Roadshow, Frankfurt, Johannes Rudbeck

8/8/2019 Roadshow, Frankfurt, Johannes Rudbeck

1/16

SEB Enskilda

Investment Ideas in Scandinavia12 September 2008Johannes Rudbeck

Head of IR


2/16

(2)

Continued solid results in Q2

Continued solid results in allbusiness areas

Net profit for the period Jan-Junincreased by 8 percent toSEK 6 504m (6 022)

Conversion to covered bonds on

21 April decreased spreads,increased liquidity and facilitatedfunding

New capital adequacy objective

for full Basel 2 Tier 1 capitalratio is to be 8.5-9.0 percent

Credit quality remains good and inline with expectations

The macro environment in theBaltic states has deterioratedcompared with expectations inQ1, affected by a weaker

European economy

Net gains and losses on financialitems were positively affected byunrealized valuation effects

valuation volatility expected todecrease as from Q3 2008.


3/16

(3)

H1 2008 best half-year so far

0

50

100

150

200

250300

350

400

450

Q2

06

Q3

06

Q4

06

Q1

07

Q2

07

Q3

07

Q4

07

Q1

08

Q2

08

Prof it for the per iod of which Fi rst Securities

SEKm

Swedish Banking Baltic Banking International Banking Swedbank Markets

500

1,000

1,500

2,000

Q1

07

Q2

07

Q3

07

Q4

07

Q1

08

Q2

08

Profit for the period

SEKmSEKm

900

950

1 000

1 050

1 100

1 150

1 200

1 250

1 300

Q1

07

Q2

07

Q3

07

Q4

07

Q1

08

Q2

08


SEKm

25

50

75

100

125

150

Q1

07

Q2

07

Q3

07

Q4

07

Q1

08

Q2

08


SEKm


4/16

(4)

Initiatives in line with our strategy

Ukraine and RussiaBalticsSweden

Stable baseGrowth andexperience

Future growth andprofitability

Structural initiatives operation and branches

Channel management Corporate market andmetropolitan areas

Private banking, life and

pension, environmentallyfriendly products and services

Build-up of critical functionsand growth management

Grow distribution network -ATMs, branches and agencynetwork

Broaden product range

Re-branding completed Capture future growth

Productivity improvement Cross-border capabilities IT management and

development Corporate sector leverage on

pan-Baltic position

Broaden customer offerings Re-branding starting in autumn

Share of lending: 80 % Share of lending: 16 % Share of lending: 2 %


5/16

(5)

The Swedish economy is slowing

Real GDP growth

1.0%

1.5%

2.0%

2.5%

3.0%

2007 2008F 2009F

Sweden Euro-zone

CPI growth

0.0%

1.0%

2.0%

3.0%

4.0%

2007 2008F 2009F

Sweden Euro-zone

The Swedish economy has performed better than the EU average. However, GDP growth,CPI and other indicators show that the Swedish economy will grow more slowly in the next fewquarters

Higher inflation, rising interest rates and weaker disposable income for households areexpected to lead to weakening household consumption and credit growth.

Source: Swedbank, Economic Secretariat


6/16

(6)

Baltic macro development

Baltic growth decelerates

Less favourable global situation, e.g. weaker

export demand, more expensive borrowing

Imbalances built up during the times of rapidcredit growth weigh heavy on the economies

Need of restructuring evident

To return to a sustainable growth path, a moveaway from non-tradables and towards tradablesis necessary: restructuring is costly and takes

time There are signs of restructuring underway, but it

is far from complete

The deepest slowing likely to be seen in LV

where imbalances have been largest

Real GDP growth, % YoY

-5

0

5

10

15

Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08

%

Estonia

Latvia

Lithuania

Domestic Credit and Housing Loans, % of GDP

0

25

50

75

100

Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08

%

EE Domestic

creditEE Housing

loansLV DomesticcreditLV Housing

loansLT Domestic

creditLT Housing

loans

Average Labour Productivity growth, % YoY

-5

0

5

10

15

Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08

%

Estonia

Latvia

Lithuania


7/16

(7)

Baltic macro outlook

Fall in activity will be shallower and recovery faster than benchmarks (busts inindustrial countries)

Less institutional rigidities Fiscal and monetary policies likely to be less pro-cyclical, support from EU funds

Low actual level of leverage in the economy

Household consumption will contract

Investment will contract

Imports will contract due to shrinking consumption and investment Recovery in late 20092010 depends on global recovery in H2 2009 Export

development outlook

Producer price inflation of exported goods has swiftly decreased

By 2009 energy prices will have converged to the levels of western Europe

Companies are increasingly investing to improve their productivity thus improving theirresistance to negative shocks

Real estate market will lag behind overall recovery as consumers will be unsureabout the start of recovery and will try to rebuild their depleted savings first


8/16

(8)

Summary economy and banking sector

Baltic economies have strong long term growth potential, e.g.

Average labour productivity being at 60-70% of the EU 27 average providesample opportunities for productivity convergence

EU funds are expected to amount to ca 2% of annual GDP till 2013, providingsupport to real convergence

Only 15-25% of households have mortgages

Good institutional framework, e.g. in the World Banks Doing Business 2008index Latvia ranked 22nd among 175 countries

Significant restructuring of the economies and the banking sector is

expected - different risk assessment, different pricing and labour lay-offs Successful return to sustainable growth path and stability achieved only if

successful structural reforms are implemented to boost productivity


9/16

(9)

Credit quality, Group

*Loan losses, net = write-offs +provisions - recoveries + change inproperty taken over

Loan losses, net

Loan loss ratio

-200-100

0100200300400500600

Q1

-03

Q2

-03

Q3

-03

Q4

-03

Q1

-04

Q2

-04

Q3

-04

Q4

-04

Q1

-05

Q2

-05

Q3

-05

Q4

-05

Q1

-06

Q2

-06

Q3

-06

Q4

-06

Q1

-07

Q2

-07

Q3

-07

Q4

-07

Q1

-08

Q2

-08 -0.20

-0.100.000.100.200.300.400.500.60

SEKm %

Impaired loans

Share of impaired loans

0

1,000

2,000

3,0004,000

5,000

6,000

Q3-03

Q4-03

Q1-04

Q2-04

Q3-04

Q4-04

Q1-05

Q2-05

Q3-05

Q4-05

Q1-06

Q2-06

Q3-06

Q4-06

Q1-07

Q2-07

Q3-07

Q4-07

Q1-08

Q2-08

0.000.050.100.150.200.250.300.350.400.450.50

SEKm %


10/16

(10)

Credit quality, Baltic Banking

0.54%

0.30%

0.73%0.55%

Q2 08

0.39%

0.25%

0.53%0.38%

Q1 08

0.47%

0.28%

0.64%0.48%

H1 08

-0.18%Group level provision adjustment

0.28%Baltic Banking

0.10%Lithuania

0.63%Latvia0.58%Estonia

Q4 07

*Loan loss ratio, net = (changes in provisions + net write-offs) /credit portfolio at the beginning of the period

Loan loss ratio, net*

Overdue ratio (more than 60 days)*

0.86%

0.92%

0.79%Q1 08

1.20%

1.11%

1.24%Q2 08

0.71%Baltic Banking

0.75%Private

0.65%CorporateQ4 07

*Overdue ratio (more than 60 days) = volume of loans morethan 60 days overdue /12 month-old credit portfolio


11/16

(11)

Baltic banking overdues vs market

Estonia - overdue over 60 days / current

portfolio

0.0%

0.5%

1.0%

1.5%2.0%

31.1

2.0

5

30.0

6.0

6

31.1

2.0

6

30.0

6.0

7

31.1

2.0

7

30.0

4.0

8

Rest of the market HB Bank

Estonia - overdue over 30 days / current

portfolio

0.0%0.5%1.0%1.5%2.0%2.5%3.0%

31.1

2.0

5

30.0

6.0

6

31.1

2.0

6

30.0

6.0

7

31.1

2.0

7

30.0

4.0

8

Rest of the market HB Bank

Latvia - overdue over 30 days / current portfolio

0%

1%

2%3%

4%

5%

31.1

2.0

4

30.0

6.0

5

31.1

2.0

5

30.0

6.0

6

31.1

2.0

6

30.0

6.0

7

31.1

2.0

7

Rest of the market HBA Bank

Latvia - overdue over 90 days / current portfolio

0,0%

0,5%

1,0%

1,5%2,0%

2,5%

3,0%

31.1

2.0

4

30.0

6.0

5

31.1

2.0

5

30.0

6.0

6

31.1

2.0

6

30.0

6.0

7

31.1

2.0

7

Rest of the market HBA Bank

Source: Swedbank, Bank of Estonia, and Financial and Capital Market Commission (Latvia)


12/16

(12)

Observations so far during Q3

Baltic macro development continue to be weak no surprises incredit quality

Signs of declining lending growth in Sweden foremost in privatesector but also towards corporates

Tight funding markets with increasing spreads for all players

The funding market is expected to remain tough throughout 2008

Trading, especially equities, continues to be slow

Internal risk rating, risk profile, watch list and loan losses hasremained stable in Sweden

Swedish macro development is slowing isolated customers insegments such as capital goods and retail trade are getting morestressed


13/16

(13)

Swedbank lending and funding

Swedbank Treasury (excluding Mortgage)

Large deposits

Liquidity reserves

Net lender in the interbank market

Liquidity limits conservative view

Swedbank Mortgage

constitutes a larger part of

Swedbank Groups balance

sheet than other financial

institutions

Distribution of Net Funding Need

Swedbank Mortgage

Lending to the public, SEK 1,169bn

SwedbankGroup, excl.SwedbankMortgageSEK 596bn

SwedbankMortgageSEK 573bn- Exclusively Swedishmortgage lending

Funding

12%

Equity

8%

Deposits

80%

Covered Bonds

73%

Equity

5%

Commercial

Papers

22%

Ukraine1%

Russia1%

Lithuania5%

Latvia5%

Estonia7%

SwedbankMortgage

49%

Sweden30%

Nordic; 3%


14/16

(14)

Maturity profile Swedbank long-term funding

Swedbank Mortgage - Long term funding, maturity profile

June 30 2008

0

20

40

60

80

100

120

2008 2009 2010 2011 2012 2013 2014-

SEK bn

Covered

Swedbank AB - Long term funding, maturity profile

June 30 2008

0

20

40

60

80

2008 2009 2010 2011 2012 2013 2014-

SEK bn

Senior Subordinated


15/16

(15)

New capital adequacy target mid-term

New target:The capital ratios will at least meet the level that at any given time is

considered appropriate to maintain sustainable financial stability anddevelop operations. Considering full effect of Basel 2, the Tier 1 capital ratiois to be 8.5-9.0%.

Swedbank is currently well capitalized given the current risk profile and the

risk development under an adverse scenario Swedbank is currently capitalized in line with European peers in full Basel 2

In relative terms Swedbank has a low risk business model with apredominance of Swedish mortgage business and low counterparty risks,

which indicates a lower than average Tier 1 capital ratio. Growing presencein Eastern Europe indicates higher Tier 1 capital ratio


16/16

(16)

Summary

Swedbank offers a strong and stable banking operation with highprofitability across several geographical areas

Baltics is continuing to slow down, need for further restructuring, stronglong-term growth potential intact

Signs off a gradual slow down of lending growth in Sweden, credit qualityremains strong

Focus on efficiency to secure continued profitable growth

Solid results in H1 2008

Roadshow, Frankfurt, Johannes Rudbeck

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