Debt investor presentation Q3 2017
Disclaimer This presentation contains forward-looking statements that reflect management’s current views with respect to certain future events and potential financial performance. Although Nordea believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of various factors. Important factors that may cause such a difference for Nordea include, but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate, (iii) change in the regulatory environment and other government actions and (iv) change in interest rate and foreign exchange rate levels. This presentation does not imply that Nordea has undertaken to revise these forward-looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided. 2
Table of contents 1. Nordea in brief 4 2. Financial results highlights 12 3. Group transformation 21 4. Capital 26 5. Macro 29 6. Funding 33 3
1. Nordea in brief 4
The largest financial services group in the Nordics Household market Corporate & Institutional position market position Business position #1 #1 - Leading market position in all four Nordic countries - Universal bank with strong position in household, corporate and wealth management - Well diversified business mix between net interest income, net commission income and capital markets income #1 11 million customers and strong distribution power #2 - Approx. 10 million household customers #1-2 - 540 000 corporate customers, incl. Nordic Top 500 #2 #1-2 - Approx. 600 branch office locations - Enhanced digitalisation of the business for customers #2-3 #1-2 Financial strength - EUR 10bn in full year income (2016) #2 - EUR 615bn of assets (Q3 2017) - EUR 32.3bn in equity capital (Q3 2017) - CET1 ratio 19.2% (Q3 2017) AA level credit ratings - Moody’s Aa3 (stable outlook) - S&P AA- (stable outlook) - Fitch AA- (stable outlook) EUR 46.3bn in market cap - One of the largest Nordic corporations - A top-10 universal bank in Europe 5
Nordea is the most diversified bank in the Nordics A Nordic-centric portfolio (97%) Lending: 46% Corporate and 54% Household Public Sector Outside Nordic 1% Other Russia 2% 15% 1% Denmark Other financial Sweden 26% institutions 31% 3% Shipping and offshore 3% Retail trade Credit portfolio Credit portfolio Household 3% 54% by country by sector Consumer staples EUR 297bn* EUR 297bn* 3% Industrial commercial services 4% Finland 21% Real estate 14% Norway 19% 6 * Excluding repos
Re-domiciliation summary Why is Nordea re-domiciling? • Nordea’s pan-Nordic structure gives us special needs • Logical move to be supervised within the banking union given our size and business model • Nordea’s four home markets are all part of the single European market • Being domiciled within the banking union is in the best interest of our customers, shareholders and employees Impact of re-domiciliation • Nordea’s focus is to maintain its AA rating and continue to develop our customer offering • Nordea will still have four home markets – we will remain strongly committed to all of them • Nordea intends to maintain its capital and dividend policy • Nordea will continue to be one of the major tax payers in all four countries • Nordea will focus on delivering value for all our customers Timeline and process • The re- domiciliation is intended to be carried out by way of a “downstream cross - border” merger through which Nordea Bank AB (publ) will be merged into a newly established Finnish subsidiary • Tentatively the re-domiciliation will be effective by 1 October 2018 • The Nordea share will remain listed at the stock exchanges of Stockholm, Helsinki and Copenhagen 7
Strong Nordea track record Strong capital generation and stable returns at low risk* 47 43 39 37 CAGR* 13% Acc. dividend EURbn 35 Acc. equity EURbn 31 29 26 20 18 15 12 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2005 Q317 CET1 CET1 ratio (%) 5.9** ratio (%) 19.2 Leverage ratio (%) 4.9 * 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 8 ** Calculated as Tier 1 capital excl. hybrid loans
The most stable bank in the Nordics (2006-2016) Nordea and peers 2006 – 2016, % 127 73 Quarterly net profit 54 volatility 36 23 18 Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 1.00 0.89 0.51 Quarterly CET1 0,40 0,34 ratio volatility* 0,20 Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Max quarterly drop 0.38 3.24 1.42 2.15 0.65 0.72 * 2006-2016. Calculated as quarter on quarter volatility in CET1 ratio, adjusted so that the volatility effect of the instances in which the CET1 ratio increases between the quarters are excluded 9
Changed revenue structure Nordea’s focus on ancillary income offset pressure on net interest income 11,000 Total income: 9,930 +26% over 10 years 10,000 9,000 7,889 8,000 4,727 Net interest income: (48%) +10% over 10 years 7,000 6,000 4,282 (54%) 5,000 4,000 3,000 5,203 Ancillary income: (52%) +44% over 10 years 3,607 2,000 (46%) 1,000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 10
Well mixed profit generation Business Area contribution in YtD 2017 Operating Income Operating Profit Economic Capital 6% 9% 9% 10% 29% 31% 21% 33% 24% 30% 21% 14% 22% 19% 22% Personal Banking Commercial & Business Banking Wholesale Banking Wealth Management Group Functions & Other 11
2. Financial results highlights 12
Executive summary • Solid economic environment • Stable lending and deposit margins • Seasonally lower transaction levels in Q3 • Low demand on capital market products coming from low volatility • Credit quality improves as expected • CET1 ratio maintained at 19.2% • Management buffer at all-time-high at 180bps • Group transformation enters the next phase • So far focus on investments in technology and build-up of capabilities in compliance and risk management • Investments start to deliver – time to enter the next phase of the transformation • Structurally lower costs and increased efficiency • Cost base of approx. EUR4.9bn in 2018 – to come down to below EUR4.8bn in 2021 13
Q3 2017 Group financial highlights Q3/17 vs. Q3/16* Q3/17 vs. Q2/17* • Total revenues • -4% • -1% • Net Interest Income • +1% • +1% Income • Fee and Commission Income • +3% • -4% • Net Fair Value • -26% • -1% • Total expenses • +2% • -7% Costs • Staff costs • +2% • -5% • Loan loss level • 10 (16) bps • 10 (13) bps Credit quality • Impaired loans • 174 bps (163 bps) • Unchanged • CET1 ratio • 19.2% (17.9%) • 19.2% (19.2%) Key ratios • ROE • 10.5% (11.6%) • 10.5% (9.5%) • C/I • 51% (48%) • 51% (54%) 14 * In local currencies and excluding non-recurring items
Net Interest Income 6 quarters development QoQ trend • +3% q-o-q in Personal Banking from lower funding 1,209 1,197 costs 1,185 1,172 1,178 1,175 • Unchanged in Commercial and Business Banking • Lower in Wholesale Banking on lower volumes in Russia and Shipping, Oil and Offshore Q216 Q316 Q416 Q117 Q217 Q317 15
Net Fee and Commission Income 6 quarters development QoQ trend • Underlying AuM grew by 0.3% in Q3 867 866 850 814 • Seasonally lower transaction levels 804 795 • Lower fees from payments and cards Q216 Q316 Q416 Q117 Q217 Q317 16
Wealth Management with stable performance AuM development, EURbn QoQ trend • Slight decrease in Q3 AuM (-0.4%) due to structural 332.1 330.9 330.1 322.7 317.4 changes (Luminor in the Baltics, sale of Life in Poland) • Continued solid flows from international institutional clients (+19% YTD) • Wholesale distribution outflows following soft closure of Stable Return Fund Q316 Q416 Q117 Q217 Q317 • Captive channels affected by compliance and regulatory preparation as well as re-organisation of Net flow, EURbn units across Nordea 9.6 • 88% of composites outperformed benchmark over a 3-year period 1.9 1.3 0.3 -0.2 Q316 Q416 Q117 Q217 Q317 17
Net Fair Value 6 quarters development QoQ trend • Lower income in customer-driven capital markets 498 activities due to low volatility 480 405 11 • Positive impact of Fair Value adjustment of EUR 39m 127 375 136 135 361 357 3 56 39 39 96 44 26 91 72 96 19 46 19 289 281 257 242 207 200 -55 Q216 Q316 Q416 Q117 Q217 Q317 FVA Other and eliminations WB Other ex FVA Customer areas 18
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