Nordea Kredit, Investor Presentation, Q3 2011 Published 28 November 2011
This Investor Presentation has been compiled by Nordea Kredit for information purposes only, and offers facts and figures on Nordea Kredit, and the mortgage collateral supporting outstanding mortgage bonds and covered mortgage bonds. If you have any questions, please feel free to contact either of us: Finn Nicolaisen, Nordea Group Treasury, Head of Group Funding Copenhagen, phone +45 3333 1625 Kamilla H. Skytte, Nordea Group Treasury, Chief Dealer, Group Funding Copenhagen, phone +45 3333 1626 Contents: Nordea Kredit in brief Asset quality, losses and arrears Loan to value (For detailed information on LTV please refer to LTV Report 2011 Q3 ) Legislation Macro economic factors 2
Nordea Kredit in brief I Founded in 1993, number of employees 150 (as per 2011, Q2) Nordea Kredit issues covered mortgage bonds, exclusively All bonds issued by Nordea Kredit are rated AAA (by S&P) and Aaa (by Moody s) Profit before tax 1st half 2011: 529 m DKK, RoE 3.5% and Cost/Income ratio 16.9% Mortgage loans at nominal value 2011, Q3: 329.3 bn DKK Mortgage loans at fair value 2011, Q3: 333.4 bn DKK Market share 2011, Q3: 13.8% (2011, Q2: 13.7%) (Mortgage loans at fair value as a share of all Danish mortgage loans) 3
Nordea Kredit in brief II Late payments by borrowers 2011 Q3: 0.38% (2011 Q2: 0.42%) Residential properties and holiday homes, 3½ month after due date Average LTV 2011 Q3: 68% (2011 Q2: 66%) Total capital ratio 9.0% and Tier 1 capital ratio 9,0% (incl. transition rules) Total capital ratio 15.4% and Tier 1 capital ratio 15.4% (excl. transition rules) Completely match funded Pass Through setup - strict ALM (Asset Liability Management) Danish MCIs are closely regulated and supervised by Finanstilsynet (The Danish FSA) 4
Nordea Kredit market shares in per cent of total market 20 20 18 18 16 16 14 14 Other properties 12 12 Private rental housing per cent 10 10 Commercial 8-8 Agriculture 6 6 4 4 Owner occupied dwellings and holiday homes 2 2 All segments 0 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 0 5
Nordea Kredit profit and increase in net lending 35 30 << Increase in net lending DKK bn Profit before tax DKK m (rhs) >> 1400 1200 25 1000 20 800 15 600 10 400 5 200 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011, 1h Profit before tax for the 1st half of 2011 was 529 m DKK 0 6
Nordea Kredit mortgage loans at fair value CCs I&II, 2011 Q3: DKK 333.4 bn CC I, RO: 87.5 bn, 26.3 per cent Nordea Kredit has two capital centres: CC II, SDRO: 245.9 bn, 73.7 CC per I, RO cent DKK 97.9 bn 30.2% CC I: Mortgage Bonds (Realkreditobligationer, RO ) are issued out of CC I (1993 - ). More than 97% of the bonds in CC I are grandfathered covered bonds according to UCITS/CRD. CC II: Covered Mortgage Bonds (Særligt dækkede realkreditobligationer, SDRO ) are issued out of CC II (2007 - ). All bonds in CC II are covered bonds according to UCITS/CRD. All new issuance in 2011 exclusively in covered mortgage bonds (SDROs) 7
Match funded setup due to the strict Balance Principle Borrower Interest payment Principal payment Interest payment Principal payment Investor Contribution fee Nordea Kredit Nordea Kredit complies with the strict Balance Principle, and has a completely match funded Pass Through setup. Nordea Kredit has no prepayment risk and only negligible interest rate risk and foreign exchange risk. 8
Nordea Kredit distribution of loans by property category All property categories CCs I & II, 2011 Q3 at fair value: 333.4 bn DKK 9
Nordea Kredit distribution of loans by type All property categories CCs I & II, 2011 Q3 at fair value: 333.4 bn DKK DKK 54.5 bn 16.4% DKK 101.6 bn 30.5 % DKK 1.8 bn 0.5% DKK 65.7 bn 19.7% DKK 73.4 bn 22.0% DKK 20.7 bn 6.2 % DKK 13.4 bn 4.0 % DKK 2.4 bn 0.7 % Fixed Fixed IO ARM ARM IO FRN capped FRN capped IO FRN FRN IO 10
Nordea Kredit distribution of loans by type Residential properties and holiday homes CCs I & II, 2011 Q3 at fair value: 230.5 bn DKK DKK 58.8 bn 25.5 % DKK 31.7 bn 13.7% DKK 74.8 bn 32.5% DKK 1.6 bn 0.7% Fixed Fixed IO ARM ARM IO FRN capped FRN capped IO FRN FRN IO DKK 61.3 bn 26.6 % DKK 2.3 bn 1.0% DKK 0.0 bn 0.0% DKK 0.0 bn 0.0% Fixed rate loans account for 52.1% of the total loan portfolio 11
Nordea Kredit geographical distribution of loans Q3, 2011 Fair value, all segments: 333.4 bn DKK, residential properties & holiday homes: 230.5 bn DKK Total number of citizens 5.56 m January 2011 Source: Statistics Denmark 14.7 bn DKK 4.4%* 9.7 bn DKK 4.2%** (0.58 m citizens 10.4%) North Denmark Region 79.1 bn DKK 23.7%* 50.3 bn DKK 21.8%** (1.26 m citizens 22.7%) Central Denmark Region 122.0 bn DKK 36.6%* 93.7 bn DKK 40.7%** (1.70 m citizens 30.6%) Capital Region of Denmark 50.9 bn DKK 15.3%* 283 bn DKK 12.3%** South Region (1.20 m citizens 21.6%) Zealand 66.6 bn DKK 20.0%* * All segments ** Residential properties and holiday homes Denmark Region 48.5 bn DKK 21.0%** (0.82 m citizens 14.7%) 12
Asset quality - loss guarantee by Nordea Bank Danmark Nordea Bank Danmark takes first losses on Nordea Kredit loans according to the table below: Property type Guarantee period * Guarantee level ** Owner occupied dwellings 5 years 25 per cent Holiday homes 5 years 25 per cent Subsidized property 10 years 10 per cent Housing for youth/elderly 10 years 10 per cent Agricultural property 10 years 25 per cent Commercial property 10 years 25 per cent *) Guarantee period starts when a loan is issued or remortgaged **) As a percentage of the original principal disregarding all amortisation The guarantee amount is not reduced during the guarantee period, but cannot exceed the debt outstanding. A new guarantee period starts when the loan is changed e.g. due to remortgaging. 13
Asset quality - late payments by borrowers - 3½ month after due date 0,60 Residential properties and holiday homes Arrears as a percentage of the total amount due 0,50 0.41% (last 0.41%) All Danish MCIs * Nordea Kredit 0,40 0.38% (last 0.42%) 0,30 per cent 0,20 0,10 0,00 2011Q2 2011Q1 2010Q4 2010Q3 2010Q2 2010Q1 2009Q4 2009Q3 2009Q2 2009Q1 2008Q4 2008Q3 2008Q2 2008Q1 2007Q4 2007Q3 2007Q2 2007Q1 2006Q4 2006Q3 2006Q2 2006Q1 2005Q4 2005Q3 2005Q2 2005Q1 2004Q4 2004Q3 2004Q2 2004Q1 2003Q4 2003Q3 2003Q2 2003Q1 2002Q4 2002Q3 2002Q2 2002Q1 2001Q4 2001Q3 2001Q2 2001Q1 *) Including Nordea Kredit 14
Losses in per cent of mortgage loans at nominal value Mortgage loans nominal value, mdkk 300.000 250.000 200.000 150.000 100.000 50.000 0 Mortgage loans at nominal value Loss for the year in per cent of mortgage loans at nominal value (rhs) 0,025% 0,020% 0,015% 0,010% 0,005% 0,000% Losses % of mortgage loans, nominal value 2011, 1h 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 Nordea Kredit did not experience any losses prior to 1997. In the 1st half of 2011, losses amounted to 21.5 m DKK total accumulated losses in Nordea Kredit since 1997: 83.5 m DKK 15
Nordea Kredit LTV, loan-to-value 2011 Q3 (2011 Q2) LTV CC I & II LTV CC I LTV CC II 2011Q3 2011Q2 2011Q3 2011Q2 2011Q3 2011Q2 Owner occupied 74 71 69 65 77 74 dwellings Private rental housing 64 62 57 61 67 63 Commercial 61 55 44 46 63 59 Agriculture 49 49 44 44 50 50 Other properties 40 41 41 41 40 41 Total 68 66 65 61 70 68 Refinancing of Cibor6 loans affects LTV figures in the segments Private rental housing and Commercial, as loans are being refinanced from the grandfathered RO capital center I, to the SDRO based capital center II. Machineries and other movables can under RO legislation be included in valuation of property, but isn t possible under SDRO legislation. Hence, the changed LTV figures for the categories Private rental housing and Commercial. For more detailed information on LTV please refer to LTV Report 2011 Q3 16
Legislation Danish mortgage financing is closely regulated and supervised by the DFSA (Finanstilsynet): www.ftnet.dk Some legislation can be found in English at the DFSA s English website: http://www.finanstilsynet.dk/en/regler-og-praksis/translated-regulations.aspx All relevant legislation can be found in Danish at the DFSA s Danish website: http://www.finanstilsynet.dk/da/regler-og-praksis/lovsamling.aspx 17
The Danish economy - house prices and foreclosures DKK per sqm 25.000 23.000 21.000 19.000 17.000 15.000 13.000 11.000 9.000 Detached houses Apartments Foreclosures, seasonally adj. all segments 1.500 1.250 1.000 750 500 250 7.000 2003 Q2 2003 Q4 2004 Q2 2004 Q4 2005 Q2 2005 Q4 2006 Q2 2006 Q4 2007 Q2 2007 Q4 2008 Q2 2008 Q4 2009 Q2 2009 Q4 2010 Q2 2010 Q4 2011 Q2 0 1993 jan 1994 jan 1995 jan 1996 jan 1997 jan 1998 jan 1999 jan 2000 jan 2001 jan 2002 jan 2003 jan 2004 jan 2005 jan 2006 jan 2007 jan 2008 jan 2009 jan 2010 jan 2011 jan Source: Federation of Danish Mortgage Banks (Realkreditforeningen), Association of Danish Mortgage Banks (Realkreditrådet), The Danish Bankers Association (Finansrådet) and The Danish Association of Chartered Estate Agents (Dansk Ejendomsmæglerforening). Source: The Danish National Statistical Office. Latest data are as per October 2011 For a number of years house prices increased but by mid 2006 house prices peaked and subsequently declined. Recently, however, increases have been seen. For more information on macroeconomics please refer to the current issue of Economic Outlook published by Nordea Markets, Economic Research. Please note that the top graph to the left is based on new, recalculated data for actual sales prices. The data in this new form were first published in December, 2010 and the latest available data are as of end June 2011. Source: Statistics Denmark (Danmarks Statistik) 18
Danish housing market: Hesitant buyers but with high net wealth After a rebound house prices have started to decrease moderately again. The housing market is affected by elevated uncertainties and a non-positive (currently flat) development in employment. Sales are suffering and both dwellings for sale and exposure time are at recordhigh levels. Affordability ratios are low and prices are near a long term fundamental equilibrium. Less than 0.5% of total repayments on homeowners mortgage have not been paid 3½ months after the due date. Arrears and forced sales have flattened and are now at 3-6 times lower levels than during the 1980s and early 1990s. We expect house prices to decrease 3% this year and 1% next year. 19
DISCLAIMER IMPORTANT NOTICE This presentation and any information contained in this presentation or supplied in connection therewith, whether in writing or not, are provided for information purposes only. Nordea is not acting as your financial adviser or in any other fiduciary capacity and this presentation should not be treated as giving investment advice. This presentation and any information contained in this presentation or supplied in connection therewith, whether in writing or not, do not constitute or form a part of, and should not be construed as, an offer, recommendation, advertisement of an offer or invitation to subscribe for or purchase any securities of any Nordea Group company anywhere in the world or a solicitation of any such offer, and shall neither form the basis of, or be relied on in connection with, any offer or commitment whatsoever. Information contained in this presentation is derived from publicly available sources which Nordea believes are reliable, and includes market information based on data provided by third party sources identified herein and estimates, assessments, adjustments and judgments that are based on Nordea's experience and familiarity with the sectors in which it operates. There is no assurance that such estimates, assessments and judgments are the most appropriate for making determinations relating to market information or that market information prepared by other sources will not differ materially from the market information included herein. This presentation contains forward-looking statements that reflect management's current views with respect to certain future events and potential financial performance. Although Nordea believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of various factors. Important factors that may cause such a difference for Nordea include, but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate and (iii) change in interest rate and foreign exchange rate levels. This presentation does not imply that Nordea has undertaken to revise these forward-looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided. Neither Nordea nor any of its directors, officers, employees or advisors nor any other person makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this presentation. Neither Nordea nor any its directors, officers, employees or advisors nor any other person shall have any liability whatsoever for loss howsoever arising, directly or indirectly, from any use of this presentation. [This presentation (i) does not and will not constitute or include an invitation to tender for purchase or sale, an advertisement or an offer of any securities in circumstances which could qualify as a public offer (oferta pública) or as a private offer (oferta particular) pursuant to the Portuguese Securities Code (Código dos Valores Mobiliários) enacted by Decree Law no. 486/99, of 13 November, and published by Decree Law no. 357-A/2007 of 31 October, as amended from time to time and (ii) complies with all applicable laws and regulations of the Republic of Portugal.][1] You may not distribute this presentation, in whole or part, without our prior express written permission. This presentation is not for release, directly or indirectly, in or into the United States of America, Australia or Japan. [1] For presentations in Portugal. 20