Please refer to page 34 for important disclosures and analyst certification, or on our website
www.macquarie.com/research/disclosures.
SWEDEN/NORWAY/DENMARK
Inside
1. Summary and conclusions 2
2. Profitability 4
3. Capital and dividends 10
4. Financial forecasts 13
5. Volumes and margins 17
6. Economic background 20
7. Valuation 22
8. Conclusion 26
Appendices 27
Nordic Bank changes
Source: Macquarie Research, January 2015
Analyst(s) Edward Firth +44 20 3037 4077 [email protected] Namita Samtani +44 203 037 2197 [email protected]
26 January 2015 Macquarie Capital (Europe) Limited
Nordic Banks “Everything is Awesome ... ish”
Nordic Banks have been extremely rewarding investments over the past three
years, delivering a 3-year total return of +114%, massively outperforming the
broader European Banks index (+44%).
However with (i) valuations increasingly demanding; (ii) growing questions as to
the sustainability of different levels of sector profitability (core ROTE range c9%-
17%); and (iii) increasingly clarity on local capital requirements, we have taken
the opportunity to revisit our thinking.
Overweight Swedish Banks maintained
Battling with deflation does not put Sweden in a class of one. Despite margins
likely to disappoint near term (lower rates), attractions include a combination of
positive sector loan growth and well capitalised, profitable banks distributing the
bulk of their earnings. In a European sector battling deflation, slowing growth,
negative volumes and uncertainty over capital, they remain a core Overweight.
Upgrade Nordea to Outperform, TP SK103 (from SK91)
A sector leading restructuring programme (2015e costs -7%) means Nordea is
set to deliver the best pre-provision performance of the Nordics this year and
comfortable double digit EPS growth (+14%). In addition, a core tier 1 forecast
to exceed 15% offers the prospect of material dividend growth (DY15e 7%).
There are risks around Russian exposure (c€5bn or SK12 a share) but these are
more than reflected in a c30% PTBV discount to Swedish peers. Add to
European Bank Conviction Outperform in place of Swedbank (O, TP: SK201).
Downgrade SEB to Neutral, TP SK100 (from SK97)
The shares have outperformed the European Bank sector by +40% since
October 2013 (see our note, European Banks - “Argumentum ad populum…”
dated 10 October 2013). A new cost and capital plan due to be published at the
full year results (29 January) may provide modest upside. However a price to
tangible book 2015e of 1.7x looks demanding for a sustainable ROTE profile that
we see as no better than 14%, whilst the challenges faced by the European
corporate sector add to the risks.
Maintain Conviction Underweight DNB, TP104 (from NK110)
We see every reason to remain Underweight DNB. c22% of Norwegian GDP is
based on Oil and Gas. The recent fall-off in Oil prices will have clear
implications for the wider economy. We have reduced our 2015e earnings
expectations by 9% today, but suspect that this is the beginning not end of a
downgrade cycle.
Old New Old New Chge
Danske U U 160 162 +1.3%
DNB U U 110 104 (5.5%)
SHB N N 330 380 +15.2%
Nordea N O 91 103 +13.2%
SEB O N 97 100 +3.1%
Swedbank O O 200 201 +0.5%
TargetRec
Macquarie Research Nordic Banks
26 January 2015 2
1. Summary and conclusions
We have been long been fans of Nordic banks, particularly Swedish. Swedbank in particular
has been the longest running member of our European Bank Conviction list – delivering a
total return of +190% since we first added it in September 2011, outperforming the DJSTOXX
European Bank sector by a creditable +120%.
However with (i) valuations increasingly demanding; (ii) growing questions as to the
sustainability of different levels of sector profitability (core ROTE range c9%-17%); and (iii)
increasingly clarity on local capital requirements, we have taken the opportunity to revisit our
thinking.
Fig 1 Adjusted EPS forecasts 2014e-2015e
2014e 2015e Old New Old New
Danske 12.1 11.7 (2.9%) 13.9 14.6 +5.1% DNB 12.6 12.1 (4.2%) 12.6 11.5 (8.7%) Handelsbanken 24.1 24.1 +0.0% 25.5 25.5 +0.0% Nordea 0.81 0.81 +0.9% 0.93 0.93 (0.2%) SEB 7.24 7.35 +1.5% 7.82 7.62 (2.5%) Swedbank 15.4 15.1 (1.9%) 15.6 15.7 +0.2%
Source: Macquarie Research, January 2015
Key conclusions
Positive Sweden - Firstly we remain overweight Nordic banks, particularly Swedish. Whilst
there are clearly increasing risks (zero interest rates, deflation, demanding valuations) they
are far from unique in a European context.
In the meantime government finances are broadly in order, banks are very well capitalised,
lending volume growth is (almost uniquely) positive, house prices remain robust and
increasing clarity on capital requirements raises the spectre of materially increased dividends.
Nordea – Upgrade to Conviction Outperform (from Neutral), TPSK103 (from SK91) – We
do see risks to near term performance from areas such as Russia, Finland, Norway, etc. We
understand that total risk exposure in respect of Russia is c€5bn, which equates to a
manageable cSK12 a share (assuming no tax relief on losses).
However, Nordea is forecasting to deliver in 2015:-
the most ambitious cost programme in the sector, which we expect will reduce costs by -
7% (fall away of restructuring charges and improved efficiency in Swedish Retail);
the best pre-impairment profit performance in the Nordic sector (+12%);
a post tax return on tangible equity above 13%; and
a Pillar 2 adjusted core tier 1 ratio of comfortably over 15% ensuring a robust dividend (we
forecast 2015e yield of 7%).
Against that backdrop, a multiple of 1.4x prospective 2015 tangible book looks far from
demanding. We upgrade the shares and add them to our Conviction list.
Swedbank ...
Positive Sweden
Nordea upgrade
Macquarie Research Nordic Banks
26 January 2015 3
Swedbank - Maintain (O, TP: SK201 from SK200) – We continue to like Swedbank. Robust
capital, attractive 2016 cost targets, excellent management and a sustainable 6% dividend
yield in a 0% interest rate environment are all supportive. Furthermore our profitability
analysis does indicate premium returns are sustainable given the business mix and very
strong fee franchises in the Swedish banking market (Asset management, payments and
Cards).
However, a price to 2015e tangible book of c2.0x against a sustainable return on tangible of
c17% looks demanding. Furthermore October’s surprise rate cut may well drive margin
disappointment in Q4.
SEB - Downgrade to Neutral (from Outperform), TP: SK100 (from SK97) – The shares
have outperformed the European Bank sector by +40% since October 2013 (see our note,
European Banks - “Argumentum ad populum…” dated 10 October 2013). A new cost and
capital plan due to be published at the full year results (29 January) may provide some
upside. However, a price to tangible book 2015e of 1.7x looks demanding for a sustainable
ROTE profile that we see as no better than 14%. Furthermore the prospective dividend yield
is high (2015e 5.5%) but lags both Swedbank and Nordea. Finally, there must be a risk that
the broader malaise in the European corporate sector will finally catch up with what is at heart
a Corporate and Institutional bank.
Handelsbanken - Maintain (N, TP: SK380 from SK330) – The best performing Nordic bank
over the past quarter +13%. The shares are now trading alongside Swedbank on 2.0x
prospective 2015 tangible book value. This looks extremely demanding for a business that
we do not think will deliver sustainable returns in excess of 16%. Furthermore, it remains far
from clear to us how Handelsbanken risk weightings are so materially below the peer group.
DNB – Maintain Conviction Underweight , TP: NK104 (from NK110) - We see material
risk to the outlook for DNB earnings in the current environment. Oil and Gas contributes
c22% of Norwegian GDP – significantly greater if all the related businesses are added.
We downgrade our earnings expectations today by -4% and -9% for 2014e and 2015e
respectively on higher impairments (benchmarked to 2009). We await the full year results
presentation for any further indication of the likely impact (remember at the re-assuring
December presentation the oil price was over $60 a barrel against less than $50 now).
Danske – Maintain Underperform, TP: DK162 (from DK160) - One of the best performing
European banks in 2014 (+36%). However, whilst the management has done an excellent
job setting up a non-core business and realising those assets well ahead of expectations the
fundamental problem remains – namely a banking franchise that shows little sign of
managing to deliver sustainable double digit returns.
Last week’s cut in Danish interest rates will only make achieving that goal even more
demanding. In the meantime, a PTBV15e of 1.1x implies that delivery of double digit returns
is behind not ahead of us.
Fig 2 Full year 2014 results publication dates
Bank Date
Nordea 28 January 2015 SEB 29 January 2015 Danske 3 February 2015 Swedbank 3 February 2015 Handelsbanken 4 February 2015
Source: Macquarie Research, January 2015
Swedbank
Outperform
maintained
SEB downgrade to
Neutral
Handelsbanken
Neutral maintained
DNB maintain
Underweight ...
... downgrade
earnings
expectations
Danske maintain
Underperform
Macquarie Research Nordic Banks
26 January 2015 4
2. Profitability Key message: Swedish banks generate attractive returns (c13%) on premium levels of
capital. Swedbank tops the sector with returns that we believe are broadly sustainable
driven by mix (Swedish Retail) and fee generation (Asset mgt, Payments, Cards). More
questions over Handelsbanken where returns appear to be driven by low risk
weightings. Nordea offers the highest restructuring / improvement potential for 2015e
and is the only Nordic bank we expect to deliver double digit pre-impairment growth.
The key attraction of Nordic banks is still their robust profitability - generating surplus capital
and paying healthy dividends. Sweden and Norway are incidentally the only European
countries delivering any noticeable loan growth, but at mid to low single digits we think it is
not sufficient to justify any sort of premium rating.
Fig 3 Nordic returns on tangible
Source: Macquarie Research, January 2015
The Nordic sector is delivering an average return on tangible of 13%. Swedbank continues to
lead the pack at 16%+. Danske and DNB both lag peers at 11% and 12% respectively. The
key question is the extent to which superior profitability is sustainable and / or there is
potential for recovery amongst the laggards.
Fig 4 Analysis of profits to average risk weighted assets 2014e (i)
Danske DNB Nordea SEB SHB Swedbank Average
Net Interest Income 2.80% 2.94% 3.39% 2.97% 4.69% 4.07% 3.48% Non Interest Income 2.40% 1.46% 2.69% 3.46% 1.83% 2.92% 2.46% Total Revenue 5.21% 4.40% 6.08% 6.43% 6.52% 6.99% 5.94% Operating Expenses (2.71%) (1.90%) (3.07%) (3.25%) (2.93%) (3.06%) (2.82%) Pre-provision profits 2.50% 2.50% 3.01% 3.19% 3.59% 3.93% 3.12% Provisions (0.33%) (0.15%) (0.34%) (0.20%) (0.25%) (0.09%) (0.23%) Adjusted PBT 2.16% 2.48% 2.67% 2.98% 3.39% 3.86% 2.92% Average weighting - to average loans 54% 79% 47% 49% 34% 42% 51% - to average total assets 25% 44% 26% 25% 22% 30% 29%
Source: Macquarie Research, January 2015
(i) Swedish risk weighting adjusted to include implied Pillar 2 buffer for 25% mortgage weighting
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Danske DNB Nordea SEB SHB Swedbank
ROTE15e ROTE16e
Profitable sector
Swedbank 16%+
Macquarie Research Nordic Banks
26 January 2015 5
We have analysed profitability of the six Nordic banks (against risk weighted assets) in Fig 4
above. Interestingly the superior profitability of Swedbank is driven by consistently strong
performance across the P/L, with all line items better than average (except costs - albeit
average analysis distorted by DNB).
Revenue
The Swedish banks deliver strong revenue margins (on risk assets) c100bps+ above Danske
or DNB. That said, they are not out of line with the broader European bank sector which we
forecast will deliver an average revenue margin of 2016e 661bps. See European Banks -
More Utah than Bhodi ..., 14 November 2014
Both Handelsbanken and Swedbank deliver net interest margins on average risk assets
materially above peers. In the case of Swedbank this appears to be driven by business mix,
with over 60% of their lending business focused on Personal customers (see Fig 5) – by
some margin the highest in the sector.
Retail margins in themselves at Swedbank (138bps of loans) do not look out of line with peers
(see Fig 6).
Fig 5 Personal lending % of Total, Q3 2014 Fig 6 Retail division NII on average loans, 2014e
Source: Company data, Macquarie Research, January 2015 Source: Macquarie Research, January 2015
This is not the case for Handelsbanken where Personal sector lending exposure is c50% of
total - broadly in line with the peer average. The reason for the better margin on RWAs at
Handelsbanken appears to be the lower average risk weighting (c34%) even after adjusting
for the Pillar 2 buffer.
This must be a risk factor when assessing the potential trajectory of returns going forward for
Handelsbanken. Tough to see how one bank can have sustained exclusive access to lower
risk customers that are comfortable paying a higher margin. If the same profitability analysis
is conducted on either average loans or average total assets, Handelsbanken moves from
being the second most profitable bank in the sector to the least (see Figs 13 & 14 below).
Interestingly the poor NII returns on risk weighted assets of DNB looks to be primarily driven
by the higher risk weightings imposed by the Norwegian regulator. Norwegian Retail margins
on loans are the highest in the region (see Fig 6).
The reason for Danske Bank’s low NII margin on risk assets is more difficult to identify
specifically given the lack of divisional breakdown of risk assets. However, it would appear to
be a combination of higher risk weightings / lower NII returns in the Business and Corporate &
Institutional operations particularly.
0%
10%
20%
30%
40%
50%
60%
70%
SE
B
No
rde
a
SH
B
DN
B
Danske
Sw
edbank
0
50
100
150
200
250
Dans
ke
SE
B
Sw
edb
ank
SH
B
Nord
ea
DN
B
bps
Swedish revenue
margins ...
Handelsbanken
Danske Bank
DNB
Macquarie Research Nordic Banks
26 January 2015 6
Fig 7 Non interest income % of Total revenue Fig 8 Retail non interest income % of Retail revenue
Source: Macquarie Research, January 2015 Source: Macquarie Research, January 2015
Swedbank’s superior profitability is also boosted by the second highest level of Non interest
income per risk assets in the sector. Swedbank’s Retail division generates c40% of its
revenue through fees / non interest income compared with an average of only 30% for peers
(see Fig 8). This reflects their substantial Asset management business (23% share of
Swedish market) as well as a focus on payments (c50% Swedish market share) and the
robust Cards business.
Operating expenses
Nordea has the most ambitious cost targets in the sector (2015e -5% in constant currency or -
7% stated). The question is whether these are realistic on a sustainable basis.
Fig 9 Nordic bank group cost ratios 2014e
Source: Macquarie Research, January 2015
Nordea cost ratios are currently towards the top end of the sector (se Fig 9). A 7% reduction
in costs will reduce their cost income ratio from the current 51% (2014e) to 46%, broadly
equating to a c€350m reduction in costs. This is a marked improvement, although will still the
ratio above the sector leading DNB (43%) and Swedbank (44%).
0%
10%
20%
30%
40%
50%
60%
SHB DNB Swedbank Nordea Danske SEB0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
SHB DNB Nordea Danske SEB Swedbank
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
0%
10%
20%
30%
40%
50%
60%
DNB Swedbank SHB Nordea SEB Danske
Cost income (LHS) Cost to loans (RHS)
Swedbank fee
income
Nordea ambitious
cost targets
Macquarie Research Nordic Banks
26 January 2015 7
Fig 10 Nordea cost programme
Source: Company presentation, Macquarie Research, January 2015
Nordea have provided outline details of the key source of the €350m savings (see Fig 10). In
the first instance, the Nordea core cost base in 2014e includes c€225m of restructuring
charges. This is up from <€30m in 2013. We are expecting a return to low / negligible levels
in 2015 which will represent the bulk of savings.
However, Fig 10 does suggest that a large element of the operational savings will be
delivered from the core Swedish Retail business (4.1m customers / No. 2-3 market share).
We are intuitively cautious of divisional analysis (given the distortions of central cost
allocation).
Fig 11 Analysis of Retail cost efficiency 2014e
Source: Macquarie Research, January 2015
(i) Swedish Branch banking including Corporate lending
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
0%
10%
20%
30%
40%
50%
60%
70%
SHB (i) SEB SWED Nordea Nordea DNB Nordea Danske
Cost income (LHS) Cost to loans (RHS)
Sweden Norway Denmark
Nordea Swedish
Retail business
Macquarie Research Nordic Banks
26 January 2015 8
However, as highlighted above in Fig 11, Nordea Swedish Retail business has materially
higher costs than peers. The cost income ratio of 54% and cost to loans of 1.24% are both
c20% higher than direct peers (c45% & 1.00% - Handelsbanken distorted by including
Corporate business).
Bringing the Nordea Swedish Retail cost ratios in line with peers would deliver a further
€135m of savings. Interestingly, the Norwegian and Danish Retail businesses benchmark
well with peers.
Impairments
Finally, Swedbank and DNB both face profitability headwinds from increased impairments.
At Swedbank the current ratio is depressed by continuing write-backs in the Baltic business
(2014e +SK217m). A more normalised 40bps charge in that business would increase the
impairment charge as a % of risk assets to 22bps from the 9bps highlighted in Fig 4.
However, even at 22bps bottom line profitability for Swedbank remains top of the sector.
At DNB we see the impairment charge growing from 15bps of RWAs to over 30bps in 2015
reflecting the deteriorating economic environment in Norway (lower oil prices – see Fig 12).
Fig 12 Norwegian Real GDP growth (%) against Oil prices
Source: Bloomberg, Macquarie Research, January 2015
29/ 12/ 200628/ 02/ 200730/ 04/ 200730/ 06/ 200731/ 08/ 200731/ 10/ 200731/ 12/ 200729/ 02/ 200830/ 04/ 200830/ 06/ 200831/ 08/ 200831/ 10/ 200831/ 12/ 200828/ 02/ 200930/ 04/ 200930/ 06/ 200931/ 08/ 200931/ 10/ 200931/ 12/ 200928/ 02/ 201030/ 04/ 201030/ 06/ 201031/ 08/ 201031/ 10/ 201031/ 12/ 201028/ 02/ 201130/ 04/ 201130/ 06/ 201131/ 08/ 201131/ 10/ 201131/ 12/ 201129/ 02/ 201230/ 04/ 201230/ 06/ 201231/ 08/ 201231/ 10/ 201231/ 12/ 201228/ 02/ 201330/ 04/ 201330/ 06/ 201331/ 08/ 201331/ 10/ 201331/ 12/ 201328/ 02/ 201430/ 04/ 201430/ 06/ 201431/ 08/ 201431/ 10/ 201431/ 12/ 2014
20
40
60
80
100
120
140
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
01/11/2006 01/05/2008 01/11/2009 01/05/2011 01/11/2012 01/05/2014
Bre
nt O
il P
rice ($)
No
rway R
eal G
DP
(%
)
Norway Real GDP yoy Oil Price (Brent)
Implies c€135m of
savings available ...
Swedbank & DNB
impairment
headwinds
Macquarie Research Nordic Banks
26 January 2015 9
Fig 13 Analysis of profits to average loans 2014e
Danske DNB Nordea SEB SHB Swedbank Average
Net Interest Income 1.49% 2.35% 1.59% 1.49% 1.58% 1.72% 1.70% Non Interest Income 1.28% 1.16% 1.25% 1.73% 0.62% 1.23% 1.21% Total Revenue 2.77% 3.51% 2.84% 3.22% 2.20% 2.95% 2.91% Operating Expenses (1.44%) (1.52%) (1.44%) (1.63%) (0.99%) (1.29%) (1.38%) Pre-provision profits 1.33% 1.99% 1.40% 1.60% 1.21% 1.66% 1.53% Provisions (0.18%) (0.12%) (0.16%) (0.10%) (0.08%) (0.04%) (0.11%) Adjusted PBT 1.15% 1.98% 1.25% 1.49% 1.15% 1.63% 1.44%
Source: Macquarie Research, January 2015
Fig 14 Analysis of profits to average total assets 2014e
Danske DNB Nordea SEB SHB Swedbank Average
Net Interest Income 0.70% 1.31% 0.86% 0.78% 1.05% 1.21% 0.98% Non Interest Income 0.60% 0.65% 0.68% 0.91% 0.41% 0.87% 0.69% Total Revenue 1.29% 1.96% 1.54% 1.69% 1.47% 2.08% 1.67% Operating Expenses (0.67%) (0.85%) (0.78%) (0.85%) (0.66%) (0.91%) (0.79%) Pre-provision profits 0.62% 1.11% 0.76% 0.84% 0.81% 1.17% 0.88% Provisions (0.08%) (0.07%) (0.09%) (0.05%) (0.06%) (0.03%) (0.06%) Adjusted PBT 0.54% 1.10% 0.68% 0.78% 0.76% 1.15% 0.83%
Source: Macquarie Research, January 2015
Macquarie Research Nordic Banks
26 January 2015 10
3. Capital and dividends Key message: Dividend yield is a key attraction of the Nordics. Swedbank delivering a
consistent c6% has been our poster child. We add Nordea today, which is set to
deliver material surplus capital in 2015 matched by a significant increase in dividend
(yield 6%).
Nordic banks have enviably strong capital ratios that benchmark well with any global bank
sector.
It is important to recognise that published ratios for the Swedish banks are overstated by the
regulator’s preference for including higher risk weighting on mortgage assets as a Pillar 2
capital buffer rather than higher risk weighted assets.
However to ensure comparability, we re-state the Swedish ratios including the Pillar 2
mortgage buffer as risk weighted assets (see Fig 15). This has a marked impact on
Swedbank and Handelsbanken in particular. However, both companies maintain ratios well
above minimum requirements.
Fig 15 Analysis of Nordic core tier 1 ratios, Q3 2014
Danske DNB Nordea SEB SHB Swedbank
Core tier 1 capital 120,077 136,042 23,759 96,937 100,287 84,667 Published RWAs (i) 868,470 1,079,701 152,549 598,063 485,263 409,637 Implied Pillar 2 adjustment +0 +0 +8,900 +65,889 +98,000 +129,643 Adjusted RWAs 868,470 1,079,701 161,449 663,952 583,263 539,280 Published core tier 1 (CT1) 13.8% 12.6% 15.6% 16.2% 20.7% 20.7% Pillar 2 adjustment +0.0% +0.0% (0.9%) (1.6%) (3.5%) (5.0%) Adjusted core tier 1 13.8% 12.6% 14.7% 14.6% 17.2% 15.7% Minimum regulatory requirement
Source: Macquarie Research, January 2015
(i) Risk weighted assets
The Swedish regulator gave very clear disclosure on minimum capital requirements in the
summer of 2014 (see Fig 16 below). Adjusting for the Pillar 2 buffer requirements (that we
include within risk weighted assets), Swedish banks are required to have minimum core tier 1
ratios of around 14%.
We therefore use 15% as the minimum CET1 ratio for Swedish banks for dividend paying
capacity, assuming a 1% management buffer. Elsewhere we assume a minimum CET 1 of
14.0% for Danske and DNB based on company disclosures.
Strong capital ratios
Pillar 2 capital
requirement ...
Minimum CET1
ratios of 14.0% -
15.0%
Macquarie Research Nordic Banks
26 January 2015 11
Fig 16 Swedish Regulator Minimum CET1 Requirements
Source: Swedish Finansinspektionen, Macquarie Research, January 2015
We have consolidated the above in our capital and dividend forecasts below (see Fig 17).
We have long highlighted Swedbank as a compelling investment proposition given a stable
earnings stream and robust payout ratio offering a 6% yield.
However, as we enter 2015 we would add Nordea to that list. With the adjusted core tier 1
set to comfortably exceed 15.0% this year, we expect to see a further increase in payout ratio
such that the dividend yield 2015e tops the sector at 7%.
13.8% 14.2% 13.9% 14.0% Implied Pillar 2 adj. minimum
Swedbank
Nordea
Macquarie Research Nordic Banks
26 January 2015 12
Fig 17 Nordic bank capital and dividend forecasts
Min 2013 2014e 2015e 2016e 2017e
Danske Core tier 1 14.0% 12.8% 12.8% 13.3% 14.8% 15.7% Dividend per share 2.00 5.10 5.84 6.33 6.55 Pay-out 31% 43% 40% 40% 40% Yield 1.2% 3.0% 3.4% 3.7% 3.8%
DNB Core tier 1 14.0% 11.8% 13.0% 13.8% 14.9% 15.6% Dividend per share 2.70 2.78 2.88 3.11 5.12 Pay-out 25% 23% 25% 25% 40% Yield 2.5% 2.5% 2.6% 2.8% 4.7%
Nordea Core tier 1 15.0% 13.6% 14.8% 15.5% 16.2% 16.5% Dividend per share 0.43 0.47 0.70 0.72 0.74 Pay-out 55% 58% 75% 75% 75% Yield 4.2% 4.6% 6.8% 7.0% 7.3%
SEB Core tier 1 15.0% 14.3% 14.8% 15.0% 15.4% 15.7% Dividend per share 4.0 4.4 5.3 5.5 5.7 Pay-out 61% 60% 70% 70% 70% Yield 3.9% 4.4% 5.3% 5.4% 5.6%
SHB Core tier 1 15.0% 17.3% 17.0% 17.4% 18.0% 18.5% Dividend per share 16.5 15.7 16.6 17.3 17.9 Pay-out 74% 65% 65% 65% 65% Yield 4.4% 4.1% 4.4% 4.6% 4.7%
Swedbank Core tier 1 15.0% 16.1% 15.7% 16.3% 16.8% 17.3% Dividend per share 10.1 11.1 11.7 12.1 12.1 Pay-out 73% 73% 75% 75% 75% Yield 5.2% 5.7% 6.1% 6.3% 6.3%
Source: Macquarie Research, January 2015
SEB also offers attractive dividend potential (2015e 5.3%). However, 2015e capital is less
robust than Nordea and with the shares already trading at a premium the potential dividend
yield attractions are c20% below Nordea or Swedbank.
We see little prospect of Danske or DNB materially increasing dividend payout ratios before
2016.
SEB
Macquarie Research Nordic Banks
26 January 2015 13
4. Financial forecasts Key message: We have materially (-9%) reduced our expectations for DNB given the
likely impact of lower oil prices on Norwegian GDP. Nordea forecast to deliver the best
pre-impairment earnings growth in 2015e on materially lower costs.
Adjustments to Macquarie forecasts 2014-2015e
Full details of our financial forecasts for the six Nordic banks covering the period 2014e-
2017e are attached at Appendix B. As we start 2015 we have summarised key changes to
our expectations below (see Fig 18).
Fig 18 Adjusted EPS forecasts 2014e-2015e
2014e 2015e Old New Old New
Danske 12.1 11.7 (2.9%) 13.9 14.6 +5.1% DNB 12.6 12.1 (4.2%) 12.6 11.5 (8.7%) Handelsbanken 24.1 24.1 +0.0% 25.5 25.5 +0.0% Nordea 0.81 0.81 +0.9% 0.93 0.93 (0.2%) SEB 7.24 7.35 +1.5% 7.82 7.62 (2.5%) Swedbank 15.4 15.1 (1.9%) 15.6 15.7 +0.2%
Source: Macquarie Research, January 2015
We have made the largest adjustment to DNB expectations, downgrading both 2014e (-4%)
and 2015e (-9%) materially. Lower 2014e expectations primarily reflect what we believe to
have been a very tough trading environment in Q4 for Norwegian banks.
As we go into 2015e we have also made a first stab at likely increased impairments reflecting
the impact on the Norwegian economy of a materially lower oil price (see Fig 12). In
particular, we have increased impairment charge expectations to 25bps of loans (which
compares with a 2009 peak of 35 bps (ex Baltic & Poland)).
Elsewhere we have only made modest adjustments to forecasts. SEB 2015e expectations
are marginally reduced reflecting slightly lower revenue expectations given the more
uncertain environment for the European corporate sector in particular.
The 2015e increase for Danske reflects lower expectations for losses in the Non-core
business. We have not factored in the potential margin impact of the Central bank rate cut
announced on 19 January 2015.
Macquarie forecasts against consensus 2014e-2015e
We have outlined below (Fig 19) details of Macquarie adjusted EPS forecasts for 2014e and
2015e against Bloomberg consensus. We would add a word of caution, particularly with
regard to 2014 expectations, which are significantly distorted in a number of one-off items
which are not always consistently adjusted in consensus.
DNB downgrades
SEB 2015e ...
Danske ...
Macquarie Research Nordic Banks
26 January 2015 14
Fig 19 Macquarie adj. EPS 'v' Consensus
Source: Bloomberg, Macquarie Research, January 2015
We are broadly comfortable with consensus expectations for Handelsbanken, Nordea and
Swedbank. In contrast, expectations for DNB, Danske and SEB look optimistic to us.
In particular, we do not believe that DNB expectations adequately reflect the impact of lower
oil prices on the Norwegian economy. In the meantime, a slower European economy is likely
to feed through to the corporate franchises of both SEB and Danske – the latter of which will
be impacted by further 2015 margin pressure following January’s rate cut.
Danske
DNB
HandelsbankenNordea
SEB
Swedbank
(8.0%)
(7.0%)
(6.0%)
(5.0%)
(4.0%)
(3.0%)
(2.0%)
(1.0%)
+0.0%
+1.0%
(4.0%) (3.5%) (3.0%) (2.5%) (2.0%) (1.5%) (1.0%) (0.5%) +0.0%
Adj EPS 2015e
Adj EPS 2014e
Handelsbanken,
Nordea and
Swedbank
Macquarie Research Nordic Banks
26 January 2015 15
Financial forecasts 2014e-2016e
Fig 20 Pre-impairment and Adj. EPS growth 2014e-2016e (p.a.)
Source: Macquarie Research, January 2015
Danske is forecast to deliver the most robust adjusted EPS growth over the next two years,
by some considerable margin (see Fig 20). However, this is primarily driven by falling
impairments.
When one looks at the more important pre-provision profit progression, Nordea looks set to
top the sector (+8% p.a.), followed by Danske (+7% p.a.) and Swedbank (+6% p.a.). DNB is
set to deliver the lowest growth based on either adjusted EPS or pre-impairment earnings.
Fig 21 Revenue growth 2014e-2016e p.a. (%) Fig 22 Cost growth 2014e-2016e p.a. (%)
Source: Macquarie Research, January 2015 Source: Macquarie Research, January 2015
Interestingly when one looks at revenue and cost progression (see Figs 21 & 22) the key
driver of better pre-impairment earnings performance is costs rather than revenue.
Revenue growth for the sector is set to average +3% per annum, with only Handelsbanken
(+4.2% p.a. – incl. UK growth) and DNB (1.5% p.a. – slowing Norway) materially divergent.
In contrast, those banks forecast to deliver the best earnings growth are those forecast to
deliver premium cost performance – Nordea (-3% p.a.), Swedbank (-2% p.a.) and Danske (-
2% p.a.).
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
DNB SEB SHB Swedbank Danske Nordea
Gro
wth
2014e-2
016e p
.a. (
%)
Pre-impairment profit Adj. EPS
+0%
+1%
+2%
+3%
+4%
DN
B
Sw
ed
ban
k
No
rdea
Dan
ske
SE
B
SH
B
(3%)
(2%)
(1%)
+0%
+1%
+2%
+3%
No
rdea
Sw
ed
ban
k
Dan
ske
DN
B
SE
B
SH
B
Danske adj. EPS
Nordea pre-
impairment
Revenue growth
Cost targets ...
Macquarie Research Nordic Banks
26 January 2015 16
All three banks have stated cost targets (see Fig 23). We particularly highlight the Nordea
programme which is forecast to deliver a cost progression in 2015 of -5% (at constant
currency, -7% stated). As we detail in Section 2 we are increasingly confident that they will
deliver on the programme ensuring a progressive improvement in profitability.
Fig 23 Nordic Bank cost targets
Bank Cost Target
Danske Nominal costs to be kept below DKK 23bn in the year 2015 DNB Underlying nominal costs are expected to be stable in the period up to 2016, and the
cost/income ratio will remain highly competitive Handelsbanken Most cost effective bank – The profitability goal will partly be achieved by having higher
cost-effectiveness than peer banks Nordea A 5% lower cost base in 2015 vs.2013 initiatives for cost savings of approximately EUR 900
million SEB The cost cap will be kept at SEK 22.5bn per year until 2015 through continued efficiency
improvements. Swedbank To lower total expenses for 2016 towards SEK 16bn
Source: Company Reports, Macquarie Research, January 2015
Macquarie Research Nordic Banks
26 January 2015 17
5. Volumes and margins Key message: Volume growth remains remarkably robust in Sweden and Norway. We see risks to the latter. In the meantime pricing remains robust across the Nordic region, although it is clear that lower rates in all three main markets will / is feeding through to margins.
Fig 24 Personal sector volume growth - yoy % Fig 25 Corporate sector volume growth – yoy %
Source: Statistics Sweden, Norges, Danmarks Nationalbank, Macquarie Research, January 2015
* Series break
Source: Statistics Sweden, Norges, Danmarks Nationalbank, Macquarie Research, January 2015
We have detailed volume growth of the three principal Nordic countries above. Sweden
continues to offer the best dynamics with modestly improving Personal sector volumes (+6%)
and a Corporate sector that is also modestly positive (+4%). Whilst neither of these would
have earned you pre-crisis bragging rights, in the current European environment both levels
benchmark to towards the top end of the European sector.
The Swedish regulator is working hard to control consumer volumes / house prices through
limits on lending / amortisation requirements. In particular, all “new” mortgages at must be
amortised by at least 2% a year down to 70% LTV and then a minimum of 1% per year down
to 50% LTV.
However, we understand that for most banks the bulk of higher LTV mortgages amortise
already (c80-90%) and with interest rates cut to 0% in October (persistently weak inflation), it
is difficult to see material volume slowdown near term.
Norwegian volumes remain equally robust. In contrast, however, with the economy likely to
slow markedly in response to the oil price slide we would expect volume to slow markedly
during the course of the year, particularly in the Corporate sector.
We see little prospect of volume pick up in Denmark. The Personal sector in particular is the
most highly geared in Europe (Debt to GDP c120%) offering little prospect of better than GDP
progression.
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
01/01/2006 01/01/2008 01/01/2010 01/01/2012 01/01/2014
Sweden Norway Denmark
*
(10%)
(5%)
+0%
+5%
+10%
+15%
+20%
+25%
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
Sweden Norway Denmark
Sweden
Swedish mortgage
restrictions
Norwegian volumes
Denmark
Macquarie Research Nordic Banks
26 January 2015 18
Fig 26 Nordic region - Indexed property prices
Source: Statistics Sweden, NEF, Statistics Denmark, Macquarie Research, January 2015
Similar themes are reflected in local house price progression. Danish prices are broadly flat
whilst Norway and Sweden are more buoyant.
As already highlighted, the Swedish regulator is particularly concerned by house prices that
currently are still growing at c10% year on year. However, with interest rates recently cut to
0% and approximately 2/3rds of mortgages priced off 3mth rolling rates, we do not expect to
see a sharp correction near term.
Again, we would be more concerned by Norway (economic implications) or Denmark (where
the most recent data does suggest something of a downturn).
Fig 27 Retail spread analysis (%) Fig 28 Corporate spread analysis (%)
Source: Statistics Sweden, Danish National Bank, Statistics Norway, Macquarie Research, January 2015
Source: Statistics Sweden, Danish National Bank, Statistics Norway, Macquarie Research, January 2015
80
90
100
110
120
130
140
150
160
170
180
Q1 2005
Q4 2005
Q3 2006
Q2 2007
Q1 2008
Q4 2008
Q3 2009
Q2 2010
Q1 2011
Q4 2011
Q3 2012
Q2 2013
Q1 2014
Q4 2014
DK NO SD
1.80
2.30
2.80
3.30
3.80
4.30
De
c-0
5
Ju
n-0
6
De
c-0
6
Ju
n-0
7
De
c-0
7
Ju
n-0
8
De
c-0
8
Ju
n-0
9
De
c-0
9
Ju
n-1
0
De
c-1
0
Ju
n-1
1
De
c-1
1
Ju
n-1
2
De
c-1
2
Ju
n-1
3
De
c-1
3
Ju
n-1
4
Sweden Norway Denmark
1.50
1.70
1.90
2.10
2.30
2.50
2.70
2.90
De
c-0
5
Ju
n-0
6
De
c-0
6
Ju
n-0
7
De
c-0
7
Ju
n-0
8
De
c-0
8
Ju
n-0
9
De
c-0
9
Ju
n-1
0
De
c-1
0
Ju
n-1
1
De
c-1
1
Ju
n-1
2
De
c-1
2
Ju
n-1
3
De
c-1
3
Ju
n-1
4
Sweden Norway Denmark
House prices ...
Sweden ...
Macquarie Research Nordic Banks
26 January 2015 19
Danish and Norwegian margins have remained broadly flat in Q4 across both the Retail and
Corporate loan books.
In contrast, margin pressure in the Swedish Retail market has continued during Q4. This is
disappointing against our expectations for margins widening as mortgages re-priced on the
back of higher Pillar 2 risk weightings. However, whilst asset margins did widen over the
quarter, this was more than offset by the impact of the Central bank rate cut (to zero) at the
end of October on deposit spreads.
Norway did not cut interest rates (by 25bps to 1.25%) until 11 December 2014, whilst
Denmark cut its main deposit and lending rates on 19 January 2015. Neither will have a
material impact on spreads until Q1 2015.
Denmark and
Norway flat margins
Swedish Retail
margin pressure
Macquarie Research Nordic Banks
26 January 2015 20
6. Economic background Key message: We are most confident on the outlook for Sweden. Deflation is a very
real risk, but underlying GDP growth remains robust. In contrast, there is clear
downside risk to Norwegian consensus growth expectations which we still do not
believe reflect the impact of lower oil prices.
Whilst the economic problems for core European markets grow, the outlook for the principal
Nordic countries is not without challenges.
As we look into 2015, Sweden remains best placed in our opinion, with consensus for Real
GDP growth of 2.4% (see Fig 29 below) - marginally down on previous expectations but still
comfortably ahead of the +1.9% forecast for this year.
Fig 29 Real GDP 2015e - Analysis of forecast and momentum
Source: Bloomberg consensus, Macquarie Research, January 2015
(i) Change since 30 September 2014
We do not believe that the downside risks to Norway are fully reflected in current
expectations. Whilst consensus is still looking at Real GDP growth of +2.1% for 2015e we
suspect that this fails to reflect the very marked fall in global oil prices – Brent crude is
currently trading below $50 a barrel, compared with a peak of over $110 as recently as June
2014.
The oil and gas sector directly accounts for approximately 22% of Norwegian GDP –
considerably more if related business was to be included. As we highlight in Fig 30 this
results in a good correlation between oil prices and Norwegian GDP.
Czech RepHungary
Romania
Russia
Ukraine
DenmarkFinland
NorwaySweden
France
Germany
UK US
Ireland
Latvia
Estonia
Brazil
Lithuania
(3.0%)
(2.5%)
(2.0%)
(1.5%)
(1.0%)
(0.5%)
+0.0%
+0.5%
+1.0%
(2.5%) (1.5%) (0.5%) +0.5% +1.5% +2.5% +3.5%
Momentum (i)
Forecast 2015e
Japan
Sweden robust
Norway
Macquarie Research Nordic Banks
26 January 2015 21
Fig 30 Norwegian Real GDP growth (%) against Oil prices
Source: Bloomberg, Macquarie Research, January 2015
The last time Norway saw a similar fall off in oil prices was 2008. Clearly this was in the
depths of the global financial crisis which is likely to have exacerbated any slowdown, but did
result in Real GDP falling a cumulative -4.3%. Against that backdrop, expecting positive Real
GDP progression in 2015 for Norway looks ambitious.
The principal challenge to Sweden remains inflation, which was running at -0.2% into the end
of 2014. 0% central bank rates are expected to generate a modest improvement in 2015 to
+0.7% (see Fig 31).
Fig 31 Inflation 2015e - Analysis of forecast and momentum
Source: Bloomberg consensus, Macquarie Research, January 2015
(i) Change since 30 September 2014 (ii) Ukraine inflation +15% / 3mth momentum +4%; Russia +9% / 3mth momentum +2%
29/ 12/ 200628/ 02/ 200730/ 04/ 200730/ 06/ 200731/ 08/ 200731/ 10/ 200731/ 12/ 200729/ 02/ 200830/ 04/ 200830/ 06/ 200831/ 08/ 200831/ 10/ 200831/ 12/ 200828/ 02/ 200930/ 04/ 200930/ 06/ 200931/ 08/ 200931/ 10/ 200931/ 12/ 200928/ 02/ 201030/ 04/ 201030/ 06/ 201031/ 08/ 201031/ 10/ 201031/ 12/ 201028/ 02/ 201130/ 04/ 201130/ 06/ 201131/ 08/ 201131/ 10/ 201131/ 12/ 201129/ 02/ 201230/ 04/ 201230/ 06/ 201231/ 08/ 201231/ 10/ 201231/ 12/ 201228/ 02/ 201330/ 04/ 201330/ 06/ 201331/ 08/ 201331/ 10/ 201331/ 12/ 201328/ 02/ 201430/ 04/ 201430/ 06/ 201431/ 08/ 201431/ 10/ 201431/ 12/ 2014
20
40
60
80
100
120
140
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
01/11/2006 01/05/2008 01/11/2009 01/05/2011 01/11/2012 01/05/2014
Bre
nt O
il P
rice ($)
No
rway R
eal G
DP
(%
)
Norway Real GDP yoy Oil Price (Brent)
Latvia
Hungary
Romania
Denmark
Finland
Norway
Sweden
France
Germany UK
US
Ireland Estonia
Lithuania
(0.9%)
(0.8%)
(0.7%)
(0.6%)
(0.5%)
(0.4%)
(0.3%)
(0.2%)
(0.1%)
+0.0%
+0.1%
+0.5% +1.0% +1.5% +2.0% +2.5%
Momentum (i)
Forecast 2015
Macquarie Research Nordic Banks
26 January 2015 22
7. Valuation Key message: Dividend yield (see Section 2) still remains the most compelling
investment theme. We prefer Nordea (7%) and Swedbank (6%). DNB is the cheapest
Nordic bank, but with a cycle of earnings downgrades on the back of lower oil prices
yet to be fully reflected in earnings we remain cautious.
Our valuation of the six Nordic banks is detailed above (see Fig 32). Macquarie banks
valuation is based on estimated sustainable returns applied to 2016 tangible book value
adjusted for surplus capital (valued at par). We have summarised the key changes below:-
Fig 33 Nordic Bank - Macquarie normalised ROTE valuations
Rec Target Old New Old New Chge Comments
Danske U U 160 162 +1.3% Discount roll forward DNB U U 110 104 (5.5%) Earnings downgrade / Lower profitability SHB N N 330 380 +15.2% Discount roll forward + COE to 9.5% (v 10.0%) Nordea N O 91 103 +13.2% Discount roll forward + COE to 9.5% (v 10.0%) SEB O N 97 100 +3.1% Discount roll forward Swedbank O O 200 201 +0.5% Discount roll forward + modest fct changes
Source: Macquarie Research, January 2015
Fig 32 Nordic Bank - Macquarie normalised ROTE valuations
Danske DNB Nordea SEB SHB1 Swedbank
Tangible book per share 2016e 152 111 7.5 60.8 197.0 101.8
Core tier 1 Basel 3 14.8% 14.9% 16.2% 15.4% 18.0% 16.8%
Minimum core tier 1 14.0% 14.0% 15.0% 15.0% 15.0% 15.0%
Surplus/ deficit per share 7.4 6.2 0.49 1.2 29.6 9.4
Normalised tang. NAV per share 144.3 105.2 7.0 59.6 167.0 92.4
Forecast ROTE 2016e 10.8% 11.7% 13.1% 13.2% 13.9% 16.2%
Normalised sustainable ROTE 10.0% 10.0% 13.0% 14.0% 16.0% 17.0% COE 9.5% 11.0% 10.0% 10.0% 9.5% 9.5%
Sustainable growth 0% 0% 0% 2% 3% 1%
Discounted to end 2015e
Core business value 138.7 90.7 8.8 85.0 305 159.0 Surplus/ (Deficit) CT1 2016e 6.7 6.2 0.5 1.1 27 8.4
Sub-total 145.4 96.9 9.2 86.1 332 167.3
Dividends 2015/16e 16.7 8.5 1.8 14.8 48 33.9
Other (1.7) (0.3)
Target Price DKK 162 NOK 104 SEK 103 SEK 100 SEK 380 SEK 201
Current Share Price DKK 172 NOK 109 SEK 95 SEK 101 SEK 379 SEK 193
Upside to TP -5.4% -5.2% +8.1% +0.7% +0.2% +4.3%
Risk weighted assets 887,963 1,159,969 166,666 716,929 522,787 563,424
No. Of shares 1,000 1,629 4050 2,194 636 1,097
Source: Company data, Macquarie Research, January 2015 1 Svenska Handlesbanken
Macquarie Research Nordic Banks
26 January 2015 23
Profitability
We remain comfortable with the premium return profile of Swedbank, which reflects the heavy
weighting towards Swedish Retail and the strong related fee generation (asset management,
payments and Cards). This justifies a material premium valuation.
We are less convinced by Handelsbanken. Superior profitability is evident but this appears to
be driven more by lower risk weighting then business mix. No-one would bet against the
remarkable track record of the company, but we struggle to see why similar business appears
to attract lower risk weighting per margin at Handelsbanken against peers.
DNB and Danske remain the least profitable Nordic bank franchises. With interest rates cut
in December and January for Norway and Denmark respectively, and oil price weakness yet
to fully flow through to the Norwegian economy it is challenging to see material recovery from
either bank.
The superior profitability dynamics of the Nordic banks are clear from the sector analysis
above (see Fig 34). Nordea in particular stands out as offering similar return characteristics
to SEB and Handelsbanken in 2016 (including -7% costs in 2015) and yet is trading at a
marked discount. There are risks around Russian exposure in particular, but we upgrade the
shares to Outperform.
Fig 34 Profitability (ROTE16e) against PTBV15e
Source: Macquarie Research, January 2015
BNPACA
SG
ING
KBC
CBK
BKIR
EBS
RBI
CS
DBK
UBSISP
UCG
DANSKE
DNB
SHBA
NDA
SEBA
SWEDA
BCP
BPI
BKT
POP
SAB
BBVA
SAN
BARC
LLOY
RBS
HSBA
STAN
OSB
0.00x
0.50x
1.00x
1.50x
2.00x
3.0% 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% 17.0% 19.0% 21.0% 23.0%
Pri
ce t
o t
angi
ble
bo
ok
20
15
E
ROTE 2016E
Swedbank
Handelsbanken
DNB and Danske
Nordea
Macquarie Research Nordic Banks
26 January 2015 24
Prospective price earnings 2015e and 2016e
We have detailed a table of prospective price earnings ratios for European banks below (Fig
35).
Fig 35 European Bank prospective P/E ratios 2015e & 2016e
Company Curr Price EPS EPS PE PE 2015e 2016e 2015e 2016e
1 Raiffeisen Euros 11.3 345.2 366.8 3.3x 3.1x 2 Credit Suisse CHF 19.7 324.0 349.4 6.1x 5.6x 3 Deutsche Bank Euros 26.3 374.1 427.3 7.0x 6.2x 4 SocGen Euros 38.1 501.2 548.7 7.6x 6.9x 5 OneSavings GBP 2.1 22.9 27.4 9.1x 7.6x 6 BPI Euros 1.0 9.9 12.4 9.7x 7.8x 7 UBS CHF 14.9 173.9 191.0 8.6x 7.8x 8 Barclays GBP 2.4 26.2 30.9 9.3x 7.9x 9 BNP Paribas Euros 49.4 573.8 600.0 8.6x 8.2x 10 Erste Group Euros 20.3 216.6 241.7 9.4x 8.4x 11 St Chartered USD 14.4 161.1 170.5 8.9x 8.4x 12 Credit Agricole Euros 11.4 120.4 134.1 9.5x 8.5x 13 BCP Euros 0.1 0.6 0.8 11.9x 8.8x 14 DnB NOR NKr 109.3 1,153 1,243 9.5x 8.8x 15 UniCredit Euros 5.7 54.6 63.0 10.5x 9.1x 16 BBVA Euros 8.0 62.3 84.6 12.8x 9.4x 17 Lloyds GBP 0.8 8.1 7.9 9.4x 9.6x 18 Commerzbank Euros 11.5 94.8 117.6 12.1x 9.7x 19 HSBC USD 9.4 88.9 95.5 10.5x 9.8x 20 KBC Euros 49.2 441.9 491.1 11.1x 10.0x 21 ING Euros 11.6 101.3 115.4 11.5x 10.1x 22 Nordea SKr 10.2 93.7 96.5 11.0x 10.7x 23 Danske Bank DKr 171.5 14.6 15.8 11.8x 10.9x 24 Santander Euros 6.1 48.7 52.9 12.6x 11.6x 25 Swedbank SKr 192.8 1,566.3 1,616.1 12.3x 11.9x 26 Bank of Ireland Euros 0.3 1.4 2.5 21.7x 12.1x 27 Intesa Sanpaolo Euros 2.6 16.1 20.8 16.2x 12.5x 28 SEB SKr 101.3 762.4 787.5 13.3x 12.9x 29 Popular Euros 4.2 23.9 31.9 17.3x 13.0x 30 Sabadell Euros 2.4 14.4 17.9 17.0x 13.7x 31 Handelsbanken SKr 379.2 2,548 2,667 14.9x 14.2x 32 RBS Core GBP 3.9 34.8 23.3 11.1x 16.6x 33 Bankinter Euros 6.9 40.7 40.8 17.0x 16.9x Unweighted average 11.3x 10.0x
Source: Macquarie Research, January 2015
The European Bank sector trades on an average 10x prospective 2016 estimated earnings.
Given their resilient business models, robust capital and high payout ratios it is unsurprising
that the Nordic banks generally trade at a premium to the peer group.
The exception is DNB on just under 9x prospective 2016 earnings. However, we do not see
this as a buying opportunity. With oil price weakness looking to continue near term it is
difficult to have confidence that we will not see further downgrades.
Elsewhere Nordea is the cheapest of the Nordic banks trading on less than 11x prospective
2016 earnings. This is likely to reflect, amongst other things, the risk associated with the
Russian operation (c€160m profits (c4%); €6.6bn lending (2% of loans)). However, with a
market leading cost programme in 2015 and expectations for a 70% payout ratio, we upgrade
the shares to Outperform.
Nordic bank
premium PEs ...
DNB exception
Nordea cheapest
Macquarie Research Nordic Banks
26 January 2015 25
Capital generation / Dividend
Nordic markets are not growth markets (albeit it remains the only region in Europe to deliver
any visible volume growth in both the Personal and Corporate sectors). With that in mind, the
ability of banks to generate surplus capital and pay it to investors is core to the investment
proposition.
Fig 36 Analysis of capital generation 2014e to 2016e Fig 37 Surplus cap. generation 2014-16e v PTBV15e
Source: Macquarie Research, January 2015 Source: Macquarie Research, January 2015
We have highlighted in Fig 36 details of the capital we expect to be generated by the sector
over the period 2014-2016e, analysed between growth in tangible book; dividends; and repair
of capital ratios.
Handelsbanken and Swedbank continue to generate the most surplus capital over the next
couple of years, equivalent to almost 40% of tangible book value. This is a direct reflection of
their superior profitability. Swedbank continues to pay the vast bulk of this back to investors,
whilst Handelsbanken retains a greater proportion to support growth (UK, etc).
SEB and Nordea are forecast to generate surplus capital equivalent to marginally below 30%
of tangible book, with a modest amount required to repair opening core tier 1 ratios.
DNB and Danske both bring up the rear reflecting their weaker profitability and on-going
capital shortfall against required minima at the end of 2014.
Comparing the surplus capital generation 2014-2016e with current price to 2015e tangible
book ratios (see Fig 37) highlights both DNB and Nordea trading at a discount. Whilst we
acknowledge DNB does look cheap against fundamentals the level of uncertainty around the
oil price / Norway outlook leaves us comfortable retaining our conviction short position.
In the case of Nordea, Russia / Finland (14% loans) are clearly risks. However, we
understand that the bulk of the Russian exposure is to major international corporates and
approximately 70% of lending exposure is in USD. Management do not currently expect to
see material write-downs.
We have outlined in section 3 our expectations for dividends in the coming years.
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
SHB Swedbank SEB Nordea DnB Danske Bank
NTA Growth (% 2016e/14e)
Total Div (% of NTA14e)
Surplus/deficit CT1B3 2014 Swedbank
SHB
SEB
Nordea
DnB
Danske Bank
0.90x
1.10x
1.30x
1.50x
1.70x
1.90x
2.10x
10% 15% 20% 25% 30% 35% 40%
Price to tangible 15e
Surplus capital generation
Surplus capital
generation ...
SEB and Nordea
Handelsbanken and
Swedbank
DNB and Danske
Nordea, Russia /
Finland
Macquarie Research Nordic Banks
26 January 2015 26
8. Conclusion
The Nordic banks remain a safe haven for investors in a remarkably difficult European
banking environment. The economies of the region are not immune from challenges but the
banks are well capitalised, profitable and despite deflationary pressures, volumes continue to
build steadily.
Finally, in the ultra low interest rate environment in which we find ourselves any stocks that
deliver yields of 5-7% are attractive by definition.
We have modestly altered our preferences for 2015 to reflect the individual circumstances of
2015 but remain fundamentally positive on Sweden in particular.
Macquarie Research Nordic Banks
26 January 2015 27
Appendices
Appendix A
European Bank Sector Valuation Statistics **
Source: FactSet, Macquarie Research, January 2015, Prices as of 22 January 2015
*Macq. adjusted returns (excl. exceptionals)
** NOTE REC & TP CHANGES NOT REFLECTED IN ABOVE TABLE
Rec Target Old New Old New Chge Comments
Danske U U 160 162 +1.3% Discount roll forward DNB U U 110 104 (5.5%) Earnings downgrade / Lower profitability SHB N N 330 380 +15.2% Discount roll forward + COE to 9.5% (v 10.0%) Nordea N O 91 103 +13.2% Discount roll forward + COE to 9.5% (v 10.0%) SEB O N 97 100 +3.1% Discount roll forward Swedbank O O 200 201 +0.5% Discount roll forward + modest fct changes Standard Chartered 1100p 950p (13.6%) See Asian Banks - Commodity Finance Risk
Source: Macquarie Research, January 2015
Local Currency Ticker Rtg Share Target Mcap
Price Price (EURMn) 15e 16e 15e 16e 15e 16e 15e 16e 15e 16e 15e 16e
Benelux & France 182,080 4.9x 4.6x 9.4x 8.7x 0.99x 0.92x 8.3% 8.4% 10.9% 10.9% 4.3% 4.6%
BNP Paribas BNP FP N 49.40 55.00 11% 59,181 4.1x 3.9x 8.6x 8.2x 0.92x 0.86x 8.1% 8.1% 11.0% 10.8% 4.5% 5.1%
Credit Agricole ACA FP O 11.43 13.50 18% 28,278 5.3x 4.9x 8.9x 7.9x 0.87x 0.81x 6.4% 6.9% 10.2% 10.7% 5.2% 6.1%
ING INGA NA O 11.60 13.00 12% 44,757 6.2x 5.8x 11.2x 10.4x 1.05x 0.99x 8.0% 8.1% 9.9% 9.8% 2.7% 3.4%
KBC KBC BB U 49.18 33.50 -32% 20,546 6.1x 5.8x 11.1x 10.0x 1.61x 1.48x 14.1% 14.1% 15.6% 15.4% 4.1% 0.0%
SocGen GLE FP O 38.08 48.00 26% 29,318 3.2x 3.0x 7.6x 6.9x 0.70x 0.66x 6.8% 7.2% 9.5% 9.7% 5.8% 7.2%
CEE 12,055 2.3x 2.2x 7.7x 7.0x 0.81x 0.75x 8.9% 9.2% 10.8% 11.0% 4.3% 4.7%
Erste Group EBS AV N 20.35 21.00 3% 8,744 2.6x 2.5x 9.4x 8.4x 0.99x 0.92x 8.9% 9.3% 11.0% 11.3% 2.2% 2.5%
Raiffeisen RBI AV N 11.30 33.00 192% 3,311 1.4x 1.4x 3.3x 3.1x 0.32x 0.30x 9.0% 8.9% 10.1% 10.0% 9.7% 10.6%
Germany 49,297 5.1x 4.2x 8.4x 7.1x 0.63x 0.60x 6.8% 7.7% 8.4% 9.2% 3.7% 4.7%
Commerzbank CBK GR O 11.45 14.50 27% 13,036 4.9x 4.5x 12.1x 9.7x 0.54x 0.52x 4.0% 4.8% 4.5% 5.5% 3.5% 5.2%
Deutsche Bank DBK GR N 26.29 28.00 7% 36,261 5.2x 4.1x 7.0x 6.2x 0.67x 0.62x 7.8% 8.7% 9.7% 10.5% 3.8% 4.6%
Italy 76,564 4.4x 4.2x 13.4x 11.0x 0.94x 0.91x 6.1% 7.1% 7.2% 8.3% 3.8% 5.5%
Intesa Sanpaolo ISP IM U 2.61 2.15 -18% 42,860 5.1x 4.9x 15.1x 12.3x 1.11x 1.08x 6.3% 7.6% 7.5% 8.9% 4.6% 6.9%
UniCredit UCG IM O 5.75 6.80 18% 33,704 3.5x 3.2x 11.1x 9.5x 0.73x 0.69x 5.8% 6.5% 6.7% 7.5% 2.8% 3.9%
Nordics 157,783 8.5x 8.2x 12.0x 11.5x 1.53x 1.45x 12.0% 11.9% 13.3% 13.0% 4.8% 4.8%
Danske Bank DANSKE DC U 171.50 160.00 -7% 23,243 7.7x 7.5x 12.4x 11.3x 1.14x 1.07x 8.3% 8.6% 9.5% 9.8% 3.2% 3.5%
DnB ASA DNB NO U 109.30 110.00 1% 20,423 6.0x 5.9x 8.7x 8.4x 1.06x 0.97x 12.4% 11.6% 12.9% 12.0% 2.9% 3.0%
Handelsbanken SHBA SS N 379.20 330.00 -13% 25,763 10.8x 10.3x 14.9x 14.2x 1.97x 1.87x 12.7% 12.7% 13.8% 13.5% 4.4% 4.6%
Nordea NDA SS N 95.25 91.00 -4% 41,251 7.7x 7.7x 11.0x 10.6x 1.32x 1.26x 11.8% 11.6% 13.2% 12.9% 6.4% 5.6%
SEB SEBA SS O 101.30 97.00 -4% 23,766 9.7x 9.3x 12.2x 12.5x 1.74x 1.65x 12.5% 12.3% 13.8% 13.5% 4.6% 4.7%
Sw edbank SWEDA SS O 192.80 200.00 4% 23,339 9.1x 8.7x 12.9x 12.0x 1.99x 1.89x 14.5% 14.4% 16.4% 16.2% 6.1% 6.3%
Portugal 5,293 3.2x 3.0x 11.3x 8.5x 0.76x 0.70x 6.6% 8.2% 6.9% 8.5% 0.0% 1.7%
BCP BCP PL N 0.07 0.08 12% 3,886 3.3x 3.1x 11.9x 8.8x 0.82x 0.75x 6.8% 8.5% 7.1% 8.9% 0.0% 0.0%
BPI BPI PL U 0.97 1.25 29% 1,407 3.0x 2.8x 9.7x 7.8x 0.59x 0.57x 6.2% 7.4% 6.2% 7.4% 0.0% 6.4%
Spain 158,970 4.1x 4.1x 13.3x 11.3x 1.27x 1.20x 7.3% 8.3% 10.2% 11.0% 3.2% 3.7%
Bankinter BKT SM U 6.92 4.50 -35% 6,217 7.5x 8.3x 16.5x 16.8x 1.75x 1.66x 10.1% 9.4% 10.9% 10.2% 3.0% 3.0%
BBVA BBVA SM U 7.98 8.20 3% 49,656 4.2x 3.9x 12.8x 9.4x 1.18x 1.10x 7.8% 10.0% 9.4% 12.0% 3.6% 4.2%
Popular POP SM U 4.15 3.90 -6% 8,755 4.4x 4.4x 17.3x 13.0x 0.87x 0.85x 4.0% 5.2% 5.1% 6.6% 2.4% 3.8%
Sabadell SAB SM O 2.45 2.25 -8% 9,856 6.1x 6.0x 17.0x 13.7x 1.03x 1.00x 5.4% 6.5% 6.2% 7.4% 1.8% 3.6%
Santander SAN SM U 6.12 5.90 -4% 84,485 3.6x 3.8x 12.6x 11.6x 1.36x 1.28x 7.4% 7.7% 11.5% 11.4% 3.2% 3.5%
Switzerland 89,542 8.5x 5.7x 7.7x 7.0x 1.08x 1.01x 12.1% 12.5% 14.5% 14.7% 4.7% 7.9%
Credit Suisse CSGN VX U 19.72 25.00 27% 31,895 4.1x 3.9x 6.1x 5.6x 0.79x 0.73x 11.2% 11.2% 13.6% 13.4% 3.5% 7.6%
UBS UBSN VX O 14.90 19.50 31% 57,648 10.9x 6.7x 8.6x 7.8x 1.25x 1.16x 12.6% 13.2% 14.9% 15.4% 5.4% 8.1%
UK 370,041 6.0x 5.8x 10.1x 9.6x 1.08x 1.03x 9.4% 9.4% 11.2% 11.1% 4.1% 4.6%
Barclays BARC LN O 2.43 2.65 9% 53,062 4.2x 3.7x 9.3x 7.9x 0.80x 0.75x 7.6% 8.5% 8.9% 9.8% 2.7% 4.7%
Lloyds LLOY LN U 0.76 0.66 -13% 71,428 6.0x 6.1x 9.4x 9.6x 1.35x 1.27x 13.5% 12.4% 14.9% 13.7% 4.1% 4.6%
RBS RBS LN U 3.86 3.40 -12% 56,248 7.2x 7.3x 11.2x 11.7x 0.92x 0.89x 6.7% 6.2% 8.5% 7.7% 0.0% 0.0%
HSBC HSBA LN O 6.20 6.80 10% 157,507 6.6x 6.3x 10.5x 9.8x 1.17x 1.12x 9.1% 9.4% 11.4% 11.7% 5.8% 6.0%
St Chartered STAN LN N 9.53 11.00 15% 31,131 4.2x 4.0x 7.7x 7.2x 0.82x 0.78x 9.6% 9.8% 11.0% 11.1% 6.1% 6.2%
OneSavings OSB LN O 2.07 2.40 16% 666 8.6x 7.3x 81.1x 68.2x 1.88x 1.56x 23.7% 23.2% 23.9% 23.4% 1.9% 2.3%
Ireland 9,903 7.3x 6.3x - 11.0x 1.35x 1.20x 6.6% 10.2% 8.2% 11.5% 0.0% 0.0%
Bank of Ireland BKIR ID O 0.31 0.34 11% 9,903 7.3x 6.3x 17.3x 11.0x 1.35x 1.20x 6.6% 10.2% 8.2% 11.5% 0.0% 0.0%
All Regions 1,101,626 5.9x 5.5x 10.7x 9.7x 1.12x 1.06x 9.1% 9.4% 11.1% 11.3% 4.1% 4.8%
Div YieldROTE*+/-
Pre-Prov P/E Adj. P/E P/TBV ROE*
Macquarie Research Nordic Banks
26 January 2015 28
Nordic Bank Financial Forecasts Appendix B
Appendix B(i) – Danske financial forecasts 2013-2017e
Source: Company data, Macquarie Research, January 2015
Recommendation - U
Fair Value - DKK 162.0
Price - DKK 172
P&L account (DKKm) 2013 2014e 2015e 2016e 2017e 2014e 2015e 2016e 2017e
Net interest income 22,077 23,238 23,934 24,362 24,836 +5% +3% +2% +2%
Other income 17,663 19,935 20,329 21,051 21,859 +13% +2% +4% +4%
Operating income 39,740 43,173 44,262 45,413 46,696 +9% +3% +3% +3%
Operating costs (24,343) (22,476) (21,655) (21,620) (22,018) (8%) (4%) (%) +2%
Operating profit 15,397 20,696 22,607 23,794 24,678 +34% +9% +5% +4%
Provisions (4,187) (2,766) (2,643) (2,726) (3,249) (34%) (4%) +3% +19%
Other 0 0 0 0 0 na na na na
Adjusted profit before tax 11,210 17,930 19,964 21,068 21,428 +60% +11% +6% +2%
Exceptionals & other items 0 (8,000) 0 0 0 na (100%) na na
PBT, Core 11,210 9,930 19,964 21,068 21,428 (11%) na +6% +2%
PBT, Non-core (1,777) (1,831) (241) (66) (8) +3% (87%) (72%) (87%)
Profit before tax 9,433 8,099 19,724 21,001 21,420 (14%) na +6% +2%
Tax (2,944) (4,104) (4,791) (4,846) (4,714) +39% +17% +1% (3%)
Minorities 0 (243) (324) (324) (324) na +33% 0% 0%
Net income 6,489 3,752 14,608 15,832 16,382 (42%) na +8% +3%
Balance sheet (DKKm) 2013 2014e 2015e 2016e 2017e 2014e 2015e 2016e 2017e
Loans to Customers 1,536,772 1,585,220 1,667,888 1,609,440 1,637,507 +3% +5% (4%) +2%
Goodwill 20,641 20,480 20,480 20,480 20,480 (1%) 0% 0% 0%
Total assets 3,227,057 3,452,951 3,633,019 3,505,707 3,566,842 +7% +5% (4%) +2%
Risk Weighted Assets 897,768 874,601 920,210 887,963 903,448 (3%) +5% (4%) +2%
Customer deposits 776,412 756,505 515,630 805,109 833,447 (3%) (32%) +56% +4%
Shareholders equity 145,657 152,521 162,225 172,213 182,262 +5% +6% +6% +6%
Per share data (DKK) 2013 2014e 2015e 2016e 2017e 2014e 2015e 2016e 2017e
EPS reported 6.48 3.75 14.60 15.83 16.37 (42%) na +8% +3%
EPS adjusted 6.48 11.75 14.60 15.83 16.37 +81% +24% +8% +3%
DPS 2.00 5.10 5.84 6.33 6.55 na +15% +8% +3%
BVPS 146 152 162 172 182 +5% +6% +6% +6%
TBVPS 125 132 142 152 162 +6% +7% +7% +7%
Number of shares (year end) (m) 1,000 1,000 1,000 1,000 1,000 0% 0% 0% 0%
Ratios 2013 2014e 2015e 2016e 2017e
Profitability
NIM 1.31% 1.40% 1.45% 1.43% 1.51%
Cost income ratio 61% 52% 49% 48% -47%
LLC/loans (bp) 26bps 18bps 16bps 17bps 20bps
Tax rate 31% 24% 24% 23% 22%
ROE 4.6% 2.5% 9.3% 9.5% 9.2%
ROTE 5.4% 2.9% 10.7% 10.8% 10.5%
RORWA 0.78% 0.42% 1.65% 1.75% 1.83%
ROA 0.19% 0.11% 0.41% 0.44% 0.46%
Leverage - Basel 3 3.3% 3.1% 3.2% 3.6% 3.8%
Core Tier 1 - Basel 3 fully loaded 12.8% 12.8% 13.3% 14.8% 15.7%
Loans / Deposits 198% 210% 323% 200% 196%
Loans / Assets 48% 46% 46% 46% 46%
Equity / Assets 4.5% 4.4% 4.5% 4.9% 5.1%
Price multiples
P/E Adjusted 26.5x 14.6x 11.7x 10.8x 10.5x
P/BV 1.18x 1.12x 1.06x 1.00x 0.94x
P/TBV 1.37x 1.30x 1.21x 1.13x 1.06x
Div yield 1.2% 3.0% 3.4% 3.7% 3.8%
Dividend cover 3.2x 0.7x 2.5x 2.5x 2.5x
Divisions (DKKm) 2013 2014e 2015e 2016e 2017e 2014e 2015e 2016e 2017e
Revenues
Personal Banking 16,524 16,653 17,155 17,625 18,169 +1% +3% +3% +3%
Business Banking 12,105 12,219 12,599 12,920 13,258 +1% +3% +3% +3%
Corp & Ins. 8,435 9,412 9,735 9,963 10,232 +12% +3% +2% +3%
Capital 2,164 2,322 2,392 2,464 2,537 +7% +3% +3% +3%
Non-Core 385 231 289 165 83 (40%) +25% (43%) (50%)
Other 127 2,335 2,092 2,276 2,417 na (10%) +9% +6%
Total 39,740 43,173 44,262 45,413 46,696 +9% +3% +3% +3%
Profit before tax
Personal Banking 2,899 4,719 5,690 6,141 6,507 +63% +21% +8% +6%
Business Banking 4,872 5,768 6,283 6,478 6,218 +18% +9% +3% (4%)
Corp & Ins. 3,374 4,446 5,001 5,277 5,452 +32% +12% +6% +3%
Capital 2,219 3,195 3,113 3,212 3,314 +44% (3%) +3% +3%
Non-Core (1,777) (1,831) (241) (66) (8) +3% (87%) (72%) (87%)
Other (2,154) (8,199) (122) (41) (61) na (99%) (67%) +51%
Total 9,433 8,099 19,724 21,001 21,420 (14%) nm +6% +2%
Danske Bank
Macquarie Research Nordic Banks
26 January 2015 29
Appendix B(ii) – DNB financial forecasts 2013-2017e
Source: Company data, Macquarie Research, January 2015
Recommendation - U
Fair Value - NOK 104
Price - NOK 109
P&L account (NOKm) 2013 2014e 2015e 2016e 2017e 2013 2014e 2015e 2016e 2017e
Net interest income 30,192 32,323 32,915 33,647 34,395 +11% +7% +2% +2% +2%
Other income 17,086 16,007 15,936 16,169 16,406 +6% (6%) (%) +1% +1%
Operating income 47,278 48,330 48,852 49,816 50,801 +9% +2% +1% +2% +2%
Operating costs (21,582) (20,878) (20,374) (20,242) (20,614) +5% (3%) (2%) (1%) +2%
Operating profit 25,696 27,452 28,478 29,573 30,187 +12% +7% +4% +4% +2%
Provisions (2,185) (1,629) (3,512) (2,658) (2,464) (31%) (25%) na (24%) (7%)
Other (5) 80 79 79 79 (99%) na (1%) 0% 0%
Adjusted profit before tax 23,507 25,903 25,044 26,994 27,801 +24% +10% (3%) +8% +3%
Exceptionals & other items (797) 1,307 0 0 0 (60%) na (100%) na na
Profit before tax 22,709 27,210 25,044 26,994 27,801 +33% +20% (8%) +8% +3%
Tax (5,188) (6,577) (6,261) (6,748) (6,950) +29% +27% (5%) +8% +3%
Minorities 4 0 0 0 0 (95%) (100%) na na na
Net income 17,526 20,632 18,783 20,245 20,851 +34% +18% (9%) +8% +3%
Balance sheet (NOKm) 2013 2014e 2015e 2016e 2017e 2013 2014e 2015e 2016e 2017e
Loans to Customers 1,340,831 1,412,385 1,422,216 1,449,961 1,483,684 +3% +5% +1% +2% +2%
Goodwill 6,511 6,182 6,182 6,182 6,182 (3%) (5%) 0% 0% 0%
Total assets 2,405,239 2,533,596 2,551,230 2,601,000 2,661,495 +4% +5% +1% +2% +2%
Risk Wghtd Ats (Transitional) 1,089,114 1,098,874 1,137,773 1,159,969 1,186,948 +1% +1% +4% +2% +2%
Customer deposits 867,904 889,904 918,276 956,143 959,770 +7% +3% +3% +4% +%
Shareholders equity 142,227 157,845 172,110 187,660 203,449 +12% +11% +9% +9% +8%
Per share data (NOK) 2013 2014e 2015e 2016e 2013 2014e 2015e 2016e 2017e
EPS reported 10.76 12.67 11.53 12.43 12.80 +34% +18% (9%) +8% +3%
EPS adjusted 10.77 12.06 11.53 12.43 12.80 +20% +12% (4%) +8% +3%
DPS 2.7 2.8 2.9 3.1 5.1 +29% +3% +4% +8% +65%
BVPS 87 97 106 115 125 +12% +11% +9% +9% +8%
TBVPS 83 93 102 111 121 +12% +12% +9% +9% +9%
Number of shares (year end) (m) 1,629 1,629 1,629 1,629 1,629 0% (%) 0% 0% 0%
Ratios 2013 2014e 2015e 2016e 2017e
Profitability
NIM 1.85% 1.90% 1.88% 1.90% 1.90%
Cost income ratio 46% 43% 42% 41% 41%
LLC/loans (bp) 17bps 12bps 25bps 19bps 17bps
Tax rate 23% 25% 25% 25% 25%
ROE Adjusted 13.3% 13.2% 11.4% 11.3% 10.7%
ROTE Adjusted 13.7% 13.7% 11.8% 11.7% 11.0%
RORWA 1.62% 1.89% 1.68% 1.76% 1.78%
ROA 0.74% 0.84% 0.74% 0.79% 0.79%
Capital & leverage
Core Tier 1 - Transitional 11.8% 13.0% 13.8% 14.9% 15.6%
Core Tier 1 - Basel III fully loaded 12.9% 15.1% 15.9% 17.1% 17.8%
Loans / Deposits 154% 159% 155% 152% 155%
Loans / Assets 56% 56% 56% 56% 56%
Equity / Assets 5.9% 6.2% 6.7% 7.2% 7.6%
Price multiples
P/E Adjusted 10.1x 9.1x 9.5x 8.8x 8.5x
P/BV 1.25x 1.13x 1.03x 0.95x 0.88x
P/TBV 1.31x 1.17x 1.07x 0.98x 0.90x
Div yield 2.5% 2.5% 2.6% 2.8% 4.7%
Dividend cover 4.0x 4.6x 4.0x 4.0x 2.5x
Divisions (NOKm) 2013 2014e 2015e 2016e 2017e 2013 2014e 2015e 2016e 2017e
Revenues
Personal customers 17,461 18,779 18,882 19,260 19,645 +18% +8% +1% +2% +2%
SME 7,665 8,073 8,399 8,633 8,874 +8% +5% +4% +3% +3%
Large corporates 16,777 17,135 17,625 17,977 18,337 +1% +2% +3% +2% +2%
Trading 2,588 2,408 2,010 2,010 2,010 (42%) (7%) (17%) +0% +0%
Other (incl. Pensions) 2,787 1,935 1,935 1,935 1,935 na (31%) +0% (0%) +0%
Total revenue 47,278 48,330 48,852 49,816 50,801 +9% +2% +1% +2% +2%
Profit before tax
Personal customers 8,431 9,820 10,093 10,735 10,950 +33% +16% +3% +6% +2%
SME 3,344 3,625 3,570 3,813 3,950 +8% +8% (2%) +7% +4%
Large corporates 9,342 10,171 9,100 10,031 10,487 +14% +9% (11%) +10% +5%
Trading 1,943 1,926 1,507 1,507 1,507 (48%) (1%) (22%) +0% 0%
Other (incl. Pensions) 447 359 774 906 906 na (20%) na +17% 0%
Total PBT 23,507 25,903 25,044 26,994 27,801 +24% +10% (3%) +8% +3%
DnB NOR
Macquarie Research Nordic Banks
26 January 2015 30
Appendix B(iii) – Nordea financial forecasts 2013-2017e
Source: Company data, Macquarie Research, January 2015
Recommendation - O
Fair Value - SEK 103
Price - SEK 95
P&L account (EURm) 2013 2014e 2015e 2016e 2017e 2013e 2014e 2015e 2016e 2017e
Net interest income 5,525 5,500 5,602 5,662 5,780 (1%) (0%) +2% +1% +2%
Other income 4,366 4,351 4,507 4,660 4,814 (2%) (0%) +4% +3% +3%
Operating income 9,891 9,851 10,109 10,321 10,594 (1%) (0%) +3% +2% +3%
Operating costs (4,995) (4,973) (4,617) (4,678) (4,743) (1%) (0%) (7%) +1% +1%
Operating profit 4,896 4,878 5,492 5,643 5,851 (1%) (0%) +13% +3% +4%
Provisions (734) (557) (662) (666) (693) (18%) (24%) +19% +1% +4%
Other 0 0 0 0 0 na na na na na
Adjusted profit before tax 4,162 4,321 4,830 4,977 5,158 +3% +4% +12% +3% +4%
Exceptionals & other items 0 7 0 0 0 na na (100%) na na
Profit before tax 4,162 4,328 4,830 4,977 5,158 +3% +4% +12% +3% +4%
Tax (1,009) (1,015) (1,135) (1,170) (1,212) +4% +1% +12% +3% +4%
Minorities 9 (25) 40 40 40 (84%) na na +0% +0%
Net income 3,163 3,288 3,736 3,849 3,987 +1% +4% +14% +3% +4%
Balance sheet (EURm) 2013 2014e 2015e 2016e 2017e 2013e 2014e 2015e 2016e 2017e
Loans to Customers 341,900 351,556 360,348 365,924 374,178 (1%) +3% +3% +2% +2%
Goodwill 3,246 3,259 3,259 3,259 3,259 (5%) +0% +0% +0% +0%
Total assets 630,434 648,239 664,451 674,732 689,951 (6%) +3% +3% +2% +2%
Risk Weighted Assets (incl P2) 160,354 162,017 165,055 166,666 168,881 (4%) +1% +2% +1% +1%
Customer deposits 200,743 199,984 208,221 213,728 219,635 +0% (0%) +4% +3% +3%
Shareholders equity 29,209 30,760 32,593 33,639 34,739 +4% +5% +6% +3% +3%
Per share data (EUR) 2013 2014e 2015e 2016e 2017e 2013e 2014e 2015e 2016e 2017e
EPS reported 0.78 0.82 0.93 0.96 0.99 +0% +5% +14% +3% +4%
EPS adjusted 0.78 0.81 0.93 0.96 0.99 +0% +5% +14% +3% +4%
DPS 0.43 0.47 0.70 0.72 0.74 +26% +10% +47% +3% +4%
BVPS 7.22 7.60 8.05 8.31 8.58 +4% +5% +6% +3% +3%
TBVPS 6.41 6.79 7.24 7.50 7.77 +6% +6% +7% +4% +4%
Number of shares (year end) (m) 4,050 4,050 4,050 4,050 4,050 +0% +0% +0% +0% +0%
Ratios 2013 2014e 2015e 2016e 2017e
Profitability
NIM 1.61% 1.59% 1.57% 1.56% 1.56%
Cost income ratio 51% 50% 46% 45% 45%
LLC/loans (bp) 21bps 16bps 19bps 18bps 19bps
Tax rate 24% 24% 24% 24% 24%
ROE Adjusted 11.2% 11.2% 11.8% 11.6% 11.7%
ROTE Adjusted 12.7% 12.6% 13.1% 12.9% 12.9%
RORWA 1.96% 2.13% 2.42% 2.45% 2.51%
ROA 0.49% 0.51% 0.57% 0.57% 0.58%
Capital & leverage
Core Tier 1 14.9% 15.7% 16.4% 17.1% 17.5%
Core Tier 1 - Basel III fully loaded 13.6% 14.8% 15.5% 16.2% 16.5%
Loans / Deposits 170% 176% 173% 171% 170%
Loans / Assets 54% 54% 54% 54% 54%
Basel 3 Leverage 4.3% 4.6% 4.7% 4.9% 4.9%
Price multiples
P/E Adjusted 13.1x 12.5x 11.0x 10.7x 10.3x
P/BV 1.41x 1.34x 1.27x 1.23x 1.19x
P/TBV 1.59x 1.50x 1.41x 1.36x 1.31x
Div yield 4.2% 4.6% 6.8% 7.0% 7.3%
Dividend cover 1.8x 1.7x 1.3x 1.3x 1.3x
Divisions (EURm) 2013 2014e 2015e 2016e 2017e 2013e 2014e 2015e 2016e 2017e
Revenues
Retail 5,319 5,312 5,456 5,549 5,676 (0%) (0%) +3% +2% +2%
Wholesale 2,604 2,417 2,408 2,429 2,470 (6%) (7%) (0%) +1% +2%
Wealth 1,532 1,643 1,767 1,865 1,969 +8% +7% +8% +6% +6%
Other 436 478 478 478 478 (6%) +10% +0% +0% (0%)
Total 9,891 9,851 10,109 10,321 10,594 (1%) (0%) +3% +2% +3%
Profit before tax
Retail 1,882 2,027 2,177 2,247 2,339 +9% +8% +7% +3% +4%
Wholesale 1,454 1,473 1,411 1,414 1,423 (5%) +1% (4%) +0% +1%
Wealth 731 867 968 1,043 1,122 +15% +19% +12% +8% +8%
Other 95 (40) 274 274 274 (34%) na na +0% (0%)
Total 4,162 4,328 4,830 4,977 5,158 +3% +4% +12% +3% +4%
Nordea
Macquarie Research Nordic Banks
26 January 2015 31
Appendix B(iv) – SEB financial forecasts 2013-2017e
Source: Company data, Macquarie Research, January 2015
Recommendation - N
Fair Value - SEK 100
Price - SEK 101
P&L account (SEKm) 2013 2014e 2015e 2016e 2017e 2013 2014e 2015e 2016e 2017e
Net interest income 18,827 20,105 20,938 21,704 22,410 +7% +7% +4% +4% +3%
Other income 22,525 23,394 23,703 24,121 24,605 +4% +4% +1% +2% +2%
Operating income 41,352 43,500 44,641 45,825 47,015 +5% +5% +3% +3% +3%
Operating costs (22,287) (21,961) (22,262) (22,572) (22,901) (3%) (1%) +1% +1% +1%
Operating profit 19,065 21,539 22,379 23,253 24,114 +17% +13% +4% +4% +4%
Provisions (1,155) (1,342) (1,445) (1,637) (1,735) +23% +16% +8% +13% +6%
Other 16 (32) (10) (5) (3) na na (69%) (50%) (50%)
Adjusted profit before tax 17,926 20,165 20,924 21,611 22,377 +16% +12% +4% +3% +4%
Exceptionals & other items 201 3,371 0 0 0 na na (100%) na na
Profit before tax 18,127 23,536 20,924 21,611 22,377 +27% +30% (11%) +3% +4%
Tax (3,338) (4,629) (4,185) (4,322) (4,475) +59% +39% (10%) +3% +4%
Minorities/Disc ops (11) (10) (10) (10) (10) (98%) (9%) 0% 0% 0%
Net income 14,778 18,897 16,729 17,279 17,892 +27% +28% (11%) +3% +4%
Balance sheet (SEKm) 2013 2014e 2015e 2016e 2017e 2013 2014e 2015e 2016e 2017e
Loans to Customers 1,302,568 1,396,312 1,444,389 1,489,381 1,535,376 +5% +7% +3% +3% +3%
Goodwill 13,085 13,288 13,288 13,288 13,288 (1%) +2% 0% 0% 0%
Total assets 2,484,834 2,663,663 2,755,378 2,841,206 2,928,949 +1% +7% +3% +3% +3%
Risk Weighted Assets 627,224 676,099 697,186 716,929 737,112 +2% +8% +3% +3% +3%
Customer deposits 849,475 1,036,835 1,054,095 1,075,914 1,097,812 (1%) +22% +2% +2% +2%
Shareholders equity 122,814 133,974 141,030 146,598 152,395 +12% +9% +5% +4% +4%
Per share data (SEK) 2013 2014e 2015e 2016e 2017e 2013 2014e 2015e 2016e 2017e
EPS reported 6.74 8.61 7.62 7.87 8.15 +27% +28% (11%) +3% +4%
EPS adjusted 6.55 7.35 7.62 7.87 8.15 +25% +12% +4% +3% +4%
DPS 4.00 4.41 5.34 5.51 5.71 +45% +10% +21% +3% +4%
BVPS 56 61 64 67 69 +12% +9% +5% +4% +4%
TBVPS 50 55 58 61 63 +14% +10% +6% +4% +4%
Number of shares (year end) (m) 2,194 2,194 2,194 2,194 2,194 +0% (0%) +0% +0% +0%
Ratios 2013 2014e 2015e 2016e 2017e
Profitability
NIM 1.48% 1.48% 1.47% 1.48% 1.48%
Cost income ratio 54% 50% 50% 49% 49%
LLC/loans (bp) 9bps 10bps 10bps 11bps 11bps
Tax rate 18% 20% 20% 20% 20%
ROE Adjusted 12.8% 12.9% 12.2% 12.0% 12.0%
ROTE Adjusted 14.5% 14.0% 13.5% 13.2% 13.1%
RORWA 2.47% 2.72% 2.76% 2.68% 2.70%
ROA 0.58% 0.70% 0.62% 0.62% 0.62%
Capital & leverage
Leverage - Basel 3 4.2% 4.3% 4.4% 4.4% 4.5%
Core Tier 1 - Basel III fully loaded 14.3% 14.8% 15.0% 15.4% 15.7%
Loans / Deposits 153% 135% 137% 138% 140%
Loans / Assets 52% 52% 52% 52% 52%
Equity / Assets 4.9% 5.0% 5.1% 5.2% 5.2%
Price multiples
P/E Adjusted 15.5x 13.8x 13.3x 12.9x 12.4x
P/BV 1.81x 1.66x 1.58x 1.52x 1.46x
P/TBV 2.03x 1.84x 1.74x 1.67x 1.60x
Div yield 3.9% 4.4% 5.3% 5.4% 5.6%
Dividend cover 1.7x 2.0x 1.4x 1.4x 1.4x
Divisions (SEKm) 2013 2014e 2015e 2016e 2017e 2013 2014e 2015e 2016e 2017e
Revenues
Merchant Banking 16,729 18,165 18,484 18,815 19,131 +6% +9% +2% +2% +2%
Retail Banking 12,243 12,867 13,237 13,590 13,953 +10% +5% +3% +3% +3%
Wealth Management 4,232 4,854 5,051 5,242 5,439 +5% +15% +4% +4% +4%
Life 4,590 4,822 4,917 5,014 5,112 (1%) +5% +2% +2% +2%
Baltic 3,393 3,578 3,763 4,003 4,245 +3% +5% +5% +6% +6%
Other 165 (786) (811) (837) (864) (34%) na +3% +3% +3%
Total 41,352 43,500 44,641 45,825 47,015 +5% +5% +3% +3% +3%
Profit before tax
Merchant Banking 8,171 9,018 9,446 9,755 10,052 +15% +10% +5% +3% +3%
Retail Banking 5,743 6,831 7,054 7,259 7,469 +32% +19% +3% +3% +3%
Wealth Management 1,610 2,307 2,449 2,588 2,732 +25% +43% +6% +6% +6%
Life 1,892 2,118 2,142 2,165 2,178 (4%) +12% +1% +1% +1%
Baltic 1,280 1,672 1,650 1,699 1,837 +20% +31% (1%) +3% +8%
Other (569) 1,590 (1,816) (1,853) (1,891) (64%) na na +2% +2%
Total 18,127 23,536 20,924 21,611 22,377 +27% +30% (11%) +3% +4%
SEB
Macquarie Research Nordic Banks
26 January 2015 32
Appendix B(v) – Svenska Handelsbanken financial forecasts 2013-2017e
Source: Company data, Macquarie Research, January 2015
Recommendation - N
Svenska Handelsbanken Fair Value - SEK 380
Price - SEK 379
P&L account (SEKm) 2013 2014e 2015e 2016e 2017e 2013 2014e 2015e 2016e 2017e
Net interest income 26,669 27,568 28,893 30,138 31,153 +2% +3% +5% +4% +3%
Other income 9,658 10,736 11,115 11,458 11,799 +8% +11% +4% +3% +3%
Operating income 36,327 38,304 40,009 41,596 42,952 +4% +5% +4% +4% +3%
Operating costs (17,061) (17,228) (17,708) (18,266) (18,794) +2% +1% +3% +3% +3%
Operating profit 19,266 21,076 22,301 23,330 24,158 +5% +9% +6% +5% +4%
Provisions (1,178) (1,445) (1,536) (1,597) (1,678) (6%) +23% +6% +4% +5%
Other 0 0 0 0 0 (100%) na na na na
Adjusted profit before tax 18,088 19,631 20,764 21,732 22,480 +6% +9% +6% +5% +3%
Exceptionals & other items 0 306 0 0 0 na na (100%) na na
Profit before tax 18,088 19,937 20,764 21,732 22,480 +6% +10% +4% +5% +3%
Tax (3,915) (4,386) (4,568) (4,781) (4,946) +27% +12% +4% +5% +3%
Minorities/discontinued 122 75 0 0 0 na (39%) (100%) na na
Net income 14,295 15,626 16,196 16,951 17,535 +2% +9% +4% +5% +3%
Balance sheet (SEKm) 2013 2014e 2015e 2016e 2017e 2013 2014e 2015e 2016e 2017e
Loans to Customers 1,680,628 1,798,272 1,872,170 1,919,171 1,980,901 +2% +7% +4% +3% +3%
Goodwill 7,835 8,001 8,001 8,001 8,001 +9% +2% +0% +0% +0%
Total assets 2,489,806 2,738,787 2,851,333 2,922,918 3,016,933 +4% +10% +4% +3% +3%
Risk Weighted Assets 465,701 489,853 509,983 522,787 539,602 (4%) +5% +4% +3% +3%
Customer deposits 817,601 940,241 968,448 997,502 1,027,427 +22% +15% +3% +3% +3%
Shareholders equity 111,339 124,020 130,263 136,686 143,203 +7% +11% +5% +5% +5%
Per share data (SEK) 2013 2014e 2015e 2016e 2017e 2013 2014e 2015e 2016e 2017e
EPS reported 22.52 24.58 25.48 26.67 27.58 +1% +9% +4% +5% +3%
EPS adjusted 22.33 24.09 25.48 26.67 27.58 +14% +8% +6% +5% +3%
DPS 16.5 15.7 16.6 17.3 17.9 +53% (5%) +6% +5% +3%
BVPS 175 195 205 215 225 +7% +11% +5% +5% +5%
TBVPS 163 177 187 197 207 +9% +8% +6% +5% +5%
Number of shares (year end) (m) 636 636 636 636 636 +0% +0% +0% +0% +0%
Ratios 2013 2014e 2015e 2016e 2017e
Profitability
NIM 1.60% 1.58% 1.57% 1.59% 1.60%
Cost income ratio 47% 45% 44% 44% 44%
LLC/loans (bp) 7bps 8bps 8bps 8bps 9bps
Tax rate 22% 22% 22% 22% 22%
ROE Adjusted 13.7% 13.3% 12.7% 12.7% 12.5%
ROTE Adjusted 14.8% 14.2% 14.0% 13.9% 13.7%
RORWA 3.00% 3.21% 3.19% 3.28% 3.30%
ROA 0.57% 0.57% 0.57% 0.58% 0.58%
Capital & leverage
Core Tier 1 19.2% 20.4% 20.8% 21.4% 21.8%
Core Tier 1 - Basel III fully loaded 17.3% 17.0% 17.4% 18.0% 18.5%
Loans / Deposits 206% 191% 193% 192% 193%
Loans / Assets 68% 66% 66% 66% 66%
Equity / Assets 4.5% 4.5% 4.6% 4.7% 4.7%
Price multiples
P/E Adjusted 17.0x 15.7x 14.9x 14.2x 13.7x
P/BV 2.16x 1.94x 1.85x 1.76x 1.68x
P/TBV 2.32x 2.15x 2.03x 1.93x 1.83x
Div yield 4.4% 4.1% 4.4% 4.6% 4.7%
Dividend cover 1.4x 1.6x 1.5x 1.5x 1.5x
Divisions (SEKm) 2013 2014e 2015e 2016e 2013 2014e 2015e 2016e 2017e
Revenues
Sweden 20,441 20,325 20,794 21,253 21,722 (2%) (1%) +2% +2% +2%
Ex-Sweden 11,949 13,527 14,675 15,714 16,510 +14% +13% +8% +7% +5%
Market 3,796 4,211 4,295 4,381 4,469 +5% +11% +2% +2% +2%
Other 141 241 244 248 251 (37%) +71% +1% +1% +1%
Total 36,327 38,304 40,009 41,596 42,952 +4% +5% +4% +4% +3%
Profit before tax
Sweden 12,489 12,067 12,613 12,908 13,211 (4%) (3%) +5% +2% +2%
Ex-Sweden 5,436 6,382 6,934 7,571 7,981 +20% +17% +9% +9% +5%
Market 1,101 1,722 1,756 1,791 1,827 +79% +56% +2% +2% +2%
Other (938) (233) (539) (539) (539) (14%) (75%) na (%) 0%
Total 18,088 19,937 20,764 21,732 22,480 +6% +10% +4% +5% +3%
Macquarie Research Nordic Banks
26 January 2015 33
Appendix B(vi) – Swedbank financial forecasts 2013-2017e
Source: Company data, Macquarie Research, January 2015
Recommendation - O
Fair Value - SEK 201
Price - SEK 193
P&L account (SEKm) 2013 2014e 2015e 2016e 2017e 2013e 2014e 2015e 2016e 2017e
Net interest income 22,029 22,578 23,359 23,822 24,408 +8% +2% +3% +2% +2%
Other income 14,909 16,187 16,557 16,707 17,304 (6%) +9% +2% +1% +4%
Operating income 36,938 38,765 39,916 40,529 41,712 +2% +5% +3% +2% +3%
Operating costs (16,648) (16,974) (16,704) (16,197) (16,714) +1% +2% (2%) (3%) +3%
Operating profit 20,290 21,791 23,212 24,333 24,998 +3% +7% +7% +5% +3%
Provisions (935) (504) (1,207) (1,644) (2,364) na (46%) na +36% +44%
Other 0 0 0 0 0 na na na na na
Adjusted profit before tax 19,355 21,287 22,005 22,688 22,634 (1%) +10% +3% +3% (%)
Exceptionals & other items 0 111 0 0 0 na na (100%) na na
Profit before tax 19,355 21,398 22,005 22,688 22,634 (1%) +11% +3% +3% (%)
Tax (4,099) (4,280) (4,401) (4,538) (4,527) (1%) +4% +3% +3% (%)
Minorities & Disc. Business (2,355) (415) (415) (415) (415) na (82%) 0% 0% 0%
Net income 12,901 16,703 17,189 17,736 17,692 (10%) +29% +3% +3% (%)
Balance sheet (SEKm) 2013 2014e 2015e 2016e 2017e 2013e 2014e 2015e 2016e 2017e
Loans to Customers 1,264,910 1,365,862 1,396,106 1,428,403 1,461,591 +2% +8% +2% +2% +2%
Goodwill 13,658 13,669 13,669 13,669 13,669 +2% +0% +0% +0% +0%
Total assets 1,820,807 1,911,847 1,911,847 1,911,847 1,911,847 (1%) +5% +0% +0% +0%
Risk Weighted Assets 501,863 544,431 553,616 563,424 573,503 (11%) +8% +2% +2% +2%
Customer deposits 620,853 670,403 685,248 701,100 717,389 +7% +8% +2% +2% +2%
Shareholders equity 109,540 115,159 120,201 125,436 130,231 +6% +5% +4% +4% +4%
Per share data (SEK) 2013 2014e 2015e 2016e 2017e 2013e 2014e 2015e 2016e 2017e
EPS reported 11.76 15.22 15.66 16.16 16.12 (10%) +29% +3% +3% (0%)
EPS adjusted 13.89 15.14 15.66 16.16 16.12 +3% +9% +3% +3% (0%)
DPS 10.10 11.07 11.75 12.12 12.09 +2% +10% +6% +3% (0%)
BVPS 100 105 110 114 119 +6% +5% +4% +4% +4%
TBVPS 87 92 97 102 106 +7% +6% +5% +5% +4%
Number of shares (year end) (m) 1,097 1,097 1,097 1,097 1,097 +0% +0% +0% +0% +0%
Ratios 2013 2014e 2015e 2016e 2017e 2013e 2014e 2015e 2016e 2017e
Profitability
NIM 1.76% 1.72% 1.69% 1.69% 1.69%
Cost income ratio 45% 44% 42% 40% 40%
LLC/loans (bp) 7bps 4bps 9bps 12bps 16bps
Tax rate 21% 20% 20% 20% 20%
ROE Adjusted 14.9% 15.3% 14.6% 14.4% 13.8%
ROTE Adjusted 17.0% 17.4% 16.5% 16.2% 15.5%
RORWA 2.90% 3.16% 3.13% 3.18% 3.11%
ROA 0.70% 0.89% 0.90% 0.93% 0.93%
Capital & leverage
Leverage ratio (Basel 3) 4.3% 4.3% 4.6% 4.8% 5.0%
Core Tier 1 - Basel III fully loaded 16.1% 15.7% 16.3% 16.8% 17.3%
Loans / Deposits 204% 204% 204% 204% 204%
Loans / Assets 69% 71% 73% 75% 76%
Equity / Assets 6.0% 6.0% 6.3% 6.6% 6.8%
Price multiples
P/E Adjusted 13.9x 12.7x 12.3x 11.9x 12.0x
P/BV 1.93x 1.84x 1.76x 1.69x 1.62x
P/TBV 2.21x 2.08x 1.99x 1.89x 1.82x
Div yield 5.2% 5.7% 6.1% 6.3% 6.3%
Dividend cover 1.2x 1.4x 1.3x 1.3x 1.3x
Divisions (SEKm) 2013 2014e 2015e 2016e 2017e 2013e 2014e 2015e 2016e 2017e
Revenues
Retail Banking 21,716 22,129 23,639 24,004 24,484 +2% +2% +7% +2% +2%
Large Corps 7,482 7,806 7,952 8,101 8,322 +4% +4% +2% +2% +3%
Baltic Banking 5,623 6,046 6,159 6,377 6,648 +2% +8% +2% +4% +4%
Other 2,117 2,784 2,166 2,047 2,258 na +32% (22%) (5%) +10%
Total 36,938 38,765 39,916 40,529 41,712 +2% +5% +3% +2% +3%
Profit before tax
Retail Banking 11,652 11,783 13,140 13,601 13,578 +3% +1% +12% +4% (%)
Large Corps 4,041 4,184 4,506 4,637 4,691 +1% +4% +8% +3% +1%
Baltic Banking 3,592 3,798 3,565 3,624 3,539 (4%) +6% (6%) +2% (2%)
Other 70 1,633 794 826 826 na na (51%) +4% (%)
Total 19,355 21,398 22,005 22,688 22,634 (1%) +11% +3% +3% (0%)
Swedbank
Macquarie Research Nordic Banks
26 January 2015 34
Important disclosures:
Recommendation definitions
Macquarie - Australia/New Zealand Outperform – return >3% in excess of benchmark return Neutral – return within 3% of benchmark return Underperform – return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield
Macquarie – Asia/Europe Outperform – expected return >+10% Neutral – expected return from -10% to +10% Underperform – expected return <-10%
Macquarie First South - South Africa Outperform – expected return >+10% Neutral – expected return from -10% to +10% Underperform – expected return <-10%
Macquarie - Canada
Outperform – return >5% in excess of benchmark return Neutral – return within 5% of benchmark return Underperform – return >5% below benchmark return
Macquarie - USA Outperform (Buy) – return >5% in excess of Russell 3000 index return Neutral (Hold) – return within 5% of Russell 3000 index return Underperform (Sell)– return >5% below Russell 3000 index return
Volatility index definition*
This is calculated from the volatility of historical price movements. Very high–highest risk – Stock should be
expected to move up or down 60–100% in a year – investors should be aware this stock is highly speculative. High – stock should be expected to move up or down at least 40–60% in a year – investors should be aware this stock could be speculative. Medium – stock should be expected to move up or down at least 30–40% in a year. Low–medium – stock should be expected to move up or down at least 25–30% in a year. Low – stock should be expected to move up or down at least 15–25% in a year. * Applicable to Asia/Australian/NZ/Canada stocks only
Recommendations – 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations
Financial definitions
All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards).
Recommendation proportions – For quarter ending 31 December 2014
AU/NZ Asia RSA USA CA EUR Outperform 51.80% 58.06% 45.07% 44.42% 60.54% 46.81% (for US coverage by MCUSA, 5.29% of stocks followed are investment banking clients)
Neutral 31.80% 27.37% 30.99% 50.10% 35.37% 33.51% (for US coverage by MCUSA, 3.08% of stocks followed are investment banking clients)
Underperform 16.39% 14.57% 23.94% 5.48% 4.08% 19.68% (for US coverage by MCUSA, 0.44% of stocks followed are investment banking clients)
Company-specific disclosures: Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/disclosures.
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