35
Nordea’s strategic direction UBS Global Financial Services Conference, 8 May 2012 Christian Clausen, President and Group CEO
Nordea’s strategic direction UBS Global Financial Services Conference, 8 May 2012
Christian Clausen, President and Group CEO
Disclaimer
2 •
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.
Key messages
3 •
• Nordea’s business model delivers strong fundamentals
• Improved relationships
• High diversification
• High RoE
• Strong capital generation
• Execution of New Normal will build the future bank business model
• Building the future bank business model
• Approx. 100 projects in place
• Target is to reduce costs from new regulations by being more efficient on
costs, capital and liquidity
4 •
• Total income up 35% since 2007
• Relationship customers up 42%
since 2007…
• …and reinforced position as
market leader in corporate
merchant banking
Improved relationships is the long term value driver
Total operating income and relationship customers
Total operating income, EURm
Number of Gold and Private Banking customers, millions
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
0
500
1 000
1 500
2 000
2 500
Q1/0
7
Q3/0
7
Q1/0
8
Q3/0
8
Q1/0
9
Q3/0
9
Q1/1
0
Q3/1
0
Q1/1
1
Q3/1
1
Q1/1
2
• Business model
• Building the future bank business model
Nordea’s focused and prudent business model
6 •
Well diversified and
balanced model
Relationship banking is key
Very risk focused
Resources efficiently used
on core business
Fully integrated model across
countries and business units
The Nordics and its structure as
the home market
7
Risk focus and diversification is illustrated clearly by Nordea’s
integrated and centralised risk and capital management
function and credit portfolio composition
Geography
Products
Industry
Integrated and centralised risk
management framework
• Risk awareness is
incorporated in the business
strategies
• Clear risk, liquidity and capital
management frameworks,
including policies and
instructions for different
risk types, capital adequacy,
capital structure and
renumeration
• Nordeas credit portfolio is well
diversified both in terms of
industry sector and geography
Example; Nordea’s credit portfolio composition
Sovereign15%
Institution14%
Corporate36%
Retail33%
Other2%
Nordea credit portfolio (exposure at default) split by customer type
Denmark21%
Finland29%
Norway16%
Sweden24%
Baltics2%
Poland2%
Russia1%
Other5%
Nordea credit portfolio (exposure at default) split by geography
9
• Since 2001, Nordea’s loan
losses has averaged 16 bps of
total lending
• Historically low credit losses is
the result of a well diversified
credit portfolio, a rigid risk
management process as well
as low risk appetite
…. generates low credit losses over a business cycle
-60
-50
-40
-30
-20
-10
0
10
20
Net loan losses (bps)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Nordea’s Business Model has proven highly effective
10
• Low volatility in earnings due
to diversification both in terms
of geography, industry sectors
and products with a main
focus on traditional banking
• Income from items at fair
value is derived from customer
flow business
• The model has proven
resilient with an average
capital adjusted ROE of 16%
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Total operating income 2001 - 2011 (EURm)
Net interest income Net commission income Trading income Other income
Return on Equity is vital in ensuring stability…
11 •
RoE, adjusted for restructuring costs 2011, percent
Avg. = 19.1
2008 2009 2010 2011
CT1 = 6.8% CT1 = 11.6%
Avg. = 15.3
Avg. = 11.3 Avg. = 11.5
Avg. = 11.1
2012
12 •
… and it gives strong capital generation…
Core Tier 1 capital, EURm
• Generated capital of EUR 6.9bn
since 2006*
• In addition distributed EUR 6.3bn
to shareholders
• Strong capital generation gives
good flexibility
*Adjusted for rights issue
13 •
… as well as a clear increase in Core Tier 1 ratio
Core Tier 1 capital ratio, % (excl. Hybrids)
• Improved ratio by 150bps since
Q1/10 due to;
• Strong profit generation
• Controlled RWA development
• Lending growth of 17%
• RWA growth of 1%
11,6
Basel 2.5 excluding transition rules
• Business model
• Building the future bank business model
New Normal is execution of a “Focused relationship strategy”
5x
2.5x
4x Segments
Customers
Units
Christian Clausen
President and Group
CEO
Ari Kaperi
Group Risk
Management
Group CRO
Casper von
Koskull
Wholesale
Banking
Peter Nyegaard
(COO)
Michael
Rasmussen
Retail Banking
Torsten H.
Jørgensen
Group Operations
& Other Lines of
Business
Fredrik Rystedt
Group Corporate
Centre,
Group CFO
Gunn Wærsted
Wealth
Management
1. Disciplined ROE focus
2. Cost efficiency
3. Capital efficiency
4. Liquidity efficiency
Themes
15 •
An ambitious change plan to counter the effects of the new
regulations on our business model
• Staff reductions
• Efficient branch network
• Internet/mobile banking
• Optimising distribution
mix
• Trim product and services
deliveries
• Better and cheaper
payment solutions
• Digitalisation of central
processes
• Control of IT
development costs
• Free up time for advice
• Reduce staff
• Optimising RWAs
• Configure/design
products
• Meet customer demand
with capital-light products
• Reduce “waste” of too
large credit facilities
• Streamline processes
and collateral routines
• Improve asset/liability
management
• New models for customer
rating and counterparty
risk
• “Think more capital
efficient”
• Shorter maturity of
lending
• Increase deposits
• Reduce funding need
• Diversify funding (short
and long)
• Active funding
programmes in liquid
markets
• Nordic platform for
covered bonds
• Review of prices which
must reflect market
flexibility and new
regulations
• Reduce “waste” of too
large credit facilities
• Strengthen liquidity
management – size and
composition of buffer
• Increase awareness of
the liquidity consumption
of products and how much
this costs
• One system for liquidity
premiums
• Focus on limits
• Fine-tune models and
data
Cost efficiency Capital efficiency Lending efficiency Liquidity efficiency
16 •
Cost efficiency according to plan
17 •
• FTE’s are down by approx.1,600
(4.6%) since mid-2011
• EUR 120m in cost savings
• 6% staff reduction by end 2012
• Shift in Poland to full relationship
banking approach
• FTE’s reduced by up to 400
Total Group full-time equivalents
18 •
• Nordea will deliver flat costs for a
prolonged period of time
Expenses under strict control
Total expenses, EURm
Total income / FTE
# customers per FTE
Focus on improved efficiency
+2%
(EURt) Business volumes / FTE (EURm)
(Nordea Group) Cost to serve a customer (cost / customer) (EUR)
19 •
20 •
Capital efficiency has clearly strengthened our Core Tier 1
RWA development, EURbn
Liquidity premia: An execution of funding efficiency
Purpose
• Align internal pricing with true cost / value of funding and liquidity
• Ensure pricing to customer reflects the true economics of the contract
• Enhance understanding of product and customer profitability
Principles
• Calculated at contract level
• Reflect the characteristics of the contract, e.g. maturity
• Based on Nordea’s cost of funding curve
Status
• “Granular liquidity premia” allocated to business areas, but not below
• Pilots are carried out in a number of areas to assess impact
• Roll-out across most business units planned for Q1 2013
21 •
Customer behaviour supports our distribution journey
Number of manual transactions, million
Number of netbank log-ins, million
Number of unique mobile banking users, thousands
22 • * Semi-annualised
Retail Banking
Transforming the branch network
23 •
Nordic development, manual cash location and share of advisors in branch network staff
Focused on
relationship
customers
78 branches
focused on
Corporate
558 Corporate and
Advisory branches
200 Service
branches
995 Full-service
branches
388 Community
branches
Focused on
daily service
and cash
All Customers
All Services
Nordic branch
network, end 2009
Nordic branch
network 2012
7%
Share of all branches
93%
49%
17%
34%
40%
50%
60%
70%
80%
0
200
400
600
800
1 000
2010 2011 2012 2013 2014
Locations Manual cash
locations
Adviser share
of total staff (rhs)
Retail Banking
24 •
Attracting new customers Net increase of relationship customers, thousands, accumulated
Retail Banking
Wholesale Banking – the core relationship bank
25 •
Customer relationship strategy Product strategy
• Long-term relationships
• Strategic dialogue based on understanding
customer needs
• Customer teams
• Large customer wallet share based on
increased fee-based income and cross-
selling
• Broad, top-quality product range
• Further strengthen the leading Nordic
position as provider of financial market
solutions, advisory and capital markets
access
• Continued strengthening of the structuring
specialist capabilities
• Leveraging the Nordea customer base
Wholesale Banking
European scale and capabilities (relevance),
with local commitment and expertise (intensity)
Relationship strategy is key
Nordic leader in quality and volume
-125 -100 -75 -50 -25 0 25 50 75 100 125
Quality of delivery, index
Imp
ort
an
t re
lati
on
sh
ips (
%) Nordea
100
Nordic leader in customer relationship,
Percent
3
33
0
10
20
30
40
50
60
70
80
90
100
44
12
Nordea Peer 1 Peer 2 Peer 3 Peer 4
41
6
31
10
26
6
10
Core
Basic
Lead
Source: Greenwich Associates 2011
26 •
Wholesale Banking
96
59
42
71 68
60
15 21 18
Successful advisory business
27 •
#1 Advisor, M&A Nordic region, Q1/12 #1 Bookrunner Syndicated Loans Nordic, Q1/12
Bank Deal value Transactions
Nordea Corporate Finance 2.111 6
Barclays 1.800 1
Deutsche Bank 1.800 1
Goldman Sachs 1.800 1
Handelsbanken Capital Markets 1.600 3
JP Morgan Cazenove 1.600 1
SEB Enskilda 759 3
Morgan Stanley 557 1
Swedbank First Securities 510 2
FIH Partners A/S 510 1
Bank Deal value Transactions
Nordea Markets 673 6
SEB Enskilda 563 5
Swedbank First Securities 342 3
HSBC 297 3
RBS 297 3
Citi 297 3
Danske Bank 268 3
Deutsche Bank 197 2
Barclays 197 2
Mitsubishi UFJ Financial Group 196 2
Source: Merger Market and Dealogic
Wholesale Banking
Fair and consistent pricing reflecting funding and capital cost
• Prioritize core relationships
• Stronger focus on customer,
sector and product profitability
• Review of customer portfolio to
identify improvement areas
• Consistent pricing reflecting
credit quality, customer rating,
incurred risk, maturity, etc.
Pricing grid
Maturity
Pricing strategy
28 •
Wholesale Banking
Nordea
Customer
Rating
Business selection
Economic capital
RaRoCaR
32
21
78
33 31
23
74
28
Cost/income RaRoCaR RWA Lending to
Q4/11
Q1/12
Execution of New Normal
29 •
Wholesale Banking
(%) (%) (EURbn)
(EURbn)
deposit gap
Strong Q1 performance
• Further alignment of the Wholesale
Banking value chain
• Mitigate impact of new regulations
• Strict internal resource management
• Optimization of capital utilization in
banking and trading books
Business model refinement
Dedicated offering for entrepreneurs
Increase share of assets in alternative investment products and discretionary management
Dissavings offering
Revitalized retail funds
Tax wrappers
Digitalized and customized reports
Enhance product and reporting offering to reflect market sentiment and customer preferences
Planned and ongoing portfolio strategic initiatives…
30
Wealth Management
31 •
Harvesting business potential and increasing efficiency through
differentiated Relationship Banking
Income / FTE, Private Banking*
*Nordic units
Wealth Management
Traditional
New
traditional
Unit linked
Risk
products
High guarantee
closed for new business
Asset liability matching
Customer migration to
other products
Fee based product
Premium guarantee
Offered as attractive
alternative to traditional
products
Actively grow business
to all segments via all
channels
Actively grow
business via bundling
with bank products
Life & Pensions product strategy 1
Bring Life & Pensions in line with Group ROE target by
increasing cost and capital efficiency
32
Life & Pensions ROE % by product, 2010
Traditional Unit Linked Risk products
Group
ROE target
2
Extensive cost reduction programme
– including scaling down activities in
less profitable areas
Wealth Management
33 •
2,6
2,8
3,0
3,2
3,4
3,6
3,8
4,0
10
/10
11
/10
12
/10
01
/11
02
/11
03
/11
04
/11
05
/11
06
/11
07
/11
08
/11
09
/11
10
/11
11
/11
12
/11
01
/12
02
/12
Nordea
BankInvest
Danske Invest
Jyske Invest
Nykredit
2,6
2,8
3,0
3,2
3,4
3,6
10
/10
11
/10
12
/10
01
/11
02
/11
03
/11
04
/11
05
/11
06
/11
07
/11
08
/11
09
/11
10
/11
11
/11
12
/11
01
/12
02
/12
Evli
OP
Nordea
FIM
Danske
2,4
2,6
2,8
3,0
3,2
3,4
3,6
10
/10
11
/10
12
/10
01
/11
02
/11
03
/11
04
/11
05
/11
06
/11
07
/11
08
/11
09
/11
10
/11
11
/11
12
/11
01
/12
02
/12
Storebrand
Odin
Nordea
Alfred Berg
DnB NOR
Terra/WarrenWicklund
Denmark #2
2,2
2,4
2,6
2,8
3,0
3,2
3,4
3,6
10
/10
10
/11
10
/12
11
/01
11
/02
11
/03
11
/04
11
/05
11
/06
11
/07
11
/08
11
/09
11
/10
11
/11
11
/12
12
/01
12
/02
SHB
SwedbankRobur
SEB
Nordea
Skandia
LF
SEB Externa
SHB Externa
Norway shared #2
Data as of February 2012
Morningstar ratings picking up
Finland #1
Sweden #2
Wealth Management
Key messages
34 •
• Nordea’s business model delivers strong fundamentals
• Improved relationships
• High diversification
• High RoE
• Strong capital generation
• Execution of New Normal will build the future bank business model
• Building the future bank business model
• Approx. 100 projects in place
• Target is to reduce costs from new regulations by being more efficient on
costs, capital and liquidity
Nordea’s strategic direction UBS Global Financial Services Conference, 8 May 2012
Christian Clausen, President and Group CEO
