bank of america merrill lynch banking & insurance ceo conference · 2010-09-30 · bank of...
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Bank of America Merrill Lynch Banking & Insurance CEO Conference London, 30 September 2010
Christian ClausenGroup CEO
2
Disclaimer
This presentation contains forward-looking statements that reflect management’s current views with respect to certain future events and potential financial performance. Although Nordea believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward- looking statements as a result of various factors.
Important factors that may cause such a difference for Nordea include, but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate, (iii) change in the regulatory environment and other government actions and (iv) change in interest rate and foreign exchange rate levels.
This presentation does not imply that Nordea has undertaken to revise these forward- looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided.
3
A well diversified, fast growing and high-quality operation
4
CMB
Large
OtherNordic PB
Gold
Other
Income well split between corporate and household customer segments
Strong growth trend in all corporate segments and in Gold and Private Banking
Diversified and fast growing customer operation
Income split per customer segment, Q210 Income growth YoY Q210/Q209, %
-10%
0%
10%
20%
CMBLargeOtherNEM
ShippingFin inst
Nordic P
B GoldOtherNEM
Int'l PB
Total
Int’l PB
NEMShipping
Corp
orat
e
Hous
ehol
d
NEM
Fin inst
Corporate Household
5
Diversification inherent strength in Nordea
Household mortgage
Consumer
Real estate
Industrial commercial
services
Financial inst
Consumer staples
Retail trade
Shipping
Transport
Construction
Other corporate
56% corporate lending and 44% household
Only one industry account for more than 10% of total lending
87% of the portfolio in the Nordic countries
NB Denmark
NB Sweden
NB Finland
NB Norway
BalticsPoland
Russia
Shipping
Fin inst incl repos
Credit portfolio by sector Credit portfolio by customer area/ geography
6 Source: company information and reports
Nordea one of few AA rated banksProfit orientation
and prudence
Ratings, September 2010S&P long-term Moody’s long-term
BBVA AA Aa2Santander AA Aa2BNP Paribas AA Aa2Nordea AA- Aa2Handelsbanken AA- Aa2
Intesa Sanpaolo A+ Aa2Société Générale A+ Aa2DnB NOR A+ Aa3Lloyds A+ Aa3Danske Bank A Aa3UniCredit A Aa3Commerzbank A Aa3Erste Bank A Aa3
Barclays A+ A1SEB A A1RBS A A1Swedbank A A2KBC A- A1AIB A- A1Bank of Ireland A- A1
7
Funding operation based on multiple sources
Nordea Hypotek SEK, 20%
Nordea Hypotek EMTN, 7%
Nordea Kredit DKK, 33%
Nordea Hypotek Reg CB, 1%
Nordea Kredit EUR, 3%Eiendomskreditt NOK, 4%
Nordea Bank FinlandMTN Structured, 6%
Nordea EMTN, 12%
Nordea MTN plain, 0%
Subord., 6%USMTN, 2 %
Nordea Stand alone, 3%
Gov’t gteed, 1%NY US CD, 2%
Outstanding long-term funding
8
Broad funding base and high activity – record EUR 25bn issued already this year
Accumulated long term funding (excl Nordea Kredit))
0
5,000
10,000
15,000
20,000
25,000
30,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
€ m
2008 2009 2010
Latest transactions in 2010EUR 1bn 3-year FRN in June –3-month Euribor +75 bps
EUR 1.25bn 10-year fixed rate in June –midswap +110 bps – the first fixed rate senior deal in two months as Nordea reopened the market
EUR 1.25bn 5-year fixed rate in August –midswap +73 bps – the first fixed rate FIG benchmark post summer
Strong covered bond platformDomestic issuance continues as normal in Danish and Swedish covered bond markets
First issuance by Nordea Eiendomskreditt in August in the Norwegian domestic covered bond market
Nordea Bank Finland – covered bond platform under establishment
9
%
Source: Swedish Riksbank, Standard & Poor’s
0
1
2
3
4
5
6
7
8
9
10
Nor
dea
HSB
C
DnB
NO
R
Dex
ia
SEB
Sw
edba
nk
SHB
KB
C
Sant
ande
r
Bar
clay
s
Cre
dit S
uiss
e
Cre
dit A
gric
ole
Soc
iété
Gén
éral
e
LBBW
Uni
Cre
dit
Inte
sa S
anpa
olo
Dan
ske
Ban
k
Deu
tsch
e Ba
nk
BN
P P
arib
as AIB
Bay
eris
che
LB
UBS
Citig
roup
Strong capital position in a global perspective
Risk-adjusted capital ratios
10
One of the most stable profit development among banks in Europe
Profit before tax development through the financial crisis (Indexed)
Index = 100
* Aggregate of a selected number of banks in the European peer group: BBVA, Commerzbank, Erste, Intesa Sanpaolo, KBC, Santander, UniCredit
** Nordic peers: Danske Bank, DnB NOR, SEB, SHB, Swedbank
-40
-20
0
20
40
60
80
100
120
140
07Q1
07Q2
07Q3
07Q4
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
Nordea
European peers*Nordic peers**
1111
Customer satisfaction improving versus competitors
Nordea
2007 2009
Peers
-0.6 3.9
71.267.6
70.6+0.9
- 3.6
CSI index (aggregate) 2007-2009*
71.5
*Corporate and high involvement customers, corresponding to Gold and Silver segment customers
Values
12
The history of Nordea – 10 years of success
13
Nordea created through a string of mergers
From the start:- Around 300 banks
1970s: 80 banks 1980s: 30 banks1990s: 4 banks
2010: Nordea- One operating model- Unique diversification- Proven business model
1414
An outstanding starting point in nine markets
Nordea home marketsNordea home markets
Distribution power1,400 branches and 6 million e-banking customers
11 million customers9 home marketsApprox. 10m personal customers750 000 corporates, incl. Nordic Top 500
Financial strengthEUR 9bn in Income (2009)
EUR 571bn of Assets (2009)
EUR 23bn in equity capital
AA credit rating
EUR 31bn in market capOne of the largest Nordic corporationsA top 10 European retail bank1 of 2 Nordic Forbes 100 companies
15
0%
50%
100%
150%
Lend
ing
Depos
its
Incom
e
Expen
ses
Profit b
. loan
loss
es
Nordea was renamed at an EGM in November 2000
More than doubling of lending and deposit volumes as well as profit before loan losses
Considerable cost/income ratio improvement from 64% to 53%
10 years of success…
10-year growth, % (H1/10 annualised compared to Q4/00 annualised )
40%
50%
60%
70%
2000
2010
Cost/income ratio, % (H1/10 annualised compared to Q4/00 annualised )
16
-60
-50
-40
-30
-20
-10
0
10
20
H1
2002
H2
2002
H1
2003
H2
2003
H1
2004
H2
2004
H1
2005
H2
2005
H1
2006
H2
2006
H1
2007
H2
2007
H1
2008
H2
2008
H1
2009
H2
2009
H1
2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
bps
…with strong credit management
Credit risk appetite 25 bps
Loan loss ratio
17
30.9
0 10 20 30 40 50 60 70 80 90 100
Allied Irish BanksBank of IrelandCommerzbank
ErsteSwedbank
SEBDanske Bank
KBCSHB
DnBNORIntesa Sanpaolo
NordeaSociete Generale
RBSBBVA
UnicreditBarclays
LloydsBNP Paribas
Santander
…has created a sizeable European bank
EURbn
Source: ThomsonReuters Datastream
Market capitalisation (15 September 2010)
18
The current trend for Nordea
19
Macroeconomic stabilisation in the Nordic region
Growth rates expected to be solid in the Nordic countries
In 2010, all Nordic countries are expected to have:
Positive growth rates
Modest inflation
Relatively strong public finances
Improvements in labour markets
GDP growth, %, y/y
Source: Nordea Markets
Public finances, % of GDP
08 09 10 11 12-10.0
-7.5
-5.0
-2.5
0.0
2.5
5.0
-10.0
-7.5
-5.0
-2.5
0.0
2.5
5.0 % of GDP % of GDP
USA
Euro area
Denmark
Finland
Sweden
Norway +12-18%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q409 10
-10.0
-7.5
-5.0
-2.5
0.0
2.5
5.0
7.5
-10.0
-7.5
-5.0
-2.5
0.0
2.5
5.0
7.5% y/y GDP % y/y
Sweden Denmark Norway Finland
20
Result highlights
EURm H1/10 H1/09 Chg % H2/09 Chg %
Net interest income 2,484 2,661 -7 2,620 -5
Net fee and commission income 1,013 793 28 900 13
Net result from items at fair value 887 1,109 -20 837 6
Other income 80 75 7 78 3
Total income 4,464 4,638 -4 4,435 1
Staff costs -1,388 -1,352 3 -1,372 1
Total expenses -2,350 -2,206 7 -2,306 2
Profit before loan losses 2,114 2,432 -13 2,129 -1
Net loan losses -506 -781 -35 -705 -28
Operating profit 1,608 1,651 -3 1,424 13
Net profit 1,182 1,245 -5 1,073 10
Risk-adjusted profit 1,194 1,524 -22 1,262 -5
21
1,305 1,2991,235 1,249
1,321
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10
EURm
Net interest income held up well in H1 2010, despite the low interest rate level
Solid trend in customer operations continues
Lending and deposit volumes up
Margins stable
Remains subdued by the low interest rate levels
Lower contribution from Group Treasury
Slight increase in average funding cost when maturing long-term funding was prolonged at higher market rates
22
EURm
687 702 687 701
392 382471 438 445
670
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10
Staff costs Other expenses
1 116 1 087
1 2191 164
Expenses in line with outlook
1 186Cost management remains firm
Increase in H1 2010 related to Group initiatives and currency effects
Total expenses up 7% compared to last year
Up 2% adjusted for currency effects
23
468
-91
425413
-82
358452
-135
346358
-97
261316
-128
245
58
4827
29
Q2/09 Q3/09 Q4/09 Q1/10 Q2/10
Gross loan losses Danish guarantee scheme
DK, 42%
OTHER, 2%NEM, 17%
SOSI, 6%SE, 0%NO, 4%
FI, 29%
Loan losses by area Q2 2010
EURm
Credit quality improving during 2010
Net loan losses down to 36 bps in H1 2010 (55 bps last year)
30 bps individual (42 bps)
6 bps collective (13 bps)
140 bps in the Baltic countries (166 bps)
Excluding guarantee scheme provisions, net loan loss ratio down to 32 bps (51 bps)
Decreased loan losses in most areas
Impaired loans gross down 1% in Q252% of impaired loans performing
Reversals Net loan losses
24
The future - Journey to Great Nordea
25
Great Nordea framework
Profit orientation & prudence
Ambitious vision & targets
Strong customer- oriented values &
culture
Growth to free up resources to improve customer satisfactionGrowth to create value to our shareholders
Through the cycle approach – careful navigation between risks and opportunities
Need to set targets to be able to reach the goalsMotivation to perform extraordinarily
Nine countries, and everything differentCommon values and platform to form one team
Rationale
Clear growth strategy
26
Delivery on long-term targets
Top quartile
Total shareholder return 1 Jan 2007- 16 Aug 2010
Risk-adjusted profit rolling 4 quarters development
2007 – Q2 2010
RoE 2007 – Q2 2010Nordea has reported one of the highest average return on equity (RoE) of Nordic
peers¹, 14.4%¹Nordic peers: Danske Bank, DnB NOR, SEB, SHB, Swedbank
41.4%
25.5%
Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q4/ 08 Q1/ 09 Q2/ 09 Q3/ 09 Q4/ 09 Q1/ 10 Q2/ 10
Rolling four quarters compared with FY 2006 EUR 1,957mLong-term target for average yearly growth
Ambitious vision & targets
0.0
-100
-80
-60
-40
-20
0
20
Allie
d Iri
sh B
anks
RBS
Ban
k of
Irel
and
Com
mer
zban
k
Lloy
ds
KB
C
Uni
cred
it
Soc
iete
Gen
eral
e
Sw
edba
nk
SEB
Inte
sa S
anpa
olo
Bar
clay
s
Dan
ske
Ban
k
Ers
te
BB
VA
BN
P P
arib
as
San
tand
er
Nor
dea
DnB
NO
R
SH
B
27
Strong customer-oriented values and culture – become part of DNA
Foundation:Profit orientation and
prudent cost, risk and capital management
A Great European Bank,acknowledged for its people, creating
superior value for customers and shareholders
Great customer experiences It’s all about people One Nordea team
Values
28
Prudent growth strategy – Group initiatives and strong business development
29
We continue on the journey to Great and to deliver on our long-term target
Great Nordea
07 08 09 10 11 12
Middle of the road
Keep income growth momentum
Cost, risk and capital take the lead
Enable us to accelerate out of the crisis
Profitable organic growth Prudent growth
Organic growth strategy Next level strategy based on stronger position
Group initiatives launched to support the strategy
Next generation of initiatives launched
Growth strategy
30
Clear growth strategy
HouseholdNew Markets
Efficient value chain delivery to customer segmentsUpgrade IT infrastructure and processes and back office operationsReplacing multiple old stand-alone platforms (cards and payments) with one uniform platform per product area
Corporate New European Markets
Growth strategy
Migrate existing customers to relationship segmentsAttract new customers to relationship segmentsIncrease advisory capacityReduce cost by multichannel
Increase market share with largest customersProactive advise on ancillary products to Medium customers
Continue successful organic growth path in Poland
Efficiency initiatives
31
Household relationship strategy
Household
Growth strategy
Higher income and growth potential
More loyal
Low risk
Efficient to serve
5 x higher income in PB vs. Gold4 x higher income in Gold vs. Silver13% income growth in Gold and PB segments last 12 months
Customer benefits: Relationship-based and prioritized access to named advisor, long-term view on relationship, attractive prices
CSI scores 3-7 points higher in Gold and PB segments than in rest of Household
Sale of all products through the Gold dedicated 360° advisory meetingTransactions and daily services through lower cost to serve channels
6 bps in loan losses for household mortgages in H12010
Migrate existing customers to relationship segmentsAttract new customers to relationship segmentsIncrease advisory capacityReduce cost by multichannel
32
Solid trend accelerated in 2010 – 7% more customers from one year ago
110,000 new Gold and Private Banking customers in H1 2010 – more than 70% new customers in Nordea
Improved market share in all countries
Continued strong customer demand in household segment – increased volumes with stable margins
Total income in household segment up 5%
Household strategy delivery: + 7% in H1
2,6902,812
2,885
Q2 2009 Q1 2010 Q2 2010
Number of Gold customers, ‘000
0.3
0.1 0.1
0.2
DK FI NO SE
Lending market share increase, %
Growth strategy
33
Corporate relationship strategy
Corporate
Growth strategy
Higher income and potential
All products
Customer benefits: Relationship-based advise, access to Nordea’s products and balance sheet capacity, competitive prices, and a partner for a rainy day
Close, partnership based relationships
75% of Corporate income from CMB and Large, < 5% of number of Corporate customersBalanced, diversified product mix: lending, deposits, transactions, risk management and corporate finance
Growth at lower risk than existing portfolio – average risk weights 1%-point down in 2010
Mutual commitment and knowing your customer, provide help also in difficult timesTop ranked in GreenwichUp to 7 points higher CSI scores with CMB and Large segments
Prudent risk taking
Increase market share with largest customersProactive advise on new products to Medium customers
34
136 139 144
Q2 2009 Q1 2010 Q2 2010
Increased business confidence - lending volumes up 4% in H1 2010
Continued strong demand for risk management products
Improved market share in Corporate Banking - strategy to build house-bank relations proven successful
Corporate strategy delivery: Income + 7% in H1
Corporate lending, EURbn
0.1 0.1
-0.1
0.1
DK FI NO SE
Lending market share increase, %
Growth strategy
35
Rating distribution
0%
2%
4%
6%
8%
10%
12%
14%
16%
6+ 6 6- 5+ 5 5- 4+ 4 4- 3+ 3 3- 2+ 2 2- 1+ 1 1-
Rating
EAD
(%)
06.2010 12.2009
Improved average risk weights following growth focused to stronger corporates
Decreases during 1H 2010Increases during 1H 2010
Growth strategy
36
Increase in corporate lending margins
Corporate lending margins, average in the lending book, %
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10
Banking Denmark
Banking Norway
Nordic Banking total
Banking Finland
Banking Sweden
Growth strategy
37
New European Markets strategyGrowth strategy
High potential
Proven track record
Low risk
Nordic model
High GDP growth (now ~2x Nordic), and growth in penetration of banking products (bringing growth to ~3x)
110 + 50 branches opened14x more Gold customers in H12010 vs. H12006Operating profit doubled H12010 vs. H12009
Loan losses of 5 bps in 2009
Application of Nordic business model and customer concepts with focus on Gold segment
New European Markets
Continue successful organic growth path in Poland
Customer benefits: Nordic business model and conceptsRelationship and advise in focusPrudent banking
New European Markets: Russia, Poland and the Baltic countries
38
New European Markets: A growth area for Nordea
Strong growth over time…
…driven by positive development in Poland and Russia
Costs well under control – C/I-ratio down to 44% in 2009
Baltic countries back to profitability in 2Q10
Profitable growth – RAROCAR 22% in H12010
CAGR 63%
60 65117
151
206
275 268255
317
H106
H206
H107
H207
H108
H208
H109
H209
H110
NEM income, EURm
Growth strategy
39
Concluding remarks
40
Key messagesNordea has a uniquely diversified operation
Nordea has a proven record of growth and improving efficiency
Continued strong trend in customer businessIncome from corporate customers up 7% and from household customers up 5% in H1
Increased lending, deposits and AuM volumes
Solid inflow of new customers – increased market shares in all markets
Positive development in corporate finance business – relationship banking approach further strengthened
Focus on prudent growth and the execution of the Group initiativesOn track in all areas
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