Debt investor presentation Q2 2018 The Euromoney / ECBC Covered Bond Congress 2018, Munich
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 Nordea overview Covered bond section Nordea in brief 4 Nordea Mortgage Bank 31 Financial results highlights 10 Nordea Eiendomskreditt 41 Capital 15 Nordea Hypotek 51 Macro 18 Nordea Kredit 55 Funding 22 Appendix 59 3
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 11 million customers and strong distribution power #1 - Approx. 10 million household customers #2 - 700 000 corporate customers, including Nordic Top 500 - Approx. 450 branch office locations #1-2 #2 #2-3 - Enhanced digitalisation of the business for customers #2-3 Financial strength #2-3 - EUR 9.5bn in full year income (2017) - EUR 570bn of assets (Q2 2018) - EUR 31.9bn in equity capital (Q2 2018) #2 - CET1 ratio 19.9% (Q2 2018) AA level credit ratings - Moody’s Aa3 (stable outlook) - S&P AA- (stable outlook) - Fitch AA- (stable outlook) EUR 33.5bn in market cap (Q2 2018) - One of the largest Nordic corporations - A top-10 universal bank in Europe 5 * Combined market shares in lending, savings and investments ** Combined market position from Corporate & Investment Banking, Markets and Commercial & Business Banking
Nordea is the most diversified bank in the Nordics A Nordic-centric portfolio (98%) Lending: 47% Corporate and 53% Household Public Sector Russia Outside Nordic 1% Other Household (Denmark) 1% 1% 13% 14% Sweden Shipping and offshore Denmark 29% 3% 29% Retail trade 3% Household (Finland) Consumer staples 13% Credit portfolio Credit portfolio (food, agriculture etc) 4% by country by sector Industrial commercial services etc EUR 292bn* EUR 292bn* 4% Other financial institutions Household (Norway) 4% 10% Real estate Finland (residential) Norway 21% 7% Real estate 19% Household (Sweden) (commercial) 16% 8% 6 * Excluding repos
Re-domiciliation of the parent company to Finland • The re-domiciliation will be carried out by way of a cross-border reversed merger through which Nordea Bank AB (publ) will be merged into a newly established Finnish subsidiary • Nordea Board of Directors has on 25 October 2017 signed the merger plan • Nordea AGM approved the proposal to re-domicile on 15 March 2018 • Ongoing work with relevant authorities and the re-domiciliation is planned to be effective as of 1 October 2018 Current: Nordea Bank AB Planned: Nordea Bank Abp Cross-border reversed merger Cross-border reversed merger Nordea Bank AB Nordea Bank Abp (publ) (Sweden) (Finland) Branches: Denmark Intl. branches (incl. Branches: Denmark Intl. branches (incl. Finland Norway New York, Singapore) Sweden Norway New York, Singapore) Nordea Nordea Nordea Kredit Nordea Nordea Nordea Nordea Kredit Nordea Hypotek AB Eiendoms- Realkredit- Mortgage Hypotek AB Eiendoms- Realkredit- Mortgage Various Nordea Bank Various kreditt AS aktieselskab kreditt AS aktieselskab (publ) Bank Plc (publ) Bank Plc subsidiaries Abp (Finland) 1 subsidiaries Norway Denmark Norway Denmark Sweden Finland Sweden Finland Legal entity New entity Legal entity Changes Branch Branch Note 1: Nordea Holding Abp changed name to Nordea Bank Abp during Q2 following the banking license granted by the ECB 7
Re-domiciliation process according to plan ECB grants Nordea temporary permission for continued use of ECB grants banking licence to internal models Nordea Holding Abp Expected re-domiciliation 15 Mar 29 Jun 23 Aug 27 Jun 17 Aug 1 Oct 2018 Finnish FSA sets Nordea Swedish FSA approves the AGM decision systemic risk buffer merger between Nordea Bank AB and Nordea Bank Abp 8
Nordea’s sustainability work, initiated more than 15 years ago, further enhanced from 2015 Nordea’s publicly stated commitments, examples Enhanced ESG focus from 2015 • • The UN Environment Program Finance Initiative Business Ethics & Values Committee established (2015) • • The UN Global Compact New Corporate Values Framework (2017) • • The United Nations’ Universal Declaration of Human Rights Green Bond Framework (2017) • • The UN Guiding Principles on Business and Human Rights Inaugural Green Bond issuance (2017) • • The ILO-conventions Climate Change Position Paper (2017) • • The OECD Guidelines for Multinational Enterprises First Sustainable Finance Conference (2017) • • The Equator Principles New Sustainability Policy (2017) • • Paris Pledge for Action in support of COP 21 New Group Sustainable Finance organization (2018) • • The UN Convention against Corruption Sector Guideline for Defence Industry (2018) • • The Rio Declaration on Environment and Development Green Bond Impact Report (2018) • The UN Principles for Responsible Investments Nordea ESG evaluation process in financing Sustainability acknowledgements The Nordea ESG evaluation process includes an assessment of Company Rating: C (A+ to D-)* large corporate borrowers with respect to: • Governance ESG Score: 81 (out of 100)** • Environmental, health and safety management processes • Social aspects including human and labour rights • Potential controversies ESG Rating: A (AAA-CCC) * Highest rating within sector is C+ 9 ** Nordea’s percentile rank score is 93/100, currently at the 95 th percentile (Bloomberg, May 2018)
Financial results highlights 10
Improved customer satisfaction and business momentum • Stabilising trend in NII • Positive signs in volume development in most sectors • Strong trend in corporate advisory service Delivering on the cost targets Strong credit quality Capital ratios at all-time-high Major improvements in compliance 2018 outlook • Reported net profit for 2018 to be higher vs 2017 • Unlikely that recurrent revenues in 2018 will reach the 2017 level* • Confident to reach cost target for 2018 of EUR 4.9bn • Loan losses in the coming quarters are expected to be lower than the long-term average Planned acquisition of Gjensidige Bank – strategic partnership with Gjensidige Forsikring * 2017 revenues adjusted for the deconsolidation of the Baltic operations and Nordea Life and Pension in Denmark
Nordea Group EURm Q218 Q118 Change QoQ Change QoQ Q217 Change YoY Change YoY (local currency) (local currency) Net interest income 1,073 1,053 2% 2% 1,175 -9% -7% Net fee and commission income 800 770 4% 5% 850 -6% -4% Net fair value result 260 441 -41% -39% 361 -28% -25% Other Income 408 51 21 Total operating income 2,541 2,315 10% 10% 2,407 6% 8% Total operating expenses -1,154 -1,205 -4% -3% -1,291 -11% -8% Net loan losses -59 -40 48% 53% -106 -44% -41% Operating profit 1,328 1,070 24% 24% 1,010 31% 34% Net profit 1,085 820 32% 33% 743 46% 49% Return on equity (%) 13.9 10.0 +3.9 %-points 9.5 +4.4 %-points CET1 capital ratio (%) 19.9 19.8 +0.1 %-points 19.2 +0.7 %-points Cost/income ratio (%) 45 52 -7 %-points 54 -9 %-points 12
Strong asset quality Total net loan losses*, EURm Comments • Collective provisions related to potential impacts of sanctions to Russia 135 129 • Write-backs in Nordic franchise 127 113 106 • Gross impairment rate (stage 3) also down 79 71 59 40 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 13 * Total net loan losses: includes Baltics up until Q317
Planned acquisition of Gjensidige Bank – strategic partnership with Gjensidige Forsikring Gjensidige Bank – a growing, profitable and digital bank RoE >10% EUR 4,840m customer assets 12% CAGR (2015-2017) Acquisition summary* • Price NOK 5,500m** • EUR 25m annualised cost synergies by 2022 • RoI ~16% by 2022 Rationale for the planned acquisition and partnership • Strategy to grow in the Nordics • Expand customer reach • Both insurance and financing product offering via partnership 14 * Subject to regulatory and other approvals ** Adjusted for the equity generated by Gjensidige Bank until closing of the transaction
Capital 15
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