Second Quarter Results 2014 Investor presentation Fourth Quarter and Full Year Results 2014 Berenberg European Conference USA 2015 Torsten Hagen Jørgensen, Group CFO Investor presentation Christian Clausen, President and Group CEO
Disclaimer 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, (iii) change in the regulatory environment and other government actions and (iv) change in interest rate and foreign exchange rate levels. This presentation does not imply that Nordea has undertaken to revise these forwardlooking 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. 2
The relationship bank business model has delivered 14 3
Nordea has a unique position in the Nordics Superior customer franchise Global capabilities on par with international peers 1 Retail Customers Corporates & Institutions Sweden Norway Relationships (m) Market position 4.2 #2-3 0.9 #2 Market position #1-2 #2 Capital Markets #1 Asset Management #1 Finland 2.9 #1-2 #1 Denmark 1.8 #2 #1-2 Life & Pension #1 Private Banking #1 Total Nordea 10.2 #1 #1 Note: Illustration excludes, Baltic's (406,700 total customers) and Russia (67,000 total customers) 1: Ranking in Nordic region 4
Pro-longed period of low growth and interest rates continued GDP Interest rates FX** 4% 2% 0% -2% Norway Sweden Denmark 2012 2013 2014 2015E* Finland 1,2 1 0,8 0,6 0,4 0,2 0-0,2-0,4 Euribor 3m Stibor 3m 1,8 1,6 1,4 1,2 0,8 0,6 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 1 EUR/USD (-18%) EUR/RUB (+26%) EUR/SEK (+5%) EUR/CHF (-15%) Slow recovery and increasing geopolitical risk Limited volume growth and increasing focus on asset quality EU economy lacks drivers, expansionary monetary policy Pressure on deposit margins, lower funding costs Significant FX impact in 2014 on income and costs Current FX-rates indicate similar negative impact also in 2015 *Nordea estimate **Indexed, 1.1.2014=1 5
Net interest margin and volumes BLENDED NET INTEREST MARGIN DEVELOPMENT, BPS COMMENTS 108 109 109 108 103 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 LENDING AND DEPOSIT VOLUMES*, EURbn Blended margin down 5 bps to 103 bps Slightly improving lending margins Pressure on deposit margins Lending volumes up 3% y-o-y* 302 305 308 309 311 172 172 171 175 172 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Lending volumes Deposit volumes * Excluding repos and FX 6
Strong AuM growth with balanced risk levels in customer savings AUM DEVELOPMENT, EURbn COMMENTS 238.7 248.3 254.5 262.2 290.0 All time high AuM at EUR 290bn Record high net inflow of EUR 7.2bn Continuous strong and well diversified inflow Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 High customer interest in balanced funds 53% of net sales AUM FUNDS SPLIT, % EUR 96.5bn 23 53 33 19 44 29 28 28 55 17 EUR 132.1bn 33 38 Balanced Equities Fixed income and MM Nordea Stable Return Fund has been the best-selling fund in Europe in the beginning of 2015 72% of composites outperformed benchmark over a 3-year period Funds AuM Q1/14 Net sales Performance Funds AuM Q1/15 7
Net fair value NET FAIR VALUE DEVELOPMENT, EURm COMMENTS 644 411 356 174 94 291 66 367 32 304 Supporting corporate and institutional customers to manage their risks Customer areas up from strong previous quarter 237 262 225 335 340 High activity in capital markets Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Customer areas Other areas 8
Expenses under solid control TOTAL EXPENSES*, EURm COMMENTS 1 237 1 196 1 172 55 57 66 426 390 378 1 227 1 184 53 44 416 363 Depreciations Other expenses Cost/income ratio improved 520 bps to 43.6% 756 749 728 758 777 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Staff costs Costs are down 3.4% in local currencies and excluding variable pay Staff costs up 3% in local currencies Higher variable pay and pension expenses Other expenses down 12% Cost programme delivering according to plan * Excluding non-recurring items 9
Special attention areas Finland Slight improvement in household and corporate PD s Loan losses at moderate level of 16 bps, down from 17 bps Slow growth but underlying macro conditions are stable Oil Russia 21% of portfolio* 2% of portfolio Credit exposure mainly towards large int l Russian, and Nordic, corporates 89% of credit portfolio in USD or EUR - financing large Russian corporates international operations Loan losses are at low levels limited risk on increased loan losses Danish agriculture 2% of portfolio 2% of portfolio Limited risk of increased loan losses, stress tests performed on customer level Likely negative effect on Norwegian economy, mitigated by lower interest rates, weaker NOK and sovereign oil fund spending Agriculture sector affected by world market price pressure; negative effect on crop, milk and pork prices Polarisation between strong and weak farmers *Portfolio of total loans to the public, excluding reverse repurchase agreements 10
Nordea capital considerations CET1 ratio build-up, % 0.7 1.5 0.8 14.8 0.8 15.6 2.0 10.0 0.2 1.1 Pillar1 Countercyclical Norwegian Swedish & Buffer* Mortgage (0-2.5%) Risk Weight floor Pillar 2 Systemic Risk Buffer Pillar 2 (IRRBB, pension, conc risk)** Pillar 2 (other)** CET1 level as per Swedish FSA* Current Management buffer Nordea Q1/15 * Countercyclical buffer only applied for Sweden, in accordance with Swedish FSA Memorandum on Capital Requirement for Swedish banks (Feb 17, 2015) ** In the Swedish FSA Memorandum on May 11, 2015 (Adjusted requirement on the assessment of capital requirements from three significant risk types), the Swedish FSA published the final methods for assessing requirements for three different risk types. The CET1 requirement for Nordea based on these methods is estimated to 0.7%. Note that individual Pillar 2 CET1 requirements for other risks are estimated and agreed bilaterally with the Swedish FSA in the SREP and can vary over time. In the Swedish FSA Memorandum on Capital Requirements for Swedish Banks (Feb 17, 2015) a standardised CET1 value of 1.5% was used for other Pillar 2 risks. 11
Delivering on the 2015 plan - Progress in summary PROGRESS ON NORDEA FINANCIAL PLAN 2015 IN Q1/15 VS Q1/14 CET1 capital ratio Risk exposure amount Income growth Costs Loan losses CET 1 capital ratio up 100 bps to 15.6% Impact from capital management of EUR 31bn since 2013 of which 1bn in the quarter Income up 11% Cost programme delivering according to plan Loan loss ratio 14 bps RoE RoE up 290 bps to 14.3% Simplification Progressing according to plan 12
Strategic priorities 14
Three transforming drivers for the banking industry Balance sheet regulations Operational regulations Digitalisation Not over yet More to come Behaviour changing SIMPLIFICATION 14
Simplification will be the lever in our transformation Fewer, more flexible core products Simplification of customer data Investment in new IT platforms 15
Nordea strategic priorities Strategic priorities 1 2 Build on global product capabilities and superior Nordic distribution power Leverage on Pan-Nordic platforms and scale opportunities Improved income mix and growth Continued cost efficiency Disciplined capital management 3 Sustain actively managed portfolio with low volatility Stringent risk management 16
Retail Banking Household Branch optimisation and cash removal Improved income mix and growth 992 Branch locations Cash locations Increase share of wallet Mortgage growth with stable margins 718-30% 695 Strengthen online service, sales and advice Continued cost efficiency Branch optimisation and cash removal -67% 238 Product and service clean-up and simplification Process automation/consolidation IT simplification/develop future platforms for full economies of scale 17
Retail Banking Corporate Volume development 2012-2014* Improved income mix and growth Lending REA Increase share of wallet Active customer selection to shift business mix Mitigation of negative interest rates through actions towards Professional depositors -10% -23% Disciplined capital management Improved quality of existing customers (financial strength, collateralisation) Continued improvements of capital management Strengthened risk management models Cross-sales of capital light products * Year-end 2011 compared to year-end 2014 18
Wholesale Banking CIB and SOO Strong large corporate franchise Improved income mix and growth Greenwich Survey* 100 Nordea 75 Peer 3 50 Peer 2 Peer 4 Peer 5 25 Peer 1 0 (40) 0 40 80 Increase share of wallet, customer selection to shift business mix Accelerated shift from lending to capital market financing/syndications Strengthening of advisory value propositions Disciplined capital management Fee & commission income +15% 2012 2014 Active business selection with focus on profitability Management of low yielding relationships Agency/intermediation role, optimised rating models/airb SOO = Shipping, Oil and Offshore * Share of important relationships (%, y-axis) vs. Quality index score (x-axis) 19
WB Capital Markets & Transaction Services C/I ratio of Capital Markets, FY2014* Improved income mix and growth 36 48 67 68 68 68 72 72 75 79 80 83 88 Selective strengthening of international distribution New York equities distribution Improve competence pool in select markets and products Continued cost efficiency Nordea Nordic and International peers Highly cost-efficient operation Acceleration to e-markets New simplified payment platform Further long term efficiencies expected in line with Group Simplification deliveries *Best proxy to Nordea CMP used as benchmark. All ratios calculated in local currencies. 20
Wealth Management Pursuit of scale and profitable growth Improved income mix and growth % Cost / Income in PB Bp Cost / AuM ROE* in L&P 62 60 56 50-19% 2011 2012 2013 2014 39 38 36 32-18% 2011 2012 2013 2014 16.7% 12.5% +4.2 2013 2014 Strengthen sales, advisory and service excellence Grow internationally through Distribution Partners Develop digital offerings Leading retirement offering Continued cost efficiency Benchmarking with global best practices Scalable and reliable IT platforms Performance culture *External principles 21
Second Quarter Results 2014 Investor presentation Fourth Quarter and Full Year Results 2014 Berenberg European Conference USA 2015 Torsten Hagen Jørgensen, Group CFO Investor presentation Christian Clausen, President and Group CEO