Merrill Lynch

Banking & Insurance Conference

7 October 2008
Mikael Inglander
CFO
Continued solid results in Q2
• Continued solid results in all
business areas
– Net profit for the period Jan-Jun
increased by 8 percent to
SEK 6 504m (6 022)
• Conversion to covered bonds on
21 April – decreased spreads,
increased liquidity and facilitated
funding
• New capital adequacy objective
for full Basel 2 – Tier 1 capital
ratio is to be 8.5-9.0 percent
• Credit quality remains good and in
line with expectations
• The macro environment in the
Baltic states has deteriorated
compared with expectations in
Q1, affected by a weaker
European economy
• Net gains and losses on financial
items were positively affected by
unrealized valuation effects –
valuation volatility expected to
decrease as from Q3 2008.
(2)
 H1 2008 – best half-year so far

Swedish Banking Baltic Banking International Banking Swedbank Markets

SEKm SEKm
SEKm SEKm

1 300 450
150
2,000 400
1 250
125 350
1 200
300
1,500 1 150
100 250
1 100
200
1 050 75
1,000 150
1 000 100
50
950 50
500 900 0
25
Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
07 07 07 07 08 08 Q1 Q2 Q3 Q4 Q1 Q2
07 07 07 07 08 08 06 06 06 07 07 07 07 08 08
07 07 07 07 08 08

Profit for the period Profit for the period of which First Securities
Profit for the period
Profit for the period

(3)
Initiatives in line with our strategy
Sweden
• Structural initiatives –
operation and branches
• Channel management
• Corporate market and
metropolitan areas
• Private banking, life and
pension, environmentally
friendly products and services
Stable base
Share of lending: 80 %
Baltics
• Productivity improvement
• Cross-border capabilities
• IT management and
development
• Corporate sector – leverage on
pan-Baltic position
• Broaden customer offerings
• Re-branding starting in autumn
Growth and
experience
Share of lending: 16 %
Ukraine and Russia
• Build-up of critical functions
and growth management
• Grow distribution network -
ATMs, branches and agency
network
• Broaden product range
• Re-branding completed
• Capture future growth
Future growth and
profitability
Share of lending: 2 %
(4)
 The Swedish economy is slowing
• The Swedish economy has performed strongly the past few years. GDP growth, CPI and other
indicators show that the Swedish economy will grow more slowly in the next few quarters
• Higher inflation, rising interest rates and weaker disposable income for households are
expected to lead to weakening household consumption and credit growth.

Real GDP growth CPI growth

2,9% 4,0%

2,3% 3,0%
1,7%
2,0%
1,2%
1,0%
0,6%
2007 2008F 2009F 0,0%
2007 2008F 2009F
Sweden Euro-zone Sweden Euro-zone
(5)

Source: Swedbank, Economic Secretariat

 Real GDP growth, % YoY
Baltic macro development 15

10
Estonia

• Baltic growth decelerates 5

Latvia

%
Lithuania
– Less favourable global situation, e.g. weaker 0
export demand, more expensive borrowing Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08

-5
– Imbalances built up during the times of rapid Domestic Credit and Housing Loans, % of GDP
credit growth weigh heavy on the economies 100
EE Domestic
75 credit
EE Housing
loans

%
50 LV Domestic
• Need of restructuring evident credit
LV Housing
25 loans
– To return to a sustainable growth path, a move LT Domestic
credit
0
away from non-tradables and towards tradables Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08
LT Housing
loans

is necessary: restructuring is costly and takes Average Labour Productivity growth, % YoY
time 15

– There are signs of restructuring underway, but it 10

Estonia
is far from complete Latvia
5

%
Lithuania
– The deepest slowing likely to be seen in LV
where imbalances have been largest 0
Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08 (6)
-5
Baltic macro outlook
• Fall in activity will be shallower and recovery faster than benchmark’s (busts in
industrial countries)
– Less institutional rigidities
– Fiscal and monetary policies likely to be less pro-cyclical, support from EU funds
– Low actual level of leverage in the economy
• Household consumption will contract
• Investment will contract
• Imports will contract due to shrinking consumption and investment
• Recovery in late 2009–2010 depends on global recovery in H2 2009 Export
development outlook
– Producer price inflation of exported goods has swiftly decreased
– By 2009 energy prices will have converged to the levels of western Europe
– Companies are increasingly investing to improve their productivity thus improving their
resistance to negative shocks
• Real estate market will lag behind overall recovery as consumers will be unsure
about the start of recovery and will try to rebuild their depleted savings first

(7)
Summary – economy and banking sector
• Baltic economies have strong long term growth potential, e.g.
– Average labour productivity being at 60-70% of the EU 27 average provides
ample opportunities for productivity convergence
– EU funds are expected to amount to ca 2% of annual GDP till 2013, providing
support to real convergence
– Only 15-25% of households have mortgages
– Good institutional framework, e.g. in the World Bank’s Doing Business 2008
index Latvia ranked 22nd among 175 countries

• Significant restructuring of the economies and the banking sector is

expected - different risk assessment, different pricing and labour lay-offs
– Successful return to sustainable growth path and stability achieved only if
successful structural reforms are implemented to boost productivity

(8)
Credit quality, Group
SEKm %
600 0.60
500 0.50 Loan losses, net
400 0.40
300 0.30 Loan loss ratio
200 0.20
*Loan losses, net = write-offs +
100 0.10 provisions - recoveries + change in
0 0.00 property taken over
-100 -0.10

Q2-07
Q1-05
Q2-05
Q3-05
Q4-05
Q1-06
Q2-06
Q3-06
Q4-06
Q1-07

Q3-07
Q4-07
Q1-08
Q2-08
Q4-03
Q1-04
Q2-04
Q3-04
Q4-04
Q1-03
Q2-03
Q3-03

-200 -0.20

SEKm %
6,000 0.50
0.45
5,000 0.40 Impaired loans
4,000 0.35
0.30
3,000 0.25 Share of impaired loans
0.20
2,000 0.15
1,000 0.10
0.05
0 Q4-07 0.00
Q1-08
Q2-08
Q3-07
Q3-05
Q4-05
Q1-06
Q2-06
Q3-06
Q4-06
Q1-07
Q2-07
Q3-03
Q4-03
Q1-04
Q2-04
Q3-04
Q4-04
Q1-05
Q2-05

(9)
Credit quality, Baltic Banking
Loan loss ratio, net*

Q4 07 Q1 08 Q2 08 H1 08
Estonia 0.58% 0.38% 0.55% 0.48%
Latvia 0.63% 0.53% 0.73% 0.64%
Lithuania 0.10% 0.25% 0.30% 0.28%

Group level provision adjustment -0.18%

Baltic Banking 0.28% 0.39% 0.54% 0.47%
*Loan loss ratio, net = (changes in provisions + net write-offs) /
credit portfolio at the beginning of the period

Overdue ratio (more than 60 days)*

Q4 07 Q1 08 Q2 08
Corporate 0.65% 0.79% 1.24%
Private 0.75% 0.92% 1.11%
Baltic Banking 0.71% 0.86% 1.20%
*Overdue ratio (more than 60 days) = volume of loans more
than 60 days overdue /12 month-old credit portfolio
(10)
 Baltic banking overdues vs market
Estonia - overdue over 30 days / current Estonia - overdue over 60 days / current
portfolio portfolio

3.0% 2.0%
2.5%
2.0% 1.5%
1.5% 1.0%
1.0%
0.5% 0.5%
0.0% 0.0%
31.12.05

30.06.06

31.12.06

30.06.07

31.12.07

30.04.08

31.12.05

30.06.06

31.12.06

30.06.07

31.12.07

30.04.08
Rest of the market HB Bank Rest of the market HB Bank

Latvia - overdue over 30 days / current portfolio

Latvia - overdue over 90 days / current portfolio
5%
3,0%
4%
2,5%
3% 2,0%
2% 1,5%
1% 1,0%
0% 0,5%
0,0%
31.12.04

30.06.05

31.12.05

30.06.06

31.12.06

30.06.07

31.12.07

31.12.04

30.06.05

31.12.05

30.06.06

31.12.06

30.06.07

31.12.07
Rest of the market HBA Bank
Rest of the market HBA Bank (11)

Source: Swedbank, Bank of Estonia, and Financial and Capital Market Commission (Latvia)
Recent events: Lehman Brothers
Total exposure, secured and un-secured (USDm)

Un-secured: Derivatives
of USDm 13 million and
bonds with a nominal
value of USDm 17
million, relating to six
companies within the
Lehman Brothers Group.
Un-
secured;
30
• Swedbank has performed an investigation on
site in the US of the collateral, i.e. commercial
real estate loans, with accompanying
documentation. Also, these loans’ collateral (real
estate) have been investigated.
• The commercial real estate loans are all
performing and the collateral is good.
• Swedbank assessment is that there is no need
for provisions. This opinion is confirmed by the
external auditor Deloitte.
• More information will be available at the time of
the Q3 report.

Secured: The collateral consists

of a pool of 70 real estate
debtors, with a variety of US real
estate of substantial
Secured; geographical diversity with a
1350 maximum loan to value ratio of
72% as underlying asset.
(12)
Observations so far during Q3
• Baltic macro development continue to be weak – no surprises in
credit quality
• Signs of declining lending growth in Sweden foremost in private
sector but also towards corporates
• Tight funding markets with increasing spreads for all players
– The funding market is expected to remain tough throughout 2008
• Trading, especially equities, continues to be slow
• Internal risk rating, risk profile, watch list and loan losses has
remained stable in Sweden
• Swedish macro development is slowing – isolated customers in
segments such as capital goods and retail trade are getting more
stressed

(13)
Swedbank lending and funding
Lending to the public, SEK 1,169bn
Russia Ukraine
1% 1%
Nordic; 3%
Lithuania
5%
Latvia
Swedbank 5% Swedbank
Group, excl. Estonia
7%
Mortgage
Swedbank Swedbank
SEK 573bn
Mortgage Mortgage
49%
- Exclusively Swedish
SEK 596bn mortgage lending
Sweden
30%

Distribution of Net Funding Need

Swedbank Treasury (excluding Mortgage) Swedbank Mortgage
Funding Equity
12% 5%

Commercial
• Large deposits Papers
Swedbank Mortgage
Equity
• Liquidity reserves 8% 22% constitutes a larger part of
Swedbank Group’s balance
• Net lender in the interbank market sheet than other financial
• Liquidity limits – conservative view institutions

Covered Bonds (14)

Deposits 73%
80%
Maturity profile Swedbank long-term funding
Swedbank AB - Long term funding, maturity profile
June 30 2008
SEK bn
80

60

40

20

0
2008 2009 2010 2011 2012 2013 2014-

Senior Subordinated

Swedbank Mortgage - Long term funding, maturity profile

June 30 2008
SEK bn
120

100

80

60

40

20

0
2008 2009 2010 2011 2012 2013 2014- (15)

Covered
New capital adequacy target – mid-term
• New target:
The capital ratios will at least meet the level that at any given time is
considered appropriate to maintain sustainable financial stability and
develop operations. Considering full effect of Basel 2, the Tier 1 capital ratio
is to be 8.5-9.0%.
• Swedbank is currently well capitalized given the current risk profile and the
risk development under an adverse scenario
• Swedbank is currently capitalized in line with European peers in full Basel 2
• In relative terms Swedbank has a low risk business model with a
predominance of Swedish mortgage business and low counterparty risks,
which indicates a lower than average Tier 1 capital ratio. Growing presence
in Eastern Europe indicates higher Tier 1 capital ratio

(16)
Summary
• Swedbank offers a strong and stable banking operation with high
profitability across several geographical areas

• Baltics is continuing to slow down, need for further restructuring, strong

long-term growth potential intact

• Signs off a gradual slow down of lending growth in Sweden, credit quality
remains strong

• Focus on efficiency to secure continued profitable growth

• Solid results in H1 2008

(17)