Netherlands Roadshow23 May 2008
Mikael InglanderCFO
(2)
LatviaTotal population: 2.3mEmployees: 2,653Private customers: 0.8mCorp. customers: 55,000Branches: 73Typical market share: 30%
The leading retail bank in four small countries
SwedenTotal population: 9.2mEmployees: 8,656Private customers: 4.1mCorp. customers: 277,000Organisations: 117,000Branches: 445Typical market share: 25%
LithuaniaTotal population: 3.4mEmployees: 3,319Private customers: 3.0mCorp. customers: 79,000Branches: 126Typical market share: 30%
EstoniaTotal population: 1.3mEmployees: 3,234Private customers: 1.2mCorp. customers: 90,000Branches: 91Typical market share: 50%
• Supporting markets: Denmark, Finland, Norway, Russia,Ukraine, USA, Luxemburg, China, Japan and Spain
80%
6% 5% 5% 4%
Swed
en
Esto
nia
Latv
ia
Lith
uani
a
Oth
ers
Share of group lending
• Potential home markets: Russia and Ukraine
(3)
Strong position for profitability and growth
Ukraine and RussiaBalticsSweden
Stable base Growth and experience
Future growth and profitability
Swedbank is the leading bank in Sweden. Profitability is high and stable and the bank is consolidating its market shares in important segments in both the private and corporate sectors.
Swedbank has a small but growing presence in Ukraine and Russia. In the long term, a significant share of Swedbank’s growth will be generated in these markets.
The Baltic economies are experiencing strong economic growth that is expected to remain for many years. As the largest bank in the region, growing with the market ensures attractive earnings growth.
Share of profit 2007: 65%
Share of lending 2007: 80%
Share of profit 2007: 3%
Share of lending 2007: 2%
Share of profit 2007: 32%
Share of lending 2007: 16%
(4)
58%
32%
7% 6% 3%
-6%-10%
0%
10%
20%
30%
40%
50%
60%
70%
SwedishBanking
BalticBanking
SwedbankMarkets
AssetManagement & Insurance
InternationalBanking
SharedServices& Group
Staffs
Share of Group net profit, Q1 2008
Swedbank, group overview
(5)
Core business is doing well – challenging financial markets
• Solid business development with corporates and private customers
• Development as expected in the Baltic states
• Funding programmes continue to function well – conversion to covered bonds on 21 April
• Credit quality remains good, credit losses and impaired loans are increasing from low levels
• Lower commission income due to weaker equity markets and low corporate finance activity
• Net gains and losses on financial items were adversely affected by unrealized valuation effects caused by the credit crunch
(6)
Business volumes
102
19 31
340
102
385
1734
401
334
0
100
200
300
400
500
Deposits,Sweden
Deposits,Baltics
AM funds,Sweden
AM funds,Baltics
Structuredproducts,
bonds
Dec 2007 Mar 2008
SEKbn
Savings
475
390
77 1006178 104
68
1,103 1,131
484397
0
200
400
600
800
1,000
1,200
Lending,Group
Private,Sweden
Corporate,Sweden
Private,Baltics
Corporate, Baltics
Other
Dec 2007 Mar 2008
SEKbnLending
(7)
Margins
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08
Estonia LatviaLithuania Sweden
% Lending
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08
Estonia LatviaLithuania Sweden
Deposits%
Lower interest rates in Latvia and Lithuania adversely affected deposit margins.
Increased funding costs have not yet
been fully transferred to customers.
(8)
Credit quality, Group
0
1,000
2,000
3,000
4,000
5,000
6,000
03 S
ep
03 D
ec
04 M
ar
04 J
un
04 S
ep
04 D
ec
05 M
ar
05 J
un
05 S
ep
05 D
ec
06 M
ar
06 J
un
06 S
ep
06 D
ec
07 M
ar
07 J
un
07 S
ep
07 D
ec
08 M
ar
0.000.050.100.150.200.250.300.350.400.450.50
Impaired loansImpaired loan provisionsShare of impaired loans
SEKm %
(9)
Credit quality, Baltic Banking
0.35%-0.05%
0.23%0.56%0.21%
2007
0.39%
0.25%0.54%0.38%Q1 08
-0.28%Group level provision adjustment0.28%Baltic Banking
0.13%Lithuania0.78%Latvia0.67%EstoniaQ4 07
*Loan loss ratio, net = (changes in provisions + net write offs) / credit portfolio at the beginning of the year
Loan loss ratio, net*
Overdue ratio (more than 60 days)*
0.71%0.75%0.65%Q4 07
0.86%0.92%0.79%Q1 08
0.56%Baltic Banking0.49%Private0.58%CorporateQ2 07
*Overdue ratio (more than 60 days) = volume of loans more than 60 days overdue /12 month-old credit portfolio
(10)
Swedish Banking
• Continued solid volume growth• Net interest income increased
by 2% compared with Q4 2007• Lower equity related
commission income• Continuous work to adjust the
branch structure – sale of 8 branches to savings banks for SEK 440m
0500
1,0001,5002,0002,5003,0003,5004,0004,5005,000
Q306
Q406
Q107
Q2 07
Q307
Q407
Q108
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Income Costs C/I-ratio
C/I-ratioSEKm C/I-ratioSEKm
(11)
Baltic Banking Operations
• Profitability remained robust• Lending growth continued to
decrease• Net interest margins declined due
to decreasing local interest rates and higher funding costs
• Net loan losses as expected• Cost focus
– Operational excellence pilots indicate substantial potential
– No new net staff recruitments0
200400600800
1,0001,2001,4001,6001,8002,0002,2002,400
Q306
Q406
Q107
Q2 07
Q307
Q407
Q108
0.0
0.1
0.2
0.3
0.4
0.5
Income Costs C/I-ratio
SEKm C/I-ratio
(12)
Baltic macro development
Real GDP growth
0%2%4%6%8%
10%12%14%
2005 2006 2007 2008F 2009FEst Lat Lit
CPI growth
2%4%6%8%
10%12%14%16%
2005 2006 2007 2008F 2009FEst Lat Lit
• Economic slowdown in Estonia continues: GDP growth will fall to about 3.5% in 2008, with a recovery to 5% growth in 2009. The bottom of the cycle is expected to be in summer 2008
• In Latvia growth will decline to about 4% in 2008 and to about 3.0% in 2009. The bottom of the cycle is expected to be in winter 2008/2009
• Slowdown in Lithuania will be modest: expected GDP growth of about 6.0% in 2008 and about 5.5% in 2009
• Export growth remains relatively strong, while weak domestic demand is reducing imports. Trade and current account deficits are falling. CPI will peak in Q1 2008. Long-term GDP growth (6-7%) will be above EU average.
Source: Hansabank Markets
(13)
International Banking
• Continued solid performance in Ukraine– Launch of the new brand initiated– Expansion and restructuring of
the branch network continues– New corporate offering
• Cautious expansion in Russia– Raimo Valo new head of Russian
operations• Cooperation with FDB/COOP
regarding banking products in Denmark.
0
25
50
75
100
Q306
Q406
Q107
Q2 07
Q307
Q407
Q108
International Banking, profit for the periodof which Russian Bankingof which Ukrainian Banking Operations
SEKm
(14)
Swedbank Markets
• Fixed income and FX trading continued to do well
• Equity trading was weaker due to negative market sentiment
• Market leader position in structured products was improved, in a weaker market
• Weak quarter in Corporate Finance for First Securities
• Result was negatively affected by unrealized valuation effects as a result of the credit crunch.
050
100150200250300350400450500
Q106
Q206
Q306
Q406
Q107
Q2 07
Q307
Q407
Q108
Profit for the period attributable to shareholders of Swedbank First Securities
SEKm
(15)
Accounting and valuation effects
Accounting and valuation effects, SEKmQ1
2008Q4
2007Q3
2007
Swedbank Markets – 187 – 40 – 60
Group Treasury, intra-group lending – 253 20 – 90
Swedbank Mortgage – 22 66 – 129
Group Treasury, liquidity portfolio 69 – 5 – 68
(16)
Swedbank funding structure
Swedbank Treasury (excluding Mortgage)
• Large deposit base• Liquidity reserves• Net lender in the
interbank market• Liquidity limits –
conservative view
Swedbank Mortgage constitutes a larger part of Swedbank Group’s balance sheet compared with other financial institutions
Distribution of net funding requirementSwedbank Mortgage
Lending to the public: SEK 1,131bn
Deposits80%
Equity8%
Funding12%
Equity4%
Funding96%
50%50%Swedbank Group, excl. Swedbank Mortgage SEK
562bn
Swedbank Mortgage
SEK 569bn
(17)
Focus on funding
Funding costs have increased• Higher price of risk• Increased liquidity reserve• Short-term adverse effect on margins
Covered bonds as of 21 April 2008• AAA rating (S&P and Moody’s) ⇨ funding at lower cost• Facilitates access to a broader investor base – more stable liquidity• Provides substantially increased liquidity reserve.
(18)
Income statement, Group
SEKmQ1
2008Q4
2007 %Q1
2007 %Net interest income 5,241 5,259 – 0 4,501 16Net commission income 2,180 2,536 – 14 2,289 – 5Net gains/losses on financial items at fair value 75 386 – 81 530 – 86Other income 950 693 37 473 101Total income 8,446 8,874 – 5 7,793 8Staff costs 2,311 2,111 9 1,932 20Profit-based staff costs 268 522 – 49 390 – 31Other expenses 1,861 1,893 – 2 1,615 15Total expenses 4,440 4,526 – 2 3,937 13Profit before loan losses 4,006 4,348 – 8 3,856 4Loan losses 288 238 21 49 488Operating profit 3,718 4,110 – 10 3,807 – 2Tax 805 950 – 15 851 – 5Profit for the period 2,913 3,160 – 8 2,956 – 1Attributable to shareholders of Swedbank 2,900 3,108 – 7 2,910 – 0
(19)
Net interest income Q1 08 (Q4 07)
5,259 5,241
55
-13
1 22
-215
132
4,600
4,800
5,000
5,200
5,400
Net
inte
rest
inco
me
Q4
07
Sw
edis
hB
anki
ng
Bal
tic B
anki
ngO
pera
tions
Bal
tic B
anki
ngIn
vest
men
t
Inte
rnat
iona
l B
anki
ng
Sw
edba
nk
Mar
kets
Sha
red
Ser
vice
s an
dot
her
Net
inte
rest
inco
me
Q1
08
SEKm
(20)
Swedish Banking, change in net interest income
SEKmQ1 2008
vs Q4 2007Q1 2008
vs Q1 2007Net interest income Q4 2007 2,927Net interest income Q1 2007 2,943
Changes:Higher lending volumes 55 234Decreased lending margins – 116 – 403Difference in number of days/quarter, lending – 18 18Higher deposit volumes 24 122Higher deposit margins 110 194Difference in number of days/quarter, deposits – 13 13Other changes 13 – 139
Total change 55 39Net interest income Q1 2008 2,982 2,982
(21)
Baltic Banking, change in net interest income
SEKmQ1 2008
vs Q4 2007Q1 2008
vs Q1 2007Net interest income Q4 2007 1,588Net interest income Q1 2007 1,215
Changes:Higher lending volumes 47 245Higher lending margins 3 8Difference in number of days/quarter, lending -11 11FX-effects, lending 14 21Higher deposit volumes 44 68Higher deposit margins 85Decreased deposit margins -148Difference in number of days/quarter, deposits -6 6FX-effects, deposits 10 11Other changes 34 -95Total change – 13 360Net interest income Q1 2008 1,575 1,575
(22)
Net commission income, Group
0
200
400
600
800
1,000A
sset
man
agem
ent
Pay
men
ts
Bro
kera
ge
Lend
ing
Insu
ranc
e
Cor
pora
tefin
ance
Oth
er
Q1 2008 Q4 2007
SEKm
(23)
Loan losses Q1 08 (Q4 07)
-1 000
1 000
3 000
5 000
7 000
9 000
11 000
13 000
15 000
17 000
2000 2001 2002 2003 2004 2005 2006 2007-1 000
1 000
3 000
5 000
7 000
9 000
11 000
13 000
15 000
17 000
Resultat före kreditförluster Reavinster EnterCard, KIABKreditförluster, netto* Rörelseresultat (exkl. reavinster)
mkr mkr
-100
-50
0
50
100
150
200
250
300
350
Group, total Swedish Banking Baltic BankingOperations
International Banking
Swedbank Markets
Shared Servicesand other
Q4 2007 Q1 2008
mkr
(24)
Expenses
SEKmQ1
2008Q4
2007 %Q1
2007 %Swedish Banking 2,255 2,279 – 1 2,183 3Baltic Banking 899 1,062 – 15 769 17International Banking 309 272 14 107 of which Ukrainian Banking 150 163 – 8 Swedbank Markets 456 560 – 19 517 – 12Asset Management & Insurance 253 230 10 183 38Other 268 123 178 51Total expenses 4,440 4,526 – 2 3,937 13of which staff costs in: Swedish Banking 1,099 1,096 0 1,023 7Baltic Banking 522 587 – 11 451 16International Banking 157 155 1 52 Swedbank Markets 258 351 – 26 345 – 25Asset Management & Insurance 110 138 – 20 76 45
(25)
Business areas
2008 vs 2007, SEKm 2008 % 2008 % 2008 % 2008 % 2008 %Net interest income 2,982 1 1,575 30 369 289 – 28 25 32Net commission income 1,025 – 5 458 8 54 26 227 – 38 416 4Other income 690 93 209 – 24 26 254 2 24 – 57Total income 4,697 7 2,242 17 449 770 – 24 465 – 2Staff costs 1,099 7 522 16 157 258 – 25 110 45Other expenses 1,156 – 0 377 19 152 198 15 143 34Total expenses 2,255 3 899 17 309 456 – 12 253 38Profit before loan losses 2,442 11 1,343 17 140 65 314 – 36 212 – 27Loan losses 95 173 62 26 ## 0 0 Operating profit 2,347 4 1,170 13 114 58 314 – 36 212 – 27Tax 656 4 107 20 28 75 88 – 36 53 – 23Profit for the period 1,691 4 1,063 12 86 54 226 – 37 159 – 28Attributable to Swedbank's shareholders 1,688 4 1,063 12 86 54 216 – 31 159 – 28Return on allocated equity, % 23.3 29.1 5.0 23.7 29.4
AssetMgmt
Int'l.Banking
Swedish Banking
BalticBanking
Swedbank Markets
(26)
Key figures
Jan-Mar2008
Jan-Mar2007
Return on equity, % 16.8 18.9Earnings per share, SEK 5.63 5.65Equity per share, SEK 136.43 122.84C/I ratio before loan losses 0.53 0.51Loan loss ratio, net, % 0.10 0.02Share of impaired loans, % 0.16 0.07Dividend, SEK 9.00* 8.25Tier 1 capital ratio, new rules, % 8.2 8.0Tier 1 capital ratio, transition rules, % 6.5 6.8 Capital adequacy ratio, new rules, % 11.7 11.8 * according to Board of Directors proposal
(27)
Core business is doing well – challenging financial markets
• Solid business development with corporates and private customers
• Development as expected in the Baltic states
• Funding programmes continue to function well – conversion to covered bonds on 21 April
• Credit quality remains good, credit losses and impaired loans are increasing from low levels
• Lower commission income due to weaker equity markets and low corporate finance activity
• Net gains and losses on financial items were adversely affected by unrealized valuation effects caused by the credit crunch
(28)
Appendix
(29)
Exposures• No direct US subprime exposure
– Minimal indirect exposure through investments of EUR 48m in bonds issued by US mortgage institutions. The bonds have about 5% exposure to US subprime
• Total exposure to structured credits is minimal– No commitments as regards conduits or SIVs of any kind– Negligible exposure to CDOs
• Swedbank holds a very small CDO trading stock for client trades in CDOs issued by Swedbank, with mainly large caps as underlying risk
• Holdings totalled EUR 18m at end Q1– Exposure to Mortgage Backed Securities was about EUR 714m
• European Aaa and mainly residential• Held for EUR liquidity purposes and client trading
• Hedge fund exposure was about EUR 500m, all collateralized• Exposure to private equity firms and their target companies was about
EUR 1,350m in total – Nordic related LBOs
• The above-mentioned exposures together represent less than 1.5% of total assets.
(30)
Baltic Banking lending by sectors
593
1,076
1,780
1,800
2,933
8,370
3,185
0 2,000 4,000 6,000 8,000 10,000
Other
Construction
Transport
Industry
Retail &Wholesale
Real-estatemgmt
Individuals
47
-35
88
64
-79
268
-2
-250 0 250 500 750
Portfolio, March 2008 Portfolio growth, Q1 08
42%
xx% - share of portfolio and portfolio growth
3%
5%
9%
9%
15%
10%
-12%
41%
16% 0%
13%
-5%
7%
As of 2008, Bank of Estonia changed the official sector classification details. During the process of implementing the new classification, Hansabank switched to a different source system and reviewed the sector data in detail. This resulted in many reclassifications, particularly as regards the real estate management sector. The current classification better illustrates Baltic Banking’s exposure to the real estate sector. Real estate management portfolio growth prior to reclassification was EUR 145m in Q1 08.