Debt Investor Presentation Q2 2017
Table of contents 1. Nordea in Brief 4 2. Financial Results Highlights 16 3. Transformational Change Agenda 26 4. Capital 29 5. Macro 32 6. Funding 36 7. Appendix: Business 50 2
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. 3
1. Nordea in Brief 4
The largest financial services group in the Nordics Corporate & Institutional Household market market position 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 personal customers #2 - 700 000 corporate customers, incl. Nordic Top 500 #2 #2-3 - Approx. 600 branch office locations - Enhanced digitalisation of the business for customers #3 #1-2 Financial strength - EUR 10bn in full year income (2016) #2 - EUR 643bn of assets (Q2 2017) - EUR 31.4bn in equity capital (Q2 2017) - CET1 ratio 19.2% (Q2 2017) AA level credit ratings - Moody’s Aa3 (stable outlook) - S&P AA- (stable outlook) - Fitch AA- (stable outlook) EUR 45bn in market cap - One of the largest Nordic corporations - A top-10 universal bank in Europe 5
Resilient Nordic economies GDP development Unemployment rate Forecasted GDP development, % Comments Country 2014 2015 2016 2017E 2018E The Nordics are enjoying a tailwind, bolstered by the Denmark 1.7 1.6 1.7 2.2 1.9 synchronised global recovery. Exports are a bright spot in Sweden and will gradually pick up in Finland, while Finland -0.6 0.3 1.5 3.0 2.0 employment is high in Denmark and expected to grow in Norway 2.2 1.1 0.8 1.8 1.8 Norway in the coming years. Sweden 2.7 3.8 2.9 2.8 2.3 Source: Nordea Markets, European Commission, Spring 2017 forecast 6
Nordea is the most diversified bank in the Nordics A Nordic-centric portfolio (94%) Lending: 47% Corporate and 53% Household Public Sector Russia 2% Other Other Baltics 1% 2% 14% 3% Denmark 26% Sweden Retail trade 30% 3% Shipping and offshore 3% Credit portfolio Credit portfolio Household 53% Consumer staples by country by sector 3% EUR 304 bn* EUR 304 bn* Industrial commercial services 4% Other financial institutions Finland 4% 20% Real estate Norway 14% 18% * Excluding repos 7
Re-domiciliation summary Why is Nordea re-domiciling ? • Overall goal for Nordea has been to domicile where we grow and develop our business further to offer customer friendly solutions • A thorough review of implications from an operational, regulatory and supervisory standpoint has been undertaken • Decision is to initiate a redomiciliation of the parent company to Finland • 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 Banking union 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 8
The Board has decided to initiate a process to re-domicile to Finland Tentatively by 1 October 2018 Decision background: • Decision is the outcome of six months of careful study and analysis weighing in all relevant factors • Focus has been on where to best grow and develop our business further by offering customer friendly solutions, contribute to the Nordic economies and develop our people • The domiciliation is an important strategic step to ensure level playing field with our European competitors Finland: • Is in the Banking Union • Is one of Nordea’s strongest home markets • Provides a regulatory environment on par with our European competitors 9
Re-domiciliation and impact On the Nordic Economies On Our Customers On Our People & Company • Nordea will continue to pay taxes and other • No changes in day to day operations - We • Nordea will continue to do business in all of its obligations in all the countries where we will continue to focus on delivering value for all four Nordic home markets our customers operate • A limited number of employees is expected • Unchanged commitment to Swedish • Nordea will stay committed to the local to be affected customers - what changes is only the economies where we do business • Nordea’s focus is to maintain its AA rating domiciliation of the parent-company and develop it business model further 10
What happens now • 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 • The merger is planned to be effected during the second half of 2018 and will be subject to e.g. necessary regulatory approvals and the shareholders’ approval at a general meeting requiring a 2/3 majority. Tentatively in the annual General Meeting on 15 March 2018 • We will in cooperation with the relevant authorities agree a detailed timeline • The re-domiciliation will tentatively be effective as of 1 October 2018 • The Nordea share will remain listed at the stock exchanges of Stockholm, Helsinki and Copenhagen 11
Strong Nordea track record Strong capital generation and stable returns at low risk 1 47 Acc. dividend EURbn 43 Acc. equity EURbn 39 CAGR 1 13% 37 35 31 29 26 20 18 15 12 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 CET 1 5.9 2 19.2 Ratio, % 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 12 assumption on reinvestment rate for paid out dividends 2) Calculated as Tier 1 capital excl. hybrid loans
The most stable bank in the Nordics (2006-2016) Nordea and peers 2006 – 2016, % 127 Quarterly net volatility 73 profit 54 36 23 18 Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 1.00 Quarterly CET1 0.89 volatility¹ 0.51 ratio 0,40 0,34 0,20 Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Max 0.38 3.24 1.42 2.15 0.65 0.72 quarterly drop 1) 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 13 quarters are excluded .
Changed revenue structure Nordea’s focus on ancillary income offset pressure on net interest income 11,000 9,930 Total Income: 10,000 +26% over 10 years 9,000 7,889 8,000 Net interest income: 4,727 (48%) +10% over 10 years 7,000 4,282 6,000 (54%) 5,000 4,000 Ancillary income: 3,000 5,203 +44% over 10 years (52%) 3,607 2,000 (46%) 1,000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 14
Well mixed profit generation Business Area contribution in H1 2017 Operating Income Operating Profit Economic Capital 4% 5% 10% 27% 9% 29% 22% 32% 28% 31% 21% 18% 23% 20% 21% Personal Banking Wealth Management Commercial & Business Banking Group Functions & Other Wholesale Banking 15
2. Financial Results Highlights 16
Executive summary Stable revenues and high activity in our transformation programme • Overall economic situation remains solid • Although increasingly unstable geopolitical environment • Stable operating environment in our home markets • Margins improved from very low levels in recent quarters • Stabilising trend which we expect to continue • Very high activity level in this quarter in our transformation and simplification projects impacting the cost development • Strong credit quality at 13bps loan loss level • Capital position continued to be build up and strengthen with CET1 ratio at 19.2% in Q2 • Nordea strives to secure a fair, stable and predictable regulatory environment 17
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