Swedbank s third quarter 213 results Michael Wolf, CEO Göran Bronner, CFO Anders Karlsson, CRO Swedbank
Retail Stable results SEKm Q3 12 Q2 13 Q3 13 Q/Q Y/Y Net interest income 3 45 3 367 3 473 16 68 Net commissions 1 532 1 536 1 55 14 18 Total income 5 413 5 312 5 491 179 78 Total expenses 2 477 2 398 2 389-9 -88 Profit before impairments 2 936 2 914 3 12 188 166 Impairments 72 37 16 69 34 ROE, % 25.5 28.1 28.1 C/I ratio.46.45.44 Stable NII Loan growth Stable back book margins Improved funding cost Improved deposit margins Stronger loan growth in Stockholm Solid asset quality 2
Large Corporates & Institutions Robust customer activity SEKm Q3 12 Q2 13 Q3 13 Q/Q Y/Y Net interest income 768 851 864 13 96 Net commissions 416 523 467-56 51 Total income 1 655 1 926 1755-171 1 Expenses excl. variable staff costs 662 73 66-7 -2 Variable staff costs 65 14 99-5 34 Profit before impairments 928 1 92 996-96 68 Impairments -38 15 7-143 45 Stable NII Slightly weaker trading income Stable expenses Solid asset quality ROE, % 14.6 14.5 18.3 C/I ratio.44.43.43 3
Baltic Banking Increasing customer activity SEKm Q3 12 Q2 13 Q3 13 Q/Q Y/Y Net interest income 753 763 87 44 54 Net commissions 376 445 446 1 7 Total income 1 287 1 378 1453 75 166 Improved NII Recoveries Total expenses 556 593 64 11 48 Profit before impairments 731 785 849 118 64 Impairments -13-41 -146-15 -133 ROE, % 11.2 13.4 16.6 C/I ratio.43.43.42 4
Group results Stable earnings SEKm Q3 12 Q2 13 Q3 13 Q/Q Y/Y Net interest income 5 85 5 49 5 641 232 556 Net commission income 2 375 2 525 2 52-5 145 Net gains and losses 687 296 17-126 -517 Total income 8 971 8 979 9 225 246 254 Total expenses 3 92 4 126 3 995-131 75 Profit before impairments 5 51 4 853 5 23 179 377 Credit impairments 36 88-56 -144-92 Other impairments 11 372 95-277 -6 Tax 1 216 913 998 85-218 Profit from continuing ops. 3 698 3 48 4 193 713 495 ROE continuing operations, % 15.2 14.1 16.2 C/I ratio.44.46.43 Improved NII Mortgage loan growth Treasury Margins in Baltic Banking and LC&I Stable commission income Weaker NGL Stable expenses Continued solid asset quality CET 1 ratio, % (Basel 3) 15.4 17.2 18. 5
Capital Reduced RWA SEKbn 5 48 46 44 42 Basel 3 487.1 Basel 2 464.3 Swedbank s Risk-Weighted Assets development Basel 3 459.5-4.7 Basel 3 446. - 3.7 -.6. - 1.4-1.4-1.9 Basel 2 455.2 Basel 2 441.6 Mix change Rating migration FX Market risk 4 38 36 6
Asset quality Continued strong asset quality Credit impairments, SEKm Q3 12 Q2 13 Q3 13 Retail 72 37 16 Large Corporates & Institutions -38 94 7 Baltic Banking -18-43 -147 Estonia 2-36 -38 Latvia 8 18-7 Continued solid asset quality in Sweden Net recoveries in the Baltic countries Lithuania -28-25 -39 Swedbank Group 36 88-56 7
Swedbank s third quarter 213 results Q & A
Appendix
Swedish customer satisfaction index (SKI) Average rating 8 78 76 74 72 7 Industry average 68 66 Swedbank 64 62 6 22 23 24 25 26 27 28 29 21 211 212 213 Source: SKI/EPSI 1
Swedish housing market Regulatory initiatives targeting the mortgage market 12 1 8 6 4 2 Swedbank s equity doubled Total equity, SEKbn 25 Q3 213 LTV cap of 85% Amortisation Risk-weight floor of 15% on mortgage loans Capital and liquidity requirements High minimum regulatory requirements (including SiFi buffer) Countercyclical buffer? Leverage ratio? Source: Swedbank 11
Number of apartments Number of homes / persons, thousands Swedish housing market Shortage of housing 8 Housing completions Population and housing growth 7 6 Apartment buildings Single-family dwellings 1 2 1 Acc increase in population Acc increase in housing completions 5 8 4 6 3 2 4 1 2 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 9 92 94 96 98 2 4 6 8 1 12 Source: Sweden statistics and Swedbank 12
Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Loans past due 6 days performance Q/Q EURm 5 Estonia Latvia Lithuania -5-1 -15-2 -25 13
Provisions well provided for SEKm 2 Provision ratio, % Q3-13 15 1 64% 2 4 1 951 65% 1 774 9 934 62% 1 545 57% 54% 53% Retail 63 LC&I 43 Baltic Banking 52 Group 53 5 7 77 1 42 4 429 1 398 4 47 1 325 3 57 Q2-12 Q3-12 Q4-12 Q1-13 * Q2-13* Q3-13* Individual provisions Portf olio provisions Provision ratio * Russia and Ukraine reported as discontinued operations 14
Credit portfolio - Retail Corporate portfolio drives capital efficiency Total portfolio SEK 222bn 94 15 23 Swedbank Mortgage AB Swedbank Finans AB Other Segments excl. Swedbank Mortgage and Swedbank Finance Volume (SEKbn) Secured (%) Agriculture 6.1 81 Manufacturing 8.5 74 Public sector and utilities 4.5 92 Construction 4.4 82 Retail 8.9 88 Transportation 2. 85 Shipping.1 95 Hotels and restaurants 3.1 91 Information & communication.8 46 Finance and insurance 1.4 66 Property management 52.1 97 Professional service 6.8 65 Other 5.8 72 Total 14.7 87 15
Credit portfolio Agriculture Private: Residential 2% Agriculture 45% Segment definitions Corporate agriculture: Businesses that derive their main income from agricultural activities Private investments: Private individuals who own the agricultural properties for living or investment purposes Private: Forestry 22% Forestry 13% Lending exposure to the agriculture industry SEK 64.3bn Corporate agriculture: (58%) Agriculture 45% Forestry 13% Private investments (42%) Residential: 2% Forestry: 22% 16
Credit portfolio Large Corporates & Institutions Shipping and offshore Lending exposure to Shipping & Offshore sector SEK 24.5bn. Decrease over the quarter mainly due to FX Portfolio duration 4-5y Average fleet age 7y Strong employment profiles Shipping and offshore SEKbn -2.4% 3-7.2% 25 26 24 23 25 4 2 5 1 15 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Offshore Tanker Other Shipping and offshore portfolio by subsegment RORO 2. Container 1. Dry bulk.7 Gas (LNG/LPG) 2. Crude oil.5 Q3-13 Product 2. Q2-13 Chemical.7 Floating production 1.7 Accommodation 1.2 Supply 3.9 Oil service 1.2 Drilling & exploration 7.1 Cruise.5 2 4 6 8 JPY NOK USD EUR SEK Shipping and offshore portfolio by currency Q3-13 Q2-13 5 1 15 2 25 17
Liquidity and funding Core balance sheet* structure SEKbn 1 4 Assets SEKbn 1 4 Liabilities 1 2 Estonia CEE lending 1 2 Suppl. cap CET1 Government guaranteed debt Senior 1 Other corporate lending, Sweden & other Nordic countries 1 Deposits 8 Other private, Sweden 8 6 6 4 Swedish mortgage loans 4 Covered bonds 2 2 Q3 213 Q3 213 * Simplified balance sheet Source: Swedbank Sep 213 18
Over-collateralisation Liquidity and funding Senior unsecured debt strategy Limited need given Swedbank s balance sheet structure Secure OC Fund liquidity reserves Senior unsecured debt maturity profile House price sensitivity of the cover pool SEKbn Senior unsecured debt 5% 6 4% OC, Q313 3% 4 2% 2 1% % 213 214 215 216 217 218 219- -1% % -5% -1% -15% -2% -25% -3% -35% -4% -45% -5% House price drop Source: Swedbank Sep 213, nominal amounts 19
Liquidity and funding Lower funding needs LCR 147% (Swedish FSA definition FFFS 212:6) NSFR 91% Issued SEK 89bn of term-funding YTD of which SEK 2bn in Q3 Term funding issuance completed and planned SEKbn 12 Covered bonds Senior unsecured 1 8 6 4 2 Source: Swedbank, 3 Sep 213, nominal amounts 2
Liquidity and funding Long-term funding maturity profile Term funding plan for the next 12 months of SEK 12bn to meet maturities of SEK 98bn Long-term funding maturity profile SEKbn 2 15 Government guaranteed debt Senior unsecured debt Covered bonds 1 5 213 214 215 216 217 218 219- Source: Swedbank 3 Sep 213 21
Liquidity and funding Liquidity reserve According to the template defined by the Swedish Bankers' Association SEKm Cash and holdings in central banks 132 1 Deposits in other banks available overnight 443 Securities issued or guaranteed by sovereigns, central banks or multilateral development banks 46 642 Securities issued or guaranteed by municipalities or public sector entities Covered bonds 54 17 - Issued by other institutions 54 17 - Own issued Securities issued by non-financial corporates Securities issued by financial corporates (excl. covered bonds) 2 314 Other Total 1 235 57 Additional liquid assets, Group 2, 3 39 437 1 96% of the securities in the liquidity reserve per Q3 213 are rated AAA 2 81% of the additional liquid assets fulfill the Liquidity Reserve definition by the Swedish Bankers Association except from that they are held outside the Treasury department. 3 78% of the additional assets are rated AAA Source: Swedbank Fact book, Sep 3, 213 22
Liquidity and funding Prefunded in excess of 12 months SEKbn 25 2 15 1 5 2 4 6 8 1 12 14 16 18 2 22 24 26 28 3 32 34 36 Days forward SEKbn 4 35 3 25 2 15 1 5 Source: Swedbank Jun 3, 213 4 35 Additional pledgeable 3 and/or liquid assets 25 1 Liquidity reserve, securities 2 15 1 Liquidity reserve, central bank deposits, 1 SEKm 5 1 As defined by the Swedish Bankers Association Next 12-month term funding maturities CP / CDs and net interbank funding, SEKm 23
Liquidity and funding Limited need for USD funding USD funding need covered for more than 12 months Issued USD 1bn of covered bonds (144a) and USD 1bn of senior (144a) YTD 213 SEKbn 25 Assets held for sale 2 Interest-bearing securities Lending to the public 15 Loans to credit institutions 1 Cash and balances with central banks Deposits and borrowings from the public 5 Amounts owed to credit institutions Debt securities in issue Assets Liabilities Source: Swedbank Fact book, 3 Sep 213 24
Liquidity and funding Asset encumbrance Encumbered assets - distribution by type of liability (row ) and asset (column) Government Central banks and supranational Debt instruments issued by Securities issued by debt debt Covered credit corporate and SEKm instruments instruments bonds institutions other issuers ABS Mortgage loans Cash Total of w hich received collateral (offbalance) Central bank funding Intraday settlement 2 444 8 971 11 415 7 856 Repurchase agreements 1) 24 92 11 986 36 78 12 183 Derivative 2) 647 1 322 1 136 12 15 85 Covered bonds 3) 59 35 59 35 Other 4) 7 288 988 Total 27 183 22 279 7 59 35 1 424 569 936 2 124 Financial assets pledged for insurance policy holders 114 256 Unencumbered assets - additional assets available for secured funding Central banks and SEKm Government debt instruments supranational debt instruments Covered bonds Debt instruments issued by credit institutions Securities issued by corporate and other issuers ABS Mortgage loans Cash Total of w hich received collateral (offbalance) Securities 5, 6) 33 444 21 254 7 426 12 668 8 447 926 147 165 23 997 Cover pool over collateralisation 7) 221 992 221 992 Cover pool eligible assets 8) Total 33 444 21 254 7 426 12 668 8 447 926 221 992 369 157 23 997 1) Repoed securities. 2) Collateral posted under CSA agreements, gross (3-year, SEKm, High: 21 572, Low : 1 86, Average: 13 453). 3) Of w hich accrued interest of encumbered assets in the cover pool, SEK 2 173m as of 3 September 213. 4) Collateral pledged in securities lending activities and w ith exchanges. 5) Reversed repos are included. 6) All type of securities, including securities non pledgeable at central banks, of w hich 82% are rated AAA, 2% are rated below A- and 7% are not rated. 7) Of w hich accrued interest of assets in the cover pool overcollateralisation, SEK 96m as of 3 September 213. 8) Securities received as collateral in for example reversed repo transactions that; either have (encumbered) or have not (unencumbered), been used as collateral by Sw edbank. Source: Swedbank Facts Q3 213 25
Swedish housing and mortgage market Swedish mortgage market No securitisation (on balance sheet), no sub-prime market, no 3 rd party origination, insignificant buy-to-let market 7% home ownership 1 Rental market is regulated Transparent credit information (credit information agency, www.uc.se) Publicly available information regarding income, debt, payment track record etc Consumer credit legislation requires affordability calculations including stress test of higher interest rate Very limited debt forgiveness possibilities (full recourse) Strong social security and generous unemployment benefit system 1 Source: Boverket, 211 26
Swedish housing and mortgage market Real estate price performance Sweden 12 months Single-family homes 1 Tenant-owner rights 2 Combined 3 12M Δ 12M Δ 12M Δ Oct-12 1% 6% 3% Nov-12 3% 7% 4% Dec-12 4% 7% 6% Jan-13 3% 7% 5% Feb-13 4% 7% 5% Mar-13 3% 7% 5% Apr-13 2% 8% 4% May-13 4% 8% 5% Jun-13 4% 1% 6% Jul-13 4% 9% 6% Aug-13 5% 11% 7% Sep-13 5% 11% 7% 1 HOXHOUSESWE, 2 HOXFLATSWE, 3 HOXSWE Source: Valuegard www.valuegard.se (Based on data from Mäklarstatistik), 27
Jan-5 Jul-5 Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jan-5 Jul-5 Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-5 Jul-5 Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Real estate prices Baltic countries EURm 18 16 14 12 1 8 6 4 Tallinn EURm 1 8 1 6 1 4 1 2 1 8 6 4 Riga 2 2 Nr.of deals EUR/m2 Nr.of deals EUR/m2 Source: Swedbank, Estonian Land Board Source: Land book database EURm Vilnius 1 8 1 6 1 4 1 2 1 8 6 4 2 Nr.of deals Source: Swedbank. State Enterprise Centre of Registers EUR/m2 28
Mortgage loans, gross margin (3 months) % 6 5 4 3 2 1 Net margin The gross margin covers: Cost of liquidity ~.2% Administrative costs ~.3% Credit impairments ~.3% Tax (22 % on profit before tax) 23 24 25 26 27 28 29 21 211 212 213 Gross margin Swedbank's funding cost Stibor 3 months Swedish Riksbank's repo rate 29