The leading Wholesale Bank in the Nordic countriesJohan Näs, Head of Corporate & Institutional Banking Sweden
September 10 2014
Disclaimer
This presentation contains forward-looking statements that reflect management’s currentviews with respect to certain future events and potential financial performance. AlthoughNordea believes that the expectations reflected in such forward-looking statements arereasonable, no assurance can be given that such expectations will prove to have beencorrect. Accordingly, results could differ materially from those set out in the forward-lookingstatements as a result of various factors.
Important factors that may cause such a difference for Nordea include, but are not limited to:(i) the macroeconomic development, (ii) change in the competitive climate, (iii) change in theregulatory environment and other government actions and (iv) change in interest rate andforeign exchange rate levels.
This presentation does not imply that Nordea has undertaken to revise these forward-lookingstatements, beyond what is required by applicable law or applicable stock exchangeregulations if and when circumstances arise that will lead to changes compared to the datewhen these statements were provided.
2 •
Topics for today’s presentation
The relationship bank business model has delivered
The leading Nordic Wholesale Bank:
A clear strategy and formula to sustainably achieve higher returns than any other regional bank
The Nordea Corporate & Institutional Banking result reflects the chosen strategy and recent investment banking successes
Nordea is benefitting from the recent capital market trends due to the significant investments done during the last few years
Nordea and Wholesale Banking will continue on its successful journey, but the visibility on market dynamics is short
3 •
The relationship bank business model has delivered
14
4
5
Nordea has a unique position in the Nordics…
Note: Illustration excludes, Baltic's (406,700 total customers) and Russia (67,000 total customers)
1: Ranking in Nordic region
Sweden
Norway
Finland
Denmark
Relationships (m)
Market position
Superior customer franchise Global capabilities on par with international peers1
#1-2
TotalNordea
10.5 #1 #1
Capital Markets Asset Management
Life & Pension Private Banking
#1
#1
#1
#1
Retail Customers Corporates & Institutions
4.1 #2-3
1.0 #2
3.2 #1-2
1.8 #2
#1-2
#2
#1
Market position
…with a resiliant relationship bank business model
Nordea is the mostdiversified Nordic bank…
…with low-volatilityearnings growth…
…and low funding costs
Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5
Largest market contribution1
Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5
Earnings volatility2 Funding cost3
Nordea Peer 1-18
Notes: 1) Credit portfolio by geographical area2) Net income volatility 2008-2013. Compared to Nordic peers3) Five year Senior CDS spread. Compared to European peers
6 •
Q2/14 financial results
EURm Q2/14 Q1/14 Chg % H1/14 H1/13 Chg %
Net interest income 1,368 1,362 0 2,730 2,749 (1) 3
Net fee & commission income 708 704 1 1,412 1,287 10 13
Net fair value result 356 411 (13) 767 860 (11) (10)
Total income* 2,456 2,501 (2) 4,957 4,996 (1) 2
Staff costs -907 -756 20 -1,663 -1,507 10 14
Other expenses -415 -426 (3) -841 -914 (8) (5)
Total expenses -1,386 -1,237 12 -2,623 -2,523 4 7
Profit before loan losses 1,070 1,264 (15) 2,334 2,473 (6) (3)
Net loan losses -135 -158 (15) -293 -384 (24) (22)
Operating profit** 1,125 1,106 2 2,231 2,089 7 10
Operating profit 935 1,106 (15) 2,041 2,089 (2) 1
Net profit from continuingoperations 716 840 (15) 1,556 1,583 (2) 1
Return on equity** (%) 12.0 11.4 +60 bps 11.7 11.3 +40 bps -
CET1 capital ratio (%) 15.2 14.6 +60 bps 15.2 14.0 +120 bps -
Cost/income ratio** (%) 48.7 49.5 -80 bps 49.1 50.5 -140 bps -
* Includes other income** Excluding restructuring charge in Q2/14
7 •
The leading Wholesale Bank in the Nordic countries
14
8
17,273
23,822
33,245
26,428
33,211
37,955
7%
11%14%
10%12%
13%
0%
5%
10%
15%
20%
25%
30%
0
5000
10000
15000
20000
25000
30000
35000
40000
2008 2009 2010 2011 2012 2013
46%
37%32%
43% 43%40%
2008 2009 2010 2011 2012 2013
The Nordic corporate and institutional market is large and interesting from a wholesale banking perspective Successful global companies with Nordic base
9 • Source: CIB Corporate Research
*Aggregate for Nordea CIB Sweden’s 60 largest customers
Favourable business performance and risk level – Example Sweden
EBIT (EURm) and EBIT Margin*
Net Gearing*
10
The leading Nordic Wholesale Bank for corporate and institutional customers
Key 2013 Wholesale Banking facts
#1 or #2 position in each of the Nordic countries
Total income EUR 2,606m
Operating profit EUR 1,455m
Cost/income ratio 34%
RaRoCaR 15.1%
Lending volume EUR 89bn
Approximately 6,000 employees
Operating income split
EUR2.8bnEUR 2.6bn
Net interest43%
Items at fair value 35%
Net fee & comm. 22%
CIBSE20%
CIBDK19%
CIBFI13%
CIBNO9%
SOO14%
Russia10%
Other14%
11
Nordea Wholesale Banking vision and strategic positioning
Strategic positioning
A leading position built on local presence and global scale, resulting in deep customer
understanding and competitive solutions
Customer dimension:Multi-local presence = Intensity
Prod
uct d
imen
sion
:Si
ze a
nd c
ompe
tenc
ies
= R
elev
ance
International competition
Local competition
The vision is to be the leading wholesale bank in the Nordic region
The leading relationship bank for our customers
The best Nordic provider of;
— Capital Markets Products
— Working Capital Management services
Strategic vision
12
Nordic Wholesale Banking value creation should deliver systematic “Alpha” versus industry performance
RaRoCaR*Income Op. Ex. Funding cost Loan Losses
=Capital
_ _ _
- A profitable customer mix
- Leading cross-sell ratio and profitable product mix
- Pricing discipline/Business selection
- Nordic scale
- Cost efficiency programme
- 1 of 3 banks in Europe with AA rating
- Geographical and sector diversification
- A sound and strong risk culture
- Business selection and capital efficiency program
*Risk adjusted Return on Capital at Risk
13
Leading customer franchise and profitable product mix
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
(40) (20) 0 20 40 60 80
Impo
rtan
t rel
atio
nshi
ps
Greenwich Quality Index -Difference from average*
Nordea
Peer 2Peer 1
Peer 3
Peer 4
Peer 5
Large corporates evaluation of quality and relationship*
*Greenwhich Associates survey “Large Corporate Banking – 2013”
CAGR 12%
Leading Nordic Capital Markets Operation
#1 bookrunner in Nordic corporate
bonds
#1 Nordic bank in Nordic ECM
#1 bookrunner in Nordic
syndicated loans
Most Award Winning Equity Broker Nordics
Leading Nordic FX and interest rate derivatives
franchises
Income, EURm
201320122011201020092008200720062005
14
Nordea Wholesale Banking outperforms on cross-sales
74%
57% 55% 53%45% 42%
Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5
Product Cross-Sell Effectiveness – Nordics* Product Cross-Sell Effectiveness – Sweden*
*Greenwhich Associates survey “Large Corporate Banking – 2013”
69%64%
55%
45% 45%
34%
Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5
15
Active business selection to maximise net interest margin
CIB lending margin development
Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214
+17 bps
Some positive pricing effects are expected — Lending portfolio turnover, i.e. still some refinancing
of 2006/2007 credits
— Capital markets products as new regulation comes into effect
Comments
16
Cost initiatives to further improve cost efficiency
Wholesale Banking total cost development, EURm
237221
245228 229
210
237213 218
Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214
C/I ratio of 34%
Continuous streamlining/simplification of processes
WB cost efficiency programme 2014 - 2015
Comments
17
-12-10
38 42 42 45 45 47 48 48 50 52 55 58 6065 67 70
8085 85 85 85
105105
Bel
gium
Fran
ceP
eer 1
Pee
r 2P
eer 3
Pee
r 4P
eer 5
Pee
r 6P
eer 7
Pee
r 8P
eer 9
Pee
r 10
Pee
r 11
Pee
r 12
Pee
r 13
Pee
r 14
Spa
inIta
lyP
eer 1
5P
eer 1
6P
eer 1
7P
eer 1
8P
eer 1
9P
eer 2
0
One of the lowest funding costs in Europe
Source: FactSet, Datastream, and Bloomberg
Ratings for selected European banks
SH
B
BN
P P
arib
as
Sw
edba
nk
DN
B
SE
B
Lloy
ds
Bar
clay
s
Deu
tsch
e B
ank
Soc
Gen
Cre
dit A
gric
ole
Dan
ske
bank
KB
C
Com
mer
zban
k
Ers
te
San
tand
er
RB
S
BB
VA
Inte
sa
Uni
cred
it
AA-
Sta
ndar
d &
Poo
r
EUR 5yr issuance spreads over mid-swaps, bps
18 •
Stable credit quality
Strong domestic demand and slowly recovering exports
Solid credit portfolio and track record
Rising activity in Danish economy
Improving credit quality
Decline in oil investments but solid consumption growth to underpin overall growth. Strong fundamentals remain
Except for one individual exposure, strong portfolio and track record
Continued weak domestic demand and investments
Most companies in WB have global operations and/or have been able to adjust to new environment
However, a handful cases are being addressed
19 •
Banking Russia
Strong credit portfolio
Limited share of Group operations
— 3% of income
— 2% of credit exposure
Majority of lending is towards large Russian and Nordic corporates
— Largest sector exposure towards materials, real estate, utilities, energy and construction
— 600 Nordic corporate customers are serviced
— Largest currency exposure towards USD (66%)
RUB exposure funded locally via deposits, USD and EUR exposure funded via the Group
— Maturity of USD and EUR funding has been prolonged
We monitor the situation closely. Nordea follows all sanctions and is fully compliant with all regulatory requirements
Nordea Bank Russia Total
% ofGroup Total
Total income 260 2.6
Operating profit 161 3.9
Nordea Bank Russia Total
% ofGroup Total
Lending corporates 5.6 3.0
Lending households 0.5 0.3
Total lending 6.1 1.8
Impaired loans gross 0.023 0.3
FY 2013, EUR MILLION
Q2 2014, EUR BILLION
Key Financials Comments
20
Increased capital efficiency – lower REA
Wholesale Banking REA development, EURbn
77.9
65.459.0 58.0
2011 2012 2013 2014 H1
-25%
Strong Wholesale Banking track record
Customer targeted initiatives
Production environment
Increase RaRoCaR and sustain business momentum
Comments
21
39.9 39.0
H1 13 H1 14
15
19
H1 13 H1 14
CIB delivers on income, costs and capital
Income, EURm
REA, EURbn
Expenses, EURm
Lending volumes, EURbn
Loan Losses, EURm
RaRoCar, %
214211
H1 13 H1 14
336 348
262 299
173 134
H1 13 H1 14
NII
NCI
Fair value
95
80
H1 13 H1 14
36.8
30.9
H1 13 H1 14
A direct consequence of the strategy
22
Nordea have benefitted from the capital market trends – will this continue?
NII
NCI
Fair value
336 348
262299
173134
H1 13 H1 14 H1 15
?Income, EURm
• Strong structural and cyclical trends
• Nordea gaining market share – leading Nordic Wholesale Bank
• Stability of trends?
23
Structural and cyclical trends fuelling capital markets growth
• Growing share of short-term financing
• Strong increase in usage of CP programs since low point in 2011 up 50% YTD
Bank Lending and RCF
Commercial Paper
Bonds
Hybrid
Equity
• Strong appetite from banks
• Longer maturities
• Less strict structures, e.g. “cov-loose/cov-lite”
• Syndication market works again
• Blue-chip companies fund clear majority of balance sheet in capital market
• Unrated bond issuance has increased significantly
• High yield bond issuance setting new record levels
• “Mega bond” issuance to support M&A also in the Nordics
• Strong acceleration in issuance of hybrid instruments (convertible bonds and preference shares issuance)
• IPOs are back
• Mega M&As are back also in the Nordics
Nordea selected sub market dynamics
Bonds an increasingly important source of funding…
35%
52%
3%
10%
38%
49%
5%8%
Loans*
Bonds**
CommercialPaper**
Other***
Source: Annual reports, CIB Corporate Research* Total approved bank borrowing room including undrawn RCF** Outstanding bond volume including hybrid debt*** “Other” including Private Placements, SEK, EIB, NIB etc.
2006 (pre Lehman) 2009 (Lehman) 2013 (post Lehman)
29%
57%
3%11%
Funding mix for 25 Nordic blue chip corporates with external debt rating
24 •
75% share of funding excluding undrawn
facilities!
69%
19%
7%5%
…and potential for growth within non-rated large corporates
84%
10%5% 1%
84%
8%6% 2%
Loans*
Bonds**
Commercial Paper
Other***
2006 (pre Lehman) 2009 (Lehman)
Source: Annual reports, CIB Corporate Research* Total approved bank borrowing room including undrawn RCF** Outstanding bond volume including hybrid debt*** “Other” including Private Placements, SEK, EIB, NIB etc.
2013 (post Lehman)
Funding mix for 25 Nordic non-rated large corporates
25 •
28% share of funding excluding undrawn
facilities!
High yield bond issuance soaring in the Nordics
Source: Dealogic, Bloomberg, Nordea
Nordic HY Bond volume 2010 – YTD 2014, EURm
26 •
1 478 2 854
8 278 9 250 8 493
128
1 361
1 777
3 610 3 923
2010 2011 2012 2013 2014YTD
Corporate Private Equity
Extrapolation
18 624
High activity within M&A and IPO
Deal value USD 3.1 bn
acquire RottapharmJuly 2014
acquire Nokia Mobile
September 2013
Deal value USD 5 bn
Deal value USD 9 bn
acquireScania
February 2014
acquire Rautaruukki
February 2014
Deal value USD 2.5 bn
3.6
5.3
3.6
0.1 0.0
5.5
1.20.6
1.5
4.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD2014
Selected “Mega M&A” Nordic IPO and rights issue volume development, EURbn
6.9
Extrapolation
2006/2007: Peak of the previous cycle
2010: Distressed rights issues
2014: Expected new all-time high in Nordic IPO volume
27 •
28 •
665665
726787
1,0621,086
1,2151,295
1,5611,603
PeerPeerPeerPeerPeerPeerPeerPeerPeer
Nordea
243263
318373384
496593
680811
1,358
PeerPeerPeerPeerPeerPeerPeerPeerPeer
Nordea
The strengthened Investment Banking organisation with integrated advisory capabilities within debt and equity has paid off
Nordea Investment Banking is the leading Nordic provider in capital markets activities; bonds, equities and syndicated loans
Nordic ECM Q2 2014, EURm
Nordic Corporate Bonds Q2 2014, EURm
Comments
Nordic Syndicated Loans Q2 2014, EURm
Nordea is benefitting from the capital market trends due to the significant investments done during the last few years
1 1361 2341 240
1 6181 673
1 9072 667
2 7953 062
6 179
PeerPeerPeerPeerPeerPeerPeerPeerPeer
Nordea
29
Market shares, NasdaqOMX Nordic Cash Equity
30
Outlook for the coming period
Market Dynamics: Active! – but short visibility
INCOME Growth picking up
somewhat
Margins – some downward pressure likely
Events presently fuelling fee income / potential NII growth
Unfavourable conditions for FICC
EXPENSES
Delivering on cost efficiency programme
CAPITAL
Strict business selection
Focus on “capital light” products
Continued model improvements
Credit Quality
Norway – positive
Denmark – positive
Finland – negative/stable
Sweden – consistent positive
RaRoCaR
Positive market trend
Nordea Wholesale Banking’s position
Positive impact on RaRoCaR
?
The leading Wholesale Bank in the Nordic countriesJohan Näs, Head of Corporate & Institutional Banking Sweden
September 10 2014