2008Annual Report 2008 Contents

The Nordea Business Solid result and strong position Summary 2 despite financial turmoil and economic re- CEO letter 6 Vision, values and strategy 8 cession. Nordea sticks to its organic growth Business development 2008 12 ­strategy, but adjusts the speed of execution. People forming Great Nordea 22 Cost, risk and capital management receives Corporate Social Responsibility 24 higher priority. Nordea will continue to focus The Nordea share 26 Events 2008 30 ’’on supporting existing core customers and to Board of Directors’ Report attract new relationship customers with solid Financial Review 2008 31 credit profiles. Our ambitious vision of Great Customer area results 37 Nordea remains. Risk, Liquidity and Capital management 44 Christian Clausen, Corporate Governance 70 President and Group CEO Financial statements 5-year overview 78 Quarterly development 81 Income statement 82 Balance sheet 83 Statement of recognised income and expense 84 Cash flow statement 85 Notes to the financial statements 87 Proposed distribution of earnings 145 Audit report 146 Organisation Legal structure 147 Board of Directors 148 CEO letter Page Group Executive Management 150 6 Group Organisation 151 Others Ratings 151 Business definitions 152 Annual General Meeting 153 Financial calendar 153 Corporate Governance Report

This Annual Report 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 can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of various factors. Important factors that may cause such a difference for Nordea include, but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate and (iii) change in interest rate level. This report does not imply that Nordea has undertaken to revise these forward-looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided. Organic growth strategy maintained, but the speed of implementation has been reduced. The organic growth strategy is maintained, despite the much more challenging macro- Strong income growth in 2008 economic environment. By applying the – continued support to customers. ­“middle of the road” approach, Nordea aims to Lending growth to Nordea’s corporate cus- maintain high business momentum balancing tomers increased, following strong market opportunities and challenges. position and strong funding and capital posi- tion. In the household segments, the number Vision, values and strategy Page 8 of customers continued to increase.

Business development 2008 Page12

Well-diversified credit­portfolio. The economic slowdown has resulted in higher net loan losses and increased impaired loans. Impaired loans net have increased from a low level to 0.50% of total loans and receivables and net loan losses were 2008 EUR 466m or 19 basis points of lending.

Risk, Liquidity and Capital management Page 44 2 Nordea Annual Report 2008 Nordea – with an outstanding starting point the largest distribution network for customers in the Nor countries and a highly competitive e-bank, Nordea also has private banking. corporate merchant banking as well as retail banking and Nordea is a universal bank with leading positions within assets under management. asset manager with 126bn EUR in 2008. EUR EUR approx. 13bn, EUR total assets of region with a market capitalisation of group in the Nordic and Baltic Sea Nordea is the largest financial services Summary The Nordea Business Nordic peers 2.1%) (average among Cost base/RWA ratio 2.0% Economies of scale tion rules Tier 1 ratio 9.3% before transi- 15.8bn EUR in tier 1 capital Financial strength Approx, 1,400 branches Strong distribution power Corporate customers customers and 700,000 active Approx. 10 million Household A unique customer base With approx. 1,400 branches, call centres in all Nordic 15.8bn, as of end December 474bn and a tier 1 capital of ­Nordea is the region’s largest

1) Global, Other, Group

Shipping, Oil Services & International, International Private Banking and Group functions. 0.7 - 1) Total operating income, EURbn is 56%, exceeded by only two peer banks. peer group. Since end of 2000, Nordea’s accumulated TSR 2008, only surpassed by one other bank in the European approx. one quarter of Nordea’s total income. sified with the largest geographical market accounting for dent risk management. The lending portfolio is well diver presence and applying a customer team concept. combining Nordic resources and competences with local rate customers and aims at becoming the house bank by has a clear emphasis on relationship banking with corpo- products and services including a personal banker. Nordea the household segment are offered a complete range of allocation according to customer needs. Gold customers in ers and differentiating both value proposition and resource and 0.7 million are active corporate customers. million are household customers in customer programme customers including new European markets, of which 7.5 services group in the Nordic region with approx. 10 million Lithuania, Latvia and Estonia. branches in five new European markets, Russia, Poland, dic and Baltic Sea region, including more than 260 Nordea’s total shareholder return (TSR) was –47% in Nordea pursues an organic growth strategy, with pru- The core in Nordea’s strategy is segmentation of custom- Nordea has the largest customer base of any financial Norway Denmark 1.1 2.0 Sweden 2.0

New European Markets Finland 1.9 0.5 - Tier 1 ratio before transition rules Capital position, industry has faced, Nordea has in 2008 continued to show attitude towards liquidity risk. considers a high level reflecting the Group’s conservative in the range EUR 20 – 40bn throughout 2008, which Nordea levels throughout 2008. Nordea’s liquidity buffer has been The short-term liquidity risk has been held at moderate Liquidity and funding conditions. ing from the prevailing extraordinarily challenging market position the bank for the risks and the opportunities aris- agement believes it is responsible to act pro-actively to best 2009. at an Extraordinary General Meeting to be held on 12 March 0.5bn. The rights offering is subject to shareholder approval 2008, which will increase core tier 1 capital by approx. EUR reduce the dividend payment to 19% of the net profit for approx. EUR 2.5bn net and secondly by proposing to shares with pre-emptive rights for existing shareholders of through an underwritten discounted issue of new ordinary Group’s core tier 1 capital by EUR 3bn. This will be done Nordea in February announced measures to strengthen the strengthen core capital position by 3bn EUR Rights offering and reduced 2008 dividend to the total capital ratio is 11.5%. cycle, the target for the tier 1 ratio is 9% and the target for 9.3% and a core capital ratio of 8.5% at the end of 2008. tier 1 capital, a tier 1 capital ratio before transition rules of Nordea has a strong capital position, with EUR 15.8bn in Capital position and revised capital policy State guarantee fee. increased by 2%, and by 3.5% when excluding the Danish profit in seven years. In 2008, the risk-adjusted profit Nordea’s long-term target is to double the risk-adjusted Return on equity was 15.3% in 2008. Starting from 2006, Even in the very difficult environment that the financial Nordea’s Board of Directors and Group Executive Man- The revised capital policy states that over a business 10 0 2 4 6 8 % 2005 200

6 200 7 200 8 total long-term funding issued Funding strength, compensate for higher liquidity premiums. Due to its lending margins, reflecting re-pricing of credit risk and to driven by volume growth in combination with increased successful execution of strategic investment plans. ported by a strong underlying business momentum and tional Banking reported an income growth of 10%, sup- tomer areas. Nordic Banking and Institutional & Interna- aged to produce a year with solid result. financial crisis and global recession, Nordea again man- loan losses increased by 1% to EUR 3,862m. Despite the Total income increased 4% to EUR 8,200m and profit before Business development and Group result 2008 were 0.50%, up 19 basis points from 2007. assessed loans, in relation to total loans and receivables points. Impaired loans gross increased to EUR 2,224m. amounted to EUR 466m, giving a loan loss ratio of 19 basis RWA was an increase by approx. 4.5% in 2008. Loan losses than uprated. The total effect from rating migration on folio, with somewhat more customers being downrated fourth quarter 2008, mainly in the corporate credit port­ credit decision authority level within the Group. customers and customer groups are set at the relevant decision-making structure ensures that credit risk limits for risk management over a long time period. The Group-wide Nordea has operated with a consistent and prudent credit Well-diversified credit portfolio all contributed positively. access to two large domestic covered bond markets, have funding base, including stable household deposits and the file. This, combined with the well-diversified and strong liquidity management, with a conservative business pro- being a well recognised AA- rated bank, having a prudent good prices on a relative basis. Nordea draws benefit from funding strength and has been able to raise new funding at The strong growth in net interest income continued, The income growth was particularly strong within cus- Impaired loans net, after allowances for individually Some weakening has been seen in credit quality in the 30 10 15 20 25 35 0 5 EURbn 200 7

200 8 The Nordea Business 3 3 Nordea Annual Report 2008 4 Nordea Annual Report 2008 in January 2009, aiming to ensure that there is capital losses. approx. EUR 500m, which would be reported as loan additional expenses for the guarantee of at maximum mission expense of approx. EUR 180–200m, and possible if well as its portion of additional losses of up to DKK 10bn, 7.5bn annually for two years in guarantee commission as cover any losses under the guarantee scheme and of DKK dea guarantees the payment of its portion of DKK 10bn to Bank Danmark A/S would participate in the scheme. Nor banks. of unsecured senior creditors against losses in participating until end of September 2010, which guarantees the claims banks to set up a guarantee scheme valid for two years, In early October 2008, Danish Parliament agreed with Denmark and the amendments. financial stability and is currently evaluating the schemes 2009. Generally, Nordea welcomes the State schemes for dic countries during the autumn 2008 and the beginning of these have been presented by the governments in the Nor systems. these intentions in the local efforts to stabilise the financial financial sector and throughout Europe, countries follow US, the government announced a rescue package to the launched systems to support the banking systems. In the Many countries around the world have during the period The financial crisis became critical during the autumn 2008. Financial crisis and Government guarantee schemes tunities also with new customers with solid credit profiles. existing customers and selectively capture business oppor targets, Nordea will focus on doing more business with In addition to the cost efficiency measures and new capital costs, risk and capital management is further emphasised. in the organic growth is reduced and the firm attention on ahead. In adapting to the new market conditions, the speed 2009. Nordea is therefore preparing for challenging times affect the Nordic countries and this is likely to continue in guarantee fee. 2,459m, up 2%, and up 3.5% excluding the Danish State ing profit was EUR 3,396m. Risk-adjusted profit was EUR maintained at high level, EUR 3,862m, up 1% and operat- unchanged growth rate, 7%, compared to 2007. core customers as usual and respond to customer demand. strong position, Nordea was able to conduct business with The Nordea Business losses exceed these amounts. A second Danish State guarantee scheme was launched The scheme is expected to cost Nordea an annual com- Nordea decided for commercial reasons that Nordea State schemes for financial stability and amendments to The sharp macroeconomic slowdown has started to For the Nordea Group, profit before loan losses was The increase in total expenses was maintained at an - - - has up to this date not joined the Swedish scheme. pulsory fee to the Stability fund. the State guarantee, making fees deductable from the com- posed in the fee structure for issues of debt securities under nary terms in a new shares issue. Changes are also pro- loans on market terms to the State, as a participant on ordi- ducing availability for banks to issue new shares or hybrid tion programme for solid banks has been introduced, intro- in late January 2009 and in early February, a capital injec- also benefits customers. with a Stability fund and measures to ensure that support ning until April 2009, long-term solvency support system guarantee system for banks’ funding planned to be run- National Debt Office and the Central Bank, middle-term short-term liquidity supply through activities by the system for the banking system with mainly four parts: The Swedish government introduced in October a support Sweden swap facilities under the present Norwegian scheme. liquidity measures have also been extended. corporates at an amount of NOK 100bn. The stabilising quate access to financing from banks to households and announced a new stability plan that aims at providing ade- conducted. ernment bonds are swapped for covered bonds have been wegian Central Bank with a facility for banks, where gov- In Norway, stabilising liquidity measures through the Nor Norway be considered as core capital. taking banks, in the form of subordinated loans, which can ment a proposal for state capital investment in deposit-­ of the need to continue granting guarantees. date, the Government will carry out a separate evaluation ited to the amounts becoming due up to that date. At a later tees. Guarantees are granted until 30 April 2009, and lim- EUR 50bn. A market-based fee will be charged for guaran- the refunding of Finnish banks up to a maximum value of invest in capital instruments and grant state guarantees to opens the possibility for the Finnish state to provide and In Finland, a new regulation has been presented, which Finland whether or not to join the second scheme. participating and eligible banks. Nordea is evaluating its as well as a scheme for injections of tier 1 capital into prolonged guarantees for banks’ debt securities and depos- enough in the financial sector. The second scheme contains Nordea welcomes the amendments to the scheme, but The Swedish guarantee programme has been amended During the fourth quarter 2008, Nordea participated in The Norwegian Government has also, in February 2009, Nordea has to date not joined the Finnish scheme. In February 2009, the Government will submit to Parlia- - 2) 1) Ratios and key figures Business volumes, key items Key financial figures potential for growth somewhat more than the market. be lower in 2009, compared to 2008, however Nordea sees prioritised segments. Market lending growth is expected to basis attracting new customers with solid credit profiles in more business with existing customers, and on a selective management, the focus in 2009 will be to continue doing year. In addition to firm attention on cost, risk and capital negative. Nordea is therefore preparing for a challenging sharp slowdown and GDP growth is in 2009 expected to be tries has during the latter part of the autumn shown a tainty. look is associated with an unusually high degree of uncer Due to the prevailing market conditions, the provided out- Outlook 2009 Return on equity, % Tier 1 capital Total capital ratio Risk-adjusted profit, EURm Risk-weighted amounts Diluted shares outstanding Total shareholder return, % Total operating income, EURm Number of employees Diluted earnings per share, EUR Tier 1 capital ratio Total capital ratio, before transition rules Cost/income ratio, % Economic capital, EURbn Proposed/actual dividend per share, EUR Total operating expenses, EURm Share price Tier 1 capital ratio, before transition rules EPS, risk-adjusted, EUR Equity per share Profit before loan losses, EURm RAROCAR, % Loan losses, EURm MCEV, EURm Net profit for the year, EURm Loans and receivables to the public, EURbn Deposits and borrowings from the public, EURbn – Assets under management, EURbn Technical provisions, Life, EURbn Equity, EURbn Total assets, EURbn

Risk-weighted amounts according to Basel I for 2006. End of the year. of which saving deposits The macroeconomic development in the Nordic coun- 1) , EUR 1) , EURm 1) 1) , EUR 1) , % , % 1) (full-time equivalents) 1) 2)

, EURbn 1) , million 1) 1) , % , % - 23–25%. the same level as in 2008. ever significant. The uncertainty regarding future loan loss levels is how- line with the annualised rate of the fourth quarter 2008. look, Nordea anticipates net loan losses in 2009 broadly in will be affected. Based on the current macroeconomic out- mies now are weakening means that the credit portfolio operations to the prevailing market conditions. 2008, as cost growth is managed downwards adjusting Cost growth is expected to be somewhat lower than in The effective tax rate is expected to be in the range of Risk-adjusted-profit is in 2009 expected to be at approx. The high speed at which the global and Nordic econo- 34,008 15,760 –4,338 2,592 2,459 –46.9 8,200 3,862 2,624 2,672 265.1 148.6 125.6 474.1 2008 2008 –466 6.84 5.00 12.1 15.3 1.03 0.20 0.95 20.8 45.5 28.3 17.8 11.8 213 9.5 7.4 9.3 53 31,721 14,230 –4,066 2,594 2,417 7,886 3,820 3,189 3,130 244.7 142.3 157.1 389.1 11.42 2007 2007 6.58 10.9 19.7 1.20 10.2 0.50 0.93 23.6 40.8 32.1 17.2 205 9.1 7.0 8.3 6.4 52 60 Change, % The Nordea Business –15 –20 –12 12 22 4 7 1 8 4 3

29,248 13,147 –3,822 2,591 2,107 7,365 3,543 2,873 3,153 214.0 126.5 158.1 346.9 11.67 2006 2006 5.89 22.9 32.3 1.21 0.49 0.81 22.7 33.6 30.8 15.3 n.a. n.a. 185 257 9.8 7.1 9.3 52

5 Nordea Annual Report 2008 6 Nordea Annual Report 2008 as one of the strongest banks in Europe. strengthened core capital position, we will maintain our position Our ambition on a Great Nordea remains and with the sis, which is characterised by capital shortage, and which European banks. funding costs in 2008 were among the lowest of the major bond markets in Denmark and Sweden. Nordea’s average ing the crisis and has taken advantage of the large covered been able to continue its short-term funding normally dur with wholesale funding mainly long-term. Nordea has ally decreasing credit spreads. resumption of liquidity flows between banks and gradu- outs of risky assets. These programmes have led to a industry including funding guarantee schemes and buy- launched financial stability programmes for the banking Central banks and governments once more intervened and banks suddenly encountered severe funding problems. to an increasing part of commercial banks’ lending, many markets dried out. With wholesale funding corresponding supply of funds to some segments of the money and capital crisis a large widening of credit spreads took place, and the and capital markets. In this second phase of the financial with general lack of confidence and dysfunctional money 2008 the financial crisis turned into a global systemic crisis investment vehicles or conduits. exposure to the sub-prime mortgage market, structured financial crisis. Nordea has no direct and very little indirect troubled financial institutions. ing liquidity to money markets and rescue programmes for banks. Central banks and governments reacted by provid- loan losses and write-downs not least among investment ated a liquidity crisis. This in turn resulted in substantial and other asset backed securities in the United States cre- dence by investors in the value of securitised mortgages cally during 2008 the crisis goes back to 2007. Loss of confi- of global financial crisis. Although it developed dramati- The year 2008 is likely to always be remembered as a year Dear Shareholder, recession. despite Solid result and strong position CEO letter The Nordea Business We have now entered the third phase of the financial cri- Nordea has a well diversified and strong funding base With the bankruptcy of Lehman Brothers in September Nordea was hardly affected in this first phase of the financial turmoil and economic - erating profit before loan losses. profit growth and a fourth quarter with a record level of op- proud that Nordea in 2008 delivered a pean banks in terms of total shareholder return. I during amthree years alsoin a row been among the top-three Euro- 20%-points better than the average of the peer group holderand return with a return – although negative – tion somein the European peer group 2008 in terms of total share - the global financial crisis and economic recession. ago, Nordea has delivered strong financial results despite and the launch of the organic growth strategy two years Since the beginning of the journey towards Great Nordea Nordea journey 2008 ing from the market dislocation. to exploit business opportunities of high credit quality aris- the uncertain business environment and provide flexibility Europe. It will establish an additional capital cushion for Nordea in a position as one of the strongest banks in issue. The capital strengthening measures will maintain reduction of dividend and a fair and transparent rights strengthening of Nordea’s capital with EUR 3bn includes a nary and challenging market conditions. The proposed well as opportunities arising from the prevailing extraordi - act pro-actively to best position the bank for the risks as lenging 2009. However, Nordea has found it appropriate to strong starting point when entering the expected very chal- activities. And with a tier 1 ratio of 9.3%, Nordea has a cient capital to support a 10% annual growth of its business lowed suit by engaging in a series of interest rate cuts. massive fiscal stimulus packages. Central banks have fol- programmes for banks and also other industries and by started to react to the capital crisis by launching capital being migrated to lower rating classes. Governments have tions – higher risk-weighted assets because of customers losses and – due to the changed capital adequacy regula- of the income sources for banks, substantially higher loan turn since the 1930’s. This will mean lower growth of some omy has shifted direction towards the most severe down- from the Nordic markets. And not least, the global econ- international banks are deleveraging and withdrawing rowing is returning to the balance sheets of banks. Some Some part of the corporate customers’ security market bor cannot be solved by state funding guarantee programmes. I am proud that Nordea has obtained a number-two posi- Nordea in general over a business cycle generates suffi- ­positive risk-adjusted ’’ - constrains risk-weighted asset growth. part of Nordea’s income at risk, increases loan losses and requirement has increased. The economic recession puts become more expensive. The market assessment of capital and possibly next year as well. Long-term funding has expected to have a substantial impact on Nordea this year The financial crisis and global economic recession is ”Middle of the road” approach ­picturing a unique, internal and external momentum. showing positive development and, very importantly, employees. The survey results in 2008 were impressive have noted an increasing number of proud and confident ­satisfaction – in particular relative to competitors – and we 94 have welcomed 170,000 new customers and established Banking customers, and in New European Markets we ­customers in Nordic Banking, 5,000 or 6% new Private of 2007 Nordea has gained 113,000 or 5% new Gold more income per customer than ever. Since the first quarter growth in customer areas. We report more customers and growth rates in lending and deposits and a solid income business momentum is also reflected in double-digit The success of the organic growth strategy and the strong exciting, and Nordea has proven to be in a very strong Meeting the challenges of today and those of the future is Ambitious vision remains and deposits volumes will be monitored carefully. tion of caps in business units, and the gap between lending on the growth of risk-weighted assets through the applica- teams in all markets. And finally, a firm grip will be taken through additional credit reviews and credit work-out Risk management will be strengthened among other things staffing corresponding to a 2% staff reduction during 2009. not least in branch offices and a general right sizing of the will include acceleration of ongoing efficiency programmes tion. adjust focus and significantly reduce speed of implementa- New European Markets, Nordea will keep the strategy but particular through less capital consuming products. In ing costs, and the share of customer wallet will grow in will be increased reflecting risks and the increasing fund- with solid credit profiles in the Nordic markets. Margins core customers and to attract new relationship customers higher priority. road” with cost, risk and capital management receiving cution. The way forward will follow the “middle of the strong business momentum, but adjusts the speed of exe- dea sticks to its organic growth strategy and keeps up the new branch offices. Nordea’s response to the challenges ahead is clear. Nor At the same time, we have also improved customer The priority given to cost, risk and capital management Nordea will continue to focus on supporting existing - Christian Clausen Best regards, journey towards a Great Nordea. journey last year, and I welcome you to the continuing employees for having been with us on our challenging I would like to thank all shareholders, customers and values and culture. tious vision of a Great Nordea remains. tion and rating. It is therefore no surprise that our ambi- full range product offering and a strong competitive posi- customer base, a scalable business and operating model, a position in doing that. Nordea has a large and diversified The foundation for this is our strong customer-oriented The Nordea Business

7 Nordea Annual Report 2008 8 Nordea Annual Report 2008 Financial targets and capital structure policy ­perceptions. capital ratio targets, also reflecting the changed market implementation of the Basel II framework and raised its target despite the extraordinary market conditions. below the trend line for its long-term risk-adjusted profit 2008. For the period as a whole, Nordea was only slightly Nordea met its overall shareholder value target in 2007 and long-term growth dimension by risk-adjusted profit. value creation is measured by return on equity and the total shareholder return. The profitability dimension of ­ambitious vision on value creation, which is measured by ­superior value for customers and shareholders. Nordic bank, acknowledged for its people, creating ­customers to reach their objectives. Nordea’s overall mission is to make it possible for its Ambitious vision and targets • The road towards a Great Nordea: Vision, values and strategy The Nordea Business • • • • Dividend pay-out ratio (%) Capital ratio (%) Tier 1 ratio (%) Capital structure policy RoE (%) Risk-adjusted profit (EURm) TSR (%) Long term financial targets Nordea has aligned its capital structure policy following With top-three and top-two positions in the peer group, The external financial targets of Nordea reflect the Nordea has an ambitious vision of being the leading Ambitious Strong Profit and Integrated Clear on ­operational cost, risk and capital culture growth orientation customer vision operating ­efficiency 1) strategy and oriented – >40% >40% of net profit 11.5% 9% Target over a business cycle In line with top Nordic peers Double in 7 years peer group In the top quartile of European Target strong model targets values focus 2) and

Outcome: Outcome: no. 3 of 20 tent decision making and control. Exposures are consoli- Group-wide policies and strategy and uniform and consis- credit portfolio. The common credit processes include processes and today has a very strong and well diversified be managed down, in particular in New European ­environment and increased uncertainty the cost growth will 2009 and responding to the changed macroeconomic countries as well as the New European Markets. Going into investments in the organic growth strategy in the Nordic reflecting the growing demand for financial services and and 2008 in a controlled and focused way increased costs integration and an unchanged cost level, Nordea in 2007 Nordea’s foundation. Following a period with operational with only modest valuation losses. aged to weather out the storms in the financial markets explaining how Nordea since the summer of 2007 has man- capital management and to funding is an important factor ­economic downturn. The systematic approach to risk and culture and is of paramount importance in the current ­capital management acts as the foundation for Nordea’s Profit orientation with a strong focus on cost, risk and risk and capital Profit orientation – strong focus on cost, scores in internal employee satisfaction surveys in tion and loyalty, also relative to competitors, and in higher tion of the values is reflected in improved customer satisfac- best solutions for customers. The successful implementa- ­experience One Nordea team working together to find the together. It is Nordea’s ambition that customers will business growth and growing competence of people go lines that people make the difference, and recognises that and decisions of all employees. It’s all about people under ­experiences are the core value that guides the behaviour reflected in the activities of the bank. Great customer by strong customer oriented values and culture. The vision, targets and strategy of Nordea are supported Strong customer oriented values and culture 19.7% 10.9% 2007 8.3% 15% 42% 2007 Nordea has developed consistent and group-wide credit Firm cost management and flexibility is a key element of The values were introduced in 2007 and are now 3)

no. 2 of 20 2008 16.7% 15.3% 12.1% 19% 2008 9.3% 4) 3) 4) 3) 2) 1) credit strength are followed care- every early indicators of shift in Rating and scoring migrations and household customers are in place. customers and scoring models for applied. Rating models for corporate dated and industry policies and caps

Based Based on proposed dividend of 0.20 EUR per share. transition rules. Tier 1 ratios and capital ratios are calculated before Baseline 2006 2,107m,EUR accumulated outcome. non-recurring items. tax. In addition, risk-adjusted profit excludes major total expenses, less expected losses and standard Risk-adjusted profit is defined as total income less

2008. Markets. ­Markets. - Strong customer oriented values and culture and key performance indicators Segmentation and value proposition – Corporate customers Segmentation and value proposition – Household customers Gold CMB Segment Private Banking Segment Bronze Silver Medium Large Small Great customer experiences Cost • • • • lending margins Growth savings Increased Income change growth in corporate market shares, Customers, 000’s Customers, 000’s • Economic acknowledged for its people, creating superior 2,600 3,600 1,300 590 100 25 70 Profit orientation – cost, risk and capital 3 value for customers and shareholders profit • • The leading Nordic bank, Change index Employee customers Gold It’s all about people and Private Banking in Growth • satisfaction number no. of products > 5 Volume > 30k EUR Criteria Criteria Active customer no. of products > 3 Volume > 6k EUR Income potential Assets > 150k EUR Income potential Income potential ship potential Income and relation­ of of risk-weighted assets Value proposition Strategic entry Business Partnership Personal solutions individual solutions service • • Named access Simple – Personal service when needed The best Nordea has to offer Delivery satisfaction improvement Relative Value proposition favourable One Nordea team – tailored, – relationship service – efficient partnership – relationship advisor satisfaction customer standard guaranteed – one Funding • price individual – – handling point fair priority pro – – – price index simple one best individual of gap solutions entry in point price –

of ers through a pro-active relationship new profitable, high quality custom- corporate customers and to attract with existing Nordic household and growth area is to increase business The first and most important organic customers ­Nordic customers and attract new Increase business with existing implementation has been reduced. nomic environment, but the speed of much more challenging macroeco- direction is maintained despite the European Markets. This new strategic Nordic markets as well as the New clear organic growth strategy in the Nordea two years ago embarked on a Clear growth strategy funding structure. according to risks and an optimal Group KPIs in order to ensure pricing ing gap have been selected as new corporate lending margins and fund- of costs, risks and capital. In addition, and give first priority to management financial and economic circumstances in order to adapt to the extraordinary been added as common Group KPIs growth of risk weighted asset have Group KPIs. For 2009 cost change and satisfaction were selected as common In 2008 income growth and customer the strategic focus in the short term. adjusted each year in order to reflect indicators (KPI). These indicators are cial and operational key performance sured by a number of internal finan- Nordea’s strategy and values is mea- vision and targets and the success of costs and liquidity risk. gins, which reflect the true funding ing gap and ensuring prices and mar of risk weighted assets and the fund- include controlling the development ing. The focus going forward will confirmation of the long-term AA rat- midst of the financial crisis and with availability of funding also in the diversified funding platform with tively strong balance sheet and a well management has resulted in a rela- a fully and action plans developed in

dialogue with troubled customers. The progress towards Nordea’s Nordea’s strong focus on capital The Nordea Business -

9 Nordea Annual Report 2008 10 Nordea Annual Report 2008 parent products. Nordea’s savings product offering takes capital consumption rather than complex and non-trans- favour simple savings products and products with low environment will ensure a flexible range of products and tion power. Product development in the current market highly skilled product organisation and a strong distribu- has a broad and well performing range of products, a ported by a focused product strategy. Nordea in general and back-office functions is expected to be reduced. process. Not least the number of traditional bank tellers of sales efficiency by implementation of a structured sales up of resources for customer interaction and improvement cesses have been launched aiming at a substantial freeing Major transformation programmes for the branch pro- ticular to customers in the Silver and Bronze segments. these segments and to improve efficiency of service in par Banking and Gold, to identify and migrate customers into the customers in the premium segments including Private egy is to continue the development of the relationship with well as for Nordea. This can be seen as a win-win situation for customers as dea. Prices are transparent and in general non-negotiable. customers generating most business and income to Nor and advice and the best product solutions and prices to the philosophy of this strategy is to provide the best service and service level, pricing and product solutions. The core value proposition has been developed including contact based upon their business with Nordea.For each segment a attracted at prices reflecting the long-term risk level. the current market conditions new volumes can be ers to offer products from its entire product range. During best opportunities. Nordea proactively contacts its custom- guish itself. perceived to be strong, has a unique opportunity to distin- banking strategy. In challenging markets, Nordea, which is Clear organic growth strategy The Nordea Business • Take Nordea to the next level of operational efficiency and support sustained growth • customers and attract new customers Increase business with existing Nordic • • • • • Free Strengthen Support customer segments Strengthen focused product strategy Invest streamline processes and IT-systems Enhance customer segments differentiation of service levels among and within Develop banking customers efficient servicing - in particular, of non-relationship The household relationship banking strategy is sup- The short-term focus of the household customer strat- Household customers are divided into four segments Resources are prioritised to customers providing the up in resources the product employee accessibility position the relationship implementation development, across competencies in for relationship-driven banking all the customers value IT-systems of strategy and further chain leadership and - by and developing secure a IT-infrastructure capabilities channels, • lines European business Exploit Global and management shipping and wealth positions within Continue customer to leverage service - - concepts • • European Markets investments in New growth through Supplement Nordic medium sized corporate customers in New European Mar upper segments among household customers and solid Nordea, in addition to its Nordic customers , targeting the has been developed to include local customers, and today business in these countries. The original strategy gradually tially primarily to service Nordic corporate customers with entered this fast growing region almost 20 years ago, ini- Baltic countries, Estonia, Latvia and Lithuania. Nordea New European Markets include Russia, Poland and the European Markets Supplement Nordic growth through investments in New Denmark in the autumn of 2008. and the acquisition of nine branches from Roskilde Bank in branches from Svensk Kassaservice in the summer of 2008 ing the retail banking activities like the acquisition of 68 plemented by very selective bolt-on acquisitions support- business. group of customers with combined personal and corporate concept will be developed and implemented to service the ers in the Small segment, a new advisor profile and service ers’ daily services and to customer retention. For custom- ments, as cash management services are key to the custom- will be further developed for all corporate customer seg- rate finance functions, and the cash management services Nordea will continue to strengthen its equity and corpo- This has been a major success during the last 2–3 years. offering to customers in the Large and Medium segments. market transactions a natural part of the basic product to make corporate risk management products and capital establishment of credit work-out teams in all markets. porate customer segments. Proactivity also includes the level and funding costs will have a high priority in all cor assets and managing lending margins to reflect the risk ings only. Controlling the development of risk weighted will be selected carefully and include those with high rat- ever in the current market environment. New customers Group with the rest of the Further balanced growth profitable, risk- Continue and The organic growth strategy in the Nordic region is sup- In the corporate customer product strategy Nordea aims further integrating the customers are more important than cials organise the relationship. on the business customer’s and finan- ship managers having a holistic view banking business as possible. Relation- daily customer’s and event-driven bank relations including as much of the ship strategy aims at building house- uct solutions. The corporate relation- ing contact and service level and prod- proposition has been developed includ- Nordea. For each segment a value income and relationship potential for into four segments based upon their to their risk appetite. and life cycle into account in addition customers’ wealth, involvement level Pro-activity and staying close to Corporate customers are divided - - kets and the New European Markets. services and wealth management outside the Nordic mar Nordea has a successful track record within shipping, oil Exploit Global and European business lines when the business cycle turns up again. offerings, continues to prepare for a continued expansion Group, not least within risk management and product lowered in Poland. The integration with the rest of the Baltic countries has been discontinued and significantly down. The branch network expansion in Russia and the of Nordea’s business in these markets has been slowed the New European Markets, the speed of the development economic conditions and the high uncertainty and risks in Group operating model. are in the process of being aligned with the integrated been aligned with the Group, and the business operations Most risk management measures and procedures have Poland and the Baltic countries and scheduled for Russia. used in the Nordic countries are now implemented in Group. scale banking businesses integrated with the rest of the gradually develop these operations into diversified full- Markets is to continue the profitable growth strategy and level is taking place. distribution, a broadening of the product range and service larger Russian bank. In parallel with the development of same time as Nordea sold its minority holding in another holding in Orgresbank was acquired in late 2006, at the countries and especially in Poland. In Russia, a majority work expansion that was initiated in late 2006 in the Baltic been well contained. The strategy has been based on a net- to gradual increases in income and result, while risks have customers. This has been a successful strategy that has led kets and, in addition, in Russia the very large corporate Integrated Group operating model However, as a result of the extreme financial and macro- The customer segmentation and value propositions The long-term strategic direction for New European Customer Areas Private Banking Nordic Banking Institutional & International Banking

Segments Household and Corporate Savings Products & Asset Management Banking Products Capital Markets & Product Areas Savings Capital Markets Products Transaction Products Account Products - Group Operations Group Operations Markets. and is gradually being implemented in New European der along the value chain. tions or activities across organisational units or cross bor ensure clear responsibilities and avoid overlapping func- ket. A fundamental principle of the operating model is to time required to bring new products and services to mar increasing the time spent with customers and reducing the ciency by improving the quality of customer relations, organic growth strategy and to ensure operational effi- Nordea’s operating model is designed to support the Integrated operating model and operational efficiency growth strategy. tions and distribution agreements support the organic ucts distributed to institutional customers. Smaller acquisi- multi-boutique with a range of own and in-sourced prod- egy, and its European fund distribution is positioned as a national Private Banking pursues an organic growth strat- services and European fund distribution. Nordea’s Inter and Switzerland. The operation includes private banking largest Nordic private banking operation in Luxembourg ancillary business of existing customers. careful customer selection and a focus on all potential management will be applied in the short run including a rates. However, a stronger focus on costs, risks and capital downturn in the global economy, world trade and freight the well proven business model continues despite the graphical regions as well as a strong syndication franchise. and secured lending portfolio across segments and geo- In addition Nordea aims at maintaining a well diversified large, transparent and preferable publicly listed companies. is to establish and preserve long-term partnerships with global shipping and offshore industries. Nordea’s strategy Nordea is one of the leading financial institutions to the The operating model is common for all Nordic markets Nordea’s International Private Banking & Funds is the The overall ambition for this business line remains and Service and staff units People & Identity Group Corporate & Risk Control Group Credit Group Legal Centre

The Nordea Business

- - - 11 Nordea Annual Report 2008 12 Nordea Annual Report 2008 crises. Customer satisfaction was stable, while the market have been able to count on their bank through the financial has appreciated the house-bank philosophy by which they growth components from volume to been to realise a controlled volume growth shifting income ­established prudent risk management policy, focus has book. restructure the maturity profile of the corporate lending on long-term funding, Nordea has initiated an effort to higher liquidity premiums. reflecting re-pricing of credit risk and to compensate for tomer relationship. increased wallet share as a prerequisite for continued cus- bank philosophy Nordea stood firm on expecting increasing risk and funding cost. Following the house- ket conditions meeting them with a fair price reflecting our house-bank corporate customers through difficult mar to develop relationships and become the house bank. The aim for medium and small customer segments is also ships, comprising the full spectrum of financial services. ­strategic partnerships develop into house bank relation - Banking and Large corporate customers. Successful largest customers, in the segments Corporate Merchant and risk overview. terms of business opportunities, business development business and financial affairs, which is beneficial both in proven successful in giving a total view of the customer’s developing and organising the customer relationship has through designated relationship managers in charge of growth, despite market turbulence. Relationship banking, tact policies provided high income growth and modest cost kets, segments and products combined with proactive con- difficult market conditions. Diversification in terms of mar During 2008, Nordea’s strategy proved strong under very Corporate segments – relationship banking • Corporate Business The Nordea Business • • • Corporate customers show high loyalty to Nordea and Building on the relationship strategy and the well Due to the significantly increased liquidity premiums Corporate lending margins increased during the year, Nordea’s strategy in time of financial crises is to back Our aim is to establish strategic partnerships for the Strong Increased turbulent Lending re-pricing pensate Customer decline income generally for margins global ­ of customer satisfaction higher credit customer growth financial increased in development liquidity risk the activity, stable, 22% ­margins. and market markets premiums to reflecting despite despite com- segments - - especially in the container and dry bulk sectors, following segments. There was significant pressure on freight rates, second half of the year with increased volatility in most increase by 29%. picked up. Total income amounted to EUR 306m, an tightened considerably and pricing of new transactions markets. During the year credit terms and conditions have transactions were successfully closed despite challenging 12.5bn were arranged during the year. All syndicated loan transactions for an aggregate volume of more than USD ­Nordea held a 15% market share as bookrunner. New loan tion as arranger of syndicated shipping loans in 2008. tables (Dealogic) where Nordea reinforced its No 1 posi- oil services industries, as evidenced by official league vices provider to the international shipping, offshore and Nordea maintained its position as leading financial ser Business development solutions and targets top-tier syndicated loan transactions. able underwriting capacity. Nordea provides tailormade syndication franchise and placing power as well as size- knowledge, second-to-none structuring capabilities, strong This position is maintained due to in-depth industry viders to the shipping, offshore and oil services industries. Nordea is one of the world-leading financial services pro - Shipping and Oil Services and volume growth. be a significant income driver, based on margin increases chant Banking was EUR 1,079m, up 26% compared to 2007. pace in the different countries. Income in Corporate Mer gins, although this is taking effect with somewhat varying for income growth are further shifting from volumes to mar customers during these difficult market conditions. Drivers paper markets. Nordea has succeeded well in supporting its well as malfunctioning corporate bond and commercial international banks withdrawing from the Nordic market as ing. The reported volume growth was largely a result of high business activity with 12% growth in corporate lend- In 2008, business activity was characterised by continued Business development income in the corporate segment. market. This segment accounts for approx. 27% of total ­Nordea’s 1,000 largest customers in one central unit in each The Corporate Merchant Banking organisation serves Corporate Merchant Banking products. tions, resulting in income growth on risk management tomers hedging their market risk in volatile market condi- rated corporate customers. customer acquisition of profitable, creditworthy and high- improved the position in the corporate market by selective in general showed a decline. Furthermore, Nordea In general, the shipping market started to weaken in the The expectation for 2009 is that corporate business will Nordea provided continued assistance to corporate cus- 2008 - - - household products as well as corporate products. opportunity by a dedicated sales force capable of handling opportunities arise from cross-fertilising the business approx. 525,000 smaller customers. Significant growth presence. rate are focused on relationships, product range and local proposition and service concepts for medium-sized corpo- branches serve 55,000 medium-sized customers. The value Nordea’s relationship managers allocated to selected Medium-sized and Small corporate customers EUR 916m, up 22% compared to 2007. margin increases, with greater focus on pricing of risk. growth are progressively shifting from volume growth to Volume growth continued in 2008. The drivers for income Business development tomers’ needs. of product specialists who design solutions to fulfil cus- banking relationships. Each SRM is supported by the team tact to the bank with responsibility to create long-term in the Nordic region. The SRM is the customers’ main con- ship managers (SRM) in 63 corporate competence centres Customers in this segment are served by senior relation - the large Nordic resources and competences of the Group. petitive strength is based on combining local presence with For the 18,000 customers in segment Large, Nordea’s com- Large corporate customers excess 60%. level of business activity generating income growth in national Network performed strongly in 2008, with a high tive offices also operate in Beijing and Sao Paulo. The Inter port Nordic customers’ business in the region. Representa - In April 2008, the branch in Shanghai was opened to sup- Business development in Beijing and Sao Paulo. gapore and Shanghai. Representative offices also operate network with offices in New York, London, Frankfurt, Sin- ucts to Nordic customers abroad through its international Nordea offers a broad range of financial services and prod- International network going forward. spending on exploration and production investments but prolonged oil prices at current level could dampen segment remains high, as oil supply continues to be tight, tinued financial turmoil. Demand in the oil and offshore further strengthened in 2009. credit quality and the proactive risk management will be sectors. Still, the development has affected the overall well-diversified with an underweight towards the troubled global trade. Nordea’s exposure to the shipping industry is the economic downturn and increased uncertainty about Nordea’s branch-based advisers serve a number of Income from Large corporate customers amounted to Fewer new transactions are expected following the con- - Following the recession in the Baltic countries, lending Total income was EUR 89m, up 53%. both deposits and lending and increased lending margins. business volumes in general banking products, including Income continued to grow in 2008, supported by increased Business development 17,000 corporate customers. tomer service units. At the end of 2008, Nordea had almost effort is also supported by the expanded network of cus- primarily for the small and medium-sized corporates. This ments. Additional relationship managers were recruited rate customers segment and is moving ahead in other seg- Nordea has a strong position in the Nordic-related corpo- Baltic countries number of transactions up 35% to 27 million in 2008. additional subcustody volumes were gained, with total however was subdued. Despite subdued equity markets, hedge risks in their portfolios. Activity in asset products, asset-liability management products as they sought to tional clients were very active in risk management and financial institutions. Toward the end of the year Institu- ings of Nordea’s products and services. and relationship management process as well as high rank- survey verifies the strength of Nordea’s customer concept ened its position. Greenwich Associates’ annual customer business in an adverse environment and further strength- ingly paid off during the year, as Nordea was able to attract close customer relations remains intact and has increas - handled adverse situations. Nordea’s continued strategy of holders from across the bank, Nordea has satisfactorily transactions that were attracted. this is illustrated by the vast amount of capital markets attractive counterparty, due to its size and stability – and ­Nordea In the wake of continued uncertainty and volatility, Business development tomer needs. teams of product specialists tailored to the respective cus- are served by senior relationship managers together with tional financial institutions and 750 banking groups, which Customers include approx. 300 Nordic and 100 interna- Financial institutions umes and margins. was EUR 951m, up 3% compared to 2007, with stable vol- Income from medium-sized and small corporate customers Business development approach, scale benefits and multi-channel competencies. financial needs receive service based on a mass-market The smallest corporate customers, with less advanced Lending to corporates increased by 51% to EUR 4.2bn. Total income amounted to EUR 409m, up by 21%. High volatility made 2008 a very challenging year for Through proactive and diligent work involving stake- was increasingly perceived as a dependable and The Nordea Business 13 Nordea Annual Report 2008 14 Nordea Annual Report 2008 by segment, 2008 Share of income, corporate customers, other Western standard employee benefit products. package, which in the year to come will be completed with ers are offered a competitive employee benefit product Employee savings product PPE in 2009, corporate custom- business in Poland. With the launch of the Group customers and SMEs. new sales capacity primarily targets affluent household of branches has increased by 60 to 144 during 2008. The umes increased by 37% and 27% respectively. The number increased by 52% to EUR 63m. Lending and deposit vol- up well, has supported strong income growth. Income year. This, in combination with average margins that held Business volumes have developed favourably during the Business development of customers was more than 55,000 at the end of 2008. small and medium-sized corporate segment. The number capacity and will thus facilitate increased focus on the corporates. The expansion of the network has boosted sales medium-sized corporates and on large and Nordic-related The focus on corporate customers in Poland is both on Poland sory services. vices, triggering significant growth of capital markets advi- agement services and enhanced the focus on advisory ser expanded the product range and developed the cash man- of total loans and receivables at the end of 2008. vidually assessed loans, amounted to EUR 112m or 1.46% of credit exposures deteriorated in the fourth quarter. especially in the Baltic countries where the average ratings high attention on risk management. customers, including Nordic customers, pre-empted by refers to Nordea’s commitment to support existing core growth quarter-on-quarter came down during the year and The Nordea Business Financial institutions Life & Pensions has grown a successful Group Term Life In line with the house-bank approach, Nordea has Even so, impaired loans net, after allowances for indi- The economic slowdown has affected the credit quality, Merc New European Shipping and hant B Oil Services Corporate Markets anking Other Large 0 % 5 10 15 20 25 30 - scarce lending supply. latter part of the year, while margins picked up reflecting volumes. porates was successful and generated increased business were arranged during 2008. The emphasis on Nordic cor Several large transactions with major Russian companies income was EUR 120m, up 171% compared to last year. Lending volumes were EUR 3.7bn by end of 2008 and Business volumes showed overall strong growth in 2008. Business development already customers of Nordea. corporate customers present in Russia, many of which are large corporates in Russia. The aim is also to target Nordic introduced. Nordea managed to target the top-tier and further expanded during the year and segment strategies The service offering toward corporate customers has been Russia both corporate and institutional customers. ing was a significant growth driver also in 2008, regarding Nordea’s comprehensive risk management product offer Business development exchange-, interest rate-, credit-, equity or commodity sheet risks.risks against market volatility, whether it be foreign corporate and institutional customers to handle their balancewell as advisory services. Risk management products allow including various asset and risk management products as Nordea supplies a wide range of capital markets productsCapital markets products Products in focus advisory services. cash management services, capital markets products and tomers. Focus is mainly on non-lending products such as ing the year to provide even better service to corporate cus- by segment, 2008 Income growth, corporate customers, Product development capacity has been increased dur The trend with strong volume growth levelled off in the The number of customers was 7,000 at end of 2008. Financial institutions Merc New European Shipping and hant B Oil Services Corporate Markets anking Other Large To ta l 0 % 20 40 60 80 100 - - - Book Book runner, 2008 Syndicated shipping loans, EUR 1.1bn, which Nordea executed in 2008. buy-backs, as evidenced by the 12 transactions totalling leading position in related equity activities such as share – the largest Nordic rights issue ever. Nordea also has a the equity side was the Carlsberg rights issue of EUR 4.1bn Finland, Storebrand and others during 2008. A highlight on benchmark transactions for issuers such as the Republic of In the international bond markets, Nordea arranged euro Source: Dealogic. Shipping loans not included. Pos. Nordic Bookrunner, 2008 syndicated loans for Nordic customers. tion as the leading mandated arranger and bookrunner of rienced strong activity and Nordea maintained the posi- generally low. However, the syndicated loan market expe- market turmoil and market volumes during the year were share buy-backs. ranging from syndicated loans, bond financings, IPOs to related products for liquidity- and capital raising purposes, Nordea Markets also provides a variety of debt and equity- Capital raising – debt and equity cute customer flows. illiquid markets while at the same time continuing to exe- year. Total income was EUR 845m, up 15% compared to last volatility. Activity in asset products was more subdued. year as customers sought to hedge the effect of the market Transaction volumes increased steadily throughout the 1 2 3 4 5 Source: Dealogic. Mitsubishi UF HSH BNP These product areas suffered significant impact from the Nordea was highly focused on managing risks in very Nordbank DnB NOR Parisbas Bank name Nordea SEB Svenska Handelsbanken DnB NOR RBS Nordea F ortis IN Citi G G 0 USD m 3,000 6,000

9,000 Amount EURm 6,017 3,797 3,739 2,725 2,026 12,000 15,000 No. 16 12 12 7 4 Share 15 10 10 % 7 5 product needs, while offering a complete product package ucts designed for corporate customers with specific risk simplified collective schemes to complex tailor-made prod- corporate pension schemes, including everything from The offering to corporate customers covers a full range of Life and Pensions equity markets. custody transactions, up 35% in 2008, despite subdued tion in the Nordic region, which handled 27 million sub- marily in sub-custody, where Nordea has a leading posi- ity of customer transfers will take place during 2009. itise areas where long-term value can be added. The major leader in institutional global custody, but decided to prior business to JPMorgan. Nordea was until then the Nordic In 2008, Nordea divested its institutional global custody Securities Services management solutions in the region. acknowledged for its customer service capabilities. tion in the Cash Management area and was especially ing role in relationship banking. Nordea has a strong posi- cash management solutions. transactions are offered to customers through the various Solutions for liquidity management and handling payment Cash management products Posten AB and EQT’s public offer for Securitas Systems. the announced merger between Post Danmark A/S and in many significant transactions during the year, including of Nordea’s customer offering, and the area was involved rate Finance. The advisory services are an integrated part institutional customers and governments through Corpo- Nordea offers financial advisory services to corporate and – Corporate Finance Structuring and execution of mergers and acquisitions Going forward, Securities Services will specialise pri- Nordea is a top provider of quality institutional cash Cash management also plays an important strengthen- The Nordea Business

- - 15 Nordea Annual Report 2008 16 Nordea Annual Report 2008

2) 1) Number of customers, ’000 Income, EURm Number of customers, ’000 Corporate customer segments and financial institutions, key figures and the sales force of European Fund Distribution. ­customers by an institutional asset management sales force sale in 16 European countries. Services are provided to includes Nordea’s European Funds, which are licensed for ers and fund sales via external platforms. The fund offering tion advice and balanced mandates for institutional custom- to large sophisticated pension funds, as well as asset alloca- single products (funds, equity products etc.) offered globally Nordea’s institutional asset management services include Institutional asset management Poland and Sweden. 1,977m. Premium growth derived mainly from Denmark, increased corporate gross written premiums up 18% to EUR value proposition was strong during 2008 resulting in Focus on sales activities and maintaining the competitive Business development sales team, and brokers or tied agent. Baltic customers, via Nordea’s branches, Life & Pensions to employees. Products are offered to Nordic, Polish and The Nordea Business

Volumes, EURbn Income, EURm

Margins, % Volumes, EURbn Margins, %

Margins for 2007 do not include Russia. Volumes are excluding reversed repurchase agreements and repurchase agreements. Lending Deposits Lending Deposits Lending Deposits Lending Deposits

1) 1)

New European 1,079 2008 2008 customers customers Corporate Merchant corporate 10.7 43.2 17.1 1.72 0.99 1.58 0.39 Banking Markets 291 3.2 79

2007 2007 38.6 14.5 1.01 0.82 1.37 0.41 855 147 6.8 2.6 70 2)

successfully extended to the Nordic region. bution of funds to third party financial institutions was generated an inflow of EUR 0.3bn. Furthermore, the distri- funds distributed through the European fund distribution asset mix in terms of income margins. risky products, which for Nordea meant a less favourable 23.1bn and forced institutional investors to reallocateket conditions reduced the value of intoinstitutional AuM lessto EUR cessful and outperformed benchmark by 5.9% in 2008. Mar cially designed for extreme market conditions, proved suc- EUR 1.1bn. Product wise, the “Stable Equity” products, espe- business from existing customers, resulting in Nordica net and inflowinternational of customers and generatedsuccessful and additionalNordea won several new mandates from both During 2008, Nordea’s institutional sales activitiesBusiness development proved Shipping and In line with the multi-boutique strategy, insourced Oil Services customers customers 2008 2008 corporate 13.8 42.0 17.3 1.10 0.94 0.42 0.64 916 306 6.4 Large 18 2

2007 2007 36.6 15.1 0.96 0.84 0.41 0.64 11.1 750 237 6.7 15 2 and Small corporate Medium-sized 2008 2008 institutions 22.9 14.5 19.5 0.55 1.04 0.34 1.59 customers 951 409 Financial 2.0 1

2007 2007 26.7 20.3 19.3 0.35 1.03 0.31 1.65 920 339 1.9 1 134.7 2,946 108.2 3,952 and financial 2008 2008 78.0 53.9 1.03 0.97 0.79 0.93 institutions Corporates customers corporate Nordic Total

2007 121.7 2,525 101.9 3,248 2007 78.6 49.0 0.91 0.89 0.82 0.96 - 2) cially compared to peers. young adults. track to attract younger customers in the 18–28 age group - reached the highest level in the programme (Gold). in maximising growth potential from customers, who have one for each segment. pricing on most products, differentiated in three levels – tions combined into a transparent and competitive offer. ing brand promise, pricing, service level and product solu- The customer programme is a value proposition compris- Customer programme closing down of very small branches. work is expected to slightly decrease mainly because of ­Roskilde Bank. However, the total size of the branch net- Svensk Kassaservice, and 9 acquired branches from ened by 68 new branches in Sweden, taken over from Nordea’s branch network has been significantly strength- Branch network daily banking needs and Personal Bank Advisors. cost and gradually change the ratio between staff servicing amount of tellers in the branch network. This will reduce decreasing and as a consequence Nordea is reducing the The demand for manual cash transactions are steadily Further focus on relationship banking and transaction efficiency ing the cost of service. with the aim of maintaining a stable income stream exceed- ited potential in terms of business volume growth in line approach to increase business volumes. these into the premium segments using a structured the lower segments – Silver and Bronze – and develop ment is to be capitalised. lifetime er’s financial partner, the potential in the Gold seg- of servicing 100% of the wallet customer’s as the custom- With a clear emphasis on relationship banking and the aim Household segments – leveraging the customer base Increased • Household • • • Customer satisfaction improved in all markets, espe- A very attractive offer is specially designed as a fast The designated personal banker plays a proactive role Nordea operates with non-negotiable and transparent Cost-efficient services are offered to customers with lim- The aim is also to identify potential Gold customers in Lending Customer Stable volumes markets, credit volume up especially number satisfaction 3% quality customers up of compared 1% customers improved and deposit to in peers all tion of new Gold personal customers. financial crises have boosted customer loyalty and acquisi- ers. Also the credibility and stability of Nordea during the 360-degree advisory have been appreciated by our custom- ering all aspects of their financial affairs. pro-actively offering customers 360-degree meetings cov- growth by increasing sale of the entire product range by from household customers derives from Gold customers. average from Silver customers. Approx. 55% of income significant. Average income per Gold customer is twice the The income potential from developing the customer base is Gold customers – the engine for profitable growth income decreased by 15% to EUR 324m. EUR 36.1bn, down 21% compared to 2007. Consequently, tion in 2008, Nordic Private Banking AuM decreased to est rates on deposits. Due to the general market deprecia- tion deposits and taking advantage of the attractive inter equity markets by moving funds into savings and transac- Banking customer activity was to decrease exposure to number of employees. In 2008, the key trend in Private in the customer base was matched by an expansion in the offering and those acquired from competitors, and growth ­Nordea customers now qualifying for the Private Banking of EUR 2.1bn. New customers included both internal customers from 2007, and capturing a net inflow of assets 4.800 new customers, equaling a 6% increase in number of business model, demonstrated by welcoming more than strong market position and the attractive Private Banking In 2008, Nordic Private Banking capitalised on Nordea’s Business development Management units catering to high-net-worth customers. regional branches in Nordic Banking) and 7 Private Wealth served out of 73 Private Banking units (co-located with approx. 83,000 Nordic Private Banking customers are markets reflecting differences in the legacy business. The in the Nordic Region. The position varies across the Nordic Nordea is the largest provider of private banking services Nordic Private Banking Premium segments: 20% ber of Gold customers, compared to last year. Approx. continues to be successful with a 5% increase in the num - The focus on developing the potential in the customer base Business development sated by increased product penetration. vating customers to the Gold level is more than compen- best services and prices. The decrease in margin from ele- increase in volumes in savings deposits. meet the increased competition in this area led to a 12% products. A successful development of the product mix to ket, causing the sharp reduction in fee income on savings Income was affected by the turmoil in the equity mar Nordea’s pro-active approach and customer centric The Gold segment in the long run achieves profitable Customers elevated to Gold customers are offered our of new Gold customers are new customers of The Nordea Business ­Nordea, - - 17 Nordea Annual Report 2008 18 Nordea Annual Report 2008 by segment, 2008 Share of income, household customers, ber of personal bank advisers, further upgraded the sales 30,000 are Gold customers. Nordea has increased the num- approx. 458,000 household customers, of which almost 2008. Following this, Nordea has 144 branches serving In line with the Turbo Plan, 60 new branches were opened Poland proactive risk management is in focus. downturn in the Baltic countries is closely monitored and to Estonian customers. sions entered the Baltic region with a pension fund offering rate than in previous years. Late 2008, Nordea Life & Pen- mortgage lending continued, but at a clearly lower growth lower sales of investment funds. Growth in household deposit volumes, of more than 50%, compensated for was 15% to EUR 39m. Strong double-digit growth in supported strong income growth in 2008. Income growth Higher business volumes offset lower deposit margins and Business development the annual customer survey. customer satisfaction as confirmed by the high ranking in The improved services have resulted in a good progress in nearly 250,000 customers, of which 46,000 Gold customers. of 66 branches offering a full range of products serving hold customers in the Baltic countries through its network Nordea continued to build up advisory services for house- Baltic countries compared to last year. where financialcustomer’s affairs are of utmost priority. pro-activity towards Gold customers in a market situation ings with customers have continued. The focus is to increase account, actual mortgage margins are lower than reported. liquidity premiums. Taking the full liquidity cost into reported margins on mortgages do not reflect the increased increased, changing years of decreasing trend. However, the customers increased toward the end of the year. the problems of some smaller banks, the number of new gramme. As a result of the financial turmoil and especially thus reflecting the attractiveness of Nordea’s customer pro- The Nordea Business The impact on credit quality from the macroeconomic Income from Gold customers was EUR 1,911m, up 4% The activities to increase the number of proactive meet- In Sweden and Finland, mortgage margins have Private B Private B New European International Markets Nordic anking anking Other Gold 01 % 0 20 30 40 50 60 tinued to grow and customer contact frequency remained In 2008, International Private Banking customer base con- Business development more than 125 countries. Europe with approximately 12,000 customers based in banks, Nordea is the largest private banking operator in ing outside Nordea’s home markets. Among the Nordic the Group’s advisory services to wealthy individuals resid- International Private Banking & Funds is responsible for International Private Banking and income reached EUR 11m. This development supported increased business volumes number of household customers rose significantly in 2008. fied and well-balanced banking business in Russia, the In line with the long term ambition to build a well-diversi- Business development cards and car financing. tial Gold customers. Key products include mortgage loans, in 2008 targeting especially affluent households and poten- concepts, as used in other markets, have been introduced Moscow and St Petersburg regions. The same customer tomers being served through 53 branches centered to the Orgresbank currently has approx. 40,000 household cus- Russia terms of number of customers. & Pensions is the fifth largest Polish pension provider in compared to 2007. Within the attractive PTE segment, Life in personal gross written premiums was strong, up 46% products to approx. 873,000 household customers. Growth EUR 60m, up 77% compared to 2007. declined due to the financial turbulence. Total income was tional deposits volumes, while sales of investments funds ing. Competitive pricing of savings accounts attracted addi- business volumes, in particular household mortgage lend- The expanded branch network has supported growth in Business development tomers and customer satisfaction was high. provide even better services to the increasing number of cus- systems and upgraded the capacity of the contact centre to by segment, 2008 Income growth, household customers, Nordea Life & Pensions in Poland offers life and savings Private B Private B New European International Markets Nordic anking anking Other Gold To ta –3 l % 0 –20 –10 01 0 20 30 40 50 60 hold net sales of savings products amounted to EUR 6.9bn. to cope well with the market turbulence and total house- The end-to-end savings product portfolio allowed Nordea Business development traditional savings deposits. equities, bonds and all life and pension products as well as ucts offered cover investment funds, structured products, regarding to savings and investments. The savings prod- importance and value of Nordea’s advisory offering Current financial market conditions further highlight the role for the total savings offering to household customers. Financial planning and advisory services play a central Savings products potential for growth. were important drivers for growth. There is still significant while margins have increased. 7% income growth supported by volume growth of 6%, A positive trend continued in other consumer lending with Business development advising customers to use Nordea as a full-range supplier. volume of consumer loans to existing Gold customers, by lending and home-equity products. Focus is to increase credits, overdraft facilities and standard collateralised non-collateralised lending, credit card based revolving Nordea offers a full product range, including standard of lower liquidity, thereby providing financial flexibility. Consumer lending enables the customers to bridge periods Consumer lending unchanged compared to last year. 2007. The market shares in mortgage lending were broadly Mortgage lending volumes increased 4% compared to Business development ­Nordea’s Gold customers have a mortgage loan. buyers and home-equity products. Approx. 90% of including home savings product, products to first-time solutions through the entire customer’s housing life cycle, advice tools throughout the organisation. a comprehensive product range and supporting sales turing the full customer’s banking business. Nordea offers possibilities for cross-selling the whole product range, cap- term relationships with household customers. This creates Housing products are key for attracting and building long- Mortgage lending Products in focus EUR 85m, down 21% compared to 2007. of transactions affected income negatively. Income was market depreciation and thus reduced to EUR 6.8bn. new investment vehicles. AuM in 2008 were affected by the production of structured products and introducing value proposition was in 2008 improved by eg expanding abroad and customers acquired from competitors. The high. New customers consisted of Nordic citizens living Non-collateralised lending and home-equity products Nordea has focused on extending the offering to include This development combined with a general lower level new traditional (passive), unit-linked (active), and risk ucts are based on the product groups traditional (passive), the Baltic countries and Poland. All life and pension prod- products to household customers in the Nordic countries, Nordea offers a full range of life insurance and pension Life & Pensions products competing savings deposits. ucts were challenged by the difficult market backdrop and modities and climate. However, sales of structured prod- duced in 2008, with focus on themes like equities, com- bonds. year, savings deposits were an attractive substitution to bond yields were very volatile in 2008 and by the end of the sales of bonds went up 60% compared to 2007. However, interest for Nordea’s online trading services. channel increased substantially, confirming the increasing with savings deposits or bonds. The activity in the online customers to reduce their equities positions, and substitute values globally. These circumstances led many personal turbulent market conditions with severe decreases in share market share on savings deposits increased to 21%. to EUR 8bn, up 13% compared to 2007. In 2008, the Nordic into household savings deposits was record high, amounting innovative savings deposits products in 2008. opment Thus,within deposits, leading inflowto launch of several new and ­Nordea has therefore had significant focus on product devel- kets, high interest rates and the state guarantee schemes. traditional investment products due to volatile financial mar During 2008, savings deposits were attractive Business alternativesdevelopment to ings are available both online and through personal service. national equities and fixed income instruments. Such offer ucts and trading possibilities as concerns Nordic and inter degree of flexibility. its and several variable interest rate products with a high viding both a wide range of attractively priced time depos- Nordea has a comprehensive savings deposit offering, pro- Savings deposits, equity, bonds and structured 1) Total savings volumes, personal customers selling product in 2008. increased sales of savings deposits, which became the best ing sales of investment products and significantly and awaiting markets to level out. The result was stagnat- as household customers were becoming more risk avert However, the net sales product mix changed significantly Total EURbn Retail funds Life & Pensions products Savings deposits Equities, bonds and structured products

Custodian assets in Norway are not included. Several theme-based structured products were intro- Primarily as a result of decreases in share values, net The equity business was in 2008 influenced by the very Further, Nordea offers a broad range of advisory prod- 1) The Nordea Business

103.9 2008 23.4 19.3 15.7 45.5

119.8 2007 33.7 28.3 17.0 40.8 ­product Change –31 –13 –32 –8 12 - - % - 19 Nordea Annual Report 2008 20 Nordea Annual Report 2008 manager selection team. external funds are carefully selected by Nordea’s own nally, and external funds. Both external managers and include Nordea branded funds, primarily managed inter assets such as hedge funds and private equity. Offerings income, equities and balanced funds as well as alternative of funds based on traditional asset classes like fixed Within investment funds, Nordea offers a broad spectrum Investment funds and Poland. and particularly stemming from sales in Sweden, Denmark by sales of both traditional products and unit link The products,strong organic growth in personal premiums was driven in 2008 as gross written premiums were up 6% from 2007. life provisions in 2008. level of financial buffers decreased to EUR 673m or 3% of allocated customer bonuses) negatively. Accordingly, the increased credit spread affected the financial buffers (non- performance in the equity markets and especially the of 10%, based on total gross written premiums. Negative the life and pensions business with a Nordic market share pared to 2007 and Nordea kept the leading position within products of EUR 4,222m were record-high, up 12% com- In 2008, total gross written premiums on life and pensions Business development life cycle including dissavings products and advice. products. The products cover all stages of the customers’ Household customer segments, key figures The Nordea Business

Number of customers, ’000 Income, EURm Volumes, EURbn

Margins, %

Income, EURm Number of customers, ’000 Volumes, EURbn

Margins, %

Assets under Management Assets under Management Lending Deposits Lending Deposits Lending Deposits Lending Deposits Sales activities in the household segment were successful Markets household New European 2008 2008 0.70 36.1 0.71 1.48 1.12 customers 324 108 746 4.5 6.2 4.6 1.6 Banking 83 Private Nordic

2007 2007 0.63 45.6 0.79 1.25 1.50 379 588 3.6 5.0 3.0 1.0 78 68 - Assets under Management and a net outflow of EUR 4.5bn in 2008 was reported. not beneficial for the sales of investment funds in general, that the 2008 financial market environment was generally Sweden. This development did not, however, offset the fact on Assets under Management in Denmark, Norway and funds to supplement the Nordea branded funds. funds were launched in 2008, including selected external posites outperformed benchmark in 2008. Several new market or credit/mortgage exposure. Thus, 43% of all com- return negatively for fixed income products with money premiums on the financial market affected 2008 investment posites outperformed their benchmark. However, high risk negative absolute returns. In total, 9 out of 11 equity com- strong in 2008, despite volatile equity markets and large The relative performance of equity investment funds was Business development Nordic Retail funds European fund distribution Nordic Private Banking International Private Banking Institutional asset management Life & Pensions Total In 2008, Nordea increased its funds market share based 2,510 1,911 International 2008 2008 90.5 40.6 0.87 1.47 0.77 0.60 customers 0.9 1.7 6.8 Banking 85 12 Private Gold

2,397 1,843 2007 2007 90.6 38.6 0.77 1.59 0.83 0.68 108 1.4 2.2 9.6 11 2008 10.9 16.4 2.46 2.57 household customers 999 Other 125.6

2008

21.9 36.1 23.1 36.1

1.6 6.8 1,008 2007 17.6 2.36 2.46 11.1 157.1

2007

34.4 45.7 24.9 38.8 3.6 9.6 2008 3,234 105.9 3,427 111.3 –4.5 –0.8 –0.6 –2.0 2008 2008 63.2 1.07 1.74 Household 66.5 1.08 1.70 Net inflow household 2.1 1.1 0.6 customers customers Nordic Total

2007 3,230 105.3 3,406 109.7 –2.7 –1.8 –2.5 –2.4 2007 2007 61.2 1.00 1.81 64.4 1.01 1.77 3.7 0.6 0.3 Latvia Estonia Banking Sweden Banking Norway Banking Finland Banking Denmark EURm Loans and receivables to the public, by customer segment Market positions

Corporate customers Number of customers:, 000’s customer programme Household customers in Private Banking Net banking Financial institutions Shipping, oil services and international Number of branches Corporate lending Market shares ,% Corporate deposits Household investment funds Life & Pensions Brokerage Household mortgage lending Consumer lending Household deposits household customers corporate customers household customers corporate customers consumer lending household mortgage lending corporate customers consumer lending household mortgage lending corporate customers consumer lending household mortgage lending corporate customers consumer lending household mortgage lending corporate customers 31 Dec 20,243 32,677 59,041 14,914 19,349 34,996 20,608 26,096 52,055 26,267 30,085 67,984 11,632 1,164 1,878 3,042 1,406 2,228 6,121 5,351 2008 Denmark 822 733 1,050 864 319 47 33 21 30 16 20 16 14 21 4 22 13 20 26 %

1 1 Finland 2,485 1,476 127 345 26 37 42 28 23 31 30 32 31 Dec 21,641 31,775 59,781 17,120 19,145 37,218 23,513 47,488 10,312 24,893 27,504 62,709 19,115 3 1,312 2,295 1,006 1,685 6,365 4,860 2007 Norway 983 679 953 350 415 124 84 16 18 10 11 11 6 2 9 9 24 15 19 26 % Sweden 1 1 2,908 2,085 348 341 17 14 22 14 15 18 Total Other Reversed repurchase agreements Financial Institutions International Shipping, Oil Services and Russia Poland Lithuania EURm 4 2 9 and other lending of which reversed repos lending of which other household lending of which household mortgage of which corporate customers household customers corporate customers household customers corporate customers household customers corporate customers Estonia <1 10 74 48 22 14 12 8 9 7 Latvia 73 63 22 12 16 4 5 2 6 Lithu- ania

102

96 22 11

3 8 9 6 2 Poland

134,708 265,100 31 Dec 19,961 23,837 86,594 13,823 11,074 n.a. 8,887 2,045 3,464 3,714 1,619 2,199 3,818 1,686 2,393 458 186 144 2008 <1 55 250 707 3 2 4 1 Russia The Nordea Business 100 <1 <1 <1 <1 <1 33 51 40 53 % 7 9 3 4 1 5 1 1 1 7 1 national Inter- 121,680 244,682 31 Dec 14,670 22,490 85,842 11,100 7,246 7,424 1,900 1,541 1,648 1,835 2,707 1,049 1,481 12 2007 107 872 432 7,540 5,233 1,392 Total 100 685 35 50 95 % 6 9 3 3 1 1 1 1 5 2 1 21 Nordea Annual Report 2008 22 Nordea Annual Report 2008 equivalents, FTEs) Number of employees (full time Providing • Mobilising, • Staffing, • Being • Building • ­prioritised areas, namely: Good to Great. The People Strategy focuses on selected Consequently, our people are what will move are what ultimately distinguish us from our competitors. While products and services can easily be copied, people It’s all about people and Nordea’s People Strategy making it possible. riences, as one team, living our vision – continue to create great customer expe - Nordea’s more than 37,000 employees People forming Great Nordea The Nordea Business the putting solid people processes in place is an integral part of Having Building the foundation – HR Basics Nordea Team and It ’s all about People. ­Nordea’s three values; Great Customer Experiences, One All of these priorities shall be guided by and reinforce Practising • countries. ment. In 2008, this system was implemented in all Nordic people data. This system should also support our most important information system enabling us to collect relevant people 30 10,000 15,000 20,000 25,000 35,000 5,000 securing outstanding organisational performance place at the right time us from Good to Great from Good to Great. grow ,000 People 0 processes, a 200 the good Strategy. 4 ensuring the employer the opportunities differentiating understanding foundation 2005 leadership like A we

Performance prerequisite of 200 have choice 6 – for required HR and the 200 of our for 7 Basics the right rewarding, for people and those people to 200 this person enable Talent 8 who is to resources to develop thereby ­Nordea from in will Manage- us have the to move go an right and and HR ture. where feedback and coaching is a natural part of our cul- not more importantly, by continuing to build a culture by further simplifying the process and tools, but equally if agement at Nordea in 2008. This work will continue in 2009 Nordea securing outstanding organisational performance Mobilising, differentiating and rewarding, thereby different experiences. time allowing for our employees to grow through new and son in the right place at the right time, while at the same internal mobility, making sure that we have the right per recruitment process. In addition, we will seek to improve plans to people needs and by further strengthening the our People Planning Process, translating our business even further in 2009. This will be done by strengthening to speed quickly. We are looking at intensifying this work tion of an on-boarding process bringing new employees up oping the recruitment process and through the introduc- made to do just this in 2008, for example by further devel- % of employees, 31 Dec 2008 Employees distributed by age son Going from Good to Great requires us to have the right per in the right place at the right time Staffing, ensuring we have the right person with us in moving from Good to Great. more selective seeking to target those that can best partner This work will continue in 2009 with the aim to be even ­presented the different opportunities available at Nordea. fairs ­employees on line from all parts of the bank, and labour ­dating, allowing for selected target groups. Examples of initiatives are speed worked hard in 2008 to strengthen our brand among to the Our ability to realise the vision requires that Nordea has who will move us from Good to Great Being the employer of choice for those 60 50 40 30 55–59 45–49 35–39 25–29 20–24

attract and to retain the very best. To do this, we have –6 –5 –4 –3 very best employees. This applies both to the ability 65– –19 age in at selected schools and universities, where we have More 4 4 4 4 0 the has right than worked 369 place 85% ­students to meet with Nordea hard of at all the to managers right improve time. 12 went Performance Much 15 through

effort %

Man- has coach- been - - % of employees, 31 Dec 2008 Employees distributed by ages in service females in leadership positions in 2009. focus to females, aiming at increasing the percentage of together with us. While doing this, we will put special provide opportunities for them to realise their potential, ment process making sure we identify talents early and for efforts to strengthen the leadership will continue in 2009, in Nordea in 2008, and will continue to do so in 2009. The a guide in the development of all leadership programmes competencies. These leadership behaviours have served as 2008, through the implementation of Nordea's leadership leadership we shall seek to build, which was addressed in future. The foundation for this work is to agree to what have the potential to take on greater responsibilities in the sure we identify and develop those that are considered to Hence, targets will most certainly require the same for Nordea. its current and future leadership. Our ambitious vision and An organisation’s success is to a large degree dependent on from Good to Great Practising the leadership required to enable us to go more use of e-learning than we do today. ways to allow for people to grow, for example by making to this, we must make sure to always look for the effective ultimately needs and all that we do in terms of building competencies, sure to further strengthen the tie inbetween the business no intentions to settle with this. In 2009, we must make improvements advisers and branch managers, has led to tangible academies aimed at developing for example personal bank 2008. For example, the introduction of a number of new We are proud of the improvements made in this area in and grow Providing opportunities for our people to develop area in 2009. ing training in 2008, and we will continue to focus on this 30 35–39 25–29 20–24 15–19 10–14 years example –3 40 5–9 –4 4 – 05 we measuring must by of further grow our 10 business the our strengthening 15 value current 20 results. of leaders our 25 our investment. However, 30 Talent while % making Manage- we Related have

Nordea Group Other functions Group Group Group People & Identity Banking Capital – Institutional – in Nordea Proud Considered a good workplace Development Satisfaction and motivation Nordic Full-time equivalents (FTEs) 31 Dec 2008 Number of employees, by area or function Recommend ESI, index Employee satisfaction survey results processes impacting more than one country. ­representatives to be involved in certain decision making in ­special arrangements have been agreed with the unions Due to the cross-border nature of the Nordea Group, of of the Nordic countries. These agreements allow staff which  which  to Legal Corporate Credit Banking Markets Products tell Shipping, Financial institutions Russia Poland Baltic Banking Banking Banking Banking others & others & International Risk & countries Centre & Savings where to Sweden Norway Finland Denmark Group Control Oil start Services I working ok 0 8 75 78 80 work Operations Banking & International The Nordea Business 2008 2 0 – 76 70 77 72 72

2007 74 74 71 34,008 17,253 6,174 1,679 1,542 1,161 4,802 1,878 5,420 5,149 5,134 4,112 2006 127 427 295 150 255 376 411 72 73 71 23 Nordea Annual Report 2008 24 Nordea Annual Report 2008 new ment in June 2008. The overall purpose of the proposed The 2007, tion of and trust in Nordea’s business operations. the various risks and opportunities related to the reputa - vices provider, is the management of business ethics and ing support the business objectives. A cruical factor for build- reflect the Group’s business strategy and are designed to CSR CSR solid financial system in society. ­citizen by participating in maintaining a ers, and also to be a good corporate portive financial partner for our custom- more important than ever to be a sup- of troubled markets, Nordea deems it important end products of CSR. In times and good business practices are all includes, financials. Reputation, trust we do that reaches beyond, but also are parties who share an interest in what and external stakeholders. Stakeholders and enhance our relations with internal the concept Nordea applies to maintain Corporate Social Responsibility (CSR) is Corporate Social Responsibility The Nordea Business inspiring It is important for Nordea to be a good corporate citizen, forced with the introduction of new Nordea values in 2007. dard of our role in society, and they have been further rein- ship Principles have since 2002 served as the main stan- active member of society. The Nordea Corporate Citizen- Citizenship in general means being a responsible and Taking responsibility in financial turmoil creation of a Great Nordea. Nordea values and the Group’s strategic move towards the thy operate, and to be perceived as a responsible and trustwor Following the introduction of new Nordea values in shareholder financial proposal CSR policies is a an process strategy confidence integrated partner and was to value procedures create presented and element for and and its a our trust related new for customers. to have of being CSR in Group Nordea's activities the been strategy a markets leading Executive developed business. is was to where financial support initiated. Manage- to The we ser the - - ing it is important to be proactive giving advice and support- serving have proved sustainable and we continue to apply them in ened credit conditions. Nordea's credit granting principles cial turmoil that led to lack of trust in the market and tight- the We have committed ourselves to good citizenship. During ture covering the entire group and all our activities. tions, thus producing a business conduct guidance struc- apply within customer and product areas and group func- finances supplementary and temporary staff working for Nordea. There are also ships. These apply to all employees of the Nordea Group been ness ethics, the Nordea Code of Conduct and this has also from us in this regard. stantly improve and aim to excel in what can be expected these tomer Experiences and we continue this endeavour during credits to customers. and and will continue to work proactively with governments worthy customers. To achieve this, Nordea has worked be able to make lending facilities available to our credit- ity, during these challenging circumstances, requires us to place relationship lies in the positive everyday meetings taking asset: our customers’ well-being. The foundation of this ture, lines constitutes a foundation for a common corporate cul- son is that a common set of values and behavioural guide- conduct and ethics. There are two reasons for this. One rea - A The right behaviour tomers. loans outstanding both to corporate and household cus- adviser. During 2008, we have increased the amount of tomers, strating Likewise, in terms of opportunities, a workforce demon- human conduct is an important risk-control mechanism. dures and make systems. In other words, appropriate people systems. in banking, stems from human behaviour, procedures and conduct relates to risks and opportunities. Operational risk opment. Sound creating value for our customers and for society at large. Nordea Team. In Nordea, it is all for one and one for all in

cornerstone Nordea has developed a groupwide standard of busi- We are committed to our value of creating Great Cus- We therefore conclude that corporate social responsibil- The other main reason for the emphasise on business second customers central and documented difficult between finances who the serving good and Human a way half financial banks make solve business times. of in customers of are to specifications as Nordea’s their behaviour 2008, to judgements fulfil in their potential a facilitate Our needs a prerequisite financial Guide conduct we one long-term ambition and CSR experienced of of is problems to the a Nordea to central our and continued affairs work is Sound these customers. for also Nordea financial is decisions, to all concerns to staff instructions – beneficial proactively. Business stand to exceptional sustainable this flow rationalise values: – partner because and In define by business of these Relation- to the we sufficient One that our and devel- finan- cus- proce- con- it times, their is core Group In New initiatives ment process. ment Investments signed risks ing, assessing and managing social and environmental global Equator Principles. The Equator Principles constitute a Multinational businesses. Nordea supports the OECD Guidelines for cial institutions address environmental aspects of their (UNEP also the UN Environmental Program Finance Initiative of ten principles for conducting responsible business, and tions. exchange and cooperation with European Union institu- within tional industry networks and forums with other large, multina- frequent stakeholder dialogue. Nordea also participates in Among other things, this means conducting an open and Nordea communicates and interacts with society at large. The bigger picture the tion. tion and organisation to the business side of the organisa- bility 2008, was expanded to also cover social and political risks. So, in in the credit procedures. During 2007, the scope of analysis (ERAT) cific assessment in its corporate credit decision process. A spe- making processes and ownership policies and practices. nance issues (ESG) into its investment analyses, decision- to incorporate environmental, social and corporate gover principles through which a signatory institution commits first effects of these changes are expected to emerge during the apply organised and the work with more detailed action plans to a Nordea Nordea supports the UN Global Compact, which is a set Nordea has since 2002 included environmental risk customers. proposal half toolkit, This in a Tool of corporations the financial Executive CSR

the second FI), project was CSR of in recommended (SPRAT) United (Savings 2009. a Europe, the order developed (UNPRI). was charter for Enterprises, tool, In financing. Environmental services a Management. transferred November, to Nations new and was the and a and bring business The CSR Social for financial introduced industry Asset strategy a cooperation CSR Principles and this UNPRI strategy from a and Management CSR forum purpose is Risk closer In institutions, also benchmark was Political September, the consists in Secretariat Assessment was for a for to initiated. the Compliance forum signatory and the Responsible information presented credit Risk of operations units) implemented for for six where the was Assess- The assess- Tool determin- instance general to responsi- ’’ has func- to the first finan- and - people who care. It’s all about people; For first order to meet these requirements, the Group introduces its ing introduced by the Swedish government in 2007, and in web pages. tainability Citizenship Principles, the Code of Conduct and the Sus- please go to www.nordea.com/csr. Nordea's Corporate dea single largest shareholder in Nordea. Consequently, Nor the Nordea Environmental Footprint. dea has since 2003 issued an annual environmental report, annual status report related to the Equator Principles. Nor Progress (COP) report to the UN Global Compact and an signatory. This includes an annual Communication on international agreements and principles to which we are a Nordea Transparency At the end of 2008, the Swedish government was the further is integrated subject strives Report information to to Sustainability the fulfil 2008 requirements the will on reporting CSR be Report made in for the available The Nordea Business requirements non-financial effective Nordea

from at Group, Nordea's of report- 2008. the - - 25 Nordea Annual Report 2008 26 Nordea Annual Report 2008 European banks, 2000–2008 Nordea share performance compared to ­Nordea ranked as number two among the European peer shareholder value growth per share and reinvested dividends. Total Total Total shareholder return as of the Nordea share with competitors and general indexes com, where it is also possible to compare the performance index and and 2000, European Exchange 52.50. Stock Exchange) ranged between SEK 108.00 and SEK ­Nordea on 30 December 2008. The daily prices listed for the Exchange of been sharply downwards. During the year the share price since 2008 was characterised by the weakest equity markets Share price development (EUR) dic, eighth the eighth largest company in the Nordic area and the EUR The market capitalisation of Nordea at the end of 2008 was quartile of the European peer group. create value for shareholders in the top Nordea's overall financial target is to The Nordea share The Nordea Business 100 120 40 60 80 20 Nordea well The Nordea’s share price can be monitored at www.nordea. the outperformed Unidanmark, SE 2000 13.0bn. shareholder 1991 the (–54%). The and K Nordea largest Nordea as stock share during 2008 (closing prices at Stockholm date to 2001 depreciated from banks SX40 and depreciated Copenhagen find return Ranked exchanges of among the 2002 share SEK Financials the DJ index historical return ST the overall the in merger 108 O 2003 by is XX EuropeanB European 2008 Nordea by Dow depreciated by listed market on (DKK). in (TSR) 48%, 49% trend 200 Index was prices Stockholm 28 between Jones 4 on December share on the is –46.9% anks capitalisation financial for 2005 the of realised of the STOXX Dow by financial T the the NASDAQ has urnover MeritaNordbanken Stockholm 200 (in 64%. (6.4% Stockholm Nordea Jones appreciated 6 2007 , thous groups. SEK), through European 200 Since

shares in ands ofshares Nordea Source: Reuters Ecowin STOXX to 7 OMX 2007). Helsinki share. SEK Stock 200 6 market Stock March have 8 banks 29% Nor 54.70 was 0 100,000 200,000 3 4 5 00,000 00,000 00,000 - group approx. share in 2008, with an average daily trading volume of The Liquidity and 2008, lion shares. Of the total number of Nordea shares traded in EUR Turnover on the three stock exchanges combined totaled price lent the Copenhagen Stock Exchange. A trading lot is equiva- Exchange, indicate a change in Nordea´s dividend policy. strengthen Nordea´s core capital position, and does not temporary measure to, together with the rights offering, profit responding dividend poses profit that Nordea pursues a policy of high dividends. The policy is Dividend policy and proposed dividend value creation. tribute repurchases tal returned to shareholders through dividends as well as Nordea aims at keeping capital flexibility with excess capi- Capital management pany With indexes indexes and it is also included in European and global This proposed reduction of the dividend is intended as a The The Nordea share is represented in a number of national Nordea to 2006.) the 27bn a 30 in approx. after for a banks 1 weight Board to dividend the total within EUR December share Market capitalisation, 31 Dec 2008, EURbn the payment achieving Source: Reuters Ecowin in Societe Generale The 11% Allied IrishBa tax. Intesa Nordic Ba to Commerzbank share of BNP Paribas 2008, in dividend year. nk ofIreland 107m, of 81% Swedbank Sa in Sa DnBN of a Unicredit average Ba own The MSCI, on nt terms Danske Nordea HBOS npaolo Lloyds payout Directors rclays ander Stockholm, Erste SH KB RBS SE 4.3% for OR nks was C the B B was which 2008 for OMX 01 dividend EURbn corresponding shares. the 2008 of Helsinki Dow Nordea 2008 the payment traded TSR profitability ratio is TSR 40 corresponds 0 of of then most Efficient Jones would index in EUR Nordea Copenhagen in for yield on was the 20 Stock 4.0%. 2008 liquid will 2008 the STOXX, 0.20 at peer then the calculated to target use (number the Bank exceed 30 Stockholm Exchange of 13 per to Nordic fifth group by 19% end of million more and share. FTSE AB and 40 capital EUR largest 40% of of three on was (publ) financial Helsinki. than 2008. shareholder the and and 519m shares. Stock The 50 of the will –67%. com- net in the 3 7% S&P. share pro- total bil- 2007 cor con- 60 net on - Total Shareholder Return (TSR) 2000–2008 Nordea’s Daily contact with investors and analysts is handled by ­Nordea Group can be found in the Group’s web pages. investors. on the Internet in communication with shareholders and investors in Europe and US. Nordea relies to a large extent Executive investors. CEO, CFO and other members of the Group in ers 195,000. and in Finland the number of shareholders is approx. registered Nordic companies. The number of Nordea shareholders 2008, Nordea has one of the largest shareholder bases of all With approx. 480,000 registered shareholders at the end of Shareholders out exchange rate is published. In Denmark, dividend is paid choose are registered. Owners of shares registered in Sweden can rency of payment depends on in which country the share The the stakeholders. Nordea has during 2008 further upgraded clear and relevant information to shareholders and other one of the leading European companies in terms of open, ings updates and recommendations. Nordea aims at being Close to 30 equity analysts cover Nordea with regular earn- Investor communication ing est individual shareholder is the Swedish state with a hold- land, custody institute decides their own conversion rate. In Fin- account, the dividend is converted into local currency. Each Source: Reuters Ecowin Societe Generale Nordea Intesa Nordea conducts a proactive approach in meetings with The largest among the various categories of sharehold- Ba is Commerzbank Group’s of in BNP Paribas dividend nk ofIreland Lloyds TS Swedbank Sa non-Nordic the Sa DnBN Unicredit 19.9% EUR. Ba Nordea nt Danske HBOS npaolo between rclays ander Erste SH KB RBS SE AI OR dividend –100 C Investor B B B B All Management in compared % If financial at Sweden significant is the –7 year 5– denominated dividend shareholder shareholders, Relations is 50 end. paid to reports is –25 approx. 23.4% regularly financial in in department. 02 EUR. SEK and in at does 95,000, holding the EUR, or 55 presentations. travels information not in end 07 although EUR. in have 22.5% of to Denmark 5 2007. meet An a 100 EUR about of official the The with the cur 190,000 larg- shares - ’’ SHB/SPP Swedbank Nordea-fonden Sampo Oyj Swedish Shareholder 31 Dec 2008 Largest registered* shareholders in Nordea, top three in 2007 and 2006. 2008 and has been among the group banks in terms of TSR in two among the European peer ­ Nordea ranked as number * Excluding nominee accounts. Source: SIS ägarservice, Nordic Central Securities Depository, VP Online. Total Govt of Singapore Inv Corp Länsförsäkringar Nordea Alecta Seventh Swedish National Pension Fund Varma AMF First Swedish National Pension Fund Second Swedish National Pension Fund Ilmarinen Skandia Fourth Swedish National Pension Fund AMF Nordea Funds SEB Funds

Pension Pension Mutual Profit-sharing Life state

Funds Mutual Robur Insurance Funds Pension Funds Funds Pension Foundation Fund Insurance The Nordea Business No of million hrs Holdings shares, 0. 4.1 19.9 105.3 313.2 515.6 1,397 11 3.1 81.1 37 0.5 13.7 0.8 20.7 1.9 48.3 80 0.7 18.0 29 0.5 0.5 12.9 14.0 16.4 0.9 23.6 23.9 24.1 1.2 30.9 31.0 32.6 59 1.0 25.9 1.3 34.6 11.0

12.1 53.8 0.6 0.9 0.9 1.2 1.3 0.4

% 27 Nordea Annual Report 2008 28 Nordea Annual Report 2008 Outstanding shares Earnings Equity Dividend Price-to-book Market P/E High/Low DJ Total 1,000,001– 100,001–1,000,000 10,001–100,000 1,001–10,000 1–1,000 Distribution Share TSR Dividend by investor category Shareholder structure, 31 Dec 2008 decided on an issue of 2,880,000 redeemable and convert- gramme In order to implement the Long Term Incentive Pro- Share capital ­Nordea's web pages. reports can be downloaded and ordered by accessing and the summary will be distributed on request. The well as in the four Nordic languages. The full annual report Source: SIS ägarservice 3) 2) 1) Share data 5 years Distribution of shares, 31 Dec 2008 A The annual report is available in English and Swedish. Annual report The Nordea Business

Yield calculated at starting price on payment day, for 2008 per 28 December. Proposed dividend. Excluding shares issued for the Long Term Incentive Programme. summary of the annual report is available in English as STOXX (actual)

price per Capitalisation per 2008 yield European share of share shares in a 1) cost-efficient

banks index Swedish public,2% Danish public,4% Finnish public,6% Danish institutions,7% Finnish institutions,17 Swedish st Swedish institutions,21% International investors,23% manner, ate, 20% 108.00 ,9,0,2 2541827 ,9,0,2 2541827 2,734,845,227 2,594,108,227 2,594,108,227 2,594,108,227 2,594,108,227 the EUR EUR SEK EUR EUR % –64.00% –46.90% AGM / 30n EUR 13.0bn 4.0% 0.20 25 119.30 52.50 47 SEK 54.70 2008 .3 EUR 1.03 .4 EUR 6.84 0.90 7.20 3) 2) 2008 EUR hrhles Shareholders, shareholders Number of –16.90% 479,672 396,794 / 96n EUR 29.6bn 77,970 0.0 SEK 108.00 6.39% by geography Shareholder structure, 31 Dec 2008 or staff or management options in Nordea. Meetings. (publ) is not entitled to vote for own shares at General entitled issue, C C tions. The new C shares do not entitle to any dividend. The against ible C shares. The C shares should hedge the programme 96 107.00 99.60 4,092 4.9% 2007 .0 EUR 1.20 .8 EUR 6.58 1.73 9.50 .0 EUR 0.50 230 586 shares were converted to ordinary shares. After the new shares Further to the LTIP, there are no convertible bond loans All shares in Nordea carry voting rights, with each share the negative to have share one been vote capital 18.50% 32.30% financial / 03n EUR 30.3bn 0.0 SEK 105.50 10.70 72 84.25 77.25 3.9% 2006 bought .1 EUR 1.21 .9 EUR 5.89 2.14 .9 EUR 0.49 at 100 6 189,327,510 155,312,394 16 83 % General 1,909,280,512 242,356,235 103,844,176 0 0 1 amounts

effects back Other France, 1% Luxembourg, 2% United Kingdom,5% United St Denmark, 12% Finland, 23% Sweden, 43% 2,594,108,227 Meetings. Number of to and , 3% from EUR 21.60% 27.50% / ates, 11% 37n EUR 23.7bn hrs Shares, shares 10.20 42 67.75 64.25 25 SEK 82.50 on 4.0% 2005 .6 EUR 0.86 .8 EUR 4.98 1.76 .5 EUR 0.35 share 22 2,600,108,227. Nordea 1) May price 2008 Bank apprecia- the 10.30% 29.80% / 21.2bn AB 10.80 48.70 67.00 3.6% 2004 0.69 4.59 1.62 0.28 100 73 % 9 4 7 6 The Nordea Business

Change in share capital Quota,value Number of shares Nominal change Total number Share capital Date per share1), SEK issued SEKm of shares SEKm 17 Dec-97 New issue 7.00 1,275,267,441 8,927 1,275,267,441 8,927 28 Jan-00 Reduction –3,188 New issue 4.50 815,800,287 3,671 2,091,067,728 9,4102) 25 Apr-00 Reduction –2,091 New issue 3.50 869,776,488 3,044 2,960,844,216 10,363 09 Jun-00 New issue 3.50 18,348,501 64 2,979,192,717 10,427 29 Aug-00 New issue3) 3.50 3,006,359 11 2,982,199,076 10,438 11 Dec-00 New issue3) 3.50 59,764 0 2,982,258,840 10,438

Quota,value Number of shares Nominal change Total number Share capital Date per share1), EUR issued EURm of shares EURm 10 Jan-01 Conversion4) 0.405) 2,982,258,840 1,182 20 Feb-01 New issue3) 0.40 8,408 0 2,982,267,248 1,182 15 May-01 New issue3) 0.40 2,401 0 2,982,269,649 1,182 14 Dec-01 New issue3) 0.40 396,441 0 2,982,666,090 1,182 31 May-02 New issue3) 0.40 2,405,087 1 2,985,071,177 1,183 25 Sep-026) New issue3) 0.40 45,050 0 2,985,116,227 1,183 07 Oct-03 Reduction7) 0.40 –57,008,000 –23 2,928,108,227 1,160 26 Oct-04 Reduction7) 0.40 –81,608,500 –32 2,846,499,727 1,128 19 Sep-05 Reduction7) 0.40 –140,159,800 –56 2,706,339,927 1,073 02 Oct-06 Reduction7) 0.40 –112,231,700 –44 2,594,108,227 1,028 11 May-06 Bonus issue 1.00 1,566 2,594,108,227 2,594 08 Jun-07 New issue8) 1.00 3,120,000 3 2,597,228,227 2,597 15 May-08 New issue9) 1.00 2,880,000 3 2,600,108,227 2,600 1) As of January 2006 nominal value has been replaced by quota value according to the new Swedish Companies Act. 2) Anticipated in Balance Sheet 31 Dec 1999, registration 28 January 2000 3) Conversion of bonds 4) From SEK to EUR 5) 0.39632 EUR 6) On 1 September 2002 Nordea AB (publ) redeemed the outstanding loan amount of EUR 96,928,426.28 early. Subsequently, the company has no outstanding convertible bond loans 7) Retirement of shares repurchased and held by Nordea 8) C-shares issued for the Long Term Incentive Programme 2007. Converted to ordinary shares 18 June 2007. 9) C-shares issued for the Long Term Incentive Programme 2008. Converted to ordinary shares 22 May 2008. Nordea Annual Report 2008 Report Annual Nordea

29 30 Nordea Annual Report 2008 Operations. ment increased. - Nordea reports quarterly results. Growth strategy on track April Fund Awards. Nordea March strategy and prudent risk management. Nordea presents strong full year result - based on growth February ment Nordea Life & Pensions receives award for risk manage- January Events 2008 The Nordea Business syndicated loans in the Nordic area. appointed Bank network with one third. Kassaservice, which increases Nordea’s Swedish branch customer areas. Nordea reports its strongest ever quarterly result in the July Depository. Nordea opens a new branch in Shanghai. June shareholder representation is present. Officer income Ari Michael Nordea wins three international prizes from Lipper Euroweek ranks Nordea as number one bookrunner for Nordea Nordea wins Euromoney awards as In Sweden, Nordea takes over 68 branches from Svensk Nordea sells its shares in Nordic Central Securities At in when from Nordea’s Kaperi and the sells growth head appoints Risk Rasmussen Nordic member appointed its joins Annual global Magazine. of continued Institutional Group and Fredrik of custody head Group joins Baltic General Executive and of Rystedt Group region. Executive Banking operations & profit Meeting, International Executive as Management before new ia Products Management. Best a to record Chief JPMorgan. loan Regional Manage- Banking. & losses Financial high when Group Denmark, Nordea acquires nine branches, in the Zealand region in September the Olympic Games in China. market. Nordea August by ing approach for the major part of the retail customers. Follow- ment vices receives top rating. tations. Nordea’s strong results for the third quarter exceeds expec- October trainee programme. with the launch of pension funds. Nordea December until 2013. Nordea and TrygVesta prolong the distribution agreement November services. interbank services, and by Forbes, for general corporate Nordea Nordea sponsors Nordic athletes, who participates in Nordea Nordea and other banks agree with the Danish govern- In an external customer survey, Nordea’s custody ser Nordea presents a Graduate Programme, the new Nordea Poland is awarded prizes by Newsweek, for the the on IRB approval, issues receives a state from approach. issues Life a & guarantee Roskilde 5-year approval Nordea lower Pensions USD tier Bank. has scheme to expands 2 5bn use capital 83% extendible internal for of into of its financial EUR exposure the rating note Baltic 0.5bn. stability. based in covered region the (IRB) US - European pany, dea ture Nordea Legal structure Net • Nordea • Rights • Continued • Proposed • Earnings • Risk-adjusted • Operating • Profit • Expenses • Net • Income • Solid performance despite rapid economic slowdown Financial Review 2008 Tier • Total • is moil The tive and improved authorities. dea Bank the regulatory tion ment remaining minority Nordea Orgresbank up dated owner of million. JSB following JSB Among the ratio 1% strengthen responding 3.5% local Nordea The Nordea to first Orgresbank Bank obtaining solutions, final complexity and and are for shareholders one a Orgresbank Orgresbank, same since loan interest final 1 Societas of currencies quarter aims has excluding Following deposits further Development. as ratio before Reconstruction regulatory shareholders AB year offering Company operational 19 EUR 17.7% other expects is will approvals regards A losses in conversion level up per 29 increased dividend awaiting (publ) basis at

profit transformation 9.3% core support necessary the particularly from to income March subsequently and continuous loan 8,200m of Europaea”, as through share yet things, profit of up a as fourth EUR and 2009. to Danish well points capital risk-adjusted dividend the and of (8.3%), the JSB EUR to analysing will start in responses 12%, losses Statute. 100% and which EUR 2007. be satisfactory efficiency, 2008 of per reduced transaction, 7% to EUR Nordic EUR as the 466m Orgresbank The (EUR process a be approvals and a 3,396m quarter to seen customers exercise conversion in is enhanced position State new share before in to EUR European converted 1.03 execution. simplification Nordea transaction (“SE”), expected 5,093m local Nordea 2,459m payout Development increase the the (positive 7,886m is and the banks to issue 2008 guarantee (EUR expected in 3,862m EUR (EUR profit reduced 2008 accounts. deposit the currencies transition its changes itself to regulatory by Nordea from in (EUR from – has (EUR capital ratio dividend has right of be current the 2007), is Bank to 0.20, lending 1.20) into EUR accordance agreed the 3,883m), EUR for approx. conditional is with evaluated. (EUR already be the been aim guarantee to the of operational equity 4,282m), estimated of to 2,417m), 2009 a fee in (EUR completed 3bn for will is efficiency. up lead rules European 60m), 19% relevant its acquire financial the process. two is with subject and a 3,820m), up to Reconstruc- 4% at that legal majority EUR own down consoli- European to capital 0.50), 17%, manage- approx. with legisla- loan the up Nordea up on issue. Nor to the 100% struc- 100 to risk tur 13% 19% in com- in 2%, cor Nor take the up loss - of - - - aged existing targets, addition risk organic adapting dea Nordic ness profiles. with 15%, growth declined to tomer-driven growth during reflecting pace and margins expenses higher the before Total Result summary for 2008 Danish points, amounted losses risk-adjusted these. 3.5%. antee the The are 9.0% has by transition according one The The Net In Lending Total The Operating Nordea the targets financial commission been is and increase with opportunities towards a annualised. and to New income schemes, therefore Impaired and year reduced cost/income loan liquidity interest rapid organic economic excluding 2008 countries guarantee produce was in Nordea growth expenses customers capital in to during revised continued to of for re-pricing rules, net to increased European to over reports corporate ago. the losses volumes the EUR 17%. with crisis Basel relates the economic EUR increased profit profit the capital interest income cost growth dividend the new preparing management is a will loans In of expenses premiums. the total a with 28m. slowdown and Income end business increased the increased reduced increased schemes, year and 466m, II, a 8.5%. local with increase and efficiency was was ratio mainly volume year tier focus of market impaired increased markets Markets of lending losses capital this of gross income a global credit increased strategy with slowdown by will 9.3% new currencies, 1 new the down up These giving and ratio of in ratio, related is on for 4% cycle. and 2% to 39%. total increased in and NEM year. related also 7%, likely conditions, by solid growth, has target ratio and customers risk doing was recession, is and challenging measures operations. and to (NEM), the risk-adjusted to loans. 13% ratios the to 8% 1% before further continued Board of Directors’ Report a including 19 EUR resulted selectively income, 19%. strongly, Margins a to and EUR loan Nordic result. increased in household of income to has to to firm core for basis to the to more the the 11.5%. continue although Net EUR have EUR 8,200m to EUR 55% the lending The the started transition loss 2,459m. lending emphasised. attention Danish tier and the Nordea with fourth compensate points in driven loan countries. business guarantees tier times from have driven 265bn capital 3,862m. restructuring to been to ratio 3,396m, Both speed 1 capture higher 84% profit new deliver EUR solid ratio, mortgages, and 1 to in losses growth at quarter Excluding State including volume the ratio increased impacted ahead. of again by affect 2009. in numbers rules a compared capital on by policy profit in was 2,224m. lower credit 17 with Despite net before cus- 2008, while strong busi- costs, the higher In results guar of for in basis man- Nor the loan In the - - 31 Nordea Annual Report 2008 32 Nordea Annual Report 2008 re-pricing by Net Net interest income of underlying reported Banking was Total Income Board of Directors’ Report currencies negatively rencies currencies, which ket agement ital ties tionships liquidity from customers increased reflecting markets in second household compared from deposit rencies, ing Group’s to quence fourth graphical deposits. volumes deposits. strong 14%. increased net income business income net one strategic Lending Growth Corporate Both Total In a positions needs, interest increased to interest particularly strong most Market business Institutional income

interest support reflects year quarter brand compared half of increase and margins household growth deposits operations. increased in and policy. activity into an and Deposit Nordea re-pricing markets. liquidity 12% significant while of sectors.

to in was in excluding affected mortgage capital ago. increase investment income. business to of income income profit in credit growth last Institutional the increased corporate name

household strong lending by strong income the customers the with in mainly the up Nordea was still In of and 1% strong fourth year. continued the increased in market public year, to During markets, growth & 29%, Nordic liquidity local 40% risk Margins mortgage premiums. has by household growth increased particular complying

in balance compared of 9%. demand International one

Group, was momentum lower reversed rate lending margins and on In the lending credit lending plans. mainly 4% attracted mainly has was within quarter. mainly currencies, However, year savings increased with Nordic 9%, transaction cuts shares the markets, & was weaker also to Nordea’s in savings-related to of at premiums. have supported sheet International and

risk across market EUR lending which have

ago. general their EUR repurchase from 19% a 10%, continued recorded increased Total customers the and customer to to on was with driven high have Banking, a in accounts and compensate and decreased one have Norwegian corporate Banking The customer-driven substantial 8,200m. short to 8% due especially increased 149bn, deposit

Nordic deposit 11% central supported the the income shows close turmoil, level. accounts EUR strengthened year successful and increased to and by growth

provided Nordic by to prudent and in compensate and during areas.

to agreements, a decreased pressure customer Banking margins consumer up strong and 5,093m, ago. all 17% The Income banks. Banking (IIB), that strong volumes fees, volumes attract during from 19% lending. long-term on during with 4% divisions, for inflow and

region as rate by corporate Nordic total In in Nordea’s in deposits. risk the income execution opportuni- in solid compared a growth the corporate strong local local scarce increase all Swedish large driven conse- its growth on on was local rela- the capital by year, man- by and the lend- for

of and geo- mar cap- cur cur 6%

as

in - - - the tively 1,883m, Net Net fee and commission income decrease margins down EUR 1,148m. was centrated year. net AuM challenging retail income equities to 766m, vate EUR tomer or Net Net gains/losses on items at fair value Banking development sions. the credit compensated and resulted products driven financial performed to were last decreased 90m appreciation revenues when deferred were EUR the EUR Savings-related Total The The Secondly, Danish increase year. year, fee gains/losses Institutional reported. Banking 2007. 125.6bn, 1,043m Net approx. deferred, funds 2008 strong the affected Lending-related market 10% areas, however by customer-driven decline and 442m, 181m, and Assets with payment to in decreased and revenues was markets. eg in inflow in financial to significant by fixed-income was compared a very State the to commission Denmark, the a market in retail net strong (EUR the appreciation of Shipping, savings-related 33% and 10%. EUR change in turmoil, for down up These to sales by savings in due under EUR interest OMX OMX with particular strongly gains/losses of net guarantee EUR & specific 12% on net the commissions of funds, or A can 1,048m 140m buffers EUR commissions as to International increase of conditions,

gains/losses 20% record items EUR 2.0bn. outflows EUR a gains/losses activity weak in shares to holding. Management a decline 1,028m compared institutional minor which be earlier deposits commissions result Offshore rate sales the 2.1bn capital products, income lower in compared in valuation available 1.1bn 92m, of last at have within The equity expenses result which 2008, end and in accounted listed fair within increase mix, commission have were compared recognised in of were was year). Income net this outflow mainly decreased for total markets of improved. of the a foreign decreased decreased to value and Banking. despite from was change Corporate markets. an ie was EUR gains September lower reported and been Institutional largely products. for last year, losses compensated (AuM) to financial risk a continued net of outflow Oil in shift achieved, one income from mainly Life decreased due non-listed year, for EUR 4.7bn was reported exchange to outflow in activities cards of management Services. transaction during the in following income by year unchanged This 2007. approx. Nordic decreased from which by & by Adjusted to in asset these primarily with 50m, Merchant turbulent buffers. 1% Following Pensions, during of the 2008. 12% commis- 18% Nordic attributable recognition ago to more clients. EUR especially In sales the to from earlier mix by for fact strong equities areas the nega- increase, have the areas, Banking to cus- to EUR EUR and Income the year 15%, by the for The than 4.5bn EUR EUR to that of from Pri- at con- a in gain its Other Other income Eksportfinans, a Income Equity method which Total Expenses being growth ing Roskilde branch increase To Measures to manage the costs downwards number growth of ing increased Capital growth total Net Loan losses 52% the fourth as sions nomic loans nomic in Typically, made loans. loan impairments sized increased rapid slowdown negative various measurements well 25% Almost Also, The The New The prepare

expenses Danish the loan in losses of expenses expenses both exposures stems slowdown 8% for income In EUR slowdown cycle. quarter.

2007. cost/income increases, increase network, EUR growth as holding Markets rate downwards. areas, under

provisions efficiency additional of addition, losses Bank. different higher lower 8%, faster there sectors result for half employees and for constitutes guarantee 3m from as 85m,

of have ie collectively due was increased the a in

increased EUR of These Net investments EUR were reported reported is in in this year

reversals Private rather and including than from in 2007, from a the have a reported in follow Equity during net NCSD to new

subsectors. EUR been large activities lag have loan the

–15m. time. all ratio 28m. EUR New a of Due cost activities in schemes loan is the higher provisions very despite between than been economic markets collective modest 172m, identified. Banking, by 2007. losses estimated number net been under Nordea’s by

Holding method coming increased increase Excluding and to However, 23% and 466m,

European the losses 6% in low

and from 7% more taken are loan the number

made recoveries, branches including individually compared holding have also the of equity

expected to under the where levels, wage following of fourth as losses, cycle, EUR a provisions years, Growth was for efficient EUR AB, number to related models to The few include smaller start to well resulted

at the restructuring Markets. manage performing decrease

of 53%, EUR inflation. method. way, which an 44m. Nordea result in

main large 4,338m, loan acquired mainly reported quarter but Nordea’s of employees as to growth, primarily early Norwegian Plan to operations, for of

increased the of losses which last compared 24m, assessed and due losses investments in have exposures. part from resulted employees the impaired a Staff by economic restructur Sweden, operates. stage in year. the weak medium- 2008,

to from including cost loss impaired

2%. a

of the related expenses, should been sale the have the number costs same in net follow- loans

when provi- levels eco- of in the to eco- the of a - to in countries financing. sponds Net Net profit last The Taxes lending tion, amount the but Total Financial structure the were attributable ­Denmark, of The currency tion are during pared Risk-adjusted Risk-adjusted profit dated and umes ish increased Investments Securities to 265bn loans The Lending decrease changes ish with one 17 New A The The krona and translated Baltic increase increases year. profit effective net growth currency on

large real EUR basis EUR assets and and into to and year increase Euro 2008. accounting to Norwegian loan portfolio collective of in 2007. in estate, rates countries, was at by receivables a fair decreased 24bn. part The and 1.03 points, the EUR calculated currency ago. Group return increased in the to in strengthened losses in All EUR tax are exchange to value unchanged Nordea profit Excluding total used. the risk-adjusted total 19 (EUR of interest end in 54m, pig balance EUR rate reported in the basis excluding 4bn, provisions total shift on assets policies in assets krona collective farming these of however changes, increased exchange by 1.20 for net for in 2008 equity at to by Group. 2008 or points in bearing assets rates. 15% local the the 2008 sheet some 22% loan of the in 5%, countries. loan was v.s. during in strongly correspond and EUR correspond year-end public, 2007). and profit to the of all Danish currencies were due from or was the reflects to losses allowances including See items rates driven 2% sectors, losses. EUR 15.3%. securities four item Board of Directors’ Report EUR EUR guarantee 25bn. the Euro. the to Note to 21%, was made, very against of amounted is 2,672m, changed in Nordic segment EUR State 27 end rates higher 85bn 70bn. The by EUR Earnings seen including to Liabilities foreign 3.5%. The compared therein 1 to low by these. an for a of and net, for 2,459m, net guarantee 1.42% when loan to losses both 20bn, 17% in net 8% 2008. markets levels. which business more the EUR interest consumer profit Denmark, in shares currencies to for increase effect per loss compared the the of Baltic consoli- construc- to a decreased in The com- to informa- 474bn cross total the is share EUR corre- Swed- ratio 20% fee, and of rates vol- Dan- in in 33 Nordea Annual Report 2008 34 Nordea Annual Report 2008 gage Nordea 4% 22bn tutions development The Deposits and funding activities Board of Directors’ Report ties derivative ent The Derivatives holders” written, investments securities Net Life insurance activtites 109bn. tion. dea was more ditions short-term financial The ­generally In Nordea’s funding operations Notes end volatility ket supported activity increased active ered ered ing markets one Total Credit portfolio 178%. 133% the The Issuance The respectively. values value issuance. in benefits year premiums of growth balance government able bond bond All companies and lending liquid at second issuance during 1, 2008. derivatives lending/deposit improved but in funding the which short-term 20 continued ago. to institutions. by in of EUR difficult, and by the for markets markets, contracts the funding and also secure end of foreign of derivatives and EUR For sheet from were EUR increased The half in the derivatives customer-driven properties. Swedish the volume 6bn received led as 44. from of more deposits During issuance amounted programmes packages 3bn year. its and per share of item only 397bn, total its December to volume, due respectively, remained to programmes currencies normally. both is 2008, well a the year-end or Nordea support the information closer disclosed In growth. decrease “Derivatives” partly assets to and to of contracts. in 9%. 2008, ratio the public, and or contrast recognised end activities Lower is risk funding EUR lending the came to measured though Danish 12%, Swedish to and open including borrowings was compensated of was Later long-term EUR aversion in Life the and funding year-end, The 265bn, capital of corresponding 2008 which in the to fair have to excluding bank’s to The financed able “liabilities on business to in Note for interest 31bn. the at increase covered mainly in EUR bank the values AA- corporate the amounted a reflects derivatives, and the in issuance. nominal been up markets rescue to increased high among in covered international 44. issuance nominal 3,802bn. market long-term Total the continue rated 8% and year, from good the rates explained by by are on in bonds level. covered in market the compared to Danish for the active a debt gross investors. premiums these market credit customers to invested operations value bank time. policy- These strong to bonds during was net many by under terms, High 73% mort- see Nordea EUR with was securi- fund- EUR mar was pres- use. bonds posi- Nor cov- of insti- the cov- by two and con- was the its to in - - of nies tutes increased was fourth credit uprated. lio, increased tained impaired pared forming loans shares through Nordea A Market risk More on approval reduce approx. core Nordea strengthen core capital position by 3bn EUR Rights offering and reduced 2008 dividend to on ­capital A Capital position and revised capital policy ity instruments the rical Nordea Hedge accounting sented agement 0.5bn. which 2008, conditions. ing position

description description which Some The Further Nordea's 12 page in with hedged from an owned tier accounting 3% cash to March gross information portfolio. to The will quarter with stability. under weak policy the increase be has announces uses EUR 65. 1 an loans. the somewhat EUR weakening of The the believes 99% at loans to 55% capital flows rights decided dividend information increase the underwritten are item an pre-emptive by resolved bank Board 57%. and prevailing 2009. hedge economic total 2.5bn Risk are is 1,432m of of to 2008, Extraordinary private Group’s performing and Impaired presented by Market the treatment and and in offering EUR by senior Lending it for on effect management of approx. net order by measures accounting more is core loan Capital mainly EUR has payment net changes to the the Directors at responsible 2,224m the equity and development about extraordinarily increase total the loans. risk from been tier investments losses rights risks hedged customers to 3bn. discounted loans is 2009 under in of loans secondly 4.5% end subject hedge in position 1 is lending. the the to General funds rating in seen the capital at and to The the presented Annual after for and in gross of strengthen fair Nordea's on the in 19% Baltic changes Capital and risks credit order to corporate 2007. the the existing in Board 2008 to page Group amounts end value migration being several act and by has credit by in in of issue 38% Lending shareholder Meeting opportunities exposure are countries General challenging pro-actively the portfolio foreign to the proposing 62% in approx. of 46. management started the on of in share found are of have downrated the Executive the of shareholders the Group quality net Directors years fair page credit the of revised to new non-per corporate year to on Group's to profit impaired operations. a Meeting, EUR capital to value hedging EUR to in consti- compa- is symmet- be 56. RWA of ordinary variabil- portfo- to affect in Note pre- com- market held sus- to aris- 7.4bn, Man- for of the - of than best

1. of the was 54.70. OMX During The Nordea Share 2,600,108,227. C-shares. dea 2008. as page is also outstanding, nary holders case obligations ciation Company Association ibles. acquirer’s indirect 10%. were ond individual ing Authority following or Nordea, As Holding of own shares (Treasury shares) neither through and the of The Dividend Incentive partly 32m. value (0.4% out amounts found EUR part an According In However, The The of average Company Business ratio may Board a largest number note of shares, A 70. These the addition, increase On 31 There minor Nordic of is Total as

any 31 employees of table which case 0.20 2008, in EUR acquisition December total the on end be of only hedges 22 to 40 a The Programmes. December consent is this according total of shareholder hedge issuance 19% shareholder was between shares page EUR issued May are TSR per and regarding pension exercised where not indirect showing Act. two of since namely Directors 1 the number Exchange to will shareholders total through On of respect. and there 2008 no holding share Sampo of aware the a was qualified of 519m. 2008, share 29. of 15 of table ensure by have are restrictions net Nordea in number 2008, the conditional after 20 of Articles The the of is May, 2008, are each foundation. shareholding to –67%. two 2,600,108,227 the (EUR the of partly directly profit. shares in found the the Nordea new acquisition price of will the showing with Oyj depreciated an to Long return provisions there shares) voting Nordea the Swedish any largest that classes, owner 2,880,000 holdings, C-shares right the comprise indirect is Swedish propose with of with shares, 0.50), of of European held a Total a in on agreements Term Swedish is the shares in holding by credit Association Profit-sharing Nordea (TSR) rights Nordea, to rights in only page the a and law registered a held The the ordinary corresponding reciprocal for transfer Financial holding proposed holding price Nordea. in ordinary shareholding warrants in Incentive were C-shares to may Banking from a change institution, in or employees. trading each was one the voting in 27. the qualifying 9,757,510 are the of peer state on the in amounts the which Company converted only 19.9%. class Articles SEK –46.9%. described between the the AGM class shares of shares of shares Company The shareholders Long-Term Supervisory group, in rights was shares, rights dividend or were purposes and more 12.1%. Programme Foundation Articles NASDAQ take 108 share of causes convert- remain shares nominal The a a the holding to of shares and to Financ- and Nordea of in dividend direct to issued and place are share- than where a 0.5% to see EUR on Asso- Nor These largest capital sec- SEK pay- is the of ordi- the in and in or - in in gender agement Personnel Personnel sented ­Further adverse A Profit sharing and management incentive sented Information Rating disputes of the to term Act nary year, own Meeting Within Legal proceedings from EUR fair rates, Group, injection Nordea Life & Pensions page The Mandate to repurchase and convey of own shares dividend The The which actuarial moil increase ing Plans) The Pension liabilities points. strengthen the

description a which No Group wholly-owned 2008. value has large Board proposed ex-dividend total shares. and shares 2,099m incentive mainly 74. 2009. but new will has on in the are but been information has effect in (AGM) is is personnel involve losses obligation The changes People extent payments also of page expenses, increased faces of framework lead unrecognised disclosed considered not the mandate has in conducted This plan on as due proposed Directors increase of to on record accordance solvency programmes affecting a lowered 151. amounts the to claims offset the in new forming consequence date to mandate relatively the assets in a April subsidiary Ratings the and limited in Profit will exchange is to significant from Group in date earned for by is pension likely of presented received repurchase in a to turbulence Note has the the the of mainly be capital 2008 to the changes losses, the Great civil the EUR for with sharing has the limited made EUR of distribution increase decreased total tier or in to normal Nordea pension 8. AGM the a the Nordea of lawsuits Life rates. not its Nordea plans More 2,775m the have mandate Nordea agreements Board of Directors’ Report 1 due injection at following 559m the capital dividend in ratio on financial Nordea in been scheme the in and subgroup. Swedish amounts. on Note to in exchange Total general 16 any business (Defined information share the rights. Annual Life from 2 in at a the to is convey April. and utilised on April ratio by significant financial to significant the the presented of 43. EUR Group unrecognised and pension lower Holding, position. page is is countries repurchase EUR disputes, EUR with Companies The market end Nordea None 7 3 by The operations, 2009. General Benefit rates. 2,830m April, April the of during 22. 9 increase 200m discount is 2,407m of key own is basis capital markets. Long pre- cost of 2008, on pre- tur to The 2009. and and man- most these dur ordi- into the - as to is - 35 Nordea Annual Report 2008 36 Nordea Annual Report 2008 ­countries tainty. look Due Outlook 2009 land, The Foreign branches page financial A State schemes for financial stability and tiatives costs their group ples, In Environmental concerns Board of Directors’ Report environmental business ing social combining

description accordance The The to parent cooperation to is Nordea own 4. and Denmark responsibility, reduce entities associated the macroeconomic policy regarding activities. stability business has operations, prevailing financial company is the during also in with manage policy committed and relation with negative in with financial guides risks The Group Shanghai. the performance caring the has market supporting suppliers. that and an Nordea development Nordic to to latter foreign policymaking unusually environmental provides Corporate the to the control involvement for sustainable conditions, Group. part different the countries Group branches the with environment environmental of guidance high Citizenship reduction in the has environmental the State and by the development is autumn impact degree in adopted presented Nordic business business provided Norway, schemes on of and how of of Princi- shown related issues uncer an its work- units ini- the on Fin- and for out- by in - market. Nordea expected profiles selective doing capital a lenging be operations 2008, ever the The line look, will mies tion on The Annual General Meeting 23–25%. sharp negative. Cost The Risk-adjusted-profit The Thursday same Annual with uncertainty be is significant. now Nordea as more presented high effective affected. management, slowdown growth in year. sees cost basis level the to are prioritised to be business speed General Nordea growth potential annualised 2 In anticipates the weakening attracting as lower April is addition tax Based regarding on in prevailing expected at and 2008. rate page is is 2009 Meeting which in with the segments. for managed on therefore GDP 2009, is is rate new net to focus means 153. growth in the in expected existing future to firm the market

2009 Stockholm. loan growth of compared current customers of be in global the shareholders Market attention preparing that downwards somewhat expected 2009 somewhat losses loan customers, fourth to conditions. is the macroeconomic be and loss will in to in lending Further with credit in 2009 on quarter 2008, 2009 Nordic levels to for be the lower more cost, adjusting be solid will to expected and a portfolio range broadly chal­ however at informa- continue growth is 2008. risk than be econo- than approx. on credit how- held of a out- and in the to in is and deposits margins to Total Result 2008 Banking Denmark ratio ­RAROCAR including from points Denmark. above-mentioned impacted increased rencies, Total 6,289m. In Result 2008 Risk-adjusted • Balanced • Expenses • Income • Nordic Banking Customer area results expenses guarantee points visions sub graphically schemes. sions includes in downturn 2007. the 2008, Operating Net Net lending Net Profit Compared Operating suppliers the

decreased the income expenses of credit

of of loan fee loan for payment This income EUR income Net

and Danish and before new total lending

The increased by

by these. and schemes in growth pig

losses and decreased losses

cycle. interest growth increased lower was 5%. the

Denmark negatively 44m in profit

profit collective total to loans to

commission farming. increased to Banking loan increased in

by the guarantee the volume profit positively to excluding

49% payment connected amounted of Nordic

of net income

industry,

and was 7% decreased and the construction other with income losses EUR 5%

to loan (50%). 3% compared is increased State

provisions 31 The down receivables impacted

Denmark in 25% growth 3% regarded deposits by 192m Nordic Banking

in

basis

from

schemes increased 2008 income losses to affected the loan increased

to with 2008 to to guarantee 7%

(26%) the

17% 8%

EUR the EUR losses

were savings points and in

loss sector 8%

State countries, were 2007. to some by growing

increased and to Danish increased fell compared

both

and excluding

and

EUR 3,107m. by 402m expenses in 5% savings recorded. be ratio from

15%

14% guarantee including widely losses increased 2008

scheme. and concentration

the products 19 further lending from

2,780m.

or

was guarantee

basis to

to the cost/income faster collective the

In 6% 17 5%

commissions EUR

and EUR to last the would spread Danish local 24

This basis economic progressed

Total 2007. compared points and to

these.

scheme corporate and than losses basis provi- year.

4,206m. 1,530m, EUR cur

have the pro- to geo- -

in Nordic Banking, operating profit by market Net EURm Banking Denmark, operating profit by market Net Net EURm Net Cost/income Loan fair Net fair Net RAROCAR, Operating profit Profit before loan losses Equity Equity Lending Other information, EURbn Expenses incl. allocations Depreciations Other Staff Cost/income Loan Other Staff Other Other Deposits Total income incl. allocations Economic Deposits Lending Other information, EURbn RAROCAR, Operating profit Profit before loan losses Depreciations Total income incl. allocations Economic Expenses incl. allocations value value interest fee interest fee gains/losses gains/losses costs costs losses losses expenses expenses operating operating method method and and Capital Capital commission commission income income % % ratio, ratio, etc. etc. income income on on % % items items noe ,3 172 1 1,772 1,530 income income at at

–3,107 110 110 4 –25 –4 –1,140 –1,160 191 186 1 –4 –16 –1,836 –1,901 Board of Directors’ Report ,0 366 9 37 59 3,666 4,206 2,780 3,182 1. 207.2 214.1 6,289 1. 110.1 117.1 08 07 08 2007 2008 2007 2008 42 5 –3 55 –402 1 40 0 460 517 4 –6 2 –10 –21 –26 –46 . 7.4 8.1 9 50 49 5 26 25 5 0 3 40 25 1 5 0 25 11 oa Functions Total –3,002

Denmark Banking 3,016 2,961 5,963 ,9 1,036 1,192 1,803 08 2007 2008 36 –360 –376 12 1 –192 –462 –497 –878 36 31.6 62.7 33.6 68.0 1 489 413 7 155 173 –41 733 925 . 2.2 2.6 19 22 0 25 20 63 9 48 49 2 27 22 5 –2 –5 Nordic 2 5

0

13

0

0

5

1,707 –824 –39 884 883 16 42 3 37 Nordea Annual Report 2008 38 Nordea Annual Report 2008 Banking Norway, operating profit by market Net EURm Banking Finland, operating profit by market Board of Directors’ Report Net EURm Net Net fair Net Equity fair Net Equity Cost/income Loan Other Staff Other Cost/income Loan Other Staff Other Economic Deposits Lending Other information, EURbn RAROCAR, Operating profit Profit before loan losses Depreciations Total income incl. allocations Economic Deposits Lending Other information, EURbn RAROCAR, Operating profit Profit before loan losses Depreciations Total income incl. allocations Expenses incl. allocations Expenses incl. allocations value value interest interest fee fee gains/losses gains/losses costs costs losses losses expenses operating expenses operating method method and and Capital Capital commission commission income income % % ratio, ratio, etc. etc. income income on on % % items items income income at at

Banking Banking ,4 1,065 1,146 1,688 08 2007 2008 08 2007 2008 22 –292 –292 10 –163 –170 –455 –476 21 –283 –291 –772 –468 57 30.4 47.5 35.7 52.1 72 18.8 37.2 17.2 35.0 8 544 686 509 415 2 111 128 6 170 161 851 916 6 60 –65 416 482 950 6 7 –66 . 1.9 2.0 . 1.3 1.3 9 0 –9 5 80 95 6 44 46 0 38 30 9 56 49 –2 –4 3 18 23 7 –4 –7 Norway Finland 0 0 11 8 7 8 1,007 1,696 –749 –450 947 358 351 801 lending Total Result 2008 Banking Finland from fully pared Net points trade Total Result 2008 Banking Norway net real vidual year. Total Profit Operating Total Operating Net Profit interest loan estate. compensate low income income and to of provisions loan margin expenses expenses 2007. before before losses total savings services The income, losses in in profit profit lending. Net loan were Banking Banking loan loan increases for fee increased increased and increased sector. interest decreased increased which loss losses losses EUR the and collective ratio Finland Norway adverse The commission and 65m, income increased decreased increased by by to was loan 16% volume 15% EUR 3% 4%. mostly provisions was effect increased 18 increased compared compared loss compared 66m, by basis 37% unchanged 3% growth. income. stemming ratio on 26%. from both compared income points. for 19%, was 8%, to to to due last This residential 2007. last 2007. 14 driven driven com- from growth year. to basis did year. to indi- the last not by by year. and from Total Result 2008 Banking Sweden the bles. were sions Profit Total Net The Operating integration commission The net seen income related loan number expenses before interest loan in losses the to increased profit loss of corporate of loan sectors income income, branches increased FTE’s increased ratio increased losses by was retail increased decreased which customers. 4%, increased from by 13 to trade 1% with EUR basis 1%. increased Svensk compared by and by a 76m points. 8% The strong 406, 11%. consumer Kassaservice. compared following main mainly by to contribution 14%. 2007. increases due dura- Net provi- to last to fee Banking Sweden, operating profit by market Net EURm Net fair Net Equity Cost/income Loan Other Staff Other Economic Deposits Lending Other information, EURbn RAROCAR, Operating profit Profit before loan losses Depreciations Total income incl. allocations Expenses incl. allocations value interest fee gains/losses costs losses expenses operating method and Capital commission income % ratio, etc. income on % items income at

Board of Directors’ Report Banking ,2 984 1,123 1,785 08 2007 2008 38 –300 –318 61 –632 –621 –948 06 29.3 59.8 30.6 59.0 4 604 540 2 114 121 7 –26 –76 761 837 . 2.0 2.2 3 55 53 5 24 25 9 –8 –9 Sweden 0 0 15 1 1,717 –940 751 777 39 Nordea Annual Report 2008 40 Nordea Annual Report 2008 Economic Deposits Lending Other information, EURbn RAROCAR, Cost/income Operating profit Loan Profit before loan losses Expenses incl. allocations Depreciations Other Staff Equity Net Net Net EURm Institutional & International Banking, operating profit by area sions. during The Result 2008 Institutional & International Banking Board of Directors’ Report Total income incl. allocations Other in 5,130 The ­Markets increase EUR ­capital losses lending 2008. Higher gains/losses fee interest business number costs losses 477m by expenses operating Total increased method and markets 2008 margins the were and capital business commission income in % income ratio, end and of etc. the activity 2008, higher income full-time on products. following of resulting strong fuelled % items 2008, up reached volumes investments within noe 8 27 9 4 6 6 2 7 5 16 3 5 5 1 10 15 54 51 136 146 57 75 7 22 16 16 34 39 257 287 income 21%. at growth equivalents net a fair Total higher growth high The EUR interest IIB in au 21 7 1 5 3 1 – 5 2 11 3 3 1 4 1 4 13 33 138 181 26 53 –1 6 21 33 5 13 178 271 value combination expenses was customer main remained 1,217m, number in of recorded income. New approx. (FTEs) 1,217 12 13 2 –1 3 –3 5 –6 18 7 –1 3 –1 3 – –3 –2 –37 –41 –31 –31 –72 –118 –26 –52 –477 –23 –34 –21 –28 –143 –192 25 23 2 –4 4 –8 2 –2 9 –7 13 13 1 –3 1 –20 –17 –13 –10 –143 –153 –67 –95 –12 –24 –28 –40 –24 –28 –243 –275 08 07 08 07 08 07 08 07 08 07 08 07 08 07 08 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 15 –2 1 1 1 1 1 4 – –4 –0 –5 4 –45 2 –10 0 –14 –1 –46 1 –18 –1 –1 –1 –32 5 –115 drivers 57 09 . 14 . 17 . 06 . 37 45 03 . 67 . 0.1 0.1 1.8 6.7 1.9 6.4 11.1 20.3 13.8 14.5 1.9 3.7 2.0 4.7 9.8 0.6 15.3 0.9 1.6 1.7 3.8 2.0 2.7 1.4 3.8 1.8 5.5 30.9 7.7 25.7 24.6 33.1 625 740 1 – – – – – – – – – 0 – 0 –1 0 0 –1 0 0 –7 –9 –1 –1 –4 –5 –1 –2 –8 –10 5 44 0 6 9 5 19 6 3 18 3 5 2 10 6 21 26 170 221 65 73 168 336 56 149 52 94 68 100 424 656 1 1 0 0 0 0 0 0 1 1 –12 0 0 0 0 0 0 0 0 0 0 0 0 1 –12 . 10 . 03 . 01 . 01 . 04 . 02 . 04 . 0.0 0.1 0.4 0.4 0.2 0.2 0.4 0.7 0.1 0.2 0.1 0.1 0.3 0.3 1.0 1.3 2 8 1 3 2 4 0 38 50 64 62 23 31 21 17 51 45 57 47 62 43 61 55 43 38 38 45 42 39 5 1 3 1 6 9 1 – 4 –1 0 1 0 9 4 6 1 1 4 3 0 1 8 15 oa cutis oad usa akt Institutions Markets Russia Poland countries Total amounted up demand European of at atc Baltic –394 was 479 474 868 employees. a with Net 40%. 940 behind in high all approx. FTEs gains/ –58 153 increased 62 95 for divi- level to the

–46 106 59 60 –80 146 66 66 up Profit related loan was sions the Oil points European improved income third

–56 RAROCAR 35 36 92 56%. Services loan for losses quarter of before refer 101 –77 178 to ratio IIB EUR 83 Operating loss the Markets operating oa Ol Services Oil New Total uoen iaca & Financial European of 47 to & –39 ratio loan improved 26m in Baltic EUR 25 24 63 basis collective International strengthened the –222 losses was in 202 248 470 115m. 47 profit unit points countries, the efficiency. basis

106 –146 to 108 109 255 IIB amounted unit provisions Of increased 39% of basis points. Other. –184 9 net to IIB total 210 225 409 basis including reflecting 42% points, loan Other. hpig Shipping, –174 lending, 165 165 339 In to points by reported in losses, the EUR 2008 ainl Other national 30%, The of 244 254 –52 306 collective high Baltic which and Inter- for 740m loan and including EUR in 189 187 –50 237 income Shipping, for countries, the the loss 48 in 58m New provi- –32 –18 first 2008, basis cost/ 14 32 ratio and was net and

–24 17 13 37 and Loan Disposals Operating profit Other customer operations, operating profit ings. depreciation, cant result included Banking The Other customer operations tional In Result 2008 International Private Banking & Funds within ­Private areas. Total operating expenses Depreciations Other Staff Net Net Net EURm Equity Total operating income Other line gains/losses fee interest

2008 customer costs reduction losses 2008 expenses income that Private Other method with and Life Banking or of profit under income has commission income tangible Institutional & the customer leading Pensions. Banking operations,

not in ended 2008 on Other &

clients’

ended items been Funds and general to

income at customer operations and intangible

at allocated reduction

EUR & transactions at fair as which International Funds EUR market well value 29m, 116m, operations, assets are as to was include in down customer any development, not both

and exposed down of included Banking, 71%

AuM negative International the as 37% operations from customer well to and a from in are Interna-

market signifi- 2007. as earn- Nordic 2007 44 44 5 –5 17 13 36 –276 –306 –103 –117 –55 –51 –434 –474 –493 08 07 08 07 08 07 08 2007 2008 2007 2008 2007 2008 2007 2008 –70 1 –1 2 –3 8 –4 0 86 103 –74 –83 –23 –29 –11 –10 0 16 6 1 8 8 –6 –18 –46 81 81 113 66 176 101 5 40 1 11 8 6 112 64 283 191 15 0 410 255 426

3 – 0 0 0 0 0 0 0 –3 0 –3 9 1 – – – – 0 0 0 –4 –5 –5 –4 –10 –9 0 5 9 4 0 1 21 11 0 0 44 49 65 60 Total 1 1 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 9 1 9 3 1 0 –3 9 11 0 9 9

product ing. to result ended EUR In Result 2008 Life customer operations The Other & Life –456 206 660 Pensions Nordic 2008 customer For customer 281m in at Life the result, Capital EUR Private Banking down International see presentation customer –84 116 & 29 operations operations 76m, Funds see page Markets Banking 22% page or down 101 –83 183 43. Institutional operations from 42. of Products, “Other” is 57% Capital 2007. included –204 from 281 Board of Directors’ Report 76 generated 2008 Life mainly & Markets which 2007. International in –181 179 360 operating the includes The is result an Products’ not result income –175 –204 allocated profit for 29 Bank- Other the for Life of –190 –74 116 41 Nordea Annual Report 2008 42 Nordea Annual Report 2008 Product result Loan Distribution Operating expenses Other Staff Total income Other Net Net Net EURm result an The Result 2008 Capital Markets Products Product groups Treasury’s firm liquidity sury years. the unprecedented During Business development Group Corporate Centre Board of Directors’ Report corporate was EUR Capital Markets Products, product result ­volumes points. EUR assuming transaction tomers portfolio eligible ish has increase At The In household third gains/losses fee interest executed product costs EUR risk losses has 38m. –218m line

expenses the of In and structural are the ECB

continued and been this management. worst management, represents

end 27m. with risk increased The commission income interest not of expenses end of assuming result collateral a extreme a

15% of management able EUR mortgage very its risk affected securitisation stock on volatility of December interest prudent compared items the

of strong to rate related 7.5bn strong high-quality market EUR market generate market year, income decreased within positions, in at a portfolio,

flexible as was customer income fair any 845m risk liquidity to

2008, financial products, the rates to development equities, transaction au 89 720 819 value environment, its closed way management a 2007. was financial solid liquidity the investment market mortgage by risk calculated

allowing by demand, management, very The 100 price markets

on record result (SIIR) this calculated 17 basis good crisis rates satisfactory of portfolio. risk transaction. October. in 1,333

part loans. Group focus. 14 –140 –276 –459 –154 –305 2007 2008

from transaction was especially for as 845 1 241 313 1 –26 –18 218 201 approach 1 –1 –11 experienced the points result by on turned 1 0 VaR, additional of EUR last as prudent 100 Group Nordea The its Trea- VaR, The is was with and 100 basis Finn- 55m into

a 1,180 for cus- The –416 and

737

Group Corporate Centre, operating profit ing Operating profit Total operating expenses Total income Other Equity Net Net Net EURm and affected 153m, Operating Result 2008 during Assets decrease Total Result 2008 Savings Products & Asset Management types. relatively had %-points were gin equity on funds tinued of compared quence 2007. lower The retail in of gains/losses fee interest by a driving income The income negative NCSD, 11 towards method up Finally, and market under imbalances product EUR 2008 of by funds staff basis in from 14% decrease higher the commission to profit income solid income led 85m 2007. was the costs. Management mainly decrease the points compared returns year are impact sales on result to performance in margin decrease in EUR general items a relatively Reduction in in Group was end gains decrease of compared reported sales product income was reduced on institutional in 626m, at a 2007. product to income income fair consequence from low in EUR Corporate mix, and last higher. income value in down A in result investment in as the the

year. 194m, ie reduction transaction a to 2008 the Other as compared decrease margin, a 2007. sale equity shift products, costs 27% Secondly, was funding margin. The cost Centre down of of income. Three in from a strong were the the base asset as of activity direct in sales income –140 2007 2008 to equities this 52% was 153 293 107 160 Firstly, operations income decrease Group’s 4 –9 –4 7 24 87 0 156 50 as 2007. negative elements other was 5 0 down class result from margins asset conse- EUR from level a margin. The con- asset by result are mar 3% retail hold- class is in –149 14 134 283 a - Number Economic Cost/income Income Margins of Product result Net Net Net EURm buffers losses moil Financial Life & Pensions Estimated Operating expenses Other Staff Total income Other Equity financial 3% fees tively take Denmark ducted, ognised from the 2007. from Life method buffers gross cial Asset Management activities Product result and key figures EUR which The The of accrued gains/losses fee interest buffers. business can costs fees. on 227m the 2007. The expenses income written the with and method and margins product market were have of due the income by be from first buffers capital distribution All technical buffers result and employees commission utilisation income The was available which approx. financial fee However, ratio, to improved. EUR in three was premiums, the Finland, consistent (%) constraints within reduced on income very all, result was were were % Finnish EUR Nordea items 673m quarters provisions. these EUR (full–time expenses negatively strong. for markets, of Nordic income was down as in 2,624m implying in at part MCEV at income 100m. factors a the 2008 embedded business. fair the measures EUR from the result of Banking by of 2008 value in Danish qiaet) ,8 1,040 1,083 equivalents) end resulting negatively 2008 Compared year the The Nordic is EUR 177m, impacted the recognition affected of

a a new of temporarily buffers. result This a low and reversed end value value 1,558m. 2008 record business akn –3 –147 –137 Banking down business in financial no 2008, has the of affected by corresponding mark-to-market to creation (MCEV), Thus, fee losses high once been result 35% 2007, a and down reversal of income 08 2007 2008 10 –138 –295 –167 –140 –156 .6 0.67 0.56 inability 4 143 244 7 586 472 194 7 782 572 626 value 9 53 69 4 51 54 EUR buffers level financial accrued from financial con- 7 0 15 0 0 0 by of the nega- in 18% the finan- tur its of 67m rec- of –305 of 403 855 - to in to Total Holding Poland Sweden Norway Finland Denmark Number Economic Technical Investment Total investment assets Investment Total operating expenses Premiums Key figures of Total product result Estimated Total profit Unit–linked Total Profit Traditional Traditional Profit drivers EURm Life insurance activities Product result and key figures 1) EURm 31 MCEV composition of Nordea Life & Pensions

Includes New Traditional business Alternative of Unit-linked Property Equities Bonds of of Return Contribution Contribution Fee which Dec which which which contribution/profit 2008

of income on provisions capital distribution written, financial from from employees insurance: return assets: shareholders’ investments from from Unit-linked Traditional within % net buffers risk cost (full of expenses Nordic reinsurance result result rdtoa Linked Traditional sharing equity/other time business uies business business business Banking 1,847 qiaet) ,5 1,252 1,353 equivalents) in 443 426 931 13 34 Nordic Board of Directors’ Report – Unit rft 8 29 83 profits akn –2 –17 –12 Banking 5 171 777 208 158 648 174 1,040 222 109 1 558 115 821 32,118 28,281 32,261 15,799 18,322 ,8 1,572 1,683 ,7 7,349 3,178 6,977 2,788 2,998 4,772 2,513 1,451 2,208 3,780 2,539 4,222 1) –197 08 2007 2008 – – 16 3.6 –1.6 8 1,136 2,231 889 673 177 130 Total 8 124 98 59 3 30 43 1 –3 –1 173 5 33,885 2,624 –175 274 229 62 43 Nordea Annual Report 2008 44 Nordea Annual Report 2008 capital structure. tions for different risk types and for the works, including policies and instruc- ­liquidity and capital management frame- ­Nordea’s business strategies. organisation is a key component of loans and receivables. significant being credit risk related to its ordinary business activities, the most and Nordea assumes a variety of risks in inherent in providing financial services, services industry. Exposure to risk is are key success factors in the financial Risk, liquidity and capital management Risk, Liquidity and Capital management Board of Directors’ Report Nordea has clearly defined risk, Maintaining risk awareness in the principles and control in Nordea. risk, liquidity and capital management as well as internal ity for developing and maintaining effective principles for The Chief Executive Officer (CEO) has overall responsibil- CEO and GEM Executive Credit Committee (ECC). Committee confirms industry policies approved by the industry and major customer exposures. The Board Credit the credit portfolio on the whole as well as with respect to The Board Credit Committee monitors the development of Board Credit Committee and liquidity risk in the Group. The Board of Directors also decides on the limits for market also vary depending on the internal rating of customers. within the customer areas in Nordea. Authorisations may on powers-to-act for credit committees at different levels least annually. ­adequacy assessment process. All policies are reviewed at operational risk management and the internal capital of Directors decides on policies for credit, market, liquidity, and policies approved by the Board of Directors. The Board measured and reported according to common principles setting the targets for the capital ratios. Risk in Nordea is The Board of Directors also has ultimate responsibility for ity for limiting and monitoring the Group’s risk exposure. The Board of Directors of Nordea has ultimate responsibil- Board of Directors Management principles and control In the credit instructions, the Board of Directors decides The • The • Capital • Risk, Liquidity and Capital Management responsibilities Risk, Liquidity and Capital Management governance structure The • for risk, liquidity and capital management: exposures and have established the following committees techniques such as stoploss rules. introduce more detailed limits and other risk mitigating units allocate the respective limits within the unit and may gies, which are reviewed at least annually. The heads of the The setting of limits is guided by Nordea's business strate- risk-taking units, such as Group Treasury and Markets. Directors, allocates the market and liquidity risk limits to with the scope of resolutions adopted by the Board of Structural Interest Income Risk (SIIR) and in accordance on the targets for the Group’s risk management regarding The CEO in Group Executive Management (GEM) decides Balance sheet management framework (Chairman: CFO) Committee, as industry limits for certain defined industries. its for customers or consolidated customer groups and Group. Credit risk limits are granted as individual lim- on major credit risk limits and industry policies for the Credit Committee (GCC), chaired by the CRO, decide gated level. (CRO), monitors developments of risks on an aggre- capital planning activities within the Group. requirements, the capital base, and decides also upon the development of internal and regulatory capital decision by the CEO in GEM. operations, financial risks and capital management for major importance concerning the Group’s financial the Chief Financial Officer (CFO), prepares issues of The CEO and GEM regularly review reports on risk Asset and Liquidity management framework Chief Financial Officer (CFO) Chief Executive Officer (CEO)/Group Executive Management (GEM) Capital management framework Liability ALCO Group Corporate Centre Asset Executive Risk (Head: CFO) Planning Committee, and (Chairman: CFO) Liability Credit Planning Nordea – Board of Directors Capital Forum Forum, Board Credit Committee Committee chaired Committee chaired (Chairman: CRO) by Committee Group Credit and Risk Control Risk management framework Chief Risk Officer (CRO) the Risk (ECC) by Monitoring and reporting (ALCO), Chief the (Head: CRO) and CFO, Risk (Chairman: CRO) Executive and ECC ECC and GCC Group Group Credit Committees, chaired monitors Officer by accordance with the annual audit plan. of the processes regarding risk and capital management in and Board of Directors. Capital and default and stress testing are included. analyses such as credit migration, current probability of entity. Within the credit risk reporting, different portfolio ing covering market, credit and liquidity risk per legal Directors in each legal entity reviews internal risk report- Management and to the Board of Directors. The Board of terly basis for operational risk. a monthly and quarterly basis for credit risk and on a quar conducted on a daily basis for market and liquidity risk, on organisational units. Monitoring and reporting of risk is ples of separation of duties and strict independence of The control environment in Nordea is based on the princi- Monitoring and reporting sub levels. dates and monitors the risks on Group level and relevant reporting, while Group Credit and Risk Control consoli- tions. This responsibility entails identification, control and responsible for managing the risks arising from its opera- management. risk-weighted amounts and for liquidity and balance sheet tal and parameter estimation used for the calculation of which includes capital adequacy reporting, economic capi- and control processes. guidelines to the credit instructions and the credit decision as well as credit policy and strategy, credit instructions, dation and monitoring of the rating and scoring systems, and operational risk. This includes the development, vali- the CFO is head of Group Corporate Centre. responsible for SIIR and liquidity risk. base. Group Treasury, within Group Corporate Centre, is framework including required capital as well as the capital rate Centre is responsible for the capital management tions and guidelines for the whole Group. Group Corpo- management framework, consisting of policies, instruc- capital, liquidity and balance sheet management. trol and Group Corporate Centre, are responsible for risk, Within the Group, two units, Group Credit and Risk Con- CRO and CFO issue supplementary guidelines and limits. The CRO has the authority, when deemed necessary, to Group Internal Audit makes an independent evaluation The internal capital reporting includes all types of risks Risk reporting is regularly made to Group Executive Each customer area and product area is primarily The CFO is responsible for the capital planning process, The CRO is responsible for the Group’s credit, market The CRO is head of Group Credit and Risk Control and Group Credit and Risk Control is responsible for the risk is reported Planning regularly Forum, Group to the Risk Board of Directors’ Report Executive Committee, Management ALCO, - 45 Nordea Annual Report 2008 46 Nordea Annual Report 2008 Credit decision-making structure on the counterpart. rity of the contract and that Nordea at that time has a claim equity or credit derivatives contract defaults prior to matu- risk that a counterpart in an FX, interest, commodity, transfer risk and settlement risk. Counterparty risk is the Nordea has issued guarantees or documentary credits. its arises from the potential claims on customers, for which ters of credit. also from guarantees and documentary credits, such as let- to the public (corporates and household customers), but lateral does not cover the claims. to fulfil their agreed obligations and that the pledged col- Credit risk is defined as the risk of loss if counterparts fail Credit risk definition and identification fication of credit risk. score in accordance with the Nordea framework for quanti- tomer responsible unit. Customers are assigned a rating or ure of the Credit decision process). authorities on different levels in the organisation (see fig- tors, credit risk limits are approved by decision-making monitors the credit risks on both Group and sub levels. while Group Credit and Risk Control consolidates and responsible for managing the credit risks in its operations, instructions and guidelines for the Group. risk management framework, consisting of policies, Group Credit and Risk Control is responsible for the credit Credit Risk management Risk management Board of Directors’ Report Nordic Banking Decision-making Decision-making Board Board of Directors Country Credit Credit risk may also include counterparty credit risk, The credit risk from guarantees and documentary cred - Credit risk stems mainly from various forms of lending The responsibility for a credit exposure lies with a cus- Within the powers-to act granted by the Board of Direc- Each customer area and product area is primarily Committees Authorities Authorities Branches Regions Nordea Bank Denmark Nordea – Board of Credit Directors/Board Committee Policy matters / Instructions / Monitoring Trade and Committee Finance Project Credit Executive Credit Committee Group Credit Committee Board Board of Directors Nordea Bank Reporting Finland Institutions Committee Financial Credit

Committee Shipping, Services national Inter­ Credit Oil & Board Board of Directors Nordea Bank Reporting Norway European Committee Markets Credit New

the quality of the credit exposures. credit impairments, Nordea works continuously to review Throughout the process of identifying and mitigating Individual and collective assessment of impairment is set up to support the customer responsible unit. minimise a potential credit loss. If necessary, a special team monitoring, an action plan is established outlining how to in terms of review of the risk. In addition to the continuous tomer exposure, that exposure is assigned special attention automatically regarded as defaulted. Exposures that have been past due more than 90 days are remedied, then the exposure is regarded as defaulted. interest or fees, and the situation cannot be satisfactorily to repay its debt obligations, for example the principal, ity is threatened. the credit is impaired or if the repayment customer’s abil- uate and, if necessary, reassess the rating to reflect whether financial position, the customer responsible unit must eval- scoring migration and macroeconomic circumstances. internal systems, such as late payments data, behavioural ing of credit risk is based on all available information from understanding each customer's financial position, monitor customers’ performance. deviations from agreed conditions and weaknesses in the tomers’ ability to fulfil their obligations and identifying responsible unit, which on an ongoing basis assesses cus- figure). sion authorities on different levels within the Group (see and customer groups are made by the relevant credit deci- The decisions regarding credit risk limits for customers Decisions and monitoring of credit risk World Bank and International Finance Corporation (IFC). Principles and environmental risk in project financing. The Equator benchmark for determining, assessing and managing social adopted include assessment of social and political risk. ment Tool (ERAT). This tool is being extended to also ment through the so-called Environmental Risk Assess- risks are also taken into account in the overall risk assess- industry exposure. Corporate customers’ environmental cies, which establish requirements and limits on the overall monitoring groups and managed through industry poli- nomic and political situation of the countries concerned. rower is domiciled, and is affected by changes in the eco- the transfer of money from another country where a bor tlement process. Transfer risk is a credit risk attributable to cial contract, due to a counterpart's default during the set- Settlement risk is the risk of losing the principal on a finan- If credit weaknesses are identified in relation to a cus- If it is considered unlikely that the customer will be able If new information indicates a change in the customer's In addition to building strong customer relationships and The responsibility for credit risk lies with the customer For larger project finance transactions, Nordea has Risks in specific industries are followed by industry

the

are

Equator

based

on

Principles,

the

policies

which

and

is

guidelines

a

financial

of

industry

the - - tification of the repayment capacity of the customer, ie the holds and small business customers. 1) the • ment and decision-making process, including: risk. They are used as integrated parts of the risk manage- ity to classify and rank customers according to their default The common element of both rating and scoring is the abil - Rating and scoring rate and bank segments the IRB Foundation approach. household and small business customers and for the corpo- nal rating based (IRB) approach for the retail segment, ie for external supervisory requirements. quantification of credit risk is now being aligned with under the Capital Requirements Directive, the internal (EAD). Following the rollout of risk classification methods as there are models used to assess such prudential indicators for the rating and scoring models, which lay the foundation The primary quantitative tools for assessing credit risk are Measurement methods tification of impairment losses for an individual customer. group of loans represent an interim step pending the iden- balance sheet day. Impairment losses recognised for a incurred losses are accounted for up to and including each individual and collective assessment is to ensure that all been found to be impaired on individual level. ing is performed for groups of customers that have not vidually significant customers, collective impairment test- when determining default probability. performing. Impaired exposures are treated as in default future cash flow and the value of pledged collateral. estimated loss considering the discounted value of the lateral included. The size of the provision is equal to the impacted to the extent that full repayment is unlikely, col- observable data that the future customer’s cash flow is if there is objective evidence based on loss events or debt service capacity and the possible need for provisions. in terms of current performance, business outlook, future ously monitored and reviewed at least on a quarterly basis Weak and impaired exposures are closely and continu- calculation • calculation • monitoring • counterparts and sovereigns While ratings are assigned to corporate customers, bank performance •

Sovereigns include central governments, central banks, regional governments, local authorities and other public sector entities. Loss A rating is an estimate that exclusively reflects the quan- For Regulatory Capital purposes Nordea uses the inter The rationale for this two-step procedure with both In addition to individual impairment testing of all indi- Impaired exposures can be either performing or non- An exposure is impaired, and a provision is recognised, Amount) framework the credit Probability Given approval Default of of and measurement Economic Regulatory of reporting Default (LGD) process Capital 1) Capital of and (PD) , scoring is used for house- using credit Exposure estimation. and (Risk the risk Expected Economic Weighted at Default In addition, Loss Profit - are then grouped into pools. customer. Exposures having the same risk characteristics measures the expected realised loss given the default of a nents the collateral type, the counterpart's balance sheet compo - Loss Loss Given Default credit process. also utilises commercial credit bureau information in the supplement to the behavioural scoring models, Nordea ers and portfolio risk levels can be closely monitored. As a where ”early warnings” can be issued for high risk custom- sion support, as well as the risk management process, credit approval process, eg automatic approvals or deci- ing models developed on internal data to support both the rate customers. Nordea utilises bespoke behavioural scor used in the household segment as well as for small corpo - dict the probability of customer default. The models are qualitative factors. which financial and quantitative factors are combined with all rating models are based on an overall framework, in internal data to expert-based models. In general however, methods range from purely statistical models based on model the development methodology may vary. These unique characteristics of these segments. Moreover, in each and real estate management, taking into account the been developed for specific segments, such as shipping majority of industries, a number of specific models have Aside has decided upon a differentiation of rating models. ­industries with highly distinctive characteristics, Nordea basis of their characteristics. mance from the default history of past customers on the possible to derive a prediction of future customer perfor capacity. Rating models are based on the principle that it is rating that ranks the customer based on its repayment which, given a set of customer characteristics, produces a rating models. and transparency of the ratings are ensured by the use of tion in the customer's repayment capacity. The consistency graded as soon as new information indicates a deteriora- by the credit committees. However, a customer is down- als and the annual review of the customers, and approved tion. considered as weak or critical, and require special atten- year ment capacity of each rating grade is quantified by a one- grades from 0+ to 0- for defaulted customers. The repay- grades from 6+ to 1- for non-defaulted customers and 3 risk of customer default. The rating scale consists of 18 such ­investment grade as defined by external rating agencies Scoring models are pure statistical methods used to pre- In order to better reflect the risk of customers in A rating model is a set of specified and distinct criteria Ratings are assigned in conjunction with credit propos- Rating grade 4– and higher are comparable to PD. given as and from a general corporate model used to rate the Moody’s the default presence and (LGD) S&P. of any is Rating measured structural Board of Directors’ Report grade taking 2+ support. and into lower LGD account are - - 47 Nordea Annual Report 2008 48 Nordea Annual Report 2008 quacy at least annually as part of Nordea’s Internal Capital Ade- tion, comprehensive credit risk stress testing is performed such as concentration risk. the portfolio model is used to assess portfolio imbalances using the output from a credit portfolio model. In addition, tions capital factors, which are differentiated based on combina- Capital nomic Risk-Weighted The Quantification of credit risk accuracy, ie the ability to predict the level of defaults. guish default risk on a relative basis, as well as cardinal discriminatory power, ie the ability of the model to distin- els composes for example statistical tests of the models' quantitative as well as a qualitative validation. The validation is performed annually and includes both a ensure Nordea’s models, procedures and systems as well as to the purpose of ensuring and improving the performance of accordance with the Capital Requirements Directive with Nordea has established an internal validation process in Validation of products are then grouped into pools. data and is a statistical model. Exposures of the same kind requirements. The CCF is estimated based on historical Credit Conversion Factor (CCF) as defined by regulatory the unutilised amount of an exposure multiplied with a ilar the utilised exposure. The setup for EAD estimation is sim- lines and derivative contracts, the EAD can be higher than the utilised exposure, but for some products, such as credit year prior to default. EAD is for many products equal to an exposure that will be drawn within the period of one Exposure at default (EAD) is an estimate of how much of Exposure at Default ulatory requirements. Loss approach in the calculation of the Regulatory Capital. The banks segments, Nordea uses the IRB Foundation and small corporate customers. For the corporate and estimates historical data. for The Board of Directors’ Report database is used. perform various portfolio analyses, a Group-wide credit the estimation of the credit risk parameters as well as to As a complement to the ordinary credit risk quantifica - Nordea calculates Economic Capital for credit risk with The quantitative validation of rating and scoring mod- EAD is measured as the sum of the utilised amount and For Regulatory Capital purposes Nordea uses internal Loss to parameters LGD Given of that Assessment Capital the are PD Given model of for accuracy also and Default LGD LGD. for Default Amount LGD. used PD, used for credit Process for of LGD the in The is the and an the based risk. (RWA), retail and exposure capital PD, (ICAAP). calculation is Expected a CCF on segment, LGD statistical Expected factors an are is and overall In then used of Loss order ie CCF are model Economic Loss for defined framework and to estimated estimates. to households quantify and facilitate based Economic by Eco- Profit. reg- on 7% ables, if not stated otherwise. ures (Pillar sented in the Group's Capital adequacy and risk report as a more detailed analysis of Nordea's credit risk is pre- rities financing. Further information on exposure, as well includes the risk related to derivatives contracts and secu- ers and counterparts, net after allowances. Exposure also the public or off-balance-sheet potential claims on custom- claims, ie loans and receivables to credit institutions and principle amount (at amortised cost) of on-balance-sheet Credit risk exposure is measured and presented as the Credit risk analysis to 445bn). credit risk exposure at year end was EUR 488bn (EUR related Including off-balance sheet exposures and exposures increase in EUR has been reduced with almost 10 %-points. changes in Swedish and Norwegian exchange rates, the EUR of real estate industry (EUR 13.5bn) is to companies in Swe - rating grades (3+ or lower). Nearly 40% of lending to the erage, especially for exposures which are assigned lower grades 4– and higher. There is a high level of collateral cov- strong companies, with 74% (74%) of the lending in rating dominantly is comprised of relatively large and financially portfolio, at EUR 35.5bn (EUR 36.8bn). The portfolio pre- Real estate remains the largest sector in Nordea’s lending Loans and receivables to corporate customers lower. higher, which indicates a probability of default of 1% or is rated 5- or higher has remained steady at 95% (95%). grades. The portion of Nordea's institutional exposure that distribution that is skewed towards the higher rating tutions and retail customers on the other hand exhibit a higher, with an average rating for this portfolio of 4+. Insti- retail exposures. for scored household and small business customers, ie corporate customers and institutions, as well as risk grades analysis of the distribution across rating grades, for rated One way in which credit quality can be assessed is through Rating distribution steady tions, mainly in the form of inter-bank deposits, remained tomers corporate customers was 57% (54%) and to household cus- 109bn (EUR 107bn). The portion of total lending going to ing to household customers increased only slightly to EUR the 2008 Nordea's total loans and receivables have increased by The largest credit risk exposure is loans and receivables Loans About 86% of the retail exposures are scored C– or 73% (74%) of the corporate exposure is rated 4– or to seen 265bn EUR public 3) at 41% to was for and EUR in securities 289bn (EUR EUR (44%). the 2008, (lending), receivables 24bn following 152bn 245bn). during available Loans and at the which (EUR Life 2008 to and end section at corporate insurance 133bn), receivables www.nordea.com. in (EUR of 2008 2008 are 269bn). for up increased (EUR customers operations, Loans 14%, to 24bn). Due credit while and by to at All institu- 8% the the the Receiv- lend- fig- to total end tial real estate. den and close to half is to companies with mainly residen- of small, lending in the region has increased 54%. At the end outside the Nordic countries. Other EU countries represent the main part of the lending shows that the Nordic market accounts for 87% (89%). Lending Geographical distribution 80%. including to SMEs, 91% had a loan-to-value ratio below 77% (77%), of which the Nordic market accounts for 98%. portion of mortgage loans out of total household loans was only In Loans and receivables to household customers size of large credit exposures. tion of loans remains the primary tool for managing the swaps has been done to a limited extent, normal syndica- strong. cially weaker customers than for those which are financially objects. Collateral coverage is higher for exposures to finan- types are real estate mortgages, floating charges and leasing of collateral. In corporate exposures, the main collateral has been relatively stable in recent years. a scale of up to EUR 50m per customer. This distribution where approx. 61% of the corporate volume is for loans on by size of loans shows a high degree of diversification tribution between Nordic and non-Nordic customers. ing Nordea's global customer strategy, there is an even dis- strong credit quality, with an average rating of 4+. Reflect- and financially most robust industrial players and exhibits folio is diversified by type of vessel, has a focus on large gest increase in the offshore and oil service sector. The port- increased of the exposure rated 4- or higher. folio quality is high with an average rating of 4+, and 68% in to EUR 365m (EUR 115m). To recognise the risk related to tomers. Exposure related to India has increased markedly countries' importance for Nordea’s Nordic corporate cus- ­contributing the highest to transfer risk, reflecting the (EUR and is primarily short-term and trade-related. China The transfer risk exposure is dominated by a few countries Transfer risk and in Russia EUR 3.6bn (EUR 1.6bn). EUR the 2008, 2008, Lending Though the exposure to New European Markets is Of the mortgage lending to household customers, While credit risk mitigation by the use of credit default The main credit risk mitigation technique is the pledging The distribution of loans and receivables to corporates The loans and receivables to shipping and offshore slightly 8.3bn 515m) and Brazil (EUR 509m) are the countries Nordic lending mortgage to 24% (EUR the to to region construction to public EUR to 6.0bn), EUR loans customers is 84bn distributed 11.3bn EUR and in and Poland and 3.0bn consumer (EUR in EUR civil the by (EUR EUR 9.1bn), 25bn Baltic engineering borrower loans 3.4bn 2.9bn). respectively. countries with increased (EUR domicile The the industry stron- port­ 2.4bn), was The Counterparty risk exposure Guarantees and documentary credits agreements pledged as collateral in repurchase Treasury bills and interest-bearing securities Treasury – To credit institutions and settlement risk exposure) (excluding cash and balances at central banks 3,157m,EUR 2007 5,020m, EUR and total exposure Credit risk exposure, loans and receivables 3) 2) 1) banking operations Total credit risk exposure in the Other credit commitments, etc. – To the public – the Guarantees and documentary credits in Lending the life insurance operations Interest-bearing securities in EURm life insurance operations Total credit risk exposure including

–

– facilities Unutilised portion of appr. overdraft Total loans and receivables

as well as potential future exposure. After closeout netting and collateral agreements, including current market value exposure credit commitments approx. 85% and Of which for corporate customers: unutilised portion of approvedThe figures foroverdraft 2007 are notfacilities fully comparable, due toand changes inother industry categorisation. of of of Energy Metals Paper Industrial Other materials (building materials etc) Shipping Construction Industrial Retail Media and leisure Consumer Transportation Health Consumer Financial Telecommunication IT software, hardware and services Real estate Telecommunication of Other Utilities – – of life mortgage consumer which which which which which insurance 2) trade and in bills and care

(oil, (distribution the banks corporate other household public and institutions capital commercial forest durables staples mining and and gas financing financing life and offshore credit operations etc) interest-bearing sector pharmaceuticals insurance materials goods civil (food, materials (cars, equipment operators institutions and services niern 361 3,243 3,671 engineering agriculture 3) rdcin 402 3,310 4,022 production) ­guarantees and documentary credits approx. 95%. appliances

prtos 120 operations

2)

t 1,8 15,403 15,482 etc euiis 140 25,894 31,430 securities

Board of Directors’ Report 2)

629 24,202 26,249 t) 293 11,267 12,943 etc) t) ,5 2,807 2,752 etc) 31 receivables Loans Dec 265,100 467,901 488,004 0,0 107,067 108,602 289,003 5,1 133,321 151,711 23,903 621 38,170 36,271 787 21,225 27,887 49,145 258 23,741 22,548 19,945 641 12,239 16,481 35,500 042 7,855 10,462 394 82,893 83,974 468 24,174 24,628 126 7,581 11,296 100 10,190 11,020 7,916 ,5 522 1,355 ,1 1,448 2,815 ,5 792 1,750 ,8 1,928 5,377 2,287 ,6 3,189 3,264 3,171 4,017 ,0 1,772 1,606 1,489 ,8 1,062 1,686 ,8 4,294 4,787 2008 31 n Loans and 2 641 623 8 52 38

receivables Dec 244,682 426,560 444,693 268,944 24,262 43,437 18,081 36,766 2007 4,688 3,568 3,104 3,845 1,309 and 1) 0 49 Nordea Annual Report 2008 50 Nordea Annual Report 2008 31 (scored customers), distributed by scoring grades, Exposure to household and SME customers Total Other Russia Poland Baltic Sweden Norway Finland Denmark EURbn by country Real estate industry, loans and receivables, Nordea More and the transaction is eliminated in the Nordea Group. by Nordea. Consequently there has been no transfer of risk dea Ltd the portfolio except for in connection to the establishment of Nordea has not securitised assets from its ordinary lending Securitisation end rated countries. risk allowance and provisions for non-investment grade lending to developing countries, Nordea carries transfer Board of Directors’ Report 10 15 20 25 0 5 The total transfer risk allowance and provisions at the Dec 2008

Special

% (Kirkas) Group of A+ countries information

200

2008 A

can

8 A– and Purpose was

be

in B+

found 2008. B the

EUR B– on bonds Entity

This

C+ Kirkas 58m, in C note

SPE issued C– 31 Dec (SPE) increased

08 % 2008 and

22. 35.5 13.5 D+

. 3 1.2 0.5 1 0.4 0.2 22 7.7 20 7.1 14 4.8 is D consolidated Kirkas by other

100 D– 38 the

1 1 from E+ SPEs

SPE Northern E

2007 E– are established

into Rating grade F+

(EUR held

31 Dec F Lights the

2007

36.8 14.9 F– 0.5 0.1 3 1.0 . 0 0.1 24 8.6 19 7.0 12 4.6 in 42m). Nor % full by 100 41 - 1 0 Total Other Russia Poland Baltic Sweden Norway Finland Denmark EURbn receivables, by country Construction and civil engineering industry, loans and exposures gross, EUR 603m. The ratio of allowances to cover impaired loans, individually EUR customers EUR 1,586m and for household customers countries, Russia, Norway and Denmark. impaired loans by borrower domicile were in the Baltic engineering and Retail trade. The main increases in Real estate, Consumer durables, Construction and civil balance items have increased to EUR 100m (EUR 54m). especially and worsened economic conditions for many customers, Impaired Impaired loans EUR Probability of Default (PD) Rating and Scoring, 2008 Past The main increases in impaired loans were in the sectors 30 10 15 20 25

0 5 1,432m, 1,323m countries

was %

6+ due Rating /A

+ loans,

6/ during

were 34% A loans

6–/ in

assessed

during A–

2008.

(42%).

5+/ EUR gross, Scoring

B+ the that

5/ B

2008

408m 5–/ fourth

loans

Allowances

are have

B– 4+/C+

as not

31 Dec 4/ (EUR

increased increased

C quarter

result 08 % 2008

4–/C– impaired

. 11 0.4 3.7 0.1 1 0.1 0.0 0.7 0.5 20 0.7 29 1.1 3+/ 354m).

D+ for

of 100

3/ 19 13

of D 4 4 the

collectively to to

3–/ 2008.

were

D–

EUR Provisions EUR

current

2+

/E

+

2/ Allowances

E

for

2,224m 762m 2–/

downturn E– corporate Rating grade

31 Dec

1+ assessed

2007

/F

for from

+ 6 0.2 3.2 0.0 3 0.1 0.1 0.5 0.6 21 0.7 35 1.1

1/

from F

off- % 1–/

for 100 F– 15 17 0 3 distributed by rating grades, 31 Dec 2008 and 2007 Exposure to corporate customers (rated customers), EURbn (Retail portfolio) Mortgage exposure on households and SMEs Loan-tovalue distribution Total Russia Poland Baltic Sweden Norway Finland Denmark EURbn by country Mortgage loans to household customers, and customers, which EUR 330m (positive EUR 88m) relates to corporate provisions, were EUR 466m (positive with EUR 60m), of The net loan losses in the income statement, including new Loan losses scheme of EUR 44m. losses also include losses related to the Danish guarantee and recoveries, primarily in the fourth quarter. Net loan and individually assessed loans as well as lower reversals losses follows increased provisions both for collectively Total >90% 80–90% 70–80% 50–70% <50% 10 15 20 0 5 % 6+ EUR countries 200

6 8 32m 6– EUR 5+ 200 to 5 103m credit 7 5– 4+ (EUR institutions. 4 4– 28m) 3+ 31 Dec 08 20 % 2007 % 2008 07 5 20 27 21 84.0 22.0 24 17.5 25 19.7 25 20.7 18 20.7 25 15.2 27 21.3 22.4 3 . 2 . 1 3 0.8 2.1 2 0.1 3 1.6 2.7 to 31 3– This household Dec 2+ 100 growth 2 2008 0 87.3 23.1 26.0 29.5 3.9 4.8 2–

Rating grade 1+ 31 Dec customers in 1 82.9 0.1 net 1– loan 100 100

27 30 34 % 4 5 0 Total Offshore Other Gas tankers Chemical tankers Crude tankers Product Bulk carriers Total EUR 500m– EUR EUR EUR EUR EUR EURbn by size of loan Loans and receivables to corporate customers, 1) EURbn loans and receivables, by segment Shipping, offshore and oil services industry, visions for different groups. visions and a redistribution between some collective pro­ and corresponding decreases of some of collective pro­ were partly affected by increases in individual provisions as in household consumer financing. Retail trade and Construction and civil engineering as well The main net loan losses were in the corporate sectors

Shipping and offshore, and partly in other industries, such as Transportation. Lending to shipping and offshore in this table for 2007 is partly included in the industry 31 (rated customers), distributed by rating grades, Exposure to institutional customers Gross loan losses items, ie new provisions and reversals, 30 40 50 10 20 250–500m 100–250m 50–100m 10–50m 0–10m 0 Dec 2008 and 2007 shipping % 6+ tankers and 200 6 8 Oil 6– 5+ evcs . 32 3.6 services 200 5 7 5– 4+ 4 31 Dec 08 % 2008 4– 11.3 31 Dec . 18 2.1 0.7 1.0 1.1 11 1.3 1.6 151.7 08 20 % 2007 % 2008 3+ Board of Directors’ Report 08 4 41 11 10 14.1 26 13.9 42 34.4 14 55.9 12 20.8 23 18.2 38 35.2 57.3 12 82 6 8.2 7 11.2 9.0 100 3 15 6 9 9 3– 100 2+ 6

2 2– 31 Dec

133.3 Rating grade 1+ 31 Dec 2007 6.8

1 9.1 19 1.7 0.5 0.8 1.0 11 1.0 1.3 . 29 2.6 1) 1– % 100 100 14 11 6 9 5 51 Nordea Annual Report 2008 52 Nordea Annual Report 2008 EURm Restructured loans and receivables current year insurance operations Total credit risk exposure including life Lending operations Total credit risk exposure in the banking 31 Loans and receivables, impaired loans and allowances, by customer type Board of Directors’ Report – – – To the public – – To credit institutions restructuring, Loans restructuring, book value Loans of – – of Other Utilities Telecommunication Telecommunication IT Real Financial Health Consumer Retail Media Consumer Transportation Shipping Construction Industrial Industrial Other Paper Metals Energy of of which other credit institutions of Dec consumer mortgage which which which which software, and and 2008, estate trade materials and in and and care (oil, (distribution receivables receivables the public household corporate banks and institutions EURm commercial capital forest staples durables leisure mining and book gas hardware financing financing life and offshore etc) sector (building pharmaceuticals insurance materials value goods civil (food, materials before after (cars, operators equipment and and services engineering agriculture rdcin 404 ,2 2 .5 00 0 6 0.06 16 0 0.07 3 0.05 2 4,022 4,024 production) materials appliances operations services

etc t) ,5 523 7 .2 6 31 4 2 2.23 28 48 3.10 169 0.52 27 5,283 5,452 etc) 31 t) 304 297 0 .9 3 10 6 4 0.58 44 60 1.04 136 0.39 50 12,917 13,054 etc) t) ,9 266 01 18 .3 8 3 4.65 23 38 6.03 168 0.17 4 2,626 2,795 etc) Dec

loacs mard on ipie Gos and Gross impaired loans impaired allowances receivables 08 31 2008 Loans 22 11 290,293 290,173 0,4 1826 5 .8 7 05 18 7 0.39 27 158 0.53 579 0.08 85 108,266 108,845 0.67 36 582 1.05 1,608 0.21 320 151,005 152,613 266,247 before 486 449 3 .2 9 16 15 7 1.01 37 0.04 93 145 1.60 51 397 0.25 0.52 0.22 26 55 53 0.33 15 24,429 35 0.34 24,826 56 10,493 0.01 10,548 2 16,442 16,497 0.06 61 20 0.15 33 0.01 3 22,539 22,572 23,926 409 387 2 .4 8 02 1 7 0.20 7 13 0.22 0.37 182 37 0.04 32 76 0.58 83,837 206 84,019 0.34 0.43 119 54 35,489 77 35,695 0.92 143 0.07 11 15,427 15,570 131 122 00 5 05 5 0.48 9 5 0.52 59 0.01 1 11,242 11,301 115 088 4 .3 1 19 8 3 1.23 37 81 1.95 217 0.13 14 10,898 11,115 ,8 474 00 5 .0 3 0.07 32 2 0.10 5 0.00 0 4,784 4,789 ,8 168 02 2 .9 2 0.07 25 0 2.02 0.09 16 2 1.42 6 0.20 36 0.77 2.40 3 42 26 39 0.36 2.23 22 0.07 1,688 35 0.60 71 0.10 1,689 1.32 1 0.01 27 0.09 6 29 53 46 3 5 1,574 0.25 0.56 1 1,613 0 18 10 0.82 0.14 3,129 0.06 0.02 19 2 3,200 3,995 1 2 0.04 4,049 0.06 1 0.04 1 3,254 1 3,272 2,274 1,750 2,292 2,816 1,752 2,816 1,355 ,9 146 00 2 14 8 7 0.90 37 8 1.43 21 0.06 2.38 1 34 1,476 46 1,498 3.62 136 0.85 31 3,613 3,749 n – and 2 120 120 3 59 00 3 52 1 2 3.77 29 10 5.28 33 0.01 0 599 633

Dec 288,069 287,949 264,056 23,893 which 2007 1,355 124 not 63 f for of Allowances assessed 1) EURm Assets taken over for protection of claims Land Current assets, book value: Shares and other participations Other assets Total

olc Gos in Gross collec- recovery is reached. fulfill its obligations to Nordea. The assetstaken over are at the latest, disposed when full used as collateral for the loan, are generally taken over when the customer is not able to in compliance with the local Banking Business Acts, wherever Nordea is located. Assets, In accordance with Nordea’s policy for taking over assets for protection of claims, which is tively 408 408 405 and 0 3 buildings of not in % 0.14 0.14 0.15 0.00 0.01 2,224 2,224 2,191 33 0 of loans Individually impaired as % loans and receivables 0.77 0.77 0.82 0.00 0.14 e. ne gos and gross ances rec. Specific 31 allow- Dec 762 762 742 20 0 08 31 2008 impaired 14 18 0 4 1) loans % 34 34 34 61 f Net of 0 Dec of loans 2007 as % 0.50 0.50 0.54 0.00 0.05 rec. 0 1 3 4

31 Loans and receivables, impaired loans and allowances, by customer type – To the public – – To credit institutions insurance operations Total credit risk exposure including life Lending the banking operations Total credit risk exposure in – – Utilities (distribution and production) Telecommunication Telecommunication equipment IT software, hardware and services Real Financial Health Consumer Retail Media Consumer Transportation Shipping Construction Industrial Industrial Other Paper Metals Energy (oil, gas, etc.) of which corporate of of of which public sector Consumer Mortgage of which household Other Dec which which 2007, estate trade materials and in and and care the other banks and institutions financing EURm commercial capital forest staples durables financing leisure mining and life and offshore credit (building pharmaceuticals insurance materials goods civil (food, materials (cars, operators institutions services, engineering agriculture, materials, appliances, operations

etc. t, 367 ,1 1 05 19 .1 9 6 1.92 36 39 3.01 109 0.52 19 3,517 3,627 etc,) t. 1,5 1,5 3 02 10 .8 3 3 0.41 53 53 0.88 100 0.27 30 11,251 11,350 etc.) t. 285 ,8 6 .3 0 .1 1 2 1.02 52 31 2.11 60 0.23 6 2,785 2,845 etc.)

loacs mard on ipie Gos and Gross impaired loans impaired allowances receivables Loans 134,076 245,629 269,901 269,901 107,258 before 226 223 00 3 02 6 0 0.21 20 0.71 6 45 0.27 60 33 1.29 0.00 132 0 0.03 4 12,213 12,246 10,121 0.00 10,254 100 8 0.03 8 0.01 2 23,742 23,750 24,272 688 689 8 .6 9 .4 4 8 0.15 38 34 0.24 89 0.26 0.39 98 53 36,809 68 36,898 0.83 128 0.07 11 15,354 15,482 439 402 5 .4 9 12 10 0 0.73 0.10 40 13 120 12 1.22 0.12 297 97 0.14 0.03 35 23 24,032 82,832 24,329 82,929 ,6 101 00 1 .1 2 0.09 24 0 0.41 0.11 42 1 1.24 5 0.00 38 0.03 0.71 0 51 24 13 0.74 2.00 2 0.11 1,061 36 63 0.73 1,062 2 0.05 0.06 65 13 4 1,314 2 1,767 1.15 26 0.00 1,779 37 2.07 0 3,067 0.21 40 3,130 7 0.00 7,579 3,870 7,583 0 3,172 3,209 1,914 1,955 1,449 ,6 322 02 4 14 1 3 0.90 37 17 1.43 47 0.26 8 3,222 3,269 ,9 793 0 12 5 07 4 7 0.16 77 43 0.70 56 1.25 4,296 100 7,943 7,998 3,311 n – and 9 70 00 3 .4 2 0.26 654 23 1 0.00 0 0.34 3 0 0.00 0.00 0 0 0.00 790 0 793 522 522 0 0

133,047 244,205 268,469 268,469 106,864 24,264 which 1,300 3,810 1,447 3,308 4,294 617 not f for of Allowances assessed olc Gos in Gross collec- tively 294 352 354 354 58 0 0 7 0 2 0 0 of not in % 0.00 0.00 0.18 0.00 0.22 0.14 0.01 0.00 0.13 0.13 0.01 0.05 1,029 1,424 1,432 1,432 394 37 14 60 1 8 3 2 of loans Individually impaired as % loans and receivables 5.66 1.09 1.54 0.07 0.77 0.58 0.03 0.09 0.53 0.53 0.04 0.37 e. ne gos and gross ances rec. Board of Directors’ Report Specific allow- 461 595 603 603 133 13 18 6 0 8 1 1 impaired loans % 100 34 39 30 45 42 40 42 42 70 34 f Net of 3 of loans as % 3.73 0.67 1.08 0.07 0.42 0.34 0.00 0.05 0.31 0.31 0.01 0.24 rec.

53 Nordea Annual Report 2008 54 Nordea Annual Report 2008 31 by geography domicile of customers Loans and receivables to the public, impaired loans and allowances, Board of Directors’ Report 31 Total Non-OECD OECD Latin Asia USA EU Russia Poland Lithuania Latvia Estonia – – – – Nordic Total Non-OECD other OECD Latin Asia USA EU Russia Poland Lithuania Latvia Estonia – – – – Nordic of of of of of of of of Dec Dec countries countries

which which which which which which which which America America other other 2008, 2007, countries countries Sweden Norway Finland Denmark Sweden Norway Finland Denmark other EURm EURm other other loacs mard on ipie Gos and Gross impaired loans impaired allowances loacs mard on ipie Gos and Gross impaired loans impaired allowances receivables receivables Loans Loans 266,247 0.54 35 677 0.83 1,923 0.11 262 228,419 230,342 245,629 1,1 2775 6 01 133 .1 5 4 0.36 41 553 0.61 1,343 0.12 261 217,775 219,117 before before 074 062 00 3 03 7 0 0.24 20 7 0.30 0.28 32 0.40 29 1.13 33 0.00 0.43 27 74 0 49 83 0.39 211 0.60 309 251 1.54 10,672 251 0.85 0.07 10,704 796 0.15 624 46 0.15 61 0.11 74 63,480 81 41,493 63,731 50,887 41,744 72,560 51,683 73,184 266 242 5 .7 0 03 10 9 0.17 0.14 49 0.85 49 0.33 30 100 50 57 0.33 176 0.27 220 204 1.21 117 0.67 0.07 582 0.16 439 45 0.16 70 0.10 78 62,422 68 42,833 62,626 47,380 42,950 65,139 47,962 65,578 ,1 145 01 0 .1 9 0.00 0.06 0.00 98 80 0.00 0 1.92 0 80 3 1 0 0.01 0.29 1 0.31 0.60 0 40 0.00 0 4 0.64 46 0.02 0 1.67 0.17 1.60 52 1.94 7 1 0.17 16 18 5 2 0.01 35 0.49 18 2 0.23 1.12 10 0 0.00 17 2 1.33 6 38 1,415 1.99 0 1,199 0.47 34 1,416 1.68 0.21 2,769 64 1,203 2,655 16 0.71 44 2,769 7 1,762 1.74 2,656 18 1.35 1,797 3,541 55 3,341 35 3,558 2,527 3,379 3,167 2,561 2,588 3,231 2,632 ,2 172 00 1 .6 0 0.06 0.24 0 0 0.01 0 0.00 86 0 0.68 100 0.06 0.06 7 0.39 60 0.24 87 1 1 0.47 7 3 0.09 24 2 0.00 0.08 7 8 0.00 1.70 1 1 0 0.49 0 0 0.00 40 0.42 0.50 8 1,579 0.48 0 0.07 1,722 10 8 1,418 0.76 10 1,723 2 1.83 1,421 8,932 12 1.24 1,917 1,611 44 8,940 2,301 25 1,612 1,624 2,341 2,381 1,632 2,023 2,391 2,033 n – and n – and 2 93 00 0 .1 0 0.00 0 0 0.01 0 0.00 0 923 923

264,056 244,205 which which 1,579 1,916 not not f for of f for of Allowances Allowances assessed assessed olc Gos in Gross collec- olc Gos in Gross collec- tively tively 405 352 1 0

of not of not in % in % 0.15 0.14 0.08 0.00 2,191 1,424 0 1 of loans of loans Individually impaired Individually impaired as % as % loans and receivables loans and receivables 0.82 0.58 0.00 0.05 e. ne gos and gross ances rec. e. ne gos and gross ances rec. Specific Specific allow- allow- 742 595 0 1 impaired impaired loans loans % % 100 34 42 f Net of f Net of 0 of loans of loans as % as % 0.54 0.34 0.00 0.00 rec. rec.

sible changes in the market value of the individual contract potential future exposure is an estimate, which reflects pos- (replacement cost) and potential future exposure. The the counterparty credit risk, ie the sum of current exposure active asset and liability management. trading book, but also in the banking book as a result of accordingly. Counterparty credit risk arises mainly in the credit limits like other credit exposures and is treated on the counterpart. Counterparty credit risk is subject to tract and that Nordea at that time has a contractual claim derivatives contract defaults prior to maturity of the con- Counterparty credit risk is the risk that a counterpart in the Counterparty risk the balance sheet. an ongoing basis and affect the reported result as well as ties on the balance sheet. derivatives in its hedging activities of the assets and liabili- Treasury, the Group uses interest rate swaps and other tion with own credit portfolio. However, through Group ­Nordea does not actively use credit derivatives in connec- rate bonds, and may include basket credit derivatives. in order to hedge positions in assets such as traded corpo- on customer demand. This is performed either directly or counterpart. contract are agreed upon on an individual basis with the often OTC traded, ie the terms connected to the specific spreads or commodity prices. The derivative contracts are from underlying interest rates, currencies, equities, credit futures, forwards, swaps or options that derive their value Derivative contracts are financial instruments, such as Risk in derivatives siderably in recent years. sure against major trading counterparts has decreased con- CLS-clearing. currencies and with those counterparts that are eligible for which eliminates the settlement risk of FX trades in those FX Nordea is a shareholder of, and participant in, the global minimising settlement risk. spondent banks and custodians are selected with a view of assessed in the credit process, and clearing agents, corre- restricted by settlement risk limits. Each counterpart is finally confirmed. receipt of the corresponding payment or security has been a transfer of a principal amount or security, but before default after Nordea has given irrevocable instructions for the potential loss that could occur if a counterpart were to process of settling a contract or execution of a payment. Settlement risk is a type of credit risk arising during the Settlement risk Nordea uses the transaction-based model to calculate The derivative contracts are evaluated at fair value on Nordea invariably enters into derivative contracts based The settlement risk on individual counterparts is The risk amount is the principal of the transaction, and clearing system As a result, CLS (Continuous Nordea’s settlement Linked Settlement), risk expo- 1) EURm Transfer risk exposure Past due loans, non-impaired loans traded corporate bonds and basket credit derivatives. related events. tracts at a specific time or upon the occurrence of credit tives contracts that provides the option to terminate con- based upon a condition in some of the long-term deriva- by the use of these risk mitigation techniques. able, as 85% of the current exposure (gross) was eliminated closeout netting and collateral agreements are consider lesser extent mortgage bonds are accepted. The effects of lateral is largely cash, but also government bonds and to a placed or received to cover the current exposure. The col- where collateral on a regular – typically daily – basis is increasing use of collateral management arrangements, banks, hedge funds and institutional counterparts by an of default of the counterpart. ment values of contracts under the agreement in the event which allow the bank to net positive and negative replace- most common is the use of closeout netting agreements, risk mitigation techniques are widely used in Nordea. The current exposure was towards Financial Institutions. sents 2008 remaining lifetime and the underlying asset. The size of the risk weight depends on the contract’s the notional principal amount multiplied by a risk weight. during the remaining contract lifetime, and is measured as Asia 6–30 days 31 Eastern 31–60 Latin 61–90 Middle East >90 Africa Total Past

the end of 2007 42m. EUR The total transfer risk allowances and provisions at the end of 2008 were 58m EUR and at Dec Nordea is using credit derivatives to hedge positions in Finally, Nordea also uses a risk mitigation technique Nordea also mitigates the exposure towards large To reduce the exposure towards single counterparts, The total counterparty credit risk exposure at the end of days due was America days days EUR 2008, Europe non-impaired/lending EUR 12.2bn. EURm and 27.9bn, CIS 47% of of 1) which the in total 1.05 % the Board of Directors’ Report exposure 31 current utmr customers customers Corporate Dec 1,512 1,586 08 31 2008 671 422 277 662 227 691 266 175 exposure and 35% Household Dec repre- of 1,323 - 2007 the 1.22 906 673 369 439 570 102 397 179 148 55 Nordea Annual Report 2008 56 Nordea Annual Report 2008 sented with the Value-at-Risk (VaR) measurement. Treasury. The market price risk is to a large extent pre- ance-sheet items. This is achieved by transactions in Group are eliminated by matching assets, liabilities and off-bal- banking activities, the basic principle is that market risks sury are the key contributors to market risk. For all other and the investment and liquidity portfolios of Group Trea- The customer-driven trading activity of Nordea Markets Market price risk in financial market variables. folios and financial instruments as a result of movements Market risk is the risk of a loss in the market value of port- Market risk Total – Other production) Utilities (distribution and Telecommunication operators Telecommunication services IT software, hardware and Real Financial Health care and pharmaceuticals (food, Consumer staples Retail Media (cars, Consumer durables Transportation Shipping engineering Construction and civil services, Industrial commercial Industrial capital goods (building materials, etc,) Other materials Paper Metals and mining materials Energy – To To EURm Loan losses, 2008 Board of Directors’ Report of of the credit which which estate appliances, trade and agriculture, public and (oil, etc. institutions and institutions forest leisure household corporate gas, offshore

etc.) aeil –5 5 0 0 15 –15 materials etc.)

etc.)

qimn –0 2 – 2 12 –10 equipment

visions and write-offs New pro- 26 1 –0 10 34 –103 –27 113 117 –890 –216 –144 25 18 –330 305 –433 418 –635 –852 7 2 –6 55 –56 20 15 –76 –11 1 –18 –12 –66 –46 13 –32 6 –38 1 4 9 7 12 –45 –9 19 21 4 –23 21 –64 23 –7 –12 76 5 –21 –46 16 –12 21 –37 –32 28 –60 6 – 18 –2 –3 3 –6 –1 –6 0 2 0 0 0 0

recoveries Reversals and 424 10 11 11 0 1 4 6 0 Loan losses –466 loan Net –13 –55 –36 –3 1 3 4 0 ratio, loss bps 170 100 17 33 9 – – – 5

heading structural interest income risk and is dealt with under the net interest income over time. In Nordea this is seen as market variables, a change in interest rates will also affect of Nordea’s assets and liabilities from a change in financial position. ual Nordea companies is handled in each company’s FX branches generate an FX exposure, which for the individ- streams generated in foreign currencies or from foreign the parent company. Furthermore, earnings and cost as dividends are exchanged to the functional currency of ­capital of approximately EUR 6m. towards Euro will cause a decrease in Nordea’s equity Euro. A 1% decrease in the Russian rouble’s exchange rate holding of JSB Orgresbank (Russia) is partly financed in obtained at an excessive cost. Nordea Bank AB (publ)’s matched funding is impossible to obtain, or can only be from this principle may be made in markets where is denominated in foreign currencies. The general principle investments in subsidiaries and associated enterprises Structural foreign exchange (FX) risk arises primarily from Structural market risks sponsored defined benefit pension plans for employees. minimum the investment of policyholders’ money with guaranteed Furthermore, market risk on Nordea’s account arises from divided into Trading Book and Banking Book risk. measure and manage the consolidated risk and the risk Moreover, the same Value-at-Risk (VaR) model is used to in Nordea Markets (the Trading Book) and Group Treasury. control processes are applied for the market risk exposures management. This implies that the same reporting and management principles and standards for the market risk A Nordea group-wide framework establishes common Reporting and control processes in relation to the earnings these activities generate. Markets, the risk appetite and the market risk limits are set increased volatility. For the trading activities in Nordea unchanged business activity in an environment of risk tite is ensured by market risk limits and stop-loss rules. The time in a financial year. The compliance with the risk appe- accumulated the maximum level of risk such that it should not lead to an Markets. For Group Treasury, the Board of Directors has set in Group Treasury and the trading activities in Nordea appetites for both the investment and liquidity portfolios The Board of Directors has formulated market price risk Market price risk appetite management chapter. to hedge this by matched funding , although exceptions In addition to the immediate change in the market value Payments appetite Structural yields was made loss in increased in Interest to Life earnings parent and Income in Pensions, companies in 2008 excess in Risk order and of in from EUR the Nordea-­ to subsidiaries facilitate Liquidity 250m at any senior • parency is achieved by: sound risk culture throughout the organisation. This trans- process is central to maintaining risk awareness and a daily control process. sures and correlation risk are limited and monitored in the with corporate bonds. In addition, jump-to-default expo- their sensitivities to changes in interest spreads, in analogy CDOs and CDSs are included in the VaR figures through control process, but not included in the VaR numbers. ures are limited and monitored in the daily reporting and prices and, where relevant, their volatility. These risk fig- ios are based on the sensitivity to changes in the underlying which are measured using scenario simulation. The scenar funds and investments in hedge funds in Group Treasury, and fund linked derivatives in Markets and private equity is the case for commodity risk, structured equity options and are monitored and limited separately. For example, this However, certain risk exposures have special characteristics Single-name Single-name CDS, investment grade EURm Credit derivatives Reduction in counterparty risk exposure due to closeout netting and collateral agreements Counterparty risk exposure (after closeout netting and collateral agreements) Multi-name Total EURm EURm Public Total Corporates Financial Total basis monthly basis, and the Board of Directors on a quarterly dated market risk every day; GEM receives reports on a The CRO receives reporting on the Group’s consoli- Transparency in all elements of the risk management entities institutions management CDS CDS, indices non-investment taking an grade active exposure Current (gross) 82,203 role in the closeout netting 66,364 from process. 31 Dec Reduction from held 2008 collateral exposure - Current 12,202 ,5 132 2,727 1,302 1,754 3,637 ,9 1,5 1,1 221 474 14,738 14,734 2,201 12,150 13,010 7,146 14,454 6,157 4,291 having • having • having • defining • having • having • having • having • Potential 31 how policies and instructions are to be implemented making body would be informed immediately is crucial, and should a limit be breached, the decision- which instruments may be traded. Adherence to limits individual levels), in terms of limits and restrictions on complemented by instructions issued by the CRO Policies responsibilities and objectives are explicitly outlined. and risk control posable instruments’ features and risk factors requires an elaborate analysis and documentation of the instruments and methods for the valuation of these, that analyse their risk figures allows all traders and controllers to easily monitor and ing the day. the positions that a trader, desk or department has dur exposure exposure

Dec Current 12,202 22,902 future (net) 2008 a proactive detailed risk a a tools are clear comprehensive framework “business

credit risk decided models that risk 27,887 exposure Total business Current allow information (gross) 29,800 mandates intelligence” that

7,364

20,082 by for notional sold the the make approval policy Total gross procedures protection exposure Board calculation closeout Current netting (at Board of Directors’ Report 18,399 45,845 23,979 sharing 3,375 risk from 31 1 116 1,136 1,136 310 6 619 5,351 6,119 864 framework, departmental, type Dec of of 31 figures Potential Directors, 31 Reduction traded Dec from held 2007 that collateral exposure risk between Dec of 21,989 future 2008 2,446 VaR clearly easily IT notional bought 2007 financial by system figures and desk Total gross which trading protection credit risk decom- exposure state Current are 18,335 45,380 19,416 21,225 7,629 3,375 Total and that (net) on - 57 Nordea Annual Report 2008 58 Nordea Annual Report 2008 the potential for extreme market moves. future. In particular the historical values may fail to reflect not give an adequate description of their behaviour in the tions of the market variables that are used as inputs may duced. Also, it should be noted that the historical observa- tions that have significant impact on the risk figures pro- VaR-models are based on assumptions and approxima - made to make the VaR-model as realistic as possible, all However, it is important to note that, while every effort is exceeded in only one of a hundred 10-day trading periods. VaR-figures can be interpreted as the loss that will be and options. also used. The VaR figures include both linear positions risk categories, allowing for diversification among them, is equity and credit spread risks. A VaR measure across these the Trading Book and in Group Treasury. used to limit and measure market risk at all levels both for scale 1-day VaR figures to 10-day figures. The model is is VaR. The sample of historical market changes in the model ber of the most adverse simulation results as an estimate of historical simulation VaR model uses the average of a num- cal changes in market prices and rates. This implies that the based on historical simulation on up to two years’ histori- model, which uses the expected shortfall approach and is Nordea’s universal VaR model is a 10-day, 99% confidence Normal market conditions positions and option key figures. tistical risk measures such as basis point values, net open Default exposure, scenario simulation and other non-sta- measures including VaR models, stress testing, Jump-to- of market risk, Nordea on a daily basis uses several risk As there is no single risk measure that captures all aspects Measurement methods Market risk, VaR Board of Directors’ Report sive to changes in market volatility. As a result, in June ing indicated a need for making the model more respon- increased 15 120 30 60 90 updated 0 0 In With the chosen characteristics of the VaR model, the VaR is used to measure interest rate, foreign exchange, EUR Jan the To Interest rateVa m t al Va Fe summer markedly b daily. R Mar R Apr The of and 2007 May “square Equity Va Credit spreadVa in June volatility the 10 6 7 8 9 July R root % spring High 2005 Aug R of in ten” the of Sep Low 2008, FX financial 200 rule Oct Va 6 R the is Nov applied backtest- markets 200 Dec 7 to 200 8 ditions is analysed separately. The scenario for normal market con- cyholders’ arising from both Group Treasury and Nordea Markets. Nordea's market risk analysis is based on consolidated risk Market risk analysis measures the risk over a three year horizon. part the risk over a shorter time horizon, market risk is also a or geopolitical situation. While these stress tests measure scenarios relevant at the current state of the economic cycle based on selected historical events prior to 1993 or adverse stress tested for subjective scenarios, which are most often beginning of 1993. In addition, Nordea’s portfolios are data on daily financial market developments since the daily stress tests based on the current portfolio and using occur under extreme market conditions. Nordea performs Stress tests are used to estimate the possible losses that may Stress testing and stressed market conditions, respectively. for two standard market scenarios, which represent normal Nordea risk exposure on policy holders’ assets and liabilities in tion outcomes). in the left-hand tail of the distribution of historical simula- simulation results in the estimate of the VaR (ie further out period, to one year, and the number of the most adverse 2008, risk in the four categories. spread risk, as the total VaR is lower than the sum of the between interest rate, equity, foreign exchange and credit demonstrating a considerable diversification effect The Total VaR pension plans is also measured separately. 28m and simulated daily profit/loss Backtesting, one-day VaR Market risk associated with the mismatch between poli- The market risk due to a mismatch between the market –5 –4 –3 –20 –10 30 10 20 total of at 0 0 0 0 the EUR Jan the the shows Life Hypothetical p/l model VaR m comprehensive end assets Fe & 100 120 b 40 60 80 20 was a 0 Pensions of Mar risk was Jan and 2007). EUR Apr of adjusted Fe liabilities EUR b Low May 86m The is Mar measured ICAAP June 59m market (EUR by Apr

July in at reducing May Nordea

59m) stress the risk Aug as Jun end the at from Sep testing, Life the the Jul loss of Oct 2008 the end lookback Aug and sensitivity which internal Nov of Sep (EUR Pension 2008 Dec Oct Nov Dec Danish ­ at Nordea’s foreign exchange VaR was EUR 17m (EUR 3m) Foreign exchange risk risk is to a large extent concentrated on spread VaR model to include Group Treasury. Credit spread increased market volatility, and of the extension of the credit 5m), both as a result of the adjusted VaR model and Credit Credit spread risk year-end the sale of Nordea’s holding in the OMX Group. VaR levels implied by the adjusted model were offset by (EUR 33m). For equities, the tendency towards increased At Equity risk nor, stemmed 212m tions if all interest rates were to move adversely, was EUR the market value of Nordea’s interest rate sensitive posi- point parallel shift, which measures the development in end The total interest rate VaR was EUR 74m (EUR 57m) at the Interest rate risk unchanged or had even decreased. although in many cases underlying exposures were ures VaR model to the volatility, have implied that the VaR fig- since In general, the increased volatility in the financial markets EURm Consolidated market risk exposures EURm Consolidated market risk figures Private Hedge Total – – – – Diversification effect Structured Commodity Interest Equity Credit Foreign year-end. The largest foreign exchange exposure is to Structured The largest part of Nordea’s interest rate sensitivity the of Danish were Risk August at Funds end spread 2008. Equity Kroner. Spread the Risk Rate Exchange (EUR from Equity higher of Risk end Kroner The ud Fair Funds 2008, 2007 Risk VaR equity Risk interest 26m). of Option total at increased Risk and 2008 Nordea’s and the option gross the rate ik Simulation Risk end (EUR US increased Dollars. sensitivity positions of risk over equity Type Net 261m). 2008 was asset value 2008 of than VaR xoue 31 exposure Measure VaR VaR VaR VaR VaR VaR Simulation responsiveness down in value to ­Nordic financials. to Euro, at stood EUR a the 1 to percentage 30m Swedish EUR end at EUR (EUR of 12m of 2007, 31m 31 Kro- the

at Dec Dec 4. 144 4. 100 150.0 170.0 144.4 174.4 142.5 2008 2008 2008 44% 87 113.4 98.7 58 123.4 85.8 44 123.1 74.4 31.1 29.7 17.2 12.0 4.1 ing its own operational risks. Group Credit and Risk Con- issues on financial and operational risks. the Group is submitted to the Board, incorporating all main ment. personnel, is the key to successful operational risk manage- of a risk management framework, leadership and skilled Solid internal control and quality management, consisting with external parties. organisation, in outsourced activities and in all interaction damage due to a deficient or incorrect legal assessment. “Legal confidence in the Group. Operational risk also includes sanctions, financial loss or damage to the reputation and stakeholders' trust and increasing the risk of regulatory ics, thereby jeopardising customers’ best interest, other ulatory requirements, market standards and business eth- of business not being conducted according to legal and reg - from external events. Compliance risk is defined as the risk or failed internal processes, from people and systems, or rect loss, or damaged reputation resulting from inadequate ment, operational risk is defined as the risk of direct or indi- In Operational risk risk paper, is solely related to customer-driven activities. The Nordea’s exposure to commodity risk, primarily pulp and Commodity risk investments are spread over a number of funds. private equity funds was EUR 143m (150m). Both types of 99m at year-end (96m), and the fair value of investments in The net asset value of investments in hedge funds was EUR Hedge fund and private equity fund risk the Each unit in Nordea is primarily responsible for manag - An annual report on the quality of Internal Control in Operational risks are inherent in all activities within the was Group’s

Risk”, 2008 EUR ih 2008 high high 45.5 36.1 22.7 29.3 11.0

which 4m Policy

at

the means for

2008 end Internal 62 103.1 96.2 43.4 38.8

11.2 low 2008 low the 2.6 8.3 2.1 3.6 of 2008

risk Board of Directors’ Report

Control 2008

that (EUR average 31 average

the and 73.0 72.8 16.7 20.3 21.0 8m). 6.5 6.5

Group

31 Risk

suffers Manage- Dec Dec 2007 2007 41% 96.1 58.9 57.2 32.9 25.9 4.8 3.4 8.2 59 Nordea Annual Report 2008 60 Nordea Annual Report 2008 toms. measures in relation to the sources, rather than the symp- complements the Group's focus on limiting and mitigating functions and globally throughout the organisation. It also the comparability of risk profiles in different areas and the definition of operational risk. This approach improves risks are structured around the risk sources as described in tion. chains rather than focusing on single units in the organisa- gation efforts target reliability and continuity in the value broad insurance cover for handling major incidents. Miti- together with crisis management preparedness and a improvement initiatives and business continuity plans change management and product development. oping the processes. and other early-warning signals are in focus when devel- of operational risk-related events, potential risk indicators related to incidents and quality deficiencies. The analysis documenting, registering and following up activities ongoing monitoring through risk self-assessment and the throughout the organisation. IT Control, and close cooperation is maintained with Group pliance functions are included in Group Credit and Risk this broad scope, the Group security and the Group com- components when managing operational risks. To cover tion and educational and training activities are important implementing the framework. ing operational risks and supports the line organisation in assessing, mitigating, monitoring, controlling and report- trol develops and maintains a framework for identifying, Board of Directors’ Report and The techniques and processes for managing operational The mitigating techniques consist of continuous Special emphasis is put on quality and risk analysis in The main processes for managing operational risks are Information security, physical security, crime preven- Group Legal, in order to raise the risk awareness account. that changes in the underlying risks are properly taken into the parameters in the risk models is undertaken to ensure risks. A continuous supervision of the appropriateness of ers, reinsurance contracts, stress tests and provisions for methods, ie through tariffs, rules for acceptance of custom- rates and selection effects. due to changes in mortality rates, longevity rates, disability holders rather than on Nordea’s own account. and market risks. The majority of these risks are on policy- risks in the life insurance business are life insurance risks tracts, with durations of more than 40 years. The two major generally consists of very long-term pension savings con- The insurance operations Life insurance risk and market risks in the Life tal presented in the market risk section above. directly dependent on, investment return. The figure is is primarily fee-based, and contingent upon, but not movements in financial market prices. The income model sions and is measured as a loss in operating income, due to exposure ance operations arises from mismatches of the market risk sented on www.nordea.com according to the CRD in the Basel II framework is pre- The management Pillar 3 disclosure, Capital adequacy and risk in the market risk section above. the Group’s consolidated market risk figure, also presented The These risks are primarily controlled using actuarial The life insurance risk is the risk of unexpected losses The market risk emanating from separated equity capi- investments Life disclosure market insurance on assets risk in for accordance business and for Nordea Nordea’s liabilities Life of with Nordea and own in the Nordea Pensions account Pillar Life and Life 3 is requirements of Pensions included Life and insur Pen- in - 50 50 12% 8% 8% loss on counterparts Disability – 10% decrease Disability – 10% increase Mortality– Mortality – decreased living with 1 year EURm Sensitivities Financial contract Health and personal accident Unit-Link Traditional Product Risk profiles on insurance 1) 31 Liabilities to policyholders divided in guaranty levels (technical interest rate) Life insurance risk and market risks in the Life insurance operations EURm 31 EURm Technical Technical

2007 figures restated to include all life insurance products. bp bp Dec Dec decrease decrease decrease increase 2008 2007 provision provision increased 1) in

in in in property all interest interest shareprices living value rates rates with – – – – – – – – – – – – Risk 1 year Return guaranties Disability Mortality Return guaranties Disability Mortality Return guaranties Disability Mortality Return guaranties Disability Mortality ye Material types ,1 401 ,2 9,496 9,823 4,091 4,210 ,7 422 ,9 10,283 7,097 4,202 7,875 non non

effect Yes Yes Yes Yes Yes Yes No No No No No No Effects on 0 pct. 0 pct. holders policy- –144.3 –183.0 –103.4 –176.9 122.4 –35.9 –94.1

35.4 80.7 31 Dec 0 to 3 pct. 0 to 3 pct. 2008 Nordea’s own Effects on

account –28.9 –6.1 –1.3 –7.3 –0.4 –7.9 0.4 0.1 7.0 3 to 5 pct 3 to 5 pct vr Total Over

Board of Directors’ Report Effects on holders policy- –105.6 –127.7 –583.0 –258.5 –65.9 34.1 –6.6 50.1 6.1 31 5 pct. 5 pct. Over Dec 6 27,778 160 9 29,656 199 2007 Nordea’s own Effects on liabilities liabilities account –22.0 Total –7.1 –6.1 –1.7 –8.2 1.7 3.6 0.0 7.0

61 Nordea Annual Report 2008 62 Nordea Annual Report 2008 and organisational procedures. ments resulting in different liquidity risk measures, limits unable to meet obligations as they fall due. commitments only at increased cost or, ultimately, being Liquidity Liquidity risk management guidelines for the whole Group. frameworks, which consists of policies, instructions and and develops the liquidity risk and SIIR management decision by CEO in GEM. the Group’s financial operations and financial risks for the CFO, prepares issues of major importance concerning liquidity risk limits. adopted by the Board of Directors, the allocation of the Risk (SIIR), as well as, within the scope of resolutions risk management regarding Structural Interest Income management. These policies are reviewed at least annually. Board of Directors also decides on policies for liquidity risk common principles and policies approved by the Board. The iting and monitoring the Group’s structural risk exposures. bility The Board of Directors of Nordea has the ultimate responsi- Management principles and control Liquidity management Board of Directors’ Report 2008, ever, foreign exchange risk is covered. As of the end of Notes, Medium Term Notes) in diverse currencies. How- and Danish Covered bonds, European Medium Term Papers, Papers, the variety of funding programmes. in the form of a strong and stable retail customer base and the strong presence in the Group’s four domestic markets with investors in order to manage the market access. funding and seeks to establish and maintain relationships risk. Nordea strives to diversify the Group’s sources of agement reflects a conservative attitude towards liquidity influences that could affect the funding need or theplausible funding events. The stress test should identify events on or a bank’s liquidity situation under a set of exceptionalStress testing is butdefined as the evaluation of potential effects ing and a business continuity plan for liquidity management. situation of the Group to remain trustworthy at all times. cal range and rating sensitivity. composition of the investor base in the terms of geographi- average maturity of 9.0 years. Special focus is given for the volume of the long-term programs is EUR 65bn with the 44bn Policy Nordea’s liquidity management is based on policy state- Group Treasury operationalises the targets and limits The The CEO in GEM decides on the targets for the Group’s Risks in Nordea are measured and reported according to Funding programs are both short-term (US Commercial Broad and diversified funding structure is reflected by Nordea’s liquidity risk management includes stress test- Nordea publishes adequate information on the liquidity with for the Asset Certificates European Asset total statements risk the and average is volume and the Liability Commercial Liability of risk stipulate Deposits) of maturity of short-term Committee being Management that Papers, of and able 0.2 Nordea’s programs long-term to years (ALCO), Commercial meet of the and liquidity liquidity Group was (Swedish chaired the EUR total ie man- lim- by the next 14 days, has been EUR -8.7bn (EUR –4.8bn). average expected need for raising liquidity in the course of els The short-term liquidity risk has been held at moderate lev- Liquidity risk analysis be funded by stable liabilities. ing should be positive, which means that stable assets must ALCO maturity longer than 6 months and committed facilities. prise retail loans, other loans with a remaining term to shareholders’ equity, while stable assets primarily com- a remaining term to maturity longer than 6 months, and ily comprise retail deposits, bank deposits and bonds with stable liabilities and stable funding, which is defined as the difference between limited by the Board of Directors through the net balance of used as collateral in funding operations. consists of high-grade liquid securities that can be sold or cash flow defined by the funding risk measurement and buffer. The liquidity buffer is set to ensure a total positive Board of Directors for the minimum size of the liquidity suffice, urgent need of cash and the normal funding sources do not Board of Directors. total figure for all currencies combined is limited by the rency and as a total figure for all currencies combined. The Funding gap risk is measured and limited for each cur balance sheet and off-balance sheet items are included. in the course of the next 14 days. Cash flows from both on- expected maximum accumulated need for raising liquidity measures the funding gap risk, which expresses the all material sources of liquidity risk. of liquidity risk measures have been developed covering order to measure the exposure on both horizons, a number liquidity risk and long-term structural liquidity risk. In The liquidity risk management focuses on both short-term Liquidity risk measurement methods its ity in Nordea and for compliance with the group wide lim- need and on the other hand on increased funding price. Stress tests focus on the other hand on increased funding account the current business structure and environment. Nordea is presumed to be most vulnerable to taking into are based on assessment of the particular events for siswhich with minimal damage to Nordea. Nordea stress scenariosplan properly describes procedures to handle a liquidity cri- adequate in stressful events, and that the business continuitysurement and confirm that the business continuity planof is stress tests is to supplement the normal liquidity risk mea- price and seek to quantify the potential effects. The purpose 40.2bn

from Nordea’s The structural liquidity risk of Nordea is measured and To ensure funding in situations where Nordea is in In order to avoid short-term funding pressures, Nordea Group Treasury is responsible for managing the liquid- throughout

(EUR has Nordea the set Boards

liquidity 12.5–28.3bn) as

2008. holds a target of

­stable assets. These liabilities primar The

buffer Directors, a liquidity

that average throughout

has the

been CEO buffer.

net funding

in balance 2008 in

the Limit GEM

with gap

range of

is and risk,

an stable set

EUR

average ALCO.

ie by

the 20.1– fund- - the - of organisational procedures. ments resulting in different SIIR measures, targets and ­liabilities and derivatives do not correspond exactly. pricing periods, volumes or reference rates of assets, and one during ­Nordea’s accumulated net interest income would change Structural Interest Income Risk (SIIR) is the amount Structural Interest Income Risk ing was EUR 8.0bn (EUR 9.8bn). 2008. stable funding has been comfortably achieved throughout of consisting of 94% of central bank eligible securities eventsat thein endparticular. Nordea’s liquidity buffer is liquidity risk highlyin general and liquidtowards unexpected liquidity level and it reflects the Group’s conservative attitude towards can Group Treasury, also other business units hold securities that and decrease if interest rates fall. that net interest income would increase if interest rates rise rates was At the end of the year, the SIIR for increasing market rates SIIR analysis its correspondingly. choose not to increase interest rates on all customer depos- be negative. not be applied to non-maturity deposits since rates cannot rates are decreasing further, the total decrease of rates can- are, however, taken into account. decision-making process concerning Nordea’s own rates ket transactions are made during the period. gaps are calculated under the assumption that no new mar respectively decrease, in all interest rates. The re-pricing 12 measuring the effect on Nordea’s net interest income for a The basic measures for SIIR are the two re-pricing gaps SIIR measurement methods wide targets. tional management of SIIR and for complying with Group ­public information. ment under stressful market conditions and adequate identification of all significant sources of SIIR, measure- ture, balanced risk taking and reliable earnings growth,

EUR 2008. months Policy Nordea’s SIIR management is based on policy state- SIIR reflects the mismatch in the balance sheet items The aim of always maintaining a positive net balance of Similarly in an increasing rate environment Nordea may For example in a low interest rate environment, when Main elements of the customer behaviour and Nordea’s Group Treasury has the responsibility for the opera-

be percentage point. the off-balance- sheet items when the interest rate re- EUR was The

used

27.1bn the In statements 55m

EUR yearly addition period next

to

increase (EUR (EUR -218m 12 average of

months to

19.4bn). 235m) a

focus the (EUR

one liquidity

official for percentage if on and -267m).

Nordea the all optimising

(see

the interest Liquidity net

SIIR table

These balance considers point rates for

on

financial buffer figures

decreasing page increase, of change

this stable

held

62).

imply a struc-

high

by by fund- - including Life insurance operations Total (total liabilities and equity) the Liabilities Total (total liabilities and equity) Equity – – Subordinated debentures Other Derivatives – – – – Debt securities in issue – – from the public Deposits and borrowings – – Deposits by credit institutions Liability EURm Funding sources 31 Dec 2008 Net balance of stable funding (NBSF) Total stable long-term assets Illiquid assets Long-term Loans Core assets Asset type, EURbn Stable long -term assets Total stable liabilities and equity Long-term Long Long-term Structural funding Equity Deposits Equity and Core liabilities Liability Stable liabilities and equity Net balance of stable 31 funding Dec (NBSF) 2008 debenture Undated subordinated debenture Dated subordinated Other bond loans bond loans Mortgage covered Commercial Certificates Other deposits Deposits on demand Longer Shorter than 3 months Life CD liabilities and insurance type type, and and than to receivables loans bonds deposits policyholders loans loans borrowings CP of EURbn 3 papers eois Euribor deposits ots Euribor months to issued prtos operations

credit from

to

the credit institutions

from in public

the institutions market Fixed rate, market market based Fixed rate, market based Fixed rate, Euribor etc Administrative Euribor etc rate Fixed rate, Euribor Interest public

Board of Directors’ Report ae auiy Amount maturity base ae na 1,942 n.a. 6,268 based 6.4 based t 02 33,666 0.2 etc 2,591 0.8 etc t 02 10,440 0.2 etc Average 11.3 n.a. n.a. .. 23,774 n.a. .. 29,238 n.a. 1.8 0.4 0.0 0.1

Amount Amount 474,074 107,393 444,836 17,803 85,538 15,378 49,504 41,198 49,341 184.3 177.0 192.0 127.3 17.8 43.2 7.8 1.6 5.7 2.5 1.3 63 Nordea Annual Report 2008 64 Nordea Annual Report 2008 Cumulative exposure Exposure Off-balance-sheet items, net Total liabilities and equity Non interest bearing Interest Liabilities and equity Total assets Non Interest Assets Assets at fair value and Held for trading Available for sale Interest rate fixing period EURm Re-pricing gap for increasing interest rates Structural Interest Income Gap Risk analysis (SIIR), 31 Dec 2008 3) 2) 1) 31 December 2008 Interest-bearing securities and treasury bills, by portfolio Liabilities Remaining EURm Liabilities Remaining EURm Contractual cash flows Liquidity risk, contractual maturity analysis for financial liabilities Board of Directors’ Report EURm Group Held to maturity Total interest-bearing securities and treasury bills

Held to maturity includes mainly Mortgage institutions and Other credit institutions. Distribution by issuer type is presented in Note 48 on page 138. The total liquidity buffer amounts to 35.9bn, EUR including also other financial instruments ofEUR 4.4bn. interest bearing bearing contractual contractual bearing liabilities assets 3)

assets maturity maturity Group 2)

aac Within Balance 474,074 1,2 2318 970 034 199 473 580 ,5 317,721 1,957 25,830 14,773 11,919 10,344 19,760 156,353 233,138 317,721 5,5 2670 936 026 ,4 919 177 507 351,451 25,037 31,797 9,169 9,045 10,296 474,074 19,326 246,780 351,451 2,2 0 0 0 1264 122,624 122,624 0 0 0 0 0 0 122,624 sheet

Payable Payable months 233,138 246,780 –6,060 7,582 31 31 on on 0 36 –2 – 25 Non- 2–5 1–2 6–12 3–6 3 Dec Dec iudt Taig Life Trading Liquidity ead Other demand Other demand months 123,721 117,726 buffer –2,283 –1,848 19,760 19,326 20,786 10,684 31,475 2007 2008 5,299 1) 0 5 otoi Pnin tos total tions Pensions portfolio

months 10,344 10,296 4,381 –918 –870 0 14,864 14,864 within within 11,919 years 6,045 1,664 4,538 9,045 1,544

0,9 4,3 5,0 322,960 55,906 46,232 443,945 82,052 103,097 72,692 165,481 1 1 0 er 1–5 year 1–5 year –1,065 14,773 years 19,644 21,188 4,980 4,539 9,169 0 eiia Group elimina- &

>5 years er >5 year >5 year 10,649 25,830 31,797 5,669 –299 Other and 0 –8,289 –8,245 repricing 44 –10,649 158,310 156,353 147,661 er Total year Total year 12,228 0 474,074 156,353 474,074 47,005 59,282 Total 49 request by the CFO. ments. Meetings are held at least quarterly and upon issuance of subordinated debt and hybrid capital instru- decides, within the mandate given by the Group Board, on Nordea hybrid instruments and reviews the capital situation in the ­developments, market trends for subordinated debt and external and internal debt and capital injection decisions. in the assessment of annual dividends, share repurchases, Additionally, Group, including regulatory, internal and available capital. for coordinating capital planning activities within the ALCO mum capital requirements is reviewed regularly within the capital ratios in Nordea. The Board of Directors decides ultimately on the targets for Capital governance maintaining a prudent risk and return relationship. ferent asset-, liability- and risk categories. active management of the balance sheet with respect to dif- Nordea strives to attain efficient use of capital through Capital management Capital management tal management of its risk profile. maintains its target capital via its dividend as well as active Both numbers are targets over a business cycle. Nordea total capital ratio of 11.5% and a target tier 1 ratio of 9%. rules Nordea in the revised capital policy aims at a target Based on the EU Capital Requirements Directive (CRD) Capital structure policy and ICAAP operational risk, the standardised approach is applied. the major parts of the market risk in the trading books. For at-Risk (VaR) models to calculate capital requirements for remaining portfolios. implement the internal ratings based approach for some approaches ers, Nordea had 83% of the exposure covered by IRB ings based approach for the major part of the retail custom- tite of the institution. mine an internal capital requirement reflecting the risk appe- risks to assess the adequacy of internal capital and to deter the management, mitigation and measurement of material to the CRD should for each bank have the purpose to review poses are sufficient. assesses that the buffers held for regulatory capital pur ing, capital forecasting and growth expectations, Nordea in CRD. Considering results of capital adequacy stress test - exceeded the regulatory minimum requirements outlined

Adequacy The With The Nordea’s ability to meet targets and to maintain mini- The goal is to enhance returns to the shareholder while The capital structure policy is related to the Internal Capi- Nordea is also approved to use its own internal Value- In 2008, and CPF, CPF Group the Nordea’s the approval considers by headed

Assessment the Capital the and CPF end in by tier in information key reviews Planning of the December 1

Process 2008. legal capital CFO future Nordea entities. is Forum

(ICAAP), and the on 2008 capital key forum capital will to (CPF). In regulatory use

the which continue requirements responsible base CPF internal

according the to CFO rat- - - RWA RWA Basel II (pillar 1) before transition rules Capital adequacy ratios, EURbn 3) 2) 1) Total capital ratio Capital structure policy Capital requirements and RWA Tier Economic with transition rules Regulatory Capital requirement Leverage requirement before transition rules (%) Capital Capital ratio with transition rules (%) Capital Tier 1 ratio with transition rules (%) Tier 1 ratio before transition rules (%) Core tier 1 ratio with transition rules (%) Core tier 1 ratio before transition rules (%) Capital Tier 1 ratio Dividend EURm Credit risk – IRB – – – Standardised – Basel I reporting entities – Market risk – – – Operational risk Sub total Standardised according to transition rules Additional capital requirement Adjustment for transition rules Total

Target over a business cycle. The ratios are calculated before transition rules. Proposal to the Annual General Meeting 2009. of which corporate of which retail of of of of of which FX, non-VaR of of foundation 1 which which which which which which

with capital base ratio base ratio pay-out Capital 2) transition institutions other sovereign other trading trading

/ before Regulatory 2) (EC ai 1% 42% 19% ratio 21 1.% Target 10.9% 12.1% book, book, transition rules including o-a 20 ,7 3,027 1,715 3,372 137 270 non-VaR VaR Capital requirement 2008 rules 9.3%

NLP) 31 Capital

12,060 13,486 17,062 1) 6,909 ,3 1927 83,865 119,207 9,537 ,1 1,9 9,302 1,465 12,699 1,016 2,523 ,4 3,9 67,099 30,599 2,448 3,577 % 1. 10.9 12.1 (%) Board of Directors’ Report 2007 Dec 4 1,837 147 474 952 5 1,9 10,976 11,896 952 na 5 940 75 67 8.3% 08 31 2008 150,746 168,572 213,281 Basel II 86,358 18,313 31,539 44,709 11,896 RWA 5,930 843 31 Dec na 168.6 1. 204.6 213.3 08 2007 2008

17.1 28 10.9 12.8 66 22.7 26.6 18.7 14.2 20.3 15.8 151 9.5 7.4 9.3 6.7 8.5 Target 9% Dec 156,952 171,482 204,585 Basel II 11.5% 31 Dec 73,736 67,342 10,976 33,103 Policy >40% RWA 171.5 5,745 3,554 2007 16.4 136 827 243 527 9.1 7.0 8.3 6.3 7.4 3) 3) – 0 65 Nordea Annual Report 2008 66 Nordea Annual Report 2008 of dends with a dividend payout ratio exceeding 40 per cent Nordea aims to ensure competitive and predictable divi- Dividends capital requirement the internal capital requirement as well as the regulatory third parties. ­buffers, subject to the judgment of the aforementioned measurements as the basis for any additional capital ­business risk – Nordea uses its existing internal capital benefit plans, real estate risk, concentration risk and investment portfolios, risk in Nordea’s internal defined – interest rate risk in the banking book, market risk in the ­Pillar ments with and without market stress. As a number of ­Capital (EC), when considering internal capital require- agencies. tal requirements, in particular views of the external rating ongoing dialogues with third parties affect Nordea’s capi- In addition to Nordea’s internal capital requirements, Board of Directors’ Report capital requirement. expressed as RWA and EUR 3.6bn expressed as regulatory other portfolios. At present, this difference is EUR 44.7bn receives approval for internal ratings based models for period as the floor gradually decreases and Nordea posed (53%) Out of the total pillar 1 requirement for credit risk 79% more ­overview The Capital requirements – Pillar 1 ing the deduction for the life insurance operations. ance operations. tal framework, which includes risks in Nordea’s life insur internal capital requirements based on the Economic Capi- sition rules was 8.5% and including transition rules 6.7%. total capital ratio was 9.5%. The core tier 1 ratio before tran- Including transition rules, the tier 1 ratio was 7.4% and the rules II on Nordea’s capital requirement when compared to Basel shows that the regulatory transition rules comprise a floor tal the bank using a variety of capital measurements and capi- indicate a change in Nordea´s dividend policy. strengthen Nordea´s core capital position, and does not a share payout ratio of 19% of net profit, compared to 0.50 EUR per 2008 temporary measure to, together with the rights offering, (Pillar the Nordea’s policy is to ensure that the capital base exceeds Nordea uses its internal capital models, Economic At This difference will fluctuate through the transition As such, the EC is compared to the capital base revers- In addition to regulatory requirements, Nordea has The transition phase of Basel II creates a need to manage This proposed reduction of the dividend is intended as ratios. table divided was than or the II net relate to risks 42% 1) amount end “Capital The profit 9.3% of 89% minimum to the exist of on of table IRB and (92%) net for Pillar 2008 the to within requirements exposures, the profit “Capital the EUR risk Nordea’s of requirements. 1 year. total capital the types. 0.20 for Nordea’s pillar The capital requirements 2007. per 21% requirements The tier dividend and share 1 (43%) 1 current credit requirement ratio ratio RWA” corresponding was to risk before for and EC standardised shows at 12.1%. 2008 comprises framework RWA” the in transition is Nordea. end an pro- to of a - business lines: corporate finance, trading & sales, retail in which all of the bank’s activities are divided into eight (0.9bn) and is calculated using the standardised approach, The capital requirement for operational risk is EUR 1.0bn Capital requirements for operational risk in the table above) instead. according to the standardised approach (non-VaR figures internal Value-at-Risk (VaR) models. supervisors, for which Nordea is allowed to use its own positions in those portfolios approved by the financial interest rate risk, equity risk and foreign exchange risk for Trading book VaR figures comprise general and specific EUR 5.1bn (3.6bn) covers the trading book in Markets. required capital for market risk in the Nordea Group. The (risks in trading book) Capital requirements for market risks using credit conversion factors (CCF). sure. Off-balance sheet exposures are converted into EAD long settlement transactions is 100% of the original expo- tive contracts and securities financing transactions and visioning. The EAD for the on-balance sheet items, deriva- the IRB approach is measured gross of adjustments, ie pro - using the IRB or standardised approach. weight percent, RWA and capital requirement calculated the exposure, exposure at default (EAD), average risk type, product type, collateral type and exposure size. the type of counterparty while others are based on the asset the IRB approach. Some exposure classes are derived from approach differ from the classification in accordance with requirements. classes, which serve as the basis for the reporting of capital requirements for credit risk differ between exposure calculation pillar 1 requirement. assess ment. Nordea benefits from the use of internal models to approach, constitutes 7% (6%) of the total pillar 1 require - Operational risk, calculated with the standardised average of 57% (55%) compared with 100% under Basel I. class, which under the foundation approach has an RWA following formulas: ­capital requirements for credit risk are calculated using the In the standardised and IRB approach, the regulatory Capital requirements for credit risk Report IRB exposures and 0% (4%) to Basel I reporting entities. In the Risk Weighted Amounts = Risk weight Minimum capital requirements = Risk weighted amounts Portfolios Of the EUR 5.9bn (3.6bn) in market risk RWA, approx. The exposure value of an on-balance sheet exposure in The The definitions of exposure classes in the standardised The principles for the calculation of minimum capital Further information on capital requirements and the approach, table market table 2008, “Capital of “Capital on not RWA risk, 72% www.nordea.com. reported requirements which

(88%) are requirements available relate constitutes with VaR to for in the Nordea’s for models market x 4% corporate Exposure at default credit (2%)

risk” are Pillar risk” of reported exposure the shows shows 3 total x 8% are gross income. The risk for each business line is the beta coefficient times of the business lines within each group and legal entity. lated as the simple sum of the capital requirements for each agency services, asset management and retail brokerage. banking, commercial banking, payment & settlement, Capital requirements for market risk 31 Dec 2008 1) Capital requirements for credit risk 31 Dec 2008 using ers in the Nordic Banking. risk capital within Nordic corporate and personal custom- that a majority of Nordea’s risk is held in the form of credit divided by customer area and risk type and demonstrate lated ICAAP Nordea base the internal capital requirements under the Capital requirements – Pillar 2 closes the gap between regulatory capital and EC by Total Standardised approach Interest EURm Exposure class, EURm Total Total IRB approach Other – – – Retail Corporate Equity risk Institutions IRB approach Central Standardised approach Foreign Commodity risk Regional Diversification effect Institution Total Retail Corporate Exposures secured by real estates Other

included in exposure. Administrative bodies and non-commercial undertakings, multilateral developments banks, past due items, short term claims, covered bonds, and other items. Associated companies not of of of The beta coefficients differ between business lines and The total capital requirement for operational risk is calcu- Nordea has calculated internal capital requirements Economic in which which which 1) to non-credit the the

governments rate

exchange on EUR governments range EC SME other mortgage Nordea’s risk 12.8bn framework Capital obligation retail from risk or (EUR Economic and (EC) 12% central local assets since to 10.9 at banks 18%. 31 authorities 2001. bn). Capital December –1,044 Trading book, VaR RWA ,6 14 ,5 23 0 213 2,654 164 2,068 1,715 The 171 520 Pillar 0

framework. pie requirement 2008 1 chart of Capital the is –83 137 show calcu- 14 2 0 42 CRD 0 Exposure EC 469,434 389,088 116,045 152,015 120,390 214,072 Trading book, non-VaR 80,346 891 25,649 86,236 28,981 86,788 241 49,143 52,401 972 20,959 19,752 042 20,960 13,864 30,402 ,2 2,210 2,327 ,2 4,160 4,621 ,2 1,838 2,226 ,2 7,425 9,126 ,1 4,624 4,310 RWA 3,372 564 668 50 0

Nordea’s credit exposures. foundation for the Basel II framework for IRB models for The parameter estimation framework used for EC is the tration and counterparty risk in Nordea’s trading book. model is also used to consider Nordea’s portfolio concen- inputs, and are reviewed and updated annually. This default, loss given default and exposure at default are estimated using a portfolio model, where probability of used for the corporate and institution segments have been tomer segments and credit quality categories. The factors capital factors are developed for different products, cus- Credit risk is calculated using a set of capital factors. The pected losses for each of the risk types compiled into EC: defined benefit plans, real estate risk and concentration risk. risk in the investment portfolios, risk in Nordea’s internal account for interest rate risk in the banking book, market life insurance risk. Additionally, the EC models explicitly credit risk, market risk, operational risk, business risk and surement. improving the risk sensitivity of regulatory capital mea- requirement Quantitative models are used to estimate the unex- Nordea calculates EC for the following major risk types: Capital 385,517 319,042 66,476 9,739 EAD 270 558 53 843 0 4 0

Banking book, non-VaR risk weight, % RWA 843 0 0 0

Average requirement 0 1,837 100 0 1,099 50 47 39 2 1,323 1,465 8,065 6,909 8,925 32 18,313 31 86,358 10 16 57 37 6 269 1,016 12,699 26 20 9 079 1,658 20,719 99 77 73 Capital 4 1 Board of Directors’ Report 7 ,6 109 1,363 67 67 472 377 4,722 0 0 0 0 150,746 119,208 31,538 RWA 7,469 –1,044 RWA 5,930 840 100 903 406 839 50

Total requirement requirement Capital Capital 12,060 2,523 9,537 106 645 714 147 –83 598 474 88 67 67 72 33 4 8 67 Nordea Annual Report 2008 68 Nordea Annual Report 2008 pected losses during one year in 99.97% of all possible cases. Nordea’s total EC equals the amount needed to cover unex- year and the confidence level is 99.97% for all risk types. throughout Nordea, the measurement period is set to one risk) and technical provisions (longevity risk). EU minimum solvency requirement (death and disability insurance products. It is calculated as percentages of the assumptions for mortality and morbidity used to price life adjustments for market, operational and credit risk. ual volatility in historical profit and loss time series after income risk. Business risk is calculated based on the resid- liquidity risk and indirect effects such as structural interest ronment. costs due to changes in the economic and competitive envi- in all businesses due to the uncertainty of revenues and within Basel II. resulting from inadequate or failed internal processes. options in guarantee products. ated by Monte Carlo simulation to capture embedded (ALM) insurance business an asset and liability management nal market risk in investment portfolios, risk in Nordea’s inter to determine EC for interest rate risk in the banking book, ­Additionally, Nordea uses VaR and simulation modelling time horizon and confidence interval in place for EC. simulation and Value-at-Risk (VaR) models scaled to the Market risk for the banking business is based on scenario Board of Directors’ Report holder value creation. Nordea Economic Profit (EP) capital requirement. potential management interventions, in Nordea’s internal The results of stress testing are considered, along with the effects of a series of global and local shock scenarios. prehensive capital adequacy stress test process to analyse EC that is lower than the sum of the EC for each risk type. lated at all. In the end, the diversification effects produce an while life insurance risks and operational risks are not corre- eral economy and thus highly correlated with each other, are both highly correlated with the development of the gen- from its operations. For instance, credit risk and market risk approach to estimate the diversification benefits arising losses are assumed to occur simultaneously. risks are considered on a standalone basis, all unexpected able diversification benefits. However, when Nordea’s EC tors. focus drives and supports the right behaviour with a balanced The varied operations of Nordea give rise to consider In order to achieve consistent risk measurement Life The main risk drivers are reputation risk, strategic risk, Business risk represents the earnings volatility inherent It is calculated according to the standardised approach Operational risk reflects the risk of direct or indirect loss In Risk-adjusted In addition to calculating EC, Nordea conducts a com- Thus, Nordea uses a conservative correlation matrix defined EP investment on insurance model

is uses income, calculated benefit EP is

as used, decisions profit costs risk one t as plans represents of which risk-adjusted and and its and and risk. financial EP is

real are based customer The risk measures estate profit performance EP in on

model the scenarios risk. relationships, less actuarial for cost For also share- indica- the of gener cap- equity. Life EP - -

- ous portfolios. vidual credit exposure over a business cycle as well as vari- Expected losses reflect the normalised loss level of the indi- Expected losses used in the economic profit framework. tures both growth and return. EC and expected losses are 2008 exposure at default (EAD), was 17 basis points as of end of nomic economic tion to use the same parameters in internal calculations of eign and institution exposure classes. Nordea has the ambi- points tions. calculation above. Going forward, this model change will affect the as sum Capital base (referred to as own funds in the CRD) is the Capital base dimension) distributions. capacity business cycle as a consequence of shifts in the repayment stable measure than actual losses, but it will vary with the and deferred tax assets are deducted from tier 1. included after deduction of proposed dividend. Goodwill instruments limited portion hybrid capital loan (perpetual loans) the character of paid-up, capital-eligible reserves and a However, and ment in insurance should be deducted from tier 1 capital other financial companies. are set after deductions, i e, investment in insurance and loans may not exceed half the amount of tier 1. The limits deducted the The a The It Tier Tier 1 capital is defined as capital of the same or close to According to CRD, half of the deduction for the invest- PD • formula: on EAD • LGD • The Definition of Expected Loss (EL): invested consequence total the of should (16 Therefore, lost in the event of default. terpart will default. event of default. the capital as average 2 tier EL remaining basis (PD is tier of from is capital current a

divided is 1 of the is is transitional a be (maximum capital EL= capital the 2 dimension) measure a risk-adjusted framework, a points amount noted the end measure Expected measure normalised the and PD of portfolio. half sum into of in the and average as x that EL 2008, Nordea LGD of may from of IRB of perpetual rule 30% tier

of of as and the Loss the end calculated tier how the in profit Retail based EL not x 2 valid the loss EL probability of Expected collateral EAD, capital regulatory of 1 (EL) Life

expected is tier

and exceed ratio much sum 2007) rate measured for loans until approval on and ratio 1). where tier as of after 2009 has the calculated is Profit excluding tier Pension Loss coverage end tier EL and 2 exposure expected used that assumptions capital been capital. deductions. and

divided 1. 1 of to using dated ratio may and the Dated in 2012 be recalibrated 2008. to based the calcula- coun- (LGD the 22 only tier is the to in be loans. allows by a basis eco- tier be the sover 2. more be 2 - cerning the financial conglomerate regulation. tal. Nordea has not experienced material limitations con- ensure that the financial conglomerate has sufficient capi- quacy rules) and insurance (solvency rules) are added to meaning that eg the requirements from bank (capital ade- ent company to increase the core capital. nated debt instruments or a capital injection from the par in a subsidiary, the primary options are internal subordi- instruments and capital injections and issuance of shares. group contribution, subordinated and perpetual debt well-established and include the options of dividend and from a Basel I perspective. the shortfall is also deducted from the RWA to be neutral capital base. For the purpose of Basel II transitional rules, sion) tal made for the related exposures are adjusted for in the capi- 31 Dec 2008 Economic Capital distributed by area, The sented on www.nordea.com. according to the CRD in the Basel II framework is pre- The management Pillar 3 disclosure, Capital adequacy and risk activities tutions and the solvency requirement for the insurance aggregation of the capital requirement in the group of insti- responding capital requirements is calculated though an group base for the conglomerate includes the capital base for the and the aggregation method. This means that the capital calculated with a combination of the consolidation method The capital base of the conglomerate has in Nordea been dated capital requirements for the financial conglomerate. capital base that at all times are equal or above the consoli- defined as a financial conglomerate are required to hold a stated 1 cial Conglomerates (FC), which was implemented by the ates July The capital requirements valid for financial conglomer Nordea is also defined as a financial conglomerate In situations when the capital base needs to be increased Internal processes for capital transfer within Nordea are According to the CRD, the shortfall is deducted from the Institutions and insurance companies that have been base. differences disclosure are is 2006. of in know stated The institutions FFFS within Detailed negative as 2006:6. in in between the companies the accordance “shortfall”. Swedish and instructions difference expected Nordea under with law & GroupOperations,1% B Group T Capit B Institutional &International Nordic B (EL anking Products anking, 12% Life and (Act Nordea loss the al Markets&S

is reasury Holding requirements anking, 73 Pillar larger (EL) (2006:531)

, 4% Life and 3 % avings, 10% than requirements AB. Holding provision on provi- The are Finan- cor AB. - - - Proposed/actual Equity Calculation of total capital base EURm Summary of items included in capital base Excess capital Capital requirements and Capital base (net of deductions mEUR Capital situation of the financial conglomerate Total capital base Other deduction institutions (50%) Deduction for investments in credit IRB – Tier 2 capital – Tier 1 capital (net after deduction) Other items, net institutions (50%) Deduction for investments in credit IRB Intangible Deferred tax assets Hybrid capital loans of which perpetual subordinated loans of which hybrid capital 31 Dec 2008 Economic Capital distributed by risk type, provisions provisions adjustments) assets excess excess dividend (+)/shortfall (+)/shortfall

– –6 –30 –269 (–) –30 –269 (–) Board of Directors’ Report

Life risk,1% Business risk,9% Operational risk,8% Market risk,12% Credit risk,70 31 Dec 17,803 18,148 20,326 –1,175 15,760 –2,374 –2,193 150 20,252 21,540 % 3,392 6,097 1,447 1,447 08 2007 2008 59 –1,300 –519 08 2007 2008 –364 –87 690 –87 –58 31 Dec 17,160 18,343 18,660 –1,535 14,230 1,909 6,075 1,409 1,409 –370 –185 –80 664 –80

69 Nordea Annual Report 2008 70 Nordea Annual Report 2008 Corporate Governance enhances the trust in the capital market. ness, gives competitive edge and porate governance facilitates good busi- to influence the companies. Good cor- to be able to take on responsibility and transparent in order for the shareholders interests. The processes should also be responsibilities and avoiding conflict of cesses, thus giving clarity concerning and systematic decision-making pro- about companies having straightforward Strong corporate governance is all Corporate Governance Board of Directors’ Report Committee Auditors Audit Board Board of Directors General Meeting Shareholders President and CEO Remuneration Nomination Committee Committee Committee Credit Governance (the Code). rules and principles of the Swedish Code of Corporate adopted principles of corporate governance including the Corporate governance in Nordea follows generally remuneration to the Board members and auditors. Board members and Chairman of the Board, as well as whose The Nomination process ­Swedish law. are resolved at General Meetings in accordance with www.nordea.com. Changes in the Articles of Association ing), is divided among the shareholders (in the General Meet- Board of Directors, the management and control of Nordea Association and the internal instructions laid down by the the Banking and Financing Business Act, the Articles of Pursuant Division of powers and responsibilities for rules on the Nordic exchanges resulting in a new Rule book OMX’s work in respect of harmonisation of disclosure Nordic area. In line with this Nordea took part in Nasdaq debate on how to develop corporate governance in the ders in the Nordic countries and takes an active part in the C not entitled to vote for own shares at General Meetings. ber of shares that he or she owns or represents. Nordea is ings, each shareholder is entitled to vote for the full num- tenth of one vote at General Meetings. At General Meet- share entitled to one vote and each C share entitled to one shares in Nordea carry voting rights, with each ordinary issued in two classes, ordinary shares and C shares. All According to the Articles of Association, shares may be Voting rights www.nordea.com. for a closer dialogue. Directors and GEM in person and provide an opportunity the possibility to meet representatives of the Board of This will give the shareholders in Denmark and Finland held like last year, local shareholder information meetings are and the Code. applicable Swedish legislation, the Articles of Association and auditors as well as other matters in accordance with ­Directors and auditors, remuneration to Board members annual accounts, dividend, election of the Board of At the General Meeting decisions are taken regarding the body, Meeting is the Company’s highest decision-making shares are not entitled to any dividend. Nordea has extensive experience in working across bor The Articles of Association can be found on For General Meetings are held in Stockholm. In addition, Pursuant issuers. AGM in the where the shareholders exercise their voting rights. the task Copenhagen Board to 2008 minutes The in the to reference the of decided new provisions Directors Swedish of rules and the to to Helsinki AGM entered the set of and Companies the up AGM held the a Swedish into prior Nomination President 2009 on force 3 Act, to April is Companies the to 1 the and propose July AGM

2008, Committee General CEO. 2008. 2009. see Act, - terms man of the Board) and of the four largest shareholders in with the AGM resolution, consists of Hans Dalborg (Chair The Nomination Committee, established in accordance with pendent of the Company and its executive management, cent of all shares and votes in Nordea Bank AB (publ). Försäkringsaktiebolaget CEO of Sampo Abp which, together with the subsidiary shareholders. Björn Wahlroos is managing director and from Björn Wahlroos, independent of the Company’s major ers all Board members elected by the shareholders, apart pendence of the Board. The Nomination Committee consid- Nordea complies with applicable rules regarding the inde- Independence of the Board of Directors page 148. 2008 information about the Board members elected at the AGM Directors appears from the table on page 73 and further member of the Board. The composition of the Board of be represented in the board. The CEO of Nordea is not a Employees have a right according to Swedish legislation to one deputy member are appointed by the employees. by the General Meeting. In addition three members and tions are conducted. and market areas in which the Group’s principal opera- business and cultural conditions prevailing in the regions sesses the requisite knowledge and experience of the social, shall be that the Board, as a whole, for its operations pos- may serve on the Board. ship nor is there a time limit for how long a Board member Nordea has no specific retirement age for Board member The mandate period for the Board members is one year. members elected by shareholders at the General Meeting. tors shall consist of at least six and no more than fifteen According to the Articles of Association the Board of Direc- Composition of the Board of Directors Nordea Board of Directors www.nordea.com. explanation for proposals, will be available on 2009. presented to the shareholders in the notice of the AGM tee, replacing Christer Elmhagen. Ingrid Bonde, as new member of the Nomination Commit- has appointed the newly installed managing director, mittee tee. The appointment of members of the Nomination Com- Viktoria Aastrup is chairman of the Nomination Commit- (Nordea-fonden) ish participate in the Committee, Viktoria Aastrup (the Swed- All of the members elected by the shareholders are inde- The Board currently consists of eleven members elected Further, according to the Articles of Association the aim The proposals of the Nomination Committee will be On Government), is the A of 12 was found

report voting exception December, made in on rights the the public and Kari of separate it work Lars Christer as was Stadigh

on Sampo of G announced of 31 22 Nordström section the August September Elmehagen (Sampo

Liv, Committee,

own “Board 2008, that Plc), and

more 2008. (AMF AMF who of Mogens Stine including

Directors”, ­ than wished Pension Pension). Bosse.

ten Hugo

per to - - ment stability programmes, Internal Capital Adequacy Assess- issues related to financial markets turmoil and financial tion, the Board dealt with for example reports on and cial targets and the strategy are reviewed annually. In addi- and development and risks on a regular basis. The finan- the Board follows up on the strategy, the financial position three meetings were held per capsulam. During the year holm, one in Copenhagen and one in Riga. In addition below information about internal control within Nordea is given internal control system is adequate and effective. Further cess. on Nordea’s risk management control and governance pro- issues yearly to the Board an overall Assurance Statement established and maintained. Group Internal Audit (GIA) that an adequate and effective system of internal control is controls. The Board is ultimately responsible for ensuring pany’s financial position in general includes satisfactory respect of accounting, management of funds, and the Com- Board shall ensure that the Company’s organisation in Code, the Articles of Association and the Charter. The accordance with applicable rules and regulations, the overall management of the Nordea Group’s affairs in and the management of the Company’s operations and the the operations of the Group. ties as well as other policies, instructions and guidelines for Instructions for the CEO specifying the CEO’s responsibili- interest. Furthermore, the Board of Directors has adopted umentation of meetings and rules regarding conflicts of the Board and the Chairman, the number of meetings, doc- inter alia rules pertaining to the areas of responsibility of the Nordea Board of Directors (the Charter), containing members. The Board has adopted rules of procedures for appointed the vice Chairman and the Board Committee CEO or any other Company executive being present. year the Board meets the external auditors without the Board. which also establishes the management reporting to the The work of the Board of Directors follows an annual plan, The work of the Board of Directors and therefore not independent of the Company. appointed by the employees are employed by the Group or working in an operative capacity in the Company. pany and its management. board members are independent in relation to the com- a the Lars life sales of property general insurance products and sales of Nordea Group have concluded agreements concerning director subsidiary The Board is charged with the organisation of Nordea During The Board members and the deputy Board member No Board member elected by the AGM is employed by Group and G The Process under Nordström The pension and assurance 2008 until statutory of CEO heading (ICAAP), TrygVesta the 13 products of April was Board statement TrygVesta meeting “Internal employed revised 2007. A/S. held with following Stine for 15 A/S. Thus TrygVesta overall control”. Board of Directors’ Report 2008 meetings, as Bosse Companies the President concludes Group the majority At Forsikring is AGM least 13 managing organisation and in within once Stock- of that 2008 CEO the A/S, the a the of 71 Nordea Annual Report 2008 72 Nordea Annual Report 2008 Ursula Ranin Timo Claus Birgitta Marie issues, assessment of CEO and transactions of significance. and top management transition process, remuneration Board of Directors’ Report Harald Svein Members of the Audit Committee during 2008 guidance and evaluation of GIA. auditors. The Committee is further responsible for the ment between Group Internal Audit (GIA) and the external by the Board, the CEO and GEM, and the audit arrange- plan, as well as the systems of internal control established annual and annual financial statements and external audit observations tor’s and conclusions on the Group’s semi- Group’s quarterly financial reporting, the external audi- oversight responsibilities by reviewing the Nordea The Audit Committee assists the Board in fulfilling its The Audit Committee minutes are communicated to the Board. Committee regularly reports on its work to the Board. The defined in specific instructions adopted by the Board. Each Board Committees, as well as working procedures, are sibilities in separate working committees. The duties of the tion to working in plenary meetings, conduct their respon- the Board of Directors elected by the shareholders, in addi- An established principle in Nordea is that the members of Board Committees service firm. evaluation process is supported by an external advisory sions between each Board member and the Chairman. The and individual Board members as well as personal discus- includes questionnaires evaluating the Board as a whole Board. The evaluation is based on a methodology which of the Board is thoroughly evaluated and discussed by the tion process, through which the performance and the work The Board of Directors annually carries out a self-evalua- Evaluation of the Board process. of the Board is evaluated annually in the self-evaluation information and supporting data, and ensure that the work with the CEO, see to that the Board receives sufficient organise and lead the Board’s work, keep in regular contact the Board fulfils its duties. The Chairman shall see to that the Board work is conducted efficiently and that at the AGM. According to the Charter, the Chairman shall The Chairman of the Board is elected by the shareholders The Chairman Kari Head Secretary Suominen Peltola of Jacobsen Høeg Ehrling Arnkværn Kantola Group Madsen of (from (from the (Chairman, Legal, as (until secretary. (Chairman, Board AGM AGM (until since AGM 2008) of 2008) AGM from May Directors 2008) until AGM 2008 2008) AGM is when 2008) Lena 2008) she Eriksson, inter alia succeeded regarding his own employment terms and conditions. to vote. The CEO does not participate in considerations holders. the Company, as well as of the Company’s major share- pendent of the Company and the executive management of The members of the Remuneration Committee are inde- Björn Savén Timo Tom Kjell Hans Dalborg (Chairman) Members of the Remuneration Committee during 2008 members of GEM. determining the terms of employment of the individual Board. The CEO also consults with the Committee before pares other issues of principle for the consideration of the whole. At the request of the Board the Committee also pre- and alterations of the terms of employment for GEM as a officers, the terms of employment for the CEO and the CAE Company’s guidelines for remuneration to the executive remuneration issues. This includes proposals regarding the and presenting proposals to the Board of Directors on The Remuneration Committee is responsible for preparing The Remuneration Committee not in decisions. meetings with the right to participate in discussions, but The Head of Group Credit and Risk Control is present at Christian Clausen, CEO Björn Timo Tom Heidi Lars Marie Stine Harald Hans Dalborg (Chairman) Members of the Credit Committee during 2008 uates the overall quality of the credit portfolio. well as Credit Instructions for the Nordea Group and eval- adherence The Credit Committee continuously reviews and monitors The Credit Committee cussions, but not in decisions. are present at meetings with the right to participate in dis- pany, as well as of the Company’s major shareholders. the Company and the executive management of the Com- The members of the Audit Committee are independent of The CEO participates in the meetings without the right The CEO and the Group Chief Audit Executive (CAE) G Knutzen Knutzen Aamot Bosse Peltola Peltola Wahlroos M. Ehrling Nordström Arnkværn Petersen to (from (until (until the (from (until (until (from established AGM AGM (from (until (from AGM AGM AGM AGM AGM 2008) AGM 2008) AGM AGM 2008) 2008) 2008) 2008) 2008), Credit 2008) 2008) 2008) and Policy and Strategy as Björn Wahlroos Kari Ahola Appointed by employees Marie Ehrling Harald Arnkværn Nils Q. Kruse Björn Savén Ursula Ranin Birgitta Kantola Heidi M. Petersen Stine Bosse together with senior officers within the Group in GEM. tems for internal control within the Group. The CEO works responsible for developing and maintaining effective sys- ment of the Nordea Group’s operations and he is also the Board, for instance with planning of Board meetings. the Board. The CEO works closely with the Chairman of responsibilities and the interaction between the CEO and Board of Directors. The instructions regulate the division of lations, the Code, as well as instructions provided by the Nordea Group’s affairs in accordance with laws and regu- with the day-to-day management of Nordea Bank and the Nordea’s President and CEO, Christian Clausen, is charged The CEO and Group Executive Management 8) 7) 6) 5) 4) 3) 2) 1) Lars Oddestad Steinar Nickelsen (deputy 1 May 08–31 Oct 08) (deputy 1 Nov 07–30 Apr 08) (deputy 1 Nov 08–30 Apr 09) Claus Høeg Madsen Svein Jacobsen Kjell Aamot the individual Board members: of Directors and its committees as well as the attendance of The table shows the number of meetings held by the Board Meetings and attendance Lars G Nordström Tom Knutzen Bertel Finskas Christian Clausen, CEO Timo Peltola Hans Dalborg Elected by AGM Meetings attended: (of which per capsulam) Number of meetings

of the Annual Report. Change of position as per 1 November 2008 effective following the submission Board member from 1 January 2009, replacing Bertel Finskas, who retired. Board member until 31 December 2008. The CEO is not a Board member, but a member of the Credit Committee. Board member and Committee member from AGM 2008. Board member and Committee member until AGM 2008. Committee member until AGM 2008. Committee member from AGM 2008. The CEO is responsible to the Board for the manage- 4) 3)

6) 7) 4)

4) 3)

4) 3)

3)

5)

8)

8) Directors

Board of

(3) 18 16 18 18 17 13 15 13 12 17 18 16 16 18 18 18 11 4 5 5 5

mittee Audit Com- (–) 5 5 6 5 2 2 1 7 1) 1)

2 2 Credit mittee Com- (–) 3 2 3 4 3 2 2 5 5 1) 2) 2) 2)

3 6 Remunera- tion Com- mittee (–) 6 3 6 6 1)

bers of Group Executive Management. the executives reporting directly to him also being mem- officers includes the CEO of Nordea Bank AB (publ) and to executive officers within Nordea. The term executive ket levels is thus the overriding principle for compensation targets. Salaries and other remuneration in line with mar- competence and capacity to deliver according to Group tions needed to recruit and retain executive officers with remuneration to the executive officers. The AGM 2008 approved the following guidelines for officers for 2008 Approved guidelines for remuneration to the executive Management including incentive systems Remuneration to CEO and Group Executive “Group Executive Management”, page 150. about the CEO and GEM is found in the separate section with the other members of GEM. Further information chaired by the CEO, who reaches decisions after consulting GEM has recorded weekly meetings. These meetings are Presently GEM consists of seven members and the CEO. the country of which they are permanent residents. Notice retirement benefits in accordance with market practice in members of Group Executive Management shall be offered sidered fair in relation to general market practise. The The levels of these benefits are determined by what is con- Group Executive Management members’ performance. as a general rule not exceed 50 per cent of fixed salary. Group Executive Management may be increased and shall Incentive Programme, the variable cash remuneration to Annual General Meeting does not approve a Long Term invited to join the Long Term Incentive Programmes. If the ing. The members of Group Executive Management will be gramme should be proposed to the Annual General Meet- Directors will evaluate whether a similar incentive pro- and total shareholder return. On a yearly basis the Board of which are based on the principles of risk adjusted profit holder value and the fulfilment of Nordea’s financial targets, tion shall be dependent on the creation of long term share- the Long Term Incentive Programme are that the compensa- cap. The underlying basic principles for compensation under mined financial targets are reached. The programme has a shares, and requires, for full outcome, that certain predeter proposed to be given in the form of a right to acquire Nordeaticipants. According to the programme the remuneration is requires an initial investment in Nordea shares by the par- mance-based Long Term Incentive Programme which targets are reached, respectively. faction, return on equity, income growth or other financial personal objectives are met and the level of customer satis- salary, and is determined by to what extent predetermined salary shall as a general rule not exceed 35 per cent of fixed performance meeting agreed specific targets. The variable mance. In addition, variable salary can be offered to reward Fixed salaries are paid for fully satisfactory perfor- Nordea maintains remuneration levels and other condi- Non-monetary benefits are given as a means to facilitate The AGM 2007 decided to introduce a share- and perfor- Board of Directors’ Report - 73 Nordea Annual Report 2008 74 Nordea Annual Report 2008 variable abstain Senior Executives have on a voluntary basis decided to members of Group Executive Management being Country consists of fixed and variable salary. The CEO and the four the remuneration for the CEO and other members of GEM In Previous undertakings not yet due: ­proposal for guidelines Additional information to the Board of Directors’ have a right to an additional 6 months severance pay. the CEO has been employed two years and will no longer and Board of Directors’ Report reach a maximum of approx. EUR 1.4m. excluding It is estimated that the total cost for variable salaries, Estimated cost for variable remunerations in 2009: No Deviations from approved guidelines 2008: Management affect the remuneration of members of Group Executive any guarantee agreement or any similar agreement which ment made by Nordea against a state or public authority in ondly, it is stated that any potential undertaking or commit- cial, customer-related and personal objectives are met. Sec- and be determined by to what extent predetermined finan- salary shall as a general rule not exceed 35% of fixed salary variable salary will be changed. Henceforward, the financial targets the common criteria for determining the ter reflect Nordea's strategic challenges and long term above, with the following three amendments. Firstly, to bet- officers equivalent guidelines for remuneration to the executive accordance with the Swedish Companies Act, approves the The officers for 2009 Proposal for guidelines for remuneration to the executive in Note 8 on page 101. for this. stated above, if there in a certain case are special reasons employment has an additional 6 months severance pay. apart from the CEO who during the first two years of his fixed salary for members of Group Executive Management, all ing maximum investments by all GEM members and that months Programme amounts ment of the performance criteria for this programme EUR 0.3m. However, the expected cost based on 50% fulfil - whole programme for GEM is approx. EUR 1.4m. accordance The Further information about remuneration is to be found The Board of Directors may deviate from the guidelines criteria deviations

Board severance maximum

for from in salary to

Long are 2007–2009,

of 2009 approx. 2007,

increase Directors

will fully with have pay for

as Term

be which cost

was the in met, the been EUR

observed. total in Incentive allocated period

2009

will approved guidelines the will will 0.2m. made shall

propose for fixed for be January

the Thirdly, The during to Programmes, not expensed 2009

last salary GEM approved Long

calculated exceed that

amount year – 2008.

at April

members, year the Term

the and during 24

AGM by

2009 AGM 2009. to months for

Incentive cost is AGM approx.

described GEM

24 2009, and assum- of

­variable 2009, the 2008 of from

can in 24 Incentive The ment key employees identified as essential to the future develop- Incentive of the whole programme for GEM is approx. EUR 0.6m. gramme amounts to approx. EUR 0.3m. The calculated cost 50% fulfilment of the performance criteria for this pro- approx. EUR 0.8m. However, the expected cost based on and assuming maximum investments by all GEM members Incentive introduced Nordea’s Long term incentive programmes Incentive systems of the whole programme for GEM is approx. EUR 1.0m. gramme amounts to approx. EUR 0.3m. The calculated cost 50% fulfilment of the performance criteria for this pro- approx. EUR 0.6m. However, the expected cost based on and assuming maximum investments by all GEM members 24 2008 the a right to exercise 97.77% of their B Rights. For the C Rights pants will consequently, on the conditions stipulated, have in Nordea’s be at least 10 %-points better than the peer group’s TSR. panies. The stretched target was that Nordea’s TSR had to TSR of a group of Nordic and European financial com­ ­Nordea’s For so the participants cannot exercise any of the C Rights. 2% but get 2006. adjusted Rights the performance criteria related to growth in risk fulfilment of certain performance conditions. For the B Shares was, in addition to these conditions, subject to the any performance conditions. was, in addition to the conditions mentioned, not subject to period. The exercise of A Rights to acquire Matching Shares dea during the initial two year vesting period and that all Nor exemptions, remained employed within the Nordea Group among the invited managers and key employees and the Rights. tions stipulated, have a right to exercise 100% of their D the the months months The A requirement for the exercise of the A-D Rights granted The and 15%. performance peers. The participants will consequently, on the condi- for the D Rights, the performance criterion was related to shares maximum that that was

of The LTIP maximum exercise 2008 The

the the all all The profit

1.739% Long Programme TSR TSR Programme Programme minimum

in in locked

2007 in stretched Group. criteria criteria LTIP compared growth 2008–2010, 2009–2011,

May 2007 during

cost per Term of was

criteria 2007 and cost B-D into

2007, share The are are - 2009

hurdle 2008 that Incentive in target thereby both which received 2008, 2009, Rights 2009 the fully fully to

RAPPS LTIP

targeting allocated also allocated for (“RAPPS”) the 2007. was LTIP 2007 for 12%. was which which the met, met,

2007 had participant, related to below 20.0

Programme the

The a was 2007 approved and acquire 2% 98% The been will will

replaced up to to will will proposed %-points minimum 14.71% and 2008, the were for GEM to

GEM growth to for for participation in be be growth

400 minimum Performance 2007 the place 2009 2009 with expensed expensed in kept Long

members,

members, an (LTIP

and managers stretched better relation Long compared in

Executive amount amount hurdle certain as during in RAPPS the Term

from 2007) RAPPS Term than hurdle, ratio partici- during during to was

tar and 2003.

to to this was the to - - value The profit sharing scheme is capped and not based on the Profit-sharing scheme on holders The interests and perspectives with those of the shareholders. and value growth, to increased efforts by aligning their efforts have direct impact on Nordea’s result, profitability to stimulate the managers and key employees whose best talent for key leadership positions. The aim is further strengthen Nordea’s capability to retain and recruit the Incentive 71% of the permitted maximum number of shares. number of shares and the remaining 15% locked in average the participants locked in 100% of the permitted maximum among the invited managers and key employees. 85% of Rights. hurdle, so the participants cannot exercise any of the B RAPPS 2008 Nordea’s ranking when comparing Nordea’s TSR year For the D Rights the performance criteria was related to stretched number of shares. participants locked in 99% of the permitted maximum scheme provided for under Nordea’s ordinary profit sharing growth Programme compliance • receive reliability • effectiveness • achievement of objectives in the following categories: designed to provide reasonable assurance regarding the Directors, management and other staff within Nordea, Internal control is a process carried out by the Board of Internal control will amount to a maximum of approx. EUR 100m. If all performance criteria are met, the cost of the scheme maximum outcome for the three parameters is unchanged. changed to relative customer satisfaction. The possible tomer relation. The level of customer satisfaction will be order to better reflect Nordea's aim to strengthen the cus- sured by return on equity. performance compared to a Nordic peer group as mea- tion and an additional EUR 600 based on Nordea’s relative additional EUR 600 based on the level of customer satisfac- based on a pre-determined level of risk-adjusted profit, an safeguarding • The Board’s main objective with the programmes is to The The The ment of risks in operations. the proposal – of 2009 LTIP AGM Board profit The a 2008 in for in the maximum target Programme RAPPS the all

to LTIP 2007 Nordea (LTIP was of 2008 sharing for has the notice employees. with operational was and

of and LTIP 2008 1.739% decided TSR

both approved 2008). assets, external of share. 12% efficiency of LTIP scheme

received 2009 (LTIP of EUR for the The and the also

including to For 2008 the In AGM will and 3,200,

2009) peer a propose and minimum thereby 2008, for for 2008, B similar of a is be financial and 94% 2009 2009. internal both operations, group. presented of to presented a each sufficient C which the total a below participation Long has the Rights More similar hurdle AGM The employee reporting, regulations, of been B EUR Term and the EUR in information growth to and manage- 2009. Long Note was changed the minimum C 2,000 Incentive 73m the Rights. ratio share- can 4% 8. Term in and is was in prehensive risk assessment. Association. The annual audit plans are based on a com- issued by the Information Systems Audit and Control tors and the Standards for Information Systems Auditing Internal Auditing issued by the Institute of Internal Audi- comply is required to discharge its duties. The work of GIA shall carry out all investigations and obtain all information that and in communicating its results. GIA is authorised to scope of internal auditing, in performing its audit work, ties of the Group fall within the scope of GIA. continuous improvement. ment, control and governance process as well as promoting organisation by assuring the quality of the risk manage- pose of GIA’s assurance activity is to add value to the Audit Committee gives it special assignments. The pur and dismissal of the CAE. CEO. The Board of Directors approves the appointment Audit Committee. The CAE reports administratively to the CAE reports functionally to the Board of Directors and the Executive (CAE) has the overall responsibility for GIA. The GIA within the Nordea Group. The Group Chief Audit mittee is responsible for guidance on and evaluation of commissioned by the Board of Directors. The Audit Com- Group Internal Audit (GIA) is an independent function Internal audit which is attached to this annual report. rate reports internal control and risk management regarding financial The Board’s Report on the key aspects of the systems for reports according to the Code control and risk management regarding financial Report on the key aspects of the systems for internal management • control • measurement • risk • components of the framework are: cedures, and is expressed in a common language. The main ments of roles and responsibilities, common tools and pro- control. tribute to the effectiveness and the high quality of internal necessary preconditions for the whole organisation to con- munication and an independent evaluation process. four-eyes principle, quality and efficiency of internal com- parent organisational structure, segregation of duties, the culture, goal-orientation and follow-up, a clear and trans- includes the following elements: values and management Internal control is based on the control environment which GIA operates free from interference in determining the All activities, including outsourced activities and enti- GIA does not engage in consulting activity unless the The framework is based on clear definitions, assign- The framework for internal control aims at creating the section management, for with activities, the of the the Financial monitoring. Standards systems Corporate and Year and for Governance 2008 reporting the Board of Directors’ Report is Professional submitted procedures, Report in Practice 2008, a sepa- - of 75 Nordea Annual Report 2008 76 Nordea Annual Report 2008 continue the General Meeting may decide that the assignment will ers for a term of four years. At the re-election of auditors tors shall be elected by the General Meeting of sharehold- According to the Articles of Association one or two audi- External audit Board of Directors’ Report the Bohlins AB was re-elected auditor for the time period up to ber in-charge, for KPMG a end 2008 period Bohlins of the for the Carl up name a AGM term Lindgren, to AB the of was of 2007. the end three re-elected firm Following was of years. the was designated. AGM changed auditor At a the 2011. tender AGM at On to A the

process KPMG new 25 2003 AGM Septem- auditor- KPMG AB. 2007 reviewed by the auditors. management regarding financial reports, has not been key aspects of the systems for internal control and risk this annual report. The report, including the Report on the Nordea’s Corporate Governance Report Corporate Governance Report 2008 is attached to 44 29 28 Statement Statement of recognised income and expense Balance sheet 43 27 26 30 Cash flow statement Income statement 42 41 40 39 25 35 31 34 33 2 10 15 Notes to the balance sheet and memorandum items 9 8 4 3 Notes to the income statement 1 Notes to the financial statements Quarterly development 5-year overview Contents Financial statements 16 18 24 38 37 36 32 11 14 13 12 7 6 5 17 19 23 22 21 20

Commitments Prepaid expenses and accrued income Other assets Contingent liabilities Deposits by credit institutions Investment property Leasing Other assets pledged Assets pledged as security for own liabilities Equity Untaxed Untaxed reserves Property and equipment Accrued expenses and prepaid income Other liabilities Deposits and borrowings from the public Debt securities in issue Segment reporting charges of tangible and intangible assets Depreciation, amortisation and impairment Other expenses Staff costs Net fee and commission income Net interest income Accounting policies Treasury bills Loans and receivables and their impairment Financial instruments pledged as collateral Subordinated liabilities Intangible assets Retirement benefit obligations Provisions Liabilities to policyholders Loan losses Other operating income Dividends Net gains/losses on items at fair value Earnings per share Taxes Appropriations Interest-bearing securities Shares Investments in associated undertakings Investments in group undertakings in portfolio hedge of interest rate risk Fair value changes of the hedged items Derivatives and Hedge accounting ......

......

...... 130 130 130 108 108 106 106 106 109 131 121 121 120 119 121 128 128 118 124 122 122 124 105 101 100 101 111 125 124 124 122 105 101 101 100 111 112 111 115 115 127 117 84 99 85 83 82 81 87 78 48 47 46 49 45 Other notes 54 50 51 53 52

Classification of financial instruments Assets and liabilities at fair value Capital adequacy Insurance activities Assets and liabilities in foreign currencies Acquisitions Investments, customer bearing the risk to be sold or repledged Obtained collaterals which are permitted Related-party transactions Maturity analyses for assets and liabilities ...... Financial statements ......

...... 136 140 132 131 131 142 142 144 143 142 77 Nordea Annual Report 2008 78 Nordea Annual Report 2008 1) Loans and receivables to the public Loans and receivables to credit institutions Treasury bills and interest-bearing securities EURm Balance sheet Net profit for the year Income tax expense Operating profit Disposals of tangible and intangible assets Loan losses Total operating expenses charges of tangible and intangible assets Depreciation, amortisation and impairment General administrative expenses: Total operating income Other income Equity method Net gains/losses on items at fair value Net fee and commission income Net interest income EURm Income statement 5-year overview – Group Financial statements Total assets Other assets Derivatives Deposits and borrowings from the public Deposits by credit institutions Total liabilities and equity Equity Other liabilities Subordinated liabilities Derivatives Debt securities in issue Liabilities to policyholders

have not been done for 2004. Reclassification of non-cash collaterals to ”Financial instruments pledged as collateral” (included in “Other assets” in thetable above) from ”Treasury bills” and ”Interest-bearing securities” Other expenses Staff costs

265,100 474,074 148,591 474,074 108,989 23,903 51,375 –4,338 –1,646 –2,568 46,858 86,838 51,932 17,803 23,774 85,538 29,238 2,672 3,396 8,200 1,028 1,883 5,093 8,209 2008 –724 –466 –124 2008 172 24 0 244,682 389,054 142,329 389,054 24,262 43,975 –4,066 –1,575 –2,388 44,637 31,498 30,077 17,160 26,837 33,023 99,792 32,280 3,130 3,883 7,886 1,209 2,140 4,282 7,556 2007 –753 –103 2007 214 60 41 3 213,985 346,890 126,452 346,890 26,792 35,744 –3,822 –1,485 –2,251 46,162 24,207 32,288 15,322 25,254 24,939 83,417 31,041 3,153 3,808 7,365 1,042 2,074 3,869 8,177 2006 –655 2006 257 –86 312 68 8 188,460 325,549 325,549 115,550 31,578 31,727 –3,668 –1,455 –2,082 44,908 28,876 29,790 12,960 21,386 28,602 82,609 26,830 2,269 3,048 6,573 1,935 3,663 7,822 2005 –779 –131 2005 137 132 776 67 6 161,060 280,074 104,704 280,074 24,774 38,371 –3,655 –1,466 –2,021 29,503 26,366 30,156 12,676 16,986 26,675 59,579 23,480 2,078 2,745 6,127 1,794 3,495 5,818 2004 –667 –168 2004 300 –27 685 98 55 1) MCEV, EURm RAROCAR, % EPS, risk-adjusted, EUR Economic capital, EURbn Economic profit, EURm Risk-adjusted profit, EURm Number of employees (full-time equivalents) 1) Risk-weighted amounts Tier 1 capital, EURm Total capital ratio, % Tier 1 capital ratio, % Total capital ratio, before transition rules,% Tier 1 capital ratio, before transition rules,% Cost/income ratio, % Assets under management, EURbn Return on equity, % Diluted shares outstanding, million Shares outstanding, million Equity per share, EUR Proposed/actual dividend per share, EUR Total shareholders’ return, % Share price, EUR Diluted earnings per share, EUR Basic earnings per share, EUR Ratios and key figures

RWA according to Basel I for the years 2004–2006. 1) , EURbn 34,008 15,760 2,624 1,432 2,459 125.6 2,592 2,590 –46.9 2008 20.8 0.95 12.1 15.3 6.84 0.20 5.00 1.03 1.03 11.8 213 9.5 7.4 9.3 53 31,721 14,230 3,189 1,585 2,417 157.1 2,594 2,593 11.42 2007 23.6 0.93 10.2 10.9 19.7 6.58 0.50 1.20 1.20 205 9.1 7.0 8.3 6.4 52 29,248 13,147 2,873 1,412 2,107 158.1 2,591 2,591 11.67 2006 22.7 0.81 22.9 5.89 0.49 32.3 1.21 1.21 185 9.3 9.8 7.1 52

Financial statements 28,925 11,438 2,283 1,127 1,783 147.6 2,592 2,592 2005 20.6 0.67 18.0 4.98 0.35 27.5 8.79 0.86 0.86 169 8.7 9.2 6.8 56

28,929 10,596 126.1 2,735 2,735 2004 16.9 4.63 0.28 29.8 7.43 0.74 0.74 145 9.5 7.3 60 79 Nordea Annual Report 2008 80 Nordea Annual Report 2008 1) Total liabilities and equity Equity Other liabilities/untaxed reserves Subordinated liabilities Debt securities in issue Deposits and borrowings from the public Deposits by credit institutions Total assets Other assets Investments in group undertakings Loans and receivables to the public Loans and receivables to credit institutions Treasury bills and interest-bearing securities EURm Balance sheet Net profit for the year Income tax expense Appropriations Operating profit Disposals of tangible and intangible assets Impairment of securities held as financial non-current assets Loan losses Total operating expenses charges of tangible and intangible assets Depreciation, amortisation and impairment General administrative expenses: Total operating income Other income Dividends Net gains/losses on items at fair value Net fee and commission income Net interest income EURm Income statement 5-year overview – Parent company Financial statements

have not been done for 2004. Reclassification of non-cash collaterals to ”Financial instruments pledged as collateral” (included in “Other assets” in thetable above) from ”Treasury bills” and ”Interest-bearing securities” Other expenses Staff costs

113,034 113,034 12,471 17,949 33,457 34,713 15,866 29,240 43,855 12,178 –1,208 11,895 7,615 6,829 1,888 1,917 3,231 2,063 2008 –103 –473 –632 2008 –40 –26 –80 190 –13 468 523 11 0

94,478 94,478 13,839 32,296 24,275 15,488 26,640 36,824 –1,211 11,910 9,743 6,007 6,151 5,783 1,203 1,281 2,467 1,323 2007 –101 –514 –596 2007 –34 –44 127 194 463 360 25 0 –

89,437 89,437 12,009 12,638 30,482 23,971 16,561 21,501 36,970 –1,168 8,979 3,940 6,397 5,426 4,642 4,751 5,901 4,739 2006 –501 –568 2006 –76 –33 –99 130 186 481 365 18 – –

74,731 74,731 10,248 26,579 20,784 16,551 19,069 26,638 –1,135 7,094 8,284 3,296 5,540 5,379 1,983 1,023 –229 2005 –309 –536 –500 2005 917 595 551 –99 122 –38 432 444 –1 13

67,848 67,848 25,669 22,885 16,741 17,492 23,749 –1,146 3,601 9,201 3,035 3,526 3,532 6,265 1,256 1,267 2,557 1,422 2004 –103 –544 –499 2004 –111 –37 –33 155 435 470 26 75 – 1) 1) Group Quarterly development EURm Marketing Net interest income Postage, telephone and office expenses Net fee and commission income (spec. 1) Rents, premises and real estate expenses Net gains/losses on items at fair value Other Equity method Total Other income Total operating income General administrative expenses (spec. 2):

charges of tangible and intangible assets Depreciation, amortisation and impairment Total operating expenses Profit before loan losses Loan losses Disposals of tangible and intangible assets Operating profit Income tax expense Net profit Diluted earnings per share (EPS) EPS, rolling 12 months up to period end Spec. 1 Net fee and commission income, EURm Asset Management commissions Life insurance Brokerage Custody Deposits Total savings related commissions Payments Cards Total payment commissions Lending Guarantees and documentary payments Total lending related commissions Other commission income Fee and commission income Life insurance Payment expenses State guarantee fees Other commission expenses Fee and commission expense Net fee and commission income Spec. 2 General administrative expenses, EURm Staff – Information technology

(2007: EUR Refers to IT operations, service expenses and consultant fees. Total IT–related costs in 2008, including staff etc, but excluding IT expenses in insurance operations, were –666m EUR Staff costs Other expenses of which variable salaries – 654m). 1)

–1,150 –1,116 1,386 2,251 1,101 –167 2008 –121 –655 –461 –320 –144 2008 –200 2008 –655 0.25 1.03 –28 –51 390 –94 325 105 –34 781 637 270 105 185 102 590 –12 –73 –50 –65 115 390 –61 Q4 Q4 Q4 45 71 53 20 80 63 39 33 11 0 –1,030 –1,060 1,296 1,996 –144 2008 –635 –395 –192 2008 –151 2008 –635 0.25 1.11 –19 –49 480 –92 221 –91 –25 –30 936 –89 847 655 130 273 107 198 631 –18 –74 –59 480 –49 118 Q3 Q3 Q3 24 62 47 22 12 91 83 35 42 0 – –1,040 –1,073 1,230 1,992 –135 2008 –634 –406 –190 2008 –149 2008 –634 0.27 1.15 –30 –50 518 –94 198 –97 –33 919 –36 883 693 141 302 106 192 120 667 –17 –73 –59 518 –53 Q2 Q2 Q2 22 24 70 63 18 10 86 85 35 53 0 – –1,028 –1,055 1,181 1,961 –130 2008 –644 –384 –198 2008 –149 2008 –644 0.26 1.19 –25 –53 495 –89 284 –87 –18 –27 906 –21 885 687 146 303 104 191 102 644 –20 –67 –62 495 –64 Q1 Q1 Q1 19 67 54 24 12 87 68 34 48 0 – –1,044 –1,073 1,143 2,142 1,069 1,078 –150 2007 –615 –429 –226 2007 –151 2007 –615 0.33 1.20 –35 –52 526 –96 316 –96 145 –29 852 192 354 200 677 –17 –81 –53 526 –63 111 Q4 Q4 Q4 12 74 59 19 10 89 49 34 83 40 6 3 – 1,092 1,914 –138 2007 –968 –596 –372 –993 –171 2007 –152 2007 –596 0.29 1.21 –17 –41 531 –86 264 –90 –25 921 932 761 182 338 108 200 105 683 –15 –69 –68 531 –44 Q3 Q3 Q3 10 17 13 –2 63 65 19 92 70 35 40 9 – –1,008 1,043 1,957 –126 2007 –101 –983 –592 –391 –162 2007 –152 2007 –592 0.31 1.26 –29 –51 548 –84 338 –25 949 978 816 196 360 107 195 106 700 –15 –65 –72 548 –55 Q2 Q2 Q2 19 28 67 68 20 88 71 35 39 9 1 9 – 1,004 1,873 –124 2007 –968 –585 –383 –992 –194 2007 –139 2007 –585 Financial statements 0.27 1.23 –23 –53 535 –85 291 –98 –24 881 895 701 192 356 108 181 100 674 –21 –55 –63 535 –57 Q1 Q1 Q1 10 33 13 66 68 21 73 68 32 37 1 9 – –4,214 –2,568 –1,646 –4,338 –2,568 5,093 1,883 1,028 8,200 3,862 3,396 2,672 1,148 2,532 1,883 –576 2008 –102 –203 –369 –396 –124 –466 –724 2008 –287 –245 –649 2008 –227 1.03 1.03 172 532 270 217 422 344 766 299 143 442 176 –67 –50 24 84 45 0 –3,963 –2,388 –1,575 –4,066 –2,388

4,282 2,140 1,209 7,886 3,820 3,883 3,130 1,408 2,734 2,140 –538 2007 –104 –197 –351 –385 –103 –753 2007 –270 –256 –594 2007 –219 1.20 1.20 214 762 270 260 434 342 776 258 136 394 156 –68 41 60 79 37 3 – 81 Nordea Annual Report 2008 82 Nordea Annual Report 2008 Diluted earnings per share, EUR Basic earnings per share, EUR Total Minority interests Shareholders of Nordea Bank AB (publ) Attributable to: Net profit for the year Income tax expense Appropriations Operating profit Disposals of tangible and intangible assets Impairment of securities held as financial non-current assets Loan losses Total operating expenses charges of tangible and intangible assets Depreciation, amortisation and impairment General administrative expenses: Operating expenses Total operating income Other operating income Dividends Profit from companies accounted for under the equity method Net gains/losses on items at fair value Net fee and commission income Fee and commission expense Fee and commission income Net interest income Interest expense Interest income Operating income EURm Income statement Financial statements Other expenses Staff costs

14 14 13 12 22 11 10, 25, 26 9 7 6 23 5 4 3 Note 8 –11,660 –4,338 –1,646 16,753 –2,568 2,672 2,671 2,672 3,396 8,200 1,028 1,883 2,532 5,093 –724 –466 –124 –649 2008 1.03 1.03 172 24 1 – 0 – – Group

–4,066 –1,575 –8,627 12,909 –2,388 3,130 3,121 3,130 3,883 7,886 1,209 2,140 2,734 4,282 –753 –103 –594 2007 1.20 1.20 214 60 41 9 – 3 – –

–1,208 –3,123 Parent company 3,646 1,888 1,888 1,888 1,917 3,231 2,063 –473 –103 –154 2008 –632 –40 –26 –80 190 –13 468 622 523 11 – 0 –

–2,381 –1,211 2,741 1,203 1,203 1,203 1,281 2,467 1,323 –514 –101 –155 2007 –596 –34 –44 127 194 463 618 360 25 – 0 – – Derivative commitments Commitments excluding derivatives Contingent liabilities Other assets pledged Assets pledged as security for own liabilities Total liabilities and equity Total equity Retained earnings Other reserves Share capital Minority interests Equity Untaxed reserves Total liabilities Subordinated liabilities Retirement benefit obligations Provisions Deferred tax liabilities Accrued expenses and prepaid income Other liabilities Current tax liabilities in portfolio hedge of interest rate risk Fair value changes of the hedged items Derivatives Debt securities in issue Liabilities to policyholders Deposits and borrowings from the public Deposits by credit institutions Liabilities Total assets Prepaid expenses and accrued income Other assets Retirement benefit assets Current tax assets Deferred tax assets Investment property Property and equipment Intangible assets Investments in associated undertakings Investments in group undertakings in portfolio hedge of interest rate risk Fair value changes of the hedged items Derivatives Shares Financial instruments pledged as collateral Interest-bearing securities Loans and receivables to the public Loans and receivables to credit institutions Treasury bills Cash and balances with central banks Assets EURm Balance sheet

20, 44 44 43 42 41 40 39 38 37 36 13 35 34 13 21 32 31 30 29 28 37 13 13 27 25, 26 24 23 22 21 19 18 17 16 16 15 Note 20 33 20 3,802,101 474,074 456,271 148,591 474,074 265,100 108,989 31 Dec 88,434 26,287 10,807 95,507 17,803 16,013 17,970 29,238 51,932 14,604 10,669 44,830 23,903 85,538 86,838 2,600 8,209 1,053 3,278 2,827 3,334 2,535 7,937 6,545 3,157 –888 2008 340 143 458 532 168 344 375 431 413 78 64 – – Group 3,405,332 389,054 371,894 142,329 389,054 244,682 31 Dec 87,006 24,254 79,708 17,160 14,645 22,860 32,280 30,077 17,644 38,782 24,262 33,023 99,792 31,498 6,304 7,724 2,597 7,556 2,762 2,183 3,492 2,725 4,790 5,193 5,020 –160 –323 –105 2007 462 703 300 123 142 191 342 366 78 73 – – Financial statements 104,378 100,561 113,034 113,034 31 Dec 24,139 21,947 12,471 33,457 34,713 10,080 29,240 43,855 15,866 17,949 Parent company 9,504 3,360 9,876 4,229 2,099 1,107 2,600 6,829 3,097 2,098 2,756 3,562 2008 465 783 757 276 118 –5 42 76 28 81 27 – – 2 3 0 0 – – 2 299,852 31 Dec 94,478 94,478 29,474 14,066 82,561 32,296 24,275 26,640 36,824 15,488 13,839 11,910 7,270 3,054 9,308 4,014 1,940 2,034 5,216 2,597 6,151 2,806 1,581 1,281 2007 129 341 –69 402 819 567 296 52 34 53 30 –4 – 5 – 7 2 2 0 – – 83 Nordea Annual Report 2008 84 Nordea Annual Report 2008 Total Minority interests Shareholders of Nordea Bank AB (publ) Attributable to: Total recognised income and expense for the year Net profit for the year Net income recognised directly in equity Tax on items taken directly to or transferred from equity Group contributions Cash flow hedges: Available-for-sale investments: Currency hedging of net investment in foreign operations Currency translation differences during the year EURm income and expense Statement of recognised Financial statements Gains/losses taken to equity Transferred to profit or loss on sale for the year Valuation gains/losses taken to equity

–1,233 1,944 1,943 1,944 2,672 –728 –173 2008 691 –7 –6 1 – – Group

3,081 3,072 3,081 3,130 2007 –49 –24 –26 9 0 – – – 1

Parent company 1,864 1,864 1,864 1,888 2008 –24 –19 –7 –7 – 9 – – –

1,168 1,168 1,168 1,203 2007 –35 –55 13 – – – 7 – – Cash flow for the year Cash flow from financing activities Dividend paid Repurchase of own shares incl change in trading portfolio New share issue Amortised subordinated liabilities Issued subordinated liabilities Financing activities Cash flow from investing activities Purchase/sale of other financial fixed assets Investments in debt securities, held to maturity Sale of intangible assets Acquisition of intangible assets Sale of property and equipment Acquisition of property and equipment Sale of investments in associated undertakings Acquisition of investments in associated undertakings Sale of business operations Acquisition of business operations Investing activities Cash flow from operating activities Change in other liabilities Change in debt securities in issue Change in liabilities to policyholders Change in deposits and borrowings from the public Change in deposits by credit institutions Changes in operating liabilities Change in other assets Change in investment properties Change in derivatives, net Change in shares Change in financial assets pledged as collateral Change in interest-bearing securities Change in loans and receivables to the public Change in loans and receivables to credit institutions Change in treasury bills Changes in operating assets before changes in operating assets and liabilities Cash flow from operating activities Income taxes paid Adjustment for items not included in cash flow Operating profit Operating activities EURm Cash flow statement Change Cash and cash equivalents at the end of year Exchange rate difference Cash and cash equivalents at the beginning of year

–10,938 –41,085 –11,184 –1,297 10,839 –1,837 15,137 16,558 –6,903 –3,148 –1,526 24,670 –1,149 –1,149 –1,254 6,323 2,268 3,396 1,020 4,694 7,097 –804 –132 –162 –687 –792 –534 –594 2008 –10 500 135 –41 –81 137 704 17 12 3 – 6 – Group

–30,365 –1,575 –1,271 16,349 15,484 –3,141 –6,109 –2,438 –1,601 4,419 1,238 3,085 5,706 2,091 3,000 3,883 2,493 2,493 7,097 4,650 –351 –315 –149 –157 –262 –591 –292 2007 –119 –10 –28 458 924 –46 18 61 –9 42 8 3 – –

Financial statements –2,891 –1,297 –2,518 –2,346 –2,700 –3,723 –1,912 10,437 –1,455 Parent company 6,989 1,161 1,617 1,917 3,288 3,288 4,897 1,609 4,110 –810 –412 –975 –291 2008 –16 500 –29 –45 207 950 110 –3 –8 3 – – – 1 – 2 – – 0

–1,552 –1,271 –4,121 –1,287 –2,208 –1,342 –5,140 –4,372 –1,443 –4,499 –4,499 1,174 1,572 1,200 1,412 1,814 4,703 1,281 1,609 6,108 –281 –350 –238 2007 –37 –23 –76 304 996 –3 37 11 3 – 0 – – 1 0 – – 0 85 Nordea Annual Report 2008 86 Nordea Annual Report 2008 Net effect on cash flow acquired business operations Cash and cash equivalents in 1) EURm income taxes paid. Adjustment for non-cash items includes: the year with adjustment for items not included in cash flow and and cash flows are mainly derived from the operating profit for Operating activities are the principal revenue-producing activities Operating activities by operating, investing and financing activities. such as depreciation and loan losses. The cash flows are classified operating profit is adjusted for effects of non-cash transactions been prepared in accordance with the indirect method, whereby cash and cash equivalents during the year. Nordea’s cash flow has IAS 7. The cash flow statement shows inflows and outflows of The cash flow statement has been prepared in accordance with Comments on the cash flow statement Financial statements Depreciation Impairment charges Loan losses Unrealised gains/losses Capital gains/losses (net) provisions Change in accruals and Anticipated dividends Group contributions Translation differences to policyholders Change in bonus potential Other Total EURm received and interest expenses paid with the following amounts: derivatives are reported net. and receivables, deposits and debt securities in issue. Changes in bilities that are part of normal business activities, such as loans Changes in operating assets and liabilities consist of assets and lia- Interest payments received Interest expenses paid Purchase price paid Total liabilities Other liabilities and provisions Debt security in issue Liabilities and borrowings from the public Deposits by credit institutions Total assets Other assets Property & equipment and intangible assets Shares Interest-bearing securities Loans and receivables to the public Loans and receivables to credit institutions Cash and cash equivalents Acquisition of business operations EURm business assets. Aggregated cash flows arising from acquisition and sale of rent assets, like property and equipment, intangible and financial Investing activities include acquisitions and disposals of non-cur Investing activities

Including translation difference, see also Note 54 Acquisitions. Cash flow from operating activities includes interest payments operations 1) are presented separately and consist of:

–2,033 16,230 11,429 1,216 2008 –973 –594 2008 530 –83 173 452 114 10 Group Group – – 12,579 8,131 2007 –264 –307 –292 2007 103 –43 –42 152 24 85 0 – – Parent company Parent company –1,593 –1,912 3,504 3,020 –243 –269 –177 –142 2008 2008 –350 –340 2008 101 101 –88 370 –81 –85 –10 435 394 28 32 Group – 4 – – 5 – – – 4 –1,072 –1,443 2,602 1,174 2,334 –246 2007 –139 –248 2007 –928 –224 –393 –286 2007 –28 218 101 –99 –25 330 148 445 218 –11 22 31 0 1 2 – 1 1 - assets: The following items are included in Cash and cash equivalents Cash and cash equivalents dends and issued/amortised subordinated liabilities. and subordinated liabilities, such as new issues of shares, divi- Financing activities are activities that result in changes in equity Financing activities Net effect on cash flow sold business operations Cash and cash equivalents in Purchase price received Capital gain/loss on sold business operations Total liabilities Other liabilities and provisions Deposits by credit institutions Total assets Other assets Property & equipment and intangible assets Loans and receivables to the public Cash and cash equivalents Sale of business operations EURm EURm central banks Cash and balances with on demand credit institutions, payable Loans and receivables to

ties. assets not represented by bonds or other interest-bearing securi- Loans to credit institutions, payable on demand include liquid – – ity, where the following conditions are fulfilled; central banks and postal giro systems under government author Balances with central banks consist of deposits in accounts with Cash comprises legal tender and bank notes in foreign currencies. the balance on the account is readily available any time. country where the institution is established the central bank or the postal giro system is domiciled in the

31 Dec 3,157 1,537 4,694 2008 Group 31 Dec 5,020 2,077 7,097 2007 Parent company 31 Dec 4,621 4,897 2008 2008 276 Group – – – – – – – – – – – – 31 Dec 1,313 1,609 2007 2007 –61 –59 101 296 42 –7 49 –2 89 - 7 9 1 4 26. 25. are, in all material aspects, unchanged in comparison with the The accounting policies, basis for calculations and presentation 3. and presentation” below. presentation described in section 3 “Changed accounting policies The comparative figures for 2007 include effects of changes in the 2. Meeting on 2 April 2009. cial statements, subject to final approval of the Annual General statements”. Capital management section or in other parts of the “Financial above, have been included in the notes, the Risk, Liquidity and visory Authority (FFFS 2008:25) have also been applied. Board as well as the accounting regulations of the Financial Super and UFR statements issued by the Swedish Financial Reporting dation RFR 1.1 ”Supplementary Accounting Rules for Groups” Institutions and Securities Companies (1995:1559), the recommen- mentary rules in the Swedish Act on Annual Accounts of Credit endorsed by the EU Commission. In addition, certain comple- Financial Reporting Interpretations Committee (IFRIC), as (IFRS) and interpretations of such standards by the International ­accordance with International Financial Reporting Standards Nordea’s consolidated financial statements are prepared in 1. 27. 21. 24. 23. 22. 20. 19. 18. 17. 16. 15. 14. 13. 12. 11. 10.

Table of contents Notes to the financial statements Note 1 9. 7. 6. 8. 5. 4. 3. 2. 1. On 17 February 2009 the Board of Directors approved the finan- The disclosures, required in the standards and legislation Changed accounting policies and presentation Comparative figures Basis for presentation Parent company Segment reporting Exchange rates Pensions to employees. Related-party transactions Share-based payment Equity Earnings per share Taxes Liabilities to policyholders Investment property Property and equipment Intangible Intangible assets Leasing Loans and receivables Financial instruments Cash and cash equivalents Determination of fair value of financial instruments Hedge accounting in the balance sheet Recognition and derecognition of financial instruments Recognition of operating income in foreign currencies Translation of assets and liabilities denominated Principles of consolidation uncertainty Critical judgements and key sources of estimation Changed accounting policies and presentation Comparative figures Basis Basis for presentation ...... Accounting policies ......

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90 88 87 98 98 96 96 96 96 94 94 90 90 88 89 95 95 95 93 91 91 91 97 97 97 87 87 - the applicable balance sheet lines is described in the table below. bearing security as “Interest-bearing securities”. The impact on securities are classified as “Treasury bills” and any other interest been changed to “Treasury bills”. Central- and local government The balance sheet line “Treasury bills and other eligible bills” has Presentation of treasury bills and other eligible bills Dividends items at fair value Net gains/losses on EURm below. in 2008 and on the comparative figures is disclosed in the table from the item “Dividends”. The impact on the income statement at fair value” and have therefore, to some extent, been reclassified Received dividends are recognised as “Net gains/losses on items Presentation of received dividends a chasing in the near term. Nordea has made no reclassification as the assets are no longer held for the purpose of selling or repur reclassified out of the fair value through profit or loss category if when the assets meet the definition of loans and receivables, be amendment was that financial assets can, in rare circumstances or October with effective date 1 July 2008. The impact from this made, as an amendment to IAS 39 and IFRS 7 was published in rately below. dends and treasury bills and other eligible bills presented sepa- 2007 Annual Report, except for the presentation of received divi- securities Interest-bearing Treasury bills EURm and interpretations not yet implemented would, if implemented a significant impact on Nordea if implemented in advance. The assessment is that none of these interpretationsthat are wouldrelevant have forhad Nordea have been publishedmandatory (IFRICfor 13,Nordea 14, in 16). 2008, but allowed to implement in advance, of operating segments. assets and IFRS 8 would have had an impact on the presentation impact on the valuation of developed intangible and tangible has chosen not to implement in advance. untarily to adopt these new standards already in 2008, but Nordea force on 1 July 2009 applicable for Nordea as from 2010. It is vol- except for IFRS 3, parts of IAS 27 and IAS 39, which will come into new or updated standards will come into force on 1 January 2009, “Operating segments” as well as “Improvement to IFRSs”. These “Share-based Payment” and published the new standard IFRS 8 “Financial instruments: Recognition and Measurement”, IFRS 2 Statements”, IAS 32 “Financial Instruments: Presentation”, IAS 39 Costs”, amended IAS 27 “Consolidated and Separate Financial ­“Presentation of Financial Statements”, IAS 23 “Borrowing IASB has revised IFRS 3 “Business Combinations”, IAS 1 Forthcoming changes in IFRSs consequence of this amendment. An addition to the accounting policies has furthermore been The abovementioned new, revised and amended standards In addition to changes in these standards, new interpretations not If implemented in advance, IAS 23 would have had a limited

44,830 stated stated 1,028 6,545 Re- Re- 31 Dec 2008 – 2008 Pre policy Pre policy change change 39,825 11,550 1,016 12 Financial statements

38,782 stated stated 1,209 5,193 Re- Re- 31 Dec 2007 – 2007 ported ported 35,472 1,187 8,503 - Re- Re- 22 87 Nordea Annual Report 2008 88 Nordea Annual Report 2008 The • The • prices or recently observed market prices in the following areas: OTC Derivatives and other financial instruments that lack quoted Critical judgement is exercised when determining fair value of Fair value measurement claims • the • the • the • the • in particular associated with: inherently uncertain. These critical judgements and estimates are and estimates, the majority of which relate to matters that are management to make difficult, complex or subjective judgements important to the financial position of Nordea, since they require extent, differ from the estimates and the assumptions made. financial statements presented. Actual outcome can later, to some and off-balance sheet items, as well as income and expenses in the ment behind them affect the reported amounts of assets, liabilities believes are fair and reasonable. These estimates and the judge- are based on past experience and assumptions that management use of estimates and assumptions by management. The estimates ally accepted accounting principles requires, in some cases, the The preparation of financial statements in accordance with gener uncertainty 4. adequacy. in 2008, have had only an insignificant impact on Nordea’s capital Financial statements customer. mation of the most probable future cash flows generated from the judgement, containing the highest uncertainty, relates to the esti- When testing individual loans for impairment, the most critical Loans and receivables “Intangible assets”. cash flows and may result in impairment charges of goodwill. conditions, competition, strategy or other, affects the forecasted Changes to any of these parameters, following changes in market growth, business volumes, margins and cost effectiveness. and include parameters like macroeconomic assumptions, market tions and estimates have significant effect on these calculations units to which goodwill has been allocated. A number of assump- estimates of future revenues and expenses for the cash-generating cash-generating unit, to which the goodwill has been allocated. measured as the present value of the cash flows expected from the the recoverable amount involves establishing the value in use, ing amount of goodwill is fully recoverable. The determination of impaired. This consists of an analysis to assess whether the carry- events or changes in circumstances indicate that it might be Goodwill is tested for impairment annually, or more frequently if Goodwill Impairment testing value”. financial instruments” and Note 48 “Assets and liabilities at fair policies. judgement in accordance with Nordea’s accounting and valuation In all of these instances, decisions are based upon professional The • The • – – Certain accounting policies are considered to be particularly See also the separate section 15 “Intangible assets” and Note 24 The forecasts of future cash flows are based on Nordea’s best See also the separate section 10 “Determination of fair value of liquidity risk. rate relevant risk factors such as credit risk, model risk and value. Critical judgements and key sources of estimation loans and receivables. goodwill and actuarial actuarial impairment fair

judgement determination choice construction in value civil of calculations calculations valuation measurement lawsuits.

of testing of

which of fair when of: techniques. value

market of of quoted liabilities pension of adjustments certain

parameters prices liabilities. to financial policyholders. fail in

that order to instruments.

represent are to

observable. incorpo- fair - cost of the business combination is the aggregate of the fair values, nised identifiable assets, liabilities and contingent liabilities. The the business combination is established as the fair values of recog- in a purchase price allocation analysis. In such analysis, the cost of tingent liabilities. The acquisition cost to the Group is established acquires the subsidiary’s assets and assumes its liabilities and con- regarded as a transaction whereby the parent company indirectly pooling method. Under the purchase method, the acquisition is holding in Nordea Bank Finland Plc was consolidated using the method, except for the forming of Nordea in 1997–98 when the the financial and operating policies of the entity. per cent of the voting rights or otherwise has the power to govern directly or indirectly through group undertakings, more than 50 nition is generally fulfilled when the parent company owns, meet the definition of a subsidiary according to IAS 27. This defi- parent company Nordea Bank AB (publ), and those entities that The consolidated financial statements include the accounts of the Consolidated entities 5. on Nordea or its financial position. putes are considered likely to have any significant adverse effect of which involve relatively limited amounts. None of these dis- faces a number of claims in civil lawsuits and other disputes, most Within the framework of the normal business operations, Nordea Claims in civil lawsuits and Note 43 “Contingent liabilities”. tax expenses effect the calculation of policyholder liabilities. dea’s discretion. Also assumptions for future administrative and extent, stipulated in local legislation and therefore not under Nor cash flows. The financial and actuarial assumptions are, to a large ity assumptions, which affect the size and timing of the future Other important actuarial assumptions are mortality and disabil- tions is the interest rate used for discounting future cash flows. financial and actuarial. One of the important financial assump- of these liabilities includes estimations and assumptions, both with some insurance contracts having long durations. A valuation The liabilities to policyholders consist of long-term obligations Actuarial calculations for liabilities to policyholders Note 32 “Liabilities to policyholders”. disclosed in Note 37 “Retirement benefit obligations”. return on the different asset classes. The expected return is also asset composition and based on long-term expectations on the The expected return on plan assets is fixed taking into account the invested in liquid assets and valued at market price at year-end. disclosed in Note 37 “Retirement benefit obligations”. of these parameters. The fixing of these parameters at year-end is inflation are fixed based on the expected long-term development Other parameters like assumptions as to salary increases and used. The most important financial parameter is the discount rate. calculations a number of actuarial and financial parameters are assumptions based on the current population. As a basis for these plans is calculated by external actuaries using demographic The Projected Benefit pension Obligation (PBO) for major pension employees Actuarial calculations of pension liabilities related to Note 16 “Loans and receivables and their impairment”. current situation. adjusting the assumptions based on historical data to reflect the when using historical data and the acquired experience when customers in the group contains a high degree of uncertainty Assessing the net present value of the cash flows generated by the indicate that losses have been incurred in the group of loans. aspect is to identify the events and/or the observable data that When testing a group of loans collectively for impairment, the key All Group undertakings are consolidated using the purchase See also the separate section 18 “Liabilities to policyholders” See also the separate section 21 “Pensions to employees” and The major part of the assets covering the pension liabilities is See also the separate section 13 “Loans and receivables” and Principles of consolidation - (publ). The current method is used when translating the financial the presentation currency of the parent company Nordea Bank AB The consolidated financial statements are prepared in euro (EUR), Currency translation of foreign entities group undertakings are eliminated. Intra-group transactions and balances between the consolidated Principles of elimination Note 22 “Investments in Group undertakings”. SPEs that are consolidated in the Group are further described in have the majority of the residual- or ownership risk. benefits from its activities through such power. Nor does Nordea ties. Nordea consequently does not have the objective of obtaining power to govern the financial and operating policies of these enti- rights and obligations indicate that Nordea does not have the investments are not consolidated as Nordea’s legal and contractual tal invested. In most instances, SPEs used to allow clients to hold trative decisions, but has no or only an insignificant amount of capi- ager and has sole discretion about investments and other adminis- custodian or in some other function. Nordea is the investment man- for the creation of the SPE, or because it acts as investment manager,clients. Typically, Nordea will receive service and commission andfees rewards of the assets held by the SPE entirely reside with mutualthe funds), which are generally purchased by the SPE. The risks allow one or more clients to invest in an asset or set of assets (e.g. nificant risks or rewards on these assets and liabilities. not consolidated the rationale is that Nordea does not have any sig- retained the majority of the risks and rewards. For the SPEs thatownership risks. areNordea consolidates all SPEs, where Nordea has obtain the majority of the benefits or the majority of the residual-Nordea or has in substance the decision making powers, the rights to of the SPE are being in substance conducted on Nordea’s behalf or of if factors are evaluated. These factors include whether the activities tional decisions for the SPE in question. about risks and rewards and assesses the ability to make opera- Nordea controls an SPE or not, Nordea has to make judgements and liabilities beyond its control. In order to determine whether In accordance with IFRS Nordea does not consolidate SPEs’ assets Special Purpose Entities (SPE) income tax expense for Nordea. the tax expense related to these profits is not included in the are reported post-taxes in the income statement. Consequently, value in accordance with the rules set out in IAS 28 and IAS 39. venture capital organisation within Nordea, are measured at fair within Nordea’s investment activities, which are classified as a and/or where Nordea has significant influence. Investments ings where the share of voting rights is between 20 and 50 per cent The equity method of accounting is used for associated undertak- Investments in associated undertakings Nordea. is adjusted to ensure consistency with IFRS principles applied by separately disclosed in the balance sheet and income statement. trol ceases. dea and are no longer consolidated as from the date on which con- accounts as from the date on which control is transferred to Nor recognised in the income statement. will. If the difference is negative, such difference is immediately liabilities and contingent liabilities, the excess is reported as good- combination exceeds the net fair value of the identifiable assets, utable to the business combination. When the cost of the business exchange for the net assets acquired, plus any costs directly attrib- assumed and equity instruments issued by the acquirer, in at the date of exchange, of assets given, liabilities incurred or The number of SPEs that Nordea has created is limited. The SPEs used to allow clients to hold investments are structures that When assessing whether Nordea shall consolidate a SPE, a range Profits from companies accounted for under the equity method In the consolidation process the reporting from the subsidiaries Equity and net income attributable to minority interests are The Group undertakings are included in the consolidated - Investment • Foreign • in collective bonus potential, Life, correspond mainly to the part mentioned income lines in the note. Gains and losses derived from assets in Life are split on the above- Life insurance Other • Interest-bearing • Shares/participations • value”. are recognised in the item “Net gains/losses on items at fair Markets and Life, on financial instruments measured at fair value Realised and unrealised gains and losses, including net interest in Net gains/losses on items at fair value and “Fee and commission expense” respectively. the instruments and classified as “Fee and commission income” bought financial guarantees are amortised over the duration of the period when the services are received. pleted, i.e. when the syndication has been finalised. certain acts are recognised as revenue when the act has been com- for arranging a loan as well as other fees received as payments for services are provided. A loan syndication fee received as payment performed services are recognised as income in the period these the execution of a significant act. Fees received in connection to ognised as revenue when services are provided or in connection to on the purpose for which the fees are received. Fees are either rec- to its customers. The recognition of commission income depends Nordea earns commission income from different services provided Net fee and commission income external interest income and interest expense. internal funding of Markets are replaced with the related Group income and expense connected to internal placements by and on the line “Net gains/losses on items at fair value”. Interest items in Markets and Life are recognised in the income statement interest rate method as basis for the calculation. expense that is a reasonable approximation of using the effective based on a method that results in an interest income or interest on the effective interest rate method or, if considered appropriate, Interest income and expense are calculated and recognised based Net interest income 6. “Acquisitions” for more information. tute a business under IFRS 3, from Roskilde Bank. See Note 54 been effected as Nordea has acquired nine branches, which consti- during the year. A business combination has, on the other hand, There have been no significant changes in the Group structure Changes in Group structure in the separate section 27 “Exchange rates”. liabilities and are also translated at the closing rate. tion of group undertakings are treated as local currency assets and differences are accounted for directly in equity. translated at the average exchange rate for the year. Translation lated at the closing rates, while items in the income statements are rency. The assets and liabilities of foreign entities have been trans- statements of foreign entities into EUR from their functional cur as well as commodity instruments/derivatives. The note lines Change in technical provisions, Life and Change investment properties in Life. as the running property yield stemming from the holding of This line also includes realised results from divestments as well un­ ments. Realised and unrealised gains and losses derive from: Income from issued financial guarantees and expenses from Commission expenses are transaction based and recognised in Interest income and interest expense related to all balance sheet Information on the most important exchange rates is disclosed Goodwill and fair value adjustments arising from the acquisi- Recognition of operating income realised income, for instance revaluation gains and losses. financial exchange properties, instruments, securities gains/losses. and Life, and other which which other share-related includes contain interest-related Financial statements credit realised instruments. derivatives and instru- - 89 Nordea Annual Report 2008 90 Nordea Annual Report 2008 parent company Nordea Bank AB (publ) uses two functional cur primary economic environment in which the entity operates. The The functional currency of each entity is decided based upon the foreign currencies 8. “Obtained collaterals which are permitted to be sold or repledged”. agreements” within 12 “Financial instruments”, as well as Note 50 lending agreements” and “Repurchase and reverse repurchase the counterpart, i.e. on settlement date. Nordea performs, for example when Nordea repays a deposit to when the liability is extinguished. Normally this occurs when accounting is applied, are derecognised from the balance sheet ments. include e.g. security lending agreements and repurchase agree- assets with retention of all or substantially all risks and rewards ments pledged as collateral” in the balance sheet. Transfers of the assets. If all or substantially all risks and rewards are retained, either all or a portion of risks and rewards of the transferred fers assets that are recognised on the balance sheet, but retains formed by e.g. repaying a loan to Nordea, i.e. on settlement date. normally expire or are transferred when the counterpart has per or are transferred to another party. The rights to the cash flows contractual rights to the cash flows from the financial asset expire ing is applied, are derecognised from the balance sheet when the recognised on the balance sheet on settlement date. balance sheet on the trade date. Other financial instruments are spot transactions are recognised on and derecognised from the Derivative instruments, quoted securities and foreign exchange the balance sheet 7. when the transactions have been finalised. not related to any other income line, are generally recognised Net gains from divestments of shares and other operating income, Other operating income tion is available. financial statements of Nordea in the period in which the informa- external reporting provided by the associates and affects the these profits is excluded from the income tax expense for Nordea. income statement post-taxes. Consequently, tax expense related to panies accounted for under the equity method are reported in the share of net assets in the associated companies. Profits from com- method is defined as the post-acquisition change in Nordea’s The profit from companies accounted for under the equity Profit from companies accounted for under the equity method receive payment is established. the note. Income is recognised in the period in which the right to “Shares/participations and other share-related instruments” in “Net gains/losses on items at fair value” and classified as Dividends received are recognised in the income statement as Dividends Life. note as Insurance risk income, Life and Insurance risk expense, lines in the income statement, this result is presented within the not material in comparison with the other income and expense result and is presented separately in the note. As the net income is cyholders”. deposits. See further information in section 18 “Liabilities to poli- risk are reported in the balance sheet as increases or decreases in received, and repayments to policyholders, related to the financial Nordea has disclosed these lines separately in the note. Premiums of the financial result transferred to the policyholders within Life. Financial statements Recognition and derecognition of financial instruments in For further information, see sections “Securities borrowing and Financial liabilities, other than those for which trade date In some cases, Nordea enters into transactions where it trans- Financial assets, other than those for which trade date account- The change in Nordea’s share of the net assets is based on the The insurance risk result is separated from the financial risk Translation of assets and liabilities denominated in transferred assets are reclassified to the item “Financial instru - - - ognised directly in equity. The ineffective portion of the gain or ing instrument, that is determined to be an effective hedge, is rec- variable interest rates. The portion of the gain or loss on the hedg- to variations in future interest payments on asset or liabilities with Cash flow hedge accounting is used for the hedging of exposure Cash flow hedge accounting losses on items at fair value”. is affecting the income statement under the item “Net gains/ consequently measured and evaluated so that any ineffectiveness a portfolio basis. The effectiveness of the hedging relationships is portfolio hedge of interest rate risk” in accordance with IAS 39. from the portfolio in “Fair value changes of the hedged items in in a portfolio hedge of interest rate risks is reported separately in the income statement. The fair value change of the hedged item the carrying amount of the hedged item, which is also recognised with the derivative instrument are reflected in an adjustment to in fair value of the hedged item attributable to the risks hedged balance, meaning the net result will be close to zero. The changes an effective hedge, the two changes in fair value will more or less ment in the item “Net gains/losses on items at fair value”. Given being hedged will be recognised separately in the income state- changes in fair value of the hedged item attributable to the risks interest rate risk. Changes in fair value from derivatives as well as loans, securities and deposits with a fixed interest rate, causing bilities in Nordea’s financial statements originates mainly from to a specific risk. The risk of changes in fair value of assets and lia- changes in fair value of a recognised asset or liability attributable Fair value hedge accounting is used when derivatives are hedging Fair value hedge accounting Hedges • Cash • Fair • and for hedge accounting lies within Group Treasury. ments. The overall operational responsibility to hedge positions sentation of Nordea’s economical hedges in the financial state- eign operations. The overall purpose is to have a true and fair pre- exposure to variability in cash flows and net investments in for in fair value of the hedging instruments and in order to hedge the ment of the changes in fair value of the hedged item and changes hedge accounting in order to have a symmetrical accounting treat- oped to fulfil the requirements set out in IAS 39. Nordea uses of both assets and liabilities. dea applies the EU carve out version of IAS 39 for portfolio hedges hedge accounting. All derivatives are measured at fair value. Nor hedging instruments and the underlying hedged item, so-called IAS 39 includes principles and rules concerning accounting for 9. value”. income statement in the item “Net gains/losses on items at fair undertaking into Nordea. Any ineffectiveness is recognised in the tion differences affecting equity when consolidating the group hedge is effective. This is performed in order to offset the transla- group undertaking are recognised in equity, to the extent the nated hedging instruments in a hedge of a net investment in a ment in the item “Net gains/losses on items at fair value”. monetary assets and liabilities, are recognised in the income state- unrealised translation differences on unsettled foreign currency at rates different from those at the date of the transaction, and are translated at the exchange rate on the balance sheet date. Monetary assets and liabilities denominated in foreign currencies are recorded at the exchange rate on the date of the transaction. functional currency of the entity. Foreign currency transactions ent activities in the underlying business. rencies for reporting in consolidated accounts, based on the differ Fair value hedge accounting in Nordea is performed mainly on According to IAS 39 there are three forms of hedge accounting: The hedge accounting policy within Nordea has been devel- Translation differences on financial instruments that are desig- Exchange differences arising on the settlement of transactions Foreign currency is defined as any currency other than the Hedge accounting value flow of hedge hedge net investments. accounting. accounting. - - - teristics. as well as a group of assets or liabilities with similar risk charac- According to IAS 39 a hedged item can be a single asset or liability Hedged items only used as hedging instruments when hedging currency risk. ments are only utilised in a few transactions. Cash instruments are interest rate swaps. Currency interest rate swaps and cash instru- The hedging instruments used in Nordea are predominantly Hedging instruments inated in foreign currency”. See separate section 8 “Translation of assets and liabilities denom- Hedges of net investments interest income or interest expense from the hedged asset or liability. equity are recognised in the income statement in the same period as gains/losses on items at fair value” in the income statement. loss on the hedging instrument is recognised in the item “Net Debt • Derivatives • Shares. • Interest-bearing • Treasury • value for items disclosed under the following balance sheet items: dominantly using published price quotations to establish fair to measure financial assets and financial liabilities. Nordea is pre- is the best evidence of fair value and when they exist they are used knowledgeable, willing parties in an arm’s length transaction. which an asset could be exchanged, or a liability settled, between losses on items at fair value”. value recognised in the income statement in the item “Net gains/ are recorded at fair value on the balance sheet with changes in fair ties at fair value through profit or loss and derivative instruments Financial assets and liabilities classified as financial assets/liabili- 10. value” in the income statement. is reclassified from equity to “Net gains/losses on items at fair prehensive income from the period when the hedge was effective on the hedging instrument that has been recognised in other com- the hedged item. In cash flow hedges, the cumulative gain or loss statement on a straight-line basis over the remaining maturity of the hedge relationship is terminated, is amortised to the income change in the fair value on the hedged item, up to the point when ment at fair value through profit or loss. For fair value hedges, the it was last proven effective, be accounted for in the income state- lised value of the derivatives will, prospectively from the last time hedge accounting will be terminated. The change in the unrea- made on a cumulative basis. fair value of the hedged item. The effectiveness measurement is the change in fair value of the hedging instrument to the change in measures the fair value of the hedging instruments and compares range of 80–125 per cent. fair value of the hedging instrument. The result should be within a value of the hedged item can be essentially offset by changes in tion and throughout its life it can be expected that changes in fair highly effective. A hedge is regarded as highly effective if at incep- The application of hedge accounting requires the hedge to be Hedge effectiveness or liabilities and portfolios of assets or liabilities. valuation technique. Valuation techniques can range from simple are not available, fair value is established by using an appropriate and regularly occurring market transactions or if quoted prices If quoted prices for a financial instrument fail to represent actual Gains or losses on hedging instruments recognised directly in The existence of published price quotations in an active market Fair value is defined by IAS 32 and IAS 39 as the amount for If the hedge relationship does not fulfil the requirements, When assessing hedge effectiveness retrospectively Nordea Kredit Realkreditaktieselskab). Determination of fair value of financial instruments securities Hedged bills. (listed items in securities. issue derivatives). in Nordea (issued mortgage consist of both bonds individual in Nordea assets – Financial • Financial assets: classified into one of the following categories: Each financial instrument within the scope of IAS 39 has been Classification of financial instruments 12. flow statement. are also recognised as “Cash and cash equivalents” in the cash “Financial instruments”. within the category “Loans and receivables”, see section 12 Cash and cash equivalents are financial instruments classified The • The • tral banks where the following conditions are fulfilled: Cash and cash equivalents consist of cash and balances with cen- 11. fair value”. and Risk Control and all models are reviewed on a regular basis. sider when setting a price. ments, and incorporate the factors that market participants con- accepted economic methodologies for pricing financial instru- income statement over the contractual life of the contract any upfront gains are thereby deferred and amortised through the initially at the fair value estimated by the valuation technique and non-observable data is used, the instrument cannot be recognised where this data is judged to represent realistic market prices. If can be collected from generally available external sources and kets. By data from observable markets, Nordea considers data that the valuation model are fully based on data from observable mar ation technique, it is investigated whether the variables used in For financial instruments, where fair value is estimated by a valu- Sensitivity • Benchmarking • portfolio adjustment for model risk comprises two components: as the portfolio’s counter party credit risk and liquidity risk. The niques, model assumptions and unobservable parameters as well adjustment covers uncertainties associated with the valuation tech- tion is supplemented by a portfolio adjustment. The portfolio parameters and assuming no risks and uncertainties. This calcula- individual contracts, based on independently sourced market Fair value is calculated as the theoretical net present value of the Derivatives • Shares • Interest-bearing • Loans • Treasury • under the following balance sheet items: valuation techniques to establish fair value for items disclosed unobservable model parameters. Nordea is predominantly using and rates as input whenever possible, but can also make use of Valuation models are designed to apply observable market prices discounted cash flow analysis to complex option pricing models. – Loans and receivables to credit institutions payable on demand operating under a banking licence. For further information, see Note 48 “Assets and liabilities at New valuation models are subject to approval by Group Credit The valuation models applied by Nordea are consistent with varied to take other reasonable values. where available. market information or against results from alternative models, able). market are not available). ­Danish subsidiary Nordea Kredit Realkreditaktieselskab). available). Financial instruments Cash and cash equivalents value through profit or loss (Fair Value Option). Financial assets upon initial recognition designated at fair Held balance central and (when for bills assets receivables calculations trading. bank (OTC-derivatives). is quoted (when readily of at securities is the fair domiciled quoted model prices available value to where the (when in output through prices public in unobservable an at a quoted active country any in (mortgage (market profit an time. Financial statements market active prices where or values) parameters loss: loans market in are Nordea an not against in active are the avail- are is not - 91 Nordea Annual Report 2008 92 Nordea Annual Report 2008 Held-to-maturity Held to maturity investments in the separate section 13 “Loans and receivables”. market. These assets and their impairment are further described fixed or determinable payments, that are not quoted in an active Loans and receivables are non-derivative financial assets, with Loans and receivables assets and financial liabilities at fair value through profit or loss. assets and financial liabilities in Markets are classified as Financial cial assets and liabilities to fair value. Consequently, all financial stems from that Markets is managing and measuring all its finan- assets and financial liabilities related to Markets. The classification of that these assets and liabilities are managed on a fair ment valuecontracts in basis.Life also belongs to this category, as a consequence accounting mismatch. Interest-bearing securities, shares and invest- through profit or loss to eliminate or significantly reduce an classified as upon initial recognition designated at fair value Assets and liabilities in Nordea Kredit Realkreditaktieselskab are est-bearing securities, shares and investment contracts in Life. Danish subsidiary Nordea Kredit Realkreditaktieselskab and inter profit or loss are mortgage loans and related issued bondsliabilities in the upon initial recognition designated at fair value through trading liabilities such as short-selling positions. securities and shares within Markets and Treasury. It also contains instruments that are held for trading purposes, interest-bearing designated at fair value through profit or loss (Fair value option). and Financial assets/financial liabilities upon initial recognition ment in the item “Net gains/losses on items at fair value”. changes in fair values are recognised directly in the income state- or loss are measured at fair value, excluding transaction costs. All Financial assets and financial liabilities at fair value through profit through profit or loss Financial assets and financial liabilities at fair value sheet is presented. the classification of the financial instruments in Nordea’s balance recognised. In Note 47 “Classification of financial instruments” measured in the balance sheet and how changes in its value are egories forms the basis for how each instrument is subsequently value. The classification of financial instruments into different cat- All financial assets and liabilities are initially measured at fair Other • – Financial • Financial liabilities: Available • Held • Loans • Financial statements tive evidence of impairment. more information on the identification and measurement of objec- the income statement. See section 13 “Loans and receivables” for estimated future cash flows and is recognised as “Loan losses” in difference between the carrying amount and the present value of dence, an impairment loss is recorded. The loss is calculated as the objective evidence that the asset is impaired. If there is such evi- term using the effective interest rate method. value is amortised in the income statement over the remaining surement, the difference between acquisition cost and redemption gory are measured at amortised cost. In an amortised cost mea- Subsequent to initial recognition, the instruments within this cate- ance sheet at the acquisition price, including transaction costs. Nordea also applies the Fair value option on certain financial The major parts of the sub-categories Financial assets/financial The The – Nordea assesses at each reporting date whether there is any value through profit or loss (Fair Value Option). Financial liabilities upon initial recognition designated at fair Held sub-category category to financial and for maturity liabilities for receivables. trading. sale consists investments liabilities. investments. financial Held at fair of for two value trading assets. are sub-categories; initially through mainly recognised profit contains Held

or loss: for in derivative trading the bal- - rity for own liabilities”. recognised off-balance sheet in the item “Assets pledged as secu - instruments pledged as collateral”. the securities are recognised on the balance sheet as “Financial the counterpart has the right to resell or repledge the securities, ised from or recognised on the balance sheet. In the cases where received under reverse repurchase agreements are not derecogn- Securities delivered under repurchase agreements and securities Repurchase and reverse repurchase agreements are recognised in “Net gains/losses on items at fair value”. ings from the public”. as “Deposits by credit institutions” or as “Deposits and borrow- received from the counterparts is recognised on the balance sheet or as “Loans and receivables to the public”. Cash collateral the balance sheet as “Loans and receivables to credit institutions” “Assets pledged as security for own liabilities”. cial instruments pledged as collateral”. ties, the securities are recognised on the balance sheet as “Finan- where the counterpart is entitled to resell or repledge the securi- ognised from or recognised on the balance sheet. In the cases rewards of ownership are transferred, the securities are not derec- tions are entered into on a collateralised basis. Unless the risks and Generally, securities borrowing and securities lending transac- Securities borrowing and lending agreements the item “Net gains/losses on items at fair value”. Changes in fair values are recognised in the income statement in derivative, is measured at fair value through profit or loss. bined instrument, host contract together with the embedded portfolio item “Net gains/losses on items at fair value”. ded derivatives, are recognised in the income statement in the of a derivative instrument. Changes in fair values, of the embed- tract, and the embedded derivative actually meets the definition related to the economic characteristics and risks of the host con- teristics and risks of the embedded derivative are not closely for as stand-alone derivatives at fair value, if the economic charac- instruments are separated from the host contract and accounted sured at amortised cost. The embedded derivatives in those to be part of the funding activities. The zero coupon bond, is mea- debt instruments, such as issued index-linked bonds. combinations arise predominantly from the issuance of structured a host contract and an embedded derivative instrument. Such Hybrid Hybrid (combined) financial instruments item “Interest expense” in the income statement. cost. Interest from Other financial liabilities is recognised in the ties at fair value through profit or loss, are measured at amortised Financial liabilities, other than those classified as Financial liabili- Other financial liabilities value”. income statement in the item “Net gains/losses on items at fair ised in equity are removed from equity and recognised in the accumulated fair value changes that previously have been recogn- value”. income statement in the item “Net gains/losses on items at fair losses from Available for sale financial assets are recognised in the income statement. Foreign exchange effects and impairment reserves in equity. Interest is recognised as interest income in the and impairment losses, are recognised directly in the revaluation Changes in fair values, except for interest, foreign exchange effects Available for sale financial assets are measured at fair value. Available for sale financial assets Securities received under reverse repurchase agreements are Interest income and expense generated from these transactions Cash collateral advanced to the counterparts is recognised on Borrowed securities are recognised off balance sheet in the item Index-linked bonds issued by Markets as part of the trading Index-linked bonds issued by Group Treasury are considered When an available for sale financial assets is disposed of, the (combined) are classified financial as Held instruments for trading, are and contracts the entire containing com- events indicating incurred losses in a group. terly risk reviews. Through these processes Nordea identifies loss credit decision and annual review process supplemented by quar Nordea monitors its portfolio through rating migrations, the ability to pay all amounts due according to the contractual terms. similar credit risk characteristics that are indicative of the debtors’ assessed for impairment. The loans are grouped on the basis of All loans not impaired on an individual basis are collectively Impairment test of loans attached to groups of customers impairment test. a group of loans with similar risk characteristics for a collective including the fair value of the collaterals, the loan is impaired. than the net present value of the estimated future cash flows, assessed at fair value. If the carrying amount of the loan is higherent value. Collaterals received to mitigate the credit risk will be are then discounted by the effective interest rate giving the net pres- able future cash flows generated by the customer. These cash flows impairment, an assessment is performed to estimate the most prob- and Capital Management” section, sub-section “Credit risk”. identification of loss events can be found in the “Risk, Liquidity sent objective evidence of impairment. More information on the indicators for impairment (loss event) and whether these repre- process for impaired loans, Nordea monitors whether there are loans have become impaired. As a first step in the identification basis. The purpose of the impairment tests is to find out if the Nordea tests significant loans for impairment on an individual Impairment test of loans attached to individual customers dence of impairment tified as impaired if the impairment test indicates objective evi- attached to individual customers or groups of customers are iden- arate section on Risk, Liquidity and Capital management. Loans well as Note 47 ”Classification of financial instruments”). derecognition of financial instruments in the balance sheet” as amortised cost (see also the separate section 7 “Recognition and Loans and receivables not measured at fair value are measured at 13. ised off-balance sheet in the item “Contingent liabilities”. are recognised in the income statement in the item “Loan losses”. tle the present obligation. Provisions and changes in provisions as the discounted best estimate of the expenditure required to set- received guarantee fee less amortisation, or a provision calculated recognised on the balance sheet, at the higher of either the balance sheet. The guarantees are subsequently measured, and cial guarantee contracts are recognised as deferred income on the Upon initial recognition, the premiums received in issued finan- Financial guarantee contracts on items at fair value”. recognised in the income statement in the item “Net gains/losses interest, are recognised as liabilities in the item “Derivatives”. Derivatives with total negative fair values, including any accrued accrued interest, are recognised as assets in the item “Derivatives”. fair value. Derivatives with total positive fair values, including any All derivatives are recognised on the balance sheet and measured at Derivatives (short sale). chase agreements trigger the recognition of a trading liability receivables to the public”. “Loans and receivables to credit institutions” or as “Loans and repurchase agreements is recognised on the balance sheet as and borrowings from the public”. Cash delivered under reverse balance sheet as “Deposits by credit institutions” or as “Deposits Cash received under repurchase agreements is recognised on the Loans that are not individually impaired will be transferred to In the process to conclude whether there is objective evidence of Nordea monitors loans and receivables as described in the sep- The contractual amounts from financial guarantees are recogn- Realised and unrealised gains and losses from derivatives are Additionally, the sale of securities received in reverse repur Loans and receivables - - pledged for the conceded loans, shares issued by the obligor or obligor and in exchange for this concession acquires an asset In a financial reconstruction the creditor may concede loans to the Assets taken over for protection of claims recovery, reported as recoveries of realised loan losses. regain the realised loan losses incurred. This is, in the event of a regarded as final losses unless Nordea retains the possibility to the new conditions. Concessions made in reconstructions are is normally regarded as not impaired if it performs according to an impairment loss for the creditor. After a reconstruction the loan rated financial situation and where this concession has resulted in creditor has granted concessions to the obligor due to its deterio- In this context a restructured loan is defined as a loan where the Restructured loans and, if applicable, to a group of loans. effective interest rate for loans attached to an individual customer The discount rate used to measure impairment is the original Discount rate recovered. dea, for other reasons, deem it unlikely that the claim will be through a legal based or voluntary reconstruction or when Nor ruptcy procedure, or when Nordea forgives its claims either administrator has declared the economic outcome of the bank- regarded as final when the obligor is filed for bankruptcy and the “Loan losses” in the income statement. An impairment loss is with a corresponding gain or loss recognised in the line item and the related allowance for impairment loss are derecognised realised loss. A realised loss is recognised and the value of the loan allowance account and as “Loan losses” in the income statement. accumulated impairment losses will be recorded as changes in the accumulated impairment losses. Changes in the credit risk and loss is accounted for on an allowance account representing the the impairment loss. of the collaterals and other credit enhancements, the difference is net present value of estimated cash flows, including the fair value If the carrying amount of the loans is higher than the sum of the Impairment loss future cash flows are insufficient to serve the loans in full. risk characteristics where Nordea assesses that the customers’ cash-flows. Netting is only performed within groups with similar losses on loans that are down-rated due to estimated decreases in increases in cash flows, this improvement will be netted against ciple, i.e. when rated engagements are up-rated due to estimated Risk, Liquidity and Capital management. models are described in more detail in the separate section on enced judgement performed by management. Rating and scoring data, as default rates and loss rates given a default, and experi- through scoring models. These are based mostly on historical sonal customers and small corporate customers are monitored certain macro parameters, e.g. dependency to oil prices etc. Per grouped mostly based on type of industry and/or sensitivity to the risk for a default in a rating class. These loans are rated and Nordea uses historical data on probability of default to estimate the existing rating system as a basis when assessing the credit risk. engagement or by other indicators. ual basis. The identification is made through a default of the group of loans until the losses have been identified on an individ- “Emergence period”. The impairment remains related to the and the date when it is identified on an individual basis is called basis. This period between the date when the loss event occurred has occurred, which has not yet been identified on an individual there is a need to make a provision due to the fact that a loss event when performing the assessment of the group. Only loss events incurred up to the reporting date are included If the impairment loss is regarded as final, it is reported as a If the impairment loss is not regarded as final, the impairment The collective assessment is performed through a netting prin- For corporate customers and bank counterparts, Nordea uses The objective for the group assessment process is to evaluate if Financial statements - - 93 Nordea Annual Report 2008 94 Nordea Annual Report 2008 for these premises is recognised on the basis of the time-pattern of leases are thus classified as operating leases. The rental expense term is not for the major part of the assets’ economic life. These appreciation in value of the leased property. In addition, the lease asset by the end of the lease term, nor any economic benefits from The lease agreements include no transfers of ownerships of the lease agreements were initially 3-25 years with renewal options. that Nordea has divested are leased back. The duration of the and office equipment contracts normal to the business. years. pattern of the benefit.user’s The lease terms range between 3 to 25 lease term unless another systematic way better reflects the time expenses in the income statement on a straight-line basis over the For operating leases the lease payments are recognised as Operating leases similar owned assets. leased assets is performed following the same principles as for tent with that of the assets in own use. Impairment testing of tion expense for the leased asset. The depreciation policy is consis- bility for each period. A finance lease also gives rise to a deprecia- stant periodic rate of interest on the remaining balance of the lia- allocated to periods during the lease term so as to produce a con- the reduction of the outstanding liability. The finance charge is Lease payments are apportioned between the finance charge and assets are reported in accordance with the nature of the assets. payments of the leased assets at the inception of the lease. The the fair value, or if lower, the present value of the minimum lease assets and liabilities in the balance sheet at the amount equal to In the consolidated accounts finance leases are recognised as Finance leases Nordea as lessee and equipment in the income statement. policy for similar assets and reported as depreciation on property leased assets is calculated on the basis of Nordea’s depreciation straight-line basis over the lease term. The depreciation of the and equipment. Leasing income is recognised as income on a in accordance with the nature of the assets, in general as property Assets subject to operating leases in the balance sheet are reported Operating leases outstanding in respect of the finance lease. pattern reflecting a constant periodic return on the net investment ­principal and interest income. The income allocation is based on a ment, excluding cost of services, is recorded as repayment of amount equal to the net investment in the lease. The lease pay- balance sheet item “Loans and receivables to the public” at an A Nordea’s leasing operations mainly comprise finance leases. Finance leases Nordea as lessor 14. of asset taken over not affected by any subsequent remeasurement quently, the credit loss line is after the initial recognition of the Group’s presentation policies for the appropriate asset. Conse- taken over, is presented in the income statement in line with the tion principles for the appropriate type of asset. for protection of claims are valued in accordance with the valua- cost value, as applicable. In subsequent periods, assets taken over the asset on the date of recognition becomes its cost or amortised for protection of claims are valued at fair value. The fair value of investments properties. At initial recognition, all assets taken over not held for Nordea’s own use, is reported together with other assets already held by Nordea. For example a property taken over, other asset is reported on the same balance sheet line as similar Available for sale (see section 12 “Financial instruments”) and any other assets. Financial assets that are foreclosed are classified as Financial statements

finance lease is reported as a receivable from the lessee in the the asset. The central district properties in Finland, Norway and Sweden Operating leasing is mainly related to office premises contracts Any change in value, after the initial recognition of the asset Leasing generates cash inflows in relation to the asset. For goodwill, the which is defined as the smallest identifiable group of assets that sell and the value in use of the asset or the cash-generating unit, the carrying amount of the intangible asset is fully recoverable. such indications exist, an analysis is performed to assess whether nite useful lives are reviewed for indications of impairment. If between the carrying amount and the recoverable amount. ment. The impairment charge is calculated as the difference formed more frequently if required due to indication of impair of any indications of impairment. Impairment testing is also per are not amortised but tested for impairment annually irrespective Goodwill and other intangible assets with indefinite useful lives Impairment useful lives, generally 5 years. talised and amortised using the straight-line method over their Expenditure on acquired patents, trademarks and licenses is capi- Other intangible assets tracts. Amortisation is recognised over the expected lifetime of the con- contracts is recognised as customer related intangible assets. When acquiring customer related contracts the fair value of these Customer related intangible assets ful life of the software, generally a period of 3 to 10 years. function of a tangible asset. ware includes also acquired software licenses not related to the directly attributable to preparing the asset for use. Computer soft- software development staff costs and overhead expenditure benefits, are recognised as intangible assets. These costs include of three years or more and the ability to generate future economic with major software development investments, with a useful life are recognised as expenses as incurred. Costs directly associated Costs associated with maintaining computer software programs Computer software less any impairment losses. framework (Swedish generally accepted accounting principles) sents the amount recognised under Nordea’s previous accounting 2004. In respect of acquisitions prior to that date, goodwill repre- those business combinations that occurred on or after 1 January will is carried at cost less accumulated impairment losses. changes in circumstances indicate that it might be impaired. Good- tested annually for impairment, or more frequently if events or included in “Investments in associated undertakings”. Goodwill is “Intangible assets”. Goodwill on acquisitions of associates is tion. Goodwill on acquisition of group undertakings is included in group undertaking/associated undertaking at the date of acquisi- fair value of Nordea’s share of net identifiable assets of the acquiredGoodwill represents the excess of the cost of an acquisition over theGoodwill software and customer related intangible assets. intangible assets in Nordea mainly consist of goodwill, computer economic benefits flowing from the underlying resource. The means that Nordea has the power and rights to obtain the future physical substance. The assets are under Nordea’s control, which Intangible assets are identifiable, non-monetary assets without 15. rated from the contract and accounted for as leased assets. legal form of a leasing contract. If applicable, these assets are sepa- ment, or a series of payments, although the agreement is not in the Agreements can contain a right to use an asset in return for a pay- Embedded leases basis and better resembles an ordinary rental arrangement. Nordea’s economic benefit which differs from the straight-line The recoverable amount is the higher of fair value less costs to At each balance sheet date, all other intangible assets with defi- Amortisation is calculated on a straight-line basis over the use- As part of its transition to IFRS, Nordea elected to restate only Intangible assets - - – • risk percentage of five or higher is a significant insurance risk. beginning of the contract period. It is Nordea’s assessment that a able as a percentage of the reserve behind the contract at the risk transfer has been assessed to be insignificant. have the legal form of insurance contracts but where the insurance event) adversely affects the policyholder”. policyholder if a specified uncertain future event (the insured another party (the policyholder) by agreeing to compensate the one party (the insurer) accepts significant insurance risks from ance contracts and investment contracts with policyholders. Liabilities to policyholders include obligations according to insur 18. gains/losses on items at fair value”. ments are recognised directly in the income statement as “Net estimates of future cash flows are used. active market, discounted cash flow projections based on reliable location and condition. In the absence of current prices on an rent prices on an active market for similar property in the same value. The best evidence of a fair value is normally given by cur are attributable to Life. Investment properties are measured at fair and capital appreciation. The majority of the properties in Nordea Investment properties are primarily properties held to earn rent 17. the asset is estimated and any impairment loss is recognised. impaired. If any such indication exists, the recoverable amount of indication that an item of property and equipment may be At each balance sheet date, Nordea assesses whether there is any Leasehold improvements Equipment Buildings Depreciation is calculated on a straight-line basis as follows: they are accounted for as separate items. an item of property and equipment have different useful lives, asset to the working condition for its intended use. When parts of price, as well as any directly attributable costs of bringing the cost of an item of property and equipment comprises its purchase mulated depreciation and accumulated impairment losses. The Items of property and equipment are measured at cost less accu- improvements, IT equipment, furniture and other equipment. Property and equipment includes own-used properties, leasehold 16. loss is recognised. erable amount is less than the carrying amount, an impairment estimated according to standard capital asset pricing. If the recov- and discounted at a discount rate determined as the cost of equity, based on the asset or cash-generating unit in its current condition the asset or the cash-generating unit. The cash flows are assessed is the present value of the cash flows expected to be realised from 25 “Segment reporting”per acquired legal entity. The value in use cash generating units are defined as segments presented in section – – The contracts can be divided into the following classes: The insurance risk is generally calculated as the risk sum pay- Investment contracts are contracts with policyholders that An insurance contract is defined as “a contract under which Net rental income, gains and losses as well as fair value adjust- Insurance Investment property Liabilities to policyholders Property and equipment Health Unit-Linked contracts with significant insurance risk. tionary participation feature. Traditional life insurance contracts with and without discre- and contracts: personal accident. term. 10–20 years and the remaining leasing are depreciated over the shorter of Fixtures installed in leased properties ings and the remaining leasing term. the principles used for owned build- term. New construction the shorter of of 10 years and the remaining leasing Changes within buildings the shorter 3–5 years. 30–75 years. - - contracts. not transfer sufficient insurance risk to be classified as insurance Investment contracts are contracts with policyholders, which do Investment contracts tracts. sured on deferred basis in the same way as general insurance con- reserves and claims outstanding. This item is recognised and mea- Health the • cretion to pay these additional benefits as bonus on risk result, cant benefits in addition to guaranteed benefits. Nordea has dis- include a contractual right for the policyholder to receive signifi- Some traditional life insurance contracts and investment contracts Discretionary participating features (DPF) nate or significantly reduce an accounting mismatch. recognition designated at fair value through profit or loss to elimi- linked to these contracts. These assets are classified as upon initial with IAS 39, Financial instruments, equal to fair value of the assets tures are recognised and measured to fair value in accordance sion has only a small number of these contracts. contracts using local accounting principles. Nordea Life & Pen- tion features are, in line with IFRS 4, accounted for as insurance the • and measured at fair value on the basis of: tional insurance contracts. These contracts are mainly recognised ance contracts include the same insurance risk elements as tradi- investment guarantee. Unit-Linked contracts classified as insur ing to Unit-Linked policies written either with or without an requirements about collective bonus potential. and national regulation concerning profit sharing and other structure of the business and is closely related to solvency rules, nal tariff rates and assumptions about expenses and risk. a prospective method. The discount rate used is equal to the origi- had an impact on the income statement or balance sheet. recognised as “Collective bonus potentials” and this has thus not value and the prospective market value at the date of change is ish insurance contracts. The difference between the retrospective prospective method similar to the method for Swedish and Dan- 2008 changed from a retrospective method to a market consistent bonus potential on paid policies and on future premiums. current term. In Denmark, the provision, in addition, includes expenses and life risk. The discount rate is based on the liabilities’ tions about market consistent discounting rates as well as the policyholders are entitled. The calculation includes assump- pared by calculating the present value of future benefits, to which Poland, Luxembourg, Isle of Man, Estonia and Lithuania. including companies in Sweden, Norway, Finland, Denmark, provisions for all the companies in Nordea Life & Pensions, cies method on consolidation. tained consequently resulting in a non-uniform accounting poli- The measurement principles under local GAAP have been main- Insurance contracts Investment • However, flows. sidering the impact on every risk element included in the cash culated in the same way as traditional insurance contracts con- and Investment contracts without discretionary participation fea- Unit-Linked contracts represent life insurance provisions relat- The accounting policy for each company is based on the local In Norway the provisions are mainly calculated on the basis of The measurement of insurance contracts in Finland has during In Denmark, Sweden and Finland the measurements are pre- Traditional life insurance provisions represent consolidated – – ­feature. Investment contracts without discretionary participation ­feature. Investment contracts with discretionary participation­ estimated fair and value personal investment contracts: of present the accident assets value contracts linked provisions of the with to insurance the discretionary include Financial statements Unit-Linked risk premium which participa- contracts, is

cal- - 95 Nordea Annual Report 2008 96 Nordea Annual Report 2008 effects of all dilutive potential ordinary shares, which comprise weighted average number of ordinary shares outstanding for the vested). Diluted earnings per share is determined by adjusting the (including rights in the long term incentive programmes that are average number of ordinary shares outstanding during the period attributable to shareholders of Nordea Bank AB by the weighted Basic earnings per share is calculated by dividing the profit or loss 20. bilities and assets. offset if there is a legally enforceable right to offset current tax lia- legal right to offset exists. Deferred tax assets and liabilities are probable that the related tax benefit will be realised. reporting date and are reduced to the extent that it is no longer tax credits can be utilised. Deferred tax assets are reviewed at each the temporary differences, tax losses carry forward and unused probable that future taxable profits will be available against which counted. A deferred tax asset is recognised to the extent that it is reporting date. Deferred tax assets and liabilities are not dis- the laws that have been enacted or substantively enacted at the applied to the temporary differences when they reverse, based on goodwill. taxable temporary differences arising on the initial recognition of foreseeable future. In addition, deferred tax is not recognised for to the extent that it is probable that they will not reverse in the relating to investments in subsidiaries and associated companies that effects neither accounting nor taxable profit, and differences liabilities in a transaction that is not a business combination and for temporary differences arising on initial recognition of assets or tax losses and unused tax credits. Deferred tax is not recognised Deferred tax assets are recognised for the carry-forward of unused ing purposes and the amounts used for taxation purposes. the carrying amounts of assets and liabilities for financial report- ance sheet method, providing for temporary differences between previous years. reporting date, and any adjustment to tax payable in respect of for the year, using tax rates enacted or substantively enacted at the equity, in which case the tax effect is recognised in equity. extent that the tax effect relates to items recognised directly in tax expense is recognised in the income statement, except to the Income tax expense comprises current and deferred tax. Income 19. accounted for and recognised in the income statement. with higher than the best estimate of future cash flows discounted ing date to ensure that the carrying amount of the liabilities is The adequacy of insurance provisions is assessed at each report- Liability adequacy test “Liabilities to policyholders”. Both the mentioned lines are included in the balance sheet line depending on whether the investment result is allocated or not. sions, Life and/or Change in collective bonus potentials, Life, the balance sheet representing either Change in technical provi- realised and unrealised investment gains is therefore included in fair value (insurance contracts). The part policyholder’s of both reserves. In Sweden and Denmark, the main valuation principle is part of both the total unrealised investment gains and additional In Norway, collective bonus potential includes the policyholder’s prospective measurement principles of the insurance contracts). ums (the difference between retrospective and market consistent ment gains and bonus potential on paid policies and future premi- tial includes the part policyholder’s of the total unrealised invest- attributed to the policyholders. In Finland, collective bonus poten- bonus potential) are classified as liabilities in the balance sheet. expense result and interest rate. These DPF-features (Collective Financial statements Current tax assets and current tax liabilities are offset when the Deferred tax is measured at the tax rates that are expected to be Deferred tax assets and liabilities are recognised, using the bal- Current tax is the expected tax expense on the taxable income Collective bonus potential includes amounts allocated but not Earnings per share Taxes current interest rates. If needed, additional provisions are differences in accordance with IAS 21. (Fair value reserve and Cash flow hedges) as well as translation reserves include revaluation reserves in accordance with IAS 39 that are reported in equity in accordance with IFRS. These Other reserves comprise income and expenses, net after tax effects Other reserves (publ). undertakings not owned directly or indirectly by Nordea Bank AB Minority interests comprise the portion of net assets of group Minority interests 22. based on the net recognised surplus or deficit by plan. contributions to the plan. value of any future refunds from the plan or reductions in future actuarial losses, unrecognised past service costs and the present the recognised asset is limited to the net total of any unrecognised actuarial gains and losses are not recognised. vice period of the employees participating in the plan. Otherwise, in the income statement over the expected average remaining ser gation or the fair value of the plan assets, the excess is recognised the greater of either the present value of the defined benefit obli- actuarial gain or loss exceeds a “corridor” equal to 10 percent of statement. Rather, only when the net cumulative unrecognised gains and losses are not recognised immediately in the income effects (actual outcome compared to assumptions). The actuarial as a result of changes in actuarial assumptions and experience fair value of any plan assets, actuarial gains and losses may arise benefit obligations”). and financial assumptions (as disclosed in Note 37 “Retirement benefit obligations and related costs, based on several actuarial formed annually, are applied to assess the present value of defined value of any plan assets are deducted. Actuarial calculations, per its present value. Any unrecognised prior service cost and the fair current and prior periods. That benefit is discounted to determine future benefit that employees have earned for their service in the calculated separately for each plan by estimating the amount of due. Nordea’s net obligation for defined benefit pension plans is and the contribution payable in exchange for that service becomes ised as an expense as the employee renders services to the entity sion plan in accordance with IAS 19. The pension calculations are carried out by country and by pen- Pension costs for Nordea. Nordea also contributes to public pension systems. based on defined contribution plans that hold no pension liability are recognised as defined benefit obligations. ised as an asset (defined benefit asset). Non-funded pension plans ity (defined benefit obligation). If not, the net amount is recogn- defined benefit obligation, the net amount is recognised as a liabil- a specific pension plan, is lower than the gross present value of the funds/foundations. If the fair value of plan assets, associated with benefit plans are funded schemes covered by assets in pension sponsored in Sweden, Norway and Finland. The major defined where they operate. Defined benefit plans are predominantly plans, reflecting national practices and conditions in the countries sisting of both defined benefit plans and defined contribution The companies within Nordea have various pension plans, con- Pension plans 21. ­performance criteria are met at the reporting date. grammes. These rights are considered dilutive to the degree rights to performance shares in the long term incentive pro- Social security contribution is calculated and accounted for When the calculation results in a benefit to the Nordea entity, When establishing the present value of the obligation and the Obligations for defined contribution pension plans are recogn- Most pensions in Denmark, but also certain Finnish plans, are Equity Pensions to employees - - ated undertakings” in the Nordea Group is found in notes 23 “Investments in associ- ciples of consolidation”. For the definition of Associated undertakings see section 5 “Prin- Associated undertakings eliminated in the consolidated accounts. OECD requirements on transfer pricing. These transactions are formed according to arm’s length principles in conformity with group undertakings”. included in the Nordea Group is found in Note 22 “Investments in of consolidation”. Further information on the undertakings For the definition of Group undertakings see section 5 “Principles Group undertakings influence. no shareholder in Nordea is considered having such significant any means, have a significant influence over Nordea. At present Shareholders with significant influence are shareholders that, by Shareholders with significant influence Other • Key • Associated • Group • Shareholders • Nordea defines related parties as: 24. based on the rights’ fair value at the reporting date. sessed on each reporting occasion to ensure that the provision is listed enterprises”. The provision for social security costs is reas- cial Reporting Board: “IFRS 2 and social security contributions for in accordance with statement UFR 7 issued by the Swedish Finan- vesting due to market conditions. adjustment (true-up) for differences between estimated and actual ment to the initial estimate of fair value at grant date. There is no mance conditions in D-rights are reflected as a probability adjust- service in Nordea in order for their rights to vest. Market perfor vesting period is the period that the employees have to remain in expensed on a straight-line basis over the vesting period. The ally vest, which is reassessed at each reporting date, and is on the group’s estimate of the number of rights that will eventu- grant date. The total fair value of these rights is determined based The expense is based on the estimated fair value of each right at According to IFRS 2, the value of such rights is to be expensed. in Nordea at a significant discount to the share price at grant date. share-based and equity-settled rights, i.e. rights to acquire shares 2008. Employees participating in these programmes are granted Nordea has issued Long-Term Incentive Programmes in 2007 and 23. either a financial asset or financial liability. shares. Also own shares in trading portfolios are classified as treasury treasury shares is recorded as a deduction of retained earnings. Treasury shares are not accounted for as assets. Acquisition of Treasury shares included in retained earnings. panies, after the acquisition date, that have not been distributed is equity net of deferred tax at prevailing tax rates in respective country. earnings include the equity portion of untaxed reserves. Apart from undistributed profits from previous years, retained Retained earnings Further information on the associated undertakings included Group internal transactions between legal entities are per For more information see Note 8 “Staff costs”. Social security costs are also allocated over the vesting period, Contracts on Nordea shares that can be settled net in cash are In addition, Nordea’s share of the earnings in associated com- Untaxed reserves according to national rules are recorded as Related-party transactions Share-based payment management related undertakings. undertakings. with parties. personnel. significant influence. - - cated items/units. statement and balance sheet items that are related to the unallo- tomer areas. Group Functions and Eliminations consist of income with the identification of the customer responsible unit. with the underlying business transactions as driver combined Customer areas based on internal agreements. Income is allocated Costs are allocated from Group Functions and Product areas to Allocation principles formance. strategic alternatives as well as for the evaluation of financial per interest income based on the respective use of Economic Capital. subordinated debt is also included in the Customer areas’ net medium-term risk-free return. The cost above LIBOR from issued a capital benefit rate corresponding to the expected average risks taken. As a part of net interest income, business units receive return on economic capital (RaRoCar). ness areas. Standard tax is applied when calculating risk-adjusted utilisation and distribution of capital between the different busi- well as operational and business risk. This framework optimises risk exposure considering credit and market risk, insurance risk as ing economic capital, which reflects each business unit’s actual Capital allocation is based on the internal framework for calculat- Economic Capital customer responsible unit’s income statement and balance sheet. dea’s total business relations with customers are reported in the market risk-taking in financial instruments. and liability management as well as the Group’s own centralised ment and treasury operations. The latter includes funding, asset activities. It is furthermore responsible for the capital manage- responsible for the finance, accounting, planning and control as well as Capital Markets Products are reported separately. Report, Savings Products & Asset Management, Life & Pensions and Other. Banking and Funds as well as customer operations within Life to any of the customer areas. These include International Private Customer operations as well as the result that is not fully allocated or Institutional and International Banking are included in Other Customer operations which are not included in Nordic Banking Nordic Banking and Institutional and International Banking. The Financial results are presented for the two main Customer areas, Segment reporting structure 25. tions”. other related parties is found in Note 53 “Related-party transac- Nordea’s pension foundations. key management personnel. Other related parties also include panies significantly influenced by close family members to these by key management personnel in Nordea Group as well as com- Other related parties comprise companies significantly influenced Other related parties sonnel is found in Note 53 “Related-party transactions”. ing other transactions between Nordea and key management per agement personnel, see Note 8 “Staff costs”. Information concern- For information about compensation and pensions to key man- The • The • The • Key management personnel includes the following positions: Key management personnel Assets, liabilities and economic capital are allocated to the Cus- Economic Profit constitutes the internal basis for evaluating Economic Capital is allocated to business areas according to Within Nordea, customer responsibility is fundamental. Nor Group Corporate Centre, which is reported separately, is In the product dimension disclosed in the Board of Directors’ Information concerning transactions between Nordea and Segment reporting Group Chief Board Executive of Executive Directors. Officer Management (CEO). (GEM). Financial statements - - - 97 Nordea Annual Report 2008 98 Nordea Annual Report 2008 EURm idend, if the formal decision has been made before the financial are anticipated if the parent alone can decide on the size of the div- eral Meeting. recorded as a liability following the approval of the Annual Gen- Dividends paid to the shareholders of Nordea Bank AB (publ) are Dividends companies are recognised under the cost model. The parent company’s investments in subsidiaries and associated Investments in group undertakings and associated undertakings Accounting policies applicable to the parent company only amendment. ­Nordea has made no reclassification as a consequence of this accounting policies and presentation” for more information. October with effective date 1 July 2008. See section 3 “Changed made, as an amendment to IAS 39 and IFRS 7 was published in As for the Group, an addition to the accounting policies has been Dividends items at fair value Net gains/losses on the comparative figures is disclosed in the tables below. presentation”. The impact on the income statement in 2008 and on described above in section 3 “Changed accounting policies and 2007 Annual Report, except for the presentation of dividends are, in all material aspects, unchanged in comparison with the The accounting policies, basis for calculations and presentation Changed accounting policies and presentation amendments to IFRS that shall be made. and taxation. The recommendation sets out the exceptions and islation and considering the close tie between financial reporting extent possible within the framework of Swedish accounting leg- standards and interpretations issued by the IASB and IFRIC to the (FFFS 2008:25). Under RFR 2.1, the parent company shall apply all accounting regulations of the Financial Supervisory Authority ties” issued by the Swedish Financial Reporting Board and the lowing the recommendation RFR 2.1 “Accounting for Legal Enti- (1995:1559) and IFRS with the amendments and exceptions fol- Annual Accounts of Credit Institutions and Securities Companies (publ) are prepared in accordance with the Swedish Act on The financial statements for the parent company, Nordea Bank AB 26. heading. included in the customer responsible units are reported under this tomer areas, and profits from associated undertakings that are not Risk Control, People and Identity and Group Legal. of the four Group Functions: Group Operations, Group Credit and Group Functions and Eliminations include the unallocated results Group Functions and Eliminations insurance business. Banking, as well as sales commissions and margins from the life total result related to investment funds is included in Nordic on such transactions is reported in the relevant Customer area based OECD requirements on transfer pricing. The financial result of formed according to arm’s length principles in conformity with for in the Customer areas or Group Functions. and applied to all assets and liabilities allocated to or accounted Funds transfer pricing is based on current market interest rates Transfer pricing Financial statements Dividends paid by group undertakings to the parent company Expenses in Group Functions, not defined as services to Cus- Group internal transactions between legal entities are per assigned Parent company product

and stated 2,063 customer –13 Re- 2008 Pre policy change responsibilities. 2,063 –13

stated 1,323 194 Re- However, 2007 ported - 1,325 the 192 Re- Balance sheet (at end of period) Income statement (average) EUR 1 = PLN Balance sheet (at end of period) Income statement (average) EUR 1 = NOK Balance sheet (at end of period) Income statement (average) EUR 1 = DKK Balance sheet (at end of period) Income statement (average) EUR 1 = SEK 27. ings) and deferred tax liability. reserves are reported in their components equity (retained earn- tax component. In the consolidated financial statements, untaxed erated depreciation under tax regulations, including the deferred The parent company reports untaxed reserves, comprising accel- Untaxed reserves by the receiving entity. regarded as substitutes for dividends are accounted for as income ish Financial Reporting Board. Group contributions that can be tributions and shareholders’ contributions”, issued by the Swed- (after adjustment for tax) in accordance with UFR 2 “Group con- legal entity reported as a decrease/increase of unrestricted equity nies for the purpose of optimising Nordea’s tax expense are in the Group contributions paid or received between Swedish compa- Group contributions statement. tax are recognised in the item “Appropriations” in the income received from the pension foundation and related special wage item “Staff costs”. Pension benefits paid, contributions made to or ing special wage tax) for active employees and is recognised in the consists only of changes in recognised pension provisions (includ- instructions from the Swedish FSA, the pension cost in Sweden pension foundation or recognised as a liability. In accordance with In Sweden, actuarial pension commitments are guaranteed by a Pensions lation of assets and liabilities denominated in foreign currencies”. EUR in accordance with the policies disclosed in section 8 “Trans- (publ) is EUR. All transactions in other currencies are converted to The functional and presentation currency of Nordea Bank AB Functional currency longer amortisation period is justified. over a period of five years unless, in exceptional circumstances, a Institutions and Securities Companies (1995:1559), i.e. normally rules set out in the Swedish Act on Annual Accounts of Credit amortised as any other intangible asset in accordance with the ments. In the parent company financial statements goodwill is useful lives are not amortised in the consolidated financial state- Under IAS 38, goodwill and other intangible assets with indefinite Amortisation of goodwill following aspects: The accounting principles applied differ from IFRS mainly in the Differences compared to IFRS ognised on the separate income line “Dividends”. report is published. Dividends from group undertakings are rec- Exchange rates Jan–Dec 10,9361 4,1483 3,5020 9,8512 8,2088 7,4532 7,4560 9,6043 2008 Jan–Dec 3,6022 3,7790 7,9738 8,0147 7,4588 7,4505 9,4572 9,2498 2007 The split into geographical segments is based on the location of the legal entities. Nordea’s main geographical market comprises the Nordic countries, the Baltic countries, Poland and Russia. business combinations, EURm intangible assets through Investments in tangible and intangible assets, EURm Investments in tangible and Total assets, Total operating income Other income the equity method accounted for under Profit from companies at fair value Net gains/losses on items commission income Net fee and Net interest income EURm Geographical segments business combinations Capital expenditure through Group Capital expenditure Other segment items, EURm RAROCAR, % Economic capital Total liabilities and equity Equity Total liabilities Other liabilities from the public Deposits and borrowings Total assets Other assets to the public Loans and receivables Balance sheet, EURbn Operating profit intangible assets Disposals of tangible and Loan losses Total operating expenses and intangible assets Depreciation of tangible Other expenses Staff costs Total operating income Other income for under the equity method Profit from companies accounted at fair value Net gains/losses on items Net fee and commission income Net interest income Income statement, EURm Customer segments Group Note 2

EUR bn Segment reporting

1,727 2008 218 153 –17 670 853 Sweden –3,107 –1,901 –1,160 84 2,780 6,289 1,530 4,206 3 –402 2008

247 239 122 247 214 –46 517 Banking 117

1,762 Nordic 32 25 18 33 25 2007 11 8 8 0 158 138 195 746 657 68

–3,002 –1,836 –1,140 6 3,016 5,963 1,772 3,666

2007 1,714 2,807 233 226 233 208 –26 460 2008 116 110 220 26 24 807 25 262 55 40 25 Finland 88 28 –4 6 7 7 0

1,463 2,653 International 2007 1,217 –477 –275 –192 2008 –115 102 189 149 623 376 625 –10 –12 271 287 656 Banking Inst. & 42 42 41 15 26 42 33 15 2 2 1 1 9 0

1,024 1,415 2008 103 236 Norway –394 –243 –143 2007 27 33 60 19 324 479 868 178 257 424 39 33 33 31 34 25 –8

9 1 0 2 9 0 5 1,127 8 1 2007 258 768 25 61 92 6 7 2 –493 –474 2008 operations

customer –68 –10 425 255 101 1,331 1,910 2008 49 49 41 50 35 15 –9 60 Other Denmark 138 –25 507 4 1 0 8 0 0 9 0 32 57 78 19

–455 –434 2007

1,131 1,971 2007 206 –10 660 410 176 –11 129 269 476 46 46 38 47 37 10 65 48 64 31 6 1 0 8 1 0 9 0

–4,077 –2,186 –1,826 2008 3,337 7,931 1,043 1,918 4,922 countries 155 –517 2008 customer 14 41 99 338 329 178 151 339 262 –65 Baltic 0 9 1 0 32 24 10 77 49 –1 areas Total

9 0 2007 –3,851 –2,090 –1,717 111 3,701 7,491 1,048 2,205 4,155 36 69 2007 0 7 1 – 5 330 312 305 156 149 314 243 –44

39 71 60 57 26 9 7 1 2008 159 Poland 32 35 35 86 4 3 –

–140 2008 Corporate 154 –99 –41 294 160 2007 Centre Group 19 19 19 19 19 87 50 –3 105 0 0 0 0 0 0 0 0 0 23 31 47 9 3 4 –

–149 2007 –110 2008 134 –39 283 156 107 152 140 15 15 15 15 15 24 –9 Russia 0 0 0 0 0 0 0 0 5 2 4 2 – 6 4

Functions and 2007 Eliminations –121 –701 2008 61 –1 55 270 108 –95 –59 639 –25 –65 –32 117 116 110 113 7 2 1 – 6 Group –2 51 36 25 11

Financial statements Eliminations 2 9 3 0 –191 –125 –154 2008 –114 and others –97 189 128 –632 2007 4 236 –66 –59 625 133 –56 112

62 10 52 59 –7 60 58 48 10 20 –210 –100 2007 1 2 2 0 5 324 211 16 96 92 –4,338 –1,646 –2,568 – 3 3,396 8,200 1,028 1,883 5,093

–466 –124 2008 1,028 1,883 5,093 8,200 294 474 456 307 149 474 209 265 172 2008 294 172 474 32 21 12 18 24 Total 32 24 0 Total –4,066 –1,575 –2,388

1,209 2,140 7,886 4,282 3,883 7,886 1,209 2,140 4,282 2007 –103 2007 330 275 214 389 275 330 389 372 230 142 389 144 245 214 41 24 10 17 60 41 3 99 Nordea Annual Report 2008 100 Nordea Annual Report 2008 Total operating income Other income Net gains/losses on items at fair value Net fee and commission income Net interest income EURm Geographical segments Parent company Total operating income Other income Net gains/losses on items at fair value Net fee and commission income Net interest income Income statement, EURm Customer segments EURm Parent company Financial statements credit institutions Loans and receivables to Interest income the public Loans and receivables to Interest–bearing securities Other interest income Interest income Deposits by credit institutions Interest expense from the public Deposits and borrowings Debt securities in issue Subordinated liabilities Other interest expenses Interest expense EURm Net interest income see also ing, decreases the total interest expense. For further information derivatives, measured at fair value and related to Nordea’s fund- –2,287m) for the parent company. The net interest income from –10,521m (EUR measured at fair value through profit and loss amounts to EUR ent company. Interest expenses from financial instruments not 9,791m) for the Group and EUR 3,086m (EUR 2,507m) for the par value through profit and loss amounts to EUR 14,183m (EUR Interest income from financial instruments not measured at fair Net interest income Interest income Leasing income, net Interest expense Total Note 3 Note 2 Note 1. Net interest income Segment reporting, cont. –4,575m) for the Group and EUR

–11,660 –11,660 13,862 16,753 –1,595 –4,398 –4,587 16,361 1,121 1,571 5,093 5,093 2008 –393 –687 2008 199 392 Group Group 12,909 –1,033 –3,946 –3,218 –8,627 12,607 –8,627 11,175 1,049 4,282 4,282 2007 –399 2007 685 –31 302 0 1,363 1,687 1,035 2008 2008 –2,873m (EUR Parent company Parent company 385 –13 468 523 529 Banking 119 Sweden –3,123 –3,123 Nordic 1,739 1,594 3,646 3,646 –897 –892 –820 –303 2008 2008 –211 4 308 523 523

5 – 1,485 1,542 2007 2007 466 194 465 360 590 824 113 15 –2,381 –2,381 1,434 1,144 2,741 2,741 2007 –748 –631 –604 –296 –102 2007 153 360 360 International 10 1,301 1,301 - 2008 2008 – –24 Banking Finland Inst. & 68 –1 46 47 – – – 2007 2007 EURm commissions Asset Management Life insurance Brokerage Custody Deposits commissions Total savings related Payments Cards Total payment commissions Lending payments Guarantees and documentary commissions Total lending related to Other commission income Fee and commission income Life insurance Payment expenses State guarantee fees Other commission expenses Fee and commission expense income Net fee and commission EUR parent company. The corresponding amount for fee expenses is (EUR ing of assets on behalf of customers amount to EUR 1,019m rate, from fiduciary activities that result in the holding or invest- Group and EUR 104m (EUR 79m) for the parent company. through profit or loss amount to EUR 329m ( EUR 277m) for the from financial assets and liabilities not measured at fair value Fee income, not included in determining the effective interest rate, 556 556 Note 4 96 54 19 23 Fee income, not included in determining the effective interest – – – 0 –67m (EUR 1,292m) for the Group and EUR 135m (EUR 158m) for the 2008 2008 operations –117 customer 305 305 –90 –16 Norway 43 Other – – – 0 Net fee and commission income 2007 2007 –13 –47 –68m) for the Group. 26 5 5 – – – 8 0

1,894 2,153 2008 –332 2008 Denmark Coporate

207 207 Centre Group 73

– – – 0 1,056 1,324

2007 –342 2007 299 301 –2 77 –3 1,148 2,532 1,883 2008 –287 –245 –649

– – 532 270 217 422 344 766 299 143 442 176 –67 –50 84 45 Group Functions and Eliminations 2008 –328 –150 2008 –211 –64 Others Group 55 55 97 1,408 2,734 2,140 – – – 2007 –270 –256 –594 762 270 260 434 342 776 258 136 394 156 –68 79 37 – 2007 –214 –169 –145 2007 122 122 103 –3 – – – Parent company –130 –154 2008 174 139 173 312 622 –24 468 3,231 2,253 3,231 2,253 2008 2008 67 61 28 76 20 96 40 11 –13 468 523 –13 468 523 7 – – Total Total 2,467 1,450 2,467 1,450 2007 –124 –155 2007 2007 191 156 170 326 618 –31 463 194 463 360 194 463 360 90 63 21 58 69 32 11 11 6 0 – EURm Total Investments in group undertakings EURm EURm 3) 2) 1) EURm Insurance risk income, net Life potential, Life Change in collective bonus Divestment of shares instruments and other share-related Shares/participations Available for sale assets, realised hedge accounting Financial instruments under Total Insurance risk income, Life Income from real estate instruments and other interest-related Interest-bearing securities through profit or loss designated at fair value Financial instruments – Insurance risk expense, Life Other financial instruments deposit guarantee system Refund from the Finnish for trading Financial instruments held – Total Foreign exchange gains/losses Other Other Net gains/losses for categories of financial instruments Investment properties Total Financial risk income, net Life provisions, Life Change in technical

Note 7 Note 6 Note 5 group and 9m EUR for 2008 1m) (EUR for the parent company. Of which deferred day one profits amounts toEUR 63m for 2008 35m) (EUR for the closed on gross basis, ie before eliminations of intragroup transactions. The figures disclosed for Life (financial risk income and insurance risk income) are dis- Premium income amounts to 2,077mEUR 2,274m).(EUR hedging instruments of which net losses on hedged items of which net gains on 3)

Other operating income Dividends Net gains/losses on items at fair value 1)

1)

–3,125 2,025 1,028 1,028 2008 2008 2008 –231 –772 320 982 –58 282 830 714 670 167 172 16 50 82 29 90 83

Group Group Group 5 7 – 4 1,209 1,209 2007 –866 2007 2007 –215 –196 242 903 827 256 185 103 120 568 432 214 –11 41 41 34 63 28 49 11 2 4 Parent company Parent company Parent company Parent company 2,063 2,063 –104 –422 2008 2008 2008 2008 –26 –13 396 –73 –13 124 102 190 13 40 88 – – – – – – 0 0 – – – – 2) 1,323 1,323 2007 2007 2007 2007 204 224 –12 194 –23 –63 194 127 114 51 –8 11 – – – – – – 2 2 – 1 – – – EURm 1) – EURm (specification below) Salaries and remuneration – Defined benefits plans (Note 37) Pension costs: (specification below) Pension costs Total (parent company only) Actuarial pension costs Social insurance contributions To other employees Defined contribution plans foundation Allocation to profit-sharing Total Total Other staff costs described in the Corporate Governance section and below. tion, takes part of the Long-Term Incentive Programmes as finally determined during the first quarter 2009. The CEO, in addi- ary. The variable salary for 2008, totalling EUR 187,452, will be specific targets, can amount to a maximum of 35% of the fixed sal- approved by the Board. Variable salary, which is based on agreed, are proposed by the Board Remuneration Committee and towards ­Nordea and hence Nordea does not have any pension obligation payments have been made over time. This is paid in full by age of 65 is covered by an external insurance institute to which the remaining part of pensionable salary. The pension after the ish “price base amounts” 2001, equal to SEK 36,900, and 32.5% of receives a pension amounting to a maximum of 65% of 180 Swed- previously employed by Nordea. the Board, except for pension commitments to one board member severance pay, pension or other compensation to the members of tion for their Board membership. There are no commitments for members employed by Nordea do not receive separate compensa- mittee and EUR 1,840 for other members per meeting. Board committee meetings was EUR 2,370 for the chairman of the com- board meetings was EUR 1,840 per meeting. Remuneration for bers EUR 75,600. In addition, remuneration for extra-ordinary The Chairman EUR 252,000, Vice Chairman EUR 97,650 and mem- The remuneration for the Board resolved by the AGM 2008 was: CEO and Group Executive Management Salaries and other remuneration to the Board of Directors, Total To executives Salaries and remuneration:

Note 8 Group and to 31 (29) individuals in the parent company. operating subsidiaries, are included. Executives amount to 251 (275) individuals in the uty CEOs, managing directors and executive vice presidents, in the parent company and dents in operating subsidiaries. Former board members (including deputies), CEOs, dep- the Board of Directors (including deputies), managing directors and executive vice presi- utive vice presidents and Group Executive Management in the parent company as well as Executives include the Board of Directors (including deputies), CEO, deputy CEO, exec- benefits Fixed compensation and compensation Performance-related The fixed salary, variable salary and contract terms for the CEO Hans Dalborg, Hans 1) Staff costs

Dalborg. Chairman

of the –1,934 –1,909 –1,934 –2,568 2008 2008 –217 –307 –148 –217 Board, –18 –69 –25 –47 –63 –7 Group Group –

–1,762 –1,734 –1,762 –2,388 Financial statements former 2007 2007 –221 –275 –138 –221 –20 –83 –28 –73 –57 –8 –

CEO Parent company Parent company –394 –143 –388 –394 –632 2008 2008 –60 –26 –34 –60 –28 –5 –1 –6 –7 of –

Nordea, 2007 2007 –363 –129 –354 –363 –596 –61 –26 –35 –17 –61 –26 –7 –2 –9 – 101 Nordea Annual Report 2008 102 Nordea Annual Report 2008 EUR 9) or 62. Pension agreements are either Defined Contribution Plans Benefits include primarily car and/or housing benefits. CEO, GEM takes part of the Long-Term Incentive Programmes. will be finally determined during the first quarter 2009. As for the fixed salary. The variable salary for 2008, totalling EUR 903,461, based on agreed, specific targets, can be a maximum of 35% of the the salary terms for members of GEM. Variable salary, which is with the Board Remuneration Committee, the CEO determines conditions, for resolution by the Board. Following consultation as well as alterations in retirement benefits, contract terms and salary levels for Group Executive Management (GEM) as a whole, ­pensionable income. For the CEO, fixed salary and variable salary are included in earned as of 31 December 2008 is fully funded with plan assets. is maximised to 190 Swedish “income base amounts”. The portion to 50% of the pensionable income for life. The pensionable income benefits. ­Benefits received by the CEO include primarily car and housing 8) 7) 6) 5) 4) 3) 2) 1) Marie Ehrling Financial statements

Timo Peltola Vice Chairman of the Board: Hans Chairman of the Board: Harald Christian Clausen CEO: Gunnel Duveblad Total Maija Torkko Svein Jacobsen Claus Stine Bosse 7 (8) individuals excluding CEO Group Executive Management: Anne Birgitte Lundholt Kjell Aamot Björn Wahlroos Ursula Ranin Tom Knutzen Birgitta Kantola Other Board members: Björn Savén Lars G Nordström Heidi

Note 8 GEM members GEM included for the period they have been appointed. Decrease in fixedsalary in 2008 due to received holiday allowance when leaving Denmark 2007, in accordance with Danish legislation. Resigned as board member during 2008 or 2007. New member as from the Annual General Meeting 2008. Compensation as CEO received up until his retirement and board fee received as from his retirement. Employee representatives excluded. more information on the valuation of the Long-Term Incentive Programmes, please see below. Disclosed expense is calculated in accordance with 2 IFRS “Share-based 31,250 Payment”.A-rights, 31,250 C-rights and 31,250 D-rights in LTIP 2008 (no B-rights can be exercised due to that performance conditions were not fulfilled and C-D-rightsCEO and aremembers conditional). of For hold GEM 34,002 A-rights, 33,244 B-rights and 34,002 D-rights in LTIP 2007 (no C-rights can be exercised due to that performance conditions Includes were also not executive fulfilled),incentive and payout. Restated from variable salary paid out during 2007 to variable salary earned during 2007. The Board fee includes fixed remuneration and meeting fees. These are booked inSEK and translated intoEUR based on the average exchange rate each year. GEM members are entitled to retire with pension at the age of 60 The Board Remuneration Committee prepares alterations in The retirement age for the CEO is 60 and his pension amounts Dalborg M. Høeg Arnkværn Petersen 6) 7) Madsen

7)

Staff costs, cont.

6) 6) 7)

6) 7) 8) 7) 5)

7)

7) 4)

9)

4,024,791 6,055,001 832,960 8,1 2817 – – – 8,1 268,157 283,212 – – – – – – 268,157 283,212 124,577 23,084 29,765 64,357 68,175 21,282 62,312 64,357 82,175 89,087 23,014 86,973 87,440 87,440 Fixed salary/ 2008 Board fee – – –

3,994,632 6,365,924 956,646 352,019 113,715 85,360 23,484 95,927 19,932 23,484 81,747 60,068 85,299 60,026 60,068 85,360 1) 2007

– – – – 1,090,913 903,461 187,452 2008 Variable – – – – – – – – – – – – – – – – – salary 1,535,443 1,805,114

these 12 months. executive receives as a result of any other employment during pay equal to 12 months’ salary to be reduced by the salary that the period is 12 months. One Danish GEM member has a severance during these 18 months. For the Danish GEM members the notice that the executive receives as a result of any other employment to severance pay 18 months’ salary to be reduced by the salary ary during the notice period before termination, and with regard wegian and Swedish GEM members are entitled to 6 months’ sal- salary is included for Finnish and Swedish GEM members. Fixed salary is pensionable income for all GEM-members. Variable adjusted. The Swedish members of GEM have DCP agreements. of GEM receives 70% of the pensionable income for life, annually ally adjusted by the Finnish TyEL-index. The Norwegian member GEM receive 50% or 60% of their pensionable income for life, annu- ish GEM member has a DCP agreement. The Finnish members of level of salary increases in Nordea Bank Denmark. The other Dan- receives 50% of the salary for life, annually adjusted by the general (DCP) or Defined Benefit Plans (DBP). One Danish GEM member 269,671 2007

In accordance with their employment contracts, Finnish, Nor

2) – – – – – – – – – – – – – – – – –

498,570 580,194 81,624 Programmes 2008 Long-Term Incentive – – – – – – – – – – – – – – – – – 315,809 380,945 65,136 2007 3) – – – – – – – – – – – – – – – – –

141,051 182,138 41,087 2008 Benefits – – – – – – – – – – – – – – – – – 132,521 163,147 19,463 11,163 2007 – – – – – – – – – – – – – – – – 5,567,873 1,143,123 7,908,246 124,577 23,084 29,765 64,357 68,175 21,282 82,175 62,312 64,357 89,087 23,014 86,973 87,440 87,440 2008 – – – Total 5,978,405 1,310,916 8,715,130 363,182 113,715 85,360 23,484 95,927 19,932 23,484 81,747 60,068 85,299 60,026 60,068 85,360 2007 - – – – – excluding CEO 7 (8) individuals Management: Group Executive Total Thorleif Krarup Vesa Vainio and the board and CEOs: Former Chairman of EUR Conditional Rights LTIP 2008 Share-based payment 6) 5) 4) 3) 2) 1) Board members and Group Executive Management Pension costs and obligations to the Board of Directors, CEO Christian Clausen CEO: Lars G Nordström Granted Forfeited Outstanding at end of year Conditional Rights LTIP 2007 –

Outstanding at the beginning of year Granted Forfeited Outstanding at end of year –

Note 8 restated restated accordingly. Curtailments and settlements as defined in IAS 19). Comparative information hasand been to pension rights earned during the year in DBPs (Service cost, Past Pensionservice costscost forand management is related to pension premiums paid during the year in DCPs earned in, and funded by, banks forming Nordea. The pension obligation for Vesa Vainio and Thorleif Krarup is mainly due to pension rights plan assets with fair value generally on the same level as the obligations. management pension plans are funded, meaning that these obligations are backed with expected salary levels at retirement (at 60 or 62 years depending on agreement). The that the pension obligations disclosed are the earned pension rights calculated using the nificant. IAS 19 includes an assumption about future increases insalary, which leads to dent of changes in actuarial assumptions and inter annual variations can therefore be sig- Pension obligations calculated in accordance with IAS 19. These obligations are depen- between the years. The significant decrease in pension obligations due to the change in composition ofGEM sion obligation is the obligation towards the members of as GEM of 31 December 2008. Members of included GEM for the period they have been appointed. The disclosed pen- actuarial losses, interest cost (discounting effect) and pension earned in 2008. pension obligation is the lowering of the discount rate, which has given rise to significant The CEO’s pension agreement is unchanged. The main reason behind the increase in Employee representatives excluded. of which currently exercisable of which currently exercisable Staff costs, cont. 3) 6) 1)

:

2)

1,395,407

Pension 477,408 917,999 cost 4) – – 2008 obligation 35,413,389 18,691,275 10,444,859 5,891,708 Pension 385,547 5)

A–rights A–rights 3,787,889 3,236,142 502,943 501,771 474,557 452,246 –22,311 Pension –1,172 476,315 75,432 cost – – – 4) – 2007 obligation 42,830,210 17,928,135 19,927,951 4,586,607 B–C–rights B–C–rights Pension 387,517 1,005,886 –496,868 –504,115 501,771 938,531 441,663 2008 2008 5) – – – employed by Nordea. and receivables to key management personnel who are not personnel are granted on normal market terms, as well as loans Loans and receivables to family members of key management and receivables above the defined caps are set on market terms. both on fixed- and variable interest rate loans. Interest on loans time. There is currently a cap of 57 Swedish price base amounts variable interest rate loans is somewhat lower and varies over tomers (with a lower limit of 150 basis points). The discount on points lower than the corresponding interest rate for external cus- employee interest rate on fixed interest rate loans is 300 basis and 30 basis points for loans over EUR 400,000. In Sweden the funding cost with a margin of 10 basis points up to EUR 400,000, interest rate for loans and receivables corresponds to Nordea’s base amounts 55 plus NOK 100,000. In Finland the employee tomers, with a cap on the loan amount of 3 Norwegian income lower than the best corresponding interest rate for external cus- employee interest rate for loans and receivables is 100 basis points the same terms as for external customers. In Norway the management personnel in Denmark whose loans are granted on the same credit terms apply as for other employees, except for key pany. (EUR 0m) in the Group and EUR 0m (EUR 0m) in the parent com- ent company. Interest income on these loans amounts to EUR 0m EUR 3m (EUR 2m) in the Group and EUR 1m (EUR 0m) in the par Loans and receivables to key management personnel amounts to Loans and receivables to key management personnel sidiaries, are included. utive vice presidents, in the parent company and operating sub- ing deputies), CEOs, deputy CEOs, managing directors and exec- idents in operating subsidiaries. Former board members (includ- (including deputies), managing directors and executive vice pres- ment in the parent company as well as the Board of Directors CEO, executive vice presidents and Group Executive Manage- include the Board of Directors (including deputies), CEO, deputy and pension obligations to EUR 53m (EUR 55m). Executives Pension cost for all executives, amounted to EUR 4m (EUR 8m) For key management personnel who are employed by Nordea D–rights D–rights 502,943 501,771 474,557 452,246 –22,311 –1,172 – – – A–rights 477,428 474,557 –2,871 – – B–C–rights Financial statements 954,856 –16,325 938,531 2007 – – D–rights 477,428 474,557 –2,871 – – - 103 Nordea Annual Report 2008 104 Nordea Annual Report 2008 Group Average number of employees expense for 2008 arising from LTIP 2007 amounts to EUR 1m (EUR 2m) and for LTIP 2008 to EUR 1m. The expensed amounts over include a social period charges. of 24 months. The maximum cost equals approximately EUR 6m for LTIP 2007 and EUR 6m for LTIP 2008. The total amounts to EUR 5m (EUR 5m) and for LTIP 2008 to EUR 2m. The amounts include social charges. expense equals approximately EUR 21m for LTIP 2007 and EUR 20m for LTIP 2008. The total expense for 2008 arising from The LTIPexpected expense for 2007 LTIP 2007, EUR 17m, and for LTIP 2008, EUR 8m, are expensed over a period of 24 months. The maximum 1) Financial statements Sweden Full-time equivalents Denmark Finland Ordinary share per right Norway Poland Exercise price Russia Latvia Grant date Luxembourg Vesting period Estonia Lithuania Contractual life United States United Kingdom First day of exercise Singapore Germany Fair value at grant date Total average Parent company Total number of employees (FTEs), end of period Sweden Full-time equivalents Other countries Total average right to exercise B-rights and C-rights in LTIP 2008, the EPS for 2008 and 2009 should not be lower than 0.80. or more during 2008, and by 12% or more during 2009 and if TSR during 2008 and 2009 ranks as number one that in EPS the for peer 2007 group. and Tofor 2008 equaled have or the exceeded 0.80. Full right to exercise in LTIP 2008 will be obtained and if if the TSR RAPPS during increases2007 and by 2008 12% exceeded peer group index by 10 percentage points. Additionally, exercise right in LTIP 2007 demanded (TSR) in comparison with a peer group’s TSR during 2007 and 2008 for LTIP 2007 and during 2008 and 2009 for LTIPcise any 2008. B-rights or C-rights respectively. Additionally, the performance criteria for D-rights is a growth target in total shareholder and return B rights in LTIP 2008) and for 2009 (C-rights in LTIP 2008) be lower than a predetermined level the participants (Bare rights)not entitled and to exer in 2009 (C-rights) for LTIP 2008. Should the reported EPS for 2007 criteria (B-rightscomprise a in target LTIPgrowth in risk 2007) adjusted andprofit for per share2008 (RAPPS)(C-rights in 2007in (B-rights)LTIP and in 2008 (C-rights)2007 for LTIP 2007acquire and inthree 2008 additional ordinary shares, based on fulfilment of certain performance conditions (“Performance Shares”). The performance ditional A-right to acquire one ordinary share (“Matching Share”), based on continued employment, and the conditional B-D-rights to shares. For each ordinary share the participants acquired and locked in to the LTIP 2007 and LTIP 2008, the participants Participationwere granted ina con- the Long-Term Incentive Programme (LTIP) requires that the participants take Long-Termdirect ownershipIncentive Programmesby investing in Nordea

Note 8 ited sensitivity to expected volatility and risk-free interest. The value of the D-rights is calculated based on market related conditions. Expected volatility is set to 20% for LTIP 2007 and to 21% for LTIP 2008 based on historical data. As the exercise deducted, price risk is free significantlyrate below4.20% thefor shareLTIP price at grant2007 date,and the3.83% valuefor hasLTIP a lim- 2008 and expected employee turn over in the programme is weighted set average to share 3% price 12.33 per EUR for year LTIPfor LTIP 2007 2007and 11.08 EUR for and LTIP4% per year 2008, right for life LTIPis estimated 2008. to 3 years for LTIP The 2007fair value and is 2.5 measured years through for the LTIPuse of 2008, generally expected accepted dividends valution are models with the following input factors: For the parent company, the total expected expense for LTIP 2007 amounts to EUR 5m and for LTIP 2008 to EUR 3m, which is also Full right to exercise in LTIP 2007 was obtained if the RAPPS increased by 15% or more during 2007, and by 12% or more during 2008

Staff costs, cont. 1)

13 May 2008 April 2010 24 months 48 months EUR 7.53 EUR 3.00 A–rights 1 13 May 2008 B–C–rights April 2010 24 months 48 months LTIP 2008 EUR 8.45 EUR 2.00 33,944 34,008 8,454 8,427 3,561 1,679 1,603 8,233 8,292 8,311 2008 2008 513 409 416 355 70 58 52 36 59 1 Total Total 13 May 2008 April 2010 24 months 48 months 31,867 31,721 8,072 8,152 8,162 3,416 1,247 1,177 EUR 4.14 7,534 7,591 EUR 2.00 D–rights 2007 2007 427 393 356 259 67 57 49 33 57

1 12,874 3,643 3,887 1,742 1,845 3,490 3,530 2008 2008 30 april 2009 17 May 2007 518 582 138 249 86 24 months 78 37 48 months 36 15 18 40 EUR 8.76 EUR 4.00 A–rights Men Men 12,046 1 3,467 3,784 1,618 1,777 3,195 3,234 2007 2007 388 454 244 112 55 49 36 32 14 16 39 30 april 2009 17 May 2007 B–C–rights 24 months 48 months EUR 10.49 LTIP 2007 EUR 2.00 21,070 1 4,540 6,569 1,716 1,161 1,021 4,743 4,762 4,811 2008 2008 375 160 330 277 33 22 37 18 19 30 april 2009 17 May 2007 Women Women 24 months 48 months EUR 7.76 EUR 2.00 D–rights 19,821 4,605 4,368 6,544 1,639 4,339 4,357 2007 2007 859 723 315 149 301 210 - 31 25 35 17 18 1 50–65 30–49 18–29 Women Men Total

Sick leave dea. women. Internal Boards consist mainly of management in Nor numbers for Other executives were 84% (85%) men and 16% (15%) (90%) were men and 10% (10%) were women. The corresponding In the Board of Directors of the Nordea Group companies, 90% – – Other executives – – Board of Directors Nordea Bank AB (publ) Per cent Gender distribution Total Other countries Sweden EURm Parent company Total Germany Singapore United Kingdom United States Lithuania Estonia Luxembourg Latvia Russia Poland Norway Finland Denmark Sweden EURm Group Salaries and remuneration per country 1) Parent company

Note 8 ordinary working hours. days or more. The sick leave of each category is stated as a percentage of the category’s excluding overtime. Long-term sick leave refers to a continuous period of absence of 60 Ordinary working hours refer to the number of hours agreed in the employment contract, Women Men Women Men 1) Staff costs, cont. percentage of ordinary Execu- Execu- tives tives working hours 2008 Sick leave as a –25 5.3 3.6 3.1 5.6 2.3 4.4 –6 –2 –4 –2 –3 –5 –2 –2 –2 –4 –5 – – – – – – 2008 2008 employees employees –1,909 Other Other 2007 –388 –377 –276 –398 –641 –431 –14 –44 –39 –31 –11 5.7 3.9 2.4 5.9 2.2 4.4 –3 –4 –5 –6 –8 –9

Execu- Execu- 31 Dec leave in per cent tives tives 2008 2008 long-term sick Proportion of –28 47 27 45 20 80 27 73 –9 –3 –6 –1 –3 –4 –2 –4 –2 –5 –7 – – – 0 – –

2007 2007 employees employees 31 Dec –1,734 Other Other 2007 2007 –354 –348 –264 –369 –593 –378 - –48 –18 –25 –11 61 43 57 18 82 21 79 –6 –3 –3 –5 –4 –6 –7 EURm EURm Depreciation/amortisation EURm Auditors’ fees 2) 1) Marketing Information technology Equipment Property and equipment Auditing assignments KPMG Total office expenses Postage, telephone and Buildings audit-related services Other assignments incl Rents, premises and real estate Goodwill Intangible assets audit-related services Other assignments incl Ernst & Young Divestment of shares Internally developed software Auditing assignments Deloitte Other Other intangible assets audit-related services Other assignments incl Total Auditing assignments PriceWaterhouseCoopers Equipment Property and equipment (Note 25) Reversed impairment charges Impairment charges / audit-related services Other assignments incl Goodwill Intangible assets Other Internally developed software Total Total Total

Note 10 Note 9 Including fees and remuneration to auditors distributed as follows. were related costs including staff etc, but excluding IT expenses in insurance operations, Refers to IT operations, service expenses and consultant fees for the Group. Total IT-

2) EUR –666m (EUR –654m). –666m (EUR EUR

Other expenses charges of tangible and intangible assets Depreciation, amortisation and impairment (Note 24) (Note 24)

1)

(Note 25) –1,646 –576 2008 2008 2008 –396 –102 –203 –369 –124 –114 –81 –18 –14 –10 –10 –5 –1 –2 –1 –1 –1 –3 –1 –6 Group Group Group – – 0 0 0 –1,575 Financial statements –538 2007 2007 2007 –382 –104 –197 –351 –103 –103 –72 –17 –12 –4 –2 –2 –1 –3 –1 –1 –9 – 0 0 0 – – – – Parent company Parent company Parent company –172 2008 2008 2008 –473 –101 –103 –110 –26 –17 –69 –96 –72 –1 –1 –1 –7 –5 –2 –3 –2 0 – – 0 0 – 0 – 0 –185 2007 2007 2007 –127 –514 –103 –101 –101 –30 –17 –69 –72 –1 –1 –1 –6 –6 –1 –4 0 0 0 0 0 – – 0 – – 105 Nordea Annual Report 2008 106 Nordea Annual Report 2008 Total Total Change in depreciation in excess of plan, equipment Total Special wage tax/return tax Allocations/compensation Pension benefits paid Reversed actuarial pension costs Pension adjustments EURm EURm 2) 1) Financial statements – credit institutions Loans and receivables to Loan losses divided by class, net – the income statement Changes directly recognised in – – – Total – – in the balance sheet Changes of allowance accounts Specification of Loan losses the public Loans and receivables to Total – – – Off-balance sheet items

Note 12 Note 11 Included in Note 16 Loans and receivables and their impairment. Included in Note 36 Provisions. provisions of which write-offs and items of which Off-balance sheet recoveries of which reversals and provisions of which write-offs and of which realised loan losses recoveries of which reversals and of which realised recoveries receivables of which Loans and provisions of which write-offs and recoveries of which reversals and 1)

2) Appropriations Loan losses

1)

2008 –391 –466 –442 –401 –466 –815 –51 –51 –58 –14 –24 –16 –89 414 65 Group 7 2 2007 –451 –23 –22 –55 449 53 53 30 75 –1 60 10 85 30 –2 60 9 Parent company Parent company 2008 2008 –144 –40 –44 –13 –55 –53 –25 –45 –80 –55 –78 –80 24 –2 –2 –3 –2 20 66 4 4 – 0 1 2

2007 2007 –44 –42 –12 –55 –32 –86 –2 –2 25 20 20 –6 20 25 26 31 –3 25 83 11 0 – 8 0 8 EURm Income tax expense EURm amount that would arise using the tax rate of Sweden as follows: The tax on the Group’s operating profit differs from the theoretical 1) Current tax Profit before tax Deferred tax of 28% Tax calculated at a tax rate Total in other countries Effect of different tax rates Tax charges not related to profit undertakings Income from associated Other direct taxes Tax-exempt income Non-deductible expenses prior years Adjustments relating to previously not recognised Income tax due to tax assets Change of tax rate Not creditable foreign taxes Tax charge Average effective tax rate

Note 13 Of which relating to prior years (see below)

1)

Taxes

3,396 2008 2008 –430 –294 –951 –724 –724 21% –33 –68 212 –10 66 29 16 Group Group 6 0 9 9

–1,087 3,883 2007 2007 –473 –280 –753 –753 19% –52 –17 236 64 83 –8 17 –1 11 –8 1 Parent company Parent company 1,877 2008 2008 –526 –1% 554 –30 17 –6 13 11 11 13 – – – 0 – – – 1,237 2007 2007 –346 –33 –34 328 –29 –34 3% –1 12 12 – 1 – – – – – EURm Deferred tax tax losses carry-forward Deferred tax due to temporary differences, including Deferred tax expense (–)/ income (+) Deferred tax due to change of tax rate Deferred tax due to tax assets previously not recognised Income tax expense, net Deferred tax assets due to tax losses carry-forward Deferred tax assets Deferred tax assets due to temporary differences Offset against deferred tax liabilities Total Deferred tax liabilities due to untaxed reserves Deferred tax liabilities – Deferred tax liabilities due to temporary differences Offset against deferred tax assets Total Deferred tax assets due to tax losses carry-forward Deferred tax assets (+)/ liabilities (–), net – Deferred tax liabilities due to untaxed reserves Deferred tax assets/liabilities in loans and advances to the public Deferred tax assets/liabilities in derivatives Deferred tax assets/liabilities in intangible assets Deferred tax assets/liabilities in property and equipment Deferred tax assets/liabilities in investment property Deferred tax assets/liabilities in retirement benefit obligations subsidiaries Deferred tax liability due to hedge of net investments in foreign Deferred tax assets/liabilities in liabilities/provisions Deferred tax assets/liabilities, net Deferred tax relating to items recognised directly in equity Movements in deferred tax assets/liabilities, net are as follows: Reclassification Translation differences Acquisitions and others Deferred tax in the income statement At end of year subsidiaries Deferred tax relating to hedge of net investments in foreign Current and deferred tax recognised directly in equity Deferred tax relating to available-for-sale investments Deferred tax relating to cash flow hedges Total Current tax assets Current tax liabilities – Unused tax losses carry-forward Unrecognised deferred tax assets – Unused tax credits Other deductible temporary differences Total Note 13 of which expected to be settled after more than 1 year of which expected to be settled after more than 1 year of which expected to be settled after more than 1 year of which expected to be settled after more than 1 year

Taxes, cont.

1,064 1,053 2008 –522 –294 –105 –300 –193 –175 –235 –989 –173 –294 –477 –175 –173 –116 –116 212 100 105 100 759 –43 –50 –10 344 458 Group 16 80 64 53 55 50 53 11 1 – 0 0 2 – 3 – 2007 –469 –280 –320 –183 –512 –280 –286 172 181 191 631 703 –72 –18 –58 –14 142 300 167 197 17 10 72 10 69 54 21 – – 6 – 0 – 8 – 0 – 0 9 Financial statements Parent company

2008 –6 –6 28 28 16 28 28 –6 –4 76 – – – – – 0 – 0 – 0 – – 0 – – – – – 2 – – – – 0 2 2 0 – – – – – – 2007 –1 –1 34 34 –4 36 32 –2 –1 –1 –4 –2 –2 52 – – – – – 2 – 2 – – – – – – – – – – – – 0 – – – – 107 Nordea Annual Report 2008 108 Nordea Annual Report 2008 outstanding Diluted weighted average number of shares (related to Long-Term Incentive Programmes ) number of additional ordinary shares outstanding Adjustment for diluted weighted average outstanding Basic weighted average number of shares in trading portfolio Adjustment for average own shares repurchase of own shares referring to Nordea Bank AB (publ)’s Adjustment for average own shares beginning of year Number of shares outstanding at outstanding (in millions): Basic weighted average number of shares Diluted earnings per share, EUR Basic earnings per share, EUR outstanding (in millions) Diluted weighted average number of shares outstanding (in millions) Basic weighted average number of shares of Nordea Bank AB (publ) (EURm) Profit attributable to shareholders Group EURm 1) Financial statements Expire date 2009 Expire date 2010 Expire date 2011 Expire date 2012 Expire date 2013 Expire date 2014 Expire date later than 2014 Total

Note 14 Note 13 share, exist in the Long-Term Incentive Progammes. Contingently issuable shares not included, that can potentiallly dilute basic earnings per Earnings per share Taxes, cont.

2008

28 19 53 Group

1 0 1 1 3

2007

197

10 28 40 88 24

3 4 1)

Parent company 31 Dec 2,594 2,593 2,597 2,594 2,593 2,671 2008 2008 1.03 1.03 –7 1 3 – – – – – – – –

31 Dec 2,592 2,591 2,594 2,592 2,591 3,121 2007 2007 1.20 1.20 –5 1 2 – – – – – – – –

Maximum 1 year (carrying amount) Remaining maturity Maturity information All bills are subject to variable interest rate risk. 1) More than 1 year EURm Total State and sovereigns – public bodies Municipalities and other Total Total

Note 15 183m (EUR 183m 0m). (EUR Of which 183m 0m) EUR (EUR held at amortised cost with a nominal amount of EUR collateral (Note 18) instruments pledged as of which Financial

Treasury bills

31 Dec 1,989 4,556 6,545 6,377 6,545 6,545 2008 168 Group – 31 Dec 1,274 4,089 5,363 5,263 5,363 5,193 2007 170 100 Parent company 31 Dec 1,431 2,230 2,230 2,230 2,098 2008 799 132 – 31 Dec 1,034 1,435 1,435 1,435 2007 401 868 567 – 1) Group 1)

EURm EURm Loans and receivables, not impaired Loans and receivables, not impaired Impaired loans and receivables Impaired loans and receivables – – – – Loans and receivables before allowances Loans and receivables before allowances Allowances for individually assessed impaired loans Allowances for individually assessed impaired loans – – – – Allowances for collectively assessed impaired loans Allowances for collectively assessed impaired loans Allowances Allowances Loans and receivables, carrying amount Loans and receivables, carrying amount Payable on demand Remaining maturity (carrying amount) Maturity information Payable on demand Remaining maturity (carrying amount) Maturity information Maximum 3 months Maximum 3 months 3–12 months 3–12 months 1–5 years 1–5 years More than 5 years More than 5 years Total Total Parent company

Note 16 Finance leases, where Nordea Group is a lessor, are included in Loans and receivables to the public, see Note 26 Leasing. Performing Performing Non-performing Non-performing Performing Performing Non-performing Non-performing Loans and receivables and their impairment 31 Dec 31 Dec 43,857 23,893 23,926 43,863 23,903 43,855 20,528 26,606 23,903 43,855 11,280 1,537 4,621 1,050 institutions institutions 2008 2008 –20 –19 –23 820 670 348 298 Credit Credit 33 32 –6 –5 –1 –1 –3 –2 –8 6 5 1 1

31 Dec 31 Dec 36,824 24,264 24,272 36,832 24,262 36,824 26,845 24,262 36,824 21,115 2,077 1,313 8,135 2007 2007 –10 670 284 507 116 –8 –8 –7 –6 –1 –2 –2 –8 24 8 8 7 6 1 2 0 264,056 266,247 265,100 265,100 31 Dec 31 Dec 29,061 29,358 –1,147 29,240 34,872 66,239 18,091 53,621 12,421 92,277 29,240 The public 2,191 1,357 The public 4,527 8,604 3,101 2008 2008 –742 –437 –305 –405 –118 297 265 834 –77 –53 –24 –41 587 32

244,205 245,629 244,682 244,682 31 Dec 31 Dec 26,577 26,752 26,640 31,223 56,953 10,872 18,867 49,391 88,248 26,640 1,424 4,351 1,759 8,907 2007 2007 –595 –300 –295 –352 –947 –112 1) 1) 175 917 106 507 –89 –34 –55 –23 751 69

Financial statements 287,949 290,173 289,003 289,003 31 Dec 31 Dec 72,918 73,221 –1,170 73,095 36,409 86,767 35,210 14,381 54,291 13,471 92,625 73,095 18,911 2,224 1,389 9,148 2008 2008 –762 –456 –306 –408 –126 303 270 835 –83 –58 –25 –43 885 33 Total Total

268,469 269,901 268,944 268,944 31 Dec 31 Dec 63,401 63,584 63,464 33,300 78,068 37,717 19,537 49,675 88,364 63,464 1,432 5,664 9,894 9,414 2007 2007 –603 –307 –296 –354 –957 –120 183 924 508 –97 –40 –57 –23 775 112 71 109 Nordea Annual Report 2008 110 Nordea Annual Report 2008 Closing balance at 31 Dec 2007 Currency translation differences Allowances used to cover write-offs Changes through the income statement Reversals Provisions Opening balance at 1 Jan 2007 Closing balance at 31 Dec 2008 Currency translation differences Allowances used to cover write-offs Changes through the income statement Reversals Provisions Opening balance at 1 Jan 2008 EURm Parent company Closing balance at 31 Dec 2007 Currency translation differences Reclassification Allowances used to cover write-offs Changes through the income statement Reversals Provisions Opening balance at 1 Jan 2007 Closing balance at 31 Dec 2008 Currency translation differences Reclassification Allowances used to cover write-offs Changes through the income statement Reversals Provisions Opening balance at 1 Jan 2008 EURm

Group Allowances and provisions 1) Group Reconciliation of allowance accounts for impaired loans Financial statements

EURm Allowances for items in the balance sheet Provisions for off balance sheet items Total allowances and provisions Allowances for items in the balance sheet Parent company Provisions for off balance sheet items Total allowances and provisions

Note 16 See Note 11 Loan losses. Loans and receivables and their impairment, cont. assessed assessed vidually vidually Indi- Indi- Credit institutions Credit institutions –20 –13 –14 –7 –7 –6 –7 –8 –1 –7 –8 0 – 0 – 0 0 – 1 1 – – 0 0 0 0 1 – 0 1

assessed assessed Collec- Collec- 31 Dec tively tively institutions 2008 –12 –13 –23 –54 –77 Credit –1 –2 –1 –2 –1 –2 –1 10 –1 –3 –1 –3 –2 –8 –1 –9 3 – 8 8 – 0 – 1 3 0 9 0 – 0 2 31 Dec Total Total 1) 2007 –19 –10 –20 –23 –14 –17 –10 –10 –36 –46 –10 –8 –8 –2 –8 –1 10 –1 –8 –2 3 – 8 8 0 0 – 0 2 2 0 9 1 – 0 3 assessed assessed vidually vidually Indi- Indi- –595 –230 –757 –742 –313 –541 –595 –89 –17 –43 –91 –76 –28 –68 –89 150 238 129 228 15 26 34 40 33 4 7 4 – 8 4 The public The public assessed assessed Collec- Collec- 31 Dec –1,147 –1,193 tively tively –352 –166 –341 –405 –185 –352 2008 –120 –118 The public –23 –10 –39 –42 –24 –30 –23 –40 126 –64 121 –46 –4 20 30 –4 33 –2 11 0 5 – 6 0 – 0 1) 1)

31 Dec –1,098 –1,147 Total Total –130 –947 –396 –377 –726 –947 2007 –947 –966 –112 –118 –112 –112 –112 –53 –52 –98 150 –32 364 129 349 –19 15 56 12 34 46 33 44 0 3 0 4 0 assessed assessed vidually vidually Indi- Indi- –603 –230 –764 –762 –326 –555 –603 –96 –17 –43 –98 –82 –27 –68 –96 150 238 129 229 15 26 34 41 34 4 7 3 – 8 4 assessed assessed Total Total Collec- Collec- 31 Dec –1,170 –1,270 tively tively –354 –167 –354 –408 –188 –354 2008 –100 –126 –129 –24 –10 –51 –44 –25 –32 –24 –31 136 –65 123 –1 28 38 –1 32 –3 11 Total 0 5 – 7 0 – 0 31 Dec –1,170 –1,012 –1,118 Total Total –120 –149 –126 –100 –120 –957 –397 –391 –743 –957 2007 –957 –120 –122 –53 –52 150 –23 374 129 352 –55 15 64 12 34 48 32 45 –2 11 3 2 4 instruments pledged as collateral. the assets are reclassified in the balance sheet to the item Financial receiving the collateral has the right to sell or repledge the assets, non-cash assets are transferred as collateral. When the counterpart In repurchase transactions and in securities lending transactions, Financial instruments pledged as collateral Key ratios Maximum 1 year (carrying amount) Remaining maturity Maturity information 1) 5) 4) 3) 2) 1) impaired and receivables, not Non-performing loans loans Allowance rate, impaired Total allowance rate Impairment rate, net EURm More than 1 year EURm Repurchase agreements Impairment rate, gross schemes Total including portfolio Issued by public bodies Securities lending agreements – Issued by other borrowers Total Total Total Listed securities Unlisted securities Total

Note 18 Note 17 Note 16 2,327m (EUR 2,327m 0m). (EUR Of which 2,335m 0m) EUR (EUR held at amortised cost with a nominal amount of EUR and receivables, not impaired). Past due loans and receivables, not impaired due to future cash flows (included in Loans ally assessed impaired loans and receivables before allowances, %. Allowances for individually assessed impaired loans and receivables divided by individu- Total allowances divided by total loans and receivables before allowances, %. loans and receivables before allowances, %. Individually assessed impaired loans and receivables after allowances divided by total loans and receivables before allowances, %. Individually assessed impaired loans and receivables before allowances divided by total collateral (Note 18) instruments pledged as of which Financial 4)

, % 5) , EURm Financial instruments pledged as collateral Interest-bearing securities Loans and receivables and their impairment, cont. 3)

2)

, %

, % 1)

, %

31 Dec 31 Dec 31 Dec 16,509 36,237 52,746 49,626 44,830 52,746 48,829 52,746 7,917 3,120 7,916 7,937 3,917 2008 2008 2008 34.3 142 0.4 0.5 0.8 20 Group Group Group

31 Dec 31 Dec 31 Dec 13,036 30,263 43,299 40,354 38,782 43,299 35,125 43,299 4,688 2,945 4,517 4,790 8,174 2007 2007 2007 42.1 102 0.4 0.3 0.5 98 Parent company Parent company Parent company 31 Dec 31 Dec 31 Dec 13,045 13,045 10,080 13,045 13,045 5,161 7,884 3,097 2,965 3,097 9,516 3,529 2008 2008 2008 27.2 0.2 0.3 0.4 – – – 31 Dec 31 Dec 31 Dec 2,173 4,981 2,806 7,154 7,154 1,938 5,216 2,806 7,154 5,239 1,915 7,154 2007 2007 2007 53.0 0.2 0.1 0.3 – – – 1)

assets and its associated liabilities are included in the tables below. exposed to changes in the fair value of the assets. Therefore, these continue to be recognised on the balance sheet since Nordea is still these transactions are specified in the following tables. The assets The types of assets transferred and the liabilities associated with sheet and associated liabilities Transferred assets that are still recognised in the balance EURm EURm Shares held for trading Treasury bills Repurchase agreements value through profit or loss Shares designated at fair Interest-bearing securities – Shares Shares available for sale Shares Securities lending agreements Total Total Listed shares Liabilities associated with the assets Unlisted shares EURm Total Deposits by credit institutions Repurchase agreements – from the public Deposits and borrowings – Total Other Total Note 19 for protection of claims of which shares taken over collateral (Note 19) instruments pledged as of which Financial settled after more than 1 year of which expected to be

Shares

31 Dec 31 Dec 31 Dec 10,690 10,690 10,669 3,766 6,917 7,916 7,937 7,742 2,948 6,578 1,370 7,952 2008 2008 2008 313 13 20 21 Group Group Group – 1 7 4 31 Dec 31 Dec 31 Dec 12,076 17,747 15,766 17,747 17,644 Financial statements 5,655 4,517 4,790 1,981 3,776 4,777 2007 2007 2007 170 102 103 862 262 139 16 0 1 Parent company Parent company Parent company 31 Dec 31 Dec 31 Dec 1,063 2,965 1,107 3,097 1,107 3,104 1,107 3,104 2008 2008 2008 132 638 469 44 13 44 – 0 – – – – 31 Dec 31 Dec 31 Dec 1,828 1,938 2,034 2,806 2,003 2,034 2,826 2,034 2,826 2007 2007 2007 868 199 31 34 – – 7 – – – – 111 Nordea Annual Report 2008 112 Nordea Annual Report 2008

Financial statements 31 Dec 2008, EURm Interest rate swaps Interest rate derivatives Derivatives held for trading FRAs Futures and forwards Options Other Total Equity swaps Equity derivatives Futures and forwards Options Total Currency and interest rate swaps Foreign exchange derivatives Currency forwards Options Other Total Credit default swaps Credit derivatives Total Swaps Other derivatives Futures and forwards Options Other Total Total derivatives held for trading Interest rate swaps Interest rate derivatives Derivatives used for hedge accounting Total Options Equity derivatives Total Currency and interest rate swaps Foreign exchange derivatives Currency forwards Total Total derivatives used for hedge accounting – – Total derivatives Note 20 of which fair value hedges of which cash flow hedges Derivatives and Hedge accounting

Positive 43,992 52,425 18,123 27,037 86,520 86,838 4,631 2,159 6,258 8,002 4,631 1,125 1,504 322 516 923 908 294 280 280 318 288 13 85 85 37 37 30 Fair value 3 4 – 1 1 –

Negative Group 43,264 52,100 17,195 24,605 83,277 85,538 2,066 6,375 6,542 4,584 4,584 1,033 1,283 2,052 2,052 2,261 2,114 395 581 705 866 100 202 202 147 64 60 87 63 0 2 7 7 –

Total nom 1,899,652 2,939,059 3,770,087 3,802,101 amount 802,160 171,877 192,133 453,227 686,889 65,345 12,632 14,035 27,385 33,622 99,208 99,208 10,007 17,546 13,940 13,940 18,005 18,005 32,014 30,403 7,907 4,463 1,450 1,626 1,611 718 25 69 69 –

Positive 1,626 1,983 3,165 3,562 692 781 202 108 401 357 253 253 102 137 397 265 132 46 42 91 35 Fair value 1 – – – – – – – – – – 7 7

Parent company Negative 1,385 1,532 2,551 2,756 756 851 147 164 166 205 147 54 39 53 18 24 95 10 10 63 63 32 32 58 2 – – – – – – 7 7 2

Total nom amount 104,378 47,756 15,728 66,632 16,566 27,946 98,378 11,380 3,128 1,774 1,626 1,626 4,229 4,229 1,413 1,664 6,000 3,991 2,009 785 425 564 400 400 107 107 251 20 – – – – – –

Net cash flows 31 Dec 2007, EURm Cash outflows (liabilities) Cash inflows (assets) Interest rate swaps Interest rate derivatives Derivatives held for trading EURm Parent company Net cash flows FRAs Cash outflows (liabilities) Cash inflows (assets) Futures and forwards EURm Group when they are expected to affect the income statement Periods when hedged cashflows are expected to occur and Options Other Total Swaps Equity derivatives Futures and forwards Options Total Currency and interest rate swaps Foreign exchange derivatives Currency forwards Options Total Credit default swaps Credit derivatives Total rate of return swaps Total Swaps Other derivatives Futures and forwards Options Total Total derivatives held for trading Note 20 Derivatives Derivatives and Hedge accounting, cont. Positive 16,391 19,860 31,083 2,913 1,178 1,310 2,257 4,826 7,365 1,163 1,163 1,183 1,385 196 337 282 <1 year 103 <1 year 23 57 75 99 Fair value – –757 –432 –21 736 436 4 Negative Group 16,889 20,462 32,324

2,963 1,584 1,840 2,305 5,012 7,599 1,142 1,308 1,115 1,115 190 405 137 282 119 118 15 48 1–3 years 1–3 years – –1,077 –857 –96 981 936 79 Total nom 1,387,471 2,571,356 3,367,780 amount 642,258 167,641 370,078 170,131 465,014 667,979 16,528 27,334 32,834 90,476 90,476 10,635 3,908 1,379 9,427 9,169 769 697 –

3–5 years 3–5 years –271 –76 195 –82 164 82 Positive 1,068 720 770 216 211 14 27 44 36 81 Fair value 2 7 1 5 – – 1 1 – – – – 5–10 years 5–10 years Parent company Negative –213 –248 Financial statements –24 35 35 11 1,310 771 818 131 307 361 12 28 77 49 54 0 7 5 – – – – – – – – over 10 years over 10 years Total nom amount 100,317 122,946 276,258 294,803 48,240 12,039 16,663 4,533 1,481 1,632 4,624 –240 –240 235 235 222 250 250 111 –5 –5 40 – – – – – – 113 Nordea Annual Report 2008 114 Nordea Annual Report 2008

Total More than 5 years 1–5 years 3–12 months Maximum 3 months (carrying amount) Remaining maturity Maturity information 31 Dec 2008, EURm Financial statements 31 Dec 2007, EURm Interest rate swaps Interest rate derivatives Derivatives used for hedge accounting Total Options Equity derivatives Total Currency and interest rate swaps Foreign exchange derivatives Currency forwards Total Total derivatives used for hedge accounting – Total derivatives Note 20 of which fair value hedges Derivatives Derivatives and Hedge accounting, cont.

Positive 86,838 34,229 27,686 13,844 11,079 Group Negative 85,538 33,330 26,607 14,584 11,017 Positive 31,498 Positive Parent company 252 252 108 415 415 3,562 1,817 55 55 97 11 Fair value 269 650 826 Negative Negative 2,756 1,603 Group 341 489 323 33,023 124 124 502 502 699 699 73 73 – Total More than 5 years 1–5 years 3–12 months Maximum 3 months (carrying amount) Remaining maturity Maturity information 31 Dec 2007, EURm Total nom 3,405,332 amount 32,918 32,918 37,552 37,552 4,381 4,381 253 253 –

Positive 31,498 14,163 Positive 9,770 2,978 4,587 1,281 Group 213 213 48 48 73 73 92 92 Fair value Negative – 33,023 14,505 9,907 3,426 5,185 Parent company Negative 1,581 168 169 271 271 Positive 29 29 73 73 Parent company 1 1,281 421 590 105 165 Total nom Negative amount 299,852 1,581 3,256 3,256 1,433 1,451 5,049 5,049 603 658 137 183 342 342 18 Assets bility, the change is presented as a liability. item is presented within assets and when the hedged item is a lia- hedged item is an asset, the change in the fair value of the hedged the hedged item is an asset respectively a liability. When the changes in the fair value for those repricing time periods in which The carrying amount at end of year represents accumulated 1) Liabilities 1)

EURm EURm Carrying amount at end of year Carrying amount at end of year of year Carrying amount at beginning beginning of year Carrying amount at – – Changes during the year Changes during the year

Note 21 sation sation is based on the relevant repricing time period. the carrying amount related to the dissolved hedges are included in this line. The amorti- A part of the portfolio hedge designation was revoked during 2007. The amortisation of tion is based on the expected relevant repricing time period. the carrying amount related to the dissolved hedges is included in this line. The - amortisa A part of the portfolio hedge designation was revoked during 2007. The amortisation of Translation differences Translation differences after more than 1 year of which expected to be settled after more than 1 year of which expected to be settled Revaluation of hedged items Revaluation of hedged items portfolio hedge of interest rate risk Fair value changes of the hedged items in

1) 1) 31 Dec 31 Dec

2008 2008 –105 –323 919 547 –29 –64 413 532 329 461 Group Group

31 Dec 31 Dec 2007 2007 –105 –323 –401 –71 –37 71 3 7 Parent company Parent company 31 Dec 31 Dec 2008 2008 –69 111 31 27 42 –4 23 23 – – 31 Dec 31 Dec 2007 2007 –69 –96 –5 27 –4 – – 1 IFRS 2 expenses Reclassifications Sales during the year Acquisitions during the year Acquisition value at beginning of year EURm Parent company The total amount is expected to be settled after more than 1 year. 1) – Total Accumulated impairment charges at end of year Translation differences Reclassifications Impairment charges during the year Reversed impairment charges during the year beginning of year Accumulated impairment charges at Acquisition value at end of year

Note 22 information, see Note 8. Allocation of 2 IFRS expenses for LTIP 2007/2008 related to the subsidiaries. For more of which, listed shares Investments in group undertakings 1)

Financial statements 31 Dec 15,953 15,866 16,360 2008 –494 –465 402 –26 –3 – – 5 – – – 31 Dec –2,084 17,615 15,488 –1,054 15,953 –141 2007 –465 560 141 448 3 – – – 115 Nordea Annual Report 2008 116 Nordea Annual Report 2008 Nordea Fastigheter AB Total Parent company The This specification includes all directly owned group undertakings and major group undertakings to the directly owned companies. Specification Nordea Bank Norge ASA Nordea Bank Danmark A/S Nordea Bank Finland Plc 31 Dec 2008 3) 2) 1) OOO Promyshlennaya Companiya Vestkon Nordea Bank Polska S.A. Financial statements Nordic Baltic Holding (NBH) AB Nordea Do Brasil Representações LTDA Nordea North America Inc. Nordea Putten Fastighetsförvaltning AB Nordea Hästen Fastighetsförvaltning AB Nordea Bemanning AB PK Properties Int’l Corp Nordea Investment Funds I Company SA Nordea Ejendomsinvestering A/S Nordea Investment Fund Company Finland Ltd Nordea Investment Management AB Nordea Fondene Norge AS Nordea Finans Sverige AB (publ) Nordea Bank S.A. Nordea Fonder AB Nordea Hypotek AB (publ) Nordea Life Holding AB

Norgreskreditt AS Nordea Kredit Realkreditaktieselskab Nordea Finans Danmark A/S Nordea Finance Finland Ltd PRIVATmegleren AS Christiania Forsikring AS Nordea Finans Norge AS Note 22 Nordea Life Holding Finland Ltd Nordea Livförsäkring Sverige AB (publ) Nordea Liv Holding Norge AS Nordea Liv & Pension, Livforsikringsselskab A/S JSB Orgresbank Dormant. Nominal value expressed in representing RUB, Nordea’s participation in Vestkon. New name is Nordea Eiendomskreditt AS as from 5 January 2009. Nordea Life Assurance Finland Ltd Livforsikringsselskapet Nordea Liv Norge AS full specification and statutory information are available on request from Nordea Investor Relations. Investments in group undertakings, cont.

1)

3)

3)

1,030,800,000 749,991,704 551,358,576 50,000,000 45,070,392 3,380,000 1,000,000 of shares Number 100,000 999,999 100,000 38,996 12,600 15,000 1,000 1,000 1,000 1,000 1,000 3,350 1,200 1,000 300 510 2)

Carrying amount EURm 15,866 2,402 3,503 5,948 2008, 1,714 262 649 323 679 201 64 29 77 9 1 0 0 0 0 0 0 0 1 4 Carrying amount EURm 15,488 2,401 3,501 5,947 2007, 1,714 262 451 323 679 34 64 29 77 1 0 0 0 0 0 0 0 1 4 0 power of holding Voting 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.0 67.0 99.0 91.1 51.0 % Stockholm Stockholm Oslo Copenhagen Copenhagen Copenhagen Espoo Helsinki Domicile Oslo Gdynia Oslo Oslo Oslo Sao Paulo, Brasil Ballerup Moscow Moscow Delaware, USA Stockholm Stockholm Stockholm Atlanta, USA Luxembourg Copenhagen Helsinki Stockholm Oslo Stockholm Luxembourg Stockholm Stockholm Espoo Espoo Stockholm Bergen Bergen Stockholm

556592-7950 556021-4917 15134275 89805910 13522197 911044110 0112305-3 1680235-8 number Registration 971227222 KRS0000021828 986386661 941219349 924507500 51-696.268/0001-40 24260577 1027739436955 1027700034185 51-0276195 556653-5257 556653-6800 556222-4336 91-1682291 B30550 26640172 1737785-9 556060-2301 930954616 556021-1475 B14157 556020-4694 556091-5448 0927072-8 1737788-3 516401-8508 959922659 984739303 556742-3305

Total Kirkas Northern Lights Ltd Viking ABCP Conduit EURm Special Purpose Entities (SPEs) – Consolidated CMO Denmark A/S The total amount is expected to be settled after more than 1 year. 1) 4) 3) 2) 1) Kalmar Structured Finance A/S

EURm Dividend received beginning of year Acquisition value at Reclassifications Acquisitions during the year Translation differences Sales during the year Acquisition value at end of year Share in earnings charges at beginning of year Accumulated impairment charges on sales during the year Accumulated impairment the year Impairment charges during Translation differences charges at end of year Accumulated impairment Total –

Note 23 Note 22 at year end 2008. These SPEs are consolidated as they are closely linked to the activities within Nordea. Also, Nordea is exposed to credit risk through ing the funds liquidity on facility.the liquidity facilities available. Nordea has provided liquidity facilities of maximum 1,122m EUR and at year end 2008 733mEUR were utilised. There is no trade outstanding receivables CP from issue the approved sellers and fund the purchases either by issuing Commercial Papers (CP) via the established Asset Backed Commercial Papers programme or by The draw- Viking Conduit ABCP (Viking) has been established with the purpose of supporting trade receivable or accounts payable securitisations to core Nordic customers. The SPEs purchase- ership risks in the SPE, why the SPE is consolidated into the Nordea Group. bonds issued. The total notional of bonds and subordinated loans was 8,096m at EUR year end 2008, which are held in full by Nordea. Nordea still holds the Kirkas Northern majority Lights of Ltd the (Kirkas) residual- has and been own- established during 2008. Assets have been sold from Nordea’s ordinary lending portfolio to Kirkas. Kirkas has used the assets as collateral the for SPEs as part of offering a secondary market for the notes. The investment amounted to 25m EUR at year end 2008. in the CDSs. Nordea is the counterpart in the derivative transactions. The total notional of outstanding CLNs in this category was 142m EUR at year end 2008. Nordea holds aquires CLNs a issued credit by risk on an underlying portfolio of names (like corporate names) and at the same time the SPE issues Credit Linked Notes (CLN) with a Kalmar similar Structured credit Finance risk A/S that was reflectsestablished to theallow terms customers to invest in structured products in the global credit markets. The SPE enters into Credit Default Swaps investment (CDS) and amounted hereby to 12m EUR as of year end 2008. the total notional of outstanding bonds were 33m EUR available to investors. Nordea holds bonds issued by CMO Denmark A/S as part of offering a secondary market for risk, the interest bonds. rate The risk, prepayment risk, maturity etc. The SPE purchased a pool of mortgage bonds and reallocated the risk through tranching a similar bond Collateralised issue Mortgage (CMOs). At Obligations year Denmark end A/S 2008 (CMO Denmark A/S) was established with the purpose to issue CMOs in order to meet specific customer preferences in terms of credit of which, listed shares Share in earnings as Net gains/losses on items at fair value Associated undertakings in Life, reported Portfolio hedge, Eksportfinans ASA under the equity method Profit from companies accounted for EURm Share in earnings Investments in associated undertakings Investments in group undertakings, cont. 1)

2)

1)

4)

31 Dec 3)

2008 2008 –14 376 –38 –53 441 –10 –10 431 112 112 17 41 Group 35 53 24 – – – – 31 Dec Collateralised Mortgage Obligation Credit Linked Note Purpose Factoring Collateralised Mortgage Obligation 2007 2007 –48 –23 –33 376 –13 –10 366 411 58 41 58 17 9 2 3 0 0 – – Parent company 31 Dec

2008 –28 30 – – – – – 2 – – – – – 2 – 31 Dec 2007 29 30 30 – – – 1 – – – – – – – – associated undertaking EUR 0m (EUR 0m). undertakings amounts to EUR 249m (EUR 368m), and on behalf of Nordeas’ share of contingent liabilities in favour in associated Operating profit Operating income Total liabilities Total assets EURm income statements can be summarised as follows: The associated undertakings’ aggregated balance sheets and Duration >5 years >5 years >5 years <1 year

investment Nordea’s 8,866 8,096 Financial statements 733 25 12 31 Dec 7,994 8,499 2008 148 195 Total assets 31 Dec 7,182 7,603 9,072 8,096 2007 211 142 801 43 33 117 Nordea Annual Report 2008 118 Nordea Annual Report 2008 Total Other Visa Sweden Bankpension Sverige AB BPB Bankernas Depå AB 31 Dec 2008 Parent company The statutory information is available on request from Nordea Investor Relations. Total Other Visa Sweden PBS Holding A/S Lautruphöj 1-3 A/S Multidata Holding A/S KFU-AX II A/S KIFU-AX II A/S Automatia Pankkiautomaatit Oy Axel IKU Invest A/S Ejendomsselskabet Axelborg I/S Hovedbanens Forretningscenter K/S E-nettet Holding A/S Nymøllevej I/S Oy Realinvest Ab LR Realkredit A/S Luottokunta Ejendomspartnerskabet af 1/7 2003 Eksportfinans ASA 31 Dec 2008 Group 1) Nordea Bank Danmark A/S Financial statements EURm Nordea Bank Norge ASA Goodwill Nordea Bank Sverige AB (publ) Nordea Bank Polska S.A. JSB Orgresbank Life insurance companies Other goodwill Goodwill, total Internally developed software Other intangible assets Total

Note 24 Note 23 Excluding goodwill in associated undertakings. 1) Intangible assets Investments in associated undertakings, cont.

31 Dec 2,143 2,535 2008 439 847 150 243 309 303 65 90 89 Group 31 Dec 1,034 2,408 2,725 2007 439 173 290 321 236 74 77 81 Parent company 31 Dec 2008 665 665 757 80 12 – – – – – – 801020-5097 556695-8194 556695-3567 number Registration 801020-5097 67007719 26640172 27226027 25894286 25893662 0974651-1 24981800 79334413 16301671 21270776 24247961 0680035-9 26045304 0201646-0 27134971 816521432 number Registration 31 Dec 2007 736 736 819 63 20 – – – – – – 1) Sales/disposals during the year EURm Translation differences beginning of year Acquisition value at Goodwill of year Acquisition value at end Acquisitions during the year at beginning of year Accumulated amortisation at end of year Accumulated amortisation plan for the year Amortisation according to charges at beginning of year Accumulated impairment the year Impairment charges during Translation differences charges at end of year Accumulated impairment Total

Vestkon made (preliminary) in Q4 2007. The offsetting decrease is related to an update of the purchase price allocation covering Of which 18m EUR related to the acquisition of nine branch offices from RoskildeBank.

Stockholm Stockholm Stockholm Domicile Stockholm Ballerup Ballerup Ballerup Fredriksberg Fredriksberg Helsinki Billund Copenhagen Ballerup Copenhagen Ballerup Helsinki Copenhagen Helsinki Ballerup Oslo Domicile

Carrying amount, Carrying amount,

31 Dec 2,408 2,144 2,143 2008 –276 12 –1 –1 Group 1) – 0 – – – 0

EURm EURm 31 Dec 2,083 2,408 2,408 431 166 2007 112 17 12 14 24 41 303 2 0 0 1 1 5 7 6 2 2 7 1 9 2 3 1 22 – – – – – – – – Parent company 31 Dec 1,058 1,059 2008 –322 –394 Voting power Voting power of holding % of holding % 665 –72 – – 1 – – – – 31 Dec 1,058 1,058 2007 –250 –322 736 –72 23 40 20 23 28 50 28 34 26 33 33 33 50 20 50 49 39 24 49 23 – – – – – – –

The total amount is expected to be settled after more than 1 year. 1) Translation differences Sales/disposals during the year EURm Acquisition value at end of year Reclassifications beginning of year Acquisition value at Internally developed software at beginning of year Accumulated amortisation Acquisitions during the year plan for the year Amortisation according to Sales/disposals during the year sales/disposals during the year Accumulated amortisation on Reclassifications Reclassifications Translation differences Translation differences Acquisition value at end of year at end of year Accumulated amortisation at beginning of year Accumulated amortisation Total plan for the year Amortisation according to sales/disposals during the year Accumulated amortisation on Reclassifications Translation differences end of year Accumulated amortisation at charges at beginning of year Accumulated impairment the year Impairment charges during Translation differences charges at end of year Accumulated impairment Total

EURm beginning of year Acquisition value at Other intangible assets Acquisitions during the year

Note 24 Of which acquisitions through business combinations 13m 21m). EUR (EUR Intangible assets, cont.

1)

31 Dec 31 Dec 2008 2008 157 296 –66 127 –14 –26 –16 379 –68 –59 –18 –71 303 147 –2 25 –9 –4 –2 89 –1 –1 –6 –5 Group Group 0 8 4 1 6 2

31 Dec 31 Dec 2007 2007 147 146 –53 –12 –10 296 –66 –16 –17 –34 –59 236 56 88 71 –1 81 10 –2 –1 –1 88 2 1 0 0 0 1 – – Parent company Parent company 31 Dec 31 Dec 2008 2008 –28 102 –33 –13 –20 –3 45 76 26 –5 12 –7 –2 –2 80 48 – – – – – – – – – – – – – – 31 Dec 31 Dec 2007 2007 –22 –28 –13 48 35 25 –6 16 76 20 –6 –7 63 37 11 – – – – – – – – – – – – – – –

1) need for significant goodwill impairment. of 150 basis points has been applied. tions in Poland and the Baltics where an additional risk premium internal performance management purposes), except for opera- post-tax average cost of equity of 8.5% (equal to what is used for torical data, updated to reflect the current situation. 6% for Orgresbank has been used. Growth rates are based on his- used, while a growth rate of 5% for Poland & Baltic countries and dic market an average growth rate of approximately 4% has been two years) are based on estimated sector growth rates. In the Nor sales and cost development. Longer term cash flows (more than financial forecasts, derived from forecasted margins, volumes, entity, is the basis for the goodwill impairment test. A cash generating unit, defined as segment per acquired legal Impairment test Sales/disposals during the year EURm Reclassifications Property and equipment Translation differences – Acquisition value at end of year Total at beginning of year Accumulated depreciation beginning of year Acquisition value at Equipment sales/disposals during the year Accumulated depreciation on Acquisitions during the year Reclassifications plan for the year Depreciations according to Translation differences at end of year Accumulated depreciation charges at beginning of year Accumulated impairment on sales/disposals during the year Accumulated impairment charges during the year Reversed impairment charges the year Impairment charges during Translation differences charges at end of year Accumulated impairment Total

Note 25 Of which acquisitions through business combinations 1m 3m). EUR (EUR of which buildings for own use The impairment tests conducted in 2008 did not indicate any The derived cash flows are discounted at the Group’s defined Cash flows are risk adjusted using normalised loan losses. Cash flows in the near future (up to two years) are based on Property and equipment

1)

31 Dec 2008 –453 –498 161 –24 375 –36 866 375 770 –81

–13 355 –11 –5 20 13 18 –3 Group 5 0 0 1 31 Dec Financial statements 1,031 –312 2007 –746 –453 149 –95 342 770 342 303 –72 –12 306 –11 –3 36 63 –1 0 0 – 1 Parent company 31 Dec 2008 –125 –111 206 164 –16 45 –3 81 81 81 0 – 0 2 0 – – – – – – – 31 Dec 2007 –110 –111 –16 164 167 –17 22 –9 53 53 53 – 0 9 7 – – – – – – – - 119 Nordea Annual Report 2008 120 Nordea Annual Report 2008

Financial statements EURm beginning of year Acquisition value at Land and buildings Acquisitions during the year Sales/disposals during the year Reclassifications Translation differences Acquisition value at end of year at beginning of year Accumulated depreciation sales/disposals during the year Accumulated depreciation on Reclassifications plan for the year Depreciation according to Translation differences at end of year Accumulated depreciation charges at beginning of year Accumulated impairment Reclassifications Translation differences charges at end of year Accumulated impairment Total with an estimated market value of EUR 0.7m (EUR 0.6m). 0.5m (EUR 0.5m). Tax value amounts to EUR 0.6m (EUR 0.4m) two tenant rights in Stockholm with a carrying amount of EUR The parent company owns two properties outside Stockholm and Parent company The total amount is expected to be settled after more than 1 year. Note 25 Property Property and equipment, cont.

31 Dec 2008 –17 45 –2 27 –9 –1 –7 20 Group 1 – – 2 1 0 0 0 0 31 Dec 2007 –13 47 10 –8 –5 45 –2 –9 36 1 2 4 0 0 – 0 0 Parent company 31 Dec 2008 0 – – – – 0 0 – – 0 – 0 – – – – 0 31 Dec 2007 0 – – – 0 0 0 – – 0 – 0 – – – 0 Depreciation for 2008 amounted to EUR 17m (EUR 13m). Carrying amount at end of year Land and buildings Equipment on groups of assets, EURm Carrying amount distributed – Carrying amount at end of year Accumulated impairment charges Accumulated depreciations Acquisition value Carrying amount of leased assets, EURm they are reported as tangible assets. vehicles, aeroplanes and other equipment. In the balance sheet Assets subject to operating leases mainly comprise real estate, Operating leases Net investment in finance leases Less unearned future finance income on finance leases Total gross investment Later years 2013 2012 2011 2010 2009 EURm rity was distributed as follows: As of 31 December 2008 the gross investment at remaining matu- minimum lease payments receivable Accumulated allowance for uncollectible lease payments receivable Present value of future minimum accruing to the benefit of the lessor Less unguaranteed residual values Net investments in finance leases Less unearned finance income Gross investments EURm minimum lease payments: Reconciliation of gross investments and present value of future equipment. The leased assets mainly comprise vehicles, machinery and other (see Note 16) at an amount equal to the net investment in the lease. from the lessee included in ”Loans and receivables to the public” agreements. Finance lease agreements are reported as receivables Nordea owns assets leased to customers under finance lease Finance leases Nordea as a lessor Note 26 carrying amount of which repossessed leased property, Leasing

31 Dec 31 Dec 31 Dec 5,871 5,796 6,465 –594 2008 2008 2008 –13 –54 178 –75 111 111 111 Group Group Group – 1 3 31 Dec 31 Dec 31 Dec 31 Dec Group 5,520 5,871 6,465 1,262 1,272 1,384 5,471 5,974 1,113 –454 2007 2007 –594 2008 2007 102 102 102 –10 –43 155 675 759 –49 – 1 6 Leasing expenses and office equipment. Nordea has entered into operating lease agreements for premises Operating leases amounts to EUR 1m (EUR 1m). agreements. The book value of assets subject to finance leases Nordea has only to a minor extent entered into finance lease Finance leases Nordea as a lessee Total Later years 2013 2012 2011 2010 2009 EURm lease payments receivable are distributed as follows: Under non-cancellable operating leases, the future minimum during the year, EURm Leasing expenses during the year – – regarding sublease payments Leasing income during the year ing leases amounted to and are distributed as follows: Future minimum lease payments under non-cancellable operat- EUR EUR cancellable subleases amounts to EUR 20m for the group and Total sublease payments expected to be received under non-­ Total Later years 2013 2012 2011 2010 2009 EURm Note 26 payments of which minimum lease of which contingent rents 316m of the subleases are towards group undertakings. 336m for the parent company. For the parent company Leasing, cont.

31 Dec

2008 253 250 Group 3 7

31 Dec 31 Dec Group 1,435 2007 2008 243 241 466 100 251 230 304 84 2 6

Parent company 31 Dec 2008 84 84 38 – company 31 Dec 31 Dec 31 Dec Group Parent 2008 2007 2008 784 184 219 166 178 48 14 19 84 84 18 18 19 1 1 4 9 – Amounts recognised in the income statement The total amount is expected to be settled after more than 1 year. Carrying amount at end of year Translation differences Transfers/reclassifications during the year Net gains or losses from fair value adjustments Sales/disposals during the year Capitalised subsequent expenditure Acquisitions during the year Carrying amount at beginning of year EURm Movement in the balance sheet Group

1) rental income Direct operating expenses that did not generate rental income Direct operating expenses that generate Rental income EURm EURm EURm proceeds Claims on securities settlement Accrued interest income Reinsurance recoverables Other accrued income Other Prepaid expenses Total Total – –

Note 28 Note 29 Note 27 Together with fair value adjustments included in Net gains/losses on items at fair value. after more than 1 year of which expected to be settled after more than 1 year of which expected to be settled

Other assets Investment property Prepaid expenses and accrued income

31 Dec 31 Dec

10,532 14,604 4,063 1,964 2,827

2008 2008 425 438 360 31 Group Group 9

31 Dec 31 Dec Financial statements 5,293 1,563 2,427 7,724 2,183 2007 2007 360 260 4 1)

Parent company Parent company 31 Dec 31 Dec 31 Dec 3,334 3,492 2,038 2,099 –266 2008 2008 2008 2008 –19 109 –86 233 492 280 783 222 18 –1 61 11 0 – 0 – 31 Dec 31 Dec 31 Dec 3,492 3,230 1,759 1,940 2007 2007 2007 2007 –114 –96 209 253 –62 234 181 350 402 –9 43 9 1 – 9 121 Nordea Annual Report 2008 122 Nordea Annual Report 2008

Financial statements EURm EURm Deposits from the public Central banks Other banks Borrowings from the public Other credit institutions Total Total Deposits. Danmark A/S of EUR 3,070m (EUR 3,981m) are also included in ings (IPS) are also included. Portfolio schemes in Nordea Bank excess of the individual amount limits. Individual pension sav- government deposit guarantee but also including amounts in Deposits are defined as funds in deposit accounts covered by the Payable on demand (carrying amount) Remaining maturity Maturity information EURm Maximum 3 months Payable on demand (carrying amount) Remaining maturity Maturity information, Deposits 3–12 months Maximum 3 months 1–5 years 3–12 months More than 5 years 1–5 years Total More than 5 years Total Payable on demand (carrying amount) Remaining maturity Maturity information, Borrowings Maximum 3 months 3–12 months 1–5 years More than 5 years Total Note 31 Note 30 Deposits and borrowings from the public Deposits by credit institutions

145,131 148,591 101,880 145,131 31 Dec 31 Dec 31 Dec 26,341 22,544 51,932 14,133 35,208 30,764 51,932 3,460 3,047 1,847 6,510 5,541 3,273 3,460 2008 2008 2008 448 296 436 121 12 41 13 Group Group Group

138,273 142,329 107,415 138,273 31 Dec 31 Dec 31 Dec 21,789 30,077 19,026 20,438 30,077 5,882 4,056 2,406 6,315 3,751 3,706 3,700 4,056 6,115 2007 2007 2007 639 346 599 243 34 64 15 Parent company Parent company Parent company 31 Dec 31 Dec 31 Dec 33,447 25,497 33,457 34,713 21,838 26,266 34,713 33,447 8,806 7,822 3,595 7,181 1,366 2008 2008 2008 410 10 92 10 10 – – – 0 – – – 31 Dec 31 Dec 31 Dec 32,047 21,250 32,296 24,275 12,227 28,325 24,275 32,047 2,746 7,103 3,059 3,722 1,810 2007 2007 2007 249 279 249 249 76 – – – 0 – – – ­policies. ure and recognises insurance contracts using local accounting Each market represented by Nordic and European entities meas­ ing in non-uniform accounting policies method on consolidation. under previous GAAP has been maintained consequently result- dance with IFRS 4, i.e. the measurement and recognition principle Life insurance contracts are measured and recognised in accor – Total Collective bonus potential Investment contracts Total insurance contracts Provisions, Health & personal accident Insurance claims provision Unit-linked insurance provisions Traditional life insurance provisions EURm other insurance related items. pure investments contracts. insurance risk and contracts without insurance risk. The latter are contracts. These contracts are divided into contracts containing Liabilities to policyholders are obligations related to insurance Group Note 32 after more than 1 year of which expected to be settled Insurance contracts consists of Life insurance provisions and Liabilities to policyholders

31 Dec 28,802 29,238 24,433 20,286 4,022 3,611 2008 783 173 363 31 Dec 32,280 25,825 20,515 2,231 4,224 4,796 2007 - 161 353

31 Dec 2008, EURm beginning of year Provisions/ bonus potentials, beginning of year Accumulated value adjustments, beginning of year Retrospective provisions/ bonus potentials, Gross premiums written Transfers Addition of interest/ Investment return Claims and benefits expense bonus Expense loading inclusive addition of Change in provisions/ bonus potential Other Translation differences Provisions/ bonus potentials, end of year Accumulated value adjustments, end of year Total discretionary participation feature: Provision relating to bonus schemes/

31 Dec 2007, EURm beginning of year Retrospective provisions/ bonus potentials, Gross premiums written Transfers Addition of interest/ Investment return Claims and benefits expense bonus Expense loading inclusive addition of Change in provisions/ bonus potential Other Provisions/ bonus potentials, end of year Accumulated value adjustments, end of year Total discretionary participation feature: Provision relating to bonus schemes/ Note 32

Liabilities to policyholders, cont.

Traditional life Traditional life

provisions provisions insurance insurance 20,515 20,515 –1,166 20,286 20,286 21,517 –1,733 –1,734 20,843 20,515 1,790 1,007 1,866 –336 –124 –641 –759 –137 –328 98% 95% 947 117 – – – –

Unit-linked Unit-linked provisions provisions insurance insurance –1,037 4,796 4,796 4,571 4,796 4,796 3,611 3,611 –530 –191 –524 586 –45 –87 763 –60 –44 119 82 – – – – 8 –

provisions provisions Insurance Insurance claims claims 353 354 363 363 303 353 353 –11 20 49 1 – – – – – 0 – – – – – – 1 –

Provisions, Provisions, Health & Health & personal personal accident accident 161 161 173 173 153 161 161 –1 0 5 – – 8 – – 0 – – – – – – 8 0 –

Investment Investment provisions provisions contracts contracts 4,224 4,224 1,315 4,022 4,022 2,220 1,793 4,224 4,224 –299 –560 –318 –394 –585 41% 40% –37 874 –37 –93 –23 91 75 – – – – Financial statements Collective Collective potentials potential –1,983 bonus bonus 2,231 2,848 2,277 2,231 2,231 617 –82 783 783 –44 –2 – – – – – 0 – – – – – – – 32,280 32,898 –1,165 –1,647 –1,983 –1,240 29,238 29,238 31,041 –2,843 32,608 32,280 3,696 3,503 1,104 Total Total –590 –206 –525 –218 –328 618 –80 101 – 0 123 Nordea Annual Report 2008 124 Nordea Annual Report 2008

Financial statements EURm EURm EURm Accrued interest settlement proceeds Liabilities on securities Certificates of deposit Other accrued expenses Commercial papers Sold, not held, securities Prepaid income Bond loans Accounts payable Total Other Other – Total Total Maximum 1 year (carrying amount) Remaining maturity Debt securities in issue Maturity information, – More than 1 year Total Payable on demand (carrying amount) Remaining maturity Maturity information, Other Maximum 3 months Total Note 35 Note 34 Note 33 settled after more than 1 year of which expected to be settled after more than 1 year of which expected to be Accrued expenses and prepaid income Other liabilities Debt securities in issue

108,989 108,860 31 Dec 31 Dec 31 Dec 33,667 10,440 64,753 17,970 56,158 52,702 2,174 4,057 3,278 7,586 6,110 2008 2008 2008 901 203 217 129 107 126 129 12 Group Group Group 3 31 Dec 31 Dec 31 Dec 31,926 61,780 99,792 22,860 48,875 50,696 99,571 1,941 4,970 5,865 9,650 2,762 8,023 2007 2007 2007 787 217 221 221 221 34 – Parent company Parent company Parent company 31 Dec 31 Dec 31 Dec 10,074 17,949 17,824 11,171 7,750 1,785 1,734 4,229 6,653 2008 2008 2008 289 681 465 125 125 125 115 61 29 – 0 – – 31 Dec 31 Dec 31 Dec 13,839 13,636 11,206 7,162 1,572 6,474 1,804 4,014 2,430 2007 2007 2007 185 601 341 203 203 203 81 75 37 – –

EURm Reserve for restructuring costs Transfer risk, off-balance off-balance sheet Individually assessed, Other Total the reimbursement. provision with amount of the asset that has been recognised for be settled during 2009). provisions amounting to EUR 3m (of which EUR 1m expected to tions of EUR 5m (not expected to be settled during 2009) and other 2009), provision for environmental and property-related obliga- sion EUR 2m (of which EUR 1m expected to be settled during (of which EUR 2m expected to be settled during 2009), rent provi- ing 2009), provision for disputes and pending law suites EUR 4m packages EUR 1m (of which EUR 1m expected to be settled dur items (ie Gurantees and L/C’s) amounted to EUR 45m. on the volume of business with different countries. impaired loans in Note 16. Provision for transfer risk is depending included in the item Allowances for collectively assessed items. Transfer risk reserve relating to loans and receivables is ing provisions of EUR 29m. ilde Bank, but also to other areas. This has resulted in restructur coming years, have been initiated. This is mainly related to Rosk- Restructuring activities, which should increase efficiency during – At end of year Translation differences Discounting effect Reclassifications Reversals Provisions utilised New provisions made At beginning of year Group Movement in the balance sheet on the volume of business with different countries. impaired loans in Note 16. Provision for transfer risk is depending included in the item Allowances for collectively assessed items. Transfer risk reserve relating to loans and receivables is Provision for Transfer risk reserve is related to off-balance sheet – At end of year Translation differences Reversals Provisions utilised New provisions made At beginning of year Parent company Note 36 1 year settled after more than of which expected to be settled after more than 1 year of which expected to be The amount of any expected reimbursement for each class of Other provision refers to the following provisions: redundancy Loan loss provisions for individually assessed off-balance sheet Provision for Transfer risk reserve is related to off-balance sheet Provisions Restruc-

turing

Restruc- 28 –1 29 turing – 0 – – – 0

31 Dec Transfer –1 2008 0 0 0 – 1 0 143

28 55 45 15 Group

risk Transfer 55 55 –1 –3 22 37 – – – 31 Dec risks 2007 balance –1 37 18 18 73 sheet 2 2 0 – 1 2 0 Off- 38 45 –1 –4 –4 36 18 balance – – Parent company 31 Dec sheet 2008 Other Off- 0 2 1 – 3 1 1 – – – 1 – 10 15 –1 –4 18 0 0 0 2 31 Dec Total Total 2007 103 143 - - –2 –5 –7 –5 89 73 –1 –1 0 2 – – 0 2 3 3 0 3 2 Funded schemes funded schemes covered by assets in pension funds/foundations. on the Group’s balance sheet. The major plans in each country are tions net of plan assets backing these obligations will be reflected more, Nordea also contributes to public pension plans. contribution plans are not reflected on the balance sheet. Further contribution arrangements as is also the case in Denmark. Defined and pensions for new employees are instead based on defined and Finland. The plans in Finland are closed to new employees Nordic countries with the predominant share in Sweden, Norway Nordea has pension obligations from defined benefit plans in all Total Defined benefit plans, net EURm Group Asset composition in funded schemes At the end of the year, the equity exposure in pension funds/foundations represented 13% (21%) of total assets. The combined return on assets in 2008 was –3.9% (3.1%) mainly reflecting the general market turmoil during the year. Asset composition – Other plan assets Real estate Bonds Equity EURm Amounts recognised in the balance sheet – PBO – Total surplus/deficit (–) Plan assets Of which recognised in the balance sheet – Of which: – Funded status – surplus/deficit (–) Plan Assets PBO EURm Overview of surplus or deficit in the plans – Members 2008 Average member age Members 2007 Average member age Note 37 of which Nordea shares of which Nordea real estate of which unrecognised actuarial gains/losses (–) retirement benefit assets retirement benefit obligations related to unfunded plans (PBO) IAS 19 secures that the market based value of pension obliga- Retirement benefit obligations 21,545 20,980 Swe 54 54 6,061 5,857 Nor 55 55 31 Dec 19,873 20,124 2008 172 172 Fin 59 58 31 Dec 2007 Den 339 339 60 71 62 71 - Sweden Sweden Assumptions each of the Group’s pension plans. calculators and are based on the actuarial assumptions fixed for Calculations on major plans are performed by external liability IAS 19 pension calculations and assumptions Discount rate 2008 Salary increase Inflation before taxes Expected return on assets Discount rate 2007 Salary increase Inflation before taxes Expected return on assets pension obligation of 17% and in service cost of 27%. point decrease in the discount rate would lead to a increase in obligation of 14% and in service cost of 20%. A one percentage increase in the discount rate would lead to a decrease in pension obligation will increase and vice versa. A one percentage point tion and pension cost. If the discount rate is reduced the pension premium. the discount rate while equities and real estate have an added risk for return on the different asset classes. On bonds, this is linked to The expected return on assets is based on long-term expectations 1,253 2,099 2,830 Total 2008 2008 –390 –437 –731 2008 84% 15% 816 –47 114 110 1% The discount rate has the most significant impact on the obliga- 67 – – –

Norway Norway 2,407 2,775 Total 2008 2008 –101 –289 –188 –368 2007 70% 10% 20% 691 402 188 133 – – – –

Finland Finland 2,367 3,004 Total 2008 2008 –637 2006 77% 14%

777 –59 770 3% 6% –7 52 83 31 23 – –

Denmark Denmark 4.0% 3.5% 2.0% 5.0% 5.0% 3.5% 2.0% 6.0% Swe 2,256 2,910 Total 2008 2008 –654 2005 24% 70% 109 111 6% –9 18 11 – – – 2 7 7 Financial statements

4.5% 3.5% 2.0% 5.5% 5.0% 3.5% 2.0% 6.0% Nor 2,830 2,099 2,065 2,675 Total Total Total 2008 2008 –731 –559 –172 –610 2004 78% 13% 168 340 273 3% 6% 4.5% 3.5% 2.0% 5.5% 5.0% 3.5% 2.0% 6.0% – – Fin

4.5% 3.5% 2.0% 5.5% 5.0% 3.5% 2.0% 6.0% 2,775 2,407 Total Total Den 2007 2007 –368 –339 71% 21% –29 123 462 302 2% 6% 1% – 125 Nordea Annual Report 2008 126 Nordea Annual Report 2008 EURm Changes in the PBO PBO at 1 Jan Service cost Interest cost Pensions paid Curtailments and settlements Past service cost Actuarial gains(-)/losses Effect of exchange rate changes Change in provision for SWT/SSC count rates and a lower expected return on assets. cost on defined benefit plans is expected to increase in 2009, mainly as a consequence of higher recognition of actuarial losses, lower dis- The pension cost is lower than expected in the beginning of the year, to a high degree reflecting changes in exchange rates. The net pension 1) Recognised net defined benefit cost, EURm (See specification in Note 8.) EUR The total net pension cost related to defined benefit plans recognised in the Group’s income statement (as staff costs) for the year is Defined benefit pension cost 1) Actuarial gains/losses – – Experience adjustments Effects of changes in actuarial assumptions EURm EURm Changes in the fair value of plan assets 1) Financial statements Service cost Assets at 1 Jan Interest cost Expected return on assets Expected return on assets Pensions paid Curtailments and settlements Contributions Recognised past service cost Actuarial gains/losses(-) Recognised actuarial gains(-)/losses Plan assets at 31 Dec Effect of exchange rate changes SWT/SSC Pension cost on defined benefit plans PBO at 31 Dec Actual return on plan assets Overview of actuarial gains/losses

Note 37 Cost related to the Swedish special wage tax (SWT) and the social security contribution (SSC). The 5-year trend information will be built up over time. Provision on difference to GAAP for the Swedish special wage tax (SWT) and the social security contribution (SSC) in Norway and Denmark on recognised amounts. of which on plan liabilities of which on plan assets The Group expects to contribute EUR 48m to its defined benefit plans in 2009. 69m (EUR 83m). Total pension costs comprise defined benefit pension costs as well as costs related to defined contribution plans. 1)

Retirement benefit obligations, cont.

1)

1) Sweden Sweden Sweden 1,152 1,253 Total 2008 –193 2008 –605 –225 –268 –337 2008 2008 –128 –50 266 –43 968 –51 –76 816 –25 28 55 28 55 51 –3 40 –5 – – 4 – – 0 8 Norway Norway Norway Total 2008 –153 2008 2007 2008 759 –41 189 –34 –41 230 473 –28 –25 –41 –94 –12 691 402 –13 28 34 74 –7 28 34 28 61 37 2 – 2 – – 1 Finland Finland Finland Total 2008 2008 2006 2008 –109 762 –41 –16 –15 856 –48 –40 –12 777 770 –61 37 32 –5 10 37 48 27 –1 –9 3 – 0 1 9 3 – 0 – – Denmark Denmark Denmark 2008 2008 2008 102 109 110 111 –8 –5 –6 2 4 – – 8 1 2 4 5 – 1 – 1 0 0 0 1 0 6 2,775 2,407 2,830 2,099 Total Total Total 2008 –140 –361 2008 2008 –132 –225 –234 130 380 130 132 –67 –17 –93 61 61 86 –1 69 2 0 2 0 9 3,004 2,367 2,775 2,407 Total Total Total 2007 –137 –223 2007 2007 –108

–36 108 –63 –34 –31 115 115 58 –1 58 60 –1 14 83 –7 74 2 2 3 with Swedish rules. insurance policies. the provisions are covered by “Tryggandelagen”. to former employees of Postgirot Bank. EUR 99m (EUR 116m) of ­covered by allocations to its pension foundation. The pension liabilities of Nordea Bank AB (publ) are mainly Parent company Pension provisions concerning key management personnel is disclosed in Note 8. personnel in 2008 were EUR 1m (EUR 3m). Complete information assets. Defined benefit pension costs related to key management year. These obligations are to a high degree covered with plan personnel amounted to EUR 35m (EUR 43m) at the end of the The Group’s total pension obligations regarding key management Key management personnel 1) pension commitments Net reported in respect of Balance at end of year Acquisition/disposal of operations Yield Currency difference Opening balance EURm Pension Foundation Nordea Bank AB (publ) – separated assets Actual value relating to specifically Balance at end of year Other increase in capital value Acquisition/disposal of operations Pension benefits paid Interest expense Costs excl. interest charged to the result Currency difference Opening balance EURm under own management Capital value of pension commitments Balance at end of year Other changes Provisions utilised New provisions made Balance at beginning of year EURm Pension provisions

Note 37 For futher information see Note 1, section 24, Related Party transactions. parent company of which related to the The following figures are based on calculations in accordance A small percentage of the pension obligations is covered by The provisions in the balance sheet pertain almost exclusively Retirement benefit obligations, cont. 1)

31 Dec Foundation 2008 828 789 assets

31 Dec

2007 962 916 31 Dec –124 2008 –131 2008 2008 obligations 789 916 750 830 –55 977 –16 129 712 118 Pension 41 –3 25 – 9 – 5 – 5 31 Dec 2007 2007 2007 –42 916 951 892 –43 977 –57 999 129 135 848 61 51 25 –6 –2 7 0 0 2 2 Length of life for men, years Average retirement age, years

Length of life for women, years levels on the accounting date The calculation is based on pay and pension Discount rate Assumptions for benefit-determined obligations: separated assets Percentage return on specifically Total Other assets Interest-bearing securities Shares EURm Actual value of holdings in pension foundations Reported net cost attributable to pensions assets/increase in surplus in separated assets –/+ Expenses covered by surplus in separated The year’s pension expenses Special payroll tax on pension expenses Tax on returns from pension funds Subtotal Insurance premiums Pensioning through insurance: own management Costs in respect of pensions under Result effect of redemption of commitments Return on specifically separated assets Expenses excl. interest expenses Pension system under own management: EURm Costs in respect of pensions 1) EURm debenture loans Dated subordinated debenture loans Undated subordinated Hybrid capital loans Total – category, the loans entitle lenders to equal payment rights. ordinated loans and hybrid capital loans. Within each respective debenture loans entitle the lender to payment before undated sub- These debenture loans are subordinated to other liabilities. Dated

Note 38 From 2008 is the expected remaining lifetime based on DUS 2006. after more than 1 year of which expected to be settled Subordinated liabilities

1)

1) 31 Dec

6,267 1,406 8,209 7,339

2008

536

Group 31 Dec Financial statements 5,626 1,326 7,556 2007 604

Parent company 31 Dec –0.3% 5,423 1,406 6,829 6,804 3.0% 2008 2008 2008 789 641 Yes 118 64 30 79 79 63 34 29 26 11 – 0 5 – 3

31 Dec 4,825 1,326 6,151 0.8% 3.0% 2007 2007 2007 916 601 272 Yes 82 64 79 43 68 66 54 35 19 –7 26 2 7 5 0 – 127 Nordea Annual Report 2008 128 Nordea Annual Report 2008 Issued C shares Total recognised income and expense Net profit for the year Net income recognised directly in equity Currency translation differences – – Cash flow hedges: – – Available-for-sale investments: Balance at 1 Jan 2008 Balance at 31 Dec 2007 Other changes Issued C shares Total recognised income and expense Net profit for the year Net income recognised directly in equity Currency translation differences – – Available-for-sale investments: Balance at 1 Jan 2007 Balance at 31 Dec 2008 Other changes Group Nordea Bank AB (publ) Year of issue / maturity 10% of the total outstanding volume. At 31 December one loan – with terms specified below – exceeded Parent company standing At 31 December no separate loan exceeds 10% of the total out- Group Purchases of own shares Dividend for 2007 Share-based payments Divestment of own shares Dividend for 2006 Share-based payments 5) 4) 3) 2) 1) EURm 1) Financial statements Repurchase of C shares Repurchase of C shares

Note 40 Note 38 Refers to the Long-Term Incentive Programme (LTIP 2007). The programme was hedged by issuing 3,120,000 C shares, the shares Refers haven to been the bought Long-Termback and converted to Incentive ordinary Programme shares. (LTIP 2008). The programme was hedged by issuing 2,880,000 C shares, the shares have been Restricted bought capital back was and at converted 31 to Dec ordinary 2008 2,600m EUR (31 shares. Dec 2007: 2,603m). EUR Unrestricted capital was 31 Dec 2008 15,125m EUR (31 Dec 2007: 14,479m).EUR Dec 2008 was 3.8 million (31 Dec 2007: 1.6 million). Refers to the change in the trading portfolio and Nordea’s shares within portfolio schemes in Denmark. The number of own shares in the trading Totalportfolio and in shares the registered portfolio were schemes2,600 million at (31 31 Dec 2007: 2,597 million). Call date 20 May 2010. Tax on fair value gains Fair value gains Tax on transfers to net profit Transfers to net profit Tax on fair value gains Fair value gains ­volume. Equity Subordinated liabilities, cont.

4) 5)

4) 5) 4) 5) 1)

2)

2)

MSEK 6,904 Nominal value

capital Carrying Share amount 2,597 2,597 2,594 2,600 EURm Attributable to the share holders of Nordea Bank AB (publ) 1) 3 3 750

investments Available- (coupon) Interest for-sale FRN rate –6 –6 –6 0 6 6 1 1 0 1 5 0 Other reserves:

hedges Cash flow Total Equipment Accumulated excess depreciation EURm Note 39 –5 –5 –7 –5 2 – – – – – differences translation Currency Untaxed reserves –717 –717 –717 –166 –166 –883 –116 –50 –50 –50

Retained earnings 14,645 14,645 12,793 16,013 –1,297 –1,271 2,671 2,671 3,121 3,121 –10 –10 –3 –3 11 7 4

3) 17,082 17,082 15,276 17,725 –1,297 –1,271 1,943 2,671 3,072 3,121 Total –728 –717 –10 –49 –50 –10 –7 –6 –3 –3 11 2 0 0 0 1 7 4 3 3 Minority interests Parent company 31 Dec 2008 78 23 78 –1 46 78 1 1 9 9 2

2 31 Dec equity 17,160 17,160 15,322 17,803 –1,297 –1,271 1,944 2,672 3,081 3,130 Total 2007 –728 –717 –49 –50 –10 –7 –6 13 –1 –3 –3 11 7 7 2 0 0 1 7 4 3 3 Parent company which will be accounted for in equity as an appropriation of retained earnings in the year ending 31 December 2009. actual EUR 1,297,054,114) is to be proposed. The financial statements for the year ended 31 December 2008 do not reflect this resolution, dividend in respect of 2008 of EUR 0.20 per share (2007 actual dividend EUR 0.50 per share) amounting to a total of EUR Final dividends are not accounted for until they have been ratified at the Annual General Meeting (AGM). At the AGM on 2Dividends Aprilper 2009,share a 1) New issue Balance at 31 Dec 2006 Share capital Description of items in the equity is included in Note 1 Accounting policies. 4) 3) 2) 1) Balance at 31 Dec 2008 New issue Balance at 31 Dec 2007 Net income recognised directly in equity Net income recognised directly in equity Dividend for 2006 Dividend for 2007 Share-based payments Share-based payments EURm Repurchase of C shares Repurchase of C shares Net profit for the year Net profit for the year Balance at 31 Dec 2007 Purchases of own shares Balance at 1 Jan 2008 Total recognised income and expense Total recognised income and expense Balance at 31 Dec 2008 Available-for-sale investments: Issued C shares Issued C shares – Available-for-sale investments: Balance at 1 Jan 2007 – – – Group contribution, net Group contribution, net

Note 40 Refers to the Long-Term Incentive Programmes (LTIP). Refers to the Long-Term Incentive Programme (LTIP 2007). The programme was hedged by issuing 3,120,000 C shares, the shares Refers have to been the bought Long-Termback and converted to Incentive ordinary Programme shares. (LTIP 2008). The programme was hedged by issuing 2,880,000 C shares, the shares have been Apart bought from back retained and earnings, converted unrestricted to equity ordinary consists shares. of a free fund to the amount of 2,762m.EUR After adjustment for tax. Fair value gains Fair value gains Tax on fair value gains Tax on fair value gains 1) 1)

Equity, cont. 4) 3)

4) 3) 4) 3) 1) 1)

Quota value per share, EUR Restricted equity Share capital 2,597 2,597 2,600 2,594 3 3

1.00 1.00 1.00

Available-for-sale investments Other reserves: Total number of shares Unrestricted equity –5 –5 –7 –2 5 5 5 5 0 7 2 2,594,108,227 2,600,108,227 2,597,228,227 –

Cash flow 2,880,000 3,120,000 hedges –5 –5 –5 –7 – – – – 2 –

2) Retained earnings Financial statements –1,271 –1,297 1,888 1,203 9,308 9,308 1,874 1,163 9,876 9,415 –14 –40 –14 –40 –13 Share capital, EUR –3 –3 518,821,646 4 7

2,594,108,227.00 2,600,108,227.00 2,597,228,227.00 2,880,000.00 3,120,000.00 12,009 equity (2007 –1,271 –1,297 12,471 11,910 11,910 1,888 1,203 1,864 1,168 Total –14 –40 –24 –35 –13 –14 –3 –3 –2 4 7 3 3 0 7 4 129 Nordea Annual Report 2008 130 Nordea Annual Report 2008

pledged deposits. liquidity intraday/over night. Other pledged assets relate to The terms and conditions require day to day security and relate to rity for payment settlements within the Central bank of Sweden. Securities etc. includes interest-bearing securities pledged as secu- 2) 1) Lease agreements assets funded by finance lease agreements. pledged by Nordea to comply with authority requirements and registered as collateral. Other relates to a certificate of deposits vency, the holders of these bonds have prior rights to the assets bonds and mortgage bonds. In the event of the company’s insol- the public have been registered as collateral for issued covered typically short term with maturity within three months. Loans to tions are credit institutions and the public. The transactions are by financial markets participants. Counterparts in those transac- transactions are conducted under standard agreements employed security in repurchase agreement and in securities borrowing. The Assets pledged for own liabilities contain securities pledged as 1) Financial statements Deposits by credit institutions commitment items to the following liability and EURm EURm Securities etc Securities etc commitments Other liabilities and Other assets pledged Lease agreements liabilities Assets pledged for own Loans to the public Other assets pledged Total Other pledged assets Total Total The above pledges Deposits by credit institutions commitment items to the following liability and The above pledges pertain from the public Deposits and borrowings Debt securities in issue commitments Other liabilities and Total

Note 42 Note 41 For undertakings of the company itself or for a third party. accounted for under this item. on behalf of a third party or on behalf of the company’s own contingent liabilities are Collaterals pledged on behalf of other items other than the company’s own liabilities, eg, ated assets are Loans and advances to the public. The agreements are financial lease agreements where Nordea is the lessor. The associ- Other assets pledged Assets pledged as security for own liabilities 1)

2)

pertain 1)

31 Dec 31 Dec 32,228 10,686 60,809 10,807 95,507 10,625 51,987 16,027 85,229 9,210 9,225 2,350 6,590 2008 2008 120 120 15 Group Group 1

31 Dec 31 Dec 12,284 61,867 79,708 50,506 67,519 6,147 6,293 6,293 5,399 6,304 8,042 4,141 4,830 2007 2007 158 146 11 0 Parent company Parent company 31 Dec 31 Dec 3,360 9,504 9,504 9,504 3,360 3,220 3,360 9,211 2008 2008 293 140 – – – – – – 31 Dec 31 Dec 6,147 3,054 7,270 1,123 7,270 7,270 3,054 3,148 3,270 2007 2007 122 – – – – – –

EURm Guarantees

Documentary credits Other contingent liabilities Total For further disclosure, see Note 8. they are dismissed before reaching their normal retirement age. have taken the decisions to the Swedish courts. contest both the ordinary tax claim and the tax surcharge and real-estate companies divesting their portfolios, Nordea strongly divestment structure was a well established practice for many reported gain is correctly treated from a tax perspective. Since this been complied with in the transactions, and that the previously owner occupied properties in Sweden. is related to the sales gain in respect of the divestment of Nordea’s including a surcharge, amounts to approximately EUR 100m and for the years 2003 and 2004, respectively. The potential tax Fastigheter AB will be increased by SEK 225m and SEK 2,711m, able income for Nordea’s wholly owned subsidiary Nordea AB (publ). aging director or board director in subsidiaries of Nordea Bank potential payment liability against them in their capacity as man- individuals and on certain conditions to be responsible for the (1995:1559) (ÅRKL) chapter 7 paragraph 5. Accounts of Credit Institutions and Securities Companies 556060-2301, in accordance with the Swedish Act on Annual commitments in Nordea Investment Management AB, org no EUR additional expense for the guarantee of maximum approximately antee scheme is expected to be approximately 20%. The possible ing banks hence capped to DKK 35bn. Nordea´s share of the guar guarantee commissions. The total payments are for all participat- tional losses of up to DKK 10bn should also be covered by further 7.5bn annually for two years. If losses exceed these amounts, addi- ment of an annual guarantee commission amounting to DKK 10bn to cover any losses under the guarantee scheme and the pay- scheme. Nordea guarantees the payment of its portion of DKK reasons that Nordea Bank Danmark A/S would participate in the losses in the participating banks. Nordea decided for commercial tors, excluding covered bonds and subordinated debt, against September 2010, which guarantees the claims of unsecured credi- set up a guarantee scheme valid for two years, until the end of that reimbursement will not be received. vision to cover a probable loan loss that arises from the judgement sidered as off-balance sheet items, unless there is a need for a pro- banks customers. Guarantees and documentary credits are con- These transactions are part of the bank services and support the documentary credits and confirmed export documentary credits. Contingent liabilities also include unutilised irrevocable import guarantees, warranty guarantees and export related guarantees. mercial guarantees such as bid guarantees, advance payment and pension institutions. Other guarantees consist mainly of com- are given for customers to guarantee obligations in other credit- of guarantees in favour of the banks customers. Loan guarantees In the normal business of Nordea, the bank issues various forms Note 43 Loan guarantees Other guarantees A limited number of employees are entitled to severance pay if Nordea is of the opinion that all tax rules and regulations have The Swedish tax authorities have notified Nordea that the tax- Nordea Bank AB (publ) has undertaken in relation to certain Nordea Bank AB (publ) has issued a guarantee covering all In early October 2008, Danish Parliament agreed with banks to 500m has been recorded as a contingent liability. Contingent liabilities 31 Dec 15,805 26,287 6,920 3,203 2008 359 Group 31 Dec 16,021 24,254 4,965 3,052 2007 216 Parent company 31 Dec 17,200 21,947 4,742 2008 – 5 ­liability, 31 Dec 10,385 14,066 3,639 2007 35 7 - Claims paid, life insurance Investments, life insurance Change in technical provisions, life insurance life insurance Change in collective bonus potential, Total Derivatives derivatives Commitments excluding Other commitments

EURm Operating profit, insurance Total operating expenses charges of tangible and intangible assets Depreciation, amortisation and impairment Operating expenses Operating income Credit commitments Future payment obligations 2) 1) Premium income, life insurance Fee and commission expense Fee and commission income EURm Operating profit, insurance Group 1) and has made no provisions. case to the Swiss Supreme Court. Nordea is contesting the claim the claim in April 2008. The liquidation estate has appealed the mercial Court of Zürich. The Zürich Commercial Court dismissed interest by SAirGroup in Nachlassliquidation filed with the Com- 31 Group or its financial position. is considered likely to have any significant adverse effect on the which involve relatively limited amounts. None of these disputes Group faces claims in civil lawsuits and other disputes, most of Within the framework of the normal business operations, the Legal proceedings

Note 45 Note 44 Included in ”Net gains/losses on items at fair value” in the Group Income statement. Before allocations and elimination of intra-group transactions. Including unutilised portion of approved overdraft facilities. Other expenses Staff costs January 2006 based on an avoidance claim of USD 61.2m plus A writ has been served on Nordea Bank Danmark A/S on 2) Insurance activities Commitments

1)

2) 2) 3,890,535 3,802,101

31 Dec 85,416 88,434 1,705 1,313 2) 2008

1) Group

3,492,338 3,405,332 31 Dec 81,607 87,006 2,532 2,867 2007

2)

128,517 104,378 Parent company 31 Dec –2,338 –2,529 22,831 24,139 2,359 1,308 2,034 2008 –193 2008 –118 –111 541 –78 243 294 50 –4 –

329,326 299,852 31 Dec –1,002 –2,354 27,696 29,474 2,530 1,059 1,778 2007 –174 2007 –130 –98 262 –71 436 291 42 –5 – the Risk, Liquidity and Capital management section page 44. The Capital Adequacy information for the Group can be found in – Total liabilities and equity Equity Total liabilities Subordinated liabilities Retirement benefit obligation Deferred tax liabilities Accrued expenses and deferred income Other liabilities Current tax liabilities Derivatives Liabilities to Life insurance policyholders Deposits and borrowings from the public Liabilities – Total assets Prepaid expenses and accrued income Other assets Current tax assets Deferred tax assets Investment property Tangible assets Intangible assets Participating interests Derivatives Shares and participations Interest-bearing securities Loans and advances to the public Treasury bills Cash and balances with central banks Assets EURm Balance sheet Note 46 of which intra-group transactions of which intra-group transactions Capital adequacy

Financial statements 31 Dec –4,077 34,937 34,372 29,238 –3,157 34,937 17,964 3,341 3,327 6,794 1,824 3,224 2008 565 859 255 220 318 495 342 256 411 211 46 91 64 14 4 6 5 31 Dec –2,757 36,490 36,076 32,280 –1,814 36,490 16,842 11,794 2,645 3,478 2,143 2007 414 224 781 357 454 351 153 857 110 20 10 16 36 – 6 3 6 0 131 Nordea Annual Report 2008 132 Nordea Annual Report 2008 Group Financial statements 31 Dec 2008, EURm Cash and balances with central banks Assets Treasury bills Loans and receivables to credit institutions Loans and receivables to the public Interest-bearing securities Financial instruments pledged as collateral Shares Derivatives in portfolio hedge of interest rate risk Fair value changes of the hedged items Investments in associated undertakings Intangible assets Property and equipment Investment property Deferred tax assets Current tax assets Retirement benefit assets Other assets Prepaid expenses and accrued income Total Group

31 Dec 2008, EURm Deposits by credit institutions Liabilities Deposits and borrowings from the public Liabilities to policyholders Debt securities in issue Derivatives in portfolio hedge of interest rate risk Fair value changes of the hedged items Current tax liabilities Other liabilities Accrued expenses and prepaid income Deferred tax liabilities Provisions Retirement benefit obligations Subordinated liabilities Total Note 47

Classification of financial instruments

receivables Loans and 217,833 247,971 18,731 3,157 5,738 2,090 413 9

maturity Held to 12,045 12,228 183 value through profit or loss value through profit or loss Held for Held for Financial liabilities at fair trading trading 138,672 108,343 17,559 86,520 83,277 11,074 Financial assets at fair 6,353 5,172 7,937 3,745 8,133 2,999 4,021 5,242 4,056 312 614 1

Designated at fair Designated at fair value through value through profit or loss profit or loss 36,193 15,177 23,202 27,153 57,910 67,116 6,917 8,829 4,914 2,641

Derivatives Derivatives hedging hedging used for used for 2,261 2,261 318 318

Available liabilities financial 140,678 259,152 for sale 20,597 76,594 10,780 Other 1,763 8,208 532 49 56 7 liabilities financial financial 25,217 28,605 assets Non- Non- 2,535 3,334 7,713 1,053 431 375 344 168 425 458 493 901 143 340 64 37 265,100 474,074 148,591 108,989 456,271 23,903 44,830 10,669 86,838 14,604 51,932 29,238 85,538 17,970 3,157 6,545 7,937 2,535 3,334 2,827 3,278 1,053 8,209 Total Total 413 431 375 344 168 532 458 143 340 64 Group 31 Dec 2007, EURm Cash and balances with central banks Assets Treasury bills Loans and receivables to credit institutions Loans and receivables to the public Interest-bearing securities Financial instruments pledged as collateral Shares Derivatives in portfolio hedge of interest rate risk Fair value changes of the hedged items Investments in associated undertakings Intangible assets Property and equipment Investment property Deferred tax assets Current tax assets Retirement benefit assets Other assets Prepaid expenses and accrued income Total Group

31 Dec 2007, EURm Deposits by credit institutions Liabilities Deposits and borrowings from the public Liabilities to policyholders Debt securities in issue Derivatives in portfolio hedge of interest rate risk Fair value changes of the hedged items Current tax liabilities Other liabilities Accrued expenses and prepaid income Deferred tax liabilities Provisions Retirement benefit obligations Subordinated liabilities Total Note 47

Classification of financial instruments, cont.

receivables Loans and 205,054 231,608 14,841 5,020 5,345 1,443 –105 10

maturity Held to 1,632 1,632 value through profit or loss value through profit or loss Held for Held for Financial liabilities at fair trading trading 20,674 31,083 84,502 32,324 57,624 Financial assets at fair 5,183 9,421 7,424 4,790 5,552 4,029 2,272 4,224 5,072 9,650 375 53

Designated at fair Designated at fair value through value through profit or loss profit or loss 32,204 16,426 12,076 63,053 33,648 37,113 2,342 3,330 130 5 5

Derivatives Derivatives hedging hedging used for used for 415 415 699 699

Available liabilities financial 139,927 245,760 for sale 26,048 61,072 Other 9,563 1,917 7,556 –323 Financial statements 50 16 66 liabilities financial financial 28,056 30,698 assets Non- Non- 2,725 3,492 7,778 366 342 191 142 123 360 300 317 787 703 462 37 73 244,682 389,054 142,329 371,894 24,262 38,782 17,644 31,498 30,077 32,280 99,792 33,023 22,860 5,020 5,193 4,790 2,725 3,492 7,724 2,183 2,762 7,556 Total Total –105 –323 366 342 191 142 123 300 703 462 73 133 Nordea Annual Report 2008 134 Nordea Annual Report 2008 Parent company Financial statements 31 Dec 2008, EURm Cash and balances with central banks Assets Treasury bills Loans and receivables to credit institutions Loans and receivables to the public Interest-bearing securities Financial instruments pledged as collateral Shares Derivatives in portfolio hedge of interest rate risk Fair value changes of the hedged items Investments in group undertakings Investments in associated undertakings Intangible assets Property and equipment Deferred tax assets Current tax assets Other assets Prepaid expenses and accrued income Total Parent company

31 Dec 2008, EURm Deposits by credit institutions Liabilities Deposits and borrowings from the public Debt securities in issue Derivatives in portfolio hedge of interest rate risk Fair value changes of the hedged items Current tax liabilities Other liabilities Accrued expenses and prepaid income Deferred tax liabilities Provisions Retirement benefit obligations Subordinated liabilities Total Note 47

Classification of financial instruments, cont.

receivables Loans and 36,361 29,240 68,700 2,025 276 771 27

maturity Held to 2,335 2,518 183 value through profit or loss value through profit or loss Held for Held for Financial liabilities at fair trading trading 24,480 Financial assets at fair 1,915 7,494 7,745 3,097 1,063 3,165 3,104 2,551 6,340 680 1 4 1

Designated at fair Designated at fair value through value through profit or loss profit or loss 7,867 7,867 118 44 74

Derivatives Derivatives hedging hedging used for used for 397 397 205 205

Available liabilities financial for sale 23,742 33,457 17,949 85,813 Other 3,449 6,828 346 42 0 0 liabilities financial financial 15,866 16,821 assets Non- Non- 757 100 336 115 118 81 28 76 11 2 0 0 0 3 100,561 113,034 43,855 29,240 10,080 15,866 34,713 33,457 17,949 2,098 3,097 1,107 3,562 2,099 2,756 4,229 6,829 Total Total 276 757 783 465 118 27 81 28 76 42 2 0 0 3 Parent company 31 Dec 2007, EURm Cash and balances with central banks Assets Treasury bills Loans and receivables to credit institutions Loans and receivables to the public Interest-bearing securities Financial instruments pledged as collateral Shares Derivatives in portfolio hedge of interest rate risk Fair value changes of the hedged items Investments in group undertakings Investments in associated undertakings Intangible assets Property and equipment Deferred tax assets Current tax assets Other assets Prepaid expenses and accrued income Total Parent company

31 Dec 2007, EURm Deposits by credit institutions Liabilities Deposits and borrowings from the public Debt securities in issue Derivatives in portfolio hedge of interest rate risk Fair value changes of the hedged items Current tax liabilities Other liabilities Accrued expenses and prepaid income Deferred tax liabilities Provisions Retirement benefit obligations Subordinated liabilities Total Note 47

Classification of financial instruments, cont.

receivables Loans and 29,812 26,640 58,719 1,600 296 375 –4

maturity Held to value through profit or loss value through profit or loss Held for Held for Financial liabilities at fair trading trading 17,404 Financial assets at fair 6,743 4,378 2,806 1,828 1,069 2,826 1,310 1,572 5,708 567 13

Designated at fair Designated at fair value through value through profit or loss profit or loss 1,651 3,386 3,710 269 838 199 340 320 5 4

Derivatives Derivatives hedging hedging used for used for 212 212 271 271

Available liabilities financial for sale 18,063 32,296 13,839 72,580 Other 2,044 6,151 Financial statements –69 256 7 7 0 liabilities financial financial 15,488 16,485 assets Non- Non- 819 129 292 30 53 34 52 78 81 0 9 2 2 36,824 26,640 15,488 94,478 24,275 32,296 13,839 82,561 5,216 2,806 2,034 1,281 1,940 1,581 4,014 6,151 Total Total 296 567 819 402 –69 341 129 –4 30 53 34 52 0 2 2 135 Nordea Annual Report 2008 136 Nordea Annual Report 2008 profit or loss at fair value through Financial liabilities 2007, EURm

through profit or loss Loans and receivables designated at fair value profit or loss at fair value through Financial liabilities Financial statements EURm 2008, EURm Carrying amount

credit risk Maximum exposure to the credit risk derivatives used to mitigate Carrying amount of credit be paid at maturity Comparison of carrying amount and contractual amount to change since designation is EUR credit risk is for 2008 EUR the average yield on Danish mortgage bonds. conditions is based on relevant benchmark interest rates, which is method of the fair value changes attributable to changes in market since designation are EUR ties are for 2008 EUR ”Fair value through profit and loss”. ations are measured at fair value and classified into the category Deposits made by Markets as well as the funding of Markets oper Nordea Kredit Realkreditaktieselskab are measured at fair value. Issued mortgage bonds in the fully owned Danish subsidiary Changes in fair values attributable to changes in credit risk through profit or loss Financial liabilities designated at fair value Note 47 The change in the fair value of loans attributable to changes in The change in fair value attributable to credit risk of the liabili- Classification of financial instruments, cont.

Carrying Carrying

–51.2m (EUR 0.0m). The cumulative change amount amount

57,910 37,113 –9.5m (EUR –0.1m). The cumulative –51.2m (EUR 0.0m). The calculation

Group Group

31 Dec maturity maturity 36,193 36,193 Amount Amount –8.6m (EUR 0.9m). 2008 paid at paid at 39,587 61,777 to be to be Group – 31 Dec 32,204 32,204 2007 – Carrying Carrying

amount amount Parent company Parent company Parent company 3,710 7,867 31 Dec

2008

– – – maturity maturity Amount Amount paid at paid at 31 Dec 3,710 7,867 to be to be 2007 269 269 – - Group

EURm Assets with central banks Cash and balances Treasury bills to credit institutions Loans and receivables to the public Loans and receivables Interest-bearing securities pledged as collateral Financial instruments Shares Derivatives hedge of interest rate risk hedged items in portfolio Fair value changes of the undertakings Investments in associated Intangible assets Property and equipment Investment property Deferred tax assets Current tax assets Retirement benefit assets Other assets accrued income Prepaid expenses and Total assets Liabilities institutions Deposits by credit from the public Deposits and borrowings Liabilities to policyholders Debt securities in issue Derivatives hedge of interest rate risk hedged items in portfolio Fair value changes of the Current tax liabilities Other liabilities prepaid income Accrued expenses and Deferred tax liabilities Provisions obligations Retirement benefit Subordinated liabilities Total liabilities Note 48

Assets and liabilities at fair value

Carrying amount 265,100 474,074 148,591 108,989 456,271 23,903 44,830 10,669 86,838 14,604 31 Dec 2008 51,932 29,238 85,538 17,970 3,157 6,545 7,937 2,535 3,334 2,827 3,278 1,053 8,209 413 431 375 344 168 532 458 143 340 64

265,846 474,892 148,615 109,477 456,809 23,952 44,853 10,669 86,838 14,604 51,918 29,238 85,538 17,970 value 3,157 6,545 7,937 2,535 3,334 2,827 3,278 1,053 8,249 Fair 413 431 375 344 168 532 458 143 340 64 Carrying amount 244,682 389,054 142,329 371,894 24,262 38,782 17,644 31,498 31 Dec 2007 30,077 32,280 99,792 33,023 22,860 5,020 5,193 4,790 2,725 3,492 7,724 2,183 2,762 7,556 –105 –323 366 342 191 142 123 300 703 462 73

244,503 388,839 142,215 371,619 24,263 38,749 17,644 31,498 30,083 32,280 99,625 33,023 22,860 value 5,020 5,189 4,790 2,725 3,492 7,724 2,183 2,762 7,556 –105 –323 Fair 366 342 191 142 123 300 703 462 73 Parent company EURm Assets with central banks Cash and balances Treasury bills to credit institutions Loans and receivables to the public Loans and receivables Interest-bearing securities pledged as collateral Financial instruments Shares Derivatives hedge of interest rate risk hedged items in portfolio Fair value changes of the undertakings Investments in group undertakings Investments in associated Intangible assets Property and equipment Deferred tax assets Current tax assets Other assets accrued income Prepaid expenses and Total assets Liabilities institutions Deposits by credit from the public Deposits and borrowings Debt securities in issue Derivatives hedge of interest rate risk hedged items in portfolio Fair value changes of the Current tax liabilities Other liabilities prepaid income Accrued expenses and Deferred tax liabilities Provisions obligations Retirement benefit Subordinated liabilities Total liabilities Note 48

Assets and liabilities at fair value, cont.

Carrying amount 100,561 113,034 43,855 29,240 10,080 15,866 34,713 33,457 31 Dec 2008 17,949 2,098 3,097 1,107 3,562 2,099 2,756 4,229 6,829 276 757 783 465 118 27 81 28 76 42 2 0 0 3

100,468 113,147 43,894 29,280 15,866 34,696 33,416 17,915 10,114 value 2,098 3,097 1,107 3,562 2,099 2,756 4,229 6,828 Fair 276 757 783 465 118 27 81 28 76 42 2 0 0 3 Carrying amount 36,824 26,640 15,488 94,478 24,275 32,296 31 Dec 2007 13,839 82,561 5,216 2,806 2,034 1,281 1,940 1,581 4,014 6,151 296 567 819 402 –69 341 129 –4 30 53 34 52 0 2 2

36,823 26,643 15,488 94,481 24,283 32,299 13,839 82,573 value 5,217 2,806 2,034 1,281 1,940 1,581 4,014 6,152 Fair 296 567 819 402 –69 341 129 –4 30 53 34 52 0 2 2 ment of deferred Day 1 profit or loss). reconciliation of changes in the balance of this difference (move- income statement at the beginning and end of the period and a below shows the aggregate difference yet to be recognised in the transaction price and any trade date profit is deferred. The table uation technique, the financial instrument is recognised at the Note 1, if there are significant unobservable inputs used in the val- In accordance with the Group’s accounting policy as described in Deferred Day 1 profit or loss the parent company was EUR data amounted to EUR 117 m (EUR 35m) in Nordea. The effect in based on assumptions not fully supported by observable market financial liabilities that are measured using valuation techniques The total effect on the income statement from financial assets and Fair value of financial assets and financial liabilities measured at fair value, see Note 1. intangible assets, property and equipment and provisions. associated undertakings, investments in group undertakings, sible to estimate. This is valid for the line items investments in assets and liabilities for which no reliable fair value has been pos- credit risk and short time to maturity. amount is a reasonable approximation of fair value due to limited short-term financial assets and financial liabilities. The carrying count rates used are based on current market rates for each term. result of changes in the relevant market interest rates. The dis- sented in the tables above. The value of the fixed interest term is a fixed interest term in order to estimate the fair values that are pre- borrowings and issued securities are adjusted for the value of the receivables, deposits and borrowings and issued securities. generally measured at fair value, with the exception of loans and Financial assets and financial liabilities in the balance sheet are Estimation of fair value for assets and liabilities EURm Amount at beginning of year transactions Deferred profit/loss on new statement during the year Recognised in the income Amount at end of year For further information about valuation of items normally Fair value is set to carrying amount, in the tables above, for Fair value is estimated to be equal to the carrying amount for The carrying amounts on loans and receivables, deposits and

–9m (EUR 1m). 31 Dec 2008 105 –63 104 62 Group 31 Dec Financial statements 2007 –35 105 58 82 Parent company 31 Dec 2008 17 –9 1 9 31 Dec 2007 18 –1 17 0 137 Nordea Annual Report 2008 138 Nordea Annual Report 2008 Derivatives Debt securities in issue Liabilities Derivatives Shares Financial instruments pledged as collateral – – – – – – – Derivatives Debt securities in issue Liabilities Derivatives Shares Financial instruments pledged as collateral – – – – – – – Interest-bearing securities and Treasury bills Assets The following table presents the valuation methods used to determine fair values of financial instruments carried at fair value Determination of fair value from quoted market prices or valuation techniques 1) Interest-bearing securities and Treasury bills Assets 31 Dec 2007, EURm Group 5) 4) 3) 2) 1) Financial statements 31 Dec 2008, EURm Group

Note 48 Of which 5,183m EUR Treasury bills and 37,150mEUR Interest-bearing securities (the portion held at fair value in Note 47). liquidity being maintained in the majority of the markets. increase, during 2008, in instruments categorised in level 3 relates to unlisted shares held by Nordea Life & Pensions. The nature of unobservable parameters remained able broadly market the prices same or with rates. This is generally the case for private equity instruments and private equity funds as well as for certain complex and/or Level structured 3 financialconsists instruments.of Thefinancial main instruments for which fair values cannot be obtained directly from quoted market prices or indirectly using valuation techniques or modelstives supportedand byseveral observ- other instruments not traded in active markets fall within this category. techniques or models, based wherever possible on assumptions supported by observable market prices or rates prevailing at the balance sheet date. The majority of Level Nordea’s 2 OTCconsists of deriva- financial assets and financial liabilities which do not have quoted market prices directly available from an active market, and where fairother valuessecurities, arelisted estimatedshares, usingexchange-traded valuation derivatives as well as listed issued bonds and other securities. Level 1 consists of financial assets and financial liabilities valued using unadjusted quoted prices in active markets for identical assets or liabilities. This category includesOf listed which bonds6,353m EUR and Treasury bills and 32,785mEUR Interest-bearing securities (the portion held at fair value in Note 47). kets operation, and derivatives used for hedging. Except for mainly mortgage loans in the Danish subsidiary Nordea Kredit Realkreditselskab designated at fair value through profit and loss, overnight funding from credit institutions for Mar- of which other of which corporates, sub-investment grade of which corporates of which other credit institutions of which mortgage institutions of which municipalities and other public bodies of which state and sovereigns of which other of which corporates, sub-investment grade of which corporates of which other credit institutions of which mortgage institutions of which municipalities and other public bodies of which state and sovereigns Assets and liabilities at fair value, cont.

1) 2)

Instruments with Instruments with quoted prices in quoted prices in active markets active markets (Level 1) (Level 1) 26,616 15,142 13,888 33,285 27,153 10,883 32,362 4,790 1,094 1,931 6,763 3,836 5,075 7,682 2,216 1,845 4,879 7,454 4,943 7,937 546 671 698 728 572 142 3)

10,487 13,120 16,360 which which 1,094 1,193 5,619 1,042 3,003 4,707 2,158 1,500 6,897 1,653 3,189 Life Life – of – of 676 493 142 821 25 – – 4 – – – – observable observable (Level 2) technique technique Valuation Valuation (Level 2) 29,519 12,104 28,320 79,778 83,318 using using 1,366 3,736 2,266 2,546 8,977 5,242 1,258 2,192 1,251 6,760 data data 192 209 848 585 608 155 711 20 4) – 8 –

which which 1,232 1,731 2,489 2,011 Life Life – of – of 258 241 144 107 702 427 706 296 291 156 100 16 59 95 35 – – – – 8 – – observable observable using non- using non- (Level 3) technique technique Valuation Valuation (Level 3) 2,259 2,092 1,136 2,771 2,630 2,139 data data 71 71 16 5) – – – – – – – – 7 – 9 – – – – –

which which 1,385 Life Life – of – of 75 64 64 – – – – – – – – – – – – – – 9 – – – – 9 – 1)

. 32,324 38,720 31,083 17,644 14,080 42,333 83,277 32,395 86,520 39,138 10,669 11,491 4,197 9,309 4,045 5,083 2,808 7,071 7,609 6,194 4,790 4,505 7,937 1,114 3,112 Total Total 853

Derivatives Liabilities Derivatives Shares Financial instruments pledged as collateral – – – – Interest-bearing securities and Treasury bills Assets 31 Dec 2008, EURm Parent company 4) 3) 2) 1) – Group Collaterised Debt Obligations (CDO) – Exposure 1) Interest-bearing securities and Treasury bills Assets 31 Dec 2007, EURm Parent company 1) Derivatives Liabilities Derivatives Shares Financial instruments pledged as collateral – – – – – CDOs, gross Notionals, EURm Hedged exposures – CDOs, net

Note 48 These instruments are classified at fair value through profit and loss. 48m 73m)(EUR and not rated 152m 239m). EUR (EUR Of which investment grade 1,401m 1,455m) EUR (EUR and sub investment grade EUR 4m 4m). (EUR Of which investment grade 1,503m 1,486m) and EUR (EUR sub investment grade EUR ­reference pool attachment, detachment, maturity and currency. Net exposure disregards exposure where tranches are completely identical in terms of Of which 567m EUR Treasury bills and 5,216m EUR Interest-bearing securities (the portion held at fair value in Note 47). Of which 1,915m EUR Treasury bills and 7,745mEUR Interest-bearing securities (the portion held at fair value in Note 47). of which corporates of which other credit institutions of which mortgage institutions of which state and sovereigns of which equity of which corporates of which other credit institutions of which mortgage institutions of which state and sovereigns of which mezzanine of which senior 1)

Assets and liabilities at fair value, cont. Bought protec- 1,507 4,390 2,883 31 Dec 2008 tion 277 337 893 2)

protec- 1,601 4,484 2,883 Sold tion 360 245 996 3)

1) 1)

Bought protec- 1,490 4,078 2,588 31 Dec 2007 Instruments with Instruments with tion 4) 218 373 899 quoted prices in quoted prices in active markets active markets 2)

protec- 1,767 4,355 2,588 (Level 1) (Level 1) Sold tion 376 414 977 1,177 2,806 2,735 3,391 2,731 2,214 1,075 3,988 3) 567 649 699 118 114 62 62 27 74 – technique using technique using observable data observable data Valuation Valuation (Level 2) (Level 2) 2,392 1,167 2,889 3,478 1,216 5,672 2,384 1,811 972 167 414 366 906 38 72 – – – non-observable data non-observable data technique using technique using Valuation Valuation (Level 3) (Level 3) Financial statements 819 202 458 25 34 53 – – – – – – – – – – – –

1,838 1,310 1,068 2,034 2,806 3,149 5,783 2,551 3,165 1,107 3,097 5,692 1,147 1,915 9,660 Total Total 229 567 906 139 Nordea Annual Report 2008 140 Nordea Annual Report 2008 Treasury bills Assets 31 Dec 2008, EURbn Group ognised in the income statement. adjustments for model risk. These fair value adjustments are rec- including VaR, and the CDO valuations are subject to fair value risk positions are subject to various types of market risk limits, the seller of protection. necessarily invested, triggered by a credit event is then carried by tion, any losses in the reference portfolio, in which Nordea has not a credit event. When Nordea buys protection in a CDO transac- ries the risk of losses in the reference portfolio on the occurrence of When Nordea sells protection in a CDO transaction, Nordea car Loans and receivables to credit institutions Loans and receivables to the public Interest-bearing securities Other assets Total assets Deposits by credit institutions Liabilities and equity Deposits and borrowings from the public Debt securities in issue Financial statements Provisions Subordinated liabilities Other liabilities and equity Total liabilities and equity Position not reported in the balance sheet Net position, currencies Treasury bills Assets 31 Dec 2007, EURbn Group Loans and receivables to credit institutions Loans and receivables to the public Interest-bearing securities Other assets Total assets Deposits by credit institutions Liabilities and equity Deposits and borrowings from the public Debt securities in issue Provisions Subordinated liabilities Other liabilities and equity Total liabilities and equity Position not reported in the balance sheet Net position, currencies Note 49 Note 48 The risk from CDOs is hedged with a portfolio of CDSs. The Assets and liabilities in foreign currencies Assets and liabilities at fair value, cont.

183.7 188.6 120.3 122.5 EUR EUR 77.5 14.1 83.0 17.8 47.8 30.2 88.7 65.8 35.3 40.5 20.9 50.3 –2.4 –4.6 3.3 5.8 0.1 4.0 6.3 1.4 3.5 6.1 9.6 7.4 0.1 3.3 -

2,144m. 1,333m and the net position from sold protection amounts to EUR Bonds. The net position from bought protection amounts to EUR CDSs are used for hedging exposure in CDOs as well as Credit Credit Default Swaps (CDS) – Exposure –20.4 SEK SEK 59.2 16.8 93.1 32.5 17.8 16.4 72.3 61.1 12.3 86.0 32.6 22.6 15.9 75.6 –9.3 2.7 7.8 6.6 4.7 0.0 0.9 0.4 1.3 6.4 4.9 3.7 0.0 0.8 1.1 DKK DKK 61.8 16.8 93.8 34.3 25.2 27.2 92.3 –1.8 –0.3 56.6 16.3 10.5 91.4 30.6 25.1 24.4 82.3 –5.4 0.0 5.8 9.4 5.6 0.0 0.0 0.2 7.8 2.2 0.0 0.0 3.7

NOK NOK –14.0 –15.2 33.2 48.1 19.8 10.7 33.7 37.1 54.1 23.2 10.3 37.9 0.4 0.9 3.7 9.9 1.7 1.5 0.0 0.0 0.4 0.2 1.5 5.5 9.8 2.6 1.8 0.0 0.0 1.0 USD USD 22.6 37.8 19.5 27.4 67.0 28.9 –0.3 14.8 23.5 22.2 49.1 24.5 –1.1 0.1 3.1 3.0 9.0 9.1 0.0 2.1 8.9 0.0 1.2 2.0 5.5 9.5 9.9 2.1 5.4 –

Other Other 10.8 17.6 20.2 –0.4 13.8 21.7 0.0 0.5 0.6 5.7 2.6 5.1 6.9 0.0 1.2 4.4 2.2 0.0 1.3 9.3 0.5 2.7 4.7 5.5 7.2 0.0 1.4 2.9 8.3 0.4 265.1 133.8 474.1 148.6 109.0 156.3 474.1 244.7 389.1 142.3 109.2 389.1 Total Total 23.9 44.8 51.9 24.3 38.8 76.1 30.1 99.8 6.5 0.1 8.2 1.2 1.2 5.2 0.1 7.6 0.5 0.5 Treasury bills Assets 31 Dec 2008, EURbn Parent company Loans and receivables to credit institutions Loans and receivables to the public Interest-bearing securities Other assets Deposits by credit institutions Liabilities and equity Total assets Deposits and borrowings from the public Debt securities in issue Provisions Subordinated liabilities Other liabilities and equity Position not reported in the balance sheet Total liabilities and equity Net position, currencies Treasury bills Assets 31 Dec 2007, EURbn Parent company Loans and receivables to credit institutions Loans and receivables to the public Interest-bearing securities Other assets Total assets Deposits by credit institutions Liabilities and equity Deposits and borrowings from the public Debt securities in issue Provisions Subordinated liabilities Other liabilities and equity Total liabilities and equity Position not reported in the balance sheet Net position, currencies Note 49 Assets and liabilities in foreign currencies, cont.

EUR EUR 17.3 34.9 15.1 39.5 –0.4 16.0 30.2 13.2 31.5 –3.8 –5.1 11.7 0.4 7.7 4.7 4.8 6.8 2.6 3.3 4.2 0.3 8.0 3.4 2.5 7.9 1.2 6.5 0.0 2.7 –

SEK SEK 23.6 18.3 14.5 52.9 29.8 48.6 –4.0 20.4 18.4 47.3 30.1 45.8 1.6 3.5 5.9 1.0 0.0 0.9 2.4 0.3 0.2 2.3 6.0 9.0 2.1 0.0 0.8 3.8 0.0 1.5 DKK DKK 3.3 1.1 1.0 1.9 5.0 7.3 0.2 0.0 1.9 7.1 0.0 0.2 0.0 0.3 1.9 0.1 0.7 3.0 1.9 0.1 0.0 0.0 0.2 2.2 2.6 3.4 – – – –

NOK NOK –2.8 –1.4 0.6 0.5 0.1 2.3 0.3 3.5 0.2 0.0 0.2 0.7 0.0 0.2 0.4 2.5 3.1 0.6 0.1 0.0 0.1 0.8 0.9 – – – – – – – USD USD 13.7 –1.0 11.1 11.3 0.0 7.2 2.9 0.7 0.3 6.8 0.5 4.2 1.8 0.4 2.6 0.0 0.1 6.5 1.9 0.3 0.1 8.9 3.8 0.6 4.7 1.8 0.4 1.4 – – Financial statements

Other Other –0.1 1.5 1.7 0.0 0.1 3.3 1.3 0.2 1.0 0.8 0.1 3.4 0.0 1.4 0.6 0.0 2.0 1.1 0.2 0.5 0.9 0.2 2.9 2.2 1.3 – – – – –

113.0 113.0 Total Total 43.9 29.2 10.1 27.8 34.7 33.5 17.9 20.1 36.8 26.6 25.3 94.5 24.3 32.3 13.8 17.9 94.5 2.0 0.0 6.8 0.0 0.0 0.6 5.2 0.0 6.2 1.0 1.0 141 Nordea Annual Report 2008 142 Nordea Annual Report 2008 Cash and balances with central banks Deposits by credit institutions Deposits and borrowings from the public Liabilities to policyholders Debt securities in issue Derivatives portfolio hedge of interest rate risk Fair value changes of the hedged items in Subordinated liabilities Total liabilities with fixed maturities Other liabilities Equity Total liabilities and equity Treasury bills 31 Dec 2008, EURm Loans and receivables to credit institutions Loans and receivables to the public Interest-bearing securities Financial instruments pledged as collateral Derivatives portfolio hedge of interest rate risk Fair value changes of the hedged items in Total assets with fixed maturities Other assets Total assets Remaining maturity Group ticipants. under standard agreements employed by financial markets par ments, can be sold or repledged. The transactions are conducted ties borrowing agreements which, under the terms of the agree- Nordea obtains collaterals under reverse repurchase and securi- Financial statements EURm can be repledged or sold Received collaterals which Reverse repurchase agreements – can be repledged or sold Received collaterals which Securities borrowing agreements – Total Note 52 Note 50 of which repledged or sold of which repledged or sold

Maturity analyses for assets and liabilities to be sold or repledged Obtained collaterals which are permitted

31 Dec 21,310 20,118 3,377 1,192 1,192 2008 Group 31 Dec 23,485 25,024

9,191 1,539 1,539 2007

30 31 32 33 20 21 38

40

15 Note 16 16 17 18 20 21

Parent company 31 Dec 7,524 1,308 1,308 8,832 2008 799

31 Dec 6,593 1,412 1,778 1,778 8,371 2007 - demand Payable 101,892 116,505 116,505 14,133 34,872 39,770 39,770 3,157 1,537 352 128 204 on

Total liabilities Other liabilities Investment contracts Insurance contracts Deposits and borrowings from the public Liabilities Total assets Other assets Shares Interest-bearing securities Assets EURm ance sheet. A breakdown is shown below: entities, these assets and liabilities are included in the Group’s bal- ing the risk. Since the assets and liabilities legally belong to the bilities included in their balance sheet where customers are bear Life Group and Nordea Bank Danmark A/S have assets and lia- Note 51 Maximum 3 months 120,050 120,050 109,256 109,256 35,208 34,037 35,541 14,584 20,528 66,239 13,844 7,630 665 102 901 15 12

Investments, customer bearing the risk

months 20,618 40,458 40,458 18,091 39,723 39,723 11,017 11,079 1,847 6,631 1,887 7,108 3–12 205 820 666 69 71 72 101,280 101,280 28,777 26,607 60,932 60,932 53,621 13,537 27,686 years 1,257 3,008 2,610 2,900 448 477 358 670 256 1–5 148,694 148,694 5 years 27,545 23,925 33,330 95,084 95,084 92,277 16,351 34,229 More 5,554 4,331 1,946 3,470 than 296 103 348 73 maturity Without 41,045 35,351 23,242 17,803 35,351 31 Dec fixed 8,715 2,000 3,070 8,715 6,730 1,820 3,611 2008 165 34 Group 474,074 474,074 148,591 108,989 433,029 265,100 438,723 31 Dec 11,344 11,344 51,932 29,238 85,538 23,242 17,803 23,903 44,830 86,838 35,351 2,503 4,796 3,981 8,975 2,157 8,209 3,157 6,545 7,937 Total 2007 212 532 413 64 - tions on the Nordea figures. The information below is presented from a Nordea perspective, meaning that the information shows the effect from related party transac- EURm EURm Net interest income and expense Interest expense Interest income Interest income and interest expense Parent company Off balance Total liabilities Accrued expenses and deferred income Other liabilities Derivatives Debt securities in issue Deposits Liabilities Total assets Prepaid expenses and accrued income Other assets Investments in group undertakings Investments in associated undertakings Derivatives Financial instrument pledged as collateral Interest-bearing securities Loans and receivables Assets Parent company Group

EURm Loans and receivables Assets Interest-bearing securities Derivatives undertakings Investments in associated Total assets Deposits Liabilities Debt securities in issue Derivatives Total liabilities Off balance Note 53

Related-party transactions

31 Dec undertakings 6,113 2008 Associated 181 431 731 172 172 119 – – – 31 Dec 6,042 2007 159 107 366 632 106 207 99 – 2 related parties 31 Dec 2008 31 Dec 74 74 79,253 24,795 22,787 61,006 15,866 37,323 Other – – – – – – – – 1,790 1,904 2,143 1,573 3,524 undertakings undertakings 2008 2008 –792 998 319 258 56 34 14 31 Dec Group Group – 2007 56 56 1) – – – – – – – – 31 Dec 66,345 18,289 17,655 55,991 15,488 35,006 1,346 2,637 1,960 2007 2007 –668 678 465 136 386 378 42 44 83 1) EURm Group Interest income expense Interest income and interest Interest expense expense Net interest income and –

table. table. not involve more than normal risk-­ terms as those for comparable transactions with companies of similar standing. They did and the related companies’ ordinary course of business and on the same criteria and ners AB and TrygVesta A/S. Transactions with related companies are made in Nordea’s related parties are Nokia Oyj, Posten AB, Sampo Abp, Danisco A/S, IK Investment Part- ment personnel are considered to be related parties to Nordea. Included in this group of well as companies significantly influenced by close family members to these key manage- Companies significantly influenced by key management personnel in Nordea Group as 31 Dec undertakings undertakings 2008 2008 Associated Associated 40 38 0 0 – – 1 – – – – 1 – – – 2 – – –

taking. taking. The transactions are therefore not included in the 31 Dec 2007 2007

49 30 19 1 – 1 – 1 – – – – 1 – – – – – – undertakings 2008 Associated –1 5 4 Financial statements 2007 –1 6 5 31 Dec related parties related parties 2008 2008 related parties –2 –2 21 21 2008 – – – – – – – – – – – – – – – Other Other –4 –4 Other – 31 Dec 2007 2007 2007 –1 –1 37 37 1) – 0 0 0 – – – – – – – – – – – – – – 143 Nordea Annual Report 2008 144 Nordea Annual Report 2008 guarantee. The latest maturity is on 31 December 2011. corresponds with the maturity dates of the bonds included in the date amounts to approx. EUR 61m. The agreement’s expiring date dea’s share of the fair value of the contract as of the balance sheet owners being the Norwegian state and other Nordic banks. Nor securities portfolio. Nordea owns 23 % of the company with other tium to support Norwegian Eksportfinans ASA in relation to its Starting in March 2008 Nordea takes part in a guarantee consor Group Other related-party transactions ­personnel are specified in Note 8. Compensation and loans and receivables to key management management personnel Compensation and loans and receivables to key Financial statements Note 53 Related-party Related-party transactions, cont. - - tisation is made over 10 years. which Nordea has been assessed to have sufficient control. Amor acquired customers. This relates, however, only to the part over goodwill. The part separated is related to future earnings from branches. from implementing Nordea’s operating model in the new work will create cost synergies and more synergies will be derived achieve. Integrating the nine branches into Nordea’s branch net- Goodwill arises mainly due to the synergies Nordea expects to Goodwill Customer related intangible asset Allocation of surplus value: Surplus value Cost of combination Purchase price, to be settled in cash Purchase price, settled in cash Acquired net assets in accordance with IFRS Other liabilities Deposits Other assets Loans EURm and can be updated during 2009. adjusted due to the volumes returned. The PPA is still preliminary, reflect the return of loans and guarantees and the price has been lished as of 3 November 2008. This PPA has been adjusted to price was adjusted due to the return of loans to Roskilde Bank. return some of the loans to household customers. The purchase Q4 and EUR 60m of guarantees. In Q1 2009 Nordea expects to approximately EUR 225m of loans to corporate customers during considered unattractive, to Roskilde Bank. Nordea has returned EUR 235m. below. In addition, Nordea acquired guarantees to the amount of in Nordea. Assets and liabilities acquired are disclosed in the table date from which the acquired assets and liabilities are recognised the Danish regulators. November 3 is the acquisition date and the closed on November 3, when Nordea received final approval from selskabet af 24. august 2008” (Roskilde Bank). The transaction was agreement to acquire nine branch offices from “Bankaktie-­ On September 29, 2008 Nordea Bank Danmark A/S signed an Note 54 The impact on Nordea’s net profit for the year is insignificant. A customer related intangible asset has been separated from The following purchase price allocation (PPA) has been estab- Nordea is entitled to return lending and guarantees, which are Acquisitions 3 Nov 2008 –343 163 132 –10 476 18 13 31 78 85 9 -

1) Total Net profit for the year Other free funds Retained earnings General Meeting of Shareholders: lowing amount is available for distribution by the Annual According to the parent company’s balance sheet, the fol- Proposed distribution of earnings

Employee representative (see further page 73, footnote 8). referred to in the European parliament and councils’ regulation (EC) 1606/2002, from 19 July 2002, on application of with respect to the size of the Company’s and the Group’s equity, which are imposed by the nature, scope and risks, The Board of Directors’ Report for the Group and the Company gives a true and fair overview of the development and the annual report have been prepared in accordance with the International Reporting Standards (IFRS/IAS) It is the assessment of the Board of Directors that the proposed dividend is justifiable considering the demands of the operations, financial position and result of the Group and the Company and describes the material International Accounting Standards and in accordance with generally accepted accounting principles. The Board of Directors and the President and CEO certify that the consolidated financial statements associated with the business, and the Company’s and the Group’s need for consolidation, liquidity They give a true and fair view of the Group’s and the Company’s financial position and result. Lars Oddestad Board member Board member Marie Ehrling Vice Chairman Board member Nils Q Kruse Timo Peltola

risks and uncertainties that the Company and the Group companies are facing. 1) 1)

Our audit report was submitted on 18 February 2009 Board member Björn Savén and financial position in general. 9,875,771,813 1,887,807,578 2,762,284,828 5,225,679,407 Authorised Public Accountant Heidi M. Petersen Christian Clausen Steinar Nickelsen President and CEO 17 February 2009 Svein Jacobsen Board member Board member Carl Lindgren EUR Hans Dalborg Board member Board member Kari Ahola KPMG AB Chairman Total To be carried forward EUR 0.20 per share Dividends paid to shareholders, distributed as follows: The Board of Directors proposes that these earnings are 1) 1)

Björn Wahlroos Board member Lars G Nordström Tom Knutzen Ursula Ranin Board member Board member Board member Board member Stine Bosse Financial statements 9,875,771,813 9,356,950,167 518,821,646 EUR 145 Nordea Annual Report 2008 146 Nordea Annual Report 2008 accounts. As a basis for our opinion concerning discharge information in the annual accounts and the consolidated accounts as well as evaluating the overall presentation of when preparing the annual accounts and consolidated made by the board of directors and the managing director tors and the managing director and significant estimates principles used and their application by the board of direc - accounts. An audit also includes assessing the accounting dence supporting the amounts and disclosures in the ment. An audit includes examining, on a test basis, evi- the consolidated accounts are free of material misstate- but not absolute assurance that the annual accounts and require that we plan and perform the audit to obtain high accepted auditing standards in Sweden. Those standards administration based on our audit. annual accounts, the consolidated accounts and the accounts. Our responsibility is to express an opinion on the and Security Company when preparing the consolidated the EU and the Annual Accounts Act of Credit Institutions national financial reporting standards IFRSs as adopted by preparing the annual accounts and the application of inter Act of Credit Institutions and Securities Company when pany as well as for the application of the Annual Accounts sible for these accounts and the administration of the com- board of directors and the managing director are respon- printed version of this document on pages 31–145. The accounts and the consolidated accounts are included in the Nordea Bank AB (publ) for the year 2008. The annual the board of directors and the managing director of accounts, the accounting records and the administration of We have audited the annual accounts, the consolidated Corporate identity number 516406-0120 To the annual meeting of the shareholders of Nordea Bank AB (publ) Audit report Financial statements We conducted our audit in accordance with generally Stockholm, 18 February 2009 Authorised Public Accountant Carl Lindgren KPMG AB - tor be discharged from liability for the financial year. members of the board of directors and the managing direc- proposal in the Board of reportDirector’s and that the the parent company be dealt with in accordance with the ent company and the group be adopted, that the profit of that the income statements and balance sheets of the par accounts and the consolidated accounts. report is consistent with the other parts of the annual position and results of operations. The Board of Director’s pany and give a true and fair view of the group’s financial Accounts Act of Credit Institutions and Securities Com- dards IFRSs as adopted by the EU and the Annual in accordance with international financial reporting stan- in Sweden. The consolidated accounts have been prepared accordance with generally accepted accounting principles company’s financial position and results of operations in Securities Company and give a true and fair view of the with the Annual Accounts Act of Credit Institutions and out below. our audit provides a reasonable basis for our opinion set Company or the Articles of Association. We believe that Annual Accounts Act of Credit Institutions and Securities panies Act, the Banking and Financing Business Act, the has, in any other way, acted in contravention of the Com- ined whether any board member or the managing director board member or the managing director. We also exam- able to determine the liability, if any, to the company of any taken and circumstances of the company in order to be from liability, we examined significant decisions, actions We recommend to the annual meeting of shareholders The annual accounts have been prepared in accordance - * Main legal structure*, 31 Dec 2008 Legal structure Danmark A/ Nordea’s businesses in the Baltic countries are operated as branches in Nordea Bank Finland Plc. Further information is presented in Note 22. Nordea Bank subsidiaries Denmark V arious S Nordea Bank Finland Plc subsidiaries V Finland arious Nordea Bank Norge ASA subsidiaries Norway V arious Nordea Bank P olsk P oland a S.A. Nordea BankAB(publ) Sweden Orgresbank company Holding Russia JSB investment manage- V arious subsidiaries Fund companies ment companies Em Ubezpieczen na livsforsikrings- Nordea Po Liv &Pe To To Po selska Sweden AB Nordea Life subsidiaries Assurance e Z wa warzystwo Denmark Nordea Nordea ryt Sweden wszec Va ycie S.A. Po Po (publ) rz rious aln land land b A/ ys nsion e S hne to lska S w .A. Nordea LifeHoldingAB & Pe IP Nordea Life subsidiaries Estonia AS Nordea Liv Luxemburg Norge AS Pe Pe AS Nordea Holding Nordea Va Norway Latvia nsion S.A. nsions nsions rious Sweden Organisation Nordea Life Finland Ltd Nordea Life Finland Ltd Assurance Holding Finland Finland 147 Nordea Annual Report 2008 148 Nordea Annual Report 2008 * Shareholding in Nordea: 1,882* 1987–2001 2002–2005 2004–2006 Previous positions Non-executive Director of Amlin plc Board member of Grundfos Management A/S and Poul Due Heart Child Disease Foundation). Board Chairman of Forsikring & Pension and Hjertebarnsfonden (Danish Group CEO of TrygVesta A/S. Master of Law. Board member since 2008. Born 1960. Stine Bosse Shareholding in Nordea: 5,187* 1971–2005 Previous positions Advisor to Cap Man Plc Public Market Fund. AB. Member of the Advisory Board of CVC Capital Partners and Sveafastigheter Board member of TeliaSonera AB (publ) and SAS AB. Board Chairman of Neste Oil and AW-Energy Oy. Dr. of Economics (Hc). Board member since 1998. Born 1946. Vice Chairman Timo Peltola Shareholding in Nordea: 40,760* 1972–1989 1989–1990 1991–1997 1998–1999 2000 1997–2005 2005–2008 Previous positions Member of the European Round Table of Financial Services (EFR). ­Institute for Financial Research (SIFR). Economics and East European Economies (SITE) and the Stockholm Board member of Axel Johnson AB, the Stockholm Institute of Transition University. Board Chairman of the Swedish Corporate Governance Board and Uppsala Ph.D. (Economics). Board member since 1998. Born 1941. Chairman Hans Dalborg Board of Directors Organisation Shareholdings also include shares held by family members. Svein Jacobsen Hans Dalborg ­President 1999–2002 Various positions within Tryg Forsikring A/S. Senior Vice Board Member of Flügger Board Member of TDC 1988–2004. Various positions within Huhtamäki group including CEO Various positions within Skandia Group Skandia Group. Senior Executive Vice President and Chief Operating Officer of President and CEO Nordbanken President and CEO MeritaNordbanken President and CEO Nordea Board Chairman of the Royal Swedish Opera Sciences (IVA) Board Chairman of the Royal Swedish Academy of Engineering Tom Knutzen Timo Peltola ­Jensens Fond. of Engineering Sciences (IVA). American Chamber of Commerce. Member of the Royal Swedish Academy Board member of TeliaSonera AB, Posten AB, Viking Line Abp, the Swedish- Association (EFMA). ­Chamber of Commerce and European Financial Management & Marketing Board Chairman of the Royal Swedish Opera, the Finnish-Swedish President and Group CEO of Posten AB. Law studies at Uppsala University. Board member since 2003. Born 1943. Lars G Nordström Shareholding in Nordea: 5,000* 1985–1988 1988–1996 1996–2000 2000–2006 2006– Previous positions hagen and the Danish Academy of Technical Sciences (ATV). Board member of the Confederation of Danish Industries (DI) in Copen­ CEO Danisco A/S MSc (Economics). Board member since 2007. Born 1962. Tom Knutzen Shareholding in Nordea: 0* 1984–1996 Previous positions Member of the Advisory Board in CVC Capital Partners. Deputy Chairman of Orkla ASA and Expert AS. Abandonment AS. Board Chairman of Think Global AS, Vensafe AS and Norse Cutting & MBA. Certified public accountant. Board member since 2008. Born 1951. Svein Jacobsen Shareholding in Nordea: 1,500* 1977–1979 1979–1980 1980–1982 1982–2002 2003–2006 Previous positions ­Executives Council IVA. högskolan in Stockholm, World Childhood Foundation and Business Home Maid AB, Centre for Advanced Studies of Leadership at Handels­ Board member of Securitas AB, Oriflame SA, Schibsted ASA, Safe Gate AB, BSc (Economics). Board member since 2007. Born 1955. Marie Ehrling Lars G Nordström Stine Bosse Various positions within Fællesbanken Various positions within Niro A/S CFO NKT Holding A/S CEO NKT Holding A/S CEO Danisco A/S 1996 Various positions within Tomra Systems including CEO 1988– Financial analyst at Fourth Swedish National Pension Fund Information officer at the Ministry of Education Information officer at the Ministry of Finance ­executive positions within the SAS group Deputy CEO SAS Group, Head of SAS Airline and other CEO TeliaSonera Sverige AB Heidi M. Petersen Marie Ehrling * Shareholding in Nordea: 400,000* 1972–1974 1974–1976 1976–1988 1988–1993 Previous positions Member of the Royal Swedish Academy of Engineering Sciences (IVA). Chairman of the British-Swedish Chamber of Commerce. Board member of Attendo Care AB and Minimax AG. Deputy chairman of Dynea Oy and Konecranes Oyj. Chairman of Industri Kapital since 1993. since 2006. Ekon. dr. h.c., MBA and MSc (Econ.& Bus.). Born 1950. Board member Björn Savén Shareholding in Nordea: 5,000* 1981–1984 1984–2005 Previous positions Board member of Finnair Plc and UPM-Kymmene Corporation. LLM and BSc (Economics). Board member since 2007. Born 1953. Ursula Ranin Shareholding in Nordea: 0* 1995–1997 1997–2000 2000–2002 2003–2007 Previous positions Norwegian Energy Company ASA and Arendals Fossekompani ASA. AS, Glamox ASA, Songa Floating Production ASA, Scan Geophysical ASA, Board member of Aker Kværner ASA, Norsk Hydro ASA, Calora Subsea Board Chairman of Sandefjord Lufthavn AS. degree Master’s in chemistry. Board member since 2008. Born 1958. Heidi M. Petersen Shareholding in Nordea: 15,000* 1970–1993 1993– 2002–2007 Previous positions Shareholdings also include shares held by family members. Bertel Finskas Ursula Ranin Analyst, Gulf Oil, Stockholm. MBA studies at Group in Stockholm, London and New York. General and financial management positions within the Esselte Chief Executive Enskilda Ventures (SEB), London. Served as a circuit court judge of Directors from 1996. President, General Counsel from 1994 and secretary to the Board Various positions within Nokia Corporation including Vice Various managerial posts with Gullfaks C oljerigg Vice President in Kværner Oil & Gas AS Sandefjord Managing director of Future Engineering AS Managing director of Ramböll Future AS from 1989) Various positions within Skandinaviska Enskilda Banken (EVP Various executive management positions within Nordea Group President and CEO Nordea Bank AB Harvard Business School, Boston. Nils Q Kruse Björn Savén Shareholding in Nordea: 0* Board member from 1 January 2009. Born 1950. Employee representative. Lars Oddestad Shareholding in Nordea: 0* Board member since 2007. Born 1962. Employee representative. Steinar Nickelsen Shareholding in Nordea: 1,849* Board member since 2004. Born 1950. Employee representative. Nils Q Kruse Shareholding in Nordea: 1,400* representative. Board member since 2000 and until 31 December 2008. Born 1948. Employee Bertel Finskas Shareholding in Nordea: 0* Board member from 2006. Born 1960. Employee representative. Kari Ahola Shareholding in Nordea: 0* 1974–1979 1979–1985 1980–1981 1983–1984 1985–1992 1992–1997 1998–2000 Previous positions ­Policy Forum EVA/ETLA and the Mannerheim Foundation. Board member of several charities, including the Finnish Business and Board Chairman of UPM-Kymmene Oyj. Group CEO and President of Sampo Plc. Ph.D (Econ), 1979. Board member since 2008. Born 1952. Björn Wahlroos Steinar Nickelsen Björn Wahlroos School of Economics Acting lecturer and assistant professor in Finance at the Swedish School of Economics Professor and acting professor of Economics at the Swedish Visiting assistant professor in Economics at Brown University Northwestern University ­Decision Sciences at Kellogg Graduate School of Management, Visiting associate professor in Managerial Economics and ­committee 1989–1992 ­executive vice president and member of the executive Various positions with Union Bank of Finland including President of Mandatum & Co Ltd Chairman of Mandatum Bank plc Lars Oddestad Kari Ahola Organisation 149 Nordea Annual Report 2008 150 Nordea Annual Report 2008 Frans Lindelöw Shareholding: 3,200 Nordea Appointed member 2008. Born 1960. Head of Institutional & International Banking. Ari Kaperi Upper row from left to right: Ari Kaperi, Gunn Wærsted, Christian Clausen, Michael Rasmussen, Frans Lindelöw. Lower row from left to right: Peter Group Schütze,Executive Management: Carl-Johan Granvik, Fredrik Rystedt. 1) Shareholding: 18,080 Nordea Appointed member 2004. Born 1962. Head of Banking Sweden. Shareholding: 9,000 Nordea Appointed member 2000. Born 1949. Control. Executive Vice President, CRO, Head of Group Credit and Risk Carl-Johan Granvik Shareholding: 28,480 Nordea Appointed member 2001. Born 1955. President and Group CEO 2007. Christian Clausen Group Executive Management Organisation

Shareholdings also include shares held by family members. 2) 2) 1) 1) 1) 1)

Shareholding: 7,831 Nordea Appointed member 2008. Born 1964. Head of Banking Products & Group Operations. Michael Rasmussen Gunn Wærsted Peter Schütze Shareholding: 5,000 Nordea Appointed member 2008. Born 1963. Executive Vice President, CFO, Head of Group Corporate Centre. Fredrik Rystedt 2) Shareholding: 9,085 Nordea Appointed member 2007. Born 1955. People & Identity. Executive Vice President, Head of Capital Markets & Savings and Shareholding: 13,646 Nordea Appointed member 2002. Born 1948. Executive Vice President, Head of Nordic Banking.

Country Senior Executive. 2) 2) 1) 1) 1) 1)

Nordea Hypotek AB (publ) Nordea Bank Norge ASA Nordea Bank Finland Plc Nordea Bank Danmark A/S Nordea Eiendomskreditt AS 1) Nordea Kredit Realkreditaktieselskab Nordea Bank AB (publ) Ratings 1) Group Organisation

Russia, P Covered bond rating. Anne St Segment Household Segment Corporate B Nordic B B P B B F P P Anders Jensen Nordic Private anking Denmark eter Sc anking Sweden rans Lindelöw anking Norway T ekk eter L anking Finland opi Manner B oland &B ärk- anking a Nuuttila ybec anking hütze Johansen ker altic Countries.

International B Shipping, OilServices Financial Institutions T Bir Institutional & homas Nec New European & International Carl E.Steen Ari Kaperi ger Gezelius Markets anking 1) kmar L ena Eriksson Group Legal Capit Pe Gunn W Gunn W S International Private Asset Management Henrik Prier Johan Sidenmark Lars Häggstr B Jhon Mortensen Communications avings Products& Group Identity& P Life &P Capit Jukk ople &Identit Group Human Nordic Private anking &Funds eter Nyegaar Lauri P Allan P S al Markets& Resources Marketing avings Products Investors Service B a P anking al Markets ærsted Short ærsted ensions erttula eltola olac P–1 P–1 P–1 P–1 P–1 Moody’s President andGroupCEO gaar öm k

Christian Clausen y d

d Aaa Aaa Long Aa1 Aa1 Aa1 Aa1 A1

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Mic B Hans-Henrik Eigtved Group Operations T anking Products& Gert AageNielsen T rans hael Rasmussen Account Products K apio Saar Group Sourcing Nordea Finance Jukk Service Centre T Group Internal urt Gust Ossi L ransformation

P Te Information action Products er E.Ber c Group A–1+ A–1+ A–1+ A–1+ A–1+ Short a Salonen Secret hnology T Flemming DalbyJensen orsten HagenJør Standard & Poor’s & Poor’s eikola afsson elainen Group Management ariat &GroupStrategy g

AAA AAA Long AA– AA– AA– AA–

1) 1)

gensen Group Corporate Fredrik Rystedt Johnny Bac Jakob Grinbaum Investor Relations F L Jakob Grinbaum Group Corporate Group Planning Group Finance Group T Short ouise Lindgr rank Söllested Johan Ekwall Development Group Risk Centre F1+ F1+ F1+ F1+ & Control Modelling Fitch reasury

kman Long AA– AA– AA– AA– en

R–1 (high) R–1 (high) R–1 (high) R–1 (high) Eva-L Carl- Group InternalAudit Group Operational Group MarketRisk Group Credit& Holger Otterheim Organisation Risk Management Sigur Marja Nyk Risk Control Niels N.Kjær Johan Granvik Group Credit Group Credit Group Credit Short ott Stig Hansen Management DBRS Process Control a Rosenqvist d Carlsen

änen Long AA AA AA AA 151 Nordea Annual Report 2008 152 Nordea Annual Report 2008 shares, minority interests excluded. Net profit divided by the average number of outstanding Earnings per share shares after full dilution, minority interests excluded. Net profit divided by the average number of outstanding Earnings per share, after full dilution chase additional shares. dividends are reinvested at the time of the payment to pur of a shareholding over a specified period, assuming the Total shareholders return measured as growth in the value Total shareholders return (TSR) profit and dividend until paid, minority interests excluded. of average equity for the period. Average equity including net other revaluations recognised direct in equity,change inas faira percentagevalue related to available forNet saleprofit holdings excluding and minority interests and theReturn on equity period’s Capital base as a percentage of risk-weighted amounts. Total capital ratio percentage of risk-weighted amounts. The Core tier 1 ratio is calculated as core tier 1 capital as a Tier 1 capital as a percentage of risk-weighted amounts. Tier 1 capital ratio been deducted from the capital base and goodwill. insurance companies, book value of shares which have tions governing capital adequacy, excluding assets in of the Group’s undertakings, in accordance with regula - of the credit and market risks, as well as operational risks Total assets and off-balance-sheet items valued on the basis Risk-weighted amounts separate capital requirements. expected losses and provisions. Insurance companies have expected shortfall, the negative difference between wholly owned insurance companies and the deduction for loans, after deduction of the book value of the shares in the supplementary capital consisting of subordinated The capital base includes the sum of the Tier 1 capital and Capital base loans). The Core tier 1 capital excludes these items. nated loans (Tier 1 capital contributions and hybrid capital ties, Tier 1 capital also includes qualified forms of subordi- expected shortfall deduction. goodwill in the banking operations and half of the ance companies, proposed dividend, deferred tax assets, dated shareholders’ equity excluding investments in insur The proportion of the capital base, which includes consoli- Tier 1 capital Report. These definitions apply to the descriptions in the Annual Business definitions Others Subsequent to the approval of the supervisory authori- - - tional value is included in MCEV. objective market return. No franchise value or other addi- on a portfolio of in-force life and pension business based on MCEV is an estimate of the value a shareholder would put MCEV tal. defined as Risk-adjusted profit relative to Economic capi- RAROCAR, % (Risk-adjusted return on capital at risk) is RAROCAR simultaneously. drivers and the improbability that unexpected losses occur diversification effects resulting from the differences in risk arising from activities in Nordea’s various business areas. Operational Risk, Business Risk and Life Insurance Risk consistent measurement for Credit Risk, Market Risk, probability. EC uses advanced internal models to provide a pected losses in the course of its business with a certain capital and measures the capital required to cover unex- Economic Capital is Nordea’s internal estimate of required Economic capital parameter to manage risk appetite and investment level. times Economic capital. share’s volatility and correlation with market volatility. equities multiplied by Beta, which reflects the Nordea euro rate plus required average risk premium to invest in tors on the Nordea share, measured as the long risk free Cost of equity (%) is defined as required return by inves- Cost of equity ous portfolios. vidual loan exposure over a business cycle as well as vari- Expected losses reflect the normalised loss level of the indi- Expected losses from Risk-adjusted profit. Economic profit is derived by deducting Cost of equity Economic profit major non-recurring items. tax (26 % 2008). In addition, Risk-adjusted profit excludes operating expenses, minus Expected losses and standard Risk-adjusted profit is defined as total income minus total Risk-adjusted profit income. Total operating expenses divided by total operating Cost/income ratio shares after full dilution. minority interest excluded divided by the number of Equity as shown in the balance sheet after full dilution and Equity per share The aggregation of risks across the group gives rise to The Cost of equity is set by management once a year as a Cost of equity in EUR is defined as Cost of equity (%) SE-105 71 Stockholm, Sweden Anna Halaby Christopher Casselblad Andreas Larsson Johan Ekwall, Head of Investor Relations Investor Relations Fredrik Rystedt, Group CFO/EVP Contacts 3rd quarterly report 2nd quarterly report 1st quarterly report Dividend payments Record date Ex-dividend date Annual General Meeting Financial calendar 2009 Financial calendar 13.00 Swedish time at the following address: Nordea Bank AB (publ) at the latest on 27 March 2009 at Notification of participation in the AGM must be made to Sweden Shareholders registered in Euroclear Sweden AB in trustee about this. shareholder in good time prior to this date must inform the den AB in Sweden on 27 March 2009. This means that the Værdipapircentralen in Denmark. Receipts in Finland and holders of shares registered in This applies for example to holders of Finnish Depositary Euroclear Sweden AB in order to be able to participate. rarily re-register their shares in their own names with whose shares are held in custody therefore must tempo­ than 27 March 2009 and notify Nordea. Shareholders Securities Register Center (Euroclear Sweden AB) not later entered in the share register maintained by the Swedish Shareholders who wish to participate in the AGM shall be Notification of participation etc Djurgårdsslätten 43–45, Stockholm. held on Thursday 2 April at 13.00 CET at Cirkus, Nordea’s Annual General Meeting (AGM) 2009 will be Annual General Meeting 2 April 2009 Such re-registration must be effected in Euroclear Swe-

Tel: +46 8 614 92 77 28 October 21 July 29 April 16 April 7 April 3 April 2 April Tel: +46 8 614 78 00

euro in­ thereof. A Swedish version may be obtained upon request. annual report is in Swedish. This is an English version main legal structure is presented on page 147. The original pertains to the operations of the Nordea Group, whose This Annual Report covers Nordea Bank AB (publ) and The Annual Report 2008 work, is presented on www.nordea.com EU Capital Requirements Directive in the Basel II frame- ­accordance with the Pillar 3 requirements according to the ­dis be ­Nordea Bank Norge ASA, Nordea Bank Finland Plc can Nordea Group may be ordered via Investor Relations. at: www.nordea.com Financial reports published by the All reports and press releases are available on the Internet Website web page www.nordea.com. phone +45 4546 0997 or fax +45 4546 0998, or on A/S, Kongevejen 418, DK-2480 Holte, Denmark, or by tele- Nordea Bank AB (publ), c/o I-NVESTOR DANMARK latest on 26 tion of shares to Euroclear Sweden AB must be made at the Notification of participation in the AGM and re-registra- Denmark Shareholders registered in Værdipapircentralen in web +358 9 348 9230 or fax +46 8 622 63 51, or on Nordea’s Box 10, SE-182 11 Danderyd, Sweden, or by telephone Nordea Bank AB (publ), c/o Novator Consulting Group AB, latest on 26 tion of shares to Euroclear Sweden AB must be made at the Notification of participation in the AGM and re-registra- Finland Holders of Finnish Depositary Receipts (FDR) in web page www.nordea.com. +46 8 755 13 46, or by fax +46 8 622 63 51, or on Nordea’s Box 10, SE-182 11 Danderyd, Sweden, or by telephone Nordea Bank AB (publ), c/o Novator Consulting Group AB, come statements and other financial data quoted in downloaded at www.nordea.com Nordea’s Pillar 3 In this Annual Report, the Nordea Group presents The annual reports of Nordea Bank Danmark A/S, closure, Capital adequacy and risk management, in page www.nordea.com. (EUR). March 2009 at 12.00 noon Danish time to March 2009 at 12.00 noon Finnish time to ­Nordea’s Others

153 Nordea Annual Report 2008 Corporate Governance Report 2008 according to the Swedish Code of Corporate Governance

Application by Nordea Control Environment Nordea Bank AB (publ) applies the Swedish Code of Internal control in Nordea is based on the control environ- ­Corporate Governance (the Code). ment, which includes the following elements: Values and A description of corporate governance in Nordea in the management culture, goal-orientation and follow-up, a most recent financial year is included in the 2008 Annual clear and transparent organisational structure, segregation Report on page 70. In this Corporate Governance Report of duties, the four-eyes principle, quality and efficiency of Nordea indicates where it has departed from the rules in internal communication and an independent evaluation the Code and explains the reasons. The report also includes process. The documentation of the internal control frame- the Board’s annual report on the key aspects of the systems work consists of Group directives and supporting instruc- for internal control and risk management regarding finan- tions covering the financial and administrative business cial reports. processes in Nordea. According to the Code the minutes from the last Annual General Meeting (AGM) are to be posted on the Compa- Risk Assessment ny’s web site. Nordea did not fully comply with this rule Management of risks within Nordea is proactive, empha- since the minutes were posted without the appendices con- sising training and risk awareness. Nordea maintains a taining personal information equivalent to information in high standard of risk management, applying available the register of voters from the meeting. Nordea has found techniques and methodology in a cost efficient way. Risk that the integrity of the individual shareholders is best pro- management is considered an integrated part of running tected by not posting the appendices of this kind, given the business. that it is not necessary to report the register of voters from the meeting according to the Code. The decisions are found Control Activities in the minutes. The control activities include general as well as more detailed controls, which aim at preventing, revealing and Report on the key aspects of the systems for internal correcting errors and deviations. The control activities are control and risk management regarding financial prepared and documented at group level, at business area reports for the Financial Year 2008 level as well as unit level. The procedures cover the initial This report has been prepared following rules 10.5 and 11.2 registration of each transaction and the subsequent IT pro- on internal control reporting in the revised Code and the cessing. The heads of the respective units in Nordea are report is submitted as a separate section of the Corporate primarily responsible for managing the risks associated Governance Report 2008. with the operations and financial reporting processes of The systems for Internal control and risk management the unit. over financial reporting are designed to give reasonable assurance concerning reliability of financial reporting and Information & Communication the preparation of financial statements for external pur- The Group Accounting Manual and the Financial Control poses in accordance with generally accepted accounting Principles constitute the main tools for accounting and principles, applicable laws and regulations, and other financial reporting principles in respect of providing infor- requirements for listed companies. The internal control mation and instructions. In addition to this, a standard and risk management activities are included in Nordea’s reporting package is used by all entities to ensure consis- planning and resource allocation processes. Internal con- tent use of Nordea’s principles and coordinated financial trol and risk management over financial reporting in reporting. ­Nordea can be described in accordance with the following framework: Monitoring quarterly and annual financial reporting, the external and Nordea has established a process with the purpose of ensur- internal auditors’ observations and conclusions as well as ing a proper monitoring of the quality of the financial report- the system of internal control. ing and the follow-up regarding possible deficiencies. The CEO annually issues a report to the Board of Direc- Financial reporting and communication with auditors tors on the quality of internal control in Nordea. This The manner in which the Board of Directors ensures the report is based on, inter alia, a self-assessment process and a quality of the financial reports is presented in the section hierarchical reporting covering the whole organisation. on monitoring in the Report on the key aspects of the sys- Internal control over financial reporting is included as one tems for internal control and risk management regarding of several processes in the self-assessment. financial reports, see above. Group Internal Audit (GIA) is an independent function Furthermore, the Board of Directors reviews the exter- commissioned by the Board of Directors. The Audit Com- nal auditors’ result of their audits of the Group’s annual mittee is responsible for guidance and evaluation of GIA. financial statement and the external auditors’ review of the The internal auditing work provides assurance on that part Group’s six-month report. The Board further reviews the of Nordea’s control system, which is essential for the exter- external audit plan and external audit results. At least once nal auditors’ assessment of the financial statements. GIA a year the Board of Directors meets the external auditors annually issues an assurance statement to the Board of without the presence of the CEO or any other company Directors on the risk management, control and governance executive. In addition the auditor in charge meets sepa- processes of the Nordea Group. rately with the Chairman of the Board of Directors and the The Audit Committee also assists the Board of Directors Chairman of the Audit Committee. in fulfilling its oversight responsibilities by reviewing the

This Corporate Governance Report, including the Report on the key aspects of the systems for internal control and risk management regarding financial reports, has not been reviewed by the auditors and it is not part of the formal financial statements. Layout: Marketing Production: n3 Kommunikation Photo: Bsmart, Egon Gade and Per Myrehed Printing: Strokirk-Landströms

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