Russia & Ukraine

Implementation of the decision to transition from a full-service bank to primarily supporting Swedbank’s corporate customers from its home markets was a priority during the year. All the branches have been closed with the exception of one in Moscow and one in St. Petersburg. The accounts of private customers are being closed as the products mature, and private customerloan portfolios are gradually being sold off. To adapt costs to the new, more focused strategy, the number of employees was
reduced from 284 to 174.

In autumn 2011 Swedbank decided to exit the private customer segment in Ukraine and focus exclusively on the corporate segment. The new strategy will be implemented over a twoyear period, during which time existing retail operations will gradually be closed down and the number of branches will be reduced from 84 to 10. During the year 33 branches were closed.

The improved result in 2011 was primarily due to credit quality stabilisation and cost-cutting. The positive impact on net interest income from the restructuring of impaired loans was offset by rapid amortisation of the performing part of the loan portfolio, which has not been replaced with new lending. The loan portfolios in local currency decreased from the beginning of the year by 26 per cent in Ukraine and by 19 per cent in Russia. Net commission income remained at a low level as a result of slow business activity. Lower total expenses were the result of a continued cost focus. Credit quality was stable during the year and the volume of impaired loans decreased by 33 per cent. Net recoveries of SEK 1 038m were primarily due to successful restructuring of the impaired corporate portfolio.

The ongoing change in operational focus will continue in 2012 as well. In Russia, implementation of the new strategy is being completed. In Ukraine, the focus in 2012 will be on closing the majority of the branches and moving the remaining business operations to regional centres. The work of the FR&R teams to restructure loans and recover debts will remain a top priority.