Swedbank's presentation of the third quarter 2011 results

1. Swedbank’s third quarter 2011 results
Michael Wolf, CEO
Wolf
Göran Bronner, CFO
Håkan Berg, CRO

2. Stable result but increased macro uncertainty
y
• Net profit of SEK 3 475m
• Core Tier 1 capital ratio of 15.1 per cent
• Return on equity of 14 4 per cent in Q3
14.4
• Pause in buy-backs
Profit for the period
Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
2

3. Well prepared to meet increased uncertainty
p p y
• Increased macro uncertainty – lower growth
• Income pressure likely
– Interest rates
– Lower activity
• Intensified cost focus
• Strong position capital and liquidity
3

4. Potential long-term effects
Increased cost of doing banking
g g
• Lower leverage
– Governments banks, businesses and households
Governments, banks
• Reshaping of savings market
• Long-term regulatory changes
– Demarcation line tax payers/shareholders
– Cost of senior funding
– Ring fencing of certain banking activities
g g g
– Increased cost for cross border banking
• Increased cost of doing banking will affect all stakeholders
4

5. Retail
Solid performance
p
SEKm Profit before impairments • Improved NII
2 800
2 400
2 000 • Stable asset quality
1 600
1 200
800
• Good cost control
400
0
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
• High interest rate sensitivity
SEKm Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 • Transaction to relation (T2R)
Net interest income 2 499 2 752 2 925 3 026 3 143
Net commission income 1 019 1 132 1 073 1 051 1 089
Total income 3 981 4 349 4 395 4 593 4 683
Total expenses 2 100 2 223 2 193 2 237 2 082
Profit bef impairments 1 881 2 126 2 202 2 356 2 601
Total impairments -3 136 5 5 106
C/I ratio
0.53 0.51 0.50 0.49 0.44
5

6. Large Corporates & Institutions
Turbulent market conditions
SEKm Q1 11* Q2 11 Q3 11 SEKm Profit before impairments
1 100
Net interest income 850 884 778
of which LC & FI** 450 485 557
of which Capital markets 370 378 184 700
Commission income 505 412 399
of which LC & FI**
f C ** 289 202 225 300
of which Capital markets 215 211 174
Total income LC&I 1 755 1 344 1 311 -100 Q3 10 Q4 10 Q1 11* Q2 11 Q3 11
of which LC & FI**
FI 781 731 827
of which Capital markets 943 589 415
Total expenses, excl variable pay 776 778 772
• Poor capital markets income
Variable staff costs 83 50 6
Profit bef impairments 896 516 533 • Strong customer related
of which LC & FI** 514 473 594 income
of which Capital markets 364 31 -127
Credit impairments -105 -19 -66
• Continued re-pricing
C/I ratio 0.49 0.62 0.59
• Increased volumes
* Excluding Lehman one-off ,**Large corporates and Financial institutions
6

7. Baltic Banking
Stable development
p
Profit before impairments
SEKm
1 000
• Slowing deleveraging
800
• Continued recoveries
600
400
• Increased activity
200
0
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
• High interest rate sensitivity
SEKm Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Net interest income 919 1 168 997 1 017 994
Net commission income 386 383 317 365 392
Total income 1 561 1 632 1 472 1 568 1 606
Total expenses 624 697 658 653 649
Profit bef impairments 937 935 814 915 957
C/I ratio 0.40 0.43 0.45 0.42 0.40
7

8. Group results
Solid core development
p
SEKm 9M 10 9M 11 Q2 11 Q3 11 • Lower asset management and
Net interest income 11 802 14 124 4 740 4 857
corporate finance fees
Net commission income 6 987 6 837 2 244 2 292
Net gains and losses 2 043 1 025 511 259
Other income 2 254 3 011 860 782
• Negative funding related
Total income 23 086 24 997 8 355 8 190 valuation effects in Treasury
l ti ff t i T
Total expenses 13 052 13 060 4 345 4 331
Profit before impairments 10 034 11 937 4 010 3 859 • Good cost control
Total impairments 3 524 -1 733 - 309 - 454
– One-off cost of SEK 100m
Profit for the period 4 694 10 779 3 452 3 475
in Ukraine
Return on equity, % 6.9 15.0 14.4 14.4
– Cost increase in Ektornet
Cost-income ratio 0.57 0.52 0.52 0.53
Core Tier 1 capital ratio, %* 13.4 15.1 14.8 15.1
Risk-weighted assets, SEKbn* 560 497 509 497
• Deposit g
p growth
Deposits and borrowings
524 555 529 555
from the public
* Basel 2
8

9. Liquidity and funding
Funding development Q3
g p
• SEK 60bn of long-term debt issued in Q3
• Demand f S db k short-term paper continued
D d for Swedbank h t t ti d
• USD-funding need covered for more than 12 months
Long-term debt issued in Q3 Outstanding short-term debt
SEKm
SEKm
SEK
35 000 Q2 11
60 000
Q3 11
30 000
50 000
25 000
40 000
20 000
30 000
15 000
20 000
10 000
5 000 10 000
0 0
Domestic Euro CB USD CB Other CB Senior Domestic CP ECP USCP Yankee CD
CB (144A) unsecured
9

10. Liquidity and funding
Term funding at a slower pace going forward
g p g g
• Over SEK 600bn term funding issued since Q3 2009
• Significantly lengthened maturities
• All government guaranteed debt pre-funded
SEKbn
100 Term funding issuance
Average term funding issuance
Pre-funded term maturities
75 Average term funding need
50
25
0
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q1 2011
Q2 2011
Q3 2011
Q4 2011
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
10

11. Liquidity
Conservative liquidity levels
q y
• Short-term funding mainly a tool for cash management
SEKbn
350
300
250 Next 12-month
Other pledgeable
and/or liquid assets term funding
200 maturities
Additional liquidity
q y
reserve assets
150 Commercial
Central bank deposits papers/ Certificate
of deposits and
100 net interbank
funding
50
0
Source: Swedbank 30 Sep 2011
11

12. Liquidity
Conservative liquidity levels
q y
• Short-term funding mainly a tool for cash management
• More th 15 months pre-funded
M than th f d d
SEKbn
350
300
250 Next 12-month
Other pledgeable
and/or liquid assets term funding
200 maturities
Additional liquidity
reserve assets
150 Commercial
Central bank deposits papers/ Certificate
of deposits and
100 net interbank
funding
50
0
Source: Swedbank 30 Sep 2011
12

13. Capital management – Core Tier 1 ratio
Uncertain regulatory demand – Swedbank well positioned
g y p
• Still large regulatory uncertainty
regarding minimum CT1 ratio and
15.1%
different buffers
Excess capital
(SEK 10.4bn) • Basel 3
13%
Extra buffer
– CT1 ratio impact 100bp
due to prevailing
circumstances
– LCR 212%
(SEK 14.9bn)
10%
– NSFR 92%
Risk appetite
(ICAAP buffer,
SEK 14.9bn)
7%
Minimum
requirement
(SEK 34.8bn)
13

14. Risk highlights
Improvement but increased macro uncertainty
p y
• Improved asset quality
– Decreased impaired loans
– Continued recoveries
– Positive rating migration
– Improved loan-to-value developments in Estonia, Latvia and Lithuania
• Increased macro economic uncertainty
– World economy slowing
– House market in Sweden slowing down
14

15. Asset quality
Net recoveries of SEK 441m in Q3
Credit impairments, SEKm • Continued recoveries in CEE
120
– Positive development in the
Baltic corporate portfolio
– Mortgage provisions in Ukraine
• Solid Swedish performance
-324
-441
441
-483
-972
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Retail LC&I Baltic Banking Russia & Ukraine Other
15

16. Continues actions to ensure proactive risk management
p g
• Review of potentially exposed sectors in Retail and LC&I
– P
Proactive work
ti k
– Ensure customers’ buffers
• Complementary stress tests shows strong resilience
– Prudent mortgage lending in Sweden
• Ukrainian and Latvian mortgage books most exposed
– Limited total impact
16

17. Focus on risk-weighted assets
g
RWA development • Future focus areas
SEKbn
515 – Review of small and mid-sized
corporates Sweden
4.8 – Advanced IRB
510 509.3
509 3 -8.0
80
• Potential regulatory development
– Mortgages
505
-4.8
500 -2.1
-2.2
497.1
495
2011 Volume Def inition Rating Other credit Market 2011
Q2 (EAD) change* migration risk risk Q3
* Corporate size definition
17

18. Swedbank’s resilience strong
g
• Solid credit portfolio
• Strong capitalisation
• Resilient funding position
– No short-term funding dependence
– Limited dependence on senior funding
– Well matched USD funding
– High q
g quality covered bond p
y pool
18

19. Swedbank’s cover pool
House price sensitivity of the cover p
p y pool
Over
collaterlisation • Resilient LTV-structure with
30%
an approximate 2-to-1
2 to 1
25%
OC
relationship between house
20%
price drops and cover pool
15% size
10%
5%
0%
-5%
-10%
-15%
-20%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
House price drop
19

20. Appendix
20

21. Asset quality
Impaired loans decreasing
p g
• Excluding FX effect down SEK 2.5bn in Q3
• Minor increase in Retail in Q3
SEKm
SEK
45 000 42 719 38 631
40 132 40 328
2 391 -4 088 34 778
40 000
35 770 4 362 196
-3 853
3 31 747
35 000 Share of
6 113 -3 031 30 669
29 657 28 743 impaired
-1 078
30 000 -1 926 loans, gross
25 000 5 840 Ukraine 63%
1 378 Russia 22%
20 000
5 810 Lithuania 15%
15 000 29 657
10 000 9 079 Lativa 23%
5 000 Estonia 7.9%
4 532
LCI 0.12%
400
1 704 Retail 0.19%
0
Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q3 11
21

22. -90
-70
-50
-30
-10
-110
-150
-130
10
30
EURm
Q
Q3 10
Q
Q4 10
Q
Q1 11
p
Asset quality
Estonia
Q
Q2 11
Q
Q3 11
Q
Q3 10
Q
Q4 10
Q
Q1 11
Latvia
Q
Q2 11
Q
Q3 11
y
Q
Q3 10
Q
Q4 10
p
Q
Q1 11
Lithuania
Q
Q2 11
Q
Q3 11
Q
Q3 10
Q
Q4 10
Q
Q1 11
Ukraine
Q
Q2 11
Loans past due 60 days – performance Q/Q
Q
Q3 11
Q
Q3 10
Q
Q4 10
Q
Q1 11
Russia
Q
Q2 11
Q
Q3 11
22

23. Asset quality
Provisions – well provided for
p
• Individual provisioning rates maintained
• Work out
Work-out portfolios slowly declining
• Positive rating migrations
SEKm
30 000
Provision ratios, % Q3 11
63.9% Retail 87
25 000
3 606 62.7% LC&I 103
61.0% 60.0% Baltic Banking 54
20 000 21 068 3 297 59.8%
2 769 Russia 62
18 494 2 436
2 409 Ukraine 67
15 000 16 598 15 952
14782 Group
G 60
10 000 6 306
5 204
2 099 4 373
5 000
1 449
0
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Individual provisions Portf olio provisions Write-of f s, gross, cum f rom 2010 Provision ratio
23

24. Asset quality
Repossessed assets
p
SEKm
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Real Estate Residential Real Estate Commercial Passenger & Commercial Transport Shares Other
24

25. Asset quality
Credit impairments by category
p y g y
SEKm
2 000
1 500
1 000
120
500
0
- 500
- 324
- 441
-1 000
- 483 - 972
-1 500
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Portfolio provisions Individual provisions Recoveries Write-offs net
25

26. Real estate prices – Sweden 2011
p
Single-family homes Tenant owner rights
Purchase price /
12M Δ Price (SEK) per Sqm* 12M Δ
assessed tax value*
value
Jan/11 1,58 1% 21 909 8%
Feb/11 1,59 1% 22 074 7%
Mar/11 1,59 0% 22 004 7%
Apr/11 1,6 0% 21 884 5%
May/11 1,6
16 -1%
1% 21 584 4%
Jun/11 1,6 -1% 21 286 3%
Jul/11 1,58 -2% 21 196 1%
Aug/11 1,56 -2% 21 264 -1%
Sep/11 1,56 -2% 21 480 -1%
*3 months moving average
Source: Mäklarstatistik (www.maklarstatistik.se)
26

27. 20
40
60
80
0
100
120
140
0
100
120
140
20
40
60
80
2007-01 2007-01
2007-03 2007-03
2007-05 2007-05
2007-07 2007-07
2007-09 2007-09
Total volume
2007-11 2007-11
Total volume
2008-01 2008-01
2008-03 2008-03
2008-05 2008-05
2008-07 2008-07
2008-09 2008-09
2008-11 2008-11
2009-01 2009-01
p
2009-03
Stockholm (index)
Götaland (index)
2009-03
2009-05 2009-05
2009-07 2009-07
2009-09 2009-09
2009-11 2009-11
2010-01 2010-01
2010-03
2010-03
2010-05
2010-05
Single-family homes - by region*
2010-07
Svealand (index)
2010-07
2010-09
* 20 larger geographically distributed cities excl Stockholm, Gothenburg and Malmö
Gothenburg (index)
Single-family homes - major cities
2010-09
2010-11
2010-11
2011-01
2011-01
2011-03
2011-03
2011-05
2011-05
2011-07
2011-07
2011-09
2011-09
0
Norrland (index)
0
Malmö (index)
1 000
2 000
3 000
4 000
5 000
6 000
500
Volume
Real estate prices – Sweden
Volume
1 000
1 500
2 000
2 500
3 000
0
0
100
120
140
100
120
140
160
180
20
40
60
80
20
40
60
80
2007-01 2007-01
2007-03 2007-03
2007-05 2007-05
2007-07 2007-07
2007-09 2007-09
(
2007-11
Total volume
2007-11
2008-01 2008-01
2008-03 2008-03
Total volume (index)
)
2008-05 2008-05
2008-07 2008-07
2008-09 2008-09
2008-11 2008-11
(
2009-01 2009-01
(
2009-03 2009-03
)
Stockholm (index)
2009-05 2009-05
Götaland (index)
)
2009-07 2009-07
2009-09 2009-09
2009-11 2009-11
2010-01 2010-01
2010-03 2010-03
2010-05
(
2010-05
Gothenburg (
Tenant owner rights - by region*
2010-07
Tenant owner rights - major cities
2010-07
2010-09 2010-09
Svealand (index)
)
)
g (index)
2010-11 2010-11
2011-01 2011-01
2011-03 2011-03
2011-05 2011-05
2011-07 2011-07
(
(
2011-09 2011-09
0
0
)
Malmö (index)
Norrland (index)
)
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
2 000
4 000
6 000
8 000
Volume
10 000
10 000
12 000
Volume
27
Source: Mäklarstatistik, Swedbank

28. Real estate prices – Baltic countries
p
Tallinn Riga
1 800 2 000
1 616 1 762
1 600 1 800
1 400 1 600
1 200 1 400
939 1 200
1 000
1 000
800
800 598
600 600
400 400
200 200
0 0
May-05
May-06
May-07
May-08
May-09
May-10
May-11
Mar-06
May-07
Feb-09
Apr-10
Jan-05
Sep-05
Jan-06
Sep-06
Jan-07
Sep-07
Jan-08
Sep-08
Jan-09
Sep-09
Jan-10
Sep-10
Jan-11
Sep-11
Jan-05
Aug-05
Dec-07
Jul-08
Sep-09
Nov-10
Jun-11
Oct-06
Nr.of deals EUR/m2 Nr.of deals EUR/m2
Source: Swedbank, Estonian Land Board Source: Swedbank
Vilnius
2 000
1 800 1 731
1 600
1 400
1 068
1 200
1 000
800
600
400
200
0
Mar-06
May-07
Feb-09
Apr-10
Jan-05
Aug-05
Dec-07
Jul-08
Sep-09
Nov-10
Jun-11
Oct-06
Nr.of deals EUR/m2
Source: Swedbank, State Enterprise Centre of Registers
28

29. Liquidity and funding
Liquidity reserve*
q y SEKm
SEK
AAA-rating**
Cash and holdings in central banks 190 843
Deposits in other banks available overnight
p g 759
Securities issued or guaranteed by sovereigns, central banks or multilateral development banks 32 854
Securities issued or guaranteed by municipalities or Public sector entities
Covered bonds 54 383
- Issued by other institutions 54 383
- Own issued
Securities issued by non-financial corporates
Securities issued by financial corporates (excl. covered bonds) 929
Other
Total 279 768
*According to the template defined by the Swedish Bankers' Association
Additional liquid assets, Group 57 287
Other, over-collateralisation in the cover pool 130 000
Total 467 055
**100% of the securities in the liquidity reserve per Q3 2011 are rated AAA
f th iti i th li idit t d
29

30. Liquidity and funding
Long-term funding
g g
• Continued focus on covered bonds with Q3 issuance of SEK 60bn
• Term funding of SEK 210bn issued first 9M 2011, with maturities of SEK 97bn
during the same period
• Maturities for the remainder of 2011 amount to nominal SEK 69bn
• Nominal figures term funding Q3 2011:
• Covered bonds SEK 58bn; Senior unsecured SEK 2bn
Long-term funding maturity profile, SEKbn
200 200
150 Covered bonds 150 Senior unsecured
Guaranteed bonds
100 100
50 50
0 0
2011 2012 2013 2014 2015 2016 2017- 2011 2012 2013 2014 2015 2016 2017-
30

31. Liquidity and funding
Remaining government guaranteed debt
gg g
• Exited the programme on 30 April 2010
• No issuance under the programme since summer 2009
p g
• SEK 39bn of government guaranteed debt matured during the first nine months of 2011
• Maturities of SEK 41bn for the remainder of 2011
Maturity profile as per Q3 2011, SEKbn
60
40 USD
SEK
EUR
CHF
HKD
20
JPY
0
2011 2012 2013 2014
31

32. Liquidity and funding
Limited unsecured funding need
g
Lending to the public, less deposits, covered bond
pool and retail bonds
SEKbn
200
150
100
50
0
-50
-100
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011
32