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CEO presentation Q3 analyst call

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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 Q3 analyst call CEO presentation Q3 analyst call Presentation Transcript

    • Swedbank’s third S db k’ thi d quarter 2010 results t lt 21 October 2010 Michael Wolf, CEO Erkki Raasuke, CFO Göran B Gö Bronner, CRO
    • Continued financial improvement p • Net profit of SEK 2.6bn in Q3 • Baltic Banking net profit in Q3 of SEK 531m • Improved NII and stable net commission income Net p o t performance et profit pe o a ce Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 2
    • Result by business area Business highlights g g SEKm Profit before impairments 2 000 Retail Q2 10 Q3 10 • Increased NII and seasonally lower costs 1 000 • Increased market share in new mortgage lending 0 • New in-principle framework agreement with savings banks -1 000 Retail Large Baltic Russia & Asset Ektornet Corporates & Banking Ukraine Management Large Corporates & Institutions Institutions • Slow trading activity SEKm Operating result 2 000 • Stable corporate lending volumes Q2 10 Q3 10 1 000 Baltic Banking • NII supported by lower domestic rates 0 • Deleveraging in Baltic Banking continues • Decreasing credit impairment trend -1 000 Retail Large Baltic Russia & Asset Ektornet Corporates & Banking Ukraine Management Institutions 3
    • Net interest income Improved NII p • Retail showed increased volumes and improved margins • LC&I lower activity levels • Treasury deficit reduced by funding mismatch effects 5 017 Retail Treasury, 4 702 LC&I Baltic Russia, Banking Ukraine Other 3 980 4 023 102 24 123 146 3 799 45 -113 918 711 2 432 (SEKm) -227 227 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 4
    • Net commission income Stable commission income • Strong card and payment volumes • Lower b k L brokerage and corporate fi d t finance f fees (SEKm) Retail LC&I Baltic Russia, Asset Mgmt, 2 395 Banking Ukraine Other 2 361 2 310 2 208 2 282 -57 -21 -2 4 -9 387 19 386 387 1 131 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 5
    • Net gains/losses on financial items, fair value Supported by valuation effects pp y • Low trading activities • FX losses i Uk i l in Ukraine • Funding related valuation effects in Group Treasury still high (SEKm) 809 Retail LC&I Baltic Banking Russia, , -5 Ukraine Treasury, 647 -49 Other -41 574 -48 92 -92 256 48 223 260 87 35 -25 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 6
    • Expenses Expenses seasonally lower p y SEKm Q3 10 Q2 10 % Staff costs 2 261 2 282 -1 Variable staff costs 19 141 -87 Other expenses 1 958 2 000 -2 Total expenses 4 238 4 423 -4 C/I ratio 0.56 0.57 0.57 0.55 0.54 Retail LC&I Baltic Russia, Staff and 4 526 4 391 4 423 Banking Ukraine other 4 300 4 238 97 -114 -90 90 530 52 -52 26 -26 202 626 690 (SEKm) 2 190 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 7
    • Liquidity & Funding Solid wholesale funding activity continues • YTD term funding of SEK 190bn, of which Outstanding wholesale funding SEK 40bn during the third quarter (nominal SEKbn) • Remaining maturities of SEK 42bn in Q4, Long-term, 459 out of SEK 137bn in total maturities for the non- 456 guaranteed 397 full year 2010 (nominal values) 163 • SEK 159bn of central bank repos and Long-term, 173 guaranteed* guaranteed funding were redeemed during 180 the first nine months of 2010 35 Central bank • Average maturity of all wholesale funding 89 repos 116 of 28 months, 38 months for covered bonds ( (nominal value) ) Short term, Short-term, 112 non- 112 guaranteed** 97 0 Short term, Short-term 0 Q3 2010 guaranteed*** 61 Q2 2010 Q4 2009 * Issued with more than 12 month maturity ** Including interbank deposits *** Issued with less than 12 month maturity 8
    • Third quarter 2010 results Income statement SEKm Q3 10 Q2 10 QoQ % YTD 10 YTD 09 YoY% Income 7 647 7 772 -2 2 23 086 26 800 -14 14 Expenses 4 238 4 423 -4 13 052 13 548 -4 Profit before impairments 3 409 3 349 2 10 034 13 252 -24 Total impairments 173 1 091 3 524 21 040 Operating profit 3 236 2 258 43 6 510 -7 788 Tax expense 638 672 -5 1 779 866 105 Profit attributable to shareholders 2 591 1 567 65 4 694 -8 707 Return on equity, % 11.3 7.0 6.9 -14.1 Cost-income ratio 0.55 0.57 0.57 0.51 Loan-deposit ratio, Loan deposit ratio % 233 229 233 257 Core Tier 1 capital ratio, %* 13.4 12.7 13.4 9.9 Risk-weighted assets * 559.7 579.4 559.7 607.5 * Basel 2 9
    • Asset quality Continues to improve p • Asset quality indicators in the right direction – Impaired loans – 60 days overdue All declining – Restructured loans – Watch list • W ll provided f within existing problem areas Well id d for ithi i ti bl • Positive rating migration in Sweden, stable in the Baltic countries g g , • Significant RWA reduction • Business activity increasing 10
    • Asset quality Volumes • CEE lending decreased partly due to SEK 7.5bn FX effect • Continued relative shift from corporate to private in Sweden SEKbn 1 000 948 955 961 Private 900 Corporate C t 800 700 521 573 566 600 500 400 300 251 200 427 389 388 97 163 150 90 100 77 71 154 43 86 79 47 0 Q4 08 Q2 10 Q3 10 Q4 08 Q2 10 Q3 10 Q3 10 Sweden CEE Excl Estonia 11
    • Asset quality Credit impairments significantly reduced p g y • Sweden small reversals SEKm 7 000 • Baltic B lti countries ti 6 121 6 000 – Credit impairments in Latvia 5 003 5 000 • Recoveries i R R i in Russia and Uk i i d Ukraine 4 000 3 000 2 210 2 000 963 1 000 120 0 -1 000 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Retail LC&I Baltic Banking Russia & Ukraine Other 12
    • Asset quality Provisions • Provision ratio levels maintained SEKm 30 000 64.8% 64 8% 65.9% 65 9% 63.5% 63 5% Provision ratios Q3 10 63.9% 25 000 4 104 Retail 87% 62.9% 4 684 5 135 3 606 LC&I 92% 20 000 6 922 Baltic Banking B lti B ki 61% Russia 58% 15 000 Ukraine 66% 21 889 23 028 10 000 20 882 21 068 Group 64% 15 582 3 953 4 603 5 000 3 311 2 504 958 0 Q3 2009 Q4 2009 Q1 10 Q2 10 Q3 10 Individual provisions Portf olio provisions Write-of f s, gross, cum Provision ratio 13
    • Simplified core balance sheet p • High quality mortgage portfolio – low LTV • Limited impact under severe economic conditions p • Strategy – preserve quality and AAA rating 1 400 SEKbn 1 200 1 000 800 600 400 Swedish mortgage lending 200 0 Assets 14
    • Swedish mortgage lending funded by covered bonds g g g y • High quality mortgage portfolio • Limited impact under severe economic conditions p • Strategy – preserve quality and AAA rating • Government guaranteed funding expected to be replaced largely by covered bonds 1 400 SEKbn 1 200 1 000 800 600 Government guaranteed 400 Swedish mortgage lending 200 Covered bonds 0 Assets Liabilities 15
    • Other Swedish and Nordic lending g • Stress test real estate related – very high resilience • Strategy – Improve risk adjusted return, increased diversification gy p j 1 400 SEKbn 1 200 1 000 Other Swedish and 800 Nordic corporate lending Other Sw. private Sw 600 Government guaranteed 400 Swedish mortgage lending 200 Covered bonds 0 Assets Liabilities 16
    • Other Swedish and Nordic lending funded with deposits g p • Stress test real estate related – very high resilience • Strategy – Improve risk adjusted return, increased diversification gy p j • Funded with large deposit base 1 400 SEKbn 1 200 1 000 Other Swedish and 800 Nordic corporate lending Swedish and Nordic deposits Other Sw private Sw. 600 Government guaranteed 400 Swedish mortgage lending 200 Covered bonds 0 Assets Liabilities 17
    • CEE lending g • CEE lending decreased substantially since end 2008 • ICAAP stress test show significant resilience g • Estonia to adopt the euro – becomes different risk category • Strategy – selective reductions, LTD restriction 1 400 SEKbn 1 200 CEE 1 000 Other Swedish and 800 Nordic corporate lending Swedish and Nordic deposits Other Sw private Sw. 600 Government guaranteed 400 Swedish mortgage lending 200 Covered bonds 0 Assets Liabilities 18
    • Limited need of senior unsecured funding g • Large and stable deposit base • High quality Swedish mortgage p g q y g g portfolio 1 400 SEKbn 1 200 Subordinated debt Equity CEE Senior unsecured 1 000 CEE d deposits it Other Swedish and 800 Nordic corporate lending Swedish and Nordic deposits Other Sw private Sw. 600 Government guaranteed 400 Swedish mortgage lending 200 Covered bonds 0 Assets Liabilities 19
    • Appendix 21
    • Asset quality Impaired loans decreased by SEK 4bn p y • Without FX effect down SEK 1.5bn • Underlying decreases mainly relate to the Baltic countries SEKm Impaired loans as % of gross lending 45 000 42 719 38 631 40 132 40 328 40 000 -4 088 196 2 391 35 770 4 362 8 531 Ukraine 67% 35 000 6 113 29 657 30 000 2 152 Russia 24% 6 971 25 000 Lithuania 17% 20 000 12 907 Latvia 27% 15 000 29 657 10 000 5 134 Estonia 8.1% 5 000 1 123 LC&I 0.3% 0 1 813 Retail 0 2% 0.2% Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q3 10 22
    • 50 -50 0 100 00 150 200 250 -150 -100 50 EURm Q3 09 0 Q4 09 0 Q1 10 p Estonia Q2 10 Q3 10 0 Q3 09 Q4 09 0 Q1 10 Latvia Q2 10 Q3 10 y p 0 Q3 09 Q4 09 0 Q1 10 Lithuania Q2 10 Q3 10 0 Q3 09 Q4 09 0 Q1 10 Russia Loans past due 60 days – performance Q/Q Q2 10 Q3 10 0 Q3 09 Q4 09 0 Q1 10 Ukraine Q2 10 Q3 10 23
    • Asset quality Repossessed assets p SEKm 2 500 2 000 1 500 1 000 500 0 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 10 Real Estate Residential Real Estate Commercial Passenger & Commercial Transport Shares Other 24
    • Real estate prices p Tallinn Riga* 1 800 1 800 1 762 1 800 1 800 1 611 1 500 1 500 1 500 1 500 ns s No of transactions No of transaction 1 200 1 200 1 200 1 200 EUR/m2 EUR/m2 900 822 900 900 900 616 600 600 600 600 300 300 300 300 0 0 0 0 Q4'06 Q2'07 Q4'07 Q2'08 Q4'08 Q2'09 Q4'09 Q2'10 Q4'06 Q2'07 Q4'07 Q2'08 Q4'08 Q2'09 Q4'09 Q2'10 No of deals Average price No of deals Average price Source: S db k E t i L d B d S Swedbank, Estonian Land Board Source: S db k S Swedbank Vilnius* 1 731 1 800 1 800 1 500 1 500 No of transactions 1 200 1 016 1 200 EUR/m2 900 900 E t 600 600 300 300 0 0 Q4'06 Q2'07 Q4'07 Q2'08 Q4'08 Q2'09 Q4'09 Q2'10 No of deals Average p g price Source: Swedbank, State Enterprise Centre of Registers * Data as of August 2010 25
    • Liquidity & Funding Long-term funding g g • SEK 42bn (nominal value) of remaining term funding maturities in Q4 • Continued focus on covered bonds with YTD issuance of SEK 164bn • YTD issued SEK 26bn in senior unsecured and structured funding • Average maturity of wholesale funding of 28 months, covered bonds of 38 months (nominal value) ( i l l ) • SEK 180bn (nominal value) in maturities during 2011 Swedbank, long term maturity profile long-term (including Swedbank Mortgage) SEKbn, nom 100 80 60 40 20 0 - 2016- Q4 10 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 11 Q2 11 Q3 11 Q4 11 26
    • Liquidity & Funding Remaining funding under the Swedish guarantee programme g g g p g • Swedbank exited the guarantee Currency distribution programme on 30 April 2010 EUR 41% • No issuance under the programme as of USD 27% August 2009 g SEK 25% • Outstanding guaranteed funding CHF 5% decreased during the third quarter by SEK 10bn to SEK 163bn (nominal value) value), JPY 2% mainly due to FX effects Maturity distribution 3-4Y 18% 2-3Y 6% 1-2Y 51% < 12 M 25% 27
    • Liquidity & Funding Cover pool and covered bond funding sources p g As per Q3 2010 Total pool size SEK 626bn • AAA/Aaa Rating from S&P and Geographic distribution Sweden 100% Moody’s Average seasoning 56 months Average LTV 1, 2 • Unlimited domestic covered bond – WA LTV on property level 58% programme, through tap system Non-performing loans 3 p g None Types of loans • EUR 25bn EMTN covered bond – Residential mortgages 90.8% programme – Public 2.3% – Commercial 0.1% 0 1% • SEK150bn domestic MTN covered SEK150b d ti d – Forest and Agriculture 6.8% bond programme Fixed /Floating interest loans 4 – Fixed 51% • Unlimited Norwegian covered – Floating 5 49% Average loan size SEK 413 441 bond programme Number of loans outstanding 1 514 910 Dynamic pool y Yes • Registered covered bonds 1 Index valuation as of 31 May 2010 • In addition to public deals, private 2 Maximum LTV: Residential 75%, Commercial 60%, Forest and Agriculture 70% 3 Past due loans > 60 days are not eligible for the cover pool placements are executed through 4 Distribution by origination y g 5 Floating interest loans < 365 days all programmes mentioned above Source: Swedbank 28
    • Swedbank Mortgage total loan portfolio of SEK 687bn • 100% of l di i S d f lending in Sweden • 90% in residential lending • Average LTV of 46% (loan level) 61% (property level*) Cover pool 43% and 58% level*). respectively. SEKbn Loan-to-value* Lending distributed by collateral 110 100 90 Cooperative Commercial 80 apartments properties 15% 0.2% 0 2% 70 Municipalities 2% 60 Multi-family housing 50 15% 40 Forest & 30 Agriculture 7% 20 10 0 <30% >30-40% >40-50% >50-60% >60-70 >70-80% >80-90% >90% Single-family housing Single-family housing Cooperative apartments Multi-family housing (incl housing coop. ass.) Forest & Agriculture 61% *From Q3 2010 the LTV distribution in the graph is changed from ”loan level” to ”property level” 29