video debt investor presentation q2 2020 - nordea · video debt investor presentation q2 2020....
TRANSCRIPT
Video debt investor presentation Q2 2020
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
Table of contents
1. Nordea Q2 result
2. Credit quality and loan loss provisions
3. Capital position
4. Funding, liquidity and issuance plans for 2020
4
7
11
13
3
Executive summary
• Solid result – continued strong momentum across business areas and countries
➢ High activity level kept revenues largely unchanged
➢ Increasing volumes in lending and deposits, net commission income impacted by the lockdowns
➢ Challenging times have proven the resilience of our business model
• We are progressing according to our plan towards 2022 financial targets
➢ Cost to income ratio decreased to 52% - with increasing customer satisfaction
➢ Return on equity impacted by loan loss provisions
➢ We remain committed to delivering on our business plan and financial targets
• Strong financial position to support our customers and maintain dividend capacity
➢ CET1 ratio at 15.8%, 5.6%-points above requirement
• Strong credit quality remains – significant buffer built up in the quarter
➢ Full-year 2020 net loan losses projected below EUR 1bn (less than 41bps)
➢ Underlying Q2 net loan losses EUR 310m including IFRS 9 model updates
➢ New management judgement allowances of EUR 388m in the quarter building up the buffer to EUR 650m – to cover
future loan losses
5
Revenues – continued volume growth but impact from COVID-19
Net commission income, EURm
Net interest income, EURm
Q219 Q319 Q419 Q120 Q220
1,071 1,083 1,108 1,109 1,091
+2%
Net fair value, EURm
743 756 775 765673
Q219 Q120Q319 Q419 Q220
-9%
283
211266
109
318
Q120Q219 Q319 Q220Q419
+12%
Comments year over year
• Net interest income up 2%
• Strong mortgage growth in all countries
• Strong growth in both household and corporate deposits
• Slightly improving margins compared to previous year
• Negative impact from significant FX movements
• Net commission income down 9%
• Asset management fees down due to market turmoil, but strong
recovery in AuM
• Highest quarterly inflow since Q316
• Corporate advisory income recovering in June
• Payment and card activity down due to lockdowns
• Net fair value up 12%
• Solid development in customer areas
• Higher market making and trading income in Markets supported
by improved valuations of inventory after a turbulent Q1
• Treasury income improving due to revaluations
6
Year over year bridge, EURm
Quarter over quarter bridge, EURm
121
4920
Q219
1,180
Cost
decrease
Q220
adj.
FX Q220
1,0881,108
Resolution fee
-6%
153
49 49 7
Q120 Resolution
fee
Q120 adj. Cost
decrease
1,088
FXQ220
adj
1,248
1,095 1,095
Resolution
fee
Q220
0%
Costs – continue to deliver on cost plan and building a strong cost culture
Comments
• Delivering on cost plan
• Staff costs down by 11%
• New ways of working supporting cost reductions
• Slightly lower IT spend in the quarter
Outlook
• Costs for 2020 to be below EUR 4.7bn
21% 26% 21% 31% 2%
Nordic societies have well structured social safety nets, strong fiscal positions and effective legal systems
45%
8%
47% Total portfolio
EUR 304bn*
Well diversified portfolio
across countries and
segments
Updated analysis of COVID-19
impact by segment
Five segments with 4% of
total exposure significantly
affected
Corporates Consumer Mortgages
* Excluding repos
EUR 224bn
74%
EUR 66bn
22%
EUR 14bn, 4% Significantly affected
Partially affected
Insignificantly
affected
Consumer durables
Oil, gas & offshore
Materials
2.4%
Residential real estate
Land transportation
Retail trade
0.5%
Maritime
Capital goods
Wholesale trade
Unsecured consumer lending
1.2%
Agriculture
0.7%
0.1%
Secured consumer lending
Commercial real estate
47.0%
Other corporates
0.4%
Mortgages
0.1%
0.1%
8.9%
0.5%
0.5%
2.1%
1.1%
1.8%
2.4%
5.8%
5.8%
0.8%
Media & entertainment
Accomodation & leisure
Household & personal products
Air transportation
Mining & supporting activities
18.0%
7
Loan book – well-diversified with strong underlying credit quality
8
Comments
• Total underlying net loan losses in Q2 at EUR 310m
• Three drivers of increased losses:
• Collective provisions based on updated macro scenarios
• Additional provisions in maritime and offshore due to decreased
collateral valuations and oil price volatility
• Some increased provisions on commercial real estate and
unsecured consumer lending
• Otherwise loan losses stable vs. previous quarters
• Reflects generally stable credit portfolio quality development
(staging distribution)
Drivers of underlying net loan losses, EURm
149
310
150
134
-47
Updated macro-
economic
scenarios
-76
Maritime & offshore
new & increased
Other Underlying
net loan losses
74
87
New and increase
Reversals & recoveries
Underlying net loan losses – at EUR 310m while overall stable credit quality
9
Comments
• New management judgement of EUR 388m in the quarter
• Total management judgement buffer of EUR 650m:
• EUR 430m for cyclically driven loan losses
• EUR 110m for IFRS 9 model improvements
• EUR 110m for non-performing loans requirement
• Total provisions in H12020 amount to EUR 852m
• Loan loss projection for 2020 already mostly covered by the
provisions made this year
• Full-year loan loss projection below EUR 1bn (<41 bps)
• Significant management judgement buffer in place to cover future
losses
• Total allowances on balance sheet increased to EUR 3bn
(2.4bn in Q1)
Management judgement developments, EURm
852
120
310
388
Q220
<1,000
34
Q120 H120
cumulative
Projected
FY2020
net loan lossesUnderlying net loan lossesTotals
Management judgement
Net loan losses, EURm
142
650
120
388
Q419
existing
stock
Q120
addition
Q220
addition
H120
total
Management judgement added – full-year 2020 loan losses already mostly covered
Comments
• Stage 3 impaired loans decreased 2%
• Allowance ratio stage 3 loans at 43%
• Total impairment ratio 1.65%
Coverage ratio
• Further improved in the second quarter
• Average Q2 coverage ratio is between 40-70% in
significantly affected segments and between 35-60% in
partially affected segments
Stage 3 impaired loans at amortised cost, EURm
Stage 3 allowances, %
4,6104,5164,555
Q119
4,493
Q219
4,678
Q319 Q419 Q120
4,421
Q2 20
0
10
20
30
40
50
Q119 Q220Q219 Q319 Q419 Q120
Asset quality – stage 3 loans
CET1 capital position and requirement
0.2% 20.1%
14.5%
15.8%
CET1 ratio
Q2 2020
2.0%
4.5%
2.5%
Own funds
requirement
0.4%
1.0%
CET1
requirement
Total
capital ratio
Q2 2020
2.0%
0.3%1.5%
10.2%
10.2%
+5.6%
+5.6%
11
Pillar 2 Requirement*
CCyB
Actual O-SII
CCoB Minimum requirement
*Total Pillar 2 Requirement of 1.75% of which 0.98% in CET1, 0.33% in AT1 and 0.44% in Tier 2 capital
MDA
level
Capital – significant buffer to capital requirements
Comments
Q2 CET1 ratio 15.8% compared to the current requirement
of 10.2%
• Capital policy of 150-200bps above regulatory requirement
(MDA level)
CET1 requirement lowered by ~2.9 %-points since
1 January 2020
CET1 buffer above requirement of ~5.6 %-points
corresponding to ~EUR 8.7bn
Nordea has postponed the 2019 dividend decision
• Authorisation for the Board of Directors to decide on 2019
dividend. The amount is still deducted from the
CET1 capital ratio (~1 %-point)
• Dividend accrual for 2020 based on dividend policy of 60-70%
pay-out ratio
•
•
•
•
CET1 capital ratio development, %
CET1 capital buffer, %
12
16.0
Q120
0.1
FX effects Volume
growth
0.1 0.1
Market risk
& CVA
0.1
Other
15.8
Q220
10.2
Requirement
+5.6
Capital policy CET1 requirement
CET1 buffer
(above MDA)
pre COVID-19
1 Jan 2020
CET1 buffer
(above MDA)
Q220
2018
EBA stress
test result
Nordea´s
COVID-19
stress test
result
3.2
5.6
2.7 2.6
+2.4%
Comments
• CET1 capital ratio at 15.8%
• Risk exposure amount (REA) increased by EUR 2.5bn to EUR
155bn
• Limited credit REA migration in Q2
• Capital buffer of 5.6 %-points
• Continued dividend accruals for 2019 and 2020
• Current capital buffer is twice the amount consumed in a stress
scenario
• Dividend capacity remains intact
Capital – strong position to support customers while maintaining dividend capacity
%
Liquidity – solid position and normalising funding markets
Liquidity buffer development, EURbn
Deposits*, EURbn
Q318
100
Q418
102
Q218 Q319
105
Q419
101
Q119 Q219 Q120 Q220
95
107
104 103 104
89 87 91 86 91
83 79 77 8897
2017 2018 Q120 Q2202019
172165 169 174
188
Corporate Households
Comments
• Robust liquidity position
• Liquidity buffer over EUR 100bn
• Liquidity coverage ratio (LCR) of 160%
• EU net stable funding ratio (NSFR) of 113%
• Deposits increased 4% in the quarter in local currencies
• Approx. EUR 9bn long-term debt issued during Q2
• All key funding markets are functioning well at tighter spread levels
• During Q2, Nordea participated in selected central bank
liquidity facilities including ECB’s TLTRO facility
* Including repos13
* Including CDs with original maturity over 1 year, excluding Nordea Kredit
Domestic covered bonds49%
International covered bonds
8%
Domestic senior unsecured bonds
3%
Green senior unsecured bonds
1%
International senior unsecured bonds
10%
Senior non-preferred bonds
1%
Subordinated debt5%
CDs & CPs*23%
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
EURm AT1 T2 Senior non-preferred Senior preferred Covered
Long-term and short-term funding outstanding, EUR 191bn
14
Long-term issuance volumes YTD Q2 2020, EUR 14.4bn Strong funding position further improved
• EUR 14.4bn long term debt issued in H1 2020 whereof EUR 8.8bn
during Q2
• NSFR 113.2% end Q2 2020 (109.7% Q1)
• 77% of total funding is long-term end Q2
• Selective participation in central bank facilities in home countries incl.
TLTRO as a supplement to ordinary funding
High-level issuance plan for 2020
• Full year 2020 issuance estimated in the lower end of EUR 20-25bn
• To be issued via covered bonds and senior unsecured debt of which
approximately 50% expected to be issued in the domestic markets
• Total estimated need of senior non-preferred debt for forthcoming MREL
requirements approximately EUR 10bn until 2023
• EUR 2.7bn has already been issued
Solid funding operations
Senior non-preferred issuance plan
15 * EUR 10bn does not include potential refinancing amount
** Excluding amortised Tier 2
24 24 24 24 24
3 3 3 3
4 4 4
~10
CET1 AT1 T2 SNP issuanceneed
Remainingsenior unsecured
debt
Point of Non Viability Resolution
• Total estimated SNP need for future MREL requirement remains
unchanged at EUR 10bn* by end of 2023
• EUR 2.7bn has been issued
• SNP issuance plan to be reviewed during Q3 2020 and in Q1 2021
in connection with the SRB decision on Nordea MREL subordination
requirement
• Nordea’s own funds of ~EUR 31bn** will rank junior to SNP
investors
27
8
10
Outstanding seniorunsecured debt (excl.
SNP)
SNP issuance need
35
Final maturity
before end of
2023
Senior bonds available for potential refinancing in SNP format, EURbn
CommentsOwn funds and bail-in-able debt, EURbn
Contacts
Investor Relations
Matti Ahokas
Head of Investor Relations
Mobile: +358 405 75 91 78
Andreas Larsson
Head of Debt Investor Relations
Mobile: +46 709 70 75 55
Tel: +46 10 156 29 61
Maria Caneman
Senior Debt IR Officer
Mobile: +46 768 24 92 18
Tel: +46 10 156 50 19
Randie Atto
Debt IR Officer
Mobile: +46 738 66 17 24
Group Treasury & ALM
Mark Kandborg
Group Treasurer
Tel: +45 33 33 19 09
Mobile: +45 29 25 85 82
Ola Littorin
Head of Long Term Funding
Tel: +46 8 407 9005
Mobile: +46 708 400 149
Petra Mellor
Head of Bank Debt
Tel: +46 8 407 9124
Mobile: +46 70 277 83 72
Jaana Sulin
Head of Short Term Funding
Tel: +358 9 369 50510
Mobile: +358 50 68503
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