ceo presentation q3 analyst call
DESCRIPTION
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.TRANSCRIPT
S db k’ thi d t 2010 ltSwedbank’s third quarter 2010 results21 October 2010
Michael Wolf, CEOErkki Raasuke, CFOGö B CROGöran Bronner, CRO
Continued financial improvementp
• Net profit of SEK 2.6bn in Q3
• Baltic Banking net profit in Q3 of SEK 531m
• Improved NII and stable net commission incomeImproved NII and stable net commission income
Net profit performanceet p o t pe o a ce
2
Q3 09 Q4 09 Q1 10 Q2 10 Q3 10
Result by business area
Business highlightsSEKm Profit before impairments
Retail• Increased NII and seasonally lower costs
g g
1 000
2 000SEKm Profit before impairments
Q2 10
Q3 10
• Increased market share in new mortgage lending
• New in-principle framework agreement with 0
savings banks
Large Corporates & Institutions
-1 000Retail Large
Corporates & Institutions
Baltic Banking
Russia & Ukraine
Asset Management
Ektornet
• Slow trading activity• Stable corporate lending volumes 2 000
SEKm Operating result
Q2 10
Q3 10
Baltic Banking• NII supported by lower domestic rates• Deleveraging in Baltic Banking continues
0
1 000
• Deleveraging in Baltic Banking continues• Decreasing credit impairment trend -1 000
Retail Large Corporates & Institutions
Baltic Banking
Russia & Ukraine
Asset Management
Ektornet
3
Institutions
Improved NIINet interest income
p• Retail showed increased volumes and improved margins
• LC&I lower activity levels• LC&I lower activity levels
• Treasury deficit reduced by funding mismatch effects
5 017 4 702
4 023
Retail LC&I Baltic Banking
Russia, Ukraine
Treasury, Other
102 24 1461233 980
4 023 3 799 102
-113
711
45
918
24 146 123
711
2 432
227
(SE
Km
)
4
-227Q3 09 Q4 09 Q1 10 Q2 10 Q3 10
Stable commission incomeNet commission income
• Strong card and payment volumes
L b k d t fi f• Lower brokerage and corporate finance fees
2 208 2 361 2 282
2 395 Retail LC&I Baltic
BankingRussia, Ukraine
Asset Mgmt,Other
(SEKm)
2 310
-57 -21 -2
386
-9
19
4 387
387
1 131
5
Q3 09 Q4 09 Q1 10 Q2 10 Q3 10
Supported by valuation effectsNet gains/losses on financial items, fair value
• Low trading activities
FX l i Uk i
pp y
• FX losses in Ukraine
• Funding related valuation effects in Group Treasury still high
809 Retail LC&I Baltic Banking Russia,
(SEKm)
647
Banking ,Ukraine Treasury,
Other-5
-49-41
-48-92
574
22348
92256
87
35
260
-25
6
-25
Q3 09 Q4 09 Q1 10 Q2 10 Q3 10
Expenses seasonally lowerExpenses
p ySEKm Q3 10 Q2 10 %Staff costs 2 261 2 282 -1Variable staff costs 19 141 -87Other expenses 1 958 2 000 -2Total expenses 4 238 4 423 -4
0.56 0.540.57 0.57 0.55
C/I ratio
4 526 4 300 4 391 4 423
Retail LC&I Baltic Banking
Russia, Ukraine
Staff andother
-114 -90 52 26
97530
4 238
90
690
-52
626
-26 202
2 190
(SE
Km
)
7
Q3 09 Q4 09 Q1 10 Q2 10 Q3 10
Solid wholesale funding activity continues Liquidity & Funding
Outstanding wholesale funding • YTD term funding of SEK 190bn, of which SEK 40bn during the third quarter (nominal SEKbn)
397456459Long-term,
non-guaranteed
• Remaining maturities of SEK 42bn in Q4, out of SEK 137bn in total maturities for the full year 2010 (nominal values)
180173
35
163Long-term, guaranteed*
• SEK 159bn of central bank repos and guaranteed funding were redeemed during the first nine months of 2010
11689
112
35
Short-term,
Central bank repos• Average maturity of all wholesale funding
of 28 months, 38 months for covered bonds (nominal value)
97112
0
112
Short-term
Short term, non-
guaranteed**
( )
610Short term,
guaranteed*** Q3 2010Q2 2010Q4 2009
* Issued with more than 12 month maturity
8
** Including interbank deposits*** Issued with less than 12 month maturity
Third quarter 2010 results
Income statement
SEKm Q3 10 Q2 10 QoQ % YTD 10 YTD 09 YoY%
Income 7 647 7 772 2 23 086 26 800 14Income 7 647 7 772 -2 23 086 26 800 -14
Expenses 4 238 4 423 -4 13 052 13 548 -4
Profit before impairments 3 409 3 349 2 10 034 13 252 -24
Total impairments 173 1 091 3 524 21 040
Operating profit 3 236 2 258 43 6 510 -7 788
Tax expense 638 672 -5 1 779 866 105
Profit attributable to shareholders 2 591 1 567 65 4 694 -8 707
Return on equity, % 11.3 7.0 6.9 -14.1Cost-income ratio 0.55 0.57 0.57 0.51Loan deposit ratio % 233 229 233 257Loan-deposit ratio, % 233 229 233 257Core Tier 1 capital ratio, %* 13.4 12.7 13.4 9.9Risk-weighted assets * 559.7 579.4 559.7 607.5
9
* Basel 2
Continues to improveAsset quality
p
• Asset quality indicators in the right directionImpaired loans– Impaired loans
– 60 days overdue– Restructured loans
All decliningRestructured loans
– Watch list
W ll id d f ithi i ti bl• Well provided for within existing problem areas
• Positive rating migration in Sweden, stable in the Baltic countriesg g ,
• Significant RWA reduction
• Business activity increasing
10
VolumesAsset quality
• CEE lending decreased partly due to SEK 7.5bn FX effect
• Continued relative shift from corporate to private in Sweden
948 955 961900
1 000SEKbn
PrivateC t
521 566 573600
700
800Corporate
427 389 97251
163 150200
300
400
500
427 389 388
154 86 79 47
9777 71
43
163 150 90
0
100
200
Q4 08 Q2 10 Q3 10 Q4 08 Q2 10 Q3 10 Q3 10
11
Sweden CEE Excl Estonia
Asset quality
Credit impairments significantly reduced• Sweden small reversals
B lti t i
p g y
7 000
SEKm
• Baltic countries – Credit impairments in Latvia
R i i R i d Uk i
6 121
5 003
5 000
6 000
• Recoveries in Russia and Ukraine4 000
5 000
2 210
9632 000
3 000
963
120
0
1 000
-1 000
0
Q3 09 Q4 09 Q1 10 Q2 10 Q3 10
12
Retail LC&I Baltic Banking Russia & Ukraine Other
ProvisionsAsset quality
• Provision ratio levels maintained
Provision ratios Q3 1064 8% 65 9% 63 5%30 000SEKm
Provision ratios Q3 10
Retail 87%
LC&I 92%
B lti B ki 61%6 922
5 135 4 684 4 1043 606
62.9%
64.8% 65.9% 63.5%63.9%
20 000
25 000
Baltic Banking 61%
Russia 58%
Ukraine 66%21 889 23 028
21 068
6 922
15 000
Group 64%15 582
20 882 21 889 23 02821 068
9582 504 3 311
3 953 4 6035 000
10 000
9580
Q3 2009 Q4 2009 Q1 10 Q2 10 Q3 10
Individual provisions Portfolio provisions Write-of fs, gross, cum Provision ratio
13
Simplified core balance sheetp• High quality mortgage portfolio – low LTV• Limited impact under severe economic conditionsp• Strategy – preserve quality and AAA rating
1 200
1 400 SEKbn
800
1 000
400
600
0
200
Swedish mortgage lending
14
0Assets
Swedish mortgage lending funded by covered bondsg g g y• High quality mortgage portfolio• Limited impact under severe economic conditionsp• Strategy – preserve quality and AAA rating• Government guaranteed funding expected to be replaced largely by covered bonds
1 200
1 400 SEKbn
800
1 000
400
600Government guaranteed
0
200
Swedish mortgage lending
Covered bonds
15
0Assets Liabilities
Other Swedish and Nordic lendingg• Stress test real estate related – very high resilience • Strategy – Improve risk adjusted return, increased diversificationgy p j
1 400
1 200
1 400SEKbn
800
1 000
Other Sw private
Other Swedish and Nordic corporate lending
400
600
Other Sw. private
Swedish mortgage lending
Government guaranteed
0
200
Swedish mortgage lending
Covered bonds
16
0Assets Liabilities
Other Swedish and Nordic lending funded with depositsg p• Stress test real estate related – very high resilience • Strategy – Improve risk adjusted return, increased diversificationgy p j• Funded with large deposit base
1 400
1 200
1 400SEKbn
800
1 000
Other Sw private
Other Swedish and Nordic corporate lending
Swedish and Nordic deposits
400
600
Other Sw. private
Swedish mortgage lending
Government guaranteed
0
200
Swedish mortgage lending
Covered bonds
17
0Assets Liabilities
CEE lendingg• CEE lending decreased substantially since end 2008• ICAAP stress test show significant resilience
1 400
g• Estonia to adopt the euro – becomes different risk category• Strategy – selective reductions, LTD restriction
CEE
1 200
1 400SEKbn
800
1 000
Other Sw private
Other Swedish and Nordic corporate lending
Swedish and Nordic deposits
400
600
Other Sw. private
Swedish mortgage lending
Government guaranteed
0
200
Swedish mortgage lending
Covered bonds
0Assets
18
Liabilities
Limited need of senior unsecured fundingg• Large and stable deposit base• High quality Swedish mortgage portfoliog q y g g p
1 400
CEE
1 200
1 400SEKbn
Equity
CEE d it
Subordinated debt
Senior unsecured
800
1 000
Other Sw private
Other Swedish and Nordic corporate lending
Swedish and Nordic deposits
CEE deposits
400
600
Other Sw. private
Swedish mortgage lending
Government guaranteed
0
200
Swedish mortgage lending
Covered bonds
19
0Assets Liabilities
Appendix
21
Impaired loans decreased by SEK 4bn Asset quality
p y
• Without FX effect down SEK 1.5bn
• Underlying decreases mainly relate to the Baltic countries
Impaired loans as% of gross lending
196 2 391-4 08840 132 40 328
42 719 38 631
40 000
45 000
SEKm
Ukraine 67%
Russia 24%6 113
4 362 196 2 391
29 657
35 770
30 000
35 000
6 9712 152
8 531
Lithuania 17%
Latvia 27%
29 65715 000
20 000
25 000
12 907
6 971
Estonia 8.1%
LC&I 0.3%Retail 0 2%
5 000
10 000
1 8131 123
5 134
22
Retail 0.2%0Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10
1 813
Q3 10
Loans past due 60 days – performance Q/Qp y p
250
EURm
100
150
200
50
0
50
00
-150
-100
-50
09 09 0 0 0 09 09 0 0 0 09 09 0 0 0 09 09 0 0 0 09 09 0 0 0
Q3
0
Q4
0
Q1
1
Q2
1
Q3
1
Q3
0
Q4
0
Q1
1
Q2
1
Q3
1
Q3
0
Q4
0
Q1
1
Q2
1
Q3
1
Q3
0
Q4
0
Q1
1
Q2
1
Q3
1
Q3
0
Q4
0
Q1
1
Q2
1
Q3
1
Estonia Latvia Lithuania UkraineRussia
23
Repossessed assetsAsset quality
p
2 500
SEKm
2 000
1 000
1 500
500
0Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 10
Real Estate Residential Real Estate Commercial Passenger & Commercial Transport Shares Other
24
Real estate pricesTallinn Riga*
p1 762
1 500
1 800
1 500
1 800
s
1 6111 500
1 800
1 500
1 800
ns
616600
900
1 200
600
900
1 200
No
of tr
ansa
ctio
ns
EU
R/m
2
822
600
900
1 200
600
900
1 200
No
of tr
ansa
ctio
n
EUR
/m2
0
300
0
300
Q4'06 Q2'07 Q4'07 Q2'08 Q4'08 Q2'09 Q4'09 Q2'10No of deals Average price
0
300
0
300
Q4'06 Q2'07 Q4'07 Q2'08 Q4'08 Q2'09 Q4'09 Q2'10No of deals Average price
S S db k E t i L d B d S S db k
Vilnius*
1 731
Source: Swedbank, Estonian Land Board Source: Swedbank
1 731
1 016900
1 200
1 500
1 800
900
1 200
1 500
1 800tra
nsac
tions
EUR
/m2
0
300
600
0
300
600
Q4'06 Q2'07 Q4'07 Q2'08 Q4'08 Q2'09 Q4'09 Q2'10
No
of tE
No of deals Average price
25
g p
* Data as of August 2010
Source: Swedbank, State Enterprise Centre of Registers
Liquidity & FundingLong-term funding g g• SEK 42bn (nominal value) of remaining term funding maturities in Q4
• Continued focus on covered bonds with YTD issuance of SEK 164bn
• YTD issued SEK 26bn in senior unsecured and structured funding
• Average maturity of wholesale funding of 28 months, covered bonds of 38 months ( i l l )
Swedbank, long-term maturity profile
(nominal value)
• SEK 180bn (nominal value) in maturities during 2011
80
100
SEKbn, nom
Swedbank, long term maturity profile(including Swedbank Mortgage)
40
60
80
0
20
40
-
Q4
10
Q1
11
Q2
11
Q3
11
Q4
11
Q1
12
Q2
12
Q3
12
Q4
12
Q1
13
Q2
13
Q3
13
Q4
13
Q1
14
Q2
14
Q3
14
Q4
14
Q1
15
Q2
15
Q3
15
Q4
15
2016
-
2626
Liquidity & FundingRemaining funding under the Swedish guarantee programmeg g g p g
• Swedbank exited the guarantee programme on 30 April 2010
Currency distributionprogramme on 30 April 2010
• No issuance under the programme as of August 2009
USD 27%
EUR 41%
g
• Outstanding guaranteed funding decreased during the third quarter by SEK 10bn to SEK 163bn (nominal value)
CHF 5%
SEK 25%
SEK 10bn to SEK 163bn (nominal value), mainly due to FX effects
JPY 2%
Maturity distribution
2-3Y 6%
3-4Y 18%
< 12 M 25%
1-2Y 51%
2727
Cover pool and covered bond funding sourcesLiquidity & Funding
p g• AAA/Aaa Rating from S&P and
Moody’sTotal pool size SEK 626bnGeographic distribution Sweden 100%
As per Q3 2010
• Unlimited domestic covered bond programme, through tap system
Average seasoning 56 monthsAverage LTV 1, 2
– WA LTV on property level 58%Non-performing loans 3 None
• EUR 25bn EMTN covered bond programme
SEK150b d ti MTN d
p g
Types of loans– Residential mortgages 90.8%– Public 2.3%
Commercial 0 1% • SEK150bn domestic MTN covered bond programme
• Unlimited Norwegian covered
– Commercial 0.1%– Forest and Agriculture 6.8%
Fixed /Floating interest loans 4
– Fixed 51% Unlimited Norwegian covered bond programme
• Registered covered bonds
– Floating 5 49%Average loan size SEK 413 441Number of loans outstanding 1 514 910Dynamic pool Yes
• In addition to public deals, private placements are executed through all programmes mentioned above
y
1 Index valuation as of 31 May 20102 Maximum LTV: Residential 75%, Commercial 60%, Forest and Agriculture 70%3 Past due loans > 60 days are not eligible for the cover pool4 Distribution by origination all programmes mentioned above
28
y g5 Floating interest loans < 365 days
Source: Swedbank
Swedbank Mortgage total loan portfolio of SEK 687bn100% f l di i S d• 100% of lending in Sweden
• 90% in residential lending
• Average LTV of 46% (loan level) 61% (property level*) Cover pool 43% and 58%• Average LTV of 46% (loan level) 61% (property level*). Cover pool 43% and 58% respectively.
110Lending distributed by collateralLoan-to-value*SEKbn
Cooperativeapartments
15%
Commercialproperties
0 2%80
90
100
110
15% 0.2%Municipalities
2%Multi-family
housing15%50
60
70
Forest &Agriculture
7%20
30
40
Single-familyhousing
61%
0
10
<30% >30-40% >40-50% >50-60% >60-70 >70-80% >80-90% >90%
Single-family housing Cooperative apartments Multi-family housing (incl housing coop. ass.) Forest & Agriculture
29
*From Q3 2010 the LTV distribution in the graph is changed from ”loan level” to ”property level”