BofAML 21st Annual Financials CEO Conference Investor presentation
Casper von Koskull, President and Group CEO
London 29th September
13% CAGR in capital generation and CET1-ratio up 10.6 pp in 10 years
Strong capital generation and stable returns at low risk1
1) CAGR 2015 vs. 2005, adjusted for EUR 2.5bn rights issue in 2009. Equity columns represents end-of-period equity less dividends for the year. No assumption on reinvestment rate for paid out dividends
2) Calculated as Tier 1 capital excl. hybrid loans 2 •
2012 2015
43
2014
39
2013
37 35
20
15
31
2008 2006
12
2005 2011 2010
19
29 26
2007 2009
5.92 16.5
Acc. dividend, EURbn Acc. equity, EURbn
CET1 Ratio %
The most stable bank in the Nordics
1) Calculated as quarter on quarter volatility in CET1 ratio, adjusted so that the volatility effect of those
instances where the CET1 ratio increases between quarters are excluded
Nordea and peers 2006 – 2015, %
3 •
146
77
47382417
Peer 5 Nordea Peer 4 Peer 2 Peer 3 Peer 1
1,040,88
0,520,350,33
0,21
Peer 3 Peer 2 Peer 1 Nordea Peer 4 Peer 5
Qu
art
erl
y n
et
pro
fit
vo
lati
lity
Qu
art
erl
y C
ET
1 r
ati
o
vo
lati
lity
¹
Our focus on ancillary income has offset pressure on NII margins
2008 2015 Change
Net Interest Income (EURm) 5 093 4 963 -3%
Lending and deposit volumes (EURbn) 414 530 +28%
Net Fee and Commission Income (EURm) 1 883 3 230 +72%
Net Fair Value (EURm) 1 028 1 645 +60%
Total Income (EURm) 8 200 10 140 +24%
4 •
Recent Trends
Q2/16 vs. Q2/15*
• Income down 3%
Despite low growth and turbulent financial markets – stabilising trend in the quarter
Ancillary income holding up well
• Costs +3% in local currencies
Developing as expected
Flat 18 vs. 16, down after 18
• Loan loss provisions at 15bps
Expected level for full year approximately 16bps
Overall, solid asset quality with strongly rated customers
• CET 1 ratio improved 10bps from previous quarter to 16.8% (Pro forma 17.2%)
SREP finalised end-September, early October – current requirement of approx. 17%
Project Archean closed successfully end-August
• Simplification programme is delivering according to plan
5 •
*In local currencies
Retail Banking - strong financial development
1) Lending margins
2) Adjusted for insourcing of IT and compliance build up
Income (EURbn) Profitability (%)
Cost (EURbn)
■ Non interest income +9%
■ Margins1 +43 bps
■ Relationship customers +6%
■ FTEs down by ~2,000 (~10%)2
■ 35% fewer branch locations
RoCaR
Cost / income
1313
11
9
7
2013 2012 2011 2014 2015
65
59 59
56 54
2011
3.2
2015
2.7
4.9
2011 2015
5.0
6 •
Wholesale Banking – a leading Nordic platform
2015 - Tier 1 – Nordea Nordic #1
No. 1
positions
No. 2
positions
No. 3
positions
#1 Nordea 22 12 8
#2 Nordic Peer 14 12 13
#3 Nordic Peer 5 14 13
Greenwich Prospera
7 •
288
2015 2011 2014
1,929
2013 2012 2014
1,127
2011 2015 2012 2013 2013 2012 2011 2014 2015
Wealth Management - 20% profit CAGR since 2011
Operating income (EURm) Operating profit (EURm) AuM (EURbn)
8 •
Banking: an industry in transition – and more disruption lurks
around the corner
Big Data – relevance & personalisation
Cloud – profitability at lower scale
A digital
revolution
Mobile – always
accessible
Social Media – networks redefined
KEY TECHNOLOGIES IMPACTING BANKING MORE DISRUPTION COMING
E.g. Blockchain
9 •
Banking customers: Same needs as before but changing behavior
Co-creation Network
building Personalisation
Impatient & empowered - 24/7
availability and immediate delivery
Knowledgeable - Specialised and
tailored advise that complements the
research we have done ourselves
Integrated & connected – Integrated
into my process and
connected/compared with peers
Require relevance - Personalised
products, services and interaction
Are becoming less loyal
Use several channels in combination
Use digital channels more intensively
Use digital channels to enforce:
CHANGING CUSTOMER EXPECTATIONS… …AND CHANGING CUSTOMER BEHAVIOR
10 •
Also Nordea’s customers are changing their behavior
22 Mobile
Branches
■ Digital response required
■ Front-end solutions will not suffice
■ Automated end-to-end processes across
the full value chain is a must
■ Consistency and endurance in execution to
unlock benefits
Tra
nsa
cti
on
s
Mill
ions
Q3/10 Q3/15
Ab
ilit
y t
o e
xe
cu
te
Level of digital response
60
End-to-end digital response required Relationship banking is turning digital fast
3
Netbank
Q2
2015
10%
Q4
2014
3%
Q4
2016
17%
Q4
2015
Q4
2017
Sh
are
of
Re
mo
te
Meeti
ng
s
(Pe
rce
nt)
11 •
Surge in new operational regulations
& OUR CUSTOMERS
Machinery
room
Recovery and
resolution
Solvency 2
TLAC
Structural reforms
for banking
Investor
compensation
Living
wills
Leverage
ratio
NSFR
Shadow
banking
Banking union
Products
Short selling CSD
regulations
AIFMD
UCITS
Long-term
financing
Prospectus
Directive Bank
account IORP II
SFT
transparency
Margin for
derivatives
Mortgage
Directive Securities
legislation
MMFs
Capital
requirements
Deposit
guarantee
MAD
AML
EMIR PRIPs
MiFID II
FTT
FATCA Data
protection
SEPA
Dodd-Frank
Payment
package
Corporate
governance
Benchmark
regulations
Transparency
Directive
Balance sheet
regulations
Fundamental
review of the
trading book
Operational regulations
PSD II
12 •
IT complexity in large legacy banks
Complex, risky, expensive & slow – hinders compelling customer experience
Source: BCG
13 •
For Nordea the strategic response to the industry transformation is
“Simplification” – the corner stone of our transformation
Digital offering Compliance
One operating
model
Cost and
capital efficiency
Simplification
14 •
2015 2020
Milesto
nes
K
ey a
cti
vit
ies
High-level delivery and migration plan for Core Banking Platform
Country migrations done
1 2 3 4 SV / SI
selected
Contract signed
CBP implementation done
Decommissioning done
Prep.
Pilot
Deposits
Loans
Mortgages
Trans. accounts
Complex
Customers Data cleansing and decommissioning
Business case +
migration strategy
agreed First version of model bank
implemented Pilot
Implemented
15 •
Digitalisation is at the heart of the future business/operating model
New
great customer
experiences
Robust platforms
as foundation
COMPETENT
RELEVANT
SAFE
ANYTIME, ANYWHERE
EFFICIENT COMPLIANT
CONFIGURABLE RESILIENT
Four strategic capabilities
Agility
Competence
Resilience
Scale
16 •
True end to end process
optimisation
Cost efficiency & capital management
Retail Banking transformation
Group Simplification Programme
Risk & compliance
2015 2018
Legal Structure Programme
Oth
er
bu
sin
ess
decis
ion
s
2016
Delivering on financial targets while transforming the bank
Transformational change agenda a cornerstone in achieving best-in-class C/I ratio
17 •
Nordea FinTech start-up accelerator program
BofAML 21st Annual Financials CEO Conference Investor presentation
Casper von Koskull, President and Group CEO
London 29th September