identification and authorisation PayEx acquisition Regulatory approval received Enhanced merchant omnichannel payment solutions 13

14 Swedbank enlarges its green footprint Strategy Robur s sustainability funds recognized Green Bond Framework established Swedbank s Green Bond Framework is compliant with the Green Bond Principles. Nordic Swan Ecolabel. Five of Swedbank Robur's sustainability funds have met the stringent requirements that apply when the Nordic Ecolabel makes its entry into the fund market. The Nordic Ecolabel makes it easy to find and choose funds that affect companies in a sustainable direction. The proceeds of each Swedbank Green Bond will be used to (re)finance loans and investments that promote the transition to low-carbon, climate resilient and sustainable economies and provide clear environmental benefits. Eligible Green Assets Renewable Energy Energy Efficiency Sustainable Management of Living Natural Resources Pollution Prevention and Control Sustainable Development Goal SDG7 and SDG13 SDG7, SDG11 and SDG13 SDG15 SDG6 and SDG11 Clean Transportation SDG9 and SDG11, SDG13 Industry winner and improved sustainability scoring Dow Jones Sustainability index Sustainable Brand Index B2B 2017 Industry winner. Swedbank gradually increases the scoring in DJSI Continued activity in Green bond transactions SEK 150m Due 2020 October 2017 SEK 300m Due 2021 August 2017 SEK 200m Due 2020 August 2017 Issuer: Vasakronan Issue date: 5 October 2017 Use of Proceeds: Financing projects with environmental benefits Certification: Cicero Role: Sole Arranger Issuer: Fabege Issue date: 22 August 2017 Use of Proceeds: Financing of green buildings Certification: Sustainalytics Role: Sole Arranger Issuer: Vasakronan Issue date: 22 August 2017 Use of Proceeds: Financing projects with environmental benefits Certification: Cicero Role: Sole Arranger 14

15 Swedbank creates value Strategy Return on Equity >15% target 15.4% YTD Common Equity Tier 1 ratio One of the highest among European banks 23.9% Dividend per share 75% payout ratio for 5 th year in a row SEK Source: Swedbank Fact book 3Q

16 Quarterly financial update 2. Quarterly financial update

17 Swedish Banking Good loan volume growth Quarterly financial update SEKm Q3 17 Q2 17 QoQ Net interest income Net commission income Other income Total income Total expenses Profit before impairments Credit impairments Ratios Q3 17 Q2 17 ROE, % C/I ratio Net interest income Continued mortgage loan volume growth and stable back-book margins Strong deposit volume growth Net commission income PayEx consolidated in September Higher customer card activity while brokerage and lending & guarantees were weaker Solid asset quality Volumes, SEKbn Q3 17 Q2 17 QoQ Loans Deposits Sep

18 Baltic Banking Continued solid performance Quarterly financial update SEKm Q3 17 Q2 17 QoQ Net interest income Net commission income Other income Total income Total expenses Profit before impairments Credit impairments Tax Ratios Q3 17 Q2 17 ROE, % C/I ratio Net interest income Loan volume growth in all three countries Stable margins Stable net commission income Negative FX effects Strong asset quality Higher tax expense due to increased dividend policy in Estonia Volumes, SEKbn Q3 17 Q2 17 QoQ Loans Deposits Sep

19 Large Corporates & Institutions Resilient result Quarterly financial update SEKm Q3 17 Q2 17 QoQ Net interest income Net commission income Net gains and losses Other income Total income Total expenses Profit before impairments Credit impairments Stable net interest income Net commission income seasonally weaker Slower trading mitigated by FX effects Lower provisions for oil related exposures Ratios Q3 17 Q2 17 ROE, % C/I ratio Volumes, SEKbn Q3 17 Q2 17 QoQ Loans Deposits Sep

20 Group results Stable result SEKm Q3 17 Q2 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 Ratios Q3 17 Q2 17 ROE, % C/I ratio CET1 capital ratio, % Loan volume growth strengthened net interest income Seasonally weaker net commission income Weaker net gains and losses due to lower market volatility PayEx consolidated Total expenses FY 2017 expected at around SEK 16.1bn One-off impairment CET1 capital ratio negatively impacted by 37bps Solid asset quality Tax regime changes in the Baltics Quarterly financial update Sep

21 Capital Strong capitalisation no excess capital Quarterly financial update 25.0% 24.2% 24.6% 23.9% 21.6% CET1 capital decreased by SEK 0.1bn Positive effect from net profit of SEK 0.9bn excl. dividend Q Q Q Q CET1 capital ratio requirement Negative effect from PayEx consolidation of SEK 1.1bn REA increased by SEK 12.8bn Buffer of around 230bps Sep

22 Capital Increased REA Quarterly financial update SEKbn Exposure change increased primarily due to loan volume growth Further model adjustments in corporate portfolio relating to default frequency PayEx consolidation increases REA Q Exposure change Rating migration (PD) LGD changes Increase Other credit risk Decrease Other risk Operational risk Q Sep

23 Group Solid asset quality Quarterly financial update Credit impairments, SEKm Q3 17 Q2 17 QoQ Swedish Banking Baltic Banking Large Corporates & Institutions Swedbank Group Credit impairments in line with expectations Ratios Q3 17 Q2 17 Credit impairment ratio, % Share of impaired loans, gross % Total provision ratio for impaired loans, % Sep

24 Capital fully loaded CRD IV 3. Capital considerations

25 Pillar 1 Pillar 2 Composition of Swedbank s CET1 and total capital ratio requirements Capital fully loaded CRD IV 230bp 30.9% 27.3% Systemic Risk charge in Pillar % 2.0% 25% REA Mortgage Floor 21.6% 2.0% 8.2% 16.1% Individual Pillar 2 charge Automatic MDA Restrictions 6.6% 1.7% 2.5% 1.3% 3.0% 12.6% 11.3% 2.3% 2.5% 1.3% 3.0% 3.5% 4.5% 4.5% 14.8% Capital Conservation Buffer Countercyclical buffer (2.0%) Systemic Risk Buffer Min. Additional T1 and T2 capital Minimum CET1 Requirement Available Distributable Items Items Swedbank AB (parent comp) FY 2016** Q Share premium reserve Retained earnings Available distributable items Dividend* Comprehensive income other 195 ADI Q * paid out in April 2017 ** Based on fully audited numbers Swedbank CET1 Requirements Swedbank CET1 Capital Ratio Swedbank Total Capital Requirements Swedbank Total Capital ratio Sep

26 Regulatory uncertainty remains Capital fully loaded CRD IV Basel proposal input and output floors Awaiting final details on new standardised approach Discussion on level of output floor on-going Likely long phasing in period potentially until 2027 Swedish FSA will review Pillar 2 requirements imposed on Swedish banks Basel floors won't force Swedish banks to issue capital. Fitch Ratings, April 2017 IFRS9 impact Sep

27 Regulatory uncertainty remains Capital fully loaded CRD IV Relevance: MREL EU banks under BRRD SEKbn 140 MREL requirements Timing: Amount: What qualifies: Yes Applies to Swedbank: 1 st Jan, 2018 transition period - fully implemented 1 st Jan, 2022 Set individually by Riksgälden (National Debt Office) Loss Absorption Amount (LAA): Total capital requirements less combined buffers in Pillar1, Mortgage REA floor 15-25% and systemic risk buffer in Pillar2 Recapitalisation Amount (RCA): Total capital requirements less combined buffers in Pillar1. Capital (LAA) + Senior >1Year (RA) % 20.5% Type of subordination is up to each individual bank to decide: Structural (hold-co) Statutory (insolvency law) Contractual (documentation) Loss absorption amount Swedbank total capital Recapitalisation amount Senior unsecured debt >1Y* *Nominal amount Sep

28 Asset portfolios low risk Group loan book* Q3 2017, total SEK 1 488bn CET1 EBA stress test, 2016, % Hotels and restaurants, Retail Shipping and offshore, Transportation Manufacturing Other corporate lending Other property management Residential properties Agriculture and forestry 8% 7% 15% 25% 20% 15% 10% 5% Asset quality 0% SHB Nordea SEB Swedbank Household loans (90% mortgages) 70% Sweden Loan distribution Baltic banking 31% 69% Private Corporate 46% 54% Private Corporate Tenant ow ner associations * Loans to the public excl. loans to credit institutions and SNDO Sep

29 Liquidity and funding 4. Liquidity and funding

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

31 Covered bond strategy Liquidity and funding Sweden SEK bn Covered bond strategy 100% Swedish households financial assets SEKbn % 80% % % EUR/USD SEK bn 50% 40% Other SEK 20-50bn 30% 20% 10% <5Y 3-7Y >7Y Maturity, years 0% Deposits, cash and retail bonds (LHS) Equities (LHS) 0 Pension savings and mutual funds (LHS) Other financial assets (LHS) Sep 2017 Total financial assets (RHS) 31

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

33 Conservative funding position LCR 145% (Swedish FSA definition FFFS 2012:6) Liquidity and funding NSFR 109% (Basel committee) Issued SEK 161bn of term funding YTD Q Plan to issue around SEK 200bn in 2017 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 Sep

34 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 34

35 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 3 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 175 Securities issued by financial corporates (excl. covered bonds) 329 Other Total ) 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-. SEKm 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 Sep

36 Rating Liquidity and funding On 1 September 2017, Moody s affirmed Swedbank's ratings at Aa3/P-1 with a stable outlook. The ratings reflect Swedbank s strong credit quality, solid regulatory capital and stable earnings, underpinned by its established franchise in Sweden. Swedbank is also expected to be broadly resilient to the risks in the residential housing market and household sector in Sweden. 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. February 17, 2016, S&P affirmed the rating of Swedbank at AA-/A-1+. 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 outlook on the rating is negative, reflecting S&P s view of heightened economic risk for the Swedish economy. S&P (Negative) Moody's (Stable) Fitch (Stable) Short Long SACP 1 Short Long BCA 1 Short Long VR 1 Swedbank A-1+ AA- a+ P-1 Aa3 a3 F1+ AA- AA- Swedbank Mortgage A-1+ AA- - P-1 Aa Covered bonds - AAA Aaa Standalone Rating Stable outlook Sep

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

38 Cover pool data 1 Rating, S&P / Moody s AAA / Aaa Total pool size SEK 915.7bn Geographic distribution Sweden 100% Current OC-level 72.0% Weighted average seasoning 2 Average LTV 3, 4 66 months WA LTV on property level (Max LTV) 50% Non-performing loans 5 None Fixed /Floating interest loans 6 Fixed 28.7% Floating 71.2% Repayment structure 7 Amortising 66% Interest only 34% Average loan size SEK Number of loans outstanding Number of borrowers Number of properties Dynamic pool 1 As per 30 Sep, sector loans not included 3 Index valuation as per Aug, 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 Swedbank is a labeled issuer of the ECBC Covered Bond Label Foundation ( ) Yes Sep

39 Cover pool data Type of loans (based on loan volume) Residentials 91.9% of w hich Single-family housing 56.9% of w hich Tenant ow ner rights 20.5% of w hich Tenant ow ner association 9.8% of w hich Multi-family housing 4.7% 0.8% Commercial 0.7% Forest & Agricultural 6.6% Population, Jun 2017 (thousands) 100.0% Sw eden Stockholm, county Västra Götaland, county (incl. Gothenburg) Skåne, county (incl. Malmoe) Geographical distribution, Sw eden, per cent 30 Jun (based on loan volume) 2017 North 6.4 Norrbotten county (BD) 1.3 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) 4.0 Södermanland county (D) 2.1 Stockholm county (including Stockholm) (AB) 26.9 South (including Göteborg and Malmö) 49.6 Västra götaland county (Including Göteborg) (O) 17.8 Östergötland county (E) 4.2 Jönköping county (F) 3.5 Halland county (N) 4.0 Kronoberg county (G) 2.1 Kalmar county (H) 2.9 Skåne county (including Malmö) (M) 13.1 Blekinge county (K) 1.4 Gotland county (I) 0.6 Swedbank is a labeled issuer of the ECBC Covered Bond Label Foundation ( ) Sep

40 Cover pool loan-to-value distribution Weighted average LTV on property level 50% 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 0.8% 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 ( Sep

41 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 ownertenant owner rights associations (apartments) Multi-family housing Commercial Forestry & Agricultural Total all types 1 0% 1 excluding public sector loans of 0.8% Sep

42 Over-collateralisation Strong resilience to house price changes 80% 70% 60% 50% 40% 30% 20% 10% House price sensitivity of the cover pool OC, Q317 Min req. 2% Current OC-level of 72% 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 0% 0% -5% -10% -15% -20% -25% -30% -35% -40% -45% -50% House price drop Sep

43 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: 43

44 Swedish and Baltic macro 6. Swedish and Baltic economies

45 Sweden - Strong growth gradually slowing Key economic indicators 1, Most recent F 2018F 2019F Real GDP (calendar adjusted) 3.1 (Q2) CPI growth, average 1.7 (Oct) CPIF growth, average 1.8 (Oct) Unemployment rate (15-74), % of labor force 6.7 (Sep) Savings ratio (households),% Real disposable income (households) Kingdom of Sweden rated Aaa/AAA/AAA Swedish and Baltic macro 1 % growth rate unless indicated otherwise, Y/Y growth for the most recent data 2 seasonally adjusted and smoothed Domestic demand drives growth Sentiments remain elevated Oct

46 The Swedish economy Households remain cautious Housing is driving investments Swedish and Baltic macro Cautious recovery of exports Services dominate export pick up Oct

47 The Swedish economy, con t Strong employment; wages and unemployment lag Solid public finances Swedish and Baltic macro Inflation is picking up The krona strengthens Oct

48 The Swedish credit market Lending growth dampens Interest rates remain low; while margins are steady Swedish and Baltic macro Riksbank s policy rate unchanged until 2018 Quantitative easing during the remainder of 2017 Oct

49 Baltics strong performance Swedish and Baltic macro Key economic indicators 1, % growth rate unless indicated otherwise, Y/Y growth for the most recent data Real growth is picking up Most recent F 2018F 2019F Real GDP Estonia 5.7 (Q2) Latvia 4.0 (Q2) Lithuania 4.1 (Q2) CPI growth, average Estonia 3.7 (Sept) Latvia 2.9 (Sept) Lithuania 4.8 (Sept) Unemployment rate (15-74), % of labor force Estonia 7.0 (Q2) Latvia 8.9 (Q2) Lithuania 7.0 (Q2) Ratings Republic of Estonia: A1/AA-/A+ Republic of Latvia: A3/ A-/A- Republic of Lithuania: A3/ A-/A- A gradual slowdown in unemployment 49

50 Estonia: Growth momentum is strengthening Improving foreign demand helps exports; investment growth recovers Swedish and Baltic macro Improving foreign demand and investment growth Export and manufacturing output accelerate 50

51 Latvia: Growth accelerates Support from rising external demand and improved export market shares, EU funds, credit growth, and tightening labour market. Swedish and Baltic macro Sharp cyclical pick up in growth to moderate in 2019 Sentiments are strengthening 51

52 Lithuania: Exceeding expectations Supported by stable confidence & higher foreign demand Swedish and Baltic macro Strong & broad-based GDP growth Pick up in exports in

53 Swedish housing and mortgage market 7. Swedish housing and mortgage market

54 Swedish mortgage market Swedish housing and mortgage market No securitisation (on balance sheet), no sub-prime market, no 3 rd party origination Restricted buy-to-let market 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 Very limited debt forgiveness possibilities (full recourse) Strong social security and generous unemployment benefit system 54

55 Household borrowing growth Swedish housing and mortgage market Lack of residential housing drives household lending growth Annual % change, total lending (s.a.) Annual % change, mortgage lending (s.a.) Data up to and including September LTV cap of 85% Mandatory since 2010 (SFSA) (Min 15% own equity) Amortisation (1 st June 2016) 2% annual amortisation >70% LTV 1% annual amortisation >50% LTV Proposed (SFSA) 1% additional amortisation if DTI > 450% Risk-weight floor of 25% on mortgage loans (Pillar2) 55

56 High amortisation in new lending with LTV >50% Average LTV in new lending is 68% (average LTV in mortgage back book is 53%) 99% of households with LTV >70% amortise in Q3 (95% in mortgage back book) 98% of households with LTV 50-70% amortise in Q3 (81% in mortgage back book) In total 87% of households amortise in Q3 (68% in mortgage back book) Swedish housing and mortgage market 80% 75% 70% Volume-weighted portfolio LTV 71% 100% 90% 80% Amortisation level new lending in LTV buckets 1) 99% 98% 87% 65% 67% 70% 60% 55% 50% Q2 Single-family homes, back book Single-family homes, new lending Tenant owner rights, back book Tenant owner rights, new lending 55% 53% 60% 50% 40% 2012Q2 2013Q2 2014Q2 2015Q2 2016Q2 0-50% 50-70% >70% Total LTV 1) The amortisation rates are based on amortisation on property level (i.e. amortisation YES or NO) and should not be mixed up with the share of households compliant with SFSA s new amortisation requirement 57% 2017Q2 56

57 Shortage of housing Swedish housing and mortgage market 2016 Highest number of completed apartments since In addition apartments through rebuilding's, in total apartments. According to the National board of Housing, Building and Planning (Boverket) the need for housing in is units (average units per year) Housing starts FY 2016 show a trend-shift Housing completions (thousand units / year) 2016: +144 th. Apartment buildings Housing starts (thousand units / year) Single-family dwellings Apartment buildings Single-family dwellings Population growth (thousand persons) Average for the period Average annual need

58 No. of households w/ mortgages 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 > >700 Source: Riksbank Total debt as % of post tax income 58

59 Strong affordability Swedish housing and mortgage market Low interest rate environment Disposable income: Increase in salaries and tax cuts (income + property tax etc.) Higher indebtedness: Higher share of home ownership, rapid population growth and strong urbanisation trend Wealth: Increase in house prices, mutual funds and pension savings etc. Swedish household financial assets and liabilities 20 Household saving rates, % of disposable income Sweden Germany Norway United States Finland Denmark F 18F Source: OECD Economic Outlook, Jun 2017, table 26 59

60 Strong affordability Swedish housing and mortgage market Household interest expenditure in Sweden, % of disposable income Interest ratio Historical average 140 greater affordability Swedbank boindex (2Q 17) Source: Swedish Riksbank s Financial Stability report 2017:1 (chart 2.10) 100 Single houses Total Tenant owner rights Source: Swedbank Research & Macrobond Single houses Tenant owner rights Stockholm Gothenburg Malmoe Boindex (the housing affordability index) is 100 when a household* uses 30% of their disposable income for housing costs. The higher the number, the greater the affordability. * 2 adults and 2 children with median disposable income paying for a 135 sqm house or a 95 sqm apartment. Market rates for new lending (a mix of fixed and variable rates) are used. Source: Swedbank Research 60

61 House prices flattening out Sweden, total Total Tenant owner rights (apartments) Single-family houses Stockholm Tenant owner rights (apartments) Single-family houses Swedish housing and mortgage market Gothenburg 350 Malmoe Tenant owner rights (apartments) Single-family houses Tenant owner rights (apartments) Single-family houses Source: Valueguard Index (2005=100), (data up to and including Sep 2017) Sep

62 Appendix

63 Swedbank largest retail bank in our four home markets Sweden Population 10.0m Private customers 4.1m Corporate customers Organisations Branches 220 Cards 4.2m Number of card purchases 323m Digitally active customers* 3.0m Latvia Population 2.0m Private customers 0.9m Corporate customers Branches 36 Cards 1.0m Number of card purchases 38m Digitally active customers* 0.7m This is Swedbank Estonia Population 1.3m Private customers 0.9m Corporate customers Branches 34 Cards 1.1m Number of card purchases 51m Digitally active customers* 0.6m ~86%* * Share of loan book ~10%* Lithuania Population 2.9m Private customers 1.5m Corporate customers Branches 64 Cards 1.7m Number of card purchases 35m Digitally active customers* 0.7m Source: Swedbank Factbook 3Q 2017 * Number of customers that have made a payment, transfer, application, investments or lending activity in the last month 63

64 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 86% of total loans originated in Sweden - Swedish mortgages account for 50% of total loans 90% of total loans are collateralised (78% real estate and 12% 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 260bp Conservative funding and liquidity position survival horizon longer than 12 months assuming closed funding markets, NSFR 110% and LCR 128% Baltic operations self-funded loan-to-deposit ratio < 100% Liquidity & capital, % This is Swedbank NSFR LCR CET1 capital ratio, CRDIV (RHS) Q3 17 Credit impairment ratio, bps -10 Q3 12 Q3 13 Q3 14 Q3 15 Q3 16 Q Sep

65 Swedbank strong and stable earnings capacity 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 This is Swedbank Profit before impairments, SEKbn Profit before impairments One-off related to Visa Q3 12 Q3 13 Q3 13 Q3 15 Q3 16 Q3 17 Sep

66 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, SEK m Acquistion of Sparbanken Öresund Target 17 C/I ratio, % YTD 2017 Sep

67 Swedbank enlarges its green footprint Strategy Robur s sustainability funds recognised Green Bond Framework established Nordic Swan Ecolabel Nordic Swan Ecolabel. Five of Swedbank Robur's sustainability funds have met the stringent requirements that apply when the Nordic Ecolabel makes its entry into the fund market. The Nordic Ecolabel makes it easy to find and choose funds that encourage companies to develop in a sustainable direction. Swedbank s Green Bond Framework is compliant with the Green Bond Principles. The proceeds of each Swedbank Green Bond will be used to (re)finance loans and investments that promote the transition to low-carbon, climate resilient and sustainable economies and provide clear environmental benefits. Eligible Green Assets Renewable Energy Energy Efficiency Sustainable Management of Living Natural Resources Pollution Prevention and Control Sustainable Development Goal SDG7 and SDG13 SDG7, SDG11 and SDG13 SDG15 SDG6 and SDG11 Clean Transportation SDG9 and SDG11, SDG13 Industry winner and improved sustainability scoring Sustainable Brand Index Dow Jones Sustainability index Sustainable Brand Index B2B 2017 Industry winner Swedbank gradually increases the scoring in DJSI Continued activity in Green bond transactions SEK 150m Due 2020 October 2017 SEK 300m Due 2021 August 2017 SEK 200m Due 2020 August 2017 Issuer: Vasakronan Issue date: 5 October 2017 Use of Proceeds: Financing projects with environmental benefits Certification: Cicero Role: Sole Arranger Issuer: Fabege Issue date: 22 August 2017 Use of Proceeds: Financing of green buildings Certification: Sustainalytics Role: Sole Arranger Issuer: Vasakronan Issue date: 22 August 2017 Use of Proceeds: Financing projects with environmental benefits Certification: Cicero Role: Sole Arranger 67

68 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 68

69 Sweden the dominating home market Total lending to the public amounts to SEK 1 488bn (as per Q3 2017), out of which around 86% is originated in Sweden Estonia makes up 47% of total lending in the Baltics This is Swedbank Lending distributed by countries Sweden 85.7% SEK 1 275bn Estonia 4.6% Swedish Mortgage loans (private+corp) Latvia 2.2% Other corporate (incl. LC&I, Sweden) Lithuania 3.1% Other* 4.5% * Mostly Norway and Finland Sep

70 Oil sector still under pressure Asset quality Loan portfolio negatively impacted by lower oil price, SEK 14.3bn 1.0% of total loans gross Derivatives exposures of SEK 1.2bn (incl. collateral) Lower provisions* of SEK 51m in Q LC&I Shipping & Offshore, loans gross, SEK 24bn % of the portfolio is negatively impacted by lower oil price Oil-related, exposure by risk grade, SEKbn Def * Total provisions of SEK 1 358m for the whole Shipping and Offshore sector with a provision ratio (for impaired loans) of 30%. 70

71 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. 21.6% 10.3% 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." Automatic MDA Restrictions 11.3% Pillar 2 CET1 requirements Pillar 1 CET1 requirements 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. Swedbank CET1 requirements Sep

72 Wholesale funding profile Liquidity and funding Q % of wholesale funding < 12 months, SEK 336bn placed with central banks Average maturity for covered bonds, 38 months Average maturity for senior unsecured bonds, 33 months Outstanding wholesale funding, SEK 912bn 600 Q Q Maturity profile of outstanding wholesale funding 6% 23% M M >1-5Y % >5Y % 0 Covered bonds Senior unsecured Structured retail bonds Short-term programmes Sep

73 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 Sep

74 Funding sources Liquidity and funding Swedbank AB 100% owned Swedbank Mortgage AB* Program Long Term Global MTN Domestic MTN USD Senior (144a / Reg.S) AUD Senior** NSV (stand alone doc.) Short Term Domestic CP European CP/CD US CP Yankee CD Finnish CD Limit USD 40bn SEK 60bn USD 15bn AUD 10bn SEK 80bn EUR 6bn USD 20bn USD 20bn EUR 4bn Program Long Term Domestic Benchmark CB EMTN CB USD Covered bonds (144a / Reg.S) Domestic MTN CB Norwegian Benchmark CB AUD Covered bonds** Registered CB (stand alone doc.) Short Term Domestic CP * 100% guaranteed by parent company - Irrevocable - Unconditional - Timely ** Combined limit for unsecured- and covered bonds *** Limited by cover pool size Limit Unlimited*** EUR 25bn USD 15bn SEK 150bn Unlimited*** AUD 10bn SEK 50bn 74

75 Asset encumbrance Type of assets (Balance Sheet items) SEKm Encumbered assets Unencumbered assets, additional assets available for secured Carry Amount Fair Value Carry Amount Fair Value Assets of the reporting institution Loans on demand Equity instruments Debt securities Loans and advances other than loans on demand of w hich mortgage loans Other assets Type of assets (Off-balance sheet items) Encumbered received collateral Unencumbered received collateral available for secured funding SEKm Fair value Fair value Collateral received by the reporting institution Loans on demand Equity instruments Debt securities Loans and advances other than loans on demand Other collateral received Ow n debt securities issued other than ow n covered bonds or ABSs Purpose for encumbrance (On- and off-balance sheet items) Encumbered Assets SEKm 30 Sep 30 Jun 31 Mar 31 Dec Total balance sheet, SEK 2 460bn Asset encumbrance ratio of around 24% Liquidity and funding Carrying amount of selected financial liabilities of w hich Derivatives of w hich Deposits of w hich Debt securities issued Other sources of encumbrance Total Sep

76 Benchmark transactions, 2016 YTD 2017 Liquidity and funding ISIN Product Tenor Currency Amount Type Spread Value date Maturity date XS CB 5Y EUR Fixed MS+14 February 10, 2016 February 10, 2021 XS SU 144a 5Y USD Fixed T+135 March 10, 2016 March 10, 2021 XS SU 3Y EUR 500 FRN 3m +45 March 11, 2016 March 11, 2019 XS CB 5Y GBP 250 Fixed G+65 Dec 7, 2016 Dec 7, 2021 XS AT1 Perpetual USD 500 NC5 6.00% Dec 16, 2016 Perpetual XS CB 5Y6M EUR Fixed MS -3 January 16, 2017 July 18, 2022 AU3CB SU 5Y AUD 100 Fixed MS+118 February 17, 2017 February 17, 2022 AU3FN SU 5Y AUD 350 FRN 3mBBSW+118 February 17, 2017 February 17, 2022 XS SU 5Y6M EUR 750 Fixed MS+18 March 6, 2017 September 6, 2022 XS SU 144a 5Y USD 500 FRN 3m$L+70 March 14, 2017 March 14, 2022 XS SU 144a 5Y USD Fixed T+80 March 14, 2017 March 14, 2022 XS CB 7Y EUR Fixed MS-6 May 8, 2017 May 8, 2024 XS T2 10.5NC5.5 EUR 650 Fixed MS+82 May 15, 2017 Nov 22, 2027 XS SU 4Y3M GBP 500 Fixed G+76 Sep 29, 2017 Dec 29, 2021 XS CB 4Y2M GBP 250 Fixed G+57 Oct 2, 2017 Dec 7, 2021 XS SU Green 5Y EUR 500 Fixed MS+7 Nov 7, 2017 Nov 7, 2022 Nov

77 Real estate price performance Sweden, 12 month Swedish housing and mortgage market Single-family homes 1 Tenant-owner rights 2 Combined 3 12M Δ 12M Δ 12M Δ Nov 16 9% 7% 8% Dec 16 9% 8% 9% Jan 17 9% 8% 9% Feb 17 9% 8% 9% Mar 17 9% 8% 9% Apr 17 8% 8% 8% May 17 8% 9% 9% Jun 17 9% 10% 10% Jul 17 10% 9% 9% Aug 17 10% 8% 9% Sep 17 8% 4% 7% Oct 17 4% 1% 3% House price index, Sweden = Source: Valuegard (Based on data from Mäklarstatistik), 1 HOXHOUSESWE, 2 HOXFLATSWE (apartments), 3 HOXSWE Oct

78 Swedbank contacts and financial calendar For further information, please contact: Tomas Hedberg, Head of Group Treasury Gregori Karamouzis, Head of Investor Relations DEBT INVESTORS Financial calendar Q4 Year end report 6 Feb Annual Report 23 Feb Annual General Meeting 22 Mar 2018 Q1 Interim report 24 Apr 2018 Q2 Interim report 18 Jul 2018 Q3 Interim report 23 Oct 2018 Peter Stenborn, Debt Investor Relations peter.stenborn@swedbank.com Magnus Alvesson, Debt Investor Relations magnus.alvesson@swedbank.com Ulf Jakobsson, Head of Funding ulf.jakobsson@swedbank.se Contact Investor Relations: ir@swedbank.com Joakim Henriks, Money Markets and Short-Term Funding joakim.henriks@swedbank.se EQUITY INVESTORS Mattias Mauritzon, Investor Relations mattias.mauritzon@swedbank.com Postal address: Visitors: Swedbank AB (publ) Landsvägen 40, SE Stockholm, Sweden Sundbyberg Annie Ho, Investor Relations annie.ho@swedbank.com 78