Nordea Bank Abp (NDAFI) Earnings Call Transcript & Summary

Welcome to Nordea's Annual General Meeting. These are extraordinary times, and this is an unusual Annual General Meeting. I apologize for any inconvenience this may have caused you. But of course, health and safety will always have to come first. And I hope that we will meet in person next year and have more detailed discussions. The COVID-19 pandemic has proved the saying that you need to be prepared for the unexpected, and Nordea is an exceptionally well-capitalized bank. At the same time, management has all it needs to meet customer expectations. So we are well prepared to meet good times but indeed also to meet rough times and with unexpected circumstances. As you're aware, the Board has proposed a different dividend process this time in face of the pandemic and following the recommendation from the ECB. The Board proposes to postpone the decision on dividend payment for the financial year 2019 and to authorize the Board to decide on the dividend payment later this year. We intend to follow the recommendation by the ECB and refrain from deciding on the dividend payment before the 1st of October of this year. And we will, of course, monitor the situation closely and publish any decisions separately. The authorization shall remain in force until the beginning of the AGM next year, 2021. Putting the epidemic to the side for a moment, 2019 was also a year of change for Nordea. The Board was not satisfied with the performance of the company and made a number of important decision for change. We now have in place a new CEO and a set of new targets published at the Capital Markets Day in October last year. I'm confident that the management will deliver on this change program. The key question is, of course, not targets or other plans, it is how Nordea delivers. And this is very much about creating a performance culture with less complexity in the organization, with accountability for decisions, with remuneration closely linked to performance and with a higher level of general quality. During the last few quarters, we have seen some positive signs of improving performance, but many steps need to be taken to achieve the target levels. We will continuously raise our ambitions to provide the best personal and digital solutions to our customers and to create value to you, our shareholders.

Dear shareholders, this spring has been different than expected. Who would have anticipated the magnitude of the COVID-19 pandemic when we entered this year? It is impacting our everyday life. It is impacting the global economy. It is impacting our businesses, and it is impacting us as a bank. It is times like these that require us to be an even safer and more trusted partner to our customers and to all of you. Nordea is a strong, well-capitalized and liquid bank, even in the most turbulent times. It gives a solid ground for supporting our customers and to grow our business. While the current situation is exceptional, so was last year for Nordea. We updated our business plan. We decided on new financial targets, restructured our leadership team and adjusted our organization. Moreover, we took the first step to deliver on our new plan. In the latter part of '19, we started to see the results of the actions we had taken. Both our financial performance and customer satisfaction improved. The positive trends have continued also in '20. Despite the promising start, we still have a lot of work ahead of us. In '19, our total income was 1% lower than the previous year, but we managed to increase revenues by 6% in the last quarter compared to the same period in '18. We were also able to improve our efficiency. We reduced total operating expenses by 1% compared to '18. This year, our target is to reduce total costs by more than EUR 200 million and reach a cost base of below EUR 4.7 billion, with planned net cost reductions continuing beyond '20. As a result, our full year '19 comparable operating profit was EUR 3.4 billion. Our cost-to-income ratio was 57%. Our target is 50% in '22. We had a return on equity of 8.1%. We are targeting a return of equity above 10% in '22. It is important to note that some major negative extraordinary items impacted our operating profit last year. These amounted to EUR 1.25 billion, which mainly related to the new business plan. Our strong balance sheet enables us to respond to any potential changes in regulatory requirements and continue to capture growth opportunities. In these uncertain times, businesses need solid ground under their feet. Our very strong capital position and robust liquidity position enable us to navigate even through the storms. I would like to go back to our updated business plan and our key priorities. This plan is actually fairly straightforward. It is about retaking lost ground and making us truly competitive. It is about greater empowerment and accountability in the business areas to take the necessary actions to deliver on 3 key priorities, and these are: To optimize operational efficiency, to drive income growth initiatives and to create great customer experiences. We have a plan in place with the key priorities in focus. Most of all, this new direction is about creating a solid and a consistent performance culture. It is about hard work. It requires many tough decisions, a clear focus and a tight follow-up, making sure that we get things done. It's about delivering and doing that a little bit better every single day. That is the way I want to see the bank progressing. It is not going to be a walk in the park, but we are determined to execute and create more value to all our stakeholders. The building blocks are in place. I am impressed by our employees' expertise, passion to serve our customers and sheer determination to improve our business results. I'm convinced that a strong customer focus, combined with enhanced operational efficiency, will enable us to deliver on our targets and significantly improve Nordea's financial performance over time. This year is a special one for Nordea. This marks our 200 years' anniversary. As a strong and personal financial partner, we have helped our customers realize their dreams and fulfill their aspirations for 2 centuries. It makes me personally very proud and humbled. In terms of our legacy and what we have become as a company, to run a sustainable business with purpose, these extraordinary times really show what is at the core of our business, supporting our customers through good times and through challenging times. It is our role as a leading bank in the Nordics, taking an active role, creating solutions. During the COVID-19 pandemic, we have supported our customers in multiple ways. For example, we have received more than 80,000 applications for installment-free periods from our customers and granted 97% of these. The activity level has been very, very high. Most importantly, we have been able to respond to the demand. In these turbulent times, I want us as a bank to represent care, stability, expertise, productivity and flexibility and a relentless drive forward for the benefit of our customers, our shareholders and for a greater good. Thank you. [Foreign Language]