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Interim Report Q1 2011

Interim Report Q1 2011

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Published by Swedbank AB (publ)
Swedbank AB Interim report January-March 2011
Swedbank AB Interim report January-March 2011

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Published by: Swedbank AB (publ) on Apr 28, 2011
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09/16/2011

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Swedbank
 –
Interim report January-March 2011 Page 1 of 45
First quarter 2011
Compared with the fourth quarter 2010
 
The quarterly result amounted to SEK 3 852m (2 750)
 
Earnings per share amounted to SEK 2.47* (2.37)
 
The return on equity was 16.1 per cent (11.7)
 
The cost/income ratio was 0.52 (0.58)
 
Net interest income was unchanged at SEK 4 527m (4 527)
 
Profit before impairments increased by 21 per cent to SEK 4 068m(3 368)
 
Swedbank reported net recoveries of SEK 972m (483)
 
The core Tier 1 capital ratio was 14.9 per cent (13.9 per cent on 31December 2010) according to Basel 2 and 10.4 per cent (10.1) accordingto transition rules. The Tier 1 capital ratio according to Basel 2 increasedto 16.2 per cent (15.2). According to transition rules, the Tier 1 capitalratio increased to 11.2 per cent (11.0).
First quarter 2011
Compared with the first quarter 2010
 
The quarterly result amounted to SEK 3 852m (536)
 
Earnings per share amounted to SEK 2.47* (0.46)
 
The return on equity was 16.1 per cent (2.4)
 
The cost/income ratio was 0.52 (0.57)
 
Net interest income increased by 13 per cent till 4 527m (4 023)
 
Profit before impairments increased by 24 per cent to SEK 4 068m(3 276)
 
Swedbank reported net recoveries of SEK 972m (credit impairments of2 210).
*)
Earnings for the purpose of calculating earnings per share is specified on page 41.
 
05001 0001 5002 0002 5003 0003 5004 0004 5005 000Q1-2010Q2-2010Q3-2010Q4-2010Q1-2011SEKm
Profit for the period
0,00,51,01,52,02,53,03,54,0Q1-2010Q2-2010Q3-2010Q4-2010Q1-2011*SEK
Earnings per share
0,02,04,06,08,010,012,014,016,018,020,0Q1-2010Q2-2010Q3-2010Q4-2010Q1-2011%
Return on equity
0,02,04,06,08,010,012,014,016,0Q1-2010Q2-2010Q3-2010Q4-2010Q1-2011%
Core Tier 1 capital ratio
 
 
 
Swedbank
 –
Interim report January-March 2011 Page 2 of 45
CEO Comment
Swedbank has had a good start to 2011. First quarterprofit amounted to SEK 3.9bn, bolstered by one-off
revenue from a settlement with Lehman Brothers‟
bankruptcy estate and recoveries from the Balticcountries, Russia and Ukraine.The trends from recent quarters are continuing. Highermarket interest rates are supporting net interest income.Credit quality continues to improve at the same time thatrisk-weighted assets are declining. Expenses have beenmaintained at the same level as last year.All in all, we were able to strengthen our capital basesignificantly. At the end of the quarter the core Tier 1capital ratio was 14.9 per cent. This enables us to beginexercising the share repurchase mandate that the Boardof Directors received from the Annual General Meeting.During the period until the next Annual General Meetingwe will steer the core Tier 1 capital ratio towards ourshort-term target of 13 per cent. This means that as of31 March we had nearly SEK 10bn to repurchaseshares. Our long-term measures to be more capitaleffective launched in 2009 are continuing. As part of thiswork, we are further increasing transparency, partly withregard to stress tests and risk weights.We are focusing our energy primarily on developing thebusiness and improving customer experience.Our long-term work to become a more relationship-oriented bank is a priority in all our business areas andwe are continually making progress in this regard. Ourgoal is for Swedbank to be the bank with the mostsatisfied customers and the best customer offerings,and thereby with the highest share of customers whorecommend the bank to friends and businessacquaintances. It is a realistic goal that I am convincedwe will achieve. The challenge is significant and willtake several years of dedicated effort where we focuslong-term on our business and on building a strong,unified culture within the bank.In Retail, our service concepts have generated solidsales growth. Over 90 000 customers signed up forvarious private customer concepts during the firstquarter. Sales to financially strong customers areincreasing, though at a slower pace than othersegments, and we are now taking measures to improvethe sales trend. Resources are increasing andcompetence is being improved at the same time thatmarketing and customer activities are being intensified.The number of midcorps where Swedbank is the mainbanking provider is increasing, as is the level of activityamong existing customers, in turn contributing to animproved risk-adjusted return.The level of activity within Large Corporates &Institutions is high. Competence within the sector teamis gradually increasing, and we can see an increasedinterest in Swedbank as an alternative. For example, weare seeing an increase in the number of queries aboutparticipating in financing solutions. We are continuing toadjust the margins on exposures where our risk-adjusted return is too low; this means that someexposures are still being wound down. At the same timeour goal is to further develop existing businessrelationships, so that a larger share of our custo
mers‟
business is done with Swedbank. The integration ofFirst Securities is progressing according to plan, and themajority of managerial positions in the new organisationhave now been filled with a combination of individualsfrom First and Swedbank. We are continuing toharmonise the research products within the businessarea, an important step in attracting customers.Baltic Banking has successfully concluded the firstphase of a major training programme on proceduresand customer responsibility. The aim is to increaseefficiency and customer satisfaction in the long term. Intotal, the training programme will include around 2 500employees in 2011. During the quarter the InternetBank's functionality was improved. Credit demand isgradually rising, but at a slightly slower-than-expectedpace. The areas where new lending has been good arelargely related to infrastructure projects and to someextent the export industry.As part of the effort to increase quality and efficiency inthe organisation, we have identified areas where wehave an opportunity to free up around one million man-hours. The biggest potential for efficiency improvementsis in the credit area in Sweden. Several projects torealise this potential have begun.During the quarter we took advantage of favourablefunding conditions for the bank and raised more fundingthan planned. This has resulted in slightly higher fundingcosts as a result of larger short-term liquidity reserveswith limited returns. Since actual funding costs are notfully reflected in the internal interest rate, net interestincome in the business areas was slightly strongerduring the quarter, while Treasury had a correspondingnegative impact.
Swedbank was again named Sweden‟s most popular 
workplace within the financial sector by Universum, in asurvey among business students. At the same timeGlobal Finance named Swedbank as the best bank inEstonia and Latvia.We expect a gradual improvement in profit before creditimpairments (excluding one-off items). Creditimpairments are expected to remain low with goodpotential for recoveries in the Baltic countries, Russiaand Ukraine.Michael WolfPresident and Chief Executive Officer
 
 
Swedbank
 –
Interim report January-March 2011 Page 3 of 45
Table of contents
Page
Financial summary 4Overview 5
Market 5Important events during the quarter 5
First quarter 2011 compared with the fourth quarter 2010 5
Result 5
First quarter 2011 compared with the first quarter 2010 6
Result 6Credit and asset quality 7Funding and liquidity 9Capital and capital adequacy 9Market risk 10Operational risk 10Other events 10Rating 11Events after 31 March 2011 11
Business areas
Retail 12Large Corporates & Institutions 14Baltic Banking 16Asset Management 18Russia & Ukraine 19Ektornet 21Group Functions 22Eliminations 22
Financial informationGroup
Income statement, condensed 24Other comprehensive income, condensed 24Balance sheet, condensed 25Statement of changes in equity, condensed 26Cash flow statement, condensed 27Notes 28
Parent company 41Signatures of the Board of Directors and the President 44Review report 44Contact information 45
More detailed information can be found in Swedbank‟s fact book, 
www.swedbank.com/ir, under Financial information andpublications.

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