swedbank's first quarter results for 2013 from the analyst conference
TRANSCRIPT
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Swedbanks first quarter 2013 results
,
Gran Bronner, CFO
Hkan Berg, CRO
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Customer requirements drive new ways of banking
Retail banking
Focus on functionality and ease of use
million Monthly logins Swedbank and Savings Banks
25
15
5
10
0
J an 2010 J an 2011 J an 2012 J an 2013
Mobile bank Internet bank
2
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Fast increase of digital usage
Swedbank and Savings Banks
Internet Bank, private and corporate (since March 1997) Number of users: >3.5 million
Mobile Bank, private (since Dec 2009)
Number of users: >1.3 million
Mobile Bank Youth (since March 2013) Number of users: 6 700
Mobile Bank Corporate (since March 2013) Number of users: >8 000
Number of users: >200 000
Swish (since Dec 2012) Number of users: ~100 000
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Stable results
Retail
Stable NIISEKm Q1 12 Q4 12 Q1 13 Q/Q Y/YNet interest income 3 371 3 353 3 332 -21 -39
Solid asset quality
Net commissions 1 538 1 554 1 589 35 51
Total income 5 346 5 255 5 377 122 31
o a expenses - -Profit before
impairments2 917 2 781 2 971 190 54
Credit impairments 21 91 55 -36 34
ROE, % 28.4 28.0 27.9
ra o . . .
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Good return
Large Corporates & Institutions
Stable NIISEKm Q1 12 Q4 12 Q1 13 Q/Q Y/YNet interest income 728 795 783 -12 55
Low activity in Corporate
Finance
Net commissions 485 536 419 -117 -66
Total income 2 071 1 857 1 814 -43 -257Ex enses excl variable
Structural challenges inEquities
staffcosts- -
Variable staff costs 105 75 88 13 -17
Profit before
impairments1 305 1 114 1 080 -34 -225
Solid credit qualityCredit impairments 17 162 74 -88 57
ROE % 18.9 18.3 16.7
C/I ratio 0.37 0.40 0.40
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Focus on costs
Baltic Banking
Stable NII in local currencySEKm Q1 12 Q4 12 Q1 13 Q/Q Y/YNet interest income 910 760 742 -18 -168
Increased customer activity
Net commissions 386 366 388 22 2
Total income 1 468 1 289 1 281 -8 -187
Increased efficiency in focus
o a expenses - -
Profit before
impairments839 656 695 39 -144
Credit impairments -134 -329 -70 -259 -64
ROE, % 14.6 13.3 12.6
ra o . . .
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Robust earnings
Group results
Stable NII
SEKm Q1 12 Q4 12 Q1 13 Q/Q Y/Y
Net interest income 4 895 5 346 5 353 7 458
Funding costs
Lower deposit margins
Net commission income 2 398 2 502 2 388 -114 -10
Net gains and losses 979 830 557 -273 -422
Total income 9 072 9 437 9 082 -355 10
Net gains and lossesone-off gain in Q4 12
Total expenses 4 327 4 142 4 043 -99 -284
Profit before impairments 4 745 5 295 5 039 -256 294
Impairment of tangible assets 40 141 85 -56 45
Lower costsCredit impairments -96 -76 60 136 -156Tax 1 108 786 976 190 -132
Profit from continued ops. 3 693 4 427 3 918 -509 225
Continued good asset qualityProfit from discontinued ops. -279 -174 -390 -216 -111Profit for the period 3 410 4 252 3 525 -727 115
discontinued operations
Return on equity, % 14.1 16.9 13.8
ROE continuing operations, % 15.3 17.5 15.3
Cost/income ratio 0.48 0.44 0.45
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Continued strengthening capital position
Capital situation
13-15% CET116.7 17.3
16.4
Common Tier 1 capital ratio
Basel 2* Basel 3
CRD/CRR IV less impact
IRB Advanced
* As of 2012 incl. IAS 19.
Waiting for regulatory clarity
2007 2008 2009 2010 2011 2012 Q1 13
Changes in B3 CET1 ratio Q4-Q1
15.45%
0.14% 0.14%0.24%
0.55%
-0.13
16.38%
Q4 2012 Profit Q1 IAS 19 RWA SME& Other Q1 2013
8
change Q1 CVA(Basel 3)
Basel3changes
Increase Decrease
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Strong credit quality
Continued high credit qualityCredit impairments, SEKm Q1 12 Q4 12 Q1 13Retail 21 91 55
Slower net recoveries in
Large Corporates & Institutions 17 162 74
Baltic Banking -134 -329 -70
a c an ng
Exiting Russia and Ukraine
s ona - - -
Latvia -21 86 4
Lithuania -35 -173 -20
Swedbank Group -96 -76 60
31.735
SEKbn Impaired loans
20
25
30
10.3
0
5
10
9
Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13*
* Russia and Ukraine reported as discontinued operations.
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Swedbanks first quarter 2013 results
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Appendix
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Loans past due 60 days performance Q/Q
EURm
Estonia Latvia Lithuania
-50
0
-150
-100
-250
-200
Q11
Q21
Q31
Q41
Q11
Q11
Q21
Q31
Q41
Q11
Q11
Q21
Q31
Q41
Q11
12
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Provisions well provided for
SEKm
Provision ratios, % Q1 13
Retail 70
LC&I 7620 000
25 000
Baltic Banking 52
Group 57
2 478
65.0% 63.7% 65.2%61.9%
57.0%15 000
11 915
10 951 9 934
7 077
1 774
1 545
1420
10 000
4 429
0
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13*
* Russia and Ukraine reported as discontinued operations.
Individual provisions Portfolio provisions Provision ratio
13
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Corporate portfolio drives capital efficiency
Credit portfolio - Retail
Total portfolio SEK 222bn Segments excl. SwedbankMortgage and Swedbank Finance
Volume
(SEKbn)
Secured
(%)
grcu ure .
Manufacturing 9.7 74
Public sector and utilities 5.1 92
94104
Construction 4.7 82
Retail 9.0 88
Transportation 1.9 85
24
Shipping 0.1 95
Hotels and restaurants 3.1 91
Information & communication 0.9 46
Swedbank Mortgage AB
Swedbank Finans AB
Other
Finance and insurance 2.0 66
Property management 49.4 97
Professional service 6.7 65
Other 6.0 72
Total 104.4 87
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Shipping and Offshore
Credit portfolio Large Corporates & Institutions
Shipping and Offshore
4
24 26 25 24 23
30 Exposure to Shipping & Offshoresector was SEK 23.5bn plus
-3.0% -3.0%
15
5
10
20
unutilised commitments of SEK 7.7bn Portfolio duration 4-5y
Avera e fleet a e 7
0Q1-12 Q2-12 Q3-12 Q4-12 Q1-13
Offshore Tanker Other
Strong employment profiles
J PY
Shipping and Offshore portfolio by currency
Q1-130.7
0.9
1.6
Dry bulk
Container
RORO
Shipping and Offshore Portfolio by subsegment
bn
USD
NOK
Q4-12
1.9
0.2
2.3
0.7
1.4
Floatin roduction
Chemical
Product
Crude oil
Gas (LNG/LPG)Q1-13
Q4-12
SEK
EUR
6.8
1.6
3.5
1.2
Drilling & exploration
Oil service
Supply
Accommodation
15
0 5 10 15 20
.
0 2 4 6 8SEKbn
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Agriculture
Credit portfolio
Segmentation definitions Corporate Agriculture: Businesses
that derive their main income fromagricultural activities
Private Investments: Private individuals whoown agricultural properties for residential or
Private:Residential
20%
investment purposes
Agriculture45%
Lending to the agricultural sectorSEK 63.3bn
Private:Forestry
Agriculture 45%
Forestry 13%
Private Investments (42%)Forestry
13%
Residential: 20%
Forestry: 22%
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Core balance sheet* structure
Liquidity and funding
14001400
Assets LiabilitiesSEKbn SEKbn
12001200
CEE lendinEstonia
Senior
CET1
Suppl. cap
Governmentguaranteed debt
800
1000
800
1000
Othercorporatelending, Sweden &otherNordics Deposits
600600
er prva e, we en
200
400400
Swedishmortgage loans
Coveredbonds
0
Q1 20130
Q1 2013
17
Source: Swedbank, 31 March, 2013
* Simplifiedbalance sheet
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Senior unsecured debt strategy
Liquidity and funding
Limited need given Swedbanks balance sheet structure
Fund liquidity reserves
40%Senior unsecured debt
Senior unsecured debt maturity profile
SEKbn
House price sensitivity of the cover pool
20%
30%OC, Q113
60
ion
0%
10%
40
er-
collateralisa
-10%
20 O
-0% -5% -10%-15%-20%-25%-30%-35%-40%-45%-50%2013 2014 2015 2016 2017 2018 2019-
18
Source: Swedbank, 31 March, 2013, nominalamounts House pricedrop
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Lower funding needs
Liquidity and funding
LCR 139% (Swedish FSA definition FFFS 2012:6)
Expanded investor base
Term funding issuance completed and planned
100
120
n
40
60
0
20
19
Source: Swedbank, 31 March, 2013, nominal amounts
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Conservative funding plan
Liquidity and funding
Issued SEK 40bn of term-funding in Q1
, -maturities of SEK 86bn
6000070000
Issued long-term debt Outstanding short-term debtSEKm SEKm
40000
50000
50000
60000
20000
30000 Q4 12
Q1 13
30000
40000 FY 2012
Q1 13
0
10000
0
10000
CB
(144A)
unsecured
20
Source: Swedbank, 31 March, 2013, nominalamounts
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Long-term funding maturity profile
Liquidity and funding
FY 2013 maturities amount to nominal SEK 86bn, of whichSEK 46bn for the remainder of 2013
Long-term funding maturity profile
150
200
Government
guaranteed debt
Senior unsecureddebt
100
0
50
2013 2014 2015 2016 2017 2018 2019-
2121
Source: Swedbank Mar 31, 2013
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Limited need for USD-funding
Liquidity and funding
USD-funding need covered for more than 12 months
Issued USD 1bn of covered bonds (144a) and USD 1bn of senior (144a) YTD 2013
300Interest-bearing securities
SEKbn
250Lending to the public
150
200Loans to credit institutions
Cash and balances with
100
Deposits and borrowingsfrom the public
0
50 Amounts owed to creditinstitutions
Debt securities in issue
Assets Liabilities
22
Source: Swedbank Fact book, Mar 31, 2013
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Liquidity reserve
Liquidity and funding
According to the template defined by the Swedish Bankers' Association
SEKm
Cash and holdings in central banks 210 251
Deposits in other banks available overnight 1 290
Securities issued or guaranteed by sovereigns, central banks or multilateral development banks 27 751
Securities issued or guaranteed by municipalities or Public sector entities 378
- Issued by other institutions 58 284
- Own issued
Securities issued by non-financial corporates
Securities issued by financial corporates (excl. covered bonds) 2 532
Other
Total1
300 486
ona qu asse s, roup,
1 95% of the securities in the liquidity reserve per Q1 2013 are rated AAA2 84% of the additional liquid assets fulfill the Liquidity Reserve definition by the Swedish Bankers Association except forthe fact that they are held outside the Treasury department.
23
3 82% of the additional assets are rated AAA
Source: Swedbank Factbook, 31 March, 2013
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Prolonged survival horizon
Liquidity and funding
SEKbn
250
300
SEKbn
150
200
50
100
Days forward
00 20 40 60 80 100 120 140 160 180 200 220 240 260 280 300 320 340 360365
Days forward
24
Source: Swedbank 31 March, 2013
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Conservative liquidity levels
Liquidity and funding
Short-term funding mainly a tool for cash management
-
SEKbn
300
350
Next 12-month term300
350Additional pledgeableand/or liquid assets
150
200
unding maturities
CP / CDs and netinterbank funding,
150
200Liquidity reserve,securities
Liquidity reserve,
1
1
0
50
100
0
50
100,
SEKm
25
Source: Swedbank 31 March, 2013
1 As defined by the Swedish Bankers Association
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Asset encumbrance
Liquidity and funding
Encumbered assets - distribution by type of liability (row) and asset (column)
SEKm
Government
debt
instruments
Central banks
and
supranational
debt
instruments
Covered
bonds
Debt
instruments
issued by
credit
institutions
Securities
issued by
corporate and
other issuers ABS
Mortgage
loans Cash Total
Central bank funding 0
Intraday settlement 1 028 10 772 11 800
Repurchase agreements 1) 18 448 12 765 31 213
Derivative 2) 74 1 949 13 125 15 148Covered bonds 3) 514 795 514 795
Other 4) 0 736 284 1 020
Total 19 550 0 25 486 736 0 0 514 795 13 409 573 976
Financial assets pledged for insurance policy holders 109 813
Unencumbered asse ts - additional assets available for secured funding
SEKm
Governmentdebt
instruments
and
supranationaldebt
instruments
Covered
bonds
instruments
issued bycredit
institutions
Securities
issued bycorporate and
other issuers ABS
Mortgage
loans Cash Total
Securities 5, 6) 30 948 11 213 73 812 12 671 8 238 984 137 866
Cover pool over
collateralisation 7) 192 782 192 782
Cover pool eligible assets 8) 12 031 12 031
Total 30 948 11 213 73 812 12 671 8 238 984 204 813 0 342 679
Total assets 1 917 227
1) Repoed securities on balance sheet.
2) Collateral posted under CSA agreements, gross (3-year, SEKm,
High: 21 572, Low : 10 945, Average: 13 975).
3) Of w hich accrued interest of assets in the cover pool, SEK 2 389m
as of Q1 2013
4) Collateral pledged in securities lending activities and with
6) All type of securities, including securities non pledgeable at central
banks, of which 80% are rated AAA, 2% are rated below A-
and 8% are not rated.
7) Of which accrued interest of assets in the cover pool
overcollateralisation, SEK 831mas of Q1 2013
8 T e of loans Residential 84.3% Forestr &A riculture 15.4%
26
Source: Swedbank Fact book Q1 2013
exchanges
5) Reversed repos are included.
Commercial 0.3%.
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Swedish mortgage market
Swedish housing and mortgage market
No securitisation (on balance sheet), no sub-prime market, no 3rd party origination, insignificantbuy-to-let market
70% home ownership1
Rental market is regulated Transparent credit information (credit information agency, www.uc.se)
Publicly available information regarding income, debt, payment track record etc
rate Very limited debt forgiveness possibilities (full recourse)
Strong social security and generous unemployment benefit system
27
1Source: Boverket, 2011
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Real estate prices Sweden 12 months development
Swedish housing and mortgage market
Single-family homes1 Tenant-owner rights2 Combined3
12M 12M 12M
Apr/12 -2% 2% -1%
May/12 -2% 3% -1%
-
J ul/12 0% 4% 1%
Aug/12 2% 4% 3%
Sep/12 2% 5% 3%
Oct/12 1% 6% 3%
Nov/12 3% 7% 4%
Dec/12 4% 7% 6%
Feb/13 4% 7% 5%
Mar/13 3% 7% 5%
28
Source: Valuegard www.valuegard.se (Based on data from Mklarstatistik), 1 HOXHOUSESWE, 2 HOXFLATSWE, 3 HOXSWE
R l i
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Baltic countries
Real estate prices
1400
1 600
1 800Riga
1400
1600
1800Tallinn
600
800
1 000
1 200
600
800
1000
1200
0
200
400
an-0
5
Jul-05
an-0
6
Jul-06
an-0
7
Jul-07
an-0
8
Jul-08
an-0
9
Jul-09
an-1
0
Jul-10
an-1
1
Jul-11
an-1
2
Jul-12
an-1
30
200
400
an
-05
ul-05
an
-06
ul-06
an
-07
ul-07
an
-08
ul-08
an
-09
ul-09
an
-10
ul-10
an
-11
ul-11
an
-12
ul-12
an
-13
1 600
1 800
Vilnius
J J J J J J J J J
Nr.of deals EUR/m2
Source: Land book database
JJ
JJ
JJ
JJ
JJ
JJ
JJ
JJ
J
Nr.of deals EUR/m2
Source: Swedbank, Estonian Land Board
800
1 000
1 200
1 400
0
200
400
n-0
5
ul-05
n-0
6
ul-06
n-0
7
ul-07
n-0
8
ul-08
n-0
9
ul-09
n-1
0
ul-10
n-1
1
ul-11
n-1
2
ul-12
n-1
3
J J J J J J J J J J J J J J J J J
Nr.of deals EUR/m2
29
Source: Swedbank, State Enterprise Centre of Registers
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Mortgage loans, gross margin (3 months)
6
%
5
4
Net margin
2
3
The gross margin covers:Cost of liquidity ~0.2%Administrative costs ~0.3%
1
re mpa rmen s ~ .Tax (22 % on profit before tax)
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Gross margin Swedbank's funding cost Stibor 3 months Swedish Riksbank's repo rate
30