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CEO presentation of Q1 2009 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 Q1 2009 results

  1. 1. First quarter results 2009 23 April 2009 Michael Wolf, CEO and Erkki Raasuke, CFO
  2. 2. 2 Reduce current risk levels 1. Secure asset quality by pro-active measures 2. Protect earnings capacity throughout the downturn 3. Funding strategy – improve liquidity and extend maturity profile We have initiated change
  3. 3. 3 Secure asset quality • Prudent provisions due to low visibility • Intensified Financial Restructuring & Recovery (FR&R) activities • Proactive measures in Sweden • Short to medium term aim to decrease risk weighted assets in absolute terms Provision ratio expected to decline during 2009
  4. 4. 4 Decentralisation through formalisation • Shared leadership – joint responsibility • Implement committee structures at board and management level to ensure duality, integrity and accountability • Strong governance and formalisation processes Empowering the front-line
  5. 5. 5 Determine the post-crisis position Review of earnings’ capacity and goodwill Enhanced medium-term earnings Target improved ratings Secured funding capacity
  6. 6. 6 Unique repositioning opportunity for Swedbank The preferred partner for the many households, companies and institutions  in Sweden, Estonia, Latvia and Lithuania A journey over 3‐5 years Unique customer base Long history and  strong market  position Strong relationship with the Swedish savings banks Dedicated staff
  7. 7. 7 Operating profit -4 000 -3 000 -2 000 -1 000 0 1 000 2 000 3 000 4 000 5 000 6 000 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 SEKm Operating profit before impairments Operating profit First quarter results 2009 Deteriorating economic environment affecting results – Prudent provisions due to low visibility and increasing impaired loans in Baltic Banking and Ukrainian Banking Operation – Impairment of intangible assets in Ukrainian Banking Investment – Strong trading result • Main drivers behind the SEK -3.4bn operating profit SEK 5.3bn,  excl. Robur one‐off  • Operating profit before impairments SEK 5.3bn, excl. Swedbank Robur one-off of SEK 480m
  8. 8. 8 Results by business area International Banking • Severe increase of impaired loans, goodwill impairment Swedish Banking • Stable results, low impairment losses Baltic Banking • Severe increase of impaired loans, declining NII Swedbank Markets • Best ever quarterly results Asset Management • Results affected by declining AUM, one-off pricing error Result before impairments and provisions -1 000 -500 0 500 1 000 1 500 2 000 2 500 3 000 Sw edish Banking Baltic Banking International Banking Sw edbank Markets Asset Management SEKm Q4 08 Q1 09 Operating profit -4 000 -3 000 -2 000 -1 000 0 1 000 2 000 3 000 Sw edish Banking Baltic Banking International Banking Sw edbank Markets Asset Management SEKm Q4 08 Q1 09
  9. 9. 9 First quarter results Income statement SEKm Q1 2009 Q4 2008 Change Net interest income 5 803 5 742 61 Net commission income 1 374 2 011 -637 Net gains/losses on financial items, fair value 1 711 1 244 467 Other income 536 1 349 -813 Total income 9 424 10 346 -922 Staff costs 2 335 2 340 -5 Profit-based staff costs 206 262 -56 Other expenses 2 090 2 300 -210 Total expenses 4 631 4 902 -271 Profit before impairments 4 793 5 444 -651 Impairment of intangible assets 1 305 1 403 -98 Impairment losses on loans and other credit risk provisions 6 845 1 633 5 212 Operating profit -3 357 2 408 -5 765 Tax expense -13 500 -513 Profit for the period -3 344 1 908 -5 252 Profit for the period attributable to: Shareholders of Swedbank AB -3 358 1 915 -5 273
  10. 10. 10 Asset quality Impaired loans • Increased covenant breaches, whilst level of impaired loans in Swedish Banking remained low • Sharp increase of impaired loans in Baltic and Ukrainian Banking Impaired loans by business area (gross, SEKm) 0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000 Swedish Banking Estonia Latvia Lithuania Russia Ukraine Swedbank Markets Q4 08 Q1 09 Share of impaired loans 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Swedish Banking Baltic Banking International Banking Swedbank Markets Swedbank Group
  11. 11. 11 Asset quality Provisioning • Formation of additional collective provisions of SEK 3.7bn • Total provisions of SEK 6.8bn • Maintained provision ratio in Baltic Banking • Increased provision ratio in Ukraine to 101% • Swedbank Group provision ratio at 64% • Impaired loans expected to level off during the year 0 5 000 10 000 15 000 20 000 Q4 08 Q1 09 0 5 000 10 000 15 000 20 000 Impaired loans (gross) Collective provisions for impaired loans Individually identified impaired loan provisions
  12. 12. 12 Earnings capacity Net interest income • Highest ever net interest income • Improved lending margins and reduced deposit margins in Swedish Banking • Reduced lending and deposit margins in Baltic Banking • Strong NII in Swedbank Markets Q4 08 Q1 09 5,742 5,803 -125 113 -22-207 302 4,000 4,200 4,400 4,600 4,800 5,000 5,200 5,400 5,600 5,800 6,000 Netinterestincome SwedishBanking BalticBanking IntlBanking SwedbankMarkets AssetManagement Other Netinterestincome SEKm
  13. 13. 13 Earnings capacity Net gains and losses • Favourable market conditions provided good trading opportunities for Swedbank Markets • Net gains and losses related to Swedbank Mortgage (part of Swedish Banking) will continue to be volatile SEKm Q1 09 Q4 08 Q1 08 Swedish Banking 100 828 16 Baltic Banking 285 12 78 International Banking 18 229 22 Swedbank Markets 1,221 304 244 Asset Management & Insurance 3 1 -15 Shared Services and Group Staffs 36 -156 -270 Eliminations 48 26 0 Swedbank Group 1,711 1,244 75
  14. 14. 14 Liquidity & Funding Strengthened position in challenging environment • Improved liquidity position • Ongoing efforts to strengthen liquidity further • Active use of state guarantee programme SEK 227bn • Action taken to extend maturity profile – Capital market funding over 1Y maturity, as of 31 December 37% – As of 31 March 45% Stress test of liquidity as of 31 March 2009 Main assumption • No access to capital markets • No refinancing of amounts owed to credit institutions, issued bonds or subordinated loans Q1 09 Non-covered Covered Nominal figures bonds bonds SEKbn (Swedbank AB) Swedbank Mortgage Total Bonds in issue1 66 25 91 Of which with state guarantee 65 0 65 Expired bonds 18 10 28 Repurchased 0 60 60 1 Excluding issues tied to index-linked bonds0 50 100 150 200 250 1W 2W 3W 1M 2M 3M 4M 5M 6M 9M 12M SEKbn 2009-03-31 2008-12-31
  15. 15. 15 Capital management Actively manage risk weighted assets • Improved documentation and processes • Increased focus on risk return • Declining lending volumes • Through the cycle methodology Development risk weighted assets (SEKbn) 600 620 640 660 680 700 720 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09
  16. 16. 16 Capital management Solid capitalisation following last year’s rights issue 8.2 8.8 8.7 11.1 10.8 12.6 12.5 11.7 15.2 15.0 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09
  17. 17. 17 Summary • Economical challenges of historical dimensions • Strong measures taken in Q1 to address RWA and credit quality • Prudence in provisioning levels as impaired loans continue to increase but we expect it to level off during the year • Q2 focus will be to take firm control of our destiny in the ongoing economical downturn
  18. 18. Appendix
  19. 19. 19 Balance sheet Swedbank Group SEKm Mar 09 Dec 08 % Loans to credit institutions 141 996 128 536 10% Loans to the public 1 282 258 1 287 424 0% Interest-bearing securities 169 813 133 694 27% Shares and participating interests 59 484 60 182 -1% - for which customers bear the investment risk 52 551 51 638 2% Derivatives 111 752 128 055 -13% Other assets 65 493 73 799 -11% Total assets 1 830 796 1 811 690 1% Amounts owed to credit institutions 358 812 316 730 13% Deposits and borrowings from the public 471 833 508 456 -7% Debt securities in issue 610 256 593 365 3% "Financial liabilities for which customers bear the investment risk" 53 126 52 074 2% Derivatives 103 409 116 720 -11% Other liabilities and provisions 104 471 93 128 12% Subordinated liabilities 45 874 44 755 3% Equity 83 015 86 462 -4% - Non-controlling interest 257 232 11% - Equity attributable to shareholders 82 758 86 230 -4% Total liabilities and equity 1 830 796 1 811 690 1%
  20. 20. 20 Provisioning (P&L effect) Q1 2009 Q4 2008 Change Change Specific provisions for individually assessed loan 2 423 832 1 591 191% Provisions for contingent liabilities, net 10 -6 16 -267% Provisions for collectively valued homogenous groups of loans with limited value and similar credit risk 126 34 92 271% Collective provisions for individually assessed loans 491 574 -83 -14% Additional collective provisions 3 680 3 680 Total provisions, gross 6 730 1 434 5 296 369% Reversal of individual provisions no longer required -178 -25 -153 612% Total provisions, net 6 552 1 409 5 143 365%
  21. 21. 21 Lehman Brothers • Collateralised exposure related to Lehman Brothers is USD 1,350m – Collateral consists of 69 commercial real estate loans, secured by 55 properties – 9 loans were non-performing at March 31 – Aggregate notional value of assets well above book value of Lehman exposure • Additional stress tests performed due to the further deteriorating CRE market in the US – Appr. 2/3 of the notional portfolio consists of loans to high quality* commercial real estate. No need for provisions – Appr. 1/3 of the notional portfolio consists of development projects in different stages of completion. These have been valued mark to market *strong DSCR, stable contract situation and/or very low LTV
  22. 22. 22 Exposures FAQ • Private Equity related exposures is EUR 1,425m in total – Nordic related LBO’s – 99% Senior lending – Largest sector is health care with 45% – Average size of single exposure is EUR 60m • Lending exposure to shipping sector is EUR 2,081m plus unutilised commitments of EUR 693m – Portfolio duration is 4y – Average fleet age is 6y – 9% is dry bulk – 2.7% is car carriers – Strong employment profiles Tanker 33% Ro-Ro, Container &Bulk 25% Offshore 42%
  23. 23. 23 Exposure FAQ • Hedge Fund Exposure is EUR 94m – All collateralised • Total exposure to SIV’s and Conduits is EUR 8m • Total Exposure to CDO’s is EUR 2m
  24. 24. 24 Low risk in interest-bearing securities (SEK 170bn) Holding distributed by currency SEK 76% NOK 7% EUR 12% LVL 0% LTL 1% USD 4% EEK 0% GBP 0% Geographic distribution of issuers Sweden 76% Norway 7% UK 5% Baltics 2%US 4% Other 6% As of 31 March 2009, around 15% of the Group’s interest-bearing securities were valued using valuation models against 19% as of 31 December 2008. * Recognised at fair value with changes in value through P&L. ** Measured at amortised cost Holding distributed by sector Central banks 29% Mortgage bonds, covered 23% Banks 11% Other corporations 8% States & municipalities 14% Other financial corporations 9% Mortgage bonds, not covered 6% Accounting classification Held for trading* 94% Held-to-maturity investments** initial classification 1% Held-to-maturity investments** reclassified as of 2008-06-30 Held-to-maturity investments**
  25. 25. 25 Maturity profile – long-term funding Swedbank Mortgage, long-term maturity profile 0 20 40 60 80 100 120 2009 2010 2011 2012 2013 2014- SEK bn, nom Swedbank AB, long-term maturity profile (excl. Swedbank Mortgage) 0 20 40 60 80 100 120 2009 2010 2011 2012 2013 2014- SEK bn, nom
  26. 26. 26 Swedbank Mortgage, Q1 2009, total loan portfolio SEK 642bn (Euro 59bn) Lending Single-family homes; 60.2% Multi-family houses; 4.9% Tenant Owners Assoc.; 11.4% Commercial; 0.2% Municipalities etc; 3.0% Forest- & Agricult.; 6.2% Condominiums; 14.2% Loan to value (LTV) 0 50 000 100 000 150 000 200 000 250 000 <30% 30-50% 50-60% 60-75% 75-85% >85% SEKm Single-family homes Condominiums Multi-family houses (incl Condo Ass) SEK 6.5bn
  27. 27. 27 Other lending to the public, Sweden, SEK 306bn (excl. Swedbank Mortgage) 0 50 000 100 000 150 000 200 000 250 000 300 000 350 000 SEKm Municipalities Other corporate lending Forestry and agriculture Transportation Manufacturing Construction Retail, hotels and restaurants Real estate management Private individuals Real estate management Residential properties 26% Tenant-owned housing- associations 17% Industry properties 8% Commercial properties 40% Other real estate mgmt 9%
  28. 28. Appendix – Baltic Banking
  29. 29. 29 Asset quality 0 50 100 150 200 250 300 350 400 450 Q108 Q208 Q308 Q408 Q109 0% 1% 2% 3% 4% 5% 6% 7% 8% EURm Loan loss ratio, % % Q1 09 Q4 08 Estonia 3.31 1.32 Latvia 14.13 3.70 Lithuania 6.00 0.77 Baltic Banking 7.50 1.91 Impairment losses Q109 2008YE 2007YE Overdues >60 days, EURm 1,113 536 101 Overdues >60 days, % 5.9 2.7 0.5 Risk indicators Loan loss ratio
  30. 30. 30 Asset quality by country Latvia 8 11 16 60 229 0 50 100 150 200 250 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 EURm Estonia 7 11 14 29 68 0 50 100 150 200 250 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 EURm Lithuania 3 4 12 11 86 0 50 100 150 200 250 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 EURm Impairment loss dynamics pa e t osses 0% 2% 4% 6% 8% 10% 12% 14% 16% Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Est Lat Lit Baltic Banking Loan loss ratio
  31. 31. 31 Overdue developments Overdues, EE Corporate 2,5% 0,9% 4,5% 0% 2% 4% 6% 8% 10% Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 31-60 days 61-90 days over 90 days Overdues, LV Corporate 4,0% 2,9% 9,4% 0% 2% 4% 6% 8% 10% Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 31-60 days 61-90 days over 90 days Overdues, LT Corporate 7,5% 0,3% 5,2% 0% 2% 4% 6% 8% 10% Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 31-60 days 61-90 days over 90 days Overdues, EE Private 1,4% 0,6% 1,5% 0% 1% 2% 3% 4% 5% Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 31-60 days 61-90 days over 90 days Overdues, LV Private 2,7% 1,2% 4,1% 0% 1% 2% 3% 4% 5% Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 31-60 days 61-90 days over 90 days Overdues, LT Private 1,0% 0,5% 1,1% 0% 1% 2% 3% 4% 5% Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 31-60 days 61-90 days over 90 days * Overdues / current portfolio
  32. 32. 32 Overdue loans – Swedbank Estonia and Swedbank Latvia vs market Estonia - overdues over 60 days / current portfolio 0% 1% 2% 3% 4% 5% 6% 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 feb-09 Rest of the market Swedbank Estonia (bank) Estonia - overdues over 30 days / current portfolio 0% 1% 2% 3% 4% 5% 6% 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 feb-09 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. Baltic Banking data
  33. 33. 33 Baltic lending by sectors* 983 1 590 1 576 3 193 451 3 051 0 2 000 4 000 6 000 8 000 10 000 Other*** Construction Transport Industry Retail & Wholesale Real-estate mgmt** Individuals EURm -86 -35 -89 -145 100 -177 -191 -300 -150 0 150 Portfolio (EURm), March 2009 Portfolio growth (EURm), Q1 09 % share of portfolio * Lending portfolio split is based on NACE classification as presented to Central Bank ** In Q109 certain loans were reclassified to Real estate management. As a result real estate portfolio grew by EUR 107m while Construction decreased by EUR 62m. Other business services EUR -37m and Energy EUR -1m *** Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans 2% 5% 8% 8% 16% 16% 45%Mortgage Other
  34. 34. 34 Mortgage portfolio EE Mortgage overdues > 30 days 0% 1% 2% 3% 4% 5% 6% 7% 0m 6m 12m 18m 24m 30m 36m Overdues/Balance,% 2005 2006 2007 2008 LV Mortgage overdues > 30 days 0% 1% 2% 3% 4% 5% 6% 7% 0m 6m 12m 18m 24m 30m 36m Overdues/Balance,% 2005 2006 2007 2008 • 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 LT Mortgage overdues* > 30 days 0% 1% 2% 3% 4% 5% 6% 7% 0m 6m 12m 18m 24m 30m 36m Overdues/Balance,% 2005 2006 2007 2008
  35. 35. 35 Mortgage portfolio quality indicators Est Lat Lit* LTV, total portfolio: Q1 09 69% 78% 79% LTV, total portfolio: Q4 08 67% 71% 70% LTV>80% 33% 46% 46% LTV>100% 14% 23% 24% * Part of loans issued backed by guarantee of the State insurance company • High risk concentration in mortgage portfolios stays ~12% in Estonia and ~20% in Latvia, Lithuania. High risk is defined as all loans with loan to value ratio (LTV) over 75% and loan servicing ratio over 50% • Due to the residential price drop, Baltic Banking has a higher share of under-collateralised loans. More than 1/5th of loans issued in Latvia and Lithuania already have LTV>100%. A further drop by 20% will mean that close to 50% of the portfolio will be under-collateralised
  36. 36. Corporate client portfolio • The effect of the downturn has shown a deterioration of Baltic Banking real estate, in particular residential development portfolio • Downgrades have led to provisions increase by EUR 116.6m in Q1 2009 (not including the additional collective provision) BB Rating 6 & 7 exposures 0 200 400 600 800 1 000 1 200 Q1 2009 Q4 2008 Q4 2007 EURm Commercial real estate Production Retailing Transportation Other BB Total provisions, YTD 0 50 100 150 200 250 300 350 400 450 Q1 2009 Q4 2008 Q4 2007 EURm Commercial real estate Production Retailing Transportation Other
  37. 37. 37 Baltic lending by sectors – real estate Estonia 24% 6% 22% 28% 15% 5% Latvia 16% 13% 22% 12% 3% 34% Lithuania 13% 6% 30% 40% 6% 5% Office Production&Warehouse Residential Retail Land plots Other
  38. 38. 38 Collateral breakdown Mar 2009 % Dec 2008 % State 396 2 370 2 Private real-estate 7 481 37 7 321 36 Corporate real-estate 6 898 35 7 715 38 Guarantees 361 2 317 2 Other collateral* 3 547 18 3 742 18 Unsecured 1 299 7 1 104 5 Unsecured corporate 505 3 776 4 Unsecured private 794 4 328 2 Total** 19 980 100 20 569 100 • 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 low: 7% (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
  39. 39. 39 Volumes development Loan portfolio 0 5 000 10 000 15 000 20 000 ´06 ´07 ´08 Mar´09 ´06 ´07 ´08 Mar´09 ´06 ´07 ´08 Mar´09 ´06 ´07 ´08 Mar´09 EURm -10% 10% 30% 50% 70% 90% portfolio YoY% growth Estonia Latvia Lithuania Baltic Banking Loan/Deposit ratio 100% 150% 200% 250% 300% 2006 2007 2008 Q109 Estonia Latvia Lithuania Baltic Banking

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