Digital Banking. Digital Banking. Investor Relations Meeting 8th November Digitalization seminar, 11 th November 2014

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1 Digital Banking Digital Banking Digitalization seminar, 11 th November 2014 Christian Bornfeld, Head of Digital Banking Investor Relations Meeting 8th November 2014 V1

2 1. Nordea highlights 2. Customer behaviours & competitive dynamics 3. Digital Banking & the future relationship bank

3 Nordea highlights Financial results Q314 Income holding up despite continued macro headwind, low interest rates and low volatility Capital gain of EUR 378m related to sale of Nets Cost programme delivering according to plan (5% decrease in 2015 vs in local currencies on-track) Loan losses are down to 12 bps, below 10 year average Operating profit up 7% YTD (EUR 3,324m)* CET 1 ratio improved 40 bps to 15.6% RoE is up 30 bps YTD to 11.5%* Building the future relationship bank Changing customer behaviour and increasing level of operational regulations Increase agility, scale and resilience New core banking and payment platforms Avg annual increase in IT investments of approx % over the coming 4-5 years Impairment charge of EUR 344m * Excluding non-recurring items in Q2/14 and Q3/14 3

4 1. Nordea highlights 2. Customer behaviours & competitive dynamics 3. Digital Banking & the future relationship bank

5 Customer behaviours and expectations are changing rapidly The Internet, smartphones and apps drive customers who are increasingly connected knowledgeable empowered & impatient 5

6 and our competitive picture becomes more fragmented Relationship banking Daily banking Traditional banking competition High regulation Transactions Financing Payment providers Advisory Cash Mobile payments Peer to peer transfers Disruptive players Lower regulation 6

7 New behaviours are impacting on all of Nordea s touch-points 7

8 reflected especially in a growth of digital interactions TRANSACTIONS / LOGONS, MILLIONS +753% 273 High-value digital interactions / qtr -50% % Branch trans. Mobile trans. Mobile log-ons e 8

9 But interactions need to be converted to loyalty and sales Our business opportunity lies in converting primarily transactional interactions, into value creating dialogues and thereby loyalty and sales High-value digital interactions / qtr Making the relationship digital 9

10 1. Nordea highlights 2. Customer behaviours & competitive dynamics 3. Digital Banking & the future relationship bank

11 We will address the well established Relational Banking model Personal relationship Knowledge Classic relationship banking Responsive 11

12 and through digitalization, make it scalable for the future Convenience Personal Digitally enabled relationship banking Trust Analytics, learning & automation 12

13 for both our personal and business segments CONVENIENCE HOUSEHOLD CUSTOMERS Engaging with Nordea at the touch-point of choice Consistent advice and services across touch-points Human interaction available when wanted CORPORATE CUSTOMERS Tools and services supporting user work efficiency Advice and financial overview across touch-points Human interaction available when wanted PERSONAL Timely, relevant and proactive advice Known and recognised in all touch-points Adaptive interfaces to Nordea Timely, relevant and proactive advice Services integrated into businesses value chain Role-based interfaces to Nordea TRUST Strong security (a strong box for bits and bites) Data used to improve service and advice Competent and sincere recommendations Strong security and stability Data used to improve service and advice Professional advice strengthening businesses Analytics, learning & automation 13

14 allowing us to better serve more customer groups BREAKING THE 80 / 20 RULE BUSINESS IMPACT Greatly widen target groups for sales Increase loyalty Lower cost to serve Improve channel mix & productivity Analytics, learning & automation 14

15 Our digital approach is built on clear choices STRATEGIC CHOICE REJECTED ALTERNATIVE Branch & product centric model Self-directed digital model Broaden engagement across all touch points Service combining people & technology Customer knowledge in all touch-points Customer dialogue Tailored solutions Scalable Nordic ideas drive towards self-service choosing between human or digital knowledge with an advisor alone broadcast communication standard products local solutions 15

16 and enabled by establishing a dedicated business unit DIGITAL BANKING Responsible for the full value chain Combining business expertise and creativity with technical knowledge Change agent to ensure momentum DIGITAL BANKING SOLUTION PRINCIPLES Think in end-to-end customer journeys Leverage analytics and respect data privacy No physical meetings required Digital signing / paperless processes Same front-end for assisted & self-service Utilize existing public infrastructures Mobile-first approach to Household 16

17 Digital Banking will apply a mindset of learning Evolution rather than revolution Exploration and curiosity Challenge constraints / dogma Deploy > observe > learn > adjust Partnerships and open innovation 17

18 and of collaboration Evolution rather than revolution 28th 30th November

19 The first steps in a longer journey are being implemented Additional investments in online- and mobile significantly increasing speed of development Remote meetings rolled out in all countries improved flexibility for customers in terms of timing and place Re-mortgaging process automated in Denmark significantly reducing manual work and drastically decreasing paper send to customers (900,000 letters) and internally (3,500 kg of paper) Data driven sales pilot in Sweden - targeting mass market customers in Sweden with strong early results Contact centre improvements in Finland and Norway chat services, improved identification measures, etc. improving efficiency and customer experience 19

20 and the priorities for digital transformation are clear Deliver to customers Simple yet comprehensive 24/7 digital offering for both household and corporate customers Personalised to reflect customer needs and preferences Enable key end-to-end customer journeys by combining the strengths of the various touch-points Build capabilities Advanced analytics capabilities feeding all touch-points New ways of working with customers and partners Digital marketing/sales competencies & operating model Efficiency and agility through simplification Straight-through fulfilment Nordic solutions that leverage the scale of Nordea Prepare for adoption of new banking platforms 20

21 All in all building the future Relationship Bank Value-creating interactions at every touch-point Internal complexity Customer experience Efficient and compliant delivery by a simplified and effective back-end 21

22 22

23 Thank you!

24 Appendix

25 Nordea Financial Results Q314 EURm Q3/14 Q2/14 Chg % Q3/14 YTD Q3/13 YTD Chg % Net interest income 1,396 1, ,126 4, Net fee & commission income ,079 1, Net fair value result ,058 1, Total income* 2,754 2, ,711 7, Total income** 2,376 2, ,333 7, Staff costs ,391-2, Other expenses ,748-1, Total expenses -1,516-1, ,139-3, Total expenses** -1,172-1, ,605-3, Profit before loan losses** 1,204 1, ,728 3, Net loan losses Operating profit 1, ,167 3, Operating profit** 1,093 1, ,324 3, Net profit cont. operations ,494 2, Return on equity (%) bps bps - CET1 capital ratio (%) bps bps - Cost/income ratio (%) unchanged bps - * Includes other income **Excluding non-recurring items (Re-structuring charge in Q2, Nets and IT impairment in Q3) 25

26 The leading Nordic retail bank Retail Banking result Q3/14 EURm Q3/14 Q2/14 Chg % Q3/14 YTD Q3/13 YTD Chg % Net interest income Net fee & commission income Net fair value result Total income Staff costs Total expenses Profit before loan losses Net loan losses Operating profit Retail Banking contribution* Operating income Operating profit FTE s Lending Deposits 54% 45% 59% 67% 60% * FY

27 Digital Banking Digital Banking Digitalization seminar, 11 th November 2014 Christian Bornfeld, Head of Digital Banking Investor Relations Meeting 8th November 2014 V1