Scandinavian Banking in Poland and the View on Poland From a Banker

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1 Scandinavian Banking in Poland and the View on Poland From a Banker Egil Rindorf Head of Nordic & International Corporate Banking Poland & the Baltic States

2 Poland is not an isolated island, but proved to be resilient GDP per capita (EU average = 100) % % GDP change % % Denmark Sweden Finland Norway Poland Source: Eurostat -6 EU Euro area Poland Source: Eurostat GDP per capita (EU average = 100) % % GDP level Index, 2005=100 Index, 2005= Hungary Czech Rep. Poland EU average Euro area Poland Source: Eurostat Source: Eurostat No 2

3 Negative external demand shock well absorbed Where do Polish exports go? Others, 33.1 Germany, EURPLN EURPLN Ukraine, 2.5 Hungary, 2.6 Sweden, 2.8 Netherlands, 4.4 Russia, 4.5 Italy, 5.3 France, 6.1 UK, 6.4 Czech Republic, Source: Central Statistical Office Q01 3Q01 1Q02 3Q02 Actual EURPLN EURPLN at which exports are no longer profitable 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q Source: National Bank of Poland No 3

4 No overhang of excessive private sector debt Source: Eurostat No 4

5 Economic activity Slowdown underway The Polish economy is slowing down amid negative impact of Euroarea recession and domestic fiscal consolidation, but Poland remains one of the resilient economies in the EU. The key reason for the slowdown is weaker external demand, although Poland benefits from not being as open economy as its regional peers and from the fact that its dominant export market is relatively strong German economy. Domestic fiscal consolidation adds to headwinds for the Polish economy, with the pinch felt particularly strongly in public investments. Weakening in investment activity is also taking place as many large infrastructure projects were finished before UEFA Euro 2012 in June. Economic slowdown is also driven by weakening in consumption growth due to elevated inflation, deterioration in labour market conditions and adjustments in households balance sheets (there is a need to rebuild savings after the savings rate has dropped to historical lows over the past few years while there is no need to reduce debt because private sector debt to GDP ratio in Poland is at one of the lowest levels in the EU being one of the strengths of the economy). In mid-2013 a recovery should start amid rebound in the Euro area, an expected responsese of domestic macroeconomic policy and gradual beginning of large investments in the energy sector (conventional power plants, wind farms, nuclear power plant, exploration of shale gas). Activity momentum weakens notably, but Poland remains growth outperformer Jan-08 Jan/08 % y/y % y/y Foreign trade turnover Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Exports Imports Oct-11 Jan-12 Apr-12 Source: GUS, Nordea Markets % y/y % y/y Economic activity indicators Apr/08 Jul/08 Oct/08 Jan/09 Apr/09 Jul/09 Oct/09 Jan/10 Apr/10 Jul/10 Oct/10 Jan/11 Apr/11 Jul/11 Oct/11 Jan/12 Industrial output Construction output Retail sales Apr/12 Source: GUS, Nordea Markets Jul/

6 The End of the World as We Know It... 6

7 Implications Banks should have more, not less capital Banks should have more liquidity Interest rates have been too low Reversing the above means higher financial costs This means lower, sustainable, demand for credits The global banking machine is much too big! No 7

8 This is permanent For the rest of our professional careers, we will have to clean up the mess and live with the lessons No 8

9 How Ratings Adjust Assets There is a complex formula (determined by the regulatory authorities) that takes the rating, the product and collaterals to determine how to translate your nominal loan to a risk weighted asset (loan) 9

10 Price Shock Good customers are used to getting good pricing and not so good expect higher pricing, but not 2-3 times higher! 10

11 Why Then Invest in Poland? Poland is the biggest country in Central and Eastern Europe (population 38,1 mio) Poland is in the best fiscal and financial condition among all new EU countries according to the world bank Polish employment costs are among the lowest in EU Poland ranks well above EU average in terms of quality of human resources There are many academic centers in Poland with 2 mio students Polish students have good knowledge of foreign languages (more than 50% speak fluent English) 11 Source: KPMG

12 Key policy areas to consider when entering Poland Risk strategy Currency strategy Non-commercial considerations CSR environmental ethical Investment considerations Organization Legal obstacles unknown law system Distribution channels Other practises and unknown bureaucracy... and more 12

13 Be Prepared to Change Your Plan! 13

14 So What is the Nordea Story? 14

15 Why Exactly is Nordea in Poland? To follow our clients in a growth market We sell individual value generating solutions for each customer and develop longstanding mutually beneficial cooperation Nordea is first choice to a comparatively large proportion of Nordic companies Leading Cash management partner in the Nordic region All services are harmonized with Nordea standards To capitalize on our strong industry teams 15

16 Long-Term Business Strategy in Poland one of the leading banks in Poland both on corporate and individual markets to offer a wide range of new banking products and services branches in selected major cities and electronic channels (e-banking, m-banking) cooperation with at least 50% of Nordic Companies operating in Poland 16

17 Can I borrow locally? and is it the best solution? The Nordea concept is: One-point-of-entry for every customer This means that main part of negotiation of terms and credit decision is made in Denmark by your normal contact Lending can be booked in Denmark or locally as you wish Most types of banking products are almost as they are in Denmark Local borrowing may be the best solution In order to make pledges locally for tax reasons For practical reasons It is often more bureaucratic to establish the business locally than in Denmark but day-to-day operations are normally smooth No 17

18 Cash Pool is Avaiable Company A (Negative Account Holder) Current account Cash pool agreement Power of attorney (for Bank) Overdraft limit of xxx PLN Company B (Positive Account Holder) (1) The Bank has a credit claim towards Company A resulting from the used part of overdraft limit granted (4) Company B becomes the real lender towards Company A and thus is entitled to receive interest payable on the credit claim (3) against payment Bank (2) The Bank sells its credit claim towards Company A to Company B... Current account Cash pool agreement Power of attorney (for Bank) 18

19 Corporate products Products Trade finance Markets Cash management Loans, Deposits &NF Lending/Deposits Cash Management EPF DCM E-banking Trade Finance Markets (TIP) Customer value proposition Nordea Finance Cards No 19

20 Can I help. 20

21 Egil Rindorf Head of Nordic and International Corporate Banking, Central & Eastern Europe 21

22 Appendix Nordea Products in Poland

23 Major Products Available for Corporate Clients Payments Nordea Client Funding Hedging Trade Finance Monitoring Credit Cards Cash Processing Electronic Banking Channels Nordea Accounts 23

24 Nordea Major Products 1 Accounts Current, Salary, Social, Escrow PLN, EUR, USD, SEK and other major curriencies Deposits Monitoring Statements in paper form Electronic statements Balance Reporting MT940 / 941/ 942 Payments Domestic: Supplier, Salary, ZUS, TAX International: Nordea Group Payments, Standard, Urgent Mass Payment Reconciliation System Direct Debit 24

25 Nordea Major Products 2 Electronic Banking Channels Solo Corporate software homebanking solution efirma Plus Internet homebanking solution Request for Transfer MT101 Credit Cards VISA Electron VISA Business Debit VISA Business Charge Cash Processing via branch network via outsourced companies 25

26 Nordea Major Products 3 Funding Short and Medium Term Loans, incl. overdraft facility Investment Loans Syndicated Loans Leasing Hedging Currency / Foreign Exchange (spot, forward, dual currency deposit) Interest Rates (forward rate agreement, interest rate swap, cross currency interest rate swap) Trade Finance Guarantees L/C etc. 26

27 Electronic Banking Channels 1 Solo Corporate - Off-line system - Accounts and reporting - All kinds of payments - Unlimited number of users - Unlimited number of workstations - Communication via modem or fixed line - Possible integration with ERP system (file transmission) - Both English and Polish version 27

28 Electronic Banking Channels 2 Solo efirma Plus - On-line system (based on Internet) - Accounts and reporting - All kinds of payments - Unlimited number of users - Well-suited for small and medium companies - Both English and Polish version 28

29 Other Nordea Products Direct Debit DD is an instruction given to the Bank by the Creditor for debiting the Debtor s account with a specified amount and crediting the Creditor s account with the same amount simultaneously. The Debtor has a right to withdraw from a DD at any time. DD enables more efficient realization of periodical payments. It may be applied for regular payments made by individuals as well as for fixed payments between business entities. Mass Payments Reconciliation System (MPRS) MPRS is based on the coded information about the payer in the Bank account number. A different virtual account number, including a unique personalizing identifier, is assigned to each payer. Payments are transfered to this virtual account. The Customer s current account is credited with one aggregated amount of all the payments. MPRS enables quick and unequivocal identification of the payment made by the payer and automatic booking of the received payments as well as its identification in the Customer s accounting system. 29

30 NORDIC CORPORATE BANKING DEPARTMENT fax: Maciej Czerwonogrodzki Head of NCBD tel Danish/Swedish/International Desk Magdalena Winiarska Senior Relationship Manager tel Marzena Pietruczuk Senior Relationship Manager tel Hubert Dziedzic Senior Relationship Manager tel Jolanta Jakubiec Relationship Manager tel Cezary Jeżewski Relationship Manager tel Tomasz Błahut Relationship Manager tel Finnish/Norwegian Desk Magdalena Rutkowska Senior Relationship Manager tel Kinga Gerchard Relationship Manager tel Krzysztof Bujnowski Junior Relationship Manager tel Cash Management Sylwia Czyż Head of Cash Management Unit tel Joanna Hońdo Cash Management Advisor (Danish customers) tel Aleksandra Bara Cash Management Advisor (Sw edish customers)tel Radosław Rogalski Cash Management Advisor (Finnish customers) tel s: first 30

31 CORPORATE CUSTOMERS' SERVICE TEAM fax: Agnieszka Owczarek Head of Customer Service Team tel Piotr Wodzyński Customer Manager tel Małgorzata Chmielewska Customer Manager tel Marzena Szarek Customer Manager tel Dariusz Drzewiecki Customer Manager tel Mariola Ardej Customer Manager tel Krzysztof Płoucha Customer Manager tel MARKETS fax: Piotr Kurowski Head of Markets tel Dorota Olender Deputy Head of Markets tel Anna Solarz Sales Manager tel Dariusz Grzyb Senior Sales Manager tel Filip Moryl Junior Sales Manager Katarzyna Wierzch Senior Sales Manager tel Tomasz Bartkowski Senior Sales Manager tel s: first 31