RNS Number:1411D
Skandinaviska Enskilda Banken
4 May 2001
PART 1
Interim Report January-March 2001
Stable result in spite of weak stock market
- Operating result* amounted to SEK 2 789 M (3 186).
- Net interest income rose by 6 per cent to SEK 3 070 M (2 883).
- Net commission income decreased by 21 per cent to SEK 2 933 M (3 702).
- Return on equity was 18.4 per cent (25.3).
Efficiency measures kept costs stable and risks decreased
- Total costs, SEK 5 462 M (5 385), were kept stable and staff costs decreased.
- Action plan to freeze IT costs was implemented.
- Strong result in Merchant Banking.
- BfG re-branded to SEB - restructuring ahead of plan.
- Today SEB's Volvo Ocean Race yacht will be christened.
Operating result includes pension settlements/provisions.
President's Statement
"Despite the weakening trends in the equities markets during the first quarter
of the year, SEB is reporting a stable profit for the Group as a whole. It is
pleasing to note that our net interest income has increased and that staff costs
have declined by 12 per cent compared with the year-earlier period," says Lars H
Thunell, President and Group Chief Executive.
"Merchant Banking continues to show strong earnings. It is also pleasing that
customers-related revenues continue to show a positive trend."
"The restructuring of BfG is proceeding faster than planned. The re-branding of
BfG to SEB in April got a great deal of attention in Germany. Earnings are
satisfactory, taking into account the market conditions. The number of e-banking
customers in Germany is now up to 158 000, an increase of 120 per cent since the
first quarter of 2000."
"We have taken action to freeze the Group's IT costs. These measures will gain
effect gradually during the year which means that IT costs will not continue to
rise."
"Planning efforts prior to the proposed merger with ForeningsSparbanken are
intensive and proceeding as planned. As part of the integration efforts, work on
developing business plans for the new bank SEB Swedbank's four divisions and
other main areas, is under way. The leading star in all integration efforts is
to make the changes positive for our various customer groups. Discussions with
the Merger Task Force of EU have been initialised."
THE GROUP
Summary of operating result per division and business area
January- January- Change
March March per cent
SEK M 2001 2000
Personal Banking Sweden 526 615 -14
Personal Banking International 12 119 -90
SEB Germany * 125 124 1
Corporate and Institutions
Merchant Banking 917 671 37
Enskilda Securities 150 396 -62
Mid Corporate 331 338 -2
SEB Securities Services 125 173 -28
Investment Management & Life 118 145 -19
The Baltic & Poland 125 72 74
Total all divisions 2 429 2 653 -8
Joint Group incl. capital gain and elimination. 360 533 -32
Operating result 2 789 3 186 -12
Changes in surplus values -251 473 -153
Total result SEB Group 2 538 3 659 -31
*) -excluding capital gains
Weaker commissions offset by strong trading
Total income decreased by 7 per cent to SEK 8 193 M (8 770) excluding changes in
surplus values. Vilniaus Bankas was not consolidated in the first quarter of
2000. Thus, the decrease for comparable units was 9 per cent. The decline is
entirely explained by lower commission income due to stock market related
development. Compared with the fourth quarter of 2000 the decrease was limited
to 1 per cent.
Net interest income rose by 6 per cent to SEK 3 070 M (2 883). Personal Banking
Sweden showed an increase of 16 per cent, whereas Merchant Banking reported a
decrease of 11 per cent. Adjusted for Vilniaus Bankas the increase was 2 per
cent. The cost for the governmental deposit guarantee decreased by SEK 50 M.
Net commission income decreased by 21 per cent to SEK 2 933 M (3 702). The
income varied significantly between different product areas and parts of the
Group. Net commission income from payments rose by 4 per cent, while net
commission income from securities fell by 22 per cent in comparison with the
first quarter of 2000. The decline was especially pronounced within Enskilda
Securities. (Full disclosure is provided in note x.)
Net result of financial transactions increased by 15 per cent to SEK 1 035 M
(SEK 900 M including an one-off item of SEK 153 M from sales of Brady bonds) due
to favourable results from trading in shares, bonds and derivatives (see further
note x.)
A change in market interest rates by one percentage point at 31 March 2001 would
result in an increase/decrease in the Group's interest-bearing assets and
liabilities, inclusive derivatives, by SEK 2.1 billion.
Other income amounted to SEK 1 155 M (1 285). Of this amount capital gains and
one off items accounted for SEK 742 M (793). SEK 503 M was from the sales of
shares in OM and EUR 26.6 M (approximately 240) from SEB AG's divestment of
shares in Deutsche Borse.
Cost level stable or actually decreasing for comparable entities
Total costs amounted to SEK 5 462 M (5 385). Adjusted for Vilniaus Bankas, which
was not included in the first quarter of 2000, costs decreased by 1 per cent. In
local currencies costs decreased by 3 per cent.
Efficiency measures within different business areas have decreased costs by 16
percent compared to the fourth quarter 2001. In the e-banking area, for example,
development as from January 2001 is carried out within the different divisions.
Taken together the costs for e-banking in the first quarter of 2001 amounted to
SEK 357 M (184). The cost in the fourth quarter 2000 was SEK 561 M.
Total costs for IT (including calculated cost for own personnel etc.) amounted
to SEK 1.3 billion compared with SEK 1.1 billion in the first quarter and with
SEK 1.7 billion in the fourth quarter of 2000. Of this, external IT costs were
SEK 635 M (491). The cost in the fourth quarter 2000 was SEK 767 M. The action
plan to freeze IT-development projects both with regard to the planned merger
and the weaker market conditions will keep the total IT-costs for the whole year
2001 at an unchanged or lower level than during 2000.
Rising staff costs by negotiated salary increases and negative exchange rate
effects were offset by efficiency measures mainly in Personal Banking Sweden and
Merchant Banking and restructuring in SEB Germany. In addition variable
performance-related remuneration decreased by 320 SEK m compared to first
quarter 2000. Thereby staff costs, net, decreased by 10 per cent to SEK 2 738 M
(3 040). Staff costs, gross, declined by 5 per cent to SEK 3 036 M (3 211). The
compensation for the pension costs included in the gross costs increased to SEK
298 M (171). This also includes the pension insurance scheme that has replaced
the earlier profit-sharing system.
SEB has an overfunded pension fund to support pension costs. At the end of March
2001, total assets in the pension funds amounted to SEK 19.4 billion (23.2 at
year-end 2000), while commitments was SEK 8.3 billion (8.0). Accordingly the
surplus value as per 31 March 2001 amounted to SEK 11.1 billion.
Depreciation amounted to SEK 455 M (427), of which goodwill accounted for SEK
178 M (165).
The remaining restructuring reserve for the acquisition of Trygg Hansa in 1997
was SEK 256 M at the beginning of 2001. Of this, SEK 67 M has been utilised
during the first quarter.
The acquisition of BfG in January 2000 resulted in a difference between equity
and purchase price. The allocation and utilisation of the negative goodwill is
described in Appendix 1.
Lending losses and doubtful claims
The Group's lending losses, including changes in the value of assets taken over
and write-downs, amounted to SEK 182 M, net (281), of which SEK 100 M, net
(310), pertained to SEB Germany. The level of lending losses was 0.08 per cent
(0.17).
Doubtful claims, net, that is after provisions of possible lending losses,
amounted to SEK 8 596 M (8 365 by year-end 2000). The increase is explained by
exchange rate changes. The volume of pledges taken over declined to SEK 161 M
(213).
Credit portfolio
SEB's total credit exposure amounted to SEK 948 billion, an increase of 22
billion from year-end 2000. The increase can be seen mainly within the corporate
sector where the exposure has grown by close to SEK 16 billion, primarily to
Swedish manufacturing companies. The lending to the household sector increased
by SEK 5 billion of which SEB AG contributed with approximately half and the
remaining part is related to mortgage lending within Sweden. Exposure on banks
remained stable.
SEB's exposure to the telecommunication industry (operators and manufacturing
companies) increased during the first quarter by SEK 2 billion to approximately
SEK 14 billion or 1.5 per cent of the credit portfolio. The increase is
attributable to short term exposure to existing clients, mainly hedging of
foreign exchange exposure. The exposure to the IT sector is stable around SEK 4
billion or 0.4 per cent of the credit portfolio.
SEB's exposure in emerging markets amounted to SEK 10 483 M, net, a decrease of
9 per cent from year-end 2000 (SEK 11 483 M). The decline was mainly due to
decreased exposures in Latin America and Eastern and Central Europe. (See
further Appendix 2).
Non-life insurance business
Operating result for non-life insurance operations amounted to SEK 241 M (52).
The increase was mainly due to capital gains of SEK 126 M from sales in the bond
portfolio.
One-off items
Total one-off items in the first quarter of 2001 amounted to SEK 869 M (947).
Change in surplus in life insurance operations
The change in surplus in life insurance operations, which is described in detail
in Appendix 3, was influenced by the negative financial effects due to the stock
market trend and amounted to SEK -251 M (SEK 473 M). See further in Appendix 3.
Capital base and capital adequacy
On the 31 March 2001, the capital base for the financial group of undertakings
(excluding the insurance companies) amounted to SEK 52.9 billion (53.3). Core
capital was SEK 36.4 billion (36.5), of which SEK 1.8 billion constituted core
capital contribution. (For calculation of the capital base see Appendix 4). The
risk-weighted assets amounted to SEK 514.7 billion (495.6).
The core capital ratio amounted to 7.08 per cent (7.37 per cent at year-end
2000) and the total capital ratio to 10.27 per cent (10.76). This is in line
with the Group's goal to maintain a core capital ratio of at least 7 per cent
and a total capital ratio of not less than 10 per cent.
If the first quarter results were to be included in the capital base, the core
capital ratio would have been 7.35 per cent and the total capital ratio 10.56
per cent.
Rating
In connection with the presentation of the proposed merger of
ForeningsSparbanken and SEB all major rating institutes placed SEB's rating
under review for a possible upgrade to ForeningsSparbankens's confirmed ratings.
2001 Annual General Meeting
At the Annual General Meeting in April all board members were re-elected. The
dividend was set at SEK 4.00 per share.
Stockholm, 4 May, 2001
Lars H. Thunell
President and Group Chief Executive
The interim report for January-June 2001 will be published on 23 August 2001.
SEB's reports are available on the Internet (www.seb.se; www.seb.net).
Additional information is available from:
Gunilla Wikman, Head of Group Communications, +46 8 763 81 25
Lotta Treschow, Head of Investor Relations, +46 8 763 95 59
This report has not been reviewed by the auditors of the Bank.
THE DIVISIONS AND BUSINESS AREAS
As of 2001, SEB's operations are organised into six divisions: Personal Banking
Sweden, Personal Banking International, SEB Germany (former BfG less merchant
banking operations), Corporate & Institutions, Investment Management & Life and
The Baltic & Poland.
Personal Banking Sweden - rising net interest earnings and lower costs
The Personal Banking Sweden division has responsibility for the SEB Group's
retail- and private-banking customers in Sweden. The organisation contains the
earlier retail operations within SEB - with the branch office network, the
telephone bank and the Internet services - as well as SEB Enskilda Banken.
For the first quarter of 2001 Personal Banking Sweden shows an operating result
of SEK 526 M (pro forma SEK 615 M for the corresponding period of 2000).
The result has to a large extent been affected by the sharp decline on the stock
market. The contrast is even bigger if the figures are compared with the first
quarter of 2000 (pro forma) when the market situation, on the other hand, was
extremely favourable. A comparison with the second half of last year, however,
shows stable equity earnings - despite the continued weak market situation.
The decrease in commissions is also offset by a positive development of net
interest income, continued low credit losses and decreasing costs - with, for
example, the staff costs at the same level as in January-March 2000.
Net interest income increased by 16 per cent. The strong rise comes from
increase in both volumes and margins. A specifically strong area is housing
loans (mortgages) with growth in both net interest and in volumes. Another
example is Enskilda Banken, Private Customers, where the net growth in volumes
under management is SEK 2.8 billion, mainly due to an increased "share of
wallet" from existing SEB-customers.
Since the end of last year, the monthly rate of new internet-customers is
growing at a level of 12 500 new private customers and 1 000 new corporate
customers. In total, the number of Internet customers of Personal Banking Sweden
now is 591 000.
Within the Personal Banking Sweden division there is now a number of activities
to further increase income and decrease costs. Examples are programmes for
intensified and closer activity toward various customer segments, cuts in the
project portfolio and continued efficiency measures.
Personal Banking International
The activities of Personal Banking International include SEB Kort, Private
Banking in Luxembourg, the UK, Switzerland, Norway, Denmark and e-banking in
Denmark and the UK. SEB AG's (former BfG's) private banking business in
Luxembourg has been merged with SEB in Luxembourg and is included in the
division from 2001.
The operating result for the division was SEK 12 M (119).
Personal Banking International excluding SEB Kort
With the prevailing stock market situation, SEB has chosen to concentrate the
resources on markets in which the Group already has broader activities. Thus,
the planned marketing launch in spring of the e-banking and e-brokerage service
that was recently opened in the UK has been cancelled due to the decision to
suspend the launch of a stand-alone e-banking venture.
In Denmark the total number of e-banking customers is approximately 10 000. In
Norway there will be a soft launch of e-banking in order to support existing
Private Banking at the end of the second quarter. The launch will be carried out
gradually step by step, just as in Denmark, without any large-scale marketing
launch.
Development of the e-banking concept in Luxembourg was completed during the
first quarter. SEB has an existing private banking business in Luxembourg, with
a customer base and skilled advisors. E-banking creates a new channel for the
customer to use SEB's services. According to plan this channel will be
operational in late May.
In February, e-Asia Finance, a joint venture between SEB, Ankar Capital
Management, Tata Consultancy Services and Compass ventures was announced. The
aim is to supply Asian corporate customers with the technical platform for
e-banking and e-brokerage solutions.
The units within Personal Banking International showed a combined result of SEK
-69 M (4) consisting of two different parts. One part is the profitable
private-banking business in Luxembourg and Switzerland, negatively affected by
the low activity level on the financial markets. The other is the development
cost for e-banking, generating negative results for the UK, Denmark and Norway.
However, with actions taken to suspend further launches under prevailing market
conditions, these costs are significantly lower than in the fourth quarter last
year and will not increase further.
SEB Kort
The turnover increased by 6 per cent and the outstanding credit volume increased
by 11 per cent, which shows a continued interest for card payments. The total
income did not increase correspondingly. A majority of the cards are "pay later"
cards which are inversely affected by raising interest rates.
Costs increased by 10 per cent due to increased staff costs and IT-related
expenditures. The number of personnel has increased primarily within the IT and
sales areas. Increased turnover resulted in higher costs for systems operations.
There was also ongoing development in new systems.
Incurred losses and fraud show a continued negative trend. This increased volume
resulted in higher reserves than in previous quarters. The operating result
decreased by 28 per cent to SEK 81 M.
Eurocard in Sweden has in co-operation with Ericsson developed a mobile payment
solution. The test is being carried through now in selective shops. One hundred
chosen Eurocard cardholders will be able to pay their purchases with a virtual
Eurocard via Ericsson's mobile telephone R520m. The aim of this test is to
measure if the customer rates this type of payment as simpler, quicker and more
convenient than other methods of payment, for example cash and cards.
Corporate & Institutions
The Corporate & Institutions division is focused on medium sized and large
corporate and financial institutions. The division consists of the business
areas Merchant Banking, Mid Corporate, Enskilda Securities and SEB Securities
Services (custody).
The operating result of the division for January-March 2001 was SEK 1 511 M (SEK
1 574 M) despite the prevailing financial market climate. Merchant Banking is
making very good results thanks to good performance within the Fixed Income and
Debt Capital Market product areas due to high customer activity. Enskilda
Securities is the business area that is most negatively affected by the market
conditions.
Great effort has been made to increase customer penetration in the Mid Corporate
segment. The division has further increased its focus on the use of capital and
is still working with the aim of keeping the costs on a competitive level. IT
costs have increased during the first quarter due to necessary investments in
order to adapt to the new SWIFT-standards. The total costs are lower than last
year mainly due to reduced staff costs.
Merchant Banking - right on track for the 6th consecutive quarter
The strong momentum continued for Merchant Banking. Operating result amounted to
SEK 917 M, an increase of 37 per cent compared to the first quarter last year.
This was the second best quarterly result to date for Merchant Banking, only
exceeded by the fourth quarter of 2000. Customer related income continued to
show a positive development, up 9 per cent compared to the first quarter of
2000. Costs were 5 per cent lower than last year and the cost/income-ratio
improved to 0,45 (0,54).
The growing customer related income was mainly attributable to good performance
within the Foreign Exchange and Fixed Income areas. This is the main explanation
for the higher net result of financial transactions, but it is also explained
buy a strong first quarter for Treasury Operations. The decreased spread between
short and long interest rates has had a negative effect on Treasury Operation's
net interest income. The lower net interest income is also partly due to a
decrease in capital utilisation.
The Debt Capital Markets and Structured Finance product areas also performed
well despite tough market conditions.
This year's customer surveys confirm and enhance the latest years' trend and
reinforce Merchant Banking's leading position in its key markets. For example,
Greenwich Associates' yearly market survey of the financial markets in Sweden
ranked SEB as number one in "overall relationship performance" in the large
corporate sector, for both quality and number of important relationships. Also
Foreign Exchange Services was ranked number one in overall quality and had the
largest estimated market share. The number one position was also achieved within
the Cash Management area, which both in terms of overall services index and
number of clients outperformed the competitors. In another recent survey,
conducted by Euromoney, credit research teams in Europe were ranked and SEB made
it into the league tables for the first time and as the only Scandinavian bank.
Merchant Banking continued its long-term strategy to lower its utilised capital.
This was achieved through lower credit, market and operational risk levels. The
risk weighted assets within Merchant Banking's corporate lending portfolio
(excluding structured products) have decreased by 6 per cent compared to a year
ago. During January-March 2001 the average daily Value at Risk was SEK 58 M,
which is the same level as in the first quarter last year.
As from January 2001 the result from the German trading activity and the large
corporate segment, previously reported within SEB AG (BfG), is included in
Merchant Banking. Year 2000 figures have been restated accordingly.
SEB Mid Corporate
The new business area SEB Mid Corporate comprises two units - Mid Corporate (the
corporate part of the former Retail Distribution business area) and the finance
company SEB Finans. SEB Mid Corporate is specialising in and focusing on
tailor-made solutions for medium-sized companies.
The business area reached a result of SEK 331 M, down 2 per cent compared to
last year's pro forma result. Net interest income showed a strong development,
primarily due to higher margins on the deposit stock. Commission income
decreased due to the recession in the stock market.
The majority of the result comes from Mid Corporate SEK 271 M (SEK 257 M pro
forma for the first quarter last year). SEB Finans accounted for SEK 60 M
compared to SEK 81 M last year.
SEB Finans' decreasing result is a consequence of weak sales during the third
and fourth quarter of 2000, which backlogs the result to a certain extent.
Enskilda Securities - lower result in a weak market
In the first quarter stock market activity as well as market capitalisation
decreased significantly compared to the first quarter in 2000, which was the
best quarter to date in the investment banking industry. The turnover fell on
all Nordic exchanges and the equity capital market activity was sharply lower
than last year.
In these less friendly market conditions, Enskilda Securities continued to
strengthen its positions in the Nordic equity markets, especially in Norway,
Finland and Denmark. On all these exchanges Enskilda Securities has a market
share exceeding 10 per cent. Enskilda Securities' equity trading turnover was
the highest ever in the first quarter and increased by 21 per cent compared to
the same period in 2000.
Enskilda Securities' total income decreased by 44 per cent. All product areas
show decreased revenues. However, secondary commission, which is the single most
important source, has held up well. The bulk of the fall in revenues is related
to trading, which is by nature more volatile. Also Equity Capital Markets and
Mergers and Acquisitions experienced revenue losses, but in these areas there is
now a healthy and growing order backlog, which should translate into stronger
revenues in the coming quarters.
Total costs fell by 33 per cent, which is primarily an effect of a reduced
provision for bonus payments to employees due to lower earnings. Pre-bonus costs
increased by 4 per cent, mainly due to higher IT-costs.
The operating result for the first quarter was SEK 150 M, which is 62 per cent
down from last year.
SEB Securities Services
The operating result of SEB's custody service unit decreased by 28 per cent, to
SEK 125 M. Income remained at the same level as in 2000, SEK 247 M, with the
help of increased volumes. The number of transactions rose by 15 per cent to 973
000 and assets under custody increased by 18 per cent to SEK 2 089 billion.
Total costs increased by 54 per cent, to SEK 122 M as a result of major
investments during the first quarter, primarily within the IT-sector, and rising
transaction volumes.
The market shares of the various segments remained stable, ranging between 30
and 75 per cent.
SEB Germany
As from 2 April the German subsidiary BfG Bank AG has changed its name to SEB
AG. A nation-wide marketing campaign is now ongoing to create customer awareness
for the new brand within the future target customer groups.
Operations in the old BfG Bank has been changed in the following way:
The private banking unit in Luxembourg has been merged with SEB in Luxembourg
and is now a part of division Personal Banking International. The merchant
banking activities (Corporate Customer Division and Trading) as well as
Skandinaviska Enskilda Banken AG in Germany (a subsidiary of SEB AG as from 1
January), have joined the Merchant Banking business area within the Corporate &
Institutions division of the SEB Group.
Retail and personal banking, institutions and real estate activities, have been
formed into division SEB Germany.
Total result of SEB Germany amounted to SEK 364 M (SEK 124 M). The profit and
loss account in SEK has been affected by exchange rate fluctuations. Total
income for SEB Germany rose by 5 per cent in SEK, but was down 1 per cent in
euro. Total costs increased by 2 per cent in SEK, but decreased by
4 per cent in euro. The drop in total income depends on the reduction of capital
employed by EUR 500, which has reduced net interest income by SEK 54 M.
Net interest earnings, SEK 1 027 M, are stable whereas net commission income,
SEK 347 M, has been affected by the negative markets.
During the first quarter, SEB AG sold its shares in Deutsche Borse, which
generated a profit of EUR 26.6 M (approximately SEK 240 M).
The mutual funds in BfG Invest and ImmoInvest had a continuously good net inflow
(SEK 880 M). In spite of this, and due to the market development, Assets under
Management have gone down somewhat to SEK 105 billion.
Risk weighted assets have been further reduced by almost SEK 5 billion, and
e-banking customers have increased by another 10 000, to over 158 000.
The restructuring programme is continuing. The number of full time employees has
been reduced by a further 275 compared to year-end 2000. During the first
quarter apprentices have been hired, resulting in a net reduction by 170 full
time employees.
Costs are well under control, down 4 per cent in euro, and credit losses have
been moderate.
The legal entity SEB AG comprises all activities within SEB Germany and the
above-mentioned merchant banking operations including those of Skandinaviska
Enskilda Banken AG. The legal entity will be reported as additional information
for continuity with the acquired BfG Bank.
Figures in euro for the legal German entity are presented in Appendix 4. They
correspond to the previous BfG Group, but with the addition of Skandinaviska
Enskilda Banken AG in Germany.
The figures for 2000 have in both cases been restated for the internal purchase
and sale of Skandinaviska Enskilda Banken AG in Germany and BfG Luxembourg
respectively, and are hence comparable.
Investment Management & Life
The division comprises the SEB Invest (former SEB Invest & Funds) and SEB Trygg
Liv business areas and accounts for the SEB Group's business within mutual
funds, institutional portfolio management and life insurance products. The
division is affected by the downward trend on stock markets both concerning the
demand of savings products and the effect of the so-called surplus values in the
life insurance business. The operating result, before change in surplus values,
amounted to SEK 118 M (145). Total result, after change in surplus values, was
SEK -133 M (618), where the financial effects, due to the negative stock market
development, had an impact of SEK -644 M (294).
The division's revenues, excluding change in surplus values, increased to SEK
774 M (772). Costs increased by 4 per cent to SEK 653 M (625).
As per 31 March 2001, total assets within the division managed by SEB Invest,
amounted to SEK 562 billion (581). Of this total, portfolio management accounted
for SEK 132 billion (119), traditional life insurance for SEK 254 billion (246)
and mutual funds and unit linked insurance for SEK 176 billion (216). Since
year-end total assets under management has decreased by 5 per cent.
During the first quarter seven of the ten external funds that where introduced
in SEB's range of funds in 2000, were made available as unit linked insurance.
Supplementary external funds will be introduced during the spring.
SEB Invest
SEB Invest (reported together with Private Banking as Asset Management in 2000)
showed an operating result of SEK 167 M (162), an improvement of 3 per cent.
Revenues increased by 8 per cent to SEK 409 M (380). Lower costs for
distribution of mutual funds compensated the drop in stock prices. Net sales
increased from SEK 6 billion to SEK 11 billion, above all due to an increase in
institutional mandates. Costs rose by 11 per cent to SEK 242 M (218), mainly due
to recruitment within asset allocation, hedge products and the mutual fund sales
organisation. Costs were 11 per cent lower than in the fourth quarter of 2000.
During February it was formally decided that the business area should be
incorporated. It is estimated that the incorporation will be completed by 1
January 2002.
Two new mutual funds were launched in the first quarter: SEB Opportunity Europe,
for the Premium Pension programme, and SEB Global Chance/Risk, to strengthen the
range of the prosperous chance/risk concept. The Financial Supervisory Authority
granted the permission to merge 19 funds into 9. The purpose is to streamline
and simplify the range of funds for the customers. The merger of funds will take
place in May 2001.
SEB Trygg Liv
The negative stock market development and the relatively low expire of bonds
during the introduction of 2001, has negatively affected SEB Trygg Liv's sales,
compared to the first quarter 2000 when the market situation was exactly the
opposite. Sales (new business plus extra premiums on existing insurance
contracts) amounted to SEK 2,786 M (4,368), a decrease of 36 per cent (compared
with an increase by 70 per cent). Premiums written decreased by 24 per cent to
SEK 4,357 M (5,748).
The ongoing market conditions mainly affect sales of single premium insurance,
which decreased by 41 per cent. The market for current premium insurance is not
as sensitive to weakening stock markets and the decrease in sales was limited to
5 per cent. The share of current premium insurance amounted to 24.9 per cent
(16.7). A prominent rise was recorded for employer-paid insurance and especially
occupational pension that rose by 49 per cent.
Revenues decreased by 7 per cent to SEK 364 M (391), mainly due to lower asset
values in unit-linked. Costs increased by 1 per cent to SEK 413 M (408), which
is 10 per cent lower than in the fourth quarter 2000. The operating result,
before change in surplus values, amounted to SEK -49 M (SEK -17 M). Total result
after change in surplus value decreased to SEK -300 M (SEK 456 M). This result
is heavily affected by the financial effects in calculating the surplus value.
Excluding these financial effects, the result increased to SEK 344 M (162) See
Appendix 3.
In surveys among life insurance brokers made by the company Marknadsindikator,
it is stated a more and more positive attitude towards SEB Trygg Life in
comparison to other life insurance companies. This is regarded as a result of
the deliberate and consequent commitment to improve the relationship with
brokers. Sales through brokers, especially employer-paid insurance, rose by 20
per cent compared to last year.
SEB Trygg Liv's ambition is to continue to develop the business within
occupational pension and other life insurance services and products paid by the
employer, and to secure the strong position in the market for private
individuals. The main sales focus is on unit linked insurance, which represents
the absolute majority of the sales.
The Baltic & Poland - continued result improvement
The Baltic & Poland division comprises the three Baltic banks, Eesti Uhispank,
Latvijas Unibanka and Vilniaus Bankas, as well as SEB's holding in the Polish
Bank Ochrony rodowiska, BOS.
The Baltic banks are today wholly owned subsidiaries of SEB.
The operating result of the division was SEK 125 M, an increase of 74 per cent
compared to the first quarter of 2000, when Vilniaus Bankas was not
consolidated. Pro forma, with full consolidation of Vilniaus Bankas during the
first quarter of 2000, operating result increased by 25 per cent.
In March 2001, SEB acquired another 6 per cent of the shares in BOSS. SEB's
ownership in BOS has thereby increased to 38 per cent.
The merger with ForeningsSparbanken
On 22 February it was announced that the Boards of Directors of
ForeningsSparbanken and SEB had proposed to merge the two companies. The name of
the new group will be SEB Swedbank.
The two groups complement each other well. The merger creates Sweden's leading
financial group with a stronger range of products and services for customers in
Sweden and good opportunities for continued growth as a European financial
group.
The new group will have 35 000 employees, whereof 19 000 in Sweden, total assets
of approximately SEK 2 000 billion and SEK 1 300 billion in assets under
management, and a joint market value of about SEK 150 billion.
ForeningsSparbanken and SEB will merge as equal parties, creating one of the 25
largest banks in Europe.
The merger is expected to yield annual cost savings of SEK 2.5-3.0 billion,
mainly at a central level, within the IT area, within the product companies but
also as a result of overlapping branch office networks. No dismissals will occur
as a consequence of the merger. However, the number of employees is expected to
be reduced by 2 000 persons during a three-year period, which is expected to
happen through natural retirement. The merger is expected to generate
restructuring costs of approximately SEK 4 billion, which will be covered over
time by payments from pension funds and the sale of branches to independent
savings banks and jointly owned banks. Increases in income due to the merger are
expected to, by a margin, exceed any reductions in income the merger may cause.
The vision of the new group is to create a leading customer oriented European
financial group based upon a broad Swedish base, through a combination of
personal service/advice, local presence and modern technology.
The merger is conditional upon e.g. the approval of the extraordinary general
meetings of the two banks and the necessary approval from the Government and the
appropriate authorities, including the EU. Depending on whether the EU decides
to simply review or thoroughly investigate the merger, a decision will be
announced either in late June or in November.
Prior to the merger, integration planning will be led by an integration
committee. Eighteen project teams, covering the entire new group, have been
formed with the assignment to plan the forthcoming integration.
The Boards of Directors of both banks have unanimously recommended the
shareholders to vote in favour of the merger.
The SEB Group
Operational Profit and Loss Account
SEK M January- January- Change Full
March March per year
2001 2000 cent 2000
Net interest income 3 070 2 883 6 11 616
Net commission income 2 933 3 702 -21 13 846
Net result of financial transactions 1 035 900 15 3 552
Other operating income 1 155 1 285 -10 3 644
Total income 8 193 8 770 -7 32 658
Staff costs -3 036 -3 211 -5 -12 761
Pension compensation 298 171 74 943
Other operating costs -2 269 -1 918 18 -8 751
Depreciation's -455 -427 7 -1 763
Total costs -5 462 -5 385 1 -22 332
Net credit losses -182 -281 -35 -890
Net result from associated companies -1 30 -103 95
Operating profit from non-life insurance
operations 241 52 212
Operating result 2 789 3 186 -12 9 743
Change in surplus value in life insurance
operations -251 473 -153 337
Total result 2 538 3 659 -31 10 080
Taxes -800 -638 25 -2 856
Taxes on change in surplus values 70 -132 -153 -94
Minority interests -29 -124 -77 -245
Total result after tax 1 779 2 765 -36 6 885
According to the Swedish Financial Supervisory Authority's guidelines and
recommendations results from the banking and insurance operations should be
separated in the profit and loss account as from 2001. SEB adopted these
instructions already in 2000. In addition to the legal accounts SEB is also
presenting an operational profit and loss account. As from 2001 SEB has chosen
to show the changes in surplus value as a separate item in the income statement.
The SEB Group
Key figures
January- January- Full
March March year
2001 2000 2000
Return on equity, % 18.4 25.3 16.9
Return including change in surplus values, % 15.8 27.2 16.5
Return on equity, 12 months moving average, % 14.5 15.0 16.9
Return including change in surplus values, 12 months
moving average, % 13.1 17.1 16.5
Earnings per share, SEK 2.78 3.44 9.43
Earnings per share (Total result after tax), SEK 2.52 3.92 9.77
Income/cost ratio, SEB Group 1.50 1.63 1.46
Income/cost ratio, banking operations 1.45 1.60 1.42
Cost/income ratio, SEB Group 0.67 0.61 0.68
Cost/income ratio, banking operations 0.69 0.62 0.70
Lending loss level, % 0.08 0.17 0.12
Provision ratio for doubtful claims, % 48.8 51.7 49.1
Level of doubtful claims, % 1.39 1.09 1.35
Total capital ratio, % 10.27 9.90 10.76
Core capital ratio, % 7.08 6.73 7.37
The SEB Group
Operational Profit & Loss Account, quarterly performance
SEK M 2001:1 2000:4 2000:3 2000:2 2000:1
Net interest income 3 070 2 898 2 849 2 986 2 883
Net commission income 2 933 3 507 3 400 3 237 3 702
Net result of financial transactions 1 035 1 294 786 572 900
Other operating income 1 155 598 394 1 367 1 285
Total income 8 193 8 297 7 429 8 162 8 770
Staff costs -3 036 -3 391 -3 072 -3 087 -3 211
Pension compensation 298 227 226 319 171
Other operating costs -2 269 -2 847 -1 891 -2 095 -1 918
Depreciation's -455 -508 -409 -419 -427
Total costs -5 462 -6 519 -5 146 -5 282 -5 385
Net credit losses etc -182 -112 -247 -250 -281
Net result from associated companies -1 20 23 22 30
Operating profit from non-life insurance
operations 241 43 36 81 52
Operating result 2 789 1 729 2 095 2 733 3 186
Change in surplus values in life
insurance operations -251 -269 179 -46 473
Total result 2 538 1 460 2 274 2 687 3 659
Taxes -800 -613 -719 -886 -638
Taxes on change in surplus values 70 76 -50 12 -132
Minority interests -29 -36 -64 -21 -124
Total result after tax 1 779 887 1 441 1 792 2 765
The SEB Group
Net commission income
SEK M 2001:1 2000:4 2000:3 2000:2 2000:1
Payments 283 286 296 276 300
Cards 445 426 375 401 375
Issue of securities 49 114 195 156 76
Custody and mutual fund 931 1 170 1 028 1 013 982
Courtage shares 662 659 724 679 1 004
Courtage other 47 47 36 52 51
Lending 105 116 166 129 114
Deposits 16 1 11 27 28
Guarantees 31 35 29 33 34
Advisory 89 241 199 211 293
Derivatives 79 32 46 66 40
Other 106 91 74 40 104
SEB AG and The Baltic 602 756 595 556 727
Commission income 1) 3 445 3 974 3 774 3 639 4 128
Payments -246 -209 -226 -221 -210
Securities -102 -59 -66 -39 -73
Other -58 -69 -16 -45 -44
SEB AG and The Baltic -106 -130 -66 -97 -99
Commission costs -512 -467 -374 -402 -426
Payments 482 503 445 456 465
Securities 1 587 1 931 1 917 1 861 2 040
Other 368 447 509 461 569
SEB AG and The Baltic 496 626 529 459 628
Net commission income 2 933 3 507 3 400 3 237 3 702
1) Enskilda Securities
Issue of securities 34 95 133 142 64
Courtage shares 343 378 456 335 451
Advisory 78 233 177 196 284
Derivatives 71 20 33 51 18
Other 10 18 13 55 4
Commission income 536 744 812 779 821
The SEB Group
Net result financial transactions
Mkr 2001:1 2000:4 2000:3 2000:2 2000:1
Skandinaviska Enskilda Banken 1) 419 621 288 198 74
Enskilda Securities 181 145 159 67 311
SEB AG 49 64 61 44 148
Other 37 12 1 13 3
Realised and unrealised 686 842 509 322 536
Exchange rate fluctuations 349 448 291 262 367
Redemptions of bonds 4 -14 -12 -3
Net result financial transactions 1 035 1 294 786 572 900
1) Dividend on shares in trading portfolio amounts to SEK 193 M in 2001:1, in
2000:2 corresponding amount of SEK 134 M was reported as dividend
The SEB Group
Operational Profit and Loss Account by division
Personal
Personal Banking Corporate &
Banking Interna- SEB Institu-
January-March 2001, SEK M Sweden tional Germany tions
Net interest income 812 73 1 027 1 100
Net commission income 541 409 347 1 001
Net result of financial transactions 17 22 13 915
Other income 45 7 276 54
Total income 1 415 511 1 663 3 070
Staff costs -454 -171 -680 -944
Pension compensation 105 3 70
Other operating costs -513 -275 -447 -655
Depreciations -10 -15 -92 -50
Total costs -872 -458 -1 219 -1 579
Net credit losses etc -17 -24 -100 20
Net result from associated companies -17 20
Operating profit from non-life
insurance operations
Operating result 526 12 364 1 511
Change in surplus values in life
insurance operations
Total result 526 12 364 1 511
Other
Investment incl
Management The Baltic elimina- SEB
January-March 2001, SEK M & Life & Poland tions Group
Net interest income 19 278 -239 3 070
Net commission income 556 124 -45 2 933
Net result of financial transactions -7 71 4 1 035
Other income 206 66 501 1 155
Total income 774 539 221 8 193
Staff costs -274 -161 -352 -3 036
Pension compensation 13 1 106 298
Other operating costs -368 -93 82 -2 269
Depreciations -24 -84 -180 -455
Total costs -653 -337 -344 -5 462
Net credit losses etc -78 17 -182
Net result from associated companies -3 1 -2 -1
Operating profit from non-life
insurance operations 241 241
Operating result 118 125 133 2 789
Change in surplus values in life
insurance operations -251 -251
Total result -133 125 133 2 538
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