A robust and sustainable business model 13 December 2013 Rodney Alfvén, Head of Investor Relations
Nordic ideas Nordea was created with the vision that the Nordic region was one market and to establish a pan-nordic platform Today, Nordea is the largest financial services group in the Nordic and Baltic Sea region. 11 million customers - 8 home markets - Approx. 10 million personal customers - 500 000 corporate customers, incl. Nordic Top 500 Distribution power - Approx. 900 locations in total - Approx. 7 million Netbank customers Financial strength - EUR 10.2bn in full year income (2012) - EUR 626bn of assets (Q3 2013) - EUR 29.0bn in equity capital (Q3 2013) - AA credit rating - Core Tier 1 capital ratio of 14.4% (Q3 2013) The Baltic region was added via green field operation. EUR ~36.1bn in market cap - One of the largest Nordic corporations - A top-10 European retail bank 2
Nordea is the most diversified Nordic bank Geographic exposure vs. Nordic peers¹, % Largest market contribution Total loans to public by geography, % ~90% Russia 1% Baltics 2% 71% ~60% ~70% ~70% ~80% Norway 17% Finland 29% 29% Denmark 25% Sweden 26% Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Total: EUR 343bn 1 Comparison based on reported geographical breakdown of loans to the public; latest available financials. 3
with lower earnings volatility and stable ROE over the cycle Net income volatility vs. Nordic peers 1, % 147 11 13 24 54 61 Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 ROE development 2007-2013 2, % 21.5 19.1 18.0 18.1 15.816.2 15.014.4 13.9 12.0 11.7 Stable ROE over the cycle Not a single quarter below 8%. Every year above 11% 8.1 11.3 9.5 12.2 12.8 12.011.5 8.5 12.311.9 12.5 10.3 12.3 11.1 11.5 10.8 2007 CT1 = ~6% 2008 2009 2010 2011 2012 2013 CT1 = ~13% 1 Annual net income volatility over last 5 years. 2 ROE adjusted for restructuring costs 2011. 4
Boring is beautiful
One offering to all our stakeholders Regulation Massive regulatory agenda with many and interlinked metrics Investors Investor support a prerequisite for contributing to society Customers A clear value proposition to all our customers Society Bank sector contributing to society 6
A clear value proposition to our customers Customers Continuous inflow of Gold and Private Banking customers Clear value proposition to relationship customers Customer s benefits 2.931 3.051 3.112 3.168 Trust bank s ability holistic advice in best interest one provider of all services stability; a bank for sunny and rainy days 2.697 2.568 2.423 Know the customer Advise the customer Service the customer Commit to the customer Q3/07 Q3/08 Q3/09 Q3/10 Q3/11 Q3/12 Q3/13 Number of Gold and Private Banking customers, m Focus on the right customers/ projects Bank s benefits identify efficient solutions service all financial needs/ benefit from diversification loyalty lt and higher profitability 7
Superior Corporate and institutions franchise Customers Nordea top ranked for relationship and quality Multi-local presence 100% 90% Nordea Only bank with a substantial lead bank footprint in all markets ships Imp portant relation 80% 70% 60% 50% 40% 30% Peer 2 Peer 3 Peer 4 Peer 5 Peer 1 Deep and intimate local presence Interaction on all levels with many touch-points Coordination of effort in customer teams Proactivity on all levels 20% 10% 0% (40) (20) 0 20 40 60 80 100 Greenwich Quality Index Large Corporates - Difference from average 1 1 The Greenwich Quality Index reflects a normalised composition of all quantitative scores. 8
Nordea s great delivery to customers and society First 3 quarters of 2013 Customers Households We have issued 200,000 new mortgages making it possible for families to buy their homes Advised 1,2 million customers, and ran 0.5 million financial plans 1,2 million active mobile bank users did 11.6 million transactions on the mobile, banking where they wanted SME Corporates Conducted d 240,000 000 corporate customer meetings, ensuring we are close to our customers Issued 12 billion euros of new or refinanced loans, being active with core customers to help them reach their goals Society Entrepreneurship: Developing young peoples entrepreneurial skills, as well as creativity and selfbelief Financial education: Increasing the financial literacy among youth and other groups, leveraging our skilled staff 9
Swedish bank sector contributing to society Society Direct employment Direct Share of * Contribution to GDP total corporate tax*** 85 000 144 bn ** 11% Year 2010 ** Incl insurance companies ** SEK Source: Bankföreningen 10
Increased costs of risk Investors Beta Source: UBS 11
lead to high cost of equity despite a low risk free rate Investors Implied CoE 1. 10 year Swedish government bond yield 2. Implied equity risk premium (Europe ex-uk) Source: UBS 12
A sound valuation of equity gives positive effect on funding costs and customer offerings Investors 2.0 1.8 SHB Swedbank Price to book va alue 1.6 1.4 1.2 1.0 0.8 0.6 0.4 Nordea SEB DNB Danske BNP Deutsche CA Erste SG Barclays RBS Commerz KBC BBVA Santander Intesa UniCredit 0.2 0 20 40 60 80 100 120 140 160 180 200 5 year CDS spread 13
Efficiency amongst the best in the world Investors Cost / income ratio vs Cost to avg assets Source: Citi 14
5 years since the Lehman collapse we face a massive regulatory agenda of interlinked metrics Regulations Living Wills Deposit Guarantee Schemes Coherence of legislation CSD regulation Solvency II Investor Protection schemes Mortgage Directive PRIPs Corporate Governance Data Protection SEPA End-datedate Liikanen Structural Reform Banking Union Basel III CRD IV / CRR MiFID II / MiFIR & our customers EMIR Short Selling Remuneration Payments package MAD (PSD II) 4 th AML Directive Bank Account Securities Law Directive Recovery & Resolution for FMIs Banking Recovery & Resolution Directive UCITS AIFMD Transparency Directive FATCA Dodd-Frank Act Volcker Rule Shadow Banking FTT Leverage Ratio Prospectus Directive EU FATCA NSFR Fundamental Review of the Trading Book Long-term Financingi 15
The funding strategy is a balance multiple constraints Regulations Risk appetite Internal constraints Currency mismatch Liquidity risk Maturity mismatch Diversification LCR Rating Funding strategy Long-term investor relations Asset encumbrance BRRD External constraints Market environment Funding capacity NSFR LCR Capital requirements Funding Cost Regulation 16
Leverage ratio creates a bottom level on risk-weights on all assets example w. 3% leverage ratio and 12% capital requirement Regulations Capital in % of assets 15% 12% If capital req. 12%, risk weight 100% 9% 6% Stable Funding Ratio (%) 3% 0% 0% 25% 50% 75% 100% 125% Risk weights in % of assets Leverage ratio Loan amount x Leverage ratio Capital in % of loan Capital requirement Loan amount x Risk x Capital requirement Capital in % of loan 17
The Nordic-Baltic regions reliance on wholesale funding Regulations Advance saving markets and good knowledge on the customer side High savings ratios but not in deposits Reformed pension systems - less deposits But stable and reliable funding through covered bonds instead of deposits Liquid markets Functioned well during the financial crisis Domestic markets in Denmark, Finland, Norway and Sweden 18
Structural liquidity- Stable funding ratio by S&P Regulations StanChar, AA-/Negative/ HSBC Holdings, AA-/Negative/ /A-1+ /A-1+ Erste, A/Negative/A-1 UBS, A/Stable/A-1 Cooperative, AA-/Stable/ ZKB, AAA/Negative/ /A-1+ /A-1+ RZB, A/Negative/A-1 Commerzbank, A-/Negative/A-2 KBC, A-/Positive/A-2 RBS, A/Negative/A-1 Norddeutsche, BBB+/Negative/A-2 Nationwide, A/Negative/A-1 AIB, BB/Negat ive/b DNB, A+/Stable/A-1 Lloyds, A/Negative/A-1 Barclays, A/Stable/A-1 ABN Amro, A/Stable/A-1 Santander, BBB/Negative/A-2 Rabobank, AA-/Stable/ /A-1+ ING, A+/Negative/A-1 Swedbank, A+/Stable/A-1 Caixa, BB-/Watch Neg/B BOI, BB+/Stable/B Unione, BBB-/Negative/A-3 Mediobanca, BBB/Negative/A-2 Credit Suisse, A/Stable/A-1 SEB, A+/Negative/A-1 UniCredit, BBB/Negative/A-2 Credit Mutuel, A/Stable/A-1 Intesa, BBB/Negative/A-2 BCP, B/Watch Neg/B Danske, A-/Stable/A-2 Nordea, AA-/Negative/A-1+ SocGen, A/Negative/A-1 Popolare, BB/Negat ive/b BBVA, BBB-/Negative/A-3 BNP, A+/Negative/A-1 113 113 111 109 107 105 105 101 101 101 99 99 99 98 98 97 96 96 95 95 94 94 93 93 92 92 92 91 91 90 90 89 888 124 122 119 119 BPCE, A/Negative/A-1 888 Espirito Santo, BB-/Watch Neg/B 86 DB, A/Stable/A-1 86 Credit Agricole, A/Negative/A-1 Sabadell, BB/Negat ive/b Caixa, BBB-/Negative/A-3 Bankia, BB-/Negat Handelsbanken, AA-/Negative/ ive/b /A-1+ Belfius, A-/Negative/A-2 BPE, BB-/Negat ive/b Nykredit, A+/Negative/A-1 NBG, CCC/Negati ive/c Dexia, BBB/Stable/A-2 28 70 69 75 79 78 86 84 84 82 140 120 100 80 60 40 20 0 -Source: Standard & Poor s based on YE 2012 -Highlighting in; Green = Above Average; Orange = Average; Red = Below Average 19
The value of a common Nordic-Baltic approach Regulations The Nordic-Baltic region One market! Good cooperation with the various authorities in the region But cooperation and harmonization could be improved would be beneficial for growth and further developments in the Nordic-Baltic region We have well developed and advanced banking markets in the Nordic-Baltic region in some areas a coordinated approach with the authorities to support the distinctiveness of the Nordic-Baltic region would be welcomed 20
A robust and sustainable business model 13 December 2013 Rodney Alfvén, Head of Investor Relations