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Swedbanks fourth quarter results 2010 ceo presentation

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Swedbanks fourth quarter results 2010 presentation.
Presented on the 8 feb 2010 by Michael Wolf, CEO
Erkki Raasuke,CFO
Göran Bronner, CRO

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Swedbanks fourth quarter results 2010 ceo presentation

  1. 1. Swedbank’s fourth quarter 2010 results8 February 2011Michael Wolf, CEOErkki Raasuke, CFOGöran Bronner, CRO
  2. 2. Favourable profit trend p• Net profit of SEK 7.4bn for 2010• Core Tier 1 ratio of 13.94 per cent• Proposed dividend: SEK 2 10 per A-share 2.10 A-share, SEK 4.80 per preference share Net profit performance Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 2
  3. 3. Priorities 2010Summing up the year g p y• Customer satisfaction• Lower risk level• Earnings• Liquidity and capitalisation 3
  4. 4. Priorities 2010 – Customer satisfactionMaking progress but still more to do… gp g• New service concepts in Retail yields result• Sector focus in LC&I• Baltic Banking implementing same customer approach as Retail in the branch network• Enhanced capital markets offering to meet increased demands p g 4
  5. 5. Priorities 2010 – Lower risk levelSignificantly reduced risk g yCredit impairments, SEKm • Continued reduced CEE lending7 500 • Estonia joined the EMU6 500 1 Jan 20115 500 • Decreased RWA4 500 • Reduced need for senior funding g3 5002 5001 500 500-500 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 0 0 0 0 0 1 1 1 1 5
  6. 6. Priorities 2010 – EarningsPre-provision earnings starting to improve p g g pNet interest income, SEKm • Net profit increased by7 000 SEK 18bn due to lower credit impairments6 000 • NII troughed in Q2 positive trend Q2,5 000 • Expenses adopted to lower4 000 business volumes3 0002 0001 000 0 * In Q4 NII in Baltic Banking was positively affected by about Q4 08 8 Q1 09 9 Q2 09 9 Q3 09 9 Q4 09 9 Q1 10 0 Q2 10 0 Q3 10 0 Q4 10 0 SEK 200m attributable to the reclassification of penalty f 200 ib bl h l ifi i f l fees and late interest, previously recognised as other income. 6
  7. 7. Priorities 2010 – Liquidity and capitalisationStrengthened funding position g gpSEKbn • Average maturity of capital500 Covered bonds market f di extended k t funding t d d Central bank and guaranteed funding to 27 months400 • L f the state guarantee Left h programme in April300 • State guaranteed funding and central bank repos reduced to200 SEK 156bn (359)100 0 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 7
  8. 8. New capitalisation target and dividend policy p g p y• Core Tier 1 capital ratio of at least 13 per cent until 2013• Long-term core Tier 1 capital ratio of at least 10 per cent• AGM to decide on buy-back programme to manage capitalisation• New dividend policy from 2011 – 50 per cent pay-out ratio pay out 8
  9. 9. Net interest income Growing NII g • Increasing interest rates in SEK • Deposit margins improving • Restated Baltic Banking late payment fees Retail LC&I Baltic Russia, Treasury, Banking Ukraine Other 4 702 4 527 13 159 249 91 4 023 253 -59 3 799 3 980 1 168 733 2 752(SEKm) -285 285 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 9
  10. 10. Net commission income Strong commission income g • Strong syndicated lending fees • Low b k L brokerage f fees i Q3 in • Corporate finance picking up Retail LC&I Baltic Russia, Asset mgmt, Banking Ukraine Other 2 538 2 361 2 395 2 310 2 282 23 94 -3 1 428 113 20 383 575 1 132(SEKm) Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 (Excluding non-recurring items) 10
  11. 11. Net gains/losses on financial items, fair valueLower gains with higher quality g g q y• Strong end of the year from LC&I• Cancellation of deposit i R C ll ti fd it in Russia i• Treasury valuation effects turned to negative Baltic Russia, Treasury, LC&I Banking Ukraine Other Retail 809 29 180 647 574 38 -71 315 77 223 439 EKm) -435(SE 74 -96 -179 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10(Excluding non-recurring items) 11
  12. 12. Expenses Expenses seasonally higher p y g • Accelerated IT development • Y/Y expenses fl t flat • FR&R and Ektornet 2010 expenses SEK 714m 0.57 0.57 0.55 0.58 0.54 LC&I Baltic B lti Russia, Russia Asset mgmt, mgmt Retail Banking Ukraine Other 4 300 4 391 4 423 152 73 9 4 590 4 238 123 -5 582 211 697 877(SEKm) 2 223 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 12
  13. 13. Liquidity & Capital managementSEK 265bn term funding issued in 2010• Full year 2011 maturities of nominal Issued & matured full year 2010 (nominal SEKbn) SEK 180bn 60 – Of which SEK 80bn in guaranteed 40 funding 20 – Of which SEK 86bn in covered bonds 0 -20• Average maturity of wholesale funding, -40 including short-term funding, 27 months -60 (38 months for covered bonds) -80 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Maturity p y profile full year 2011 y (nominal SEKbn) 0 -20 -40 -60 -80 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 13
  14. 14. Fourth quarter 2010 resultsIncome statementSEKm Q4 10 Q3 10 QoQ % Q4 09Income 7 958 7 647 4% 7 982Expenses 4 590 4 238 8% 4 300Profit before impairments 3 368 3 409 -1% 3 682Impairment of intangible assets 23Impairment of tangible assets 406 30 352Credit impairments - 483 120 5 003Operating profit 3 445 3 236 6% -1 673Tax expense 693 638 9% 115Profit attributable to shareholders 2 750 2 591 6% -1 804Return on equity, % 11.7 11.3 -8.3Cost incomeCost-income ratio 0.58 0 58 0.55 0 55 0.54 0 54Loan-deposit ratio, % 222 233 240Core Tier 1 capital ratio, %* 13.94 13.39 11.97Risk-weighted assets * 541.3 541 3 559.7 559 7 603.4 603 4* Basel 2 14
  15. 15. Asset qualityContinued improvements p• All indicators in the right direction – Impaired loans – 60 days overdue Declining in all countries – Restructured loans – Watch list• RWA d decreased b SEK 18 4b i Q4 d by 18.4bn in – Positive rating migration – C ti Continued d l d de-leveraging i B lti countries i in Baltic ti• Recoveries in CEE portfolio• Further tightened lending criteria in Swedish mortgage market 15
  16. 16. Asset qualityCredit impairments of SEK -483m pSEKm6 000 • Net recoveries in Baltic Banking 5 003 and Russia & Ukraine5 000 • Minor credit impairments in4 000 Retail and LC&I3 000 • Write-down of tangible assets, 2 210 mainly in Ukraine2 000 9631 000 120 0-1 000 -483 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Retail LC&I Baltic Banking Russia & Ukraine Other 16
  17. 17. Asset qualityProvisions – work-out portfolios slowly declining p y gSEKm30 000 65.9% 65 9% 63.5% 63 5% Provision ratios, % Q4 10 64.8% 63.9%25 000 4 104 Retail 99 4 684 5 135 3 606 62.7% LC&I 10620 000 3 297 Baltic Banking B lti B ki 58 Russia 5715 000 Ukraine 65 21 889 23 028 Group 6310 000 20 882 21 068 18 494 5 919 4 603 5 000 3 311 3 953 2 504 0 Q4 2009 Q1 10 Q2 10 Q3 10 Q4 10 Individual provisions Portfolio provisions Write-offs, gross Write offs gross, cum Provision ratio 17
  18. 18. 10% 12% 14% 16% 0% 2% 4% 6% 8% UBS S Swedbank k 13.9 p SEB B 12.2 Dexia a SHB B 12.1 N. B. Of Greece e p DnB NOR R Stan Chart t Capital management HSBC C RBS S Nordea 10.3 s Barclays Core Tier 1 ratios (Basel 2) European banks* Danske Bank k p Credit Suisse e EFG EuroBank k Bank of Ireland d BNP P B. Popular Espana P a BNP P Lloyds s Soc Gen n Santander r Banco Pastor r Banesto o BBVA A UniCredito o Intesa a MPS S Banco Sabadell *Source: Deutsche Bank Research, Q4 10 estimates (Swedbank, SEB and Nordea actual Q4 figures) Marf in n European peer comparison core Tier 1 ratios Piraeus Bank k UBI Banca a Erste Bank k B. Po polare di Milano o BCP P Aareal Bank k Bank Inter r Raif f eisen Int t18
  19. 19. Capital managementAssets – significantly reduced risk level since Q4 08 g y(SEKbn)1 400 • Estonia joined the EMU, 1 Jan 20111 200 • RWA reduced from SEK 697bn to -108 CEE lending SEK 541bn Estonia1 000 • Reduced need for unsecured Other corporate lending, Sweden & funding of about SEK 150bn other Nordic 800 -57 Other private, Sweden 600 +67 400 Swedish mortgage loans 200 0 Q4 08 Q4 10 19
  20. 20. Capital managementLiabilities – significantly reduced risk level since Q4 08 g y(SEKbn)1 400 • Increased use of stable and efficient funding sources1 200 Central banks + Government guaranteed -182 Senior unsecured • Issued SEK 365bn since1 000 -46 second rights issue Covered bonds 800 +140 • Maturity extended significantly 600 • Liquidity buffer established +26 • Limited, if any, need for 400 Deposits unsecured funding 200 Supplementary capital +11 Co e e capital Core Tier 1 cap ta 0 Q4 08 Q4 10 20
  21. 21. Capital management – Core Tier 1Capitalisation – solid to meet risk profile and uncertainties p p 13.9% Excess capital (SEK 4.9bn) • CT1-ratio to stay above 13.0% 13 per cent until 2013 Extra buffer due to prevailing – Perception circumstances (SEK 16.2bn) – Unclear regulatory framework 10.0% – Uncertain macro economic Risk appetite environment (ICAAP buffer, SEK 16 2bn) 16.2bn) 7.0% • Long-term CT1-ratio of at least 10 per cent – CT1-ratio to stay above regulatory minimum in ICAAP Regulatory requirement (SEK 37 9bn) 37.9bn) ( (stressed) scenario ) 21
  22. 22. Capital managementExcess capital – no need to increase capital further p p• Large capital buffer in relation to current risk level• I Increasing profit generation i fit ti• RWA growth expected to be moderate• Continued focus on capital efficiency 22
  23. 23. Capital managementProposal p• AGM to decide on buy-back programme to manage capitalisation – U t 10 per cent of outstanding shares (incl. acquisition of own Up to t f t t di h (i l i iti f shares through the securities operations) – Gradual buy-backs during the permit period buy backs – Full flexibility to chose between A and preference shares 23
  24. 24. Priorities 2011• Customer focus• Growth in selective segments• Quality and effectiveness• Robust and low-risk balance sheet 24
  25. 25. Welcome to Swedbank’s Capital markets day p y23 February 2011Registration at www.swedbank.com/ir
  26. 26. Appendix 26
  27. 27. Loan to deposit ratio improved p pSEKbn 2010 2009 ΔRetail - loans 873 854 19Retail - deposits 347 318 29LC&I - loans 130 150 -20LC&I - deposits 74 69 5BB - loans 130 170 -40BB - deposits 93 103 -10R&U - loans 13 18 -5R&U - deposits 3 7 -4Group - loans 1 146 1 192 -46Group - deposits 517 497 20 27
  28. 28. Business area performance pProfit before impairments p Q4 10 Q3 09 Δ 8Q development pRetail 2 126 1 881 245Large corporates & 895 664 231InstitutionsBaltic Banking 935 937 -2Asset management 188 179 9Russia & Ukraine -116 116 -55 55 -61 61Other -660 -197 -463Group 3 368 3 409 -41 Q1 09 Q4 10 28
  29. 29. Impaired loans decreasing p g• Excl. FX effect down SEK 3bn in Q4• Underlying decreases in all business areas in Q4SEKm45 000 42 719 40 132 40 32840 000 -4 088 35 770 4 362 196 2 391 Impaired loans as % 38 631 -3 853 335 000 of gross lending 6 113 34 778 7 957 29 657 Ukraine 62%30 000 1 939 Russia 22%25 000 6 529 Lithuania 17%20 000 11 25915 000 29 657 Latvia 26%10 000 4 722 Estonia 7.7% 5 000 LC&I 0.25% 770 Retail 0.18% 1 602 0 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q4 10 29
  30. 30. -50 0 100 150 200 00 250 -150 -100 50 EURm Q Q4 09 Q Q1 10 p Q Q2 10 Estonia Q Q3 10 Q Q4 10 Q Q4 09 Q Q1 10 Q Q2 10 Latvia Q Q3 10 y Q Q4 10 p Q Q4 09 Q Q1 10 Q Q2 10 Q Q3 10 Lithuania Q Q4 10 Q Q4 09 Q Q1 10 Q Q2 10 Loans past due 60 days – performance Q/Q Q Q3 10 Ukraine Q Q4 10 Q Q4 09 Q Q1 10 Q Q2 10 Q Q3 10 Russia Q Q4 1030
  31. 31. Asset qualtiyRepossessed assets pSEKm4 0003 5003 0002 5002 0001 5001 000 500 0 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Real Estate Residential Real Estate Commercial Passenger & Commercial Transport Shares Other 31
  32. 32. Real estate prices p Tallinn Riga* 1 800 1 800 2 000 2 000 1616 1 500 1 500 No of transactions 1 500 1 500 1 200 1 200 EUR/m2 No.o transactions 813EUR/m2 900 900 1 000 1 000 617 600 669 600 500 500 of N 300 300 0 0 0 0 Q4 06 Q2 07 Q4 07 Q2 08 Q4 08 Q2 09 Q4 09 Q2 10 Q4 10 Q4 02 Q4 03 Q4 04 Q4 05 Q4 06 Q4 07 Q4 08 Q4 09 Q4 10 No of deals Average price Source: S of db k S No. transactions (Riga) NoSwedbank Average price EUR/m2 price,Source: Swedbank, Estonian Land Board Vilnius 1 800 1 731 1 800 1 500 1 500 No of transactions 1 200 1 070 1 200EUR/m2 900 900 600 600 o 300 300 0 0 Q1.05 Q4.05 Q3.06 Q2.07 Q1.08 Q4.08 Q3.09 Q2.10 No f deals N of d l Average price A i Source: Swedbank, State Enterprise Centre of Registers 32
  33. 33. Liquidity & fundingLong-term funding g g• Continued focus on covered bonds with full-year issuance of SEK 238bn• SEK 23bn in senior unsecured issuance• 4 EUR-denominated covered bond benchmark deals, each in the size of EUR 1bn• 1 EUR-denominated senior unsecured benchmark deal of EUR 1bn• Total term funding maturities in 2011 of SEK 180bnLong-term funding maturity profile, SEKbn Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2011 Q2 2011 Q3 2011 Q4 2011 2016- 0-10-20-30-40-50-60-70-80 80-90 Other NON-SEK Covered Bonds SEK Covered Bonds 33
  34. 34. Liquidity & fundingRemaining government guaranteed debt gg g• Exited the programme on April 30, 2010• No issuance under the programme since summer 2009• SEK 75bn of government guaranteed debt matured during 2010• Maturities of nominal SEK 80bn in 2011Maturity p y profile, SEKbn , 0 USD SEK EUR -20 CHF HKD -40 JPY -60 -80-100 100 2011 2012 2013 2014 34

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