Interim report Q4 2008

by 11% due to downturn in the stock market • Increased provisions for loan losses, SEK 1 633m (812), of which Baltic Banking amounted to SEK 977m • Im...

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Interim report Q4 2008 12 February 2009

Jan Lidén President and CEO

Content • Fourth quarter 2008 – Group – Business areas

• Comments on issues in focus – – – –

Credit quality Liquidity and funding Capitalization Dividend

• Summary and conclusions

© Swedbank

2

Profit trend

Fourth quarter 2008 – Group • • • • • •

Profit for the period increased by 34% to SEK 3 318m (2 468 Q3), excl. impairment of goodwill Net interest income increased by +6% to SEK 5 742m (5 424) Net commission income decreased by 11% due to downturn in the stock market Increased provisions for loan losses, SEK 1 633m (812), of which Baltic Banking amounted to SEK 977m Impairment of goodwill in Ukraine amounted to SEK 1 403m The proposed dividend amounts to SEK 2.40 per preference share and SEK 4.50 per ordinary share.

© Swedbank

Profit for the period, SEKm

* Excl. impairment of goodwill SEK 1 403m

4

Fourth quarter 2008 – Group, cont. • Successful share issue of SEK 12.4bn increases the tier 1 capital ratio to 10.7% • Stronger liquidity due to larger funding volumes (with and without state guarantee) • Prepared for tougher times

Tier 1 capital ratio, %

** Including total subscribed capital

© Swedbank

5

Business areas Swedish Banking

International Banking





Increased operating profit



18 new branches in Ukraine and two more in Russia during the period – focus on attracting deposits



Good business development in the Nordic branches



Impairment of goodwill

Continued lending growth, corporate lending decreased due to cooperation with Kommuninvest



Net interest income increased by 6%



Continued focus on cost control and credit quality

Baltic Banking

Swedbank Markets



Significant macroeconomic challenges





Continued strong profit before loan losses

Growing customer trading and good risk management entailed continued solid earnings



Increased provisions for loan losses



Swedbank remains a leading player in the Swedish corporate bond market



Focus on credit quality



Market share in equities trading on Nasdaq OMX Stockholm increased

© Swedbank

6

Comments on issues in focus

Credit quality – impaired loans are increasing Share of impaired loans

Distribution of lending % Lithuania 5%

4.0

Other 7%

3.5

Latvia 6%

3.0

Estonia 7%

2.5 Sw eden 75% Sw edbank Mortgage 49%

2.0 1.5 1.0 0.5 0.0 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 Swedbank Mortgage

© Swedbank

Swedish Banking

Baltic Banking

Group

8

Credit quality – write-offs still low Swedbank Mortgage

Baltic Banking

SEKm

1.0

400

0.8

300

0.6

200

0.4

100

0.2

0

0.0

Q4-08

Q3-08

Q2-08

-1.0 Q1-08

-0.8

-500 Q4-07

-0.6

-400 Q3-07

-0.4

-300

Q2-07

-0.2

-200

Q1-07

-100

Q1-06

Q4-08

Q3-08

Q2-08

Q1-08

Q4-07

Q3-07

Q2-07

Q1-07

Q4-06

Q3-06

Q2-06

Q1-06

500 400 300 200 100 0 -100 -200 -300 -400 -500

%

500

Q4-06

% 1.0 0.8 0.6 0.4 0.2 0.0 -0.2 -0.4 -0.6 -0.8 -1.0

Q3-06

SEKm

SEKm

Q2-06

Swedish Banking

%

1,200

2.5

1,000

2.0

800

1.5

600 1.0

400

© Swedbank

Q4-08

Q3-08

Q2-08

Q1-08

Q4-07

Q3-07

Q2-07

Q1-07

Q4-06

0.0 Q3-06

0 Q2-06

0.5

Q1-06

200

Loan losses, net

Write-offs

Loan loss ratio, net

Loan losses, net = write-offs + provisions –recoveries

9

Selected exposures – limited risk •

The secured exposure to Lehman is unchanged – USD 1 350m – 69 loans with 55 properties as underlying collateral – The collateral value is well above the exposure amount – Updated analysis shows that there is no further need of provisions



Exposure to hedge funds – SEK 1.4bn – All exposure is secured

• • •

Exposure to Conduits and SIVs – SEK 94m Exposure to CDOs – SEK 183m Exposure to Private Equity – SEK 15.1bn – – – –

© Swedbank

Nordic acquisition finance 99% constitutes senior debt Largest sector is health care, 45 % Average loan amount is about SEK 650m

10

Low risk in interest-bearing securities (SEK 134bn) Holding distributed per sector

Geographic distribution of issuers

Mortgage bonds, not covered 7%

Others 8% Baltics 2%

Other financial corporations 9%

Mortgage bonds, covered 37%

Other corporations 11%

USA 5% Norway 5% UK 7%

Banks 15%

Sweden 73%

Public sector 21%

Holding distributed per currency

Accounting classification

LTL 1% LVL 1% NOK USD 5% 4%

EEK 0%

Held-tomaturity investments ** Intitial classification 1%

Held-tomaturity investments **Reclassified as of 2008-06-30 6%

GBP 0%

EUR 16%

As of 31 December, around 19 percent of the Group’s interestbearing securities were valued using valuation models against around 81 percent as of 30 September and around 5 percent as of 31 December 2007

* Recognised at fair value with changes in value through P/L. ** Measured at amortised cost SEK 73%

© Swedbank

Held for trading* 93%

11

Liquidity for more than 1 year Stress test of liquidity as of 31 Dec 2008 Main assumption: No access to capital markets; no refinancing of lending to credit institutions, issued bonds or subordinated loans.

250

SEK bn

200 150 100 50 31/12/2008

05/02/2009

0 1W

© Swedbank

2W

3W

1M

2M

3M

4M

5M

6M

9M

1Y

12

Prepared for tougher times • • • •

Tier 1 capital ratio, 10.7 % Solid liquidity Closer evaluations of exposures deemed at higher risk Continued focus on systematic work in the Baltics: – – – –

© Swedbank

Reinforcement of resources Processes Legal structures Scenario planning

13

Group results Mikael Inglander CFO

© Swedbank

14

Income statement, Group SEKm Net interest income Net commission income Net gains/losses on financial items at fair value Other income Total income Staff costs Profit-based staff costs Other expenses* Total expenses Profit before loan losses Loan losses, net Operating profit Tax Profit for the period Attributable to shareholders of Swedbank

Q4 2008 5 742 2 011 1 244 1 349 10 346 2 340 262 2 300 4 902 5 444 1 633 3 811 500 3 311 3 318

Q3 2008 5 424 2 265 – 109 658 8 238 2 223 235 1 855 4 313 3 925 812 3 113 640 2 473 2 468

% 6 – 11

26 5 11 24 14 39 22 – 22 34 34

Q4 2007 5 259 2 536 386 693 8 874 2 111 522 1 893 4 526 4 348 238 4 110 950 3 160 3 108

% 9 – 21 95 17 11 – 50 22 8 25 –7 – 47 5 7

* Excluding impairment of goodwill SEK 1 403m, Q4 2008

© Swedbank

15

Income statement, Group SEKm Net interest income Net commission income Net gains/losses on financial items at fair value Other income Total income Staff costs Profit-based staff costs Other expenses* Total expenses Profit before loan losses Loan losses , net Operating profit Tax Profit for the period Attributable to shareholders of Swedbank

Jan-Dec 2008 21 702 8 830 2 351 3 580 36 463 9 142 950 7 993 18 085 18 378 3 156 15 222 2 880 12 342 12 290

Jan-Dec 2007 19 157 9 880 1 691 2 196 32 924 8 134 1 658 6 927 16 719 16 205 619 15 586 3 450 12 136 11 996

% 13 – 11 39 63 11 12 – 43 15 8 13 –2 – 17 2 2

* Excluding impairment of goodwill SEK 1 403m, 2008

© Swedbank

16

Business areas 2008 vs 2007, SEKm Net interest income Net commission income Other income Total income Staff costs Other expenses Total expenses Profit before loan losses Loan losses, net Operating profit Tax Profit for the period Attributable to Swedbank's shareholders Return on allocated equity, %

Swedish Baltic Banking Banking 2008 2008 % 11 840 1 6 448 4 078 – 9 1 925 2 349 59 1 040 18 267 3 9 413 4 282 – 0 1 801 4 799 2 1 796 9 081 1 3 597 9 186 6 5 816 594 1 800 8 592 0 4 016 367 2 156 – 11 6 436 4 3 649 6 425 21.8

* Excluding impairment of goodwill SEK 1 403m, 2008 Ukrainian Banking Operations was consolidated July 2007 © Swedbank

4

– 16 – 19 – 16

Int'l. Banking* 2008 2 171 354 407 2 932 846 769 1 615 1 317 478 839 261 578

3 649 – 16

578

24.4

% 14 4 – 17 7 – 12 20 1 11

6.5

% 89 16 87 80 78 79 99 70 54 54

Swedbank Asset Mgmt Markets 2008 % 2008 1 555 32 76 960 – 28 1 513 530 – 30 209 3 045 – 7 1 798 1 094 – 7 414 760 11 427 1 854 – 0 841 1 191 – 16 957 290 0 901 – 36 957 231 – 39 224 670 – 35 733

% –8 – 19 – 10 – 18 –3 –8 –5 – 26 – 26 – 30 – 25

629 – 30

733 – 25

17.6

33.6 17

Net interest income, Swedish Banking SEKm Net interest income Q3 2008 Net interest income Q4 2007 Changes: Higher lending volumes Higher lending margins Higher deposit volumes Decreased deposit volumes Decreased deposit margins Other changes Total change Net interest income Q4 2008

© Swedbank

Q4 2008 vs Q3 2008

Q4 2008 vs Q4 2007

2 857 2 927 15 247

166 197 36

– 40 – 81

– 103

32 173 3 030

– 193 103 3 030

18

Baltic Banking Operations, change in net interest income SEKm Net interest income Q3 2008 Net interest income Q4 2007 Changes: Higher lending volumes Decreased lending margins Exchange rate effect, lending Decreased deposit volumes Higher deposit margins Exchange rate effect, deposits Other changes Total change Net interest income Q4 2008

© Swedbank

Q4 2008 vs Q3 2008 1 667

Q4 2008 vs Q4 2007 1 588

-24 67 -61 206 41 -221 8

104 -124 89 -14 72 59 -99 87

1 675

1 675

19

Net commission income, Group

SEKm Payments Lending Brokerage Asset management Insurance Corporate finance Other Total net commissions

© Swedbank

Q4 2008 889 129 141 727 59 58 8 2 011

Q3 2008 899 194 166 864 69 22 51 2 265

% –1 – 34 – 15 – 16 – 14 – 84 – 11

Q4 2007 800 162 290 995 80 209 0 2 536

% 11 – 20 – 51 – 27 – 26 – 72 – 21

20

Net gains and losses on financial items at fair value

SEKm Swedish Banking Swedbank Mortgage open interest rate exposure MasterCard

Baltic Banking International Banking Inefficiency in hedge accounting

Swedbank Markets Valuation of credit bonds

Asset Management & Insurance Shared Service and Group Staff Derivatives Group funding

Eliminations Total net gains and losses

© Swedbank

Q4 2008 Q3 2008 Q2 2008 Q1 2008 Q4 2007 Q3 2007 828 -126 179 16 116 1 763

-172

29 101

-22

66

-129 89

12 229

107 -6

205 114

78 22

163 30

213 42

-126

-72

61

304

-210

118

244

137

167

0

-217

0

-187

0

-60

1 -156

-14 139

25 512

-15 -270

-1 -31

1 -228

0

0

419

-272

21

-89

26 1 244

1 – 109

-12 1 141

0 75

-28 386

0 196

21

Expenses SEKm Swedish Banking Baltic Banking Operations International Banking* Swedbank Markets Asset Management & Insurance Other Total expenses of which staff costs in: Swedish Banking Baltic Banking International Banking Swedbank Markets Asset Management & Insurance

Q4 2008 2 390 977 557 500 182 296 4 902

Q3 2008 2 197 926 315 398 200 277 4 313

% 9 6 77 26 –9 7 14

Q4 2007 2 279 1 062 302 530 230 123 4 526

1 120 453 257 261 107

1 046 483 213 227 99

7 –6 21 15 8

1 096 587 173 333 138

% 5 –8 84 –6 – 21 8 2 – 23 49 – 22 – 22

* Excluding impairment of goodwill SEK 1 403m, Q4 2008

© Swedbank

22

Key figures, Group

Return on equity, % * Earnings per share, SEK * Equity per share, SEK C/I ratio * Loan loss ratio, % Share of impaired loans, % Provision ratio for impaired loans, % Core tier 1 capital ratio, new rules, % Tier 1 capital ratio, new rules, % Capital adequacy ratio, new rules, %

Jan-Dec 2008

Jan-Dec 2007

17.1 21.95 111.54 0.50 0.28 0.52 60 9.3 10.7 14.8

18.9 21.78 131.96 0.51 0.07 0.13 120 7.3 8.5 12.7

* Excluding impairment of goodwill SEK 1 403m, 2008

© Swedbank

23

Summary • Strong result • Transparent, diversified balance sheet • Improved capitalization and liquidity • Focus on systematic work to manage the Group through more difficult times

© Swedbank

24

Appendix

© Swedbank

25

Shipping exposure •

Exposure to shipping companies amounted to SEK 20.4bn as of 31 December – Duration of the portfolio is 4 years – Average age of vessels is six years – Limited exposure to dry cargo (9%) and car transports (2.7%) – Customers generally have long freight contracts Offshore 42%

Tanker 33%

Ro-Ro, Container &Bulk 25%

© Swedbank

26

Maturity profile – long-term funding

Swedbank (excl. Swedbank Mortgage) Maturity profile

Swedbank Mortgage, Maturity profile 120 SEK bn, nom. amount

SEK bn, nom. amount

120 100 80 60 40 20 0

100 80 60 40 20 0

2009

© Swedbank

2010

2011

2012

2013

2014-

2009

2010

2011

2012

2013

2014-

27

Long-term funding 2008-2009

Swedbank Group - Long-term funding SEK bn

Swedbank

Swedbank Mortgage

Debt to mature 2008

55

155

Issued 2008

110

97

-of which guaranteed

61

0

Debt to mature 2009

49

104

Issued 2009*

41

5

-of which guaranteed

40

0 * As of 9 Feb 2009

© Swedbank

28

Mortgage lending, Sweden

Lending

SEK 595bn

Public sector 3% Tenant ow ners associations 14%

LTV

Share of portfolio

Forest & Agriculture 6%

Multi-family homes 2%

70,0% 60,0%

Condiminiums 15%

50,0%

Commercial real estate 0%

40,0%

Single family homes 60%

30,0%

Funding Funding

20,0%

Equity 6%

10,0%

CP 26%

LTV 0,0% <30%

30-50% Småhus

50-60%

60-75%

Flerfamiljshus (inkl Brf)

75-85%

>85%

Bostadsrätter

Average loan-to-value 46 percent. More than 50 percent of the total loan portfolio has a loan-to-value ratio of less than 30 percent. © Swedbank

Covered Bonds 68%

29

Other lending to the public, Sweden (excl. Swedbank Mortgage), SEK 309bn SEKbn

350 000

Real estate management

300 000

250 000

Public sector Other corporate lending Forestry and agriculture

200 000

Transportation Industry Construction

150 000

Renting, other industry 8%

Renting, other estate 9%

Renting of singlefamily homes 28%

Hotel and restaurant Retail and w holesale

100 000

Real estate management Individuals

50 000

0

© Swedbank

Renting, industry 36%

Tenant ow ners associationsr 19%

30

Baltic Banking

© Swedbank

31

Asset quality Net loan losses

Net loan losses 105 90 75 60 45 30 15 0

500% 400%

EURm

300% 200% 100% 0%

Net loan losses

2007

Q4 08

0.77% 1.61% 0.58% 0.98%

0.33% 0.51% 0.17% 0.35%

1.32% 3.70% 0.77% 1.91%

Q4 08

Q3 08

Q2 08

Q1 08

Q4 07

Q3 07

Q2 07

Q1 07

-100%

Estonia Latvia Lithuania Baltic Banking

2008

NLL YoY % growth

Net loan losses Risk indicators 2008

2007

2006

Overdues >60 days, EURm Overdues >60 days, % Total provisions, EURm

535.9 2.6% 320.2

100.7 0.5% 148.7

41.5 0.3% 102.2

Write offs, EURm

27.0

15.1

8.2

Recoveries, EURm Total repossessed assets, EURm

8.7 40.1

5.5 5.7

7,2 4.8

© Swedbank

Corporate incl real estate incl industry

Private incl private home loans

Baltic Banking

2008 1.32%

2007 0.42%

Q4 08 2.95%

2.16% 1.02%

0.57% 0.31%

5.81% 1.99%

0.52%

0.33%

0.95%

0.29%

0.34%

0.73%

0.98%

0.35%

1.91% 32

Asset quality by country Net loan loss dynamics Net loan losses

5,0%

Estonia

EURm 60

4,0%

40

3,0%

20

2,0%

0,0% Q1 07 Est

11

14

Q1 08

Q2 08

Q3 08

Q2 07

Q3 07 Lat

Q4 07 Lit

Q1 08

Q2 08

Q3 08

Q4 08

Baltic Banking

Global recession has had a large negative impact on the Baltic economies. The impact is seen as a surge in net loan loss levels in Q4 2008 in Estonia and Latvia. Lithuania expected to follow with a time lag Downturn has particularly sharp impact on residential market.

Latvia

EURm 60

Q4 08

60

40 20



7

0

1,0%



28

8

11

Q1 08

Q2 08

16

0 Q3 08

Q4 08

12

11

Q3 08

Q4 08

Lithuania

EURm 60 40 20 3

4

Q1 08

Q2 08

0

© Swedbank NLL ratio – change in total provisions (both for performing and non-performing loan portfolio) and net write-offs against beginning of the year portfolio

33

Credit quality of the loan book Large corporate risk profile

30%

Nonperforming

15% 10% 5% 0% 1

1-

2

2-

3

3-

Q4 2007

4

4-

5

5-

6

6-

7

Q4 2008

SME/SSE risk profile

25% 20% EURm

Well diversified portfolio dominated by retail exposures Macro developments have triggered downgrades in all segments: – Real estate sector drives downgrades in large corporate segment (exposure > EUR 0.8m). Due to negative sentiment new lending is down, and the effect of downgrades cannot be balanced any more – SME/SSE has been the first segment to react to downturn. Acceptable risk profile retained (45% of portfolio with PD<1%) – Private portfolio has low risk profile (72% with PD<1%)

Low risk

20%

Nonperforming

Low risk

15% 10% 5% 0% A

A-

B

B-

C

Q4 2007

C-

D

D-

E

E-

F

Q4 2008

Private portfolio risk profile 40% 30% EURm

• •

EURm

25%

Low risk

Nonperforming

20% 10% 0% 1

2

3

4

5

Q4 2007

© Swedbank

* Risk exposure: on-balance + off-balance portfolio

6

7

8

9

10

11

12

Q4 2008

34

Overdue development Rising overdues over 90 days have the most impact on rising NLL levels Corporate, EE

Corporate, LV

Corporate, LT

5%

5%

5%

4%

4%

4%

3%

3%

3%

2%

2%

2%

1%

1%

1%

0%

0% dec-07

mar-08

jun-08

31-60 days

sep-08

61-90 days

dec-08

0% dec-07

over 90 days

mar-08

31-60 days

Private, EE

2,5%

jun-08 61-90 days

sep-08

dec-08

over 90 days

Private, LV

2,5%

dec-07

2,0%

1,5%

1,5%

1,5%

1,0%

1,0%

1,0%

0,5%

0,5%

0,5%

0,0%

0,0%

mar-08

jun-08

sep-08

dec-08

31-60 days

61-90 days

over 90 days

© Swedbank

* Overdues / current portfolio

dec-07

mar-08

31-60 days

jun-08 61-90 days

sep-08

dec-08

over 90 days

61-90 days

sep-08

dec-08

over 90 days

Private, LT

2,5%

2,0%

dec-07

jun-08

31-60 days

2,0%

0,0%

mar-08

dec-07

mar-08

31-60 days

jun-08 61-90 days

sep-08

dec-08

over 90 days

35

Overdue loans – Swedbank Estonia and Swedbank Latvia vs market

Swedbank Estonia (bank)

dec-08

sep-08

jun-08

maj-08

apr-08

mar-08

dec-07

sep-07

jun-07

mar-07

dec-06

Rest of the market

Latvia - overdues over 30 days / current portfolio

9% 8% 7% 6% 5% 4% 3% 2% 1% 0%

dec-05

dec-08

sep-08

jun-08

maj-08

apr-08

mar-08

dec-07

sep-07

jun-07

0% mar-07

0% dec-06

1%

sep-06

1%

jun-06

2%

mar-06

2%

dec-05

3%

sep-06

4%

3%

Rest of the market

Estonia - overdues over 60 days / current portfolio

jun-06

4%

mar-06

Estonia - overdues over 30 days / current portfolio

Swedbank Estonia (bank)

Latvia - overdues over 90 days / current portfolio

6% 5% 4% 3% 2% 1%

Rest of the market © Swedbank

Swedbank Latvia (bank)

Source: Bank of Estonia, FKTK of Latvia, Hansabank Group data

Rest of the market

dec-08

sep-08

jun-08

mar-08

dec-07

sep-07

jun-07

mar-07

dec-06

sep-06

jun-06

mar-06

dec-05

sep-05

jun-05

mar-05

dec-04

dec-08

sep-08

jun-08

mar-08

dec-07

sep-07

jun-07

mar-07

dec-06

sep-06

jun-06

mar-06

dec-05

sep-05

jun-05

mar-05

dec-04

0%

Swedbank Latvia (bank) 36

Baltic lending by sectors

Portfolio (EURm), December 2008 Individuals

Mortgage

EURm

Real-estate mgmt

3 092

Retail & Wholesale

1 721

9%

Industry

1 678

8%

Transport 1 018 Construction536 Other*

Other

Portfolio growth (EURm), Q4 08

44%

-68

15%

-10 -127 -102

5%

-18

3%

-62

3 241 16% 0

2 000

4 000

-71

6 000

8 000

10 000

-150

-100

-50

0

xx% - share of portfolio * Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans © Swedbank

37

Estonian lending by sectors

Portfolio (EURm), December 2008 Individuals

48%

3 854

Real-estate mgmt

Industry

454

0

8%

633

-49

15%

1 161

Retail & Wholesale

Portfolio growth (EURm), Q4 08

-77

6%

-52

Transport 282 4%

-7

Construction 174 2%

-28

Other

1 450 0

1 000

18%

2 000

-25

3 000

4 000

-100 -50

0

50

100 150

xx% - share of portfolio * Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans © Swedbank

38

Latvian lending by sectors Portfolio (EURm), December 2008 Individuals

43%

2 805

Real-estate mgmt

1 078

Retail & Wholesale

511

Industry

Portfolio growth (EURm), Q4 08 -20

17%

4

8%

-13

10%

-43

622

Transport 298 5% Construction 252 Other

-6

4%

915 0

3

14%

1 000

-58

2 000

3 000

4 000

-100 -50

0

50

100 150

xx% - share of portfolio * Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans © Swedbank

39

Lithuanian lending by sectors Portfolio (EURm), December 2008 Individuals

2 282

Real-estate mgmt

853

Retail & Wholesale

578

Industry

603

Transport

438

Portfolio growth (EURm), Q4 08

40%

0

15%

-14

10%

-37

10%

-7

8%

-15

Construction 110 2% Other

877 0

-28

15%

1 000

-2

2 000

3 000

4 000

-50

0

50

100

150

xx% - share of portfolio * Other portfolio includes Other business services, Energy, Agriculture, State & Municipality and Other loans © Swedbank

40

Mortgage portfolio

Due to the effects of crisis all vintages are converging to the same level of overdues. Complicated to separate the effects of origination quality from the downturn impact

LTV, total portfolio LTV>80% (share of portfolio) LTV>100% (share of portfolio)

LV

LT*

67% 30% 12%

71% 38% 12%

70% 33% 13%

4% 3% 2% 1% 0% 0m

3m

Overdues / Balance, %

3% 2% 1%

9m 12m 15m 18m 21m 24m 27m 30m 33m 36m 2006

2007

2008

LT Mortgage overdues > 30 days

5%

4%

6m

2005

LV Mortgage overdues > 30 days

5% Overdues / Balance, %

EE

EE Mortgage overdues > 30 days

5% Overdues / Balance, %



4% 3% 2% 1% 0%

0% 0m 2005

© Swedbank

3m

6m

9m 12m 15m 18m 21m 24m 27m 30m 33m 36m 2006

2007

2008

0m 2005

* Part of loans issued backed by guarantee of the State insurance company

3m

6m

9m 12m 15m 18m 21m 24m 27m 30m 33m 36m 2006

2007

2008

41

Corporate client portfolio Large corporate risk profile

mEUR



From 2005 to 2008, new lending changed – – –

30%

2007

25%

New lending in 2006 and 2007 mainly went to companies rated 4 or 5 (scale of 7) In 2008, the downturn caused downgrades, rating 5 real estate portfolio most affected New lending in 2008 focused to high quality borrowers, mainly ratings 1 to 3-. Volumes decreasing due to negative market sentiment

20%

2008

15% 10% 5% 0% 1

1-

2

2-

3

3-

4

4-

5

5-

6

6-

BB Total provisions, YTD

BB Rating 6 & 7 exposures

2008

2008 Commercial real estate

Commercial real estate

Production

Production

Retailing

Retailing

Transportation

2007

Other

0

© Swedbank

200

400

600

800

2007

Transportation Other

EURm 1 000

1 200

0

50

100

150

200

250

300

mEUR 350

400

450

7

Real estate portfolio



Real estate and in particular residential development is the most sensitive sector in Baltic Banking portfolio Around 58% from total Real Estate portfolio are cash flow generating properties with good tenant mix. Baltic Banking has always strictly restrained from financing speculative type of properties

1800 1500 No of transactions



Apartment transaction volume development

1200 900 600 300 0 Dec.04

Jūn.05

Dec.05

Jūn.06 Tallinn



Dec.06 Riga

Jūn.07

Dec.07

Jūn.08

Dec.08

Vilnius

Downturn has caused drop in residential market transaction volumes. As a result residential development portfolio (31% of total real estate portfolio) is demonstrating increase in overdue and default figures. Portfolio vulnerabilities are well understood and monitored, action plans set on a case by case basis

© Swedbank

43

Baltic lending by sectors – real estate Estonia 3% 15%

24%

Portfolio, December 2008 5%

8%

6%

8%

11%

29% 43%

Latvia 2%

15%

15%

23% 12%

3%

22% 18%

Lithuania Construction Individuals Production Real-estate mgmt

Other Transport Retail & Wholesale

6%

5%

13% 38%

5%

Office Production&Warehouse Residential Retail

40% 31% © Swedbank

Land plots Other 44

Collateral breakdown • • • •



Baltic Banking loan portfolio is adequately secured. Private mortgage portfolio is fully covered with family houses and apartments (as a rule owner occupied). Commercial real estate collaterals are revaluated at least once per year. Valuation is performed by independent experts. Full asset pledge, including tangible assets and current assets, is most common case for Corporate portfolio. Collateral position enhancement with owner guarantees and additional collateral is used for more risky customers and SME segments. The share of unsecured loans is insignificant: 5.4% (used for top ratings in corporate segment and consumer products in private).

Baltic Collateral (EURm) %

Dec 2007

%

370

2%

273

1%

Private real-estate

7,321

36%

6,660

33%

Corporate real-estate

7,715

38%

7,960

39%

317

2%

668

3%

Other collateral*

3,742

18%

3,621

18%

Unsecured

1,104

5%

985

5%

Unsecured corporate

776

4%

706

4%

Unsecured private

328

2%

279

1%

20,569

100%

20,167

100%

State

Guarantees

Total**

Dec 2008

*Other collateral is deposits, customer payments, vehicles, etc ** Total loans including repos © Swedbank

45