SEB Debt Investor Presentation Q2 2008 Anders Kvist
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Transcript of SEB Debt Investor Presentation Q2 2008 Anders Kvist
1
Investor presentation
2008
Anders KvistUlf Grunnesjö
2
Outline
Overview of the SEB Group
Earnings
Asset quality
Baltics
Bond portfolios
Funding and capitalisation
Appendices
3
SEB has…an attractive platformhigh customer satisfactionstable profit growthseveral leading positions
...a strong customer base2,500 customers are large companies and financial institutions400,000 SME customers5 million private customers
3
SEB – the key to North-European markets
4
1800 1900 2000
SEB historySEB history
1972 Stockholms Enskilda Bank and Skandinaviska Banken merge
1982 SEB International 1997 Trygg Hansa1998 Acquisition of three
Baltic banks1999 BfG – Germany
1972 Stockholms Enskilda Bank and Skandinaviska Banken merge
1982 SEB International 1997 Trygg Hansa1998 Acquisition of three
Baltic banks1999 BfG – Germany
1856 Stockholms Enskilda Bankfounded
1864 Skandinaviska Bankenfounded in Gothenburg
1856 Stockholms Enskilda Bankfounded
1864 Skandinaviska Bankenfounded in Gothenburg
2004 Codan – Denmark2004 Bank Agio –
Ukraine2005 Privatbanken
– Norway2006 SEB 150 years2007 Merger SEB BoLån
and SEB AB2007 Factorial Bank -
Ukraine
2004 Codan – Denmark2004 Bank Agio –
Ukraine2005 Privatbanken
– Norway2006 SEB 150 years2007 Merger SEB BoLån
and SEB AB2007 Factorial Bank -
Ukraine 4
5
SEB’s market franchise
Difference from the average, %
100
100
100
Customer segmentation, 2007
0%
20%
40%
60%
80%
100%
SEBSwedbankSHBNordeaDanskeBank
DnB NOR
Retail- Nordic Retail GermanyRetail-Baltic Retail GB/IrelandMerchant B AMLife
Distribution of income
Important relation-
ships/customers
%
Customer survey
Large corporatesSweden
Institutionalclients and
banks –Nordic region
0
0
6
…with a different income mix0% 20% 40% 60% 80% 100%
SEB
Swedbank
SHB
Nordea
DnB NOR
Danske Bank
Net interestincome
Net fee &commissions
Net financialincome
Net lifeinsuranceincomeNet otherincome
7
SEB's franchiseMerchant Banking● #1 Nordic stock broker● #1 Nordic and Baltic investment bank● #1 Nordic and Baltic cash manager● #1 Custody Nordic and Baltic markets● #1 Scandinavian currenciesWealth Management● #1 Nordic and Baltic private bank● #2 Nordic asset managerLife and pension● #1 Nordic unit-linked businessRetail● #2 Baltic region
7
8
Ratings of Skandinaviska Enskilda Banken ABRating target set by SEB Board at AA
Moody’s S&P Fitch DBRS
Bank Senior Rating
Short Term P-1 A-1 F-1 R-1 (middle)
Long Term Aa2 A+ A+ AA (low)
Outlook Positive Stable Stable Stable
Last Action Outlook change Upgrade Outlook change Initial rating
Date Jul-07 Oct-06 Jul-08 Dec-06
9
Outline
Overview of the SEB Group
Earnings
Asset quality
Baltics
Bond portfolios
Funding and capitalisation
Appendices
10
Highlights Q2 2008
Income regained strength – second best quarter ever– High business activity– Limited portfolio losses
Strong capitalisation and liquidity
Higher costs due to continued investments and sales activities
Increased credit losses in Estonia
11
Key figuresSEB Group
3.83.7
4.6
3.5
2.4
Q2-07 Q3-07 Q4-07 Q1-08 Q2-08
4.6*
Q2 Jan-Jun2008 2008
Operating income 10,403 19,205Of which:
Net interest income 4,421 8,644Net fee and commissions 3,909 7,710Net financial income 1,161 1,000
Operating expenses 6,445 12,472Operating profit 3,507 5,917
Return on Equity, % 15.2 12.4Cost / income ratio 0.62 0.65Credit loss level, % 0.17 0.15
Core capital ratio, % Basel II 8.64 8.64
4.44.24.43.93.9
Q2 -07 Q3 -07 Q4 -07 Q1 -08 Q2 -08
Operating profitSEKbn
Net Interest IncomeSEKbn
* Including sales of Baltic properties of SEK 785m
12
Operating profit
0
1,000
2,000
3,000
4,000
5,000
6,000
Q1-04
Q2-04
Q3-04
Q4-04
Q1-05
Q2-05
Q3-05
Q4-05
Q1-06
Q2-06
Q3-06
Q4-06
Q1-07
Q2-07
Q3-07
Q4-07
Q1-08
Q2-08
SEB Group
* One-off charges of SEK 890m in Q4 2005 ** Including sales of Baltic properties in Q4 2007 of SEK 785m
**
0
2,000
4,000
6,000
8,000
10,000
12,000
Q1-04
Q2-04
Q3-04
Q4-04
Q1-05
Q2-05
Q3-05
Q4-05
Q1-06
Q2-06
Q3-06
Q4-06
Q1-07
Q2-07
Q3-07
Q4-07
Q1-08
Q2-08
Excluding portfolios Income Expenses
0.65 0.650.58 0.57
0.690.62
0.620.620.55
2004 2005 2006 2007 Q1 2008 Q2 2008
C/I ratio Excluding portfolio losses21.1
13.215.514.7
15.8
20.8
15.2
9.6
19.3
2004 2005 2006 2007 Q1 2008 Q2 2008
Excluding portfoliosReturn on Equity
Return on equitySEB Group, per cent
Cost/income ratioSEB Group
Operating profit, Income and ExpensesSEKm
*
13
Share of operating profitJan – Jun 2008
14%
8%5%
2%5%
6%
12%48%
GermanySweden
42%
35%
10%13%
Retail Banking
Wealth Management
Life Merchant Banking
Geography - Adjusted for OtherDivisions - Adjusted for Other
Lithuania
Latvia
Estonia
Norway
Finland
Denmark
14
Operating profit per divisionJan – Jun 2008 vs. Jan – Jun 2007SEKm
0 1,000 2,000 3,000 4,000
Life
WealthManagement
Retail Banking
MerchantBanking
Jan-Jun 2008
Jan-Jun 2007
Changevs. Jan-Jun 2007
-31% (-8%)
-17%
-32%
-18%
ROEJan-Jun 2008
15.6% (20.7%)
14.7%
20.2%
15.9%
Excl. portfolio losses
15
11%89%
High business activity – Merchant Banking
0
1,000
2,000
Trading &CapitalMarkets
CorporateBanking
GlobalTransaction
Services
Q2 07 Q1 08 Q2 08
Merchant Banking: Operating IncomeSEKm
Portfolio valuations, SEKm
Q2 08
Held for trading (MTM over income)
Available for sale
(MTM over equity)
Accumulatedsince
Q2 08 Q3 07
Income -66 -2,707Equity -56 -2,384Total -122 -5,091
Portfolios
16
High business activity – long-term savings
12.010.7 9.7
12.0 13.3 11.9
Q1-07 Q2 Q3 Q4 Q1-08 Q2
4.95.8
3.52.62.9
4.1
Q12007
Q2 Q3 Q4 Q12008
Q2
Swedish mutual funds: net inflowsJan-Jun, SEKbn
-7.2 -8.5
-3.0
-13.3
3.8
Robur SHB Nordea SEB Others
Life – Total salesSEKbn
Private Banking – Net salesSEKbn
17
High business activity – Retail Sweden
Cash management customers (thousands)
50
60
70
80
90
2005 2006 2007 2008
Retail Sweden, SME segment
Incomegrowth
173 176 183 189 196 201 207
Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08
Retail Sweden household mortgagesLending, SEK billions
Growth rates
+3.5% +2.3% +3.6% +3.1% +3.9% +2.3%
+6%
+ 5,200
18
SEB in Germany
-244 -226
-22
60136
74134
H1 05 H2 H1 06 H2 H1 07 H2 H1 08
Retail Germany: Operating profitSEKm
Distribution of German Op. profitJan – Jun 2008
9%
91%
807
189
843
H1 07 H2 H1 08
SEB in Germany: Operating profitSEKm
Retail
Other business
Geography - Adjusted for Other
SEB Group Operating profitJan – Jun 2008
14%
86%
Germany
Other countries
19
*
*
Cost development
Cost management program 2007 - 2009
SEK -748m SEK 1.5 – 2.0bn
2007 2009
Achieved Target
2008 2010
~4% total cost growth due to acquisitions, pensions and One IT Roadmap
SEK 202m in efficiency gains achieved in H1
20
Outline
Overview of the SEB Group
Earnings
Asset quality
Baltics
Bond portfolios
Funding and capitalisation
Appendices
21
Credit exposure - on and off balanceSEK 1,631bn
24%
11%
65%
German
Nordic
14%
38%
14%
6%
28%
Property management
Public administration
BanksCorporate
Baltic
Households
By geography By sector
22
Jun 2008 (Dec 2007) Nordic German Baltic Total
Corporates 447 (416) 84 (72) 85 (85) 616 (572)
Property Management 111 (100) 92 (87) 25 (24) 229 (210)
Households 314 (292) 91 (87) 58 (55) 463 (434)
Public Administration 19 (18) 71 (66) 5 (3) 95 (88)
Total non-banks 892 (826) 338 (312) 173 (166) 1,403 (1,304)
Banks 175 (187) 50 (58) 3 (3) 227 (248)
Total 1,067 (1,013) 388 (369) 176 (169) 1,631 (1,552)
Credit exposure – on and off balanceSEKbn
2323
Corporate credit exposure – by industryTotal SEK 616bn
10%
12%
10%
18%3%
28%
19%
Finance and insurance Wholesale and retailTransportation Other service sectorsConstruction ManufacturingOther
458 463
573616
Dec2005
Dec2006
Dec2007
Jun2008
2424
36%
3%
4%
45%
3%
2% 1%6%
SwedenFinlandNorwayGermanyEstoniaLatviaLithuaniaOther
Property management – by geographyCredit exposure - Total SEK 229bn
101 110135 147
91 8175
82
Dec2005
Dec2006
Dec2007
Jun2008
Commercial Multi-family
192210
191
229
25
0.000.100.200.300.400.500.600.700.80
2003 2004 2005 2006 2007 Q12008*
Q22008*
Germany Baltics Nordics SEB Group
Level of Net Credit Losses, %(incl. change in collective provisions)
* Annualised
Estonia 1.68Latvia 0.48Lithuania 0.17Baltics 0.73
26
Impaired loans and reservesSEKm
Dec 2005 Dec 2006 Dec 2007 Jun 2008Impaired loansNon-performing, gross (60 days) 7,957 7,123 7,619 8,247Performing, gross 1,144 1,403 772 846Impaired loans, gross 9,101 8,526 8,391 9,093Specific reserves 4,787 4,234 3,787 3,810Collective reserves 2,283 2,170 2,602 2,696Off-balance sheet reserves 268 215 209 170Total reserves 7,338 6,619 6,598 6,676Reserve ratio 77.7% 75.1% 76.1% 71.5%
27
Outline
Overview of the SEB Group
Earnings
Asset quality
Baltics
Bond portfolios
Funding and capitalisation
Appendices
28
Baltic countries: economic slowdown accelerates
-5
0
5
10
15
2002 2003 2004 2005 2006 2007 2008 (f) 2009 (f)
Estonia Latvia Lithuania
Annual GDP growthPer cent
The Baltics: Imports diving in Estonia and Latvia
Year-on-year percentage changeImports
Estonia Latvia LithuaniaSource: Reuters EcoWin
01 02 03 04 05 06 07 08-30
-20
-10
0
10
20
30
40
50
60
-30
-20
-10
0
10
20
30
40
50
60
29
0.0%
0.5%1.0%
1.5%
2.0%
Jun Dec Jun Dec Jun
Estonia Latvia
60 days past due in SEB’s portfolioPer cent
200820072006
Non-Baltic89%
Lithuania5%
Latvia3%
Estonia3%
Credit losses increase in Estonia
050
100150200250
Estonia Latvia Lithuania SEB Groupexcl. Baltics
Group credit exposureTotal exposure = SEK 1,631bn
Net credit losses (incl. change in collective provisions)
Q1 2007 - Q2 2008, SEKm
30
17 22 21 18 21 2135 41 438 8 8
4 5 5
711 12
1419 20
1014 14
13
22 2456
424134
515041
8376
Dec'06
Dec'07
Jun '08 Dec'06
Dec'07
Jun '08 Dec'06
Dec'07
Jun '08
Total
Banks
PublicAdministrationHouseholds
PropertyManagementCorporate
SEB Estonia SEB Latvia SEB Lithuania
Growth rates in local currency+38% +17% +40% +18% +47% +30%
2006 2007 2006 2007 2006 2007
+2%
2008 1H
+3% +8% 2008 1H 2008 1H
Credit Exposure – Baltic Banks on and off balanceSEKbn
31
Development of lending market shares – Baltics Per cent, Dec 2004 – May 2008
SEBSwedbankDnB NordParex BankaSampoNordea
Estonia* Latvia Lithuania
* Swedbank & Sampo as per Q1 2008
0%
10%
20%
30%
40%
50%
0%
10%
20%
30%
40%
50%
0%
10%
20%
30%
40%
50%
32
Outline
Overview of the SEB Group
Earnings
Asset quality
Baltics
Bond portfolios
Funding and capitalisation
Appendices
33
*Net of short and fully matched positions; excluding holdings in the insurance business
ABS18%
Financials27%
Covered bonds21%
Cover pool24%
Corp, Gov't etc
10%
Merchant Banking 193Group Treasury 135
Other divisions 10
Total 338
SEB Bond Portfolio*30 June, 2008, SEKbn
34
Structured creditsVolume: SEK 61bn (71)AAA-rating: 97.2% (99.3)MTM losses highly dependent on seniority, underlying assets and vintage
Financial institutions Volume: SEK 53bn (55)MTM losses on all financial holdings, not only investment banks
Bond investment portfolio – status30 June, 2008 (31 December, 2007)
Covered bonds etc. SEK 12bn (5)
2007 Q1 08 Q2 08-1,769 -872
-1,630
-2,502
MTM (SEKm)
Equity -698
-66
-56 -2,384
-122-2,467
AccP/L -2,707
-5,091
35
Structured credits Financial institutions2007 Q1 08 Q2 08
P/L -41
-15-66
Equity
Acc-1,056
-626 -990 -1,631-1,682
-794 -1,891
-1,784 -3,522
2007 Q1 08 Q2 08P/L -26
-52-78
Equity
Acc-563-72 -438 -561
-635
-78 -667
-515 -1,228
+ Covered bonds etc accumulated -341
Bond investment portfolio – financial effects30 June, 2008, SEKm
2007 Q1 08 Q2 08-1,769 -872
-1,630
-2,502
MTM (SEKm)
Equity -698
-66
-56 -2,384
-122-2,467
AccP/L -2,707
-5,091
36
Bond investment portfolio – strategyLimit P/L volatility by increasing AFS portfolios and reducing HFT portfolios Reduce subprime holdings, primarily in the HFT portfolioReduce the credit spread risk through partial hedging (ITRAXX)
30 29
05
41
26
Structuredcredits
Financialinstitutions
Coveredbonds etc.
Q4 07 Q2 08
Held for trading (MTM over income)
Available for sale (MTM over equity)
SEK bn
51 49
114
10
1
Structuredcredits
Financialinstitutions
Coveredbonds etc.
43
29
11
2620
3
Structuredcredits
Financialinstitutions
Coveredbonds etc.
Q1 08
37
Outline
Overview of the SEB Group
Earnings
Asset quality
Baltics
Bond portfolios
Funding and capitalisation
Appendices
38
A range of short and long term funding options
CP Programmes– Sweden– France– Global CP
ECP
USCP
US Extendible
CD’s– Yankee CD– London Branch
CD’s– Yankee CD– London Branch
Senior unsecured bonds– Germany – Sweden
Structured bonds
Covered bonds– Germany
Public (Pfandbriefe)Mortgage (Pfandbriefe)
– Sweden (Säkerställda Obligationer)
Subordinated debt/Hybrid Tier 1
Short Term Funding programmes Long Term Funding programmes
39
Deposits – Interbank20%
Subordinated debt3%
Senior debt4%
Public covered bonds, Germany8%
Mortgage covered bonds, Germany2%
Mortgage covered bonds, Sweden9%CPs/CDs
9%
Schuldscheins and Reg Bonds
3%
Deposits – General Public
42%
Funding structureSEB Group, June 2008SEK 1,605bn
* Over collateral within covered pools SEK 78bn
404040
400600800
1,0001,200
Q12005
Q2 Q3 Q4 Q12006
Q2 Q3Q4 Q12007
Q2 Q3 Q4 Q12008
Q2
Lending to the publicSEKbn
Deposits from the publicSEKbn
Deposit Development
Deposits to loans ratio
400500600700800
Q12005
Q2 Q3Q4 Q12006
Q2Q3 Q4Q12007
Q2 Q3Q4 Q12008
Q2
30%
50%
70%
90%
2001 2002 2003 2004 2005 2006 2007 Q2 2008
Deposits to loans ratio
41
Net liquidity position across maturities30 June, SEKbn
-50
0
50
100
150
200
250
1 week
2 weeks
4 weeks
2 months
3 months
4 months
5 months
6 months
9 months
12 months
SEB is match-funded approx.
one year
Examples of transactions:April: Euro covered bond at spread of 17 bps
May/June: Euro floating rate notes at spread of 48 bps
SEK 113bn in long-term funding raised in H1 2008
42
Capital adequacy SEB Group
7.9 8.0 7.8 7.5 8.2 8.6 8.6
10.5 10.2 10.3 10.8 11.5 11.0 10.8
Dec2002
Dec2003
Dec2004
Dec2005
Dec2006
Dec2007
Jun2008
Core capital ratio, % Total capital ratio, %
SEKbnCapital base 52.7 54.7 58.7 76.2 85.8 93.0 93.8Risk-w. Assets 503 535 570 704 741 842 871
Basel I 9.6%
Basel I 7.7%
Basel I 972
Basel II
43
Looking ahead
● Strong capital and liquidity● Top line growth● Continued investments● Cost efficiency
44
Outline
Overview of the SEB Group
Earnings
Asset quality
Baltics
Bond portfolios
Funding and capitalisation
Appendices
45
Key figuresSEB Group
Q2 Jan-Jun Q1 Q2 Jan-JunSEKm 2008 2008 2008 2007 2007
Operating income 10,403 19,205 18% -3% -8%Operating expenses 6,445 12,472 7% 10% 7%Operating profit 3,507 5,917 46% -23% -32%Net profit 2,809 4,657 52% -20% -31%
Return on Equity, % 15.2 12.4 9.6 20.7 19.8Cost / income ratio 0.62 0.65 0.69 0.55 0.56Credit loss level, % 0.17 0.15 0.13 0.12 0.11
Basel II Core capital ratio, % 8.64 8.64 8.85 8.45 8.45Risk-weighted assets, SEKbn 871 871 817 783 783
Change
46
Profit and loss accountQ2 2008 vs. Q2 2007SEKm Q2 Q2 Change Excluding
2008 2007 % portfoliosNet interest income 4,421 3,939 12Net fee and commissions 3,909 4,544 -14Net financial income 1,161 1,345 -14Net life insurance income 642 642 -Net other income 270 249 8
Total operating income 10,403 10,719 -3 -2%Staff costs -3,993 -3,774 6Other expenses -2,098 -1,768 19Depreciation of assets -354 -342 4
Total operating expenses -6,445 -5,884 10Gain/loss tangible/intangible assets 1 -1Net credit losses etc -452 -280 61
Operating profit 3,507 4,554 -23 -22%Net profit 2,809 3,522 -20
47
Balance sheet Jun 2008 Mar 2008 Jun 2007
Cash and balances with central banks 27,557 17,728 26,063Loans to credit institutions 219,111 308,822 224,899Loans to the public 1,132,374 1,098,597 1,047,546Financial assets at fair value 597,723 694,111 682,881Available-for-sale financial assets 247,245 196,848 134,115Held-to-maturity investments 2,266 1,868 2,051Investment in associates 1,361 1,314 1,122Tangible and intangible assets 26,177 25,452 23,076Other assets 50,335 53,823 45,955
Total assets 2,304,149 2,398,563 2,187,708Deposits by credit institutions 397,601 455,707 413,283Deposits and borrowings from the public 757,904 764,567 715,037Liabilities to policyholders 211,938 213,046 218,958Debt securities 506,564 499,622 454,651Financial liabilities at fair value 229,285 256,961 198,920Other liabilities 83,129 87,273 75,717Provisions 1,265 1,338 1,747Subordinated liabilities 41,664 42,990 39,094Total equity 74,799 77,059 70,301
Total liabilities and equity 2,304,149 2,398,563 2,187,708
48
SEB Forecasts GDP (%) Inflation (%)2006 2007 2008 2009 2006 2007 2008 2009
Denmark* 3.6 1.9 1.0 0.7 1.9 1.7 3.0 2.5Finland* 4.9 4.4 2.4 1.9 1.3 1.6 3.3 2.6Norway 4.8 6.0 3.2 1.9 2.3 0.8 3.2 2.4Sweden 4.4 2.9 2.1 1.3 1.4 2.2 3.6 2.6Germany* 2.9 2.5 2.1 1.4 1.8 2.3 2.8 2.1Euro zone* 2.9 2.6 1.6 1.1 2.2 2.1 3.5 2.2Estonia* 11.2 7.1 -0.5 1.5 4.4 6.6 9.8 4.0Latvia* 12.2 10.3 0.5 1.5 6.7 10.1 15.5 8.8Lithuania* 7.7 8.8 5.5 4.0 3.8 5.8 11.5 8.0Russia 7.4 8.1 7.3 6.5 9.7 9.0 13.0 10.0Ukraine 7.0 7.3 6.0 5.5 9.1 12.8 20.6 13.4
Economic forecasts
Sources: National statistical agencies, SEB* Harmonised consumer price index
49