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Nordea – the leading Nordic bank…

Nordea efter den finansiella krisen Falun 2 September 2010 Rodney Alfvén Head of Investor Relations. Nordea – the leading Nordic bank…. A unique customer base Approx. 7.7 mill. household customers in programmes, 0.7 mill. active corporate customers. Global Other Group ¹ 10%. Norway 15%.

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Nordea – the leading Nordic bank…

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  1. Nordea efter den finansiella krisenFalun2 September 2010 Rodney AlfvénHead of Investor Relations

  2. Nordea – the leading Nordic bank… • A unique customer base • Approx. 7.7 mill. household customers in programmes, 0.7 mill. active corporate customers Global Other Group¹ 10% Norway 15% Finland 21% • Strong distribution power • Approx. 1,400 branches of which 270 in NEM Sweden 23% 6% Denmark 25% New European Markets • Financial strength • EUR 20.5bn in tier 1 capital • Tier 1 ratio 11.1% excl transition rules • Market capitalisation • EUR 28bn • Diversification • No single market accounts for more than one quarter of Nordea’s income Household lending % Shipping, Oil Services & International, Financial Institutions, International Private Banking and Group Functions

  3. …and one of the larger banks in Europe EURbn Source: ThomsonReuters Datastream

  4. Macro economic stabilisation in the Nordic region GDP growth, %, y/y • Growth rates expected to be solid in the Nordic countries • In 2010, all Nordic countries are expected to have: • Positive growth rates • Modest inflation • Relatively strong public finances • Improvements in labour markets Public finances, % of GDP Norway +12-18% Source: Nordea Markets

  5. Continued strong customer business Income in Corporate segment Income in Household segment Total income Number of Gold customers Lending volumes Impaired loans

  6. Result highlights

  7. Net interest income held up well in H1 2010, despite the low interest rate level • Solid trend in customer operations continues • Lending and deposit volumes up • Margins stable • Remains subdued by the low interest rate levels • Lower contribution from Group Treasury • Slight increase in average funding cost when maturing long-term funding was prolonged at higher market rates EURm

  8. Underlying volume trends

  9. Interest rate sensitivity- 3 components • Structural interest income risk (SIIR) • Reflecting the effect on NII from re-pricing gaps* • Dynamic effects on net interest income • Changes in deposit margins – mainly transaction accounts • Market risk in the interest-bearing investment portfolios • Market risk has an immediate effect on the net result from items at fair value * Accumulated mismatch between assets and liabilities with an interest rate duration of less than 12 months, with the assumptions that non-maturity accounts are re-priced immediately following a interest rate change, without effecting margins

  10. Strong net fee and commission income • Higher income contribution from corporate advice • Continued strong performance in the savings area • High activity in capital markets EURm

  11. Credit quality improving during 2010 EURm • Net loan losses down to 36 bps in H1 2010 (55 bps last year) • 30 bps individual (42 bps) • 6 bps collective (13 bps) • 140 bps in the Baltic countries (166 bps) • Excluding guarantee scheme provisions, net loan loss ratio down to 32 bps (51 bps) • Decreased loan losses in most areas • Impaired loans gross down 1% in Q2 • 52% of impaired loans performing Reversals Net loan losses Loan losses by area Q2 2010

  12. Strong capital position maintained –and strong funding despite challenging quarter Core tier 1 capital ratio (excl. hybrids), % • Core tier 1 ratio 10.0% • High volume increase but stabilising rating migration affect RWA • EUR 20.9bn of long-term funding issued in H1 2010 • In June, after several weeks of no market supply, Nordea reopened the senior unsecured market Total long-term funding issued, EURbn

  13. Basel III – the answer to the financial crises

  14. The crises was built up during a long time period Construction as a % of GDP and weight of mortgage debt in the US New home sales and 30-year mortgage rates Source: Bloomberg

  15. Total Issuance of Structured Finance by Region (US$bn) Source: BIS

  16. Total leveraged loans – including Finance Leveraged Buyouts US$ bn by quarter Source: Datastream

  17. Leading to “super-profit” in financials Profits relative to nominal GDP in Europe (base 100 = Q1 1973) Source : Datastream

  18. The financial crisis – impact and response 2008 2009 2010 2007 Losses and write-downs Regulatory initiatives for ”Never again” Some clarity Funding problems Capital problems Response • Capital injections • State-sponsored hybrid capital • Fiscal stimulus packages • Capital • Liquidity • Systemic risk • Remuneration • Rescue packages • Bail-outs • Funding guarantees • Rate cuts • Liquidity injections

  19. Broad agreement in July 2010 on Basel III changes and implementation plan • Nordea anticipates final details towards the end of the year – including new proposal on NSFR and capital buffers • Uncertainty remains high – questions around NSFR and leverage ratio • Increased cost of capital expected, likely to impact pricing to customers ? Basel Oversightbody, broad agreement Basel Committee meeting G20 meeting Implementation capital regulation+ LCR Implementation leverage ratio + NSFR Basel release of details for 2012 and new proposals for 2018 Test/observation phase for leverage ratio + NSFR 2013-2017 Dec 2012 July 2010 Oct 2010 Dec 2010 Jan 2018

  20. Capital position strong, for regulations and growth • Limited impact from capital base adjustments • Tier 1 hybrids assumed to be replaced by new tier 1 capital types • Uncertainty on capital buffers • Nordea assessed to be in a good position • Leverage ratio • Netting approach for derivatives • Nordea assessed to be above threshold of 3% • Nordea’s capital ratios well above targets and current regulatory threshold Capital ratios H1 2010, % TargetsThreshold 11.5 9.0 8.0

  21. Liquidity – changes in right direction, but proposal still conservative and challenging for the industry Changed parameters for Liquidity Coverage Ratio, LCR Broader definition of qualifying assets in liquidity buffer Milder stress scenarios But internal covered bonds still not eligible, despite high quality and central bank eligibility Prolonged observation phase for Net Stable Funding Ratio, NSFR Observation phase 2013-2017, final version from 2018 Still challenging for the industry given the size of the funding gap relative to funding market capacity Uncertainty remains high around the final regulation and the implementation

  22. Journey to Great Nordea

  23. Great Nordea framework Rationale • Without this as the foundation, there is no bank – through the cycle Profit orientation & prudence • Need to settargets to be able to reach the goals • Motivation to perform extraordinarily Ambitious vision & targets • Nine countries, and everything different • Common values and platform to form one team Strong customer- oriented values & culture • Growth to free up resources to improve customer satisfaction • Growth to create value to our shareholders Clear growth strategy

  24. Profit orientation and prudence Strong credit management – moderate creditrisk appetite over the cycle Loan loss ratio Credit risk appetite 25 bps

  25. Profit orientation and prudence Strongest capital position among a selected group of major international banksRisk-adjusted capital ratios % Source: Swedish Riksbank, Standard & Poor’s

  26. Profit orientation and prudence One of the most stable profit development among banks in Europe Profit before tax development through the financial crisis (Indexed) Index = 100 Nordea European peers Nordic peers * Calculation based on covariance of 13 quarters operating profits 2007 – Q2 2010 ** Nordic peers: Danske Bank, DnB NOR, SEB, SHB, Swedbank

  27. Ambitious vision & targets Delivery on long-term targets Risk-adjusted profitrolling 4 quarters development 2007 – Q2 2010 Total shareholder return1 Jan 2007- 16 Aug 2010 41.4% 25.5% Top quartile RoE 2007 – Q2 2010 Nordea has reported one of the highest average return on equity (RoE) of Nordic peers¹, 14.4% ¹Nordic peers: Danske Bank, DnB NOR, SEB, SHB, Swedbank

  28. Values Strong customer-oriented values and culture –become part of DNA A Great European Bank, acknowledged for its people, creating superior value for customers and shareholders Great customer experiences It’s all about people One Nordea team Foundation: Profit orientation and prudent cost, risk and capital management

  29. Customer satisfaction improving versus competitors Values CSI index (aggregate) 2007-2009* 2007 2009 +0.9 71.5 70.6 Nordea - 3.6 71.2 Peers 67.6 3.9 -0.6 *Corporate and high involvement customers, corresponding to Gold and Silver segment customers 29

  30. Prudent growth strategy – Group initiatives andstrong business development

  31. We continue on the journey to Great and to deliver on our long-term target Middle of the road Profitable organic growth Prudent growth Great Nordea 10 07 08 09 11 12 Next level strategy based on stronger position Organic growth strategy • Keep income growth momentum • Cost, risk and capital take the lead • Enable us to accelerate out of the crisis Group initiatives launched to support the strategy Next generation of initiatives launched

  32. Growth strategy Benefits of universal relationship banking –clearly in focus for the growth Why relationship banking? Satisfying customer needs … … while focusing on the most attractive customer groups • Safety and stability • “Someone who cares” • Full range of advice • Customer needs driven innovation • Most profitable • Highest potential • Most satisfied and loyal • High efficiency in service Capital efficiency through full customer wallet … … at a low risk • Low losses, eg, Gold customers with automated credit scoring • Knowing and being close to Corporate customers • Diversification from Corporate and Household mix • Balanced and diversified business mix, e.g., lending and deposits • Complemented by, e.g., capital-efficient asset management products

  33. Quality of people One value chain A great European bank, acknowledged for its people, creating superior value for customers and shareholders Customer base Proximity Great customer experiences It’s all about people One Nordea team Customer-oriented values Foundation: Profit orientation and prudent cost, risk and capital management Capital position Demand-driven products One customer team Trustworthy brand name Growth strategy You need the right platform

  34. A great European bank, acknowledged for its people, creating superior value for customers and shareholders Great customer experiences It’s all about people One Nordea team Foundation: Profit orientation and prudent cost, risk and capital management Growth strategy Nordea has built the platform ~6,000 PBAs, SRMs and RMs trained in -09 Quality of people One value chain Customer base Proximity 1400 branches (160 Corporate), contact centres and netbank ~ 8 m household customers in programmes, 0.5 m corporate Customer-oriented values Capital position Demand-driven products One of strongest capital and funding positions in Europe One customer team E.g., top Morningstar ratings, No 1 Greenwich rating Trustworthy brand name Nordea brand stronger than ever

  35. Growth strategy Prudent growth strategy supported by next generation of Group initiatives Increase business with existing Nordic customers and attract new customers Exploit global and European business lines Supplement Nordic growth through investments in New European Markets 1. Future distribution 6. Growth plan Poland 2. New customer acquisition 3. Growth plan Finland 4. Growth plan CMB Sweden 5. Customer-driven Markets business 7. Top league IT and operations 8. Product platforms 9. Infrastructure upgrade Take Nordea to the next level of operational efficiency, support sustained growth

  36. Household strategy delivery: Value proposition attracts customers in premium segments • Solid trend accelerated in 2010 – up 7.2% from one year ago • 110,000 new Gold and Private Banking customers in H1 2010 – more than 70% new customers in Nordea • Improved market share in all countries • Significant increase of number of pro-active customer meetings • Continued strong customer demand in household segment – increased volumes with stable margins • Total income in household segment up 5% Number of Gold customers, ‘000 Lending market share increase, %

  37. Corporate strategy delivery: High activity – income up 7% in H1 Corporate lending, EURbn • Increased business confidence - lending volumes up 4% in H1 2010 • Continued strong demand for risk management products • Improved market share in Corporate Banking - strategy to build house-bank relations proven successful Lending market share increase, %

  38. Nordea’s relationship banking approach further strengthened • Strong income growth in Corporate Merchant Banking (CMB) • Strengthened market position – increased share of wallet • Improved position in capital markets • Leading arranger of Nordic syndicated loans • Participation in execution of main Nordic transactions • New area established – Corporate Merchant Banking and Capital Markets • Ensure that all service and product competences of Nordea reach the large corporate customers • Headed by newly recruited – Casper von Koskull Total income CMB, EURm

  39. Concluding remarks

  40. Key messages • We are delivering according to our plan • Credit quality improving – impaired loans decreased in second quarter • More clarity with the agreement around Basel III, but some uncertainty remains • Continued strong customer business • Income from corporate customers up 7% and from household customers up 5% in H1 • Increased lending, deposits and AuM volumes • Solid inflow of new customers – increased market shares in all markets • Positive development in corporate finance business – relationship banking approach further strengthened • Focus on prudent growth and the execution of the Group initiatives • On track in all areas

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