FöreningsSparbanken Q4 2005 Jan Lidén, CEO
Highlights 2005 2 The market share for total new savings from Swedish households rose to 19 percent (17) For new household deposits, the Swedish market share rose to 31 procent (10) Funds under management in Robur rose to SEK 355 bn (280) a new all-time high Group lending increased by 14 percent to SEK 796 bn (701) Proposed 15 percent increase in dividend to SEK 7.50 (6.50)
Result highlights 3 SEK M Q1-4 2005 Q1-4 2004 +/-, % Operating profit 15,010 10,578 42 excluding items affecting comparability 13,548 11,874 14 Total income 29,460 24,683 19 Net interest income 15,539 15,199 2 Net commissions 7,170 6,122 17 Net gains and losses on financial items at fair value 2,957 1,807 64 Expenses 14,156 13,611 4 Loan losses 294 494 40 RoE, % * 24.6 21.8 RoE, %, excluding capital gain 20.4 19.1 Earnings per share, SEK * 23.14 17.50 * based on profit and equity allocated to the Parent bank s shareholders.
Highlights Q4 4 Continued high profitability High revenue and business volume growth Market shares top priority in Sweden Hansabank s growth accelerated Basel II calculations confirm considerably lower risk-weighted amount
Basel II and capital adequacy 5 The Group s aggregated risk-weighted amount for credit risks, operational risks and market risks in FSB calculated in QIS5 study Group risk-weighted amount estimated to fall by slightly less than 30 percent Minimum future capital requirement compared to current level 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2006 2007 2008 2009 2010
Results, Q4 2005 6 Operating profit rose by 12 percent to SEK 3,279 M (2,922) Net profit rose by 25 percent to SEK 2,570 M (2,063) RoE increased to 19.7 percent (19.0) Total income increased by 9 percent to SEK 6,997 M (6,397) Costs increased by 10 percent to SEK 3,717 M (3,376) Hansabank s reported operating profit rose by 26 percent to SEK 596 M (473)
Group P&L 7 SEK M Q4, 2005 Q3, 2005 +/-, % Net interest income 3,712 3,860 4 Net commissions 1,896 1,910 1 Net gains and losses on financial items at fair value 1,006 789 28 Other income 383 1,839 79 Total income 6,997 8,398 17 Staff expenses 1,731 1,700 2 Profit-based staff expenses 378 349 8 Other expenses 1,608 1,315 22 Total expenses 3,717 3,364 10 Profit before loan losses 3,280 5,034 35 Loan losses 1 97 99 Operating profit 3,279 4,937 34
EnterCard 8 Re-classified as a joint venture and consolidated according to equity method, leaving only associate income in Group P&L from Q3, 2005 and onwards Negative impact on NII in Swedish Banking of SEK -98 M in Q4 and -91 M in Q3 Negative impact on net commission income in Swedish Banking of SEK -90 M in Q4 and -64 M in Q3
Items affecting comparability 9 2005 SEK M Q4 Q3 Q2 Q1 Q1-4 Capital gain on sale of shares in EnterCard 10 810 800 Capital gain on sale of shares in KIAB 1,421 1,421 Profit-based staff expenses 378 349 444 183 1,354 of which allocation to Kopparmyntet 148 173 261 87 669 Expenses for personnel changes 79 49 79 58 265 Profit effect IAS 39 188 192 550 70 860 Total 279 1,215 837 311 1,462 2004 SEK M Q4 Q3 Q2 Q1 Q1-4 Profit-based staff expenses 222 300 213 287 1,022 of which allocation to Kopparmyntet 132 214 90 131 567 Expenses for personnel changes 30 142 89 13 274 Total 252 442 302 300 1,296
Profit effect from IAS 39 10 2005 SEK M, compared to 2004 Q4 Q3 Q2 Q1 Q1-4 Net interest income Change in net interest income in Spintab repurchase differences 79 35 104 157 375 interest income compensation 151 132 96 102 481 Total 72 97 8 55 106 Net profit on financial items at fair value Inefficiency in hedging package 25 11 24 41 79 Valuation of assets at fair value shares 202 122 209 23 510 lending, derivatives, borrowing 229 105 108 278 504 deposits 29 32 27 4 38 Interest income compensation 233 251 228 131 843 Total 260 289 542 125 966 Total 188 192 550 70 860
Application of fair value option 11 Reduces accounting volatility that does not reflect underlying economic conditions Applies to portfolios of fixed-rate loans and related liabilities where the aggregate interest rate exposure is hedged with derivatives In total, SEK 368 bn of the Group s lending, SEK 4 bn of deposits and SEK 398 bn of securities in issue are valued at fair value at December 31, 2005 Shareholders opening equity increased by SEK 775 M compared to previously restated amount
Lending 12 Annualized growth,% SEK bn Q4 2005 Jan 1, 2005 Q4 * Q1-4 Group lending 796 701 16 14 Spintab s household lending 340 305 13 11 Corporate lending incl. Hansabank 364 315 18 16 Hansabank total lending 88 53 59 68 * *) after restatement to fair value according to IAS 39
Savings 13 annualized growth, % SEK bn Q4, 2005 Q4, 2004 Q4 Q1-4 Funds under management 365 286 17 28 Household deposits 182 157 4 16 Market share, % Q1-4 05 Q1-4, 04 Total new savings, Sweden 19 17 New household deposits, Sweden 31 10 Index-linked bonds 36 27
Change in net interest income 14 SEK M Q4, 2005 Q3, 2005 Change Swedish banking operations 2,908 3,093 185 Baltic banking operations 749 738 11 Swedbank Markets 245 205 40 Asset management and insurance 8 5 3 Shared services and new operations 25 104 79 Eliminations 173 77 96 Total 3,712 3,860 148
Change in net interest income Swedish banking operations Q4, 2005 vs. Q3, 2005, SEK M 15 Increased lending volumes + 21 Increased deposit volumes + 4 Increased deposit margins + 3 Decreased lending margins 129 KIAB 45 Shareholders equity and other balance sheet items 39 Total 185
Change in net interest income Baltic banking operations Q4 2005 vs. Q3 2005, SEK M 16 Increased lending volume + 66 Increased lending margin + 2 Increased deposit volume + 7 Increased deposit margin + 5 Maturity missmatch and other 10 Change according to Hansabank s reported figures + 70
Change in net interest income 17 SEK M Q1-4, 2005 Q1-4, 2004 +/- Swedish banking operations 12,266 12,503 312 Baltic banking operations 2,752 2,313 439 Swedbank Markets 873 996 123 Asset management and insurance 27 29 2 Shared services and new operations 228 4 131 Eliminations 151 620 469* Total 15,539 15,199 340 *) effect of change of accounting principles in the reporting of net interest income from trading operations
Net commission income 18 SEK M Q4, 2005 Q3, 2005 Q2, 2005 Q1, 2005 Q4, 2004 Payment processing 607 643 677 587 615 Lending commissions 128 154 83 89 97 Brokerage 264 190 133 111 106 Asset management 880 820 748 702 702 Insurance commissions 88 108 102 96 94 Other commissions 71 5 91 55 60 Total commissions, net 1,896 1,910 1,834 1,530 1,554
Change in net commission income Q1-4, 2005 vs. Q1-4, 2004, SEK M 19 Payment processing + 217 First Securities + 434 Asset management + 437 Brokerage + 95 Lending commissions 19 Other commissions 154 Total 1,048
Net profit on financial items 20 Q4, Q3, Q2, Q1, Q4, SEK M 2005 2005 2005 2005 2004 Financial instruments classified as trading and derivatives 1,160 737 357 258 316 Other financial instruments 232 87 874 15 9 Change in exchange rates 78 139 268 104 88 Total 1,006 789 785 377 413 of which attributable to IAS 39 188 192 550 70
Costs 21 SEK M Q4 2005 Q3 2005 Q2 2005 Q1 2005 Q4 2004 Group excl. Baltic banking operations - Underlying costs 2,631 2,499 2,704 2,678 2,681 - Costs for personnel changes 79 49 79 58 30 - Profit based staff costs 290 267 380 125 151 Baltic banking operations - Underlying costs 629 467 515 414 443 - Profit-based staff costs 88 82 64 58 71 Total costs 3,717 3,364 3,742 3,333 3,376
Number of full-time positions Baltic banking operations 22 8 000 7 000 6 000 6 541 5 901 5 931 5 943 5 935 6 049 6 069 6 255 6 497 6 847 7 226 5 000 4 000 3 000 2 000 1 000 0 2001 2002 2003 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05
C/I ratio adjusted according to IFRS from Q1, 2004 23 0,80 0,69 0,60 0,61 0,63 0,63 0,59 0,62 0,59 0,56 0,55 0,58 0,57 0,56 0,56 0,53 0,53 0,49 0,53 target 0,40 0,39 0,20 0,00 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03 Q3-03 Q4-03 Q1-04 Q2-04 Q3-04 Q4-04 Q1-05 Q2-05 Q3-05 Q4-05
Credit quality 24 Q1-4, 2005 Doubtful claims gross decreased by 14 percent to SEK 2,219 M (2,579) The provision ratio rose to 171 percent (151) Loan losses fell by 41 percent to SEK 294 M (494) The loan loss level dropped to 0.04 percent (0.07)
Swedish banking Q4, 2005 25 Healthy growth in business volumes lending increased by 9 % deposits increased by 8 % (full year) Increased product sales in branch network Erosion of regional differences in margins Unchanged costs Swedbank named Bank of the Year
New staff incentive program 26 Swedish retail banking operations Targets for branches, local banks and regions Maximum bonus one month s pay per employee Kopparmyntet profit sharing program reduced, maximum payout 1/3 lower Unchanged cost ceiling for employee incentive programs in Swedish operations
Swedbank Markets Q4, 2005 27 Strong quarter for stock trading Another strong quarter for First Securities Net commission income increased by 13 percent to SEK 283 M in Q4 (250 in Q3) Net profit on financial items increased to SEK 262 M in Q4 (143 in Q3)
Asset management and insurance Q4, 2005 28 Assets under management (AuM), increased 27 percent to SEK 355 bn (280) a new all-time high 79 percent of Robur s equity funds beat their comparative indices Robur s funds average Morningstar rating increased to 3.33 (3.28)
Key figures 29 Q1-4, 2005 Q1-4, 2004 Return on equity, % 24.6 21.8 excluding capital gains 20.4 19.1 Earnings per share, SEK 23.14 17.50 Equity per share, SEK 104.07 86.16 C/I ratio before loan losses 0.48 0.55 C/I ratio before loan losses excl capital gains 0.52 0.55 Loan loss ratio, net, % 0.04 0.07 Share of doubtful claims, % 0.12 0.18 Provision ratio for doubtful claims, % 171 151 Capital adequacy ratio, % 9.7 11.6 Tier 1 ratio, % 6.5 8.2
Q4, 2005 30
Full-year highlights 31 Rapid market growth Decrease in client margins, overall margins supported by increase in base-rate and change in product mix Expansion of Russian operations Investments in distribution and increase in personnel Increasing weight of Latvian and Lithuanian business units
Full-year highlights 32 EUR M 2005 2004 +/- Loans 9,371 5,924 58% Deposits 7,241 4,972 46% Net profit 241.8 192.5 26% Revenues 524.6 420.8 25% Expenses* 241.7 200.8 20%* Return on equity 25.0% 25.6% Net interest margin 2.97% 3.33% Cost-income 46.0% 45.8% * 2004 expenses also include goodwill amortisation. According to new IFRS regulations, banks no longer amortise goodwill on a monthly basis. Without goodwill amortisation cost in 2004, annual cost growth would have been 25%
Q4 highlights 33 Accelerating growth in all business units due to low interest rates and strong credit demand. Estonian result decreased by 3.6 million euro operating risk provision and Lithuanian result by higher credit cost (6.6 million euros in Q4 05 vs 2.9 million euros in Q4 04) Lending yield and net interest margin supported by a rise in base rates (6-month Euribor rose from 2.19% on Sep 30th to 2.64% at year-end) EBRD and Hansabank signed an agreement for EBRD to take a 15% stake in Hansabank s Russian operations Hansabank s Baltic Growth Fund and Russian Fund both received the highest grade from Morningstar
Q4 highlights 34 EUR M Q4 05 Q4 04 +/- Loans 9,371 5,924 58% Deposits 7,241 4,972 46% Net profit 60.3 51.2 18% Revenues 143.5 112.0 28% Expenses 73.7 58.3 26% Return on equity 22.6% 25.3% Net interest margin 2.80% 3.22% Cost-income 51.3% 50.3%
Market shares 35 Estonia Latvia Lithuania December 2005 Market share Change Market share Change Market share Change Retail deposits 63% -1% 29% +4% 39% - Corporate deposits 48% +1% 15% +3% 20% -1% Retail loans 52% -1% 24% +3% 30% +1% Corporate loans 45% +1% 25% +2% 20% - Pension II 55% +2% 33% +4% 44% - Cards 68% -1% 36% - 34% +2%
Regional distribution 36 EUR in millions Q4 05 Est Lat Lit Rus Deposits 7,241 43% 24% 32% 1% Loans 9,371 43% 26% 26% 5% Total revenues 143.5 44% 27% 23% 6% Operating expenses 73.7 42% 26% 26% 6% Operating profit 69.8 46% 28% 20% 6% Net credit losses -5.9-29% 9% 105% 15% Net profit 60.3 57% 27% 12% 4% ROE* 22.6% 41% 36% 15% 22% Cost-income ratio 51.3% 48% 49% 58% 49% * For business units ROE is calculated based on allocated equity - the Group is allocating equity capital to the business units based on 9% capital adequacy. Group ROE is calculated based on actual equity. Group capital adequacy was 11.0% in December 2005.
Revenues 37 YoY QoQ 140 +28% +5% Q4 05 Q4 04 +/- EUR in millions 130 120 110 100 90 80 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Net interest income Net fee income Trading income Other income Total revenues 83.6 45.1 11.3 0.5 143.5 64.5 32.8 11.4 1.2 112.0 30% 38% -1% 6% 28% Net interest income growth driven by strong lending growth (YoY 58%) in all countries Major growth drivers are lending fees, +42% to EUR 18 M, and securities fees, +76% to 6.2 M
Expenses 38 EUR in millions 80 70 60 50 40 30 YoY QoQ 26% 27% Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Personnel Administrative Data network Depreciation Other Total expenses Q4 05 34.6 13.1 5.9 5.9 15.9 73.7 Q4 04 27.1 11.5 5.0 5.0 10.6 58.3 +/- 28% 14% 18% 18% 50% 26% No of employees increased by 363 in Q4. Annual increase is 1,006: +350 in Latvia, +279 in Lithuania, +270 in Estonia and +106 in Russia. Performance related bonus reserve forms EUR 8.4 mil of Q4 personnel cost Other expenses in Q4 05 include 3.6 million operating risk provision
39 Lending growth EUR in millions 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 0 Business units 122% 79% 57% 44% Est Lat Lit Rus 140% 120% 100% 80% 60% 40% 20% 0% EUR in millions 450 400 350 300 250 200 150 100 50 0 Growth by loan type, Q4 05 Est Lat Lit Rus Dec 2004 Dec 2005 Growth YoY Other ABF Business Mortgage
40 Net interest margin Group 3,45% 2,80% 2,0% 2,5% 3,0% 3,5% 4,0% 4,5% Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 By business units 2,50% 3,85% 3,13% 3,48% 2,39% 2,41% 2,0% 2,5% 3,0% 3,5% 4,0% 4,5% 5,0% Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Estonia Latvia Lithuania
- Building a Leading Nordic-Baltic bank 41