An industry in transition …greater 3pp resilience against future financial crises and removing Estimated adverse impact of Basel III risks from banks to on global bank RoE the public finances … Source: McKinsey Vicker’s Report on Future of Banking
Exploiting regulatory arbitrage, high costs, high friction Automated Lending financial management Corporate FX banking Neobanks Payments 39 •
An industry in transition 1. A need to act 2. The Prize 3. Getting there 4. 40 •
A need to act Customers with Negative Customer Experience % change from (%) 2014-2015 2014 2.7% 2.5% North America 5.2% Only 47% of Gen Y 5.1% 1.6% Central Europe 6.7% customers in North 6.2% 1.5% Latin America 7.7% America are likely to 4.9% 6.8% Western Europe 11.7% stay with their bank 2.2% 6.8% Middle East & Africa over next 6 months 9.0% 4.0% 3.7% Asia-Pacific (excl. Japan) 7.7% 13.7% 6.3% Japan 20.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 2014 2015 Source: Capgemini 41 •
New competition Estimated impact of FinTech disruption on consumer finance 14 674 300 $ billion - 40% 35 396 Captured 2025 after 2025 before Lost Price disruption disruption erosion by FinTechs volumes Source: McKinsey
A need to act Banking profitability has not recovered since the financial crisis Source: The Economist 43 •
An industry in transition 1. A need to act 2. The Prize 3. Getting there 4. 44 •
Capitalizing on technology and changing customer behaviour Turn interactions into opportunities Creating an eco-system Relationship banking is turning digital fast 18 Mobile Transactions Millions 8 3 Branches 0 Q1/10 Q1/15 45 •
The Bank of Things & The Customer Definable Bank if then When I reach my savings goal, post on Facebook “Dream car coming soon!” if then When I go overdrawn, transfer money from my savings account to clear overdraft 46 •
Benefits of experience-driven banking Help achieving financial goals Partner network Real-time location-based offers Access to best rates on financial Social Media services across market Location Access to complementary services Bank as (e.g. legal advice) at preferred rates facilitator and Frictionless payments Transaction Data trusted advisor Contextual info (e.g. Peer/crowd interaction saving ambitions) Digital vaults & wallets Loyalty rewards 47 •
What this really means Higher customer engagement Better customer outcomes Bank as facilitator and trusted advisor Increased loyalty & wallet share Higher profitability 48 •
An industry in transition 1. A need to act 2. The Prize 3. Getting there 4. 49 •
The journey Ditching the legacy Source: BCG Complex, risky, expensive - prevents compelling customer experience 50 •
Realizing experience-driven banking Analytics Treasury CRM Channels It all starts with core Payments Wealth Management Loyalty PFM 51 •
Best practices to realize experience-driven banking Simplify First Buy a package Renovate progressively 52 •
Benefits of core banking renewal Single view, Productised embedded analytics Model Bank, upgradable, Real-time analysis based on integrated complete customer data Open Real-time, front to back Digital banking starts with a digital core Supporting open No down-time for batch architecture & Open processing; instant Banking customer fulfilment Linearly Scalable Fast time to & Efficient market Ability to grow with Single product catalogue to customer changes and remove silos rise in interactions 53 •
Nordea investor day You are invited to join us for a presentation and Q&A An update on the Nordea Core Banking Programme Joseph Edwin, Head of Core Banking, Nordea Wednesday 2 nd March 13:00 - 14:00: Presentation and Q&A Lunch will be served from 12:00 The event will be held at Goldman Sachs International Peterborough Court 133 Fleet Street London EC4A 2BB The presentation will be webcasted at Nordea.com Please register your attendance with Helen Wogel by Friday 26 th February E:mail helen.wogel@gs.com 54 •
Thank you! Joseph Edwin joseph.edwin@nordea.com
Product Mark Winterburn, Group Product Director 12 February 2016
Temenos software CHANNELS Agent Branch Call Centre Mobile ATM Internet RM Open API Marketing FRONT Service OFFICE Sales RISK REPORTING & & ANALYTICS COMPLIANCE Retail Private Wealth CORE BANKING Corporate Treasury & PAYMENTS
The market view - Suites 59
Integrated solutions freeing up budget for innovation 60 Rest of Banks* Temenos Clients 53.7% 21.2% Celent, IT Spending in Banking: A Global Perspective, 2015* Source: Temenos *Adjusted to remove Temenos customers
Today 61
Strength in depth - RetailSuite OVERVIEW CHANNELS AML KYC Business Branch Agent Call Centre Mobile ATM Internet Open API Intelligence Basle II/III Origination / Customer CRM Product Catalog Customer onboarding Output Market Teller Intelligence Risk and Order Mgt. Contact ALM Social Media Centre FRONT Alerts SCV / 360 o OFFICE Credit scoring Campaigns Prospect RISK & REPORTING Management Card Mgt. Party PFM COMPLIANCE & relationship ANALYTICS Checking / Direct debits Bundling Mutual Funds Financial IFRS overdrafts Intelligence Standing Orders Auto Finance Bill payments Savings Suspicious CORE Operational Mortgages Behavior Clearing Time deposits BANKING Reconciliation & Intelligence Limits / Matching & CDs Consumer Collateral Regulatory Predictive PAYMENTS finance Reporting Posting GL & Accounting analytics Data Restrictions
Why we win in Tier 1 Retail 63 The Biggest banks now want packaged software Modern Core a prerequisite for Digital Our Frameworks deliver the right architecture Lower risk implementations via progressive renovation The right Partners for Tier 1 Massive and linear scalability on commodity hardware and cloud
Strength in depth – WealthSuite OVERVIEW CHANNELS Basle II/III Business Branch Agent Call Centre Mobile ATM Internet RM Open API Intelligence IFRS CRM Customer Loan origination Customer Market Risk Customer Output Intelligence and ALM Onboarding Portfolio Order Social Media FRONT Management Management Management OFFICE Risk & Portfolio Relationship Treasury Compliance RISK & REPORTING & Performance Management front office COMPLIANCE ANALYTICS Operational Financial Accounts SWIFT Securities Cash Intelligence Intelligence Management Trade Banking Derivatives & Treasury & CORE Operational Structured Deposits Capital Markets AML BANKING Intelligence Products Payments & Limits and Reconciliation & Suspicious Predictive PAYMENTS GL & Accounting Collateral Lending Matching Behaviour analytics
Why we win the biggest Private Banks Integrated best of breed components Quick value from progressive renovation 90% plus out of the box Features and investment no-one else can match Strong digital offer Global and proven in more than 30 countries Seamless support for Retail > Mass Affluent > Private
How we upgrade client software – decoupled innovation cycle Channels (6m -2 years) Front – Office (1-3 years) Core Banking (2-5 years) Upgrading product family independently reducing risk and decreasing Time To Market
The architectural perspective Platform Framework Interaction Framework Integration Framework Design Framework Component Framework Data Framework
The architectural perspective Platform USABILITY 85% faster UI FLEXIBILITY Lowest TCO Framework development through choice of stacks including Cloud. Interaction Framework Integration Framework AGILITY 3x faster MAINTAINABILITY Partial software integration Design Framework upgrades across all software Component Framework PRODUCTIVITY 10X increase in customisation SCALEABILITY 70% reduction in db size – in-memory core banking productivity Data Framework
Track record of innovation… 1993 2015 Windows Open Multie Process Model Reporting SmartHybrid TM SO XML 24/7 Cloud GUI Database ntity Workflow Banks database A Retail banking, Corporate banking, Treasury, Lending, Securities Technology Trade finance Internet banking Product builder Financial Crime Mobile banking Risk & Compliance Constantly expanding Analytics & Reporting Relationship-pricing, loyalty & rewards functionality; Payments constantly evolving Marketplace Functionality technology Funds
…extending into the future Online Partial In- Process Instant Windows Open Model Reporting Database Multientity 24/7 SOA XML SmartHybrid TM Cloud Workflow GUI Banks database upgrades Upgrades memory COB Graphical product builder Retail banking, Corporate banking, Treasury, Lending, Payments back office, Securities Real-time campaigns Trade finance User Agents Internet banking Gamification Product Builder Componentised origination Financial Crime Mobile banking Compelling $100M general improvements Risk & Compliance and unrivalled Analytics & Reporting product roadmap Relationship-pricing Payments Marketplace Funds
How we build software – Agile Development Agile is a discipline that delivers software frequently with continuous learning through iteration . It ensures we deliver software faster , with better quality , minimal risk that meets our client’s requirements. Cost Value Cost Value RISK
Temenos Software in action
Today 73
Why we win in Tier 1 Retail 74 The Biggest banks now want packaged software Modern Core a prerequisite for Digital Our Frameworks deliver the right architecture Lower risk implementations via progressive renovation The right Partners for Tier 1 Massive and linear scalability on commodity hardware and cloud
Business Perspective – RetailSuite OVERVIEW CHANNELS AML KYC Business Branch Agent Call Centre Mobile ATM Internet Open API Intelligence Basle II/III Origination / Customer CRM Teller Customer onboarding Output Market Alerts Intelligence Risk and Order Mgt. Contact ALM Social Media Centre FRONT Campaigns SCV / 360 o OFFICE Credit scoring MARKETING Prospect REPORTING RISK & CATALOGUE PFM Management Card Mgt. & COMPLIANCE ANALYTICS Checking / Direct debits Bundling PRODUCT Financial IFRS overdrafts CATALOGUE Intelligence Standing Orders Auto Finance Savings Suspicious CORE Operational Mortgages Behavior Clearing Time deposits BANKING Reconciliation & Intelligence Limits / Matching & CDs Consumer Collateral Regulatory Predictive PAYMENTS finance Reporting Posting GL & Accounting analytics Data Restrictions Mutual Funds
Business Perspective – RetailSuite OVERVIEW CHANNELS AML KYC Business Branch Agent Call Centre Mobile ATM Internet Open API Intelligence Basle II/III Origination / Customer CRM Teller Market Risk Customer onboarding Output and ALM Alerts Intelligence Order Mgt. Contact Social Media Centre FRONT Campaigns SCV / 360 o OFFICE Credit scoring MARKETING Prospect RISK & REPORTING & CATALOGUE PFM Management Card Mgt. COMPLIANCE ANALYTICS Checking / Direct debits Bundling PRODUCT Financial IFRS overdrafts CATALOGUE Intelligence Standing Orders Auto Finance Savings Suspicious CORE Operational Mortgages Behavior Clearing Time deposits BANKING Reconciliation & Intelligence Matching Limits / & CDs Consumer Regulatory Collateral Predictive PAYMENTS finance Reporting Posting GL & Accounting analytics Data Restrictions Mutual Funds
Why we win the biggest Private Banks Integrated best of breed components Quick value from progressive renovation 90% plus out of the box Features and investment no-one else can match Strong digital offer Global and proven in more than 30 countries Seamless support for Retail > Mass Affluent > Private
Business Perspective – WealthSuite OVERVIEW CHANNELS Basle II/III Business Branch Agent Call Centre Mobile ATM Open API Internet RM Intelligence IFRS CRM Customer Loan origination Customer Market Risk Customer Output Intelligence and ALM Onboarding Portfolio Order Social Media FRONT Management Management Management OFFICE Risk & Portfolio Relationship Treasury Compliance RISK & REPORTING Performance Management front office COMPLIANCE & ANALYTICS Cash Financial Accounts SWIFT Securities Operational Management Intelligence Intelligence Trade Banking Derivatives & Treasury & CORE Limits and Operational Structured Capital Markets AML Collateral BANKING Intelligence Products Payments & Reconciliation & Master Data Predictive Suspicious PAYMENTS GL & Accounting Lending Matching Management analytics Behaviour
Business Perspective – WealthSuite OVERVIEW CHANNELS Basle II/III Business Branch Agent Call Centre Mobile ATM Internet RM Open API Intelligence IFRS CRM Customer Output Loan origination Customer Market Risk Customer Intelligence and ALM Onboarding Portfolio Order Social Media FRONT Management Management Management OFFICE Risk & Portfolio Relationship Treasury Compliance RISK & REPORTING Performance Management front office COMPLIANCE & ANALYTICS Cash Financial Accounts SWIFT Securities Operational Management Intelligence Intelligence Trade Banking Derivatives & Treasury & CORE Limits and Operational Structured Capital Markets AML Collateral BANKING Intelligence Products Payments & Reconciliation & Master Data Predictive Suspicious PAYMENTS GL & Accounting Lending Matching Management analytics Behaviour
Highly differentiated product 80 Packaged, upgradable Front-to-back, vertically integrated Progressive renovation Scalable Model bank Open architecture
Creating shareholder value Max Chuard, CFO, COO
Agenda 83 Creating shareholder value 1. Growth strategy 2. Medium term targets 3.
Temenos drivers of value 84 Substantial revenue growth Business model drives margin expansion Shareholder d value Significant free cash flow generation Disciplined capital allocation
Substantial license revenue growth 85 Non-IFRS Total Software License Revenues Medium term target of c.15% CAGR USDm 300 250 200 150 100 50 0 2012 2013 2014 2015
Significant growth in recurring revenue 86 Non-IFRS Maintenance, SaaS and Subscription revenues and as percentage of total revenues 49% USDm 45% 46% 51% 300 250 200 150 100 2012 2013 2014 2015
Business model drives margin improvement – packaged, upgradable, recurring 87 Non-IFRS EBIT margin Medium term target of 100 to 150 bps 28.1% 27.3% expansion p.a. 24.1% 19.3% 2012 2013 2014 2015
Consistent growth in profitability 88 Non-IFRS EBIT (USD m) Non-IFRS EPS (USD) 1.73 157 1.44 128 1.22 113 0.90 87 2012 2013 2014 2015 2012 2013 2014 2015
Exceptional Cash Flow generation 89 Operating Cash Flow and DSOs Medium term target DSO reduction of 154 days 226 days 198 days 180 days 10 to 15 days p.a USDm 250 200 150 100 50 0 2012 2013 2014 2015
Disciplined capital allocation 90 Capital allocation 2012 - 2015 Share buyback Dividends Acquisitions 30% 57% 13%
Track record of M&A 91 2007 2008 2009 2010 2011 2012 2013 2015
Track record of M&A 92 2007 2008 2009 2010 2011 2012 2013 2015
Balance sheet strength 93 2012 2015 Weighted average interest rate 5.1% 3.7% Weighted average maturity 1.5 years 2.6 years Total available financing USD 350m USD 725m Leverage ratio 0.8x 1.3x Low-cost debt structure with significant flexibility
We have created significant shareholder value 94 Total shareholder return* 1 year 3 years 10 years (31/12/15) Temenos 48% 210% 458% Swiss Market Index 1% 31% 106% Stoxx Euro 600 -1% 19% 56% Nasdaq 7% 72% 155% Peer group average 24% 66% 282% Exceptional shareholder value creation *in USD
Growth strategy
We have grown our addressable market 96 Addressable market (USD billions) 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2005 2012 2015 Medium term Core banking Wealth BI Channels Fund Admin Payments
Consistent growth in revenues from Tier 1+2 clients 97 Tier 1+2 non-IFRS total software licensing revenues $101m $46m $27m Medium term 2005 2012 2015 Tier 1+2 clients engaged in progressive renovation buy average of $3-5m additional new license p.a.
Maximising the installed base 98 Installed base will continue to represent 60%+ of non-IFRS total software licensing going forward Breakdown of the installed base Cross selling Tier 1+2 progressive renovation Relicensing c.15-20% CAGR 2012 2015 Medium term c.15-20% CAGR growth driven by multi-product penetration, progressive renovation and relicensing
Our North America strategy will drive incremental growth 99 Non-IFRS total software licensing, North America vs. Rest of World North America 25%+ c.35% CAGR 2012 2015 Medium term North America to become increasingly important
SaaS and Subscription revenues are growing rapidly 100 Non-IFRS Software licensing vs. SaaS and subscription revenues SaaS and subscription 20%+ c.20% CAGR 2012 2015 Medium term SaaS and subscription revenues expected to grow rapidly
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