Swedbank s second quarter 218 results Anders Karlsson (CFO), Helo Meigas (CRO)
Group financial highlights TOTAL INCOME SEK 11.8bn 12 8 4 Total income, SEKbn Strong loan volume growth Higher commission income from cards and asset management Q2 217 Q3 217 Q4 217 Q1 218 One-off capital gain of SEK 677m (UC) Total expenses, SEKbn TOTAL EXPENSES SEK 4.3bn 6 4 2 In line with full year guidance Q2 217 Q3 217 Q4 217 Q1 218 Credit impairments, SEKm CREDIT IMPAIRMENTS SEK -135m 6 4 2 Solid asset quality -2 Q2 217 Q3 217 Q4 217 Q1 218 KEY RATIOS ROE ROE excl. One-off * C/I ratio Credit impairment ratio CET1 capital ratio 19.2% 17.1%.36 -.3% 23.6% * Tax free capital gain of SEK 677m (UC) 2
Group result Stable net interest income NII, SEKm 134 56 6 294 28-48 -64 6 273-127 Q1 218 Loan volumes Margins Resolution fund fee Day count FX Treasury & Other Strong loan volume growth Slightly lower margins Higher resolution fund fee One more day in the quarter Positive FX effect Less favorable USD funding market 3
Group result Strong net commission income NCI, SEKm Seasonally higher cards income 3 81 11 65 31-18 -33 3 236 Asset management income supported by strong mutual fund inflows and positive asset value development Q1 218 Cards Asset management Lending & guarantees Payments Other 4
Group results Sale of UC generated one-off capital gain NGL, SEKm 567 525 Other Income, SEKm 356 Q2 217 Q3 217 Q4 217 Q1 218 Other income 686 723 UC 959 559 86 635 1 653 677 976 Overall lower trading activity due to political uncertainty Continued good client FX and interest rate swap activity Improved result in Group Treasury due to FX swap valuation effects in Q1 One-off tax free capital gain of SEK 677m (UC) Positive arbitration result of SEK 85m related to Visa Lower claims in insurance business Q2 217 Q3 217 Q4 217 Q1 218 5
Group results Strong profitability supported by high customer activity SEKm Q2 18 Q1 18 QoQ Net interest income 6 273 6 294-21 Net commission income 3 236 3 81 155 Net gains and losses 635 559 76 Other income 1 653 86 847 Total income 11 797 1 74 1 57 Total expenses 4 262 4 169 93 Profit before impairments 7 535 6 571 964 Credit impairments -135 127-262 Other impairments 282 282 Tax 1 369 1 41-41 Net profit 6 14 5 33 981 Ratios Q2 18 Q1 18 ROE, % 19.2 15.4 C/I ratio.36.39 CET1 capital ratio, % 23.6 24.8 Continued solid mortgage loan volume growth Corporate loan growth Resolution fund fee higher in 218 and lower in 219-22 Net commission income supported by solid macroeconomic fundamentals One-off tax free capital gain of SEK 677m (UC) Expenses in line with guidance Solid asset quality Impairments of intangible assets Lower corporate tax rate from 219 6
Solid volume growth Swedish mortgage loans +1bn +16bn Loans +35bn Baltic Banking Corporate excl. Baltic Banking +8bn +15bn Private Corporate Of which FX Property mgmt. +3 3 +4 4 +4 4 +6 6 Deposits +31bn * Private Corporate Of which FX +4 +15bn Prof. services +3 3 Private, other +2bn Finance and ins. +2 2 Other +4 4 Of which FX +3 3 *excl. Group functions and other (Group Treasury) 7
Group results Strong profitability supported by high customer activity SEKm Q2 18 Q1 18 QoQ Net interest income 6 273 6 294-21 Net commission income 3 236 3 81 155 Net gains and losses 635 559 76 Other income 1 653 86 847 Total income 11 797 1 74 1 57 Total expenses 4 262 4 169 93 Profit before impairments 7 535 6 571 964 Credit impairments -135 127-262 Other impairments 282 282 Tax 1 369 1 41-41 Net profit 6 14 5 33 981 Ratios Q2 18 Q1 18 ROE, % 19.2 15.4 C/I ratio.36.39 CET1 capital ratio, % 23.6 24.8 Continued solid mortgage loan volume growth Corporate loan growth Resolution fund fee higher in 218 and lower in 219-22 Net commission income supported by solid macroeconomic fundamentals One-off tax free capital gain of SEK 677m (UC) Expenses in line with guidance Solid asset quality Impairments of intangible assets Lower corporate tax rate from 219 8
Capital Strong capitalisation no excess capital CET1 capital ratio, % CET1 capital increased by SEK.5bn 24.6% 23.9% 24.6% 24.8% 23.6% 21.7% Positive effect from net profit of SEK 1.2bn excl. dividend Negative effect from IAS19 of SEK.8bn REA increased by SEK 23.7bn Q2 217 Q3 217 Q4 217 Q1 218 CET1 capital ratio requirement Buffer above minimum requirements of around 19bps 9
Capital Increased Risk Exposure Amount (REA) REA, SEKbn 41.8 19.3 1.3.1 3. 434.5 REA increased by SEK 23.7bn Loan volumes increased REA by 17.4bn FX SEK 2.9bn Q1 218 Credit risk Market risk CVA risk Other 1
Group Solid asset quality Credit impairments, SEKm Q2 18 Q1 18 QoQ Swedish Banking 84 253-169 Baltic Banking -87-26 -61 Large Corporates & Institutions -126-1 -26 Swedbank Group -135 127-262 Resilient asset quality in all business segments Recoveries in Baltic Banking and LC&I Ratios Q1 18 Q1 18 Credit impairment ratio, % -.3.3 Share of Stage 3 loans, gross %.67.7 Total credit impairment provision ratio, %.33.35 11
Appendix
Group results Strong profitability supported by high customer activity SEKm Q2 18 Q1 18 QoQ Q2 17 YoY Net interest income 6 273 6 294-21 6 9 183 Net commission income 3 236 3 81 155 3 5 186 Net gains and losses 635 559 76 567 68 Other income 1 653 86 847 686 967 Total income 11 797 1 74 1 57 1 393 1 44 Total expenses 4 262 4 169 93 3 966 296 Profit before impairments 7 535 6 571 964 6 427 1 18 Credit impairments -135 127-262 4-535 Other impairments 282 282 1 281 Tax 1 369 1 41-41 1 276 93 Net profit 6 14 5 33 981 4 746 1 268 Ratios Q2 18 Q1 18 Q2 17 ROE, % 19.2 15.4 15.6 C/I ratio.36.39.38 CET1 capital ratio, % 23.6 24.8 24.6 13
Swedbank has a low-risk residential property portfolio Swedish housing and mortgage market Real estate lending, net loans in Sweden, SEKbn 1) 1 12 781 19 69 126 17 Total real estate portfolio 18 Of which: Residential property development Private mortgages: SEK 781bn, average LTV 56% Tenant owner associations ( TOA ): SEK 19bn SEK 97bn existing TOA, average LTV 39% SEK 12bn TOA under construction Property management: SEK 195bn SEK 69bn in residential property management (rental apartment properties) SEK 126bn in other property management Construction SEK 17bn SEK 6bn residential property development SEK 11bn infrastructure, groundwork, craftsmen Swedbank has pursued a low risk strategy by tightening 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 18bn 1) As of 3 June 218 14
Residential property developers - low exposure Total loan portfolio of SEK 18bn, mainly to the larger listed construction firms, with which Swedbank has long-term relations SEK 12bn of the loans are related to tenant-owner rights projects SEK 6bn of the loans are related to residential property construction activities 9% of these projects will be finalised in 218 and 219 Swedish housing and mortgage market Tenant-owner rights related construction loans 1) the risk is highly mitigated 24% By location 1) 4% 1% 5% Stockholm region Malmö region <5 inhabitants 57% Gothenburg region >5 inhabitants Finalisation year 2) 38% 1% SEK 1bn 218 219 22-52% 1 9 8 7 6 5 4 3 2 1 Average % pre-sold by finalisation year 218 219 22-1) As of 3 June 218 2) Share of exposure 15
Swedbank low-risk bank with strong capital base 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 86% of total loans originated in Sweden - Swedish mortgages account for 5% of total loans 9% of total loans are collateralised (77.2% 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 19bps Conservative funding and liquidity position survival horizon longer than 12 months assuming closed funding markets, NSFR 11% and LCR 145%* Baltic operations self-funded loan-to-deposit ratio < 1% * 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) NSFR LCR* CET1 ratio, CRDIV (RHS) 2 3 15 1 5 4 3 2 1 Liquidity & capital, % This is Swedbank 213 214 215 216 217 Credit impairment ratio, bps 2 1-1 Q2 13 Q2 14 Q2 15 Q2 16 Q2 17 Q2 18 16
Swedbank strong and stable earnings capacity This is Swedbank 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 Profit before impairments, SEKbn 1 8 Disposal one-off 6 4 2 Q2 13 Q2 14 Q2 15 Q2 16 Q2 17 Q2 18 17
Swedbank market leader in cost efficiency This is Swedbank 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 market Cost target for 218-219 to be below SEK 17bn per year 2 18 16 14 12 6 55 5 45 4 35 3 Total expenses, SEKbn Acquisition one-off 212 213 214 215 216 217 218 Cap C/I ratio, % 212 213 214 215 216 217 18
Focus on sustainable business Improved sustainability scores Dow Jones Sustainability Index 211 212 213 214 215 216 217 Swedbank s first Green Bond Impact Report released Green Bond Impact Report 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 resulting investments in eligible green assets has enabled 457 39 tonnes of CO2 emissions to be avoided (annualised). Stronger Environmental Management System (EMS) ISO Swedbank s upgraded Environmental Management System was certified with the new and more rigorous standard ISO141:215. Swedbank is included in The Sustainability Yearbook 218 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. Eligible green assets Renewable energy Energy efficiency Sustainable management of living natural resources Pollution prevention and control Clean transportation Sustainable Development Goal SDG7 and SDG13 SDG7, SDG11 and SDG13 SDG15 SDG6 and SDG11 SDG9 and SDG11, SDG13 Sustainability Indicators: towards the 23 Agenda Swedbank has developed a new methodology, Sustainability Indicators, to review the progress towards the UN 23 Agenda for Sustainable Development. The aim is to support the business looking at ESG (environmental, social, governance) criteria and help to identify weaknesses and strengths in Sweden and the Baltic countries. The Sustainability Yearbook The Sustainability Yearbook lists the world s most sustainable companies in each industry as determined by their score in RobecoSAM s annual Corporate Sustainability Assessment. 19
Swedbank creates value Strategy % 3 SEK 14 Return on Equity >15% target 25 2 15 1 5 213 214 215 216 217 Return on Equity (LHS) CET1 capital ratio (LHS) Dividend per share (RHS) 12 1 8 6 4 2 19.2% (17.2% excl. one-off) Common Equity Tier 1 ratio One of the highest among European banks 23.6% Dividend per share 75% payout ratio for 6 th year in a row SEK 13. 2
Conservative funding position LCR 145% (EU 215/61) Liquidity and funding NSFR 11% (Basel committee) Issued around SEK 83bn YTD (in addition, SEK 3bn in Tier 2 private placements) Plan to issue around SEK 145bn in 218 Term funding issuance completed and planned Prefunded for more than 12 months SEKbn SEKbn 1 9 8 7 6 5 4 3 2 1 Covered bonds Senior unsecured debt 9 Planned, covered bonds Planned, senior unsecured debt 8 Tier 2 7 Survival horizon 6 5 4 3 2 1 2 4 6 8 1 12 14 16 18 2 22 24 26 28 3 32 34 365 Days forward 21
Long-term funding maturity profile Liquidity and funding Long-term funding maturity profile, by funding source SEKbn Senior unsecured debt Covered bonds 2 Long-term funding maturity profile, by currency SEKbn 2 15 1 5 15 1 5 Other GBP USD EUR SEK 218 219 22 221 222 223 224-218 219 22 221 222 223 224-22
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 Jul 17 1% 9% 9% Aug 17 1% 8% 9% Sep 17 8% 4% 7% Oct 17 4% 1% 3% Nov 17 1% -3% % Dec 17 % -6% -2% Jan 18 % -6% -2% Feb 18-1% -8% -4% 35 3 25 House price index, Sweden 25=1 Total Tenant-owner rights (apartments) Single-family houses Mar 18-2% -9% -4% Apr 18-2 -7-4 May 18-2 -7-4 Jun 18-2 -7-4 Source: Valuegard www.valuegard.se (Based on data from Mäklarstatistik), 1 HOXHOUSESWE, 2 HOXFLATSWE (apartments), 3 HOXSWE 5 6 7 8 9 1 11 12 13 14 15 16 17 18 23 2 15 1 5