Banking

B ki & Insurance
I CEO Conference
C f
29 September 2010
Michael Wolf, CEO
Progress
g continued throughout
g Q2
• Net profit of SEK 1.6bn

• Improved credit quality

• Term funding YTD higher than full year maturities

• Strengthened capitalisation to 12.7 per cent Core Tier 1

approvall tto buy
b b back
k Ti
Tier 2 b
bonds
d

2
Recent business achievements
• Higher mortgage new sales market shares in Sweden

• Increased corporate activity

• Continued strong deposit trend

• Retail’s tailored service concept well received

• New in-principle framework agreement with Savings Banks

Association

3
Result by business area

Q2 update SEKm Profit before impairments

2 000
Retail Q1 10

Solid credit quality, higher customer activity 1 000

Q2 10

Large Corporates & Institutions 0

Good credit quality, repricing continues, slower
trading -1 000

Baltic Banking -2 000

Improving asset quality, stabilised NII, Estonia Retail Large Baltic Russia & Asset Ektornet
Corporates & Banking Ukraine Management
back to profit Institutions

Operating result
SEKm
Russia & Ukraine 2 000
Stabilising credit quality, continued restructuring Q1 10

i R
in Russiai 1 000
Q2 10

Asset Management 0
Stable earnings
g
-1 000
Ektornet
Repossessed properties valued at SEK 1 010m, -2 000
intake slower than the plan Retail Large Baltic Russia & Asset Ektornet
Corporates & Banking Ukraine Management
Institutions

4
Net interest income

Pressure decreasing
g
SEKm
5 000

Retail LCI Baltic Banking Russia Group Treasury

4 500 & Ukraine and Other
4 023
4 000 3 799
62 -89
89
-34 41
-204
3 500

3 000

2 500

2 000

1 500

1 000

500
NII Q1 10 NII Q2 10
0

5
Net commission income

Commissions back to p
pre-crisis levels
• Positive trend from Q1 2009

• Market leader in cards and payments

• Growth driven by Asset Management

Net commission income*

SEK
SEKm
3 000

2 500

2 000

1 500

1 000

500

0
Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10
* Excl non-recurring items
6
Liquidity & Capital management

Term funding
g ahead of plan
p
• YTD, SEK 150bn in term funding of Outstanding wholesale funding
(nom SEKbn )
which around SEK 50bn during the
Total long- 456
second
d quarter
t term, non- 459
guaranteed 397
• SEK 60bn in remaining term funding
Total long- 173
maturities to roll or replace in 2010 term, 174
guaranteed* 180
• YTD around SEK 95bn of central bank
repos and guaranteed funding has been Central bank
89
108
redeemed repos
116

• Average maturity of wholesale funding Total short- 112

term, non- 87
further extended to 25 months guaranteed** 97
(38 months for covered bonds)
Total short- 0
term, 28 Q2 2010
guaranteed*** 61 Q1 2010
Q4 2009

* Issued with more than 12 months maturity, government fee of 83bp

** Including interbank deposits
*** Issued with less than 12 months maturity
maturity, government fee of 50bp

7
Asset quality

Asset q
quality
y development
p
• No impact of European sovereign debt crises

• Further stabilisation/improvement in the Baltic countries

• Continued improved risk profiles on both the asset

and liability side

• Swedbank’s
S db k’ resilience
ili vastly
tl iimproved
d
– ICAAP
– Internal
I t l stress
t tests
t t
– Stress test of the Committee of European Banking Supervisors

8
Asset quality

Credit impairments
p significantly
g y reduced
• Sweden very low levels SEKm

8 000

• Smallll recoveries
S i iin R
Russia
i and
d
7 000 6 672
Ukraine 6 121
6 000
• Baltic countries 5 003
5 000
– Few new problems
– Property prices stabilising/increasing 4 000
– Insolvency and debt restructuring laws
3 000
– Positive trend likely to continue 2 210
2 000
963
1 000

-1 000
Q2 09 Q3 09 Q4 09 Q1 10 Q2 10

Retail LCI Baltic Banking Russia & Ukraine Other

9
5Y CDS spreads

Significant
g progress
p g made – still work to be done
400

350

300

250

200

150

100

50

0
30/12/2005 30/06/2006 31/12/2006 30/06/2007 31/12/2007 30/06/2008 31/12/2008 30/06/2009 31/12/2009 30/06/2010

Swedbank SEB Handelsbanken Nordea Danske Bank DnB NOR

Source: Datastream and Reuters

10
Will lending
g margin
g pressure
p decrease?
• Swedbank has re-priced a larger part of liabilities compared to
peers
Source: SEB Enskilda Equity Research

Portion of pre-, post and mid-crisis funding matters

Nordic banks long term funding broken down by time of issuance (based on ~3,000 bonds)

120%
 The two extremes:
100%  Swedbank has only 30%
pre-crisis funding and
80%
50% mid crisis funding
60%  Handelsbanken has 60%
pre-crisis funding and ony
40% around 20% mid-crisis
20%
funding

0%
Sw edbank DnB NOR Nordea SEB Danske BankHandelsbanken

Pre-crisis Mid-crisis Post-crisis

EQUITY RESEARCH 10

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Basel 3 impact
p on Swedbank post
p July
y amendments*

• NSFR is more or less in-line with proposed future minimum requirements,

and LCR is well ahead of minimum requirements

• Core Tier 1 capital expected to decrease less than 4%, and RWA expected
to increase less than 2% compared with Basel 2

• Swedbank has a leverage ratio with a substantial margin to the proposed

minimum level of 3%

*Preliminary calculations
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Summary
y
• NII pressure decreasing

• Improved risk profiles on both the asset and liability side

• Term funding ahead of plan

• Resilience vastly improved

13
New insolvency
y law in Latvia
Legal protection proceedings Insolvency proceedings Insolvency proceedings
of legal entities of private persons
NOVELTIES
• LPP plan = business plan • Debtor’s property should be • Debtor’s property should be enforced in 6 months
• Diminished possibility to use LPP in bad enforced in 6 months • Simplified procedure to cancel appointment of administrator,
faith, to delay time • Simplified procedure to cancel also with participation of secured creditors
• Debtor should be able to make factually appointment of administrator, also • Possibility to restructure obligations of our clients by reaching
all payments under agreements with participation of secured an agreement that the client will make concrete payments to the
concluded with bank creditors bank. Other creditors will not be entitled to ask enforcement of
• Additional requirement to quality of the • Administrator by agreement with this pledge
LPP plan – money flow, substantiation of bank is entitled to sell property • Possibility to check agreements concluded by debtors 3 years
incomes etc. without auction, also the company before proclamation of insolvency
• ‘Easier’
Easier to initiate LPP as a whole
SWEDBANK’S VIEW
Positive Positive Negative
Improvement of speed and efficiency of Improvement of speed and Efficiency of proceedings depends on the court practice.
proceedings efficiency of proceedings Amendments which are crucial for Swedbank:
Amendments,
– If total liabilities exceed LVL 100th (EUR 142th), insolvency
procedure lasts 3.5 years
– If total liabilities do not exceed LVL 100th (EUR 142th),
insolvency procedure lasts 2 years. Client has to repay the
unsecured d partt off the
th loan
l that
th t has
h remained
i d after
ft the
th sale
l off
collateral covering 30% of his/her official income, but not less
than LVL 60 (EUR 85) per month (i.e. 1/3 of min salary)

Neutral (in total)

Th new law
The l provides
id many positive
iti novelties
lti to
t the
th existing
i ti regulation
l ti off insolvency
i l proceedings,
di but
b t its
it efficiency
ffi i will
ill depend
d d on mechanism
h i off
implementation. In total the law changes are not expected to change the trend in credit impairments.

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