Investor Presentation

Transcription

1 Thomas Bengtson Johan Wallenborg Investor Presentation Paris Feb

2 Contents SEB 2009 Results p.3 Swedish Housing Market p.29 Swedish Covered Bonds p.39 Swedish liquid Covered Bond market p.43 SEB Swedish mortgage lending p.55 SEB Covered Bonds p.62 Appendix p.67 2

3 SEB 2009 Results 3

4 Strong market position and diversified earnings base High asset quality in the Nordic countries and Germany Improvements in the Baltic countries Solid balance sheet 4

5 Operating Results 5

6 Operating profit Underlying business clouded by credit provisions and goodwill Operating profit SEK bn 15,6 17,0 5,1 8,8 7,9 8,2 8,8 10,0 11,2 12, , Operating profit, excluding credit provisions and goodwill SEK bn 16,2 17,2 15,7 18,8 10,6 8,5 8,9 9,8 10,6 12,1 5,

7 Stable operating expenses development on a comparable basis Decreasing operating expenses on comparable basis 2009 vs SEK m Business related Market related , Cost mgmt programme -1% -7% +0% 25,059 23, Other STI Pensions FX translation 25,428 7

8 Development of NII and net fee and commission income SEB Group, SEK m Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Net interest income Net fee and commissions 8

9 Commissions - Diversified business mix Gross quarterly development Q Q SEB Group, SEK m Capital market driven 2,500 2,000 1,500 1,000 Deal driven Securities transaction Driven* Value driven performance driven Non-capital market driven ,000 5,000 4,000 3,000 2,000 1,000 0 New issues & advisory Q1 05 Q2 Q3 Q4 Q1 06 * Q adjusted for gross commission on security lending, SEK 200m Secondary market & derivatives Non-capital market driven Q2 Q3 Q4 Q1 07 Custody & mutual funds Q2 Q3 Q4 Q1 08 Payments, cards, structured lending, deposits, guarantees Capital market driven Q2 Q3 Q4 Q1 09 Other Q2 Q3 Q4 9

10 Trading and Capital Market income Low Risk Trading Orientation TCM, excl. investment portfolio SEKm NFI 3,950 3, NII and other income lines 5, , ,000 6,700 Low risk trading orientation 9, TCM income split, excl. investment portfolio 8% 11% 7% 5% 3% 11% 6% 22% 15% 8% 8% -2% 6% 12% 44% 44% 46% 59% 50% 45% 46% 26% 28% 33% 38% 41% 36% 44% Daily trading income negative trading days out of 1,096. Average loss SEK 15m FX Capital Markets Q1-07 Equities Q2 Q3 Q4 Q1-08 SD and Other TCM -3% 21% 19% 63% 3% 8% 30% 34% 21% Q2 Q3 Q4 Q % 6% 7% 34% 22% 22% 30% 46% 34% 38% 41% Q2 Q3 Q4 Feb-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Sep-09 Dec-09 * Excluding Investment Portfolio 10

11 Increasing Life Insurance operating profit SEK m AuM 402 SEK bn Low Risk Green Light from FSA ** 2, * * Provisions ** Reversal of Provisions 11

12 Credit Exposure and Asset Quality 12

13 Credit portfolio Geographic split On and off balance total 1,816 SEK bn Dec '09 Swedish Nordic & German Baltic Total Other Corporates 18% 9% 6% 4% 36% Property Management 6% 1% 5% 2% 14% Households 17% 3% 5% 3% 28% Public Administration 1% 0% 4% 0% 5% Total non-banks 42% 13% 19% 9% 83% Banks 10% 3% 4% 0% 17% Total 52% 16% 24% 9% 100% 13

14 Level Net Provisions and Credit Losses % Germany Baltics 0,14 0,19 0,14 0,10 0,09 0,22 Estonia 2.41 Latvia 7.56 Lithuania ,43 1,28 0,23 0,27 0,13 0, Nordics 0,17 0, SEB Group 0,92 0,05 0,04 0,04 0,05 0,10 0,11 0,08 0,11 0,

15 Asset quality outside the Baltics SEB exposure to topical industries 3% Shipping & Offshore Limited exposure to Bulk and Container sub-segments 0.0% credit loss ratio 2% SMEs Sweden Low and improving default rate 0.7% credit loss ratio 2% Acquisition Finance Well diversified with 95% senior debt 1.4% credit loss ratio 8% Commercial Real Estate Mainly related to large real estate companies 0.1% credit loss ratio Level of Impaired Loans 2,0% 1,0% 0,0% DecMarJunSepDecMarJunSepDecMarJunSepDec '06 '07 '07 '07 '07 '08 '08 '08 '08 '09 '09 '09 '09 Germany Nordic 15

16 SEB Baltic Lending market shares Per cent, Q Q % Estonia 50% Latvia 50% SEBEstonia Swedbank DnB Nord Nordea Sampo/Danske Bank Lithuania 40% 40% 40% 30% 30% 30% 20% 20% 20% 10% 10% 10% 0% Q2 05 Q4 Q2 06 Q4 Q2 07 Q4 Q2 08 Q4 Q2 Q4 09 0% Q2 05 Q4Q2 06 Q4 Q2 07 Q4 Q2 08 Q4Q2 Q4 09 0% Q2 05 Q4 Q2 06 Q4 Q2 07 Q4 Q2 08 Q4 Q2 Q4 09 Source: Bank of Estonia, Bank of Latvia, Bank of Lithuania, SEB 16

17 Development of Baltic Non-Performing Loans Non-Performing Loans SEK bn Portfolio assessed Individually assessed 12.6% of lending 7.0% of lending 1,3 1,4 1,9 1,1 1,1 1,1 1,9 16.2% of lending 2,8 3,6 2,0 2,0 2,3 4,9 14.2% of lending 6,5 8,5 1,2 1,3 1,4 8,1 4,4 10,7 13,9 4,4 4,8 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Estonia Latvia Lithuania Baltics 17

18 Asset quality Baltics Past-dues slowing Past dues as % of lending >30 days >60 days 0 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Portfolio risk assessment SEK bn % reserve ratio 92 Normal business 51 Total reserves SEK 11.4bn Exceeding current recovery rates Watch list 19 Total lending* Elevated risk Non performing 18

19 Improved Outlook in the Baltics Volume increase in past due loans was very strong Q1 and Q but has now more or less stopped Revaluation of real estate collateral 80% complete additional provisions taken in Assigned values considered sustainable medium term. No major risk in other collateral e.g. leasing Extensive analysis carried out on Watch-list and other high-risk clients, showing limited further provisions in , given existing collective reserves. In absence of any major macro economic set-back, 2010 Baltic provisions likely to be considerably below 2009 level 19

20 Capital and the Balance Sheet 20

21 Capital adequacy SEB Group Total capital ratio, % Tier I capital ratio, % Core Tier I (from 2007) 10,5 10,2 10,3 10,8 11,5 7,9 8,0 7,8 7,5 8,2 Basel II (without transition rules) 14,9 15,2 14,3 12,6 12,8 13,1 13,5 12,0 9,9 10,1 11,8 11,3 10,2 8,4 8,6 14,7 13,9 11,7 Capital strengthening actions 2009 New Rights Issue and withheld dividend Buy-backs UT2 Buy-backs innovative HT1 New issue of noninnovative HT1 No government capital injection SEK bn Dec 2002 Dec 2003 Dec 2004 Dec 2005 Dec 2006 Dec 2007 Dec 2008 Q Q Q Q Capital base Risk-w. Assets

22 Strong capital situation Regulatory stress tests Anticipated provisioning and credit loss effects on Tier 1 Capital Tier 1 capital ratio forecast 14% Actual Dec % SEB 12% Swedish FSA and Riksbank 11% Swedish FSA Main, (June 2009) 10% 9% 8% 7% 6% Forecast year Swedish FSA Worst Case (Nov 2009) Swedish FSA Main (Nov 2009) Swedish FSA Worst Case, (June 2009) Riksbank Worst Case, (Nov 2009) 22

23 A strong balance sheet structure Dec 2009 Balance sheet structure Liquid assets Cash & Lending Financial Institutions Net Bond portfolio Net Other trading Household Mortgage Lending Swe+ Ger (Cover Pool) Deposits Financial Institutions Funding <1 year Funding, remaining maturity >1 year Short-term funding Banking book Lending Deposits from the public Stable funding Equity Assets Equity & Liabilities 23

24 Well prepared for regulations Proposed changes to Basel framework Bank capital redefined In line with SEB s capital actions SEB remains very well capitalised Supplementary Leverage Ratios Well placed due to high capital levels and relative size of off-balance sheet exposures Liquidity & funding Calibration during consultation period will be key SEB has more stable funding than illiquid assets Cyclical & systemic effects Proven pro-active anti-cyclical policies and actions Additional risk exposures Further details on proposed changes required for detailed assessment 24

25 Summary and Strategic Focus 25

26 SEB in a position of strength Tier I ratio 13.9% >18 mths matched-funding Leverage ratio 18x (FDIC) Reserve ratio 69% Liquidity reserves >10% Higher pre-provision profit Stable asset quality Systemic support Stronger exit from 2009 than entry Supported customers throughout crisis International banks Individual support Still in intensive care Withdrew support from regional markets and customers Recommended dividend: SEK 1 per share 26

27 SEB strategy going forward Nordics Expand Large Corporate and Institutions local presence Grow market share Germany Expand Large Corporate and Institutions Sweden Preserve Large Corporate and Institutions leading market position Increase Retail s accessibility Attract more assets under management 27

28 Outlook 2010 Strong position and diversified earnings base Positioned for market recovery but 2010 will be a challenging year Underlying cost base under control Investing in areas of proven expertise High asset quality in Nordics and Germany improvement in the Baltics Recovery phase already started provisions to fall 28

29 Swedish housing market 29

30 Swedish public finances are strong General government gross debt, % of GDP Change relative 2007 EU-27 Euro-zone General government gross debt, % of GDP Euro-zone Germany Germany EU Sweden 5 50 Sweden

31 Swedish house prices International comparison UK Denmark Spain Sweden Germany France Netherlands Source: Reuters EcoWin 31

32 Low residential investments and number of housing starts International comparison Housing investment in relation to GDP, seasonally-adjusted data (%) Sweden Denmark Spain Norway UK US Jan-93 Oct-95 Jul-98 Apr-01 Jan-04 Oct-06 Jul-09 Source: Riksbank Stability Report 2009: Number of housing starts in relation to population (%) Sweden Denmark UK Norway Spain USA Jul-92 Apr-95 Jan-98 Oct-00 Jun-03 Mar-06 Dec-08 Source: Riksbank Stability Report 2009:2 32

33 Low lending rates International comparison jan maj sep jan maj sep jan maj sep United Kingdom, std var. rate Sweden, 3 months Denmark, 0-1y Netherlands, <1y France, 5y-10y Spain,1y-5y Germany, 1y-5y Source: Reuters EcoWin 33

34 Interest rate payments share of income Close to historical lows Majority of households have floating mortgage rates According to stress tests by the Swedish Riksbank, households debt-servicing ability is affected primarily by higher mortgage rates Swe: Household debt and interest ratio % of disposable income Interest payments, after tax (RHS) The Riksbank's forecast Debt Source: Statistics Sweden, The Riksbank, SEB

35 Swedish household debt as share of GDP Household debt, % of GDP Denmark NL UK Sweden Germany France Spain Source: Reuters Ecowin, SEB

36 High household savings ratio International comparison Household savings ratio, % of disposable income partly 17.5 forecasts Germany Spain UK Denmark Sweden France Netherlands Source: OECD 36

37 Labour market significantly stronger than RB forecast already in Q4 Stress tests show that increased unemployment only affects the banks loan losses to a small extent. Although the proportion of vulnerable households increases if unemployment rises by 6%-points, the potential loan losses only increase marginally Swe: Unemployment, % of labour force The Riksbank's forecast 3-m onth average Source: Statistics Sweden, Sveriges Riksbank 37

38 Majority of Assets and Debt held by households with higher income % Share of total debt Share of financial assets Share of real assets Income group 1 has the lowest disposable income Income group 5 the highest Income group 1 Income group 2 Income group 3 Income group 4 Income group 5 Source: Sveriges Riksbank Nov

39 Swedish Covered Bonds 39

40 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 For more, see: 40

41 Bankruptcy of the issuing entity One or more adminstrator(s) in bankruptcy will be appointed. Ordinary bankruptcy proceedings and management of the cover pool Sell part(s) of the cover pool if necessary to pay the bond holders A new amendment to the Swedish Covered Bond Act will provide an explicit and broad mandate for the issuer s bankruptcy administrator to enter into loan, derivative, repo and other transactions with a view to achieving matching (liquidity, currencies, interest rates and interest periods) between the cover pool, covered bonds and derivative contracts. It is proposed that the amendments will enter into force on 1 July The cover cool, covered bonds and derivatives will be kept separated as long as the matching rules are met Covered bond holders and counterparties of registered derivatives will rank pari passu with a preferential claim in the liquidation of the covered pool 41

42 Comparison to Obligations Foncières Similarities Cover pool allows to mix mortgage assets and public sector assets (Sweden max 20%) Nominal and present value collateralisation Minimum over collateralisation mandatory, but no minimum level stipulated Valuation of underlying mortgage has comparable goals as the German one (mortgage lending value oriented, based on lasting long-term characteristics of property) Differences Universal credit institution with special license in Sweden vs. special banking principle in France 75% LTV limit for residential mortgage loans in Sweden vs. 80% in France 10% cap for commercial mortgages in Sweden, vs unrestricted utilization in France Geographical scope for eligible mortgage assets is tighter in Sweden (only EEA) than in France (EEA, Switzerland, USA, Canada, Japan) Geographical scope for eligible public assets is larger in Sweden (EEA and OECD, but not applied in practise) than in France (EEA, Switzerland, USA, Canada, Japan) Senior MBS tranches are not eligible in Sweden, but are eligible in France 42

43 The liquid Swedish Covered Bond market 43

44 Sweden fourth * largest mortgage covered bond market in Europe * If excluding structured bonds in the UK figures % Outstanding volumes in mortgage covered bonds within the EU 20.8% 14.4% * 12.4% End 2008, EUR bn 8.4% 7.9% Outstanding volumes in Swedish SEK covered and government bonds (SEK bn) Aug-99 Feb-01 Sep-02 Mar-04 Sep-05 Mar-07 Sep-08 Mar-10 Source: Statistics Sweden Outst vol in mortgages Outst vol in SGBs 5.1% % 1.5% 1.5% 1.4% 0 Denmark Spain Germany Source: European Covered Bond Council UK Sweden France Switzerland Ireland Norway Netherlands Others 44

45 Strong support from domestic investors Foreigners' share of Swedish bonds incl. repo positions Total outst, SEK bn 1,200 1, Dec- 98 Oct- 99 Aug- 00 Source: Riksbank, Statistics Sweden Jun- 01 Apr- 02 Feb- 03 Dec- 03 Total outst vol SGBs Foreign share of SGBs Oct- 04 Aug- 05 Jun- 06 Apr- 07 Feb- 08 Dec- 08 Oct- 09 Total outst vol mortgages Foreign share of mortgages 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Foreign share 45

46 Market activity during the financial crisis 0 Average daily turnover in Swedish mortgage bonds and mortgage related repos, SEK bn Mortgage related repos Mortgage bonds (spot) Government bonds (spot) Although volumes have been smaller and bid/ask spreads wider, the turnover in Swedish mortgage bonds must be deemed as decent also over the past two years. Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Source: The Riksbank Gross issuance volumes in SEK bonds (SEK bn) Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Source: Statistics Sweden Government bonds Mortgage bonds Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Throughout the crisis, Swedish mortgage institutions have been able to access liquidity through tapping the bond market. The cost, however, has of course been much higher than before the crisis. 46

47 Swedish covered bond spreads y spreads vs. swaps and government (bps) 5y Swedish constant maturity mtg vs. govt 5y Swedish constant maturity mtg vs. swap Source: SEB 47

48 The Swedish covered bond market Market share in terms of cover pool notional As of Q SEB, 13% SCBC, 8% LF Hypotek, 3% Landshypotek, 2% Swedbank Hypotek, 31% Nordea Hypotek, 17% Stadshypotek, 27% Source: Company information Issuance of mortgage bonds developed after the deregulations of financial markets during the 1980s. Conversions to covered bonds started in Today the entire Swedish mortgage bond market is covered. Five mortgage institutions dominate the Swedish covered bond market. 48

49 Underlying assets in Swedish cover pools Mostly comprised of residential mortgages. All mortgages located in Sweden. 70.9% of total lending to single-family homes, only 2.2% to multi-family housing. Tenant-owned apartments 22.3% Mortgage institutions' lending divided per collateral type Dec 2009 Multi-family housing 2.2% Agricultural 4.1% Other 0.3% Municipal guarantee 0.1% Single-family homes 70.9% Source: Statistics Sweden 49

50 SEK bn Outstanding volume concentrated in 2-5y segment Maturity profile of SEK-denominated bonds January Source: Company information, Reuters However, relatively low refinancing risk at redemptions by international standards thanks to: Swedish covered bond issuers market practice regarding redeeming bonds is to smooth refinancing risks over time. Well ahead of redemptions issuers mostly offer investors the opportunity to switch into a bond of longer maturity. 50

51 Reflects households choice of interest rate exposure 80% 70% 60% 50% 40% 30% 20% 10% Swedish households' interest rate exposure 70% 68% 65% 63% 60% 58% 55% 53% 0% Jan-01 Jan-02 Dec-02 Dec-03 Nov-04 Nov-05 Oct-06 Oct-07 Sep-08 Sep-09 50% Share of new loans to fixed rate, lhs Share of outstanding loans to fixed rate, rhs Source: Statistics Sweden 51

52 Net provisioning and credit losses % Net provisioning and credit losses / Lending to public 0.80% 0.60% 0.40% 0.20% 0.00% -0.20% Source: Statistics Sweden 52

53 The Swedish mortgage market displays excellent asset quality (1/2) Swedish Non-Performing Mortgages UK Prime RMBS Delinquency (90+ days) French Prime RMBS Delinquency (60+ days) 2.00% 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% Dutch RMBS Delinquency (90+ days) Danish Residential Mortgage Arrears * Source: Moody s for UK and Dutch RMBS data, Association of Danish Mortgage Banks for Danish mortgage data *Sep-2009 for Swedish data, Oct-2009 for UK and Dutch data, Jun-2009 for Danish data Danish Residential Mortgage Arrears, payments due (interest and amortisation) on a due at year end, which has not been repaid 3.5 months after this date, as a percentage of the total amount due at year end Danish mortgage loss data not available 53

54 The Swedish mortgage market displays excellent asset quality (2/2) Swedish Mortgage Losses (Gross) UK Prime RMBS Cumulative Losses Dutch RMBS Cumulative Losses French Prime RMBS Cumulative Losses 0.14% 0.12% 0.10% 0.08% 0.06% 0.04% 0.02% 0.00% * Source: Moody s for UK and Dutch RMBS data *Sep-2009 for Swedish data, Oct-2009 for UK, Dutch and French data 54

55 SEB Swedish mortgage lending Strict credit policy and excellent asset quality 55

56 Marketing and Origination Multiple distribution channels the local branches Internet Real Estate dept. Strong cross selling - high percentage of customers with existing banking or insurance relationship is beneficial to SEB:s credit underwriting. The loan to be secured by the first mortgage is the cornerstone of residential mortgage lending and customers relationship with SEB. 56

57 Granting of mortgage loans Private individuals Strict underwriting process The borrower s ability to repay and service the mortgage loan. Mortgages are never granted purely on the basis of LTV. Must have an income above a certain level and no payment remarks. The income is decisive for the loan size. The income must be high enough to pay interest rates on the entire loan even if interest rates would rise significantly. No income No loan. 80% of property value for single family and tenant owned apartments Strict enforcement procedures in case of payment default If the property value is not high enough to cover the mortgage loan, the borrower are still indebted until the entire loan is repaid. A negative credit history of the borrower will be reported to the Swedish independent credit agency (UC) which impairs the borrower s access to additional credit. 57

58 Granting of mortgage loans Multi family houses Decisive factor is the understanding of the purpose. The ability of the asset to generate a sufficient cash-flow. The legal situation. The counterparty has to have clear and immediate access to the cash-flow and the assets taken in as collateral. Thorough analysis Cash flow analysis > 5yrs (Object analysis) Risk class shall be 10 or better (Basel II 16-grade scale) in new credit granting Cash flow according to credit policy requirements Amortization plan depending on the geographical location Tenor maximum 10 yrs Loan-to-value < 70% of the market value but depending on geographic location 58

59 SEB mortgage lending Rest of market SEB AB Development of market share SEK bn % 11.5% 12.3% % % % % 88.5% 87.7% 87.5% 87.4% 87.6% 87.4% 87.0% Source: SCB SEB mortgage lending by interest rate type 28% Total Volume Floating Fixed 72% New Volume 6% Floating Fixed 94% Development SEB mortgage lending by property type SEK bn Multi-family Houses Tenent-owner ap. Single-family Houses % 17.0% 58.5% % 23.1% 60.5%

60 Development of mortgage lending and overall margin SEK bn 300 Private Corporate Margin 1, , , , ,5 50 0,3 0 Q2 07 Q4 Q2 08 Q4 Q2 09 Q4 0,0 60

61 Excellent asset quality 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% Non-performing amount Provisions and losses (net) Provisions and losses (gross) -0.20%

62 SEB Covered Bonds Strong cover pool Information regarding SEB Cover pool/covered Bonds is available on and You will find it under Investor Relations/Debt investors/covered bonds The information is updated quarterly 62

63 Characteristics of the cover pool Dec 2009 Loans originated by Pool type / Pool notional Type of loans Geographic distribution Substitute assets Number of loans Average loan balance & Average / property Skandinaviska Enskilda Banken AB (publ) Dynamic / SEK 259bn: 66% single family, 23% tenant owned, 11% multi family 100% residential Swedish mortgages A concentration to urban areas 70% in the three largest cities No substitute assets are included 482 T Weighted average LTV Approx 45% Over Collateral 62% SEK 539 T & SEK 1,228 T Rate type Float 72%, Fixed 28% Loans in arrears >60 days Not included in matching calculations but remain in the cover pool 63

64 Asset and Liability structure Dec 2009 SEK bn Cover Pool Float Cover Pool Fixed Assets Covered Bonds Liabilities 64

65 SEB Benchmark Covered Bonds Rated Aaa by Moody s SEK bn Benchmark Mortgage Bonds SEK Benchmark Mortgage Bonds EUR

66 Summary High quality 100% Swedish residential mortgages Concentration to the three largest cities and the rest to larger urban areas Less than 0.5bp in non-performing loans and net provisioning and credit losses Cover pool notional amount is SEK 259 bn Weighted average LTV is 45% Notional amount of outstanding covered bonds SEK 161 bn Over collateral is 62% by December 2009 Rating: Aaa by Moody s 66

67 Appendix Consumer Credit Act Enforcement procedures 67

68 Consumer Credit Act (1993) It gives borrowers a right to prepay loans, in part or in full. In the case of fixed rate loans, the lender may levy a compensatory charge for early termination of the fixed rate loan. Such a compensation may not exceed the difference i margin on the interest rate of the loan and the current Swedish government bond interest for the period up to the date to which the rate was fixed, plus 1 per cent. The borrower may repay variable interest loans, in part or in full, without incurring any such charge. It is generally accepted that under normally conditions where the borrower has maintained the scheduled payments of principal and interest, the Act is also intended to protect the borrower from having to repay a term loan on the maturity date, when the borrower reasonably could have expected that the loan would be prolonged. SEB s policy reflects this approach. 68

69 Enforcement procedure for recovering defaulted amounts on residential mortgages SEB follows enforcement procedures which are consistent with Swedish market practice and Swedish law. Surveillance group Arrears procedure are begun if the borrower fails to make a required payment within nine days of its due date. SEB will then send reminder notice by post to the borrower. If there is no response from the borrower reminder 2 and 3 are sent out automatically. If the amount is still unpaid after 90 days after its due date the Surveillance group will try to initiate discussions about the unsettled amount. Borrower is notified of the potential withdrawal of the loan. When the amount due is 2 per cent of the total claims SEB will notify the borrower by registered post that the loan has been cancelled and is due in full. Management produces monthly delinquency reports which show 60- and 90-day delinquency data on an aggregate level. 69

70 Enforcement procedure for recovering defaulted amounts on residential mortgages Collection group If the non-payment is not corrected within a 30-day waiting period following the borrower's receipt of the notice of the withdrawal, the matter is transferred to the Collection group. The Collection group initiates enforcement proceedings by applying to the state enforcement office for an enforcement order against the borrower Borrower has to appeal claim within 10 days from receipt. Enforcement order is registered 2 weeks after borrowers receipt of claim One month from registration of enforcement order, enforcement order takes legal force SEB applies for forced sale within 2 months after registration of the enforcement order. While Kronofogdemyndigheten is proceeding with the enforcement process, the Collection group, may initiate discussions with the borrower in an effort to effect the sale of the property on a voluntary basis. Such discussions may result in a rescheduling of payments due on the loan. 70

71 The Kronofogdemyndigheten Kronofogdemyndigheten, the state enforcement service, is responsible for carrying out court enforcement orders over assets in Sweden, including those for collection for unpaid debts, whether secured or unsecured. A lender begins the enforcement process by obtaining an enforcement order from the Kronofogdemyndigheten or the court. Upon registration of such an order, a lender is entitled to apply for the enforcement of his claim. If the loan is secured, the application must stipulate pledged real estate mortgage. Upon registration of an application, the Kronofogdemyndigheten takes steps to determine the identity of all secured creditors and to notify them accordingly. Forced sale Kronofogdemyndighetens sale must normally be conducted by advertised public auction held in the district in which the secured property is located and in most cases within four months of the enforcement order. In exceptional cases the sale may be conducted by other means if they are considered more expedient and it is clear which encumbrances there are on the property. Having obtained a an appraisal of the property value, Kronofogdemyndigheten will decide if it is reasonable to assume that Kronofogdemyndighetens costs for the forced sale and the claims for holders of any pantbrev ranking prior to that of the highest ranking applicant, would be satisfied at a public auction. 71

72 The Kronofogdemyndigheten Forced sale If this is not the case the claim will not be enforced. The highest ranking applicant can reject any result, which does not fully satisfy his claim. Kronofogdemyndigheten, representing the interest of the borrower, can reject any result if, in its view, a substantially higher price could be achieved at a subsequent auction. If the results of the first auction are rejected or the property is not sold in the absence of buyers, a second auction is scheduled. The proceeds received under such a forced sale are applied in each case first to satisfy Kronofogdemyndighetens costs (which, under current regulations, include an initial fee of 1 per cent. of the property s tax value (taxeringsvärde), a sales fee of 2 per cent. of the same value, costs for property appraisal, advertising, insurance, unoccupied property protection and a fix charge of SEK 1000) and then in satisfaction of the claims in order of their priority. If a lenders claim exceeds the amount distributed to him, the excess of the claim becomes an unsecured obligation of the borrower who remains liable for the deficiency. Due to deterioration of the property, the absence of the normal seller s representations of the property and warranties as to the property s freedom from undisclosed defects and the limited participation of buyers in the auction process, particularly in less populous areas of the country, the prices realised on the sale of a property at auction are typically less than they would be, realised in a sale of a property in other circumstances. 72