Swedbank year-end results 2018

Transcription

1 Swedbank year-end results 218 Birgitte Bonnesen (CEO), Anders Karlsson (CFO), Helo Meigas (CRO)

2 Strong financial result in 218 delivered on strategic priorities SELECTED 218 DELIVERIES Continued digitisation of the mortgage process and digital guiding 16.1% Return on Equity Further personalisation of the physical and digital customer interaction - data lake and data analytical tools Baltic deliveries instant payments, digital wallet and digital onboarding 75% Dividend pay-out ratio 14.2 SEK dividend per share 2

3 Initiatives in 218 to further strengthen our sustainable customer offering SELECTION OF ACCOMPLISHMENTS IN Q4 LANDMARK ACHIEVEMENTS IN 218 Banking industry winner Sustainable Brand Index B2B Swedbank Robur launches unique SDG equity fund First Nordic bank to join the initiative Science Based Targets Advanced our position in Green Bonds Issued green bonds for the World Bank Top ranking for gender equality 3

4 Continued solid mortgage loan volume growth in Q4 Total income, SEKbn TOTAL INCOME SEK 1.7bn Continued mortgage loan volume growth Lower net commission income Q4 217 Q1 218 Q2 218 Q3 218 Q4 218 Total expenses, SEKbn TOTAL EXPENSES SEK 4.4bn Expenses in line with guidance Q4 217 Q1 218 Q2 218 Q3 218 Q4 218 Credit impairments, SEKm CREDIT IMPAIRMENTS SEK 412m Solid asset quality -2 Q4 217 Q1 218 Q2 218 Q3 218 Q4 218 KEY RATIOS ROE C/I ratio Credit impairment ratio CET1 capital ratio NSFR 13.5%.41.1% 16.3% 111% Q

5 Focus on the customer relationship and friction-free experience 218 deliveries enabled further automation and potential for aggregation Proactivity and personalisation in focus for 219 Service offering based on customer needs Change in content of personal service Instant Individual Accessible everywhere Multiple channels with distinct roles complementing each other Change in ways of working

6 Strategic priorities in 219 further increase customer value and improve competitive position Offerings based on customer data Excellent digital experience Channel transformation Digital payment and commerce offering Digital lending process Improved savings and pension offering Corporate self-service and cash management 6

7 Group result FY 218 Strong result SEKm FY 218 FY 217 YoY 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 FY 218 FY 217 ROE, % C/I ratio CET1 capital ratio (pro forma) % (16.5) ROE of 16.1% - target achieved Strong income generation reflecting leading position in our home markets Expenses in line with guidance Strong asset quality CET1 capital ratio of 16.3% Solid buffer to requirements Board proposal dividend of SEK 14.2 per share Seven consecutive years of 75% pay-out ratio Q

8 Group result Stable net interest income NII, SEKm Continued mortgage loan volume growth Stable margins Accounting change to prepaid interest income Q3 218 Loan volumes Margins Deposit guarantee fee FX Accounting change to prepaid interest income Treasury & Other Q4 218 Q

9 Group result Lower net commission income NCI, SEKm Seasonally lower cards income Higher expenses in payments Lower asset management income due to weak market development Q3 218 Cards & Payments Asset management Lending & guarantees Other Q4 218 Q

10 Group result Mixed result in challenging market conditions NGL, SEKm Q4 217 Q1 218 Q2 218 Q3 218 Q4 218 Other Income, SEKm Other income UC, one-off Q4 217 Q1 218 Q2 218 Q3 218 Q4 218 Negative impact on trading and derivatives valuation Positive impact from lower covered bond buy-back volumes Positive valuation impact from basis swap spreads Stronger income from Entercard Stable net insurance Lower income from savings banks/ associates In Q3 - positive impact from changed valuation of Visa shares Q

11 Capital Strong capitalisation no excess capital CET1 capital ratio, % 24.3% Risk weight floor for Swedish mortgages moved to Pillar 1* 16.4% 16.3% 14.6% CET1 capital was unchanged Positive effect from net profit of SEK 1.bn excl. dividend Q3 218 Q3 218 Pro forma Q4 218 CET1 capital ratio requirement Negative IAS19 pension valuation effect of SEK.8bn REA increased by SEK 3.8bn Buffer of around 17bps above minimum requirements * Increased risk exposure amount (REA) due to adaptation of the Swedish mortgage risk weight floor in accordance with decision from the Swedish FSA Q

12 Capital Increased Risk Exposure Amount (REA) REA, SEKbn Risk weight floor for Swedish mortgages moved to Pillar 1 Increased REA by SEK 28.6bn* REA (pro forma) increased by SEK 3.8bn PD model change in the Baltics and other (article 3) Q3 218 Pro forma Q3 218 Credit risk Market risk CVA risk PD model Swedish change, mortgage Baltics risk weight and other floor Q4 218 * Increased risk exposure amount (REA) due to adaptation of the Swedish mortgage risk weight floor in accordance with decision from the Swedish FSA Q

13 Comments on 219 NET INTEREST INCOME Upside from rate sensitivity to roll in over Q1 with full effect from Q2 onwards TREASURY RESULT NII & NGL combined expected to be lower than in 218 EXPENSES Underlying expenses below SEK 17bn for FY

14 Expenses Continued investments according to plan FY 218 Total expenses SEK 16.8bn FY 219 Underlying expenses below SEK 17bn +.3bn +.15bn -.2bn FX Additional market-dependent Pension cost headwinds Restructuring release +.4bn +.3bn FX Pension cost Current estimation of market-dependent headwinds SEK 16.55bn Expenses guidance achieved SEK 17.bn Underlying expenses guidance to below SEK 17bn c.25% of cost base was impacted by FX movements Index 1= 2 Oct, Oct 217 Dec 217 Feb 218 Apr 218 Jun 218 USD EUR NOK Trend (EUR) Aug 218 Oct 218 Dec 218 FY 218 FX impact net positive Income: SEK 576m Expenses: SEK 23m Strategic initiatives remain a priority in 219 Examples of key deliveries Digitised mortgage lending process Multi-bank aggregation platform Proactive offers supported by AI and analytical models New corporate internet and mobile interface Q4 218 Bar chart proportions for illustration purposes only 14

15 Group Solid asset quality Credit impairments, SEKm Q4 18 Q3 18 QoQ FY 218 Swedish Banking Baltic Banking Large Corporates & Institutions Swedbank Group Resilient asset quality in all business segments Ratios Q4 18 Q3 18 FY 218 Credit impairment ratio, % Share of Stage 3 loans, gross % Total credit impairment provision ratio, % Q

16 Appendix

17 Group result Solid result amidst challenging market conditions SEKm Q4 18 Q3 18 QoQ Q4 17 YoY 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 Continued mortgage loan volume growth Weak net commission income due to market conditions Higher Group Treasury income Expenses in line with guidance Solid asset quality Ratios Q4 18 Q3 18 Q4 17 ROE, % C/I ratio CET1 capital ratio (pro forma) % (16.4) 24.6 (16.5) Q

18 Continued volume growth Loans +4bn Deposits +19bn ** Swedish private loans* +8bn Baltic Banking +3bn Corporate excl. Baltic Banking -7bn Private +11bn Corporate +8bn Of which FX -1 Of which FX -1 Of which FX -1 * Private mortgage loans, private other including tenant-owner associations **excl. Group functions and other (Group Treasury) Q

19 Swedbank has a low-risk residential property portfolio Swedish housing and mortgage market Real estate lending, net loans in Sweden, SEKbn 1) Total real estate portfolio 16 Of which: Residential property development Private mortgages: SEK 798bn, average LTV 57% Tenant-owner associations ( TOA ): SEK 17bn SEK 97bn existing TOA, average LTV 38% SEK 1bn TOA under construction 2) Property management: SEK 2bn SEK 68bn in residential property management (rental apartment properties) SEK 132bn in other property management Construction SEK 17bn SEK 6bn residential property development 2) SEK 11bn infrastructure, groundwork, craftsmen Swedbank has pursued a low risk strategy by tightening loan origination standards, and prioritising price and risk over volume growth Bulk of assets in low risk segments Average LTVs in lower ranges Residential property developer exposures of SEK 16bn 1) As of 31 December 218 2) Presented in the graph s right bar 19

20 Residential property developers - low exposure Total loan portfolio of SEK 16bn, mainly to larger, listed construction firms with which Swedbank has long-term relations SEK 1bn of the loans are related to tenant-owner association projects SEK 6bn of the loans are related to construction activities 9% of these projects will be finalised in 219 and 22 Swedish housing and mortgage market Tenant owner association project loans 1) the risk is highly mitigated Finalisation year 2) 17% 45% SEK 1bn 38% H1 219 H % By geography 2) 19% 13% 4% SEK 1bn Stockholm region Malmö region <5 inhabitants 57% Gothenburg region >5 inhabitants Average % pre-sold by finalisation year H1 219 H ) As of 31 December ) Share of exposure

21 Swedbank low-risk bank with strong capital base Liquidity & capital, % NSFR LCR CET1 ratio,(rhs) ** Credit impairment ratio, bps Low risk a Board of Directors strategic priority ensures access to funding markets and low funding cost Retail profile and four home markets a key feature Around 85% of total loans originated in Sweden - Swedish mortgages account for around 6% of total loans 9.3% of total loans are collateralised (77.5% real estate and 12.8% 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 17bps Conservative funding and liquidity position survival horizon longer than 12 months assuming closed funding markets, NSFR 111% and LCR 144%* Baltic operations self-funded loan-to-deposit ratio < 1% This is Swedbank * From Q1 218 the Liquidity Coverage Ratio (LCR) is calculated in accordance with the Commission Delegated Regulation (EU 215/61) of 1 October 214 (also, see Fact book, page 57) ** Increased risk exposure amount (REA) and capital requirement due to adaptation of the Swedish mortgage risk weight floor in accordance with decision from the Swedish FSA Q

22 Swedbank strong and stable earnings capacity This is Swedbank Profit before impairments, SEKbn 3 Disposal, one-off 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 Q

23 Swedbank market leader in cost efficiency This is Swedbank Total expenses, SEKbn Acquisition, one-off Cap C/I ratio, % 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 Q

24 Swedbank creates value Strategy % * ** Return on equity (LHS) CET1 capital ratio (LHS) Dividend per share (RHS) SEK Return on Equity >15% target 16.1% (FY) Common Equity Tier 1 ratio ** One of the highest among European banks 16.3% (pro forma Q %) Dividend per share* 75% pay out ratio for 7 th year in a row SEK 14.2 * Dividend proposal from the Board (for the financial year of 218) - to be decided by the Annual General Meeting in March 219 **After move of Swedish mortgage risk weight floor to Pillar 1 Q

25 Focus on sustainable business Q4 accomplishments Landmark achievements in 218 Banking industry winner Sustainable Brand Index B2B Sustainable Brand Index B2B First Nordic bank to join the initiative Science Based Targets Science Based Targets Swedbank joined the Science Based Targets initiative as the first Nordic bank. The goal is to play an active part in developing scientific methods for companies in the financial industry, while ensuring that the bank's future climate goals are in line with the Paris agreement. Issued green bonds for the World Bank Green Bonds Swedbank was appointed by leading decision makers to "Industry Leader 218" in the Nordic survey Sustainable Brand Index B2B. In the assessment, decision makers in large companies, with a turnover exceeding SEK 5m have ranked Swedbank as the most sustainable company in the banking industry. Swedbank was sole lead arranger for IFC, a member of the World Bank Group, in a USD 1m green bond and SEK 5m green bond tap. Swedbank Robur launches unique SDG equity fund Swedbank Robur s new sustainability equity fund, Global Impact, invests in companies that through their products, services and activities, contribute to reaching the UN s SDGs. The fund allows our customers to earn capital returns while contributing to a better, more sustainable world. The fund was among the 1 most popular funds in the quarter. Swedbank s first Green Bond Impact Report released In accordance with Swedbank s Green Bond Framework established last year the Green Bond Impact Report for 217 has now been released. It shows that investments in eligible green assets enabled tonnes of CO 2 emissions to be avoided (annualised). Top ranks for gender equality In 218 Swedbank was included in Bloomberg s Gender-Equality Index for the 2 nd consecutive year. Swedbank was also ranked no. 9 in the Equileap top 2 ranking. Swedbank was top ranked in Allbright s annual review of gender equality in listed companies. 25

26 Conservative funding position LCR 144% (EU 215/61) NSFR 111% (Basel committee) Plan to issue around SEK 14bn in 219 >9% of short-term funding is placed with central banks Issued, long-term debt Covered bonds SEKbn Senior unsecured debt Tier SEKbn Survival horizon Days forward Liquidity and funding Prefunded for more than 12 months Wholesale funding - volumes and maturity profile SEKbn 6 Q4 217 Q M 3-12M >1-5Y >5Y SEKbn 2 Maturity profile LT-funding Senior unsecured debt Covered bonds SEKbn 2 Maturity profile, by currency SEK EUR USD GBP Other 5 4 7% 13% Covered bonds Senior unsecured Structured retail bonds Short-term programmes 68% 11% 1 5 ~68bn Q

27 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 Jan 18 % -6% -2% Feb 18-1% -8% -4% Mar 18-2% -9% -4% Apr 18-2% -7% -4% May 18-2% -7% -4% Jun 18-2% -7% -4% Jul 18-3% -7% -5% Aug 18-3% -7% -5% Sep 18-3% -5% -4% Oct 18-1% -3% -1% Nov 18 2% -1% 1% Dec 18 2% 2% 2% Source: Valuegard (Based on data from Mäklarstatistik), 1 HOXHOUSESWE, 2 HOXFLATSWE (apartments), 3 HOXSWE Q House price index, Sweden 25=1 Total Tenant-owner rights (apartments) Single-family houses