Credit Management and Credit Procedures Lars-Erik Kvist Chief - PowerPoint PPT Presentation

Corporate Bank of the Year 2003 Credit Management and Credit Procedures Lars-Erik Kvist Chief Credit Officer

2 Current situation • Continued stable development of lending volumes • Continued growth in Spintab and Finans • Improved efficiency in the handling of credits

3 Group lending excluding repurchase agreements and credit institutions FSPA excl. Hansabank and FI-Holding Hansabank FI-Holding 2003 2002 2003 2002 2003 2002 SEK bn 9/30 12/31 9/30 12/31 9/30 12/31 Private individuals 317.1 298.2 10.9 8.7 0.0 0.0 of which Spintab 267.0 248.2 Real estate management 127.8 124.3 3.4 2.8 16.1 16.8 Retail, hotels, restaurants 15.6 15.6 6.2 5.1 4.5 4.9 Construction 9.2 8.5 1.1 0.8 0.9 1.3 Manufacturing 14.5 14.7 5.7 5.3 30.4 30.7 Transportation 6.5 6.6 3.7 3.3 4.1 4.5 Forestry and agriculture 33.0 30.1 0.9 0.7 0.2 0.3 Other service businesses 16.6 16.1 1.5 1.5 1.2 1.3 Other business lending 49.0 44.5 2.5 2.1 9.5 10.3 Municipalities 14.0 13.7 Total 603.3 572.3 35.9 30.3 66.9 70.1

4 Group lending by collateral September 30, 2003 Personal guarantee, 1.8% (1.8%) Chattel mortgages, 2,5% Unsecured, 11.3% (12.0%) (2.6%) Other collateral, 6.0% (5.5%) Other properties, 15,6% (16.1%) Municipalities and county councils, 7.4% (7.3%) Residential properties incl. condominiums, 55.4% (54.7%) Lending SEK 706 bn (673 bn) (Figures in parantheses refer to December 31, 2002)

5 Doubtful claims gross by Group unit SEK M Sep 30, 2003 Dec 31, 2003 Change FöreningsSparbanken AB 1,848 1,855 0 % Spintab 426 629 – 32 % FöreningsSparbanken Finans 131 148 – 11 % FI-Holding 539 389 39 % Hansabank 541 439 23 % Others 161 140 14 % Total 3,646 3,600 1 %

6 Loan losses SEK M Jan-Sep 2003 Jan-Sep 2002 Established 440 531 Provisions 931 1,452 Recoveries – 545 – 740 Change in value of property taken over 6 0 Total 832 1,243

7 Credit limits Board of Directors Unlimited Board's Credit and Unlimited Central level Capital Market Committee SEK 150/350 M Central Credit Committee SEK 10/20/30/40 M Local board Local bank Local delegation SEK 7.5/15/20/30 M Two officers SEK 0.25/3/5 M

8 Decision mandates FIH and Hansabank - Central level - FIH Hansabank Board of Directors Board of Directors > 80 DKK M > 15 % of group’s shareholders’ equity Loan Committee Executive Mgmt. 80 DKK M < 15 % of group’s shareholders’ equity Loan Department Group Loan Committee 10 DKK M < 10 % of group’s shareholders’ equity Each country’s Loan Committee EUR 7.5 M

9 Credit processing principles • Local business units have full responsibility for profits, local business and credits • Customer account managers forms independently their own opinion of each credit application • The duality principle applies to processing and decision- making • Quality assurance at the central level according to the principle of significance and risk

10 Credit control principles • Business units have full responsibility for their share of the Group’s loan portfolios: - Credit application processing - Credit decisions acc. to procedural guidelines - Management - Portfolio analysis/Risk profile - Follow-up • Chief Credit Officer • Credit Control Manager

11 Current decision flow Decision-making unit No. of decisions *) Share Local business units 745,000 **) 99.3 Central Credit Committee 5,000 0.7 Total 750,000 100.0 *) Annual rate of loan decisions incl. estimated number of decisions on change in terms **) Of which approximately 95 % two officers jointly

12 Early warning, etc. • Focus on insolvency signals • Online UC reporting (eng > SEK 100,000) • Engagements under observation • Risk classification • Efficient collection process • Targets for doubtful claims • Results doubtful claims

13 Central Credit Control • Quality assurance in Central Credit Committee • Centralized credit follow-ups and control - Risk profiles - Credit quality

14 Central Credit Unit’s control Credit follow-ups by Central Credit Unit primarily cover: • Changes in risk levels in the business unit’s credit portfolio • Business unit’s credit organization, functionality and duality • Deviations from credit policy and other rules • Quality of credit decisions and documentation • Collections and doubtful engagements • Continuous engagement follow-ups within each business unit • Credit reporting • Credit area managers

15 “Improvement program” to raise efficiency and business focus • Move back office from local banks to shared services - Loan administration - Collection administration • Consumer credits • Scheduled credit follow-ups