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SEB Danske Nordic Bank Seminar Sept 2009

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Danske - Nordic Bank Seminar in Copenhagen. 2 September 2009. Jan Erik Back, CFO.

Danske - Nordic Bank Seminar in Copenhagen. 2 September 2009. Jan Erik Back, CFO.


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  • 1. Jan Erik Back CFO Danske – Nordic Bank Seminar Copenhagen 2 September 2009 1
  • 2. SEB’s competitive position A long-term relationship bank Strong income and balance sheet Q2-recap, liquidity and capital Asset quality Stable and diversified credit portfolio Going forward Economic outlook and the new financial landscape 2
  • 3. SEB – A relationship bank Strong customer base Product excellence Large  Cash management globally companies  Scandinavian currencies globally 1,800  Nordic stock broker Financial  Nordic and Baltic investment institutions bank  Custody Nordics and Baltics 700  Nordic asset management SMEs  SMEs Sweden 400,000 Private individuals 5 million 3
  • 4. A strong large corporate franchise Nordic target market Strong growth in core markets 100 Income Nordic “top 50” Core (public companies) banking relation- ships +79% % Large corporates Nordics +33% Large corporates Sweden 0 100 Perceived 0 quality 100 H1 08 H1 09 2008 2009 Sweden Other Nordic 4
  • 5. Rightly positioned to leverage recovery of markets Mutual Funds Net Sales Sweden Assets under Management Cumulative Jan 2005 – Jun 2009, including PPM June 30, 2009, SEK bn SEK m Nordea 1,478 70,000 60,000 SEB SEB 1,267 50,000 SHB 40,000 Robur Sw edbank 743 30,000 Nordea 20,000 617 Danske Bank 10,000 0 DnB NOR 595 -10,000 -20,000 -30,000 Handelsbanken 224 Source: Morgan Stanley Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 SEB Market share Competitors Market shares SEB Rank Gross premium Sweden* 26 1 income, unit-linked Denmark** 9 2 insurance %, Q1 2009 Estonia 14 3 Latvia 14 3 * Q2 2009 ** Full year 2008 Lithuania 28 1 5
  • 6. Growing franchise of Swedish Retail The natural partner ROE for corporations 19% …from start-up to Net credit loss international expansion! SME bank of the year, level 12 bps 2008, Privata Affärer Gross new lending – householdcurrency Lending volumes in local mortgages No of corporate customers SEK bn Thousands 14.4 150 12.4 145 10.2 10.0 10.1 140 8.8 135 130 125 120 115 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 2007 2008 2009 6
  • 7. SEB’s competitive position A long-term relationship bank Strong income and balance sheet Q2-recap, liquidity and capital Asset quality Stable and diversified credit portfolio Going forward Economic outlook and the new financial landscape 7
  • 8. Highlights Q2 2009  Strong and sustainable underlying Operating profit (SEK bn) business 4.2 4.6 3.7 4.6 2.4 3.5 2.5 4.0 1.8 0.6 – SEK 5.3bn before provisions for credit Q1 Q1 Q1 losses, goodwill write offs and bond 07 Q2 Q3 Q4 08 Q2 Q3 Q4 09 Q2 7 repurchase gain 6 5  Cost development under control 4 – -4% on a comparable basis 3 2  Sharp increase of impaired loans in 1 0 the Baltic region -1 -2  Full goodwill write-off in the Baltics -3 and Russia of SEK 2.4bn -4 -5 -6  Strong balance sheet with Tier 1 of Bond repurchase gains 13 per cent and restored liquidity Profit before gains and credit losses Goodwill impairment profile Provisions for credit losses 8
  • 9. Resilient income generation 12-month rolling earnings generation excluding one-off effects SEK bn 50 Operating income 40 30 Profit before credit losses and goodwill 20 10 Operating profit 0 Q1 - Q2 Q3 Q4 Q1- Q2 Q3 Q4 Q1 - Q2 Q3 Q4 Q1 - Q2 Q3 Q4 Q1 - Q2 05 06 07 08 09 Diversified income generation SEK m Net interest income Non-interest income * 8 000 7 000 6 000 +21%* 5 000 4 000 H1 2009 3 000 vs. H1 2008 2 000 1 000 0 Q1Q2Q3Q4 Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4 Q1Q2 -05 -06 -07 -08 -09 *Income adjusted for capital gains 9
  • 10. Income drivers YoY*  NII effect of market turbulence Long- subsiding, but asset re-pricing will +26% Net interest term continue for some years income QoQ  Moderately lower lending volumes -9%  Funding duration extension Short- term  Renewed strength of fee and trend YoY* commission earnings – SEB’s Non-interest +10% traditional area of excellence income  Diversified flow based/low risk trading QoQ income +18%  Sticky unit-linked life insurance income * Income rolling twelve months adjusted for capital gains 10
  • 11. Cost development Cost management program 2007 – 2009 FTE development since year-end 2008 Group -922 net Achieved by Q2 2009 Target by Q4 2009 Sweden net -500 SEK 1,470m SEK 1,500 – 2,000m -435 net Efficiency and productivity gains offset inflation on a comparable basis Total cost base reported Excluding pensions, redundancies, CEE goodwill impairment and FX effect 30 28 26 Rolling 12 m 24 costs in Q2 22 2009 up SEK 0.3bn 20 or 6% vs. FY Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2006 06 07 07 07 07 08 08 08 08 09 09 11
  • 12. Capital situation and RWA dynamics Capital ratios, Basel II without floors Risk-weighted assets Per cent SEK bn Core Tier 1 ratio Tier 1 ratio 15% Dec 2008 818 13.1 Migration FX Op 11.3 Risk 10% 31 15 Long-term Basel II Tier 1 target 47 18 5% Required minimum Tier 1 in order to Volume IRB qualify for Swedish stabilisation changes and methods measures is 4% capital process Jun 2009 790 efficiency 0% 12
  • 13. Funding raised with original maturity > 1 year SEK bn Instrument 2008 1h 2008 1h 2009 Q1 2009 Q2 2009 Q3 2009 YCD 5.9 4.1 1.3 0.0 1.3 1.5 Senior unsecured Germany 2.0 0.8 1.1 0.1 1.0 2.1 Senior unsecured Sweden 37.4 23.2 34.7 0.0 34.7 36.2 Structured bonds 13.4 13.1 4.7 4.1 0.6 0.4 Covered bonds Germany 29.7 27.5 12.5 6.7 5.7 3.3 Covered bonds Sweden 72.9 43.9 20.4 13.9 6.5 3.8 Hybrid tier 1 4.7 4.7 0.0 0.0 0.0 0.0 Total 166.0 117.3 74.7 24.8 49.9 47.3 June 2009: 12 months match funding 13
  • 14. SEB’s competitive position A long-term relationship bank Strong income and balance sheet Q2-recap, liquidity and capital Asset quality Stable and diversified credit portfolio Going forward Economic outlook and the new financial landscape 14
  • 15. SEB has a stable and well diversified credit portfolio  85% of total credit exposure is in Nordics and Germany and only 10% in Baltics  Credit portfolio is well diversified across types of borrowers  Corporate portfolio has a pre-dominance of large corporate clients Norway 7% 85% Denmark 3% Finland 3% Households Corporates Germany 28% Sweden 40% 48% 24% Banks 12% Estonia 3% Latvia 3% Other 5% Lithuania 5% Public 10% administration Property mgmt 6% 14% Credit portfolio, SEK 1.8 trillion as of June 30 2009 Note: the chart above show the distribution by industry and location of SEB’s credit portfolio excluding the fixed-income investment portfolio. 15
  • 16. Continued buffering for CEE challenges Provisions for Net Credit Losses Non performing loans Distribution of SEK 5,953m within SEB Group % of lending Net credit loss level 25% Portfolio assessed, past due > 60 days Q1 2009* Q2 2009 H1 2009* Individually assessed 20% Estonia 1.73 3.66 2.76 15% Latvia 6.41 8.86 7.74 10% Lithuania 3.59 5.97 4.83 5% Baltics 3.70 6.00 4.93 0% Estonia Latvia Lithuania Ukraine Baltic countries Lending (SEK bn) 45 39 75 2 74% Provisioning to build-up Baltic reserves SEK m Specific Collective 2,000 22% 1,500 65% collective 4.8% provisions 1,000 0.2% Nordics, Ukraine 500 Russia Germany, etc. 0 *Isolated quarters on an annualised basis Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Actual losses: SEK 73m! 16
  • 17. Proactive and conservative approach in the Baltic region 2006 …… 2008 …… 2009  Increased  Work-out units  Accelerated capitalisation collective provisions  High Risk  Tightening of Committees  Review of all loans credit policy >€1m completed  Baltic SPVs  ROE priority >  Separate division volume  Dialogue with authorities  Full goodwill write-off Long-term commitment remains 17
  • 18. Stable asset quality outside CEE Distribution of credit provisions Level of Impaired Loans Distribution of SEK 5,953m within SEB Group 2,0% Outside 1,5% Germany CEE CEE 1,0% NPL 22% 0,5% 0.6% Nordics 78% 0,0% Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun '06 '07 '08 '09 % of total exposure 3%* 3%* Shipping Limited exposure to Bulk and SMEs Bankruptcies increasing & Offshore Container sub-segments Sweden (from a low base) 1%* 7%* Acq. Well diversified with 95% Commercial Mainly related to large real Finance senior debt Real Estate* estate companies * Excluding Baltic exposures 18
  • 19. SEB’s competitive position A long-term relationship bank Strong income and balance sheet Q2-recap, liquidity and capital Asset quality Stable and diversified credit portfolio Going forward Economic outlook and the new financial landscape 19
  • 20. Sweden - Positioned for recovery  Improved situation for manufacturing Household debt service burden Percent of disposable income  Low mortgage rates support 12 consumption, debt service burden 10 historically low 8 6  GDP bounces back 4  Riksbank starts to increase rates 2 0 Spring 2010 1981 1985 1989 1993 1997 2001 2005 2009 GDP growth New export orders Yearly growth, percentage Manufacuring industry, net OECD Sweden Orders Expected orders 8 80 6 60 4 40 2 20 0 0 -2 -4 -20 -6 -40 -8 -60 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Source: SEB Nordic Outlook, 1 Sept 2009 20
  • 21. 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 Economic sentiment Current accounts Index Percent of GDP Estonia Latvia Lithuania Euro-zone 140 Estonia Lithuania Latvia 5 120 0 100 -5 80 -10 -15 60 -20 40 -25 20 -30 0 Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Oct-95 Oct-97 Oct-99 Oct-01 Oct-03 Oct-05 Oct-07 Oct-09 01 02 03 04 05 06 07 08 09 Source: SEB Nordic Outlook, 1 Sept 2009 21
  • 22. The big unknown: A new financial landscape - Still limited visibility and no level playing field Estimated Tier 1 effect (%) Capital framework - Market risk -0.3 - Insurance goodwill -0.7 - Advanced IRB roll-out >1.0 SEB’s leverage ratio 5.3% Leverage ratio (FDIC rules) SEB’s matched funding >12 mths Liquidity requirements Liquidity reserves >10% of assets Changes timing but (hopefully) Dynamic provisioning not magnitude of losses And more... 22
  • 23. SEB has a strong position to meet the new financial landscape 12 months Tier 1 capital Reserve ratio* matched funding ratio 13.1% 72% Implementation around 2011-2013 means limited business restrictions (until next downturn?), but structurally lower ROE across banking sector vs. pre-crisis *Individually appraised non-performing loans 23
  • 24. Wholesale banking going forward Restricted capital leads banks to a more selective choice of relationships Business Credits Bank relationship – – selected clients – tight conditions a closer tie ● First priority to ● Reduced gearing ● A stronger relationship existing core clients between client and ● Second priority to + ● Lending cap towards certain industries = bank new prime clients. ● Fewer banks per client ● Tight credit ● 360°analysis documentation and ● Risk based pricing monitoring. restores attractiveness ● Ancillary business (!) of lending ● Even more focus on ● Focus on risk return repayment capacity 24
  • 25. Stabilising economy but long and winding road to recovery Full attention and actions on Baltic challenges SEB well positioned to support our customers and seize growth opportunities on a selective basis 25
  • 26. 26