Carnegie Holding AB. (Corp. Reg. No , registered office Stockholm)

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1 Carnegie Hlding AB (Crp. Reg. N , registered ffice Stckhlm) Parent Cmpany f Carnegie Investment Bank AB (publ) and Carnegie Fnder AB Year-end reprt 1 January 31 December 2011

2 Year-end reprt 1 January 31 December 2011 Financial data fr the Grup: Operating incme amunted t SEK 1,723m (2,261 1 ). The decline was mainly due t discntinued peratins, lwer activity in the market fr crprate transactins and cmmissin trading. Operating expenses ttalled SEK 1,754m (2,185 1 ). The decrease was attributable t the nging restructuring prgramme and that n variable remuneratin was expensed fr Items affecting cmparability had a negative impact f SEK 237m (ps: ) n earnings. An perating lss f SEK 31m (prfit: 76 1 ) was reprted befre items affecting cmparability. Including items affecting cmparability, the cmpany psted a lss f SEK 268m (prfit: ) befre credit lsses. The net lss fr the year was SEK 254m (prfit: ). The Grup has a strng financial psitin, with equity ttalling SEK 2.2bn, a capital rati f 18.2% and a Tier 1 rati f 12.5% at year-end. Cmpany events during the year Successful integratin f the HQ Bank and HQ Fnder acquisitins. Restructuring wrk initiated t reduce the cst base thrugh centralisatin and integratin f supprt activities, mre efficient system slutins and reduced staffing. Multiple signs f high custmer appreciatin: Eurmney named Carnegie best Nrdic investment bank, Prspera gave first-place rankings t the peratins in Nrway and Denmark and Funds and Private Banking received a number f awards and imprved ratings frm amng thers Eurmney and Mrningstar. President s cmments Psitive signs in early 2012 The past year has been characterised by majr ecnmic turmil in the Eurzne and the resulting turbulence in financial markets. The situatin affected activity amng institutinal investrs and reduced the number f transactins in the M&A and ECM markets. As a cnsequence, Carnegie s earnings fr 2011 were unsatisfactry. Althugh we delivered psitive cntributins n an peratinal level, we still reprted an perating lss if financial expenses and depreciatin/amrtisatin n Grup level are included. The Grup was als charged with cnsiderable expenses in the frm f items affecting cmparability, primarily related t the n-ging restructuring prgramme. At the business area level, Private Banking displayed a stable trend during While Funds were negatively impacted by lwer asset values, they succeeded in attracting new capital and new custmers despite the uncertainty in the market. Our crprate advisry peratin, Investment Banking, reprted weaker develpment cmpared with The year began n a strng nte but declined as market turmil increased. The Securities business area was adversely impacted by lw cmmissin-driven trading n the Nrdic exchanges last year. During 2011, we have devted time and energy t integrating the cmpanies acquired in 2010 and t launching a cmprehensive restructuring prgramme aimed at increasing efficiency and reducing csts. One main cmpnent in the n-ging restructuring is the centralisatin and integratin f supprt peratins, which is aimed t achieve savings f mre than SEK 250m. The new rganisatin cmprises three independent business areas, each cnstituting a separate cmpany, with the aim f creating greater wnership f the entire business chain. We are pleased that 2012 has started in a psitive manner with increased activity in the brkerage peratins, a very gd pipeline in crprate advisry services, a strng inflw t ur funds and a private banking peratin that cntinues t attract new custmers and capital. Our visin is t be the leading financial advisr in the Nrdic regin and in 2012 we will cntinue t develp the peratin and ffer advice frm the fremst experts in the market. A cmbinatin f lcal entrepreneurship, glbal investment skills and high internal efficiency will prvide us with a strng platfrm fr cntinued value generatin. Frans Lindelöw, President and CEO 1) Pr frma 2010: Including prfit frm HQ Bank and HQ Fnder but excluding the trading lss f SEK 1.2bn in HQ Bank. The cmparative figures n page 5 and nward are nt pr frma. 2

3 Operative incme statement Carnegie Hlding Grup Jan-Dec Pr frma (SEKm) Securities Investment Banking Private Banking Funds Operative incme Persnnel expenses Other expenses Operative expenses Prfit / lss befre items affecting cmparability Items affecting cmparability Prfit/lss befre credit lsses Credit lsses, net Prfit/lss befre taxes Taxes 9-29 Prfit/lss fr the year Average number f emplyees Number f emplyees at year-end (FTE) Incme Incme during 2011 amunted t SEK 1,723m (2,261 1 ). The Securities business area reprted lwer incme due t the discntinued peratins in the frmer HQ Bank and als t the lwer client activity caused by market turbulence in the secnd half f Incme in the Investment Banking business area was lwer than in the strng The underlying activity was high early in the year but declined gradually in the wake f the Eur crisis. The Private Banking business area displayed a stable trend, with an inflw f capital and custmers during the year. Hwever, due t lwer asset values and relatively lw custmer activity, incme declined smewhat. The Funds business area als displayed a stable trend with net inflw f SEK 1.7bn during Hwever, incme declined due t custmers shifting frm equity funds t fixed-incme funds, and assets under management decreased due t falling asset values. Expenses Operating expenses during 2011 amunted t SEK 1,754m (2,185 1 ). The decrease in expenses was attributable t the n-ging restructuring prgrammes and t n variable remuneratin being payable fr The Grup was charged with items affecting cmparability that had a net negative impact f SEK 237m (ps: ) during the year. These expenses derived frm the restructuring f the peratin, primarily related t the integratin f HQ Bank and the n-ging restructuring prgramme, as well as additinal csts fr pay-rll tax in Nrway. Read mre abut these items n page 4. In 2010, items effecting cmparability had a psitive impact f net SEK 395m, f which SEK 656m represented negative gdwill and an expense f SEK 261m was related t csts in cnjunctin with acquisitins and restructuring. Prfit Befre items affecting cmparability in 2011, an perating lss f SEK 31m (prfit: 76 1 ) was reprted. As stated abve, items affecting cmparability had a negative impact f SEK 237m (ps: ) n prfit. Accrdingly, a lss f SEK 268m (prfit: ) was psted befre credit lsses, net. Credit recveries had a psitive impact f SEK 5m (135 1 ) n prfit. The net lss fr the year was SEK 254m (prfit: ). 1) Pr frma 2010: Including prfit frm HQ Bank and HQ Fnder but excluding the trading lss f SEK 1.2bn in HQ Bank. The cmparative figures n page 5 and nward are nt pr frma. 3

4 Imprtant events during the year Operatinal/Financial Restructuring prgramme During the furth quarter f 2011, Carnegie initiated a prgramme aimed at reducing annual csts by SEK 250m. The cst savings will be realised successively during The prgramme includes the centralisatin f several functins, mre efficient system slutins and reduced cmplexity. In the Grup, we expect t reduce staff by a ttal f apprximately 100 jbs by 2013, mainly affecting persnnel in supprt functins. In the incme statement, SEK 103m was charged against prfit fr 2011 related t the restructuring. Infrmatin abut additinal emplyer cntributins As previusly annunced, the Nrwegian Tax Administratin has charged Carnegie additinal pay-rll tax fr the perid The grss amunt is a cst f NOK 66 millin, which will have an impact f NOK 41 millin n net prfit. These csts were charged against earnings fr the third quarter f The Tax Administratin s decisin has been challenged in curt, with the first instance having ruled in favur f Carnegie in January Significant awards Carnegie named best equity huse in the Nrdic regin Carnegie was named by the business magazine Eurmney as the best equity huse in the Nrdic regin. The award was received during the third quarter f 2011 at Eurmney s annual awards ceremny Awards fr Excellence. Carnegie Nrway ranked best equity huse Carnegie s Nrwegian peratins, Carnegie ASA, ended up in first place when TNS Sif Prspera ranked equity huses in Nrway in December In the 2010 survey, Carnegie ended up in secnd place. TNS Sif Prspera s survey is based n telephne interviews with apprximately 65 prtfli managers, traders and analysts frm Nrwegian institutins. Carnegie Denmark ranked Number One in crprate finance Carnegie s Danish peratins received a first-place ranking when Prspera rated players in the crprate finance market in The survey is cnducted every secnd year and is based n telephne interviews with sme 90 senir executives frm transactin active cmpanies. Imprved fund ratings in Mrningstar During the year, tw Carnegie funds, Likviditetsfnden (fixed incme) and Select Sverige (Swedish equities), were upgraded frm the secnd best t the highest ranking by the fund-rating institute Mrningstar. In additin t these tw funds, Carnegie s Sverigefnd (Swedish equities) had already been awarded five stars. Carnegie tp-ranked in Private Banking Carnegie was ranked first in eight f a ttal f 18 categries in Eurmney s annual assessment f private banks in Sweden in In ttal, Carnegie finished with a secnd-place ranking in the survey and was number ne in the categry measuring custmers with the largest wealth. Carnegie best back ffice in Sweden Carnegie ended up at the tp in TNS Sif Prspera s survey in December 2011 when institutinal custmers ranked the administrative wrk f their equity huses. In the survey, 43 institutins expressed their pinins n several criteria cncerning back-ffice functinality at 20 Swedish and internatinal equity huses. In recent years, back ffice has becme the secnd mst imprtant criteria fr institutinal custmers in TNS Sif Prspera s surveys. Management changes New head f Private Banking in Luxemburg Frank Reisböl is the newly appinted MD f Carnegie s private banking peratin in Luxemburg, Banque Carnegie Luxemburg S.A., succeeding Claes-Jhan Geijer wh stepped dwn in December Frank Reisböl has highly extensive experience frm private banking and has wrked at Carnegie since New head f Carnegie s Nrwegian peratin Natasja Henriksen became MD f Carnegie s Nrwegian peratin, Carnegie ASA, in September 2011 succeeding Anders Onarheim. Natasja has wrked at Carnegie since 2008, mst recently as Head f Carnegie Securities Finance in Nrway. 4

5 Imprtant events after the perid Björn Janssn appinted Head f Investment Banking & Securities Björn Janssn, currently c-head f Securities, will assume the psitin as Head f Investment Banking & Securities (IBS). IBS cnsists f the units Securities and Investment Banking in Sweden as well as Carnegies peratins in Denmark, Finland, Nrway, UK and the US. Risks and uncertainties General infrmatin n risks and uncertainties The business activities f Carnegie expse the Grup t market, credit, liquidity and peratinal risks. Market risk is defined as the risk f lss due t the effect f, fr example, changes in equity prices, interest rates r currency exchange rates. Credit risk is defined as the risk f lss due t a cunterparty being unable t meet its bligatins. Credit risk mainly arises as a cnsequence f lans t clients using shares as cllateral. Liquidity risk is related t the need fr liquidity in the day-t-day peratins. Operatinal risk is the risk f lss resulting frm inadequate r failed prcesses and systems r, alternatively, human errr r external events. A mre detailed descriptin f the Carnegie Grup s risk management is presented in the 2010 Annual Reprt fr Carnegie Hlding. Capital requirement and capital rati The tables belw present the capital requirement and capital rati accrding t the Swedish Financial Supervisry Authrity s directive FFFS 2007:5 regarding publicatin f infrmatin n capital adequacy. The capital rati is calculated as the rati between the capital base and capital requirement. The capital rati must nt fall belw 1 accrding t the legal requirement. At the Carnegie Bank Grup, which includes mst f the Grup s peratins, the Tier 1 capital qutient n 31 December 2011 was 2.2, crrespnding t a Tier 1 rati f 17.6%. In the financial cmpanies grup, meaning the Carnegie Hlding Grup, in which Carnegie Fnder is als included, the Tier 1 capital qutient was 1.6, crrespnding t a Tier 1 rati f 12.5%. A mre detailed descriptin f Carnegie s capital adequacy is prvided in the 2010 Annual Reprt, as well as n Carnegie s website at Capital adequacy (SEKm) Capital base Carnegie Bank Grup Dec 31 Carnegie Hlding Grup Dec 31 Equity capital Deductins Anticipated dividend Equity capital in the capital base Tier II capital (subrdinated dept) Ttal capital base Capital requirement Capital requirement fr credit risk, standardized methd Capital requirement fr equity and interest rate risk Capital requirement fr currency risk Capital requirement fr peratinal risk, base methd Ttal capital requirement Surplus capital Tier I capital qutient Capital qutient Tier 1 rati % Capital rati % ) Intangible assets and deferred tax assets 5

6 Investments The Grup s investments in fixed assets during the year amunted t SEK 31m (28). Summary f Parent Cmpany Ttal incme in the Parent Cmpany fr the year amunted t SEK 12m (12). Prfit befre tax fr the year was SEK 45m (479), which includes an expense fr a purchase cnsideratin ttalling SEK 360m (-) fr the acquisitin f Carnegie Investment Bank AB, as well as anticipated dividend incme f SEK 360m (505). N investments were made in fixed assets during the year (-). The Parent Cmpany s liquidity, defined as cash and lending t credit institutins, amunted t SEK 3m (4) n 31 December Equity ttalled SEK 2,277m (2,238) n 31 December Liquidity The Carnegie Hlding Grup s peratins largely invlve shrt-term bligatins that mature within tw mnths, which means that the bank des nt require financing with a lng duratin. The Grup s financing cmprises equity, issued bnds and depsits frm the public. Equity and bnds accunt fr 25% f the balance-sheet ttal, depsits frm the public fr (excluding client funds) 51% and ther liabilities fr 24%. Mst f the Grup s ther liabilities are nn-interest bearing. On 31 December 2011, the liquidity reserve fr the Carnegie Hlding Grup was SEK 5,251m, representing a decrease f SEK 121m during the furth quarter. The cmpsitin f the liquidity reserve was as fllws: Bank balances: SEK 4,862m Gvernment securities: SEK 302m Cvered bnds: SEK 87m The Carnegie Hlding Grup utilises risk-tlerance levels fr liquidity that ensure that the bank always has an adequate liquidity reserve t survive perids f market turbulence. The liquidity reserve shuld always exceed the anticipated utflw f cash during a perid f stress and may nly cnsist f bank balances and assets that can be refinanced with the Swedish Riksbank. A maximum f 40% f the required liquidity reserve may be derived frm the refinancing f securities. This requirement ensures that the bank des nt becme verly dependent n its financing cunterparties. The refinancing f securities n 31 December 2011 amunted t zer. The liquidity reserve shuld accunt fr at least 10% f the balance-sheet ttal. On 31 December 2011, the liquidity reserve accunted fr 42% f the balance-sheet ttal. 6

7 Cnslidated statements f cmprehensive incme 1 Jan-Dec (SEKm) Cmmissin incme Cmmissin expenses Net cmmissin incme Interest incme Interest expenses Net interest incme Other dividend incme 0 0 Net prfit frm financial transactins Capital gain frm discntinued peratins - -1 Ttal perating incme Persnnel expenses Other administrative expenses Amrtisatin f intangible assets and depreciatin f tangible fixed assets Ttal perating expenses Prfit/lss befre credit lsses Credit lsses, net Prfit/lss befre tax Taxes 9-39 Prfit/lss fr the year Other cmprehensive incme: Translatin f freign peratins, net after tax Hedge f net investment in freign peratins -6 - Ttal cmprehensive incme fr the year ) Nte that prfit frm the frmer HQ Bank is included in the cmparisn perid in 2010 as f 3 September. The frmer HQ Fnder, nw Carnegie Fnder, is included in the cmparative figures as f 22 September The cmparative figures fr 2010 include negative gdwill recgnised in the amunt f SEK 656m. The pr frma perating incme statement fr 2010 is shwn n page 3, thus prviding a better cmparisn f earnings in

8 Cnslidated statements f financial psitin 31 Dec 31 Dec (SEKm) Assets Cash and bank depsits with central banks Negtiable gvernment securities Lans t credit institutins ) Lans t general public Bnds and ther interest-bearing securities Shares and participatins Derivative instruments Shares in assciated cmpanies 12 - Intangible assets Tangible fixed assets Current tax assets Deferred tax assets Other assets Prepaid expenses and accrued incme Ttal assets Liabilities and sharehlders' equity Liabilities t credit institutins Depsits and brrwing frm general public ) Securities issued Shrt psitins, shares Derivative instruments Current tax liabilities Deferred tax liabilities Other liabilities Accrued expenses and prepaid incme Other prvisins Subrdinated debt Sharehlders' equity Ttal liabilities and sharehlders' equity Pledged assets and cntingent liabilities Pledged assets Cntingent liabilities ) Wheref SEK 505m (388) in client funds 8

9 Cnslidated statements f changes in equity Jan-Dec (SEKm) Sharehlders' equity - pening balance Dividend paid -6 - Repayment f capital cntributin Sharehlders' cntributin Cmprehensive incme fr the year Sharehlders' equity - clsing balance Cnslidated statements f cash flws Jan-Dec (SEKm) Prfit befre tax Adjustments fr items nt affecting cash flw Paid tax Cash flws frm peratins befre changes in wrking capital Changes in wrking capital Cash flws frm peratins Acquisitin f subsidiaries Sale f subsidiaries 50 - Acquisitin f intangible and tangible fixed assets Cash flws frm investing activities Issue f capital Dividend paid -6 - Repayment f capital cntributin Issue f cnvertible debentures Cash flws frm financing activities Cash flws fr the year Cash and cash equivalents at pening balance 1) Exchangerate effects n cash and cash equivalents Cash and cash equivalents at clsing balance 1) ) As f Q cash pledged as cllateral has been excluded. Cmparative figures have been restated. 9

10 Incme statement f Parent Cmpany Jan-Dec (SEKm) Net incme Other external expenses -1-2 Persnnel expenses Operating prfit/lss -1-4 Interest incme 0 0 Interest expenses Result frm investments in subsidiaries Prfit/lss frm financial items Prfit/lss befre tax Taxes 0 0 Prfit/lss fr the year Statement f cmprehensive incme Jan-Dec Prfit/lss fr the year Other cmprehensive incme, net f tax - - Ttal cmprehensive incme fr the year

11 Balance sheet f Parent Cmpany 30 Dec 31 Dec (SEKm) Assets Shares and participatins in Grup cmpanies Deferred tax assets 0 0 Ttal financial nn-current assets Current receivables frm Grup cmpanies Other current receivables Prepaid expenses and accrued incme 1 0 Cash and bank 3 4 Ttal current assets Ttal assets Liabilities and sharehlders' equity Sharehlders' equity Cnvertible debentures Trade accunt payables 1 0 Current liabilities t Grup cmpanies Other current liabilities Accrued expenses and prepaid incme Pensin prvisins 2 1 Ttal liabilities and sharehlders' equity Pledged assets and cntingent liabilities Pledged assets Cntingent liabilities

12 The Carnegie Grup T clarify the legal structure encmpassed by this financial reprt, a brief descriptin is prvided belw f the peratins within Carnegie. Carnegie Hlding Carnegie Hlding was frmed n 19 March 2009 in cnjunctin with the Altr and Bure acquisitin f Carnegie Investment Bank AB (publ) ( Carnegie Bank ). The hlding cmpany s peratins cnsist f directly r indirectly wning, managing, issuing guarantees and lans t the banking peratins and ther grup cmpanies assciated with financial peratins. All business peratins within Carnegie take place within Carnegie Bank and Carnegie Fnder AB (frmerly HQ Fnder Sverige AB). Carnegie Hlding is wned by Altr Fund III, the investment cmpany Bure Equity AB, Investment AB Öresund and emplyees f Carnegie. Carnegie Bank As f 3 September 2010, peratins previusly cnducted in HQ Bank AB were included in Carnegie Bank. HQ Bank AB was merged with Carnegie Bank n 30 September Carnegie Fnder Carnegie Hlding cnslidates Carnegie Fnder AB ( Carnegie Fnder ) as f 22 September Cmparisn figures Pages 2 and 3 present cmmentary n Carnegie Hlding's perating results fr 2011 cmpared with 2010 pr frma, that is t say including HQ Bank and HQ Fnder. Frm page 5 and subsequently, the cmparisn figures are nt pr frma. 12

13 MISCELLANEOUS Accunting plicies This reprt was prepared in accrdance with IAS 34 Interim Financial Reprting, the Annual Accunts Act fr Credit Institutins and Securities Cmpanies (1995:1559) and the Swedish Financial Supervisry Authrity s regulatins (FFFS 2008:25). The Parent Cmpany s financial statements were prepared in accrdance with the Annual Accunts Act and RFR 2 Accunting fr Legal Entities. The fllwing accunting changes have cme int effect as f 2011: IAS 24 (revised 2010) Related Party Disclsures, IAS 32 (amendment) Financial Instruments: Presentatin, IFRS 7 (amendment) Financial Instruments: Disclsures, IFRIC 14 (amendment) Prepayments f a Minimum Funding Requirement and IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments. These changes have nt had any significant impact n the cnslidated financial statements. In ther respects, the cnslidated and Parent Cmpany accunting plicies, calculatin methds and presentatin are essentially unchanged cmpared with the 2010 Annual Reprt. Nte that runding may result in amunts in SEK millins nt agreeing when summed. Unless therwise specified, all cmparisn figures in the reprt refer t the crrespnding perid in Review reprt This reprt has been reviewed by the cmpany s auditrs. Certificatin The Bard f Directrs and Chief Executive Officer hereby certify that the interim reprt prvides a true and fair view f the peratins, psitin and earnings f the Parent Cmpany and the Grup and describes the material risks and uncertainties faced by the Parent Cmpany and the cmpanies included in the Grup. Carnegie Hlding AB Stckhlm, 22 February 2012 Arne Liljedahl Chairman Björn Björnssn Bard member Fredrik Cappelen Bard member Harald Mix Bard member Fredrik Strömhlm Bard member Patrik Tigerschiöld Bard member Frans Lindelöw President and CEO 13