ubs - nordic financials conference 2010
DESCRIPTION
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.TRANSCRIPT
UBS N di Fi i l C fUBS Nordic Financials Conference 2 September 2010
Erkki Raasuke, CFO
Progress continued throughout Q2g g
• Net profit of SEK 1.6bn
• Improved credit quality
• Term funding YTD higher than full year maturitiesTerm funding YTD higher than full year maturities
• Strengthened capitalisation to 12.7 per cent Core Tier 1 l t b b k Ti 2 b dapproval to buy back Tier 2 bonds
2
Business achievements – highlights in Q2 g g
• Higher mortgage new sales market shares in Sweden
• Increased corporate activity
• Continued strong deposit trendContinued strong deposit trend
• Retail’s tailored service concept well received
3
Result by business area
Q2 updateSEKm Profit before impairments
RetailSolid credit quality, higher customer activity 1 000
2 000
SEKm
Q1 10
Q2 10
Large Corporates & InstitutionsGood credit quality, repricing continues, slower trading -1 000
0
Baltic BankingImproving asset quality, stabilised NII, Estonia back to profit
-2 000Retail Large
Corporates & Institutions
Baltic Banking
Russia & Ukraine
Asset Management
Ektornet
back to profit
Russia & UkraineStabilising credit quality, continued restructuring i R i
Institutions
2 000
SEKmOperating result
Q1 10
in Russia
Asset ManagementStable earnings
0
1 000Q2 10
g
EktornetRepossessed properties valued at SEK 1 010m, intake slower than the plan
-2 000
-1 000
Retail Large Baltic Russia & Asset Ektornet
4
intake slower than the plan Retail Large Corporates &
Institutions
Baltic Banking
Russia & Ukraine
Asset Management
Ektornet
Pressure decreasingNet interest income
g
5 000
SEKm
4 0233 79962 89
4 000
4 500Retail LCI Baltic Banking Russia
& UkraineGroup Treasury
and Other
-34 4162 -89
-204
3 000
3 500
2 500
3 000
1 500
2 000
500
1 000
NII Q1 10
5
0NII Q1 10 NII Q2 10
Commissions back to pre-crisis levelsNet commission income
p
• Positive trend from Q1 2009
• Market leader in cards and payments
• Growth driven by Asset Management
SEKNet commission income*
2 500
3 000
SEKm
1 500
2 000
0
500
1 000
0Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10
6
* Excl non-recurring items
Term funding ahead of planLiquidity & Capital management
g p• YTD, SEK 150bn in term funding of
which around SEK 50bn during the d t 456Total long-
Outstanding wholesale funding (nom SEKbn )
second quarter
• SEK 60bn in remaining term funding maturities to roll or replace in 2010
397459
173
456
Total long-
Total long-term, non-guaranteed
maturities to roll or replace in 2010
• YTD around SEK 95bn of central bank repos and guaranteed funding has been
180
108
174
89Central bank
term, guaranteed*
redeemed
• Average maturity of wholesale funding further extended to 25 months
116
87
108
112Total short-term, non-
repos
further extended to 25 months (38 months for covered bonds)
61
97
280Total short-
term, guaranteed***
guaranteed**
Q2 2010
* Issued with more than 12 months maturity, government fee of 83bp** Including interbank deposits*** Issued with less than 12 months maturity government fee of 50bp
61guaranteed*** Q1 2010Q4 2009
7
*** Issued with less than 12 months maturity, government fee of 50bp
Q2 developmentAsset quality
p
• No impact of European sovereign debt crises
• Further stabilisation/improvement in the Baltic countries
• Continued improved risk profiles on both the assetContinued improved risk profiles on both the asset and liability side
S db k’ ili tl i d• Swedbank’s resilience vastly improved– ICAAP
I t l t t t– Internal stress tests– Stress test of the Committee of European Banking Supervisors
8
Asset quality
Credit impairments significantly reduced• Sweden very low levels
S ll i i R i d
p g y
8 000
SEKm
• Small recoveries in Russia and Ukraine
• Baltic countries
6 672
6 1216 000
7 000
• Baltic countries – Few new problems– Property prices stabilising/increasing
5 003
4 000
5 000
– Insolvency and debt restructuring laws– Positive trend likely to continue 2 210
2 000
3 000
963
0
1 000
2 000
-1 000
0
Q2 09 Q3 09 Q4 09 Q1 10 Q2 10
9
Retail LCI Baltic Banking Russia & Ukraine Other
Basel 3 impact on Swedbank post July amendments*p p y
• NSFR is more or less in-line with proposed future minimum requirements, and LCR is well ahead of minimum requirementsand LCR is well ahead of minimum requirements
• The amount of Core Tier 1 capital expected to decrease less than 4%, and RWA expected to increase less than 2% compared with Basel 2RWA expected to increase less than 2% compared with Basel 2
• Swedbank has a leverage ratio with a substantial margin to the proposed minimum level of 3%minimum level of 3%
10
*Preliminary calculations
Summaryy
• NII pressure decreasing
• Improved risk profiles on both the asset and liability side
• Term funding ahead of planTerm funding ahead of plan
• Resilience vastly improved
11
New insolvency law in Latvia yLegal protection proceedings Insolvency proceedings
of legal entitiesInsolvency proceedings
of private persons
NOVELTIESNOVELTIES• LPP plan = business plan• Diminished possibility to use LPP in bad faith, to delay time• Debtor should be able to make factually all payments under agreements
• Debtor’s property should be enforced in 6 months• Simplified procedure to cancel appointment of administrator, also with participation of secured
• Debtor’s property should be enforced in 6 months• Simplified procedure to cancel appointment of administrator, also with participation of secured creditors• Possibility to restructure obligations of our clients by reaching an agreement that the client will make concrete payments to theall payments under agreements
concluded with bank• Additional requirement to quality of the LPP plan – money flow, substantiation of incomes etc.• ‘Easier’ to initiate LPP
with participation of secured creditors• Administrator by agreement with bank is entitled to sell property without auction, also the company as a whole
an agreement that the client will make concrete payments to the bank. Other creditors will not be entitled to ask enforcement of this pledge• Possibility to check agreements concluded by debtors 3 years before proclamation of insolvency
• Easier to initiate LPP as a whole
SWEDBANK’S VIEWSWEDBANK’S VIEWPositiveImprovement of speed and efficiency of proceedings
PositiveImprovement of speed and efficiency of proceedings
NegativeEfficiency of proceedings depends on the court practice.Amendments which are crucial for Swedbank:proceedings efficiency of proceedings Amendments, which are crucial for Swedbank:
– If total liabilities exceed LVL 100th (EUR 142th), insolvency procedure lasts 3.5 years– If total liabilities do not exceed LVL 100th (EUR 142th), insolvency procedure lasts 2 years. Client has to repay the
d t f th l th t h i d ft th l funsecured part of the loan that has remained after the sale of collateral covering 30% of his/her official income, but not less than LVL 60 (EUR 85) per month (i.e. 1/3 of min salary)
Neutral (in total)Th l id iti lti t th i ti l ti f i l di b t it ffi i ill d d h i fThe new law provides many positive novelties to the existing regulation of insolvency proceedings, but its efficiency will depend on mechanism of
implementation. In total the law changes are not expected to change the trend in credit impairments.
13
Significant progress made – still work to be done5Y CDS spreads
g p g400
300
350
200
250
150
50
100
030/12/2005 30/06/2006 31/12/2006 30/06/2007 31/12/2007 30/06/2008 31/12/2008 30/06/2009 31/12/2009 30/06/2010
Swedbank SEB Handelsbanken Nordea Danske Bank DnB NOR
14
Source: Datastream
Swedbank SEB Handelsbanken Nordea Danske Bank DnB NOR
Will lending margin pressure decrease?g g p
• Swedbank has re-priced a larger part of liabilities compared to peerspeers
Source: SEB Enskilda Equity Research
Nordic banks long term funding broken down by time of issuance (based on ~3,000 bonds)
Portion of pre-, post and mid-crisis funding matters
The two extremes: Swedbank has only 30%
pre-crisis funding and 50% mid crisis funding80%
100%
120%
Handelsbanken has 60% pre-crisis funding and ony around 20% mid-crisis funding
0%
20%
40%
60%
0%
Sw edbank DnB NOR Nordea SEB Danske BankHandelsbanken
Pre-crisis Mid-crisis Post-crisis
15
EQUITY RESEARCH 10