FöreningsSparbanken Nils-Fredrik Nyblæus Deputy President and CFO
2 Group objectives • Market position • Customers • Employees • Financial position
3 Basics of sustainable profitability Customer Human satisfaction capital Profitability
4 Objectives - market position • Brands – The strongest brands in specific markets for financial services within the Nordic/Baltic region Förenings Sparbanken Spintab Robur
5 Objectives - market position • Market shares in Sweden – Retail operations shall have at least 25 percent of new sales of savings and lending products by 2004, and 22 percent by 2003 – Swedbank Markets’ share of stock trading (transaction volume) shall be at least 12 percent – BABS shall maintain a market share of over 55 percent of card transaction clearance
6 Market share of total new savings * , Swedish market 30% 25% 20% 15% 10% 5% 0% 1999 2000 2001 9M 2002 2003 2004 Target Target *) deposits from household customers, mutual funds, unit-linked insurance from all customer categories, retail bonds and equity linked bonds
7 Objectives - market position • Market shares in Baltic states – Hansabank's market share for deposits and lending is at least 50 percent (currently 57 and 58, respectively) in Estonia, 25 percent (currently 18 and 20) in Latvia and 35 percent (currently 31 and 18) in Lithuania • Market shares in Denmark, Norway and Finland – FIH retains its market share of 12 percent for medium and long term lending to corporates – Norway and Finland dependent on alliances
8 Objectives - customers • Regardless of geographical market, the bank shall have the highest customer satisfaction among both private and corporate customers (not yet achieved) • In Sweden, no less than 60 percent of customers shall be very satisfied (not yet achieved) • Operations in other countries have equivalent local objectives
9 Customer satisfaction is improving 75 70 Index 65 60 55 50 1997 1998/99 2000 2001 2002 Private individuals Corporates Source: Svenskt Kvalitetsindex
10 Internal benchmarking - large potential TARGET Share of very satisfied customers 60% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 22 randomly measured local banks in Sweden
11 Objectives - employees • To be considered the most attractive employer in the financial market among applicable employee groups (not yet achieved) • In Sweden, an “employee empowerment index” rating of at least 40 percent (achieved in October, 2002) • Operations in other markets have equivalent local objectives
12 Employee empowerment index Local banks, Sweden % 50 45 40 35 30 25 20 15 10 5 0 1996 1997 1998 1999 2000 2001 2002
13 Objectives - financial targets • Profitability – Return on equity (ROE) is higher than the average for other listed Nordic competitors (currently yes) – ROE exceeds the long-term risk-free rate (6%) plus a risk premium (6.5%) by 20% over a business cycle. Under current conditions, this would mean 15% (currently 12.1%) • Operational efficiency – Cost/income ratio not exceeding 50% (currently 62%)
14 Objectives - financial targets • Dividend policy – Payout ratio of at least 30 percent (56 in 2001) • Financial strength – Primary capital ratio in the range of 6.5-7.5 percent (currently 7.1) – Capital adequacy ratio to exceed 10.5 percent (currently 10.9) • Credit risk – Loan loss ratio shall not exceed 0.5 percent over a business cycle (currently 0.24)
15 ROE, September 2002 Adjusted for profit sharing schemes RoE % 22 Average 20 peer- 18,2 group 18 15,6 16 14,8 15,8% 14 13,1 14,8 13,6% 12,3 14,1 12 10,3 11,4% 12,1 10 10,2 9,2 9,0 8 6 4 2 0 a B n k n e k n E e e d n a S k k r a n B o B n a N a e b e b k s k r s l s e a r p o n d S N a n D a s n g H n e n e D i n D e r ö F December 2001 December 2000 September 2002
16 Pension adjustments, Swedish banks Pension adjustments in the P&L as a share of pretax profits % 30 20 SEB 10 SHB FSPA 0 Nordea -10 -20 -30 8 8 8 9 9 0 0 1 1 1 2 7 9 0 2 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 - - - - - - - - - - - - - - - g g g g g c r c r c r c r c r p p p p p e u e u e u e u e u a a a a a d a d a d a d a d a Source: Riksbanken
17 Cost/income ratio % 0,70 0,65 0,60 0,55 0,50 0,45 0,40 1997 1998 1999 2000 2001 9M-2002 Target
18 Dividend pay-out ratio % * 100 90 80 70 60 50 40 30% 30 =minimum 20 10 0 1994 1995 1996 1997 1998 1999 2000 2001 Pay-out ratio * 560% in 1997
10 12 14 % Capital adequacy and tier 1 ratio 0 2 4 6 8 Dec-95 Mar-97 Sep-97 Capital adequacy Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Tier 1 ratio Sep-01 Mar-02 Sep-02 19
20 Loan loss ratio 1994 - 2002 Loan loss ratio shall not exceed 0.5% over a business cycle % 1,00 0,90 0,80 0,70 0,60 Restriction = 0.5 percent 0,50 0,40 0,30 0,20 0,10 0,00 1994 1995 1996 1997 1998 1999 2000 2001 9M- 2002 Loan loss ratio
21 Current sensitivity analysis 2002 2001 2000 1999 Asset mgmt fees, mutual funds +/- 10 bp +/- 210 210 240 175 Stock market +/- 10 % +/- 187 220 270 200 Lending margins local banks +/- 10 bp +/- 133 135 125 100 Bank lending & deposit vol. +/- 1 % (avg) +/- 65 50 60 50 New savings in mutual funds SEK 1 bn (avg) +12 +15 +15 +10 Rents + 1 % -10 -10 -10 -10 Salaries + 1 % -66 -63 -60 -50 Loan loss level + 0.1 % -688 -640 -580 -500
22 P&L threats 2003 • Asset deterioration through worsened economy • Renewed stock market decline • Credit crunch • Lower interest rates/deflation • EMU costs and referendum uncertainty • CFC taxation of Estonian subsidiaries (Hansa) • Norway!
23 P&L opportunities 2003 • Continued underlying income stability and cost control • Increased market shares • Improved lending margins • Improved margin-mix in savings vs 2002 • Improved stock market conditions • Increased payment commissions • From costs (SEK 300M in 2002) to savings (SEK 100M in 2003) from staff reduction programme • Continued stable doubtful claims and good provision ratio • OM and Marakanda write-downs in 2002 • Baltics, Norway
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