CEO presentation of Q1 2009 results

8/8/2019 CEO presentation of Q1 2009 results

1/39

First quarter results 200923 April 2009

Michael Wolf, CEO andErkki Raasuke, CFO


2/39

2

Reduce current risk levels

1. Secure asset quality by pro-active measures

2. Protect earnings capacity throughout the downturn

3. Funding strategy improve liquidity and extend maturity profile

We have initiated change


3/39

3

Secure asset quality

Prudent provisions due to low visibility

Intensified Financial Restructuring & Recovery (FR&R) activities

Proactive measures in Sweden

Short to medium term aim to decrease risk weighted assets inabsolute terms

Provision ratio expected to

decline during 2009


4/394

Decentralisation through formalisation

Shared leadership joint responsibility

Implement committee structures at board and management levelto ensure duality, integrity and accountability

Strong governance and formalisation processes

Empowering the

front-line


5/39

5

Determine the post-crisis position

Review of earnings capacity and goodwill

Enhanced medium-term earnings

Target improved ratings

Secured funding capacity


6/39

6

Unique repositioning opportunity for Swedbank

Thepreferred

partnerforthemany

households,companies

andinstitutions

inSweden,

Estonia,

Latvia andLithuania

Ajourney

over35years

Uniquecustomerbase

Longhistoryand

strongmarket

position

Strongrelationshipwith theSwedishsavingsbanks

Dedicatedstaff


7/39

7

Operating profit

-4 000

-3 000

-2 000

-1 000

0

1 000

2 000

3 000

4 000

5 000

6 000

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09

SEKm

Operating profit before impairments Operating profit

First quarter results 2009

Deteriorating economic environment affecting results

Prudent provisions due to low visibility and increasing impairedloans in Baltic Banking and Ukrainian Banking Operation

Impairment of intangible assets in Ukrainian Banking Investment Strong trading result

Main drivers behind the SEK -3.4bn operating profit

SEK5.3bn,

excl.Robur

oneoff Operating profit before

impairments SEK 5.3bn,excl. Swedbank Robur one-offof SEK 480m


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8

Results by business area

International Banking

Severe increase of impaired loans,goodwill impairment

Swedish Banking

Stable results, low impairment losses

Baltic Banking

Severe increase of impaired loans,declining NII

Swedbank Markets

Best ever quarterly results

Asset Management

Results affected by declining AUM,

one-off pricing error

Result before impairments and provisions

-1 000

-500

0

500

1 000

1 500

2 000

2 500

3 000

Sw edish

Banking

Baltic Banking International

Banking

Sw edbank

Markets

Asset

Management

SEKm

Q4 08

Q1 09

Operating profit

-4 000

-3 000

-2 000

-1 000

0

1 000

2 000

3 000

SwedishBanking

Baltic Banking InternationalBanking

Sw edbankMarkets

AssetManagement

SEKm

Q4 08

Q1 09


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9

First quarter results

Income statement

SEKm Q1 2009 Q4 2008 Change

Net interest income 5 803 5 742 61

Net commission income 1 374 2 011 -637

Net gains/losses on financial items, fair value 1 711 1 244 467

Other income 536 1 349 -813

Total income 9 424 10 346 -922

Staff costs 2 335 2 340 -5

Profit-based staff costs 206 262 -56

Other expenses 2 090 2 300 -210

Total expenses 4 631 4 902 -271

Profit before impairments 4 793 5 444 -651

Impairment of intangible assets 1 305 1 403 -98

Impairment losses on loans and other credit risk provisions 6 845 1 633 5 212

Operating profit -3 357 2 408 -5 765

Tax expense -13 500 -513

Profit for the period -3 344 1 908 -5 252

Profit for the period attributable to: Shareholders of Swedbank AB -3 358 1 915 -5 273


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10

Asset quality

Impaired loans

Increased covenant breaches, whilst level of impaired loans inSwedish Banking remained low

Sharp increase of impaired loans in Baltic and Ukrainian Banking

Impaired loans by business area (gross, SEKm)

0

1 000

2 000

3 0004 000

5 000

6 000

7 000

8 000

9 000

Sw

edish

Ba

nking

Estonia

Latvia

Lith

uania

R

ussia

Ukraine

Swedbank

Markets

Q4 08 Q1 09

Share of impaired loans

0%

1%

2%

3%

4%5%

6%

7%

8%

9%

10%

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09

Swedish Banking Baltic BankingInternational Banking Swedbank MarketsSwedbank Group


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11

Asset quality

Provisioning

Formation of additional collectiveprovisions of SEK 3.7bn

Total provisions of SEK 6.8bn

Maintained provision ratio inBaltic Banking

Increased provision ratio inUkraine to 101%

Swedbank Group provisionratio at 64%

Impaired loans expected tolevel off during the year

0

5 000

10 000

15 000

20 000

Q4 08 Q1 09

0

5 000

10 000

15 000

20 000

Impaired loans (gross)

Collective provisions for impaired loans

Individually identified impaired loan provisions


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12

Earnings capacity

Net interest income

Highest ever net interest

income

Improved lending margins and

reduced deposit margins inSwedish Banking

Reduced lending and deposit

margins in Baltic Banking Strong NII in Swedbank

Markets

Q4

08

Q1

09

5,7425,803

-125

113

-22-207

302

4,000

4,200

4,400

4,600

4,800

5,000

5,200

5,400

5,600

5,800

6,000

Netinterestincome

Sw

edishBanking

BalticBanking

IntlBanking

Swe

dbankMarkets

Asse

tManagement

Other

Netinterestincome

SEKm


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13

Earnings capacity

Net gains and losses

Favourable market conditions provided good tradingopportunities for Swedbank Markets

Net gains and losses related to Swedbank Mortgage

(part of Swedish Banking) will continue to be volatile

SEKm Q1 09 Q4 08 Q1 08

Swedish Banking 100 828 16

Baltic Banking 285 12 78

International Banking 18 229 22

Swedbank Markets 1,221 304 244

Asset Management & Insurance 3 1 -15

Shared Services and Group Staffs 36 -156 -270

Eliminations 48 26 0

Swedbank Group 1,711 1,244 75


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14

Liquidity & Funding

Strengthened position in challenging environment

Improved liquidity position Ongoing efforts to strengthen

liquidity further

Active use of state guaranteeprogramme SEK 227bn

Action taken to extend maturityprofile

Capital market funding over 1Ymaturity, as of 31 December 37%

As of 31 March 45%

Stress test of liquidity as of 31 March 2009

Main assumption No access to capital

markets No refinancing of

amounts owed to creditinstitutions, issuedbonds or subordinatedloans

Q1 09 Non-covered CoveredNominal figures bonds bondsSEKbn (Swedbank AB) Swedbank

Mortgage Total

Bonds in issue1 66 25 91

Of which with

state guarantee 65 0 65

Expired bonds 18 10 28

Repurchased 0 60 60

1

Excluding issues tied to index-linked bonds0

50

100

150

200

250

1W

2W

3W1

M2M

3M

4M

5M

6M

9M

12M

SEKbn

2009-03-31 2008-12-31


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15

Capital management

Actively manage risk weighted assets

Improved documentation and processes Increased focus on risk return

Declining lending volumes

Through the cycle methodology

Development risk weighted assets (SEKbn)

600

620

640

660

680

700

720

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09

C i l


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16

Capital management

Solid capitalisation following last years rights issue

8.2 8.8 8.7

11.1 10.8

12.6 12.5

11.7

15.2 15.0

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09


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17

Summary

Economical challenges of historical dimensions

Strong measures taken in Q1 to address RWA and credit quality

Prudence in provisioning levels as impaired loans continue toincrease but we expect it to level off during the year

Q2 focus will be to take firm control of our destiny in the ongoingeconomical downturn


18/39

Appendix


19/39

19

Balance sheet

Swedbank Group SEKm Mar 09 Dec 08 %Loans to credit institutions 141 996 128 536 10%

Loans to the public 1 282 258 1 287 424 0%

Interest-bearing securities 169 813 133 694 27%

Shares and participating interests 59 484 60 182 -1%

- for which customers bear the investment risk 52 551 51 638 2%Derivatives 111 752 128 055 -13%

Other assets 65 493 73 799 -11%

Total assets 1 830 796 1 811 690 1%

Amounts owed to credit institutions 358 812 316 730 13%

Deposits and borrowings from the public 471 833 508 456 -7%

Debt securities in issue 610 256 593 365 3%

"Financial liabilities for which customers bear the investment risk" 53 126 52 074 2%

Derivatives 103 409 116 720 -11%

Other liabilities and provisions 104 471 93 128 12%

Subordinated liabilities 45 874 44 755 3%

Equity 83 015 86 462 -4%

- Non-controlling interest 257 232 11%

- Equity attributable to shareholders 82 758 86 230 -4%

Total liabilities and equity 1 830 796 1 811 690 1%


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20

Provisioning (P&L effect)

Q1 2009 Q4 2008 Change ChangeSpecific provisions for individually

assessed loan 2 423 832 1 591 191%

Provisions for contingent liabilities, net 10 -6 16 -267%

Provisions for collectively valuedhomogenous groups of loans with

limited value and similar credit risk 126 34 92 271%

Collective provisions for individually

assessed loans 491 574 -83 -14%Additional collective provisions 3 680 3 680

Total provisions, gross 6 730 1 434 5 296 369%

Reversal of individual provisions no

longer required -178 -25 -153 612%

Total provisions, net 6 552 1 409 5 143 365%


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21

Lehman Brothers

Collateralised exposure related to Lehman Brothers isUSD 1,350m Collateral consists of 69 commercial real estate loans, secured

by 55 properties

9 loans were non-performing at March 31

Aggregate notional value of assets well above book value of Lehmanexposure

Additional stress tests performed due to the furtherdeteriorating CRE market in the US Appr. 2/3 of the notional portfolio consists of loans to high quality*

commercial real estate. No need for provisions

Appr. 1/3 of the notional portfolio consists of development projects indifferent stages of completion. These have been valued mark to market

*strong DSCR, stable contract situation and/or very low LTV


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22

Exposures FAQ

Private Equity related exposures isEUR 1,425m in total

Nordic related LBOs

99% Senior lending

Largest sector is health care with 45%

Average size of single exposure isEUR 60m

Lending exposure to shipping sector isEUR 2,081m plus unutilised commitmentsof EUR 693m

Portfolio duration is 4y

Average fleet age is 6y 9% is dry bulk

2.7% is car carriers

Strong employment profiles

Tanker

33%

Ro-Ro,

Container

&Bulk

25%

Offshore

42%


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23

Exposure FAQ

Hedge Fund Exposure is EUR 94m

All collateralised

Total exposure to SIVs and Conduits is EUR 8m

Total Exposure to CDOs is EUR 2m


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24

Low risk in interest-bearing securities (SEK 170bn)

Holding distributed by currency

SEK

76%

NOK7%

EUR

12%

LVL

0%

LTL

1%

USD

4%

EEK

0%

GBP

0%

Geographic distribution of issuers

Sweden

76%

Norway7%

UK

5%

Baltics

2%US

4%

Other

6%

As of 31 March 2009,around 15% of theGroups interest-bearingsecurities were valuedusing valuation modelsagainst 19% as of 31December 2008.

* Recognised at fair value with changes in value through P&L.** Measured at amortised cost

Holding distributed by sector

Central banks

29%

Mortgage bonds,

covered23%

Banks

11%

Other

corporations

8%

States &

municipalities14%

Other financial

corporations

9%

Mortgage bonds,

not covered

6%

Accounting classification

Held for trading*

94%

Held-to-maturity

investments** initial

classification

1%

Held-to-maturity

investments** reclassified

as of 2008-06-30

Held-to-maturity

investments**


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25

Maturity profile long-term funding

Swedbank Mortgage, long-term maturity profile

0

20

40

60

80

100

120

2009 2010 2011 2012 2013 2014-

SEK bn, nom

Swedbank AB, long-term maturity profile

(excl. Swedbank Mortgage)

0

20

40

60

80

100

120

2009 2010 2011 2012 2013 2014-

SEK bn, nom

Swedbank Mortgage Q1 2009 total loan portfolio


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26

Swedbank Mortgage, Q1 2009, total loan portfolioSEK 642bn (Euro 59bn)

Lending

Single-family homes;

60.2%

Multi-family houses; 4.9%

Tenant Owners Assoc.;

11.4%

Commercial; 0.2%

Municipalities etc; 3.0%Forest- & Agricult.; 6.2%

Condominiums; 14.2%

Loan to value (LTV)

0

50 000

100 000

150 000

200 000

250 000

85%

SEKm

Single-family homes Condominiums Multi-family houses (incl Condo Ass)

SEK 6.5bn

Other lending to the public Sweden SEK 306bn


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27

Other lending to the public, Sweden, SEK 306bn(excl. Swedbank Mortgage)

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

SEKm

Municipalities

Other corporate lending

Forestry and agriculture

Transportation

Manufacturing

Construction

Retail, hotels and

restaurantsReal estate management

Private individuals

Real estate management

Residential

properties

26%

Tenant-owned

housing-

associations

17%

Industry

properties

8%

Commercial

properties

40%

Other realestate mgmt

9%


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Appendix Baltic Banking


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29

Asset quality

050

100150200250300

350400450

Q1

08

Q2

08

Q3

08

Q4

08

Q1

09

0%1%2%

3%4%5%

6%

7%8%

EURm Loan loss ratio, %

% Q1 09 Q4 08

Estonia 3.31 1.32

Latvia 14.13 3.70

Lithuania 6.00 0.77

Baltic Banking 7.50 1.91

Impairment losses

Q109 2008YE 2007YE

Overdues >60 days, EURm 1,113 536 101

Overdues >60 days, % 5.9 2.7 0.5

Risk indicators

Loan loss ratio


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30

Asset quality by country

Latvia

8 11 16

60

229

0

50

100

150

200

250

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09

EURm

Estonia

7 11 1429

68

0

50

100

150

200

250

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09

EURm

Lithuania

3 4 12 11

86

0

50

100

150

200

250

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09

EURm

Impairment loss dynamics

0%

2%

4%

6%

8%

10%

12%

14%

Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09

Est Lat Lit Baltic Banking

Loan loss ratio


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31

Overdue developments

Overdues, EE Corporate

2,5%

0,9%

4,5%

0%

2%

4%

6%

8%

10%

Mar-08 Jun-08 Sep-08 Dec-08 Mar-09

31-60 days 61-90 days over 90 days

Overdues, LV Corporate

4,0%

2,9%

9,4%

0%

2%

4%

6%

8%

10%



Overdues, LT Corporate

7,5%

0,3%

5,2%

0%

2%

4%

6%

8%

10%



Overdues, EE Private

1,4%

0,6%

1,5%

0%

1%

2%

3%

4%

5%



Overdues, LV Private

2,7%

1,2%

4,1%

0%

1%

2%

3%

4%

5%



Overdues, LT Private

1,0%

0,5%

1,1%

0%

1%

2%

3%

4%

5%



* Overdues / current portfolio

Overdue loans Swedbank Estonia and


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32

Swedbank Latvia vs market

Estonia - overdues over 60 days / currentportfolio

0%

1%

2%

3%

4%

5%

6%

dec-05

mar-06

jun-06

sep-06

dec-06

mar-07

jun-07

sep-07

dec-07

mar-08

apr-08

maj-08

jun-08

sep-08

dec-08

feb-09

Rest of the market Swedbank Estonia (bank)

Estonia - overdues over 30 days / currentportfolio

0%

1%

2%

3%

4%

5%

6%

dec-05

mar-06

jun-06

sep-06

dec-06

mar-07

jun-07

sep-07

dec-07

mar-08

apr-08

maj-08

jun-08

sep-08

dec-08

feb-09

Rest of the market Swedbank Estonia (bank)

Latvia - overdues over 30 days / current

portfolio

0%1%2%3%

4%5%6%7%8%9%

dec-04

mar-05

jun-05

sep-05

dec-05

mar-06

jun-06

sep-06

dec-06

mar-07

jun-07

sep-07

dec-07

mar-08

jun-08

sep-08

dec-08

Rest of the market Swedbank Latvia (bank)

Latvia - overdues over 90 days / current

portfolio

0%

1%2%

3%

4%

5%

6%

dec-04

mar-05

jun-05

sep-05

dec-05

mar-06

jun-06

sep-06

dec-06

mar-07

jun-07

sep-07

dec-07

mar-08

jun-08

sep-08

dec-08

Rest of the market Swedbank Latvia (bank)

Source: Bank of Estonia. FKTK of Latvia. Baltic Banking data


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33

Baltic lending by sectors*

983

1 590

1 576

3 193

451

3 051

0 2 000 4 000 6 000 8 000 10 000

Other***

Construction

Transport

Industry

Retail &

Wholesale

Real-estate

mgmt**

Individuals

EURm

-86

-35

-89

-145

100

-177

-191

-300 -150 0 150

Portfolio (EURm), March 2009 Portfolio growth (EURm), Q1 09

% share of portfolio* Lending portfolio split is based on NACE classification as presented to Central Bank** In Q109 certain loans were reclassified to Real estate management. As a result real estate portfolio grew by EUR 107m while

Construction decreased by EUR 62m. Other business services EUR -37m and Energy EUR -1m*** Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans

2%

5%

8%

8%

16%

16%

45%Mortgage Other


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34

Mortgage portfolio

EE Mortgage overdues > 30 days

0%

1%

2%

3%

4%

5%

6%

7%

0m 6m 12m 18m 24m 30m 36m

Overd

ues/Balance,

%

2005 2006 2007 2008

LV Mortgage overdues > 30 days

0%

1%

2%

3%

4%

5%

6%

7%

0m 6m 12m 18m 24m 30m 36m

Overdu

es/Balance,

%

2005 2006 2007 2008

All vintages are converging to thesame level of overdues. Complicatedto separate the effects of originationquality from the downturn impact

* Part of loans issued backed by guarantee of the State insurance company

LT Mortgage overdues* > 30 days

0%

1%

2%

3%

4%

5%

6%

7%

0m 6m 12m 18m 24m 30m 36m

Overdu

es/Balance,

%

2005 2006 2007 2008


35/39

35

Mortgage portfolio quality indicators

Est Lat Lit*LTV, total portfolio: Q1 09 69% 78% 79%

LTV, total portfolio: Q4 08 67% 71% 70%

LTV>80% 33% 46% 46%

LTV>100% 14% 23% 24%

* Part of loans issued backed by guarantee of the State insurance company

High risk concentration in mortgageportfolios stays ~12% in Estoniaand ~20% in Latvia, Lithuania. Highrisk is defined as all loans with loan

to value ratio (LTV) over 75% andloan servicing ratio over 50%

Due to the residential price drop,Baltic Banking has a higher shareof under-collateralised loans. Morethan 1/5th of loans issued in Latviaand Lithuania already haveLTV>100%. A further drop by 20%will mean that close to 50% of theportfolio will be under-collateralised

C


36/39

Corporate client portfolio

The effect of the downturn has shown a deterioration of BalticBanking real estate, in particular residential developmentportfolio

Downgrades have led to provisions increase by EUR 116.6m

in Q1 2009 (not including the additional collective provision)

BB Rating 6 & 7 exposures

0 200 400 600 800 1 000 1 200

Q1 2009

Q4 2008

Q4 2007EURm

Commercial real estate

Production

Retailing

Transportation

Other

BB Total provisions, YTD

0 50 100 150 200 250 300 350 400 450

Q1 2009

Q4 2008

Q4 2007

EURm

Commercial real estate

Production

Retailing

Transportation

Other

B l i l di b l


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37

Baltic lending by sectors real estate

Estonia

24%

6%

22%

28%

15%

5%

Latvia

16%

13%

22%

12%3%

34%

Lithuania

13%

6%

30%40%

6%5%

Office

Production&Warehouse

Residential

Retail

Land plots

Other

C ll t l b kd


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38

Collateral breakdown

Mar2009 %

Dec2008 %

State 396 2 370 2

Private real-estate 7 481 37 7 321 36

Corporate real-estate 6 898 35 7 715 38

Guarantees 361 2 317 2

Other collateral* 3 547 18 3 742 18

Unsecured 1 299 7 1 104 5

Unsecured corporate 505 3 776 4Unsecured private 794 4 328 2

Total** 19 980 100 20 569 100

Baltic Banking loan portfolio is adequatelysecured

Private mortgage portfolio is fully covered

with family houses and apartments (as a rule

owner occupied)

Commercial real estate collaterals arerevaluated at least once per year. Valuation

is performed by independent experts

Full asset pledge, including tangible assets

and current assets, is most common case for

Corporate portfolio. Collateral position

enhancement with owner guarantees and

additional collateral is used for more risky

customers and SME segments

The share of unsecured loans is low: 7%(used for top ratings in corporate segment

and consumer products in private)

Baltic Collateral (EURm)

*Other collateral is deposits. customer payments. vehicles. etc** Total loans including repos

V l d l t


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39

Volumes development

Loan portfolio

0

5 000

10 000

15 000

20 000

06 07 08 Mar09 06 07 08 Mar09 06 07 08 Mar09 06 07 08 Mar09

EURm

-10%

10%

30%

50%

70%

90%

portfolioYoY % growth

Estonia Latvia Lithuania Baltic Banking

Loan/Deposit ratio

100%

150%

200%

250%

300%

2006 2007 2008 Q109

Estonia Latvia Lithuania Baltic Banking

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CEO presentation of Q1 2009 results

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