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CEO presentation of Q1 2008 results

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Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to ...

Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.

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CEO presentation of Q1 2008 results CEO presentation of Q1 2008 results Presentation Transcript

  • Interim report Q1 2008 24 April 2008 Jan Lidén President and CEO
  • Core business is doing well – challenging financial markets • Solid business development with • Lower commission income due to corporates and private customers weaker equity markets and low • Development as expected in the corporate finance activity Baltic states • Net gains and losses on financial • Funding programmes continue to items were adversely affected by function well – conversion to unrealized valuation effects covered bonds on 21 April caused by the credit crunch • Credit quality remains good, credit losses and impaired loans are increasing from low levels (2)
  • Strong position for profitability and growth Sweden Baltics Ukraine and Russia Swedbank is the leading bank in The Baltic economies are Swedbank has a small but Sweden. Profitability is high and experiencing strong economic growing presence in Ukraine and stable and the bank is growth that is expected to remain Russia. In the long term, a consolidating its market shares in for many years. As the largest significant share of Swedbank’s important segments in both the bank in the region, growing with growth will be generated in these private and corporate sectors. the market ensures attractive markets. earnings growth. Growth and Future growth and Stable base experience profitability Share of profit Share of profit Share of profit 2007: 65% 2007: 32% 2007: 3% Share of lending Share of lending Share of lending 2007: 80% 2007: 16% 2007: 2% (3)
  • Business volumes SEKbn Lending Savings SEKbn 1,200 500 1,103 1,131 1,000 401 400 385 334 340 800 300 600 484 475 397 200 390 400 102 102 100 200 100 104 77 78 61 68 31 34 19 17 0 0 Lending, Private, Corporate, Private, Corporate, Other Deposits, Deposits, AM funds, AM funds, Structured Group Sweden Sweden Baltics Baltics Sweden Baltics Sweden Baltics products, bonds (4) Dec 2007 Mar 2008 Dec 2007 Mar 2008
  • Margins % Lending Deposits % 4.5 4.5 Lower interest rates in 4.0 4.0 Latvia and Lithuania 3.5 adversely affected 3.5 deposit margins. 3.0 3.0 2.5 2.5 2.0 2.0 1.5 1.5 Increased funding 1.0 1.0 costs have not yet been fully transferred 0.5 0.5 to customers. 0.0 0.0 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Estonia Latvia Estonia Latvia Lithuania Sweden Lithuania Sweden (5)
  • Credit quality, Group SEKm % 6,000 0.50 0.45 5,000 0.40 4,000 0.35 0.30 3,000 0.25 0.20 2,000 0.15 1,000 0.10 0.05 0 0.00 06 Mar 07 Mar 05 Mar 04 Mar 08 Mar 05 Jun 06 Jun 07 Jun 04 Jun 06 Dec 05 Sep 05 Dec 06 Sep 03 Dec 04 Sep 04 Dec 07 Sep 03 Sep 07 Dec Impaired loans Impaired loan provisions (6) Share of impaired loans
  • Credit quality, Baltic Banking Loan loss ratio, net* Q4 07 2007 Q1 08 Estonia 0.67% 0.21% 0.38% Latvia 0.78% 0.56% 0.54% Lithuania 0.13% 0.23% 0.25% Group level provision adjustment -0.28% -0.05% Baltic Banking 0.28% 0.35% 0.39% *Loan loss ratio, net = (changes in provisions + net write offs) / credit portfolio at the beginning of the year Overdue ratio (more than 60 days)* Q2 07 Q4 07 Q1 08 Corporate 0.58% 0.65% 0.79% Private 0.49% 0.75% 0.92% Baltic Banking 0.56% 0.71% 0.86% *Overdue ratio (more than 60 days) = volume of loans more than 60 days overdue /12 month-old credit portfolio (7)
  • Swedish Banking SEKm C/I-ratio • Continued solid volume growth 5,000 0.7 • Net interest income increased 4,500 0.6 by 2% compared with Q4 2007 4,000 3,500 0.5 • Lower equity related 3,000 commission income 0.4 2,500 • Continuous work to adjust the 2,000 0.3 branch structure – sale of 8 1,500 0.2 1,000 branches to savings banks for 500 0.1 SEK 440m 0 0.0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 06 06 07 07 07 07 08 Income Costs C/I-ratio (8)
  • Baltic Banking Operations SEKm C/I-ratio • Profitability remained robust 2,400 0.5 • Lending growth continued to 2,200 2,000 decrease 0.4 1,800 • Net interest margins declined due 1,600 1,400 0.3 to decreasing local interest rates 1,200 and higher funding costs 1,000 800 0.2 • Net loan losses as expected 600 0.1 • Cost focus 400 200 – Operational excellence pilots 0 0.0 indicate substantial potential Q3 Q4 Q1 Q2 Q3 Q4 Q1 – No new net staff recruitments 06 06 07 07 07 07 08 Income Costs C/I-ratio (9)
  • Baltic macro development • Economic slowdown in Estonia continues: GDP growth will fall to about 3.5% in 2008, with a recovery to 5% growth in 2009. The bottom of the cycle is expected to be in summer 2008 • In Latvia growth will decline to about 4% in 2008 and to about 3.5% in 2009. The bottom of the cycle is expected to be in winter 2008/2009 • Slowdown in Lithuania will be modest: expected GDP growth of about 6.7% in 2008 and about 5.8% in 2009 • Export growth remains relatively strong, while weak domestic demand is reducing imports. Trade and current account deficits are falling. CPI will peak in Q1 2008. Long-term GDP growth (6-7%) will be above EU average. Real GDP growth CPI growth 14% 16% 12% 14% 10% 12% 8% 10% 6% 8% 4% 6% 2% 4% 0% 2% 2005 2006 2007 2008F 2009F 2005 2006 2007 2008F 2009F Est Lat Lit Est Lat Lit (10) Source: Hansabank Markets
  • International Banking SEKm • Continued solid performance in 100 Ukraine – Launch of the new brand initiated 75 – Expansion and restructuring of the branch network continues 50 – New corporate offering 25 • Cautious expansion in Russia – Raimo Valo new head of Russian operations 0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 • Cooperation with FDB/COOP 06 06 07 07 07 07 08 regarding banking products in International Banking, profit for the period of which Russian Banking Denmark. of which Ukrainian Banking Operations (11)
  • Swedbank Markets SEKm 500 • Fixed income and FX trading 450 continued to do well 400 • Equity trading was weaker due to 350 negative market sentiment 300 250 • Market leader position in 200 structured products was 150 improved, in a weaker market 100 50 • Weak quarter in Corporate 0 Finance for First Securities Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 06 06 06 06 07 07 07 07 08 • Result was negatively affected by Profit for the period attributable to shareholders of Swedbank First Securities unrealized valuation effects as a result of the credit crunch. (12)
  • Accounting and valuation effects Q1 Q4 Q3 Accounting and valuation effects, SEKm 2008 2007 2007 Swedbank Markets – 187 – 40 – 60 Group Treasury, intra-group lending – 253 20 – 90 Swedbank Mortgage – 22 66 – 129 Group Treasury, liquidity portfolio 69 –5 – 68 (13)
  • Swedbank funding structure Lending to the public: SEK 1,131bn Swedbank Group, excl. Swedbank 50% 50% Swedbank Mortgage SEK Mortgage 562bn SEK 569bn Distribution of net funding requirement Swedbank Treasury (excluding Mortgage) Swedbank Mortgage Funding Equity 12% 4% Swedbank Mortgage • Large deposit base constitutes a larger Equity Funding • Liquidity reserves 96% part of Swedbank 8% • Net lender in the Group’s balance sheet interbank market compared with other • Liquidity limits – financial institutions conservative view (14) Deposits 80%
  • Focus on funding Funding costs have increased • Higher price of risk • Increased liquidity reserve • Short-term adverse effect on margins Covered bonds as of 21 April 2008 • AAA rating (S&P and Moody’s) ⇨ funding at lower cost • Facilitates access to a broader investor base – more stable liquidity • Provides substantially increased liquidity reserve. (15)
  • Group results Mikael Inglander CFO (16)
  • Income statement, Group Q1 Q4 Q1 SEKm 2008 2007 % 2007 % Net interest income 5,241 5,259 –0 4,501 16 Net commission income 2,180 2,536 – 14 2,289 –5 Net gains/losses on financial items at fair value 75 386 – 81 530 – 86 Other income 950 693 37 473 101 Total income 8,446 8,874 –5 7,793 8 Staff costs 2,311 2,111 9 1,932 20 Profit-based staff costs 268 522 – 49 390 – 31 Other expenses 1,861 1,893 –2 1,615 15 Total expenses 4,440 4,526 –2 3,937 13 Profit before loan losses 4,006 4,348 –8 3,856 4 Loan losses 288 238 21 49 488 Operating profit 3,718 4,110 – 10 3,807 –2 Tax 805 950 – 15 851 –5 Profit for the period 2,913 3,160 –8 2,956 –1 Attributable to shareholders of Swedbank 2,900 3,108 –7 2,910 –0 (17)
  • 4,600 4,800 5,000 5,200 5,400 Net interest income SEKm 5,259 Q4 07 Swedish 55 Banking Baltic Banking -13 Operations 1 Baltic Banking Investment International 22 Banking Swedbank Markets -215 Net interest income Q1 08 (Q4 07) Shared Services and 132 other Net interest income 5,241 Q1 08 (18)
  • Swedish Banking, change in net interest income Q1 2008 Q1 2008 SEKm vs Q4 2007 vs Q1 2007 Net interest income Q4 2007 2,927 Net interest income Q1 2007 2,943 Changes: Higher lending volumes 55 234 Decreased lending margins – 116 – 403 Difference in number of days/quarter, lending – 18 18 Higher deposit volumes 24 122 Higher deposit margins 110 194 Difference in number of days/quarter, deposits – 13 13 Other changes 13 – 139 Total change 55 39 Net interest income Q1 2008 2,982 2,982 (19)
  • Baltic Banking, change in net interest income Q1 2008 Q1 2008 SEKm vs Q4 2007 vs Q1 2007 Net interest income Q4 2007 1,588 Net interest income Q1 2007 1,215 Changes: Higher lending volumes 47 245 Higher lending margins 3 8 Difference in number of days/quarter, lending -11 11 FX-effects, lending 14 21 Higher deposit volumes 44 68 Higher deposit margins 85 Decreased deposit margins -148 Difference in number of days/quarter, deposits -6 6 FX-effects, deposits 10 11 Other changes 34 -95 Total change – 13 360 Net interest income Q1 2008 1,575 1,575 (20)
  • 0 200 400 600 800 1,000 SEKm Asset management Payments Brokerage Q1 2008 Lending Insurance Q4 2007 Net commission income, Group Corporate finance Other (21)
  • Loan losses Q1 08 (Q4 07) mkr 350 mkr mkr 17 000 17 000 300 15 000 15 000 250 13 000 13 000 200 11 000 11 000 9 000 9 000 150 7 000 7 000 100 5 000 5 000 3 000 3 000 50 1 000 1 000 0 -1 000 -1 000 2000 2001 2002 2003 2004 2005 2006 2007 -50 Group, total Swedish Banking Resultat före kreditförluster Banking Baltic International Swedbank Reavinster EnterCard, KIAB Shared Services -100 Kreditförluster, netto* Operations Banking Markets Rörelseresultat (exkl. reavinster) and other Q4 2007 Q1 2008 (22)
  • Expenses Q1 Q4 Q1 SEKm 2008 2007 % 2007 % Swedish Banking 2,255 2,279 – 1 2,183 3 Baltic Banking 899 1,062 – 15 769 17 International Banking 309 272 14 107 of which Ukrainian Banking 150 163 –8 Swedbank Markets 456 560 – 19 517 – 12 Asset Management & Insurance 253 230 10 183 38 Other 268 123 178 51 Total expenses 4,440 4,526 – 2 3,937 13 of which staff costs in: Swedish Banking 1,099 1,096 0 1,023 7 Baltic Banking 522 587 – 11 451 16 International Banking 157 155 1 52 Swedbank Markets 258 351 – 26 345 – 25 Asset Management & Insurance 110 138 – 20 76 45 (23)
  • Business areas Swedish Baltic Int'l. Swedbank Asset Banking Banking Banking Markets Mgmt 2008 vs 2007, SEKm 2008 % 2008 % 2008 % 2008 % 2008 % Net interest income 2,982 1 1,575 30 369 289 – 28 25 32 Net commission income 1,025 –5 458 8 54 26 227 – 38 416 4 Other income 690 93 209 – 24 26 254 2 24 – 57 Total income 4,697 7 2,242 17 449 770 – 24 465 – 2 Staff costs 1,099 7 522 16 157 258 – 25 110 45 Other expenses 1,156 –0 377 19 152 198 15 143 34 Total expenses 2,255 3 899 17 309 456 – 12 253 38 Profit before loan losses 2,442 11 1,343 17 140 65 314 – 36 212 – 27 Loan losses 95 173 62 26 ## 0 0 Operating profit 2,347 4 1,170 13 114 58 314 – 36 212 – 27 Tax 656 4 107 20 28 75 88 – 36 53 – 23 Profit for the period 1,691 4 1,063 12 86 54 226 – 37 159 – 28 Attributable to Swedbank's shareholders 1,688 4 1,063 12 86 54 216 – 31 159 – 28 Return on allocated equity, % 23.3 29.1 5.0 23.7 29.4 (24)
  • Key figures Jan-Mar Jan-Mar 2008 2007 Return on equity, % 16.8 18.9 Earnings per share, SEK 5.63 5.65 Equity per share, SEK 136.43 122.84 C/I ratio before loan losses 0.53 0.51 Loan loss ratio, net, % 0.10 0.02 Share of impaired loans, % 0.16 0.07 Dividend, SEK 9.00* 8.25 Tier 1 capital ratio, new rules, % 8.2 8.0 Tier 1 capital ratio, transition rules, % 6.5 6.8 Capital adequacy ratio, new rules, % 11.7 11.8 * according to Board of Directors proposal (25)
  • Core business is doing well – challenging financial markets • Solid business development with • Lower commission income due to corporates and private customers weaker equity markets and low • Development as expected in the corporate finance activity Baltic states • Net gains and losses on financial • Funding programmes continue to items were adversely affected by function well – conversion to unrealized valuation effects covered bonds on 21 April caused by the credit crunch • Credit quality remains good, credit losses and impaired loans are increasing from low levels (26)
  • Appendix (27)
  • Exposures • No direct US subprime exposure – Minimal indirect exposure through investments of EUR 48m in bonds issued by US mortgage institutions. The bonds have about 5% exposure to US subprime • Total exposure to structured credits is minimal – No commitments as regards conduits or SIVs of any kind – Negligible exposure to CDOs • Swedbank holds a very small CDO trading stock for client trades in CDOs issued by Swedbank, with mainly large caps as underlying risk • Holdings totalled EUR 18m at end Q1 – Exposure to Mortgage Backed Securities was about EUR 714m • European Aaa and mainly residential • Held for EUR liquidity purposes and client trading • Hedge fund exposure was about EUR 500m, all collateralized • Exposure to private equity firms and their target companies was about EUR 1,350m in total – Nordic related LBOs • The above-mentioned exposures together represent less than 1.5% of total assets. (28)
  • Baltic Banking lending by sectors Portfolio, March 2008 Portfolio growth, Q1 08 Individuals 8,370 42% 268 41% Real-estate 2,933 15% -79 -12% mgmt Retail & 1,800 9% 64 10% Wholesale Industry 1,780 9% 88 13% Transport 1,076 5% -35 -5% Construction 593 3% 47 7% xx% - share of portfolio and portfolio growth Other 3,185 16% -2 0% 0 2,000 4,000 6,000 8,000 10,000 -250 0 250 500 750 As of 2008, Bank of Estonia changed the official sector classification details. During the process of implementing the new classification, Hansabank switched to a different source system and reviewed the sector data in detail. This resulted in many reclassifications, particularly as regards the real estate management sector. The current classification better illustrates Baltic Banking’s exposure to the real estate sector. Real estate management portfolio growth prior to reclassification was EUR 145m in Q1 08. (29)