topi manner head of banking finland 14.5 · 1001 1003 1009 1103 1109 1203 1209 1303 1309. headline...
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Topi Manner
Head of Banking Finland
14.5.2014
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Kommentit 76 116 154
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Macroeconomic view in Finland
2
Longest downturn in 150 years
Positive trends emerging
• Finnish economy in undergoing the longest downturn in 150 years • Central and local government deficits
are a big challenge
• Possible decline in the exports to Russia
might prolong the downturn, as Russia is one of the largest export partner in goods trading (10% of exports).
• There are anyhow some positive trends,
which usually get also the Finnish exports to grow after a while
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Kommentit 76 116 154
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Loan losses and average PD development staying stable
3
PD development
• Average Corporate PD has gone down as new lending is increasingly to better rating classes
• Household average PD has increased slightly over the last two years.
• Loan losses are not showing an increased trend despite of macroeconomic situation
COMMENTS
0.000.200.400.600.801.001.201.401.601.80
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Q1
Corporate
Household
-5
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Loan losses, Banking Finland, meur
4
Accelerated cost efficiency program on track in Finland
Adjusting distribution to meet customer behavior • Reduction of ~50 branches • Reduction of ~90 cash
Reduction of personnel • 250-300 FTE
Enhancing services in CC and online • Remote meetings • Chat • Corporate CC services
Investing to establish a new CC site • 3 sites existing in Finland + 1 in
Estonia
P
P P
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Kommentit 76 116 154
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Income momentum in Retail Finland
5
Housing loan market share
Corporate lending distribution on rating classea
• Agerage lending margins on new lending raised during 2013 to a sustainable level
• Stable development during the last year on lending market shares • Housing loans • Corporate lending • Consumer credits
• Savings and investment fees fueled by
good performance in investment sales
• New lending to customers in better rating classes than the stock
Comments
24%
26%
28%
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34%
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Kommentit 76 116 154
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Future income opportunities
6
Reprising the lending books by having the new lending margins above the book
Gaining even larger share of Transaction banking
• CM, FX, etc.
Number of small entrepreneurs will grow in Finland going forward, generating new income opportunities
Continuing the good sales of investment product
There is room to increase the sales of consumer credits within our existing relationship customers
When interest rates will rise, it will directly increase income due to heavy transaction account balance
BACK-UP SLIDES 14
Macroeconomic view 14
The starting point for 2014 sure looks pretty weak
9
Lost market shares
30.1.2013 10
Germany
Sweden
OECD
Finland
Source: OECD
(total export quantity / export market)
Private consumption declining in Finland
27.5.2014 11
March was one of the weakest export months in three years – Q1 GDP might show still another fall (q/q)
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3000
3500
4000
4500
5000
5500
6000
6500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
VALUE OF GOODS EXPORTS (Milj. euro)
SA Trend
Production capacity declining in manufacturing
30.1.2013 13
capacity
Output
Confidence indicators zigzag and do not suggest a major recovery
14
Finland: Economic sentiment and GDP
Source: Nordea Markets and Reuters Ecowin
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
-10
-8
-6
-4
-2
0
2
4
6
8
10
70
75
80
85
90
95
100
105
110
115
120 %, y/y
Economic sentiment, lhs GDP, rhs
Index
Euro area manufacturing PMI’s have improved – only moderate signs of improvement in Finnish industry
1
Only mild improvement in imports of key trading partners – no wonder exports are not expanding
2
Central and local government deficits are a big challenge
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Longest downturn in 150 years
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Years
Indexed GDP
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Finland and Russia
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Russia is the largest export partner of goods trading
• Export of goods 10 %.
• Export of services 9 %.
Russia’s share of energy imports 68%
• Oil products 69%
• Wood energy 59%
• Nuclear energy 54%
Exports to Russia have allready been declining
27.5.2014 20
Growth of Finnish exports to Russia (12m mov . Ave)
There are anyhow some positive trends, which usually get also the Finnish exports to grow after a while
21
Investments, 2007=100 Foreign trade growth, %
Source: OECD 6.5.2014
Housing market view 14
Housing prices have peaked and are now declining modestly – expect small movements in the near term
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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Housing prices, 2005=100
Finland Capital area Outside capital area Satellite municipalities
Housing prices have increased at the same pace as average earnings and market rents
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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Housing prices, rents, earnings and the wage sum (2005 = 100)
House prices Earnings Rents Wage sum
Housing price relative to rents have fallen all over Finland
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90
95
100
105
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115
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Housing prices relative to rents, 2005=100
Finland Capital area Outside capital area
Housing sales are depressed
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50
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120
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Number of dwellings sold, 2010 = 100
Seasonally adjusted Trend
New mortgages are down but seem to have hit the floor
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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Households: New mortgages, milj. euro
Actual, SA Actual, trend New contracts, SA New contracts, trend
Mortgage rates are historically low
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0.0
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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Household mortgage rates, %
New mortgages All mortgages Average interest (all)
Finnish households have less debt and as much housing wealth as Swedish households
Household debt has stabilized at 120 per cent of disposable income
Housing wealth is more than three-fold relative to disposable income
27.5.2014 29
0
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Household debt relative to disposable income, %
Finland Sweden
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Household housing wealth relativeto disposable income, %
Finland Sweden
Banking Finland result Q1 14
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Banking Finland Q1 2014
Banking Finland
EURm Q114 Q413 Q313 Q213 Q113 Q114 vs Q413 vs Q113
Net interest income 184 179 173 163 144 3 % 28 %
Other income 117 115 110 112 115 2 % 2 %
Total income 301 294 283 275 259 2 % 16 %
Staff costs -58 -57 -59 -55 -57 2 % 2 %
Other exp. excl. depreciations -101 -108 -101 -97 -102 -6 % -1 %
Total expenses incl. allocations -161 -166 -162 -154 -160 -3 % 1 %
Profit before loan losses 140 128 121 121 99 9 % 41 %
Net loan losses -7 -22 -14 -8 -13 -68 % -46 %
Operating profit 133 106 107 113 86 25 % 55 %
RAROCAR, % 19 % 17 % 16 % 16 % 13 % 2 % 6 %
Cost/income ratio, % 54 % 57 % 57 % 56 % 62 % -3 % -8 %
Number of employees (FTEs) 3 923 3 949 3 946 3 986 3 981 -1 % -1 %
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Kommentit 76 116 154
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Banking Finland
EURbn Q114 Q413 Q313 Q213 Q113 Q114 vs Q413 vs Q113
Lending to corporates 15,0 14,7 14,5 14,3 14,2 2 % 6 %
Household mortgage lending 27,0 26,9 26,7 26,5 26,2 0 % 3 %
Consumer lending 6,3 6,3 6,3 6,2 6,2 0 % 2 %
Total lending 48,3 47,9 47,5 47,0 46,6 1 % 4 %
Corporate deposits 9,3 9,7 9,3 9,2 9,1 -4 % 2 %
Household deposits 21,4 21,6 21,8 22,3 22,3 -1 % -4 %
Total deposits 30,7 31,3 31,1 31,5 31,4 -2 % -2 %
Banking Finland Q1 2014
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Kommentit 76 116 154
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Profitability comparison Finland
Note: Change versus Ytd Q1 2013 RoE on allocated equity, aligned with group equity
2.6%
+2.5% +5.1% +2.6%
15.6%
10.8%
7.9%
OP Pohjola SHB Nordea
1.9%*
2.1%*
ROE YtD Q1 2014
*Wealth mgmt + Private Banking
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Loan losses have stayed stable
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• Loan losses are not showing an increased trend despite of macroeconomic situation
COMMENTS Loan losses, Banking Finland, meur
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Non performing loans staying on a low level
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• Household non performing loans showing a slight increase from a very low level
• Corporate non performing loans being flat
COMMENTS Non performing loans, keur
36