Bank DnB NORD Banking operations around the Baltic Sea – Challenges and possibilities going forward
Sven Herlyn, CEO
Presentation at Artic Securities , Oslo
Oslo, 31 March 2008
Content
• Macroeconomics • History and the start of the Joint venture • The development until today • The future plans
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Trade of each economy in the region shows high integration
2005 Norway 44 28 43 Sweden Finland 46 37 27 20 Import 66 46 43 Germany Poland 10 11 61 Export Lithuania Latvia 64 46 60 Estonia Russia
32
Denmark
43
47
53
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The North-European Market II: Basic Economic Fundamentals
Economic dynamics and per capita income - growth of real GDP and GDP per capita
45,000 40,000
GDP/pc 2003 (USD)
Norway Denmark Finland
35,000 30,000 25,000
Germany
20,000 15,000 10,000 5,000
Sweden
Poland Lithuania Russia Latvia
4.0 5.0 6.0
Estonia
0 0.0 1.0 2.0 3.0 7.0 8.0
Real GDP growth 1992-2003 p.a. [%]
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Bank DnB NORD
- Macroeconomic key figures in Northeast Europe
Risk of hard landing in Latvia and Lithuania, decreasing growth in Poland and Scandinavia
Growth (real GDP growth %)
2005 Denmark Finland Estonia Latvia Lithuania Poland
E = DnB NORD Research estimates
Inflation (CPI)
2009E 1.3 2.5 5.0 5.0 6.5 4.5 2005 1.7 0.9 4.1 6.8 2.7 2.2 2006 1.9 1.6 4.4 6.5 3.7 1.2 2007E 1.7 2.5 6.8 10.0 5.8 2.4 2008E 1.9 2.7 7.5 12.5 6.5 2.8 2009E 1.7 2.0 5.0 7.5 5.5 2.4
2006 3.5 5.0 11.2 12.0 7.5 6.0
2007E 1.9 4.2 7.5 11.0 10.0 6.5
2008E 1.6 3.0 4.0 5.8 7.0 5.0
3.1 2.9 10.2 10.6 7.6 3.6
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Financial sector in the Baltic Rim
- Basic Indicators
6|
Source: ECB, National banks, banking associations, statistical offices.
Strategic Market View
• Denmark and Finland
– very competitive markets – modest growth expectations but consolidation gives opportunities
• Baltic States
– markets in consolidation, good margins, good position – Lithuania and Latvia highest potential, yet risk of overheating
• Poland
– very competitive market, many international banks – biggest economy in the new EU with high growth potential
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Bank DnB NORD
- Developing a Nordic/ Baltic Network Bank
1999
2000
2001
2002
2003
2004
2005
Purchase sub License to Latvia (99.7%) open sub in Poland Purchase MHB Branch (100%) (to be used in Stockholm Branch Poland) Helsinki Branch Vilnius Rep. office Tallinn Start restr. Latvian operations
Purchase sub Lithuania (93.1%)
Re-branding to Lithuania NORD/LB restructured Latvia, Lithuania Opening of and Poland outlets outside Opening in Start restr. Warsaw Poland Lithuanian operations Rep. office Oslo Latvian operations restructured
Opening of 3 outlets outside Warsaw
Start of harmonising LET & LIT as first step for common IT platform
21.6.2005: Joint Venture Agreement signed, owned 51% by DnB NOR and 49% by NORD LB
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DnB NORD and parent banks
- Market coverage and vision
Markets: GER 1) NOR SWE DEN FIN EST LAT LIT POL RUS 2)
12/2005
Rep. office
vision
Home market champion
Subsidiary/branch top 5 market share
Sub or branch
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1) 2)
Northern Germany North West Russia
Bank DnB NORD
- Total assets
EUR m Denmark Finland Estonia Lithuania Latvia Poland HQ DnB NORD total
2005 246 * 285 0 1,523 1,067 500 396 3,171
2006 401 230 105 2,243 1,947 565 866 5,632
2007 749 485 191 3,309 2,765 1,591 1,032 9,271
Legend: - Sum/Total is deviating due to elimination from internal transactions - Branch in Finland was taken over in February 2006 - Branch in Estonia was subsidiary of DnB NORD Banka (Latvia) until end of 2007 - *pro-forma
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Bank DnB NORD
- Employees
2005 Denmark Finland Estonia Lithuania Latvia Poland IT-Company HQ DnB NORD total 2 6 0 1.049 638 92 0 15 1.787
2006 14 9 12 1.078 759 116 0 27 1.981
2007 23 9 60 1.217 849 1.092 4 45 3.241
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Total Credit Portfolio 12/2007
OTHER RETAIL 3% BUILDING & CONSTRUCTION 3% WOOD PROCESSING 3%
POWER & WATERSUPPLY 2% PRIVATE LOAN 3% AGRICULTURE 2% MORTGAGE 21 %
OTHER CORP 15 %
TRANSPORT 4% TRADE 10 %
REAL ESTATE 18 % MANUFACTURING 16 %
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Corporate portfolio 12/2007
POWER & WATERSUPPLY 3% BUILDING & CONSTRUCTION 4% WOOD PROCESSING 5%
SERVICES & MANAGEMENT 2% AGRICULTURE 3%
FINANCE & CREDIT 2%
REAL ESTATE 25%
OTHER 14%
MANUFACTURING 22% TRADE 14%
TRANSPORT 6%
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Bank DnB NORD
- Branches
Total
2005 130
2006 126
2007 172
1
1
37 2 77
54
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Bank DnB NORD
EUR m
300 250 200 150 100 50 0
Gross income Profit before tax Pegasus case Pegasus case 2003 69.278 19.3
- Comparison with original scenario when JV was established
Gross income Profit before tax Pegasus case Pegasus case
2004 86.596 22.4
2005 92.3 29.4 94.3 29.4
2006 129.6 40.1 120.8 36.5
2007 248.3 72.5 151.1 54.4
Profit before tax up 80% in 2007
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Profit after Tax by Country
35 30 25 20 15 10 5 0 DEN
16|
2005 2006 2007 2008
FIN
EST
LAT
LIT
POL
DnB NORD
– Profile
LIT
Target segment
Retail & Corporate
LAT
Retail & Corporate
EST
Retail & Corporate
FIN
Corporate
DEN
Corporate
POL
Retail & Corporate
Current market position
No 2/3
No 4
Branch
No 11
No 7
No 24
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Bank DnB NORD
- Value creation
Strategy is based on organic growth, selective acquisitions and co-operations
EUR m Total assets Profit after tax Employees Implicit market value 1) 2005 3,171 24 1,787 328 2007 9,721 57 3,241 1,686 2009E 17,241 108 3,949 2,074 05-09 5.4x 4.5x 2.2x 6.3x
Baltics
JV Start
12/2005
Acquisition
2006
Integration & Consolidation
2007-2009
Strategy review
2009
18| 1) A price/book multiple of 2x is anticipated
DnB NOR & NORD/LB
- Strong parents
Total Assets [EUR bn] Profit before tax [EUR m]
Total assets, 2007
Profit before tax, 2007
500 450 400 350 300 250 200 150 100 50 0
4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0
K
th up a
in
a gB
nk
e Sw .H Sv
a db
n R B ke NO D/L an R B lsb Dn NO de an nk
B SE
B nk ea D/L Ba or d R N ke NO ns & Da OR N nB D
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NORD/LB: half-year 2007 (30.06.06-30.06.07). End-2007 figures will be published in May 2008
Positions per Country
by assets
Country Denmark Estonia Finland N.Germany Latvia Lithuania Norway Poland Russia Sweden Nordea Danske SEB Swedbank Hansabank Handelsb anken DnB NOR –NORD LB
2
1
3
4
6
6
4
1 2
3
2 3
2
4 1
1
5 4
6
3 5
5
6 1
4
4 2
5
5 3
2
1 5
1
2 6
6
6 4
3
3 1
1
3 2
3
5 5
4
2 4
5
1 3
6
4 1
2
6 6
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Benchmark banks / Nordic region incl. Northern Germany
- Market share assets; 31.12.2006
Norway
Market share 50% 18% 6% 5%
Sweden
Market share 26% 26% 16% 15% 10%
Finland
*
Market share 32% 18% 7%
DnB NORD < 1% (excl. NOR clients)
Denmark
Market share 55% 18% 5% 3%
N. Germany
Market share 13% 11% 9% 5%
DnB NORD appr. > 1% (excl. NOR clients)
* incl. Sampo
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Nordic benchmark banks /Baltics & Poland
- Market share assets; 31.12.2006
Estonia
Market share 59% 21%
Latvia
Market share 23% 17% 8%
*
9% 8%
Poland
Market share 1%
**
6%
*
Lithuania
Market share 32% 27% 13% 6%
1%
0.8 % 0.3 % Not relevant Not relevant
*
*
7%
22| ** incl. BISE pro forma
* incl. Sampo
Income development
600 500 400 300 200 100 0 2007
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Fee income interest income Total income
2008
2009
2010
Profitdevelopment
300 250 200 150 100 50 0 2005
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Operational Profit Budget Profit after tax Budget
2006
2007
2008
2009
2010
Bank DnB NORD
- core ratios 2007-2010
DnB NORD Group Cost income ratio Personnel to income Risk provision Return on 6.5% of RWA Ratio of deposit to lending (%) Loan margin Deposit margin
2007 63.8 % 32.2 % 0.2 % 12.9 % 36.3 % 1.4 % 2.14 %
2008 65.9 % 31.2 % 0.3 % 11.8 % 33.6 % 1.3 % 2.26 %
2009 60.3 % 28.0 % 0.3 % 11.9 % 32.8 % 1.3 % 2.10 %
2010 51.7 % 24.7 % 0.3 % 16.1 % 32.6 % 1.3 % 2.03 %
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Strategic Options
• Denmark and Finland:
– – – –
today only organic growth possible Niche focus and strong sales force in SME Considering entering additional segments Some opportunities can arise
• Baltic States:
– strongest market position besides home markets of parents – closing gap to Swedbank and SEB only through acquisitions
• Poland:
– Integration of BISE and organic growth, mainly in SME – next possible acquisition in 2009
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DnB NORD 2010
- Strategic focus areas
Strategic focus areas • Entering into new business segments, increasing penetration and asset utilisation in existing segments
– – – – Entering into Retail and SME segments in Estonia and Poland (BISE Integration and development) Increasing Retail market share in Latvia and Lithuania Considering new market penetration strategies in Denmark and Finland (e.g. Retail, SME) Entering into North-West Russia, either via acquisition or Retail Greenfield investments
Geographical scope
•
Harmonisation of product and processes within the DnB NORD group
– – Corazon project (IT core system) including harmonisation of all relevant satellite systems Product Board
Group-wide Group-wide
•
Developing new products and increasing cross selling
– – – Group Treasury project Cross-border banking (within DnB NORD and to parent banks) including Cash Management services Corporate Finance function
Group-wide Group-wide Group-wide
•
Management information, performance and strategy systems
– Credit Rating
Group-wide Group-wide Group-wide Group-wide
–
– –
Balanced Score Card (BSC) strategy approach
MIS, CRM and Basel II Project Portfolio Management
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Bank DnB NORD
- Challenges 2008-2009
• • • • • •
Keep strategic focus in the current market environment, increase asset utilisation and increased attention towards capital management Implementation of a new core banking system in all DnB NORD countries until 2009 Establishment of a group-wide Treasury function in Copenhagen Development of a cross-border payment system – in general improvement of cross-border financial services Overheating risk in Latvia and Lithuania (fiscal adjustment in Latvia, question of soft or hard landing; Inflation and wage pressure) ”Post-Merger-Integration” in Poland: Establishment of a competitive infrastructure and culture in the new DnB NORD Polska following legal merger with BISE in November 2007
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Covering our biggest market
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Szczecin Koszain Gdansk Bydgoszcz Poznan Warsaw Opole Wroclaw Katowice Kraków Walbrzych Gorzów Wielkopolski
Koszain Swinoujscie Szczecin Kostrzyn Gorzów Slubice Zielona Görlitz Legnica Jelenia Góra Częstochowa
13.
14. 15. 16. 17. 18. 19. 20.
Zielona Góra
Częstochowa Swinoujscie Kostrzyn Slubice Zgorzelec (Görlitz) Jelenia Góra Legnica
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DnB NORD Corporate Structure
DnB NOR 51% NORD/LB 49%
DnB NORD IT (100%)
Bank DnB NORD A/S Copenhagen
Denmark Branch Finland Branch Estonia Branch DnB NORD Polska (98.95%)
DnB NORD Bankas Lietuva (93.15%)
UAB DnB NORD Investicijy Valdymas (100%) UAB DnB NORD Bustas (100%) UAB DnB NORD Lizingas (100%)
DnB NORD Banka Latvija (99.88%)
IPAS DnB NORD Fondi (75%)
SIA DnB NORD Lizings (100%)
BISE Atechnet Leasing (48.99%)
BISE Nieruchom osci Sp. Z o.o (93.91%)
TISE S.A. (100%)
Rep. office Kaliningrad
Books Sp. Z o.o (100%)
TISE Uslugi finansowe Sp. Z o.o (100%)
Wspolnot a On-line Sp. Z o.o (100%)
Monetia Sp. Z o.o
(85%)
Top Partners Sp. z o.o
(100%)
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DnB NORD's vision
VISION
Reliability
Simplicity
Our goal is to be the most reliable and dynamic bank in North East Europe –
Team Spirit
We use Team spirit and Simplicity as our instruments to create Dynamics
Dynamics
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