Annual Report 2007 Nordea is the largest fi nancial services group in the Nordic and Baltic Sea region with a market capitalisation of approx. EUR 30bn, total assets of EUR 389bn and a tier 1 capital of EUR 14.2bn, as of end December 2007. Nordea is the region’s largest asset manager with EUR 157bn in assets under management. Nordea has approx. 10 million customers in the Nordic region and new European markets, of which 6.8 million are personal customers in customer programme and 0.7 million are active corporate customers. Contents Nordea in brief 2 Highlights 2007 3 CEO letter 4 The Nordea share 6 Key fi nancial fi gures 11 Vision, values and strategy 12 Integrated Group operating model 17 Business development – customers and products 18 People forming Great Nordea 36 Group organisation 38 Corporate Social Responsibility 40 Board of Directors’ report – Financial Review 2007 42 – Customer area results and Product results 46 – Risk, Liquidity and Capital management 52 – Corporate governance 76 5 year overview 82 Quarterly development 83 Income statement 84 Balance sheet 85 Statement of recognised income and expense 86 Cash-fl ow statements 87 Notes to the fi nancial statements 89 Risk and capital adequacy reports for the Parent company 145 Proposed distribution of earnings 148 Audit report 149 Business defi nitions 150 Legal structure 151 Ratings 151 Board of Directors 152 Group Executive Management 154 Group Organisation 155 Annual General Meeting 156 Financial calendar 157 Corporate Governance Report I-II This Annual Report contains forward-looking statements that refl ect management’s current views with respect to certain future events and potential fi nancial performance. Although Nordea believes that the expectations refl ected 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 fac- tors 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. Nordea in brief Nordea – with an outstanding starting point Global, A unique customer base European, Other*) Approx. 10 million personal customers 15% Norway 700,000 active Corporate customers 12% #2 Finland 22% Strong distribution power Sweden #1 Approx. 1,300 branches 23% #2–3 ts 4% Financial strength Denmark ean Marke 24% EUR 14.2bn in tier 1 capital #2 New Europ Economies of scale Cost base/RWA ratio 2.0% (average among Nordic peers 2.3%) Lending to personal customers % Share of Group income (size of bubbles) *) Includes mainly International Private Banking and Funds, Shipping, Oil Services and International, Financial Institutions Division and other operations and Lending to corporate customers # Market rank Group functions Nordea is the largest fi nancial services group in the Nordic Nordic resources and competences with local presence and Baltic Sea region with a market capitalisation of and – for large customers – by applying a customer team approx. EUR 30bn, total assets of EUR 389bn and a tier 1 concept. capital of EUR 14.2bn, as of end December 2007. Nordea is the region’s largest asset manager with EUR 157bn in Nordea pursues an organic growth strategy, with prudent assets under management. risk management, and is well diversifi ed. No geographical market accounts for more than one third of Nordea’s total Nordea is a universal bank with leading positions income. within corporate merchant banking as well as retail banking and private banking. Nordea’s total shareholder return (TSR) was 6.4% in 2007, only surpassed by two other banks in the European peer With approx. 1,300 branches, call centres in all Nordic group. Since end of 2002, Nordea’s accumulated TSR is countries and a highly competitive e-bank, Nordea also 244%, also exceeded by two peer banks only. has the largest distribution network for customers in the Nordic and Baltic Sea region, including more than 180 Return on equity was 19.7% in 2007, excluding non- branches in fi ve new European markets, Russia, Poland, recurring items 19.1%. Lithuania, Latvia and Estonia. Nordea’s long-term target is to double the risk-adjusted Nordea has approx. 10 million customers in the Nordic profi t in seven years, with 2006 as the baseline. On region and new European markets, of which 6.8 million average, this requires a 10% annual growth. In 2007, the are personal customers in customer programme and 0.7 risk-adjusted profi t increased by 15%. Nordea Annual Report 2007 million are active corporate customers. Gold customers, the most important personal customer segment, account Following a successful transformation from four major for approx. one third of the customers in customer pro- national banks into one integrated cross-border fi nancial gramme and are offered a complete range of products and services group, Nordea in 2007 embarked on the journey services including a personal banker. Nordea has a clear towards Great Nordea. For the journey, Nordea in 2007 emphasis on relationship banking with corporate custom- introduced three new corporate values: Great Customer ers and aims at becoming the house bank by combining Experiences, It’s all about People and One Nordea team. 2 Highlights 2007 January creating superior value for customers agreement with the company Svensk Nordea’s groupwide trainee pro- and shareholders” and the new values Kassaservice, a subsidiary to Posten, gramme is ranked among the best in are “Great Customer Experiences”, the Swedish Postal Service. 76 new Sweden and the best in the fi nancial “It’s all about people” and “One Nordea branches will from 1 July 2008 services sector. Nordea team”, supported by the be established at locations where foundation in terms of “Profi t orienta- Svensk Kassaservice has operations February tion – cost, risk and capital”. and Nordea has many of its customers. Nordea Life & Pensions was chosen Risk Magazine awards Nordea the Statoil MasterCard, a cooperation as one of eight providers to the collec- prize Best Nordic Derivative House. project with Nordea, won a presti- tively agreed pensions system ITP in gious prize at MasterCard Interna- Sweden. The agreement is the most May tional’s annual Co-Branding confer- comprehensive ever in the Swedish The interim report for the fi rst quarter ence: ’Best long-term achievement market and one of the largest at Euro- shows that the organic growth strat- and usage 2007’. pean level. Nordea won the contract egy gives Nordea continued strong Nordea´s organic growth strategy in competition with 15 other insur- momentum in the business develop- delivered strong results also for the ance providers. ment in all business areas. third quarter. Total income and the Nordea presents its full-year report number of customers in prioritised for 2006, and it was another record June segments as well as business volumes year, well ahead of the fi nancial tar- Nordea receives approval to use its continued to increase. Nordea experi- gets. Nordea consolidated the posi- internal credit risk models according enced very limited impact from the tion as the leading bank in the region. to Basel II. The approval applies for market turmoil in the third quarter of Nordea, as the fi rst Nordic bank, the portfolios Corporate and Institu- the year. starts to implement the Equator Prin- tions, which cover more than 50 per ciples, a benchmark for the fi nancial cent of Nordea´s credit portfolios. November industry to manage social and envi- Global Finance Magazine ranks Nordea introduces guidelines for ronmental issues in project fi nancing. Nordea as the ’Best Treasury and socially responsible investments, SRI, Cash Management Banks and Pro- within Asset Management. March viders 2007’ in the Nordic region. Nordea receives the award Best Nordea’s acquisition of a 75 per cent Provider of Syndicated Loans for the stake in JSB Orgresbank in Russia was July Shipping Industry at the 20th Annual fi nalised according to plan. Through The Magazine Euromoney awards Lloyd’s Shipping Conference. this investment, Nordea will capture Nordea the prize for Best Regional Nordea strengthened its presence the growth opportunities in the Bank in the Nordics and Baltics. In in the Norwegian real estate agency Russian market. addition, Nordea received fi ve local business by its purchase of the real awards in the annual competition for estate agency chain, PRIVAT- April the world´s best banks. megleren. The Annual General Meeting resolves In the fi rst half year of 2007, to introduce a Long Term Incentive Nordea maintains strong growth in December Programme to retain and attract the total income, the number of gold cus- Nordea and Standard & Poor’s rene- key leadership talents comprising up tomers as well as in business volumes gotiated the agreement from 2004 to 400 managers and key employees as a consequence of the execution of regarding equity research. Standard & in the Nordea Group. the organic growth strategy. Poor’s will concentrate on fulfi lling Nordea Annual Report 2007 Lars G Nordström retires with the requirements of Nordea’s Private pension from the position as Presi- September banking and retail customers. Nordea dent and Group CEO of Nordea and Nordea sets new standards for online will in-source the institutional equity is succeeded by Christian Clausen. emplo1yer branding and recruitment research. Nordea streamlines its organisa- with an innovative interactive speed Nordea opens a new branch in tion with a stronger customer orienta- dating tool on the Internet.