Annual Report 2010 IV Nordea Annual Report 2009 We grow with Nordea is a relationship our customers. bank focusing at creating great Last year, Nordea customer experiences. gave fi nancial advice The relationship managers meet to many both existing and discuss with customers and new customers. ’’ to understand their ’’ business and needs. Contents CEO letter 2 Nordea in brief – 10 years of steady progress into a solid position in nine markets 4 Refl ections from the Chairman 12 Prudent growth – balancing growth and return 16 Business development 2010 2010 has been an important milestone on and market position the journey towards Great Nordea. We were Customer areas and customer segments 21 2 one of the fi rst large banks to introduce a Product areas and product groups 32 programme to accelerate out of the crisis. CEO letter Group Operations and International branches 38 Market positions 39 It's people who make Nordea Great 41 Corporate Social Responsibility 43 The Nordea share and shareholders 45 Board of Directors’ report Financial Review 2010 50 Customer area and Product area results 54 Risk, Liquidity and Capital management, New regulations – Basel III 57 Corporate Governance Report 70 Remuneration 77 Financial statements The high growth in number of new Gold and 82 Private Banking customers and in corporate Income statement 83 21 income has continued in 2010. Statement of comprehensive income 84 Business development 2010 Balance sheet 85 and market position Statement of change in equity 86 Cash fl ow statement 89 Quarterly development 91 5-year overview, Business defi nitions 92 Notes to the fi nancial statements 95 Proposed distribution of earnings 173 Audit report 174 Organisation Legal structure 175 Board of Directors 176 Group Executive Management 178 Group Organisation 179 As a relationship bank, Nordea is committed Ratings 179 to people, not least our employees, who 41 – highly skilled and dedicated — deliver Annual General Meeting 2011 180 great customer experiences. Financial calendar 180 It's people who make Nordea Great 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 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, (iii) change in the regulatory environment and other government actions and (iv) change in interest rate and foreign exchange rate levels. This report does not imply that Nordea has under- taken 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 changesNORDEA compared ANNUAL to the date whenREPORT these statements 2010 were provided. 1 C E O l e t t e r CEO letter In the aftermath of the fi nancial crisis, we were one of the fi rst large banks to introduce a comprehensive programme to accelerate out of the crisis – the Prudent growth strategy. It already shows results: Customer satisfaction has increased; customer activity is high; income and profi t increased signifi cantly in the end of the year. Dear shareholder, volumes have increased and our cus- from deposits. In 2010, we established 2010 has been an important milestone tomer satisfaction has never been 45 new branches in Poland, ensuring on the journey towards Great Nordea. higher among our relationship cus- the infrastructure required to con- We came out of the financial crisis tomers. During the year, we have wel- tinue to grow in this important mar- in a strong position and used that comed more than 200,000 new Gold ket. Our experience is that a new advantage to be one of the first large and Private Banking customers. branch in Poland has a positive return banks to introduce a comprehensive The results declined in the begin- within less than a year. programme to accelerate out of the ning of 2010, due to a normalisation We continuously increase efficiency crisis – the Prudent growth strategy. of the capital markets and low general and an important part of our growth It already shows results: Customer interest rates. However, in the last strategy is to improve our foundation satisfaction increases; customer activ- two quarters, income reverted to the and make processes more efficient. ity is high; income and profit reached highest levels ever. Loan losses have record levels in the end of the year. been significantly reduced. Total The journey towards Great Nordea We implemented the strategy in expenses increased, which to a large Our long-term vision is to become a parallel with strengthening our bal- extent is due to currency effects and great European bank. Next to the ance sheet. Our position on capital, the implementation of the Group ini- Prudent growth strategy, there are liquidity and funding has improved tiatives. Efficiency gains are still three cornerstones in that vision: in order to meet demands of the com- taken out every year. In total, operat- 1. Profit orientation & prudence. ing new regulation. And we took an ing profit is 18% higher in 2010 than Through the financial crisis, important step towards our vision: to in 2009. The risk-adjusted profit Nordea’s financial results have become a Great European bank. decreased in the first half of 2010, but been very stable compared to other recovered in the latter part of the banks. Nordea’s loan losses have Prudent growth strategy delivers year. In the fourth quarter, it was 35% been limited and normalised dur- In the beginning of 2010, we launched higher than in the same period in ing 2010 to levels around our risk nine strategic initiatives to deliver on 2009. appetite, 25 basis points. Over the our ambitious financial targets, We have laid a strong foundation cycle, we have an average clearly despite the low interest rates, high for continued growth. Our risk- below 25 basis points, even though competition and stricter regulation. weighted capital position is viewed as it peaked just above 50 basis points The goal was to free up resources to one of the strongest of the world’s in 2009. We have maintained our increase customer activity, income large banks. The increasing customer AA rating, which has been a corner and profit. The initial effects of the activity within the Nordic countries stone in our operating model and is strategy can now be evaluated. will lead to further increases in the most important factor affecting The relations with corporate cus- income. Expected interest rate hikes funding costs, which will grow tomers have strengthened, business will have a positive effect on income even further in importance with the Risk-adjusted profi t growth Total Shareholder Return (TSR) in the top quartile Growth from 2006 compared to target to double in seven years of the European peer group, 2007–2010 % 50 SHB DnB NOR Nordea 40 Santander Erste Bank BNP Paribas 30 Danske Bank SEB BBVA 20 Swedbank Barclays Intesa Sanpaolo Société Générale 10 UniCredit KBC Lloyds 0 Commerzbank RBS Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Bank of Ireland Allied Irish Banks 2007 2008 2009 2010 –100 –80 –60 –40 –20 0 20 40 % Source: Thomson Reuters Ecowin 2 NORDEA ANNUAL REPORT 2010 NORDEA ANNUAL REPORT 2010 C E O l e t t e r 2010 has been an important milestone on the journey towards Great Nordea. new regulatory framework ’’for the Forbes Top 100 list of important glo- financial crises. Nordea will be financial industry. bal companies as one of only two engaged in the analysis of the coming 2. Everything everyone does in Nordic companies, and maintained regulation in order to try to ensure Nordea has one key purpose: to our position on Fortune’s top 500 that the regulation becomes efficient deliver great customer experiences. companies in the world. without undue effects on customers Our other values – One Nordea and the economic recovery. Team and It's All About People – The New Normal Nordea has taken action to meet are strong drivers in bringing great The new regulation will affect the the new regulation. Our capital ratios experiences to every customer – fundament of global financial indus- are already meeting the new require- from individual households to try. Banks will not go back to the old ments, our ROE is high relative to the some of the largest companies in normal situation after the financial market average, we have a sound the world. In 2010, Nordea’s cus- crisis, but will face a radically liquidity and we have increased tomer satisfaction reached its all- changed business environment, that maturities in our funding. These time-high among our relationship is often referred to as the “New Nor- adjustments affect the results 2010 customers. In a time when mistrust mal”. The work with new regulations compared to the situation 2007. As has spread with the entire financial is not yet finished, but the details of regulatory details are set in 2011, we industry, Nordea’s customers are the new framework are gradually will develop and adjust our Prudent more satisfied than ever. Nothing becoming clearer. growth strategy to the New Normal. makes me more proud, and nothing Before the crisis, the average core To conclude, 2010 was an important is more important for the long-term tier 1 ratio in the financial industry year for Nordea.