Presentation of Swedbank's Q3 2013 Results from the Press Conference

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Presentation of Swedbank's Q3 2013 Results from the Press Conference

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Presentation of Swedbank's Q3 2013 Results from the Press Conference

  1. 1. Swedbank’s third quarter 2013 results Michael Wolf, CEO Göran Bronner, CFO Anders Karlsson, CRO © Swedbank
  2. 2. Retail Stable results SEKm Q3 12 Q2 13 Q3 13 ▲ Q/Q ▲ Y/Y Net interest income 3 405 3 367 3 473 106 68 Net commissions 1 532 1 536 1 550 14 18 Total income 5 413 5 312 5 491 179 78 Total expenses 2 477 2 398 2 389 -9 -88 Profit before impairments 2 936 2 914 3 102 188 166 72 37 106 69 34 ROE, % 25.5 28.1 28.1 C/I ratio 0.46 0.45 0.44 • Stable NII Impairments – – – – Loan growth Stable back book margins Improved funding cost Improved deposit margins • Stronger loan growth in Stockholm • Solid asset quality 2
  3. 3. Large Corporates & Institutions Robust customer activity Q3 12 Q2 13 Q3 13 ▲ Q/Q ▲ Y/Y Net interest income 768 851 864 13 Net commissions 416 523 467 -56 51 1 655 1 926 1755 -171 100 662 730 660 -70 -2 65 104 99 -5 34 Profit before impairments 928 1 092 996 -96 68 Impairments -38 150 7 -143 45 ROE, % 14.6 14.5 18.3 C/I ratio 0.44 0.43 • Stable NII 96 0.43 SEKm Total income Expenses excl. variable staff costs Variable staff costs • Slightly weaker trading income • Stable expenses • Solid asset quality 3
  4. 4. Baltic Banking Increasing customer activity Q3 12 Q2 13 Q3 13 ▲ Q/Q ▲ Y/Y Net interest income 753 763 807 44 Net commissions 376 445 446 1 70 1 287 1 378 1453 75 166 Total expenses 556 593 604 11 48 Profit before impairments 731 785 849 118 64 Impairments -13 -41 -146 -105 -133 ROE, % 11.2 13.4 16.6 C/I ratio 0.43 0.43 • Improved NII 54 0.42 SEKm Total income • Recoveries 4
  5. 5. Group results Stable earnings SEKm Q3 12 Q2 13 Q3 13 ▲Q/Q ▲Y/Y Net interest income 5 085 5 409 5 641 232 556 Net commission income 2 375 2 525 2 520 -5 145 687 296 170 -126 -517 Total income 8 971 8 979 9 225 246 3 920 4 126 3 995 -131 75 Profit before impairments 5 051 4 853 5 230 179 377 Credit impairments 36 88 -56 -144 -92 Other impairments 101 372 95 -277 -6 Tax 1 216 913 998 85 -218 Profit from continuing ops. 3 698 3 480 4 193 713 495 – Mortgage loan growth – Treasury – Margins in Baltic Banking and LC&I 254 Total expenses • Improved NII Net gains and losses • Stable commission income • Weaker NGL • Stable expenses • Continued solid asset quality ROE continuing operations, % 15.2 14.1 16.2 C/I ratio 0.44 0.46 0.43 CET 1 ratio, % (Basel 3) 15.4 17.2 18.0 5
  6. 6. Capital Reduced RWA • Mix change Swedbank’s Risk-Weighted Assets development SEKbn 500 • Rating migration Basel 3 487.1 480 Basel 3 459.5 Basel 3 446.0 460 - 4.7 440 420 Basel 2 464.3 Basel 2 455.2 - 3.7 - 0.6 - 1.4 - 1.4 • FX • Market risk 0.0 - 1.9 Basel 2 441.6 400 380 360 6
  7. 7. Asset quality Continued strong asset quality Credit impairments, SEKm Q3 12 Q2 13 Q3 13 72 37 106 Large Corporates & Institutions -38 94 7 Baltic Banking -18 -43 -147 Estonia 2 -36 -38 Latvia 8 18 -70 -28 -25 -39 36 88 • Continued solid asset quality in Sweden -56 Retail Lithuania Swedbank Group • Net recoveries in the Baltic countries 7
  8. 8. Swedbank’s third quarter 2013 results Q&A
  9. 9. Appendix
  10. 10. Swedish customer satisfaction index (SKI) Average rating 80 78 76 74 72 Industry average 70 68 Swedbank 66 64 62 60 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: SKI/EPSI 10
  11. 11. Swedish housing market Regulatory initiatives targeting the mortgage market Swedbank´s equity doubled • LTV cap of 85% • Amortisation Total equity, SEKbn 120 100 • Risk-weight floor of 15% on mortgage loans 80 60 40 • Capital and liquidity requirements 20 0 2005 Q3 2013 – High minimum regulatory requirements (including SiFi buffer) – Countercyclical buffer? – Leverage ratio? Source: Swedbank 11
  12. 12. Swedish housing market Shortage of housing Number of apartments 70 000 Housing completions Apartment buildings Population and housing growth Single-family dwellings 1 200 Number of homes / persons, thousands 80 000 60 000 50 000 40 000 30 000 20 000 Acc increase in population Acc increase in housing completions 1 000 800 600 400 200 10 000 0 0 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 90 92 94 96 98 00 02 04 06 08 10 12 Source: Sweden statistics and Swedbank 12
  13. 13. Loans past due 60 days – performance Q/Q EURm Estonia Lithuania Latvia 50 0 -50 -100 -150 -200 Q3-13 Q2-13 Q1-13 Q4-12 Q3-12 Q3-13 Q2-13 Q1-13 Q4-12 Q3-12 Q3-13 Q2-13 Q1-13 Q4-12 Q3-12 -250 13
  14. 14. Provisions – well provided for SEKm 20 000 Provision ratio, % 15 000 64% 65% 62% 57% 54% 53% 2 040 10 000 10 951 Retail LC&I Baltic Banking Group Q3-13 63 43 52 53 1 774 9 934 1 545 7 077 1 420 1 398 4 429 5 000 4 047 Q1-13 * Q2-13 * 1 325 3 570 0 Q2-12 Q3-12 Individual provisions Q4-12 Portf olio provisions Q3-13* Provision ratio * Russia and Ukraine reported as discontinued operations 14
  15. 15. Credit portfolio - Retail Corporate portfolio drives capital efficiency Total portfolio SEK 222bn 4.5 92 Construction 4.4 82 8.9 88 2.0 85 Shipping 0.1 95 Hotels and restaurants 3.1 91 Information & communication Other 74 Transportation Swedbank Finans AB 8.5 Retail Swedbank Mortgage AB 81 Public sector and utilities 23 6.1 Manufacturing 94 Secured (%) Agriculture 105 Volume (SEKbn) 0.8 46 Finance and insurance 1.4 66 Property management 52.1 97 Professional service 6.8 65 Other 5.8 72 Total 104.7 87 Segments excl. Swedbank Mortgage and Swedbank Finance 15
  16. 16. Credit portfolio Agriculture • Private: Residential 20% Segment definitions – – Corporate agriculture: Businesses that derive their main income from agricultural activities Private investments: Private individuals who own the agricultural properties for living or investment purposes Agriculture 45% • Private: Forestry 22% Lending exposure to the agriculture industry SEK 64.3bn – Forestry 13% – Corporate agriculture: (58%) • Agriculture 45% • Forestry 13% Private investments (42%) • Residential: 20% • Forestry: 22% 16
  17. 17. Credit portfolio – Large Corporates & Institutions Shipping and offshore -2.4% 30 • Shipping and offshore SEKbn Lending exposure to Shipping & Offshore sector SEK 24.5bn. Decrease over the quarter mainly due to FX – Portfolio duration 4-5y – Average fleet age 7y – Strong employment profiles 25 -7.2% 26 24 23 25 4 20 5 10 15 0 Q3-12 Q2-13 Tanker Q3-13 Other Shipping and offshore portfolio by currency JPY Q3-13 Q2-13 NOK USD EUR 7.1 Drilling & exploration Cruise Q1-13 Offshore Shipping and offshore portfolio by subsegment 2.0 RORO 1.0 Container 0.7 Dry bulk 2.0 Gas (LNG/LPG) Q3-13 0.5 Crude oil 2.0 Product Q2-13 0.7 Chemical 1.7 Floating production 1.2 Accommodation 3.9 Supply 1.2 Oil service Q4-12 SEK 0.5 0 2 4 6 8 0 5 10 15 20 25 17
  18. 18. Liquidity and funding Core balance sheet* structure Assets Liabilities SEKbn 1 400 SEKbn 1 400 1 200 Suppl. cap CET1 Government guaranteed debt Senior 1 200 Estonia CEE lending 1 000 Other corporate lending, Sweden & other Nordic countries 800 Other private, Sweden 1 000 Deposits 800 600 600 Swedish mortgage loans 400 400 Covered bonds 200 200 0 0 Q3 2013 Q3 2013 Q3 2013 Q3 2013 * Simplified balance sheet Source: Swedbank Sep 2013 18
  19. 19. Liquidity and funding Senior unsecured debt strategy • Limited need given Swedbank’s balance sheet structure • Secure OC • Fund liquidity reserves House price sensitivity of the cover pool Senior unsecured debt maturity profile 50% Senior unsecured debt SEKbn 60 Over-collateralisation 40% 40 OC, Q313 30% 20% 10% 20 0% -10% 0 2013 2014 2015 2016 2017 2018 2019- 0% -5% -10% -15% -20% -25% -30% -35% -40% -45% -50% House price drop Source: Swedbank Sep 2013, nominal amounts 19
  20. 20. Liquidity and funding Lower funding needs • LCR 147% (Swedish FSA definition FFFS 2012:6) • NSFR 91% • Issued SEK 89bn of term-funding YTD of which SEK 20bn in Q3 Term funding issuance – completed and planned SEKbn 120 Covered bonds Senior unsecured 100 80 60 40 20 0 Source: Swedbank, 30 Sep 2013, nominal amounts 20
  21. 21. Liquidity and funding Long-term funding maturity profile • Term funding plan for the next 12 months of SEK 120bn to meet maturities of SEK 98bn Long-term funding maturity profile SEKbn 200 Government guaranteed debt Senior unsecured debt Covered bonds 150 100 50 0 2013 2014 2015 2016 2017 2018 2019- Source: Swedbank 30 Sep 2013 21
  22. 22. Liquidity and funding Liquidity reserve According to the template defined by the Swedish Bankers' Association SEKm Cash and holdings in central banks Deposits in other banks available overnight Securities issued or guaranteed by sovereigns, central banks or multilateral development banks Securities issued or guaranteed by municipalities or public sector entities Covered bonds - Issued by other institutions - Own issued Securities issued by non-financial corporates Securities issued by financial corporates (excl. covered bonds) Other 132 001 443 46 642 Total1 235 570 Additional liquid assets, Group2, 3 1 54 170 54 170 2 314 39 437 96% of the securities in the liquidity reserve per Q3 2013 are rated AAA 81% of the additional liquid assets fulfill the Liquidity Reserve definition by the Swedish Bankers’ Association except from that they are held outside the Treasury department. 3 78% of the additional assets are rated AAA 2 Source: Swedbank Fact book, Sep 30, 2013 22
  23. 23. Liquidity and funding Prefunded in excess of 12 months SEKbn 250 200 150 100 50 0 0 20 40 60 80 100 120 140 160 180 200 220 240 260 280 300 320 340 360 Days forward SEKbn 400 400 350 350 Additional pledgeable 300 and/or liquid assets 300 250 250 Liquidity reserve,1 200 securities 200 1 150 Liquidity reserve, central bank deposits, 100 SEKm 150 100 50 50 0 Next 12-month term funding maturities CP / CDs and net interbank funding, SEKm 0 Source: Swedbank Jun 30, 2013 1 As defined by the Swedish Bankers’ Association 23
  24. 24. Liquidity and funding Limited need for USD funding • USD funding need covered for more than 12 months • Issued USD 1bn of covered bonds (144a) and USD 1bn of senior (144a) YTD 2013 SEKbn 250 Assets held for sale 200 Interest-bearing securities Lending to the public 150 Loans to credit institutions Cash and balances with central banks 100 Deposits and borrowings from the public 50 Amounts owed to credit institutions Debt securities in issue 0 Assets Liabilities Source: Swedbank Fact book, 30 Sep 2013 24
  25. 25. Liquidity and funding Asset encumbrance Encum bered assets - distribution by type of liability (row ) and asset (colum n) Central banks Debt and instruments Securities Government supranational issued by issued by debt debt Covered credit corporate and SEKm instruments instruments bonds institutions other issuers Central bank funding Intraday settlement Repurchase agreements 1) Derivative 2) Covered bonds 3) Other 4) Total 2 444 24 092 647 ABS Mortgage loans 8 971 11 986 1 322 Cash 10 136 509 350 27 183 22 279 700 700 288 509 350 10 424 Financial assets pledged for insurance policy holders 33 444 21 254 70 426 12 668 8 447 ABS Mortgage loans Cash 926 7 856 12 183 85 20 124 21 254 1) Repoed securities. 2) Collateral posted under CSA agreements, gross (3-year, SEKm, High: 21 572, Low : 10 086, Average: 13 453). 3) Of w hich accrued interest of encumbered assets in the cover pool, SEK 2 173m as of 30 September 2013. 4) Collateral pledged in securities lending activities and w ith exchanges. 5) Reversed repos are included. 70 426 12 668 8 447 926 221 992 Total of w hich received collateral (offbalance) 147 165 221 992 221 992 33 444 11 415 36 078 12 105 509 350 988 569 936 114 256 Unencum bered assets - additional assets available for secured funding Central banks Debt and instruments Securities Government supranational issued by issued by debt debt Covered credit corporate and SEKm instruments instruments bonds institutions other issuers Securities 5, 6) Cover pool over collateralisation 7) Cover pool eligible assets 8) Total Total of w hich received collateral (offbalance) 0 23 997 369 157 23 997 6) All type of securities, including securities non pledgeable at central banks, of w hich 82% are rated AAA, 2% are rated below A- and 7% are not rated. 7) Of w hich accrued interest of assets in the cover pool overcollateralisation, SEK 960m as of 30 September 2013. 8) Securities received as collateral in for example reversed repo transactions that; either have (encumbered) or have not (unencumbered), been used as collateral by Sw edbank. Source: Swedbank Facts Q3 2013 25
  26. 26. Swedish housing and mortgage market Swedish mortgage market • No securitisation (on balance sheet), no sub-prime market, no 3rd party origination, insignificant buy-to-let market • 70% home ownership1 • Rental market is regulated • Transparent credit information (credit information agency, www.uc.se) – Publicly available information regarding income, debt, payment track record etc • Consumer credit legislation requires affordability calculations including stress test of higher interest rate • Very limited debt forgiveness possibilities (full recourse) • Strong social security and generous unemployment benefit system 1 Source: Boverket, 2011 26
  27. 27. Swedish housing and mortgage market Real estate price performance – Sweden 12 months Single-family homes1 12M Δ Tenant-owner rights2 12M Δ Combined3 12M Δ Oct-12 6% 3% Nov-12 3% 7% 4% Dec-12 4% 7% 6% Jan-13 3% 7% 5% Feb-13 4% 7% 5% Mar-13 3% 7% 5% Apr-13 2% 8% 4% May-13 4% 8% 5% Jun-13 4% 10% 6% Jul-13 4% 9% 6% Aug-13 5% 11% 7% Sep-13 1 1% 5% 11% 7% HOXHOUSESWE, 2 HOXFLATSWE, 3 HOXSWE Source: Valuegard www.valuegard.se (Based on data from Mäklarstatistik), 27
  28. 28. Real estate prices Baltic countries EURm Riga EURm Tallinn Nr.of deals EUR/m2 Source: Swedbank, Estonian Land Board Jul-13 Jan-13 Jul-12 Jan-12 Jul-11 Jan-11 Jul-10 Jan-10 Jul-09 Jan-09 Jul-08 Jan-11 Jan-10 Jan-09 Jan-08 Jan-05 Nr.of deals Jan-08 0 Jul-07 0 Jan-07 200 Jul-06 200 Jan-06 400 Jul-05 400 Jan-05 600 Jul-13 600 Jan-13 800 Jul-12 800 Jan-12 1 000 Jul-11 1000 Jul-10 1 200 Jul-09 1200 Jul-08 1 400 Jul-07 1400 Jan-07 1 600 Jul-06 1600 Jan-06 1 800 Jul-05 1800 EUR/m2 Source: Land book database Vilnius EURm 1 800 1 600 1 400 1 200 1 000 800 600 400 200 Nr.of deals Jan-13 Jul-12 Jan-12 Jul-11 Jan-11 Jul-10 Jan-10 Jul-09 Jan-09 Jul-08 Jan-08 Jul-07 Jan-07 Jul-06 Jan-06 Jul-05 Jan-05 0 EUR/m2 Source: Swedbank. State Enterprise Centre of Registers 28
  29. 29. Mortgage loans, gross margin (3 months) % 6 5 4 Net margin 3 The gross margin covers: Cost of liquidity ~0.2% Administrative costs ~0.3% Credit impairments ~ 0.03% Tax (22 % on profit before tax) 2 1 0 2003 2004 Gross margin 2005 2006 2007 Swedbank's funding cost 2008 2009 Stibor 3 months 2010 2011 2012 2013 Swedish Riksbank's repo rate 29

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