Sampo Capital Markets Day London, 07 September 2017 Heikki Ilkka Nordea Group CFO
Nordea in brief The largest financial services group in the Nordics Household market position #1 Corporate & Institutional market position #1 Business position - Leading market position in all four Nordic countries - Universal bank with strong position in household, corporate and wealth management - Well diversified business mix between net interest income, net commission income and capital markets income #1-2 #2 #2 #2 #2-3 #3 #1 #2 11 million customers and strong distribution power - Approx. 10 million personal customers - 700 000 corporate customers, incl. Nordic Top 500 - Approx. 600 branch office locations - Enhanced digitalisation of the business for customers Financial strength - EUR 10bn in full year income (2016) - EUR 643bn of assets (Q2 2017) - EUR 31.4bn in equity capital (Q2 2017) - CET1 ratio 19.2% (Q2 2017) AA level credit ratings - Moody s Aa3 (stable outlook) - S&P AA- (stable outlook) - Fitch AA- (stable outlook) EUR 45bn in market cap - One of the largest Nordic corporations - A top-10 universal bank in Europe 2
Integrated universal bank leading in each market and business area 3
Well mixed profit generation Business Area contribution in H1 2017 Operating Income Operating Profit Economic Capital 5% 4% 10% 22% 32% 28% 29% 9% 27% 21% 20% 21% 18% 31% 23% Personal Banking Commercial & Business Banking Wholesale Banking Wealth Management Group Functions & Other 4
Combining Nordic scale with local presence Centre of excellences Compliance Financial crime prevention Operations Robotics Finance Decentralised Customer facing activities Product development Credit decisions Marketing Efficient Scalable Agile Personalised 5
Strong capital generation and stable returns at low risk 13% CAGR in capital generation and CET1-ratio up 12.5 pp in 11 years Acc. dividend EURbn Acc. equity EURbn 26 CAGR 13% 1 29 31 35 37 39 43 47 12 15 18 20 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 5.9 2 18.4 CET1 Ratio % DPS (Euro cents) 29 26 34 43 62 64 65 6 1) CAGR 2015 vs. 2005, adjusted for EUR 2.5bn rights issue in 2009. Equity columns represents end-of-period equity less dividends for the year. No assumption on reinvestment rate for paid out dividends 2) Calculated as Tier 1 capital excl. hybrid loans
The most stable bank in the Nordics Nordea and peers 2006 2016, % Quarterly net profit volatility 131 17 24 36 55 74 Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Quarterly CET1 ratio volatility¹ 0,90 1,01 0,20 0,34 0,40 0,52 Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 7 1) Calculated as quarter on quarter volatility in CET1 ratio, adjusted so that the volatility effect of those instances where the CET1 ratio increases between quarters are excluded
ROE vs. Risk Spread Calculated at CET1 ratio of 18%, Nordea s RoE and the return over government bonds are at 10-year highs 12 % RoE & Return over gvmt bonds 11 10 9 8 7 6 5 4 3 2 1 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ROE, at 18% CET1 ratio Return (ROE-5Y Gvmt bond yld) 8
Nordea s P&L has changed over the last 10 years Reliance on NII is decreasing, as ancillary income grows 11,000 10,000 9,930 Total Income: +26% over 10 years 9,000 8,000 7,000 7,889 4,727 (48%) Net interest income: +10% over 10 years 6,000 5,000 4,282 (54%) 4,000 3,000 2,000 1,000 3,607 (46%) 5,203 (52%) Ancillary income: +44% over 10 years 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Fund distribution Equities Poland Russia Baltics 9
Q2 2017 Group financial highlights Stable environment and low growth Q2/17 vs. Q2/16* Q2/17 vs. Q1/17* Income Total revenues Net Interest Income Fee and commission income +1% +1% +7% -1% Flat -1% Total costs +8% +5% Costs 2017 vs. 2016 + 3 to 5% 2018 vs. 2016 Unchanged Loan loss level 13 (15) bps 13 (14) bps Credit quality Impaired loans 172 bps (+10 bps) Unchanged Credit quality outlook < long-term aver. of 16 bps in H2 Capital CET 1 ratio 19.2% (16.8%) 19.2% (18.8%) 10 *In local currencies and excluding non-recurring items
We are transforming the bank to meet future customer expectations Relevant Personalised Agile Trust CUSTOMER FACING Easy Anything, Anytime, Anywhere DIGITAL ENGINE Well structured Reliable One operating model for product and service delivery Cost effective Innovative End-to-end automated common processes Scalable 11
Key Milestone in the Core Banking Programme A common, Nordic Core Banking Platform supporting the core functions of banking Customer satisfaction Key software release to the product environment Will enable Nordea to launch the new deposits Preferred and savings employer product portfolio in Finland Profitability 12
Strategic partnerships with FinTech incubators Active engagement in the wider financial ecosystem Great market reception to our Open Banking pilot with hundreds of developers signing up and activity now underway Collaborations that speed up time to market for new, relevant and valuable customer solutions We take customer service to the next level through artificial intelligence (AI) Using AI, we can analyse hundreds of messages per second Partnered with FinTech Hubs in Stockholm, Copenhagen, Oslo Speeding up response time to customers with AI 13
Nordea re-domiciliation Why is Nordea re-domiciling? Overall goal for Nordea has been to domicile where we grow and develop our business further to offer customer friendly solutions A thorough review of implications from an operational, regulatory and supervisory standpoint has been undertaken Decision is to initiate a redomiciliation of the parent company to Finland Nordea s pan-nordic structure gives us special needs Logical move to be supervised within the banking union given our size and business model Nordea s four home markets are all part of the single European market Banking union Being domiciled within the banking union is in the best interest of our customers, shareholders and employees Impact of re-domiciliation Nordea s focus is to maintain its AA rating and continue to develop our customer offering Nordea will still have four home markets we will remain strongly committed to all of them Nordea intends to maintain its capital and dividend policy Nordea will continue to be one of the major tax payers in all four countries Nordea will focus on delivering value for all our customers 14
The Board decided to initiate a process to re-domicile to Finland Tentatively by 1 October 2018 Decision background: Decision is the outcome of six months of careful study and analysis weighing in all relevant factors Focus has been on where to best grow and develop our business further by offering customer friendly solutions, contribute to the Nordic economies and develop our people The domiciliation is an important strategic step to ensure level playing field with our European competitors. Finland: Is in the Banking Union Is one of Nordea s strongest home markets Provides a regulatory environment on par with our European competitors. 15
What happens now The re-domiciliation is intended to be carried out by way of a downstream cross-border merger through which Nordea Bank AB (publ) will be merged into a newly established Finnish subsidiary The merger is planned to be effected during the second half of 2018 and will be subject to e.g. necessary regulatory approvals and the shareholders approval at a general meeting requiring a 2/3 majority. Tentatively in the annual General Meeting on 15 March 2018 We will in cooperation with the relevant authorities agree a detailed timeline The re-domiciliation will tentatively be effective as of 1 October 2018 The Nordea share will remain listed at the stock exchanges of Stockholm, Helsinki and Copenhagen 16
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