Interim report Q1 2007 April 25, 2007 Jan Lidén President and CEO
Highlights Q1 2007 Strong and stable results intact SEK 2,910m (2,270 Q1, 2006) Strong and stable results from all major business areas; Swedish- and Baltic Banking and Swedbank Markets Group net interest income increased for the fourth consecutive quarter Swedish Banking SEK 1,632m (1,435) High level of customer activity, increased volumes in savings, lending and payments Net interest income was stable Baltic Banking SEK 995m (597) Continued healthy development Some signs of lending growth slowdown Swedbank Markets SEK 313m (206) Continued strong profit development in all product areas Fixed income and FX showed exceptionally good results Swedbank s leading position on the Swedish savings market was reinforced by co-operation agreement with Folksam Moody s upgraded Swedbank s long term rating to Aa1. (2)
Strong position for profitability and growth Sweden Swedbank is the leading bank in Sweden. Profitability is high and stable and the bank is gaining market share in important segments such as retail mortgages and deposits. Stable base Baltics The Baltic economies are experiecing strong economic growth that is expected to remain for many years. As the largest bank in the region, growing with the market ensures Swedbank an attractive earnings growth. Growth and experience Russia and Ukraine Swedbank has a small but growing presence in Russia and Ukraine. Long term, a significant share of Swedbank s growth will be generated in these markets. Future growth and profitability Customer satisfaction Profitability Attractive employer Swedbank had the highest increase in customer satisfaction in Sweden during 2006. Customer satisfaction in the Baltics is rising from an already high level. 72 Swedbank s average annual growth of earnings per share the last 5 years was 16.5 percent. The peer group average was 15.5 percent. 25 In Sweden, Swedbank is ranked as the most attractive employer in the financial services sector*. In the Baltics we have been able to attract the best talent for a long period of time. 70 68 66 64 62 20 15 10 5 * According to Universum 60 2001 2002 2003 2004 2005 2006 0 2001 2002 2003 2004 2005 2006 (3)
Business volumes, lending 50 SEKbn Growth Q1-07, SEKbn 1,000 SEKbn Balance, March 2007 962 40 800 30 600 20 43 400 390 331 10 0 Lending, Group 11 Mortgage, private, Sweden 15 Corporate, Sweden 2 4 5 Mortgage, private, Baltics 3 Corporate, Baltics 200 0 Lending, Group Mortgage, private, Sweden Corporate, Sweden 49 Mortgage, private, Baltics 88 Corporate, Baltics Due to change in exchange rate between SEK and Euro (4)
Business volumes, savings SEKbn Growth Q1-07 SEKbn Balance, March 2007 25 20 500 400 433 15 300 304 10 22 200 5 15 3 100 90 0 Deposits, Sweden 3 Deposits, Baltics AM funds, Group 0 Deposits, Sweden Deposits, Baltics AM funds, Group Due to change in exchange rate between SEK and Euro (5)
Margins 3.5 3.0 % Lending % 3.5 3.0 Deposits Latvian rate RIGIBOR increased substantially 2.5 2.0 2.5 2.0 Shift in product mix towards mortgages and higher RIGIBOR 1.5 1.5 1.0 1.0 0.5 0.5 0.0 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 0.0 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Estonia Lithuania Latvia Sweden Estonia Lithuania Latvia Sweden (6)
Swedish Banking SEKm % 4,500 0.7 4,000 0.6 3,500 3,000 0.5 2,500 0.4 2,000 0.3 1,500 0.2 1,000 500 0.1 0 0.0 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Continued positive volume- and market share development in: Household mortgages Household deposits Corporate lending Net interest income was stable Swedbank was named Sweden s most attractive work-place in banking and the fourth most attractive employer over-all. Income Costs C/I-ratio (7)
Swedbank leads the savings market in Sweden Total market shares Dec. 2006 Breakdown of savings market Others; 13.8 (9.7) Swedbank; 14.2 (14.0) Bonds etc; 3.5 (3.6) PPM; 6.4 (2.4) Deposits; 16.3 (16.7) The state; 3.5 (2.9) Alecta; 10.1 (11.7) SEB; 13.0 (14.2) Mutual funds; 26.8 (25.1) Folksam; 4.1(3.2) LF; 4.7 (4.9) Skandia; 10.2 (11.8) Traditional insurance; 37.7 (45.2) AMF; 7.3 (7.4) Handelsbanken; 11.0 (10.4) Nordea; 8.3 (9.7) Swedbank s market shares Unit-linked insurance; 9,4 (7,1) PPM 13.7% Bonds etc 14.1% Mutaual funds 25.9% Unit-linked insurance 16.4% Traditional insurance 0.2% Depoists 26.2% Source: SEB Sparbarometern. Comparative figures refer to December 2001. 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% (8)
New ways of distributing mutual funds (9)
Swedbank Robur strengthens its leading position in asset management in the Nordic area Swedbank Robur will manage Folksam s portfolio of interestbearing securities and equities totalling SEK 142m Swedbank Robur acquires Folksam Fond AB, with assets under management of approx. SEK 27bn, for SEK 450m. The deal will close as of January 1, 2008 The management assignment to effective as of May 1, 2007 Requires usual regulatory approval Swedbank Robur s strong asset management performance was a key factor in the deal Continued efforts in non-life insurance with Folksam as supplier. (10)
Baltic Banking SEKm % 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 0.6 0.5 0.4 0.3 0.2 0.1 0.0 Continued good earnings trend Profit for the period increased by 8 per cent to SEK 995 million C/I-ratio improved to 0.40 Some slowing down in the lending increase Strong increase in saving volumes New employments to meet demand for service Continued good credit quality. Income Costs C/I-ratio (11)
Decreasing lending growth in Baltics EURm Baltic Banking EURm Estonia 1,800 14% 600 14% 1,600 1,400 1,200 1,000 800 11.7% 12.8% 12.8% 12.0% 12% 10% 8.5% 8% 6% 500 400 300 9.9% 11.9% 10.4% 10.4% 12% 10% 8% 7.0% 6% 600 400 200 4% 2% 200 100 4% 2% 0 0 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 EURm 800 700 600 14.6% 500 400 300 200 100 0 Latvia 18.2% 17.5% 14.9% 9.8% EURm 20% 400 18% 350 16% 300 14% 12% 250 9.6% 10% 200 8% 150 6% 100 4% 2% 50 0% 0 Lithuania 14% 12% 10.4% 11.4% 10.3% 10% 9.2% 8% 6% 4% 2% Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Growth / quarter (12)
Actions taken in the Baltics Plan to combat inflation in Latvia Expected to be introduced during the spring and summer 2007 Hansabank has taken an active part in preparing the plan Since Q1 2006; increased risk margins on new credits to e.g. certain parts of the real-estate sector Financing only experienced developers Increased LTV requirements Increased guarantees from construction company required for larger projects Tightened requirements for retail lending Increased service ratio Increased LTV requirements Tougher demand on previous credit history. (13)
Baltic Banking, market shares Balance, % Estonia Latvia Lithuania Dec 31, 2006 Feb 28, 2007 Dec 31, 2006 Feb 28, 2007 Feb 28, 2007 Dec 31, 2006 Deposits, households 62.4 62.3 29.4 29.5 39.1 38.6 Mortgage lending, households 49.0 49.2 30.2 29.8 29.7 29.8 Consumer/bank lending 58.4 59.0 18.7 18.7 32.3 32.2 Deposits, SME/corporate 47.1 47.1 13.6 14.3 18.5 21.5 Lending, corporate 44.1 44.3 26.3 26.3 19.6 20.7 Pension II 52.1 52.3 43.5 43.4 43.2 43.3 (14)
Swedbank Markets 450 SEKm Continued strong development in all product areas 400 350 Net profit increased 16 percent vs. Q4 2006 and 49 percent vs. Q1 2006 300 C/I-ratio improved to 0,51 250 200 150 100 50 Fixed income and foreign exchange reported best improvements Issue of structured products increased 24 percent compared to Q1 2006 0 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Net profit Q3 06 Q4 06 Q1 07 Swedbank was largest issuer of equity linked bonds in Sweden during Q1 2007 First Securities profit increased 4 percent vs. Q4 2006 and 40 percent vs. Q1 2006. (15)
TAS-Kommerzbank Acquisition process is running according to plan. Closing is expected during Q3 after approval from Ukrainian competition authorities and the central bank Norge Sverige Finland Estland Ryssland Ongoing preparations in several areas, e.g. treasury, credit, risk management, accounting and internal audit Danmark Lettland Litauen Ukraina Continued rapid growth, opening of another 60 branches during 2007. (16)
Swedbank Russia SEKm 200 180 160 140 120 100 80 60 40 20 SEK 50 45 40 35 30 25 20 15 10 5 Incl. provisions for VAT dispute 0 Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 0 Profit (right scale) Income Costs (17)
Group results Mikael Inglander CFO (18)
Income statement, Group Q1 2007 Q4 2006 % Q1 2006 % SEKm Net interest income 4,501 4,303 5 3,506 28 Net commission income 2,289 2,309 1 2,098 9 Net gains/losses on financial items at fair value 530 908 42 531 0 Other income 473 392 21 408 16 Total income 7,793 7,912 2 6,543 19 Staff costs 1,932 1,878 3 1,812 7 Profit-based staff costs 390 302 29 292 34 Other expenses 1,615 1,917 16 1,546 4 Total expenses 3,937 4,097 4 3,650 8 Profit before loan losses 3,856 3,815 1 2,893 33 Loan losses 49 72 168 50 2 Operating profit 3,807 3,887 2 2,843 34 Tax 851 928 8 539 58 Profit for the period 2,956 2,959 0 2,304 28 Attributable to Swedbank's shareholders 2,910 2,913 0 2,270 28 (19)
Improved efficiency SEKm 9,000 8,000 Capital gains from sale of Kundinkasso and 50% of EnterCard 7,000 6,000 5,000 4,000 3,000 2,000 1,000 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 Income Costs (20)
Net interest income, by business area SEKm Q1 2007 Q4 2006 % Q1 2006 % Swedish Banking 2,950 2,949 0 2,752 7 Baltic Banking Operations 1,324 1,221 8 853 55 Baltic Banking Investment 104 103 1 125 17 Swedbank Markets 399 254 57 35 Asset Management and Insurance 19 10 90 8 138 Shared Services and New Operations 79 21 53 Eliminations 8 7 14 0 Total net interest income 4,501 4,303 5 3,506 28 (21)
Net interest income Swedish Banking, change Q1 2007 vs Q4 2006 Q1 2007 vs Q1 2006 SEKm Net interest income Q4 2006 2,949 Net interest income Q1 2006 2,752 Changes: Higher lending volumes 39 216 Decreased lending margins 58 249 Higher deposit volumes 25 101 Higher deposit margins 32 222 Other changes 37 92 Total change 1 198 Net interest income Q1 2007 2,950 2,950 (22)
Baltic Banking, change in net interest income Q1 2007 vs Q4 2006 Q1 2007 vs Q1 2006 SEKm Net interest income Q4 2006 1,221 Net interest income Q1 2006 853 Changes: Higher lending volumes 63 314 Decreased lending margins 11 33 Higher deposit volumes 10 46 Higher deposit margins 119 206 Other changes 78 62 Total change 103 471 Net interest income Q1 2007 1,324 1,324 (23)
Net commission income, Group 1,100 900 700 500 300 100-100 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 (24) Asset management Payments Brokerage Lending Insurance Corporate finance Other SEKm
Expenses SEKm Q1 2007 Q4 2006 % Q1 2006 % Swedish Banking 2,204 2,350 6 2,156 2 Baltic Banking 820 866 5 651 26 Swedbank Markets 517 535 3 437 18 Other business areas 396 346 14 406 2 Total expenses 3,937 4,097 4 3,650 8 of which staff costs in: Swedish Banking 1,036 1,011 2 1,009 3 Baltic Banking 475 471 1 352 35 Swedbank Markets 345 345 0 281 23 (25)
Loan losses, Group SEKm % 500 400 300 200 100 0-100 -200 Q1-03 Q3-03 Q1-04 Q3-04 Q1-05 Q3-05 Q1-06 Q3-06 Q1-07 Loan losses Loan loss level 0.25 0.20 0.15 0.10 0.05 0.00-0.05-0.10 (26)
Credit quality, Group 200 % % 0.20 175 0.15 150 0.10 125 0.05 100 Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 0.00 Share of impaired loans (right scale) Provision ratio (27)
Credit quality, Baltic Banking 1.5% NPL/loan portfolio (12-month old) 1.2% 0.9% 0.6% 0.3% 0.0% 1.5% 1.0% Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Est Lat Lit Net provisions* to average portfolio Increase relates to an individual customer 0.5% 0.0% -0.5% Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Est Lat Lit HBG group (28)
Business areas Q1 07 vs Q1 06, SEKm Swedish Banking Q1 2007 % Baltic Banking Q1 2007 % Swedbank Markets Q1 2007 % Asset Mgmt Q1 2007 % Net interest income 2,950 7 1,324 55 399 #### 19 138 Net commission income 1,082 1 432 23 364 24 399 4 Other income 376 18 279 81 248 51 56 87 Total income 4,408 6 2,035 50 1,011 32 474 13 Staff costs 1,036 3 475 35 345 23 76 4 Other expenses 1,168 2 345 15 172 10 107 34 Total expenses 2,204 2 820 26 517 18 183 20 Profit before loan losses 2,204 11 1,215 72 494 51 291 9 Loan losses 67 1,017 120 111 0 #### 0 #### Operating profit 2,271 14 1,095 68 494 49 291 9 Return on allocated equity, % 25.5 31.1 31.8 51.2 (29)
Key figures Mar 31, 2007 Mar 31, 2006 Return on equity, % 18.9 16.6 Earnings per share, SEK 5.65 4.41 Equity per share, SEK 122.84 108.66 C/I ratio before loan losses 0.51 0.56 Loan loss ratio, net, % 0.02 0.02 Share of impaired loans, % 0.07 0.09 Provision ratio for impaired loans, % 199 188 Tier 1 capital ratio, % 6.8 6.5 Capital adequacy ratio, % 10.0 9.7 (30)
Highlights Q1 2007 Strong and stable results intact SEK 2,910m (2,270 Q1, 2006) Strong and stable results from all major business areas; Swedish- and Baltic Banking and Swedbank Markets Group net interest income increased for the fourth consecutive quarter Swedish Banking SEK 1,632m (1,435) High level of customer activity, increased volumes in savings, lending and payments Net interest income was stable Baltic Banking SEK 995m (597) Continued healthy development Some signs of lending growth slowdown Swedbank Markets SEK 313m (206) Continued strong profit development in all product areas Fixed income and FX showed exceptionally good results Swedbank s leading position on the Swedish savings market was reinforced by co-operation agreement with Folksam Moody s upgraded Swedbank s long term rating to Aa1. (31)