Swedbank s year-end 2011 results Michael Wolf, CEO Göran Bronner, CFO Håkan Berg, CRO
Delivered according to last years prospects Net profit of SEK 11.7bn for 2011 Core Tier 1 capital ratio of 15.7 per cent Return on equity of 12.2 per cent for 2011 Proposed dividend of SEK 5.30 per share 2
All stakeholders affected by new environment Shareholders Two share issues totalling SEK 27bn Buy-back programme halted Goodwill write-downs Harder to reach ROE target Staff Number of employees down by about 6 000 since end of 2007 Overhaul of remuneration systems will reduce variable pay Customers Increased cost of money 3
Group results Continued stable development SEKm FY 2010 FY 2011 Q3 11 Q4 11 Net interest income 16 329 19 118 4 857 4 994 Net commission income 9 525 8 963 2 292 2 126 Net gains and losses 2 400 1 584 259 559 Other income 2 790 3 850 782 839 Total income 31 044 33 515 8 190 8 518 Total expenses 17 642 17 869 4 331 4 809 Goodwill write-down in Latvia SEK 1913m SEK 330m restructuring charge Increased capital markets income and positive valuation effects Profit before impairments 13 402 15 646 3 859 3 709 Cost reduction 2012: SEK 1bn CT1 ratio, %* 13.9 15.7 Return on equity, % 8.1 12.2 Continued focus on capital efficiency * Basel 2 4
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Liquidity and funding Significantly lower issuance volumes going forward SEK 44bn of long-term debt issued in Q4 (incl. SEK 7bn of senior unsecured) Over-collateralisation in covered-bond pool increased to 29% (25%) Continued strong liquidity reserves SEKbn 80 Term funding issuance Average term funding issuance Maturities 2012 60 Average term funding need 40 20 0 5
Swedbank regulatory compliant transition completed Transformation of: Maturity structure liabilities Liquidity reserve Capital buffer Significantly reduced risk in balance sheet Cost for regulatory compliance taken Ratio Swedbank Expected requirements CT1-ratio, Basel 3 14.7% 10% (2013) 12% (2015) Liquidity coverage ratio 139% 100% (2015) EUR/USD Net stable funding ratio 94% 100% (2018) 6
Capital management Current capitalisation targets withdrawn Dividend policy of 50% Other capital repatriation on hold Proposal to issue convertible debt instruments Return target of 15% 7
Risk highlights Net recoveries of SEK 174m in Q4 Credit impairments, SEKm Credit impairments in Sweden still low Known problems Limited inflow of watch list and problem loans -324-441 -174 Collective provisions mortgage loans in Latvia and Ukraine -483-972 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Retail LC&I Baltic Banking Russia & Ukraine Other 8
Risk highlights Focus on risk-weighted assets SEKbn 550 540 4.4 RWA development Significant achievements 2011 Full organisational involvement Credit volumes Customer quality -22.3 Market risks 530 Focus areas 2012 520 Review of small and mid-sized corporates Sweden 510 541.3-21.2 Retail mortgage risk-weights 500-7.4-2.6 490 Increase Decrease 492.3 480 2010 Q4 Volume (EAD) Migrations Other credit Market risk Operational risk 2011 Q4 9
Risk highlights Many factors impacting outlook Challenging economic situation in Europe Real estate Sweden: Risk picture is going down Positive outlook in Baltic countries 10
Priorities going forward Increased focus on operational efficiency Improve customer satisfaction Increase decision-making close to our customers Improve quality and cost effectiveness 11
Q & A
Appendix 13
Percent Mortgage loans gross margin (3-months) 6.0 5.0 4.0 3.0 2.0 Swedbanks price towards customer (3 months) Swedbank's funding cost Stibor 3 months Swedish Riksbanks reporate Should cover: Liquidy costs Cost of administration Credit Impairments Profit 1.0 0.0 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 Q4 11 11
Development of ROE and net interest margin ROE % 30 NIM % 1.6 25 1.4 20 15 10 5 0-5 2 004 2 005 2 006 2 007 2 008 2 009 2 010 2 011 1.2 1.0 0.8 0.6 0.4-10 0.2-15 ROE (left hand scale) NIM (right hand scale) 0.0 15
Liquidity and funding Funding development Q4 SEK 44bn of long-term debt issued in Q4 (mainly domestic covered bonds and senior unsecured private placements) Demand for Swedbank short-term paper continued USD funding need covered for more than 12 months SEKm Long-term debt issued in Q4 SEKm Outstanding short-term debt 35 000 60 000 30 000 50 000 25 000 40 000 20 000 15 000 Q4 11 30 000 Q3 11 Q4 11 10 000 20 000 5 000 10 000 0 Domestic CB Euro CB Other CB Senior unsecured 0 Domestic CP ECP/CD USCP Yankee CD Finnish CD French CD 16
Liquidity and funding Funding development FY 2011 SEK 254bn of long-term debt issued and SEK 180bn of maturities at beginning of 2011 Good demand for Swedbank short-term paper SEKm Issued long-term debt SEKm Outstanding short-term debt 160 000 50 000 140 000 120 000 40 000 100 000 80 000 60 000 2011 30 000 20 000 2010 2011 40 000 10 000 20 000 0 Domestic CB Euro CB USD CB (144A) Other CB Senior unsecured 0 Domestic CP ECP/CD USCP Yankee CD Finnish CD French CD 17
Liquidity and funding Long-term funding maturity profile Maturities for 2012 amount to nominal SEK 86bn SEKbn 200 150 Long-term funding maturity profile Government guaranteed debt Senior unsecured debt Covered bonds 100 50 0 2012 2013 2014 2015 2016 2017-18
Liquidity and funding Remaining government guaranteed debt Exited the programme on 30 April 2010 No issuance under the programme since summer 2009 SEK 37bn of government guaranteed debt matures in April 2012 SEKbn 40 Maturity profile as of Q4 2011 20 USD SEK EUR CHF HKD JPY 0 2012 2013 2014 19
Swedbank s cover pool House price sensitivity of the cover pool House price sensitivity of the cover pool Overcollateralisation 35% 30% 25% OC 20% 15% 10% 5% 0% -5% -10% -15% -20% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% House price drop 20
Liquidity and funding Liquidity reserve According to the template defined by the Swedish Bankers' Association 1 SEKm Cash and holdings in central banks 163 215 Deposits in other banks available overnight Securities issued or guaranteed by sovereigns, central banks or multilateral development banks 27 880 Securities issued or guaranteed by municipalities or Public sector entities Covered bonds 54 132 - Issued by other institutions 54 132 - Own issued Securities issued by non-financial corporates Securities issued by financial corporates (excl. covered bonds) 1 715 Other Total 246 942 2 Additional liquid assets, Group 62 082 Other, over-collateralisation in the cover pool 149 500 Total 458 524 1 96% of the securities in the liquidity reserve as of Q4 2011 are rated AAA 2 80% of the additional liquid assets fulfill the Liquidity Reserve definition by the Swedish Bankers Association except from that they are held outside Group Treasury. 21
Asset quality Impaired loans decreasing Excluding FX effect down SEK 3.4bn in Q4 Corporate portfolio quality improvements SEKm 45 000 40 000 35 000 30 000 25 000 20 000 29 657 35 770 6 113 40 132 40 328 4 362 196 42 719 38 631 2 391-4 088 34 778-3 853 31 747-3 031 30 669 28 743-1 078 24 805-1 926-3 938 5 366 1 281 Share of impaired loans, gross Ukraine 61% Russia 20% 15 000 29 657 4 792 Lithuania 13% 10 000 7 696 Latvia 21% 5 000 0 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 3 620 319 1 731 Q4 11 Estonia 6.6% LCI 0.13% Retail 0.19% 22
Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Asset quality Loans past due 60 days performance Q/Q EURm 30 10-10 -30-50 -70-90 -110-130 -150 Estonia Latvia Lithuania Ukraine Russia 23
Asset quality Provisions well provided for Individual provisioning rates maintained Additional portfolio provisions in Latvian and Ukrainian mortgages Positive rating migrations SEKm 30 000 Provision ratios, % Q4 11 25 000 20 000 15 000 10 000 5 000 62.7% 3 297 18 494 4 373 61.0% 2 769 16 598 5 204 60.0% 59.8% 61.5% 2 436 2 409 15 952 14 782 2 435 12 821 8 206 9 255 6 306 Retail 90 LC&I 135 Baltic Banking 55 Russia 46 Ukraine 72 Group 62 0 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Individual provisions Portf olio provisions Write-of f s, gross, cum f rom 2010 Provision ratio 24
Asset quality Repossessed assets SEKm 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Real Estate Residential Real Estate Commercial Passenger & Commercial Transport Shares Other 25
Asset quality Credit impairments by category SEKm 1 000 500 0-500 - 324-1 000-441 - 174-1 500-483 - 972 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Portfolio provisions Individual provisions Recoveries Write-offs net 26
Credit portfolio Large Corporates & Institutions Shipping and offshore Lending exposure to the shipping and offshore sector is SEK 22.7bn plus unutilised commitments of SEK 6.1bn Portfolio duration 4-5y Average fleet age 7y Other represents dry bulk (4%), ro/ro/car (7%), container (5%) Strong employment profiles Shipping and offshore portfolio Offshore 58% Tanker 26% Other 16% Note: Portfolio breakdown based on total exposure (lending + unutilised commitments). 27
Swedish housing and mortgage market Real estate prices Sweden 2011 Single-family homes 1 Tenant owner rights 2 Combined 3 12M Δ 12M Δ 12M Δ Jan 0% 8% 2% Feb 2% 7% 3% Mar 2% 6% 3% Apr 1% 6% 3% May 0% 6% 2% Jun 0% 5% 2% Jul 0% 6% 2% Aug -2% 3% -1% Sep -3% 1% -2% Oct -4% -1% -3% Nov -5% -4% -5% Dec -7% -4% -6% Source: Valuegard www.valuegard.se (Based on data from Mäklarstatistik), 1 HOXHOUSESWE, 2 HOXFLATSWE, 3 HOXSWE 28
Jan-05 Aug-05 Mar-06 Oct-06 May-07 Dec-07 Jul-08 Feb-09 Sep-09 Apr-10 Nov-10 Jun-11 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-05 Aug-05 Mar-06 Oct-06 May-07 Dec-07 Jul-08 Feb-09 Sep-09 Apr-10 Nov-10 Jun-11 Real estate prices Baltic countries 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 1 616 Tallinn 976 2 000 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 1 762 Riga 590 Nr.of deals Source: Swedbank, Estonian Land Board EUR/m2 Source: Swedbank Nr.of deals EUR/m2 2 000 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 Vilnius 1 731 1 103 Nr.of deals Source: Swedbank, State Enterprise Centre of Registers EUR/m2 29
Swedish housing market New private lending in Sweden Internal LTV limit of 75% having a clear impact on average LTV levels of new origination 78 Weighted average LTV on new lending 76 74 72 70 68 66 64 62 2009 2010 2011 Tenant owner rights Single-family houses Total 1 1 Total of Tenant owner rights and Single-family houses 30