Debt Investor Presentation Financials Q Thomas Bengtson John Arne Wang

Transcription

1 Debt Investor Presentation Financials Q Thomas Bengtson John Arne Wang More information Available on You will find it under Investor Relations

2 Disclaimer IMPORTANT NOTICE THIS PRESENTATION IS NOT AN OFFER OR SOLICITATION OF AN OFFER TO BUY OR SELL SECURITIES. IT IS SOLELY FOR USE AT AN INVESTOR PRESENTATION AND IS PROVIDED AS INFORMATION ONLY. THIS PRESENTATION DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS MATERIAL TO AN INVESTOR. THIS PRESENTATION IN AND OF ITSELF SHOULD NOT FORM THE BASIS OF ANY INVESTMENT DECISION. BY ATTENDING THE PRESENTATION OR BY READING THE PRESENTATION SLIDES YOU AGREE TO BE BOUND AS FOLLOWS: This presentation is not an offer for sale of securities in the United States, Canada or any other jurisdiction. This presentation may not be all-inclusive and may not contain all of the information that you may consider material. Neither SEB nor any third party nor any of their respective affiliates, shareholders, directors, officers, employees, agents and advisers makes any expressed or implied representation or warranty as to the completeness, fairness or reasonableness of the information contained herein and none of them accepts any responsibility or liability (including any third party liability) for any loss or damage, whether or not arising from any error or omission in compiling such information or as a result of any party s reliance on or use of such information. Certain data in this presentation was obtained from various external data sources and SEB has not verified such data with independent sources. Accordingly, SEB makes no representations as to the accuracy or completeness of that data. Such data involves these risks and uncertainties and is subject to change based on various factors. Any securities, financial instruments or strategies mentioned herein may not be suitable for all investors. The recipient of this presentation must make its own independent decision regarding any securities or financial instruments and its own independent investigation and appraisal of the business and financial condition of SEB and the nature of the securities. Each recipient is strongly advised to seek its own independent financial, legal, tax, accounting and regulatory advice in relation to any investment. This presentation does not constitute a prospectus or other offering document or an offer or invitation to subscribe for or purchase any securities and nothing contained herein shall form the basis of any contract or commitment whatsoever. This presentation is being furnished to you solely for your information and may not be reproduced, copied, shared, disseminated or redistributed, in whole or in part, in any manner whatsoever to any other person. The distribution of this presentation in certain jurisdictions may be restricted by law and persons into whose possession this presentation comes should inform themselves about, and observe, any such restrictions. Safe Harbor Certain statements contained in this presentation reflect SEB s current views with respect to future events and financial and operational performance. Except for the historical information contained herein, statements in this presentation which contain words or phrases such as will, aim, will likely result, would, believe, may, result, expect, will continue, anticipate, estimate, intend, plan, contemplate, seek to, future, objective, goal, strategy, philosophy, project, should, will pursue and similar expressions or variations of such expressions may constitute forward-looking statements. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause SEB s actual development and results to differ materially from any development or result expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, SEB s ability to successfully implement its strategy, future levels of non-performing loans, its growth and expansion, the adequacy of its allowance for credit losses, its provisioning policies, technological changes, investment income, cash flow projections, exposure to market risks as wells other risks. SEB undertakes no obligation to publicly update or revise forward-looking statements contained herein, whether as a result of new information, future events or otherwise. In addition, forward-looking statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the date of this presentation. 2

3 Content SEB s Core Markets, Franchise, Financial Results and Strategy p.5 Credit Portfolio and Asset Quality p.20 Capital p.25 Balance Sheet, Liquidity and Funding p.29 Additional information p.38: - Macro, Income, Corporate Credit Portfolio, Funding mix p.39; - Swedish Housing market p.47; - SEB s Swedish Residential Mortgage Lending p.55; - SEB s Swedish Pool and Covered Bonds p.61 * Fx rate March 31, 2015 : EUR/SEK = 0.11 ; SEK/EUR =

4 Summary SEB in Brief March 2015 Strong Macro-Economic Operating Environment Operates principally in economically robust AAA rated European countries Long-term Ownership Structure SEB s founder in 1856, the Wallenberg family, remains the main shareholder Diversified and balanced Business Model with strong operating leverage Resilient earnings due to a diversified and more balanced business and income mix than Nordic peers Growing importance of Swedish Retail Banking and an increased Nordic corporate client base Improved efficiency, C/I ratio is 48% High Asset Quality and Low Risk Flow Business in trading operations Increasing low-risk exposure Low level of non-performing loans, 0.7% (Impaired loans +loans past due 60 days) Low level of net credit losses, 0.05% 55 negative trading days in total since 2006 with an average loss of EUR 1.5m Robust Liquidity and Funding Position Lower dependency than Nordic peers on wholesale funding Total liquid resources is 2.2x larger than wholesale funding maturities within 12 months Strong capital generation and one of Europe s Best Capitalized Banks Strong internal capital generation of 3% p.a. (Net profit / REA before dividend) CET 1 ratio of 16.6% and Total Capital Ratio of 21.1% Solid Rating Position Moody s A1 (positive) / S&P A+ (negative) / Fitch A+ (positive) Moody s: Improving recurrent earnings, strong asset quality and capital adequacy S&P: The introduction of BRRD in EU Fitch: Risk profile is in line with AA- rated banks 4

5 SEB s Core Markets, Strategy, Franchise and Financial Results 5

6 SEB s Core Markets and Business Well diversified business in a strong economic environment Operates principally in economically robust AAA countries Diversified Business mix Total operating income from business divisions rolling 12m March 2015 SEK 45.0bn (EUR 4.8bn) Norway Denmark Germany Sweden Finland Estonia Latvia Lithuania Lithuania Wealth Management and Life & Pension Baltic Retail banking 8% 23% 28% Large Corporates & Institutions -Corporate Banking 53% -Markets 31% -Transaction Banking 16% 41% Sweden 47% Other Nordics 26% Germany 15% RoW 12% Retail banking Universal banking in Sweden and the Baltics Principally corporate banking in the other Nordic countries and Germany 6

7 SEB s Key Figures Summary - Strong Financial Development Key Figures Mar 31, ) 2010 Return on Equity, % Cost /Income ratio, % Common Equity Tier 1 capital ratio, % 2) NA NA NA Tier I capital ratio, % 2) NA NA NA Total capital ratio, % 2) NA NA NA Net credit loss level, % 3) Reserve ratio, % 4) NPL coverage ratio, % 5) NPL / Lending, % 5) ) Restated for introduction of IAS 19 (pension accounting). 2) Mar 31, 2015 and 2014 is according to CRD IV/CRR and 2013 was estimated based on SEB s interpretation of future regulation. 3) Net aggregate of write-offs, write-backs and provisioning. 4) Total reserve ratio for individually assessed impaired loans. 5) NPLs = Non Performing Loans [individually and portfolio assessed impaired loans (loans >60 days past due)] 7

8 SEB s Business Divisions Financial Development Q vs. Q Resilient earnings due to a diversified and more balanced business and income mix than Nordic peers Increased franchise and broad product offering benefitted the Large Corporate and Institutional business in Q vs. Q High net inflows of assets under management due to strong sales and positive equity markets benefitted the Wealth and Life divisions Resilient Baltic business maintains good profitablity despite geo-political uncertainty Retail Banking somewhat impacted by interest rate environment and subdued loan demand among SMEs SEK m 3,000 2,500 Operating profit before net credit losses Jan-Mar 2014 Jan-Mar 2015 March 31, ,000 1,500 1, Large Corporates and Institutions Retail Banking Wealth Management Life Baltic Business equity, SEK bn * Return on equity, % Cost / income ratio ) Return on Business Equity 8

9 Effects of SEB s Strategy to raise divisional performance Income growth in line with communicated target Business Division Target Actual growth Large Corporates and Institutions ~15% +14% Swedish Retail Banking ~20% +14% Life & Wealth ~5% +10% Baltic ~15% +7% Group ~15% +12% 9

10 SEB s Business Profile Development Increasing and more stable operating income flows driven by a growing number of clients and a greater share of their business Business sectors importance Profitable growth of Swedish retail and Nordic large corporate and institutional business Swedish Retail Banking Large Corporate and Transaction Banking Life and Wealth Markets Business Baltics Average quarterly total operating income in SEK m */ 2008-Mar % 21% 21% 23% 23% 7% 15% 25% 26% 27% Jan-Mar 2015 Geographic importance Growing Nordic importance and deleveraging in the Baltics Nordics excl. Sweden 16% Baltics Estonia 4% Latvia 4% Lithuania 6% Germany ** Finland Denmark 8% 3% 6% Norway 7% 14% 23% 62% Sweden Baltics Estonia 3% Other Latvia 2% Lithuania 3% Germany ** 7% 4% Finland 7% 8% 6% Nordics excl. Sweden 19% Denmark Norway FY 2008 Jan-Mar 2015 * Operating income of each area as a percentage of total operating income of the businesses ** excluding centralized Treasury operations 8% 60% Sweden 10

11 SEB s Business Profile Development Balanced business model creates diversified and stable income Split of operating income Non-NII is more important than NII Average quarterly income in SEK m 2006-March % 2% 11% 9% % 45% % % 43% Jan-Mar 2015 Net interest income Net commission and Life insurance Net financial income Net other income Strong market shares and high recurring income generation increase fees and commissions Average quarterly fees and commissions income in SEK m 2006-March % 14% 26% 14% 12% 36% % % 38% Jan-Mar 2015 Payments, card, lending Asset value based Activity based Life insurance income 11

12 SEB s Large Corporates & Institutions Business Entrenched Business Franchise and growing Customer Base Increasing stability of income due to more clients and cross-selling Split of average quarterly income 2006-Q Corporate & Transaction Banking Markets 100% 90% 80% 70% 30% 60% 47% 50% 40% 30% 20% 53% 70% 10% 0% Q Efficient large corporate business but new regulatory capital regime targets corporate business A more than doubling of allocated capital to SEB s Large Corporates and Institutions business the last few years C/I ratio Business Equity RoBE 1) Q % SEK 61.6bn 12.0% % SEK 52.3bn 13.4% % SEK 48.8bn 12.9% % SEK 36.7bn 14.3% % SEK 26.1bn 20.6% % SEK 25.8bn 20.5% 1) Return on Business Equity Low risk in trading operations renders minimal losses in the markets operations 55 negative trading days out of 2,066. Average loss SEK 14m (USD 1.6m) Daily trading income Jan 1, 2007 March 31,

13 SEB s Large Corporates and Institutions Business Growth initiatives fuel geographical diversification and income New Clients share of Total Clients income 413 Operating profit per geography* in SEK bn (SEKm) Denmark ** CAGR % Finland % % Norway % 6% 8% 11% 14% Germany % Client base New clients *FX adjusted **Excluding one extraordinary item 13

14 SEB s Swedish SME and Private Individuals Business Successful business strategy increases Retail Banking s importance Increased relative importance of income Focused and successful client acquisition strategy Dec 2007 March 2015 Strategic move in 2008 resulted in a more efficient, professional, advisory-driven organization and customer centric distribution capacity 20% 27% Successful re-organization, product offerings, accessibility 24/7 and focus on long-term customer relationships increased the number of clients, business volume and operating profit A cultural change focus on business acumen and local ownership Success of strategy confirmed by EPSI * ratings 2014 on customer satisfaction where SEB holds a leading position SEK m 1,800 1,600 1,400 1,200 1, Substantially increased operating profit Average quarterly operating profit Q Strong development of efficiency and profitability despite 3.5x more allocated capital C/I ratio Business Equity RoBE 1) Q % SEK 34.0bn 14.3% % SEK 24.6bn 20.7% % SEK 20.2bn 21.9% % SEK 14.4bn 22.3% % SEK 10.8bn 21.4% % SEK 9.7bn 14.5% 1) Return on Business Equity * EPSI = Extended Performance Satisfaction Index 14

15 SEB Baltic division Strong profitability despite uncertain times March 2015 Relatively good economic environment Strong development of key ratios Domestic markets cushion export challenges Falling unemployment and real income increase Consumption and investments Economic health remains above Eurozone average Deleveraged corporates and private individuals Competitive industry New markets diversification of trading partners Small economic imbalances budget deficit and government debt SEB s business and exposures are of a different nature than prior to the financial crisis C/I Business Equity RoBE 1) Q % SEK 8.5bn 14.6% % SEK 8.9bn 14.5% % SEK 8.8bn 12.9% % SEK 8.8bn 9.7% % SEK 8.8bn 29.6% 2/ % SEK 11.8bn 2.2% 1) Return on Business Equity 2/ Write-backs of provisions of SEK 1.5bn Maintaining leading market shares in lending Q1 SEB Q2 04 Q3 Q4 Q1 Swedbank Q2 05 Q3 Q4 Q1 Q2 06 Q3 DNB Q4 Q1 Estonia Q2 07 Q3 Q4 Nordea Q1 Q2 08 Aug Sep Sampo/Danske Bank 50% Estonia 50% Latvia 50% Lithuania** 40% 40% 40% 30% 30% 30% 20% 20% 20% 10% 10% 10% 0% Q2-11 Q4 Q2-12 Q4 Q2-13 Q4 Q2-14 Q4 0% Q2-11 Q4 Q2-12 Q4 Q2-13 Q4 Q2-14 Q4 0% Q2-11 Q4 Q2-12 Q4 Q2-13 Q4 Q2-14 Q4 * Competitors Q volumes are not available at time of publication and SEB Q figures are February 2015 ** Lithuania Q and Q not available at time of publication 15 Source: Estonian Financial Supervision Authority, Association of Latvian Commercial Banks, Association of Lithuanian Banks, SEB Group

16 Effects of SEB s strategic actions Improving operating leverage 1) Average quarterly income (SEK bn) Average quarterly expenses (SEK bn) % % 2) Jan-March Jan-March 2015 Larger Number of Clients Larger Share of Clients Wallet Increased Cost Efficiency Operating leverage Average quarterly profit before credit losses (SEK bn) % Jan-March ) Excluding one-offs (restructuring costs in 2010, costs for bond buy-back and IT impairment in 2012, capital gains from sale of MasterCard shares and Euroline Card Acquiring Services in 2014) 2) Estimated IAS 19 (pension accounting) costs in

17 Operating leverage Increased leverage on existing cost caps Activities Decentralisation Synergies and streamlining Investments in growth and customer interface Agile IT development Transfer of business operations to Riga and Vilnius Business 100% responsible for IT development Self-financing growth Operating expenses (SEK bn) Cost cap <22.5bn extended to

18 Operating leverage All divisions are driving operating leverage SEKbn Large Corporates and Institutions Operating income Operating expenses Retail Banking Op Profit CAGR Op Profit CAGR % +27% Life & Wealth Op Profit CAGR SEB Group Op profit CAGR 1),2) +15% Baltic 3) Op Profit CAGR % +40% 1) Excluding one-offs (restructuring costs in 2010, costs for bond buy-back and IT impairment in 2012, capital gains from sale of MasterCard shares and Euroline Card Acquiring Services in 2014) 2) Estimated Pension (IAS 19) costs in ) Balltics adjusted for a one-off write down of SEK 36m on an average quarterly basis in

19 SEB s Business Profile Financial Targets Profitability Capital Return on Equity Common Equity Tier 1 ratio Competitive with peers - long-term aspiration of 15% 150 bps over the regulatory requirement Dividend Pay-out ratio 40% or above of EPS Ratings Liquidity Efficiency Funding access and credibility as counterpart Liquidity Coverage Ratio Nominal cost cap Maintain credit ratings in support of competitive funding access and costs and as a viable counterpart in financial markets > 100% according to Swedish requirements < SEK 22.5bn in 2015 and 2016 C/I ratio Q = 48% 19

20 Credit Portfolio and Asset Quality 20

21 Benchmarking Nordic banks Credit Risk Business Sector Composition March 2015 Sector credit risk composition (EAD) 1) Other Retail other Retail mortgage Institutions Property management (incl. housing co-ops) Corporates 4% 5% 9% 5% 6% 27% 10% 16% 41% 38% 34% 38% 7% 12% 8% 12% 11% 29% 37% 33% 47% 9% 19% 19% 16% SEB DnB NOR Nordea SHB Swedbank In SEKbn 1,711 1,859 3,782 2,013 1,609 1) Internal Ratings Based ( IRB ) 2) DnB NOR s institutional exposure is classified as Standardized not as IRB Source: Interim reports, Fact books and Pillar 3 documents 21

22 Total Credit Portfolio (on and off balance sheet), excl. banks More Nordic and low-risk exposure March 2015 Credit Portfolio geographic split development SEK 1,649bn (EUR 177bn) SEK 1,946bn (EUR 209bn) 4% 5% 12% 7% 25% Total Nordics from 59% to 76% 12% 16% Other Baltics Germany Credit Portfolio - Business Sector split SEK 1,946bn (EUR 209bn) Household nonmortgage 4% Public Sector 5% 10% 4% 14% Sweden from 48% to 60% 6% 22% 31% 30% Other Nordics Swedish residential mortgage Swedish household mortgage Sweden excl. residential mortgage Residential Mortgages 32% Commercial Real Estate 9% Corporates 50% Dec '08 Mar '15 Development of certain business areas relative importance 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Dec '08 Dec '09 Dec '10 Dec '11 Dec '12 Dec '13 Dec '14 Mar '15 Large corporates Swedish Residential Mortgage Commercial Real Estate Baltics, total Swedish SMEs 22

23 Asset Quality the Group and Geographic regions Continuously improving non-nordic asset quality supports overall high asset quality Non-performing loans development (SEK bn) SEK bn Individually assessed - impaired loans with specific reserves Portfolio assessed - past due >60 days Dec '07 Dec '08 Dec '09 Dec '10 Dec '11 Dec '12 Dec '13 Dec'14 Jan-Mar 2015 Dec '07 Dec '08 Dec '09 Dec '10 Dec '11 Dec '12 Dec '13 Dec '14 Jan-Mar 2015 Dec '07 Dec '08 Dec '09 Dec '10 Dec '11 Dec '12 Dec '13 Dec '14 Jan-Mar 2015 Dec '07 Dec '08 Dec '09 Dec '10 Dec '11 Dec '12 Dec '13 Dec '14 Jan-Mar 2015 Group Nordics Germany Baltics March 31, 2015 NPL % of lending NPL coverage ratio 0.7% 55% 0.5% 46% 0.4% 77% 4.1% 62% 23

24 Asset Quality the Group and Geographic regions Low net credit losses Nordic countries, net credit losses in % Baltic countries, net credit losses in % Mar (negative = reversals) Mar-15 Germany, net credit losses in % SEB Group, net credit losses in % (negative = reversals) (negative = reversals) Mar Mar-15 Net credit losses = the aggregated net of write-offs, write-backs and provisions 24

25 Capital 25

26 SEB s capital generation Increasing Earnings and Capital Generation SEK bn Profitable throughout the Financial Crisis Profit before credit losses Operating profit Strategic investments and divestments Highest operating profit ever Mar-15 Strong Capital Generation 3.5% 3.0% 2.5% 2.0% Net Profit / REA (RWA) 1.63% 2.00% 2.47% 3.12% 2.99% 1.5% 1.0% 1.23% 0.95% 0.5% 0.0% 0.16% Mar-15 Note: All issuer s financial figures are based on 2014 and historical financials RWA Basel II without transitional floor REA Basel III fully implemented 26

27 SEB s Capital Base Strong Capital Base composition Basel III - Own Funds and Basel III ratios Per cent % 21.1% % % 15.0% 16.3% 16.3% 16.6% Tier 2 Legacy Hybrid Tier 1 Additional Tier 1 Common Equity Tier March 31, 2015 Full year 2013 Full year 2014 March 31, 2015 Common Equity Tier 1 ratio 15.0% 16.3% 16.6% Additional Tier 1 ratio N/A 1.4% 1.5% Legacy Tier 1 ratio 2.1% 1.8% 0.7% Tier 2 ratio 1.0% 2.7% 2.3% Risk Exposure Amount SEK bn Leverage ratio 4.2% 4.8% 4.1% Own Funds Basel I / 80 % of 147% 170% 162% Capital requirement Basel I * * Transitional rules in place in Sweden until further notice 27

28 Current SFSA s capital requirements SEB s current capital ratios surpass SFSA s required ratios CET 1 Requirements across Major Swedish Banks by the SFSA Composition of SEB s CET 1 and Total Capital Requirements by the SFSA Pillar I Requirement Pillar II Requirement 15.6% 5.3% 17.7% 7.2% 14.7% 4.5% 19.1% 8.5% Combined Buffer Requirement under Pillar 1 CCB CcyB SRB Total 15.6% 2.5% 0.3% 3.0% Combined Buffer Requirement under Pillar 1 Total 20.1% 2.5% 0.3% 3.0% 2.0% 2.2% Pillar 2 requirements Systemic Risk 2.0% 2.0% 10.3% 10.5% 10.2% 10.6% Mortgage Risk Weight Floor Requirements Other Individual Pillar 2 requirements Min CET1 requirements under Pillar 1 1.8% 1.5% Pillar 2 requirements Min Pillar 1 Requirements 3.5% 4.5% 4.5% AT1 1.5% & T2 2.0% SEB SHB Nordea Swedbank SEB CET1 Requirement SEB Total Capital Requirement Note: Above capital requirements published by the SFSA on May 22, Methods to use to evaluate the capital requirements as regards credit-related concentration risk, interest rate risk in the banking book and pension risk under Other Individual Pillar 2 requirements were published by the SFSA published on May 11, By Sep 30, SFSA will publish the final results of its total capital evaluation including Pillar 2 requirements. 28

29 Balance sheet, liquidity and funding 29

30 Balance sheet Diversified and Liquid Balance Sheet Total Assets SEK 2,979bn (EUR 320bn) March 31, % Other Other 90% Life Insurance Life Insurance 80% Credit Institutions Credit Institutions 70% Liquid assets 60% 50% 40% 30% Banking book 1) 20% 10% Derivatives Client Trading Cash & Deposits in Central Banks Liquidity Portfolio Household Lending Corporate & Public Sector lending Derivatives Client Trading Funding, remaining Central maturity<1y Bank deposits 2) Centra Bank deposits 2) Funding, remaining maturity >1y Household Deposits Corporate & Public Sector Deposits Short-term funding Stable funding 0% Assets Equity Liabilities 1. A relatively large share of lending is contractually short which allows for swift re-pricing to adjust for e.g. changed funding costs. 2. Central bank deposits refer to long-term relationship-based deposits from central banks and do not refer to borrowings from central banks 30

31 Balance Sheet Strategic lending growth funded through deposits and long-term debt SEB Group, March 2015 (SEK bn) Household lending, deposits and covered bond funding Lending Deposits Covered Bonds Net = lending - deposits - outstanding cov bonds Overcollateralisation in Swedish cover pool Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Corporate & public lending, deposits and senior bonds Lending Deposit Senior Debt Net = Lending - deposits - senior debt Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Household lending growth funded by deposit increases and issued covered bonds Corporate lending growth funded by deposit increases and issued senior unsecured bonds 31

32 Funding Base Diversified funding and stable structural funding position SEK bn 1, Q Stable development 3% of deposits from corporate sector and private individuals Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Total Corporate sector Private sector Public sector Treasury Total Funding Base SEK 1,968bn Wholesale funding SEK 793bn */** */** (EUR 211bn) (EUR 85bn) Wholesale funding Private Individual deposits Financial Institution deposits Public entity deposits 33% 14% 4% 4% 40% March 31, % 19% 4% 31% CPs/CDs Mortgage Cov Bonds SEB AB Mortgage Cov Bonds SEB AG Senior Debt Central Bank deposits Corporate deposits 3% 4% 7% 34% 13% 42 % Subordinated debt * Excluding repos ** Excluding public covered bonds issued by SEB AG which are in a run-off mode 32

33 Short-term Funding CP/CD funding supports Markets business SEK bn Volumes - Net Trading Assets 1 adaptable to CP/CD funding access Net trading assets Mar-15 Feb-15 Jan-15 Dec-14 Nov-14 Oct-14 Sep-14 Aug-14 Jul-14 Jun-14 May-14 Apr-14 Mar-14 Feb-14 Jan-14 Dec-13 Nov-13 Oct-13 Sep-13 Aug-13 Jul-13 Jun-13 May-13 Apr-13 Mar-13 Feb-13 Jan-13 Dec-12 Nov-12 Oct-12 Sep-12 Aug-12 Jul-12 Jun-12 May-12 Apr-12 Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11 Jun-11 May-11 Apr-11 Mar-11 Feb-11 Jan-11 Dec-10 Nov-10 Oct-10 Sep-10 Aug-10 Jul-10 Jun-10 May-10 Apr-10 Mar-10 Feb-10 CP/CD Duration - CP/CD fund net trading assets with considerably shorter duration SEK bn Average duration (days) Net Trading Assets CP/CD funding Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar Net Trading Assets = Net of repoable bonds, equities and repos for client facilitation purposes 33

34 Long-term Funding Issuance of long-term funding exceeds maturities Senior unsecured and Covered bond Issues Issuance of bonds Issued Covered Bonds Matured Covered Bonds SEK bn Issued Senior Unsecured Matured Senior Unsecured Instrument Q Senior unsecured Covered bonds SEB AB Covered bonds SEB AG ) Subordinated debt Total ) Q

35 Liquidity Sizable liquidity buffer March 2015 SEB s Total Liquid Resources 229 % of wholesale funding maturities within 1 year Core liquidity reserve Directives of Swedish Bankers Association SEK bn Other liquid resources 2) 773 Overcollateralization in SEB s Cover Pool Assets held or controlled by the Treasury function Not encumbered Eligible with Central Banks Maximum 20% risk weight under Basel II Standardized Model Lowest rating of Aa2/AA- 500 Valued marked-to-market Composition of SEB s Liquidity Portfolio SEB Core Reserve1) 1) Other liquid resources Other Non-Financial corporates Treasuries & other Public Bonds Cash & holdings in Central Banks OC SEB's Total Liquid Resources Financial corporates Covered bonds O/N bank deposits Government or state-guaranteed securities of Nordic countries, and other selected Northern European countries, principally Germany Supra-nationals High quality AAA rated covered bonds issued by banks in the Nordic countries and other selected Northern European countries, principally Germany 1) Definition according to Swedish Bankers Association 2) Liquid resources not eligible for the liquidity portfolio 35

36 Liquidity and Funding benchmarking Strong Liquidity and Funding position vs. peers Maturing Funding ratio 3M and 12M Liquid assets vs. wholesale funding and net inter-bank borrowing 3M maturing funding ratio March M maturing funding ratio March % 200% 150% 100% 227% 188% 131% 200% 150% 100% 165% 121% 96% 110% 50% 50% 0% Mar 2015 SEB Swedbank Nordea 0% Mar 2015 SEB Swedbank Nordea SHB Development Q Q Development Q Q % 300% 250% 200% 150% 100% 50% 0% Q Q Q Q Q Q % 150% 100% 50% 0% Q Q Q Q Q Q SEB Swedbank Nordea Average SEB Swedbank Nordea SHB Average Definition: Liquid Assets 1 / (Maturing Wholesale Funding within 3/12m + Net interbank borrowing within 3/12m) 1. Liquid assets defined as on balance sheet cash and balances with central banks + securities (bonds and equities) net of short positions Source Liquidatum, Fact Book SEB, Swedbank, Nordea and Svenska Handelsbanken (SHB). SHB does not disclose the 3m ratio 36

37 Conclusions Higher profitability via an enlarged customer base and a focused and cost efficient organic growth Resilient and diversified income base Conservative underwriting standards and strong asset quality Well-aligned balance sheet structure, strong liquidity and high quality capital structure 37

38 Additional Information 38

39 Macro, Income, Corporate Credit Portfolio, Funding mix 39

40 SEB s Core Markets Strong sovereign finances % of GDP Sovereign Debt Estonia Luxemburg Norway Lithuania Latvia Sweden Denmark Finland Poland Netherlands Slovenia Malta Austria Germany Hungary UK France Spain Belgium Cyprus Ireland Portugal Italy Greece 0% 50% 100% 150% 200% Budget Deficit Norway Germany Luxemburg Estonia Denmark Latvia Sweden Austria Lithuania Finland Netherlands Hungary Belgium Malta Italy Greece France Poland Cyprus Portugal UK Ireland Spain Slovenia -20% -10% 0% 10% 20% Current Account Balance Norway Netherlands Denmark Germany Slovenia Sweden Luxemburg Ireland Hungary Austria Lithuania Italy Malta Spain Greece Portugal Latvia Finland France Poland Estonia Cyprus Belgium UK -10% -5% 0% 5% 10% 15% Source: Latest available data from IMF WEO 40

41 SEB s Core Markets Economic fundamentals remain good % Nordic GDP development * Sweden Norway Finland Denmark E 2016E Finland Norway Sweden Estonia Latvia Denmark Lithuania Germany % 10 German and Baltic GDP development * Germany Estonia Latvia Lithuania E 2016E % Eurozone GDP development * E 2016E * Source: SEB Nordic Outlook, May

42 SEB s Core Market Swedish Economy 2014 to 2016 Moderate GDP-growth GDP growth of 1.3% in 2013 and expected to be 2.1% in 2014 and 3.0% in 2015 and 2.7% in 2016 Current Account surplus approx. 6-7% as a % of GDP in recent years Exports constitute approx 45% of GDP (GDP 2014 was approx. SEK 3,900bn or EUR 418bn at SEK 9.32 per USD) Goods constitute approx. 30%. Services constitute approx. 15% and are increasing in importance Roughly 50% of exports are to the Nordic countries, Germany, UK and the USA Weakening of the Swedish Krona by around 15% since the second quarter of 2013 Typically helps exports 5% weakening correlates to a 2% increase in exports (SEB estimate) The SEK is today broadly in line with the 20 year average of the broad exchange rate index (KIX) Central government debt remains approx. 35% of GDP in 2014 and is now slowly decreasing Government debt would be below 30% if re-lending (mainly to the Swedish Central Bank s currency reserve) is excluded Healthy new job creation Employment at the end of 2014 was above the pre-financial crisis peak level in 2008 But with only marginally falling unemployment due to rising labor force participation Low Inflation ( CPI ) In 2014 was on average -0.2%, well below the target of 2% Is expected to pick up just above 0% in 2015 and to around 1% in 2016 Central bank s repo rate lowered to -0.25% in March 2015 from -0.10% due to well below inflation target. It was kept at -0.25% after the April 29 meeting Source: SEB Nordic Outlook May 2015 and Statistics Sweden 42

43 Negative rates impact customer-driven NII on deposits SEB Group, cumulative changes from Q1 2010, SEK m NII from lending 5,000 4,500 4,000 3,500 Starting point Volume effect Margin effect Total 3,000 2,500 2,000 1,500 1, Q1-10 Q2 Q3 Q4 Q1-11 Q2 Q3 Q4 Q1-12 Q2 Q3 Q4 Q1-13 Q2 Q3 Q4 Q1-14 Q2 Q3 Q4 Q1-15 NII from deposits 1,500 1,250 1,000 Starting point Volume effect Margin effect Total Q1-10 Q2 Q3 Q4 Q1-11 Q2 Q3 Q4 Q1-12 Q2 Q3 Q4 Q1-13 Q2 Q3 Q4 Q1-14 Q2 Q3 Q4 Q

44 Business mix creates stable and diversified revenues Non-NII more important -Total operating income split between income categories SEK bn % 10% 10% 4% 13% % 12% 7% 10% Net Financial & Other income Net Commission & Net Life income Net Interest Income % 44% 45% 45% 50% 44% 43% 42% 47% 43% 42% % 44% % 43% % 46% % 46% % 37% % 42% % 45% % 44% 45% 46% 44% 46% 46% 46% 47% 44% 46% 45% 44% 44% 41% 39% 43% 0 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 SEK bn Payment, cards, lending* Asset value based * Activity based * Net life income % 14% 12% 17% 13% 13% 16% 16% Strong market shares render stable commission* and life income % 15% 17% 12% 11% 12% 35% 33% 32% 30% 30% 31% 30% % 12% 17% 12% 14% 11% 32% 31% 30% 37% 41% 40% 37% 40% 43% 41% 41% 41% 44% Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q % 11% 29% 46% % 12% 32% 40% % 13% 31% 42% % 20% 28% 39% % 10% 32% 44% % 12% 32% 43% % 12% 36% 38% *Gross commission development 44

45 Total Credit Portfolio (on and off balance sheet), excl. banks Low actual corporate loan exposure renders short duration and lower credit risk Important corporate sectors have low actual loan exposure in per cent of Total Credit Portfolio excluding banks Finance & Insurance Wholesale and Retail Transportation Shipping Business and Household Services Construction Manufacturing Agriculture, forestry and fishing Mining, oil and gas extraction Electricity, water and gas supply Other Total Corporate Credit Portfolio Corporate sectors credit portfolio in per cent of Total Credit Portfolio excluding banks Loan portfolio Committments, guarantees and net derivatives Total credit portfolio, excl banks = EUR 208bn of which: Loan portfolio, excl banks = EUR 137bn Total corporate credit portfolio Of which: Corporate loan portfolio 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% = EUR 104bn = EUR 49bn Four corporate sectors, representing 50% of corporate credit portfolio, have a loan exposure of less than 50% Corporate credit portfolio sectors split in loans and other types of exposure Loan portfolio Committments, guarantees and net derivatives Finance and Insurance Wholesale and Retail Transportation Shipping Business and Household Services Construction Manufacturing Agriculture, forestry and fishing Mining, oil and gas extraction Electricity, water and gas supply Other Total Corporate Credit Portfolio 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% 45

46 SEBs wholesale funding sources Diversified funding mix Wholesale funding, SEK 780bn* (EUR 84bn), 2015 Q1 Wholesale funding distribution* Short-term funding sources Q Q Q Q Commercial paper (CP) programs Total % 4% 3% 2% 0% 2% 14% Swedish French Global European % 8% 14% US Commercial deposit (CD) programs Total Yankee CDs % 2% Sterling CDs % Long-term funding sources Q Q Q Q SEB AB Total Domestic Covered bond program Domestic MTN program Global MTN programs Covered Senior A Covered and senior unsecured Retail index linked bonds Subordinated debt SEB AG Total Mortgage covered bonds Senior unsecured CP Swedish 31% CP French CP European CP US Yankee CDs Sterling CDs Domestic Covered bond program Domestic MTN program Global MTN program Covered Global MTN program Senior 144A Covered and senior unsecured Retail index linked bonds Subordinated debt SEB AG Covered bonds SEB AG Senior unsecured 46

47 Swedish Housing Market 47

48 Swedish Housing Market Long-term development Structural lack of housing has an upward pressure on prices Shift in government policy on subsidies for residential mortgage purposes and deregulation of the credit markets in the late 1980s and the beginning of the 90s had a huge negative impact on residential construction The lack of housing is most pronounced in the larger cities of Stockholm, Göteborg and Malmö to which there continues to be a strong migration Maintained rent regulation, high land and construction costs incl. planning and environmental legislation, ability to appeal against planned housing constructions and poor competition in the building sector continue to reduce the incentive for the construction of rental apartment buildings Residential investments (housing construction) increased in 2013 and 2014 and is expected to increase in 2015 at about the same pace, 20%, as in 2014 Relatively low residential investment as a % of GDP House prices (index 1995=100) International comparison Denmark Spain UK Norway Sweden USA Germany Ireland UK Denmark Spain Germany Netherlands Norway USA Sweden Sources: Macrobond 48

49 Swedish Housing Market Long-term development Population growth outpaces housing completions and puts upward pressure on prices Despite increasing housing completions, there need to be approx. 70,000 new units completed per year to match the population growth (approx. 40,000 new units were completed in 2014) Low number of new houses constructed as a % of the population Population growth vs housing completions Sweden Denmark Spain UK 1.8 Norway Sweden USA Population growth, in 1000s (RHS) Housing completions, number of apartments, in 1000s (left) Source: Macrobond Source: Statistics Sweden, SEB 1) Latest available data from Swedish National Board of Housing 49

50 Swedish Household Mortgage Market - Current market development Steady increase in house prices Slow but steady increase of lending to households Residential house and apartment prices start increasing again, March 2015 Slowly increasing lending growth to Swedish Households Area Single family houses Apartments % 16 YoY change 3m 12m 3m 12m 14 M/M 3 month average, annualized Sweden Greater Stockholm Central Stockholm Greater Göteborg Greater Malmö Source: Mäklarstatistik Source: Sweden statistics 50

51 Swedish Housing Market Affordability Total Households debt-servicing ability is solid The Central Bank s Stability Report of November 2014 states that: Households aggregated total wealth, excluding collective insurances, is 6 times higher than household disposable income Households aggregated net wealth (total assets minus total debt) is 4 times higher than disposable income Strong development of disposable income: Considerable lowering of residential real estate tax, lower income tax, abolition of wealth tax, low debt servicing costs Savings ratio at historical highs Savings ratio International comparison % 20 Germany Denmark Spain Finland France UK Netherlands Norway USA Sweden Source: Macrobond Year 51

52 Swedish Housing Market Socio economic mitigating factors Factors behind the strong asset quality Credit information agency ( UC ) Practically impossible to escape claims Strong household income No buy-to-let market Direct debit Provides unique information regarding customers, e.g. marital and employment status, age, income, fixed assets, debt, payment record, property ownership A borrower is personally liable, for life, even after a default and foreclosure procedure A household s income is to a very high degree based on two persons income. A mortgage loan is typically a joint liability A regulated rental market and tenant owner subletting restrictions Customers make payments via authorized direct debit from their account State enforcement office Enforcement orders are processed in a expedient and reliable way No intermediaries Banks and bank owned mortgage institutions originate the loans themselves and the loans remain on their balance sheet 52

53 The Swedish housing market A summary House price developments some key features Upward pressure Severe structural lack of supply particularly in the major cities to which there is a strong migration Political inability to stimulate further increased new residential investments Low interest rates Increase of households disposable income Stabilizing / downward pressure / mitigating factors Regulatory LTV cap of 85% (Fall 2010) Banks stricter lending criteria including stricter amortization requirements New and extended regulatory requirements on banks and other mortgage lenders Swedish rules stricter than Basel III and EU requirements Mortgage risk-weight floor 25% under Pillar 2 effective on Jan 1, 2015 Swedish FSA s not progressing with strict amortization requirements on new loans already in 2015 resulted in their introducing of higher counter-cyclical buffers to 1.5% from 1.0% for Swedish banks from June 2016 SFSA s liquidity and capital requirements No buy-to-let market An increase of residential investments is clearly discernible Topics publicly discussed to further lower the risk of the house price development Decrease ability to deduct interest costs (today: 30% up to about EUR 11k and 21% on the amount above EUR11k) Political unanimity in introducing amortizing requirements likely introduction is mid 2016 Gradual abolishment of the regulation of rents i.e. stimulate the construction of rental apartment buildings A lowering of the regulatory LTV cap from the current 85% 53

54 The Swedish housing market A summary Households indebtedness and affordability - key features Households aggregated debt to disposable income ratio (debt ratio) is about 172% 4) This ratio is approximately the same as it was in Q due to an increase of disposable income The increase that took place before 2010 was mainly due to changing ownership structure and higher affordability The most indebted people are the ones that can afford it 1), 2) 80% of households debt is mortgage loans The most indebted people are the ones with: the highest income and net wealth, highest level of education and live in the economically more prosperous and flourishing regions in Sweden For indebted households, the aggregated debt ratio was 242% in Q4 2013: 2) The top three income deciles have 51% of total income and 46% of total debt The lowest three income deciles have 13% of total income and 16% of total debt Strong Household affordability and other mitigating factors 3) Aggregated total wealth, excluding collective insurances, is 6 times higher than household disposable income Aggregated net wealth (total assets minus total debt) is 4 times higher than disposable income Increased affordability: Increased disposable income due to higher real salaries, Income tax cuts, Abolishment of wealth tax and a substantial lowering of real estate tax Low interest rates High savings ratio The potential risks with Households indebtedness is offset by a low public sector debt and a capacity for countercyclical measures Socio-economic factors 1) A government report from November ) The Central Bank s report How indebted are Swedish Housholds? May The volume of loans in the data covers about 80% of all household loans and 94% of all mortgages 3) Swedish Central Bank s Financial Stability Report of November ) Statistics Sweden April

55 SEB s Swedish Residential Mortgage Lending 55

56 SEB s Swedish Residential Mortgage lending Household mortgage lending dominates the portfolio March 2015 Total SEK 514 bn (EUR 55bn) Residential Apartment Buildings SEK 108bn (EUR 12bn) Private companies 48% Housing co-op associations 39% State/Community owned 13% 21% Residential Apartment Buildings Strong asset quality Impaired loans at 1bp or SEK 9m (EUR 1m) No problem loans since the 1990 s No net credit losses Low and conservative LTVs Household Mortgage lending SEK 407bn (EUR 44bn) Single family houses 63% Tenant owned apartments 32% Second homes 5% 79% Conservative lending policy Cash-flow generation Legal structure: Counterparty has to have direct and immediate access to the cash-flow and the assets taken in as collateral. Tenor max 10 years LTV <75% but depending on geographic location. Rural areas LTV<65%. Amortization structure required depending on geographic location 56

57 Asset Quality Lending to Swedish Residential Apartment Buildings Low levels of impaired loans and negligible credit losses Impaired loans do not typically turn into credit losses, in % Credit loss level NPLs to lending Mar '15 Minimal net credit losses since the early 2000s, in % Mar '15 * Net credit losses = the aggregated net of write-offs, recoveries and provisions 57

58 Dec '08 SEB s Swedish Household Mortgage lending Successful Strategy has produced growth despite stricter underwriting standards SEK bn Jun '09 Dec '09 Jun '10 Dec '10 Jun ' Dec '11 Jun ' Dec '12 Jun '13 Dec '13 Jun '14 Dec ' Mar '15 Selective origination Growing at or below the market Concentration to urban areas Stockholm area nearly 50% of volume >80% of new mortgage loan clients have become full-service clients Market share approx.16% Past-due >60days at 7bps (EUR 31m) Net credit loss level is 0 85% of the mortgage portfolio has LTV at or below 50% 2% exceeds an LTV of 70% Loan-to-value >85% 0% 71-85% 2% 51-70% 13% 0-50% Share of portfolio 85% SEB s Mortgage lending based on affordability Strict credit scoring and assessment Strict Left-to-live-on sensitivity analysis including, a 7% interest rate test including a 50-year straight amortization period strictest amortization policy in the market Loans >70% of market value must be amortized over 10 years Max loan amount 5x total gross household income irrespective of LTV and no more than one payment remark on any kind of debt (information via national credit information agency ( UC )) Strengthened advisory services and individual amortizing plans Sell first and buy later 58

59 SEB s Swedish Household Mortgage Lending Strong economic profile of customers SEB s typical mortgage customer Dual income households in the major cities High income households Personal savings above average Stronger credit rating vs. market average SFSA states in a report from April, 2014: SEB has the lowest LTV in all age spans Larger share of households with amortizing plans in new loans than market average 35% 30% 25% 20% 15% 10% 5% 0% Age distribution of SEB s customers Based on volumes December 31, 2014 Portfolio New loans UC Scoring 2) SEB s mortgage customers have a relatively stronger credit quality than market average 1) Market SEB Nov '10 Jan '11 Mar '11 May '11 Jul '11 Sep '11 Nov '11 Jan '12 Mar '12 May '12 Jul '12 Sep '12 Nov '12 Jan '13 Mar '13 May '13 Jul '13 Sep '13 Nov '13 Jan '14 Mar '14 May '14 Jul '14 Sep '14 Nov '14 1) Source: Swedish Credit Bureau ( UC AB ) Kreditbarometern November ) UC scoring is defined as the probability of getting a payment remark within one year 59