Second quarter 2013 results Strengthened customer relations, flat costs and higher capital

Transcription

1 Second quarter 2013 results Strengthened customer relations, flat costs and higher capital International telephone conference 17 July 2013 Christian Clausen, Group CEO

2 Disclaimer This presentation contains forward-looking statements that reflect management s current views with respect to certain future events and potential financial performance. Although Nordea believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of various factors. Important factors that may cause such a difference for Nordea include, but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate, (iii) change in the regulatory environment and other government actions and (iv) change in interest rate and foreign exchange rate levels. This presentation does not imply that Nordea has undertaken to revise these forward-looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided.

3 Key message Nordea delivers on income initiatives, cost efficiency and capital Welcomed new relationship customers Unchanged expenses for 11 consecutive quarters Pro forma Basel III core tier one ratio of at least 14.0% Continued stabilisation of credit quality Uncertain macroeconomic environment Highest ranked Nordic corporate bank in Prospera survey Euromoney awards Best Bank and Best Investment Bank in the Nordic and Baltic regions 3

4 Q financial results highlights Delivering on the plan

5 Financial results Q2/13 EURm Q2/13 Q1/13 Change % H1/13 H1/12 Change % Net interest income (1) Net fee and commission income Net fair value result (6) (10) Total income (1) Staff costs (753) (754) 0 (1 507) (1 502) 0 Total expenses (1 256) (1 267) (1) (2 523) (2 503) 1 Cost Income Ratio 50% 51% 51% 50% Profit before loan losses (2) Net loan losses (186) (198) (6) (384) (418) (8) Operating profit Net profit from continuing operations Risk-adjusted profit Return on equity (%) 11.5% 11.1% 11.3% 12.1% Core Tier 1 capital ratio (%) 14.0% 13.2% 14.0% 11.8% Risk-weighted assets (EURbn) Includes Other income 5

6 Net interest income Net interest income development, EURm NII up in quarter Lending margins are up Largely unchanged deposit margins Improved NII in Group Treasury One additional interest day Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 6

7 Stable Net Interest Margin but lower volumes Blended net interest margin development, % 1.5% 1.2% 0.9% 107 bps Blended net interest margin up 2 bps in Q2/13 Blended margin is unchanged in Retail Banking but improved in Wealth Management and Wholesale Banking 0.6% 0.3% 0.0% Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Lending margins are up by 4 bps in Retail Banking and by 6 bps in Wholesale Banking Lending volumes down 0.7% in local currencies Average lending volumes largely unchanged Lending- and deposit volumes, EURbn* Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Lending volumes Deposit volumes * All quarters excluding Repos and divested Polish operations 7

8 Net fee and commission income Net fee and commission income development, EURm Continued strong trend Increased savings and investments commissions Increased M&A activity and strong equity customer activity Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 8

9 Assets under Management Assets under Management development*, EURbn Strong net inflow of 2.9bn in quarter - Higher bond yields affects fixed income assets Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Net inflow, EURbn Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 * All quarters excluding divested Polish operations 9

10 Good demand for risk management products Net fair value development, EURm Good demand in customer driven business High customer activity in the currency and fixed income areas Period of high volatility Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Customer area Other areas 10

11 Flat costs for eleven consecutive quarters Total expenses (excl. FX and variable pay)*, EURm Expenses under solid control Number of FTE s down by more than 2% y-o-y Flat costs for 11 quarters - to remain flat for an additional 6 quarters Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Total expenses, EURm Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 * All quarters excluding divested Polish operations 11

12 Robust credit quality Total net loan losses, EURm ) Credit quality remains robust Stable underlying level of impaired loans Provisioning ratio remained stable at 43% A few individual provisions were made in CIB Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 1) Poland reported as discontinued operations, loan losses restated from Q1/12 Credit quality remains solid in Finland, Norway, Sweden and Baltics Impaired loans*, EURm Non-performing Non-performing Non-performing Performing Performing Performing Q4/12 Q1/13 Q2/13 * Not restated for Poland 12

13 Denmark gradually improving House price index 1 Loan losses net, EURm, Retail Banking Denmark Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Single-family houses Flats Collectively assessed Portfolio assessed non-significant loans Individually assessed House prices in Denmark shows improvement Consumer confidence improving Loan loss ratio in Banking Denmark remained stable at 46 bps 2) 1 Source: Danmarks Statistik 2) Excluding provisions to the Danish Deposit Guarantee Fund 13

14 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Shipping credit quality is stabilising Ship values Loan losses net, EURm, Shipping MUSD VLCC. 5 year old Cape Bulker. 5 year old Panamax Containership. 5 year old Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Collectively assessed Individually assessed Source: Clarkson Ship values seem to be bottoming out Higher investment appetite for shipping assets Loan losses remains elevated but continued down from previous periods 14

15 France Belgium Peer 1 Nordea Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 Peer 13 Peer 14 Peer 15 Peer 16 Italy Peer 17 Peer 18 Peer 19 Spain Peer 20 Strong access to funding Long term funding, EURbn Strong diversified funding platform Conservative liquidity management - LCR compliant - Liquidity buffer EUR 66bn One of the lowest funding costs of any bank in Europe H1/13 LCR developments 283% Spread vs MS (bp) 300 Long term senior unsecured funding* 100% 231% 181% 154% 127% 130% 134% 133% 121% Q Q Q Combined USD EUR * European banks and Governments. 5 year bonds, bps 15

16 Risk weighted assets Risk-weighted assets, EURbn* RWA down EUR 6.7bn on previous quarter FX effects Decreased derivative exposures Efficiency gains of EUR 2bn in quarter Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 * Basel 2.5 excluding transition rules 16

17 Core Tier 1 ratio +80 bps in Q2 due to profit generation and RWA efficiencies Core Tier 1 ratio development, % 0.13% 0.15% 0.01% 0.27% 0.01% 0.20% 14.0% 13.2% Core Tier 1 ratio Q Credit Quality Growth RWA efficiency FX effects & Other Profit net dividend Core Tier 1 deductions Core Tier 1 ratio Q2 2013

18 Divestment of Polish operations Improves Core Tier 1 ratio and increases return The transaction Divestment of Polish banking, financing and life insurance operations to PKO Bank Polska for EUR 694m. The rationale A rational structural change supporting our strategy to build the future relationship bank. The divestment is well aligned with the implementation of the plan to deliver strong profitability in all areas, units and segments of the bank. The impact: Core Tier 1 capital ratio The impact: RaRoCAR P Positive impact on CT1 ratio of approx. 50 bps - of which approx. half on closing of the transaction. P Improves RaRoCAR by approx. 40 bps - of which approx. half on closing of the transaction. 18

19 Q financial results highlights Delivering on the plan

20 2015 plan progress against our published goals Nordea market commitments Key initiatives and levers Strong capital generation and return of excess capital to our shareholders Capital initiatives to maintain CT1 ratio >13% ROE target of 15% at a CT1 ratio >13% and with normalised interest rates Initiatives for income generation Flat costs Initiatives for cost savings of ~EUR450m Delivering low volatility results based on a well diversified and resilient business model Low risk profile and low volatility 20

21 Pro forma CT1 ratio under Basel III Approx % Approx % 14.0% 0.3% 0.8% Approx % Approx % Approx % Approx % Approx % Approx % Q2/2013 Nordea Poland CRDIV RWA efficiency until 2013 incl. Norwegian risk weights Proforma end 2013 Additional RWA efficiency Proforma end

22 New Regulation Expected to Increase RWA by ~EUR11-17bn Regulatory Changes and RWA Impact, EURbn CVA and CCP ~6 Higher capital requirements for derivatives by introducing a capital charge for CVA risk for OTC contracts Derivatives cleared through a CCP will be subject to CCP capital requirement Asset Value Correlation, Deductions and SME boundary ~3 Higher capital requirements for loans to financial intermediaries RWA treatment of elements that otherwise would have been deducted from CT1 Reduced RWA for SMEs Norwegian Risk Weights ~1-7 Increased risk weights on Norwegian Residential Real Estate loans 22

23 Broad range of initiatives in place to mitigate regulatory effects Initiatives Applying for use of internal models, e.g. Roll-Outs Advanced IRB Nordea Bank Russia (application sent) International units (application sent) Model Reviews Review of corporate rating models including segmentation, parameter estimation Review of retail scoring models Review exposure class and product segmentation Sourcing and Processes Capital light products Efficiency in processes 23

24 Income holding up challenging environment mitigated Total income, EURm to key income related activities in Q2 Re-pricing Total lending margins +20 bps y/y (RB) CIB/SOO/NBR lending margins +20 bps y/y (WB) New customers Over 22,000 new (externally recruited) Gold and Premium customers, total >42,000 in H1 (RB) 1.5% increase in Private Banking s customer base (WM) Q Q Q Q Q Q Ancillary income Cross-selling activities on track, particular progress in savings area (RB) Investment Banking position strengthened Euromoney awards received; successfull focus on multi-product solutions (WB) Continued strong sales of capital-light products (WM) 24

25 Costs in check eleven quarters of flat costs Total expenses (excl. FX & variable pay 1 ), EURm Underlying costs Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Avg. '15 1 Variable pay including profit sharing is excluded. FX unchanged. 25

26 Cost initiatives progressing according to plan 45m of gross savings realised in Q2 (over 85m total in H1) Streamline physical distribution Optimisation of distribution mix, reduced cash-handling (RB) Right-sizing of Russian branch network, resulting in FTE reductions (WB) Gross savings Reengineer processes Enhance digitisation Automating transaction and reporting processes (WB) Transfer of staff to NOC, Nordea s near-shoring centre in Poland (RB/WB/GO) Life & Pension cost efficiency (WM) Increasing straight-through-processing, reducing manual processes, lean process design Finance Value Program (GCC) Replacing legacy, country specific solutions with global and standardised capabilities for reporting Digitisation of statements, identifications etc. (RB/GO) Approx. EUR 45m Streamline IT Optimise external spend IT Service Entity (GO) All IT resources (for the Nordea Banks) in the Nordic countries transferred to one legal entity, centralised IT contract management Efficiency improvements in IT production systems (GO) Active cost management, changed mindset (GO) 26

27 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Loan losses development in Q2 decreasing in line with plan Actual loan losses, bps (10) (20) (30) (40) (16) The credit quality continues to be robust Loan losses still concentrated to two specific areas, Denmark and Shipping but credit quality stabilised and improvements expected during 2013 Losses stable and low in other areas, except for somewhat higher provisions in CIB (50) (60) (70)

28 RoE strong underlying business performance not fully compensating for challenging macro environment and regulation Return on Equity, per cent Income initiatives delivering YTD Q YTD Q2 013 Increased ancillary business, according to plan 12,1 1,7 0,8 0,2 0,2 1,4 0,7 0,1 0,9 Lower interest rates and higher shareholders equity main offsetting factors 0,2 11,3 Business driven +2.5% External and other factors - 3.3% RoE YtD Q Income initiatives (*) Ancillary business Lower business volumes Loan losses Lower interest rates NFV non customer driven (**) Higher state guarantee fees Increase in capital Other RoE YtD Q * Incl. LP ** Markets unallocated result, Treasury, Life unallocated 28

29 Progress in summary Progress on Nordea financial plan , in Q CT1 ratio RWA Income growth Costs Loan losses RoE Core Tier 1 ratio +80 bps in Q2 to 14.0% RWA down over EUR 6bn in quarter Income holding up Underlying costs flat for 11 th consecutive quarter Decreasing in line with plan RoE somewhat down y/y (-80 bps) P P (P) P P (P) 29

30 Second quarter 2013 results Strengthened customer relations, flat costs and higher capital International telephone conference 17 July 2013 Christian Clausen, Group CEO