Annual Report 2017 Report Annual Annual Report 2017 Casper von Koskull, President and CEO Letter Group CEO, and Torsten Hagen Jørgensen, Group COO and Deputy CEO. Page 4 No.1 relationship bank in 4 the Nordics with operation- al excellence. Page 19 Long-term Personal Banking ambition to be Wholesale Banking No. 1 in profi tability, customer and employee satisfaction. Page 11 19 11 Wealth Management Commercial & Business Banking Our vision is to become the leading Wealth Manager in the 23 Nordic market by 2020. Page 23 Best-in-class advisory and digital experience, 15 effi ciency and scale with future capabilities in a disruptive market. Page 15 Annual Report 2017 Contents 4 CEO letter 6 Leading platform 8 Nordea investment case – strategic priorities 10 Business Areas 31 The Nordea share and ratings 34 Our people Board of Directors’ report 36 Financial Review 2017 40 Business area results 43 Risk, liquidity and capital management 59 Corporate Governance Report 67 Statutory Sustainability Report 69 Remuneration 72 Proposed distribution of earnings Financial statements 73 Financial statements Nordea Group 86 Notes to Group fi nancial statements 176 Financial statements Parent company 187 Notes to Parent company fi nancial statements 231 Signing of the Annual Report 232 Auditor’s report Organisation 236 Board of Directors 238 Group Executive Management 239 Legal structure 240 Annual General Meeting 240 Financial calendar This Annual Report contains forward-looking statements macro economic development, (ii) change in the competitive that reflect management’s current views with respect to climate, (iii) change in the regulatory environment and other certain future events and potential fi nancial performance. government actions and (iv) change in interest rate level and Although Nordea believes that the expectations reflected in foreign exchange rate levels. This report does not imply that such forward-looking statements are reasonable, no assur- Nordea has undertaken to revise these forward-looking state- ance can be given that such expectations will prove to have ments, beyond what is required by applicable law or appli- been correct. Accordingly, results could diff er materially from cable stock exchange regulations if and when circumstances those set out in the forward-looking statements as a result of arise that will lead to changes compared to the date when various factors. Important factors that may cause such a these statements were provided. diff erence for Nordea include, but are not limited to: (i) the Annual Report 2017 CEO letter 4 Towards One Nordea – an agile and robust bank engaging with its customers the-art banking platform with substan- With the transformation we are tial customer benefi ts in terms of speed, undergoing to meet customer needs, user experience, convenience and com- not only of today but also tomorrow, we pliance. More so, however Nordea - and are fi nding new ways of working. The hence our customers - will be able to digital transformation, with more ser- fully benefi t from the vibrant fi ntech vices containing robotics and artifi cial innovation by engaging in, and off ering, intelligence, in combination with new the fi nancial eco-system, on our journey ways of organising work, leads to a towards becoming the leading and need for fewer employees. Nordea will, most preferred banking partner for all over a period of four years, be at least customers in the Nordics. 4,000 employees and 2,000 consultants, Nordea is the fi rst Nordic bank to go fewer. This process is being conducted live with Open Banking, meaning that responsibly whereby Nordea has set up more than 1,000 external developers a specifi c unit to assist aff ected employ- have tested and provided feedback on ees with fi nding new jobs. the open APIs and associated services. 2017 was yet another year with low The Open Banking platform allows interest rates and an unstable political application developers to test their environment in parts of the world, ideas using the bank’s data and tools. In including Europe, with the decision of December, Nordea took the next step as the United Kingdom to leave the EU. we connected the APIs to the produc- Nevertheless, Nordea proved once more tion system and provided the fi rst pilot to be one of the most stable banks in developers with access to real customer Europe. It is more than 11 years since data. In the near future, customers will our shareholders experienced a loss- see a new range of services and prod- making quarter. Nordea’s balance sheet Dear shareholder, ucts developed in collaboration with is one of the strongest among the Euro- Looking back at 2017, Nordea produced third-party providers and will benefi t pean banks, and our credit rating is some signifi cant results that we can be from that source of innovation. among the highest. We delivered the proud of. We have further accelerated our To further boost and foster innova- following results for full-year 2017 transformation in the direction led by our tion both internally and externally, we (excluding items aff ecting comparability): customers. In a world in which banking have created Nordea Ventures, through Income, EUR 9,469m, Operating profi t, will be at customers’ fi ngertips anytime which we will make strategic invest- EUR 3,998m, Costs, EUR 5,102m, Loan and anywhere, Nordea needs to change. ments in fi ntech start-ups such as the loss ratio, 12bps, Return on equity, 9.5%. We are taking on the challenge and con- payment service company Betalo, and The positive eff ects of our accelerat- sequently reshaping our core banking we have recently launched Nordea Run- ed transformation are starting to reach platform, what we call the “N-core.” We way, our very own intrapreneur pro- our customers all over the Nordics. Con- are on the cusp of a new world in which gramme aimed at harnessing innova- sequently, we have received awards and banking services will be off ered to cus- tion originating from within Nordea. top rankings including: best private tomers from a growing number of service 2017 was also the year in which we bank, IT innovation of the year, best in providers - be they competitors or part- embarked on a journey that focused on real estate fi nance, best transaction ners. Nordea has embraced this change the culture of the bank. Employees banking and a number one ranking for and is working with many innovative assisted in the co-creation of a shared our large corporates operation. partners who, in collaboration with us, purpose and an updated set of corpo- will meet our customer vision of being rate values that will guide all employees Personal Banking: The mobile bank is easy to deal with, relevant and compe- in their interactions with customers, col- becoming the natural contact point. tent - anywhere and anytime. The launch leagues and the societies in which we Online meetings with the bank are con- of the partnership with Apple Pay, which operate. A vital part of the culture is tinuing to gain popularity; one out of provides payments on the go, is just one focusing on how Nordea as a business four meetings is now held online. Also, example, and we are now teaming up will create value both for our customers our investments in artifi cial intelligence with many interesting fi ntech partners and society. Creating value for our cus- – AI – progressed well and will result in like Tink in the Open Banking project, tomers is the path to long-term share- increased customer service quality. and are joining consortiums like ”we. holder value, and this is also why we On 25 August 2016 Nordea and DNB trade” in which we explore the possibili- have taken the fi rst steps in changing entered into an agreement to combine ties within blockchain technology. our organisation. We want to be faster, their operations in Estonia, Latvia and Nordea has made ambitious invest- more agile, less hierarchical and always Lithuania to create a leading indepen- ments in building the foundation of the put the customer at the heart of our dent main fi nancial services provider in future bank, and we have served our thinking and actions, organising our the Baltics. The Luminor transaction fi rst customers in Finland on “N-core”, capabilities in line with customer need. was successfully closed on 1 October our core banking platform. There will be We have taken an important step in 2017, resulting in the establishment of a further roll-out of banking services by being better at listening to and looping the third largest fi nancial services pro- product and country in 2018. When fully back customer requests into the busi- vider in the Baltic banking market. implemented, we will have a state-of- ness areas for actions. Annual Report 2017 CEO letter 5 Wealth Management: Customers dics. Long-term customer relationships Redomiciliation: On 6 September 2017, obtained a strong return on their form the core of the franchise which is Nordea’s Board of Directors decided to Nordea Funds. Nordea Swedish Stars gradually shifting towards capital-light initiate a redomiciliation of the parent fund was at the top among Swedish solutions with a strong emphasis on company of the Nordea Group into the funds after gaining 17.6%. In addition, managing for returns. The client per- Banking Union. we are the best performer among Nor- spective is the starting point for Whole- This decision was based on the wegian funds and in Denmark we are sale Banking’s goal to increase custom- Nordea Group’s unique pan-Nordic and rated best on performance among the er relevance, intensity and value as well international structure, which means largest Danish fund companies.