merrill lynch banking & insurance sept 2009
DESCRIPTION
Merrill Lynch Banking & Insurance CEO Conference in London. 30 September 2009.TRANSCRIPT
Merrill Lynch Banking & Insurance
CEO Conference
London
30 September 2009
Annika
FalkengrenPresident and CEO
1
2
Strong income, focus on efficiency and balance sheetRobust liquidity and capital position
Mitigating effects from the financial crisesCurrent status with a stable and diversified credit portfolio
The starting point: SEB has a strong competitive position A long-term relationship bank
Going forwardEconomic outlook and the new financial landscape
3
#1 Cash management globally#1 Scandinavian currencies
globally#1Nordic stock broker#1Nordic and Baltic investment
bank#1 Custody Nordics and Baltics#2 Nordic asset management#1 SME offering Sweden
Strong customer base Product excellence
700
400,000
5 million
1,800
Large companies
Financial institutions
SMEs
Private individuals
SEB –
A relationship
bank
3
4
H1 08 H1 09Sweden Other Nordic
Income Nordic “top 50”
(public companies)
+33%
+79%
Perceived quality*
-100
100
100Core
banking relation-
ships%
Large corporates
Sweden
Large corporates
Nordics
0
2008 2009
A strong large corporate franchise Strong growth in core marketsNordic target market
2006
* Relative to peer group
5
Gross premium income, unit-linked insurance %, Q1 2009
14
14
9
26
28Lithuania
Latvia
Estonia
Denmark**
Sweden*
SEB Market share Competitors
12331
SEB RankMarket shares
Rightly positioned to leverage recovery of markets
*
Q2 2009**
Full year 2008
Assets under ManagementJune 30, 2009, SEK bn
1 478
1 267
743
617
595
224
Nordea
SEB
Sw edbank
Danske Bank
DnB NOR
HandelsbankenSource: Morgan Stanley-30,000
-20,000-10,000
010,00020,00030,00040,00050,00060,00070,000
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
SEBSHBRoburNordea
Mutual Funds Net Sales SwedenCumulative Jan 2005 –
Aug 2009, including PPMSEK m
6
Growing franchise of Swedish Retail
ROE 19%
Net credit loss level 12 bps 115
120125130135140145150
Q12007
Q2 Q3 Q4 Q12008
Q2 Q3 Q4 Q12009
Q2
ThousandsNo of corporate customers
High customer interaction: 24h –
7 –
365d
7
Strong income, focus on efficiency and balance sheetRobust liquidity and capital position
Mitigating effects from the financial crisesCurrent status with a stable and diversified credit portfolio
The starting point: SEB has a strong competitive position A long-term relationship bank
Going forwardEconomic outlook and the new financial landscape
8
9%4%
64%
23%
Retail Banking
Wealth Management
Life
Merchant Banking
Stability from a diversified platform Share of pre-provision earnings* Jan –
Jun 2009
* Adjusted for goodwill impairmentsGeography –
Adjusted for Other and SEK 1,3bn capital gain on repurchased bondDivisions –
Adjusted for Other
Sweden
NordicsGermany
Baltic countries
52%
14%
8% 26%
9
12-month rolling earnings generation excluding one-off effects
01020304050
Q1 -05
Q2 Q3 Q4 Q1-06
Q2 Q3 Q4 Q1 -07
Q2 Q3 Q4 Q1 -08
Q2 Q3 Q4 Q1 -09
Q2
Profit before credit losses and goodwill
Operating income
Operating profit
SEK bn
01,0002,0003,0004,0005,0006,0007,0008,000
Q1-05
Q2Q3Q4Q1-06
Q2Q3Q4Q1-07
Q2Q3Q4Q1-08
Q2Q3Q4Q1-09
Q2
Net interest income Non-interest income *
Diversified income generationSEK m
Resilient income generation
+21%*H1 2009
vs. H1 2008
* Income adjusted for capital gains
10
Efficiency and productivity
21.620.4
19.3
Dec 06 Jun 08 Jun 09
02468
1012
Q107
Q2 Q3 Q4 Q108
Q2 Q3 Q4 Q109
Q2
CEENon-CEE
FTE developmentSEB Group, thousands
Exploiting cost synergies from increased integration while developing continuous productivity enhancements through SEB Way
Group OperationsNo. of transaction, millions
Efficiency and productivity gains offset inflation on a comparable basis
202224262830
Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09
Total cost base reportedExcluding pensions, redundancies, CEE goodwill impairment and FX effect
Rolling 12 m costs in Q2
2009 up SEK 0.3bn or 6% vs. FY
2006
Cost/transaction
-6% y-o-y
11
Financial strategyEstablish and maintain a strong capital and liquidity position
Core capitalSEK bn
60.7
103.2
89.3
53.1
Dec 2006 Jun 2009
Hybridcapital
"Book
equity"
7.5
13.9
8.2% 11.3%Core Tier
1 ratio
+36.2
45.9
17.5
41.8
40.2
Long-term funding (>1 year)SEK bn
~15 months matched funding
117.3
74.7
52.448.7
7.132.931.2
71.4
H1 08 H2 08 H1 09 Q3 09
Covered bondsOther
12
Strong income, focus on efficiency and balance sheetRobust liquidity and capital position
Mitigating effects from the financial crisesCurrent status with a stable and diversified credit portfolio
The starting point: SEB has a strong competitive position A long-term relationship bank
Going forwardEconomic outlook and the new financial landscape
13
The "perfect storm" scenario...
We prepared for “the worst”:●Extreme stress scenario –
Scenario with simultaneous severe recessions with significant contraction in all SEB’s geographic markets for 3 consecutive years
●Significant decline in pre- provision earnings
●Significant increase in RWAs from risk class migration
From rights issue
March 2009
13
14
...has not materialised
Sweden, other Nordics and Germany already turning the corner with stable asset quality
Limited impact from risk migration; on the contrary RWA decline due to lower demand for lending and efficiency gains
Flight to quality; SEB increased share of wallet among large corps and resilient life insurance operations
15
SEBLending totalSEB Lending
EURbn EURbn EURbnEstonia Latvia Lithuania
Excluding Leasing portfolioSource: Central Banks and SEB
0
10
20
30
40
Q205
Q4 Q206
Q4 Q207
Q4 Q208
Q4 Q209
0%
10%
20%
30%
40%
0
10
20
30
40
Q205
Q4 Q206
Q4 Q207
Q4 Q208
Q4 Q209
0%
10%
20%
30%
40%
0
10
20
30
40
Q2 -05
Q4 Q206
Q4 Q207
Q4 Q208
Q4 Q209
0%
10%
20%
30%
40%
SEB’s Baltic lending relative the market Per cent, Q2 2005 –
Q2 2009
16
0
500
1,000
1,500
2,000
Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09
Specific Collective
The Baltics: problematic, but contained
Provisioning to build-up Baltic reservesSEK m
65% collective provisions
Non performing loans % of lending
0%
5%
10%
15%
Portfolio assessed, past due > 60 daysIndividually assessed
Estonia
Latvia
LithuaniaLending
45
39
75
(SEK bn)
Actions
Gradual tightening of credit and portfolio policies requirements since Q4 2005
Accelerated collective provisions
Substantial work-out resources
Review of all loans >€1m completed
Separate division
Full goodwill write-off in CEE
17
Stable and well diversified credit portfolio
49%34%
10%7%
Gross impaired loans* Q2-09Distribution of SEK 16,690m within SEB Group
Sweden48%
Lithuania 5%Latvia 3%
Estonia 3%
Germany24%
Norway 7%
Other 5%
Denmark 3% 85%
10%
-500 0 500 1,000 1,500 2,000 2,500 3,000
SwedenDenmarkNorway FinlandEstonia
LatviaLithuaniaGermany
Other
Finland 3%
Impaired loans*-
change Q2-09 vs. Q4-08SEK m
Sweden
Germany Baltic countries
Other
Credit portfolio Q2-09SEK 1,806bn
5%
*Individually assessed
18
Strong income, focus on efficiency and balance sheetRobust liquidity and capital position
Mitigating effects from the financial crisesCurrent status with a stable and diversified credit portfolio
The starting point: SEB has a strong competitive position A long-term relationship bank
Going forwardEconomic outlook and the new financial landscape
19
Sweden –
Positioned for recovery
Improved situation for manufacturing
Low mortgage rates support consumption, debt service burden historically low
GDP bounces back
Riksbank
starts to increase rates
spring 2010
-8-6-4-202468
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
OECD Sweden
-60-40-20
020406080
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Orders Expected orders
0
2
4
6
8
10
12
1981 1985 1989 1993 1997 2001 2005 2009
Household
debt
service burdenPercent of disposable
income
New export ordersManufacuring
industry, net
GDP growthYearly
growth, percent
Source: SEB Nordic Outlook, 1 Sept 2009
20
Economic sentimentIndex
Current
accountsPercent of GDP
Baltics –
Stabilisation on a low level
A broader recovery in 2011
First signs of improved economic sentiment
GDP deficits leaves the negative territory
Wage cuts continue
-30-25-20-15-10-505
01 02 03 04 05 06 07 08 09
Estonia Latvia Lithuania
Source: SEB Nordic Outlook, 1 Sept 2009
40
60
80
100
120
140
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Euro-zone Estonia Latvia Lithuania
21
Multiple growth opportunities
Merchant BankingMarket penetration*
* indicative
Penetration to date
Leading Nordic asset manager and bancassurance
business!
Recognised product excellence
Bank relationship – a closer tie
Untapped potential
22
Capital requirements
Liquidity regimes
Regulatory environment
Government ownership
The big unknown: A new financial landscape –
Still limited visibility and no level playing field
SEB has a strong balance sheet
Tier 1 13.1%
15 months match funding
Liquidity reserves
>10% assets
Loan/deposit ratio 154%
22
Reserve ratio 72%
23
SEB well positioned to support our customers and seize growth opportunities on a selective basis
Stabilising economy for 90 per cent of credit portfolio
Full attention and actions on Baltic challenges
2424