BofAML 21st Annual Financials CEO Conference Investor presentation Casper von Koskull, President and Group CEO London 29 th September
13% CAGR in capital generation and CET1-ratio up 10.6 pp in 10 years Strong capital generation and stable returns at low risk 1 Acc. equity, EURbn Acc. dividend, EURbn 43 39 37 35 31 29 26 20 19 15 12 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 5.9 2 CET1 Ratio % 16.5 1) CAGR 2015 vs. 2005, adjusted for EUR 2.5bn rights issue in 2009. Equity columns represents end-of-period equity less dividends for the year. No assumption on reinvestment rate for paid out dividends 2) Calculated as Tier 1 capital excl. hybrid loans 2 •
The most stable bank in the Nordics Nordea and peers 2006 – 2015, % Quarterly net profit 146 volatility 77 47 38 24 17 Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Quarterly CET1 ratio 1,04 0,88 volatility¹ 0,52 0,35 0,33 0,21 Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 1) Calculated as quarter on quarter volatility in CET1 ratio, adjusted so that the volatility effect of those instances where the CET1 ratio increases between quarters are excluded 3 •
Our focus on ancillary income has offset pressure on NII margins 2008 2015 Change Net Interest Income (EURm) 5 093 4 963 -3% Lending and deposit volumes (EURbn) 414 530 +28% Net Fee and Commission Income (EURm) 1 883 3 230 +72% Net Fair Value (EURm) 1 028 1 645 +60% Total Income (EURm) 8 200 10 140 +24% 4 •
Recent Trends Q2/16 vs. Q2/15* • Income down 3% Despite low growth and turbulent financial markets – stabilising trend in the quarter Ancillary income holding up well • Costs +3% in local currencies Developing as expected Flat 18 vs. 16, down after 18 • Loan loss provisions at 15bps Expected level for full year approximately 16bps Overall, solid asset quality with strongly rated customers • CET 1 ratio improved 10bps from previous quarter to 16.8% (Pro forma 17.2%) SREP finalised end-September, early October – current requirement of approx. 17% Project Archean closed successfully end-August • Simplification programme is delivering according to plan *In local currencies 5 •
Retail Banking - strong financial development Income ( EURbn) Profitability (%) ■ Non interest income +9% Cost / income ■ Margins 1 +43 bps RoCaR ■ Relationship customers +6% 5.0 4.9 13 13 11 2011 2015 9 Cost (EURbn) 7 ■ FTEs down by ~2,000 (~10%) 2 65 ■ 35% fewer branch locations 3.2 59 59 56 54 2.7 2011 2012 2013 2014 2015 2011 2015 1) Lending margins 2) Adjusted for insourcing of IT and compliance build up 6 •
Wholesale Banking – a leading Nordic platform Greenwich Prospera 2015 - Tier 1 – Nordea Nordic #1 No. 1 No. 2 No. 3 positions positions positions #1 Nordea 22 12 8 #2 Nordic Peer 14 12 13 #3 Nordic Peer 5 14 13 7 •
Wealth Management - 20% profit CAGR since 2011 Operating profit ( EURm) AuM ( EURbn) Operating income (EURm) 288 1,929 1,127 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 8 •
Banking: an industry in transition – and more disruption lurks around the corner KEY TECHNOLOGIES IMPACTING BANKING MORE DISRUPTION COMING Big Data – Mobile – always relevance & accessible personalisation A digital revolution Social Media – Cloud – networks profitability at redefined lower scale E.g. Blockchain 9 •
Banking customers: Same needs as before but changing behavior CHANGING CUSTOMER EXPECTATIONS… …AND CHANGING CUSTOMER BEHAVIOR Impatient & empowered - 24/7 Are becoming less loyal availability and immediate delivery Use several channels in combination Knowledgeable - Specialised and Use digital channels more intensively tailored advise that complements the research we have done ourselves Use digital channels to enforce: Integrated & connected – Integrated Network into my process and Personalisation Co-creation building connected/compared with peers Require relevance - Personalised products, services and interaction 10 •
Also Nordea’s customers are changing their behavior Relationship banking is turning digital fast End-to-end digital response required Netbank 60 ■ Digital response required Transactions ■ Front-end solutions will not suffice Millions ■ Automated end-to-end processes across 22 Mobile the full value chain is a must Branches ■ Consistency and endurance in execution to 3 unlock benefits Q3/10 Q3/15 Share of Remote Ability to execute Meetings (Percent) 17% 10% 3% Q4 Q2 Q4 Q4 Q4 Level of digital response 2014 2015 2015 2016 2017 11 •
Surge in new operational regulations Operational Balance sheet regulations regulations Recovery and resolution EMIR SEPA Machinery PRIPs MiFID II room Capital Data Structural reforms requirements MAD FATCA protection for banking Transparency Leverage Directive AML Banking union Dodd-Frank ratio Payment Deposit & OUR CUSTOMERS Benchmark FTT TLAC package guarantee regulations Corporate SFT Investor governance Shadow transparency compensation banking Long-term AIFMD financing Short selling UCITS CSD Living Solvency 2 regulations wills Mortgage PSD II Securities Directive Prospectus legislation Fundamental NSFR Directive MMFs review of the Bank trading book account Margin for IORP II Products derivatives 12 •
IT complexity in large legacy banks Complex, risky, expensive & slow – hinders compelling customer experience Source: BCG 13 •
For Nordea the strategic response to the industry transformation is “Simplification” – the corner stone of our transformation One operating model Compliance Digital offering Simplification Cost and capital efficiency 14 •
High-level delivery and migration plan for Core Banking Platform 2015 2020 SV / SI 1 2 3 4 Milestones selected Country migrations done Contract signed Decommissioning done Business case + migration strategy CBP implementation done agreed First version of model bank implemented Pilot Implemented Prep. Pilot Deposits Key activities Loans Mortgages Trans. accounts Complex Customers Data cleansing and decommissioning 15 •
Digitalisation is at the heart of the future business/operating model ANYTIME, RELEVANT ANYWHERE COMPETENT SAFE Four strategic capabilities New great customer Agility experiences Competence Resilience Scale Robust platforms as foundation COMPLIANT EFFICIENT RESILIENT CONFIGURABLE 16 •
Delivering on financial targets while transforming the bank 2016 2018 2015 Risk & compliance Group Simplification Programme Legal Structure Programme Other business True end to end process decisions optimisation Retail Banking transformation Cost efficiency & capital management Nordea FinTech start-up accelerator program Transformational change agenda a cornerstone in achieving best-in-class C/I ratio 17 •
BofAML 21st Annual Financials CEO Conference Investor presentation Casper von Koskull, President and Group CEO London 29th September
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