Beruflich Dokumente
Kultur Dokumente
1 October 2008
Erkki Raasuke
Head of Swedbank Baltic Banking
Content
Macro summary
Financial highlights
Asset quality
Baltic macro development
Real GDP growth, % YoY
15
%
Lithuania
– Imbalances built up during the times of rapid credit
growth weigh heavy on the economies, e.g. 0
• Economic structure skewed towards domestic demand Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08
%
50 LV Domestic
– To return to a sustainable growth path, a move away credit
LV Housing
from non-tradables and towards tradables is necessary: 25 loans
restructuring is costly and takes time. LT Domestic
credit
0
– There are signs of restructuring underway (e.g. shift in Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08
LT Housing
loans
investment structure favoring tradables), but it is far
from complete Average Labour Productivity growth, % YoY
– The deepest slowing likely to be seen in LV where 15
%
Lithuania
0
Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08
-5
Baltic macro outlook (1)
10 10
• Real estate market will lag behind overall recovery as consumers will be unsure about the
start of recovery and will try to rebuild their depleted savings first
– Despite improving affordability index, prices still too high for general public
– Interest rates are rising, which adds to the cost of borrowing
– Expectations of price decreases discourages demand
– Unsold stocks are building up putting a downward pressure on the price
– There are sufficient number of flats in comparison to EU averages
Summary – economy and banking sector
• 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
Content
Macro summary
Financial highlights
Asset quality
Highlights (continued operations) – Q2 2008
• Net profit EUR 135m in Q2 2008, EUR +20m vs Q1, annual growth 7%
• The following factors affected AS Hansabank’s Q2 consolidated performance:
– Positive net effect of one-off transactions
– Recovery of trading income to average level
– Increase in loan losses mainly in real estate sector
• AS Hansabank’s consolidated results without the effect of one-off transactions was the
following:
– net profit EUR 108m (-15% YoY)
– income EUR 255m (+5% YoY)
– operating expenses EUR 108 (+14% YoY)
– ROE 21.1%
– cost-income ratio 42.3%
Net income
in millions of EUR
Q2 Q2 Q2 Norm2 150
Income Expenses
YoY QoQ 125 YoY
300
-10%
QoQ
+7% +7%
250 -13%
100
200
EURm
75
EURm
150
50 Normalized
100
EUR 107m,
50 25 QoQ +14%
0 0
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08
• Despite increasing financing cost net interest income decreased only EUR 0.8m compared to Q1
• Trading income recovered from poor results to an average quarterly level
• Other income includes gain on the sale of PKK
• Operating expenses decreased by 10% YoY to EUR 85m in Q208. Expenses include a reversal of bonus
reserve. Without this effect operating expenses grew 14% YoY
• Growth in administrative expenses is to a large extent driven by professional services and related to the
bank’s investments to longer-term strategic initiatives.
Employee productivity
2
2005 2006 2007 Q1 08 Q2 08
Estonia Latvia Lithuania Baltic Banking
2004 2005
Benchmarking total revenue to personnel cost
2006 2007
6 HBG 2007
0
Raiffeisen
OTP
RBC
DnB Nor
Santander
Group
Nordea
Danske
Unicredito
SHB
BBVA
RBS
SEB Baltic
Hansabank
SEB
CEE
Int.
Content
Macro summary
Financial highlights
Asset quality
Asset quality and provisioning costs
Net loan losses = (changes in general and special provisions + net write offs) / credit
portfolio at the beginning of the year
1.2% 1.2%
0.8% 0.8%
0.4% 0.4%
0.0% 0.0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 Q1 Q2 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08
08 08
Group Est Lat Lit Group
By sector*
1.2%
By client type* 2.5%
2.0%
0.8%
1.5%
1.0%
0.4%
0.5%
0.0% 0.0%
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008
Private Corporate Real estate, rent Retail and wholesale
Construction Industry
Logistics and comm Other business services
* Overdues over 60 days / 12 months old portfolio
Baltic Banking companies’ overdues vs market
Estonia - overdue over 30 days / current Estonia - overdue over 60 days / current
portfolio portfolio
3.0% 2.0%
2.5%
1.5%
2.0%
1.5% 1.0%
1.0%
0.5% 0.5%
0.0% 0.0%
31.12.05
31.03.06
30.06.06
30.09.06
31.12.06
31.03.07
30.06.07
30.09.07
31.12.07
31.03.08
30.04.08
31.05.08
31.12.05
31.03.06
30.06.06
30.09.06
31.12.06
31.03.07
30.06.07
30.09.07
31.12.07
31.03.08
30.04.08
31.05.08
Rest of the bank market Hansapank (bank only) Rest of the bank market Hansapank (bank only)
Latvia - overdue over 30 days / current portfolio Latvia - overdue over 90 days / current portfolio
5% 3%
4% 3%
2%
3%
2%
2% 1%
1% 1%
0% 0%
31.12.04
31.03.05
30.06.05
30.09.05
31.12.05
31.03.06
30.06.06
30.09.06
31.12.06
31.03.07
30.06.07
30.09.07
31.12.07
31.03.08
31.12.04
31.03.05
30.06.05
30.09.05
31.12.05
31.03.06
30.06.06
30.09.06
31.12.06
31.03.07
30.06.07
30.09.07
31.12.07
31.03.08
Rest of the bank market Hansabanka (bank only) Rest of the bank market Hansabanka (bank only)
Deposit and lending growth by countries
750
500
250
0
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08
-250
Loan growth
QoQ abs growth YoY % growth
750 100%
600 80%
450 60%
300 40%
150 20%
0 0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
06 06 06 06 07 07 07 07 08 08 06 06 06 06 07 07 07 07 08 08 06 06 06 06 07 07 07 07 08 08
* Market data from respective country central banks and financial supervision authorities. Q208 market information for 2 months only
Group lending by sectors
Real-estate
3,110 15% 176 29%**
mgmt
Retail &
1,803 9% 2 0%
Wholesale
EURm
Industry 1,801 9% 21 4%
Estonia
6%
22%
15%
43% 15%
26%
10%
3%
16%
22%
Construction Other
Lithuania
Individuals Transport 4%
4% 13%
Industry Retail & Wholesale
Real-estate mgmt
38%
5%
Office
Production&Warehouse
Residential
41% Retail
Land plots
34%
Other
Sectors under close watch
Wood processing
Raw material price increase coupled with sales price downwards pressure are having a
negative impact on Baltic wood processing industry. Current portfolio quality is around
average with only few problem cases observed. Additional problems may occur after export
duties will be imposed on Russian round wood as there is dependence on imported round
wood in Estonia.
Mortgages
• Standard mortgage product allows to issue new Portfolio, June 2008 Estonia Latvia Lithuania
loans with maximum LTV below 85% and loan-
service ratio below 50%.
Average portfolio LTV 59% 74% 61%
• Mortgage portfolio LTV ratios have remained
solid at 59% in Estonia, 74% in Latvia and 61%
Average maturity 21y 23y 22y
in Lithuania.
• Quality of existing portfolio and each new
customer/transaction are evaluated using
automated scoring tools.
• Decision making process, product conditions,
and pricing are adjusted based on
creditworthiness of the clients.
• Sub-prime type of mortgage lending is not
practiced in Baltics
Potential impact from deteriorating economic
environment
Impact from deteriorating economic environment
Higher NLL
To maintain cost-income ratio of 40% under these
circumstances
• Operating expenses should be cut by 8% Higher cost of
• This translates to funds
Deteriorating asset quality Increased losses, higher need for • More proactive monitoring and workout to reduce
workout/monitoring resources, higher defaults
need for capital due to rating
migration
Higher cost of funding Reduced net interest margin • Transfer higher cost of funding to customers
• Limit new business with decreasing margins
• Se up new alternative funding sources (limited)
Capital constraint due limited Need to reduce RWAs • Reduce new sales
availability from Group and • Start discussion with Swedbank about capital increase
higher requirement due to rating in BBO
migration
Short-term focuses and actions taken
• Short-term challenges
– Credit quality
– Operational efficiency
N/A
40% 22% 23% 40% 30% 27% 24%
29% 24%
7% 7% 8%
20% 7% 20% 6% 8%
8% 16% 15% 9% 4%
3% 7% 4%
8% 7% 7% 7% 12% 14% 15%
0% 0%
2003 2005 2007 Q1 08 2003 2005 2007 Q1 08
Food, beverages, tobacco etc Mineral products Food, beverages, tobacco etc Mineral products
Chemicals Plastic, rubber, wood etc Chemicals Plastic, rubber, wood etc
Textiles, footwear Machinery and equipment Textiles, footwear Machinery and equipment
Metals + other Metals + other