the leading wholesale bank in the nordic countries · pdf filethe vision is to be the leading...

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


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%


Product Cross-Sell Effectiveness – Nordics* Product Cross-Sell Effectiveness – Sweden*

*Greenwhich Associates survey “Large Corporate Banking – 2013”

69%64%

55%

45% 45%

34%


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


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


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

the leading wholesale bank in the nordic countries · pdf filethe vision is to be the leading...

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