SEB Debt Roadshow June 2008, Anders Kvist
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SEB Debt Roadshow June 2008, Anders Kvist

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SEB Debt Roadshow June 2008, Anders Kvist SEB Debt Roadshow June 2008, Anders Kvist Presentation Transcript

  • Investor presentation Paris June 2008 1
  • Macroeconomics: Sweden
  • Sweden is one of the strongest economies in Europe Rated Aaa/AAA/AAA 2007 GDP growth was 2.6% 2008 forecast around 2½% Large budget surplus Stable housing market underpinned by high employment levels and affluent households 3
  • Strong government finances 4
  • Sweden has outperformed Euro Zone The real domestic economy slowing gradually as the international economy decelerates Deceleration in private consumption modest thanks to good income growth and high savings Expected GDP growth of 2.4% this year - close to Sweden’s trend growth rate and stronger than in the Euro Zone 5
  • Unemployment close to bottoming out, inflation well contained Unemployment Unemployment will fall a bit Per cent of labour force 12 12 further and then slowly climb 10 10 8 8 Inflationary pressures will 6 6 remain for another six months 4 4 and then gradually ease 2 2 0 0 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 Source: Statistics Sweden The Swedish Riksbank decided to raise the repo rate to 4.25 in mid February 2008 The large government surplus will shrink on the back of slower growth and expansive fiscal policy 6
  • Overview of the SEB Group
  • SEB of today – an attractive platform More than 5 million customers Global top rankings within several areas 21,000 employees Customer centric organisation 2,500 large corporates & institutions Per cent of operating income Merchant Banking 40% Wealth Management Customer centric 35% Retail Banking 25% Life •5 million 400,000 private SME’s individuals 8
  • SEB history 1800 1900 2000 2004 Codan – Denmark 2004 Codan – Denmark 1856 Stockholms Enskilda Bank 1972 Stockholms Enskilda Bank 1856 Stockholms Enskilda Bank founded and Skandinaviska Banken 2004 Bank Agio – founded 2004 Bank Agio – merge Ukraine Ukraine 1864 Skandinaviska Banken 1864 Skandinaviska Banken 1982 SEB International founded in Gothenburg 2005 Privatbanken founded in Gothenburg 2005 Privatbanken 1997 Trygg Hansa – Norway – Norway 1998 Acquisition of three 2006 SEB 150 years 2006 SEB 150 years Baltic banks 2007 Merger SEB BoLån 2007 Merger SEB BoLån 1999 BfG – Germany and SEB AB and SEB AB 2007 Factorial Bank - 2007 Factorial Bank - Ukraine Ukraine 9
  • Ratings of SEB AB Rating 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 Positive Stable Last Action Outlook change Upgrade Outlook change Initial rating Date Jul-07 Oct-06 Jul-06 Dec-06 10
  • SEB’s income mix is different 0 20 40 60 80 100 Net fee income Net financial income Other income Net interest income 11
  • Share of operating profit Jan – Dec 2007 Wealth Other Merchant Life Germany Management Sweden Banking 5% 10% Lithuania 6% 19% 8% 15% Latvia 6% 37% 50% 5% Estonia 4% 38% 8% 8% Finland Denmark Norway Retail Banking 20% Geography - Excl. capital gains of Baltic real estate sale Divisions - Adjusted for Other and Eliminations 12
  • Positive jaws SEB Group*, 12 month rolling SEKm Income Expenses Operating profit 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- 04 04 04 04 05 05 05 05 06 06 06 06 07 07 07 07 08 * Excluding restructuring costs and one-off charges of SEK 890m in Q4 2005 0.62 excluding 13.2 excluding portfolios 20.8 portfolios ROE % 19.3 Cost/income ratio Cost/income ratio 0.69 0.65 0.65 15.8 14.7 0.58 0.57 9.6 2004 2005 2006 2007 Q1 2008 2004 2005 2006 2007 Q1 2008 * 17.0 excluding one-off charges of SEK 890m in Q4 2005 * 0.62 excluding one-off charges of SEK 890m in Q4 2005 13
  • Strong balance sheet Core capital SEKbn 72.4 The strategic value 62.7 10.9 Support organic growth 7.7 Hybrid Enable acquisitions capital +9.7 Create financial flexibility quot;Book 55.0 61.6 equity quot; Key driver: Profit Growth Mar 2007 Mar 2008 Core 8.3% 8.9% capital ratio 14
  • Asset quality
  • Credit exposure – on and off balance SEKbn Mar 2008 Nordic German Baltic Total Corporates 425 73 84 49% 581 41% 19% 36% Property Management 104 85 24 14% 213 10% 22% 13% Households 302 88 56 33% 446 29% 23% 28% Public Administration 18 74 4 96 2% 19% 2% 6% Total non-banks 849 320 168 1,336 Banks 199 68 2 269 19% 18% 1% 17% Total 1,048 387 170 1,605 65% 24% 11% 16
  • Level of Net Credit Losses % 0,70 0,60 0,50 0,40 0,30 0,20 0,10 0,00 2003 2004 2005 2006 Jan-Sep 2007 Q1 2008 * 2007 Germany Baltics Nordics SEB Group * Annualised 17
  • Funding
  • Short and long term funding Short Term Funding Long Term Funding CP Programmes CD’s – Sweden – Yankee CD – France – London Branch – Global CP Senior unsecured bonds ECP – Germany – Sweden USCP Structured bonds US Extendible Covered bonds – Germany CD’s Public (Pfandbriefe) Mortgage (Pfandbriefe) – Yankee CD – Sweden (Säkerställda Obligationer) – London Branch Subordinated debt/Hybrid Tier 1 19
  • Covered bonds – Strategic funding source using two funding centres Sweden (Stockholm) Germany (Frankfurt) Säkerställda Obligationer via Pfandbriefe via SEB AG Skandinaviska Enskilda Banken – German public Pfandbriefe AB (publ) Aaa (Moody’s) – On tap domestic SEK issuance – German mortgage Pfandbriefe Aaa (Moody’s) Aaa (Moody’s) – Diversification via EUR – Outstanding amounts Mar 2008 benchmark issuance Mortgage Pfandbriefe: – Outstanding amounts Mar 2008 EUR 4.1bn (SEK 38.2bn) Swedish Covered Bonds: Public Sector Pfandbriefe: SEK 144.4bn (EUR 15.4bn) EUR 11.3bn (SEK 106bn) 20
  • Overall funding structure SEB Group, March 2008 SEK 1,598bn (~EUR 170bn) CPs/CDs Mortgage covered bonds, Sweden Deposits Mortgage covered 9% 10% – General public bonds, Germany 2% 45% Public covered 7% bonds, Germany 3% 3% Senior debt 21% Subordinated debt Deposits – Financial institutions ● Over collateral within the Swedish covered pool 45% (7bn EUR) as of March 2008 ● Free eligible asset pledgeable within central banks 22bn EUR after 5 % haircut 21
  • Deposit Development Deposits from the public Lending to the public SEKbn SEKbn Q1 +14% yoy Q1 +8% yoy 800 1,200 700 1,000 600 800 500 600 400 400 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005 2006 2007 2008 2005 2006 2007 2008 Deposits to loans ratio 100% 90% 80% 70% 60% 50% 40% 30% 2001 2002 2003 2004 2005 2006 2007 Q1 2008 22
  • Net liquidity position across maturities 31 March SEKbn EURbn 300 32 10.9 7.7 200 22 100 11 0 0 1 week 2 weeks 4 weeks 2 months 3 months 4 months 5 months 6 months 9 months 12 months 23
  • The Swedish Housing Market and SEB Cover Pool
  • House prices Swedish house price growth Year-on-year precentage change 16 House prices in Sweden have 14 risen each year in the past decade 12 10 8 6 4 2 0 -2 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 House price growth. 1995 = 100 Compared with other countries, 350 Swedish house price inflation has 300 been less dramatic 250 200 Riksbank expects house prices 150 100 continue to rise but at a slower 50 rate 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Denmark UK USA Sweden 25
  • The Swedish household sector In recent months, household Household borrowing (Annual percentage change) borrowing has increased at a 18 slightly slower rate than during 16 14 the past two years 12 10 8 Loans from mortgage 6 4 institutions still account for the 2 0 largest part of lending to -2 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 households Mortgage institutions Total Household debt and post-tax interest expenditures in relation to disposable income (Per cent) The interest ratio is historically 20 200 18 180 still low and amounted to 4.4 per 16 160 cent of disposable income in 14 140 12 120 December 2007 10 100 8 80 Households’ debt ratio and the 6 60 interest ratio are expected to 4 40 2 20 rise slightly 0 0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Debt ratio (Left) Interest expenditure ratio (Right) 26
  • Duration of fixed interest periods for new mortgage loans in Sweden 1997-2008 Per cent 100% 80% 60% 40% 20% 0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Variable rate Fixed > 3 months - 5 years Fixed > 5 years Source: The Riksbank 27
  • The Swedish Covered Bond Act, 2004 Functional legislation (non-specialist principle) Eligible collateral – Residential property (75% LTV) – Agricultural property (70% LTV) – Commercial property (60% LTV, max 10% of collateral pool) – Substitute assets max 20% of collateral pool Holders of covered bonds have a preferential claim on the asset pool, which is monitored by an independent inspector – Asset pool, covered bonds and derivatives are separated from the bankruptcy estate to allow for uninterrupted payments Detailed regulations governing cover pool management – Restrictive ALM rules including daily NPV matching and stress tests, providing robust protection against market risks – Regular valuation of mortgage values required by law, forcing issuer to replenish pool in case of housing market downturn – According to the law, loans in arrears for more than 60 days will not be counted towards the value of the cover pool 28
  • Characteristics of SEB cover pool March 2008 Loans originated by Skandinaviska Enskilda Banken AB (publ) Pool notional SEK 213bn (EUR 23bn) Type of loans 100% residential Swedish mortgages Geographic distribution Across Sweden with a concentration in urban areas Substitute assets No substitute assets are included Number of loans 438,047 Average loan balance SEK 486,357 (EUR 52,000) Average loan balance per property SEK 996,893 (EUR 107,000) Weighted average LTV Approx 44 % Weighted average seasoning Approx 40 months Over Collateral 45% Rate type Float 55%, Fixed 45% Pool type Dynamic Loans in arrears >60 days Will not be included in the matching calculations but will remain in the cover pool 29
  • Distribution of the cover pool By geography By property type West excl North Multi Family Single Family Gothenburg Stockholm House Tenant 4% Gothenburg 10% 7% Owned 23% 18% 41% 67% 10% 12% 8% South excl Malmö Malmö East excl Stockholm 30
  • The Swedish mortgage business displays excellent asset quality Non-performing amount Losses (Gross) 0.05% 0.04% 0.03% 0.02% 0.01% 0.00% 2003 2004 2005 2006 2007 2008* Non-performing loans and loan losses (Gross) balances less than 1 bp * 2008-03-31 31
  • Appendices
  • Bond Portfolio
  • Merchant Banking Bond Portfolios 31 March, 2008 Trading Investments Credit & Portfolio Management Capital Markets and other 13% 8% 47% 42% 58% 21% 11% Structured credits Financial institutions Corporate bonds Financial institutions Covered bonds etc Gov't Covered bonds Volume SEK 91bn Volume SEK 131bn 34
  • Bond investment portfolio – status 31 March, 2008 Structured credits Financial institutions Reduced volume: SEK 63bn (71) Unchanged volume: SEK 55bn (55) AAA-rating: 98.3% (99.3) Rapid credit spread widening MTM losses highly dependent on MTM losses on all financial holdings, seniority, underlying assets and not only investment banks vintage Covered bonds etc. SEK 14bn (5) Q3 07 Q4 07 Q1 08 Acc MTM (SEKm) P/L -779 -990 -872 -2,641 Equity -291 -407 -1,630 -2,328 -1,070 -1,397 -2,502 -4,969 35
  • Distribution of Investment portfolio 31 March, 2008 Financial institutions Structured credits SEK 55bn SEK 63bn Direct and indirect RMBS exposure DE 4% 35% IT 6% SE 2% FI 2% NL 7% Sub Other 8% prime 3% FR 10% ABS 18% CMO 13% US 25% ES 18% CDO 7% CMBS 7% CLO UK 18% 17% 36
  • Main characteristics of structured credits portfolio (ABS portfolio) 31 March, 2008 A high quality investment portfolio initiated 1998 with fixed income securities eligible as central bank collateral Total volume SEK 63bn (71) - # of positions 740 (748) 98.3% of the portfolio is rated Aaa/AAA – 10 rating actions in our tranches since summer 2007 (Q1 08: #7) by Moody’s and Standard & Poor’s – Well diversified across products, asset classes and geographies – Cash-flow based – only one synthetic transaction ($10.5m) Mark-to-market prices applied to all 740 positions – No level 3 assets Current average remaining maturity ~4 years. Current annual amortisation rate is SEK ~10 bn 37
  • Baltics
  • The Baltics: Sharp deceleration from an extreme level 39
  • The Baltics: Imports diving in Estonia and Latvia 40
  • Net credit losses Estonia and Latvia entering next stage Retail sales Credit growth in Estonia Year-on-year percentage change 6.0% Estonia Latvia Loan Growth, % mom 5.0% 40 4.0% 30 Mortgages, % Growth mom 3.0% 20 2.0% 10 1.0% 0 0.0% -10 Jan- Mar- May- Jul-07 Sep- Nov- Jan- Mar- 01 02 03 04 05 06 07 08 07 07 07 07 07 08 08 Collective provisions drive net credit losses, % Baltics SEB Group 0,80 0,60 0,40 0,20 0,00 2006 2007 Q1 2008 * * annualised 41
  • Credit Exposure – on and off balance SEB Baltic Banks, SEKbn SEB Estonia SEB Latvia SEB Lithuania 76,4 78,6 Banks 23 22 56,3 51,1 50,6 Public 13 41,4 41,1 11 11 39,8 41,3 Administration 19 19 7 33,6 9 30,8 14 14 Households 14 25,0 5 8 10 7 10 5 5 8 7 41 42 4 35 5 3 Property 25 23 23 21 20 17 18 Management 14 14 Corporate Dec Dec Dec Mar Dec Dec Dec Mar Dec Dec Dec Mar '05 '06 '07 '08 '05 '06 '07 '08 '05 '06 '07 '08 2006 2007 Q1 2006 2007 Q1 2006 2007 Q1 +39% +19% -1% +40% +18% -1% +47% +30% +3% Growth rates adjusted for SEK/EUR changes 42
  • Other
  • Share of operating profit Jan – Mar 2008 Wealth Merchant Germany Life Management Lithuania Sweden Banking 20% 4% 12% 12% Latvia 16% 7% 32% Estonia 1% 4% Finland 58% 8% 40% Denmark 6% 18% Norway Retail Banking Geography - Adjusted for Other Divisions - Adjusted for Other 44
  • Profit and loss account Q1 2008 vs. Q1 2007 SEKm Q1 Q1 Change 2008 2007 % Net interest income 4,223 3,767 12 Net fee and commissions 3,801 4,277 -11 Net financial income -161 1,311 -112 Net life insurance income 713 743 -4 Net other income 226 95 138 Total operating income 8,802 10,193 -14 Staff costs -3,899 -3,796 3 Other expenses -1,756 -1,678 5 Depreciation of assets -372 -328 13 Total operating expenses -6,027 -5,802 4 Gain/loss tangible/intangible assets 3 - Net credit losses etc -368 -234 57 Operating profit 2,410 4,157 -42 Net profit 1,848 3,262 -43 45
  • Operating profit per division Q1 2008 vs. Q1 2007 SEKm Excl. ROE Change portfolio Q1 2008 vs. Q1 2007 losses Merchant -50% (-5%) 10.8% (20.4%) Banking GTS +1% TCM excl portfolios -12% Corp.Banking - 2% 15.3% -11% Retail Banking Sweden -5% Estonia -96% Latvia +3% 22.2% Wealth -17% Lithuania +28% Germany -44% Management Cards +6% 17.3% -20% Q1 2008 Life Q1 2007 -42% 9.6% 0 1,000 2,000 46
  • Corporate credit exposure - by industry 9% 18% 12% 9% 28% 20% 4% Finance and insurance Wholesale and retail Transportation Other service sectors Construction Manufacturing Other 47
  • Capital adequacy SEB Group Core capital ratio, % Total capital ratio, % Basel II Basel I 11.5 11.1 11.0 10.8 10.5 10.0% 10.3 10.2 Basel I 8.9 8.6 8.2 8.0 7.9 7.8 7.5 8.0 % Dec Dec Dec Dec Dec Dec Mar 2002 2003 2004 2005 2006 2007 2008 SEKbn Capital base 52.7 54.7 58.7 76.2 85.8 93.0 91.0 Basel I Risk-w. Assets 503 535 570 704 741 842 817 909 48
  • Improved quality of the capital base 100% Strategy to improve the quality 16.9 21.9 and loss absorption capacity of 80% the capital base: 12.8 14.3 – LT2 redemption in June 2007 11.2 7.7 replaced by hybrid tier 1 60% 68.2 capital in December 2007 61.9 – Hybrid tier 1 capital issued in 40% December 2007 - enhanced loss absorption capacity; 20% cancellation of coupon payments and write down of 0% principal pre-liquidation March 2007 March 2008 Equity* Hybrid capital UT2 LT2 * Total equity in the capital adequacy 49
  • Wholesale Funding Structure SEB Group, March 2008 SEK 581bn (~EUR 62bn) Schuldscheine and Reg CPs/ Bonds CDs Subordinated debt 7% 7% Senior debt 28% 8% 18% 25% 7% Public covered bonds, Germany Mortgage covered bonds, Mortgage covered bonds, Germany Sweden* * Over collateral within Swedish covered pool SEK 66 bn (7bn EUR) 50