Nordea Kredit, Investor Presentation, Q3 2011Published 28 November 2011
• 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 1625Kamilla H. Skytte, Nordea Group Treasury, Chief Dealer, Group Funding Copenhagen, phone +45 3333 1626
Contents:
• Nordea Kredit – in brief• Asset quality, losses and arrears• Loan‐to‐value (For detailed information on LTV please refer to “LTV Report 2011 Q3”)• Legislation• Macro‐economic factors
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Nordea Kredit – in brief I
• Founded in 1993, number of employees 150 (as per 2011, 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 1st half 2011: 529 m DKK, RoE 3.5% and Cost/Income ratio 16.9%
• Mortgage loans at nominal value 2011, Q3: 329.3 bn DKK
• Mortgage loans at fair value 2011, Q3: 333.4 bn DKK
• Market share 2011, Q3: 13.8% (2011, Q2: 13.7%)(Mortgage loans at fair value as a share of all Danish mortgage loans)
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Nordea Kredit – in brief II
• Late payments by borrowers 2011 Q3: 0.38% (2011 Q2: 0.42%) Residential properties and holiday homes, 3½ month after due date
• Average LTV 2011 Q3: 68% (2011 Q2: 66%)
• Total capital ratio 9.0% and Tier 1 capital ratio 9,0% (incl. transition rules)
• Total capital ratio 15.4% and Tier 1 capital ratio 15.4% (excl. transition rules)
• Completely match funded “Pass Through” setup - strict ALM (Asset Liability Management)
• Danish MCIs are closely regulated and supervised by Finanstilsynet(The Danish FSA)
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Nordea Kredit – market shares in per cent of total market
0
2
4
6
8
10
12
14
16
18
20
2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3
per cen
t
0
2
4
6
8
10
12
14
16
18
20
Other properties
Private rentalhousing
Commercial
Agriculture
Owner occupieddwellings andholiday homes
All segments
-
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Nordea Kredit – profit and increase in net lending
0
5
10
15
20
25
30
35
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011,1h
0
200
400
600
800
1000
1200
1400<< Increase in net lending DKK bn Profit before tax DKK m (rhs) >>
Profit before tax for the 1st half of 2011 was 529 m DKK
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CC I, RO: 87.5 bn, 26.3 per cent
• Nordea Kredit has two capital centres:• CC I: Mortgage Bonds (Realkredit-
obligationer, “RO”) are issued out of CC I (1993 - ). More than 97% of the bonds in CC I are grandfathered covered bonds 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 according to UCITS/CRD.
• All new issuance in 2011 exclusively in covered mortgage bonds (SDROs)
Nordea Kredit – mortgage loans at fair value CCs I&II, 2011 Q3: DKK 333.4 bn
CC I, RODKK 97.9 bn 30.2%
CC II, SDRO: 245.9 bn, 73.7 per cent
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Match funded setup due to the strict Balance Principle
Investor
NordeaKredit
Interestpayment
Interestpayment
Principalpayment
Contribu‐tion fee
Principalpayment
Nordea Kredit complies with the strict Balance Principle, and has a completely match funded “Pass Through” setup. Nordea Kredit has no prepayment risk and only negligible interest rate risk and foreign exchange risk.
Borrower
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All property categories ‐ CCs I & II, 2011 Q3 at fair value: 333.4 bn DKK
Nordea Kredit – distribution of loans by property category
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All property categories ‐ CCs I & II, 2011 Q3 at fair value: 333.4 bn DKK
DKK 20.7 bn6.2 %
DKK 13.4 bn4.0 %
DKK 73.4 bn22.0%
DKK 65.7 bn19.7%
DKK 54.5 bn16.4%
DKK 1.8 bn0.5%
DKK 2.4 bn0.7 %
DKK 101.6 bn30.5 %
FixedFixed IOARMARM IOFRN cappedFRN capped IOFRN FRN IO
Nordea Kredit – distribution of loans by type
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Residential properties and holiday homes ‐ CCs I & II, 2011 Q3 at fair value: 230.5 bn DKK
DKK 0.0 bn0.0%
DKK 0.0 bn0.0%
DKK 61.3 bn26.6 %
DKK 58.8 bn25.5 %
DKK 31.7 bn13.7%
DKK 1.6 bn0.7%
DKK 2.3 bn1.0%
DKK 74.8 bn32.5%
FixedFixed IOARMARM IOFRN cappedFRN capped IOFRNFRN IO
Nordea Kredit – distribution of loans by type
Fixed rate loans account for 52.1% of the total loan portfolio
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Nordea Kredit – geographical distribution of loans Q3, 2011
• Total number of citizens 5.56 m January 2011 – Source: Statistics Denmark
14.7 bn DKK 4.4%*9.7 bn DKK 4.2%**(0.58 m citizens – 10.4%)
79.1 bn DKK 23.7%*50.3 bn DKK 21.8%**(1.26 m citizens – 22.7%)
50.9 bn DKK 15.3%*283 bn DKK 12.3%**(1.20 m citizens – 21.6%) 66.6 bn DKK 20.0%*
48.5 bn DKK 21.0%**(0.82 m citizens – 14.7%)* All segments
** Residential properties and holiday homes
NorthDenmarkRegion
CentralDenmarkRegion
SouthDenmarkRegion
RegionZealand
CapitalRegion ofDenmark
122.0 bn DKK 36.6%*93.7 bn DKK 40.7%**(1.70 m citizens – 30.6%)
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Fair value, all segments: 333.4 bn DKK, residential properties & holiday homes: 230.5 bn DKK
• 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
Asset quality - loss guarantee by Nordea Bank Danmark
*) Guarantee period starts when a loan is issued 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 debt outstanding. A new guarantee period starts when the loan is changed e.g. due to remortgaging.
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Asset quality - late payments by borrowers - 3½ month after due date
0,00
0,10
0,20
0,30
0,40
0,50
0,60
2001Q1
2001Q2
2001Q3
2001Q4
2002Q1
2002Q2
2002Q3
2002Q4
2003Q1
2003Q2
2003Q3
2003Q4
2004Q1
2004Q2
2004Q3
2004Q4
2005Q1
2005Q2
2005Q3
2005Q4
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
per cen
t
Residential properties and holiday homesArrears as a percentage of the total amount due
All Danish MCIs * Nordea Kredit0.41%(last 0.41%)
0.38%(last 0.42%)
*) Including Nordea Kredit
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Losses in per cent of mortgage loans at nominal value
0
50.000
100.000
150.000
200.000
250.000
300.000
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011, 1h
Mortgage loans no
minal value
, mDKK
0,000%
0,005%
0,010%
0,015%
0,020%
0,025% Losses % of m
ortgage loans, nom
inal value
Mortgage loans at nominal value
Loss for the year in per cent of mortgageloans at nominal value (rhs)
Nordea Kredit did not experience any losses prior to 1997. In the 1st half of 2011, losses amounted to 21.5 m DKK –total accumulated losses in Nordea Kredit since 1997: 83.5 m DKK
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Nordea Kredit – LTV, loan-to-value 2011 Q3 (2011 Q2)
LTV CC I & II LTV CC I LTV CC II
2011Q3 2011Q2 2011Q3 2011Q2 2011Q3 2011Q2
Owner occupied dwellings
74 71 69 65 77 74
Private rental housing 64 62 57 61 67 63
Commercial 61 55 44 46 63 59
Agriculture 49 49 44 44 50 50
Other properties 40 41 41 41 40 41
Total 68 66 65 61 70 68
Refinancing of Cibor6 loans affects LTV figures in the segments “Private rental housing” and “Commercial”, as loans are being refinanced from the grandfathered RO capital center I, to the SDRO based capital center II. Machineries and other movables can under RO legislation be included in valuation of property, but isn’t possible under SDRO legislation. Hence, the changed LTV figures for the categories “Private rental housing” and “Commercial”.
For more detailed information on LTV – please refer to “LTV Report 2011 Q3”
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Legislation
• Danish mortgage financing is closely 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
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The Danish economy - house prices and foreclosures
7.0009.000
11.00013.00015.00017.00019.00021.00023.00025.000
2003 Q2
2003 Q4
2004 Q2
2004 Q4
2005 Q2
2005 Q4
2006 Q2
2006 Q4
2007 Q2
2007 Q4
2008 Q2
2008 Q4
2009 Q2
2009 Q4
2010 Q2
2010 Q4
2011 Q2
DKK pe
r sqm
Detached housesApartments
0
250
500
750
1.000
1.250
1.500
1993 jan
1994 jan
1995 jan
1996 jan
1997 jan
1998 jan
1999 jan
2000 jan
2001 jan
2002 jan
2003 jan
2004 jan
2005 jan
2006 jan
2007 jan
2008 jan
2009 jan
2010 jan
2011 jan
Foreclosures, seasonally
adj.
‐ all segm
ents
For a number of years house prices increased but by mid‐2006 house prices peaked and subsequently declined. Recently, however, increases have been seen.
For more information on macroeconomics please refer to the current issue of “Economic Outlook” published by Nordea Markets, Economic Research.
Please note that the top graph to the left is based on new, recalculated data for actual sales prices. The data in this new form were first published in December, 2010 and the latest available data are as of end June 2011.
Source: Federation of Danish Mortgage Banks (Realkreditforeningen), Association of Danish Mortgage Banks (Realkreditrådet),The Danish Bankers Association (Finansrådet) and The Danish Association of Chartered Estate Agents (Dansk Ejendomsmæglerforening).
Source: Statistics Denmark (Danmarks Statistik)18
Source: The Danish National Statistical Office. Latest data are as per October 2011
Danish housing market: Hesitant buyers – but with high net wealth• After a rebound house prices have started to decrease moderately again.
• The housing market is affected by elevated uncertainties and a non-positive (currently flat) development in employment.
• Sales are suffering and both dwellings for sale and exposure time are at record-high levels.
• Affordability ratios are low and prices are near a long term fundamental equilibrium.
• Less than 0.5% of total repayments on homeowners’ mortgage have not been paid 3½ months after the due date. Arrears and forced sales have flattened and are now at 3-6 times lower levels than during the 1980s and early 1990s.
• We expect house prices to decrease 3% this year and 1% next year.
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DISCLAIMER – IMPORTANT NOTICE
• This presentation and any information contained in this presentation or supplied in connection therewith, whether in writing or not, are provided for information purposes only. Nordea is not acting as your financial adviser or in any other fiduciary capacity and this presentation should not be treated as giving investment advice.
• This presentation and any information contained in this presentation or supplied in connection therewith, whether in writing or not, do not constitute or form a part of, and should not be construed as, an offer, recommendation, advertisement of an offer or invitation to subscribe for or purchase any securities of any Nordea Group company anywhere in the world or a solicitation of any such offer, and shall neither form the basis of, or be relied on in connection with, any offer or commitment whatsoever.
• Information contained in this presentation is derived from publicly available sources which Nordea believes are reliable, and includes market information based on data provided by third party sources identified herein and estimates, assessments, adjustments and judgments that are based on Nordea's experience and familiarity with the sectors in which it operates. There is no assurance that such estimates, assessments and judgments are the most appropriate for making determinations relating to market information or that market information prepared by other sources will not differ materially from the market information included herein.
• 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 and (iii) 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.
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• You may not distribute this presentation, in whole or part, without our prior express written permission. This presentation is not for release, directly or indirectly, in or into the United States of America, Australia or Japan.
•[1] For presentations in Portugal.
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