CEO presentation of Q4 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 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 Q4 2008 results

  1. 1. Interim report Q4 2008 12 February 2009 Jan Lidén President and CEO
  2. 2. 2© Swedbank Content • Fourth quarter 2008 – Group – Business areas • Comments on issues in focus – Credit quality – Liquidity and funding – Capitalization – Dividend • Summary and conclusions
  3. 3. Profit trend
  4. 4. 4© Swedbank Fourth quarter 2008 – Group • Profit for the period increased by 34% to SEK 3 318m (2 468 Q3), excl. impairment of goodwill • Net interest income increased by +6% to SEK 5 742m (5 424) • Net commission income decreased by 11% due to downturn in the stock market • Increased provisions for loan losses, SEK 1 633m (812), of which Baltic Banking amounted to SEK 977m • Impairment of goodwill in Ukraine amounted to SEK 1 403m • The proposed dividend amounts to SEK 2.40 per preference share and SEK 4.50 per ordinary share. Profit for the period, SEKm * Excl. impairment of goodwill SEK 1 403m
  5. 5. 5© Swedbank ** Including total subscribed capital Fourth quarter 2008 – Group, cont. • Successful share issue of SEK 12.4bn increases the tier 1 capital ratio to 10.7% • Stronger liquidity due to larger funding volumes (with and without state guarantee) • Prepared for tougher times Tier 1 capital ratio, %
  6. 6. 6© Swedbank Business areas Swedish Banking • Continued lending growth, corporate lending decreased due to cooperation with Kommuninvest • Net interest income increased by 6% • Continued focus on cost control and credit quality Baltic Banking • Significant macroeconomic challenges • Continued strong profit before loan losses • Increased provisions for loan losses • Focus on credit quality Swedbank Markets • Growing customer trading and good risk management entailed continued solid earnings • Swedbank remains a leading player in the Swedish corporate bond market • Market share in equities trading on Nasdaq OMX Stockholm increased International Banking • Increased operating profit • 18 new branches in Ukraine and two more in Russia during the period – focus on attracting deposits • Good business development in the Nordic branches • Impairment of goodwill
  7. 7. Comments on issues in focus
  8. 8. 8© Swedbank Credit quality – impaired loans are increasing Share of impaired loansDistribution of lending Sw edbank Mortgage 49% Latvia 6% Estonia 7% Sweden 75% Other 7%Lithuania 5% 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 Swedbank Mortgage Swedish Banking Baltic Banking Group %
  9. 9. 9© Swedbank -500 -400 -300 -200 -100 0 100 200 300 400 500 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 -1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 0 200 400 600 800 1,000 1,200 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 0.0 0.5 1.0 1.5 2.0 2.5 -500 -400 -300 -200 -100 0 100 200 300 400 500 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 -1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 Credit quality – write-offs still low Swedish Banking Baltic Banking Swedbank Mortgage SEKm SEKm SEKm % % % Loan losses, net Write-offs Loan loss ratio, net Loan losses, net = write-offs + provisions –recoveries
  10. 10. 10© Swedbank Selected exposures – limited risk • The secured exposure to Lehman is unchanged – USD 1 350m – 69 loans with 55 properties as underlying collateral – The collateral value is well above the exposure amount – Updated analysis shows that there is no further need of provisions • Exposure to hedge funds – SEK 1.4bn – All exposure is secured • Exposure to Conduits and SIVs – SEK 94m • Exposure to CDOs – SEK 183m • Exposure to Private Equity – SEK 15.1bn – Nordic acquisition finance – 99% constitutes senior debt – Largest sector is health care, 45 % – Average loan amount is about SEK 650m
  11. 11. 11© Swedbank Low risk in interest-bearing securities (SEK 134bn) As of 31 December, around 19 percent of the Group’s interest- bearing securities were valued using valuation models against around 81 percent as of 30 September and around 5 percent as of 31 December 2007 Holding distributed per sector Mortgage bonds, covered 37% Public sector 21% Banks 15% Other corporations 11% Other financial corporations 9% Mortgage bonds, not covered 7% Holding distributed per currency SEK 73% EUR 16% USD 4% NOK 5% LVL 1% LTL 1% EEK 0% GBP 0% Geographic distribution of issuers Sweden 73% UK 7% Norway 5% USA 5% Baltics 2% Others 8% Accounting classification Held for trading* 93% Held-to- maturity investments **Reclass- ified as of 2008-06-30 6% Held-to- maturity investments ** Intitial classification 1% * Recognised at fair value with changes in value through P/L. ** Measured at amortised cost
  12. 12. 12© Swedbank Liquidity for more than 1 year Stress test of liquidity as of 31 Dec 2008 0 50 100 150 200 250 1W 2W 3W 1M 2M 3M 4M 5M 6M 9M 1Y SEKbn 31/12/2008 05/02/2009 Main assumption: No access to capital markets; no refinancing of lending to credit institutions, issued bonds or subordinated loans.
  13. 13. 13© Swedbank Prepared for tougher times • Tier 1 capital ratio, 10.7 % • Solid liquidity • Closer evaluations of exposures deemed at higher risk • Continued focus on systematic work in the Baltics: – Reinforcement of resources – Processes – Legal structures – Scenario planning
  14. 14. 14© Swedbank Group results Mikael Inglander CFO
  15. 15. 15© Swedbank Income statement, Group SEKm Q4 2008 Q3 2008 % Q4 2007 % Net interest income 5 742 5 424 6 5 259 9 Net commission income 2 011 2 265 – 11 2 536 – 21 Net gains/losses on financial items at fair value 1 244 – 109 386 Other income 1 349 658 693 95 Total income 10 346 8 238 26 8 874 17 Staff costs 2 340 2 223 5 2 111 11 Profit-based staff costs 262 235 11 522 – 50 Other expenses* 2 300 1 855 24 1 893 22 Total expenses 4 902 4 313 14 4 526 8 Profit before loan losses 5 444 3 925 39 4 348 25 Loan losses, net 1 633 812 238 Operating profit 3 811 3 113 22 4 110 – 7 Tax 500 640 – 22 950 – 47 Profit for the period 3 311 2 473 34 3 160 5 Attributable to shareholders of Swedbank 3 318 2 468 34 3 108 7 * Excluding impairment of goodwill SEK 1 403m, Q4 2008
  16. 16. 16© Swedbank Income statement, Group SEKm Jan-Dec 2008 Jan-Dec 2007 % Net interest income 21 702 19 157 13 Net commission income 8 830 9 880 – 11 Net gains/losses on financial items at fair value 2 351 1 691 39 Other income 3 580 2 196 63 Total income 36 463 32 924 11 Staff costs 9 142 8 134 12 Profit-based staff costs 950 1 658 – 43 Other expenses* 7 993 6 927 15 Total expenses 18 085 16 719 8 Profit before loan losses 18 378 16 205 13 Loan losses , net 3 156 619 Operating profit 15 222 15 586 – 2 Tax 2 880 3 450 – 17 Profit for the period 12 342 12 136 2 Attributable to shareholders of Swedbank 12 290 11 996 2 * Excluding impairment of goodwill SEK 1 403m, 2008
  17. 17. 17© Swedbank Business areas 2008 vs 2007, SEKm 2008 % 2008 % 2008 % 2008 % 2008 % Net interest income 11 840 1 6 448 14 2 171 89 1 555 32 76 – 8 Net commission income 4 078 – 9 1 925 4 354 16 960 – 28 1 513 – 19 Other income 2 349 59 1 040 – 17 407 530 – 30 209 – 10 Total income 18 267 3 9 413 7 2 932 87 3 045 – 7 1 798 – 18 Staff costs 4 282 – 0 1 801 – 12 846 80 1 094 – 7 414 – 3 Other expenses 4 799 2 1 796 20 769 78 760 11 427 – 8 Total expenses 9 081 1 3 597 1 1 615 79 1 854 – 0 841 – 5 Profit before loan losses 9 186 6 5 816 11 1 317 99 1 191 – 16 957 – 26 Loan losses, net 594 1 800 478 290 0 Operating profit 8 592 0 4 016 – 16 839 70 901 – 36 957 – 26 Tax 2 156 – 11 367 – 19 261 231 – 39 224 – 30 Profit for the period 6 436 4 3 649 – 16 578 54 670 – 35 733 – 25 Attributable to Swedbank's shareholders 6 425 4 3 649 – 16 578 54 629 – 30 733 – 25 Return on allocated equity, % 21.8 24.4 6.5 17.6 33.6 * Excluding impairment of goodwill SEK 1 403m, 2008 Ukrainian Banking Operations was consolidated July 2007 Asset Mgmt Int'l. Banking* Swedish Banking Baltic Banking Swedbank Markets
  18. 18. 18© Swedbank Net interest income, Swedish Banking SEKm Q4 2008 vs Q3 2008 Q4 2008 vs Q4 2007 Net interest income Q3 2008 2 857 Net interest income Q4 2007 2 927 Changes: Higher lending volumes 15 166 Higher lending margins 247 197 Higher deposit volumes 36 Decreased deposit volumes – 40 Decreased deposit margins – 81 – 103 Other changes 32 – 193 Total change 173 103 Net interest income Q4 2008 3 030 3 030
  19. 19. 19© Swedbank Baltic Banking Operations, change in net interest income SEKm Q4 2008 vs Q3 2008 Q4 2008 vs Q4 2007 Net interest income Q3 2008 1 667 Net interest income Q4 2007 1 588 Changes: Higher lending volumes 104 Decreased lending margins -24 -124 Exchange rate effect, lending 67 89 Decreased deposit volumes -61 -14 Higher deposit margins 206 72 Exchange rate effect, deposits 41 59 Other changes -221 -99 Total change 8 87 Net interest income Q4 2008 1 675 1 675
  20. 20. 20© Swedbank Net commission income, Group SEKm Q4 2008 Q3 2008 % Q4 2007 % Payments 889 899 – 1 800 11 Lending 129 194 – 34 162 – 20 Brokerage 141 166 – 15 290 – 51 Asset management 727 864 – 16 995 – 27 Insurance 59 69 – 14 80 – 26 Corporate finance 58 22 209 – 72 Other 8 51 – 84 0 Total net commissions 2 011 2 265 – 11 2 536 – 21
  21. 21. 21© Swedbank Net gains and losses on financial items at fair value SEKm Q4 2008 Q3 2008 Q2 2008 Q1 2008 Q4 2007 Q3 2007 Swedish Banking 828 -126 179 16 116 1 Swedbank Mortgage open interest rate exposure 763 -172 29 -22 66 -129 MasterCard 101 89 Baltic Banking 12 107 205 78 163 213 International Banking 229 -6 114 22 30 42 Inefficiency in hedge accounting -126 -72 61 Swedbank Markets 304 -210 118 244 137 167 Valuation of credit bonds 0 -217 0 -187 0 -60 Asset Management & Insurance 1 -14 25 -15 -1 1 Shared Service and Group Staff -156 139 512 -270 -31 -228 Derivatives Group funding 0 0 419 -272 21 -89 Eliminations 26 1 -12 0 -28 0 Total net gains and losses 1 244 – 109 1 141 75 386 196
  22. 22. 22© Swedbank Expenses SEKm Q4 2008 Q3 2008 % Q4 2007 % Swedish Banking 2 390 2 197 9 2 279 5 Baltic Banking Operations 977 926 6 1 062 – 8 International Banking* 557 315 77 302 84 Swedbank Markets 500 398 26 530 – 6 Asset Management & Insurance 182 200 – 9 230 – 21 Other 296 277 7 123 Total expenses 4 902 4 313 14 4 526 8 of which staff costs in: Swedish Banking 1 120 1 046 7 1 096 2 Baltic Banking 453 483 – 6 587 – 23 International Banking 257 213 21 173 49 Swedbank Markets 261 227 15 333 – 22 Asset Management & Insurance 107 99 8 138 – 22 * Excluding impairment of goodwill SEK 1 403m, Q4 2008
  23. 23. 23© Swedbank Key figures, Group Jan-Dec 2008 Jan-Dec 2007 Return on equity, % * 17.1 18.9 Earnings per share, SEK * 21.95 21.78 Equity per share, SEK 111.54 131.96 C/I ratio * 0.50 0.51 Loan loss ratio, % 0.28 0.07 Share of impaired loans, % 0.52 0.13 Provision ratio for impaired loans, % 60 120 Core tier 1 capital ratio, new rules, % 9.3 7.3 Tier 1 capital ratio, new rules, % 10.7 8.5 Capital adequacy ratio, new rules, % 14.8 12.7 * Excluding impairment of goodwill SEK 1 403m, 2008
  24. 24. 24© Swedbank Summary • Strong result • Transparent, diversified balance sheet • Improved capitalization and liquidity • Focus on systematic work to manage the Group through more difficult times
  25. 25. 25© Swedbank Appendix
  26. 26. 26© Swedbank Shipping exposure • Exposure to shipping companies amounted to SEK 20.4bn as of 31 December – Duration of the portfolio is 4 years – Average age of vessels is six years – Limited exposure to dry cargo (9%) and car transports (2.7%) – Customers generally have long freight contracts Tanker 33% Ro-Ro, Container &Bulk 25% Offshore 42%
  27. 27. 27© Swedbank Maturity profile – long-term funding 0 20 40 60 80 100 120 2009 2010 2011 2012 2013 2014- SEKbn,nom.amount 0 20 40 60 80 100 120 2009 2010 2011 2012 2013 2014- SEKbn,nom.amount Swedbank (excl. Swedbank Mortgage) Maturity profile Swedbank Mortgage, Maturity profile
  28. 28. 28© Swedbank Long-term funding 2008-2009 * As of 9 Feb 2009 SEK bn Swedbank Swedbank Mortgage Debt to mature 2008 55 155 Issued 2008 110 97 -of which guaranteed 61 0 Debt to mature 2009 49 104 Issued 2009* 41 5 -of which guaranteed 40 0 Swedbank Group - Long-term funding
  29. 29. 29© Swedbank 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% <30% 30-50% 50-60% 60-75% 75-85% >85% Småhus Flerfamiljshus (inkl Brf) Bostadsrätter Mortgage lending, Sweden SEK 595bn LTV Lending Funding Average loan-to-value 46 percent. More than 50 percent of the total loan portfolio has a loan-to-value ratio of less than 30 percent. LTV Share of portfolio Forest & Agriculture 6% Single family homes 60% Commercial real estate 0% Condiminiums 15% Multi-family homes 2% Tenant ow ners associations 14% Public sector 3% CP 26% Covered Bonds 68% Equity 6% Funding
  30. 30. 30© Swedbank Renting of single- family homes 28% Renting, industry 36% Renting, other estate 9% Renting, other industry 8% Tenant ow ners associationsr 19% Other lending to the public, Sweden (excl. Swedbank Mortgage), SEK 309bn Real estate management SEKbn 0 50 000 100 000 150 000 200 000 250 000 300 000 350 000 Public sector Other corporate lending Forestry and agriculture Transportation Industry Construction Hotel and restaurant Retail and w holesale Real estate management Individuals
  31. 31. 31© Swedbank Baltic Banking
  32. 32. 32© Swedbank Asset quality Net loan losses -100% 0% 100% 200% 300% 400% 500% Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 0 15 30 45 60 75 90 105 EURm Net loan losses NLL YoY% growth 0.98% 0.58% 1.61% 0.77% 2008 1.91% 0.77% 3.70% 1.32% Q4 08 0.35%Baltic Banking 0.17%Lithuania 0.51%Latvia 0.33%Estonia 2007 Net loan losses 0.98% 0.29% 0.52% 1.02% 2.16% 1.32% 2008 0.35% 0.34% 0.33% 0.31% 0.57% 0.42% 2007 1.91% 0.73% 0.95% 1.99% 5.81% 2.95% Q4 08 incl industry incl real estate Baltic Banking incl private home loans Private Corporate Net loan losses 5.7 5.5 15.1 148.7 0.5% 100.7 2007 40.1 8.7 27.0 320.2 2.6% 535.9 2008 4.8 7,2 8.2 102.2 0.3% 41.5 2006 Total provisions, EURm Overdues >60 days, % Total repossessed assets, EURm Recoveries, EURm Write offs, EURm Overdues >60 days, EURm Risk indicators
  33. 33. 33© Swedbank Asset quality by country Latvia 8 11 16 60 0 20 40 60 Q1 08 Q2 08 Q3 08 Q4 08 EURm Estonia 7 11 14 28 0 20 40 60 Q1 08 Q2 08 Q3 08 Q4 08 EURm NLL ratio – change in total provisions (both for performing and non-performing loan portfolio) and net write-offs against beginning of the year portfolio Lithuania 3 4 12 11 0 20 40 60 Q1 08 Q2 08 Q3 08 Q4 08 EURm Net loan loss dynamics • Global recession has had a large negative impact on the Baltic economies. The impact is seen as a surge in net loan loss levels in Q4 2008 in Estonia and Latvia. Lithuania expected to follow with a time lag • Downturn has particularly sharp impact on residential market. Net loan losses 0,0% 1,0% 2,0% 3,0% 4,0% 5,0% Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Est Lat Lit Baltic Banking
  34. 34. 34© Swedbank Private portfolio risk profile 0% 10% 20% 30% 40% 1 2 3 4 5 6 7 8 9 10 11 12 EURm Q4 2007 Q4 2008 SME/SSE risk profile 0% 5% 10% 15% 20% 25% A A- B B- C C- D D- E E- F EURm Q4 2007 Q4 2008 Large corporate risk profile 0% 5% 10% 15% 20% 25% 30% 1 1- 2 2- 3 3- 4 4- 5 5- 6 6- 7 EURm Q4 2007 Q4 2008 * Risk exposure: on-balance + off-balance portfolio Low risk Non- performing Low risk Non- performing Credit quality of the loan book • Well diversified portfolio dominated by retail exposures • Macro developments have triggered downgrades in all segments: – Real estate sector drives downgrades in large corporate segment (exposure > EUR 0.8m). Due to negative sentiment new lending is down, and the effect of downgrades cannot be balanced any more – SME/SSE has been the first segment to react to downturn. Acceptable risk profile retained (45% of portfolio with PD<1%) – Private portfolio has low risk profile (72% with PD<1%) Low risk Non- performing
  35. 35. 35© Swedbank Overdue development Rising overdues over 90 days have the most impact on rising NLL levels Corporate, EE 0% 1% 2% 3% 4% 5% dec-07 mar-08 jun-08 sep-08 dec-08 31-60 days 61-90 days over 90 days Corporate, LV 0% 1% 2% 3% 4% 5% dec-07 mar-08 jun-08 sep-08 dec-08 31-60 days 61-90 days over 90 days Corporate, LT 0% 1% 2% 3% 4% 5% dec-07 mar-08 jun-08 sep-08 dec-08 31-60 days 61-90 days over 90 days Private, EE 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% dec-07 mar-08 jun-08 sep-08 dec-08 31-60 days 61-90 days over 90 days Private, LV 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% dec-07 mar-08 jun-08 sep-08 dec-08 31-60 days 61-90 days over 90 days Private, LT 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% dec-07 mar-08 jun-08 sep-08 dec-08 31-60 days 61-90 days over 90 days * Overdues / current portfolio
  36. 36. 36© Swedbank Overdue loans – Swedbank Estonia and Swedbank Latvia vs market Estonia - overdues over 60 days / current portfolio 0% 1% 2% 3% 4% dec-05 mar-06 jun-06 sep-06 dec-06 mar-07 jun-07 sep-07 dec-07 mar-08 apr-08 maj-08 jun-08 sep-08 dec-08 Rest of the market Swedbank Estonia (bank) Estonia - overdues over 30 days / current portfolio 0% 1% 2% 3% 4% dec-05 mar-06 jun-06 sep-06 dec-06 mar-07 jun-07 sep-07 dec-07 mar-08 apr-08 maj-08 jun-08 sep-08 dec-08 Rest of the market Swedbank Estonia (bank) Latvia - overdues over 30 days / current portfolio 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% dec-04 mar-05 jun-05 sep-05 dec-05 mar-06 jun-06 sep-06 dec-06 mar-07 jun-07 sep-07 dec-07 mar-08 jun-08 sep-08 dec-08 Rest of the market Swedbank Latvia (bank) Latvia - overdues over 90 days / current portfolio 0% 1% 2% 3% 4% 5% 6% dec-04 mar-05 jun-05 sep-05 dec-05 mar-06 jun-06 sep-06 dec-06 mar-07 jun-07 sep-07 dec-07 mar-08 jun-08 sep-08 dec-08 Rest of the market Swedbank Latvia (bank) Source: Bank of Estonia, FKTK of Latvia, Hansabank Group data
  37. 37. 37© Swedbank Baltic lending by sectors 536 1 018 1 678 1 721 3 092 3 241 0 2 000 4 000 6 000 8 000 10 000 Other* Construction Transport Industry Retail & Wholesale Real-estate mgmt Individuals EURm -62 -18 -102 -127 -10 -68 -71 -150 -100 -50 0 Portfolio (EURm), December 2008 Portfolio growth (EURm), Q4 08 xx% - share of portfolio * Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans 3% 5% 8% 9% 15% 16% 44%Mortgage Other
  38. 38. 38© Swedbank Estonian lending by sectors 174 282 454 633 1 161 3 854 1 450 0 1 000 2 000 3 000 4 000 Other Construction Transport Industry Retail & Wholesale Real-estate mgmt Individuals -28 -7 -52 -77 0 -49 -25 -100 -50 0 50 100 150 Portfolio (EURm), December 2008 Portfolio growth (EURm), Q4 08 48% 2% 4% 6% 8% 15% 18% xx% - share of portfolio * Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans
  39. 39. 39© Swedbank Latvian lending by sectors 252 298 622 511 1 078 2 805 915 0 1 000 2 000 3 000 4 000 Other Construction Transport Industry Retail & Wholesale Real-estate mgmt Individuals -6 3 -43 -13 4 -20 -58 -100 -50 0 50 100 150 Portfolio (EURm), December 2008 Portfolio growth (EURm), Q4 08 43% 4% 5% 10% 8% 17% 14% xx% - share of portfolio * Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans
  40. 40. 40© Swedbank Lithuanian lending by sectors 438 603 578 853 2 282 110 877 0 1 000 2 000 3 000 4 000 Other Construction Transport Industry Retail & Wholesale Real-estate mgmt Individuals -28 -15 -7 -37 -14 0 -2 -50 0 50 100 150 Portfolio (EURm), December 2008 Portfolio growth (EURm), Q4 08 40% 2% 8% 10% 10% 15% 15% xx% - share of portfolio * Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans
  41. 41. 41© Swedbank Mortgage portfolio LT Mortgage overdues > 30 days 0% 1% 2% 3% 4% 5% 0m 3m 6m 9m 12m 15m 18m 21m 24m 27m 30m 33m 36m Overdues/Balance,% 2005 2006 2007 2008 EE Mortgage overdues > 30 days 0% 1% 2% 3% 4% 5% 0m 3m 6m 9m 12m 15m 18m 21m 24m 27m 30m 33m 36m Overdues/Balance,% 2005 2006 2007 2008 LV Mortgage overdues > 30 days 0% 1% 2% 3% 4% 5% 0m 3m 6m 9m 12m 15m 18m 21m 24m 27m 30m 33m 36m Overdues/Balance,% 2005 2006 2007 2008 • Due to the effects of crisis all vintages are converging to the same level of overdues. Complicated to separate the effects of origination quality from the downturn impact * Part of loans issued backed by guarantee of the State insurance company 12% 30% 67% EE 13% 33% 70% LT* 12%LTV>100% (share of portfolio) 38%LTV>80% (share of portfolio) 71%LTV, total portfolio LV
  42. 42. © Swedbank Corporate client portfolio • From 2005 to 2008, new lending changed – New lending in 2006 and 2007 mainly went to companies rated 4 or 5 (scale of 7) – In 2008, the downturn caused downgrades, rating 5 real estate portfolio most affected – New lending in 2008 focused to high quality borrowers, mainly ratings 1 to 3-. Volumes decreasing due to negative market sentiment Large corporate risk profile 0% 5% 10% 15% 20% 25% 30% 1 1- 2 2- 3 3- 4 4- 5 5- 6 6- 7 mEUR 2007 2008 BB Rating 6 & 7 exposures 0 200 400 600 800 1 000 1 200 2008 2007 EURm Commercial real estate Production Retailing Transportation Other BB Total provisions, YTD 0 50 100 150 200 250 300 350 400 450 2008 2007 mEUR Commercial real estate Production Retailing Transportation Other
  43. 43. 43© Swedbank Real estate portfolio • Real estate and in particular residential development is the most sensitive sector in Baltic Banking portfolio • Around 58% from total Real Estate portfolio are cash flow generating properties with good tenant mix. Baltic Banking has always strictly restrained from financing speculative type of properties • Downturn has caused drop in residential market transaction volumes. As a result residential development portfolio (31% of total real estate portfolio) is demonstrating increase in overdue and default figures. Portfolio vulnerabilities are well understood and monitored, action plans set on a case by case basis 0 300 600 900 1200 1500 1800 Dec.04 Jūn.05 Dec.05 Jūn.06 Dec.06 Jūn.07 Dec.07 Jūn.08 Dec.08 Nooftransactions Tallinn Riga Vilnius Apartment transaction volume development
  44. 44. 44© Swedbank Baltic lending by sectors – real estate Portfolio, December 2008 Estonia 24% 6% 23% 29% 15% 3% 3% 18% 43% 5% 8% 8% 15% Construction Other Individuals Transport Production Retail & Wholesale Real-estate mgmt Latvia 15% 12% 22% 11% 2% 38% Lithuania 13% 5% 31% 40% 6% 5% Office Production&Warehouse Residential Retail Land plots Other
  45. 45. 45© Swedbank Collateral breakdown 100% 2% 4% 5% 18% 2% 38% 36% 2% % 20,167 279 706 985 3,621 668 7,960 6,660 273 Dec 2007 1%370State 20,569 328 776 1,104 3,742 317 7,715 7,321 Dec 2008 100% 1% 4% 5% 18% 3% 39% 33% % Other collateral* Unsecured Unsecured corporate Unsecured private Corporate real-estate Private real-estate Guarantees Total** • Baltic Banking loan portfolio is adequately secured. • Private mortgage portfolio is fully covered with family houses and apartments (as a rule owner occupied). • Commercial real estate collaterals are revaluated at least once per year. Valuation is performed by independent experts. • Full asset pledge, including tangible assets and current assets, is most common case for Corporate portfolio. Collateral position enhancement with owner guarantees and additional collateral is used for more risky customers and SME segments. • The share of unsecured loans is insignificant: 5.4% (used for top ratings in corporate segment and consumer products in private). Baltic Collateral (EURm) *Other collateral is deposits, customer payments, vehicles, etc ** Total loans including repos

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