Download Nordea`s strategic direction

Nordea’s strategic direction
UBS Global Financial Services Conference, 8 May 2012
Christian Clausen, President and Group CEO
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•
Key messages
• 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
3•
Improved relationships is the long term value driver
Total operating income and relationship customers
4,0
2 500
3,5
2 000
3,0
• Total income up 35% since 2007
• Relationship customers up 42%
since 2007…
2,5
1 500
2,0
1 000
1,5
1,0
500
• …and reinforced position as
market leader in corporate
merchant banking
0,5
Q1/12
Q3/11
Q1/11
Q3/10
Q1/10
Q3/09
Q1/09
Q3/08
Q1/08
Q3/07
0,0
Q1/07
0
Total operating income, EURm
Number of Gold and Private Banking customers, millions
4•
• Business model
• Building the future bank business model
Nordea’s focused and prudent business model
Relationship banking is key
Resources efficiently used
on core business
Well diversified and
balanced model
Fully integrated model across
countries and business units
Very risk focused
The Nordics and its structure as
the home market
6•
Risk focus and diversification is illustrated clearly by Nordea’s
integrated and centralised risk and capital management
function and credit portfolio composition
Integrated and centralised risk
management framework
Industry
•
Nordeas credit portfolio is well
diversified both in terms of
industry sector and geography
•
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
Geography
•
Products
7
Example; Nordea’s credit portfolio composition
Nordea credit portfolio (exposure at default)
split by customer type
Other
2%
Sovereign
15%
Nordea credit portfolio (exposure at default)
split by geography
Poland Russia Other
5%
2%
1%
Baltics
2%
Denmark
21%
Retail
33%
Institution
14%
Corporate
36%
Sweden
24%
Norway
16%
Finland
29%
…. generates low credit losses over a business cycle
Net loan losses (bps)
20
10
•
0
-10
•
-20
-30
-40
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
-50
-60
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
9
Nordea’s Business Model has proven highly effective
Total operating income 2001 - 2011 (EURm)
•
10 000
9 000
8 000
7 000
6 000
5 000
•
4 000
3 000
2 000
1 000
•
0
2001
2002
2003
Net interest income
2004
2005
2006
Net commission income
2007
2008
Trading income
2009
2010
Other income
2011
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%
10
Return on Equity is vital in ensuring stability…
RoE, adjusted for restructuring costs 2011, percent
Avg. = 19.1
Avg. = 15.3
2008
CT1 = 6.8%
Avg. = 11.3
Avg. = 11.5
2009
2010
Avg. = 11.1
2011
2012
CT1 = 11.6%
11 •
… 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
12 •
… as well as a clear increase in Core Tier 1 ratio
Core Tier 1 capital ratio, % (excl. Hybrids)
Basel 2.5 excluding transition rules
11,6
• Improved ratio by 150bps since
Q1/10 due to;
•
Strong profit generation
•
Controlled RWA development
•
Lending growth of 17%
•
RWA growth of 1%
13 •
• Business model
• Building the future bank business model
New Normal is execution of a “Focused relationship strategy”
Christian Clausen
President and Group
CEO
Themes
Units
Michael
Rasmussen
Retail Banking
Casper von
Koskull
Wholesale
Banking
Peter Nyegaard
(COO)
Gunn Wærsted
Wealth
Management
Torsten H.
Jørgensen
Group Operations
& Other Lines of
Business
Fredrik Rystedt
Group Corporate
Centre,
Group CFO
Ari Kaperi
Group Risk
Management
Group CRO
1. Disciplined ROE focus
2. Cost efficiency
5x
Segments
4x
2.5x
3. Capital efficiency
4. Liquidity efficiency
Customers
15 •
An ambitious change plan to counter the effects of the new
regulations on our business model
Cost efficiency
Capital efficiency
• Efficient branch network
• Optimising RWAs
• Configure/design
• Internet/mobile banking
• Meet customer demand
• Staff reductions
• Optimising distribution
mix
products
with capital-light products
• Reduce “waste” of too
large credit facilities
• Trim product and services
deliveries
• Streamline processes
• Better and cheaper
payment solutions
• Improve asset/liability
• Digitalisation of central
processes
• Control of IT
development costs
and collateral routines
management
• New models for customer
rating and counterparty
risk
• “Think more capital
Lending efficiency
• 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
Liquidity efficiency
• 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
efficient”
• Free up time for advice
• Reduce staff
16 •
Cost efficiency according to plan
Total Group full-time equivalents
• 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
17 •
Expenses under strict control
Total expenses, EURm
• Nordea will deliver flat costs for a
prolonged period of time
18 •
Focus on improved efficiency
Total income / FTE
(EURt)
Business volumes / FTE
(EURm)
+2%
# customers per FTE
(Nordea Group)
Cost to serve a customer (cost / customer)
(EUR)
19 •
Capital efficiency has clearly strengthened our Core Tier 1
RWA development, EURbn
20 •
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 •
Retail Banking
Customer behaviour supports our distribution journey
Number of manual transactions, million
Number of netbank log-ins, million
Number of unique mobile banking users, thousands
* Semi-annualised
22 •
Retail Banking
Transforming the branch network
Nordic development, manual cash location and share of advisors in branch network staff
1 000
80%
800
70%
600
60%
400
Focused on
relationship
customers
Nordic branch
network, end 2009
Nordic branch
network 2012
78 branches
focused on
Corporate
558 Corporate and
Advisory branches
49%
200 Service
branches
17%
388 Community
branches
34%
7%
Focused on
daily service
and cash
50%
200
All Customers
All Services
0
995 Full-service
branches
93%
40%
2010
2011
Locations
2012
Manual cash
locations
2013
2014
Adviser share
of total staff (rhs)
Share of all branches
23 •
Retail Banking
Attracting new customers
Net increase of relationship customers, thousands, accumulated
24 •
Wholesale Banking
Wholesale Banking – the core relationship bank
Customer relationship strategy
Product strategy
• Long-term relationships
• Further strengthen the leading Nordic
position as provider of financial market
solutions, advisory and capital markets
access
• Strategic dialogue based on understanding
customer needs
• Customer teams
• Large customer wallet share based on
increased fee-based income and crossselling
• Continued strengthening of the structuring
specialist capabilities
• Leveraging the Nordea customer base
• Broad, top-quality product range
European scale and capabilities (relevance),
with local commitment and expertise (intensity)
25 •
Wholesale Banking
Relationship strategy is key
Nordic leader in quality and volume
Nordic leader in customer relationship,
Percent
Basic
100
100
Important relationships (%)
Nordea
90
80
Core
96
Lead
3
33
70
71
68
12
6
59
60
10
50
42
40
30
44
41
6
31
60
26
20
10
15
21
18
10
0
-125 -100 -75
-50
-25
0
25
50
75
100 125
Nordea
Peer 1
Peer 2
Peer 3
Peer 4
Quality of delivery, index
Source: Greenwich Associates 2011
26 •
Wholesale Banking
Successful advisory business
#1 Advisor, M&A Nordic region, Q1/12
Bank
#1 Bookrunner Syndicated Loans Nordic, Q1/12
Deal value
Transactions
Deal value
Transactions
2.111
6
Nordea Markets
673
6
Barclays
1.800
1
SEB Enskilda
563
5
Deutsche Bank
1.800
1
Swedbank First Securities
342
3
Goldman Sachs
1.800
1
HSBC
297
3
Handelsbanken Capital Markets
1.600
3
RBS
297
3
JP Morgan Cazenove
1.600
1
Citi
297
3
SEB Enskilda
759
3
Danske Bank
268
3
Morgan Stanley
557
1
Deutsche Bank
197
2
Swedbank First Securities
510
2
Barclays
197
2
FIH Partners A/S
510
1
Mitsubishi UFJ Financial Group
196
2
Nordea Corporate Finance
Bank
Source: Merger Market and Dealogic
27 •
Wholesale Banking
Fair and consistent pricing reflecting funding and capital cost
Pricing strategy
•
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
Nordea
Customer
Rating
Maturity
Business selection
RaRoCaR
Economic capital
28 •
Wholesale Banking
Execution of New Normal
Business model refinement
•
Strong Q1 performance
Further alignment of the Wholesale
Banking value chain
•
Mitigate impact of new regulations
•
Strict internal resource management
78
32
Q1/12
33
31
21
•
Q4/11
74
23
28
Optimization of capital utilization in
banking and trading books
Cost/income
(%)
RaRoCaR
(%)
RWA
(EURbn)
Lending to
deposit gap
(EURbn)
29 •
Wealth Management
Enhance product and reporting offering to reflect market
sentiment and customer preferences
Planned and ongoing portfolio strategic initiatives…

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
30
Wealth Management
Harvesting business potential and increasing efficiency through
differentiated Relationship Banking
Income / FTE, Private Banking*
*Nordic units
31 •
Wealth Management
Bring Life & Pensions in line with Group ROE target by
increasing cost and capital efficiency
1
Life & Pensions product strategy
Traditional
 High guarantee
closed for new business
 Asset liability matching
 Customer migration to
other products
New
traditional
 Fee based product
 Premium guarantee
 Offered as attractive
alternative to traditional
products
Unit linked
Risk
products
Life & Pensions ROE % by product, 2010
Group
ROE target
 Actively grow business
to all segments via all
channels
 Actively grow
business via bundling
with bank products
Traditional
Unit Linked
Risk products
2
Extensive cost reduction programme
– including scaling down activities in
less profitable areas
32
Wealth Management
Morningstar ratings picking up
Denmark
Finland
#2
#1
3,6
4,0
3,8
Nordea
3,6
3,4
Evli
BankInvest
OP
3,2
3,4
Danske Invest
3,2
Jyske Invest
Nordea
3,0
FIM
Nykredit
3,0
Danske
2,8
2,8
2,6
2,6
02/12
01/12
12/11
11/11
10/11
09/11
08/11
07/11
06/11
05/11
04/11
3,6
03/11
Sweden
02/11
01/11
12/10
11/10
10/10
02/12
01/12
12/11
11/11
10/11
09/11
08/11
07/11
06/11
05/11
04/11
03/11
02/11
01/11
12/10
11/10
10/10
Norway shared #2
#2
3,6
3,4
SHB
Odin
3,2
Swedbank
Robur
SEB
Nordea
3,0
Alfred Berg
2,8
Skandia
2,6
LF
3,4
Storebrand
3,2
Nordea
3,0
2,8
DnB NOR
2,6
Terra/Warren
Wicklund
SEB Externa
2,4
SHB Externa
12/02
12/01
11/12
11/11
11/10
11/09
11/08
11/07
11/06
11/05
11/04
11/03
11/02
11/01
10/12
10/11
02/12
01/12
12/11
11/11
10/11
09/11
08/11
07/11
06/11
05/11
04/11
03/11
02/11
01/11
12/10
11/10
10/10
2,2
10/10
2,4
Data as of February 2012
33 •
Key messages
• 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
34 •
Nordea’s strategic direction
UBS Global Financial Services Conference, 8 May 2012
Christian Clausen, President and Group CEO