Carnegie Nordic Large Cap Seminar Stockholm 4 March 28 Mikael Inglander, CFO
The leading bank in four small countries Sweden Total population: 9.2m Employees: 8,75 Private customers: 4.1m Corp. customers: 275, Organisations: 12, Branches: 459 Typical market share: 25% Latvia Total population: 2.3m Employees: 2,51 Private customers:.8m Corp. customers: 53, Branches: 77 Typical market share: 3% Estonia Total population: 1.3m Employees: 3,227 Private customers: 1.2m Corp. customers: 88, Branches: 94 Typical market share: 5% Lithuania Total population: 3.5m Employees: 3,384 Private customers: 3.m Corp. customers: 78, Branches: 128 Typical market share: 3% Share of group lending 8% 6% 5% 5% 4% Sweden Estonia Latvia Lithuania Others Potential home markets: Russia and Ukraine Supporting markets: Denmark, Finland, Norway, Russia, Ukraine, USA, Luxemburg, China, Japan and Spain (2)
Strong position for profitability and growth Sweden Baltics Ukraine and Russia Swedbank is the leading bank in Sweden. Profitability is high and stable and the bank is consolidating its market shares in important segments in both the private and corporate sectors. Stable base The Baltic economies are experiencing strong economic growth that is expected to remain for many years. As the largest bank in the region, growing with the market ensures Swedbank an attractive earnings growth. Growth and experience Swedbank has a small but growing presence in Ukraine and Russia. Long-term, a significant share of Swedbank s growth will be generated in these markets. Future growth and profitability Share of profit 2: 66% Share of lending 2: 8% Share of profit 2: 32% Share of lending 2: 16% Share of profit 2: 2% Share of lending 2: 2% (3)
Swedbank, group overview Swedish Banking Baltic Banking International Banking Swedbank Markets Asset Management & Insurance Shared Services & Group Staffs 6% 5% 52% Share of Group net profit 2 4% 3% 32% 2% 1% % -1% 2% 8% 8% -2% (4)
2 A successful and eventful year Profit attributable to shareholders increased 1% to SEK 12bn Net interest income increase by 2% Net commission income increased by 11% Swedish Banking show a stable result, low risks and high return on equity Record result in Baltic Banking with balanced risks Swedbank Markets results on same level as last year s all time high A successful year despite global credit turmoil and Baltic slowdown (5)
Q4 2 Good development and strong results Good volume development in Sweden Stable margins on new lending Continued strong results in Baltic banking Economic slowdown align with expectations Strong finish of the year for Swedbank Markets Success in fixed income trading and structured investment products in Sweden and corporate finance in Norway Swedbank Ukraine continues to develop well Profit increased 7% compared with Q4 26 (6)
Solid profit development SEKm 17, 15, 13, 11, 9, 7, 5, 3, 1, SEKm 17, 15, 13, 11, 9, 7, 5, 3, 1, -1, 2 21 22 23 24 25 26 2-1, Profit before loan losses Loan losses, net* Capital gains EnterCard and KIAB Operating profit (excl. capital gains) *Loan losses, net = write-offs + provisions recoveries + change in property taken over (7)
Minor direct effects from the credit turmoil Valuation- and accounting effects, SEK M Q4 2 Q3 2 Swedbank Markets 4 6 Group Treasury, liquidity portfolio 5 68 Group Treasury, intra-group lending 2 9 Swedbank Mortgage 66 129 (8)
Business volumes SEKbn Savings SEKbn Lending 5 4 3 289 334 398 41 1,2 1, 8 1,13 919 2 1 Deposits, Sweden 84 12 Deposits, Baltics AM funds, Sweden Dec, 26 Dec, 2 13 19 AM funds, Baltics 24 31 Structured products, bonds 6 4 2 Lending, Group 475 425 39 333 Private, Corporate, Sweden Sweden 53 77 74 1 Private, Corporate, Baltics Baltics Dec, 26 Dec, 2 34 61 Other (9)
Credit quality, group %.64.56.48.4.32.24.16.8. -.8 2 21 22 Loan loss ratio, net 23 24 25 26 2 Share of impaired loans Share of provisions (1)
(11) Margins. 1. 2. 3. 4. 5. 6. Q3-6 Q4-6 Q1- Q2- Q3- Q4- Estonia Latvia Lithuania Sweden % Lending. 1. 2. 3. 4. 5. 6. Q3-6 Q4-6 Q1- Q2- Q3- Q4- Estonia Latvia Lithuania Sweden Deposits %
Swedish Banking 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 SEKm % Q2 6 Q3 6 Q4 6 Q1 Q2 Q3 Q4 Income Costs C/I-ratio.7.6.5.4.3.2.1. Continued stable earnings and high profitability Strong corporate lending during Q4 Total lending increased by 4% vs. Q3 and 14% during the full year Continued good deposit trend Deposits increased by 3% vs. Q3 and 15% during the full year Share of new savings from households increased to 18% (17% in Dec 6) Rise in funding costs are gradually, but with certain delay, passed on through higher lending rates Minor valuation effects as a consequence of the turmoil on the credit market Covered bonds as from Q2 28 In agreement to sell 8 branches to savings banks Swedish economy still relatively strong. (12)
Baltic Banking Operations 2,4 2,2 2, 1,8 1,6 1,4 1,2 1, 8 6 4 2 SEKm % Q2 6 Q3 6 Q4 6 Q1 Q2 Q3 Q4.5.4.3.2.1. Continued high profitability Net interest income increased 7% vs. Q3 Lending growth in 2 was 33%, the gradual slowdown is expected to continue Weak trading income due to market turmoil Costs affected by Annual wage increases in Latvia and Lithuania, hits P&L as of October every year Investments in operational excellence project for increased productivity High marketing costs. Income Costs C/I-ratio (13)
Credit quality, Baltic Banking 2.% Share of impaired loans (12 month old portfolio) 1.5% 1.%.5%.% 2.% 22 23 24 25 26 2 Estonia Latvia Lithuania Baltics Group Loan loss ratio, net (average portfolio) 1.2%.4% -.4% 22 23 24 25 26 2-1.2% -2.% Estonia Latvia Lithuania Group (14)
Decreasing Baltic lending growth 8, Hansabank, Estonia 7, 6, 5, 4, 3, 2, 1, 6% 5% 4% 3% 2% 1% % 7, Hansabank, Latvia 6, 5, 4, 3, 2, 1, 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % (15) 5/Mar 5/Jun 5/Sep 5/Dec 6/Mar 6/Jun 6/Sep 6/Dec /Mar /Jun /Sep /Dec 5/Mar 5/Jun 5/Sep 5/Dec 6/Mar 6/Jun 6/Sep 6/Dec /Mar /Jun /Sep /Dec 6, Hansabank, Lithuania 5, 4, 3, 2, 1, 7% 6% 5% 4% 3% 2% 1% % 2, Baltic Banking 18, 16, 14, 12, 1, 8, 6, 4, 2, 7% 6% 5% 4% 3% 2% 1% % 5/Mar 5/Jun 5/Sep 5/Dec 6/Mar 6/Jun 6/Sep 6/Dec /Mar /Jun /Sep /Dec 5/Mar 5/Jun 5/Sep 5/Dec 6/Mar 6/Jun 6/Sep 6/Dec /Mar /Jun /Sep /Dec 1, 1 % Total lending, EURm YoY growth
Baltic macro development Economic slowdown in Estonia continues: GDP growth slows from ~7% in 2 to ~5% in 28; the bottom of the cycle is expected to be in Q2 28 In Latvia growth slows from ~1.5% to 6% in 28, the bottom of the cycle is expected to be in H2 of 28 Slowdown in Lithuania started in Q4 2: GDP growth will slow from 2 s 8.7% to ~7.5% in 28 Weak domestic demand reduces imports and exports growth continues. Trade and current account deficits are falling. CPI will peak in Q1 28. Long term GDP growth (6-7%) will be above EU average. 12% 1% 8% 6% 4% Real GDP growth 12% 1% 8% 6% 4% CPI growth 2% 2% % % 25 26 2F 28F 29F Est Lat Lit 25 26 2 28F 29F Est Lat Lit (16) Source: Hansabank Market
Swedbank Markets 5 45 4 35 3 25 2 15 1 5 SEKm Q1 6 Q2 6 Q3 6 Q4 6 Q1 Q2 Q3 Profit for the period attributable to shareholders of Swedbank Q4 Good end to the year despite the capital market turmoil Strong results in, above all, fixed income and FX trading, structured investment products and corporate finance fees First Securities Minor valuation effects due to market turmoil, SEK - 4m Continued market leader in corporate bonds, new issues in SEK Sustained growth and market leading position in structured products, sales grew by 39% in 2. (17)
International Banking 1 75 5 25-25 -5-75 -1 SEKm Q2 6 Q3 6 Q4 6 Q1 Q2 Q3 International Banking, profit for the period of which Russian Banking of which Ukrainian Banking Operations Q4 Continued strong lending growth in Ukrainian Banking, + 112% to SEK 11bn in 2 Loan loss ratio, net in Ukrainian Banking decreased after adjusting calculation method to Swedbank Group s principles Annual lending growth in Russian Banking was 5% to SEK 1bn Following positive court rulings regarding VAT dispute in leasing operations, a reversal of SEK 6m was made in Russian Banking Lending in Nordic branches more than doubled in 2, reaching SEK 13bn. (18)
Business areas Swedish Banking Baltic Banking Internat. Banking Swedbank Markets Asset Mgmt 2 vs 26, SEKm 2 % 2 % 2 % 2 % 2 % Net interest income 11,71 5,667 986 1,343 83 Net commission income 4,54 1,854 196 1,441 1,868 Other income 1,473 1,252 97 773 232 Total income 17,678 4 8,773 42 1,279 3,557 1 2,183 19 Staff costs 4,296 2,44 45 1,239 425 Other expenses 4,74 1,52 366 753 463 Total expenses 9, 3 3,546 32 771 1,992 3 888 31 Profit before loan losses 8,678 5 5,227 5 58 1,565 1,295 13 Loan losses 71 45 17 Operating profit 8,6-2 4,777 49 338 1,565-1 1,295 13 Tax 2,413 455 7 427 32 Profit for the period 6,194 4,322 268 1,138 975 To Swedbank's shareholders 6,182 2 4,322 46 268 1,1 3 975 11 Return on allocated equity % 23.2 31.2 6.9 24.2 57. (19)
Key figures Jan - Dec, 2 Jan - Dec, 26 Return on equity, % 18.9 19.3 Earnings per share, SEK 23.28 21.11 Equity per share, SEK 131.96 116.37 C/I ratio before loan losses.51.52 Loan loss ratio, net, %..2 Share of impaired loans, %.13. Dividend, SEK* 9. 8.25 Tier 1 capital ratio, new principles, % 8.5 - Tier 1 capital ratio, transition principles, % 6.2 6.5 ** Capital adequacy ratio, new principles, % 12.7 9.8 ** *according to Board of Directors proposal **according to old principles (2)
Tier-1 ratio, Group % % 1 1 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 Tier 1 ratio amounted to 8.5% Tier 1 ratio, according to transition principles, was 6.2% As of January 1, 28, tier 1 ratio according to transition principles, increased by 31 bps due to the gradual implementation of Basel 2 regulations. Q1-5 Q2-5 Q3-5 Q4-5 Q1-6 Q2-6 Q3-6 Q4-6 Q1- Q2- Q3- Q4- Tier 1 ratio, Basel 2 Tier 1 ratio, transition rules Target Tier 1 ratio (21)
Swedbank Funding Structure Lending to the public, SEK 113bn Swedbank Group, excl. Swedbank Mortgage SEK 542bn 49% 51% Swedbank Mortgage SEK 561bn Swedbank Treasury (excluding Mortgage) Distribution of Net Funding Need Swedbank Mortgage Equity 8% Funding 8% Deposits 85% Large deposits Liquidity reserves Net lender in the interbank market Liquidity limits conservative view Funding 95% Equity 5% Swedbank Mortgage constitutes a larger part of Swedbank Group s balance sheet compared to other financial institutions (22)
Swedbank Mortgage Credit Risk 31-dec Commercial buildings 1% (1) Multi-family housing incl. Condominium associations 16% (17) Municipalities 3% (4) Agriculture 6% (6) SEKm 7 6 5 4 3 2 Individual condominiums 13% (11) Single-family homes 61% (61) 1-1 2 21 22 23 24 25 26 2 = 9% Residential loans Credit losses -Net recoveries during 2 7, Net 6, 3 % 5, 4, 25 2 3, 2, SEKm 15 1 1, 5, <3% 3-6% 6-75% 75-85% >85% 2 21 22 23 24 25 26 2 Distribution of loan to value Average LTV of 44% 8% percent of the portfolio has an LTV of 5% or lower Impaired, restructured and past due loans At historically low levels (23)
Converting to Covered Bonds, Q2 28 Possibility to meet a broader investor base Larger investor base ensures for even more stable liquidity AAA-rating - funding at lower cost Increased liquidity reserve through Swedbank s possibility to pledge subsidiary covered bonds in the Swedish Central Bank Funding strategy to prolong maturity structure with covered bonds (24)
Swedbank Mortgage Long Term Funding Swedbank Mortgage - Long Term Funding 25 2 15 1 5 <1y 1-2y 2-3y 3-4y 4-5y >5y Action plan: Conversion to covered bonds during Q2, 28 and covered bond issues, approx. EUR 6.bn Continuous activities in the market for private placements, approx. EUR 1.5bn Continuous issues on tap in the Swedish mortgage bond market under existing mortgage bond programme, approx. EUR 7.5bn The issue of a new 5-year Swedish benchmark bond Swedbank Mortgage 177 The maturity of SPI173 in June, 28 is smaller than the average yearly maturing domestic benchmark bond (25)
2 A successful and eventful year Profit attributable to shareholders increased 1% to SEK 12bn Net interest income increase by 2% Net commission income increased by 11% Swedish Banking show a stable result, low risks and high return on equity Record result in Baltic Banking with balanced risks Swedbank Markets results on same level as last year s all time high A successful year despite global credit turmoil and Baltic slowdown (26)
Additional questions? Johannes Rudbeck Investor relations johannes.rudbeck@swedbank.se +46858593322