Growth opportunities for Swedbank Markets Annika Wijkström Head of Swedbank Markets
Swedbank Markets’ strategic focus • Investment and Merchant Banking – Group responsibility for banks and financial institutions – Client-driven business area – Higher profitability than peer average – Capture growth opportunities in the region • Group Supplier of Capital Markets’ products – Innovative product development for all customer segments
Swedbank Markets’ product areas Capital Markets Project & CRM/Financial Operations Emerging First Securities Corporate Institutions Markets Finance Equities Project Finance Payments Back Office Trade related Equities risk FX/Fixed Corporate Custody Middle Office FX/Fixed Income income Finance Loans & Acquisition Trade Finance Corporate finance Syndications Finance Stockholm Stockholm Stockholm Stockholm Stockholm Oslo New York Shanghai Oslo Future Branch
Profit trend, Swedbank Markets SEKm 600 500 400 300 200 100 0 Q3-04 Q4-04 Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Operating profit Profit for the period attributable to the shareholders
Where are profits generated? Breakdown of Swedbank Markets' operating profit FX/Fixed Income Equity Structured Project and First Securities Products Corporate Finance 2004 2005 Q1-3 2006
Market shares, equities Stockholm Stock Exchange, Q1-3 2006 Enskilda Sec. 10% Others Carnegie 29% 8% Deutsche Bank 2% Fischer Bank 5% Handelsbanken Neonet 8% 3% H&Q UBS 3% 3% Avanza 2% E-trade Morgan Stanley 3% 5% Nordnet Goldman Sachs 2% 4% Nordea Sec. Kaupting Swedbank 3% 4% 4%
Structured products, sales Cumulative sales, Swedbank Markets 2001 - 2006 SEK bn B2006 13 2006 12 11 2005 10 9 8 2004 7 6 5 2003 4 3 2002 2 2001 1 0 j f m a m j j a s o n d • Swedbank’s market share is 29 percent (Oct. 06)
Market shares, issued corporate bonds Swedish market in SEK, accumulated Q1-3 2006 Others 9% Swedbank Danske 25% Markets 13% Handels- banken 13% SEB 22% Nordea 18%
Fixed income, Scandinavia Underwriter league tables
First Securities’ performance since start-up Revenues, No. of employees NOK M 1 000 150 900 125 800 700 First Securities’ 100 main business areas: 600 75 500 • Stock broking 400 • Fixed Income/FX 50 300 • Corporate Finance 200 25 100 - 0 1999 2000 2001 2002 2003 2004 2005 2006e Revenue Number of employees
Increasing market shares in a bull market Market turnover, Market share NOK billion 6 000 12% 5 500 11% 5 000 10% 4 500 9% 4 000 8% 3 500 7% 3 000 6% 2 500 5% 2 000 4% 1 500 3% 1 000 2% 500 1% - 0% 2001 2002 2003 2004 2005 2006 YTD Q3 Market turnover, Oslo Exchange First Securities' market share of equities sales income
Swedbank Markets’ growth strategy • Expand in selected product areas – Competitive advantage, find new customers for existing products (e.g. Norway) – Support home market clients, new offerings for existing customers (e.g. Shanghai, New York) • Ongoing examples of capturing growth – Investment in First Securities and growth of fixed income, money market and foreign exchange operations in Norway – Establishment of Project & Corporate Finance organisation – Establishment of a broker dealer company in New York
Swedbank Oslo fixed income Case study business synergies • Since the launch in February 2003, the results have been very satisfactory. By the end of 2006 we will see; – Increase in income of ≈ 600% and increase in profit of ≈ 1,500% – Increase in market share for credit bonds from 3.5% to17% – Number two underwriter in NOK bonds – Increase in annual number of issues from 12 to 120
Project & Corporate Finance base for continued growth • Next step Group Project & Corporate Finance: – Continued growth within corporate finance in Sweden • Increase market share, gradual increase in deal size will enhance revenue • Expand staff to meet and increase deal flow – Establish a cross-border organisation to serve corporate customers with corporate finance and specialty finance needs in the Baltic and Russian markets and to meet cross-border deal-flow
Swedbank First Securities base for future growth • Equity broker dealer operation in New York set up Q4 2006 • US and UK asset managers are main international buyers of Nordic and Baltic risk • International sales capacity is essential for the Nordic and Baltic Corporate Finance and Equity business • Value of the Nordic security market in 2005 estimated at USD 100 M in commissions
Swedbank Markets’ business objective • Swedbank Markets, Hansabank Markets and First Securities shall be a leading, multi-domestic market player in the region with the competitive advantage of serving our customers with access to/from the CEE region. Capital Markets’ business is increasingly global, based on a local customer base and local excellence in products and competence. There is growing demand for cross-border solutions in the region. By combining local excellence in Estonia, Latvia, Lithuania, Norway and Sweden we can create superior cross-border offerings for our customers.
Capturing synergies and growth opportunities • Create Group functions where there are obvious synergies: – Project & Corporate Finance: Implement Group PCF – Financial Institutions: Business coordination – Structured Products: Coordinate product development – Custody: Develop regional customer offering • Develop the broker dealer operation in New York selling Nordic and Baltic risk • Explore and take advantage of IT synergies going forward
Capturing synergies and growth opportunities Sweden Norway Estonia Latvia Lithuania Key Ratios 2005 YTD 2005 YTD 2005 YTD 2005 YTD 2005 YTD Income, MEUR 220.2 187.9 94.7 91.2 18.7 15.9 9.1 8.0 2.8 3.0 FTE 582 589 132 147 31 43 17 15 17 27 • The Baltic and Nordic regions are in different development stages • Market shares in the Nordic countries are lower but the income is much higher; vice versa in the Baltic countries • The strategy going forward is to defend Swedbank’s position in the growing capital markets in the Baltic countries
Capturing synergies and growth opportunities Market potential Market capitalisation/GDP 140% 120% 100% 80% 60% 40% 20% 0% 2004 2005 Baltic Markets Sweden Norway
Summary • Positive trend in earnings over time • Full range of capital market product areas, all performing very well • Strong market position in several product areas • Strong customer base, directly and indirectly • Growth opportunities – in different geographic regions – in several product areas – in customer segments
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