London Roadshow
18 July 2008
(2)
Continued solid results
• Continued solid results in all
business areas
– Net profit for the period Jan-Jun
increased ...
(3)
H1 2008 – best half-year so far
0
50
100
150
200
250
300
350
400
450
Q2
06
Q3
06
Q4
06
Q1
07
Q2
07
Q3
07
Q4
07
Q1
08
Q...
(4)
Initiatives in line with our strategy
Ukraine and RussiaBalticsSweden
Stable base
Growth and
experience
Future growth ...
(5)
A slowing Swedish economy
Real GDP growth
1.0%
1.5%
2.0%
2.5%
3.0%
2007 2008F 2009F
Sweden Euro-zone
CPI growth
0.0%
1...
(6)
Baltic macro development weaker than expected
Real GDP growth
0%
2%
4%
6%
8%
10%
12%
14%
2005 2006 2007 2008F 2009F
Es...
(7)
Credit quality, Group
*Loan losses, net = write-offs +
provisions - recoveries + change in
property taken over
Loan lo...
(8)
Baltic banking overdues vs market
Estonia - overdue over 60 days / current
portfolio
0.0%
0.5%
1.0%
1.5%
2.0%
31.12.05...
(9)
Credit quality, Baltic Banking
0.54%
0.30%
0.73%
0.55%
Q2 08
0.39%
0.25%
0.53%
0.38%
Q1 08
0.47%
0.28%
0.64%
0.48%
H1 ...
(10)
Accounting and valuation effects
Accounting and valuation effects, SEKm
Q2
2008
Q1
2008
Q4
2007
Swedbank Markets 0 – ...
(11)
Swedish Banking
• Continued strong corporate lending
growth
• Mortgage lending growth has started
to decline
• Overal...
(12)
Baltic Banking Operations
• Strong and stable income
• Lending margins decreased as a
result of higher funding costs
...
(13)
International Banking
• Annika Wijkström new head of
International Banking
• Strong net interest income development
•...
(14)
Swedbank Markets
• Magnus Geeber new head of
Swedbank Markets
• Good development in fixed
income and FX trading despi...
(15)
Swedbank lending and funding
Swedbank Treasury (excluding Mortgage)
• Large deposits
• Liquidity reserves
• Net lende...
(16)
New capital adequacy target – mid-term
• New target:
The capital ratios will at least meet the level that at any give...
(17)
Profit for the period, SEKm
0
500
1000
1500
2 000
2 500
3 000
3 500
4 000
Q2-
2008
Q1-
2008
Q4-
2007
Q3-
2007
Q2-
200...
(18)
Income statement, Group
SEKm
Q2
2008
Q1
2008 %
Q2
2007 %
Net interest income 5,295 5,241 1 4,591 15
Net commission in...
(19)
Net interest income Q2-08 (Q1-08)
5,241 5,295
151
11 44 1
72
187 2
4,600
4,800
5,000
5,200
5,400
5,600
Netinterestinc...
(20)
Swedish Banking, change in net interest income
SEKm
Q2 2008
vs Q1 2008
Q2 2008
vs Q2 2007
Net interest income Q1 2008...
(21)
Baltic Banking, change in net interest income
SEKm
Q2 2008
vs Q1 2008
Q2 2008
vs Q2 2007
Net interest income Q1 2008 ...
(22)
Net commission income, Group
SEKm
Q2
2008
Q1
2008 %
Q2
2007 %
Payments 839 793 6 743 13
Lending 199 136 46 178 12
Bro...
(23)
Expenses
SEKm
Q2
2008
Q1
2008 %
Q2
2007 %
Swedish Banking 2,239 2,255 – 1 2,330 – 4
Baltic Banking 795 899 – 12 851 –...
(24)
Business areas
Q2 08 vs Q2 07
SEKm Q2 08 % Q2 08 % Q2 08 % Q2 08 % Q2 08 %
Net interest income 2,971 2 1,531 11 441 4...
(25)
Key figures
Jan-Jun
2008
Jan-Jun
2007
Return on equity, % 18.7 19.5
Earnings per share, SEK 12.62 11.68
Equity per sh...
(26)
Continued solid results
• Continued solid results in all
business areas
– Net profit for the period Jan-Jun
increased...
(27)
Appendix
(28)
Exposure FAQ
• No direct US Sub-Prime exposure
– Minimal indirect exposure through investments of EUR 23.4m in bonds ...
(29)
CPI growth
0%
5%
10%
15%
20%
Q1
05
Q2
05
Q3
05
Q4
05
Q1
06
Q2
06
Q3
06
Q4
06
Q1
07
Q2
07
Q3
07
Q4
07
Q1
08
Q2
08
Est ...
(30)
Components of GDP growth - Latvia
-12%
-8%
-4%
0%
4%
8%
12%
16%
20%
24%
2004 2005 2006 2007 Q108
households governmen...
(31)
Current account (% of GDP)
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
Q104
Q204
Q304
Q404
Q105
Q205
Q305
Q405
Q106
Q206
Q306
...
(32)
Estonia
-5
0
5
10
15
20
25
30
35
2005 2006 2007 2008
HICP, %
Energy, %
Food including alcohol and tobacco, %
Core inf...
(33)
0
2
4
6
8
10
12
14
jan-07 feb-07 mar-07 apr-07 maj-07 jun-07 jul-07 aug-07 okt-07 nov-07 dec-07 jan-08 feb-08 mar-08 ...
(34)
Asset quality and provisioning costs
Net loan losses
0%
50%
100%
150%
200%
250%
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08
0...
(35)
Asset quality – overdue more than 60 days
Overdue more than 60-days/12m old
portfolio
0,0%
0,4%
0,8%
1,2%
1,6%
2,0%
1...
(36)
Baltic Banking lending by sectors
580
1 050
1 801
1 803
3 110
8 621
3 181
0 2 000 4 000 6 000 8 000 10 000
Other
Cons...
(37)
Estonian lending by sectors
201
308
513
694
1 158
3 685
1 570
0 1 000 2 000 3 000 4 000
Other
Construction
Transport
...
(38)
Latvian lending by sectors
262
287
653
536
1 052
2 739
838
0 1 000 2 000 3 000 4 000
Other
Construction
Transport
Ind...
(39)
Lithuanian lending by sectors
455
636
573
899
2 197
116
867
0 1 000 2 000 3 000 4 000
Other
Construction
Transport
In...
(40)
Mortgages
• Standard mortgage product allows issue of
new loans with maximum LTV of 85% and
loan-service ratio below ...
(41)
Group lending by sectors – real estate
Portfolio, June 2008
Estonia
22%
6%
26%
25%
15%
6%
3%
16%
43%
5% 9%
9%
15%
Con...
(42)
Real estate portfolio
• As indicated by internal stress-tests
and portfolio analyses, real estate and
in particular r...
(43)
Group lending by sectors – retail & wholesale
Portfolio, June 2008
Estonia
34%
35%
32%
3%
16%
43%
5%
9%
9%
15%
Constr...
(44)
Group lending by sectors – transport
Portfolio, June 2008
Estonia
23%
28%25%
24%
3%
16%
43%
5%
9%
9%
15%
Construction...
(45)
Sectors under close watch
Transportation
Trucking companies are facing problems due to increasing
fuel prices and lag...
(46)
Collateral breakdown
20,167
279
706
985
3,621
668
7,960
6,660
273
2007
100%
2%
4%
6%
18%
2%
38%
35%
1%
%
1%270State
2...
(47)
Regular process of outstanding loan review
• Portfolio quality improvement measures were introduced at the end of 200...
(48)
Credit quality management process
1. Proactive management of watch list clients
– Private clients - communication on ...
Additional questions?
Johannes Rudbeck
Investor relations
johannes.rudbeck@swedbank.se
+46858593322
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Roadshow, London, Jan Liden, CEO and Mikael Inglander, CFO

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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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Roadshow, London, Jan Liden, CEO and Mikael Inglander, CFO

  1. 1. London Roadshow 18 July 2008
  2. 2. (2) Continued solid results • Continued solid results in all business areas – Net profit for the period Jan-Jun increased by 8 percent to SEK 6 504m (6 022) • Conversion to covered bonds on 21 April – decreased spreads, increased liquidity and facilitated funding • New capital adequacy objective for full Basel 2 – Tier 1 capital ratio is to be 8.5-9.0 percent • Credit quality remains good and in line with expectations • The macro environment in the Baltic states has deteriorated compared with expectations in Q1, affected by a weaker European economy • Net gains and losses on financial items were positively affected by unrealized valuation effects – valuation volatility expected to decrease as from Q3 2008.
  3. 3. (3) H1 2008 – best half-year so far 0 50 100 150 200 250 300 350 400 450 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Profit for the period of which First Securities SEKm Swedish Banking Baltic Banking International Banking Swedbank Markets 500 1,000 1,500 2,000 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Profit for the period SEKmSEKm 900 950 1 000 1 050 1 100 1 150 1 200 1 250 1 300 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Profit for the period SEKm 25 50 75 100 125 150 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Profit for the period SEKm
  4. 4. (4) Initiatives in line with our strategy Ukraine and RussiaBalticsSweden Stable base Growth and experience Future growth and profitability • Structural initiatives – operation and branches • Channel management • Corporate market and metropolitan areas • Private banking, life and pension, environmentally friendly products and services • Build-up of critical functions and growth management • Grow distribution network - ATMs, branches and agency network • Broaden product range • Re-branding completed • Capture future growth • Productivity improvement • Cross-border capabilities • IT management and development • Corporate sector – leverage on pan-Baltic position • Broaden customer offerings • Re-branding starting in autumn Share of lending: 80 % Share of lending: 16 % Share of lending: 2 %
  5. 5. (5) A slowing Swedish economy Real GDP growth 1.0% 1.5% 2.0% 2.5% 3.0% 2007 2008F 2009F Sweden Euro-zone CPI growth 0.0% 1.0% 2.0% 3.0% 4.0% 2007 2008F 2009F Sweden Euro-zone • 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. Source: Swedbank, Economic Secretariat
  6. 6. (6) Baltic macro development weaker than expected Real GDP growth 0% 2% 4% 6% 8% 10% 12% 14% 2005 2006 2007 2008F 2009F Est Lat Lit CPI growth 2% 4% 6% 8% 10% 12% 14% 16% 2005 2006 2007 2008F 2009F Est Lat Lit • 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). Source: Hansabank Markets
  7. 7. (7) Credit quality, Group *Loan losses, net = write-offs + provisions - recoveries + change in property taken over Loan losses, net Loan loss ratio -200 -100 0 100 200 300 400 500 600 Q1-03 Q2-03 Q3-03 Q4-03 Q1-04 Q2-04 Q3-04 Q4-04 Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 -0.20 -0.10 0.00 0.10 0.20 0.30 0.40 0.50 0.60 SEKm % Impaired loans Share of impaired loans 0 1,000 2,000 3,000 4,000 5,000 6,000 Q3-03 Q4-03 Q1-04 Q2-04 Q3-04 Q4-04 Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 SEKm %
  8. 8. (8) Baltic banking overdues vs market Estonia - overdue over 60 days / current portfolio 0.0% 0.5% 1.0% 1.5% 2.0% 31.12.05 30.06.06 31.12.06 30.06.07 31.12.07 30.04.08 Rest of the market HB Bank Estonia - overdue over 30 days / current portfolio 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 31.12.05 30.06.06 31.12.06 30.06.07 31.12.07 30.04.08 Rest of the market HB Bank Latvia - overdue over 30 days / current portfolio 0% 1% 2% 3% 4% 5% 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 Latvia - overdue over 90 days / current portfolio 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 3,0% 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 Source: Swedbank, Bank of Estonia, and Financial and Capital Market Commission (Latvia)
  9. 9. (9) Credit quality, Baltic Banking 0.54% 0.30% 0.73% 0.55% Q2 08 0.39% 0.25% 0.53% 0.38% Q1 08 0.47% 0.28% 0.64% 0.48% H1 08 -0.18%Group level provision adjustment 0.28%Baltic Banking 0.10%Lithuania 0.63%Latvia 0.58%Estonia Q4 07 *Loan loss ratio, net = (changes in provisions + net write-offs) / credit portfolio at the beginning of the period Loan loss ratio, net* Overdue ratio (more than 60 days)* 0.86% 0.92% 0.79% Q1 08 1.20% 1.11% 1.24% Q2 08 0.71%Baltic Banking 0.75%Private 0.65%Corporate Q4 07 *Overdue ratio (more than 60 days) = volume of loans more than 60 days overdue /12 month-old credit portfolio
  10. 10. (10) Accounting and valuation effects Accounting and valuation effects, SEKm Q2 2008 Q1 2008 Q4 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
  11. 11. (11) Swedish Banking • Continued strong corporate lending growth • Mortgage lending growth has started to decline • Overall stable lending margins – Back book mortgage margin stabilizing. New lending shows increasing margin – Corporate margins are increasing slowly • Deposit margins decreased as a result of mix effects • Continued increase in card volumes • Capital gain of SEK 101m from sale of MasterCard shares • Continued strong credit quality – Stable low LTV ratio at 43% in Swedbank Mortgage – Only 1.5% of the lending in Swedbank Mortgage has a LTV ratio over 75%. 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 Income Costs C/I-ratio C/I-ratioSEKm C/I-ratioSEKm
  12. 12. (12) Baltic Banking Operations • Strong and stable income • Lending margins decreased as a result of higher funding costs • Deposit margins affected negatively by decreasing local interest rates and increased competition • Capital gain of SEK 66m from the sale of PKK • Profit based staff costs have been reduced by SEK 185m owing to lower provision requirements. 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 0.0 0.1 0.2 0.3 0.4 0.5 Income Costs C/I-ratio SEKm C/I-ratio C/I-ratio excluding one-offs
  13. 13. (13) International Banking • Annika Wijkström new head of International Banking • Strong net interest income development • Continued strong economic growth in Ukraine and Russia but with high inflation • Ukrainian Banking operations – Continued high lending growth – Higher costs due to operational excellence projects and profit-based staff costs • Russian Banking – Ownership transferred from Hansabank to Swedbank – Raimo Valo new CEO – Recovered tax on lease assets of SEK 19m • Strong lending growth in the Nordic branches. 0 25 50 75 100 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 International Banking, profit for the period of which Russian Banking of which Ukrainian Banking Operations SEKm
  14. 14. (14) Swedbank Markets • Magnus Geeber new head of Swedbank Markets • Good development in fixed income and FX trading despite difficult conditions at times • Stable market share in equity trading and structured products but lower market activity • Increased activity in Project and Corporate Finance compared with Q1 • Good performance in First Securities after a slow start to the year. 0 50 100 150 200 250 300 350 400 450 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 of which First Securities Profit for the period attributable to shareholders of Swedbank SEKm
  15. 15. (15) Swedbank lending and funding Swedbank Treasury (excluding Mortgage) • Large deposits • Liquidity reserves • Net lender in the interbank market • Liquidity limits – conservative view Swedbank Mortgage constitutes a larger part of Swedbank Group’s balance sheet than other financial institutions Distribution of Net Funding Need Swedbank Mortgage Lending to the public, SEK 1,169bn Swedbank Group, excl. Swedbank Mortgage SEK 596bn Swedbank Mortgage SEK 573bn - Exclusively Swedish mortgage lending Funding 12% Equity 8% Deposits 80% Covered Bonds 73% Equity 5% Commercial Papers 22% Ukraine 1% Russia 1% Lithuania 5% Latvia 5% Estonia 7% Swedbank Mortgage 49% Sweden 30% Nordic; 3%
  16. 16. (16) 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
  17. 17. (17) Profit for the period, SEKm 0 500 1000 1500 2 000 2 500 3 000 3 500 4 000 Q2- 2008 Q1- 2008 Q4- 2007 Q3- 2007 Q2- 2007 Return on equity, % 0.0 5.0 10.0 15.0 20.0 25.0 Q2- 2008 Q1- 2008 Q4- 2007 Q3- 2007 Q2- 2007 Earnings per share, SEK 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Q2- 2008 Q1- 2008 Q4- 2007 Q3- 2007 Q2- 2007 Tier 1capital ratio, % 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 Q2- 2008 Q1- 2008 Q4- 2007 Q3- 2007 Q2- 2007
  18. 18. (18) Income statement, Group SEKm Q2 2008 Q1 2008 % Q2 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
  19. 19. (19) Net interest income Q2-08 (Q1-08) 5,241 5,295 151 11 44 1 72 187 2 4,600 4,800 5,000 5,200 5,400 5,600 Netinterestincome Q1-08 SwedishBanking BalticBankingOperations BalticBanking Investment International Banking Swedbank Markets Assetmanagementand Insurance SharedServicesandother Netinterestincome Q2-08 SEKm
  20. 20. (20) Swedish Banking, change in net interest income SEKm Q2 2008 vs Q1 2008 Q2 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
  21. 21. (21) Baltic Banking, change in net interest income SEKm Q2 2008 vs Q1 2008 Q2 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
  22. 22. (22) Net commission income, Group SEKm Q2 2008 Q1 2008 % Q2 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
  23. 23. (23) Expenses SEKm Q2 2008 Q1 2008 % Q2 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 * Baltic Banking profit based staff costs have been reduced by SEK 185m owing to lower provision requirements. *
  24. 24. (24) Business areas Q2 08 vs Q2 07 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 Swedish Banking Baltic Banking International Banking Swedbank Markets Asset Mgmt
  25. 25. (25) Key figures Jan-Jun 2008 Jan-Jun 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
  26. 26. (26) Continued solid results • Continued solid results in all business areas – Net profit for the period Jan-Jun increased by 8 percent to SEK 6 504m (6 022) • Conversion to covered bonds on 21 April – decreased spreads, increased liquidity and facilitated funding • New capital adequacy objective for full Basel 2 – Tier 1 capital ratio is to be 8.5-9.0 percent • Credit quality remains good and in line with expectations • The macro environment in the Baltic states has deteriorated compared with expectations in Q1, affected by a weaker European economy • Net gains and losses on financial items were positively affected by unrealized valuation effects – valuation volatility expected to decrease as from Q3 2008.
  27. 27. (27) Appendix
  28. 28. (28) Exposure FAQ • No direct US Sub-Prime exposure – Minimal indirect exposure through investments of EUR 23.4m in bonds issued by US mortgage institutions who, in their turn, have exposures towards US sub-prime • Total exposure to structured credits is minimal – Total commitments towards conduits or SIVs is EUR 127m • The exposure has originated when reshaping an existing loan in order to gain better collateral, lower risk and higher margin – Negligible exposure to CDOs • Swedbank holds a very small CDO trading stock for client trades in CDOs which we have issued ourselves with mainly large Caps as underlying risk • Total holdings were EUR 21m at end Q2 – Exposure to Mortgage Backed Securities is about EUR 648m • European Aaa and mainly residential (RMBS) • Held for EUR liquidity purposes and client trading • Hedge fund exposure is about EUR 150m, all collateralized • Exposure towards private equity firms and their target companies is about EUR 1 375m in total – Nordic related LBOs • In total, the above mentioned exposures represent less than 1.5% of total assets
  29. 29. (29) CPI growth 0% 5% 10% 15% 20% Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Est Lat Lit Real GDP growth 0% 5% 10% 15% Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Est Lat Lit Main Baltic macro indicators Number of real-estate transactions and average sales price 0 600 1 200 1 800 2 400 3 000 jan- 05 maj- 05 sep- 05 jan- 06 maj- 06 sep- 06 jan- 07 maj- 07 sep- 07 jan- 08 maj- 08 #oftransactions 0 400 800 1 200 1 600 2 000 EUR/m2 Tallinn, # of transactions Riga, # of transactions Vilnius, # of transactions Tallinn, avg sales price Riga, avg sales price Vilnius, avg sales price Consumer confidence -30 -20 -10 0 10 20 jan- 05 maj- 05 sep- 05 jan- 06 maj- 06 sep- 06 jan- 07 maj- 07 sep- 07 jan- 08 maj- 08 Estonia Latvia Lithuania
  30. 30. (30) Components of GDP growth - Latvia -12% -8% -4% 0% 4% 8% 12% 16% 20% 24% 2004 2005 2006 2007 Q108 households government investments net exports errors Components of GDP growth - Estonia -12% -8% -4% 0% 4% 8% 12% 16% 20% 24% 2004 2005 2006 2007 Q108 households government investments net exports errors Components of GDP growth - Lithuania -12% -8% -4% 0% 4% 8% 12% 16% 20% 24% 2004 2005 2006 2007 Q108 households government investments net exports errors GDP growth components * Please note that Q1 08 data for GDP growth components are initial figures that can change as new information becomes available
  31. 31. (31) Current account (% of GDP) -30% -25% -20% -15% -10% -5% 0% 5% Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Est Lat Lit Baltic current account deficit Estonia -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Exports YoY growth Imports YoY growth Latvia 0% 5% 10% 15% 20% 25% 30% 35% 40% Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Exports YoY growth Imports YoY growth Lithuania 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Exports YoY growth Imports YoY growth
  32. 32. (32) Estonia -5 0 5 10 15 20 25 30 35 2005 2006 2007 2008 HICP, % Energy, % Food including alcohol and tobacco, % Core inflation, % Baltic consumer price index Latvia -5 0 5 10 15 20 25 30 35 2005 2006 2007 2008 HICP, % Energy, % Food including alcohol and tobacco, % Core inflation, % Lithuania -5 0 5 10 15 20 25 30 35 2005 2006 2007 2008 HICP, % Energy, % Food including alcohol and tobacco, % Core inflation, %
  33. 33. (33) 0 2 4 6 8 10 12 14 jan-07 feb-07 mar-07 apr-07 maj-07 jun-07 jul-07 aug-07 okt-07 nov-07 dec-07 jan-08 feb-08 mar-08 apr-08 jun-08 % 3m Talibor 3m Rigibor 3m Vilibor 3m Euribor Talibor, Rigibor, Vilibor, Euribor
  34. 34. (34) Asset quality and provisioning costs Net loan losses 0% 50% 100% 150% 200% 250% Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 0 5 10 15 20 25 30 EURm Net loan losses NLL YoY % growth Net loan losses -2,0% -1,5% -1,0% -0,5% 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 1999 2000 2001 2002 2003 2004 2005 2006 2007 Q1 08 Q2 08 Estonia Latvia Lithuania Group 0.55% 0.31% 0.75% 0.58% Q2 08 0.39% 0.25% 0.54% 0.38% Q1 08 0.40%Group 0.23%Lithuania 0.56%Latvia 0.39%Estonia 2007 Net loan losses by country Net loan losses = (changes in general and special provisions + net write offs) / credit portfolio at the beginning of the year 0.55% 0.06% 0.32% 0.83% 0.98% 0.71% Q2 08 0.31%0.09%incl industry 0.57%0.86%incl real estate 0.39% 0.16% 0.32% 0.43% Q1 08 0.40%Group N/Aincl home loans 0.33%Private 0.42%Corporate 2007 Net loan losses
  35. 35. (35) Asset quality – overdue more than 60 days Overdue more than 60-days/12m old portfolio 0,0% 0,4% 0,8% 1,2% 1,6% 2,0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 Q1 08 Q2 08 Group Overdue over 60-days/12m old portfolio 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Real estate, rent Retail and wholesale Construction Industry Logistics and comm Other business services Overdue over 60-days/12m old portfolio 0,0% 0,4% 0,8% 1,2% Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Private Corporate Overdue over 60-days/12m old portfolio 0,0% 0,4% 0,8% 1,2% 1,6% 2,0% Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Est Lat Lit Group
  36. 36. (36) Baltic Banking lending by sectors 580 1 050 1 801 1 803 3 110 8 621 3 181 0 2 000 4 000 6 000 8 000 10 000 Other Construction Transport Industry Retail & Wholesale Real-estate mgmt Individuals -13 -26 21 2 176 249 93 -75 0 75 150 225 300 Portfolio (EURm), June 2008 Portfolio growth (EURm), Q2 08 43% xx% - share of portfolio 3% 5% 9% 9% 15% 16% *Real estate management related portfolio growth includes refinancing of existing loan from Sweden to Latvian business unit (Nordic real estate group with significant Latvian investments) * *
  37. 37. (37) Estonian lending by sectors 201 308 513 694 1 158 3 685 1 570 0 1 000 2 000 3 000 4 000 Other Construction Transport Industry Retail & Wholesale Real-estate mgmt Individuals -4 -40 18 -5 28 116 -17 -50 0 50 100 150 Portfolio (EURm), June 2008 Portfolio growth (EURm), Q2 08 45% xx% - share of portfolio 2% 4% 6% 9% 14% 19%
  38. 38. (38) Latvian lending by sectors 262 287 653 536 1 052 2 739 838 0 1 000 2 000 3 000 4 000 Other Construction Transport Industry Retail & Wholesale Real-estate mgmt Individuals 6 11 28 0 114 38 13 -50 0 50 100 150 Portfolio (EURm), June 2008 Portfolio growth (EURm), Q2 08 43% xx% - share of portfolio 4% 5% 10% 8% 17% 13% *Real estate management related portfolio growth includes refinancing of existing loan from Sweden to Latvian business unit (Nordic real estate group with significant Latvian investments) * *
  39. 39. (39) Lithuanian lending by sectors 455 636 573 899 2 197 116 867 0 1 000 2 000 3 000 4 000 Other Construction Transport Industry Retail & Wholesale Real-estate mgmt Individuals -16 3 -25 8 34 95 97 -50 0 50 100 150 Portfolio (EURm), June 2008 Portfolio growth (EURm), Q2 08 38% xx% - share of portfolio 2% 8% 11% 10% 16% 15% * Other - largest increase in Energy, gas and water supply sector **
  40. 40. (40) Mortgages • Standard mortgage product allows issue of new loans with maximum LTV of 85% and loan-service ratio below 50%. • Mortgage portfolio LTV ratios have remained solid at 59% in Estonia, 74% in Latvia and 61% in Lithuania. • Quality of existing portfolio and each new customer/transaction are evaluated using automated scoring tools. • Decision making process, product conditions, and pricing are adjusted based on creditworthiness of the clients. • Sub-prime mortgage lending is not practiced in Baltics 22y23y21yAverage maturity LithuaniaLatviaEstonia30 June 2008 61%74%59%Average portfolio LTV
  41. 41. (41) Group lending by sectors – real estate Portfolio, June 2008 Estonia 22% 6% 26% 25% 15% 6% 3% 16% 43% 5% 9% 9% 15% Construction Other Individuals Transport Industry Retail & Wholesale Real-estate mgmt Latvia 13% 10% 38% 22% 15% 2% Lithuania 13% 5% 34% 41% 4% 4% Office Production&Warehouse Residential Retail Land plots Other
  42. 42. (42) Real estate portfolio • As indicated by internal stress-tests and portfolio analyses, real estate and in particular residential real estate development is the most sensitive sector in Baltic Banking portfolio. ‘Sensitivity’ has started to appear in overdue and default figures of corporate portfolio. • Around 2/3 from total Real Estate portfolio are cash flow generating properties with good tenant mix. Properties under development process (1/3 from portfolio) are currently affected the most by decreasing prices and liquidity in the market. Hansabank has always strictly restrained from financing speculative type of properties. • Additional defaults in the residential real estate development sector are expected in the second half of 2008, but no major surprises are expected due to previously implemented portfolio limitations and individual level monitoring. Restructuring capacity has been put in place. * Overdues over 60 days / 12 months old portfolio Real estate management overdues* -0,5% 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Estonia Latvia Lithuania
  43. 43. (43) Group lending by sectors – retail & wholesale Portfolio, June 2008 Estonia 34% 35% 32% 3% 16% 43% 5% 9% 9% 15% Construction Other Individuals Transport Industry Retail & Wholesale Real-estate mgmt Latvia 31% 43% 26% Lithuania 69% 19% 12% Distributors Specialty retail Other
  44. 44. (44) Group lending by sectors – transport Portfolio, June 2008 Estonia 23% 28%25% 24% 3% 16% 43% 5% 9% 9% 15% Construction Other Individuals Transport Industry Retail & Wholesale Real-estate mgmt Latvia 41% 11% 13% 35% Lithuania 85% 4% 1% 10% Trucking Marine Terminals&Ports Other
  45. 45. (45) Sectors under close watch Transportation Trucking companies are facing problems due to increasing fuel prices and lagging freight rates. This global problem has started to be reflected in Baltic Banking provisions (especially in SME segments) since the beginning of the year. Retail & wholesale Trade volume growth rates slowed down and started to decrease in Estonia and Latvia in Q2 2008 (still growing in Lithuania). There is no substantial impact on portfolio quality yet, but deterioration is expected along with a decrease in consumption. Wood processing Raw material price increases coupled with downward pressure on sales prices are having a negative impact on Baltic wood processing industry. Current portfolio quality is around average with only few problem cases observed. Additional problems may occur after export duties are imposed on Russian round wood as there is dependence on imported round wood in Estonia. Transportation overdues* 0,0% 0,5% 1,0% 1,5% 2,0% Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Estonia Latvia Lithuania * Overdues over 60 days / 12 months old portfolio
  46. 46. (46) Collateral breakdown 20,167 279 706 985 3,621 668 7,960 6,660 273 2007 100% 2% 4% 6% 18% 2% 38% 35% 1% % 1%270State 20,667 320 852 1,172 3,810 316 7,927 7,172 Q2 08 100% 1% 4% 5% 18% 3% 39% 33% % Other collateral* Unsecured Unsecured corporate Unsecured private Corporate real-estate Private real-estate Guarantees Total • Hansabank’s loan portfolio is adequately secured. • Private mortgage portfolio is fully covered by family houses and apartments (as a rule owner occupied). • Full asset pledge, including tangible assets and current assets, is the most common case for the 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 (used for top ratings in corporate segment and consumer products in private segment). Baltic Collateral (EUR m) *Other collateral is deposits, customer payments, vehicles, etc
  47. 47. (47) Regular process of outstanding loan review • Portfolio quality improvement measures were introduced at the end of 2006 • Real estate sector growth is under control, with regular scrutiny of existing portfolio • Strengthened risk units – Increased number of people dealing with problem loans – Strengthened workout team – Improved quality and increased frequency of portfolio quality reporting • Targets set for new origination quality • Regular loan review process includes – Overall portfolio stress test once a year – Portfolio review twice a year – Quarterly “watch list” report – IRB portfolio scoring once a month • On the individual loan basis: – Client rating review minimum once a year • Rating classes 5 and higher are subject to more frequent assessment – Quarterly financials/covenants assessment – For SME/SSE and private portfolio weekly overdue report (with client names identified)
  48. 48. (48) Credit quality management process 1. Proactive management of watch list clients – Private clients - communication on step-by-step actions to take before falling into overdues. Development of standard proactive solutions to ensure serviceability of the credit – Corporate clients - proactive communication, frequent client meetings and positive attitude to find solutions 2. Overdue management - concentrates on time horizon from occurrence of distress situation (either through late payment or on the basis of client information) to moving credit over to restructuring or workout phase. The primary focuses in overdue management are: – Process design for fast and prudent management of overdues, clear process ownership – Prudent tactics to handle overdue payments. Constant re-evaluation of the tactics on their effectiveness and adequacy – Clearly set timing and channels for client contacts – Build capacity to work with distressed clients including adequate training of employees – Internal target setting and incentives to reach targets – Timely reporting and follow up on activities taken 3. Distressed debt restructuring – Defined tactics of restructuring. Solutions to ensure client serviceability of the debt – Extended capacity to work with distressed clients – Effective solutions for collected collaterals handling
  49. 49. Additional questions? Johannes Rudbeck Investor relations johannes.rudbeck@swedbank.se +46858593322
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