Nordea Bank Abp · OMXHEX:NDA_FI
Nordea Bank Abp — Q2 2020 Earnings Presentation
26 slides from Nordea Bank Abp's earnings presentation, Sep 22, 2020
Slide 1: Second quarter results 2020
Second quarter results 2020
Slide 2: Disclaimer
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
Slide 3: Executive summary
Executive summary • Solid result – continued strong momentum across business areas and countries ➢ High activity level kept revenues largely unchanged ➢ Increasing volumes in lending and deposits, net commission income impacted by the lockdowns ➢ Challenging times have proven the resilience of our b
Slide 4: Group quarterly results Q2 2020
Group quarterly results Q2 2020 Income statement Q220 Q219 Q2/Q2 Q120 Q2/Q1 EURm, excluding one-offs* Net interest income 1,091 1,071 2% 1,109 -2% Net fee and commission income 673 743 -9% 765 -12% Net fair value result 318 283 12% 109 192% Other income 10 44 -77% 18 -44% Total operating income 2,09
Slide 5: Net interest income – continued volume growth
Net interest income – continued volume growth Year over year bridge, EURm Comments +7% 1,145 • Volume growth in all countries 19 9 46 54 1,091 • Strong growth in mortgages in all countries, +6% in local 1,071 currency • Strong growth in both household and corporate deposits • Slightly improving marg
Slide 6: Net fee and commission income – impacted by COVID-19, strong recovery in AuM
Net fee and commission income – impacted by COVID-19, strong recovery in AuM Year over year bridge, EURm Comments -8% 743 • Asset management fees down due to market 20 22 turmoil, but strong recovery in AuM 22 3 0 683 10 673 • Highest quarterly net inflow since Q316 • Good investment performance • C
Slide 7: Net fair value – good recovery in the quarter
Net fair value – good recovery in the quarter NFV development, EURm Comments • Solid development in customer areas 318 • Higher market making and trading income in 283 21 266 89 24 109 92 Markets supported by improved valuations of 211 33 9 47 44 inventory after a turbulent Q1 8 203 201 209 • Treasu
Slide 8: Costs – continue to deliver on cost plan and building a strong cost culture
Costs – continue to deliver on cost plan and building a strong cost culture Year over year bridge, EURm Comments -6% 1,180 • Delivering on cost plan 121 1,108 • Staff costs down by 11% 20 1,088 49 • New ways of working supporting cost reductions • Slightly lower IT spend in the quarter Q219 Cost Res
Slide 9: Capital – strong position to support customers while maintaining dividend capacity
Capital – strong position to support customers while maintaining dividend capacity CET1 capital ratio development, % Comments 16.0 0.1 0.1 0.1 0.1 • CET1 capital ratio at 15.8% 5.6 • Risk exposure amount (REA) increased by EUR 2.5bn to EUR 155bn 15.8 10.2 • Limited credit REA migration in Q2 • Capit
Slide 10: Liquidity – solid position and normalising funding markets
Liquidity – solid position and normalising funding markets Liquidity buffer development, EURbn Comments 107 105 104 103 104 102 101 • Robust liquidity position 100 95 • Liquidity buffer over EUR 100bn • Liquidity coverage ratio (LCR) of 160% • EU net stable funding ratio (NSFR) of 113% • Deposits in
Slide 11: Credit portfolio – summary
Credit portfolio – summary Starting point ➢ Our loan book is well-diversified and has strong underlying credit quality ➢ Full-year 2020 net loan losses projected below EUR 1bn (less than 41bps) Development ➢ Underlying Q2 net loan losses at EUR 310m, while overall stable credit portfolio in Q2 and F
Slide 12: Loan book – well-diversified with strong underlying credit quality
Loan book – well-diversified with strong underlying credit quality Well diversified portfolio Five segments with 4% of Updated analysis of COVID-19 across countries and total exposure significantly impact by segment segments affected 0.1% Air transportation EUR 14bn, 4% Significantly affected 0.1% M
Slide 13: Loan loss projections – full-year 2020 below EUR 1bn (less than 41 bps)
Loan loss projections – full-year 2020 below EUR 1bn (less than 41 bps) Analyses behind loan loss projection Comments • Estimates based on three convergent analyses • Based on updated baseline macro-economic forecasts Review of individual exposures in affected sectors • Include projected credit qual
Slide 14: Underlying net loan losses – at EUR 310m while overall stable credit quality
Underlying net loan losses – at EUR 310m while overall stable credit quality Drivers of underlying net loan losses, EURm Comments • Total underlying net loan losses in Q2 at EUR 310m 87 • Three drivers of increased losses: 310 74 • Collective provisions based on updated macro scenarios 134 • Additio
Slide 15: Management judgement - EUR 650m built up to cover future loan losses
Management judgement - EUR 650m built up to cover future loan losses Management judgement developments, EURm Comments • New management judgement of EUR 388m in the 388 quarter 650 • Total management judgement buffer of EUR 650m: 120 • EUR 430m for cyclically driven loan losses 142 Q419 Q120 Q220 H12
Slide 16: Credit quality – portfolio significantly de-risked over past 10 years
Credit quality – portfolio significantly de-risked over past 10 years Historic loan loss ratios, bps Comments 55 • Track record of strong credit quality <41 • Average cost of risk 24 bps since 2008 28 27 18 22 22 • Risk profile improved by divestments and reductions 15 16 14 12 10* 7 in high-risk ex
Slide 17: Personal Banking – strong mortgage volume growth
Personal Banking – strong mortgage volume growth Total income, EURm Comments -5% • Strong mortgage volume growth and high activity 900 855 857 823 814 • Rate movements pressuring both lending and deposit margins • Customer satisfaction steadily improving 539 523 529 517 500 • Net commission income i
Slide 18: Business Banking – higher business volumes and lower costs
Business Banking – higher business volumes and lower costs Total income, EURm Comments -1% • Strong volume growth in all countries 588 575 550 546 531 • Lending volumes up 4% and deposit volumes up 15% 346 • Lower economic activity impacting net commission income 346 343 339 338 • Payment volumes an
Slide 19: Large Corporates & Institutions – continue to execute on re-positioning plan
Large Corporates & Institutions – continue to execute on re-positioning plan Total income, EURm Comments • Income up 19% mainly driven by net fair value and increase +19% 465 in market making activities in the quarter 397 414 405 392 • Lending demand tapering off from peak levels in March/April 211
Slide 20: Asset & Wealth Management – strong inflow and investment performance
Asset & Wealth Management – strong inflow and investment performance Total income, EURm Comments -4% • Strong growth in AuM from low levels in April 269 • Positive market development and good investment performance 259 236 237 13 18 226 14 13 16 • Strong net inflow (EUR 4bn), mainly driven by Privat
Slide 21: Nordea is committed to delivering on financial targets
Nordea is committed to delivering on financial targets Cost to income ratio in FY22 Return on equity in FY22 50% >10% Capital policy Dividend policy 60-70% pay-out of distributable 150-200 bps profits to shareholders management buffer Excess capital intended to be distributed above the regulatory CE
Slide 22: Slide 22
Slide 23: Appendix
Nordea Appendix
Slide 24: Asset quality – impaired loans further reduced
Asset quality – impaired loans further reduced Stage 3 impaired loans at amortised cost, EURm Comments • Impaired loans decreased further by 2% -2% • Reflects overall stable credit quality and net 4,678 migration out of stage 3 4,610 4,555 4,493 4,516 4,421 • Allowance ratio for impaired loans rose
Slide 25: IFRS 9 model update – macro-economic assumptions behind scenarios used
IFRS 9 model update – macro-economic assumptions behind scenarios used Baseline annual GDP growth, % Comments 6 • Scenarios are conservative and recently updated in 4 2 line with Nordic central banks and ECB forecasts 0 • Base scenario, 60% weight 2019 2020 2021 2022 -2 • Gradual removal of restrict
Slide 26: Coverage ratios – further improved in the second quarter
Coverage ratios – further improved in the second quarter Coverage ratios Significantly affected Partially affected Insignificantly affected segments segments segments Avg. 49% Avg. 43% Avg. 22% 70 65 64 61 61 58 54 55 52 52 53 50 49 47 47 46 46 44 44 44 45 44 43 40 41 39 38 38 38 39 34 35 35 33 9 4