RNS Number:9235I
Skandinaviska Enskilda Banken
23 August 2001
PART 1
Stockholm, 23 August 2001
Interim Report January-June 2001
Lower result due to weaker market conditions
- Operating result* amounted to SEK 4 245 M (5 919).
- Net interest income rose by 6 per cent to SEK 6 234 M (5 869).
- Net commission income decreased by 14 per cent, to SEK 5 958 M (6 939).
- Return on equity was 13.4 per cent (22.1).
- Staff costs decreased by 1 per cent, to SEK 6 236 M (6 298).
- Lending losses were down 53 per cent, to SEK 248 M (SEK 531 M)
- The Baltic's result was up 42 per cent on a comparable basis.
- SEB had one million e-banking customers in mid-August.
- The European Commission decided to initiate an in-depth investigation of the
proposed merger with Foreningssparbanken. The integration planning
proceeds well.
* Operating result includes pension settlements/provisions.
PRESIDENT'S STATEMENT
The first half of 2001 was characterised by a marked weakening in the global
economy. Development in the US, Japanese and the European economies was weak.
Industrial production has fallen in several countries, but consumption and
the services sector have prevented a sharper decrease. The financial markets
have been characterised by unrest, with falling stock markets during the first
quarter, while a certain recovery was noted in the second quarter. Interest
rates have been falling in most countries lately due to the weak economies.
Economic conditions in Sweden, Germany and the Baltic countries are important
factors for SEB. Growth in the Baltic countries remained strong and stable.
In Germany, however, the economy was weaker than anticipated, particularly
with respect to private consumption, where price increases have undermined
purchasing power. During the first quarter 2001 the Stockholm Stock Exchange
fell sharply, but a recovery of 6 per cent in the second quarter limited the
decline to 17 per cent for the half-year.
Household savings in Sweden and Germany have increased somewhat, but from low
levels, as a consequence of increasing caution of the households as a result
of falling stock markets and uncertainty in the labour market.
For SEB, the first six months of the year were weak, compared with the
exceptionally strong results noted during the first half of 2000. However,
the result for Corporate & Institutions remains very strong, in spite of the
halved result in Enskilda Securities. It is also pleasing to see how our
three subsidiary banks in the Baltic countries are growing in both sales and
earnings.
The weakening of economic conditions became increasingly pronounced,
particularly in Europe. Thus far, the positive trend noted on the stock
markets during the second quarter does not appear to be lasting. For SEB,
this means that further measures are being implemented to reduce costs over
both the short and the long term.
The in-depth investigation into the merger has now started. The integration
planning work is proceeding well.
THE GROUP
Summary of operating result per division and business area
January - June January - June Change
2001 2000 per cent
Personal Banking Sweden 888 1 154 -23
Personal Banking International 0 214 -100
Corporate and Institutions 2 697 2 880 -6
Merchant Banking 1 528 1 232 24
Enskilda Securities 305 630 -52
Mid Corporate 597 684 -13
SEB Securities Services 285 344 -17
SEB Germany 543 435 25
Investment Management & Life 199 320 -38
The Baltic 253 125 102
Total all divisions 4 580 5 128 -11
Joint Group incl. capital gains
and elimination. -335 791
Operating result 4 245 5 919 -28
Changes in surplus values 113 427 -74
Total result SEB Group 4 358 6 346 -31
Income
Total income in January-June 2001 decreased by 9 per cent to SEK 15 377 M
(16 932). The comparison with the preceding year was affected by exchange rate
effects, the consolidation of Vilniaus Bankas and one-off items. Adjusted for
these items affecting comparability, income decreased by 7 per cent. This
decline is chiefly explained by lower commission income due to stock market
related development.
Net interest income rose by 6 per cent to SEK 6 234 M (5 869). Adjusted for the
items affecting comparability described above, net interest income declined by 1
per cent. The cost for the governmental deposit guarantee decreased by
SEK 103 M.
Net commission income decreased by 14 per cent to SEK 5 958 M (6 939), compared
with the first half of 2000. Adjusted for items affecting comparability, net
commission income declined by 17 per cent. The income varied between different
product areas and parts of the Group. The most significant decrease concerns net
commission income from securities, which fell by 20 per cent in comparison with
the first half of 2000. (Full disclosure is provided in note.)
Net result of financial transactions increased by 3 per cent to SEK 1 509 M
(1 472), due to favourable results from trading in shares, bonds and
derivatives. Adjusted for items affecting comparability, the increase was 2
per cent. The second quarter was significantly weaker than the first. (See
further note.)
Other income amounted to SEK 1 676 M (2 652). Of this, capital gains and one
off items accounted for SEK 743 M (1 428). Adjusted for these items and for
exchange rate changes, income was unchanged.
Costs
Total costs increased by 4 per cent to SEK 11 143 M (10 667). Adjusted for items
affecting comparability, including exchange rate changes, costs decreased by 2
per cent.
Staff costs, gross, decreased by 1 per cent to SEK 6 236 M (6 298). Adjusted
for exchange rate effects and other items affecting comparability, staff
costs declined by 7 per cent through a combination of efficiency improvement
measures and staff reductions, primarily within Personal Banking Sweden,
Merchant Banking and SEB Germany, and a decrease in calculated income-related
compensation (SEK 280 M less, compared with the first half of 2000). As of 30
June 2001 the number of employees amounted to 20 950 (19 770). Adjusted for
Vilniaus Bankas, which was not consolidated during the first half of last year,
the number of employees declined by 430.
Staff costs, net, declined by 2 per cent to SEK 5 707 M (5 808). Adjusted for
items affecting comparability, the decrease was 8 per cent. The compensation
for the pension costs included in the gross costs increased to SEK 529 M
(490), including the pension insurance scheme that has replaced the earlier
profit-sharing system.
At the end of June 2001, total assets in the pension funds amounted to SEK 21
billion (23.2 at year-end 2000), while commitments were SEK 9.1 billion (8.0).
Accordingly the surplus value as per 30 June 2001 amounted to SEK 11.9 billion.
Total costs for IT (including calculated cost for own personnel etc.) amounted
to SEK 2.5 billion, to be compared with SEK 2.2 billion for the first half of
2000. Of this, external IT costs represented SEK 1 129 M (1 064).
As of 30 June, preparatory merger and integration work accounted for costs of
SEK 70 M.
Depreciation amounted to SEK 916 M (846), of which goodwill accounted for
SEK 357 M (326).
The remaining restructuring reserve for the acquisition of Trygg Hansa in 1997
was SEK 256 M at the beginning of 2001. Of this, SEK 152 M has been utilised
during the first half of the year (of which SEK 85 M during the second 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 248 M, net (531), of which SEK 212 M, net
(439), in SEB Germany. The level of lending losses was 0.06 per cent (0.15).
Doubtful claims, net, i.e. after provisions of possible lending losses,
remained at a stable level. The increase in Swedish currency to SEK 8 631 M
(8 365 at year-end 2000) is explained by exchange rate changes. Approximately
half of the doubtful claims, net, are performing.
The volume of pledges taken over declined to SEK 142 M (213 at year-end).
Non-life insurance business
Operating result for non-life insurance operations, mainly run-off, amounted
to SEK 243 M (133). The increase was mainly due to capital gains of SEK 126 M
from sales in the bond portfolio in the first quarter.
One-off items
Total one-off items in the first half of 2001 amounted to SEK 869 M (1 706),
of which the entire amount for 2001 is attributable to the first quarter.
Operating result
Operating result declined 28 per cent to SEK 4 245 M (5 919). Adjusted for
exchange rate effects and other items affecting comparability, operating
result fell by 12 per cent. The result for the second quarter was lower than
for the first, mainly due to one-off effects during the first quarter and
lower net financial transactions during the second quarter.
Change in surplus in life insurance operations
The change in surplus in life insurance operations was influenced by the
negative financial effects due to the decline in the stock market and
amounted to SEK 113 M (427). See further in Appendix 3.
Total result
The Group's total result declined by 31 per cent to SEK 4 358 M (6 346).
Adjusted for items affecting comparability, the decrease in total result was
16 per cent.
Deposits and lending
As of 30 June 2001, SEB's deposits from the Swedish public (households,
companies, etc.) amounted to SEK 245.2 billion (221.5). This corresponded to
a market share of 21.8 per cent (unchanged compared with 30 June 2000).
Deposits from the household sector were SEK 59.1 billion (59.6),
corresponding to a market share of 13.8 per cent (14.2).
The Group's lending to the public in Sweden increased to SEK 327 billion
(304), which corresponded to a market share of 13.7 per cent (14.3) on 30
June. In the household market SEB's lending increased to SEK 99.6 billion
(91.1), giving a market share of 11.1 per cent (11.0).
In Germany, deposits from the public increased by 3 per cent to SEK 286
billion, while lending rose by 5 per cent to SEK 236 billion. SEB has a
market share of approximately 1 per cent.
In the Baltic countries, SEB's three subsidiary banks increased their total
deposits by 19 per cent to approximately SEK 20 billion and their lending by
19 per cent to SEK 17 billion. The three banks have approximately one third
of the Baltic market for both lending and deposits.
Assets under management
On 30 June 2001, the SEB Group had assets totalling SEK 892 M (912) under
management, of which SEK 579 M (578) were managed by SEB Invest and SEK 107 M
(112) by SEB Germany.
Credit portfolio
SEB's total credit portfolio increased during the first half of the year by
SEK 35 billion, to SEK 961 billion (926). The main part of the increase is
attributable to the Swedish corporate sector. Lending to the Swedish
household sector has also increased, but at a somewhat lower growth rate
compared to the previous year. Development within the bank sector and
municipalities continues to be stable. The German subsidiary SEB AG
contributed by SEK 353 billion (351 at year-end) to the total credit
portfolio and now represents a share of approximately 37 per cent (38). SEB's
credit classification system has also been applied to the German portfolio
for some time now.
SEB' exposure within the telecommunication industry (operators and
manufacturing companies) has been kept at a stable level during the second
quarter and amounts to approximately SEK 14 billion. The telecommunication
industry represents approximately 1.5 per cent (1.2) of the credit portfolio.
The increase is attributable to short term exposure on existing clients,
consisting mainly of foreign exchange risk hedging within normal daily
operations. Exposure on the IT sector also increased somewhat during the
first half of the year and now totals approximately SEK 5 billion.
The net exposure on emerging markets as per 30 June amounted to SEK 10 707
billion, a decrease of almost 7 per cent since year-end (11 483). The
continued decline is mainly due to reduced exposures in Eastern and Central
Europe as well as in Latin America. See further Appendix 2.
Risk management
Excluding Germany, the Group's risk taking through trading operations, or
daily value at risk, averaged SEK 64 M during the first half of 2001, meaning
that the Group could expect with 99 per cent certainty to lose no more than
SEK 64 M during a single trading day. During the year, this risk varied
between SEK 25 M and SEK 107 M. Following table shows how this risk was
distributed by type of risk (SEK M).
Min Max Average 30 June -01 31 Dec -00
Interest risk 30 109 59 80 35
Foreign exchange risk 4 29 9 7 6
Stock market risk 2 37 11 6 9
Diversification - - -15 -13 -19
Total 25 107 64 80 31
In SEB Germany's markets, the corresponding daily value at risk was SEK 12 M.
During the year, SEB Germany's value at risk varied between SEK 12 M and SEK
17 M, with an average value of SEK 15 M.
Sensitivity analysis
An increase of market interest rates by one percentage point as per 30 June
2001, would result in a reduction in the market value of the Group's all
interest-bearing assets and liabilities, including derivatives, by SEK 2 300 M.
Capital base and capital adequacy
On the 30 June 2001, the capital base for the financial group of undertakings
(excluding the insurance companies) amounted to SEK 54.2 billion (53.3 at
year-end). Core capital was SEK 37.6 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 519.4 billion
(495.6).
The core capital ratio amounted to 7.24 per cent (7.37 per cent at year-end
2000) and the total capital ratio to 10.43 per cent (10.76). The Group's goal
is to maintain a core capital ratio of at least 7 per cent and a total
capital ratio of not less than 10.5 per cent.
SEB now the largest shareholder in BOS
During the second quarter of 2001, SEB increased its ownership in the Polish
Bank Ochrony Srodowiska (BOS) from 38 to 46 per cent. BOS is active in both
the corporate and private segments. The bank has 52 branches and 1 600
employees.
Changes in ownership
In June, Investor became the largest owner in SEB through an exchange of
shares within the Wallenberg sphere. By acquiring most of Knut and Alice
Wallenberg Foundation's shareholding, Investor increased its share of the
share capital in SEB from 10.0 to 19.2 per cent. Investor's share of the
voting rights in SEB increased from 10.5 to 20.0 per cent.
The proposed merger with ForeningsSparbanken
In June, ForeningsSparbanken and SEB filed the notification regarding the
proposed merger between the two banks with the Commission of the European
Communities. In July, the Commission decided to initiate an in-depth
investigation. A final decision can be expected in mid-November.
In order to provide the shareholders with best possible background
documentation prior to taking a position with regard to the merger, both
banks have decided to postpone the Extraordinary General Meetings until the
fourth quarter.
Stockholm, 23 August, 2001
Lars H. Thunell
President and Group Chief Executive
The interim report for January-September 2001 will be published on 25 October
2001. SEB's reports are available on the Internet (www.seb.net).
Additional information is available from:
Gunilla Wikman, Head of Group Communications, +46 8 763 81 25,
mobile +46 70 763 8125 Lotta Treschow, Head of Investor Relations, +46 8 763 95
59, mobile +46 70 763 9559
This Interim Report has 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, Corporate & Institutions, SEB
Germany (former BfG less merchant banking operations). Investment Management
& Life and The Baltic & Poland.
Personal Banking Sweden - focus on competence and advisory service
The division is responsible for SEB's activities towards private individuals
and small enterprises in Sweden. The division consists of SEB'S retail
banking business including the branch office network, the telephone bank,
Swedish Internet banking services and the private bank SEB Enskilda Banken.
Changes implemented during this spring included a concentration of all
advisory services to private individuals to Enskilda Banken and a
centralisation of customer- and profitability responsibility for the retail
segment.
Personal Banking Sweden's result for the first six months of this year
amounted to SEK M 888 (1 154).
Underlying this result was a continued positive development in savings as
well as in lending. The division's net interest earnings the first two
quarters was 9 per cent higher than the corresponding period in 2000. The
improvement was due to increased volumes and margins in savings, but also the
mortgage-area showed continued growth both in volumes and market share.
A substantial part of the Division's operations focus on private customers
who are active on the stock market. Accordingly, the second quarter was also
affected to a large degree by the situation on the stock market. In total,
commission income for the first half year declined by 35 per cent. However, a
small improvement in brokerage and sales of mutual funds was evident in May
and June, due to, among other things, an increased level of customer
activities within Enskilda Banken. The private bank also has acquired 1 200
new customers so far this year, an increase of 5 per cent.
An example of SEB's focus on competence and advisory services is the new
official license for Swedish equity advisors. So far this year, SEB has
received 560 licenses, more than any other competitor on the Swedish market.
The total number of e-banking customers was nearly 622 000 as of 30 June. On
the corporate market, the division now has 43 000 Internet-customers. A new
portal for corporate customers was launched this spring.
Personal Banking Sweden's costs January-June were 3 per cent lower than in
the same period last year. The number of employees decreased by 79.
Credit losses remained on a low level, SEK 33 M, a decrease of SEK M 64
compared with the first two quarters in 2000.
Personal Banking International
The activities of Personal Banking International include SEB Kort, Private
Banking in Luxembourg (including BfG's former private banking business in
Luxembourg), the UK, Switzerland, Norway and Denmark as well as e-banking in
Luxembourg, Norway and Denmark.
The operating result for the division was SEK 0 M (214).
Personal Banking International excluding SEB Kort - close-down of e-banking
in the UK
Private Banking International consists of two different parts:
* The fundamentally profitable private banking business in Luxembourg, the
UK, Switzerland and Norway, now negatively effected by the low activity level
on the financial markets.
* e-banking activities in Luxembourg, Norway, Denmark and the UK.
In Denmark the total number of e-banking customers is approximately 11 000.
In Norway there has been a soft launch of SEB's e-banking service in order to
support existing Private Banking in 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. The e-banking concept has also been launched in
Luxembourg during the second quarter. This launch was very well received by
existing private banking customers.
Last winter SEB made a decision to suspend the launch of an e-banking service
in the British market. Due to the prevailing market conditions, SEB has now
decided to discontinue e-banking operations in the UK entirely. The
closing-down involves a limited non-recurring expense, which will be reported
in the third quarter.
Most of the start-up costs for the development of SEB's e-banking activities
in Luxembourg, Denmark and Norway have now been accounted for.
The units within Personal Banking International excluding SEB Kort showed a
combined result of SEK -206 M(13).
SEB Kort - increased card sales
SEB Kort reported a strong second quarter, meaning that the result for the
first six months was better than during the same period last year, SEK 206 M
(201). Despite some weakening in June, card sales increased by 5 per cent.
Income increased by 6 per cent. Net interest income was on par with the
preceding year, despite rising interest rates and greater financing
requirements, primarily due to the increased number of credit cards. Net
commissions improved as a result of increased card revenues. Volumes
increased outside the Nordic region, which had a positive effect on the
exchange rate premium. The increased number of cards also meant that revenues
in the form of annual fees were higher than previously.
Costs increased by 5 per cent. During the first months of the year, a number
of IT projects were implemented, which resulted in high costs during the
first quarter. Data processing costs are now in line with the preceding year.
Other operating costs rose as a result of increased volumes.
Credit losses continued to increase. The trend with respect to unauthorised
purchases, however, was not as dramatic during the second quarter as during
the first months of the year.
Several international airlines has expressed interest in SEB Kort's Central
Acquiring service since it was presented in Brussels in mid-May. This
service, which is under development, has functioned well so far. However, a
decline in the travel market was noted due to prevailing economic conditions
and cost saving measures among corporate customers.
In June, Diners Club Denmark won first prize in the Teleperformance Grand
Prix 2001 for the best call centre in Denmark. Diners Club Denmark has
participated in this competition during the past four years and on all
occasions was one of the leading companies.
Corporate & Institutions
The Corporate & Institutions division is focused on medium sized and large
corporate and financial institutions. The division consists of the Merchant
Banking, Mid Corporate, Enskilda Securities and Securities Services (custody)
business areas.
The division's operating result for January-June 2001 was SEK 2 697
(SEK 2 880 M) despite the prevailing financial market climate. Merchant Banking
continued to report very good results, due in part to good performance within
the Fixed income and Futures product areas. Although Enskilda Securities was
most negatively affected by the market conditions, it continued to strengthen
its position in the Nordic stock markets.
Great efforts are being made to increase customer penetration in the Mid
Corporate segment. The division further increased its focus on the use of
capital and is working with the aim of maintaining costs on a competitive
level.
Merchant Banking - strong performance for customer related business
Merchant Banking showed a strong performance for the seventh consecutive
quarter within the customer driven business, and the positive income
development continued, up 12 per cent compared to the same period the
previous year. Total income increased by 8 per cent, while total costs
increased by 4 per cent, resulting in a cost/income-ratio of 0.54 (0.55). The
half year operating result amounted to SEK 1 528 M, an increase of 24 per
cent.
The growing customer related income was partly attributable to good
performance within the Debt Capital Markets, Securities Finance, Fixed Income
and Futures areas. Cash Management, as well as Structured Finance, also
reported strong half year results, despite a very weak telecom sector. The
growth in customer income is not only attributable to increased business
within the Tier 1 segment, but also from Tier 2 customers, as well as from
increased business development in international financial institutions.
Rising interest rates during the second quarter had a negative impact on
Treasury Operations, especially in relation to the very good result in the
first quarter.
Recently published league tables continue to rank Merchant Banking very high
in a number of areas. For example, in Euromoney's annual customer survey of
foreign exchange markets, SEB was considered to be the best dealer in the
world on SEK and was also ranked highest among all Nordic players in the
category "key relationship banks".
Investments within Merchant Banking's growth areas are funded by efficiency
measures in mature areas. The underlying cost level, costs excluding
performance related remuneration and exchange rate effects, were 3 per cent
lower than in the corresponding period in the preceding year. This was
achieved despite increased investments in new tailor-made internet
applications for Merchant Banking's customers, and the most successful
Trading Station is now being taken one step further and developed for other
products and client segments.
Lending losses before recoveries remained at a low level, and the net after
recoveries was positive for the first six months this year.
The long-term strategy to lower Merchant Banking's overall utilised capital,
as well as reallocate capital from mature areas to growth areas, continued.
The risk weighted assets within Merchant Banking's corporate lending
portfolio (excluding structured products) had decreased by 3 per cent
compared to a year ago despite the strengthened US dollar. During
January-June 2001 the average daily Value at Risk was SEK 70 M, which was an
increase by 34 per cent compared to the very low level during the previous
year. The increase was related to the higher volatility in the markets this
year.
Mid Corporate - focusing on tailor-made solutions
The result for the Mid-Corporate business area, including SEB Finans,
amounted to SEK 597 M for the first six months of 2001, which was 13 percent
below the result for the first half of 2000. Net interest income showed a
stable trend, while commission revenues showed some decline compared with
last year.
The result for Mid Corporate (excluding SEB Finans), which comprises small
and medium sized companies, amounted to SEK 507 M for the first six months, a
decline of 3 per cent. The effect of specialisation on the SME-market began
to show a positive result despite negative market forces, which lead to lower
commission revenues.
SEB Finans' result for the first half year amounted to SEK 90 M (160). The
decline was largely due to a sole major lending loss that contributed to SEB
Finans' lending losses totalling SEK 35 M. Net commission income for SEB
Finans was also lower, compared with the preceding year. Nonetheless, SEB
Finans strengthened its position in its areas of operations, and a number of
major deals are near conclusion. Sales during the first six months were
higher than during the corresponding period in 2000.
Costs were somewhat higher than last year (+9 percent). The cost increase is
attributable to investments that will enable SEB Finans to meet customer
requirements for tailor-made solutions.
Enskilda Securities - halved result in an unfavourable market
During the first quarter stock market activity as well as market
capitalisation decreased significantly compared with the first quarter in
2000. This situation continued during the second quarter with falling
stock prices and periodically declining volatility. Turnover fell on the
exchanges in Stockholm and Helsinki, while the exchanges in Oslo and
Copenhagen showed higher turnover.
Despite the unfavourable market conditions, Enskilda Securities continued to
strengthen its positions in the Nordic markets, especially in Norway, Finland
and Denmark. In all of these countries, Enskilda Securities has a market
share well above 10 per cent. Enskilda Securities' equity trading turnover
was somewhat lower in the second quarter than in the first but at the same
time 19 per cent higher compared with the first six months in 2000.
During recent years, Enskilda Securities has invested in personnel and
systems within Equity Research. The soundness of these investments is shown
in several independent analyst rankings, in which Enskilda Securities further
improved its position this year. These rankings are both Nordic and
international.
Enskilda Securities' total income decreased by 30 per cent. Revenues from
IPOs, new issues and equity trading were primarily affected by the less
favourable conditions, while income from mergers and acquisitions reached the
same level as last year after a strong second quarter. Also the secondary
commission income, which is the single most important source of income, was
on a high level due to large volumes and increased market shares.
Total costs fell by 19 per cent, which was primarily an effect of reduced
provisions for bonus payments to employees due to lower earnings. Pre-bonus
costs increased by 14 per cent, due primarily to higher IT costs.
The operating result for the second quarter was SEK 155 M, to be compared
with SEK 150 M for the first quarter this year.
SEB Securities Services - assets under custody decreased
The result for SEB's custody service unit decreased by 17 per cent to
SEK 285 M. Income remained at the same level as last year, SEK 510 M, mainly due
to increased volumes. The number of transactions rose by 11 per cent to
1 900 000 billion, while assets under custody fell by 25 per cent to
SEK 1 900 billion.
Total costs increased by 33 per cent to SEK 225 M as a result of major
investments during the first six months, primarily regarding IT-development.
In addition, rising transaction volumes resulted in increased costs.
The market shares of the various segments remained stable, ranging between 30
and 75 per cent within the different segments.
SEB Germany - successful rebranding
On 2 April, SEB's operations in Germany, comprising BfG Bank AG with
subsidiaries, changed their name to SEB. The nation-wide marketing campaign
was very successful, and by June, 22 per cent of the Group's target customers
in Germany recognised the SEB brand, meaning that more Germans than Swedes
now recognise the SEB name. It has been decided that BfG Hypothekenbank will
also change its name to SEB.
SEB Germany's result amounted to SEK 543 M (435). The weakened Swedish krona
had a positive effect on the result. Total income for SEB Germany fell by 10
per cent in EUR and by 3 per cent in SEK. Total cost declined by 10 per cent
in EUR and by 2 per cent in SEK.
Net interest income showed a relatively stable result amounting to SEK 1 990
M. However, the reduction in risk weighted assets made it possible to reduce
allocated shareholders' equity by EUR 500 M, which in turn reduced net
interest income on equity by about SEK 110 M. Commission income fell 18 per
cent to SEK 693 M as a result of market trends.
During the first quarter, SEB AG sold its shares in Deutsche Borse, which
resulted in a capital gain of EUR 26 M (about SEK 240 M).
The SEB Invest and SEB ImmoInvest funds continued to generate positive net
inflows amounting to SEK 2 230 M during the first six months, which
corresponded to unchanged market shares. Due to market trends, managed assets
nonetheless were virtually at the same level as last year, SEK 107 M (112).
Since SEB's acquisition, risk-weighted assets have been reduced by nearly SEK
57 billion (down 25 per cent). During 2001, the reduction amounts to SEK 11
billion.
The number of e-banking customers continued to increase during the first six
months with an additional 23 000 customers bringing the total to 169 500 by
June. The migration of affluent private customers from branch offices to
Advisory Centres was ahead of schedule. During the first six months, some
10 000 additional customers were attracted, bringing the total migration into
the Advisory Centres to 38 000 to date. Activity among Internet customers
also increased. Today, 15 per cent of all payments and share transactions as
well as 35 per cent of account inquiries take place over the Internet.
Reconstruction work continued according to plan and resulted in the cost
reduction noted above. Under the prevailing market conditions, the focus in
restructuring work remains on continued cost reductions. The number of full
time employees is already below the target for the end of the current year.
The previous SEB unit in Germany, Skandinaviska Enskilda Banken AG, will be
merged with SEB AG during the autumn. (This unit is included in the Merchant
Banking division of SEB AG and is thus not reported as part of the SEB
Germany division.) In conjunction with this merger, additional restructuring
will take place intended to further reduce SEB's costs in Germany.
The SEB Germany division does not include those units (corporate customers,
trading and the old Skandinaviska Enskilda Banken AG) that are internally
included in the Merchant Banking division. Appendix 1 therefore provides
supplementary information consisting of the entire SEB AG Group's accounts
stated in EUR. The figures for 2000, as for SEB Germany above, were adjusted
for internal purchases and sales by Skandinaviska Enskilda Banken in Germany
and BfG in Luxemburg. Adjustment was not made, however, for the external
company sales completed by SEB AG during 2000.
Investment Management & Life - negatively affected by weak stock markets
The division comprises the business areas SEB Invest (former SEB Invest &
Funds) and SEB Trygg Liv and accounts for the SEB Group's business within
mutual funds, institutional portfolio management and life insurance products.
The division was affected by the downward trend on the stock markets with
respect to both demand for savings products and the effect of the so-called
surplus values in the life insurance business.
The operating result amounted to SEK 199 M (320). Total result, including
change in surplus values in the life insurance business, was SEK 312 M (747).
This constituted a recovery during the second quarter, compared with the
first quarter for which the total result was a loss of SEK -133 M. For the
period as a whole, the financial effects on the change in surplus values
resulting from the negative stock market trend had a negative impact of SEK
-485 M (+7). The division's revenues decreased somewhat to SEK 1 513 M
(1 556). Costs increased by 6 per cent to SEK 1 306 M (1 230).
As per 30 June 2001, total assets managed by SEB Invest on behalf of the
entire division amounted to SEK 579 billion (578). Of this total, portfolio
management accounted for SEK 145 billion (119), traditional life insurance
for SEK 245 billion (245) and mutual funds & unit linked insurance for SEK
189 billion (214). Since year-end total assets under management had decreased
by 2 per cent.
SEB Invest
SEB Invest showed an operating result of SEK 287 M (312), a decrease of 8 per
cent.
Revenues increased by 1 per cent to SEK 783 M (776). Lower costs for
distribution of mutual funds compensated for the drop in stock prices. Net
sales increased from SEK 6 billion to SEK 9 billion, above all due to an
increase in institutional mandates. Costs rose by 7 per cent to SEK 496 M
(464), mainly due to recruitment within asset allocation, hedge products and
the mutual fund sales organisation. The cost increase mainly related to the
first quarter.
Of the net flow to mutual fund companies in Sweden, SEB accounted for 9.8 per
cent (14.6). Corresponding market share for the whole of 2000 was 8.9 per
cent. The share of outstanding fund assets in the Swedish market was 18.5 per
cent (21.5).
In June, SEB Invest and Schroders, a leading international asset management
group, decided to enter into an advisory agreement. The agreement means that
Schroders will become an advisor in the management of SEB's Asian, Japan and
Emerging Markets funds. The co-operation gives SEB Invest's customers
first-class investment management in these areas. It also frees SEB Invest's
own resources, allowing them to be more sharply focused on maintaining a
leading position in the Nordic region, Europe and North America, as well as
in such areas as technology, pharmaceuticals, private equity and hedge funds.
In April, SEB Invest launched its second hedge fund, which is an interest
hedge fund. As per 30 June, the capital managed by the fund amounted to SEK
675 M.
SEB Trygg Liv
Sales, i.e. new premiums and extra payments under existing insurance
policies, amounted to SEK 5 290 M (7,574), a decrease of 30 per cent. 70 per
cent of the decrease refers to the second quarter and derives mainly from
single premium endowment assurance, which is sensitive to the prevailing
market conditions. However, sales of running insurance policies, mainly
occupational pensions, increased and contributed to increasing the current
value of new sales for the period, compared with last year. Sales of
occupational pensions rose by 31 per cent. Premium income (total premiums
paid) declined by 18 per cent to SEK 8 560 M (10 422).
Total income decreased by 6 per cent, mainly as a result of lower asset
values. The downward trend in the beginning of the year was broken during the
last two months. Total costs, after deducting the change in deferred
acquisition cost, rose by 6 per cent. However, the actual increase in costs
during the twelve-month period was less than 1 per cent. Operating result
totalled SEK -88 M (8) as a result of lower income and a lower amount of
capitalised acquisition costs. Total result, excluding financial effects on
changes in surplus values, rose to SEK 510 M (428), due to the increased
sales of regular premiums insurance. Including financial effects on the
surplus values, total result amounted to SEK 25 M (435). See further Appendix
3 on SEB Trygg Liv.
SEB Trygg Liv's share of the Swedish life insurance market was 12.7 per cent
(15.4) during the second quarter of 2001. This decline was primarily due to
the deregulation of the occupational pension insurance market now in progress
in which competition for newly generated volumes thus far largely favours
companies that previously had a monopoly position and large volumes of
redemptions of pension liabilities (due to early-retirement pension) for
which SEB Trygg Liv in consideration of profitability elects not to compete.
The market statistics do not include sales of the IPS pension product, which
is being given priority over private pension insurance, or the Portfolio Bond
endowment insurance, which is sold in the Swedish market by SEB Trygg Life in
Ireland.
During the first six months several major companies selected SEB Trygg Liv as
one of the suppliers of occupational pensions. 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 strengthen its
strong position in the private market.
The main sales focus is on unit linked insurance, which represents the
absolute majority of the sales. In the first half of 2001 the selection of
funds offered as unit linked insurance was extended by 17 funds from external
fund managers. In total, there are now some 70 funds in the range of unit
linked insurance.
The Baltic & Poland - steady advances
The positive earnings trend continued for SEB's wholly owned banks in the
Baltic region - Eesti Uhispank, Latvijas Unibanka and Vilniaus Bankas. The
result for the first six months amounted to SEK 253 M, an increase of 102 per
cent, compared with the preceding year, during which Vilniaus Bankas was not
consolidated in SEB and only included as a share in profits. Pro forma, with
full consolidation of Vilniaus Bankas, earnings increased by 42 per cent.
The reduction in growth in Europe has not affected the Baltic countries. The
contribution of domestic demand to the countries' growth is increasingly
great, at the same time as it also stimulates both domestic and foreign
investment. This year, GDP is expected to increase by 5 to 6 per cent in
Estonia and Latvia and by 4.5 per cent in Lithuania.
During the spring, Eesti Uhispank sold its Latvian subsidiary Saules Banka.
Customer growth in the three banks is high. The number of private customer
has increased by 27 per cent and the number of corporate customers by 8 per
cent over the last twelve months.
The positive earnings trend for the banks is due primarily to increased
deposit volumes (up 42 per cent), increased lending volumes (up 39 per cent)
and the fact that costs are increasing more slowly than revenues. Use of the
banks' Internet services is growing rapidly. Together, the three banks had
159,000 e-banking customers in June, which was an increase of nearly 50,000
since 1 January.
In June, SEB increased its ownership in the Polish Bank Ochrony Srodowiska
(BOS) from 39 to 46 per cent. Through its minority ownership, SEB has
contributed expertise primarily in international banking and given BOS
customers access to the Group's international network. A unit for serving
Scandinavian customers was established within BOS during the second quarter.
The SEB Group
Operational Profit and Loss Account
SEK M January-June January-June Change Full year
2001 2000 per cent 2000
Net interest income 6 234 5 869 6 11 616
Net commission income 5 958 6 939 -14 13 846
Net result of financial 1 509 1 472 3 3 552
transactions
Other operating income 1 676 2 652 -37 3 644
Total income 15 377 16 932 -9 32 658
Staff costs -6 236 -6 298 -1 -12 761
Pension compensation 529 490 8 943
Other operating costs -4 520 -4 013 13 -8 751
Depreciation -916 -846 8 -1 763
Total costs -11 143 -10 667 4 -22 332
Net credit losses etc -248 -531 -53 -890
Net result from associated companies 16 52 -69 95
Operating profit from non-life
insurance operations 243 133 83 212
Operating result 4 245 5 919 -28 9 743
Change in surplus value in life
insurance operations 113 427 -74 337
Total result 4 358 6 346 -31 10 080
Taxes -1 365 -1 524 -10 -2 856
Taxes on change in surplus values -32 -120 -73 -94
Minority interests -67 -145 -54 -245
Total result after tax 2 894 4 557 -36 6 885
Key figures
January-June January-June Full year
2001 2000 2000
Return on equity, % 13,4 22,1 16,9
Return including change in surplus values, % 13,0 22,3 16,5
Return on equity, 12 months moving average, % 12,4 17,0 16,9
Return including change in surplus values,
12 months moving average, % 11,8 18,6 16,5
Earnings per share, SEK 3,99 6,03 9,43
Earnings per share (Total result after tax),
SEK 4,11 6,47 9,77
Income/cost ratio, SEB Group 1,38 1,59 1,46
Income/cost ratio, banking operations 1,34 1,54 1,42
Cost/income ratio, SEB Group 0,72 0,63 0,68
Cost/income ratio, banking operations 0,74 0,65 0,70
Lending loss level, % 0,06 0,15 0,12
Provision ratio for doubtful claims, % 46,6 54,0 49,1
Level of doubtful claims, % 1,38 1,15 1,35
Total capital ratio, % 10,43 10,96 10,76
Core capital ratio, % 7,24 7,60 7,37
Operational Profit & Loss Account, quarterly performance for the Group
SEK M 2001:2 2001:1 2000:4 2000:3 2000:2
Net interest income 3 164 3 070 2 898 2 849 2 986
Net commission income 1) 2 965 2 993 3 507 3 400 3 237
Net result of financial transactions 1) 534 975 1 294 786 572
Other operating income 521 1 155 598 394 1 367
Total income 7 184 8 193 8 297 7 429 8 162
Staff costs -3 200 -3 036 -3 391 -3 072 -3 087
Pension compensation 231 298 227 226 319
Other operating costs -2 251 -2 269 -2 847 -1 891 -2 095
Depreciation -461 -455 -508 -409 -419
Total costs -5 681 -5 462 -6 519 -5 146 -5 282
Net credit losses etc -66 -182 -112 -247 -250
Net result from associated companies 17 -1 20 23 22
Operating profit from non-life insurance 2 241 43 36 81
operations
Operating result 1 456 2 789 1 729 2 095 2 733
Change in surplus value in life
insurance operations 364 -251 -269 179 -46
Total result 1 820 2 538 1 460 2 274 2 687
Taxes -565 -800 -613 -719 -886
Taxes on change in surplus value -102 70 76 -50 12
Minority interests -38 -29 -36 -64 -21
Total result after tax 1 115 1 779 887 1 441 1 792
1) A reclassification of Q1 has been done between Net commission income
SEK +60 M and Net result of financial transactions SEK-60 M.
Net commission income
SEK M 2001:2 2001:1 2000:4 2000:3 2000:2
Payments 259 283 286 296 276
Cards 479 445 426 375 401
Issue of securities 83 49 114 195 156
Custody and mutual fund 853 931 1 170 1 028 1 013
Courtage shares 541 662 659 724 679
Courtage other 34 47 47 36 52
Lending 116 105 116 166 129
Deposits 17 16 1 11 27
Guarantees 40 31 35 29 33
Advisory 254 89 241 199 211
Derivatives 10 79 32 46 66
Other 1) 71 166 91 74 40
SEB AG and The Baltic 658 602 756 595 556
Commission income 3 415 3 505 3 974 3 774 3 639
Payments -233 -246 -209 -226 -221
Securities -26 -102 -59 -66 -39
Other -88 -58 -69 -16 -45
SEB AG and The Baltic -103 -106 -130 -66 -97
Commission costs -450 -512 -467 -374 -402
Payments 505 482 503 445 456
Securities 1 485 1 587 1 931 1 917 1 861
Other 420 428 447 509 461
SEB AG and The Baltic 555 496 626 529 459
Net commission income 2 965 2 993 3 507 3 400 3 237
1 A reclassification of Q1 has been done by SEK +60 M.
Net result financial transactions
SEK M 2001:2 2001:1 2000:4 2000:3 2000:2
Skandinaviska Enskilda Banken 1) 83 419 621 288 198
Enskilda Securities 2) 32 121 145 159 67
SEB AG 19 49 64 61 44
Other 9 37 12 1 13
Realised and unrealised 143 626 842 509 322
Exchange rate fluctuations 391 349 448 291 262
Redemption of bonds 4 -14 -12
Net result financial transactions 534 975 1 294 786 572
1) Dividend on shares in the trading portfolio amounts to SEK 1 098 M in 2001:2
and SEK 193 M in 2001:1 and is included above. In 2000:2 the corresponding
amount of SEK 134 M was reported as dividend and is not included above.
2) A reclassification of Q1 has been done by SEK -60 M.
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