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Debt Investor Presentation
Financials Q1 2015
More information
Available on www.sebgroup.com
You will find it under Investor Relations
Thomas Bengtson
John Arne Wang
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
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BE BOUND AS FOLLOWS:
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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.
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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
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 : USD/SEK = 0.12 ; SEK/USD = 8.49
3
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 USD 1.6m
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
SEB’s Core Markets, Strategy,
Franchise and Financial Results
5
SEB’s Core Markets and Business
Well diversified business in a strong economic environment
Strong Macro-Economic Operating Environment
Well-diversified business mix
Total operating income from business divisions – rolling 12m March 2015
SEK 45.0bn (USD 5.3bn)
Large Corporates & Institutions
-Corporate Banking
-Markets
-Transaction Banking
Wealth Management and
Life & Pension
Norway
Finland
Sweden
Denmark
Germany
Estonia
Latvia
Lithuania
Sweden
Other Nordics
Germany
RoW
23%
Baltic Retail
banking
53%
31%
16%
47%
26%
15%
12%
41%
8%
Lithuania
28%
Retail banking
 Universal banking in Sweden and the Baltics
 Principally corporate banking in the other Nordic countries
and Germany
6
SEB’s Key Figures
Summary - Strong Financial Development
Key Figures
Mar 31, 2015
2014
2013
2012 2011 1) 2010
Return on Equity, %
Cost /Income ratio, %
13.8
48
15.3
47
13.1
54
11.5
61
12.3
62
8.9
65
Common Equity Tier 1
capital ratio, % 2)
16.6
16.3
15.0
NA
NA
NA
Tier I capital ratio, % 2)
18.8
19.5
17.1
NA
NA
NA
Total capital ratio, %
21.1
22.2
18.1
NA
NA
NA
0.05
0.09
0.09
0.08
-0.08
0.15
57
62
87
74
71
69
NPL coverage ratio, % 5)
55
59
72
66
64
66
NPL / Lending, % 5)
0.7
0.8
0.7
1.0
1.4
1.8
2)
Net credit loss level, % 3)
Reserve ratio, %
4)
1) 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
SEB’s Business Divisions’ Financial Development Q1 2015 vs. Q1 2014
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 Q1 2015 vs. Q1 2014
 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
Operating profit before net credit losses
SEK m
3,000
Jan-Mar 2014
Jan-Mar 2015
2,500
2,000
1,500
1,000
500
0
Large Corporates and Institutions
Retail Banking
Wealth Management
Life
Baltic
March 31, 2015
Business equity, SEK bn *
Return on equity, %
Cost / income ratio
1) Return on Business Equity
61.6
12.0
0.46
34.0
14.3
0.46
9.9
25.5
0.46
8.4
29.0
0.49
8.5
14.6
0.51
8
Effects of SEB’s Strategy 2013-2015 to raise divisional performance
Income growth in line with communicated target
Target
2013-15
Business Division
Actual growth
2013-14
Large Corporates and
Institutions
~15%
+14%
Swedish Retail Banking
~20%
+14%
Life & Wealth
~5%
+10%
Baltic
~15%
+7%
Group
~15%
+12%
9
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
14 000
12 000
Average quarterly
total operating income
10 000
in SEK m */
2008-Mar 2015
8 000
6 000
4 000
2 000
7%
15%
12%
25%
21%
21%
26%
23%
27%
23%
2008
2009
2010
2011
2012
2013
2014
Jan-Mar 2015
Geographic importance
Growing Nordic importance and deleveraging in the Baltics
Baltics
–
–
–
Baltics
Estonia 4%
Latvia
4%
Lithuania 6%
Germany **
Finland
Nordics excl.
Sweden
16%
Denmark
–
–
–
14%
8%
3%
6%
7%
Germany ** 7%
4%
Finland
7%
Sweden
23%
62%
Norway
FY 2008
Other
Estonia 3%
Latvia
2%
Lithuania 3%
Nordics excl.
Sweden
19%
Denmark
8%
6%
60%
8%
Sweden
Norway
Jan-Mar 2015
* Operating income of each area as a percentage of total operating income of the businesses
** excluding centralized Treasury operations
10
SEB’s Business Profile Development
Balanced business model creates diversified and stable income
Split of operating income
Non-NII is more important than NII
14 000
Average quarterly
income in SEK m
2006-March 2015
12 000
10 000
8 000
6 000
2%
9%
11%
4%
11%
45%
49%
4 000
2 000
43%
35%
2006
2007
2008
Net interest income
6 000
2010
2011
Net commission and Life insurance
2012
2013
Net financial income
2014
Jan-Mar
2015
Net other income
Strong market shares and high recurring income generation
increase fees and commissions
7 000
Average quarterly
fees and
commissions
income in SEK m
2006-March 2015
2009
14%
5 000
14%
4 000
26%
14%
12%
36%
3 000
2 000
1 000
27%
38%
34%
34%
2006
2007
2008
2009
Payments, card, lending
2010
Asset value based
2011
2012
Activity based
2013
2014
Life insurance income
Jan-Mar
2015
11
SEB’s Large Corporates & Institutions Business
Entrenched Business Franchise and growing Customer Base
Efficient large corporate business but
new regulatory capital regime targets corporate business
Increasing stability of income due to
more clients and cross-selling
 Split of average quarterly income 2006-2014
Corporate & Transaction Banking
100%
90%
80%
70%
60% 47%
50%
40%
30%
53%
20%
10%
0%
2006
2007
 A more than doubling of allocated capital to SEB’s
Large Corporates and Institutions business the last few years
Markets
C/I ratio
30%
70%
2008
2009
2010
2011
2012
2013
2014
2015
Business Equity RoBE 1)
2015
46%
SEK 61.6bn
12.0%
2014
46%
SEK 52.3bn
13.4%
2013
50%
SEK 48.8bn
12.9%
2012
54%
SEK 36.7bn
14.3%
2011
54%
SEK 26.1bn
20.6%
2010
54%
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, 2015
2007
2008
2009
2010
2011
2012
2013
2014
2015
12
SEB’s Large Corporates and Institutions Business
Growth initiatives fuel geographical diversification and income
New Clients’ share of Total Clients’ income
Operating profit per geography* in SEK bn
(SEKm)
CAGR
2010
2010-2014
0.4
Denmark 2014
+22%
0.9**
413
305
2010
209
Finland
0.5
+18%
2014
0.9
84
2010
Norway
2%
2010
6%
8%
2011
2012
Client base
11%
14%
Germany
2013
New clients
2014
2010
+13%
1.0
1.6
+21%
0.7
2014
1.5
2014
*FX adjusted
**Excluding one extraordinary item
13
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
March 2015
Dec 2007
20%
1.7
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
C/I ratio
1.7
1.4
1.1
0.8
0.5
2011

Strong development of efficiency and
profitability despite 3.5x more allocated capital
Average quarterly operating profit 2010-2015
2010
Strategic move in 2008 resulted in a more efficient,
professional, advisory-driven organization and customer
centric distribution capacity
27%
Substantially increased operating profit
SEK m
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0

2012
2013
2014
Business Equity
RoBE 1)
2015
46%
SEK 34.0bn
14.3%
2014
45%
SEK 24.6bn
20.7%
2013
49%
SEK 20.2bn
21.9%
2012
57%
SEK 14.4bn
22.3%
2011
65%
SEK 10.8bn
21.4%
2010
71%
SEK 9.7bn
14.5%
2015
1) Return on Business Equity
* EPSI = Extended Performance Satisfaction Index
14
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

C/I
Business Equity
RoBE 1)
Q1 2015
51%
SEK 8.5bn
14.6%
2014
50%
SEK 8.9bn
14.5%
2013
52%
SEK 8.8bn
12.9%
2012
62%
SEK 8.8bn
9.7%
2011
58%
SEK 8.8bn
29.6% 2/
2010
66%
SEK 11.8bn
2.2%
SEB’s business and exposures are of a different nature than
prior to the financial crisis
1) Return on Business Equity
2/ Write-backs of provisions of SEK 1.5bn
Maintaining leading market shares in lending
Q2
Q1
04 Q3 Q4 Q1
Q4 Q1
Q2
07 Q3 Q4
Q1 Q2
08 AugSepSampo/Danske Bank
06 Q3DNB
Q2
05 Q3 Q4 Q1 Q2
SEB
Swedbank
Nordea
Estonia
50%
Estonia
50%
Latvia
40%
40%
40%
30%
30%
30%
20%
20%
20%
10%
10%
10%
0%
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
-11
-12
-13
-14
0%
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
-11
-12
-13
-14
Lithuania**
50%
0%
Q2
-11
* Competitors’ Q1 2015 volumes are not available at time of publication and SEB Q1 2015 figures are February 2015
** Lithuania Q4 2014 and Q1 2015 not available at time of publication
Source: Estonian Financial Supervision Authority, Association of Latvian Commercial Banks, Association of Lithuanian Banks, SEB Group
Q4
Q2
-12
Q4
Q2
-13
Q4
Q2
-14
Q4
15
Effects of SEB’s strategic actions
Improving operating leverage 1)
Average quarterly expenses (SEK bn)
Average quarterly income (SEK bn)
9.4
9.2
2010
2)
2011
9.8
2012
11.0
10.4
2013
2014
Larger Number of Clients
11.6
+26%
Jan-March
2015
5.8
5.9
5.7
5.6
5.5
5.6
2010
2011
2012
2013
2014
Jan-March
2015
Larger Share of Clients’ Wallet
-3%
Increased Cost Efficiency
Operating leverage
Average quarterly profit before credit losses (SEK bn)
3.4
3.5
4.1
2010
2011
2012
4.8
2013
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 IAS 19 (pension accounting) costs in 2010
5.5
2014
6.1
+74%
Jan-March
2015
16
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
Self-financing growth
Operating expenses
(SEK bn)
Cost cap <22.5bn
extended to 2016
23.5
2011
22.9
2012
22.3
22.1
2013
2014
2015
2016
17
Operating leverage
All divisions are driving operating leverage
SEKbn
Large Corporates and Institutions
4.6
2.2
Retail Banking
Op Profit
CAGR 20102015
Op Profit
CAGR 20102015
3.1
+6%
1.4
SEB Group
Op profit
CAGR 1),2)
Life & Wealth
+27%
Baltic 3)
+15%
2.9
1.3
Op Profit
CAGR 20102015
0.9
+11%
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 2010
3) Balltics adjusted for a one-off
write down of SEK 36m on an average
quarterly basis in 2012
0.4
Op Profit
CAGR 20102015
+40%
18
SEB’s Business Profile
Financial Targets
Profitability
Capital
Dividend
 Return on Equity
 Common Equity Tier 1
ratio
 Pay-out ratio
 Competitive with peers
- long-term aspiration of
15%
 150 bps over the
regulatory requirement
 40% or above of EPS
 Maintain credit ratings in
Ratings
Liquidity
Efficiency
 Funding access and
credibility as
counterpart
 Liquidity Coverage
Ratio
 Nominal cost cap
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 Q1 2015 = 48%
19
Credit Portfolio and
Asset Quality
20
Benchmarking Nordic banks’ Credit Risk
Business Sector Composition
March 2015
Sector credit risk composition (EAD)
Other
Retail other
4%
Retail mortgage
1)
Institutions
Property management (incl. housing co-ops)
5%
9%
5%
38%
34%
38%
12%
8%
Corporates
6%
27%
47%
10%
16%
7%
12%
41%
In SEKbn
11%
29%
9%
19%
37%
33%
19%
16%
SEB
DnB NOR
Nordea
SHB
Swedbank
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
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 (USD 212bn)
5%
7%
12%
10%
4%
14%
SEK 1,946bn (USD 229bn)
SEK 1,946bn (USD 229bn)
4%
25%
Credit Portfolio - Business Sector split
Total Nordics
from 59%
to 76%
Sweden
from 48%
to 60%
12%
16%
Other
Baltics
Household nonmortgage
4%
Germany
6%
Other Nordics
22%
Swedish
residential
mortgage
Swedish
household
mortgage
Sweden excl.
residential
mortgage
31%
30%
Dec '08
Mar '15
Public Sector
5%
Corporates
50%
Residential
Mortgages
32%
Commercial
Real Estate
9%
Development of certain business areas’ relative importance
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Large corporates
Swedish Residential Mortgage
Commercial Real Estate
Baltics, total
Swedish SMEs
Dec '08
Dec '09
Dec '10
Dec '11
Dec '12
Dec '13
Dec '14
Mar '15
22
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
30
Portfolio assessed - past due >60 days
25
20
15
10
Group
March 31, 2015
Nordics
Germany
Jan-Mar 2015
Dec '14
Dec '13
Dec '12
Dec '11
Dec '10
Dec '09
Dec '08
Dec '07
Jan-Mar 2015
Dec '14
Dec '13
Dec '12
Dec '11
Dec '10
Dec '09
Dec '08
Dec '07
Jan-Mar 2015
Dec '14
Dec '13
Dec '12
Dec '11
Dec '10
Dec '09
Dec '08
Dec '07
Jan-Mar 2015
Dec'14
Dec '13
Dec '12
Dec '11
Dec '10
Dec '09
Dec '08
0
Dec '07
5
Baltics
NPL % of lending
0.7%
0.5%
0.4%
4.1%
NPL coverage ratio
55%
46%
77%
62%
23
Asset Quality – the Group and Geographic regions
Low net credit losses
Baltic countries, net credit losses in %
Nordic countries, net credit losses in %
-1.37
0.05
0.18
0.17
0.06
0.07
0.05
0.06
0.11
0.06
0.43
0.33
0.63
1.28
-0.03
(negative = reversals)
5.43
2007
2008
2009
2010
2011
2012
2013
2014
Mar-15
2007
2008
2009
2010
-0.07
0.09
0.22
0.14
0.02
0.02
0.11
2008
2009
2010
2011
2012
2013
2014
Mar-15
2013
2014
Mar-15
2008
2009
0.09
0.09
0.05
2014
Mar-15
(negative = reversals)
0.92
2007
0.08
0.15
0.30
(negative = reversals)
2007
2012
-0.08
0.00
0.05
2011
SEB Group, net credit losses in %
Germany, net credit losses in %
0.10
0.21
0.40
2010
2011
2012
2013
Net credit losses = the aggregated net of write-offs, write-backs and provisions
24
Capital
25
SEB’s capital generation
Increasing Earnings and Capital Generation
Profitable throughout the Financial Crisis
SEK bn
25
Profit before credit losses
Operating profit
20
24.8
Strategic investments and divestments
19.3
17.0
15.6
15
2014 Highest operating profit ever
13.0
12.4
14.2
15.0
15.2
23.3
18.1
14.2
11.4
10
6.1
5.7
5.8
5
0
2008
2009
2010
2011
2012
2013
2014
Mar-15
Strong Capital Generation
3.5%
2.00%
2.0%
1.63%
1.23%
0.95%
1.0%
0.5%
0.0%
2.99%
2.47%
2.5%
1.5%
3.12%
Net Profit / REA (RWA)
3.0%
0.16%
2008
2009
2010
Note: All issuer’s financial figures are based on 2014 and historical financials
RWA 2008 – 2012 Basel II without transitional floor
REA 2013 – 2015 Basel III fully implemented
2011
2012
2013
2014
Mar-15
26
SEB’s Capital Base
Strong Capital Base composition
Basel III - Own Funds and Basel III ratios
Per cent
25
22.2%
20
21.1%
18.1%
16.3%
15
15.0%
15.0%
16.3%
16.6%
Tier 2
Legacy Hybrid Tier 1
Additional Tier 1
10
Common Equity Tier 1
13.1
5
0
2013
Full year 2013
Common Equity Tier 1 ratio
Additional Tier 1 ratio
Legacy Tier 1 ratio
Tier 2 ratio
Risk Exposure Amount SEK bn
Leverage ratio
Own Funds Basel I / 80 % of
Capital requirement Basel I *
2014
Full year 2014
March 31, 2015
March 31, 2015
15.0%
N/A
16.3%
1.4%
16.6%
1.5%
2.1%
1.0%
598
4.2%
147%
1.8%
2.7%
617
4.8%
170%
0.7%
2.3%
623
4.1%
162%
27
* Transitional rules in place in Sweden until further notice
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
Pillar I Requirement
Composition of SEB’s CET 1 and Total Capital
Requirements by the SFSA
Pillar II Requirement
Total 20.0%
19.2%
2.5%
17.8%
15.6%
14.8%
7.2%
5.2%
10.4%
Total 15.6%
8.4%
10.2%
10.6%
2.5%
2.0%
Systemic Risk
2.0%
2.0%
Mortgage Risk Weight
Floor Requirements
Other Individual Pillar
2 requirements
1.7%
CcyB
SRB
2.2%
Pillar 2
requirements
Min CET1
requirements
under Pillar 1
SHB
Nordea
Swedbank
SEB CET1 Requirement
Note: Capital requirements are based on the SFSA’s memorandum published on February 17, 2015
3.5%
1.5%
4.5%
SEB
0.3%
3.0%
0.3%
3.0%
Combined Buffer
Requirement under
Pillar 1
4.5%
10.5%
CCB
Combined Buffer
Requirement under
Pillar 1
Min Pillar 1
Requirements
Pillar 2
requirements
AT1 1.5%
& T2 2.0%
4.5%
SEB Total Capital Requirement
28
Balance sheet, liquidity and
funding
29
Balance sheet
Diversified and Liquid Balance Sheet
Total Assets SEK 2,979bn (USD 350bn) March 31, 2015
100%
90%
80%
Other
Other
Life Insurance
Life Insurance
Credit Institutions
Credit Institutions
Derivatives
70%
Liquid assets
60%
50%
Client Trading
Cash & Deposits in
Central Banks
Client Trading
Funding,
remaining
Centralmaturity<1y
Bank deposits 2)
Centra Bank deposits
Short-term funding
2)
Liquidity Portfolio
Funding,
remaining maturity
>1y
Household
Lending
Household
Deposits
40%
30%
Derivatives
Stable funding
“Banking book” 1)
20%
10%
0%
Corporate & Public
Sector lending
Corporate & Public
Sector Deposits
Equity
Assets
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
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
500
800
Lending
Deposit
Senior Debt
Net = Lending - deposits - senior debt
700
600
400
500
300
400
200
300
200
0
100
-100
0
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
100
Household lending growth funded by
deposit increases and issued covered
bonds
-100
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
600
Lending
Deposits
Covered Bonds
Net = lending - deposits - outstanding cov bonds
Overcollateralisation in Swedish cover pool
Corporate & public lending, deposits and senior
bonds
Corporate lending growth funded by
deposit increases and issued senior
unsecured bonds
31
Funding Base
Diversified funding and stable structural funding position
Stable development3%of deposits from corporate sector and private individuals
SEK bn
1,000
800
600
400
Total
Corporate sector
Private sector
Total Funding Base SEK 1,968bn */**
33%14%
Financial Institution
deposits
Corporate deposits
Q1 2015
Q4 2014
Q3 2014
Q2 2014
Q1 2014
Wholesale funding SEK 793bn
*/**
March 31, 2015
CPs/CDs
4%
19%
40%
31%
3%
Public entity deposits
Central Bank deposits
Treasury
(USD 93bn)
4%
4%
Private Individual
deposits
Q4 2013
Public sector
(USD 232bn)
Wholesale funding
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2011
Q3 2011
Q2 2011
Q1 2011
Q4 2010
Q3 2010
Q2 2010
Q1 2010
Q4 2009
Q3 2009
Q2 2009
Q1 2009
-
Q4 2008
200
Mortgage Cov
Bonds SEB AB
Mortgage Cov
Bonds SEB AG
Senior Debt
3%
42 %
34%
4%
7%
13%
* Excluding repos
** Excluding public covered bonds issued by SEB AG which are in a run-off mode
Subordinated
debt
32
Short-term Funding
CP/CD funding supports Markets’ business
Volumes - Net Trading Assets1 adaptable to CP/CD funding access
Net trading assets
SEK bn
CP/CD
350
300
250
200
150
100
50
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
0
Duration - CP/CD fund net trading assets with considerably shorter duration
Average duration (days)
SEK bn
Net Trading
Assets
300
150
200
100
100
50
0
1. Net Trading Assets = Net of repoable bonds, equities and repos for client facilitation purposes
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
-150
May-13
-300
Apr-13
-100
Mar-13
-200
Feb-13
-50
Jan-13
-100
Dec-12
CP/CD
funding
0
33
Long-term Funding
Issuance of long-term funding exceeds maturities
Senior unsecured and Covered bond Issues
Issued Covered Bonds
Issued Senior Unsecured
Matured Covered Bonds
Matured Senior Unsecured
Issuance of bonds
Instrument
2012
2013
2014
Q1 2015
Senior unsecured
42
45
32
2
Covered bonds SEB AB
81
73
60
12
Covered bonds SEB AG
1
2
0
0
Subordinated debt
6
0
17
0
131
120
109
14
SEK bn
140
120
100
80
60
40
20
1)
0
2009
2010
2011
2012 2013
2014 2015 2016
Total
1) Q1 2015
34
Liquidity
Sizable liquidity buffer
March 2015
SEB’s Total Liquid Resources 229 % of
wholesale funding maturities within 1 year
SEK bn
900
 Not encumbered
Other liquid
resources 2)
700
600
 Assets held or controlled by the Treasury function
773
800
 Eligible with Central Banks
Overcollateralization
in SEB’s Cover Pool
569
Core liquidity reserve
Directives of Swedish Bankers’ Association
 Maximum 20% risk weight under Basel II
Standardized Model
 Lowest rating of Aa2/AA-
500
 Valued marked-to-market
400
Composition of SEB’s Liquidity Portfolio
300
 Government or state-guaranteed securities of
Nordic countries, and other selected Northern
European countries, principally Germany
200
100
0
SEB Core
1)
Reserve
1)
SEB's Total Liquid
Resources
Other liquid resources
OC
Other
Financial corporates
Non-Financial corporates
Covered bonds
Treasuries & other Public Bonds
O/N bank deposits
 Supra-nationals
 High quality AAA rated covered bonds issued by
banks in the Nordic countries and other selected
Northern European countries, principally Germany
Cash & holdings in Central Banks
1) Definition according to Swedish Bankers’ Association
2) Liquid resources not eligible for the liquidity portfolio
35
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 2015
250%
227%
200%
12M maturing funding ratio March 2015
200%
188%
131%
150%
150%
100%
100%
50%
50%
0%
Swedbank
96%
110%
Mar 2015
Nordea
SEB
Development Q4 2013-Q1 2015
350%
300%
250%
200%
150%
100%
50%
0%
121%
0%
Mar 2015
SEB
165%
Swedbank
Nordea
SHB
Development Q4 2013-Q1 2015
200%
150%
100%
50%
Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015
SEB
Swedbank
Nordea
Average
0%
Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015
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
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
Additional Information
38
Macro, Income, Corporate Credit
Portfolio, Funding mix
39
SEB’s Core Markets
Strong sovereign finances
% of GDP
Sovereign Debt
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
Norway
Germany
Luxemburg
Estonia
Denmark
Latvia
Sweden
Austria
Lithuania
Finland
Netherlands
Hungary
Belgium
Malta
Italy
Greece
France
Poland
Cyprus
Portugal
UK
Ireland
Spain
Slovenia
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%
Budget Deficit
50% 100% 150% 200%
-20% -10%
0%
10% 20%
-10% -5% 0% 5% 10% 15%
Source: Latest available data from IMF WEO
40
SEB’s Core Markets
Economic fundamentals remain good
Norway
Sweden
Nordic GDP development *
%
10
8
6
4
2
0
-2
-4
-6
-8
-10
Sweden
Norway
Finland
Denmark
Denmark
Estonia
Latvia
Lithuania
Germany
2009
2010
2011
2012
2013
2014 2015E 2016E
Eurozone GDP development *
German and Baltic GDP development *
%
Germany
10
Estonia
Latvia
Lithuania
5
0
-5
-10
-15
-20
Finland
2009
2010
2011
2012
2013
2014 2015E 2016E
%
10.0
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
-8.0
-10.0
2009 2010 2011 2012 2013 2014 2015E 2016E
* Source: SEB Nordic Outlook, May 2015
41
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 USD 460bn at SEK 8.49 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
Negative rates impact customer-driven NII on deposits
SEB Group, cumulative changes from Q1 2010, SEK m
5,000
NII from
lending
Starting point
4,500
Volume effect
Margin effect
Total
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Q1
-10
Q2
Q3
Q4
Q1
-11
1,500
NII from
deposits
Q2
Q3
Q4
Starting point
1,250
Q1
-12
Q2
Q3
Q4
Volume effect
Q1
-13
Q2
Q3
Margin effect
Q4
Q1
-14
Q2
Q3
Q4
Q1
-15
Total
1,000
750
500
250
0
-250
-500
-750
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
43
Business mix creates stable and diversified revenues
Non-NII more important -Total operating income split between income categories
SEK bn
Net Financial & Other income
Net Commission & Net Life income
Net Interest Income
14
12
10
8
6
9.9
10.3
12%
22%
18%
46%
37%
42%
10%
11.6
12%
9.6
4%
13%
11%
45%
45%
50%
44%
43%
42%
47%
43%
42%
44%
44%
44%
45%
46%
44%
46%
46%
46%
47%
44%
46%
45%
44%
44%
41%
39%
43%
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
6.6
6.4
12%
10%
44%
10%
12%
7%
9.6
10.4
9.3
9.5
9.6
11.0
12.8
9.2
9.7
9.7
10.6
12.7
11.1
10%
14%
10%
43%
10%
46%
45%
4
2
0
Strong market shares render stable commission* and life income
SEK bn
Payment, cards, lending*
7
6
5
4
3
2
1
0
5.4
5.5
5.4
5.9
14%
14%
12%
17%
13%
13%
16%
16%
35%
37%
33%
41%
32%
40%
30%
37%
Asset value based *
5.4
5.5
5.2
17%
15%
11%
17%
12%
30%
40%
31%
43%
12%
30%
41%
Activity based *
5.8
14%
12%
Net life income
6.6
5.9
5.3
5.7
5.6
5.8
17%
12%
14%
14%
11%
15%
12%
14%
13%
20%
10%
30%
29%
32%
31%
28%
32%
44%
46%
40%
42%
39%
44%
32%
11%
31%
41%
41%
5.7
13%
14%
13%
12%
32%
43%
14%
12%
36%
38%
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
*Gross commission development
44
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
Corporate sectors’ credit portfolio in per cent of Total Credit Portfolio excluding banks
Loan portfolio
Committments, guarantees and net derivatives
Finance & Insurance
Wholesale and Retail
Total credit portfolio, excl banks = USD 229 bn
of which:
Loan portfolio, excl banks
= USD 152bn
Transportation
Shipping
Business and Household Services
Construction
Total corporate credit portfolio
Of which:
Corporate loan portfolio
Manufacturing
Agriculture, forestry and fishing
Mining, oil and gas extraction
= USD 114bn
= USD 54bn
Electricity, water and gas supply
Other
Total Corporate Credit Portfolio
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
60%
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
SEBs wholesale funding sources
Diversified funding mix
Wholesale funding, SEK 780bn*, Q1 2015
Short-term funding sources
Commercial paper (CP)
programs
Q2 2014 Q3 2014 Q4 2014
Wholesale funding distribution*
Q1 2015
131
121
109
129
Swedish
7
7
3
3
French
1
2
3
0
21
29
17
17
110
82
86
108
Total
4%
3%
2% 0% 2%
14%
5%
6%
Global
European
US
Commercial deposit (CD)
programs
152
139
101
120
Yankee CDs
137
125
87
106
Sterling CDs
15
13
14
14
Q2 2014 Q3 2014 Q4 2014
Q1 2015
Total
Long-term funding sources
SEB AB
14%
8%
2%
8%
1%
CP Swedish
31%
463
474
491
492
CP French
216
236
235
245
CP European
12
12
12
10
Covered
61
61
63
61
Sterling CDs
Senior
Domestic Covered bond program
Total
Domestic Covered bond program
Domestic MTN program
Global MTN programs
CP US
Yankee CDs
74
64
67
65
144A Covered and senior
unsecured
35
38
41
45
Retail index linked bonds
35
34
35
35
Global MTN program Senior
Subordinated debt
29
29
38
31
144A Covered and senior unsecured
42
41
41
39
Retail index linked bonds
Mortgage covered bonds
26
25
25
24
Subordinated debt
Senior unsecured
17
16
15
15
SEB AG Covered bonds
SEB AG
Total
Domestic MTN program
Global MTN program Covered
SEB AG Senior unsecured
46
Swedish Housing Market
47
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 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
House prices (index 1995=100)
International comparison
as a % of GDP
Denmark
Spain
UK
Norway
Sweden
USA
Germany
Ireland
14.0
400
12.0
UK
Denmark
Spain
Germany
Netherlands
Norway
USA
Sweden
350
10.0
300
8.0
250
200
6.0
150
4.0
100
2.0
0.0
50
-00
-01
-02
-03
-04
Sources: Macrobond
-05
-06
-07
-08
-09
-10
-11
-12
-13
-14
-15
0
-95 -96 -97 -98 -99 -00 -01 -02 -03 -04 -05 -06 -07 -08 -09 -10 -11 -12 -13 -14 -15
48
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)
Population growth vs housing completions
Low number of new houses constructed
Sweden
as a % of the population
1.8
Denmark
Spain
UK
Norway
Sweden
USA
120
1.6
80
70
100
1.4
60
80
1.2
1.0
50
60
0.8
40
30
40
0.6
20
0.4
20
0.2
0.0
-00
-01
-02
-03
Source: Macrobond
-04
-05
-06
-07
-08
-09
-10
-11
-12
-13
-14
-15
0
Population
growth, in 1000s
(RHS)
Housing
completions,
number of
apartments, in
1000s (left)
10
1990
2002
2014
0
Source: Statistics Sweden, SEB
1) Latest available data from Swedish National
Board of Housing
49
Swedish Household Mortgage Market - Current market development
Steady increase in house prices
Slow but steady increase of lending to households
Slowly increasing lending growth to
Swedish Households
Residential house and apartment prices start
increasing again, March 2015
Area
Sweden
Single family
houses
Apartments
%
YoY change
16
3m
12m
3m
12m
+5
+11
+8
+14
M/M 3 month average,
annualized
14
12
10
Greater
Stockholm
+5
+15
+5
+14
8
Central
Stockholm
+7
+16
6
Greater
Göteborg
+6
+12
+9
+19
4
Greater
Malmö
+3
+7
+5
+11
2
0
2007
Source: Mäklarstatistik
2008
2009
2010
Source: Sweden statistics
2011
2012
2013
2014
2015
50
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
%
Germany
Denmark
Spain
Finland
France
UK
Netherlands
Norway
USA
Sweden
20
15
10
5
0
-5
-10
-00
-01
-02
-03
-04
-05
-06
-07
-08
Year
Source: Macrobond
-09
-10
-11
-12
-13
-14
-15
51
Swedish Housing Market – Socio economic mitigating factors
Factors behind the strong asset quality
Credit information agency (“UC”)
Practically impossible to escape
claims
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
Strong household income
A household’s income is to a very high degree based on
two persons’ income. A mortgage loan is typically a joint
liability
No buy-to-let market
A regulated rental market and tenant owner subletting
restrictions
Direct debit
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
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




Particularly on apartments in the major cities’ center
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 may result in
their introducing of higher counter-cyclical buffers for Swedish banks
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 USD 15k and 21% on the amount above USD15k)
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
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 Q3 2010 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
1)
2)
A government report from November 2013
The Central Bank’s report ”How indebted are Swedish Housholds?” May 2014.
The volume of loans in the data covers about 80% of all household loans and 94% of all mortgages
Swedish Central Bank’s Financial Stability Report of November 2014
Statistics Sweden April 2015
The potential risks with Households’ indebtedness is offset by a low public sector debt and a capacity for
countercyclical measures
Socio-economic factors
3)
4)
54
SEB’s Swedish Residential
Mortgage Lending
55
SEB’s Swedish Residential Mortgage lending
Household mortgage lending dominates the portfolio
March 2015
Total SEK 514 bn (USD 61bn)
Residential Apartment Buildings
Residential Apartment Buildings
SEK 108bn
(USD 13bn)



Private companies
Housing co-op associations
State/Community owned
Strong asset quality
 Impaired loans at 1bp or SEK 9m
(USD1.1m)
 No problem loans since the 1990’s
 No net credit losses
 Low and conservative LTVs
48%
39%
13%
21%
79%
Household Mortgage lending
SEK 407bn
(USD 48bn)



Single family houses
Tenant owned apartments
Second homes
63%
32%
5%
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
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
0.10
0.08
0.00
0.03
0.03
0.02
2008
0.04
0.00
0.02
0.04
0.00
0.00 0.01
2009
2010
0.01
0.00
0.00
0.00
2007
0.01
2011
2012
2013
2014
Mar '15
Minimal net credit losses since the early 2000s, in %
1.20
1.00
0.80
0.60
0.40
0.20
0.00
-0.20
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Mar
'15
* Net credit losses = the aggregated net of write-offs, recoveries and provisions
57
SEB’s Swedish Household Mortgage lending
Successful Strategy has produced growth despite stricter
underwriting standards
SEK bn
218
229
247
260 272
295
322 339
358 372
383 394
404
407
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 (USD 35m)
Dec
'08
Jun
'09
Dec
'09
Jun
'10
Dec
'10
Jun
'11
Dec
'11
Jun
'12
Dec
'12
Jun
'13
>80% of the mortgage portfolio has LTV below 50%
2% exceeds an LTV of 70%
Loan-to-value
Share of portfolio
>85%
71-85%
0%
51-70%
13%
0-50%
2%
85%
Dec
'13
Jun
'14
Dec
'14
Mar
'15
 Net credit loss level is 0
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
SEB’s Swedish Household Mortgage Lending
Strong economic profile of customers
SEB’s typical mortgage customer





Age distribution of SEB’s customers
Based on volumes December 31, 2014
Portfolio
35%
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
New loans
30%
25%
20%
15%
10%
5%
0%
18-29
30-39
40-49
50-59
60-69
70-
SEB’s mortgage customers have a relatively stronger credit quality than market average 1)
UC Scoring 2)
Market
1.3
SEB
1.2
1.1
1.0
0.9
0.8
0.7
0.6
1)
Source: Swedish Credit Bureau (“UC AB”) “Kreditbarometern” November 2014
2)
UC scoring is defined as the probability of getting a payment remark within one year
Nov '14
Sep '14
Jul '14
May '14
Mar '14
Jan '14
Nov '13
Sep '13
Jul '13
May '13
Mar '13
Jan '13
Nov '12
Sep '12
Jul '12
May '12
Mar '12
Jan '12
Nov '11
Sep '11
Jul '11
May '11
Mar '11
Jan '11
Nov '10
0.5
59
Asset Quality – SEB’s Swedish Household Residential Mortgage lending
Low levels of impaired loans and negligible credit losses
Loans past due 60 days do not typically turn into credit losses, in %
Credit loss level
NPLs to lending
0.17
0.01
0.00
2007
0.15
0.13
0.11
2008
0.00
2009
0.13
0.10
0.01
2010
0.02
2011
0.01
2012
0.10
0.01
2013
0.07
0.07
0.01
2014
0.00
Mar '15
Minimal net credit losses since the late 1990s, in %
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
-0.05
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Mar
'15
Net credit losses = the aggregated net of write-offs, recoveries and provisions
60
SEB’s Swedish Cover Pool and
Covered Bonds
61
Cover Pool and Covered Bonds
Only Swedish Residential Mortgages in SEB’s Cover Pool
Highlights
 Only Swedish Residential Mortgages in the Cover Pool, which historically have had very low credit losses
 SEB’s Cover Pool is more concentrated towards Single family and Tenant owned apartments, which generally have somewhat higher
LTVs
 The Cover Pool is on the parent bank’s balance sheet contrary to SEB’s major Swedish peers
 All eligible Swedish residential mortgages are directly booked in the Cover Pool on origination , i.e. no cherry picking of mortgages
from balance sheet to Cover Pool
 Covered Bonds are issued out of the parent bank and investors have full and dual recourse to the parent bank’s assets as well as
secured exposure to the Cover Pool
 SEB runs a high OC – currently at 46%
Covered Bonds
Total outstanding covered bonds (SEK bn)
Rating of the covered bond program
FX distribution
SEK
non-SEK
Q1 2015
320
Aaa Moody's
76%
24%
Q4 2014
310
Aaa Moody's
76%
24%
Q4 2013
297
Aaa Moody's
74%
26%
Cover Pool
Q1 2015
Q4 2014
Q4 2013
Total residential mortgage assets (SEK bn)
466
465
434
Weighted average LTV (property level)
57%
57%
60%
Number of loans (thousand)
685
683
655
Number of borrowers (thousand)
426
427
404
Weighted average loan balance (SEK thousand)
681
680
662
Substitute assets (SEK thousand)
0
0
0
Loans past due 60 days (basis points)
6
6
11
0.6
0.6
0.8
46%
50%
46%
Net credit losses (basis points)
Over-collateralization level
62
Cover Pool in March 2015
SEBs mortgage lending is predominantly in the three largest and fastest
growing cities with an interest rate reset date within two years
Type of loans
Interest rate type
Fixed rate reset
=>5y
1%
Residential
Apt Buildings
14%
Single
family
59%
Tenant
owned
apartments
27%
Fixed rate reset
2y<5y
10%
Floating (3m)
69%
Fixed reset <2y
20%
LTV distribution by volume in % of the Cover Pool
0-10%
10-…
20-…
30-…
40-…
50-…
60-…
70-…
2%
>75% 0%
Geographical distribution
21%
19%
12%
17%
15%
9%
6%
Malmö
region
8%
Stockholm
region
43%
Prior ranking loans
No prior ranking
loans
<25% of property
value
Larger regional
cities
33%
Göteborg
region
16%
Interest payment frequency
93%
84%
Monthly
6%
>25<75% of 1%
property value
Quarterly
16%
NOTE: Distribution in different LTV buckets based on exact order of priority for the individual mortgage deeds
according to the Association of Swedish Covered Bond Issuers
63
Covered Bonds
Profile of outstanding Covered Bonds
SEB Swedish Mortgage Covered Bonds
Outstanding covered bonds (SEK bn)
350
Moody’s Rating
Aaa
Total
outstanding
SEK 320bn
FX distribution
SEK 76%
300
250
200
150
100
non-SEK 24%
Benchmark 93%
Currency mix
Mar-15
Dec-14
Sep-14
Jun-14
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
Non Benchmark 7%
Sep-11
Mar-11
0
Jun-11
Benchmark
50
Maturity profile (SEK bn)
Covered Bond SEK
Covered Bond Non-SEK
90%
80%
70%
76%
60%
70
60
Non-Benchmark
50
EUR Benchmark
SEK Benchmark
40
50%
40%
24%
30%
30
20
20%
10%
2041
2039
2032
2031
2026
2023
2022
2021
2020
2019
2018
2017
2016
2014Q4
2014Q2
2013Q4
2013Q2
2012Q4
2012Q2
2011Q4
2011Q2
2010Q4
2010Q2
2009Q4
2009Q2
2008Q4
2008Q2
0
2015
10
0%
64
SEB contacts and information
Contacts
Thomas Bengtson, Head of Debt Investor Relations
Email: [email protected]
tel: +46 8 763 8150
John Arne Wang, Head of Treasury Management
Email: [email protected]
tel: +46 8 506 23255
More information
Available on www.sebgroup.com
You will find it under Investor Relations
65