SEB Investor Presentation 2008 Q3

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SEB Investor Presentation 2008 Q3

  1. 1. Investor presentation 1
  2. 2. Outline Overview of the SEB Group Earnings NFI and Bond portfolios Asset quality Baltics Funding and capitalisation The Swedish stability package 2
  3. 3. SEB’s market franchise Customer segmentation, 2007 Customer survey Distribution of income 100 100% Important relation- 80% ships/ customers % 60% Large Institutional corporates clients and 40% Sweden banks – Nordic region 20% 0% 0 DnB NORDanske Nordea SHB Swedbank SEB Bank 100 Retail- Nordic Retail Germany 0 Retail-Baltic Retail GB/Ireland Difference from Merchant B AM 100 the average, % Life 3
  4. 4. …with a different income mix 0% 20% 40% 60% 80% 100% Net interest SEB income Net fee & Swedbank commissions SHB Net financial income Nordea Net life insurance income DnB NOR Net other income Danske Bank 4
  5. 5. SEB's franchise Merchant 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 currencies Wealth Management ● #1 Nordic and Baltic private bank ● #2 Nordic asset manager Life and pension ● #1 Nordic unit-linked business Retail ● #2 Baltic region 5
  6. 6. Ratings of Skandinaviska Enskilda Banken 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 Stable Negative Stable Stable Last Action Outlook change Outlook change Outlook change Unaffected rating Date Sep-08 Oct-08 Jul-08 Jul-08 6
  7. 7. Outline Overview of the SEB Group Earnings NFI and Bond portfolios Asset quality Baltics Funding and capitalisation The Swedish stability package 7
  8. 8. Highlights Q3 2008 Strong capital and liquidity SEK m Income 8,705 Resilient underlying business Expenses -5,970 – Robust customer franchise Operating result 2,010 – Strong volume growth Net result 1,514 – Strengthened market position RoE, % 8.0 Negative financial effects due to financial crisis C/I-ratio 0.69 Net credit loss level, % 0.27 Continued collective provisions in the Baltic countries 8
  9. 9. Key figures SEB Group Change Q3 Jan-Sep Q2 Q3 Jan-Sep SEK m 2008 2008 2008 2007 2007 Operating income 8,705 27,910 -16% -8% -8% Operating expenses -5,970 -18,442 -7% 7% 7% Operating profit 2,010 7,927 -43% -46% -36% Net profit 1,514 6,171 -46% -51% -38% Return on Equity, % 8.0 10.9 -7.2 -9.3 -8.1 Cost / income ratio 0.69 0.66 0.07 0.10 0.09 Credit loss level, % 0.27 0.19 0.10 0.19 0.09 Basel II Core capital ratio, % 8.1 8.1 -0.5 -0.2 -0.2 Risk-weighted assets, SEK bn 937 937 66 140 140 9
  10. 10. Resilient underlying business SEK m Financial crisis impacts profit… …but underlying income generation is stable 5 000 10,000 4 000 8,000 3 000 6,000 2 000 4,000 1 000 2,000 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2007 2008 2007 2008 Other income** Lehman Brothers-related losses Net fee and commission income Portfolio losses Net interest income Reported operating profit* ** Net financial income, Net insurance income and Other income * Excluding sales of Baltic properties in Q4 2007 of SEK 785m 10
  11. 11. Net interest income Group, SEK m Lending to the public SEKbn Jan-Sep 08 +18% yoy 1,400 13,197 +14% 1,200 Total NII 1,000 11,623 800 11,911 600 +12% Customer 400 10,676 Q1 Q2Q3 Q4Q1 Q2 Q3Q4Q1 Q2Q3Q4 Q1 Q2Q3 driven* 2005 2006 2007 2008 Deposits from the public SEKbn Jan-Sep 08 +12% yoy 900 800 700 600 500 400 Q1 Q2Q3Q4Q1 Q2Q3 Q4Q1 Q2Q3Q4Q1 Q2Q3 2005 2006 2007 2008 Jan-Sep 07 Jan-Sep 08 * Volumes and margins on lending and deposits 11
  12. 12. Fee and commission income Gross development Jan-Sep 2008 vs. Jan-Sep 2007, SEK m Capital markets driven Non-capital Value driven – market driven performance driven +3% Securities -6% transaction 5,376 5,557 driven 5,402 5,091 Deal driven -14% 3,163 2,729 -35% 1,431 936 769 524 New issues & Secondary market Custody & mutual Payment, cards, Other advisory & derivatives funds structured lending, deposits, Jan-Sep 07 Jan-Sep 08 guarantees 12
  13. 13. Cost development Cost increase, +7% Cost management program 2007 – 2009 Jan – Sep 2008 vs. Jan – Sep 2007, SEK m Target Achieved 1,400 SEK -865m SEK 1.5 1,200 Other – 2.0bn 1,000 Baltics 800 * Acquisitions 600 Pension 400 cost One IT 200 Roadmap 2007 2008 2009 * 0 13
  14. 14. Operating profit per division Jan – Sep 2008 vs. Jan – Sep 2007 Excl. SEK m portfolio ROE Change losses vs. Jan-Sep 2007 Jan-Sep 2008 Merchant -21% (-11%) 15.6% (20.2%) Banking Retail Banking -19% 14.5% Sweden: 3% Germany: -41% Wealth -31% 19.8% Estonia: -67% Management Latvia: -58% Lithuania: -11% Cards: -7% Jan-Sep 2008 -36% 13.3% Life Jan-Sep 2007 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 14
  15. 15. High business activity – Merchant Banking FX profit growth driven by increased Market Shares Nordic Stock Exchanges focus on advisory services Jan – Sep 2008 Index 180 SEB 9.2% 160 Glitnir 5.4% 140 Morgan Stanley 5.4% 120 SHB 5.3% 100 80 Carnegie 4.6% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2006 2007 2008 Source: The Nordic Stock exchanges ”No. 1 Globally for Overall Customer Satisfaction in Cash Management” ”Best for Commercial Real Estate Banking in the Nordic and Baltic region” 15
  16. 16. High business activity – Retail Banking Retail Sweden insurance sales Attractive deposit offerings SEK m * 2007 2008 2 000 1 500 1 000 500 0 Retail Estonia new package offering Jan Feb Mar Apr Maj Jun Jul Aug Sep Packages sold since launch in May Retail Sweden SME 35,000 Cash managementkunder (tusental) New customers 30,000 90 account for 50 % 25,000 of sales. 80 20,000 + 5 300 70 15,000 Income 10,000 60 +7% growth 5,000 50 0 2005 2006 2007 2008 May Jun Jul Aug Sep Oct *As of Oct 23 16
  17. 17. High business activity – long-term savings Swedish mutual funds – Net inflows Life – Total sales Jan-Sep, SEK bn SEK bn 5.9 13.3 12.0 12.0 11.9 10.7 10.7 9.7 -1.1 -7.3 -11.6 -17.0 Q1-07 Q2 Q3 Q4 Q1-08 Q2 Q3 Robur SHB Nordea SEB Others Private Banking – Net sales SEK bn 5.8 5.3 4.9 4.1 3.5 2.9 2.6 * Q1 Q2 Q3 Q4 Q1 Q2 Q3 2007 2008 *As of Oct 23 17
  18. 18. Outline Overview of the SEB Group Earnings NFI and Bond portfolios Asset quality Baltics Funding and capitalisation The Swedish stability package 18
  19. 19. Net financial income Group SEK m 1,000 500 + corp fin intäkter I 0 marknaden? -500 FX Equities Capital CPM Other incl. -1,000 Markets Treasury Q3 07 Q2 08 Q3 08 Merchant Banking Investment portfolio Structured SEK m Q1 08 Q2 08 Q3 08 SEK credits 12bn Financial P/L -872 -66 -348 SEK institutions SEK 63bn Equity -1,630 -56 -2,134 55bn Covered -2,502 -122 -2,482 bonds etc 19
  20. 20. Bond investment portfolio – financial effects 30 September, 2008, SEK m Structured credits Financial institutions 2007 Q1 08 Q2 08 Q3 08 Acc 2007 Q1 08 Q2 08 Q3 08 Acc P/L -1,056 -794 -41 -400 -2,291 P/L -563 -78 -26 51 -616 Equity -72 -438 -52 -687 -1,249 -626 -990 -15 -1,107 -2,738 Equity -635 -515 -78 -637 -1,864 -1,682 -1,784 -56 -1,507 -5,029 + Covered bonds etc accumulated -680 2007 Q1 08 Q2 08 Q3 08 Acc MTM P/L -1,769 -872 -66 -348 -3,055 (SEK m) Equity -698 -4,518 -1,630 -56 -2,134 -2,467 -2,502 -122 -2,482 -7,573 20
  21. 21. Structured credits portfolio – rating Rating Composition (S&P, Moody’s and Fitch) Outstanding volumes , 30 September, 2008 Q4-07 Q1-08 Q2-08 Q3-08 100.00% 96.75% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.18% 0.02% 2.98% 0.07% 0.00% AAA AA/A BBB BB/B CCC 21
  22. 22. Outline Overview of the SEB Group Earnings NFI and Bond portfolios Asset quality Baltics Funding and capitalisation The Swedish stability package 22
  23. 23. Asset quality Group credit exposure Impaired Loans Volumes % of Credit Portfolio* Total exposure = SEK 1,805bn 3% SEB Group Germany Nordic Baltic 2% 1.5% Nordics 1.4% 66% 1% 0.6% 0.2% 0% Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep '06 '06 '06 '06 '07 '07 '07 '07 '08 '08 '08 Germany Estonia 1.31 24% Latvia 0.96 Net Credit Losses, Lithuania 0.43 % of lending Baltics 0.85 1.00 Lithuania Germany Baltics 0.80 5% Estonia Nordics SEB Group Latvia 0.60 3% 2% 0.40 0.20 0.00 2006 2007 Q1 Q1-Q2 Q1-Q3 *Annualised figures 2008* 2008* 2008* 23
  24. 24. Credit exposure On and off balance, SEK bn Sep 2008 (Dec 2007) “Nordic” German Baltic Total Corporates 533 (416) 99 (72) 88 (83) 720 (571) Property Management 119 (100) 98 (87) 28 (26) 245 (212) Households 313 (292) 94 (87) 61 (55) 469 (434) Public Administration 20 (18) 87 (66) 6 (3) 113 (88) Total non-banks 986 (826) 377 (312) 183 (166) 1,547 (1,304) Banks 204 (187) 52 (58) 2 (3) 258 (248) Total 1,189 (1,013) 430 (369) 186 (169) 1,805 (1,552) 24
  25. 25. Corporate credit exposure – by industry SEB Group, SEK bn 720 12% 19% 573 11% 463 458 10% 27% 18% 3% Finance and insurance Wholesale and retail Transportation Other service sectors Dec Dec Dec Sep Construction Manufacturing 2005 2006 2007 2008 Other 25
  26. 26. Property management – by geography* SEB Group, SEK 229bn Commercial Multi-family 3%1% 8% 245 6% 212 192 192 2% 86 42% 75 3% 81 91 159 137 111 101 35% Sweden Germany Estonia Dec 2005 Dec 2006 Dec 2007 Sep 2008 Latvia Lithuania Other Nordic Other European Other * By obligor’s domicile 26
  27. 27. Impaired Loan Volumes* % of Credit Portfolio** SEB Group Germany Nordic Baltic 2% 1.5% 1.4% 0.6% 0.2% 0% Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep '03 '04 '04 '04 '04 '05 '05 '05 '05 '06 '06 '06 '06 '07 '07 '07 '07 '08 '08 '08 * Impaired loans gross * *Excluding Banks 27
  28. 28. Level of Net Credit Losses, % Estonia 1.31 Latvia 0.96 Lithuania 0.43 Baltics 0.85 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 2003 2004 2005 2006 2007 Q1 Q1-Q2 Q1-Q3 2008* 2008* 2008* Germany Baltics Nordics SEB Group * Annualised 28
  29. 29. Outline Overview of the SEB Group Earnings NFI and Bond portfolios Asset quality Baltics Funding and capitalisation The Swedish stability package 29
  30. 30. Status report – Baltic business Provisioning to build up reserves Impaired loans in SEB’s portfolio SEK m Per cent Specific Collective Estonia Latvia Lithuania 2.0% 350 250 1.5% 150 1.0% 50 0.5% -50 0.0% Q4-07 Q1-08 Q2-08 Q3-08 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Net credit losses Profit before credit losses etc. SEK m SEK m Estonia Latvia Lithuania Estonia Latvia Lithuania 4,000 4,000 3,000 3,000 2,000 2,000 1,000 1,000 0 0 2005 2006 2007 Jan-Sep 2005 2006 2007 Jan-Sep 2008 2008 30
  31. 31. Baltic countries – Credit exposure On and of balance, SEK bn SEB Estonia SEB Latvia SEB Lithuania 89 Total 76 Banks 26 56 22 52 50 Public 44 15 41 41 13 13 Administration 34 20 19 8 14 Households 14 14 10 8 8 6 5 45 8 4 39 34 Property 22 22 22 21 18 17 Management Corporate Dec Dec Sep '08 Dec Dec Sep '08 Dec Dec Sep '08 '06 '07 '06 '07 '06 '07 2006 2007 2008 YTD 2006 2007 2008 YTD 2006 2007 2008 YTD +4% +40% +18% +47% +30% +13% +38% +17% +1% Growth rates in local currency 31
  32. 32. Baltic countries Impaired Loans and Reserves September 2008, SEK m SEB SEB SEB Total Estonia Latvia Lithuania Baltic Impaired loans, 1,019 694 1,037 2,750 gross Specific reserves 294 80 401 775 Collective 482 384 311 1,177 Off balance 0 0 0 0 Impaired loans Q4 Q1 Q2 Q3 reserves SEK m 2007 2008 2008 2008 Total reserves 776 464 713 1,952 Estonia 186 334 819 1 019 Reserve ratio 76.1% 66.8% 68.8% 71.0% Corporate 47 132 570 657 Private 138 202 249 362 Latvia 218 301 444 694 Corporate 84 86 152 285 Private 134 216 292 410 Lithuania 573 682 819 1 037 Corporate 398 416 492 633 Private 176 266 327 404 32
  33. 33. Baltic countries – Net Credit Losses Jan – Sep 2008, SEK m Estonia Latvia Lithuania Total Net Write-offs & Actual Losses 3 -11 -1 -9 Net New Specific Provisions -273 -58 -69 -400 Net New Collective Provisions -158 -187 -117 -462 Change in Value of Seized Assets -1 -1 -5 -7 Net Credit Losses -429 -257 -192 -878 33
  34. 34. Outline Overview of the SEB Group Earnings NFI and Bond portfolios Asset quality Baltics Funding and capitalisation The Swedish stability package 34
  35. 35. Capital supporting customer business Tier 1 capital ratios Risk-weighted assets Per cent SEK bn 11 Basel I Basel II Basel II (no floors) 1200 Basel II (transition rules) Basel I 10 900 9 600 8 300 7 Basel I Tier 1 target 0 6 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2007 2007 2007 2007 2008 2008 2008 2007 2007 2007 2007 2008 2008 2008 35
  36. 36. Capital adequacy SEB Group Core capital ratio, % Total capital ratio, % Basel II Basel I 11.5 11.0 10.8 10.5 9,3% 10.4 10.3 10.2 Basel I 8.6 8.2 8.1 8.0 7.9 7.8 7.5 7,3% Dec Dec Dec Dec Dec Dec Sep 2002 2003 2004 2005 2006 2007 2008 SEK bn Capital base 52.7 54.7 58.7 76.2 85.8 93.0 97.7 Basel I Risk-w. Assets 503 535 570 704 741 842 937 1.045 36
  37. 37. Structural liquidity position Balance sheet structure Net liquidity position across maturities SEK bn, 30 Sep 300 Cash & Short-term funding SEB is match- Interbank interbank loans 250 Liquid assets deposits funded approx. one year Bond portfolio 200 ST funding <1 year Other trading 150 LT funding 100 >1 year 50 “Banking book” Stable funding Lending 0 1 week 2 weeks 4 weeks 2 months 3 months 4 months 5 months 6 months 9 months 12 months Deposits from the public More than 12 months matched funding, i.e. based on no access to Equity capital markets, no refinancing of debt to credit institutions, issued bonds or subordinated capital; and moderate reduction of Assets Equity & Liabilities business activities. 37
  38. 38. Funding structure SEB Group, Sep 2008 SEK 1,702bn Schuldscheins and Reg Bonds CPs/CDs 3% 11% Mortgage Covered Bonds Sweden 10% Mortgage Covered Bonds Germany 2% Deposits - General Public Covered Public Bonds Germany 42% 7% Senior debt 2% Deposits - Subordinated debt Interbank 3% 20% * Over collateral within covered pools SEK 57bn 38
  39. 39. Outline Overview of the SEB Group Earnings NFI and Bond portfolios Asset quality Baltics Funding and capitalisation The Swedish stability package 39
  40. 40. Unprecedented government and central bank intervention Nordic central banks & governments: ● Extension of maturity and collateral for borrowing. Strengthened deposit Iceland guarantees. ● Nationalisation of all three ● SE: SEK 1,500bn to guarantee mid-term major banks. funding up to 5 years and SEK 15bn ● $6bn rescue loan from IMF, injected into new stability fund with mandate Nordic and Japanese central to recapitalise failing banks. banks. ● DK: General guarantee on all senior unsecured bank debt. ● NO: NOK 350bn government liquidity facility against collateral in mortgage bonds. ● Government: $700bn (TARP) to buy illiquid ● Government: ● Eurozone governments: assets, whereof $250bn to £50bn to recapitalise banks, €150bn to recapitalise banks, recapitalise banks. £350bn to guarantee funding. €920bn to guarantee funding. ● Fed: Extension of maturity and ● BoE: Extension of maturity and ● ECB: extension of maturity and collateral, emergency support to collateral for borrowing. collateral for borrowing. Bear Stearns, AIG. ● Nationalisation: Northern Rock, ● Nationalisation: Partly Fortis, ● Nationalisation: Fannie Mae, partly RBS, HBOS and Lloyds Dexia, capital injections in French Freddie Mac and Washington TSB. banks, liquidity guarantee Hypo Mutual. Real. 40
  41. 41. The Swedish measures The Guarantee program The Swedish situation ● SEK 1,500bn to support medium-term bank funding ● The Riksbank (central bank) deem the stability in the Swedish financial system ● Cover Swedish banks & mortgage companies as satisfactory. ● Possibility to refinance funding with ● Finansinspektionen (FSA) deem the state guarantee to a risk based fee Swedish banks as solvent. The capital ● Require Tier 1 of ≥6% to utilize guarantee adequacy requirements are met with a broad margin. ● Handled by National Debt Office (Riksgälden) The framework The Stability fund ● Based on an EU agreement ● Will amount to an average of 2,5 per cent of GDP ● Install a guarantee program in 2023, ~SEK 150bn ● Setting up a stability fund ● The government will insert SEK 15bn ● The government has a broad ● The existing deposit guarantee fund of SEK 18bn mandate to decide on further is moved into the stability fund measures if deemed necessary ● Capital injections is primarily ● The rest, ~ SEK 117bn or ~SEK 2,6bn / annually given through preference will be paid by the financial system on a risk shares issuance adjusted fee basis as well as through the guarantee program fee and the ongoing deposit ● The government has the right to guarantee fee. compulsory redemption of shares to market price under certain ● Stability fund fee payments will start when the circumstances financial turmoil has calmed down 41
  42. 42. Stability fund functionality PAYMENTS IN PAYMENTS OUT Deposit guarantee errands Deposit guarantee fees Max SEK 0,5m/person/bank Guarantee - and Redeemed guarantees stability fees 2023 2,5% of GDP Interest/redemptions Capital injection to ~ SEK 150bn banks in crisis Deposit guarantee Supplied funds fund SEK 18bn* l% of GDP SEK 33bn The State SEK 15bn* * One-Time STABILITY FUND contribution 42
  43. 43. Global downturn, and… ● Strong capital and good liquidity ● Robust customer business ● Intensified advisory services … financial turmoil has turned a corner ● Lower absolute costs 43
  44. 44. 44

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