This year Nordea celebrates its 10th anniversary. Not that much for a bank perhaps, but Nordea is a result of approximately 300 mergers within the Nordic countries and the oldest bank is from the early 19th century.

Between 1997 and 2001, leading banks in each Nordic country merged to form Nordea – the Nordic idea. This means we have a unique platform compared to our peers. Not only are we by far the biggest bank in the region, we also have a natural “hedge” in our balance sheet and profit and loss accounts given our geographical diversification. As a result we have been able to deliver high and stable results all across the financial crisis, which has enabled us to invest in and upgrade our platform further.

Nordea has branch operations in nine markets, and with 11 million customers, 1,400 branches and an AA credit rating; Nordea has become a top 10 European retail bank and one of two Nordic companies on Forbes 100.

Besides leading positions in the four Nordic markets, Nordea has also built market leading positions in the three Baltic markets, a growing niche position in Poland and a profitable corporate bank in Russia.

Customer experience
Since 2007, Nordea has focused on its relationship strategy, with the aim to improve and get a lead relationship with its customers. We think that this is in the best interest for our customers, staff and for our owners and we also believe that our relationship strategy is designed to meet the New Normal challenges.

It enables a great customer experience with safe and stable long term relations, where we can offer a full range of advice and high efficiency in service. It also enables us to be efficient in capital and funding usage, as well as keep the risks at a minimum. This strategy has served as well so far and since 2007 we have done significant investments into our strategy and to upgrade our platform. In 2010 alone we invested around €200m.

Within the household segment we have increased the number of Gold customers (a customer with five products or more) by more than six percent per year, and we now have around three million customers in this segment. We have been able to achieve this growth of new Gold customer due to an improved branding and with a structured customer approach, where our 360 degree meeting is central. In these meetings, we go through the entire financial situation with the customer, and with a holistic advice approach we are able to identify and meet every financial need for the customers.  65 percent of the new Gold customers in 2010 were new to the bank. Since January 2010 we have increased the number of 360-degree meeting per advisor by 44 percent. We can clearly see a correlation between number of meetings and the increase in Gold customers. We also see an increased customer satisfaction within the Gold customer segment as well as a low risk and improved financials; a Gold customer generates more than five times higher revenues than a non-Gold customer, whilst the loan losses are negligible.

Within the corporate segment we have invested in several areas in order to strengthen the relationship such as corporate finance and equities, cash management systems and risk management products. Cash management is a typical entering product when a lead relationship with a corporate is established. Also in the corporate area we have made good progress and we now have a leading position in three out of four markets; in Denmark we have moved from the number two to the number one position, in Sweden we have moved from a number three position to a joint number one position, in Norwegian shipping and offshore industry and in Finland we have been the number one large corporate bank for a number of years. In Sweden we have increased the lead relationships from 31 percent to 43 percent of the large corporate between 2008 and 2010 according to the latest Greenwich study. Our strengthened relationships have also lead to an improved revenue profile; our non-interest income has grown significantly in the Corporate and Merchant Banking segment, from 47 percent till 53 percent between 2008 and 2010. In 2010, our loan book “only” grew by 3 percent while revenues grew by 25 percent. This means that we can offer our customers more capital-, funding- and liquidity light products which has a positive impact on our profitability.

Nordea’s financials have improved significantly due to our increased customer acknowledgement and relationships, our revenues have increased by almost 30 percent between 2006 and 2010. At the same time we have managed to maintain loan losses at a low level, so during this time period we have been able to report the highest and (evenly important) most stable Return on Equity amongst our Nordic peers. We have managed to grow our Risk-Adjusted Profit (with normalized loan losses and taxes) by almost 40 percent, and the target to double this profit 2006-2013 is still within reach.

As a consequence of the new regulatory environment after the financial crisis, our cost of “raw material” has increased significantly since 2007. Our Core Tier 1 ratio has increased from 7.5 to 11 percent, our liquidity buffer has increased from €23bn to €56bn and our average maturity of bonds have increased from 2.3 till 3.7 years. The trend across the sector is basically the same. This will put pressure on the Return on Equity for the entire sector and will increase the demands to deliver more efficient solutions for customers and increased operational efficiency in order to deliver competitive returns to shareholders.

We think we can improve our profitability even further: Our current Return on Equity is around 12 percent and we assess that the best banks in Europe can deliver a RoE of around 15 percent (with normalised loan losses of 25bps). We are committed to take all necessary steps to be in the top league in Europe. There are three key elements for us to reach this level, where the two first elements will give us the ticket to the third.

1
Improve our Risk-Weighted Asset efficiency. This means we will develop new and RWA efficient product solutions, to optimise our RWA processes and methods and to tactically manage our RWAs. In 2010, we were able to reduce our RWAs by more than €5bn and in 1Q 2011 by another €1.2bn, due to RWA efficiency work.

2
Improve overall cost efficiency. We will have a continued focus on efficiency across value chain and to migrate customer activities to efficient channels. Since 1Q 2009, our business volume per FTE is up by 27 percent; our manual transactions in the branch network is down by 30 percent, while our transaction in the private netbank is up by 16 percent. The transactions on the netbank are now seven times higher than the manual in the branch network.

3
Maintain our growth momentum. We will continue the roll-out of new distribution model to improve customer experiences and to ensure the full share of wallet. We have more than 100 branches in new formats, which is fully focused on advisory business. Our own surveys shows that customers are significantly more satisfied with these new branches. Higher interest rates will also benefit our top-line; we estimate that a 100 bps increase in interest rates will improve our Net Interest Income by around 10 percent and our total revenues by five percent.

A high Return on Equity is not only beneficial for the shareholders, it will enable us to have access to low funding and liquidity costs which is an increasingly important competitive advantage for a bank. We have already now one of the lowest funding costs across Europe and we intend to maintain this position. More importantly, to be a financially strong bank will enable us to be a trustworthy and safe financial supplier to our customers.