thomas bengtson john arne wang - seb group · thomas bengtson john arne wang 1 may 2011. 2 contents...
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Q1 Results 2011Debt Investor Presentation
Thomas BengtsonJohn Arne Wang
1
May 2011
22
Contents
Franchise p.3
Financial Development p. 5
Credit Portfolio and Asset Quality p.13
Development of the Baltic Division p.21
Liquidity, Funding and Capital p.27
Going forward p.34
3333
● SEB founded in 1856
● Total assets of approx. SEK 2,118 bn (EUR 238bn) as at March 2011 and a market capitalisation of approx. SEK 129.2bn (EUR 16.2bn) on March 31, 2011
● Retail business– The leading Swedish Private Bank in terms of assets under management – No 2 in the Swedish total household savings market with approx. 12.2%– No 1 in unit-linked life and pension business with approx. 26.1% of the Swedish
market and approx 14% of the total life and pension business in Sweden– No 4 in residential household mortgage lending with approx 14% market share
● Corporate and Institutional business– The leading Nordic franchise in trading and capital markets activities, equities,
corporate and investment banking – No 2 Nordic asset manager with approx. SEK 1,372bn (EUR 154bn) under
management – No 1 Nordic custodian with approx. SEK 4,948bn (EUR 556bn) under custody
● Stable unsecured ratings: A1 by Moody’s, A by S&P and A+ by Fitch
● Stable Covered Bond rating: Aaa by Moody’s
● Publicly traded and listed on NASDAQ OMX. Largest owners: Investor AB 21%; Tryggfoundation 8%; Alecta 7%; SHB 4%; Robur Funds 3%. Non-Swedish owners 19%
Fx SEK/EUR = 8.90
SEB’s franchise
444
Asset quality in the Nordic and German business is excellent and further improved in the Baltic business
4
Strong macro-economic development in SEB’score markets
Resilient and well diversified income base
Amongst the best capitalized banks in Europe
Focused growth in areas of strength and sale of German Retail operations completed
Highlights
555
Financial Development
666
Operating profit (SEK bn)
SEB was profitable throughout the financial crisis - now returning to pre-crisis levels
Q1-07 – Q1-11 (SEK bn)
4,14,5
3,74,5
2,4
3,5
2,5
4,1
2,0
0,9 0,7 0,81,3
2,7 2,8
4,3 4,4
Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11
Q1 -07
Q3 Q1 -08
Q3 Q1 -09
Q3 Q1 -10
Q3 Q1-11
Operating income Operating expenses Net credit losses
Q1 -07
Q3 Q1 -08
Q3 Q1 -09
Q3 Q1 -10
Q3 Q1 -11
Q1 -07 Q3
Q1 -08 Q3
Q1 -09 Q3
Q1 -10 Q3
Q1-11
**
*
***
2007 excl. Retail Germany Proforma*Of which 1.3bn buy back of sub debt. ** of which 3.0bn goodwill write-offs*** of which 0.8bn restructuring costs in SEB AG
777
3%
7%7%
8%3%
9%7%
56%
8%
45%
27%
12%
8%Germany
SwedenNorway
Finland
Denmark
Other
Geographic Divisional*
Baltic
Merchant banking– TCM 19%– Corp bank. 17%– Payments,
trade finance etc 8%
Retail Sweden, inclPrivate Banking
Wealth,Institutional Sales
Life & pension
SEB has a well-diversified income base
Total operating income: SEK 9.7 bn (EUR 1.1 bn) March 31, 2011
Baltic– Estonia 3%– Latvia 3%– Lithuania 3%
OtherEurope
*excl. Treasury
888
NII growth driven by improved deposit margins and funding costs and enhanced liquidity management
Higher interest rates
Increased fee to the State Bank Stability Fund
Negative NII effect due to the sale of the German Retail operations
Strengthening of the Swedish currency
Net interest income, SEK mKey dynamics in Q1 2011
-1 000
0
1 000
2 000
3 000
4 000
5 000
6 000
Q107
Q2 Q3 Q4 Q108
Q2 Q3 Q4 Q109
Q2 Q3 Q4 Q110
Q2Q3 Q4 Q111
Lending Deposits Other
8
4.261
999
Stable commission and net life income and underlying franchise continues to strengthen
9
0,0
1,0
2,0
3,0
4,0
5,0
Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11
Franchise - underlying Franchise - transactional
Underlying and Transactional - Commission & life insurance income (SEK bn)
Diversified mix (SEK bn)2%
11%
35%
14%
38%
New issues & Advisory
Secondary market &derivativesCustody & mutual funds
Net life insurance
Payments, cards, lendingetc
Total SEK 4.3bn(EUR 0.5bn)
10
Corporate and institutional businesses -Strong and entrenched franchise
1010
Total income
SEK m
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011Corp banking (excl Corp Fin incl GTS) 54% 54% 57% 48% 44% 44% 51% 53% 56% 51% 58% 56% 55%TCM & Corp Fin 46% 46% 43% 52% 56% 56% 49% 47% 44% 49% 42% 44% 45%
1 000
2 000
3 000
4 000
5 000
6 000
Q12008
Q12011
Corp banking (excl Corp Fin incl GTS) TCM & Corp Fin
111111
0
500
1,000
1,500
2,000
2,500
3,000
Q1 -08
Q2 Q3 Q4 Q1 -09
Q2 Q3 Q4 Q1 -10
Q2 Q3 Q4 Q1 -11
FX EquitiesCapital Markets SD and Other TCM
Consistently strong trading record with low VAR
Low risk and stable Trading and Capital Markets incomeSEK m
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Excluding Bond Investment Portfolio
Daily trading income Q1 2007 –Q1 2011. 40 negative out of 1,060 trading days. Average loss SEK 14m (EUR 1.6m)
121212
SEK bn
0
5
10
15
Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11
Non NII Net Interest Income
12.5
8.09.6
8.4
11.910.8
9.1 9.2 8.7 9.2
59%59%64%54%60%49%58%52%59%53%
41%41%36%46%
40%51%42%
48%41%47%
8.9
53%
47%
Conclusion: SEB’s businesses generate stable and diversified revenue streams
0%
10%
20%
30%
40%
50%
60%
Wholesale Retail Asset gathering
Relative importance different types of income. Income Q1 2007 – Q1 2011
Split between Non NII and NII
10.0
55%
45%
9.7
44%
56%
131313
Credit Portfolio and Asset Quality
14
General government public debt, % of GDP
GDP, % y/y
General government deficit, % of GDP
Unemployment, %
0
20
40
60
80
100
-00 -01 -02 -03 -04 -05 -06 -07 -08 -09 -10 -11 -12
Germany Denmark FinlandNorway Sweden Eurozone
-15-10-505
10152025
-91 -93 -95 -97 -99 -01 -03 -05 -07 -09 -11
Eurozone Germany DenmarkFinland Norway Sweden
Source: OECD and DG-ECFIN
Source: Eurostat
Source: OECD
Source: Eurostat
Strong macro-economic development in core markets
-15
-10
-5
0
5
10
-00 -01 -02 -03 -04 -05 -06 -07 -08 -09 -10
Denmark Finland SwedenNorway Germany
0123456789
10
-01 -02 -03 -04 -05 -06 -07 -08 -09 -10 -11
Finland Sverige Danmark Norge
151515
SEB's Credit Portfolio is well diversifiedCredit portfolioOn & Off Balance SheetTotal SEK 1,639 bn (EUR 185 bn)
Development of Credit portfolio
FX-adjustment calculated using end of year 2010 FX rates as base for prior periods.
March 31, 2011 Swedish Nordic German Baltic Total
Corporates 20% 10% 6% 3% 40%
Property Management 9% 1% 4% 1% 16%
Households 21% 2% 0% 3% 26%
Public
Administration 1% 0% 4% 0% 6%
Total non-banks 51% 14% 15% 8% 87%
Banks 7% 3% 3% 0% 13%
Total 58% 17% 18% 8% 100%
Banks
Corporates
Prop Mgmt
Public Admin
Households
0
100
200
300
400
500
600
700
800
Dec '06 Dec '07 Dec '08 Dec '09 Dec '10
FX-adjusted
Excl. German retail
161616
SEB Group corporate credit portfolio
345
490421 415 422 425 444 438
57
103
89 95 98 8892 98
83
95
68 60 56 54 51 4950
53
49 51 52 51 53 53
35
41
29 26 26 29 26571
782
656 646 655 647 66612
650
Dec '07 Dec '08 Dec '09 Mar '10 Jun '10 Sep '10 Dec '10 Mar '11
Other
"Nordic" - Retail
Baltic
Germany - Larger
"Nordic" - Larger
SEK bn
>80% of SEB's corporate credit portfolio is to large corporates with very low net credit losses
17
17% of total assets are high qualitySwedish residential mortgage lending
Residential apartment buildingsStrong asset quality– No net credit losses since 2004– Level of NPLs 10 bps– No major problem loans since
the 1990’s– Low and conservative LTVs
Conservative lending policy– Purpose– Cash-flow generation– Legal situation. Counterparty
has to have clear and immediate access to the cash-flow and the assets taken in as collateral.
– Tenor max 10 years– LTV <75% but depending on
geographic location– Amortization depending on
geographical location
22%
78%
Households SEK 284 bn
Single family homes 51%Tenant owned apts 23%Second homes 4%
Residential apartment buildings
SEK 78 bn
Private companies 9%Tenant owners’ assoc. 8%State/Community owned 5%
Total 362 bn
181818
218 221 229 237 247 253 260 266 272 284
Dec'08
Mar'09
Jun'09
Sep'09
Dec'09
Mar'10
Jun'10
Sep'10
Dec'10
Mar'11
Selective origination● The mortgage product is the
foundation of the client relationship
● SEB is not a market share seeker
High asset performance● Low level of loans past due more
than 60 days at 14bps
● Net credit loss level remains low at 1.0bp
0-50% 76%
51-85% 22%>85% 2%
Loan-to-value Share of portfolio
SEK bn
Credit scoring and assessment7% interest rate test 85% first lien mortgage capSecond mortgages abolished15% of own equity required Max loan amount 5x total gross household income irrespective of LTV and no more than one payment claim ('UC')
Mortgage lending based on affordability
SEB Swedish household mortgage lending13% of total assets
Q/Q +1% +4% +3% +4% +2% +3% +2% +2% +4%
Portfolio grows with the market
Low LTVs by regional and global standards
191919
Net credit losses* SEB Group(SEK bn)
SEB Group – Non-performing loan and reserve development
Substantial fall in SEB’s net credit losses resulting in write-backs in 2H 2010 and Q1 2011
2.3
3.43.2 3.1
1.8
0.6
-0.2-0.4 -0.5
Q1-09
Q2 Q3 Q4 Q1-10
Q2 Q3 Q4 Q1-11
0
5
10
15
20
25
30
35
Q109
Q2 Q3 Q4 Q110
Q2 Q3 Q4 Q111
NPLs Reserves
NPL coverage ratios% 66% 63% 65% 65% 70% 71% 68% 66%
* Net credit losses = aggregated net of write-offs, write-backsand provisions
Level of NPLs 1.7%All geographies show falling NPLsBaltic NPLs constitute 68% of total SEB’s NPLsBaltic Reserves constitute 64% of SEB’s total Reserves
SEK bn
22.124.325.626.927.228.6
25.323.1
17.5
20
Excellent asset quality
0.27 0.13 0.431.28
5.43
0.63
-2.112005 2006 2007 2008 2009 2010 2011
0.04 0.04 0.050.18 0.17
0.06 0.08
2005 2006 2007 2008 2009 2010 2011
0.19 0.14 0.10 0.090.22 0.13
-0.04
2005 2006 2007 2008 2009 2010 2011
0.11 0.08 0.110.30
0.92
0.14
-0.17
2005 2006 2007 2008 2009 2010 2011
Germany – Net credit losses
• Strong credit profile• Corporates proven resilient• Wind-down property mgmt portfolio halved since 2005• Write-backs in corporate and property mgmt portfolios in Q1 2011
Nordic countries – Net credit losses
• Strong credit profile• ’No’ losses in the household mortgage book• Corporates proven resilient• Underweight SMEs• No net credit losses in property mgmt
Baltic countries – Net credit losses
• Write-backs of bothspecific and collective reserves
SEB Group – Net credit losses
212121
Development of the Baltic Division
22
GDP, Year-on-year percentage change
Retail salesSource: Reuters EcoWin
Source: Reuters EcoWin
Unemployment, Per cent of total labour force
Exports, Year-on-year percentage change
Source: Reuters EcoWin
Source: Reuters EcoWin
Turnaround of Baltic macro situation
-25
-20
-15
-10
-5
0
5
10
15
-00 -01 -02 -03 -04 -05 -06 -07 -08 -09 -10
Estonia Latvia Lithuania
0.0
5.0
10.0
15.0
20.0
25.0
-95 -96 -97 -98 -99 -00 -01 -02 -03 -04 -05 -06 -07 -08 -09 -10
Estonia Latvia Lithuania
-60
-40
-20
0
20
40
60
80
-96 -97 -98 -99 -00 -01 -02 -03 -04 -05 -06 -07 -08 -09 -10 -11
Estonia Latvia Lithuania
-40
-30
-20
-10
0
10
20
30
-02 -03 -04 -05 -06 -07 -08 -09 -10 -11
Estonia Latvia Lithuania
2323
Baltic Division's operating profit returning to pre-crisis levels
Operating profit
-2 500
-1 500
-500
500
1 500
Q1-07
Q2-07
Q3-07
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
0200400600800
1 0001 2001 4001 600
Q1-07
Q2-07
Q3-07
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Income Expenses
* Excluding SEK 3bn of goodwill write-down in Q2 2009
*
** Including SEK 0.2bn of IT system write-off
SEK m
**
242424
-500
0
500
1 000
1 500
2 000
Estonia Latvia Lithuania
Net credit losses, SEK m Q1 2008 – Q1 2011
Non-performing and Reserves, SEK bn
024
68
101214
161820
NPL Reserves Net write-offs
December 2009 December 2010 March 2011
61% NPL coverage ratio
18.7
15.9
9.1
11.4
15.0
10.0
Baltic NPLs and net credit losses have been managed by a thorough and conservative evaluation and provisioning policy
Continued net release of provisions – both specific and collective
Sharp reductions in impaired and watch-list volumesImproving weighted average risk classesIncreased heating costs and price shocks put some pressure on households
252525
Net credit loss dynamics, SEK bn
25
Build-up of provisions
2008 2009 2010 2011 ?
Realizing losses
-0.7 -0.6-0.3
0.4
1.4
2.62.52.6
1.7
0.90.40.30.2
Q1-08 Q2 Q3 Q4 Q1-09 Q2 Q3 Q4 Q1-10 Q2 Q3 Q4 Q1-11
Solid grip on the Baltic credit portfolio –end of extraordinary provisioning cycle
2626
Austerity measuresTurnaround of macro-economicsituationDetermination, flexibility and fighting spiritConsumers holding up better than expectedExport / transit business recovering fast on back of important trading partners’recoveryConsumer confidence recovering in residential propertyFirst Euro accession in the Baltic area a morale boosterSEB’s proactive work-out and provisioning
Net credit losses rapidly falling
26
Successful Euro transition in Estonia put SEB in the limelightSEB Estonia ranked #1 in customer satisfaction study (EPSI)SEB Estonia ranked #1 service company in Estonia (TNS Emor)SEB Estonia opened next-generation internet bank and homepage SEB Latvia ranked #1 in Corporate reputation index (TNS TRI*M)SEB Latvia & SEB Lithuania ranked #1 as best FX provider (Global Finance)
SEB Baltic subsidiaries receiving positive market recognition
Reasons:
272727
Liquidity, Funding and Capital
28
Strong and well aligned balance sheetstructure
2828
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Q12006
Q32006
Q12007
Q32007
Q12008
Q32008
Q12009
Q32009
Q12010
Q32010
Q12011
Public sector Corporate sectorTotal deposits Private sectorSEK m
Development of deposits from the general public, excl repos
Balance Sheet structure
Assets Equity &Liabilities
Funding <1 year
Funding, remaining
maturity >1 year
Cash & LendingFinancial
Institutions
Deposits from the general publicOther
Lending
Net Trading Assets
Equity
Liquid assets
Stable funding
Short-term funding
Required stable
funding
Bond Liquidity Portfolios
Deposits Financial
Institutions
Household Lending
29
Strong structural liquidity situation
Strong structural liquidity situation in the two most important business areas; 80% of all lending
Lending Funding
Retail banking Sweden
Lending Funding
Wholesale banking1
323
90
209
174
440
51
300
SEK bn
1. Excluding repos and reclassified bondsBalance mis-matches funded via long-term debt issuance
-300
-200
-100
0
100
200
300
jan-09 maj-09 sep-09 jan-10 maj-10 sep-10 jan-11
Net Trading Assets CPs/CDs
CP
/CD
Fu
ndin
gN
et T
radi
ng
Ass
ets
1. CPs/CDs 2. Net Trading Assets excluding Derivatives
Short-term funding1 moves in line with Net Trading Assets2 (SEK bn)
Otherloans
Residentialmortgage
loans
Retaildeposits
Issuedcoveredbonds
Corporateloans
Corporatedeposits
Publicdeposits
303030
CPs/CDs15%
Corporate deposits30%
Private Individual deposits
12%Financial Institution deposits
10%
Public entity deposits
4%
Central Bank deposits
3%
Mortgage Cov Bonds SEB AB
15%
Mortgage Cov Bonds SEB AG
2%
Senior Debt7% Subordinated debt
2%
Overall funding mix
SEB Group, SEK 1,392 bn (EUR 156 bn), March 2011
3131
Net liquidity position: Allows for sustained periods of no market access
Loan to deposit ratio excl. repos and reclassified bonds
100%120%140%160%180%200%
2002 2004 2006 2008 2010
146%
1) Note: this is a cash flow based model where assets and liabilities are mapped to contractual maturities. SEB will manage more than 18 months without any new funding if the loans and liabilities mature without prolongation.
SEB’s matched funding horizonMonths
05
10152025
Q1-08
Q3-08
Q1-09
Q3-09
Q1-10
Q3-10
Q1-11
InstrumentFull year
2009Full year
2010Q1
2011
Yankee CD 3,1 2,9 0,0
Senior unsecured SEB AG 5,2 0,4 0,2
Senior unsecured SEB AB 60,4 13,9 4,5
Structured bonds 8,3 3,2 1,5
Covered bonds SEB AG 24,4 10,7 0,0
Covered bonds SEB AB 25,7 71,0 43,9
Hybrid tier 1 3,3 0,0 0,0
Total 130,4 102,1 50,1
Funding raised with original maturity > 1 year SEK bn
*
As per April 5*
1)
323232
Maturity of long-term funding: Well distributed across type and market SEK bn
0
10
20
30
40
50
60
70
80
90
100
<1Y 1-2Y 2-3Y 3-4Y 4-5Y 5-7Y 7-10Y >10Y
Mortgage pfandbriefe, SEB AGCovered bonds SEK, SEB ABCovered bonds non SEK, SEB ABSenior unsecuredSubordinated debt
Product <1Y 1-2Y 2-3Y 3-4Y 4-5Y 5-7Y 7-10Y >10Y TotalSubordinated debt -2 -4 -3 -3 -5 -4 0 -1 -23Senior unsecured -25 -22 -8 -21 -12 -9 -5 -2 -104Covered bonds non SEK, SEB AB -9 0 -10 -9 -21 -9 -1 0 -59Covered bonds SEK, SEB AB -28 -35 -28 -20 -21 -11 0 -9 -151
Mortgage pfandbriefe, SEB AG -2 -4 -4 -1 -3 -3 -10 -6 -31Total -66 -66 -52 -54 -62 -36 -15 -18 -368
SEK bn
333333
SEB's Core Tier 1 ratio is amongst the strongest in Europe
15.114.213.9
10.19.9
8.4 8.6
13.012.211.7
12.6 12.8
14.713.8
14.6
Dec 2007 Dec 2008 Dec 2009 Dec 2010 Mar 2011
Tier 1 capital ratio, % Total capital ratio, % Core Tier 1 (from 2007)
Tier 1 capital SEK bn 72.7 82.5 101.6 102.0 102.1Capital base SEK bn 93.0 104.7 107.3 99.1 98.8RWA 737 818 730 716 678
Basel III
Estimated effect ~150 bps deduction from Core Tier 1
Basel II – without transition rules
343434
Going Forward
353535
Perceived quality*
Cor
e re
latio
nshi
ps
* Relative to mean performance in relative market (Source: Greenwich)
2012 Target20092006
Competitive positionLarge
corporatesSweden
Largecorporates
Nordics
CorporatesGermany
SEB is clearly perceived as No 1 in Sweden, making progress in the other Nordic countries and aim to leverage off its knowledge in Germany
Expansion in:
Nordic large corporates
Selected German Mittelstand
Strategy – Focused growth in areas of strength1. Large Corporates
36363636
4. Baltic banksBuilding an attractivebusiness for a post-crisis world
Offer universal bank services
Become mostrespected bank and the No 1 home bank
Strategy – focused growth in areas of strength1. Large Corporates
Nordic countries
Germany
2. Retail
SMEs & Mid-Corp sectors in Sweden
Consumer savings
3. Institutional business
Asset management
Intitutionalcustody
37373737
Positioned for increased market activity
Continued Nordic and German corporate expansion
Resilient and diversified income base
Tier 1Core Tier 1 ratio Tier 1Matched funding Tier 1Leverage
ratio Tier 1Liquidity reserveSEK 422 bn13.0% >18m 16x1/
1/ FDIC
Conclusions