SEB Investor Presentation 2008 Q3
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Transcript of SEB Investor Presentation 2008 Q3
1
Investor presentation
2
Outline
Overview of the SEB Group
Earnings
NFI and Bond portfolios
Asset quality
Baltics
Funding and capitalisation
The Swedish stability package
3
SEB’s market franchise
Difference from the average, %
100
100
100
Customer segmentation, 2007
0%
20%
40%
60%
80%
100%
SEBSwedbankSHBNordeaDanskeBank
DnB NOR
Retail- Nordic Retail GermanyRetail-Baltic Retail GB/IrelandMerchant B AMLife
Distribution of income
Important relation-
ships/customers
%
Customer survey
Large corporatesSweden
Institutionalclients and
banks –Nordic region
0
0
4
…with a different income mix0% 20% 40% 60% 80% 100%
SEB
Swedbank
SHB
Nordea
DnB NOR
Danske Bank
Net interestincome
Net fee &commissions
Net financialincome
Net lifeinsuranceincomeNet otherincome
5
SEB's franchiseMerchant Banking● #1 Nordic stock broker● #1 Nordic and Baltic investment bank● #1 Nordic and Baltic cash manager● #1 Custody Nordic and Baltic markets● #1 Scandinavian currenciesWealth Management● #1 Nordic and Baltic private bank● #2 Nordic asset managerLife and pension● #1 Nordic unit-linked businessRetail● #2 Baltic region
5
6
Ratings of Skandinaviska Enskilda Banken ABRating target set by SEB Board at AA
Moody’s S&P Fitch DBRS
Bank Senior Rating
Short Term P-1 A-1 F-1 R-1 (middle)
Long Term Aa2 A+ A+ AA (low)
Outlook Stable Negative Stable Stable
Last Action Outlook change Outlook change Outlook change Unaffected rating
Date Sep-08 Oct-08 Jul-08 Jul-08
7
Outline
Overview of the SEB Group
Earnings
NFI and Bond portfolios
Asset quality
Baltics
Funding and capitalisation
The Swedish stability package
8
Highlights Q3 2008
Strong capital and liquidity
Resilient underlying business– Robust customer franchise– Strong volume growth– Strengthened market position
Negative financial effects due to financial crisis
Continued collective provisions in the Baltic countries
SEK mIncome 8,705Expenses -5,970Operating result 2,010Net result 1,514
RoE, % 8.0
C/I-ratio 0.69Net credit loss level, % 0.27
9
Q3 Jan-Sep Q2 Q3 Jan-SepSEK m 2008 2008 2008 2007 2007
Operating income 8,705 27,910 -16% -8% -8%Operating expenses -5,970 -18,442 -7% 7% 7%Operating profit 2,010 7,927 -43% -46% -36%Net profit 1,514 6,171 -46% -51% -38%
Return on Equity, % 8.0 10.9 -7.2 -9.3 -8.1Cost / income ratio 0.69 0.66 0.07 0.10 0.09Credit loss level, % 0.27 0.19 0.10 0.19 0.09
Basel II Core capital ratio, % 8.1 8.1 -0.5 -0.2 -0.2Risk-weighted assets, SEK bn 937 937 66 140 140
Change
Key figuresSEB Group
10
Resilient underlying businessSEK m
Financial crisis impacts profit…
* Excluding sales of Baltic properties in Q4 2007 of SEK 785m
0
1 000
2 000
3 000
4 000
5 000
Q12007
Q2 Q3 Q4 Q12008
Q2 Q3
Lehman Brothers-related lossesPortfolio lossesReported operating profit*
…but underlying income generation is stable
** Net financial income, Net insurance income and Other income
0
2,000
4,000
6,000
8,000
10,000
Q12007
Q2 Q3 Q4 Q12008
Q2 Q3
Other income**Net fee and commission incomeNet interest income
11
400600800
1,0001,2001,400
Q12005
Q2Q3Q4Q12006
Q2Q3Q4Q12007
Q2Q3Q4Q12008
Q2Q3
11,623
13,197
11,911
10,676
Jan-Sep 07 Jan-Sep 08
+14%
+12%Customer driven*
Total NII
* Volumes and margins on lending and deposits
Lending to the publicSEKbn Jan-Sep 08 +18% yoy
Deposits from the publicSEKbn Jan-Sep 08 +12% yoy
400500600700800900
Q12005
Q2Q3Q4Q12006
Q2Q3Q4Q12007
Q2Q3Q4Q12008
Q2Q3
Net interest incomeGroup, SEK m
12
1,431
3,163
5,402 5,376
769936
2,729
5,0915,557
524
New issues &advisory
Secondary market& derivatives
Custody & mutualfunds
Payment, cards,structured lending,
deposits,guarantees
Other
Jan-Sep 07 Jan-Sep 08
-35%
-14%
-6%+3%
Deal driven
Securitiestransaction
driven
Value driven –performance
driven
Non-capital market driven
Capital markets driven
Fee and commission incomeGross development Jan-Sep 2008 vs. Jan-Sep 2007, SEK m
13
Cost developmentCost increase, +7%Jan – Sep 2008 vs. Jan – Sep 2007, SEK m
0
200
400
600
800
1,000
1,200
1,400
One IT Roadmap
Pension
cost
Acquisitions
Baltics
Other
*
*
SEK -865m SEK 1.5 – 2.0bn
Achieved Target
Cost management program 2007 – 2009
2007 20092008
14
Operating profit per divisionJan – Sep 2008 vs. Jan – Sep 2007SEK m
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000
Life
WealthManagement
Retail Banking
MerchantBanking
Jan-Sep 2008
Jan-Sep 2007
Changevs. Jan-Sep 2007
-21% (-11%)
-19%
-31%
-36%
ROEJan-Sep 2008
15.6% (20.2%)
14.5%
19.8%
13.3%
Excl. portfolio losses
Sweden: 3%Germany: -41%Estonia: -67%Latvia: -58%Lithuania: -11%Cards: -7%
15
High business activity – Merchant BankingFX profit growth driven by increased focus on advisory services
4.6%
5.3%
5.4%
5.4%
9.2%
Carnegie
SHB
Morgan Stanley
Glitnir
SEB
Market Shares Nordic Stock Exchanges Jan – Sep 2008
Source: The Nordic Stock exchanges
80
100
120
140
160
180
Q42006
Q12007
Q2 Q3 Q4 Q12008
Q2 Q3
Index
”Best for Commercial Real Estate Banking in the Nordic and Baltic region”
”No. 1 Globally for Overall Customer Satisfaction in Cash Management”
16
High business activity – Retail BankingAttractive deposit offerings
0
5,000
10,000
15,00020,000
25,000
30,000
35,000
May Jun Jul Aug Sep Oct
Retail Estonia new package offeringPackages sold since launch in May
New customers account for 50 % of sales.
Retail Sweden insurance salesSEK m
0500
1 0001 5002 000
Jan Feb Mar Apr Maj Jun Jul Aug Sep
2007 2008
5060708090
2005 2006 2007 2008
+ 5 300Incomegrowth +7%
Cash managementkunder (tusental)
Retail Sweden SME
*
*As of Oct 23
17
High business activity – long-term savings
12.010.7 9.7
12.0 13.3 11.9 10.7
Q1-07 Q2 Q3 Q4 Q1-08 Q2 Q3
5.34.95.8
3.52.62.9
4.1
Q12007
Q2 Q3 Q4 Q12008
Q2 Q3
Swedish mutual funds – Net inflowsJan-Sep, SEK bn
-7.3-11.6
-1.1
-17.0
5.9
Robur SHB Nordea SEB Others
Life – Total salesSEK bn
Private Banking – Net salesSEK bn
17
*As of Oct 23
*
18
Outline
Overview of the SEB Group
Earnings
NFI and Bond portfolios
Asset quality
Baltics
Funding and capitalisation
The Swedish stability package
19
Net financial incomeGroup
+ corp fin intäkter I marknaden?
-1,000
-500
0
500
1,000
Q3 07 Q2 08 Q3 08
FX Equities Capital CPM Other incl.Markets Treasury
SEK 63bnSEK
55bn
SEK 12bn
Structured credits
Financial institutions
Covered bonds etc
Merchant Banking Investment portfolio
SEK m
SEK m Q1 08 Q2 08 Q3 08
P/L -872 -66 -348Equity -1,630 -56 -2,134
-2,502 -122 -2,482
20
Structured credits Financial institutions2007 Q1 08 Q2 08 Q3 08
-41 -400
-1,107-1,507
-15-56
P/L
Equity
Acc-794-1,056
-626 -990 -2,738-1,682
-2,291
-1,784 -5,029
2007 Q1 08 Q2 08 Q3 08-26 51
-687-637
-52-78
P/LEquity
Acc-78-563
-72 -438 -1,249-635
-616
-515 -1,864
+ Covered bonds etc accumulated -680
Bond investment portfolio – financial effects30 September, 2008, SEK m
2007 Q1 08 Q2 08 Q3 08-872 -348
-2,134
-2,482-1,630
-1,769
-2,502
-66-56
-122
MTM (SEK m) Equity -698 -4,518
-2,467
AccP/L -3,055
-7,573
21
Structured credits portfolio – ratingRating Composition (S&P, Moody’s and Fitch)Outstanding volumes , 30 September, 2008
0.02%0.18%0.07%2.98%
96.75%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
AAA AA/A BBB BB/B CCC
Q4-07 Q1-08 Q2-08 Q3-08
22
Outline
Overview of the SEB Group
Earnings
NFI and Bond portfolios
Asset quality
Baltics
Funding and capitalisation
The Swedish stability package
23
Asset quality
Nordics66%
Group credit exposureTotal exposure = SEK 1,805bn
Germany24%
0.00
0.20
0.40
0.60
0.80
1.00
2006 2007 Q12008*
Q1-Q22008*
Q1-Q32008*
Germany BalticsNordics SEB Group
Net Credit Losses, % of lending
Impaired Loans Volumes % of Credit Portfolio*
Estonia 1.31Latvia 0.96Lithuania 0.43Baltics 0.85
*Annualised figures
0%
1%
2%
3%
Mar'06
Jun'06
Sep'06
Dec'06
Mar'07
Jun'07
Sep'07
Dec'07
Mar'08
Jun'08
Sep'08
SEB Group GermanyNordic Baltic
1.5%1.4%
0.6%0.2%
Lithuania5% Latvia
2%
Estonia3%
24
Credit exposure On and off balance, SEK bn
Sep 2008 (Dec 2007) “Nordic” German Baltic Total
Corporates 533 (416) 99 (72) 88 (83) 720 (571)
Property Management 119 (100) 98 (87) 28 (26) 245 (212)
Households 313 (292) 94 (87) 61 (55) 469 (434)
Public Administration 20 (18) 87 (66) 6 (3) 113 (88)
Total non-banks 986 (826) 377 (312) 183 (166) 1,547 (1,304)
Banks 204 (187) 52 (58) 2 (3) 258 (248)
Total 1,189 (1,013) 430 (369) 186 (169) 1,805 (1,552)
2525
Corporate credit exposure – by industrySEB Group, SEK bn
458 463
573
720
Dec2005
Dec2006
Dec2007
Sep2008
12%
11%
10%
18%3%
27%
19%
Finance and insurance Wholesale and retailTransportation Other service sectorsConstruction ManufacturingOther
26
42%
35%
3%
2%
6%
8%1%3%
Sweden Germany EstoniaLatvia Lithuania Other NordicOther European Other
Property management – by geography*SEB Group, SEK 229bn
101 111 137 159
91 8175
86
Dec 2005 Dec 2006 Dec 2007 Sep 2008
Commercial Multi-family
192 192212
245
* By obligor’s domicile
27
0.6%
1.4%
0.2%
1.5%
0%
2%
Dec'03
Mar'04
Jun'04
Sep'04
Dec'04
Mar'05
Jun'05
Sep'05
Dec'05
Mar'06
Jun'06
Sep'06
Dec'06
Mar'07
Jun'07
Sep'07
Dec'07
Mar'08
Jun'08
Sep'08
SEB Group Germany Nordic Baltic
* Impaired loans gross* *Excluding Banks
Impaired Loan Volumes* % of Credit Portfolio**
28
0.000.100.200.300.400.500.600.700.800.90
2003 2004 2005 2006 2007 Q12008*
Q1-Q22008*
Q1-Q32008*
Germany Baltics Nordics SEB Group
Level of Net Credit Losses, %
* Annualised
Estonia 1.31Latvia 0.96Lithuania 0.43Baltics 0.85
29
Outline
Overview of the SEB Group
Earnings
NFI and Bond portfolios
Asset quality
Baltics
Funding and capitalisation
The Swedish stability package
30
Status report – Baltic business
0
1,000
2,000
3,000
4,000
2005 2006 2007 Jan-Sep2008
Estonia Latvia Lithuania
-50
50
150
250
350
Q4-07 Q1-08 Q2-08 Q3-08
Specific Collective
Profit before credit losses etc.SEK m
Net credit lossesSEK m
Provisioning to build up reservesSEK m
0.0%
0.5%
1.0%
1.5%
2.0%
Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08
Estonia Latvia Lithuania
Impaired loans in SEB’s portfolioPer cent
0
1,000
2,000
3,000
4,000
2005 2006 2007 Jan-Sep2008
Estonia Latvia Lithuania
31
17 22 22 18 21 2234 39 458 8 8
4 5 6
813
15
1419 20
1014 14
13
2226
564441
34
525041
89
76
Dec'06
Dec'07
Sep '08 Dec'06
Dec'07
Sep '08 Dec'06
Dec'07
Sep '08
Total
Banks
PublicAdministrationHouseholds
PropertyManagementCorporate
SEB Estonia SEB Latvia SEB Lithuania
Growth rates in local currency+38% +17% +40% +18% +47% +30%
2006 2007 2006 2007 2006 2007
+1%
2008 YTD
+4% +13% 2008 YTD 2008 YTD
Baltic countries – Credit exposure On and of balance, SEK bn
32
SEB Estonia
SEB Latvia
SEB Lithuania
Total Baltic
Impaired loans, gross
1,019 694 1,037 2,750
Specific reserves 294 80 401 775Collective 482 384 311 1,177Off balance reserves
0 0 0 0
Total reserves 776 464 713 1,952
Reserve ratio 76.1% 66.8% 68.8% 71.0%
Baltic countries Impaired Loans and ReservesSeptember 2008, SEK m
Impaired loans Q4 Q1 Q2 Q3SEK m 2007 2008 2008 2008
Estonia 186 334 819 1 019Corporate 47 132 570 657Private 138 202 249 362
Latvia 218 301 444 694Corporate 84 86 152 285Private 134 216 292 410
Lithuania 573 682 819 1 037Corporate 398 416 492 633Private 176 266 327 404
33
Estonia Latvia Lithuania Total
Net Write-offs & Actual Losses 3 -11 -1 -9
Net New Specific Provisions -273 -58 -69 -400
Net New Collective Provisions -158 -187 -117 -462
Change in Value of Seized Assets -1 -1 -5 -7
Net Credit Losses -429 -257 -192 -878
Baltic countries – Net Credit Losses Jan – Sep 2008, SEK m
34
Outline
Overview of the SEB Group
Earnings
NFI and Bond portfolios
Asset quality
Baltics
Funding and capitalisation
The Swedish stability package
35
Capital supporting customer business
Risk-weighted assetsSEK bn
Tier 1 capital ratiosPer cent
6
7
8
9
10
11
Q12007
Q22007
Q32007
Q42007
Q12008
Q22008
Q32008
Basel II (no floors)Basel II (transition rules)Basel I
Basel I Tier 1 target
0
300
600
900
1200
Q12007
Q22007
Q32007
Q42007
Q12008
Q22008
Q32008
Basel I Basel II
36
Capital adequacy SEB Group
7.9 8.0 7.8 7.5 8.2 8.6 8.1
10.5 10.2 10.3 10.8 11.5 11.010.4
Dec2002
Dec2003
Dec2004
Dec2005
Dec2006
Dec2007
Sep2008
Core capital ratio, % Total capital ratio, %
SEK bnCapital base 52.7 54.7 58.7 76.2 85.8 93.0 97.7Risk-w. Assets 503 535 570 704 741 842 937
Basel I 9,3%
Basel I 7,3%
Basel I 1.045
Basel II
37
Structural liquidity position
Balance sheet structure
Assets Equity & Liabilities
Interbank deposits
ST funding <1 year
LT funding >1 year
Cash &interbank loans
Deposits from the public
Lending
Bond portfolio
Equity
Liqu
id a
sset
s
Stab
le fu
ndin
gS
hort-
term
fund
ing
“Ban
king
boo
k”
Other trading
Net liquidity position across maturitiesSEK bn, 30 Sep
More than 12 months matched funding, i.e. based on no access to capital markets, no refinancing of debt to credit institutions, issued bonds or subordinated capital; and moderate reduction of business activities.
0
50
100
150
200
250
300
1 week
2 weeks
4 weeks
2 months
3 months
4 months
5 months
6 months
9 months
12 months
SEB is match-funded approx.
one year
38
Deposits - Interbank
20%
Deposits - General Public
42%
CPs/CDs11%
Schuldscheins and Reg Bonds3%
Mortgage Covered Bonds Sweden10%
Mortgage Covered Bonds Germany2%Public Covered Bonds Germany7%
Senior debt2%
Subordinated debt3%
Funding structureSEB Group, Sep 2008SEK 1,702bn
* Over collateral within covered pools SEK 57bn
39
Outline
Overview of the SEB Group
Earnings
NFI and Bond portfolios
Asset quality
Baltics
Funding and capitalisation
The Swedish stability package
4040
Unprecedented government and central bank intervention
● Government:$700bn (TARP) to buy illiquid assets, whereof $250bn to recapitalise banks.
● Fed: Extension of maturity and collateral, emergency support to Bear Stearns, AIG.
● Nationalisation: Fannie Mae, Freddie Mac and Washington Mutual.
● Government:£50bn to recapitalise banks, £350bn to guarantee funding.
● BoE: Extension of maturity and collateral for borrowing.
● Nationalisation: Northern Rock, partly RBS, HBOS and Lloyds TSB.
● Eurozone governments:€150bn to recapitalise banks, €920bn to guarantee funding.
● ECB: extension of maturity and collateral for borrowing.
● Nationalisation: Partly Fortis, Dexia, capital injections in French banks, liquidity guarantee Hypo Real.
Nordic central banks & governments:● Extension of maturity and collateral for
borrowing. Strengthened deposit guarantees.
● SE: SEK 1,500bn to guarantee mid-term funding up to 5 years and SEK 15bn injected into new stability fund with mandate to recapitalise failing banks.
● DK: General guarantee on all senior unsecured bank debt.
● NO: NOK 350bn government liquidity facility against collateral in mortgage bonds.
Iceland● Nationalisation of all three
major banks.● $6bn rescue loan from IMF,
Nordic and Japanese central banks.
41
The Swedish measuresThe Swedish situation● The Riksbank (central bank) deem the
stability in the Swedish financial system as satisfactory.
● Finansinspektionen (FSA) deem the Swedish banks as solvent. The capital adequacy requirements are met with a broad margin.
The framework● Based on an EU agreement● Install a guarantee program● Setting up a stability fund ● The government has a broad
mandate to decide on further measures if deemed necessary
● Capital injections is primarily given through preference shares issuance
● The government has the right to compulsory redemption of shares to market price under certain circumstances
The Guarantee program● SEK 1,500bn to support medium-term bank funding
● Cover Swedish banks & mortgage companies
● Possibility to refinance funding withstate guarantee to a risk based fee
● Require Tier 1 of ≥6% to utilize guarantee
● Handled by National Debt Office (Riksgälden)
The Stability fund● Will amount to an average of 2,5 per cent of GDP
in 2023, ~SEK 150bn
● The government will insert SEK 15bn
● The existing deposit guarantee fund of SEK 18bn is moved into the stability fund
● The rest, ~ SEK 117bn or ~SEK 2,6bn / annually will be paid by the financial system on a risk adjusted fee basis as well as through the guarantee program fee and the ongoing deposit guarantee fee.
● Stability fund fee payments will start when the financial turmoil has calmed down
42
Stability fund functionality
PAYMENTS IN PAYMENTS OUT
Deposit guarantee errands Max SEK 0,5m/person/bank
Redeemed guarantees
Capital injection to banks in crisis
STABILITY FUND * One-Time contribution
20232,5% of GDP~ SEK 150bn
Supplied fundsl% of GDP SEK 33bn
Deposit guarantee fees
Guarantee - and stability fees
Interest/redemptions
The State SEK 15bn*
Deposit guarantee fund SEK 18bn*
43
Global downturn, and…
…financial turmoil has turned a corner
● Strong capital and good liquidity
● Robust customer business
● Intensified advisory services
● Lower absolute costs
4444