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Roadshow, Jan Lilja, Head of Group Treasury

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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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  • 1. Swedbank September 2008 Jan Lilja Head of Group Treasury
  • 2. Swedbank Group today Home markets, universal banking Potential home markets Russia - Banking and leasing in Sweden Moscow, Kaliningrad and St Petersburg Estonia Ukraine – OJSC Swedbank, universal banking Latvia Other markets, niche banking Lithuania Denmark – 2 Swedbank branches Finland - Swedbank branch Norway - Swedbank branch, investment banking through First Securities (51%), EnterCard (50 % owned) USA - Merchant/investment banking in New York Luxembourg - banking for Swedish expatriates China - Swedbank branch in Shanghai Japan - Rep. office in Tokyo Spain - Rep. office in Marbella (2)
  • 3. Geographical reach June 30, 2008 Russia Sweden Population 142.1 m Population 9.2 m Private customers 2,800 Employees 8,635 Corporate customers 600 Private customers 4.1 m Employees 474 of which Internet customers 2.4 m Corporate customers 282,000 Branches 3 of which Internet customers 223,000 ATMs 9 Organizations 117,000 Branches 436 Lithuania ATMs 863 Population 3.4 m Cards 3.6 m Employees 3,237 Private customers 3.0 m Estonia of which Internet customers 1.0 m Population 1.3 m Corporate customers 80,000 Employees 3,346 Branches 123 Private customers 1.2 m of which Internet customers 0.9 m ATMs 395 Corporate customers 91,000 Cards 1.4 m Branches 87 ATMs 560 Ukraine Cards 1.2 m Population 46.2 m Employees 3,481 Latvia Privates customers 0.2 m Population 2.3 m Corporate customers 21,000 Employees 2,659 Branches 190 Private customers 0.9 m ATMs 164 of which Internet customers 0.7 m Corporate customers 57,000 Cards 0.4 m Branches 74 ATMs 332 (3) Cards 0.9 m
  • 4. Stable platform in Sweden acts as engine for growth Sweden Baltics Ukraine and Russia Swedbank is the leading bank in Swedbank is the leading bank in Swedbank has a small but Sweden. Profitability is high and all Baltic countries. Continued growing presence in Ukraine and stable, risk is low and the bank is convergence means excellent Russia. In the long-term, a consolidating its market shares in long-term growth for the Baltic significant share of Swedbank’s important segments in both the region. In the short-term we will growth will be generated in these private and corporate sectors. closely manage risk and growth. markets. Growth and Future growth and Stable base experience profitability Share of lending: 80 % Share of lending: 16 % Share of lending: 2 % (4)
  • 5. Swedbank, group overview Shared Asset Swedish Baltic International Swedbank Services Management Banking Banking Banking Markets & Group & Insurance Staffs 60% 52% Share of Group net profit 2007 50% 40% 32% 30% 20% 8% 8% 10% 2% 0% -10% -2% (5)
  • 6. Market shares Market shares, Sweden Market shares, Estonia, Latvia, Lithuania % 35 % 70 30 60 25 50 20 40 15 30 10 20 10 5 0 0 Lending, Mortgage, Deposits, Lending Mortgage Deposits corporate private private Private Corporate Estonia Latvia Lithuania In Sweden, Swedbank is the market leader In Baltics, the bank is the market leader in in retail mortgages, retail deposits, mutual Estonia and Latvia, with also very strong funds and card payments positions in Lithuania (6)
  • 7. Continued solid results • Continued solid results in all • Credit quality remains good and in business areas line with expectations – Net profit for the period Jan-Jun • The macro environment in the increased by 8 percent to Baltic states has deteriorated SEK 6 504m (6 022) compared with expectations in • Conversion to covered bonds on Q1, affected by a weaker 21 April – decreased spreads, European economy increased liquidity and facilitated • Net gains and losses on financial funding items were positively affected by • New capital adequacy objective unrealized valuation effects – for full Basel 2 – Tier 1 capital valuation volatility expected to ratio is to be 8.5-9.0 percent decrease as from Q3 2008. (7)
  • 8. Accounting and valuation effects Q2 Q1 Q4 Accounting and valuation effects, SEKm 2008 2008 2007 Swedbank Markets 0 – 187 – 40 Group Treasury, intra-group lending 419 – 253 20 Swedbank Mortgage 29 – 22 66 Group Treasury, liquidity portfolio –4 53 –5 (8)
  • 9. H1 2008 – best half-year so far Swedish Banking Baltic Banking International Banking Swedbank Markets SEKm SEKm SEKm SEKm 450 2,400 2,000 400 100 2,200 350 300 1,500 2,000 75 250 200 1,800 1,000 50 150 1,600 100 50 500 1,400 25 0 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 07 07 07 07 08 08 07 07 07 07 08 08 07 07 07 07 08 08 06 06 06 07 07 07 07 08 08 Profit for the period Profit for the period Profit for the period of which First Securities Profit for the period (9)
  • 10. Credit quality, Group SEKm % 600 0.60 500 0.50 Loan losses, net 400 0.40 300 0.30 Loan loss ratio 200 0.20 *Loan losses, net = write-offs + 100 0.10 provisions - recoveries + change in 0 0.00 property taken over -100 -0.10 Q2-07 Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q3-07 Q4-07 Q1-08 Q2-08 Q4-03 Q1-04 Q2-04 Q3-04 Q4-04 Q1-03 Q2-03 Q3-03 -200 -0.20 SEKm % 6,000 0.50 0.45 5,000 0.40 Impaired loans 4,000 0.35 0.30 3,000 0.25 Share of impaired loans 0.20 2,000 0.15 1,000 0.10 0.05 0 Q4-07 0.00 Q1-08 Q2-08 Q3-07 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-03 Q4-03 Q1-04 Q2-04 Q3-04 Q4-04 Q1-05 Q2-05 (10)
  • 11. Swedish Banking SEKm C/I-ratio • Continued strong corporate lending growth 5,000 0.7 • Mortgage lending growth has started to decline 4,500 0.6 • Overall stable lending margins 4,000 – Back book mortgage margin stabilizing. 3,500 0.5 New lending shows increasing margin 3,000 – Corporate margins are increasing 0.4 slowly 2,500 0.3 • Deposit margins decreased as a result 2,000 of mix effects 1,500 0.2 • Continued increase in card volumes 1,000 • Capital gain of SEK 101m from sale of 0.1 500 MasterCard shares 0 0.0 • Continued strong credit quality Q1 Q2 Q3 Q4 Q1 Q2 – Stable low LTV ratio at 43% in 07 07 07 07 08 08 Swedbank Mortgage – Only 1.5% of the lending in Swedbank Mortgage has a LTV ratio over 75%. Income Costs C/I-ratio (11)
  • 12. A slowing Swedish economy • The Swedish economy has performed better than the EU average. However, GDP growth, CPI and other indicators show that the Swedish economy will grow more slowly in the next few quarters • Higher inflation, rising interest rates and weaker disposable income for households are expected to lead to weakening household consumption and credit growth. Real GDP growth CPI growth 3.0% 4.0% 2.5% 3.0% 2.0% 2.0% 1.5% 1.0% 1.0% 2007 2008F 2009F 0.0% 2007 2008F 2009F Sweden Euro-zone Sweden Euro-zone (12) Source: Swedbank, Economic Secretariat
  • 13. Baltic Banking Operations SEKm C/I-ratio • Strong and stable income 2,400 0.5 • Lending margins decreased as a 2,200 2,000 result of higher funding costs 0.4 1,800 • Deposit margins affected 1,600 1,400 0.3 negatively by decreasing local 1,200 interest rates and increased 1,000 0.2 competition 800 600 • Capital gain of SEK 66m from the 0.1 400 sale of PKK 200 0 0.0 • Profit based staff costs have been Q1 Q2 Q3 Q4 Q1 Q2 reduced by SEK 185m owing to 07 07 07 07 08 08 lower provision requirements. Income Costs C/I-ratio C/I-ratio excluding one-offs (13)
  • 14. Baltic macro development weaker than expected • Economic slowdown in Estonia continues: GDP growth will slow to about 2% in 2008 and recover to 4% in 2009 if global economic developments improve and price growth slows • In Latvia growth will slow to about 1.3% in 2008 and 2009, the bottom of the cycle is expected to be in winter 2008/2009 • The slowdown in Lithuania is expected to be modest: growth of about 6.5% is expected in 2008 and about 5.5% in 2009 • Export growth remains relatively strong, while weak domestic demand dampens imports. Trade and current account deficits are falling. The CPI has started to show signs of a slowdown, but external risks are high (oil, food). 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 (14) Source: Hansabank Markets
  • 15. Baltic banking overdues vs market Estonia - overdue over 30 days / current Estonia - overdue over 60 days / current portfolio portfolio 3.0% 2.0% 2.5% 2.0% 1.5% 1.5% 1.0% 1.0% 0.5% 0.5% 0.0% 0.0% 31.12.05 30.06.06 31.12.06 30.06.07 31.12.07 30.04.08 31.12.05 30.06.06 31.12.06 30.06.07 31.12.07 30.04.08 Rest of the market HB Bank Rest of the market HB Bank Latvia - overdue over 30 days / current portfolio Latvia - overdue over 90 days / current portfolio 5% 3,0% 4% 2,5% 3% 2,0% 2% 1,5% 1% 1,0% 0% 0,5% 0,0% 31.12.04 30.06.05 31.12.05 30.06.06 31.12.06 30.06.07 31.12.07 31.12.04 30.06.05 31.12.05 30.06.06 31.12.06 30.06.07 31.12.07 Rest of the market HBA Bank Rest of the market HBA Bank (15) Source: Swedbank, Bank of Estonia, and Financial and Capital Market Commission (Latvia)
  • 16. Credit quality, Baltic Banking Loan loss ratio, net* Q4 07 Q1 08 Q2 08 H1 08 Estonia 0.58% 0.38% 0.55% 0.48% Latvia 0.63% 0.53% 0.73% 0.64% Lithuania 0.10% 0.25% 0.30% 0.28% Group level provision adjustment -0.18% Baltic Banking 0.28% 0.39% 0.54% 0.47% *Loan loss ratio, net = (changes in provisions + net write-offs) / credit portfolio at the beginning of the period Overdue ratio (more than 60 days)* Q4 07 Q1 08 Q2 08 Corporate 0.65% 0.79% 1.24% Private 0.75% 0.92% 1.11% Baltic Banking 0.71% 0.86% 1.20% *Overdue ratio (more than 60 days) = volume of loans more than 60 days overdue /12 month-old credit portfolio (16)
  • 17. International Banking • Annika Wijkström new head of SEKm International Banking • Strong net interest income development 100 • Continued strong economic growth in Ukraine and Russia but with high inflation 75 • Ukrainian Banking operations – Continued high lending growth – Higher costs due to operational excellence 50 projects and profit-based staff costs • Russian Banking – Ownership transferred from Hansabank to 25 Swedbank – Raimo Valo new CEO 0 – Recovered tax on lease assets of SEK 19m Q1 Q2 Q3 Q4 Q1 Q2 • Strong lending growth in the Nordic 07 07 07 07 08 08 branches. International Banking, profit for the period of which Russian Banking of which Ukrainian Banking Operations (17)
  • 18. Swedbank Markets SEKm 450 • Magnus Geeber new head of 400 Swedbank Markets 350 • Good development in fixed 300 income and FX trading despite 250 difficult conditions at times 200 • Stable market share in equity 150 trading and structured products 100 but lower market activity 50 0 • Increased activity in Project and Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Corporate Finance compared with 06 06 06 07 07 07 07 08 08 Q1 of which First Securities • Good performance in First Profit for the period attributable to shareholders of Swedbank Securities after a slow start to the year. (18)
  • 19. Prof it for the period, SEKm Earnings per share, SEK Return on equity, % Tier 1 capital rat io, % 4 000 8.0 25.0 10.0 3 500 7.0 9.0 20.0 8.0 3 000 6.0 7.0 2 500 5.0 15.0 6.0 2 000 4.0 5.0 1500 3.0 10.0 4.0 3.0 1000 2.0 5.0 2.0 500 1.0 1.0 0 0.0 0.0 0.0 Q2- Q3- Q4- Q1- Q2- Q2- Q3- Q4- Q1- Q2- Q2- Q3- Q4- Q1- Q2- Q2- Q3- Q4- Q1- Q2- 2007 2007 2007 2008 2008 2007 2007 2007 2008 2008 2007 2007 2007 2008 2008 2007 2007 2007 2008 2008 (19)
  • 20. Income statement, Group Q2 Q1 Q2 SEKm 2008 2008 % 2007 % Net interest income 5,295 5,241 1 4,591 15 Net commission income 2,374 2,180 9 2,552 –7 Net gains/losses on financial items at fair value 1,141 75 579 97 Other income 623 950 – 34 504 24 Total income 9,433 8,446 12 8,226 15 Staff costs 2,268 2,311 –2 2,016 13 Profit-based staff costs 185 268 – 31 409 – 55 Other expenses 1,977 1,861 6 1,699 16 Total expenses 4,430 4,440 –0 4,124 7 Profit before loan losses 5,003 4,006 25 4,102 22 Loan losses, net 423 288 47 102 Operating profit 4,580 3,718 23 4,000 15 Tax 935 805 16 856 9 Profit for the period 3,645 2,913 25 3,144 16 Attributable to shareholders of Swedbank 3,604 2,900 24 3,112 16 (20)
  • 21. 4,600 4,800 5,000 5,200 5,400 5,600 Net interest income SEKm Q1-08 5,241 Swedish Banking 11 Baltic Banking Operations 44 Baltic Banking 1 Investment International 72 Banking Swedbank 187 Markets Asset management and 2 Net interest income Q2-08 (Q1-08) Insurance Shared Services and other 151 Net interest income Q2-08 5,295 (21)
  • 22. Swedish Banking, change in net interest income Q2 2008 Q2 2008 SEKm vs Q1 2008 vs Q2 2007 Net interest income Q1 2008 2,982 Net interest income Q2 2007 2,905 Changes: Higher lending volumes 54 227 Unchanged lending margins 0.0 Decreased lending margins – 244 Higher deposit volumes 34 140 Decreased deposit margins – 44 Higher deposit margins 79 Other changes – 55 – 136 Total change – 11 66 Net interest income Q2 2008 2,971 2,971 (22)
  • 23. Baltic Banking, change in net interest income Q2 2008 Q2 2008 SEKm vs Q1 2008 vs Q2 2007 Net interest income Q1 2008 1,575 Net interest income Q2 2007 1,377 Changes: Higher lending volumes 33 214 Decreased lending margins -92 -108 FX-effects, lending -5 11 Higher deposit volumes 14 78 Decreased deposit margins -76 -127 FX-effects, deposits -3 8 Other changes 85 78 Total change – 44 154 Net interest income Q2 2008 1,531 1,531 (23)
  • 24. Net commission income, Group Q2 Q1 Q2 SEKm 2008 2008 % 2007 % Payments 839 793 6 743 13 Lending 199 136 46 178 12 Brokerage 188 213 – 12 242 – 22 Asset management 945 950 –1 1,126 – 16 Insurance 71 68 5 80 – 11 Corporate finance 177 19 172 3 Other – 45 1 11 Total net commissions 2,374 2,180 9 2,552 –7 (24)
  • 25. Expenses Q2 Q1 Q2 SEKm 2008 2008 % 2007 % Swedish Banking 2,239 2,255 – 1 2,330 –4 Baltic Banking 795 899 – 12 851 –7 International Banking 349 309 13 113 of which Ukrainian Banking 197 150 31 Swedbank Markets 585 456 28 499 17 Asset Management & Insurance 206 253 – 19 239 – 14 Other 256 268 – 4 92 Total expenses 4,430 4,440 – 0 4,124 7 of which staff costs in: Swedish Banking 1,017 1,099 – 7 1,084 –6 Baltic Banking 343* 522 – 34 495 – 31 International Banking 177 157 13 64 Swedbank Markets 390 258 51 318 23 Asset Management & Insurance 98 110 – 11 102 –4 (25) * Baltic Banking profit based staff costs have been reduced by SEK 185m owing to lower provision requirements.
  • 26. Business areas Swedish Baltic International Swedbank Asset Q2 08 vs Q2 07 Banking Banking Banking Markets Mgmt SEKm Q2 08 % Q2 08 % Q2 08 % Q2 08 % Q2 08 % Net interest income 2,971 2 1,531 11 441 476 61 27 13 Net commission income 1,057 -5 478 0 55 38 352 –8 432 – 15 Other income 425 12 405 18 132 138 – 29 68 33 Total income 4,453 1 2,414 10 628 966 11 527 – 10 Staff costs 1,017 – 6 343 – 31 177 390 23 98 – 4 Other expenses 1,222 – 2 452 27 172 198 8 108 – 21 Total expenses 2,239 – 4 795 – 7 349 585 17 206 – 14 Profit before loan losses 2,214 7 1,619 20 279 381 2 321 –7 Loan losses 85 245 93 0 0 Operating profit 2,129 4 1,374 8 186 381 3 321 -7 Net shareholders' profit 1,601 8 1,272 10 147 235 0 244 –6 Return on allocated equity, % 22.1 34.8 7.8 23.3 44.7 (26)
  • 27. Key figures Jan-Jun Jan-Jun 2008 2007 Return on equity, % 18.7 19.5 Earnings per share, SEK 12.62 11.68 Equity per share, SEK 135.81 120.23 C/I ratio before loan losses 0.50 0.50 Loan loss ratio, net, % 0.12 0.03 Share of impaired loans, % 0.20 0.08 Tier 1 capital ratio, new rules, % 8.8 9.0 Tier 1 capital ratio, transition rules, % 6.7 6.7 Capital adequacy ratio, new rules, % 12.6 13.4 (27)
  • 28. Swedbank lending and funding Lending to the public, SEK 1,169bn Russia Ukraine 1% 1% Nordic; 3% Lithuania 5% Latvia Swedbank 5% Swedbank Group, excl. Estonia 7% Mortgage Swedbank Swedbank SEK 573bn Mortgage Mortgage 49% - Exclusively Swedish SEK 596bn mortgage lending Sweden 30% Distribution of Net Funding Need Swedbank Treasury (excluding Mortgage) Swedbank Mortgage Funding Equity 12% 5% Commercial • Large deposits Papers Swedbank Mortgage Equity • Liquidity reserves 8% 22% constitutes a larger part of Swedbank Group’s balance • Net lender in the interbank market sheet than other financial • Liquidity limits – conservative view institutions Covered Bonds (28) Deposits 73% 80%
  • 29. New capital adequacy target – mid-term • New target: The capital ratios will at least meet the level that at any given time is considered appropriate to maintain sustainable financial stability and develop operations. Considering full effect of Basel 2, the Tier 1 capital ratio is to be 8.5-9.0%. • Swedbank is currently well capitalized given the current risk profile and the risk development under an adverse scenario • Swedbank is currently capitalized in line with European peers in full Basel 2 • In relative terms Swedbank has a low risk business model with a predominance of Swedish mortgage business and low counterparty risks, which indicates a lower than average Tier 1 capital ratio. Growing presence in Eastern Europe indicates higher Tier 1 capital ratio (29)