Nomura Annual Financials Conference 31 August 2011 Fredrik Rystedt Group CFO / EVP
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 forwardlooking 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 Nordic economy 3
4 Sovereign mistrust accelerates
5 however the Nordics are still doing fine
Stable macroeconomics in the Nordic region Nordic GDP growth, %, y/y 6 Source: Nordea Markets
Covered bond market continues to be solid Nordic banks Euro covered bond development Nordic banks US$ covered bond development Z-spread (bps) 48 44 40 36 32 28 24 20 okt-10 dec-10 feb-11 apr-11 jun-11 aug-11 Z-spread (bps) 90 80 70 60 50 40 30 20 okt-10 dec-10 feb-11 apr-11 jun-11 aug-11 Peer Nordea Peer Peer Peer Peer Peer Peer Nordea Peer Peer Peer Peer 7 Source data: Barclays Capital and Bloomberg, 11 August
The Riksbank is now expected to cut rates 8 Source: Nordea Markets
H1 2011 results 9
Summary of H1 2011 Solid business momentum is maintained Strong inflow of new customers Good revenue growth in customer areas Maintained high level of business volume Credit quality continues to improve Reduction of impaired loans Positive credit migration Loan losses are at the lowest level since 2008 Result impacted by volatile markets Trading result down from last quarter s high level Higher funding costs through reduced risk exposure Continued strengthening of the capital position Core Tier 1 reaching 11% (10.7%) 10
Result highlights EURm H1/11 H1/10 Chg % Net interest income 2,650 2,484 7 Net fee and commission income 1,225 1,013 21 Net result items at fair value 900 887 1 Other income 77 80-4 Total income 4,852 4.464 9 Staff costs -1,512-1,388 9 Total expenses -2,540-2,350 8 Profit before loan losses 2,312 2,114 9 Net loan losses -360-506 -29 Operating profit 1,952 1,608 21 Net profit 1,442 1,182 22 Risk-adjusted profit 1,414 1,194 18 11
New Group organisation as of June 1st Christian Clausen President and Group CEO Group Internal Audit Eva-Lotta Rosenqvist Group Identity & Communications Jan Larsson Group Human Resources Henrik Priergaard Michael Rasmussen Retail Banking Casper von Koskull Wholesale Banking Peter Nyegaard (COO) Gunn Wærsted Wealth Management Torsten H. Jørgensen Group Operations & Other Lines of Business Fredrik Rystedt Group Corporate Centre, Group CFO Ari Kaperi Group Risk Management Group CRO Three main Business Areas: Retail Banking, Wholesale Banking, Wealth Management Organised in the value chain Objective to improve efficiency, increase RoE and deepen customer relationships Financial reporting will be changed in accordance with the new organisation from Q3 2011 12
Nordea has delivered 13
Five year trends Income, EUR millions Cost, EUR millions 10 000 5 000 8 000 4 000 6 000 3 000 4 000 2 000 2 000 1 000 0 2006 2010 0 2006 2010 Pre-provision profit, EUR millions Net income, EUR millions 5 000 4 000 4 000 3 000 2 000 1 000 3 000 2 000 1 000 0 2006 2010 0 2006 2010 14
Increased customer acknowledgement Absolute Group CSI CSI gap to peers (points) Position in Prospera equity ranking (Nordic average) 71 72 12-0,6 3,0 5 2007 2010 2007 2010 2007 2010 15
Improved market position Household lending market share Nordic avg. 17.6% 18.5% Private Banking, market share 13% 15% AuM, growth 2007-2010* 11% 21% 2006 2010 2007 2010 Peers Nordea Corporate lending market share Nordic avg. 21.1% 21.3% Capital Markets income relative to best peer 2X 3X Unit Link premiums (EURbn***) 1.2 2.8 2006 2010 2007 2010 2007 2010 16
Improved productivity ratios Income/FTE, EURt Income/customer, EUR 65 66 64 64 65 67 71 71 69 207 205 201 200 200 207 221 219 212 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 360 meetings and new customers/ week/pba # customers per FTE 5,5 5,2 4,6 5,8 7,1 6,0 314 320 318 319 324 323 324 323 325 3,4 3,2 3,7 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 17 Income excl. Treasury
A solid capital position 11,3% 11,0% Development of Core Tier 1-ratio 11,0% 10,8% 10,7% 10,5% 10,4% 10,3% 10,1% 10,3% 10,0% 10,0% 9,8% 9,5% Q1 10 Q2 10 Q310 Q3410 Q1 11 Q2 11 18
Low volatility in operating profit Quarterly variation operating profit*, % 285 227 14 15 32 54 Peer Nordea Peer Peer Peer Peer 19
RAP: We are well on track Risk-adjusted profit, 2007-2011 Q2 56.1% 45.1% Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Rolling four quarter compared with FY 2006 EUR 1,957m Long-term target for average yearly growth 20
ROE: In line with top peers Adjusted¹ Return on Equity 2007-2010 19.1 17.6 14.8 14.1 11.3 11.3 9.7 7.6 9.3 2 2.2 2007 2008 2009 2010 Average 2007-2010 Nordea Average Nordic peers 21 ¹ To be comparable RoE is adjusted for one-offs ² Nordic peers as per Q3: Danske Bank, DnB NOR, SEB, SHB, Swedbank
TSR: Top quartile performance Total shareholder return vs. European peer group, 2007-2011 YTD (as of August 26) % Top quartile 0-20 -19,0-40 -60-80 -100 RBS Dexia Commerzbank Lloyds Unicredit Societe Generale KBC Barclays Intesa Sanpaolo Credit Agricole Danske Bank SEB BBVA Swedbank Erste Bank BNP Paribas Santander Nordea DnBNOR SHB 22 Source: ThomsonReuters Datastream
Adapting to New Normal 23
Nordea s ambition is to be top-league in ROE 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 24 15% is topleague European banks ROE Retail banks Wholesale banks Global banks Note: Peers according to BoAML, April 12 2011
A superior ROE will differentiate Nordea A continued high credit rating (AA) Low relative funding costs Flexibility on management of capital levels Opportunity to continue to invest in Great customer experience 25
Our communicated ambitions Communicated ambition Income Costs Capital Continued focus on business momentum Contain cost growth, largely unchanged for a prolonged period of time Reduce number of employees by circa 2,000 RWA efficiency ROE To be top-league in Europe, ~15% 26
Income momentum Continued focus on customer relationships Great customer experience Larger share of wallet with the large customers Increased share of ancillary income Improved margins Higher deposit margins following higher interest rates Announced margin increases in Denmark 27
Efficiency initiatives: asset efficiency Risk-weighted assets excl. transition rules vs. total lending, EURbn 120 115 110 105 100 Low growth of risk-weighted assets A decrease of 1% q-o-q RWA optimisation and improved credit quality 95 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Lending RWA excl.transition rules 28
Efficiency initiatives: cost efficiency Total operating expenses, EURm Implement plans to contain cost growth Thereafter keep costs largely unchanged for a prolonged period of time Q2 2009 Q2 2011 29
We will reduce employee numbers by circa 2,000 Reduction of employees by the end of 2012: Denmark 500-650 employees Finland 500-650 employees Norway 200-300 employees Sweden 500-650 employees Acting early from a position of strength to increase profitability, safeguard our good rating and our competitive funding Large share of staff reduction natural turn-over and voluntary agreements Trade union negotiations expected to be finalised by November 2011 30
Key messages First half year result continues to be solid Nordea s relationship strategy has delivered strong business momentum and is a solid foundation for implementing the new normal plan Ambition: ROE in top league of European banks ~15% Cost efficiency: implement plans to contain cost growth and thereafter keep costs largely unchanged for a prolonged period of time Capital efficiency: Ensure moderate RWA increases, despite continued income growth 31
Nomura Annual Financials Conference 31 August 2011 Fredrik Rystedt Group CFO / EVP