Nordea Bank : Hypotek Capital Risk Management Report 2023

Capital and Risk Management Report 2023

Appendix F Nordea Hypotek AB

Confidential

Table of contents

Table name	Table Number
Capital Position
EU KM1 - Key metrics template	1
EU CC1 - Composition of regulatory own funds	2
EU CC2 - Reconciliation of regulatory own funds to balance sheet in the audited financial statements	3
EU OV1 - Overview of total risk exposure amounts	4
Credit Risk
EU CR1 - Performing and non-performing exposures and related provisions	5
EU CR1-A - Maturity of exposures	6
EU CR2 - Changes in the stock of non-performing loans and advances	7
EU CR3 - CRM techniques overview: Disclosure of the use of credit risk mitigation techniques	8
EU CR4 - standardised approach - Credit risk exposure and CRM effects	9
EU CR7 - IRB approach - Effect on the RWEAs of credit derivatives used as CRM techniques	10
EU CR7-A - IRB approach - Disclosure of the extent of the use of CRM techniques	11
EU CR8 - RWEA flow statements of credit risk exposures under the IRB approach	12
EU CQ1 - Credit quality of forborne exposures	13
EU CQ3 - Credit quality of performing and non-performing exposures by past due days	14
EU CQ4 - Quality of non-performing exposures by geography	15
EU CQ5 - Credit quality of loans and advances to non-financial corporations by industry	16
Liquidity
EU LIQ1 - Quantitative information of LCR	17
EU LIQ2 - Net Stable Funding Ratio	18
Operational Risk
EU OR1 - Operational risk own funds requirements and risk-weighted exposure amounts	19
Other
EU LR1 - LRSum: Summary reconciliation of accounting assets and leverage ratio exposures	20
EU LR2 - LRCom: Leverage ratio common disclosure	21
EU LR3 - LRSpl: Split-up of on balance sheet exposures (excluding derivatives, SFTs and exempted exposures)	22
EU CCyB1 - Geographical distribution of credit exposures relevant for the calculation of the countercyclical buffer	23
EU CCyB2 - Amount of institution-specific countercyclical capital buffer	24
EU ILAC - Internal loss absorbing capacity: internal MREL and, where applicable, requirement for own funds and eligible liabilities for non-	25
EU G-SIIs
EU TLAC2b - Creditor ranking - Entity that is not a resolution entity	26

Not applicable template list

1

Table 1 - EU KM1 - Key metrics template

Comparing Q4 2023 to Q2 2023, total own funds for Nordea Hypotek increased by EUR 171m. CET1 increased by 160m, while AT1 capital and T2 capital remained stable. Total REA increased by EUR 948m, however CET1 remained constant (17.3%) as did the TCR (18.3%). The leverage ratio decreased slightly by 0.1 pp to 4.2%.

		a	b	c	d	e
	Available own funds (amounts)	2023 Q4	2023 Q3	2023 Q2	2023 Q1	2022 Q4
1	Common Equity Tier 1 (CET1) capital	2,905	2,802	2,746	2,867	2,909
2	Tier 1 capital	2,905	2,802	2,746	2,867	2,909
3	Total capital	3,064	2,953	2,893	3,021	3,063
	Risk-weighted exposure amounts
4	Total risk exposure amount	16,776	16,092	15,828	16,320	16,393
	Capital ratios (as a percentage of risk-weighted exposure amount)
5	Common Equity Tier 1 ratio (%)	17.3%	17.4%	17.3%	17.6%	17.7%
6	Tier 1 ratio (%)	17.3%	17.4%	17.3%	17.6%	17.7%
7	Total capital ratio (%)	18.3%	18.4%	18.3%	18.5%	18.7%
	Additional own funds requirements to address risks other than the risk of excessive leverage (as a percentage of risk-weighted exposure amount)
EU 7a	Additional own funds requirements to address risks other than the risk of excessive	1.6%	1.6%	1.6%	1.6%	1.6%
	leverage (%)
EU 7b	of which: to be made up of CET1 capital (percentage points)	0.9%	0.9%	0.9%	0.9%	1.2%
EU 7c	of which: to be made up of Tier 1 capital (percentage points)	1.2%	1.2%	1.2%	1.2%	0.9%
EU 7d	Total SREP own funds requirements (%)	9.6%	9.6%	9.6%	9.6%	9.6%
	Combined buffer and overall capital requirement (as a percentage of risk-weighted exposure amount)
8	Capital conservation buffer (%)	2.5%	2.5%	2.5%	2.5%	2.5%
EU 8a	Conservation buffer due to macro-prudential or systemic risk identified at the level	0.0%	0.0%	0.0%	0.0%	0.0%
	of a Member State (%)
9	Institution specific countercyclical capital buffer (%)	2.0%	2.0%	2.0%	1.0%	1.0%
EU 9a	Systemic risk buffer (%)	0.0%	0.0%	0.0%	0.0%	0.0%
10	Global Systemically Important Institution buffer (%)	0.0%	0.0%	0.0%	0.0%	0.0%
EU 10a	Other Systemically Important Institution buffer (%)	1.0%	1.0%	1.0%	1.0%	1.0%
11	Combined buffer requirement (%)	5.5%	5.5%	5.5%	4.5%	4.5%
EU 11a	Overall capital requirements (%)	15.1%	15.1%	15.1%	14.1%	14.1%
12	CET1 available after meeting the total SREP own funds requirements (%)	8.7%	8.8%	8.7%	8.9%	9.1%
	Leverage ratio
13	Total exposure measure	68,809	64,785	63,263	65,763	65,656
14	Leverage ratio (%)	4.2%	4.3%	4.3%	4.4%	4.4%
	Additional own funds requirements to address the risk of excessive leverage (as a percentage of total exposure measure)
EU 14a	Additional own funds requirements to address the risk of excessive leverage (%)	0.0%	0.0%	0.0%	0.0%	0.0%
EU 14b	of which: to be made up of CET1 capital (percentage points)	0.0%	0.0%	0.0%	0.0%	0.0%
EU 14c	Total SREP leverage ratio requirements (%)	3.0%	3.0%	3.0%	3.0%	3.0%
	Leverage ratio buffer and overall leverage ratio requirement (as a percentage of total exposure measure)
EU 14d	Leverage ratio buffer requirement (%)	0.0%	0.0%	0.0%	0.0%	0.0%
EU 14e	Overall leverage ratio requirement (%)	3.0%	3.0%	3.0%	3.0%	3.0%
	Liquidity Coverage Ratio
15	Total high-quality liquid assets (HQLA) (Weighted value -average)	1,717	1,742	1,784	1,889	1,973
EU 16a	Cash outflows - Total weighted value	968	1,000	809	846	1,444
EU 16b	Cash inflows - Total weighted value	1,860	1,765	1,429	1,265	2,008
16	Total net cash outflows (adjusted value)	242	250	202	211	361
17	Liquidity coverage ratio (%)	1260%	1160%	1063%	1031%	748%
	Net Stable Funding Ratio
18	Total available stable funding	52,000	49,940	49,432	51,932	52,943
19	Total required stable funding	46,838	44,437	44,359	45,878	46,227
20	NSFR ratio (%)	111.0%	112.4%	111.4%	113.2%	114.5%

2

Table 2 - EU CC1 - Composition of regulatory own funds

At the end of 2023, Tier 1 and CET1 capital decreased by EUR 3m compared to the end of 2022. Tier 2 capital increased by EUR 4m while total own funds decreased by EUR 1m.

EURm

(a)

(b)

Source based on reference

numbers/letters of the

Amounts balance sheet under the regulatory scope of

consolidation

Common Equity Tier 1 (CET1) capital: instruments and reserves
1	Capital instruments and the related share premium accounts	10	1
	of which: Instrument type 1	10
	of which: Instrument type 2
	of which: Instrument type 3
2	Retained earnings	2,899	3
3	Accumulated other comprehensive income (and other reserves)	1	2
EU-3a	Funds for general banking risk

1. Amount of qualifying items referred to in Article 484 (3) CRR and the related share premium accounts subject to phase out from CET1
2. Minority interests (amount allowed in consolidated CET1)

EU-5a	Independently reviewed interim profits net of any foreseeable charge or dividend
6	Common Equity Tier 1 (CET1) capital before regulatory adjustments	2,910

Common Equity Tier 1 (CET1) capital: regulatory adjustments

1. Additional value adjustments (negative amount)
2. Intangible assets (net of related tax liability) (negative amount)

10	Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net	6
	of related tax liability where the conditions in Article 38 (3) CRR are met) (negative amount)
11	Fair value reserves related to gains or losses on cash flow hedges of financial instruments that are not	0
	valued at fair value
12	Negative amounts resulting from the calculation of expected loss amounts	-3

1. Any increase in equity that results from securitised assets (negative amount)
2. Gains or losses on liabilities valued at fair value resulting from changes in own credit standing

15 Defined-benefit pension fund assets (negative amount)

-1

1. Direct, indirect and synthetic holdings by an institution of own CET1 instruments (negative amount)
2. Direct, indirect and synthetic holdings of the CET 1 instruments of financial sector entities where those entities have reciprocal cross holdings with the institution designed to inflate artificially the own funds of the institution (negative amount)
3. Direct, indirect and synthetic holdings by the institution of the CET1 instruments of financial sector entities where the institution does not have a significant investment in those entities (amount above 10% threshold and net of eligible short positions) (negative amount)
4. Direct, indirect and synthetic holdings by the institution of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities (amount above 10% threshold and net

of eligible short positions) (negative amount)

EU-20a Exposure amount of the following items which qualify for a RW of 1250%, where the institution opts for the deduction alternative

EU-20b of which: qualifying holdings outside the financial sector (negative amount)

EU-20c of which: securitisation positions (negative amount)

EU-20d of which: free deliveries (negative amount)

1. Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability where the conditions in Article 38 (3) CRR are met) (negative amount)
2. Amount exceeding the 17.65% threshold (negative amount)
3. of which: direct, indirect and synthetic holdings by the institution of the CET1 instruments of financial

sector entities where the institution has a significant investment in those entities
24 Not applicable	N/A

25 of which: deferred tax assets arising from temporary differences EU-25aLosses for the current financial year (negative amount)

EU-25b Foreseeable tax charges relating to CET1 items except where the institution suitably adjusts the amount of CET1 items insofar as such tax charges reduce the amount up to which those items may be used to cover

	risks or losses (negative amount)
26	Not applicable	N/A
27	Qualifying AT1 deductions that exceed the AT1 items of the institution (negative amount)
27a	Other regulatory adjustments	-1
28	Total regulatory adjustments to Common Equity Tier 1 (CET1)	-5
29	Common Equity Tier 1 (CET1) capital	2,905

3

EURm

(a)

(b)

Source based on reference

numbers/letters of the

Amounts balance sheet under the regulatory scope of

consolidation

Additional Tier 1 (AT1) capital: instruments

1. Capital instruments and the related share premium accounts
2. of which: classified as equity under applicable accounting standards
3. of which: classified as liabilities under applicable accounting standards
4. Amount of qualifying items referred to in Article 484 (4) CRR and the related share premium accounts

subject to phase out from AT1

EU-33a Amount of qualifying items referred to in Article 494a(1) CRR subject to phase out from AT1 EU-33b Amount of qualifying items referred to in Article 494b(1) CRR subject to phase out from AT1

1. Qualifying Tier 1 capital included in consolidated AT1 capital (including minority interests not included in row 5) issued by subsidiaries and held by third parties
2. of which: instruments issued by subsidiaries subject to phase out
3. Additional Tier 1 (AT1) capital before regulatory adjustments

Additional Tier 1 (AT1) capital: regulatory adjustments

1. Direct, indirect and synthetic holdings by an institution of own AT1 instruments (negative amount)
2. Direct, indirect and synthetic holdings of the AT1 instruments of financial sector entities where those entities have reciprocal cross holdings with the institution designed to inflate artificially the own funds of the institution (negative amount)
3. Direct, indirect and synthetic holdings of the AT1 instruments of financial sector entities where the institution does not have a significant investment in those entities (amount above 10% threshold and net of eligible short positions) (negative amount)
4. Direct, indirect and synthetic holdings by the institution of the AT1 instruments of financial sector entities where the institution has a significant investment in those entities (net of eligible short positions) (negative

amount)

1. Qualifying T2 deductions that exceed the T2 items of the institution (negative amount)
   42a Other regulatory adjustments to AT1 capital
2. Total regulatory adjustments to Additional Tier 1 (AT1) capital
3. Additional Tier 1 (AT1) capital

45	Tier 1 capital (T1 = CET1 + AT1)	2,905
Tier 2 (T2) capital: instruments
46	Capital instruments and the related share premium accounts	148	9
47	Amount of qualifying items referred to in Article 484(5) CRR and the related share premium accounts
	subject to phase out from T2 as described in Article 486(4) CRR
EU-47a	Amount of qualifying items referred to in Article 494a(2) CRR subject to phase out from T2
EU-47b	Amount of qualifying items referred to in Article 494b(2) CRR subject to phase out from T2

1. Qualifying own funds instruments included in consolidated T2 capital (including minority interests and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by third parties
2. of which: instruments issued by subsidiaries subject to phase out

50	Credit risk adjustments	10
51	Tier 2 (T2) capital before regulatory adjustments	158

4

EURm

(a)

(b)

Source based on reference

numbers/letters of the

Amounts balance sheet under the regulatory scope of

consolidation

Tier 2 (T2) capital: regulatory adjustments

1. Direct, indirect and synthetic holdings by an institution of own T2 instruments and subordinated loans (negative amount)
2. Direct, indirect and synthetic holdings of the T2 instruments and subordinated loans of financial sector entities where those entities have reciprocal cross holdings with the institution designed to inflate artificially the own funds of the institution (negative amount)
3. Direct, indirect and synthetic holdings of the T2 instruments and subordinated loans of financial sector entities where the institution does not have a significant investment in those entities (amount above 10% threshold and net of eligible short positions) (negative amount)
4. Direct, indirect and synthetic holdings by the institution of the T2 instruments and subordinated loans of financial sector entities where the institution has a significant investment in those entities (net of eligible

	short positions) (negative amount)
EU-56a	Qualifying eligible liabilities deductions that exceed the eligible liabilities items of the institution (negative
	amount)
EU-56b	Other regulatory adjustments to T2 capital
57	Total regulatory adjustments to Tier 2 (T2) capital
58	Tier 2 (T2) capital	158
59	Total capital (TC = T1 + T2)	3,064
60	Total Risk exposure amount	16,776
Capital ratios and requirements including buffers
61	Common Equity Tier 1 capital	17.3%
62	Tier 1 capital	17.3%
63	Total capital	18.3%
64	Institution CET1 overall capital requirements	10.9%
65	of which: capital conservation buffer requirement	2.5%
66	of which: countercyclical capital buffer requirement	2.0%

67 of which: systemic risk buffer requirement

EU-67a	of which: Global Systemically Important Institution (G-SII) or Other Systemically Important Institution	1.0%
	(O-SII) buffer requirement
EU-67b	of which: additional own funds requirements to address the risks other than the risk of excessive	0.9%
	leverage
68	Common Equity Tier 1 capital (as a percentage of risk exposure amount) available after meeting the	8.7%
	minimum capital requirements

Amounts below the thresholds for deduction (before risk weighting)

1. Direct and indirect holdings of own funds and eligible liabilities of financial sector entities where the institution does not have a significant investment in those entities (amount below 10% threshold and net of eligible short positions)
2. Direct and indirect holdings by the institution of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities (amount below 17.65% thresholds and net of

eligible short positions)

75 Deferred tax assets arising from temporary differences (amount below 17.65% threshold, net of related tax liability where the conditions in Article 38 (3) CRR are met)

Applicable caps on the inclusion of provisions in Tier 2

1. Credit risk adjustments included in T2 in respect of exposures subject to standardised approach (prior to the application of the cap)
2. Cap on inclusion of credit risk adjustments in T2 under standardised approach

78	Credit risk adjustments included in T2 in respect of exposures subject to internal ratings-based approach	10
	(prior to the application of the cap)
79	Cap for inclusion of credit risk adjustments in T2 under internal ratings-based approach	23

Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2014 and 1 Jan 2022)

1. Current cap on CET1 instruments subject to phase out arrangements
2. Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities)
3. Current cap on AT1 instruments subject to phase out arrangements
4. Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities)
5. Current cap on T2 instruments subject to phase out arrangements
6. Amount excluded from T2 due to cap (excess over cap after redemptions and maturities)

5

Table 3 - EU CC2 - reconciliation of regulatory own funds to balance sheet in the audited financial statements

At the end of the fourth quarter of 2023 total assets as published in financial statements stood at EUR 68.0bn (EUR 65.7bn in Q4 2022), total liabilities amounted to EUR 65.0bn (EUR 62.8bn in Q4 2022) and equity amounted to EUR 2.94bn (EUR 2.91bn in Q4 2022).

EURm	a & b	c
		Balance sheet as in
		published financial	Reference
		statements
		As at period end
Assets - Breakdown by asset classes according to the balance sheet in the published financial statements
1	Loans to credit institutions	969
2	Loans to the public	64,394
3	Interest-bearing securities	1,785
4	Derivatives	953
5	Fair value changes of hedged items in portfolio hedges of interest rate risk	-330
6	Deferred tax assets		10
7	Current tax assets	0
8	Other assets	182
9 Prepaid expenses and accrued income	2
	Total assets	67,954
Liabilities - Breakdown by liability classes according to the balance sheet in the published financial statements
1	Deposits by credit institutions	26,412
2	Debt securities in issue	37,395
3	Derivatives	726
4	Current tax liabilities	3
5	Other liabilities	288
6	Accrued expenses and prepaid income	44
7	Deferred tax liabilities	0
8	Provisions	0
9	Subordinated liabilities	148
	of which: T2 Capital instruments and the related share premium accounts	148	46
	Total liabilities	65,018
Shareholders' Equity
1	Share capital	10	1
2	Fair value reserves	1
	of which: Accumulated other comprehensive income	1	3
3	Retained earnings	2,819	2
4	Net profit for the year	106
	Total shareholders' equity	2,936
	Total liabilities and shareholders' equity	67,954

6

Table 4 - EU OV1 - Overview of total risk exposure amounts

The table provides an overview of total REA for Q4 2023 where credit risk accounted for the largest risk type with approximately 94% of Pillar I REA while operational risk accounted for the second largest risk type. During the fourth qurter of 2023, total REA increased by EUR 0.4bn, mainly stemming from credit

EURm

Total risk exposure amounts (TREA) Total own funds requirements

		a	b	c
		Q4 2023	Q4 2022	Q4 2023
1	Credit risk (excluding CCR)	4,115	3,718	329
2	Of which the standardised approach	231	103	18
3	Of which the Foundation IRB (F-IRB) approach	46	47	4

4 Of which slotting approach

EU 4a	Of which equities under the simple riskweighted approach
5	Of which the Advanced IRB (A-IRB) approach	3,838	3,568	307
6	Counterparty credit risk - CCR	144	93	12
7	Of which the standardised approach	144	93	12

8 Of which internal model method (IMM) EU 8a Of which exposures to a CCP

EU 8b Of which credit valuation adjustment - CVA

9 Of which other CCR

0

1. Settlement risk
2. Securitisation exposures in the non-trading book (after the cap)
3. Of which SEC-IRBA approach
4. Of which SEC-ERBA (including IAA)
5. Of which SEC-SA approach

EU 19a Of which 1250% / deduction

1. Position, foreign exchange and commodities risks (Market risk)
2. Of which the standardised approach
3. Of which IMA

EU 22a	Large exposures
23	Operational risk	978	957	78
EU 23a	Of which basic indicator approach
EU 23b	Of which standardised approach	978	957	78
EU 23c	Of which advanced measurement approach
24	Amounts below the thresholds for deduction (subject to 250% risk weight)	0	0	0
29	Total	5,237	4,768	419
	Additional risk exposure amount related to Finnish RW floor due to Article 458 CRR
	Additional risk exposure amount related to Swedish RW floor due to Article 458 CRR	11,539	11,625	924
	Article 3 CRR Buffer
	Pillar 1 total	16,776	16,393	1,343

7

Table 5 - EU CR1 - Performing and non-performing exposures and related provisions

Total gross carrying amount of performing and non-performing loans and advances amounted to EUR 64bn at the end of 2023, of which non-performing amounted to EUR 70m. Allowances in stage 3 for non-performing loans and advances were EUR 10m at the end of Q4 2023. Including loans and advances fair value through profit and loss (FV through PL), the coverage ratio was 15%.

EURm		a	b	c	d		e	f	g		h		i	j	k	l	m	n	o
			Gross carrying amount/nominal amount		Accumulated impairment, accumulated negative changes in fair value due to		Collaterals and financial
								credit risk and provisions				guarantees received
														Non-performing exposures -	Accumulated
									Performing exposures - accumulated	accumulated impairment,
		Performing exposures	Non-performing exposures	partial write-	On	On non-
		impairment and provisions	accumulated negative changes in fair
														value due to credit risk and provisions	off	performing	performing
															exposures	exposures
Q4 2023			of which:	of which:			of which:	of which:			of which:	of which:		of which:	of which:
		stage 1	stage 2			stage 2	stage 3			stage 1		stage 2		stage 2	stage 3
005	Cash balances at central banks	969	969
	and other demand deposits
010	Loans and advances	64,353	62,568	1,784		70		70		-18		-5	-13	-10		-10		63,899	59
020	Central banks
030	General governments	139	139							-0		-0						139
040	Credit institutions
050	Other financial corporations	12	12							-0		-0						12
060	Non-financial corporations	11,885	11,678	207		5		5		-3		-1	-1	-2		-2		11,447	3
070	Of which SMEs	9,423	9,259	163		3		3		-2		-1	-1	-1		-1		9,269	2
080	Households	52,317	50,740	1,577		65		65		-16		-3	-12	-9		-9		52,301	56
090	Debt securities	1,785	1,785							-0		-0
100	Central banks
110	General governments	838	838							-0		-0
120	Credit institutions	947	947							-0		-0
130	Other financial corporations
140	Non-financial corporations
150	Off-balance-sheet exposures	3,783	3,783							-0		-0	-0

160 Central banks

1. General governments

1. Credit institutions

1. Other financial corporations

1. Non-financialcorporations

210	Households	3,783	3,783				-0	-0	-0
220	Total	70,890	69,105	1,784	70	70	-19	-5	-13	-10	-10	63,899	59

8

Table 6 - EU CR1-A - Maturity of exposures

EU CR1-A discloses net exposure values for on-balance and off-balance sheet exposures. For exposures classified as loans and advances, approximately 80.7% were in the >5 years bucket, whereas for exposures classified as debt securities, approximately 65.9% were in >1<=5 years bucket. At the end of Q4 2023, the total exposure amount for both groups amounted to EUR 70.5bn.

EURm		a	b	c	d	e	f
				Net exposure value
		On demand	<= 1 year	> 1 year <= 5	> 5 years	No stated	Total
		years	maturity
1	Loans and advances	969	5,884	4,994	55,714	1,154	68,715
2	Debt securities		232	1,552			1,784
3	Total	969	6,117	6,546	55,714	1,154	70,499

9