Debt investor presentation Q4 2018 - Nordea
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Debt investor presentation Q4 2018
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
Table of contents 1. Nordea quarterly update 4 2. Capital 21 3. Funding 26 4. Macro 42 3
1. Nordea quarterly update 4
The largest financial services group in the Nordics
Household market Corporate & Institutional
position* market position**
#1 #1 Business position
- Leading market position in all four Nordic countries
- Universal bank with strong position in household, corporate and wealth management
- Well diversified business mix between net interest income, net commission income and capital markets income
10 million customers and strong distribution power
#1 - Approx. 9.5 million household customers
#2
- 570 000 corporate customers, including Nordic Top 500
#1-2 - Approx. 360 branch office locations
#2 #2-3 - Enhanced digitalisation of the business for customers
- Income evenly distributed between NII and ancillary business (48%/52%)
#3-4
#2-3 Financial strength
- EUR 9bn in full year income (2018)
#2 - EUR 551bn of assets (Q4 2018)
- EUR 32.9bn in equity capital (Q4 2018)
- CET1 ratio 15.5% (Q4 2018)
AA level credit ratings
- Moody’s Aa3 (stable outlook)
- S&P AA- (stable outlook)
- Fitch AA- (stable outlook)
EUR ~30bn in market cap (Q4 2018)
- One of the largest Nordic corporations
- A top-10 universal bank in Europe
5 * Combined market shares in lending, savings and investments
** Combined market position from Corporate & Investment Banking, Markets and Commercial & Business BankingNordea is the most diversified bank in the Nordics
A Nordic-centric portfolio (97%) Lending: 46% Corporate and 54% Household
Russia Other Public Sector
2% Other 1% Household (Denmark)
1%
12% 14%
Denmark Shipping and offshore
27% 3%
Sweden Retail trade
30% 3%
Consumer staples Household (Finland)
(food, agriculture etc) 13%
3%
Credit portfolio Credit portfolio
Industrial commercial
by country services etc by sector
4%
EUR 292bn* EUR 292bn*
Other financial
institutions
5% Household (Norway)
10%
Real estate
(residential)
Finland 6%
21% Real estate
Norway (commercial) Household (Sweden)
19% 9% 17%
6 * Excluding reposStrong Nordea track record
53
50
47
43
Acc. dividend EURbn 11.6%* 39
Acc. equity EURbn 37
35
31
29
26
20
18
15
12
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
2005 Q4 2018
CET1 CET1
ratio (%) 5.9** ratio (%) 15.5
Leverage
ratio (%) 5.1
7 * CAGR 2018 vs. 2005, adjusted for EUR 2.5bn rights issue in 2009. Equity columns represents end-of-period equity less dividends for the year. No assumption on reinvestment rate for paid out dividends
** Calculated as Tier 1 capital excl. hybrid loansWell diversified income mix and profit generation between the different business areas
Business area contribution in FY 2018
Operating Income Operating Profit Economic Capital
7% 9% 8%
26% 9%
32% 29%
19%
24%
30%
19%
23%
23% 19% 24%
Personal Banking Commercial & Business Banking Wholesale Banking Asset & Wealth Management Group Functions & Other
8Financial results summary 2018 has been characterised by key deliveries in our transformation Challenging year in terms of revenues – the results are not where we want them to be Costs and cash spending are reduced according to plan Strong credit quality Solid CET1 ratio at 15.5% in line with expectation Nordea Bank Board is going to propose a dividend per share of EUR 0.69 Key priorities for 2019 to increase business momentum and drive structural cost efficiency 9
Nordea Group financial statements Income statement and key figures Income statement, EURm Q4 2018 Q3 2018 Q4/Q3 change 2018 2017 18/17 change Net interest income 1,126 1,072 5% 4,324 4,666 -7% Net fee and commission income 720 703 2% 2,993 3,369 -11% Net fair value result 182 205 -11% 1,088 1,328 -18% Other Income 75 66 600 106 Total operating income 2,103 2,046 3% 9,005 9,469 -5% Total operating expenses -1,384 -1,136 22% -4,879 -5,102 -4% Excl. goodwill write-down -4,738 -5,102 -7% Profit before loan losses 719 910 -21% 4,126 4,367 -6% Net loan losses -30 -44 -32% -173 -369 -53% Operating profit 689 866 -20% 3,953 3,998 -1% Net profit 492 684 -28% 3,081 3,048 1% Excl. goodwill write-down 3,222 3,048 6% Ratios, % Return on equity 6.1 8.7 9.7 9.5 CET1 capital ratio 15.5 20.3 15.5 19.5 Cost/income ratio 66 56 54 54 10
Revenues are down due to structural deals and pressure in three areas
Total income rolling 4 quarters*, EURm Comments
• Revenues are down 6%* in continued operations
9,262 9,041 8,878 -6%
603 536 8,611 8,435 • Pressure in three areas
445
370 299
1,221 1,175 1,132 1,029 963
• Savings and investments
3,151 3,090 3,084 3,026 2,939 • Market making activities
• Lower household lending margins
4,287 4,240 4,217 4,186 4,234
Q417 Q118 Q218 Q318 Q418
Structural NFV & Other NCI NII
11 * In constant currencies and excluding items affecting comparabilityStrong pressure on lending margins in household segment
Household lending margin Sweden* Household lending margin Norway*
100 100
89
74
Q417 Q118 Q218 Q318 Q418 Q417 Q118 Q218 Q318 Q418
Household lending margin Finland* Household lending margin Denmark*
100 100
97
93
Q417 Q118 Q218 Q318 Q418 Q417 Q118 Q218 Q318 Q418
12 * December 2017 = index 100Strong asset quality
Total net loan losses*, EURm Comments
• Trend with low loan losses continued in Q4
• Loan loss level of 5 bps
129
113
106 • Gross impairment rate (Stage 3) down 6 bps from previous quarter to
182 bps
79 • Our expectation for the coming quarters is that net losses will remain
71
low and around the average level for 2018
59
44
40
30
Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418
13 * Total net loan losses: includes Baltics up until Q317Outlook
Cost
• Costs expected to be 3% lower in 2021 vs. 2018 in constant currencies*
• Costs expected to be lower in 2019 vs 2018 in constant currencies**
• Total cash cost expected to be 5-10% lower in 2021 vs. 2018 in constant currencies
• Total cash cost expected to be lower in 2019 vs. 2018 in constant currencies
Credit quality
• Our expectation for the coming quarters is that net losses will remain low and around the
average level for 2018
Capital policy
• Nordea Bank Board has decided to adjust the capital policy to a management buffer range
of 40-120bps with the aim to maintain an unchanged nominal capital buffer
• The ambition is to achieve a yearly increase in the dividend per share, while maintaining
a strong capital position in line with the capital policy
14 * Excluding items affecting comparability, ie EUR141m in goodwill write-down in 2018 related to Russia
** Excluding items affecting comparability, ie EUR141m in goodwill write-down in 2018 related to Russia and approx. EUR 90m in 2019 related to divestment of Luminor-shares and acquisition of Gjensidige BankSignificant changes over the past three years to make Nordea fit for purpose
1 De-risking of the bank with a clear focus on universal banking in the Nordic region
2 Simplification of corporate structure
3 Re-domiciliation to ensure level playing field over time under ECB supervision
4 Fundamentally changed our technological and digital capabilities
5 Replacing core banking platform
6 Considerable investment in risk & compliance, conduct and culture
Measures to position Nordea for a more challenging economic cycle and competitive environment
15Where are we today?
Strong cost control
Strong risk management and attractive risk profile
Very robust capital and funding position
Satisfactory revenue development
Key priorities to increase business momentum, further improve cost efficiencies and drive scale
16Foundational capabilities for digital transformation established
1. Example of achievements,
DIGITAL Digital front-ends last 6 months
RELATION-
SHIP BANK A Drive structural cost efficiency
Remote Advisory
• New mobile front-end
launched in Sweden
Digital sales and service
• Savings and Investments in
Nordea mobile
E2E customer journeys
and digital propositions • Nova Chatbot has reached B Increased business momentum
~25% instant resolution rate in
2. Finland
DIGITAL Future-proof technology
BACKBONE • Group-wide advanced
analytics roll-out
Data backbone
• Continued agile delivery of
new Nora functionality C Increased resilience
3.
Business-led agile deli-
AGILE very model
17Key initiatives to drive structural cost efficiency
priorities
Key Priorities
Drive structural cost
efficiency
Increased usage of AI and robotics
Workforce shift with ramp-up in Poland and Estonia
Simplification of products and services
Efficiency by consolidating common units
Infrastructure partnerships and outsourcing
18Key initiatives to increase business momentum
priorities
Key Priorities
Increase business
momentum
Investments in Private Banking in Norway and Sweden
Gjensidige Bank acquisition
New distribution channels within Asset Management and Wholesale Banking
Regain momentum on mortgages
19Nordea’s stand on anti-money laundering (AML) and Nordea in the Baltics Nordea’s stand on AML • Combatting financial crime is part of our daily operations, collaborating closely with the authorities • We don’t accept to be used as a platform for money laundering • Significantly strengthened transaction monitoring and investigation capabilities – 1.8bn transactions on annual basis subject to hundreds of different monitoring scenarios, resulting in alerts which lead to Suspicious Activity Reports (SARs) • More than 1,500 employees within prevention of financial crime, 12,000 employees in direct contact with customers are trained regularly to identify signs of financial crime – AML is a societal issue, increased cooperation with authorities needed Nordea in the Baltics • Nordea owns 56% of the capital in Luminor, DNB other key shareholder – Blackstone will acquire 80% of the shares in Luminor • Due diligences were conducted by Nordea and DNB when Luminor was created, in 2017, and by Blackstone in the acquisition process • No focus on non-resident deposits and no mirror trading activities have been conducted • Nordea is not aware of any whistleblowing cases • Nordea’s Baltic operation and Luminor have not been subject to any AML/Sanctions regulatory fines 20
2. Capital 21
Common Equity Tier 1 ratio development Q418 vs Q318
Quarterly development Comments
• Common Equity Tier 1 ratio in line with expectation at 15.5%
20.3
• CET1 ratio requirement at 13.9%*
3.3
1.4 15.5
• Management buffer at EUR 2.5bn
• Risk Exposure Amount up EUR 35bn to EUR 156bn
• Swedish mortgage risk weight floors EUR 10.6bn
• ECB IRB floors EUR 25.2bn
Q318 ECB IRB floors SE mortgage floors Q418
22 * Based on Nordea’s capital commitmentECB has granted Nordea temporary permission for continued use of internal models
SREP from the Swedish FSA
(in force until SREP from ECB)
New model
applications sent
During the transition Late
2019
The Q4 2018 CET1 ratio decreased to 15.5% and
the CET1 capital requirement was reduced to 13.9%*
1 Oct The management buffer in nominal terms is largely 2020
2018 unchanged (at the latest)
SREP from the ECB
Nordea remains equally strongly capitalised. Nordea is committed to maintain its AA rating
23 * Based on Nordea’s capital commitmentCapital position
Capital position and requirement Comments
160 bps • CET1 ratio of 15.5% and total capital ratio of 19.9% in Q4 2018
• During the transitional period Nordea has committed to maintain a
nominal capital level based on SREP 2018
P2G
• This level equals EUR 21.7bn in CET1 (~13.9%) and EUR 27.8bn in
11.1% P2R own funds (~17.8%)
CCyB • Regulatory CET1 capital requirement including transitional Pillar 2
3.2% estimated at 11.1% in Q4 2018 (to be increased during 2019)
SRB
EUR 21.7bn 15.5% • During 2019 the O-SII buffer and Systemic Risk Buffer (SRB) will be
0.9%
~13.9% phased in with 2% O-SII buffer applicable from Q1 2019 and 3%
2.5% CCoB
SRB from Q3 2019 (of which the highest is applicable)
• In Q4 2019, ECB is expected to make decisions on potential Pillar 2
Requirement (P2R) and Pillar 2 Guidance (P2G) which are to be
met fully by CET1 capital. In addition to the CET1 capital
4.5% Min.CET1 Req.
requirement, we expect to have Tier 1 and Tier 2 requirements at
the minimum level
Nordea’s capital Nordea regulatory Nordea future Nordea’s Q418 • Current MDA level of 7.9% will during 2019 increase with the SRB of 3%
commitment CET1 req. Q418 requlatory req. CET1% ratio as well as additional adjustments due to changes in the CCyB*, and is
(transitional) (est Q120) expected to increase with the P2R from 2020
Pillar 2 Capital conservation buffer (CCoB) • Nordea Bank Board has decided to adjust the capital policy to a
Countercyclical buffer (CCyB) Min. CET1 requirement management buffer range of 40-120bps with the aim to maintain an
Systemic risk buffer (SRB) MDA level unchanged nominal capital buffer
24 * Including decided changes: Denmark has decided to raise the countercyclical buffer rate from 0% to 0.5% by 31 March 2019 and further to 1% by 30 September 2019. Norway has decided to raise the
countercyclical buffer rate from 2% to 2.5% to come into force on 31 December 2019. Sweden has decided to raise the countercyclical buffer rate from 2% to 2.5% to come into force on 19 September 201925
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Peer 1
Peer 2
Peer 3
Peer 4
Peer 5
Peer 6
Peer 7
Peer 8
Peer 9
Peer 10
Peer 11
Peer 12
Peer 13
Peer 14
Peer 15
Peer 16
Peer 17
Peer 18
Peer 19
Peer 20
Peer 21
Pillar 2 Requirement (P2R) level for peer European SSM banks
Peer 22
The future P2R for Nordea expected to be included in the MDA level
Peer 23
Peer 24
Peer 25
Peer 26
Peer 27
Peer 28
Peer 29
Peer 30
Peer 313. Funding 26
Diversified balance sheet
Total assets EUR 551bn
Cash and balances with Deposits by credit
central banks institutions
Loans to credit institutions
Deposits and borrowings
from the public
Loans to the public
CDs and CPs* Short-term funding
Covered bonds
Long-term funding**
Credit ratings S&P / Moody’s / Fitch
Senior bonds Short-term A-1+ / P-1 / F1+
Interest-bearing securities Covered bonds AAA / Aaa / -
incl. Treasury bills Derivatives
Senior unsecured
AA- / Aa3 / AA-
(preferred)
Derivatives Other liabilities Senior non-preferred A / Baa1 / AA-
Subordinated liabilities Tier 2 A- / Baa1 / A+
Other assets
Equity Capital base Additional Tier 1 BBB / Ba1 / BBB
Assets Liabilities and Equity
27 * Including CDs with original maturity over 1 year
** Excluding subordinated liabilitiesSolid funding operations
Long- and short-term funding, EUR 200bn Long-term issuance 2018, gross volumes, EUR 22.6bn*
EURm Covered Senior unsecured Senior non-preferred
Short term funding
21% 5 000
4 500
4 000
Domestic covered
Subordinated debt bonds 3 500
5% 44% 3 000
Senior non-preferred 2 500
bonds 2 000
1%
International senior 1 500
unsecured bonds 1 000
17% 500
Domestic senior 0
International covered Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
unsecured bonds bonds
2% 10%
Long-term funding costs trending down* Distribution of long vs. short-term funding, gross volumes****
Long-term funding, gross volumes, EURbn** Funding cost, bps*** Long-term funding Short-term funding EURbn
250
200
150
100
50
0
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4
2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
28 * Excluding Nordea Kredit covered bonds and subordinated debt **** As of Q4 2018 77% of total funding is long term, excluding subordinated debt and with
** Seasonal effects in volumes due to redemptions CDs with original maturity over 1 year included in short-term funding
*** Spread to XiborShort-term funding – prudent and active management
Comments Short-term issuance
• The fourth quarter of 2018 was very focused on planning and securing EURbn
70
the year end with fixed rate deals at competitive levels
60
• Nordea has been actively issuing long dated (18m to 2y) short term 50
issuance out of the US market, as the US market was particularly 40
attractive in the last quarter of 2018
30
• Nordea has a well diversified investor base that is tapped from Asia to 20
USA 10
0
• Each program has its niche contribution Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
• Total outstanding short-term funding has ranged between EUR 36-43bn
during Q4 2018 Split between programs
• Short dated issuance remains an attractive funding component for the EURbn
25
group. Increased demand for the Nordea name was seen due to
general market turbulence, securing competitive pricing for the Group 20
• No noticeable investor impact was seen related to the re-domiciliation to 15
Finland
10
5
0
ECP London CD NY CD US CP
29Nordea’s global issuance platform
2%11%
1%
2%
8% 2%
85%
NOK
(EUR 8bn eq.) 89%
100%
SEK
DKK (EUR 35bn eq.)
(EUR 50bn eq.) 2%
3% 21%
10%
51%
38%
77%
48%
48% 90% JPY
1%
(EUR 2bn eq.)
GBP CHF 11%
5%
(EUR 2bn eq.) (EUR 1bn eq.)
23%
EUR
50% (EUR 40bn)
22%
USD
(EUR 18bn eq.)
Covered bond Senior unsecured Senior non-preferred CDs > 1 year Capital instruments
30Nordea covered bond operations
Nordea Eiendomskreditt Nordea Hypotek Nordea Kredit Nordea Mortgage Bank
Four aligned covered
bond issuers with
complementary roles
Legislation Norwegian Swedish Danish/SDRO Finnish
Cover pool assets Norwegian residential mortgages Swedish residential mortgages primarily Danish residential & commercial Finnish residential mortgages primarily
mortgages
Cover pool size EUR 10.1bn (eq.) EUR 51.9bn (eq.) Balance principle EUR 19.8bn
Covered bonds outstanding EUR 8.4bn (eq.) EUR 30.9bn (eq.) EUR 51.9bn (eq.) EUR 16.7bn
OC 21% 68% CC1/CC2 31%/11% 19%
Issuance currencies NOK, GBP, USD, CHF SEK DKK, EUR EUR
Rating (Moody’s / S&P) Aaa / - Aaa / AAA Aaa / AAA Aaa / -
• Covered bonds are an integral part of Nordea’s long term funding operations
• Issuance in Scandinavian and international currencies
• ECBC Covered Bond Label on all Nordea covered bond issuance
31Nordea benchmark transactions last 12 months
Amount Issue Maturity
Issuer Type Currency FRN / Fixed
(m) date date
Nordea Bank Senior unsecured (preferred) EUR 1,000 7 Feb 2018 7 Feb 2022 FRN
1,250 21 Feb 2018 28 Feb 2023 Fixed
Nordea Mortgage Bank Covered EUR
750 21 Feb 2018 28 Feb 2033 Fixed
Nordea Eiendomskreditt* Covered NOK 5,000 21 Mar 2018 21 Jun 2023 FRN
Nordea Mortgage Bank Covered EUR 1,000 17 May 2018 23 May 2025 Fixed
Nordea Eiendomskreditt Covered GBP 300 6 Jun 2018 18 Jun 2023 FRN
Nordea Bank Senior non-preferred EUR 1,000 15 Jun 2018 26 Jun 2023 Fixed
2,250 19 Jun 2018 25 June 2023 Fixed
Nordea Bank Senior non-preferred SEK
750 19 Jun 2018 25 June 2023 FRN
750 22 Aug 2018 30 Aug 2023 Fixed
Nordea Bank Senior non-preferred USD
250 22 Aug 2018 30 Aug 2023 FRN
Nordea Bank Tier 2 USD 500 6 Sep 2018 13 Sept 2033 Fixed
Nordea Bank Senior non-preferred NOK 2,000 11 Sep 2018 18 Sept 2023 FRN
SEK 1,750 FRN
Nordea Bank Tier 2 19 Sep 2018 26 Sept 2028
NOK 500 FRN
Nordea Hypotek* Covered SEK 5,000 30 Jan 2019 18 Sep 2024 Fixed
32 * Continued tap issuanceNordea major funding awards 2018
Financial Issuer
of the year
Most impressive AT1 Capital Deal of the
Financial Institution Year EUR 750m PNC7
Borrower 3.5%
The Cover The Cover
Covered bond deal Best Euro Issuer Best Global Deal - EUR Best Euro Deal
EUR 1.25bn 5Y/750m 15Y 1.25bn 5Y/750m 15Y Core Nordea Mortgage
Bank
33Regulatory status
• During the transition period Nordea has committed to maintain a nominal CET1 capital level
based on the 2018 SREP outcome
Capital requirements • This level equals EUR 21.7bn and is approximately 13.9% expressed in terms of Q4 2018 Risk
Exposure Amount
• Single Resolution Board’s (“SRB”) MREL requirement decision will be based on the ECB 2019
MREL requirement including SREP capital requirements including Pillar 2 and combined buffer
subordination • MREL subordination requirement will be based on SRB MREL policy for O-SII*, coming SRB
decision, as well as clarity about SRB implementation of BRRD2** MREL subordination
Need for Senior Non-Preferred • Final SNP volume to be potentially updated after clarity from coming SRB MREL subordination
(“SNP”) decision, as well as SRB implementation of BRRD2
Creditor Hierarchy Directive • Swedish CHD law entered into force from 29 December 2018
• Finnish CHD law entered into force from November 15, 2018
(“CHD”) • Nordea contractual SNP format has been aligned to statutory SNP format
34 * In November 2018, FSB removed Nordea from G-SIB list. In December 2018, Finnish FSA decided not to designate Nordea as a G-SII. Consequently, Nordea is an O-SII (Other Systemically Important Institution)
** EU proposal for ”Bank Recovery & Resolution Directive”SNP and MREL expected timeline
SRB MREL SRB implementation of
subordination BRRD2 MREL subordination
Q4 2019
MREL subordination requirement for O-SIIs
2019 2020 …
SNDO* MREL SNDO decided MREL for transitional
period
MREL decision for Nordea
SRB MREL
expected during Q4 2019
Assumed BRRD2 entry Assumed BRRD2 application
BRRD2
into force Q2 2019 (18m after entry into force)
Planned SNP
issuance Continued issuance pending coming SRB MREL subordination decision, as well as SRB implementation of BRRD2
35 * Swedish National Debt OfficeSNP and MREL including subordination requirement
Comments Current senior bonds available for potential refinancing in SNP format
• Nordea has become an O-SII EURbn 37
• In November 2018, FSB removed Nordea from G-SIB list
11
• In December 2018, Finnish FSA decided not to designate
Nordea as a G-SII
• SRB decision on MREL requirements including subordination is Final maturity
pending, dependent on factors such as: 26 before 2022
• Nordea’s capital requirement components such as P2R for ~10
MREL calibration, to be decided by the ECB in 2019 SREP
Outstanding Senior Unsecured Debt excl. issued SNP issuance plan incl. issued SNP EUR 2.6bn &
• Clarity about SRB implementation of BRRD2 MREL SNP EUR 2.6bn potential additional MREL
subordination
SRB MREL methodology and SRB implementation of BRRD2 MREL subordination
Market confidence charge CBR – 125bps
P2R
Recapitalisation amount P1
CBR
CBR At least 8% of
total liabilities & own funds
Loss absorption amount P2R 14% of REA
with potential add-on
P1
SRB MREL* SRB MREL subordination requirement for O-SIIs Potential SRB implementation of BRRD2 MREL subordination**
36 * To be met by own funds, SNP, as well as ordinary senior unsecured debt. Until SRB MREL decision expected during Q4 2019, pre re-domiciliation SNDO decided MREL requirement is applied
** BRRD2 MREL subordination for banks with group total assets > EUR 100bn: floor of 8% of total liabilities & own funds, and potentially max of 2x(P1+P2R)+CBRPending regulatory clarity, current SNP issuance plan is unchanged
Point of Non Viability Resolution
• Current SNP issuance plan is kept pending particularly SRB
implementation of BRRD2 MREL subordination
EURbn
• Currently planned SNP issuance of ~EUR 10bn* from 2018 to
2021 (~4 years)
• Potentially updated SNP issuance plan after clarity about Own funds EUR 31bn ~10
coming SRB MREL subordination decision, as well as SRB
implementation of BRRD2 MREL subordination 4 4 4
3 3 3 3
• Nordea’s strong capital position will provide a substantial
buffer to protect SNP investors
24 24 24 24 24
• Nordea’s own funds of EUR 31bn** will rank junior to SNP
investors
• Nordea has issued SNP of EUR 2.6bn since June 2018 CET1 AT1 T2 SNP issance Remaining
plan & potential Senior
additional MREL Unsecured Debt
37 * To be subject to balance sheet adjustments
** Excluding amortised Tier 2Maturity profile
Maturity profile Comments
EURbn
300
• The balance sheet maturity profile has during the last couple of years
become more balanced by
200
• Lengthening of issuance and focusing on asset maturities
100
• Resulting in a well balanced structure in assets and liabilities in general,
0
as well as by currency
-100
• The structural liquidity risk is similar across all currencies
-200
• Balance sheet considered to be well balanced also in foreign currencies
-300
• Long-term liquidity risk is managed through own metric, Net Balance of
-400
10y Not specified Stable Funding (NBSF)
Assets Liabilities Equity Net Cumulative Net
Maturity gap by currency Net Balance of Stable Funding
EURbn EURbn
120
60
50 100
40 80
30
60
20
10 40
0 20
-10
0
-20
-30
-40
10 y Not specified NBSF is an internal metric, which measures the excess of stable liabilities against stable assets. The
stability period was changed into 12 month (from 6 months) from the beginning of 2012. In Q3 2017
EUR USD DKK NOK SEK the data sourcing was updated and classifications now in line with the CRR.
38Liquidity Coverage Ratio
Liquidity Coverage Ratio Comments
350% • EBA Delegated Act LCR in force starting from October 2016
300% • LCR of 185%
250%
• LCR compliant in USD and EUR
200%
• Compliance is reached by high quality liquidity buffer and management
150%
of short-term cash flows
100%
50%
• Nordea Liquidity Buffer EUR 104bn, which includes the cash and central
bank balances
0%
• New liquidity buffer method introduced in July 2017
Combined USD EUR
LCR subcomponents*, EURm Time series – liquidity buffer
Combined USD EUR EURbn
Total high-quality liquid assets (HQLA) 101,244 22,560 32,827 120 110 107104
Liquid assets level 1 97,810 22,179 32,045
99
Liquid assets level 2 3,434 381 782 100 95
91
Cap on level 2 0 0 0
Total cash outflows 69,876 42,113 51,133 80 68 65 69
Retail deposits & deposits from small business customers 5,741 46 1,811 61 62 64 60 64 67 66 66 66 61 62 62 67 66 65 65 65 65
59 60 60 59
Unsecured wholesale funding 48,389 10,287 15,071 56 56 58
60 49
Secured wholesale funding 3,020 537 508
Additional requirements 9,252 30,955 32,866 40
Other funding obligations 3,474 287 877
Total cash inflows 15,113 31,585 38,350 20
Secured lending (e.g. reverse repos) 4,063 1,892 246
Inflows from fully performing exposures 4,072 359 1,185
0
Other cash inflows 6,978 38,426 39,412
Limit on inflows 0 -9,092 -2,493
Liquidity coverage ratio (%) 185% 214% 257%
39 * EBA Delegated Act LCR
** LCR weighted amountsDeepened green focus
Comments Green bond asset portfolio EUR 2.3bn as of Q4 2018
• Enhanced ESG focus in the Nordea Group from 2015
Hydro Power
• Further development of the ESG evaluation process in relation to 24%
lending, including specific green lending products
45% Green Buildings
• First green bond issued in June 2017 as a 5-year EUR 500m senior
unsecured bond
16%
Wind power
• The green bond asset portfolio, which is externally reviewed, has grown 5% 1%
from EUR 0.8bn in Q2 2017 to EUR 2.3bn in Q4 2018 1% 8% 1%
Public Transportation
Electric cars Water Management
• The composition and amount of green bond assets is internally reviewed Waste-to-energy Waste-water
on a quarterly basis to account for repayments and drawings
Sustainability acknowledgements
• Nordea’s intention is to maintain an aggregate amount of green bond
assets that is at least equal to the aggregate amount of outstanding
green bonds Company Rating: C (A+ to D-)*
• Nordea aims at continuing to be a relevant issuer of green bonds
ESG Score: 20.3 (0 to 100)**
ESG Rating: BBB (AAA to CCC)
Read more on;
https://www.nordea.com/en/investor-relations/reports-and- Nordea ranked as the 47th most
presentations/bonds/green-bonds/ sustainable corporation in the world in
the 2019 Global 100 ranking
40 * Highest rating within sector is C+
** Lower score represents lower ESG risk (scale has changed, previously the other way around). Nordea currently ranked in the top 6th percentile among banksNordea legal structure after re-domiciliation
Nordea Bank Abp
(Finland)
Branches: Intl. branches
Denmark Sweden Norway (incl. New York, Singapore)
Nordea Kredit
Nordea Eiendomskreditt AS Nordea Hypotek AB (publ) Nordea Mortgage Bank Plc
Realkreditaktieselskab
Various subsidiaries
Norway Sweden Finland
Denmark
Branch Legal entity Changes
• The re-domiciliation was carried out on 1 October 2018 by way of a cross-border reversed merger through which the parent company Nordea Bank AB
(publ) was merged into a newly established Finnish subsidiary
• Senior unsecured bonds (preferred and non-preferred) and capital instruments are issued from the parent company, Nordea Bank Abp
• Covered bonds are issued from the four mortgage subsidiaries in each respective Nordic country
414. Macro 42
Robust Nordic economies
GDP development Unemployment rate
Comments GDP forecast, %
• The Nordics have enjoyed a solid economic development in recent Country 2016 2017 2018E 2019E 2020E
years. The global economy slowed down during the autumn and
especially in the Euro-Area. Monetary policy has shifted to be less Denmark 2.4 2.3 0.9 1.8 1.7
supportive. This has affected the Nordics to various extent. Sweden and
Finland have been most hit as being more dependant on exports Finland 2.5 2.8 2.3 1.5 1.0
• Short-term survey indicators have declined, but from elevated levels, Norway 1.1 2.0 2.5 2.6 2.1
suggesting that growth will remain decent in the near-term and that a
major slowdown of the economies is not imminent Sweden 2.4 2.4 2.3 1.0 1.3
Source: Nordea Markets Economic Outlook January 2019 and Macrobond
43Household debt remains high, but so is private and public savings
Household debt Household savings
Public balance/debt, % of GDP, 2019E Comments
• In all countries, apart from Denmark, household debt continues to rise
somewhat faster than income. Meanwhile, households’ savings rates
remain at high levels, apart from Finland where savings have declined
somewhat in recent years
• The Nordic public finances are robust due to the overall economic
recovery and relatively strict fiscal policies. Norway is in a class of its
own due to oil revenues
44 Source: Nordea Markets, International Monetary Fund, IMF DataMapperHouse price development in the Nordics
House prices Comments
• Recent quarters have shown stabilisation in the Swedish and Norwegian
housing markets, while prices continue to rise in Denmark and to some
extent also in Finland
• In Sweden house prices declined during H2 2017 but the trend has
levelled out in 2018. The price correction was probably due to the
marked rise in new buildings as well as the FSA’s additional
amortization requirement (March 2018). Going forward we expect house
prices to remain stable as mortgage rates will remain low even though
we see risks on the downside
• In Norway, primarily in Oslo, house prices turned down during 2017. The
downturn was primarily driven by stricter lending requirements
Household’s credit growth introduced 1 January 2017. However, prices have levelled out, and even
increased somewhat in Oslo. Largely unchanged prices are forecast
ahead
45Contacts Investor Relations Rodney Alfvén Andreas Larsson Maria Caneman Axel Malgerud Head of Investor Relations Head of Debt IR Debt IR Officer Debt IR Officer Nordea Bank Abp Nordea Bank Abp Nordea Bank Abp Nordea Bank Abp Mobile: +46 722 35 05 15 Mobile: +46 709 70 75 55 Mobile: +46 768 24 92 18 Mobile: +46 721 41 51 50 Tel: +46 10 156 29 60 Tel: +46 10 156 29 61 Tel: +46 10 156 50 19 Tel: +46 10 157 13 13 rodney.alfven@nordea.com andreas.larsson@nordea.com maria.caneman@nordea.com axel.malgerud@nordea.com Group Treasury & ALM Mark Kandborg Ola Littorin Petra Mellor Jaana Sulin Head of Group Treasury & ALM Head of Long Term Funding Head of Bank Debt Head of Short Term Funding Tel: +45 33 33 19 09 Tel: +46 8 407 9005 Tel: +46 8 407 9124 Tel: +358 9 369 50510 Mobile: +45 29 25 85 82 Mobile: +46 708 400 149 Mobile: +46 70 277 83 72 Mobile: +358 50 68503 mark.kandborg@nordea.com ola.littorin@nordea.com petra.mellor@nordea.com jaana.sulin@nordea.com 46
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