Nordea Kredit Investor Presentation 2012 Q3 Published 1 November, 2012 Nordea Kredit
This Investor Presentation has been compiled by Nordea Kredit for information purposes only, and offers facts and figures on Nordea Kredit, and the mortgage collateral supporting outstanding mortgage bonds and covered mortgage bonds. If you have any questions, please feel free to contact either of us: Finn Nicolaisen, Nordea Group Treasury, Head of Group Funding Copenhagen, phone +45 3333 1625 Peter Brag, Nordea Group Treasury, Senior Dealer, Group Funding Copenhagen, phone +45 3333 1663 Contents: Nordea Kredit – in brief • Asset quality, losses and arrears • Loan-to-value (For detailed information on LTV please refer to “LTV Report 2012, Q3”) • • Legislation • Macro-economic factors 2
Nordea Kredit – in brief I • Founded in 1993, number of employees (in FTEs) 133 (as per 2012 Q2) • Nordea Kredit issues covered mortgage bonds, exclusively • All bonds issued by Nordea Kredit are rated AAA (by S&P) and Aaa (by Moody’s) • Profit before tax 2012, 1H: 539 m DKK and Cost/Income ratio 13.0% • Mortgage loans at nominal value 2012 Q3: 344.9 bn DKK • Mortgage loans at fair value 2012 Q3: 352.2 bn DKK • Market share 2012 Q3: 14.1% (2012 Q2: 14.0%) (Mortgage loans at nominal value as a share of all Danish mortgage bank loans) 3
Nordea Kredit – in brief II • Late payments by borrowers 2012 Q3: 0.31% (2012 Q2: 0.32%) Residential properties and holiday homes, 3½ months after due date • Average LTV 2012 Q3: 72% (2012 Q2: 73%) • Total capital ratio (2012 Q2) 16.7% and Tier 1 capital ratio 16.7% (excl. transition rules) • Completely match funded “Pass Through” setup with Balance Principle • Danish mortgage banks are regulated and supervised by Finanstilsynet (The Danish FSA) 4
Nordea Kredit – ratings and over-collateralisation Moody ´ s S&P CC 1 CC2 CC1 CC 2 Aaa Aaa AAA AAA Ratings of issued bonds 4.0 14.5 6.24 9.26 Required OC / CE for Aaa and AAA rating, % 4 3 4 4 TPI leeway/Unused uplift OC per Q3 2012 % OC (over-collateralisation) and TPI leeway as measured by Moody´s CC1: 7.1 CE (credit enhancement) and unused uplift as measured by S&P All data are the latest available prior to the publication of the report CC2: 17.6 5
Nordea Kredit – market shares in per cent of total market 16 14 12 10 per cent 8 6 - 4 2 0 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 Other properties Private rental housing Commercial Agriculture Owner occupied dwellings and holiday homes All segments 6
Nordea Kredit – profit and increase in net lending 30 1200 Profit before tax << Increase in net lending DKK bn for 2012 1H was 539 m DKK Profit before tax DKK m (rhs) >> Increase in net lending DKK bn 25 1000 Profit before tax DKK m 20 800 15 600 10 400 5 200 0 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1H 7
Nordea Kredit – mortgage loans at fair value CCs I&II, 2012 Q3: DKK 352.2 bn Nordea Kredit has two capital centres: • CC I: Mortgage Bonds (Realkreditobligationer , “RO”) No open series. More than 94% of CC I, RO: the bonds in CC I are 58.0 bn DKK, grandfathered covered bonds 16.5 per cent according to UCITS/CRD. • CC II: Covered Mortgage Bonds (Særligt dækkede realkreditobligationer ,”SDRO”) are issued out of CC II (2007 - ). All bonds in CC II are covered bonds CC II, SDRO: according to UCITS/CRD. 294.2 bn DKK, • All new issuance in 2012 83.5 per cent exclusively in covered mortgage bonds (SDROs) out of CC II 8
Match funded setup due to the specific Balance Principle Interest Interest payment payment Borrower Investor Principal Principal payment payment Contribu- tion fee Nordea Kredit complies with the specific Balance Principle, and has a completely match funded “Pass Through” setup. Nordea Kredit has no prepayment risk and Nordea only negligible interest rate and foreign Kredit exchange risk. 9
All property categories CCs I & II 2012 Q3 at fair value: 352.2 bn DKK Distribution of loans by property category 44.6bn DKK 13% 7.1bn DKK 2% 37.4bn DKK 10% 242.4bn DKK 69% Owner occ. dwellings & 20.8bn DKK 6% holiday homes Private rental housing Commercial Agriculture Other properties 10
All property categories CCs I & II, 2012 Q3 at fair value: DKK 352.2 Distribution of loans by loan type 14bn DKK, 4% 21.2bn DKK, 6% 3.9bn DKK, 1% 74.7bn DKK, 21% 2.7bn DKK, 1% DKK 60.4 bn 17.6% 58bn DKK, 16% Fixed Fixed IO ARM ARM IO FRN capped FRN capped IO FRN FRN IO 115.9bn DKK, 33% 61.8bn DKK, 18% 11
Residential properties and holiday homes CCs I & II, 2012 Q3 at fair value: DKK 242.4 bn Distribution of loans by loan type 3.7bn DKK, 2% 2.4bn DKK, 1% 62.6bn DKK, 26% 85.9bn DKK, 35% DKK 60.4 bn 17.6% Fixed Fixed IO ARM ARM IO FRN capped FRN capped IO 36.4bn DKK, 15% 51.3bn DKK, 21% 12
Nordea Kredit – geographical distribution of loans, 2012 Q3 Fair value, all segments: 352.2 bn DKK - residential properties & holiday homes: 242.4 bn DKK 16.1 bn DKK 4.6%* 10.4 bn DKK 4.3%** North (0.58 m citizens – 10.4%) Denmark Region 130.1 bn DKK 36.9%* 98.1 bn DKK 40.5%** 82.6 bn DKK 23.5%* (1.71 m citizens – 30.6%) 52.7 bn DKK 21.8%** Central Capital Denmark (1.27 m citizens – 22.8%) Region of Region Denmark 54.3 bn DKK 15.4%* Region 31.0 bn DKK 12.8%** Zealand 69.1 bn DKK 19.7%* South (1.20 m citizens – 21.5%) Denmark 50.1 bn DKK 20.7%** Region (0.82 m citizens – 14.7%) * All segments ** Residential properties and holiday homes Total number of citizens 5.58 m, January 2012 – Source: Statistics Denmark 13
Asset quality - loss guarantee by Nordea Bank Danmark Nordea Bank Danmark takes “first losses” on Nordea Kredit loans according to the table below: Property type Guarantee period Guarantee level * ** Owner occupied dwellings 5 years 25 per cent Holiday homes 5 years 25 per cent Subsidized property 10 years 10 per cent Housing for youth/elderly 10 years 10 per cent Agricultural property 10 years 25 per cent Commercial property 10 years 25 per cent *) The guarantee period starts when a loan is disbursed or remortgaged **) As a percentage of the original principal – disregarding all amortisation The guarantee amount is not reduced during the guarantee period, but cannot exceed the outstanding debt. A new guarantee period starts when the loan is changed e.g. due to remortgaging. 14
Asset quality - late payments by borrowers, 2012 Q3 0.60 All mortgage Residential properties and holiday homes, arrears as a percentage banks 0.32% of the total amount due - 3½ month after due date (last 0.32%) 0.50 All Danish MCIs * Nordea Kredit 0.40 per cent 0.30 0.20 Nordea Kredit 0.31% (last 0.32%) 0.10 0.00 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 *) Including Nordea Kredit 15
Losses in per cent of mortgage loans at nominal value, 2012 Q2 400,000 0.40% Mortgage loans nominal value, mDKK Losses % of mortgage loans, nominal value 350,000 0.35% Mortgage loans at nominal value 300,000 0.30% Loss for the year in per cent of mortgage loans at nominal value (rhs) 250,000 0.25% 200,000 0.20% 150,000 0.15% 100,000 0.10% 50,000 0.05% 0 0.00% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1H 16
Nordea Kredit – LTV, loan-to-value 2012 Q3 2012 Q2 LTV CC I & II LTV CC I LTV CC II 2012Q3 2012Q2 2012Q3 2012Q2 2012Q3 2012Q2 Owner occupied 79 80 74 75 80 82 dwellings Private rental housing 66 66 62 60 67 67 Commercial 61 61 44 44 62 62 Agriculture 51 50 46 45 51 51 Other properties 39 39 41 41 39 39 Total 72 73 69 70 72 73 For more detailed information on LTV – please refer to “ LTV Report 2012 Q3” 17
Legislation • Danish mortgage financing is regulated and supervised by the DFSA (Finanstilsynet): www.ftnet.dk • Some legislation can be found in English at the DFSA’s English website: http://www.finanstilsynet.dk/en/Regler-og-praksis/Translated-regulations.aspx • All relevant legislation can be found in Danish at the DFSA’s Danish website: http://www.finanstilsynet.dk/da/Regler-og-praksis/Lovsamling.aspx 18
The Danish economy - house prices and foreclosures The latest monthly property price data indicates that the house prices are moving broadly flat. At the same time the numbers of housing units for sale are decreasing as a sign of a more balanced development – especially around the major cities. We believe this development marks the beginning of a new regime in the Danish housing market where the historically low funding costs and substantial pent-up demand will lead to market consolidation. But prices will be kept in check by a low turnover and high youth unemployment, which limits the number of first-time buyers. Trapped between these two opposing trends, housing prices are likely to remain more or less unchanged during the rest of the year. Into 2013 we expect housing prices to slowly edge higher, surpassing expected inflation again in 2014. 19
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