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Presentation of Swedbank's Q3 2013 Results from the Press Conference
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© Swedbank
Swedbank’s third quarter 2013 results
Michael Wolf, CEO
Göran Bronner, CFO
Anders Karlsson, CRO
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Stable results
• Stable NII – Loan growth
– Stable back book margins
– Improved funding cost
– Improved deposit margins
• Stronger loan growth in
Stockholm
• Solid asset quality
2
Retail
SEKm Q3 12 Q2 13 Q3 13 ▲ Q/Q ▲ Y/Y
Net interest income 3 405 3 367 3 473 106 68
Net commissions 1 532 1 536 1 550 14 18
Total income 5 413 5 312 5 491 179 78
Total expenses 2 477 2 398 2 389 -9 -88
Profit before
impairments 2 936 2 914 3 102 188 166
Impairments 72 37 106 69 34
ROE, % 25.5 28.1 28.1
C/I ratio 0.46 0.45 0.44
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Robust customer activity
• Stable NII
• Slightly weaker trading
income
• Stable expenses
• Solid asset quality
3
Large Corporates & Institutions
SEKm Q3 12 Q2 13 Q3 13 ▲ Q/Q ▲ Y/Y
Net interest income 768 851 864 13 96
Net commissions 416 523 467 -56 51
Total income 1 655 1 926 1755 -171 100
Expenses excl. variable
staff costs 662 730 660 -70 -2
Variable staff costs 65 104 99 -5 34
Profit before
impairments 928 1 092 996 -96 68
Impairments -38 150 7 -143 45
ROE, % 14.6 14.5 18.3
C/I ratio 0.44 0.43 0.43
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Increasing customer activity
• Improved NII
• Recoveries
4
Baltic Banking
SEKm Q3 12 Q2 13 Q3 13 ▲ Q/Q ▲ Y/Y
Net interest income 753 763 807 44 54
Net commissions 376 445 446 1 70
Total income 1 287 1 378 1453 75 166
Total expenses 556 593 604 11 48
Profit before
impairments 731 785 849 118 64
Impairments -13 -41 -146 -105 -133
ROE, % 11.2 13.4 16.6
C/I ratio 0.43 0.43 0.42
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• Improved NII – Mortgage loan growth
– Treasury
– Margins in Baltic Banking and LC&I
• Stable commission income
• Weaker NGL
• Stable expenses
• Continued solid asset quality
Stable earnings
5
Group results
SEKm Q3 12 Q2 13 Q3 13 ▲Q/Q ▲Y/Y
Net interest income 5 085 5 409 5 641 232 556
Net commission income 2 375 2 525 2 520 -5 145
Net gains and losses 687 296 170 -126 -517
Total income 8 971 8 979 9 225 246 254
Total expenses 3 920 4 126 3 995 -131 75
Profit before impairments 5 051 4 853 5 230 179 377
Credit impairments 36 88 -56 -144 -92
Other impairments 101 372 95 -277 -6
Tax 1 216 913 998 85 -218
Profit from continuing ops. 3 698 3 480 4 193 713 495
ROE continuing
operations, % 15.2 14.1 16.2
C/I ratio 0.44 0.46 0.43
CET 1 ratio, % (Basel 3) 15.4 17.2 18.0
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Reduced RWA
• Mix change
• Rating migration
• FX
• Market risk
6
Capital
Swedbank’s Risk-Weighted Assets development
Basel 2 464.3
Basel 2 455.2 Basel 2
441.6
- 4.7 - 3.7 - 0.6 - 1.4 - 1.4 - 1.9
0.0
Basel 3 487.1
Basel 3 459.5
Basel 3 446.0
360
380
400
420
440
460
480
500
SEKbn
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Continued strong asset quality
• Continued solid asset quality
in Sweden
• Net recoveries in the
Baltic countries
7
Credit impairments, SEKm Q3 12 Q2 13 Q3 13
Retail 72 37 106
Large Corporates & Institutions -38 94 7
Baltic Banking -18 -43 -147
Estonia 2 -36 -38
Latvia 8 18 -70
Lithuania -28 -25 -39
Swedbank Group 36 88 -56
Asset quality
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Swedbank’s third quarter 2013 results
Q & A
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Appendix
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Swedish customer satisfaction index (SKI)
10
60
62
64
66
68
70
72
74
76
78
80
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Swedbank
Industry average
Average rating
Source: SKI/EPSI
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Regulatory initiatives targeting the mortgage market
11
Swedbank´s equity doubled
Source: Swedbank
• LTV cap of 85%
• Amortisation
• Risk-weight floor of 15% on
mortgage loans
• Capital and liquidity
requirements
– High minimum regulatory
requirements (including
SiFi buffer)
– Countercyclical buffer?
– Leverage ratio?
0
20
40
60
80
100
120
2005 Q3 2013
Total equity, SEKbn
Swedish housing market
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0
200
400
600
800
1 000
1 200
90 92 94 96 98 00 02 04 06 08 10 12
Acc increase in population
Acc increase in housing completions
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11
Apartment buildings Single-family dwellings
Shortage of housing
12
Housing completions
Num
ber
of
apart
ments
Population and housing growth
Num
ber
of
hom
es / p
ers
ons,
thousands
Source: Sweden statistics and Swedbank
Swedish housing market
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Loans past due 60 days – performance Q/Q
13
-250
-200
-150
-100
-50
0
50
Q3
-12
Q4
-12
Q1
-13
Q2
-13
Q3
-13
Q3
-12
Q4
-12
Q1
-13
Q2
-13
Q3
-13
Q3
-12
Q4
-12
Q1
-13
Q2
-13
Q3
-13
EURm
Estonia Latvia Lithuania
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Provisions – well provided for
14
* Russia and Ukraine reported as discontinued operations
Provision ratio, % Q3-13
Retail 63
LC&I 43
Baltic Banking 52
Group 53
10 9519 934
7 077
4 429 4 0473 570
2 040
1 774
1 545
1 420 1 3981 325
64% 65%62%
57% 54% 53%
0
5 000
10 000
15 000
20 000
Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13
SEKm
Individual provisions Portfolio provisions Provision ratio
* * *
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Corporate portfolio drives capital efficiency
15
Credit portfolio - Retail
Segments excl. Swedbank
Mortgage and Swedbank Finance
Volume
(SEKbn)
Secured
(%)
Agriculture 6.1 81
Manufacturing 8.5 74
Public sector and utilities 4.5 92
Construction 4.4 82
Retail 8.9 88
Transportation 2.0 85
Shipping 0.1 95
Hotels and restaurants 3.1 91
Information & communication 0.8 46
Finance and insurance 1.4 66
Property management 52.1 97
Professional service 6.8 65
Other 5.8 72
Total 104.7 87
94
23
105
Total portfolio SEK 222bn
Swedbank Mortgage AB
Swedbank Finans AB
Other
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Agriculture
16
• Segment definitions
– Corporate agriculture: Businesses that derive
their main income from agricultural activities
– Private investments: Private individuals who own
the agricultural properties for living or investment
purposes
• Lending exposure to the agriculture industry
SEK 64.3bn
– Corporate agriculture: (58%)
• Agriculture 45%
• Forestry 13%
– Private investments (42%)
• Residential: 20%
• Forestry: 22%
Agriculture 45%
Forestry 13%
Private: Forestry
22%
Private: Residential
20%
Credit portfolio
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15
5
4
25 24 23
26
25
0
10
20
30
Q3-12 Q4-12 Q1-13 Q2-13 Q3-13
SEKbn Shipping and offshore
Offshore Tanker Other
17
Shipping and offshore
Credit portfolio – Large Corporates & Institutions
• Lending exposure to Shipping & Offshore sector SEK
24.5bn. Decrease over the quarter mainly due to FX
– Portfolio duration 4-5y
– Average fleet age 7y
– Strong employment profiles
-2.4% -7.2%
0 5 10 15 20 25
SEK
EUR
USD
NOK
JPY
Shipping and offshore portfolio by currency
Q3-13
Q2-13
0.5
7.1
1.2
3.9
1.2
1.7
0.7
2.0
0.5
2.0
0.7
1.0
2.0
0 2 4 6 8
Cruise
Drilling & exploration
Oil service
Supply
Accommodation
Floating production
Chemical
Product
Crude oil
Gas (LNG/LPG)
Dry bulk
Container
RORO
Shipping and offshore portfolio by subsegment
Q3-13
Q2-13
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0
200
400
600
800
1 000
1 200
1 400
Q3 20130
200
400
600
800
1 000
1 200
1 400
Q3 2013
Core balance sheet* structure
18
Liquidity and funding
CEE lending
Estonia
Other corporate
lending, Sweden &
other Nordic countries
Other private, Sweden
Swedish
mortgage loans
Senior
Covered
bonds
Deposits
CET1 Suppl. cap
Government guaranteed debt
Assets Liabilities SEKbn SEKbn
* Simplified balance sheet
Q3 2013 Q3 2013
Source: Swedbank Sep 2013
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-10%
0%
10%
20%
30%
40%
50%
0% -5% -10% -15% -20% -25% -30% -35% -40% -45% -50%
OC, Q313
0
20
40
60
2013 2014 2015 2016 2017 2018 2019-
Senior unsecured debt
Senior unsecured debt strategy
19
Source: Swedbank Sep 2013, nominal amounts
• Limited need given Swedbank’s balance sheet structure
• Secure OC
• Fund liquidity reserves
Senior unsecured debt maturity profile
SEKbn
Over-
colla
tera
lisation
House price drop
House price sensitivity of the cover pool
Liquidity and funding
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0
20
40
60
80
100
120
Covered bonds Senior unsecured
Lower funding needs
• LCR 147% (Swedish FSA definition FFFS 2012:6)
• NSFR 91%
• Issued SEK 89bn of term-funding YTD of which SEK 20bn in Q3
20
Liquidity and funding
Term funding issuance – completed and planned
SEKbn
Source: Swedbank, 30 Sep 2013, nominal amounts
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0
50
100
150
200
2013 2014 2015 2016 2017 2018 2019-
Governmentguaranteed debt
Senior unsecureddebt
Covered bonds
21
Long-term funding maturity profile
• Term funding plan for the next 12 months of SEK 120bn to meet maturities of SEK
98bn
21
Long-term funding maturity profile
Source: Swedbank 30 Sep 2013
Liquidity and funding
SEKbn
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Liquidity reserve
22
1 96% of the securities in the liquidity reserve per Q3 2013 are rated AAA
According to the template defined by the Swedish Bankers' Association
2 81% of the additional liquid assets fulfill the Liquidity Reserve definition by the Swedish Bankers’ Association except
from that they are held outside the Treasury department. 3 78% of the additional assets are rated AAA
Liquidity and funding
Source: Swedbank Fact book, Sep 30, 2013
Additional liquid assets, Group2, 3
39 437
SEKm
Cash and holdings in central banks 132 001
Deposits in other banks available overnight 443
Securities issued or guaranteed by sovereigns, central banks or multilateral development banks 46 642
Securities issued or guaranteed by municipalities or public sector entities
Covered bonds 54 170
- Issued by other institutions 54 170
- Own issued
Securities issued by non-financial corporates
Securities issued by financial corporates (excl. covered bonds) 2 314
Other
Total1
235 570
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0
50
100
150
200
250
300
350
400
Next 12-month termfunding maturities
CP / CDs and netinterbank funding,SEKm
0
50
100
150
200
250
300
350
400
Additional pledgeableand/or liquid assets
Liquidity reserve,securities
Liquidity reserve,central bank deposits,SEKm
0
50
100
150
200
250
0 20 40 60 80 100 120 140 160 180 200 220 240 260 280 300 320 340 360
Prefunded in excess of 12 months
23
Liquidity and funding
SEKbn
Source: Swedbank Jun 30, 2013
SEKbn
Days forward
1
1
1 As defined by the Swedish Bankers’ Association
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Limited need for USD funding
24
SEKbn
• USD funding need covered for more than 12 months
• Issued USD 1bn of covered bonds (144a) and USD 1bn of senior (144a) YTD 2013
Source: Swedbank Fact book, 30 Sep 2013
Liquidity and funding
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100
150
200
250
Assets Liabilities
Assets held for sale
Interest-bearing securities
Lending to the public
Loans to credit institutions
Cash and balances withcentral banks
Deposits and borrowingsfrom the public
Amounts owed to creditinstitutions
Debt securities in issue
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Asset encumbrance
25
Liquidity and funding
Source: Swedbank Facts Q3 2013
Encumbered assets - distribution by type of liability (row) and asset (column)
SEKm
Government
debt
instruments
Central banks
and
supranational
debt
instruments
Covered
bonds
Debt
instruments
issued by
credit
institutions
Securities
issued by
corporate and
other issuers ABS
Mortgage
loans Cash Total
of w hich
received
collateral
(off-
balance)
Central bank funding
Intraday settlement 2 444 8 971 11 415 7 856
Repurchase agreements 1) 24 092 11 986 36 078 12 183
Derivative 2) 647 1 322 10 136 12 105 85
Covered bonds 3) 509 350 509 350
Other 4) 700 288 988
Total 27 183 22 279 700 509 350 10 424 569 936 20 124
Financial assets pledged for insurance policy holders 114 256
Unencumbered assets - additional assets available for secured funding
SEKm
Government
debt
instruments
Central banks
and
supranational
debt
instruments
Covered
bonds
Debt
instruments
issued by
credit
institutions
Securities
issued by
corporate and
other issuers ABS
Mortgage
loans Cash Total
of w hich
received
collateral
(off-
balance)
Securities 5, 6) 33 444 21 254 70 426 12 668 8 447 926 147 165 23 997
Cover pool over collateralisation 7) 221 992 221 992
Cover pool eligible assets 8)
Total 33 444 21 254 70 426 12 668 8 447 926 221 992 0 369 157 23 997
1) Repoed securities.
2) Collateral posted under CSA agreements, gross (3-year, SEKm,
High: 21 572, Low : 10 086, Average: 13 453).
3) Of w hich accrued interest of encumbered assets in the cover
pool, SEK 2 173m as of 30 September 2013.
4) Collateral pledged in securities lending activities and w ith
exchanges.
5) Reversed repos are included.
6) All type of securities, including securities non pledgeable at
central banks, of w hich 82% are rated AAA, 2% are rated below
A- and 7% are not rated.
7) Of w hich accrued interest of assets in the cover pool
overcollateralisation, SEK 960m as of 30 September 2013.
8) Securities received as collateral in for example reversed repo
transactions that; either have (encumbered) or have not
(unencumbered), been used as collateral by Sw edbank.
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Swedish mortgage market
• No securitisation (on balance sheet), no sub-prime market, no 3rd party origination, insignificant
buy-to-let market
• 70% home ownership1
• Rental market is regulated
• Transparent credit information (credit information agency, www.uc.se)
– Publicly available information regarding income, debt, payment track record etc
• Consumer credit legislation requires affordability calculations including stress test of higher interest
rate
• Very limited debt forgiveness possibilities (full recourse)
• Strong social security and generous unemployment benefit system
26
Swedish housing and mortgage market
1 Source: Boverket, 2011
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Real estate price performance – Sweden 12 months
27
Swedish housing and mortgage market
Single-family homes1 Tenant-owner rights2 Combined3
12M Δ
12M Δ
12M Δ
Oct-12 1% 6% 3%
Nov-12 3% 7% 4%
Dec-12 4% 7% 6%
Jan-13 3% 7% 5%
Feb-13 4% 7% 5%
Mar-13 3% 7% 5%
Apr-13 2% 8% 4%
May-13 4% 8% 5%
Jun-13 4% 10% 6%
Jul-13 4% 9% 6%
Aug-13 5% 11% 7%
Sep-13 5% 11% 7%
Source: Valuegard www.valuegard.se (Based on data from Mäklarstatistik),
1 HOXHOUSESWE, 2 HOXFLATSWE, 3 HOXSWE
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Baltic countries
28
Real estate prices
Source: Land book database Source: Swedbank, Estonian Land Board
0
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400
600
800
1000
1200
1400
1600
1800
Jan
-05
Jul-0
5
Jan
-06
Jul-0
6
Jan
-07
Jul-0
7
Jan
-08
Jul-0
8
Jan
-09
Jul-0
9
Jan
-10
Jul-1
0
Jan
-11
Jul-1
1
Jan
-12
Jul-1
2
Jan
-13
Jul-1
3
Tallinn
Nr.of deals EUR/m2
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
Jan
-05
Jul-0
5
Jan
-06
Jul-0
6
Jan
-07
Jul-0
7
Jan
-08
Jul-0
8
Jan
-09
Jul-0
9
Jan
-10
Jul-1
0
Jan
-11
Jul-1
1
Jan
-12
Jul-1
2
Jan
-13
Jul-1
3
Riga
Nr.of deals EUR/m2
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
Jan
-05
Jul-0
5
Jan
-06
Jul-0
6
Jan
-07
Jul-0
7
Jan
-08
Jul-0
8
Jan
-09
Jul-0
9
Jan
-10
Jul-1
0
Jan
-11
Jul-1
1
Jan
-12
Jul-1
2
Jan
-13
Vilnius
Nr.of deals EUR/m2
Source: Swedbank. State Enterprise Centre of Registers
EURm EURm
EURm
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Mortgage loans, gross margin (3 months)
The gross margin covers:
Cost of liquidity ~0.2%
Administrative costs ~0.3%
Credit impairments ~ 0.03%
Tax (22 % on profit before tax)
Net margin
0
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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
%
Gross margin Swedbank's funding cost Stibor 3 months Swedish Riksbank's repo rate
