First Quarter Report 2012 Press and analyst conference Christian Clausen, President and Group CEO
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 •
Key messages • Strong business momentum continues • High earnings power… • Highest ever Q1 income and profit • Revenue growth of 1% • Close to 22,000 new relationship customers • Stable costs • RoE of 11.7% • Strengthened Core Tier 1 ratio to 11.6% • … and further progress in change agenda • Building the future bank business model • Approx. 100 projects in place • Target is to reduce costs from new regulations by being more efficient on costs, capital and liquidity 3 •
• Financial highlights • Building the future bank business model
Improved relationships the key revenue driver Total operating income and relationship customers • Total income up 35% since 2007 4,0 2 500 3,5 • Relationship customers up 42% 2 000 3,0 since 2007… 2,5 1 500 • …and reinforced position as 2,0 market leader in corporate 1 000 1,5 merchant banking 1,0 500 0,5 0 0,0 Q1/07 Q3/07 Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Total operating income, EURm Number of Gold and Private Banking customers, millions 5 •
Financial result – Q1/12 EURm Q1/12 Q4/11 Change % Q1/11 Change % Net interest income 1,420 1,427 -1 1,324 7 Net fee and commission income 596 588 1 602 -1 -7 -14 Net fair value result 469 506 544 Other income 46 37 24 40 15 Total income 2,531 2,558 -1 2,510 1 8 0 Staff costs -771 -714 -768 Total expenses -1,276 -1,266 1 -1,265 1 Profit before loan losses 1,255 1,292 -3 1,245 1 -17 -10 Net loan losses -218 -263 -242 Operating profit 1,037 1,029 1 1,003 3 Net profit 775 786 -1 742 4 Risk-adjusted profit 799 815 -2 771 4 6 •
Stable Net Interest Income Total Net Interest Income, EURm • Net Interest Margin largely 1 235 1 249 1 310 1 365 1 324 1 326 1 379 1 427 1 420 unchanged • Low demand for lending • Slightly higher funding costs • One interest day less Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 7 •
Net Interest Margin largely unchanged at 107bps Net interest margins (excl. liquidity buffer and repo rates) 1,20% • Higher lending margins • Lower deposit margins 1,05% • Lower interest rates • Fierce competition on deposits 0,90% 0,75% 0,60% Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 8 •
Stable lending volumes Total lending, EURbn • Average lending volumes are up 341 337 332 approx. 0.5% in fixed currencies 325 322 322 314 303 293 • Low demand from both households and corporates • Lending volumes are up 5% YTD Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 9 •
Net commission income maintained at a high level Net fee and commission income, EURm • Net fee and commission income 623 618 602 596 588 582 largely unchanged 538 525 • Strong trend in savings 475 commissions, following good performance • Lower lending and card commissions • New deposit guarantee fund system in Denmark Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 10 •
Good performance, key driver of Assets under Management Wealth Management AuM, EURbn • 0,9 Assets under Management at all-time-high of EUR 197bn 7.7 • Decent inflow of EUR 1.2bn • Strong inflow in Retail funds 1.2 197.2 • Strong investment performance 187.4 gives added value to our customers AuM end Q4/11 Net inflow Market Value added AuM end Q1/12 appreciation investment performance on assets under discretionary * management * EUR 101.9bn end of Q1/12 11 •
Morningstar ratings picking up Finland #1 Denmark #2 3,6 4,0 3,8 3,4 Evli Nordea 3,6 BankInvest OP 3,2 3,4 Danske Invest Nordea Jyske Invest 3,2 3,0 FIM Nykredit 3,0 Danske 2,8 2,8 2,6 2,6 10/10 11/10 12/10 01/11 02/11 03/11 04/11 05/11 06/11 07/11 08/11 09/11 10/11 11/11 12/11 01/12 02/12 10/10 11/10 12/10 01/11 02/11 03/11 04/11 05/11 06/11 07/11 08/11 09/11 10/11 11/11 12/11 01/12 02/12 Norway shared #2 Sweden #2 3,6 3,6 3,4 SHB 3,4 Storebrand Swedbank 3,2 Odin Robur 3,2 SEB 3,0 Nordea 3,0 Nordea Alfred Berg 2,8 Skandia 2,8 DnB NOR 2,6 LF Terra/Warren 2,6 SEB Externa 2,4 Wicklund SHB Externa 2,4 2,2 10/10 11/10 12/10 01/11 02/11 03/11 04/11 05/11 06/11 07/11 08/11 09/11 10/11 11/11 12/11 01/12 02/12 10/10 10/11 10/12 11/01 11/02 11/03 11/04 11/05 11/06 11/07 11/08 11/09 11/10 11/11 11/12 12/01 12/02 12 • Data as of February 2012
Net fair value at continued good levels Net result from items at fair value, EURm • Continued good customer demand • Good trading environment 311 255 215 • Reported revenues lower in Life, 102 but underlying are stable 254 254 251 243 233 -132 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Capital Markets income in customer area Other areas 13 •
Expenses under strict control Total expenses, EURm • Flat cost development 171 1 275 1 276 1 265 1 266 • 1 242 FX effect on costs is approx. 1% Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 One-off restructuring charge 14 •
Stable credit quality Total net loan losses, EURm • Loan losses at 26bps – close to 263 261 245 the expected level over a business 242 218 cycle 207 • Includes a provision of EUR 8m for 166 the Danish guarantee system • Denmark and Shipping are areas 118 112 of concern but only few new problem loans and well under control • Overall credit quality solid Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 15 •
Strong capital generation Core Tier 1 capital, EURm • Generated capital of EUR 1.7bn in 20 677 21 080 one year, or approx. 9% 19 103 • In addition distributed EUR 1bn to 17 766 shareholders 14 313 • Strong capital generation gives 12 821 11 689 good flexibility 2006 2007 2008 2009 2010 2011 Q1/12 Dividend payout Anticipated dividend 16 •
Reduced RWA by 2% Risk-weighted assets (RWA), EURbn Basel II excluding transition rules • IRB approval in International 185 branches reduces RWA by EUR 182 182 3.1bn • Stable credit quality • Lower derivative exposures Q1/11 Q4/11 Q1/12 17 •
We have strengthened our balance sheet Core Tier 1 capital ratio, % (excl. Hybrids) Basel II excluding transition rules • Improved ratio by 40bps since 11,6 Q4/11 due to; 11,2 11,0 • Strong profit generation • Controlled RWA development Q3/11 Q4/11 Q1/12 18 •
Strong access to funding Long-term funding, EURbn • Market based funding strategy • No participation in LTRO 33 32 • One of the lowest funding costs among European banks 27 • EUR 11.5bn have been issued of long-term funding in Q1/12 • Redemptions of EUR1.9bn in Q1/12 12 • Strong access to all funding instruments • Maintained AA rating 2009 2010 2011 Q1/12 19 •
High quality liquidity buffer Liquidity buffer, EURbn • Liquidity premia project 64 62 61 60 implemented 58 56 56 • Changed composition of liquidity 49 49 buffer • Liquidity buffer is LCR compliant in size but maybe not in composition Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 20 •
Return on Equity is vital in ensuring stability and room for manoeuvre RoE, adjusted for restructuring costs 2011, percent Avg. = 19.1 Avg. = 15.3 21,5 Avg. = 11.5 Avg. = 11.3 Avg. = 11.1 19,1 18,1 18,0 15,8 16,2 15,0 14,4 13,9 12,2 12,8 12,0 11,5 12,3 11,7 12,0 11,7 11,3 9,5 8,5 8,1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2008 2009 2010 2012 2011 2007 CT1 = 6.8% CT1 = 11.6% 21 •
• Financial highlights • Building the future bank business model
New Normal – the way to build the future bank business model • Ensure continued great customer experiences • Product innovation and enhancements • Further focus on advisory bank concept • Mitigate impact on customers from regulations • Ensure sufficient RoE to secure access to capital and attractive funding • Customer and product and advice related activities • Cost efficiency • Capital efficiency • Approx. 100 projects ongoing 23 •
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