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SEB Ubs Nordic Financials Sept 2008
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SEB Ubs Nordic Financials Sept 2008

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  • 1. Magnus Carlsson UBS Nordic Financial Services Conference 4 September 2008
  • 2. Outline An overall business update The Merchant Banking division Germany The Baltic countries Concluding remarks
  • 3. SEB – An activity based bank Share of operating profit Jan – Jun 2008 Wealth Management Baltic Life countries Nordics 13% 20% 10% 18% Germany 14% 35% 42% 48% Retail Banking Sweden Merchant Banking Geography - Adjusted for Other Divisions - Adjusted for Other
  • 4. Highlights Q2 2008 Income regained strength – second best quarter ever – High business activity – Limited bond portfolio losses Higher costs due to continued investments and sales activities Accelerated slowdown in Estonia and Latvia increases credit losses Strong capitalisation and liquidity
  • 5. Key figures SEB Group Change Q2 Q1 Q2 SEKm 2008 2008 2007 Income 10,403 18% -3% Expenses 6,445 7% 10% Operating profit 3,507 46% -23% Return on Equity, % 15.2 9.6 20.7 Cost / income ratio 0.62 0.69 0.55 Credit loss level, % 0.17 0.13 0.12 Basel II, Tier 1 ratio, % 8.64 8.85 8.45
  • 6. Business Activity High business activity – long-term savings Swedish mutual funds: net inflows Life – Total sales Jan-Jun, SEKbn SEKbn 3.8 13.3 12.0 12.0 11.9 10.7 9.7 -3.0 -7.2 -8.5 -13.3 Q1-07 Q2 Q3 Q4 Q1-08 Q2 Robur SHB Nordea SEB Others Private Banking – Net sales SEKbn 5.8 4.9 4.1 3.5 2.9 2.6 Q1 Q2 Q3 Q4 Q1 Q2 2007 2008
  • 7. Business Activity High business activity – Retail Sweden Retail Sweden household mortgages Retail Sweden, SME segment Lending, SEKbn Cash management customers (thousands) 90 207 201 196 189 183 176 173 80 + 5,200 70 60 Income growth +6% 50 2005 2006 2007 2008 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Growth +2.3% +3.9% +3.1% +3.6% +2.3% +3.5% rates
  • 8. Cost Management Cost development ~4% total cost growth due to acquisitions, pensions and One IT Roadmap SEK 202m in efficiency gains achieved in H1 Cost management program 2007 - 2009 Achieved Target SEK -748m SEK 1.5 – 2.0bn * 2007 2008 2009 2010 *
  • 9. Asset Quality Level of Net Credit Losses, % (incl. change in collective provisions) SEB Group Net credit losses Estonia 1.68 Jan – Jun 2008 Latvia 0.48 SEK 820m Lithuania 0.17 0.80 Baltics 0.73 0.70 Non-Baltic 0.60 39% 0.50 0.40 0.30 0.20 0.10 Lithuania 0.00 6% Latvia Estonia 2003 2004 2005 2006 2007 Q1 Q2 45% 10% 2008* 2008* Germany Baltics Nordics SEB Group * Annualised
  • 10. Asset Quality Credit exposure – on and off balance SEK 1,631bn By geography By sector Baltic Banks Public Corporate German administration 14% 11% 6% 24% 38% 28% 65% 14% Households Property Nordic management
  • 11. Capital Volume growth supported by strong capital Risk-weighted assets (Basel I) Tier 1 capital ratios Q4 2006 - Q2 2008, SEKbn Per cent 1,200 11 Basel II (no floors) +18% Basel II (transition rules) 1,000 Basel I 10 800 9 600 8 400 7 200 6 0 Q1 Q2 Q3 Q4 Q1 Q2 Group 2007 2007 2007 2007 2008 2008
  • 12. Liquidity Net liquidity position across maturities 30 June, SEKbn 250 SEB is match- 200 funded approx. one year SEK 113bn in long-term funding 150 raised in H1 2008 Examples of transactions: 100 April: Euro covered bond at spread of 17 bps 50 May/June: Euro floating rate notes at spread of 48 bps 0 -50 2 months 3 months 4 months 5 months 6 months 9 months 12 months 1 week 2 weeks 4 weeks
  • 13. An overall business update The Merchant Banking division Germany The Baltic countries Concluding remarks
  • 14. A leading franchise ● #1 Nordic stock broker ● #1 Nordic and Baltic corporate finance ● #1 Nordic and Baltic cash manager ● #1 Custody Nordic and Baltic markets ● #1 Scandinavian currencies
  • 15. Organisation Client Relationship Management TCM Corporate Banking GTS Capital Commercial Real Estate Cash FX Markets Management, Structured Finance Trade Finance SEB Enskilda & Securities CPM Equities Services (Investment portfolio) SEB Enskilda Corporate Finance Global product organisation – local specialists DK NO FI DE UK FR LU US SG SE PL CN BR RU IN EE LT LV
  • 16. Highlights last 12 months Client >300 new clients acquisition Top rankings in investment Customer banking, research, trade finance satisfaction custody and cash management From To Operational SEB Way on track (productivity 1 1 2 3 2 3 OK Excellence 4 gains 20% ahead of target) 5 OK MTM MTM losses on investment losses portfolio and Capital markets
  • 17. Financial development SEKm Income excluding portfolios Income Expenses 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Operating profit Excluding portfolios 2,500 2,000 1,500 1,000 500 0 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08
  • 18. High business activity… Merchant Banking: Operating Income Risk-weighted assets (Basel I) Q1 2007 - Q2 2008, SEKbn SEKm Q2 07 Q1 08 Q2 08 2,000 600 +26% 500 400 1,000 300 200 100 0 0 Merchant Banking Trading & Corporate Global Capital Banking Transaction Markets Services
  • 19. …in Trading and Capital Markets Trading and Capital Markets income by main product cluster, excl. investment portfolios 8% 5% Structured derivatives 7% 11% 11% 4% & Other TCM 15% 22% 3% 8% 6% Capital Markets 46% 49% 64% 46% 44% 49% Equities 38% 36% 28% 41% 33% 26% FX Q1 - 07 Q2 Q3 Q4 Q1 - 08 Q2 Market Shares Nordic Stock Exchanges * Jan – June 2008 SEB 8,9% Morgan Stanley 5.6% Carnegie 5.4% Glitnir 5.2% SHB 4.7%
  • 20. High business activity… Merchant Banking: Operating Income Risk-weighted assets (Basel I) Q1 2007 - Q2 2008, SEKbn SEKm Q2 07 Q1 08 Q2 08 2,000 600 +26% 500 400 1,000 300 200 100 0 0 Merchant Banking Trading & Corporate Global Capital Banking Transaction Markets Services
  • 21. …in Corporate Banking Swedish syndicated loans league (and bookrunner %) July 2007 – June 2008 0 1 2 3 EUR bn 17.6% SEB 12.4% SHB Calyon 5.6% * Source: The Nordic Stock exchanges ** Source: Dealogic Analytics RBS 3.5% 3.0% ABN AMRO
  • 22. High business activity… Merchant Banking: Operating Income Risk-weighted assets (Basel I) Q1 2007 - Q2 2008, SEKbn SEKm Q2 07 Q1 08 Q2 08 2,000 600 +26% 500 400 1,000 300 200 100 0 0 Merchant Banking Trading & Corporate Global Capital Banking Transaction Markets Services
  • 23. …in Global Transaction Services Custody volume development Assets under custody, SEKbn No of transactions/day 7,000 150,000 6,000 125,000 5,000 100,000 4,000 75,000 3,000 50,000 2,000 25,000 1,000 0 0 2004 2005 2006 2007 2008
  • 24. High business activity Merchant Banking: Operating Income Risk-weighted assets (Basel I) Q1 2007 - Q2 2008, SEKbn SEKm Q2 07 Q1 08 Q2 08 2,000 600 +26% 500 400 1,000 300 200 100 0 0 Merchant Banking Trading & Corporate Global Capital Banking Transaction Markets Services
  • 25. Investment portfolio – SEK 126bn Status and actions Investment portfolio valuations, SEKm Accumulated 97.2% AAA rated after limited since rating actions Q2 08 Q3 07 Income -66 -2,707 Mark- to-market prices applied; Equity -56 -2,384 no level 3 assets Total -122 -5,091 Reduction of income volatility Composition Accounting classification Q2 08 Q2 08 Covered Financial 42% bonds etc. 9% institutions Available Held for for sale 89% trading 11% (MTM over (MTM over income) equity) 49% Structured credits
  • 26. Long-term Near-term opportunities uncertainty
  • 27. Prioritising customer acquisition ● Grow Nordic, German and Baltic client base through focus on MidCorp segment MidCorp ● Implement cross-sell model throughout Nordics, Germany and Baltic countries growth ● Expand sales, relationship management and analytical capacity Nordic Expansion ● Fully leverage existing product platform ● Leverage SEB’s leadership in Nordic products by expanding institutional Expanded FI client base in Europe, US & Asia (including central banks, hedge funds and coverage sovereign wealth funds) ● Build on existing expertise to expand position in energy, oil/offshore and Energy, oil shipping segments & gas ● Continue developing commodities offering ● Improve business origination and subsidiary coverage at strategic locations International
  • 28. An overall business update The Merchant Banking division Germany The Baltic countries Concluding remarks
  • 29. SEB in Germany Retail Asset Banking Management Merchant Banking (incl. Commercial Real Estate)
  • 30. SEB in Germany Retail Germany: Operating profit SEB in Germany: Operating profit SEKm SEKm 136 134 74 843 60 807 -22 189 -226 -244 H1 07 H2 H1 08 H1 05 H2 H1 06 H2 H1 07 H2 H1 08 Distribution of German Operating profit Other Jan – Jun 2008 business 91% 9% Retail
  • 31. Merchant Banking in Germany Hamburg Merchant Banking’s second Bremen largest market Country-wide sales force Hannover Berlin Increased profitability in 2007 Essen Düsseldorf RoE in line with Merchant Leipzig Banking globally. Cologne Focus on export- oriented larger Frankfurt Mittelstand companies Main competitors are domestic German banks Stuttgart Cross-sale model with leading competence in FX, cash management derivatives and Munich export and trade finance
  • 32. An overall business update The Merchant Banking division Germany The Baltic countries Concluding remarks
  • 33. SEB in the Baltic countries Operating profit by country; SEKm 4,000 Lithuania Latvia Estonia 3,000 2,000 1,000 Accumulated profit since acquisition in 1998: SEK 11.5bn Acquisition price: SEK 3.8bn 0 2002 2003 2004 2005 2006 2007* H1 2008 % of Group operating profit 9% 10% 11% 13% 15% 18% 18% * Adjusted for sale of Baltic real estate
  • 34. Baltic countries: economic slowdown accelerates Annual GDP growth Per cent Estonia Latvia Lithuania 15 10 5 0 2002 2003 2004 2005 2006 2007 2008 (f) 2009 (f) -5 Economic sentiment, index Estonia Latvia Lithuania 125 115 The Baltics: Economic sentiment 105 deteriorating 95 85 75 -98 -99 -00 -01 -02 -03 -04 -05 -06 -07 -08
  • 35. Priorities for managing overheating Phase I - Actions to manage overheating Jan 06 Jul 06 Dec 06 2007 ● Further tightening ● Concluding ● Tightening of ● Overheating of credit policy internal review credit policy risks of Baltic incl. cautious communicated ● Volume restrictions economies property mgmt ● Collective ● Increased ● ROE priority > provisioning policy capitalisation volume growth Credit growth per quarter 12% 10% 8% 6% 4% 2% 0% 2006 2007 2008
  • 36. Priorities for managing recession Phase II - Actions to manage correction Asset quality Targeted credit portfolio reviews Joint local and head-office work-out team Early conservative provisioning Business development Individual country approach Full integration in SEB Group to broaden product palette Develop relationships with existing and new customers
  • 37. An overall business update The Merchant Banking division Germany The Baltic countries Concluding remarks
  • 38. Looking ahead ● Strong capital and liquidity ● Top line growth ● Continued investments ● Cost efficiency