Swedbank Baltic Banking Financial Results Q4 2008

Transcription

1 Swedbank Baltic Banking Financial Results 2

2 Content Highlights Volumes Income Expenses Risk 2

3 Highlights

4 Basis of preparation Hansabank Group refers to consolidated financial statements of AS Hansapank and its subsidiaries. On 15 September the name change process started during which Hansabank s name will change into Swedbank. Legal name of the bank will change in spring 29. In Swedbank Group interim reporting, Hansabank Group is reported as Swedbank Baltic Banking Operations. Russian entities results are shown under International Banking business unit. 4

5 Highlights (continued operations) 2 Net profit EUR 35m in 2, EUR -72m QoQ, annual decline 69% The following factors affected Hansabank s performance: Significant increase in loan losses Market turbulence related deposit decline Poor performance of trading income due to financial crises Efficiency maintained as a result of decrease in FTE numbers and stringent cost control Total income EUR 236m, EUR -23m from, annual decline 9% Net interest income down EUR 11m from decrease in deposit balance and increased funding costs Trading income declined EUR 11m due to fair value adjustments Total expenses EUR 96m, EUR -2m QoQ, annual decline 16% Decrease in employee numbers Growth in administrative expenses is related to the bank s investments to organization Loans EUR -458m QoQ, 6% YoY Deposits EUR -96m QoQ, -1 YoY Market turbulence caused a decline in customer deposits during September-October. Deposit base has been stable during November-December. Net loan losses reached EUR 1m in. Annual loan loss ratio is 98bp 5

6 Key financials QoQ 2 % YoY 2 2 % YoY Norm 2 % YoY Loans 2,228 2, , 6% Deposits 9,827 1, ,868-1 Income % % 3% Expenses % % 3% EBT % % -22% Net profit % % -23% EVA % % -61% Return on equity 1 6.2% 19.6% 24.4% 18.6% 28.7% Cost-income 4.7% 37.7% % 4.3% Net interest margin 2.67% 2.82% % 2.89% Net loan losses %.98%.4 Employees (FTE) 8,327 8, , Group ROE based on actual equity 2 Normalized growth columns - for better comparison, quarterly and YTD growth has been normalized by the effect of disposal of Russian companies, disposal of associated company and reversal of bonus 6

7 Quarterly trends 15 Net income Q1 Q1 5 Cost-income 4 ROE on actual equity % 44% 41% 38% 38% 41% 33% Q1 Q % 29% 24% 24% 26% 2 6% Q1 Q1 normalized results - for better comparison, changes in main indicators have been normalized by the effect of disposal of Russian companies, disposal of associated company and reversal of bonus 7

8 Performance against mid-term financial targets Group 2 2 Target EBT growth, YoY -68% -17% >2 ROE on actual equity 6% 19% >2 Cost-income 41% 38% <42% Net loan losses % <.35% 2 Est Lat Lit EBT growth, YoY -43% -131% -25% ROE on allocated equity 17% -9% 2 Cost-income 39% 36% 45% Net loan losses* %.82% *Net loan losses = (changes in general and special provisions + net write offs) / credit portfolio at the beginning of the year 8

9 Contribution to net profit change from By main P&L items Taxes and Other Other Income OpEx Net fees NII Trading NLL By countries Est Lat Lit Group Main contributors to the change High net loan losses, especially in Estonia and Latvia Pressure on net interest income given higher funding costs and declining deposit balance Weak performance of trading income 9

10 Countries performance Estonia Latvia Lithuania ROE (%) Q1 Q Q1 Q Q1 Q1 CI (%) Q1 Q1 2 5% Q1 Q1 2 5% Q1 Q1 NLL (%) % 3% 4% 3% 2. 2% 2% 1. 1% 1%. Q1 Q1 Q1 Q1 Q1 Q1 L/D ratio (%) Q1 Q1 Swedbank Q1 Q1 Q1 Q1 1

11 Income Statement and main ratios by BUs 2 Group Estonia Latvia Lithuania Total income Growth YoY -9% -8% -11% -4% Operating expenses Growth YoY -16% -15% -22% -9% Operating profit Growth YoY -3% -3% -2% 1% Net profit Growth YoY -69% -43% -134% -28% EVA Growth YoY -149% -72% -219% -58% Employees 2 (FTE) 8,327 2,95 2,342 3,34 Growth YoY -1-9% -9% -1 1 Starting from January 2, country EVA is reported under Basel II standardized. Group EVA is calculated on total equity while country EVA on allocated equity. 2 BU number of employees includes IT and Group level employees 11

12 Volumes

13 Loan portfolio growth Loan portfolio distribution 28% 9 7 Loan portfolio growth 32% 4 Est Lat Lit Q1 Q1 Mortgage Consumer Finance Q1 Corporate lending ABF 1 8% 8% -1%, 2 vs 2 Baltic* Est Lat Lit Loans (QoQ abs. growth) origination fees Corporate Lending Mortgages Consumer Finance Asset Based Finance Other 9 9 Deposits (QoQ abs. growth) Demand -1, Time *Country results do not sum to total Baltic results as eliminations and group units are excluded. 13

14 Lending and deposit growth by countries 1,5 Deposit growth vs market (only resident for Latvia)* Market Swedbank Baltic Banking 1, 5-5 Q1 Q1 Q1 Q1 Q1 Q1-1, Estonia Latvia Lithuania 9 75 Loan growth QoQ abs growth YoY % growth 9 75% % 3 15% -15 Q1 Q1 Q1 Q1 Q1 Q1-15% -3-3 *Market data from respective country central banks and financial supervision authorities. In Latvia, support to Parex bank of approximately EUR 1bn has been excluded from total market as of 31 December 2 14

15 Income

16 Income 3 YoY QoQ -9% -9% Change in revenue Q1 Q Other Net fees NII Trading Net interest income decreased due to change in funding mix and decrease in deposit and loan volumes Trading income declined due to crises in financial markets that has lead to fair value revaluations of the holdings (primarily from our life-insurance portfolio). 16

17 Net interest income 2 Net interest income 2 Change in net interest income QoQ Q1 Q1 Q1 Q1 3.5% % 2.84% 2.78% 2.76% 2.5% Net interest margin 3.3% 2.67% 2.59% 2.49% price volume number of days Net interest income decreased due to change in funding mix and rising risk margins Decrease in deposits and loans balance contributed to the decline 2. Q1 Q1 Estonia Latvia Lithuania Baltic Banking 17

18 Margin development Funding structure Time vs demand deposit Main medium-term factors affecting NIM: Largest impact - higher cost of foreign funding Higher cost of deposits Change of funding structure towards more expensive foreign funding Change in deposit structure from demand deposits to time deposits Deposits Foreign funding Demand Time % Loan margins 4.5% Deposit margins 4.27% 2.6% 2.2% 1.8% 1.4% 2.37% 1.94% Q1 Q1 Q1 Estonia Latvia Lithuania 2.% 1.91% 1.56% Deposit margin = (FTP-interest expense)/average deposits Loan margin = (interest income-ftp)/average loans 3.5% 2.5% 1.5%.5% 2.9% 1.% 1.% Q1 Q1 Q1 Estonia Latvia Lithuania 2.84% 2.84% 18

19 Net fee income Net fee income 6 45 Net fee income decreased EUR 3m from. Trends in countries differ slightly Stock market-related income continued to decline and contracted domestic demand limited payment-related fee growth in the fourth quarter. 4 Q1 Q1 Fee income Q Q1 Q1 Q1 Estonia Latvia Lithuania Other Securities Custody Cash and settlements Lending and guarantees Card services 19

20 Trading income 3 Total trading income 15 Decline in trading income by country Q1 Q Est Lat Lit Group Client margins Foreign exchange Securities Other Decline in trading income is related to crises in financial markets leading to fair value revaluations of the holdings (primarily from our life-insurance portfolio) 2

21 Expenses

22 Expenses 125 YoY QoQ -16% -2% Change in operating expenses Q1 Q1 7 Personnel Admin Data network Other Operating expenses decreased by 16% yoy to EUR 96m Growth in administrative expenses is to a large extent driven by professional services and related to the bank s investments to longer-term strategic initiatives Other expenses grew due to costs related to the rebranding project. 22

23 Personnel expenses +/- Salaries & Taxes % Bonus % Training % Total % FTE 8,327 9,23-1 Group s personnel expenses decreased by 28% YoY in. The number of employees (FTE) declined by 1 over the past year in Baltics. The decline in employee numbers is a combination of both natural employee turnover and controlled optimization of required workforce in lower business volume environment. Redundancy related expenses were EUR 1.6m in. Employee growth during 2 Est* Lat* Lit* Group Total change, QoQ FTE growth, YoY* Incl trainees Local business units Other local operations IT units -6-1 Q1 Q1 Q1 Group units 72-2 Estonia Latvia Lithuania Baltic Banking *BU number of employees does not include IT and Group level employees 23

24 Risk

25 Asset quality Net loan losses Net loan losses 2.5% % 1..5% Estonia.77%.39% 1.5 Latvia 1.61%.56% 4.1% Lithuania.58%.23%.82% Baltic Banking.98% Q1 Q1 Net loan losses NLL ratio, % Risk indicators Overdue >6 days Overdue >6 days, % 2.6%.5%.3% Total provisions Write offs Recoveries Total repossessed assets Net loan losses 2 2 Corporate 1.32%.42% 2.95% incl real estate 2.16%.57% 5.81% incl industry 1.2%.31% 1.99% Private.52%.33%.95% incl private home loans.29%.34%.73% Baltic Banking.98% Swedbank 25

26 Asset quality by country Net loan loss dynamics Net loan losses Estonia Q1. Q1 Q1 Est Lat Lit Baltic Banking 6 4 Latvia 6 Global recession has had a large negative impact on the Baltic economies. The impact is seen as a surge in net loan loss levels in 2 in Estonia and Latvia. Lithuania is expected to follow with a time lag Downturn has had a particularly sharp impact on the residential market Q1 6 4 Lithuania Q1 NLL Swedbank ratio change in total provisions (both for performing and non-performing loan portfolio) and net write-offs against beginning of the year portfolio 26

27 Credit quality of the loan book Well diversified portfolio dominated by retail exposures Macro developments have triggered downgrades in all segments: Real estate sector drives downgrades in large corporate segment (exposure > EUR.8m). Due to negative sentiment new lending is down, and the effect of downgrades cannot be balanced any more SME/SSE has been the first segment to react to downturn. Acceptable risk profile retained (45% of portfolio with PD<1%) Private portfolio has low risk profile (72% with PD<1%) 3 25% 2 15% 1 5% 25% 2 15% 1 5% Low risk Large corporate risk profile Low risk 2 2 SME/SSE risk profile A A- B B- C C- D D- E E- F 2 2 Nonperforming Nonperforming 4 Private portfolio risk profile Low risk Nonperforming Swedbank * Risk exposure: on-balance + off-balance portfolio 27

28 Overdue development Rising overdues over 9 days have the most impact on rising NLL levels Corporate, EE 5% 4% 3% 2% 1% Dec- Mar- Jun- Sep- Dec days 61-9 days over 9 days Corporate, LV 5% 4% 3% 2% 1% Dec- Mar- Jun- Sep- Dec days 61-9 days over 9 days Corporate, LT 5% 4% 3% 2% 1% Dec- Mar- Jun- Sep- Dec days 61-9 days over 9 days 2.5% Private, EE 2.5% Private, LV 2.5% Private, LT % 1.5% 1.5% %.5%.5%. Dec- Mar- Jun- Sep- Dec days 61-9 days over 9 days. Dec- Mar- Jun- Sep- Dec days 61-9 days over 9 days. Dec- Mar- Jun- Sep- Dec days 61-9 days over 9 days Swedbank * Overdues / current portfolio 28

29 Overdue loans AS Hansapank and A/S Hansabanka vs market 4% Estonia - overdue over 3 days / current portfolio 4% Estonia - overdue over 6 days / current portfolio 3% 3% 2% 2% 1% 1% Swedbank 29 Dec- Dec-5 Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Apr- May- Jun- Sep- Dec- Dec-5 Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Apr- May- Jun- Sep- Rest of the market AS Hansapank (bank) Rest of the market AS Hansapank (bank) Latvia - overdue over 3 days / current portfolio Latvia - overdue over 9 days / current portfolio 9% 8% 7% 6% 5% 4% 3% 2% 1% 6% 5% 4% 3% 2% 1% Sep- Dec-4 Mar-5 Jun-5 Sep-5 Dec-5 Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Dec-4 Mar-5 Jun-5 Sep-5 Dec-5 Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Dec- Rest of the market A/S Hansabanka (bank) Rest of the market A/S Hansabanka (bank) Source: Bank of Estonia, FKTK of Latvia, Hansabank Group data

30 Baltic lending by sectors Portfolio, December 2 Portfolio growth (), Individuals Mortgage Other 44% -68 Real-estate mgmt 3,92 15% -1 Retail & Wholesale 1,721 9% -127 Industry 1,678 8% -12 Transport 1,18 5% -18 Construction536 3% -62 Other* 3,241 16% -71 2, 4, 6, 8, 1, xx% - share of portfolio * Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans Swedbank 3

31 Estonian lending by sectors Portfolio (), December 2 Portfolio growth (), Individuals 3,854 48% -49 Real-estate mgmt 1,161 15% Retail & Wholesale 633 8% -77 Industry 454 6% -52 Transport 282 4% -7 Construction 174 2% -28 Other 1,45 18% -25 1, 2, 3, 4, xx% - share of portfolio * Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans Swedbank 31

32 Latvian lending by sectors Portfolio (), December 2 Portfolio growth (), Individuals 2,85 43% -2 Real-estate mgmt 1,8 17% 4 Retail & Wholesale 511 8% -13 Industry Transport 298 5% 3 Construction 252 4% -6 Other % -58 1, 2, 3, 4, xx% - share of portfolio * Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans Swedbank 32

33 Lithuanian lending by sectors Portfolio (), December 2 Portfolio growth (), Individuals 2,282 4 Real-estate mgmt % -14 Retail & Wholesale Industry Transport 438 8% -15 Construction 11 2% -28 Other % -2 1, 2, 3, 4, xx% - share of portfolio * Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans Swedbank 33

34 Mortgage portfolio Due to the effects of crisis all vintages are converging to the same level of overdues. Difficult to separate the effects of origination quality from the downturn impact EE LV LT* LTV, total portfolio 67% 71% 7 LTV>8 (share of portfolio) 3 38% 33% LTV>1 (share of portfolio) 12% 12% 13% Overdues / Balance, % 5% 4% 3% 2% 1% EE Mortgage overdues > 3 days m 3m 6m 9m 12m 15m 18m 21m 24m 27m 3m 33m 36m Overdues / Balance, % 5% 4% 3% 2% 1% LV Mortgage overdues > 3 days Overdues / Balance, % 5% 4% 3% 2% 1% LT Mortgage overdues > 3 days m 3m 6m 9m 12m 15m 18m 21m 24m 27m 3m 33m 36m m 3m 6m 9m 12m 15m 18m 21m 24m 27m 3m 33m 36m Swedbank * Part of loans issued backed by guarantee of the State insurance company 34

35 Corporate client portfolio From 25 to 2, new lending changed New lending in 2 and 2 mainly went to companies rated 4 or 5 (scale of 7) In 2, the downturn caused downgrades, rating 5 real estate portfolio most affected New lending in 2 focused to high quality borrowers, mainly ratings 1 to 3-. Volumes decreasing due to negative market sentiment 3 25% 2 15% 1 5% Large corporate risk profile BB Rating 6 & 7 exposures BB net loan losses, YTD 2 Commercial real estate 2 Commercial real estate Production Production Retailing Retailing 2 Transportation Other meur 2 Transportation Other meur , 1, Swedbank

36 Real estate portfolio Apartment transaction volume development Real estate and in particular residential development is the most sensitive sector in Baltic Banking portfolio Around 58% from total Real Estate portfolio are cash flow generating properties with good tenant mix. Baltic Banking has always strictly restrained from financing speculative type of properties No of transactions Dec.4 Jūn.5 Dec.5 Jūn. Dec. Jūn. Dec. Jūn. Dec. Tallinn Riga Vilnius Downturn has caused drop in residential market transaction volumes. As a result residential development portfolio (31% of total real estate portfolio) is demonstrating increase in overdue and default figures. Portfolio vulnerabilities are well understood and monitored, action plans set on a case by case basis Swedbank 36

37 Baltic lending by sectors real estate Estonia 3% 15% 24% Portfolio, December 2 5% 8% 8% 29% 6% 11% Latvia 2% 15% 43% 15% 23% 3% 12% 18% 22% Construction Individuals Production Real-estate mgmt Other Transport Retail & Wholesale 6% 5% Lithuania 13% 5% Office 38% Production&Warehouse Residential 4 31% Retail Land plots Other Swedbank 37

38 Collateral breakdown Baltic Banking loan portfolio is adequately secured. Private mortgage portfolio is fully covered with family houses and apartments (as a rule owner occupied). Commercial real estate collaterals are revaluated at least once per year. Valuation is performed by independent experts. Full asset pledge, including tangible assets and current assets, is most common case for Corporate portfolio. Collateral position enhancement with owner guarantees and additional collateral is used for more risky customers and SME segments. The share of unsecured loans is insignificant: 5.4% (used for top ratings in corporate segment and consumer products in private). Baltic Collateral () Dec 2 % Dec 2 % State 37 2% 273 1% Private real-estate 7,321 36% 6,66 33% Corporate real-estate 7,715 38% 7,96 39% Guarantees 317 2% 668 3% Other collateral* 3,742 18% 3,621 18% Unsecured 1,14 5% 985 5% Unsecured corporate 776 4% 7 4% Unsecured private 328 2% 279 1% Total** 2, ,167 1 *Other collateral is deposits, customer payments, vehicles, etc ** Total loans including repos 38

39 Thank you!