Öhman Russian Day 24 November 2010 Thomas Neckmar Head of New European Markets
Nordea - the leading bank in the Nordic and Baltic Sea region Sweden Nordea home markets Estonia Poland Branches 329 Customers 4.0 million Employees, FTEs 4,357 Total lending EUR 75bn Market ranking 2-3 Branches 21 21 Customers 119,000 Employees, FTEs 386 Total lending EUR 2.8bn Market ranking 3 Branches 162 Customers 640,000* Employees, FTEs 1,781 Total lending EUR 4.9bn Market ranking 14 14 Norway Branches 124 Customers 0.9 million Employees, FTEs 1,807 Total lending EUR 47bn Market ranking 2 Latvia Branches 22 22 Customers 99,000 Employees, FTEs 440 Total lending EUR 2.8bn Market ranking 3 Russia Branches 46 46 Customers 56,000 Employees, FTEs 1,679 Total lending EUR 4.4bn Market ranking 22 22 Denmark Branches 297 Customers 1.8 million Employees, FTEs 5,154 Total lending EUR 74bn Market ranking 2 Lithuania Branches 21 21 Customers 133,000 Employees, FTEs 325 Total lending EUR 2.2bn Market ranking 4 Finland Branches 313 Customers 3.4 million Employees, FTEs 5,090 Total lending EUR 53bn Market ranking 1 2 Incl. Polish Life customers
with solid platform to leverage from Nordea Group has one of the most stable profit developments among European banks Profit before tax development through the financial crisis (Indexed) Index = 100 140 120 100 80 60 40 20 0-20 -40 2007 2008 2009 2010 Nordea European peers* Nordic peers** * Aggregate of a selected number of banks in the European peer group: BBVA, Commerzbank, Erste, Intesa Sanpaolo, KBC, Santander, UniCredit ** Nordic peers: Danske Bank, DnB NOR, SEB, SHB, Swedbank and is one of few AA rated banks with a very strong capital position 10 9 8 7 6 5 4 3 2 1 0 Risk-adjusted capital ratios Nordea HSBC DnB NOR Dexia SEB Swedbank SHB KBC Santander Barclays Credit Suisse Credit Agricole Société Générale LBBW UniCredit Intesa Sanpaolo Danske Bank Deutsche Bank BNP Paribas AIB Bayerische LB UBS Citigroup Source: Swedish Riksbank, Standard & Poor s with very good reception in all funding markets S&P long-term Moody s long-term BBVA Santander BNP Paribas Nordea Handelsbanken AA AA AA AA- AA- Aa2 Aa2 Aa2 Aa2 Aa2 Total long-term funding issued, EURbn 31 30.2 Intesa Sanpaolo Société Générale DnB NOR Lloyds Danske Bank UniCredit Commerzbank Erste Bank A+ A+ A+ A+ A A A A Aa2 Aa2 Aa3 Aa3 Aa3 Aa3 Aa3 Aa3 22 23 3 Barclays SEB RBS Swedbank KBC AIB Bank of Ireland A+ A A A A- A- A1 A1 A1 A2 A1 A1 A- A1 Source: company information and reports 2007 2008 2009 Jan - Sep 2010
The journey towards Great Nordea continues - New European Markets a growth area Great Nordea Profit orientation and prudence Household Corporate New European Markets Ambitious vision and targets Efficiency initiatives Strong customeroriented values and culture Clear growth strategy 4
New European Markets strategy Growth strategy Rationale Group initiative High potential New European Markets Continue the successful organic growth Proven track record Nordic model Growth Plan Poland Low risk Customer benefits: Nordic business model and concepts. Relationship and advice in focus. Prudent banking 5
Value creation through profitable organic growth NEM accounts for 7% of group income and 10% of operating profit Total income NEM, EURm Solid income development remains 38% CAGR since 2007 141 163 176 Firm cost management C/I down to 39% Focus on low risk segments Growth Plan Poland on track 4 branches opened in Q3 Q3 2009 Q2 2010 Q3 2010 6
7 Russian macroeconomic situation and banking sector trends
Strong macroeconomic recovery GDP 10% 8% 6% 4% 2% 0% -2% 2007 2008 2009 2010E 2011E 2012E -4% -6% -8% -10% Strong GDP rebound from contraction in 2009 Growth in the 5-6% range expected for 2011 and 2012 Economy benefitting from increased export demand and higher prices of raw material Weak private consumption expected to increase due to lower unemployment rates Inflation 16% 14% 12% 10% 8% 6% 4% 2% GDP Growth, Russia GDP Growth, Euro Area Inflation down from high levels 0% 2007 2008 2009 2010E 2011E 2012E Inflation, Russia Inflation, Euro Area 8
Russian banking system stabilised beur 2500 2000 1500 1000 2 500,0 2 000,0 1 500,0 1 000,0 Banking system well capitalised Limited lending increase in 2010 credit market recovering slowly 500 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 GDP forecast "conservative" Individual loans forecast "conservative" Total assets forecast "conservative" GDP forecast "positive" Individual loans forecast "positive" Total assets forecast "positive" EUR bn 2006 2007 2008 2009 01.09. 2010 TOTAL ASSETS (LIABILITIES) 321.2 462.8 644.5 676.89 711.9 EQUITY 38.9 61.4 87.7 106.27 105.45 500,0 0,0 Competition increasing, margins for strong customers under pressure Solid growth expected for coming years, following strong economic development 9 % to assets of the banking sector 12.1 13.3 13.6 15.7 14.8 CORPORATE LOANS 141.4 214.3 287.7 288.46 304.50 % to assets of the banking sector 44 46.3 44.6 42.6 42.7 INDIVIDUALS LOANS 43.3 68.3 92.4 82.20 87.50 % to assets of the banking sector 13.5 14.8 14.3 12.1 12.2 DEPOSITS FROM INDIVIDUALS 87.7 118.7 135.9 172.15 200.6 CORPORATE CUSTOMER ACCOUNTS 110.2 162.2 201.8 219.82 230,17 Source: Central Bank of Russia
The CEE banking markets are at different development levels but generally follow the same path towards Western Europe Degree of intermediation (total assets per GDP) 300% 250% 200% 150% 100% 50% 0% 0 BIH Degree of assets and GDP per inhabitant Ø EU-25 D AUT Ø Eurozone Markets outperforming the average HR EST CZ LV SK H SLO PL Classic market development BG SCG UA RO LT Markets with additional RUS potential 6 250 12 500 18 750 25 000 GDP per inhabitants ( ) EU-members Candidate countries Independent countries Benchmarks Source: GfK, UN, zeb/research 10
Continued consolidation trend 85% 80% 75% 70% 65% 81,7% 80,6% 81,4% 81,3% 80,4% 80,4% 80,3% 80,3% 74,3% 73,5% 72,8% 72,9% 72,4% 72,8% 72,5% 70,8% 68,8% 67,3% 68,3% 68,8% 68,3% 68,1% 68,3% 68,2% 01.01.09 01.04.09 01.07.09 01.10.09 01.01.10 01.04.10 01.07.10 01.09.10 Number of banks TOP 50 share in total assets, % TOP-30 share in total assets, % TOP-20 share in total assets, % 1120 1100 1080 1060 1040 1020 1000 Number of banks continues to decline Increasing asset concentration in the banking sector, mostly because of larger share of state-owned banks 11
Nordea Russian operations 12
Nordea Bank Russia a full service bank Nordea possesses all the necessary banking licenses and provides a full range of financial products and services to corporate customers, households, and financial institutions Corporate customers Household customers Financial institutions Account services Cash management Payments Net Bank Lending Leasing Factoring Arrangement of bond issues Trade and Project finance Capital Markets Products Mortgage Car loans Consumer lending Deposits Cards Net Bank Internet trading Brokerage Payments Private banking Correspondent accounts Syndications FX-trading Custody services Bond issues Deposits 13
present in 16 regions Cities with a population over 1 million people Cities with a population of 0.5-1 million people (Yaroslavl) St Petersburg (Arkhangelsk) (Penza) (Lipetsk) Voronezh (Stary Oskol) (Belgorod) Rostov-on-Don Saratov Samara (Volgograd) Chelyabinsk Ekaterinburg Novosibirsk 14
Highly integrated part of Nordea group Nov 2006 Agreement signed to purchase 75.01% of JSB Orgresbank 2006 March 2007 May 2009 Deal finalised JSB Orgresbank remaining part 100% owned by top consolidated managers and increased equity 2007 EBRD 2008 2009 June 2009 Changed name to OJSC Nordea Bank transfer of bank licenses 15 Priority areas for integration since acquisition in November 2006 Coordination of all activities with NEM Management, through steering committee, ExCom and Board of Directors Setting up information flows and reporting routines Integration of credit processes: Credit memo Powers to act Coordination of operations with Group Treasury Nordic team transferred from IMB, product line updated and integration continues at high speed Finance Credit Market and operational risks Treasury IT HR Capital Markets Products
with a continued strong performance Operating profit Russia, EURm 86 152 154 Solid profit generation despite intensified competition # 12 in ratings of most profitable banks Increased business volumes 2008 2009 2010* * Rolling four quarters 16
Credit portfolio 17
Majority of lending towards solid corporate segments Paper/Forest Construction 4% 2% Household Transport 6% 8% Retail trade 4% Metals/Mining 23% Sector split Russia Total lending EUR 4.4bn Real estate 9% Energy 34% Impaired loans,% Other 10% Exposure mainly towards top-tier corporates on the government s list of 295 strategically important entities Limited household lending insignificant exposure towards car leasing and consumer credits Strong credit quality gross impaired loans down from low levels (113bps) Loan loss ratio 20bps 5 4 3 2 1 0 Russian market Nordea Harmonised group-wide credit policy and processes Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 18 Source: Central Bank of Russia
Strengthened Russian position Market share corporate lending Bank 31.12.2006 30.06.2007 31.12.2007 30.06.2008 31.12.2008 30.06.2009 31.12.2009 30.06.2010 31.08.2010 Sberbank 29.91% 27.49% 30.89% 30.34% 29.99% 31.06% 31.25% 29.19% 29.65% Alfa bank 3.81% 3.70% 3.48% 3.51% 3.37% 2.91% 3.04% 3.25% 3.23% UniCredit bank (former IMB) 1.97% 1.91% 2.05% 2.32% 2.43% 2.21% 2.23% 2.21% 2.18% Promsvyaz bank 1.70% 1.88% 1.89% 2.07% 1.94% 1.84% 1.83% 1.96% 1.83% Raiffeisenbank 1.84% 2.29% 2.27% 1.97% 1.97% 1.64% 1.42% 1.49% 1.53% MDM-bank (URSA) 1.86% 1.88% 1.37% 1.33% 1.20% 1.08% 1.39% 1.27% 1.34% Uralsib 1.96% 1.84% 1.58% 1.57% 1.39% 1.03% 0.96% 0.99% 1.02% Nordea Bank 0.20% 0.23% 0.39% 0.67% 0.98% 0.91% 0.90% 0.91% 1.00% Absolut Bank 0.55% 0.59% 0.66% 0.68% 0.64% 0.54% 0.42% 0.37% 0.35% Citibank 0.51% 0.46% 0.26% 0.30% 0.23% 0.22% 0.20% 0.16% 0.22% Swedbank 0.19% 0.25% 0.27% 0.28% 0.34% 0.34% 0.31% 0.20% 0.18% Market rank 48 50 30 23 18 18 18 19 18 Market share retail lending Bank 31.12.2007 30.06.2008 31.12.2008 30.06.2009 31.12.2009 30.06.2010 31.08.2010 Sberbank 31.89% 31.77% 31.29% 31.74% 32.73% 32.71% 32.34% Alfa bank 1.61% 1.74% 1.88% 1.94% 1.93% 1.87% 1.95% Raiffeisenbank 2.19% 2.13% 2.34% 2.29% 2.04% 1.89% 1.88% Uralsib 2.08% 2.10% 2.06% 2.10% 1.96% 1.94% 1.85% MDM-bank (URSA) 1.15% 1.05% 1.00% 0.94% 2.10% 1.89% 1.78% UniCredit bank (former IMB) 1.58% 1.77% 1.96% 1.86% 1.67% 1.58% 1.55% Absolut Bank 0.80% 1.06% 1.25% 1.27% 1.17% 1.08% 1.02% Promsvyaz bank 1.08% 1.32% 1.34% 1.30% 1.20% 1.07% 0.99% Citibank 0.74% 0.76% 0.86% 0.96% 0.95% 0.86% 0.83% Nordea Bank 0.18% 0.22% 0.26% 0.27% 0.27% 0.27% 0.27% Swedbank 0.04% 0.07% 0.13% 0.15% 0.15% 0.15% 0.14% Market rank 71 52 19 46 44 42 43 42
Key Trends Russian credit market Corporate lending Russian banking system 288 288 305 214 141 2006 2007 2008 2009 Q3 2010 Interest Rates 17% 16% 15% Average weighted rate under credits in rubles to non-financial institutions for the term up to 1 year Refinancing rate of the Central Bank of the RF 14% 13% 12% 11% 10% 9% 8% 7% 01.07.09 01.08.09 01.09.09 01.10.09 01.11.09 01.12.09 01.01.10 01.02.10 01.03.10 01.04.10 01.05.10 01.06.10 01.07.10 01.08.10 20 Source: Central Bank of RF
Clear direction for Russian operations 21
Nordea short-term focus Continued integration with the Group Further rationalisation of operational processes Strengthened capital markets offering New corporate customers - only well-known names with strong credit ratings Enhanced household offering exploiting the regional setup 22
Strong emphasis on corporate business Further develop relations with 295 companies from the governments list of strategically important entities - ensure good quality of credit portfolio Prioritised industries Oil and Gas Energy and Telecoms REMI All industries of targeted Nordic customers Implement ambitious business plan for Nordic and International companies Increase cross-selling of non-credit product and services 23
Retail Business low banking product penetration Household debt in Russia and CEE average, % of GDP 30 25 20 15 10 5 0 2004 2005 2006 2007 2008 Russia CEE Average Growing middle-class in Russia Estimated number of people Monthly income ~300,000 (0.3% of adult population) Nordea target segments >250,000 RUR (6,600 EUR) Affluent 60,000-250,000 RUR (1,600-6,600 EUR) ~6,000,000 (5%) Upper mass market 30,000-60,000 RUR (800-1,600 EUR) ~20,000,000 (17%) Stabilisation paving the way 24for solid long-term growth Evaluating Retail expansion to capture potential Build on experiences from Growth Plan Poland 5 pilot branches to be opened in Q4 Target mid- to high income earners Focus on employees of corporate customers Reinforce supporting channels Mass market 15,000-30,000 RUR (400-800 EUR) ~38,000,000 (32%) 24 Lower mass market/unbanked <15,000 RUR ~55,000,000 (46%) (400 EUR) ~119,000,000* *Adult population (>16yrs) Source: McKinsey
Concluding remarks 25
Concluding remarks Strong macroeconomic recovery Russian banking system stabilised Strengthened Nordea position in Russia High quality Russian portfolio focus on top-tier 295 local companies and Nordic entities Evaluating Retail expansion to capture potential New European Markets an important part of the Nordea growth strategy 26