Swedbank debt investor presentation Q October

Transcription

1 Swedbank debt investor presentation Q3 212 October

2 Table of contents 1. Financial performance 3 2. Liquidity and funding Cover pool data Swedish housing and mortgage market Appendix This is Swedbank 42 Swedish economy 49 Swedish housing and mortgage market 59 Liquidity and funding 63 Asset quality (incl ICAAP) 73 Contact details and financial calendar 85 2

3 1. Financial performance 3

4 Financial performance Group result Profitable quarter SEKm Q2 Q3 Q/Q YTD Net interest income Net commissions Net gains and losses Other income Total income Total expenses Profit before impairments Credit impairments Impairment of tangible assets Profit for the period Stable NII - Shrinking deposit margins - Continued repricing - Negative FX impact Cost management ahead of plan Stable asset quality Capital position further strengthened ROE, % C/I CT-1 ratio %, Basel 2 Source: Swedbank

5 Financial performance - Retail Stable development SEKm Q1 Q2 Q3 Q/Q Net interest income Net commissions Total income Total expenses Profit before impairments Credit impairments Deposit margins pressure Repricing lending Solid asset quality ROE, % C/I ratio

6 Financial performance - Large Corporates & Institutions Improved profitability trend SEKm Q1 Q2 Q3 Q/Q Net interest income of which LC/FI* Net commissions Net gains and losses Total income Expenses excl. variable staff costs Variable staff costs Profit before Impairments Credit impairments Continued growth in Large Corporates NII Lending growth High debt capital market activity Investment banking slow ROE, % C/I * Large Corporates/Financial Institutions 6

7 Financial performance - Baltic Banking NII hurt by lower interest rates and FX SEKm Q1 Q2 Q3 Q/Q Net interest income Net commissions Total income Total expenses Profit before impairments Credit impairments Lower Euribor affected NII Negative FX effect Small lending growth in EUR ROE, % C/I

8 Financial performance - Cost performance Cost reduction ahead of plan Target to reduce costs by SEK 1bn 212 Staff costs -441m and consultancy costs -28m year on year Cost trend (SEKm) YTD 211 YTD 212 YTD Total expenses Variable staff costs Compensation to savings banks Restructuring cost Q3 211 Ukraine -1 FX effects -51 Underlying cost Source: Swedbank 8

9 Financial performance Asset quality Stable asset quality Credit impairments (SEKm) Q2 Q3 Retail 1 69 LC&I Baltic Banking Continued high credit quality in Sweden Exit costs Ukraine continues Macro outlook continues to weaken Estonia Latvia Lithuania Group Functions & Other Russia Ukraine Other 1 2 Swedbank Group 3 24 Source: Swedbank 9

10 Financial performance Asset quality Enhanced focus on crisis portfolio workout Impaired loans decreased SEK 2.4bn in Q3 to SEK 18bn Vast majority of impaired loans from crisis portfolio SEK bn Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Source: Swedbank Q3 12 Ukraine Russia Lithuania Latvia Estonia LC&I Retail 1

11 Financial performance Asset quality Asset portfolios Russia & Ukraine 1% Shipping, off-shore & transport Hotels & Restaurants, Retailers 6% Manufacturing Baltic lending 11% Other corporate lending 9% Other property management Multi family housing Agriculture & forestry 11% Swedish household loans (9% mortgages) 62% Housing associations Source: Swedbank 11

12 Financial performance Core Tier 1 capital ratio Strong capitalisation Management expectation: CT1 ratio of % (full Basel 3) Average Swedish mortgage RWA of 1-15% would impact CT1 ratio negatively with percentage points Return target of 15% 17.3% Core Tier 1 ratio -1.2% -.7% 15.4% 14.5% 13.5% Q3 212 Basel 3* IAS 19 Q3 212 including Basel 3 and IAS 19 Increase Decrease Source Swedbank, Sep * Swedbank s estimate on current proposal Retail mortgage riskweights Internal measures (IRB Advanced) 12

13 Financial performance - Risk weighted assets Reduced RWA continued focus SEKbn RWA development RWAs declined with SEK 1bn in Q3 - Positive PD changes - FX effect Q2 Volume (EAD) Rating migration Credit risk FX-effects Other Market risk 212 Q3 credit risk Source: Swedbank 13

14 Financial performance New regulatory capital requirements Swedish capital requirement proposal Delayed, earliest implementation mid of 213 2% 18% 16% % % Supplemental capital (Equity, AT1 and/or T2), 1.5% + 2.% 14% 12% 12% Countercyclical buffer (Equity), -2.5% 1% 8% 6% 1% Capital conservation buffer (Equity can be used in stressed scenario), 2.5% Swedish SiFi buffer (Equity), 3% (213), 5% (215) 4% 2% Min. requirement (Equity), 4.5% % Proposed Proposal 213 Proposed Proposal 215 Source: The Ministry of Finance, the Riksbank and the Swedish FSA 14

15 2. Liquidity and funding 15

16 Liquidity and funding Core balance sheet* structure SEKbn 1 4 Assets SEKbn 1 4 Liabilities Government guaranteed debt Senior Estonia CEE lending Other corporate lending, Sweden & other Nordic coun Covered bonds 8 Other private, Sweden Swedish mortgage loans 4 Deposits 2 2 Q3 212 Q3 212 Suppl. cap Core T1 Source: Swedbank, Sep * Simplified balance sheet 16

17 Liquidity and funding Wholesale funding strategy Main internal liquidity measure is survival horizon (accumulated cash-flows) Covered bonds less volatile than senior unsecured debt Secure presence in senior unsecured debt markets OC level Liquidity reserve Structural subordination Source: Swedbank, Sep 3,

18 Liquidity and funding Covered bond strategy 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Swedish households financial assets Q2 212 Deposits and retail bonds Equities Pension savings and mutual funds Other financial assets Sweden SEK 3-375bn EUR/USD SEK 15-2bn Other* SEK 5-85bn <5Y 3-7Y >7Y Maturity, years Source: Statistics Sweden Hushållens ställning, Aug 3,

19 Liquidity and funding Senior unsecured debt strategy Limited need given Swedbank s balance sheet structure Secure OC Fund liquidity reserves SEKbn 6 Senior unsecured debt maturity profile Senior unsecured debt 35% 3% House price sensitivity of the cover pool 25% OC 4 2 Over-collateralisation 2% 15% 1% 5% % -5% Source: Swedbank, Sep 3, 212, nominal amounts -1% -15% % -5% -1% -15% -2% -25% -3% -35% -4% -45% -5% House price drop 19

20 Liquidity and funding Funding plan 212 completed Increased liquidity buffers LCR 144% and NSFR 94% Broadened and deepened investor base Term funding issuance completed and planned SEKbn 7 6 Covered bonds Senior unsecured Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Source: Swedbank, Sep 3, 212 2

21 Liquidity and funding Lower issuance volumes going forward SEKbn 12 Term funding issuance 1 8 Term funding issuance Average term funding issuance Average funding plan, rolling 12 months Average term funding maturities Q1 21 Q2 21 Q3 21 Q4 21 Q1 211 Source: Swedbank, Sep 3, 212 Q2 211 Q3 211 Q4 211 Q1 212 Q2 212 Q3 212 Q4 212 Q1 213 Q2 213 Q3 213 Q4 213 Q1 214 Q2 214 Q3 214 Q4 214 Q1 215 Q2 215 Q3 215 Q

22 Liquidity and funding Relative funding cost in focus and improving Bps 5Y Senior spread vs 3m Euribor Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 SWED 2/9/217 Average other major Nordic banks* Source: Thomson Reusters and Swedbank * SEB, Nordea, Handelsbanken and Danske Bank 22

23 Liquidity and funding Short- and long-term funding issuance YTD Term funding issued YTD of SEK 128bn SEKm 3 Long-term debt issued SEKm 7 Outstanding short-term debt Q1 12 Q2 12 Q Q1 12 Q2 12 Q Domestic CB Euro CB USD CB (144A) Other CB Senior unsecured Domestic CP ECP/CD USCP Yankee CD French CD Finnish CD Source: Swedbank, Sep 3, 212, nominal amounts 23

24 Liquidity and funding Liquidity reserve According to the template defined by the Swedish Bankers' Association SEKm Cash and holdings in central banks Deposits in other banks available overnight 31 Securities issued or guaranteed by sovereigns, central banks or multilateral development banks Securities issued or guaranteed by municipalities or Public sector entities 381 Covered bonds Issued by other institutions Own issued Securities issued by non-financial corporates Securities issued by financial corporates (excl. covered bonds) Other Total Additional liquid assets, Group % of the securities in the liquidity reserve per Q3 212 are rated AAA 2 9% of the additional liquid assets fulfill the Liquidity Reserve definition by the Swedish Bankers Association except from that they are held outside the Treasury department. Source: Swedbank Fact book, Sep 3,

25 Liquidity and funding Asset encumbrance Distribution by type of liability and asset SEKm Government debt instruments Central banks and supranational debt instruments Covered bonds Debt instruments issued by credit institutions Securities issued by corporate and other issuers ABS Mortgage loans Cash Total Central bank funding Intraday settlement collateral 1) Repurchase agreements 1) Derivative collateral 2) Covered bonds 3) Accrued interest of assets in the cover pool Total Financial assets pledged for insurance policy holders Additional assets available for secured funding 4) SEKm Government debt instruments Central banks and supranational debt instruments Covered bonds Debt instruments issued by credit institutions Securities issued by corporate and other issuers ABS Mortgage loans Cash Total Securities 5, 6) Cover pool (over collateralisation) 3) Cover pool eligible assets 7) Total What is right level of asset encumbrance? Different quality of encumbrance: asset-liability matched vs. mismatched Country specific characteristics Business model Balance between PD and LGD Risks Bail in legislation swing factor? Regulation Market practice 1) Pledged or repoed securities on balance sheet. 2) Collateral posted under CSA agreements, gross (3-year, SEKm, High: , Low : 9 796, Average: ). 3) Nominal amount excluding accrued interest. 4) Assets not currently encumbered. 5) Reversed repos are included. 6) All type of securities, including securities non pledgeable at central banks, of w hich 83% are rated AAA, 3% are rated below A- and 7% are not rated. 7) Type of loans; Residential 84.7%, Forestry & Agriculture 15.2%, Commercial.1%. Source: Swedbank Facts Q

26 26

27 3. Cover pool data 27

28 Swedbank s cover pool Cover pool data 1 Rating, S&P / Moody s AAA / Aaa Total pool size SEK 691.8bn Geographic distribution Sweden 1% Current OC-level 32.% Weighted average seasoning 2 62 months Average LTV 3, 4 WA LTV on property level (Max LTV) 58% Non-performing loans 5 None Fixed /Floating interest loans 6 Fixed 41% Floating 59% Repayment structure 7 Amortising 44% Interest only 56% Average loan size SEK Number of loans outstanding Number of borrowers Number of properties Dynamic pool Yes Source: Swedbank Fact book, Sep 3, As per Sep 3, Public sector loans not included 3 Index valuation as per Sep 3, Maximum LTV: Residential 75%, Commercial 6%, Forest and Agriculture 7% 5 Past due loans > 6 days are not eligible for the cover pool 6 Floating interest loans < 365 days 7 Property level of cover pool 28

29 Swedbank s cover pool Cover pool data Type of loans Residentials 91.1% of which Single-family housing 61.1% of which Tenant owner rights 16.1% of which Tenant owner association 9.6% of which Multi-family housing 4.3% Public 1.5% Commercial.2% Forest & Agricultural 7.2% 1.% Source: Swedbank, Facts, Sep 3, 212 Geographical distribution - Sweden 1% 3-Jun 212 North 6,8% Norrbotten county (BD) 1,5% Västerbotten county (AC) 2,5% Västernorrland county (Y) 1,6% Jämtland county (Z) 1,2% Middle (including Stockholm) 44,4% Dalarna county (W) 2,3% Gävleborg county (X) 2,2% Värmland county (S) 2,3% Örebro county (T) 2,6% Västmanland county (U) 2,7% Uppsala county ( C) 4,% Södermanland county (D) 2,7% Stockholm county (including Stockholm) (AB) 25,6% South (including Göteborg and Malmö) 48,8% Västra götaland county (Including Göteborg) (O) 17,% Östergötland county (E) 4,1% Jönköping county (F) 3,7% Halland county (N) 3,5% Kronoberg county (G) 2,3% Kalmar county (H) 3,4% Skåne county (including Malmö) (M) 12,4% Blekinge county (K) 1,8% Gotland county (I),6% 1,% 29

30 Swedbank s cover pool Cover pool loan-to-value distribution Weighted average LTV 59% 4% 35% 3% 25% 2% 15% 1% 5% LTV distribution per property 1 LTV distribution by volume 1, 2 25% 2% 15% 1% 5% % % Source: Swedbank, Sep 3, Public loans of 1.5% 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 ( 3

31 Swedbank s cover pool Cover pool loan-to-value distribution 7% WA LTV per property type 1 6% 5% 4% 3% 2% 1% % Single-family homes Tenant owner rights Tenant owner associations Multi-family housing Commercial Forestry & Agricultural Total all types 1 Source: Swedbank, Sep 3, 212 ( 1 excluding public sector loans) 31

32 Swedbank Mortgage AB asset quality Insignificant historical loan losses in Swedbank Mortgage Total accumulated losses since 1982 of SEK 7.4bn Main part incurred during the years of 1992 and 1993 Less than 2% in the private segment.5% Residential Forest & Agriculture.4%.3%.2%.1%.% -.1% Source: Swedbank Sep

33 Swedish covered bond legislation Overview of the Swedish covered bond legislation The Covered Bond Act The Covered Bond Act entered into force on July 1, 24 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 The cover pool may consist of certain mortgage credits, public credits and supplemental assets Loan-to-value Ratios and Other Limitations Maximum LTVs: Residential 75%, Agricultural 7%, Commercial 6% Maximum 1% commercial loans and 2% supplemental assets in cover pool Regular monitoring of the property values (reviewed on a monthly basis by Swedbank) The cover pool value shall always exceed the aggregate value of claims (including derivatives) Matching Requirements 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 Non-performing assets in the cover pool which are more than 6 days overdue must be disregarded for the purposes of the matching tests Benefit of a priority right over the cover pool Administration in event of bankruptcy Source: Holders of covered bonds and relevant derivative counterparties benefit from a priority claim over the cover pool should the institution be declared bankrupt Holders of covered bonds and relevant derivative counterparties rank pari passu ahead of unsecured creditors and all other creditors of the Institution in respect of assets in the cover pool The assets in the cover pool, the covered bonds and any relevant derivative contracts that have been entered into the Register 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 33

34 34

35 4. Swedish housing and mortgage market 35

36 Swedish housing and mortgage market Swedish mortgage market No securitization (on balance sheet), no sub-prime market, no 3 rd party origination, no buy-to-let market 7% home ownership 1 Rental market is regulated Transparent credit information (credit information agency, Publicly available information regarding income, debt, payment track record etc Consumer credit legislation requires affordability calculations including stress test of higher interest rate Very limited debt forgiveness possibilities (full recourse) Strong social security and generous unemployment benefit system 1 Source: Boverket,

37 Swedish housing and mortgage market Pace of household borrowing declines Annual percentage change 14 % Data up to and including Aug 212 Source: Riksbanken stability report 212:1, July 1, and Sweden statistics Sep, 212, chart

38 Swedish housing and mortgage market Real estate prices Sweden 12 months development Single-family homes 1 Tenant-owner rights 2 Combined 3 12M Δ 12M Δ 12M Δ Oct/11-4% -1% -3% Nov/11-5% -4% -5% Dec/11-7% -4% -6% Jan/12-4% -2% -4% Feb/12-4% -1% -3% Mar/12-4% 1% -3% Apr/12-2% 2% -1% May/12-2% 3% -1% Jun/12-1% 4% % Jul/12 % 4% 1% Aug/12 2% 4% 3% Sep/12 2% 5% 3% Source: Valuegard (Based on data from Mäklarstatistik), 1 HOXHOUSESWE, 2 HOXFLATSWE, 3 HOXSWE 38

39 Swedish housing and mortgage market Housing investments at a conservative level Housing completions, apartments in Multi-family dwellings and Single-family houses in Sweden Housing investments as a percentage of GDP (4Q moving average) 14 Number of apartments Apartment buildings Single-family dwellings Spain Eurozone Denmark UK USA Sweden Source: Statistics Sweden, May 9, 212 (data as per FY 211) Source: Reuters Ecowin, Oct 2, 212 (data as per Q2 212) 39

40 Swedish housing and mortgage market Population growth far exceeds housing unit growth Number of households increase as population grow Population- and new housing starts Number of homes / persons Population- and housing growth Number of homes / persons 1 9 Acc increase, stock of homes Acc increase in population Population increase New housing units, number of f lats Source: Statistics Sweden April 212 4

41 Appendix 41

42 This is Swedbank 42

43 This is Swedbank The Bank for the many people, households and businesses Sweden Population 9.5m Private customers 4.m Corporate customers 265 Organisations 66 Branches 311 ATMs 662 Cards 3.8m Employees Latvia Population 2.2m Private customers.9m Corporate customers 78 Branches 54 ATMs 42 Cards 1.m Employees Estonia Population 1.3m Private customers 1.m Corporate customers 116 Branches 58 ATMs 56 Cards 1.1m Employees 2 45 Lithuania Population 3.2m Private customers 1.9m Corporate customers 83 Branches 82 ATMs 491 Cards 1.9m Employees Source: Swedbank Fact book Q3,

44 This is Swedbank Market leading retail franchise in all home markets Largest retail bank and fund manager in Sweden 6 Market shares, Deposits % % August 212 Deposits Private 5 Deposits Corporate 5 6 Market shares, Lending August 212 Mortgage lending Corporate lending Sweden Estonia Latvia Lithuania Source: Source Sweden: Statistics Sweden (SCB) Source Estonia: Estonian Central Bank Sources Latvia: Association of Commercial Banks of Latvia (ACBL) & The Financial and Capital Market Commission (FCMC) Source Lithuania: Association of Lithuanian Banks (LBA) Sweden Estonia Latvia Lithuania 44

45 This is Swedbank Sweden the dominating home market Total lending to the public amounts to SEK 1,184bn (as per Q3 212), out of which around 87% is originated in Sweden Estonia makes up 45% of total lending in the Baltics Lending distributed by countries (Q3 212) Sweden 87.3% SEK 1 34bn Estonia 4.2% Swedish Mortgage loans (private+corp) Latvia 2.5% Lithuania 2.6% Other corporate (incl. LC&I, Sweden) Other Other* 3.3% Source: Swedbank Fact book Q3 212, page 37 * Russia & Ukraine, Denmark, Norway, Finland and NY Branch 45

46 This is Swedbank Total income Distributed by type of income YTD 212 and by country Treasury, Trading and Capital Markets 6% Asset Management 1% Payment, Cards 9% Share of P&L of associates 2% Insurance 3% Other* 1% Lithuania 4% Latvia 4% Estonia 6% Lending and deposits 63% Other 7% Sweden 76% Source: Swedbank Fact book, Sep 3, 212 *Other: Group functions, Asset mgmt, Ru/Uk, other 46

47 This is Swedbank Rating On 25 July Fitch Ratings upgraded Swedbank s long-term issuer default rating (IDR) from A to A+ and reaffirmed the short-term rating F1 with stable outlook On 28 June the ratings agency Standard & Poor s reaffirmed Swedbank and Swedbank Mortgage s long-and short-term ratings (A+/A-1) with stable outlook On 24 May 212 Moody s reaffirmed Swedbank s and Swedbank Mortgage s long- and short-term credit rating with stable outlook (A2/P-1) (Moody s rating review for European banks) S&P Moody's Fitch Short Long Short Long BFSR* Short Long Swedbank A-1 A+ P-1 A2 C- F1 A+ Swedbank Mortgage A-1 A+ P-1 A2 Covered bonds AAA Aaa * Bank Financial Strength Rating Source: Swedbank Sep 3,

48 This is Swedbank Baltic banking Baltic market fundamentals Legal and institutional framework Fiscal position Market concentration Absence of irrational players Sophisticated product penetration Swedbank retail and deposit incumbent GDP / capita less than half of Sweden s Estonia Latvia Lithuania Risk mitigators Loan-to-deposit restriction Group governance model 48

49 Swedish economy 49

50 Swedish economy A balance sheet in favourable condition Sweden s financial assets continue to exceed its liabilities 12 General government net financial liabilities % of nominal GDP F 213F Source: OECD Economic outlook 91 (table 33), May 22, 212 5

51 Swedish economy A budget in balance Budget framework since early 199 s to stabilize and achieve long-term sustainability in the public finances Mandatory public sector excess savings target of 1% of GDP on average over a business cycle Mandatory ceiling for the state and pension system expenses (3 years ahead) Budget balance as a percentage of GDP Swedish historic budget balance as a percentage of GDP F 213F F 213F Source: OECD Economic outlook 91 table 27, May 22,

52 Swedish economy Savings 15 Household saving rates % of disposable income Sweden US Germany Denmark Finland Norway F 213F Source: OECD Economic Outlook 91, table 23, May

53 Swedish economy Continued strong fiscal position Kingdom of Sweden rated Aaa/AAA/AAA GDP growth 1.3% (Q212 Y/Y) CPI/CPIF.4% /.9% (Sep 12 Y/Y) Source: Statistics Sweden and National Debt Office SEKbn 1 8 Swedish government debt Unemployment 7.4% (Sep12 Y/Y) Debt to GDP 31.% (Dec 11) Maastricht definition* of general government gross public debt as a percentage of nominal GDP Sweden Denmark United Kingdom Germany France Euro area Q212 Q312 Source: Swedish National Debt Office, Oct 212 *General government gross debt according to the convergence criteria set out in the Maastricht Treaty comprises currency, bills and short- term bonds, other short- term loans and other medium- and longterm loans and bonds, defined according to ESA 95. Source: OECD Economic outlook 91 table 61, May 22,

54 Swedish economy Government debt Around 15% in foreign currencies Government net financing need SEKbn F 213F Government debt in the beginning of the year Primary financing need excluding sell-off's Sale of government assets -23 Interest cost on government debt Net financing need Corrections of debt Money-market assets (annual change) Government debt change Government debt at year end Debt to GDP ratio, % historic distribution F 213F Source: Swedish National Debt Office, Jul 212

55 Swedish economy Swedish GDP breakdown GDP growth From corresponding quarter previous year, %, fixed prices Data up to and including Q GDP production approach at market price Manufacturing industry Taxes on products Other value added Wholesale and retail trade Scientific, technical and admin. Act Real estate activities Construction Information and communication Management of real estate Transport and storage Financial services and insurance activities One and two family houses, secondary Electricity, gas, steam and air Education, health and social work Agriculture,forestry, fishing Subsidies on products SEKm 6 % 2% 4% 6% 8% 1% 12% 14% The output of the Swedish economy Import GDP Gross investments Public consumption Privat consumption Export 1 Source: Statistics Sweden, Sep, 212 Resources Expenditures 55

56 Swedish economy Exports key factor for growth 12 Exports and imports trend per month, SEKm Current prices Export Import % 1% 8% 6% 4% 2% Top 1 export countries Data up to and including Q2 212 % Export distribution by important commodity groups 1% 13% 11% 12% 11% 43% Engineering Chemistry Other goods Forestry Minerals Energy Source: Statistics Sweden, Jun,

57 Swedish economy Current account balance at stable level Current account balance as % of GDP Sweden Germany Denmark Finland Canada UK France Italy US F 213F SEKbn Current account net, Sweden Source: OECD Economic outlook 91, table 51, May 22, 212 Source: Statistics Sweden, Aug 3,

58 Swedish economy Sweden has shown resilience through turbulent times 5 year Sovereign CDS Italy France United Kingdom Germany Sweden Sep-9 Oct-9 Nov-9 Dec-9 Jan-1 Feb-1 Mar-1 Apr-1 May-1 Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Source: Bloomberg, Oct 19,

59 Swedish housing and mortgage market 59

60 Swedish housing and mortgage market Price development Real estate price to disposable income, index 1993= Source: SCB and Swedbank 6

61 Swedish housing and mortgage market Debt servicing ability of the households will remain good % 6 Swedish household financial assets and liabilities to disposable income Total wealth, excluding collective insurance Financial wealth, excluding housing and collective insurance Debt Source: Riksbanks financial stability report 12:1. Jun 1 212, chart 3:1. 61

62 Swedish housing and mortgage market Structural interest rate decline key to affordability Household indebtedness and interest expenditures after tax as percentage of disposable income % % Debt ratio (left scale) Interest ratio (right scale) Source: Riksbanken, Financial Stability Report 212:1, Jun 1, 212, chart

63 Liquidity and funding 63

64 Liquidity and funding Structure of the Swedish domestic covered bond market Benchmark system established in early 199s Tap issuance enhances liquidity and reduces execution risk Continuous daily issuance Buy-backs against issuance of longer tenors Total issue size often peak at SEK 4-6bn Market making at pre-set bid/offer spreads Source: Swedbank 64

65 Liquidity and funding The Swedish covered bond market Domestic covered bonds represent approximately 1/3 of GDP and 1/2 of the total Swedish bond market Swedish Domestic Covered Bonds, in SEKbn Public debt projections Swedbank Mortgage Total SEK-denominated covered bond outstandings SEKbn 1 6 Government debt % of GDP % SEKbn F 213F 214F 215F 216F Source: Dec 31, 211 Source: Actual and forecast from government budget statement, Sep 2,

66 Liquidity and funding Swedbank s domestic covered bonds SEKbn Jun 13 May 14 Mar 15 Sep 15 Jun 16 Mar 17 Dec 17 May 2 SPI 177 SPI 166 SPI 182 SPI 183 SPI 184 SPI 185 SPI 186 SPI 18 Source: Swedbank, Sep 3,

67 Liquidity and funding Fundamental change of maturity profile 27 64% of wholesale funding < 12 months, SEK 13bn in central bank deposits Q % of wholesale funding < 12 months, SEK 213bn in central bank deposits 1% 9% SEK 673bn SEK 856bn 2% 5% Average maturity profile of outstanding market funding 8% 7% 6% 5% 4% 34% 35% 62% 5 years years 3-12 months -3 months Months % 2% 1% 29% 18% 16% % 27 Q3 212 Q3 9 Q4 9 Q1 Q2 Q3 Q4 Q Total capital market funding Q2 11 Q3 Q4 Q1 Q2 Q Covered bond funding Source: Swedbank, Sep 3,

68 Liquidity and funding Conservative liquidity levels Short-term funding mainly a tool for cash management More than 12 months pre-funded SEKbn Additional pledgeable and/or liquid 3 assets 25 1 Liquidity reserve, securities 2 15 Liquidity reserve, 1 central bank deposits, SEKm 1 5 Next 12-month term funding maturities CP / CDs and net interbank funding, SEKm Source: Swedbank Sep As defined by the Swedish Bankers Association 68

69 Liquidity and funding Long-term funding maturity profile FY 212 maturities amount to nominal SEK 86bn of which SEK 9bn for the remainder of 212 Long-term funding maturity profile SEKbn 2 15 Government guaranteed debt Senior unsecured debt Covered bonds Source: Swedbank Sep 3,

70 Liquidity and funding Low need for USD-funding USD-funding need covered for more than 12 months Issued USD 1.5bn of covered bonds (144a) and USD 1.bn of senior unsecured (144a) YTD 212 SEKbn 3 25 Interest-bearing securities Lending to the public Assets Liabilities Source: Swedbank, Sep 3, 212, (Fact book page 73) Loans to credit institutions Cash and balances with central banks Deposits and borrowings from the public Amounts owed to credit institutions Debt securities in issue 7

71 Mortgage loans, gross margin (3 months) 6 % 5 4 Net margin 3 2 The gross margin should cover: Cost of liquidity ~.2% Administrative costs ~.3% Credit impairments ~.3% Tax (26.3% on profit before tax) Gross margin Swedbank's funding cost Stibor 3 months Swedish Riksbanks reporate Source: Swedbank, Sep 3,

72 Liquidity and funding Funding sources Swedbank AB 1% owned Swedbank Mortgage AB* Program Long Term Global MTN Domestic MTN USD Senior (144a/Reg.S) NSV (stand alone doc.) Short Term Domestic CD European CP/CD US CP Yankee CD French CD Finnish CD Limit USD 4bn SEK 6bn USD15bn SEK 8bn EUR 6bn USD 15bn USD 1bn EUR 4bn EUR 4bn Program Long Term * 1% guaranteed by parent company - Irrevocable - Unconditional - Timely ** Limited by cover pool size Limit Domestic Benchmark CB Unlimited** EMTN CB EUR 25bn USD Covered bonds (144a/Reg.S) USD 15bn Domestic MTN CB SEK 15bn Norwegian Benchmark CB Unlimited** Registered CB (stand alone doc.) Short Term Domestic CD SEK 5bn Source: Swedbank, Dec 31,

73 Asset quality 73

74 Asset quality Provisions well provided for SEKm % 61.5% 65.% 63.7% 65.2% Provision ratios, % Q3 12 Retail 77 LC&I 148 Baltic Banking 56 Russia 64 Ukraine 82 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Individual provisions Portfolio provisions Provision ratio Group 65 Source: Swedbank, Sep 3,

75 Credit portfolio Retail Corporate Retail portfolio will drive capital efficiency Swedbank Mortgage AB Leasing (Swedbank Finance AB) Other Total portfolio SEK 23bn Segments excl. Swedbank Mortgage and Swedbank Finance Volume (SEKbn) Secured (%) Agriculture Manufacturing Public sector and utilities Construction Retail Transportation 2. 8 Shipping.1 98 Hotels and restaurants Information & communication Finance and insurance Property management Professional service Other Total Source: Swedbank, Sep 3,

76 Credit portfolio Large Corporates & Institutions Shipping and offshore - structure SEKbn 3 Shipping and Offshore 11.6% -1.6% Lending exposure to shipping and offshore sector of SEK 25.1bn plus unutilised commitments of SEK 6.2bn Portfolio duration 4-5y Average fleet age 7y Strong employment profiles 1 15 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 RORO 2. Offshore Tanker Other Container 1. Dry bulk 1. Shipping and Offshore Portfolio by Currency Gas (LNG/LPG) 1. Crude oil Product JPY Q3-12 Chemical.5 NOK Floating production 2. Accommodation.8 USD Supply 3.8 Oil service 2.3 EUR Drilling & exploration Cruise.5 6. SEK Source: Swedbank, Sep 3,

77 Credit portfolio Retail Credit portfolio Agriculture retail Segmentation Definitions Corporate Agriculture: Businesses that derive their main income from agricultural activities Private Investments: Private individuals who own agricultural properties for living or investment purposes Private residents 2 % Agriculture 44 % Lending to the agriculture industry Approx SEK 62bn per Q3 212 Corporate agriculture: (57%) Agriculture 44% Forestry 13% Private investments (43%) Residents: 2% Forestry: 23% Private forestry 23 % Forestry 13 % Source: Swedbank, Sep 3,

78 ICAAP 212 ICAAP Scenario Deep recession without recovery Triggers Europe enters into deep recession Limited possibilities for fiscal stimulus European bank runs Credit contraction Closed funding markets Outcome Sharp GDP drop with no recovery (1-15% from 211 level) Severe drop in house prices (25-37% from 211 level) Depreciated EUR and appreciated SEK Devaluation in Latvia and Lithuania Source: Swedbank, Sep 3,

79 ICAAP High capitalisation even in extremely stressed scenario Revenue decrease 31 percent Credit impairments SEK 64bn over 5 year Scenario effects on Core Tier 1 ratio -165bp Well above 12% Core Tier 1 ratio at low point even in extremely stressed scenario in new regulatory environment Source: Swedbank, Sep 3,

80 ICAAP 212 ICAAP scenario Deep recession without recovery 15 GDP - Index 15 Real Estate prices - index Sweden Estonia Latvia Lithuania 3.% Interest rates 3m 2.5% 2.% 1.5% 1.%.5%.% Euribor Stibor Source: Swedbank, Sep 3, Sweden Estonia Latvia Lithuania FX scenario USD/SEK EUR/SEK GBP/SEK 8

81 ICAAP 212 ICAAP Main scenario results NII decreases by 39% throughout the scenario SEK bn Net Interest Income Credit Impairments total SEK 64bn over the scenario period RWA decreases due to significant credit impairments and deleveraging Source: Swedbank, Sep 3, SEK bn SEKbn Credit impairments RWA incl. reg effects

82 ICAAP 212 ICAAP Income statement Income statement (SEKbn) Total Total net interest income Total income Total expenses Profit before credit losses Credit losses Operating profit Appropriations Tax Profit for the year Minority interest Profit for the year attr to shareholders Dividend Profit after tax, min. int. & dividend Source: Swedbank, Sep 3,

83 ICAAP 212 ICAAP Credit impairments Credit impairments (%) EAD 211 (SEKbn) Acc. loss ratio Total 1, of which LC & I Retail Estonia Latvia Lithuania Russia & Ukraine The accumulated losses constitute SEK 63.6bn. Credit impairments in LC&I and Retail constitute 74% of total accumulated credit impairments Credit impairments LC & I and Retail (%) EAD 211 (SEKbn) Acc. loss ratio Agriculture, forestry and fishing Manufacturing Public sector and utilities Construction Retail Transportation Shipping Hotels and restaurants Information and communication Finance and insurance Property management Cooperative housing associations Other corporate lending Professional services Bank Private Total 1,

84 ICAAP 212 ICAAP Main adverse scenario results Capital assessment RWA & Capital (SEKbn) RWA RWA inc 15% mortgage riskweight * RWA inc regulatory effects ** Core Tier Core Tier 1 inc regulatory effects ** Total Capital base Capital assessment (%) Core Tier 1 ratio Core Tier 1 ratio inc 15% mortgage riskweight * Core Tier 1 ratio inc. regulatory effects ** Total capital ratio inc. 15% mortgage riskweight * * The effect of a 15% average riskweight on the Swedish Mortgage portfolio ** Includes assessed effects of Basel 3, IAS 19 and changed mortgage risk-weights Source: Swedbank, 3 June

85 Appendix Swedbank contacts and financial calendar For further information, please contact: Jonas Erikson, Head of Group Treasury Gregori Karamouzis, Head of Debt Investor Relations Financial calendar Q4 Interim report 3 January 213 AGM March 213 Q1 Interim report 23 April 213 Q2 Interim report 17 July 213 Q3 Interim report 22 Oct 213 Peter Stenborn, Debt Investor Relations peter.stenborn@swedbank.com Ulf Jakobsson, Head of Funding ulf.jakobsson@swedbank.se Kimmy Samuelsson, Head of Long-Term Funding kimmy.samuelsson@swedbank.se Ingela Saarinen-Kindbom, Money Markets and Short-Term Funding Ingela.saarinen-kindbom@swedbank.com Contact debt investor relations: debt.ir@swedbank.com Postal address: Visitors: Swedbank Group Treasury Regeringsgatan 13 SE Stockholm, Sweden 85

86 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. 86