Low risk – strong capitalisation Göran Bronner, Group Chief Risk Officer at Swedbank, summarizes that Swedbank has significantly reduced risk levels since 2008 through reducing risk-weighted assets by SEK 156 billion to SEK 541 billion, reducing unsecured funding needs by SEK 150 billion, and establishing a liquidity buffer. Capitalization also remains solid with a Core Tier 1 capital ratio above 13% through 2013 to meet risk profiles and uncertainties. For 2011, Swedbank will focus on proactive risk management through continued work on risk models, developing the board's risk appetite framework, credit portfolio management, monitoring the mortgage market, and transparency.

1. Low risk – strong capitalisation
Göran Bronner, Group Chief Risk Officer
© Swedbank

2. Risk
Assets – significantly reduced risk level since Q4 08
g y
SEKbn
1 400
• Estonia joined the EMU,
1 Jan 2011
1 200
-108 CEE lending
Estonia
• RWA reduced from SEK 697bn
1 000
to SEK 541bn
Other lending,
Sweden & other
800
-57
Nordic
• Reduced need for unsecured
Other private,
Sweden funding of about SEK 150bn
600
+67
400 Swedish
mortgage loans
200
0
Q4 08 Q4 10
2

3. Risk
Liabilities – significantly reduced risk level since Q4 08
g y
SEKbn
1 400
• Increased use of stable and
Central banks +
efficient funding sources
1 200
Government
-182 guaranteed
Senior unsecured
• Issued SEK 365bn since
1 000 -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
3

4. Risk
Capitalisation – solid to meet risk profile and uncertainties
p p
13.9%
Excess capital (SEK 4.9bn) • CT1-ratio to stay above
13.0%
Extra buffer
13 per cent until 2013
due to prevailing
circumstances
– Perception
(SEK 16.2bn)
– Unclear regulatory framework
10.0%
– Uncertain macro economic
Risk appetite
(ICAAP buffer, environment
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
)
4

5. Internal Capital Adequacy Assessment
Process (ICAAP)

6. Risk
Comprehensive ICAAP scenario model
p
• The process involve a wide
Scenario group
• Adverse scenario range of expertise
g p
• Base scenario
• Partly an iterative process at
each level
Sector credit Business area Product
analysts representatives experts • The exercise takes about ½ year
Bank specific Bank specific Bank specific
variables variables variables • Board of Directors approves
adverse scenario and final
Quantitative models f calculation of
Q tit ti d l for l l ti f results
future P/L and balance sheet
Results and reports
6

7. Risk
2010 ICAAP – “The Double Dip Scenario”
p
Triggers Outcome
• Financial crunch 2008 followed by weak Sweden
recovery • Negative GDP and CPI for three consecutive
• Negative GDP growth in EU years, 2011-2013
• Recovery fails and forms a second crisis - • Unemployment rate goes from 11 1% in 2009
11.1%
the global economy falls back into recession to 20.2% in 2013
in 2011 • Real estate prices drop 15% two years in a row
• Swedish krona depreciates 25% against the
p g
ICAAP 2010 - GDP development euro
108
106 Baltic countries
104 • 30% devaluation in Latvia and Lithuania during
102
100
early 2011
98 • Estonia joins the euro in 2011 but at a 15%
96 depreciated exchange rate
94
92
• N Negative GDP growth i all th
ti th in ll three countries
ti
90 during 2011-2013
88 • Unemployment reaches above 20% in Latvia
2010 2011 2012 2013 2014 2015
and Lithuania, 15% in Estonia
Sweden US EU
7

8. Risk
ICAAP 2010 – Scenario model results
Income statement Total
2009 2010 2011 2012 2013 2014 2015 2011-2015
(SEKm)
Profit be o e impairments
o t before pa e ts 16 93
6 934 10 356
0 17 787
8 80
027 10 167
0 6 9 35
351 10 908
0 56 241
Credit impairments 24 641 7 485 25 823 12 811 10 284 5 810 4 248 58 976
Net profit -10 247 1 331 -8 035 -4 784 -116 1 642 3 087 -8 207
(SEKm) 2009 2010 2011 2012 2013 2014 2015
Risk-weighted assets 603 431 609 809 587 709 555 462 531 872 520 878 518 853
Core Ti 1 capital
C Tier it l 72 471 73 509 60 938 54 158 54 109 55 786 58 914
Core Tier 1 capital ratio, % 12.01 12.05 10.37 9.75 10.17 10.71 11.35
• Core Tier 1 capital ratio troughs in 2012
• One-off positive effect in 2011 from devaluation in the Baltic countries
One off
• Lending volumes decline over the scenario, decreasing NII and risk-
weighted assets
8

9. Risk – Priorities 2011
Focus on proactive risk management
p g
• Continue work with FRR/Ektornet
• Further develop risk appetite expressed by Board of Directors
– Secure decision at ”right level”
– Steering tool for business
• Credit portfolio management
• Monitor mortgage market
• Transparency
9