President’s statement
2009 will go down in history as one of Swedbank’s toughest years ever. The economic crisis is a well-known fact, and was unlike anything we had seen since the 1930s. The crisis especially hurt banks, which compared to others had a higher risk exposure and were more dependent on outside funding. This was true in our case, and was the main reason why our position had weakened considerably at the beginning of the year. We cannot, and will not, make excuses for the losses. We are well aware that our lending outside Sweden, especially in the Baltic countries, in 2005-2008 is a large part of the reason for this. We are now trying in every way possible to take our responsibility there.
For our owners, 2009 was a turbulent year as well. Several savings bank foundations had to give up their shares and thus their principal capital. This has made it a challenge for them to support many of their social causes, and we will be looking for new ways to demonstrate our commitment in the future.
Despite the problems during the year, I am pleased to say that we finished 2009 stronger than we started. This is the result of conscientious work to firstly reduce risk exposure, as well as to restore a sustainable foundation to conduct our banking operations successfully in accordance with our values. To strengthen our capital base and the capital markets’ confidence in the bank, we implemented a rights issue of SEK 15.1bn during the year.
In 2009 we not only paid special attention to credit quality, but also reduced our share of lending to the Baltic countries and eastern Europe. Furthermore, we reduced our liquidity risk and improved efficiency in the organisation.
Many challenges remain. In addition to intense work to reduce our risk level, the biggest challenge is to fully restore the confidence of customers, the public and opinion makers.
It is against this backdrop that we made an unprecedented decision not to pay variable pay for 2009 in cases where employment contracts unilaterally give the bank the right to set variable compensation. This is a decision that I hope and believe will strengthen public confidence in Swedbank. At the same time I want to stress the consensus among the bank’s Board of directors and management that a combination of fixed and variable compensation is the most effective way to create long-term value for customers and shareholders. We are reviewing the structure of our incentive programmes and will place greater emphasis on sustainable results going forward in determining variable compensation.
The repercussions of the financial crisis will continue to affect the entire economy for some time to come. By all indications, things will remain tough for many of our home markets in 2010 as the crisis continues to affect the real economy. It should be mentioned, however, that Estonia has an opportunity to become a eurozone member in 2011, which would change the risk picture for the better.
For the bank, 2009 marked a new beginning, with management changes, new strategic priorities, a new organisation and a renewed focus on customer relations and the capabilities and responsibilities of our branches. We now have to learn from past events, so that we can capitalise on our development opportunities.
Creating a more stable financial architecture
The financial crisis has turned attention to structural problems and systemic errors in the financial sector. Without extensive changes in structure, regulations, control and attitudes, we risk an even more severe crisis the next time. We welcome a clearer, sounder game plan. More actors have to act more responsibly through the entire business cycle, and lending must be approached from a more long-term, sustainable perspective. The financial crisis also included ripple effects from financial systems outside the stock market, banks’ core operations and corporate balance sheets. Transparency and regulations are needed in every part of the financial industry.
In Sweden, the banking sector has a specific problem to address concerning the imbalance between the length of funding and lending in the mortgage market. Although the credit quality of Swedish mortgages presumably remains good, this imbalance could become an issue for households and banks going forward if it is not addressed in time.
We continue to work closely with the governments and central banks of the Baltic countries to support the development of a sustainable financial structure. During the year exciting work has begun to create more dynamic financial markets with NASDAQ OMX and other Nordic banks in the region as important partners. Further, we established institutes of personal finance in each of the Baltic countries based on the traditional Swedish savings bank model.
Value is created in day-to-day meetings with customers
I am convinced that the key to our success is to more clearly focus on our central mission: the qualified meeting between advisor and customer through a variety of channels. It is there, in these thousands of meetings every day, that the bank creates value. Through their personal advisor, customers should feel fully confident in the bank’s services, systems, control routines and problem-solving abilities, so that our comprehensiveness becomes an asset. In a sound organisation, every employee has, and feels, a responsibility for the success of the whole business. That is the only way to build a strong brand.
These many close, day-to-day relationships make Swedbank unique. We are not designed from the biggest multinationals’ needs or for the wealthiest customers. Nor are we a niche bank for only a small portion of our customers’ needs. The savings bank ideal, which is our heritage, is to be there for a broad spectrum of people, and meet the wide-ranging needs of individuals, companies and society as a whole.
We are an inclusive bank, and our culture has always required us to have a strong reason for rejecting anyone as a customer. I am convinced that this is a smart business strategy. Today’s unemployed youth without a fixed income could become tomorrow’s entrepreneurs.
Few business relationships are as long-lasting as a good relationship with a bank. We want to be even better at accompanying our corporate customers as they grow. We also want to be able to support those who are in a stronger financial position and prefer a financial advisor with values that go beyond the purely financial.
Confidence through transparency
Maximising the time and money customers spend on us requires efficient processes behind the scenes. More resources, responsibility and decisions must rest with the branches. Our employees there are the ones who can optimise offerings for each customer based not only on proven routines and models but also personal interaction.
”I am convinced that the key to our success is to more clearly focus on our central mission: the qualified meeting between advisor and customer through a variety of channels. It is there, in these thousands of meetings every day, that the bank creates value.”
Our aim is to be open, accessible and transparent to all our stakeholders and everyone who influences our image. If we continue to call a loss a loss and a reorganisation a reorganisation, both internally and externally, it will help to restore confidence in us.
Every organisation has to nurture and continuously build its culture. Swedbank is now taking the next step by reconnecting with the close customer relationships and commitment that have always been part of the bank’s DNA.
Part of a bigger picture
Swedbank is also part of something bigger - the savings bank movement. Trust in savings banks has remained strong throughout the crisis. The closeness of the local organisation is something we at Swedbank can learn from. It is important that we develop the shared values and mutual interests between Swedbank and the savings banks, at the same time that we refine how we do business together.
Our efforts to help fight unemployment among young people, which started last autumn, are an example of our heritage of taking social responsibility. Since we are such an important part of every small town and big city where we operate, the needs of small businesses, whether for capital, payment routines or advice, are not just purely business. What we do affects the community, job opportunities, young people’s future confidence, cultural activities and sport. Creative solutions can often be found through personal interactions and alliances across borders to the political sphere and public sector, to unions and other businesses. It was valuable efforts such as these that made us Business Bank of the Year in 2009.
We can now put 2009 behind us and take the tough lessons learnt with us into 2010 and beyond. The same consideration and energy that many of our employees devoted to guiding customers through the financial crisis will now be redirected towards our future endeavours. We will continue to do our utmost to earn the trust of the great majority of households and businesses.
Stockholm, February 2010
Michael Wolf
President and CEO
”In addition to intense efforts to reduce our risk level, the biggest challenge is to fully restore the confidence of customers, the public and opinion makers.”
