Debt Investor Presentation Q4 2016
Table of contents 1. Nordea in Brief 6 2. Financial Results Highlights 14 3. Transformational Change Agenda 23 4. Capital 27 5. Macro 31 6. Funding 35 7. Appendix: Business Areas 47 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
Main legal structure as of 2 January 2017 New legal structure after the merger of NBD, NBN and NBF with NBAB Nordea Bank AB (publ) Sweden Nordea Nordea Nordea Life Holding AB Danmark, Nordea Kredit Nordea Finans Investment Sweden Realkredit- Filial af Holding Danmark A/S Management Company aktieselskab Nordea Bank AB AB (publ), Nordea Nordea Denmark Russia Denmark Sverige Sweden Liv & Pension Powszechne livsforsikrings- Towarzystwo Denmark selskab A/S Emerytalne S.A. Nordea Funds Nordea Finance Nordea Denmark Poland Ltd Mortgage Bank Finland Ltd JSC Nordea Bank Plc Nordea Bank AB (publ), Nordea Life Nordea Finland Finnish Finland Assurance Pensions Finland Russia Branch Finland Ltd Estonia AS Finland Finland Estonia Nordea Nordea Finans Nordea Bank Eiendoms- Norge AS S.A Livforsikrings- IPAS Nordea kreditt AS selkapet Pensions Luxemburg Nordea Liv Latvia Nordea Bank Norway Norway Norge AS AB (publ), filial i Norge Latvia Norway Norway Nordea Nordea Nordea Finans Nordea Investment Funds Sverige AB Hypotek AB Livförsäkring S.A. (publ) (publ) Sverige AB (publ) Luxemburg Sweden Sweden Sweden Branch – Nordea Bank AB (publ) also operates branches in Estonia, Latvia, Lithuania, Poland , Frankfurt, London, New York, Shanghai and Singapore 4 Legal entity Holding company
Nordea Group organisation chart New Nordea Group organisation with four BAs after the split of Retail into PeB and CBB President & Group CEO ------- Deputy Group CEO & COO Group Internal Audit Chief of Staff Group Finance & Group Commercial & Group Risk Group Business Wholesale Wealth Corporate Personal Business Management Compliance Group HR Banking Control Management Centre Banking Banking and Control (CFO) (COO) Heads of the units in dark blue (Personal Banking, Corporate & Business Banking, Wholesale Banking, Wealth Management, Group Corporate Centre, Group Finance & Business Control and Group HR) and dark grey (Group Risk Management and Group Compliance) together with the CEO and Deputy CEO & COO are part of the Group Executive Management team (GEM), The Deputy CEO & COO is also Head Group Corporate Centre 5
1. Nordea in Brief 6
2016 was probably the most eventful year in the history of Nordea Geopolitical events & macro challanges Customer Transformational Media focus change agenda Regulatory uncertainties 7
Executive summary • Probably the most eventful year in the history of Nordea • Improving revenue trend in 2H16 • Flat costs 2018 vs. 2016 reiterated • 2-3% cost growth in 2017 • Largely unchanged credit quality in the coming quarter • Well prepared to deal with challenges in 2017 • Strong balance sheet and robust business model • Further invest in our platform and thereby transform the bank 8
Nordea is the largest financial services group in the Nordics Household Corporate & Institutional Business position market position market position - Leading market position in all four Nordic countries #1 #1 - 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 - Approx. 10 million personal customers #2 #1 - 700 000 corporate customers, incl. Nordic Top 500 #2 #2 - Approx. 600 branch office locations - Enhanced digitalisation of the business for customers #2-3 Financial strength #3 #1-2 - EUR 10bn in full year income (2016) #2 - EUR 616bn of assets (Q4 2016) - EUR 32.4bn in equity capital (Q4 2016) - CET1 ratio 18.4% (Q4 2016) AA level credit ratings - Moody’s Aa3 (stable outlook) - S&P AA- (negative outlook) - Fitch AA- (stable outlook) EUR 42.8bn in market cap - One of the largest Nordic corporations - A top-10 universal bank in Europe Household Market Position Q4 2016 9 Corporate & Institutional Market Position Q4 2015
Nordea is the most diversified bank in the Nordics A Nordic-centric portfolio (96%) Lending: 48% Corporate and 52% Household Public Sector Russia 1% Baltics Other 1% 3% 16% Denmark 26% Sweden 31% Retail trade 3% Shipping and offshore Household Credit portfolio Credit portfolio 3% 52% Consumer by country by sector staples 4% EUR 307bn* EUR 307bn* Industrial commercial services 4% Other financial Finland institutions 21% 4% Real estate Norway 13% 18% * Excluding repos 10
Strong Nordea track record Strong capital generation and stable returns at low risk 1 Acc. dividend EURbn 47 Acc. equity EURbn 43 39 37 CAGR 1 13% 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 18.4 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 assumption on 11 reinvestment rate for paid out dividends 2) Calculated as Tier 1 capital excl. hybrid loans
The most stable bank in the Nordics (2006-2016Q3) Nordea and peers 2006 – Q3 2016, % 131 Quarterly net volatility 74 profit 55 36 24 17 Nordea Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Quarterly CET1 ratio 1,01 0,90 volatility¹ 0,52 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) 2006-2016Q3. 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. 12
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 (52%) +44% over 10 years 3,607 2,000 (46%) 1,000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 13
2. Financial Results Highlights 14
Financial Highlights FY16 vs. FY15* Q4/16 vs. Q4/15* Stable environment and low growth Total revenues - 1% + 5% Net Interest Income - 3% Flat Income Fee and commission + 1% + 6% income Total costs + 5% + 10% Excl. Group Projects +2% +7% Costs 2018 vs. 2016 Flat Continued high activity level in 2017 16bps: +90% Loan loss level 15 bps stem from Oil and Offshore Credit quality Largerly Impaired loans are Credit quality unchanged in down 3% the coming Q CET 1 ratio 18.4% (16.5%) Capital and Proposed dividend of EUR 0.64 in proposed dividend EUR 0.65 2015 * In local currencies and excluding non-recurring items 15
Nordea Group Financial result EURm FY16 FY15 Chg Loc. Q4 Chg Loc. FY16/ FY15 curr. 2016 Q416/ Q415 curr. % Chg YoY % Chg % Q416/Q415 % Net interest income 4,727 4,963 -5% -3% 1,209 0% 0% Net fee & commission income 3,238 3,230 0% 1% 867 6% 6% 4% 4% 498 18% 20% Net fair value result 1,715 1,645 Total income 9,927 10,140 -2% -1% 2,610 -1% -1% Total income* 9,754 9,964 -2% -1% 2,588 5% 5% Total expenses -4,800 -4,957 -3% -2% -1,233 16% -16% Total expenses* 4% 5% -1,319 9% 10% -4,886 -4,694 Net loan losses -502 -479 5% 9% -129 -9% -6% Operating profit 4,625 4,704 -2% -1% 1,248 22% 21% Operating profit* -9% -8% 1,140 2% 2% 4,366 4,791 Net profit 3,766 3,662 3% 4% 1,100 30% 29% -80 bps n/a 12.9 +140 bps n/a Return on equity* (%) 11.5 12.3 +190 bps - 18.4 +50 bps - CET1 capital ratio (%) 18.4 16.5 Cost/income ratio* (%) 50 47 +300 bps n/a 51 +200 bps n/a * Excluding non-recurring items 16
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