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SEB — Interim / Quarterly Report 2017
Apr 27, 2017
2966_iss_2017-04-27_f3086d02-d622-4084-9311-7c1451b1987a.pdf
Interim / Quarterly Report
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Interim Report January – March 2017
STOCKHOLM 27 APRIL 2017
SEB Interim Report January – March 2017
First quarter 2017 result
(Compared with the fourth quarter 2016)
- Operating income SEK 11.2bn (11.6) and operating expenses SEK 5.4bn (5.7).
- Operating profit SEK 5.5bn (5.6) and net profit SEK 4.3bn (4.2).
- Net credit losses SEK 204m (284) with a credit loss level of 0.05 per cent (0.08).
- Return on equity 12.2 per cent (12.3).
- Return on equity excluding items affecting comparability* 11.7 per cent (11.8).
- Earnings per share SEK 1.98 (1.96).
* All items affecting comparability occurred in 2016. See page 4.
Volumes and key ratios
* * * * Excluding items affecting comparability Mar -16 Dec -16 Mar -17
0
5
10
15
20
25
On a global scale there are indeed several worrying tendencies and events such as increased geopolitical uncertainty, summons for increased protectionism, record high indebtedness, ageing populations and increased political risks in many countries. At the same time, there are also reasons to be more optimistic. The world economy is gaining more momentum, now also in Europe. Just as seen towards the end of last year, business sentiment has continued to grow more positive. These trends have also been reflected in the financial markets development. Bond yields have risen on the back of the long period of quantitative easing programs slowly coming to an end, while expectations of increased infrastructure investments and higher growth have spurred equity markets. In the US, the Federal Reserve increased its fed funds rate for the second time, while the Swedish Riksbank has since the start of last year held its repo rate at -0.50 per cent.
Diverse business mix key strength in complex environment
With SEB's diversified business mix we can support our customers and deliver sustainable profitable growth also in the prevailing complex environment. Compared to the first quarter last year, net interest income increased by 2 per cent despite the fact that the Swedish resolution fund fee was doubled as of 2017. Strong financial markets and active corporate customers contributed to an increase in net fee and commission income of 10 per cent compared to the first quarter in 2016. Operating expenses amounted to SEK 5.4bn; in line with our annual cost cap of below SEK 22bn through 2018. Asset quality remained high with a credit loss level of 0.05 per cent. With the Common Equity Tier 1 capital ratio at 18.9 per cent, return on equity reached 12.2 per cent.
The cost of delivering banking services is increasing. This year, SEB expects to pay more than SEK 2bn in regulatory fees including resolution fund and deposit guarantee fees. Ultimately these costs will also impact customers.
Continued execution on our three year business plan
We are well into our three year business plan which comprises the first phase of our ambitious long-term journey to deliver world-class service to our customers. The plan includes three key growth areas – all our businesses in Sweden, our Nordic and German corporate franchises and the long-term savings area. It also includes a clear transformation agenda where we intend to capture the full potential that digitisation provides both in terms of enhanced and convenient services to our customers as well as increased internal efficiency by means of automation.
In the first quarter, we strengthened our franchise in Sweden. We continued to be the market leader in capital markets in Sweden, and we strengthened our SME presence with a market share of 15 per cent. In the Nordic countries and Germany, we continued to make progress with corporate customers as they increased activity in a more optimistic business climate. Overall, financial institutions showed a strong interest for ESG investments, an area where SEB has a leading position. During the quarter several transformation initiatives were deployed as for example digital onboarding of customers in Sweden, personal financial management functionality in the mobile banking app, Smart ID for digital signing in the three Baltic countries, and our new global custody platform, Investor World, to just name a few.
To me it is a great privilege to take the helm of SEB. Our strategy remains the same and we can continue the journey from a position of strength. Our commitment is relentless. We will continue to work hard to execute on our strategy and business plan. There is more work to be done before we in the eyes of our customers have reached our vision of world-class service.
The first quarter 2017
Operating profit decreased by 1 per cent to SEK 5,529m (5,558) and net profit (after tax) increased by 1 per cent to SEK 4,290m (4,244). Compared to the first quarter 2016, when two of the items affecting comparability* were included in the result, operating profit increased by SEK 6,985m to SEK 5,529m (-1,456).
Operating income
Total operating income decreased by 4 per cent to SEK 11,204m (11,618) and increased by 10 per cent from SEK 10,222m in the first quarter 2016.
Net interest income, which amounted to SEK 4,716m, decreased by 2 per cent compared with the previous quarter (4,798) and increased by 2 per cent year-on-year. Both the Swedish repo rate and the ECB euro refinancing interest rate were unchanged in the quarter, at -0.5 and zero per cent, respectively.
| Q1 | Q4 | Q1 | |
|---|---|---|---|
| SEK m | 2017 | 2016 | 2016 |
| Customer-driven NII | 5 427 | 5 424 | 4 967 |
| NII from other activities | -711 | -626 | -331 |
| Total | 4 716 | 4 798 | 4 636 |
Customer-driven net interest income was almost flat compared to the fourth quarter 2016 with only minor volume and margin effects, primarily due to the stable lending volumes.
Year-on-year, customer-driven net interest income increased by SEK 460m. A positive lending effect in the amount of SEK 769m was offset by the deposits, mainly lower deposit margins related to the negative interest rate environment, at a total amount of SEK 309m.
Net interest income from other activities decreased by SEK 86m compared to the fourth quarter 2016. Both long-term funding and additional tier 1 capital were raised during the quarter in order to replace funding that will mature during the year. The resolution fund fee increased by SEK 211m due to an increase in the regulatory requirement, from 4.5 to 9 basis points applied on adjusted total liabilities.
Total regulatory fees, including resolution fund and deposit guarantee fees, amounted to SEK 526m (331). Regulatory fees are expected to exceed SEK 2bn in total in 2017, versus SEK 1.4bn in 2016.
Net fee and commission income decreased by 7 per cent to SEK 4,268m (4,609) and increased by 10 per cent compared with the first quarter 2016. Corporate customers were active in the capital markets taking advantage of the low interest levels in the first quarter. The related fees from the issue of securities and advisory fees increased by SEK 51m compared to the fourth quarter 2016 and by SEK 132m compared to the first quarter last year. Lending activity was low in the first quarter and lending related fees decreased by SEK 170m compared to the fourth quarter 2016. The stock markets improved during the quarter, leading to an increase of SEK 49m in fee income from assets under management and custody, excluding performance and transaction fees which decreased from the seasonally high fourth quarter to SEK 38m (212). Other securities commissions decreased. Net commissions relating to the life insurance business decreased to SEK 267m (276).
Net financial income increased by 1 per cent to SEK 2,063m (2,038) and by 49 per cent compared to the first quarter 2016. Compared with the fourth quarter there was an increase due to short-term liquidity management and the market value of the bond
*Items affecting comparability:
1. In the first quarter 2016, SEB implemented a new customer-oriented organisation. The reorganisation resulted in an impairment of goodwill in the amount of SEK 5,334m accounted for as operating expense. This expense was not tax deductible.
2. In the first quarter 2016, financial effects from restructuring activities in the Baltic and German businesses and a write-down (derecognition) of intangible IT assets no longer in use were booked. In total, these items affected operating expenses by SEK 615m and there was a positive tax effect amounting to SEK 101m.
In the first quarter 2017, the items affecting comparability are only impacting the return on equity measurement, as they are part of the opening balance of equity. The table compares the operating profit for the first quarter 2017 with 2016 excluding the items affecting comparability:
| Jan–Mar | ||||
|---|---|---|---|---|
| SEK m | 2017 | 2016 | % | |
| Total operating income | 11 204 | 10 222 | 10 | |
| Total operating expenses | -5 436 | -5 416 | 0 | |
| Profit before credit losses | 5 767 | 4 806 | 20 | |
| Net credit losses etc | -239 | -313 | -24 | |
| Operating profit | 5 529 | 4 493 | 23 |
In the second quarter 2016, one additional item that affected comparability was reported. It affects the comparison of return on equity.
portfolio held for liquidity purposes increased. The fair value credit adjustment1) amounted to SEK -61m for the first quarter, a change of SEK -284m since year-end (223). The net financial income relating to the traditional life insurance operations in Sweden and Denmark decreased by SEK 171m to SEK 378m (549).
Net other income decreased by 9 per cent to SEK 157m (173) and decreased by 48 per cent compared to the first quarter 2016. Realised capital gains and unrealised valuation and hedge accounting effects were included in this line item.
Operating expenses
Total operating expenses decreased by 5 per cent to SEK 5,436m (5,709). The decrease of 52 per cent compared to the first quarter 2016 is explained by items affecting comparability (see box on page 4).
Expenses in the fourth quarter 2016 were affected by costs relating to the on-going transformation of the bank as well as seasonal effects.
Credit losses and provisions
Net credit losses decreased by 28 per cent to SEK 204m (284) and decreased by 30 per cent compared to the first quarter 2016. The credit loss level was 5 basis points (8). There were credit recoveries in the Baltic Division in the first quarter 2017 in the amount of SEK 19m.
Income tax expense
Total income tax expense decreased by 6 per cent to SEK 1,239m (1,314). The effective tax rate for the first quarter was 22.4 per cent (23.6).
In 2017, new legislation was introduced in Sweden, which restricts the tax deductibility of interest expense on subordinated debt that qualifies as tier 1 or tier 2 capital. This increased income tax expenses by SEK 85m. The total estimated effect in 2017 is an increase of SEK 360m and SEK 300m in 2018 and each year onwards, all else equal.
In addition, a dividend from the subsidiary in Estonia in the first quarter 2017 was taxed at the time of payout to the parent. The tax amounted to SEK 72m.
Return on equity
Return on equity for the first quarter was 12.2 per cent (12.3). Excluding items affecting comparability, the return on equity was 11.7 per cent (11.8).
Other comprehensive income
The other comprehensive income amounted to SEK 1,212m (1,225).
The value of the pension plan assets exceeded the defined benefit obligations. The discount rate for the pension obligation in Sweden was unchanged at 2.4 per cent (2.4) while in Germany the discount rate was changed to 1.8 per cent (1.7). The total defined benefit obligation was virtually unchanged and the market value of the pension assets increased. The net change related to the defined benefit plans was therefore SEK 1,530m (1,883).
The net effect from the valuation of balance sheet items that may subsequently be reclassified to the income statement, i.e. the total of cash-flow hedges, available-for-sale financial assets and translation of foreign operations, was negative in the amount of SEK -318m (-658).
1) Valuation of counterparty risk (CVA) and own credit risk in derivatives (DVA) as well as own credit risk for issued bonds at fair value through profit and loss (OCA).
Business volumes
Total assets at the end of the period were SEK 2,927bn, an increase by SEK 306bn since year-end (2,621).
| Mar | Dec | Mar | |
|---|---|---|---|
| SEK bn | 2017 | 2016 | 2016 |
| General governments | 27 | 28 | 36 |
| Households | 554 | 549 | 530 |
| Corporations | 796 | 786 | 711 |
| Repos | 109 | 63 | 93 |
| Debt securities | 14 | 15 | 18 |
| Other | 17 | 12 | 14 |
| Loans to the public | 1 517 | 1 453 | 1 402 |
Loans to the public amounted to SEK 1,517bn, an increase of SEK 64bn since year-end. Excluding repos, the main changes were increases in mortgage lending and financing to housing co-operative associations in Sweden as well as growth in both private and corporate lending in the Baltic region.
SEB's total credit portfolio (in which both on- and offbalance sheet volumes are included) amounted to SEK 2,167bn (2,143). During the quarter total household loans and commitments increased by SEK 9bn. The combined corporate and real estate management loans and commitments increased by SEK 1bn with some growth in residential real estate and housing co-operative financing.
| Mar | Dec | Mar | |
|---|---|---|---|
| SEK bn | 2017 | 2016 | 2016 |
| General governments | 72 | 35 | 38 |
| Households | 274 | 277 | 261 |
| Corporates | 719 | 605 | 599 |
| Repos | 12 | 1 | 21 |
| Other | 43 | 44 | 49 |
| Deposits and borrowings from the public | 1 120 | 962 | 968 |
Deposits from the public amounted to SEK 1,120bn. In the corporate segment, deposits from financial corporations increased by SEK 102bn while deposits from non-financial corporations increased by SEK 11bn during the quarter. Household deposits decreased by SEK 3bn.
Total assets under management amounted to SEK 1,800bn (1,7491)). The net inflow of assets during the year was SEK 6bn and the total market value increased by SEK 45bn.
Assets under custody increased partly reflecting the increasing stock market values during the quarter and amounted to SEK 7,463bn (6,859).
Market risk
SEB's business model is driven by customer demand. Value-at-Risk (VaR) in the trading operations averaged SEK 93m in the first quarter 2017 (113m first quarter 2016) and the full year 2016 average was SEK 112m. On average, the Group does not expect to lose more
than this amount during a period of ten trading days, with 99 per cent probability. VaR was relatively stable during the first quarter.
Liquidity and long-term funding
Short-term funding in the form of commercial paper and certificates of deposit increased by SEK 37bn from year-end 2016.
SEK 5bn of long-term funding matured during the first quarter of 2017 (of which SEK 1bn covered bonds and SEK 4bn senior debt). New issues in the quarter amounted to SEK 38bn (of which SEK 16bn constituted covered bonds, SEK 17bn senior debt and SEK 5bn additional tier 1 subordinated debt). In the advantageous interest rate environment the Bank took the opportunity to pre-finance senior and subordinated debt which will mature during the year. SEB's inaugural own green bond in the amount of EUR 500m was part of the funding raised.
The core liquidity reserve at the end of the quarter amounted to SEK 570bn (427).
The Liquidity Coverage Ratio (LCR), according to the rules adapted for Sweden by the Swedish Financial Supervisory Authority (SFSA), must be at least 100 per cent in total and in EUR and USD, respectively. At the end of the period, the LCR was 133 per cent (168). The USD and EUR LCRs were 235 and 214 per cent, respectively.
The Bank is committed to a stable funding base. SEB's internal structural liquidity measure, which measures the proportion of stable funding in relation to illiquid assets, Core Gap, was 112 per cent (114). The leverage ratio was 4.7 per cent (5.1).
Rating
Moody's rates SEB's long-term senior unsecured debt at Aa3 with a stable outlook due to SEB's asset quality, earnings stability and diversification as well as increased efficiency.
Fitch rates SEB's long-term senior unsecured debt at AA- with a stable outlook. The outlook is based on SEB's long-term strategy, earnings stability and diversification.
S&P rates SEB's long-term senior unsecured debt at A+ with a stable outlook. The outlook is based on the bank's strong capital and earnings development which may off-set the effect of heightened economic risks in Sweden as perceived by S&P.
Capital position
SEB's Common Equity Tier 1 (CET1) capital ratio was 18.9 per cent. SEB's estimate of the full pillar 1 and 2 CET1 capital requirements – where the pillar 2 requirements were calculated according to the methods set by the SFSA – was 17.0 per cent at the end of the first quarter 2017. The SFSA increased the countercyclical buffer requirement by 0.5 percentage points to 2.0 per cent in the quarter. The Bank aims to
1) Refer to page 7 for information on adjusted reporting of assets under management.
have a buffer of around 150 basis points above the capital requirement.
SEB's application to use a revised internal model for corporate exposure risk-weights is under consideration by the SFSA. If approved, the risk exposure amount (REA) is expected to increase, however the temporary pillar 2 capital buffer requirement of 0.4 per cent will be discontinued.
The following table shows the REA and capital ratios according to Basel III:
| Mar | Dec | Mar | |
|---|---|---|---|
| Own funds requirement, Basel III | 2017 | 2016 | 2016 |
| Risk exposure amount, SEK bn | 610 | 610 | 563 |
| Common Equity Tier 1 capital ratio, % | 18.9 | 18.8 | 19.1 |
| Tier 1 capital ratio, % | 22.2 | 21.2 | 21.5 |
| Total capital ratio, % | 25.9 | 24.8 | 23.9 |
| Leverage ratio, % | 4.7 | 5.1 | 4.6 |
Total REA was unchanged from year-end 2016. Credit volumes increased somewhat from year-end contributing to higher REA which was, however, partly offset by improved asset quality and foreign exchange movements.
With unchanged REA, the improved CET 1 capital ratio was primarily due to the increase in equity. Net profit for the first quarter 2017, net of a deduction for the future dividend in line with the 2016 payout ratio, contributed positively. The tier 1 and total capital ratios improved with the additional tier 1 capital raised during the quarter.
Long-term financial targets
SEB's long-term financial targets are:
- to pay a yearly dividend that is 40 per cent or above of the earnings per share,
- to maintain a Common Equity Tier 1 capital ratio of around 150 bps above the current requirement from the SFSA, and
- to generate a return on equity that is competitive with peers.
In the long term, SEB aspires to reach a sustainable return on equity of 15 per cent.
Adjusted reporting
Rounding
In line with market practice and starting from the first quarter 2017, numbers in the tables of this report will not be adjusted for the purpose of making totals agree. The change is done for practical reasons and has no material impact. Historical information has not been restated.
Assets under management
The definition of assets under management has been refined to better define and reflect all asset classes. The adjustment includes an exclusion of certain deposits that previously were included when the intention was to enact appropriate investment options in the near future. Further, certain other assets that previously were not defined as assets under management have been included in the definition. The net effect in the first quarter 2017 was a decrease of SEK 32bn. For comparison purposes, the previous eight quarters have been recalculated pro forma.
Business equity
The allocation of capital to the divisions, so-called Business Equity, is reviewed and updated in connection with the business planning process. Adjustments are made to reflect risk profile changes, regulatory updates, etc. The new requirement to include a charge for the maturity adjustment factor in the risk exposure amount for instance has been reflected in the business equity of the Large Corporates & Financial Institutions and Corporate & Private Customers divisions.
Changes in regulatory requirements
During the quarter, the proposal to introduce a new tax based on salary expense in the financial sector in Sweden was rescinded.
The Swedish government is now proposing an increase of the resolution fund fee from 9 to 12.5 basis points. Unlike resolution funds in other EU countries, no cap on the total amount is planned. Swedish banks have through the Swedish Bankers' Association objected to the proposal due to the high fee level, the lack of a cap on the resolution fund amount and because the
government is planning to use the fees as a funding source, similar to a tax. If the proposal is adopted, Swedish banks will be operating under unfair competition compared to other European banks.
Within SEB an IFRS Programme has been set up for implementation of the new accounting standards, which is described in the Annual Report 2016. IFRS 9 introduces, among other things, a new impairment model based on expected loss instead of the incurred loss model applicable today. SEB's assessment is that the expected loss model is likely to increase loan loss provisions and decrease equity at transition and that volatility in the credit loss line item in the income statement will increase with the new rules. The European Commission has proposed that incremental provisions under IFRS 9 should be phased in to the capital base over a five year period. During the first quarter tentative decisions were taken regarding IFRS 9. For classification of financial liabilities IFRS 9 allows the possibility to early adopt the presentation of changes in fair value as a result of changes in own credit risk for financial liabilities designated to fair value through profit or loss in Other comprehensive income instead of Profit or loss. SEB does not intend to adopt this possibility early. When it comes to hedge accounting, IFRS 9 allows for an accounting policy choice and SEB plans to continue to apply the hedge accounting requirements in IAS 39.
Risks and uncertainties
SEB assumes credit, market, liquidity, IT and operational as well as life insurance risks. The risk composition of the Group, as well as the related risk, liquidity and capital management, are described in SEB's Annual Report for 2016 (see page 40-45 and notes 17, 19 and 20) and in the Capital Adequacy and Risk Management report for 2016. Further information is presented in the Fact Book on a quarterly basis.
The macroeconomic development remains uncertain even though the outlook for the world economy is somewhat more positive. Deflation risks are less prominent. However, large global economic imbalances remain and the potential reduction of liquidity support to financial markets from central banks world-wide may create direct and indirect effects that are difficult to assess. There are signs that the Swedish central bank may not further cut interest rates and may even introduce a raise in late 2017. Geopolitical uncertainty has increased. The unexpected outcome of the British EU-referendum, Brexit, and the process forward for a Brexit have added to the uncertainty, as well as the ongoing election in France and upcoming elections in the United Kingdom and in Germany.
Visa transaction
In 2015, Visa Inc. announced its planned acquisition of Visa Europe (a membership-owned organisation) with the purpose of creating a single global Visa company. The transaction was approved by the European Commission on 3 June 2016. It consists of a combination of consideration in cash and shares. SEB is a member of Visa Europe through several direct and indirect memberships.
The closing of the transaction of SEB's Visa memberships in the Baltic countries resulted in a realisation of the fair value recognised in other comprehensive income in the first quarter 2016 as an item affecting comparability, a gain of SEK 520m recognised in net other income in the second quarter 2016.
In Sweden, where SEB is an indirect member via Visa Sweden, the holdings are classified as available-for-sale financial assets. The fair value changes are booked in other comprehensive income. Once the distribution between the Swedish indirect members is finalised it will be reclassified to net other income.
Stockholm, 27 April 2017
The President declares that the Interim Report for the period 1 January 2017 to 31 March 2017 provides a fair overview of the Parent Company's and the Group's operations, their financial position and results and describe material risks and uncertainties facing the Parent Company and the Group.
Johan Torgeby President and Chief Executive Officer
Press conference and webcasts
The press conference at 10 am CET on 27 April 2017, at Kungsträdgårdsgatan 8 with the President and CEO Johan Torgeby can be followed live in Swedish on www.sebgroup.com/sv/ir. A simultaneous translation into English will be available on www.sebgroup.com/ir. A replay will be available afterwards.
Access to telephone conference
The telephone conference at 1.30pm CET 27 April 2017 with the President and CEO, Johan Torgeby, the CFO, Jan Erik Back, and the Head of Investor Relations, Jonas Söderberg, can be accessed by telephone, +44(0)20 7162 0077. Please quote conference id: 961498 and call at least 10 minutes in advance. A replay of the conference call will be available on www.sebgroup.com/ir.
Further information is available from:
Jan Erik Back, Chief Financial Officer Tel: +46 8 22 19 00 Jonas Söderberg, Head of Investor Relations Tel: +46 8 763 83 19, +46 73 521 02 66 Viveka Hirdman-Ryrberg, Head of Corporate Communications Tel: +46 8 763 85 77, +46 70 550 35 00
Skandinaviska Enskilda Banken AB (publ.) SE-106 40 Stockholm, Sweden Telephone: +46 771 62 10 00 www.sebgroup.com Corporate organisation number: 502032-9081
Additional financial information is available in SEB's Fact Book which is published quarterly on www.sebgroup.com/ir.
Financial information calendar 2017
| 14 July | Interim Report January-June | The silent period starts 7 July |
|---|---|---|
| 25 October | Interim Report January-September | The silent period starts 9 October |
Accounting policies
This Interim Report is presented in accordance with IAS 34 Interim Financial Reporting. The Group's consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) and interpretations of these standards as adopted by the European Commission. The accounting also follows the Annual Accounts Act for Credit Institutions and Securities Companies (1995:1559) and the regulation and general guidelines issued by the Swedish Financial Supervisory Authority: Annual Reports in Credit Institutions and Securities Companies (FFFS 2008:25). In addition, the Supplementary Accounting Rules for Groups (RFR 1) from the Swedish Financial Reporting Board have been applied. The Parent Company has prepared its accounts in accordance with Swedish Annual Act for Credit Institutions and Securities Companies, the Swedish Financial Supervisory Authority's Regulations and General Guidelines (FFFS 2008:25) on Annual Reports in
Credit Institutions and Securities Companies and the Supplementary Accounting Rules for Legal Entities (RFR 2) issued by the Swedish Financial Reporting Board.
As of 1 January 2017 there are clarifications of several IFRS standards. IAS 12 Income Taxes has been amended regarding recognition of deferred tax assets for unrealised losses. IAS 7 Statements of Cash Flows has been amended and IFRS 12 Disclosure of Interests in Other Entities has been clarified. These amendments were applicable as of 1 January 2017, but have not yet been endorsed by the EU. The changes will not have a material effect on the financial statements of the Group or on capital adequacy and large exposures. In all other material aspects, the Group's and the Parent Company's accounting policies, basis for calculations and presentations are unchanged in comparison with the 2016 Annual Report.
Review report
We have reviewed this interim report for the period 1 January 2017 to 31 March 2017 for Skandinaviska Enskilda Banken AB (publ.). The Board of Directors and the CEO are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Swedish Annual Accounts Act for Credit institutions and Securities Companies. Our responsibility is to express a conclusion on this interim report based on our review.
We conducted our review in accordance with the International Standard on Review Engagements, ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act for Credit institutions and Securities Companies regarding the Group, and with the Swedish Annual Accounts Act for Credit institutions and Securities Companies, regarding the Parent Company.
Stockholm 27 April 2017
PricewaterhouseCoopers AB
Peter Nyllinge Martin By Authorised Public Accountant Authorised Public Accountant Partner in charge
The SEB Group
Income statement – SEB Group
| Q1 | Q4 | Jan–Mar | Full year | ||||
|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2016 | % | 2017 | 2016 | % | 2016 |
| Net interest income | 4 716 | 4 798 | -2 | 4 716 | 4 636 | 2 | 18 738 |
| Net fee and commission income | 4 268 | 4 609 | -7 | 4 268 | 3 897 | 10 | 16 628 |
| Net financial income | 2 063 | 2 038 | 1 | 2 063 | 1 385 | 49 | 7 056 |
| Net other income | 157 | 173 | -9 | 157 | 304 | -48 | 1 349 |
| Total operating income | 11 204 | 11 618 | -4 | 11 204 | 10 222 | 10 | 43 771 |
| Staff costs | -3 590 | -3 774 | -5 | -3 590 | -3 751 | -4 | -14 562 |
| Other expenses | -1 657 | -1 727 | -4 | -1 657 | -1 704 | -3 | -6 703 |
| Depreciation, amortisation and impairment | |||||||
| of tangible and intangible assets1) | - 189 | - 208 | -9 | - 189 | -5 910 | -97 | -6 496 |
| Total operating expenses | -5 436 | -5 709 | -5 | -5 436 | -11 365 | -52 | -27 761 |
| Profit before credit losses | 5 767 | 5 909 | -2 | 5 767 | -1 143 | 16 010 | |
| Gains less losses from tangible and | |||||||
| intangible assets | - 34 | - 67 | -49 | - 34 | - 22 | 56 | - 150 |
| Net credit losses | - 204 | - 284 | -28 | - 204 | - 291 | -30 | - 993 |
| Operating profit | 5 529 | 5 558 | -1 | 5 529 | -1 456 | 14 867 | |
| Income tax expense | -1 239 | -1 314 | -6 | -1 239 | - 838 | 48 | -4 249 |
| Net profit | 4 290 | 4 244 | 1 | 4 290 | -2 294 | 10 618 |
1) First quarter 2016: SEB implemented a new customer-oriented organisation. The reorganisation resulted in a new structure of cash generating units and an impairment of goodwill in the amount of SEK 5,334m.
| Attributable to shareholders | 4 290 | 4 244 | 1 | 4 290 | -2 294 | 10 618 |
|---|---|---|---|---|---|---|
| Basic earnings per share, SEK | 1.98 | 1.96 | 1.98 | -1.05 | 4.88 | |
| Diluted earnings per share, SEK | 1.97 | 1.95 | 1.97 | -1.04 | 4.85 |
Statement of comprehensive income – SEB Group
| Q1 | Q4 | Jan–Mar | Full year | ||||
|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2016 | % | 2017 | 2016 | % | 2016 |
| Net profit | 4 290 | 4 244 | 1 | 4 290 | -2 294 | 10 618 | |
| Items that may subsequently be reclassified to the income statement: | |||||||
| Available-for-sale financial assets | 32 | - 91 | 32 | 498 | -94 | 990 | |
| Cash flow hedges | - 351 | - 473 | -26 | - 351 | 190 | - 811 | |
| Translation of foreign operations | 1 | - 94 | 1 | 74 | -99 | 750 | |
| Items that will not be reclassified to the income statement: | |||||||
| Defined benefit plans | 1 530 | 1 883 | -19 | 1 530 | -3 105 | -1 875 | |
| Other comprehensive income (net of tax) | 1 212 | 1 225 | -1 | 1 212 | - 2 343 | -152 | - 946 |
| Total comprehensive income | 5 502 | 5 469 | 1 | 5 502 | - 4 637 | 9 672 | |
| Attributable to shareholders | 5 502 | 5 469 | 1 | 5 502 | -4 637 | 9 672 |
Balance sheet – SEB Group
| 31 Mar | 31 Dec | 31 Mar | |
|---|---|---|---|
| SEK m | 2017 | 2016 | 2016 |
| Cash and cash balances with central banks | 319 483 | 151 078 | 151 214 |
| Other lending to central banks | 5 945 | 66 730 | 7 251 |
| Loans to credit institutions1) | 83 621 | 50 527 | 81 378 |
| Loans to the public | 1 516 611 | 1 453 019 | 1 402 360 |
| Financial assets at fair value through profit or loss 2) | 869 429 | 785 026 | 929 749 |
| Fair value changes of hedged items in a portfolio hedge | 89 | 111 | 151 |
| Available-for-sale financial assets2) | 33 440 | 35 747 | 37 216 |
| Assets held for sale | 486 | 587 | 618 |
| Investments in subsidiaries and associates | 1 052 | 1 238 | 1 119 |
| Tangible and intangible assets | 20 142 | 20 158 | 20 307 |
| Other assets | 76 565 | 56 425 | 68 724 |
| Total assets | 2 926 862 | 2 620 646 | 2 700 087 |
| Deposits from central banks and credit institutions3) | 165 657 | 119 864 | 171 066 |
| Deposits and borrowing from the public3) | 1 119 912 | 962 028 | 967 795 |
| Liabilities to policyholders | 414 623 | 403 831 | 368 106 |
| Debt securities issued | 730 910 | 668 880 | 674 616 |
| Financial liabilities at fair value through profit or loss | 200 875 | 213 496 | 266 702 |
| Fair value changes of hedged items in a portfolio hedge | 1 429 | 1 537 | 1 727 |
| Other liabilities | 110 604 | 67 082 | 89 521 |
| Provisions | 2 011 | 2 233 | 2 598 |
| Subordinated liabilities | 46 112 | 40 719 | 31 719 |
| Total equity | 134 727 | 140 976 | 126 237 |
| Total liabilities and equity | 2 926 862 | 2 620 646 | 2 700 087 |
| 1) Loans to credit institutions and liquidity placements with other direct participants in interbank fund transfer systems. | |||
| 2) Whereof bonds and other interest bearing securities. | 349 439 | 252 421 | 376 433 |
| 3) Deposits covered by deposit guarantees. | 272 698 | 252 815 | 214 364 |
A more detailed balance sheet is included in the Fact Book.
Pledged assets, contingent liabilities and commitments – SEB Group
| 31 Mar | 31 Dec | 31 Mar | |
|---|---|---|---|
| SEK m | 2017 | 2016 | 2016 |
| Pledged assets for own liabilities1) | 490 992 | 478 998 | 540 635 |
| Pledged assets for liabilities to insurance policyholders | 414 623 | 403 831 | 368 106 |
| Other pledged assets2) | 198 736 | 154 518 | 139 003 |
| Pledged assets | 1 104 351 | 1 037 347 | 1 047 744 |
| Contingent liabilities3) | 122 133 | 120 231 | 103 151 |
| Commitments | 711 016 | 655 350 | 627 422 |
| Contingent liabilities and commitments | 833 149 | 775 581 | 730 573 |
1) Of which collateralised for covered bonds SEK 357,780m (346,585/357,017).
2) Of which securities lending SEK 98,774m (61,498/58,828) and pledged but unencumbered bonds SEK 84,000m (80,718/66,012).
3) Of which credit guarantees SEK 13,721m (14,309/12,563).
Key figures – SEB Group
| Q1 | Q4 | Jan–Mar | |||
|---|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | 2016 | |
| Return on equity, % | 12.19 | 12.28 | 12.19 | -6.58 | 7.80 |
| Return on equity excluding items affecting | |||||
| comparability1), % | 11.74 | 11.75 | 11.74 | 10.09 | 11.30 |
| Return on total assets, % | 0.61 | 0.60 | 0.61 | -0.33 | 0.37 |
| Return on risk exposure amount, % | 2.82 | 2.76 | 2.82 | -1.61 | 1.80 |
| Cost/income ratio | 0.49 | 0.49 | 0.49 | 1.11 | 0.63 |
| Cost/income ratio excluding items affecting | |||||
| comparability1) | 0.49 | 0.49 | 0.49 | 0.53 | 0.50 |
| Basic earnings per share, SEK | 1.98 | 1.96 | 1.98 | -1.05 | 4.88 |
| Weighted average number of shares2), millions | 2 169 | 2 168 | 2 169 | 2 192 | 2 178 |
| Diluted earnings per share, SEK | 1.97 | 1.95 | 1.97 | -1.04 | 4.85 |
| Weighted average number of diluted shares3), millions | 2 179 | 2 178 | 2 179 | 2 202 | 2 188 |
| Net worth per share, SEK | 70.21 | 73.00 | 70.21 | 64.43 | 73.00 |
| Equity per share, SEK | 62.09 | 65.00 | 62.09 | 57.61 | 65.00 |
| Average shareholders' equity, SEK, billion | 140.8 | 138.2 | 140.8 | 139.5 | 136.2 |
| Credit loss level, % | 0.05 | 0.08 | 0.05 | 0.08 | 0.07 |
| Liquidity Coverage Ratio (LCR)4), % | 133 | 168 | 133 | 132 | 168 |
| Own funds requirement, Basel III | |||||
| Risk exposure amount, SEK m | 610 047 | 609 959 | 610 047 | 562 754 | 609 959 |
| Expressed as own funds requirement, SEK m | 48 804 | 48 797 | 48 804 | 45 020 | 48 797 |
| Common Equity Tier 1 capital ratio, % | 18.9 | 18.8 | 18.9 | 19.1 | 18.8 |
| Tier 1 capital ratio, % | 22.2 | 21.2 | 22.2 | 21.5 | 21.2 |
| Total capital ratio, % | 25.9 | 24.8 | 25.9 | 23.9 | 24.8 |
| Leverage ratio, % | 4.7 | 5.1 | 4.7 | 4.6 | 5.1 |
| Number of full time equivalents5) | 15 006 | 15 087 | 15 003 | 15 404 | 15 279 |
| Assets under custody, SEK bn | 7 463 | 6 859 | 7 463 | 6 712 | 6 859 |
| Assets under management6), SEK bn | 1 800 | 1 749 | 1 800 | 1 607 | 1 749 |
1) Impairment of goodwill and restructuring effects in Q1 2016. Sale of shares in VISA Europe in the Baltic region in Q2 2016.
2) The number of issued shares was 2,194,171,802. SEB owned 25,177,693 Class A shares for the equity based programmes at year-end 2016. During 2017 SEB has purchased 1,930,000 shares and 2,910,601 shares have been sold. Thus, at 31 March 2017 SEB owned 24,197,092 Class A-shares with a market value of SEK 2,412m.
3) Calculated dilution based on the estimated economic value of the long-term incentive programmes.
4) According to Swedish FSA regulations for respective period.
5) Quarterly numbers are for end of quarter. Accumulated numbers are average for the period.
6) Adjusted definition implemented Q1 2017, comparatives 2016 calculated pro forma.
In SEB's Fact Book, this table is available with nine quarters of history.
Income statement on quarterly basis - SEB Group
| Q1 | Q4 | Q3 | Q2 | Q1 | |
|---|---|---|---|---|---|
| SEK m | 2017 | 2016 | 2016 | 2016 | 2016 |
| Net interest income | 4 716 | 4 798 | 4 657 | 4 647 | 4 636 |
| Net fee and commission income | 4 268 | 4 609 | 4 048 | 4 074 | 3 897 |
| Net financial income | 2 063 | 2 038 | 1 915 | 1 718 | 1 385 |
| Net other income | 157 | 173 | 175 | 697 | 304 |
| Total operating income | 11 204 | 11 618 | 10 795 | 11 136 | 10 222 |
| Staff costs | -3 590 | -3 774 | -3 530 | -3 507 | -3 751 |
| Other expenses | -1 657 | -1 727 | -1 624 | -1 648 | -1 704 |
| Depreciation, amortisation and impairment of tangible | |||||
| and intangible assets1) | - 189 | - 208 | - 201 | - 177 | -5 910 |
| Total operating expenses | -5 436 | -5 709 | -5 355 | -5 332 | -11 365 |
| Profit before credit losses | 5 767 | 5 909 | 5 440 | 5 804 | -1 143 |
| Gains less losses from tangible and intangible assets | - 34 | - 67 | - 14 | - 47 | - 22 |
| Net credit losses | - 204 | - 284 | - 197 | - 221 | - 291 |
| Operating profit | 5 529 | 5 558 | 5 229 | 5 536 | -1 456 |
| Income tax expense | -1 239 | -1 314 | -1 080 | -1 017 | - 838 |
| Net profit | 4 290 | 4 244 | 4 149 | 4 519 | -2 294 |
1) First quarter 2016: SEB implemented a new customer-oriented organisation. The reorganisation resulted in a new structure of cash generating units and an impairment of goodwill in the amount of SEK 5,334m.
| Attributable to shareholders | 4 290 | 4 244 | 4 149 | 4 519 | -2 294 |
|---|---|---|---|---|---|
| Basic earnings per share, SEK | 1.98 | 1.96 | 1.91 | 2.07 | -1.05 |
| Diluted earnings per share, SEK | 1.97 | 1.95 | 1.90 | 2.06 | -1.04 |
Income statement by division – SEB Group
| Large | |||||||
|---|---|---|---|---|---|---|---|
| Corporates | Corporate | Life & | |||||
| & Financial | & Private | Investment | |||||
| Jan-Mar 2017, SEK m | Institutions | Customers | Baltic | Management | Other1) Eliminations | SEB Group | |
| Net interest income | 2 043 | 2 330 | 551 | - 19 | - 206 | 15 | 4 716 |
| Net fee and commission income | 1 530 | 1 393 | 307 | 1 043 | - 3 | - 1 | 4 268 |
| Net financial income | 957 | 108 | 62 | 364 | 557 | 14 | 2 063 |
| Net other income | 32 | 14 | 0 | 14 | 101 | - 4 | 157 |
| Total operating income | 4 563 | 3 845 | 920 | 1 403 | 449 | 24 | 11 204 |
| Staff costs | -1 019 | - 854 | - 181 | - 382 | -1 164 | 9 | -3 590 |
| Other expenses | -1 245 | - 926 | - 246 | - 220 | 1 013 | - 33 | -1 657 |
| Depreciation, amortisation and impairment | |||||||
| of tangible and intangible assets | - 13 | - 15 | - 14 | - 9 | - 138 | - 189 | |
| Total operating expenses | -2 277 | -1 795 | - 440 | - 611 | - 289 | - 24 | -5 436 |
| Profit before credit losses | 2 285 | 2 051 | 479 | 792 | 160 | 0 | 5 767 |
| Gains less losses from tangible and | |||||||
| intangible assets | 1 | 0 | - 33 | 0 | - 2 | - 34 | |
| Net credit losses | - 144 | - 81 | 19 | 0 | 2 | - 204 | |
| Operating profit | 2 142 | 1 969 | 465 | 792 | 160 | 0 | 5 529 |
1) Other consists of business support units, treasury and staff units.
Large Corporates & Financial Institutions
The division offers commercial and investment banking services to large corporate and institutional clients, mainly in the Nordic region and Germany. Customers are also served through an international network in some 20 offices.
Income statement
| Q1 | Q4 | Jan — Mar | Full year | ||||
|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2016 | % | 2017 | 2016 | % | 2016 |
| Net interest income | 2 043 | 2 202 | - 7 | 2 043 | 2 081 | - 2 | 8 307 |
| Net fee and commission income | 1 530 | 1 690 | - 9 | 1 530 | 1 384 | 11 | 6 095 |
| Net financial income | 957 | 1 219 | - 21 | 957 | 897 | 7 | 4 187 |
| Net other income | 32 | 137 | - 77 | 32 | 175 | - 82 | 389 |
| Total operating income | 4 563 | 5 248 | - 13 | 4 563 | 4 537 | 1 | 18 978 |
| Staff costs | -1 019 | -1 032 | - 1 | -1 019 | -1 087 | - 6 | -4 062 |
| Other expenses | -1 245 | -1 208 | 3 | -1 245 | -1 355 | - 8 | -5 080 |
| Depreciation, amortisation and impairment of | |||||||
| tangible and intangible assets | - 13 | - 11 | 18 | - 13 | - 114 | - 89 | - 140 |
| Total operating expenses | -2 277 | -2 251 | 1 | -2 277 | -2 556 | - 11 | -9 282 |
| Profit before credit losses | 2 285 | 2 997 | - 24 | 2 285 | 1 981 | 15 | 9 696 |
| Gains less losses from tangible and intangible assets | 1 | - 1 | 1 | ||||
| Net credit losses | - 144 | - 200 | - 28 | - 144 | - 122 | 18 | - 563 |
| Operating profit | 2 142 | 2 796 | -23 | 2 142 | 1 859 | 15 | 9 133 |
| Cost/Income ratio | 0.50 | 0.43 | 0.50 | 0.56 | 0.49 | ||
| Business equity, SEK bn | 66.1 | 64.9 | 66.1 | 61.6 | 62.4 | ||
| Return on business equity, % | 9.7 | 13.3 | 9.7 | 9.3 | 11.3 | ||
| Number of full time equivalents1) | 2 066 | 2 063 | 2 066 | 2 208 | 2 134 |
1) Quarterly numbers are for end of quarter. Accumulated numbers are average for the period.
- Higher customer activity supported by improved market sentiment
- Increased demand for regulatory-driven services
- Operating profit amounted to SEK 2,142m and return on business equity was 9.7 per cent
Comments on the first quarter
The geopolitical uncertainty remained while market sentiment improved. This resulted in higher customer activity and customers showed a continued strong focus on sustainability related capital market products.
Financial Institutions clients focused on implementing new mandatory rules on collateralisation of counterparty derivative exposures. As a result, demand for advice and services related to collateral management increased. Despite the prospect of future higher interest rates, clients continued to search for higher yielding investments. Assets under custody amounted to SEK 7,463bn (6,859).
Within the Large Corporate segment there was low demand for traditional bank financing except within the private equity and real estate segments. However, activity within the capital markets area was high with many customers taking advantage of the attractive interest rates prior to expected rate hikes and steepening yield curves. In the Nordic countries and Germany, an optimistic business climate led to higher
activity, and in Denmark several merger and acquisition deals were closed.
SEB upgraded its cash management functionality providing customers with an enhanced view of their global liquidity. Accessibility has been improved allowing customers to monitor and transact on their accounts also in mobile devices.
Operating income was in line with last year at SEK 4,563m. The customer-driven interest income improved primarily reflecting increased lending volumes as well as measures to adapt to the negative interest environment. However, net interest income was negatively affected by the increased resolution fund fee. Net fee and commission income increased, primarily driven by the capital market and advisory activities. Operating expenses were stable excluding the items that affected comparability last year. The credit portfolio was stable. Net credit losses amounted to SEK 144m, equivalent to a credit loss level of 9 basis points.
Corporate & Private Customers
The division offers full banking and advisory services to private individuals and small and medium-sized corporate customers in Sweden, as well as card services in four Nordic countries. High net-worth individuals are offered leading Nordic private banking services.
Income statement
| Q1 | Q4 | Jan — Mar | Full year | ||||
|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2016 | % | 2017 | 2016 | % | 2016 |
| Net interest income | 2 330 | 2 331 | 0 | 2 330 | 2 188 | 6 | 8 982 |
| Net fee and commission income | 1 393 | 1 425 | - 2 | 1 393 | 1 275 | 9 | 5 414 |
| Net financial income | 108 | 111 | - 3 | 108 | 90 | 20 | 394 |
| Net other income | 14 | 19 | - 26 | 14 | 6 | 133 | 55 |
| Total operating income | 3 845 | 3 886 | - 1 | 3 845 | 3 559 | 8 | 14 845 |
| Staff costs | - 854 | - 850 | 0 | - 854 | - 844 | 1 | -3 339 |
| Other expenses | - 926 | -1 009 | - 8 | - 926 | - 888 | 4 | -3 713 |
| Depreciation, amortisation and impairment of | |||||||
| tangible and intangible assets | - 15 | - 18 | - 17 | - 15 | - 16 | - 6 | - 69 |
| Total operating expenses | -1 795 | -1 877 | - 4 | -1 795 | -1 748 | 3 | -7 121 |
| Profit before credit losses | 2 051 | 2 009 | 2 | 2 051 | 1 811 | 13 | 7 724 |
| Gains less losses from tangible and intangible assets | |||||||
| Net credit losses | - 81 | - 63 | 29 | - 81 | - 119 | - 32 | - 376 |
| Operating profit | 1 969 | 1 946 | 1 | 1 969 | 1 692 | 16 | 7 348 |
| Cost/Income ratio | 0.47 | 0.48 | 0.47 | 0.49 | 0.48 | ||
| Business equity, SEK bn | 40.4 | 38.7 | 40.4 | 36.1 | 37.3 | ||
| Return on business equity, % | 14.6 | 15.5 | 14.6 | 14.4 | 15.2 | ||
| Number of full time equivalents1) | 3 510 | 3 551 | 3 510 | 3 730 | 3 667 |
1) Quarterly numbers are for end of quarter. Accumulated numbers are average for the period.
- Continued growth in both the private and corporate segments
- Digital initiatives launched to enhance the customer offer
- Operating profit amounted to SEK 1,969m and return on business equity was 14.6 per cent
Comments on the first quarter
Although the broader market outlook remains uncertain and the geopolitical backdrop is fragile, a slightly more positive sentiment characterised the first quarter as reflected in customer activity and growing demand for savings products.
In the private customer segment, positive net savings inflows, mainly driven by Private Banking, contributed to the growth in assets under management and household mortgage volumes increased by SEK 4bn in the quarter to SEK 437bn (433). Customers' rapid pace towards digitalisation continued, with mobile interactions reaching another all-time high at 17 and 1 million in average per month for the private and corporate customer segment, respectively. The private customer offering continued to be enhanced through the launch of an all-digital customer onboarding process as well as digital card payments through its collaboration with Samsung Pay. In addition, the mobile banking app was upgraded with financial management functionality.
Within the corporate segment, the number of fullservice customers continued to increase and reached 170,000 (168,000 at year-end), representing a market share of 15 per cent. Corporate lending increased to SEK 227bn (224), partly driven by financing of residential properties. Greenhouse, a new packaged offering aiming to support corporate customers with growth ambitions was launched. Total deposit volumes from private and corporate customers amounted to SEK 368bn (372).
Year-on-year, operating profit increased to SEK 1,969m, mainly driven by continued growth in net interest income which amounted to SEK 2,330m and net fee and commission income which reached SEK 1,393m. Operating expenses remained stable at SEK 1,795m and credit losses decreased to SEK 81m, corresponding to a credit loss level of 5 basis points.
Baltic
The division provides full banking and advisory services to private individuals and small and medium-sized corporate customers in Estonia, Latvia and Lithuania. The Baltic real estate holding companies (RHC) are part of the division.
Income statement (excl. RHC)
| Q1 | Q4 | Jan — Mar | Full year | ||||
|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2016 | % | 2017 | 2016 | % | 2016 |
| Net interest income | 552 | 588 | - 6 | 552 | 509 | 8 | 2 150 |
| Net fee and commission income | 307 | 325 | - 6 | 307 | 264 | 16 | 1 171 |
| Net financial income | 62 | 38 | 63 | 62 | 54 | 15 | 218 |
| Net other income | 3 | - 5 | 3 | 1 | 200 | - 1 | |
| Total operating income | 924 | 946 | - 2 | 924 | 828 | 12 | 3 538 |
| Staff costs | - 177 | - 197 | - 10 | - 177 | - 178 | - 1 | - 734 |
| Other expenses | - 245 | - 231 | 6 | - 245 | - 317 | - 23 | -1 016 |
| Depreciation, amortisation and impairment of | |||||||
| tangible and intangible assets | - 13 | - 23 | - 43 | - 13 | - 13 | 0 | - 62 |
| Total operating expenses | - 435 | - 451 | - 4 | - 435 | - 508 | - 14 | -1 812 |
| Profit before credit losses | 489 | 495 | - 1 | 489 | 320 | 53 | 1 726 |
| Gains less losses from tangible and intangible assets | 1 | 1 | 0 | 1 | 2 | - 50 | 9 |
| Net credit losses | 19 | - 22 | 19 | - 49 | - 57 | ||
| Operating profit | 508 | 474 | 7 | 508 | 273 | 86 | 1 678 |
| Cost/Income ratio | 0.47 | 0.48 | 0.47 | 0.61 | 0.51 | ||
| Business equity, SEK bn | 7.6 | 7.7 | 7.6 | 7.6 | 7.6 | ||
| Return on business equity, % | 23.4 | 21.6 | 23.4 | 12.7 | 19.3 | ||
| Number of full time equivalents1) | 2 408 | 2 456 | 2 405 | 2 575 | 2 534 |
1) Quarterly numbers are for end of quarter. Accumulated numbers are average for the period.
Baltic Division (incl. RHC)
| Operating profit | 465 | 386 | 20 | 465 | 233 | 100 | 1 451 |
|---|---|---|---|---|---|---|---|
| Cost/Income ratio | 0.48 | 0.49 | 0.48 | 0.63 | 0.53 | ||
| Business equity, SEK bn | 7.8 | 7.9 | 7.8 | 7.9 | 7.9 | ||
| Return on business equity, % | 21.0 | 17.1 | 21.0 | 10.4 | 16.2 | ||
| Number of full time equivalents1) | 2 433 | 2 484 | 2 431 | 2 607 | 2 565 |
- Continued improvement in business environment
- Successful launch of a new core banking system in Latvia
- Operating profit amounted to SEK 508m and return on business equity was 23.4 per cent
Comments on the first quarter
GDP growth continued to be supported by higher investments and private consumption. The rise in exports in the fourth quarter 2016 continued into 2017. Also, inflation increased driven mainly by higher wages and commodity prices.
A new improved mobile app was launched in Lithuania and Estonia and was well received. Smart ID, a mobile app for digital signing, was launched in cooperation with Swedbank in all Baltic countries and is quickly improving financial infrastructure in the region. There were more than 100,000 users by the end of the quarter. In Estonia, a remote video-based functionality was introduced to enable companies to open accounts without visiting a branch office. In Latvia, the new core banking system enabled improved customers functionality and interfaces. The number of home banking customers in the division was 1,007,000 (1,003,000).
Loan volumes amounted to SEK 119bn (118) and both household and corporate lending increased. Deposits decreased to SEK 105bn (106). Despite the very low deposit margins in the Baltic countries, net interest income increased by 8 per cent year-on-year due to increased volumes and higher margins on new lending. Net fee and commission income was 16 per cent higher year-on-year as a result of increased customer activity in all countries. With strong asset quality and given an expense item that affected comparability in 2016, operating profit was 86 per cent higher and return on business equity was 23.4 per cent.
The real estate holding companies (RHC) held assets with a total book value of SEK 726m (837).
Life & Investment Management
The division offers life insurance and asset management solutions to private as well as corporate and institutional clients mainly in the Nordic and Baltic countries.
Income statement
| Q1 | Q4 | Jan — Mar | |||||
|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2016 | % | 2017 | 2016 | % | 2016 |
| Net interest income | - 19 | - 17 | 12 | - 19 | - 14 | 36 | - 60 |
| Net fee and commission income | 1 043 | 1 229 | - 15 | 1 043 | 917 | 14 | 4 059 |
| Net financial income | 364 | 484 | - 25 | 364 | 367 | - 1 | 1 764 |
| Net other income | 14 | - 82 | 14 | 18 | - 22 | - 17 | |
| Total operating income | 1 403 | 1 614 | - 13 | 1 403 | 1 288 | 9 | 5 746 |
| Staff costs | - 382 | - 415 | - 8 | - 382 | - 374 | 2 | -1 560 |
| Other expenses | - 220 | - 243 | - 9 | - 220 | - 232 | - 5 | - 984 |
| Depreciation, amortisation and impairment of | |||||||
| tangible and intangible assets | - 9 | - 10 | - 10 | - 9 | - 13 | - 31 | - 45 |
| Total operating expenses | - 611 | - 668 | - 9 | - 611 | - 619 | - 1 | -2 589 |
| Profit before credit losses | 792 | 946 | - 16 | 792 | 669 | 18 | 3 157 |
| Gains less losses from tangible and intangible assets Net credit losses |
|||||||
| Operating profit | 792 | 946 | - 16 | 792 | 669 | 18 | 3 157 |
| Cost/Income ratio | 0.44 | 0.41 | 0.44 | 0.48 | 0.45 | ||
| Business equity, SEK bn | 11.0 | 11.7 | 11.0 | 11.5 | 11.6 | ||
| Return on business equity, % | 24.7 | 27.9 | 24.7 | 20.1 | 23.5 | ||
| Number of full time equivalents1) | 1 490 | 1 491 | 1 479 | 1 464 | 1 468 |
1)Quarterly numbers are for end of quarter. Accumulated numbers are average for the period.
- Life premium income increased by 20 per cent
- Further digital enhancement of customer offerings
- Operating profit amounted to SEK 792m and return on business equity was 24.7 percent.
Comments on the first quarter
The improvement of customer digital solutions continued. In Sweden, the insurance planner, Trygghetsplaneraren, was further developed enabling more clients to carry out fully digitalised advisory meetings. Clients in Denmark benefited from the highest average return in the industry from traditional life insurance over the last three years.
The integration of sustainability criteria in the investment process continued. SEB's microfinance funds continued to grow with strong interest from institutional clients. In general, demand for funds with a clear sustainability focus grew across all geographic markets. Fondmarknaden.se, a Swedish marketplace for fund distribution, awarded SEB Hållbarhetsfond Global (Sustainability Fund) as Best Ethical Fund.
Compared to the first quarter 2016, net fee and commission income increased by 14 per cent. This
was due to a combination of higher market values and net new assets under management. Expenses decreased by 1 percent and operating profit improved by 18 per cent. Compared to the unusually strong fourth quarter 2016, operating profit decreased by 16 per cent. The decrease in income was due both to high seasonal performance fees as well as high income from risk products in the fourth quarter.
In the unit-linked business, total assets increased by SEK 40bn during the last 12 months, to SEK 330bn.
Total premium income from combined new and existing life insurance policies increased by 20 per cent compared to the first quarter 2016 to SEK 12bn. Weighted sales of life insurance products increased by 17 per cent compared to last year to SEK 15bn.
The SEB Group
Net interest income – SEB Group
| Q1 | Q4 | Jan–Mar | Full year | ||||
|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2016 | % | 2017 | 2016 | % | 2016 |
| Interest income | 8 918 | 8 860 | 1 | 8 918 | 8 889 | 0 | 35 202 |
| Interest expense | -4 203 | -4 062 | 3 | -4 203 | -4 253 | - 1 | -16 464 |
| Net interest income | 4 716 | 4 798 | - 2 | 4 716 | 4 636 | 2 | 18 738 |
Net fee and commission income – SEB Group
| Q1 | Q4 | Jan–Mar | |||||
|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2016 | % | 2017 | 2016 | % | 2016 |
| Issue of securities and advisory | 282 | 231 | 22 | 282 | 150 | 88 | 800 |
| Secondary market and derivatives | 692 | 842 | - 18 | 692 | 754 | - 8 | 3 353 |
| Custody and mutual funds | 1 825 | 1 950 | - 6 | 1 825 | 1 744 | 5 | 7 264 |
| Whereof performance and transaction fees | 38 | 212 | - 82 | 38 | 22 | 73 | 275 |
| Payments, cards, lending, deposits, | |||||||
| guarantees and other | 2 353 | 2 586 | - 9 | 2 353 | 2 252 | 4 | 9 430 |
| Whereof payments and card fees | 1 288 | 1 356 | - 5 | 1 288 | 1 247 | 3 | 5 203 |
| Whereof lending | 553 | 723 | - 24 | 553 | 575 | - 4 | 2 527 |
| Life insurance commissions | 422 | 438 | - 4 | 422 | 402 | 5 | 1 653 |
| Fee and commission income | 5 574 | 6 047 | - 8 | 5 574 | 5 302 | 5 | 22 500 |
| Fee and commission expense | -1 306 | -1 438 | - 9 | -1 306 | -1 405 | - 7 | -5 872 |
| Net fee and commission income | 4 268 | 4 609 | - 7 | 4 268 | 3 897 | 10 | 16 628 |
| Whereof Net securities commissions | 2 094 | 2 308 | - 9 | 2 094 | 1 989 | 5 | 8 378 |
| Whereof Net payments and card fees | 821 | 847 | - 3 | 821 | 756 | 9 | 3 263 |
| Whereof Net life insurance commissions | 267 | 276 | - 3 | 267 | 245 | 9 | 1 039 |
Net financial income – SEB Group
| Q1 | Q4 | Jan–Mar | |||||
|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2016 | % | 2017 | 2016 | % | 2016 |
| Equity instruments and related derivatives | 649 | 456 | 42 | 649 | - 228 | 1 173 | |
| Debt securities and related derivatives | - 350 | - 68 | - 350 | 360 | 228 | ||
| Currency and related derivatives | 1 367 | 1 114 | 23 | 1 367 | 797 | 72 | 3 699 |
| Other life insurance income, net | 378 | 549 | -31 | 378 | 369 | 2 | 1 919 |
| Other | 18 | - 13 | 18 | 87 | -79 | 37 | |
| Net financial income | 2 063 | 2 038 | 1 | 2 063 | 1 385 | 49 | 7 056 |
| Whereof unrealized valuation changes from | |||||||
| counterparty risk and own credit standing in | |||||||
| derivatives and own issued securities. | -61 | 223 | -61 | -153 | - 219 |
The result within Net financial income is presented on different rows based on type of underlying financial instrument.
For the first quarter the effect from structured products offered to the public was approximately SEK 575m (Q4 2016: 535, Q1 2016: -565) in Equity related derivatives and a corresponding effect in Debt related derivatives SEK -450m (Q4 2016: -355, Q1 2016: 560).
Net credit losses – SEB Group
| Q1 | Q4 | Jan–Mar | Full year | ||||
|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2016 | % | 2017 | 2016 | % | 2016 |
| Provisions: | |||||||
| Net collective provisions for individually | |||||||
| assessed loans | - 133 | 45 | - 133 | 113 | - 218 | ||
| Net collective provisions for portfolio | |||||||
| assessed loans | - 31 | 108 | - 31 | 31 | 260 | ||
| Specific provisions | - 355 | - 169 | 110 | - 355 | - 443 | -20 | - 734 |
| Reversal of specific provisions no longer required | 404 | 74 | 404 | 125 | 338 | ||
| Net provisions for contingent liabilities | - 1 | 2 | - 1 | - 18 | -95 | 43 | |
| Net provisions | - 116 | 60 | - 116 | - 192 | -40 | - 311 | |
| Write-offs: | |||||||
| Total write-offs | - 168 | - 602 | -72 | - 168 | - 246 | -32 | -1 480 |
| Reversal of specific provisions utilized | |||||||
| for write-offs | 18 | 206 | -91 | 18 | 100 | -82 | 584 |
| Write-offs not previously provided for | - 149 | - 396 | -62 | - 149 | - 146 | 2 | - 896 |
| Recovered from previous write-offs | 61 | 52 | 18 | 61 | 47 | 30 | 214 |
| Net write-offs | - 88 | - 344 | -74 | - 88 | - 99 | -11 | - 682 |
| Net credit losses | - 204 | - 284 | -28 | - 204 | - 291 | -30 | - 993 |
Statement of changes in equity – SEB Group
| Other reserves1) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Available | |||||||||
| for-sale | Translation | Defined | Total Share | ||||||
| Share | financial | Cash flow | of foreign | benefit | Retained | holders' | Minority | Total | |
| SEK m | capital | assets | hedges | operations | plans | earnings | equity | interests | Equity |
| Jan-Mar 2017 | |||||||||
| Opening balance | 21 942 | 1 638 | 2 399 | -1 193 | 2 595 | 113 595 | 140 976 | 140 976 | |
| Net profit | 4 290 | 4 290 | 4 290 | ||||||
| Other comprehensive income (net of tax) | 32 | -351 | 1 | 1 530 | 1 212 | 1 212 | |||
| Total comprehensive income | 32 | -351 | 1 | 1 530 | 4 290 | 5 502 | 5 502 | ||
| Dividend to shareholders | -11 935 | -11 935 | -11 935 | ||||||
| Equity-based programmes3) | 92 | 92 | 92 | ||||||
| Change in holdings of own shares | 93 | 93 | 93 | ||||||
| Closing balance | 21 942 | 1 670 | 2 048 | -1 192 | 4 125 | 106 134 | 134 727 | 134 727 | |
| Jan-Dec 2016 | |||||||||
| Opening balance | 21 942 | 648 | 3 210 | -1 943 | 4 470 | 114 471 | 142 798 | 142 798 | |
| Change in valuation of insurance contracts2) | -440 | -440 | -440 | ||||||
| Adjusted opening balance | 21 942 | 648 | 3 210 | -1 943 | 4 470 | 114 031 | 142 358 | 142 358 | |
| Net profit | 10 618 | 10 618 | 10 618 | ||||||
| Other comprehensive income (net of tax) | 990 | -811 | 750 | -1 875 | -946 | -946 | |||
| Total comprehensive income | 990 | -811 | 750 | -1 875 | 10 618 | 9 672 | 9 672 | ||
| Dividend to shareholders | -11 504 | -11 504 | -11 504 | ||||||
| Equity-based programmes3) | 433 | 433 | 433 | ||||||
| Change in holdings of own shares | 17 | 17 | 17 | ||||||
| Closing balance | 21 942 | 1 638 | 2 399 | -1 193 | 2 595 | 113 595 | 140 976 | 140 976 | |
| Jan-Mar 2016 Opening balance |
21 942 | 648 | 3 210 | -1 943 | 4 470 | 114 471 | 142 798 | 142 798 | |
| Change in valuation of insurance contracts2) | -440 | ||||||||
| Adjusted opening balance | 21 942 | 648 | 3 210 | -1 943 | 4 470 | 114 031 | -440 142 358 |
-440 142 358 |
|
| Net profit | -2 294 | -2 294 | -2 294 | ||||||
| Other comprehensive income (net of tax) | 498 | 190 | 74 | -3 105 | -2 343 | -2 343 | |||
| Total comprehensive income Dividend to shareholders |
498 | 190 | 74 | -3 105 | -2 294 -11 504 |
-4 637 -11 504 |
-4 637 -11 504 |
||
| Equity-based programmes3) | |||||||||
| -133 | -133 | -133 | |||||||
| Change in holdings of own shares | 153 | 153 | 153 | ||||||
| Closing balance | 21 942 | 1 146 | 3 400 | -1 869 | 1 365 | 100 253 | 126 237 | 126 237 | |
1) Amounts under Other reserves may be reclassified in the future to the income statement under certain circumstances, e.g. if they are related to the sale of Available for sale financial assets, dissolved Cash flow hedges or Translation of foreign operations when SEB ceases to consolidate a foreign operation. Amounts related to Defined benefit plans will not be reclassified to the income statement.
2) The valuation methodology of insurance contracts in Denmark has migrated towards the Solvency II principles and the effect on Group as of 1st of January 2016 is SEK -440m. 3) Number of shares owned by SEB:
| Jan-Mar | Jan-Dec | Jan-Mar | |
|---|---|---|---|
| Number of shares owned by SEB, million | 2017 | 2016 | 2016 |
| Opening balance | 25.2 | 0.9 | 0.9 |
| Repurchased shares for equity-based programmes | 1.9 | 29.8 | 2.9 |
| Sold/distributed shares | -2.9 | -5.5 | -0.8 |
| Closing balance | 24.2 | 25.2 | 3.0 |
Market value of shares owned by SEB, SEK m 2 412 2 406 233
In accordance with the decision by the Annual General Meeting, SEB holds own shares of Class A for the long-term equity-based programmes. The transactions may take place at one or several occasions during the year. The acquisition cost for the purchase of own shares is deducted from shareholders' equity. The item includes changes in nominal amounts of equity swaps used for hedging of equity-based programmes.
Cash flow statement – SEB Group
| Jan–Mar | Full year | |||
|---|---|---|---|---|
| SEK m | 2017 | 2016 | % | 2016 |
| Cash flow from operating activities | 178 501 | 65 982 | 171 | 42 591 |
| Cash flow from investment activities | 12 | 297 | - 96 | 852 |
| Cash flow from financing activities | - 6 929 | - 11 491 | - 40 | - 2 198 |
| Net increase in cash and cash equivalents | 171 584 | 54 788 | 41 245 | |
| Cash and cash equivalents at the beginning of year | 158 315 | 110 770 | 43 | 110 770 |
| Exchange rate differences on cash and cash equivalents | - 801 | - 1 453 | - 45 | 6 300 |
| Net increase in cash and cash equivalents | 171 584 | 54 788 | 41 245 | |
| Cash and cash equivalents at the end of period1) | 329 098 | 164 105 | 101 | 158 315 |
1) Cash and cash equivalents at the end of period is defined as Cash and cash balances with central banks and Loans to other credit institutions payable on demand.
Financial assets and liabilities – SEB Group
| 31 Mar 2017 | 31 Dec 2016 | 31 Mar 2016 | ||||
|---|---|---|---|---|---|---|
| Carrying | Carrying | Carrying | ||||
| SEK m | amount | Fair value | amount | Fair value | amount Fair value | |
| Loans | 1 909 527 | 1 920 329 | 1 704 291 | 1 715 801 | 1 620 404 | 1 617 210 |
| Equity instruments | 85 773 | 85 773 | 74 173 | 74 173 | 94 041 | 94 041 |
| Debt securities | 351 305 | 351 495 | 253 443 | 253 653 | 377 450 | 377 613 |
| Derivative instruments | 174 762 | 174 762 | 212 355 | 212 355 | 247 896 | 247 896 |
| Financial assets–policyholders bearing the risk | 304 996 | 304 996 | 295 908 | 295 908 | 267 333 | 267 333 |
| Other | 54 396 | 54 396 | 38 942 | 38 942 | 49 036 | 49 036 |
| Financial assets | 2 880 759 | 2 891 751 | 2 579 112 | 2 590 832 | 2 656 160 | 2 653 129 |
| Deposits | 1 249 085 | 1 255 287 | 1 045 056 | 1 046 864 | 1 095 447 | 1 087 013 |
| Equity instruments | 14 133 | 14 133 | 10 071 | 10 071 | 14 663 | 14 663 |
| Debt securities issued | 842 615 | 850 792 | 755 984 | 768 613 | 767 492 | 779 537 |
| Derivative instruments | 138 886 | 138 886 | 174 651 | 174 651 | 217 855 | 217 855 |
| Liabilities to policyholders–investment contracts | 306 307 | 306 307 | 296 618 | 296 618 | 268 621 | 268 621 |
| Other | 83 675 | 83 675 | 60 297 | 60 297 | 75 417 | 75 418 |
| Financial liabilities | 2 634 701 | 2 649 080 | 2 342 677 | 2 357 114 | 2 439 495 | 2 443 107 |
SEB has aggregated its financial instruments by class taking into account the characteristics of the instruments. The fair value of each class of financial assets and liabilities are compared with its carrying amount. A description of the characteristics of the classes can be found in note 39 in the Annual Report 2016.
Assets and liabilities measured at fair value – SEB Group
| SEK m | 31 Mar 2017 | 31 Dec 2016 | ||||||
|---|---|---|---|---|---|---|---|---|
| Valuation | Valuation | Valuation | Valuation | |||||
| Quoted | technique | technique | Quoted | technique | technique | |||
| prices in | using | using non | prices in | using | using non | |||
| active | observable | observable | active | observable | observable | |||
| markets | inputs | inputs | markets | inputs | inputs | |||
| Assets | (Level 1) | (Level 2) | (Level 3) | Total | (Level 1) | (Level 2) | (Level 3) | Total |
| Financial assets - policyholders bearing the risk | 282 046 | 17 595 | 5 355 | 304 996 | 275 894 | 15 589 | 4 425 | 295 908 |
| Equity instruments at fair value | 59 920 | 14 390 | 11 847 | 86 157 | 50 331 | 13 215 | 11 101 | 74 647 |
| Debt instruments at fair value | 186 790 | 148 756 | 1 792 | 337 338 | 102 894 | 133 664 | 1 779 | 238 337 |
| Derivative instruments at fair value | 1 708 | 166 232 | 6 822 | 174 762 | 2 593 | 201 621 | 8 141 | 212 355 |
| Investment properties | 0 | 0 | 7 418 | 7 418 | 7 401 | 7 401 | ||
| Assets held for sale | 0 | 486 | 0 | 486 | 587 | 587 | ||
| Total | 530 464 | 347 459 | 33 234 | 911 157 | 431 712 | 364 676 | 32 847 | 829 235 |
| Liabilities | ||||||||
| Liabilities to policyholders - investment contracts | 283 170 | 17 768 | 5 369 | 306 307 | 276 666 | 15 542 | 4 410 | 296 618 |
| Equity instruments at fair value | 13 850 | 0 | 283 | 14 133 | 9 798 | 2 | 271 | 10 071 |
| Debt instruments at fair value | 20 114 | 38 959 | 0 | 59 073 | 7 027 | 33 514 | 40 541 | |
| Derivative instruments at fair value | 1 994 | 133 602 | 3 290 | 138 886 | 2 808 | 168 207 | 3 636 | 174 651 |
| Other financial liabilities | 0 | 18 748 | 0 | 18 748 | 19 225 | 19 225 | ||
| Total | 319 128 | 209 077 | 8 942 | 537 147 | 296 299 | 236 490 | 8 317 | 541 106 |
Fair value measurement
The objective of fair value measurement is to arrive at the price at which an orderly transaction would take place between market participants at the measurement date under current market conditions.
The Group has an established valuation process and control environment for the determination of fair values of financial instruments that includes a review, independent from the business, of valuation models and prices. If the validation principles are not adhered to, the Head of Group Finance shall be informed. Exceptions of material and principal importance require approval from the GRMC (Group Risk Measurement Committee) and the ASC (Accounting Standards Committee).
An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis. The objective is to arrive at a price at which a transaction without modification or repackaging would occur in the principal market for the instrument. In order to arrive at the fair value of a financial instrument SEB uses different methods; quoted prices in active markets, valuation techniques incorporating observable data and valuation techniques based on internal models. For disclosure purposes, financial instruments carried at fair value are classified in a fair value hierarchy according to the level of market observability of the inputs. Risk Control classifies and continuously reviews the classification of financial instruments in the fair value hierarchy. The valuation process is the same for financial instruments in all levels.
When valuing financial liabilities at fair value own credit standing is reflected. Fair value is generally measured for individual financial instruments, in addition portfolio adjustments are made to cover the credit risk. To reflect counterparty risk and own credit risk in OTC derivatives, adjustments are made based on the net exposure towards each counterpart. These adjustments are calculated on a counterparty level based on estimates of exposure at default, probability of default and recovery rates. Probability of default and recovery rate information is generally sourced from the CDS markets. For counterparties where this information is not available, or considered unreliable due to the nature of the exposure, alternative approaches are taken where the probability of default is based on generic credit indices for specific industry and/or rating.
In order to arrive at the fair value of investment properties a market participant's ability to generate economic benefit by using the asset in its highest and best use are taken into account. The highest and best use takes into account the use of the asset that is physically possible, legally permissible and financially feasible. The current use of the investment properties in SEB is in accordance with the highest and best use. The valuation of investment properties is described in the Accounting policies in Annual Report 2016. The valuation of the investment properties is performed semi-annually, they are presented and approved by the board in each real estate company. The valuation principles used in all entities are in accordance with regulations provided by the local Financial Supervisory Authorities (FSA) which is in accordance with international valuation principles and in accordance with IFRS.
Level 1: Quoted market prices
Valuations in Level 1 are determined by reference to unadjusted quoted market prices for identical instruments in active markets where the quoted prices are readily available and the prices represent actual and regularly occurring market transactions on an arm's length basis.
Examples of Level 1 financial instruments are listed equity securities, debt securities, and exchange-traded derivatives. Instruments traded in an active market for which one or more market participants provide a binding price quotation on the balance sheet date are also examples of Level 1 financial instruments.
Level 2: Valuation techniques with observable inputs
In Level 2 valuation techniques, all significant inputs to the valuation models are observable either directly or indirectly. Level 2 valuation techniques include using discounted cash flows, option pricing models, recent transactions and the price of another instrument that is substantially the same.
Examples of observable inputs are foreign currency exchange rates, binding securities price quotations, market interest rates (Stibor, Libor, etc.), volatilities implied from observable option prices for the same term and actual transactions with one or more external counterparts executed by SEB. An input can transfer from being observable to being unobservable during the holding period due to e.g. illiquidity of the instrument.
Examples of Level 2 financial instruments are most OTC derivatives such as options and interest rate swaps based on the Libor swap rate or a foreign-denominated yield curve. Other examples are instruments for which SEB recently entered into transactions with third parties and instruments for which SEB interpolates between observable variables.
Level 3: Valuation techniques with significant unobservable inputs
Level 3 valuation techniques incorporate significant inputs that are unobservable. These techniques are generally based on extrapolating from observable inputs for similar instruments, analysing historical data or other analytical techniques. Examples of Level 3 financial instruments are more complex OTC derivatives, long dated options for which the volatility is extrapolated or derivatives that depend on an unobservable correlation. Other examples are instruments for which there is currently no active market or binding quotes, such as unlisted equity instruments and private equity holdings and investment properties.
If the fair value of financial instruments includes more than one unobservable input, the unobservable inputs are aggregated in order to determine the classification of the entire instrument. The level in the fair value hierarchy within which a financial instrument is classified is determined on the basis of the lowest level of input that is significant to the fair value in its entirety.
Assets and liabilities measured at fair value – continued - SEB Group
Significant transfers and reclassifications between levels
Transfers between levels may occur when there are indications that market conditions have changed, e.g. a change in liquidity. The Valuation/Pricing committee of each relevant division decides on material shifts between levels. No significant transfers or reclassifications have ocurred during the first quarter 2017.
| Gain/loss in | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Closing | Gain/loss in | Other | Transfers | Exchange | Closing | ||||||
| balance | Income | comprehen | Transfers | out of Level | rate | balance | |||||
| Changes in level 3 | 31 Dec 2016 | statement | sive income | Purchases | Sales | Issues Settlements | into Level 3 | 3 | differences | 31 Mar 2017 | |
| Assets | |||||||||||
| Financial assets - policyholders bearing the risk | 4 425 | 34 | 4 602 | -3 698 | -8 | 5 355 | |||||
| Equity instruments at fair value | 11 101 | 117 | 76 | 1 283 | -702 | -8 | -20 | 11 847 | |||
| Debt instruments at fair value | 1 779 | -18 | 59 | -25 | -3 | 1 792 | |||||
| Derivative instruments at fair value | 8 141 | -1 345 | 47 | -29 | 23 | -15 | 6 822 | ||||
| Investment properties | 7 401 | -2 | 36 | -3 | 0 | -14 | 7 418 | ||||
| Total | 32 847 | -1 214 | 76 | 6 027 | -4 457 | 0 | 23 | 0 | -8 | -60 | 33 234 |
| Liabilities | |||||||||||
| Liabilities to policyholders - investment contracts | 4 410 | 33 | 4 619 | -3 686 | -7 | 5 369 | |||||
| Equity instruments at fair value | 271 | 11 | 1 | 283 | |||||||
| Debt instruments at fair value | 0 | 0 | 0 | ||||||||
| Derivative instruments at fair value | 3 636 | -440 | 40 | 60 | -6 | 3 290 | |||||
| Total | 8 317 | -396 | 0 | 4 659 | -3 686 | 0 | 60 | 0 | 0 | -12 | 8 942 |
Sensitivity of Level 3 assets and liabilities to unobservable inputs
The table below illustrates the potential Profit or Loss impact of the relative uncertainty in the fair value of assets and liabilities that for their valuation are dependent on unobservable inputs. The sensitivity to unobservable inputs is assessed by altering the assumptions to the valuation techniques, illustrated below by changes in index-linked swap spreads, implied volatilities, credit spreads or comparator multiples. It is unlikely that all unobservable inputs would be simultaneously at the extremes of their ranges of reasonably possible alternatives.
| 31 Mar 2017 | 31 Dec 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| SEK m | Assets | Liabilities | Net | Sensitivity | Assets | Liabilities | Net | Sensitivity | |
| Derivative instruments1) 2) 4) | 784 | -968 | -184 | 47 | 780 | -940 | -160 | 49 | |
| Equity instruments3) 6) | 1 280 | -282 | 998 | 197 | 1 441 | -271 | 1 170 | 229 | |
| Insurance holdings - Financial instruments4 5 7) | 16 219 | -2 321 | 13 898 | 1 637 | 18 477 | -2 695 | 15 782 | 1 807 | |
| Insurance holdings - Investment properties6 7) | 7 418 | 0 | 7 418 | 742 | 7 401 | 7 401 | 740 |
1) Sensitivity from a shift of inflation linked swap spreads by 16 basis points (16) and implied volatilities by 5 percentage points (5).
2) Sensitivity from a shift of swap spreads by 5 basis points (5).
3) Valuation is estimated in a range of reasonable outcomes. Sensitivity analysis is based on 20 per cent (20) shift in market values.
4) Shift in implied volatility by 10 per cent (10).
5) Sensitivity analysis is based on a shift in private equity of 20 per cent (20), structured credits 10 per cent (10) and derivative market values of 10 per cent (10).
6) Sensitivity from a shift of investment properties/real estate funds market values of 10 per cent (10).
7) The sensitivity show changes in the value of the insurance holdings which do not at all times affect the P/L of the Group since any surplus in the traditional life portfolios are consumed first.
| Financial assets and liabilities subject to offsetting or netting arrangements | ||||||||
|---|---|---|---|---|---|---|---|---|
| Related arrangements | Other instruments in balance sheet |
|||||||
| Net amounts | Collaterals | not subject to | ||||||
| in | Master netting | received/ | netting | Total in | ||||
| SEK m | Gross amounts | Offset | balance sheet | arrangements | pledged | Net amounts | arrangements | balance sheet |
| 31 Mar 2017 | ||||||||
| Derivatives | 178 423 | -4 377 | 174 046 | -97 327 | -47 090 | 29 629 | 716 | 174 762 |
| Reversed repo receivables | 146 566 | -24 278 | 122 288 | -20 593 | -101 064 | 631 | 122 288 | |
| Securities borrowing | 45 382 | 45 382 | -5 688 | -39 694 | 5 179 | 50 561 | ||
| Client receivables | 4 499 | -4 499 | 31 536 | 31 536 | ||||
| Assets | 374 870 | -33 154 | 341 716 | -123 608 | -187 848 | 30 260 | 37 431 | 379 147 |
| Derivatives | 142 331 | -4 377 | 137 954 | -97 327 | -38 132 | 2 496 | 931 | 138 885 |
| Repo payables | 46 470 | -24 278 | 22 192 | -20 593 | -1 106 | 493 | 22 192 | |
| Securities lending | 25 056 | 25 056 | -5 688 | -10 467 | 8 902 | 6 | 25 062 | |
| Client payables | 4 499 | -4 499 | 33 053 | 33 053 | ||||
| Liabilities | 218 357 | -33 154 | 185 203 | -123 608 | -49 704 | 11 891 | 33 989 | 219 193 |
| 31 Dec 2016 | ||||||||
| Derivatives | 215 367 | -4 447 | 210 920 | -123 698 | -34 841 | 52 381 | 1 435 | 212 355 |
| Reversed repo receivables | 99 828 | -35 332 | 64 496 | -682 | -63 612 | 202 | 1 | 64 497 |
| Securities borrowing | 25 265 | 25 265 | -7 616 | -17 649 | 5 525 | 30 790 | ||
| Client receivables | 43 | -42 | 1 | 1 | 5 861 | 5 862 | ||
| Assets | 340 503 | -39 821 | 300 682 | -131 996 | -116 102 | 52 584 | 12 822 | 313 504 |
| Derivatives | 176 773 | -4 447 | 172 326 | -123 698 | -31 547 | 17 081 | 2 325 | 174 651 |
| Repo payables | 36 926 | -35 332 | 1 594 | -682 | -795 | 117 | 1 594 | |
| Securities lending | 25 155 | 25 155 | -7 616 | -8 765 | 8 774 | 6 | 25 161 | |
| Client payables | 42 | -42 | 7 044 | 7 044 | ||||
| Liabilities | 238 896 | -39 821 | 199 075 | -131 996 | -41 107 | 25 972 | 9 375 | 208 450 |
| 31 Mar 2016 | ||||||||
| Derivatives | 251 289 | -4 511 | 246 778 | -178 289 | -43 283 | 25 206 | 1 118 | 247 896 |
| Reversed repo receivables | 136 226 | -18 768 | 117 458 | -26 651 | -90 604 | 203 | 2 | 117 460 |
| Securities borrowing | 26 167 | 26 167 | -5 824 | -20 343 | 7 382 | 33 549 | ||
| Client receivables | 2 607 | -2 607 | 24 671 | 24 671 | ||||
| Assets | 416 289 | -25 886 | 390 403 | -210 764 | -154 230 | 25 409 | 33 173 | 423 576 |
| Derivatives | 220 035 | -4 511 | 215 524 | -178 289 | -31 731 | 5 504 | 2 331 | 217 855 |
| Repo payables | 52 386 | -18 754 | 33 632 | -26 651 | -6 798 | 183 | 33 632 | |
| Securities lending | 28 435 | -14 | 28 421 | -5 824 | -16 242 | 6 355 | 8 | 28 429 |
| Client payables | 2 607 | -2 607 | 27 150 | 27 150 | ||||
| Liabilities | 303 463 | -25 886 | 277 577 | -210 764 | -54 771 | 12 042 | 29 489 | 307 066 |
Financial assets and liabilities subject to offsetting or netting arrangements – SEB Group
The table shows financial assets and liabilities that are presented net in the balance sheet or with potential rights to off-set associated with enforceable master netting arrangements or similar arrangements, together with related collateral.
Financial assets and liabilities are presented net in the balance sheet when SEB has legally enforceable rights to off-set, in the ordinary cause of business and in the case of bankruptcy, and intends to settle on a net basis or to realize the assets and settle the liabilities simultaneously. Repos with central counterparty clearing houses that SEB has agreements with and client receivables and client payables are examples of instruments that are presented net in the balance sheet.
Financial assets and liabilities subject to enforceable master netting arrangements or similar arrangements that are not presented net in the balance sheet are arrangements that are usually enforceable in the case of bankruptcy or default but not in the ordinary course of business or arrangements where SEB does not have the intention to settle the instruments simultaneously.
Assets and liabilities that are not subject to offsetting or netting arrangements, i.e. those that are only subject to collateral agreements, are presented as Other instruments in balance sheet not subject to netting arrangements.
Non-performing loans – SEB Group
| 31 Mar | 31 Dec | 31 Mar | |
|---|---|---|---|
| SEK m | 2017 | 2016 | 2016 |
| Individually assessed loans | |||
| Impaired loans | 4 834 | 5 037 | 5 099 |
| Specific reserves | - 1 850 | - 1 928 | - 2 253 |
| Collective reserves | - 1 671 | - 1 539 | - 1 189 |
| Impaired loans net | 1 314 | 1 570 | 1 657 |
| Specific reserve ratio for individually assessed impaired loans | 38.3% | 38.3% | 44.2% |
| Total reserve ratio for individually assessed impaired loans | 72.8% | 68.8% | 67.5% |
| Net level of impaired loans | 0.19% | 0.21% | 0.19% |
| Gross level of impaired loans | 0.30% | 0.33% | 0.34% |
| Portfolio assessed loans | |||
| Loans past due > 60 days | 2 535 | 2 597 | 2 867 |
| Restructured loans | 14 | 9 | 198 |
| Collective reserves for portfolio assessed loans | - 1 350 | - 1 322 | - 1 504 |
| Reserve ratio for portfolio assessed loans | 53.0% | 50.7% | 49.1% |
| Non-performing loans1) | |||
| Non-performing loans | 7 383 | 7 643 | 8 164 |
| NPL coverage ratio | 66.6% | 63.2% | 61.9% |
| NPL per cent of lending | 0.46% | 0.51% | 0.55% |
| 1) Consists of impaired loans, portfolio assessed loans past due more than 60 days and restructured portfolio assessed loans. | |||
| Reserves | |||
| Specific reserves | - 1 850 | - 1 928 | - 2 253 |
| Collective reserves | - 3 021 | - 2 861 | - 2 693 |
| Reserves for off-balance sheet items | - 45 | - 44 | - 103 |
| Total reserves | - 4 915 | - 4 833 | - 5 049 |
Seized assets – SEB Group
| 31 Mar | 31 Dec | 31 Mar | |
|---|---|---|---|
| SEK m | 2017 | 2016 | 2016 |
| Properties, vehicles and equipment | 414 | 417 | 1 033 |
| Shares | 46 | 46 | 40 |
| Total seized assets | 460 | 463 | 1 073 |
Assets and liabilities held for sale – SEB Group
| 31 Mar | 31 Dec | 31 Mar | |
|---|---|---|---|
| SEK m | 2017 | 2016 | 2016 |
| Other assets | 486 | 587 | 618 |
| Total assets held for sale | 486 | 587 | 618 |
| Other liabilities | |||
| Total liabilities held for sale | 0 | 0 | 0 |
The Baltic division has a divestment plan for investment properties. Through the continuation of the plan, additional properties were reclassified as assets held for sale until the derecognition at concluded sales agreement. The net amount of these activities during the first quarter was SEK -101m.
SEB consolidated situation
Capital adequacy analysis for SEB consolidated situation
| 31 Mar | 31 Dec | 31 Mar | |
|---|---|---|---|
| SEK m | 2017 | 2016 | 2016 |
| Own funds | |||
| Common Equity Tier 1 capital | 115 364 | 114 419 | 107 306 |
| Tier 1 capital | 135 336 | 129 157 | 120 824 |
| Total own funds | 157 728 | 151 491 | 134 711 |
| Own funds requirement | |||
| Risk exposure amount | 610 047 | 609 959 | 562 754 |
| Expressed as own funds requirement | 48 804 | 48 797 | 45 020 |
| Common Equity Tier 1 capital ratio | 18.9% | 18.8% | 19.1% |
| Tier 1 capital ratio | 22.2% | 21.2% | 21.5% |
| Total capital ratio | 25.9% | 24.8% | 23.9% |
| Own funds in relation to own funds requirement | 3.23 | 3.10 | 2.99 |
| Regulatory Common Equity Tier 1 capital requirement including buffer | 10.9% | 10.7% | 10.4% |
| of which capital conservation buffer requirement | 2.5% | 2.5% | 2.5% |
| of which systemic risk buffer requirement | 3.0% | 3.0% | 3.0% |
| of which countercyclical capital buffer requirement | 0.9% | 0.7% | 0.4% |
| Common Equity Tier 1 capital available to meet buffer 1) | 14.4% | 14.3% | 14.6% |
| Transitional floor 80% of capital requirement according to Basel I | |||
| Minimum floor own funds requirement according to Basel I | 87 356 | 86 884 | 80 161 |
| Own funds according to Basel I | 158 204 | 151 814 | 134 765 |
| Own funds in relation to own funds requirement Basel I | 1.81 | 1.75 | 1.68 |
| Leverage ratio | |||
| Exposure measure for leverage ratio calculation | 2 902 192 | 2 549 149 | 2 655 228 |
| of which on balance sheet items | 2 441 298 | 2 120 587 | 2 251 036 |
| of which off balance sheet items | 460 893 | 428 562 | 404 192 |
| Leverage ratio | 4.7% | 5.1% | 4.6% |
1) CET1 ratio less minimum capital requirement of 4.5% excluding buffers. In addition to the CET1 requirements there is a total capital requirement of additional 3.5%.
Internally assessed capital requirement
As per 31 March 2017, the internally assessed capital requirement including insurance risk amounted to SEK 63bn (63). The internal capital requirement is assessed using SEB's internal models for economic capital and is not fully comparable to the estimated capital requirement published by the Swedish Financial Supervisory Authority due to differences in assumptions and methodologies.
Own funds for SEB consolidated situation
| 31 Mar | 31 Dec | 31 Mar | |
|---|---|---|---|
| SEK m | 2017 | 2016 | 2016 |
| Shareholders equity according to balance sheet 1) | 134 727 | 140 976 | 126 237 |
| Deductions related to the consolidated situation and other foreseeable charges | -5 601 | -14 303 | -5 543 |
| Common Equity Tier 1 capital before regulatory adjustments 2) | 129 126 | 126 673 | 120 694 |
| Additional value adjustments | -990 | -1 169 | -1 268 |
| Intangible assets | -6 893 | -6 835 | -6 560 |
| Deferred tax assets that rely on future profitability | -185 | -208 | -493 |
| Fair value reserves related to gains or losses on cash flow hedges | -2 048 | -2 400 | -3 401 |
| Negative amounts resulting from the calculation of expected loss amounts | -628 | -381 | -368 |
| Gains or losses on liabilities valued at fair value resulting from changes in own credit standing | 50 | -115 | -206 |
| Defined-benefit pension fund assets | -2 834 | -920 | -895 |
| Direct and indirect holdings of own CET1 instruments | -199 | -191 | -155 |
| Securitisation positions with 1,250% risk weight | -33 | -35 | -42 |
| Total regulatory adjustments to Common Equity Tier 1 | -13 762 | -12 254 | -13 388 |
| Common Equity Tier 1 capital | 115 364 | 114 419 | 107 306 |
| Additional Tier 1 instruments | 15 200 | 9 959 | 8 905 |
| Grandfathered additional Tier 1 instruments | 4 772 | 4 779 | 4 613 |
| Tier 1 capital | 135 336 | 129 157 | 120 824 |
| Tier 2 instruments Grandfathered Tier 2 instruments |
24 815 | 24 851 | 16 148 |
| Net provisioning amount for IRB-reported exposures | 153 | 58 | 314 |
| Holdings of Tier 2 instruments in financial sector entities | -2 575 | -2 575 | -2 575 |
| Tier 2 capital | 22 392 | 22 334 | 13 887 |
| Total own funds | 157 728 | 151 491 | 134 711 |
1) The Swedish Financial Supervisory Authority has approved SEB´s application to use the net profit in measuring own funds on condition that the responsible auditors have reviewed the surplus, that the surplus is calculated in accordance with applicable accounting frameworks, that predictable costs and dividends have been deducted in accordance with EU regulation No 575/2013 and that the calculation was made in accordance with EU regulation No 241/2014.
2) The Common Equity Tier 1 capital is presented on a consolidated basis, and differs from total equity according to IFRS. The insurance business contribution to equity is excluded and there is a dividend deduction calculated according to Regulation (EU) No 575/2013 (CRR).
Risk exposure amount for SEB consolidated situation
| 31 Mar | 31 Dec | 31 Mar | |||||
|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2016 | 2016 | ||||
| Risk | |||||||
| Risk exposure | Own funds requirement 1) |
Risk exposure | Own funds requirement 1) |
exposure | Own funds requirement 1) |
||
| Credit risk IRB approach | amount | amount | amount | ||||
| Exposures to institutions | 28 683 | 2 295 | 26 254 | 2 100 | 23 349 | 1 868 | |
| Exposures to corporates | 335 648 | 26 852 | 335 413 | 26 833 | 307 027 | 24 562 | |
| Retail exposures | 56 590 | 4 527 | 55 617 | 4 449 | 53 204 | 4 256 | |
| of which secured by immovable property | 35 093 | 2 807 | 34 079 | 2 726 | 32 836 | 2 627 | |
| of which retail SME | 4 756 | 380 | 4 723 | 378 | 3 628 | 290 | |
| of which other retail exposures | 16 741 | 1 339 | 16 815 | 1 345 | 16 740 | 1 339 | |
| Securitisation positions | 2 042 | 163 | 3 066 | 246 | 3 561 | 285 | |
| Total IRB approach | 422 964 | 33 837 | 420 350 | 33 628 | 387 141 | 30 971 | |
| Credit risk standardised approach | |||||||
| Exposures to central governments or central banks | 715 | 57 | 1 801 | 144 | 1 258 | 101 | |
| Exposures to regional governments or local authorities | 47 | 4 | 51 | 4 | 53 | 4 | |
| Exposures to public sector entities | 114 | 9 | 29 | 2 | 7 | 1 | |
| Exposures to institutions | 639 | 51 | 1 316 | 105 | 937 | 75 | |
| Exposures to corporates | 18 103 | 1 448 | 16 422 | 1 314 | 15 545 | 1 244 | |
| Retail exposures | 15 845 | 1 268 | 16 186 | 1 295 | 15 084 | 1 207 | |
| Exposures secured by mortgages on immovable property | 3 714 | 297 | 3 803 | 304 | 4 199 | 336 | |
| Exposures in default | 459 | 37 | 384 | 31 | 383 | 31 | |
| Exposures associated with particularly high risk | 1 322 | 106 | 1 477 | 118 | 1 623 | 130 | |
| Securitisation positions | 216 | 17 | 216 | 17 | |||
| Exposures in the form of collective investment undertakings (CIU) | 40 | 3 | 66 | 5 | 56 | 4 | |
| Equity exposures | 2 124 | 170 | 2 119 | 170 | 2 719 | 218 | |
| Other items | 7 746 | 620 | 8 880 | 711 | 7 328 | 585 | |
| Total standardised approach | 51 083 | 4 087 | 52 750 | 4 220 | 49 192 | 3 936 | |
| Market risk | |||||||
| Trading book exposures where internal models are applied | 27 086 | 2 167 | 30 042 | 2 403 | 27 430 | 2 194 | |
| Trading book exposures applying standardised approaches | 13 563 | 1 085 | 9 398 | 752 | 12 067 | 965 | |
| Foreign exchange rate risk | 4 478 | 358 | 3 773 | 302 | 2 902 | 232 | |
| Total market risk | 45 128 | 3 610 | 43 213 | 3 457 | 42 399 | 3 391 | |
| Other own funds requirements | |||||||
| Operational risk advanced measurement approach | 46 793 | 3 743 | 47 901 | 3 832 | 47 195 | 3 776 | |
| Settlement risk | 3 | 0 | 0 | 0 | 0 | 0 | |
| Credit value adjustment | 6 301 | 504 | 7 818 | 625 | 6 476 | 518 | |
| Investment in insurance business | 16 633 | 1 331 | 16 633 | 1 331 | 16 633 | 1 331 | |
| Other exposures | 5 639 | 451 | 6 547 | 524 | 4 364 | 349 | |
| Additional risk exposure amount 2) | 15 503 | 1 240 | 14 747 | 1 180 | 9 354 | 748 | |
| Total other own funds requirements | 90 872 | 7 270 | 93 646 | 7 492 | 84 022 | 6 722 | |
| Total | 610 047 | 48 804 | 609 959 | 48 797 | 562 754 | 45 020 | |
1) Own funds requirement 8% of risk exposure amount according to Regulation (EU) No 575/2013 (CRR).
2) Regulation (EU) No 575/2013 (CRR) Article 3.
Change in risk exposure amount (REA)
Total REA was unchanged compared to year-end 2016. Credit volumes increased somewhat from year-end contributing to higher REA which is however partly offset by improved asset quality and foreign exchange movements. The Additional REA that was established in 2015 in agreement with the SFSA as a measure of prudence, increased by SEK 0.8bn to SEK 15.5bn.
| 31 Mar | |
|---|---|
| SEK bn | 2017 |
| Balance 31 Dec 2016 | 610 |
| Asset size | 5 |
| Asset quality | -2 |
| Foreign exchange movements | -1 |
| Model updates, methodology & policy, other | -1 |
| Underlying market and operational risk changes | -1 |
| Balance 31 Mar 2017 | 610 |
Average risk-weight
The following table summarises average risk-weights (risk exposure amount divided by exposure at default, EAD) for exposures where the risk exposure amount is calculated according to the internal ratings based (IRB) approach. Repos and securities lending transactions are excluded from the analysis since they carry low riskweight and can vary considerably in volume, thus making numbers less comparable.
| IRB reported credit exposures (less repos and securities lending) | 31 Mar | 31 Dec | 31 Mar |
|---|---|---|---|
| Average risk-weight | 2017 | 2016 | 2016 |
| Exposures to institutions | 26.8% | 25.1% | 25.2% |
| Exposures to corporates | 31.5% | 31.4% | 32.2% |
| Retail exposures | 9.9% | 9.9% | 9.8% |
| of which secured by immovable property | 7.0% | 6.9% | 6.8% |
| of which qualifying revolving retail exposures | |||
| of which retail SME | 83.5% | 73.4% | 70.5% |
| of which other retail exposures | 27.9% | 28.0% | 28.3% |
| Securitisation positions | 41.9% | 50.6% | 42.8% |
Skandinaviska Enskilda Banken AB (publ.)
Income statement – Skandinaviska Enskilda Banken AB (publ.)
| In accordance with FSA regulations | Q1 | Q4 | Jan–Mar | Full year | |||
|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2016 | % | 2017 | 2016 | % | 2016 |
| Interest income | 7 861 | 7 493 | 5 | 7 861 | 7 246 | 8 | 29 022 |
| Leasing income | 1 345 | 1 377 | -2 | 1 345 | 1 351 | 0 | 5 443 |
| Interest expense | -4 391 | -4 140 | 6 | -4 391 | -3 757 | 17 | -15 223 |
| Dividends | 1 964 | 1 252 | 57 | 1 964 | 1 542 | 27 | 6 581 |
| Fee and commission income | 2 951 | 3 350 | -12 | 2 951 | 2 841 | 4 | 11 648 |
| Fee and commission expense | - 674 | -1 005 | -33 | - 674 | - 767 | -12 | -2 805 |
| Net financial income | 1 467 | 1 459 | 1 | 1 467 | 825 | 78 | 4 642 |
| Other income | 245 | 261 | -6 | 245 | 236 | 4 | 817 |
| Total operating income | 10 767 | 10 047 | 7 | 10 767 | 9 517 | 13 | 40 125 |
| Administrative expenses | -3 650 | -3 909 | -7 | -3 650 | -3 526 | 4 | -15 039 |
| Depreciation, amortisation and impairment | |||||||
| of tangible and intangible assets | -1 315 | -1 319 | 0 | -1 315 | -1 512 | -13 | -5 775 |
| Total operating expenses | -4 965 | -5 228 | -5 | -4 965 | -5 038 | -1 | -20 814 |
| Profit before credit losses | 5 802 | 4 819 | 20 | 5 802 | 4 479 | 30 | 19 311 |
| Net credit losses | - 72 | - 248 | -71 | - 72 | - 121 | -41 | - 789 |
| Impairment of financial assets1) | - 47 | - 144 | -67 | - 47 | -2 687 | -98 | -3 841 |
| Operating profit | 5 683 | 4 427 | 28 | 5 683 | 1 671 | 14 681 | |
| Appropriations | 505 | 1 882 | -73 | 505 | - 4 | 2 437 | |
| Income tax expense | -1 049 | -1 202 | -13 | -1 049 | - 638 | 64 | -2 877 |
| Other taxes | 20 | 128 | -85 | 20 | - 18 | 137 | |
| Net profit | 5 159 | 5 235 | -1 | 5 159 | 1 011 | 14 378 |
1) As a result of impairment of goodwill in SEB Group, impairment of shares in subsidiaries has affected the parent company in Q1 2016 with an amount of SEK 2,687m.
Statement of comprehensive income – Skandinaviska Enskilda Banken AB (publ.)
| Q1 | Q4 | Jan–Mar | Full year | ||||
|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2016 | % | 2017 | 2016 | % | 2016 |
| Net profit | 5 159 | 5 235 | -1 | 5 159 | 1 011 | 14 378 | |
| Items that may subsequently be reclassified to the income statement: | |||||||
| Available-for-sale financial assets | 75 | 16 | 75 | 55 | 36 | 1 130 | |
| Cash flow hedges | - 351 | - 473 | -26 | - 351 | 190 | - 811 | |
| Translation of foreign operations | 25 | - 36 -169 | 25 | 13 | 92 | 25 | |
| Other comprehensive income (net of tax) | - 251 | - 493 | -49 | - 251 | 258 | -197 | 344 |
| Total comprehensive income | 4 908 | 4 742 | 4 | 4 908 | 1 269 | 14 722 |
Balance sheet - Skandinaviska Enskilda Banken AB (publ.)
| Condensed | 31 Mar | 31 Dec | 31 Mar |
|---|---|---|---|
| SEK m | 2017 | 2016 | 2016 |
| Cash and cash balances with central banks | 286 222 | 70 671 | 127 026 |
| Loans to credit institutions | 219 342 | 287 059 | 186 293 |
| Loans to the public | 1 232 132 | 1 172 095 | 1 129 391 |
| Financial assets at fair value | 405 608 | 322 195 | 513 888 |
| Available-for-sale financial assets | 12 012 | 12 063 | 13 339 |
| Investments in associates | 841 | 1 025 | 905 |
| Shares in subsidiaries | 50 505 | 50 611 | 49 821 |
| Tangible and intangible assets | 37 406 | 37 186 | 39 704 |
| Other assets | 66 060 | 46 939 | 55 438 |
| Total assets | 2 310 129 | 1 999 844 | 2 115 805 |
| Deposits from credit institutions | 219 778 | 168 852 | 219 507 |
| Deposits and borrowing from the public | 941 098 | 782 584 | 783 831 |
| Debt securities | 726 374 | 664 186 | 668 026 |
| Financial liabilities at fair value | 168 426 | 172 678 | 231 097 |
| Other liabilities | 91 993 | 47 610 | 70 459 |
| Provisions | 70 | 80 | 151 |
| Subordinated liabilities | 46 112 | 40 719 | 31 719 |
| Untaxed reserves | 21 761 | 21 761 | 23 465 |
| Total equity | 94 515 | 101 374 | 87 550 |
| Total liabilities, untaxed reserves and shareholders' equity | 2 310 129 | 1 999 844 | 2 115 805 |
Pledged assets, contingent liabilities and commitments - Skandinaviska Enskilda Banken AB (publ.)
| 31 Mar | 31 Dec | 31 Mar | |
|---|---|---|---|
| SEK m | 2017 | 2016 | 2016 |
| Pledged assets for own liabilities | 424 533 | 392 227 | 434 768 |
| Other pledged assets | 164 681 | 152 317 | 128 319 |
| Pledged assets | 589 214 | 544 544 | 563 087 |
| Contingent liabilities | 102 005 | 97 642 | 83 336 |
| Commitments | 527 382 | 468 953 | 458 762 |
| Contingent liabilities and commitments | 629 387 | 566 595 | 542 098 |
Capital adequacy - Skandinaviska Enskilda Banken AB (publ.)
| 31 Mar | 31 Dec | 31 Mar | ||
|---|---|---|---|---|
| SEK m | 2017 | 2016 | 2016 | |
| Own funds | ||||
| Common Equity Tier 1 capital | 99 625 | 97 144 | 93 159 | |
| Tier 1 capital | 119 596 | 111 882 | 106 677 | |
| Total own funds | 141 886 | 134 384 | 120 611 | |
| Own funds requirement | ||||
| Risk exposure amount | 515 416 | 515 826 | 480 263 | |
| Expressed as own funds requirement | 41 233 | 41 266 | 38 421 | |
| Common Equity Tier 1 capital ratio | 19.3% | 18.8% | 19.4% | |
| Tier 1 capital ratio | 23.2% | 21.7% | 22.2% | |
| Total capital ratio | 27.5% | 26.1% | 25.1% | |
| Own funds in relation to capital requirement | 3.44 | 3.26 | 3.14 | |
| Regulatory Common Equity Tier 1 capital requirement including buffers | 8.1% | 7.9% | 7.6% | |
| of which capital conservation buffer requirement | 2.5% | 2.5% | 2.5% | |
| of which countercyclical capital buffer requirement | 1.1% | 0.9% | 0.6% | |
| Common Equity Tier 1 capital available to meet buffers 1) | 14.8% | 14.3% | 14.8% |
1) CET1 ratio less minimum capital requirement of 4.5% excluding buffers. In addition to the CET1 requirements there is a total capital requirement of additional 3.5%.
The internally assessed capital requirement for the parent company amounted to SEK 61bn (60).
Definitions - Alternative Performance Measures*
Items affecting comparability
To facilitate the comparison of SEB's operating profit; items that management considers reduce comparability, are identified and separately described, e.g. impairment of goodwill and restructuring.
Return on equity
Net profit attributable to shareholders in relation to average1) shareholders' equity.
Return on equity excluding items affecting comparability
Net profit attributable to shareholders, excluding items effecting comparability and their related tax effect, in relation to average1) shareholders' equity.
Return on business equity
Operating profit by division, reduced by a standard tax rate, in relation to the divisions' average1) business equity (allocated capital).
Return on total assets
Net profit attributable to shareholders, in relation to average1) total assets.
Return on risk exposure amount
Net profit attributable to shareholders in relation to average1) risk exposure amount.
Cost/income ratio
Total operating expenses in relation to total operating income.
Cost/income ratio excluding items affecting comparability
Total operating expenses excluding items affecting comparability in relation to total operating income excluding items affecting comparability.
Basic earnings per share
Net profit attributable to shareholders in relation to the weighted average2) number of shares outstanding.
Diluted earnings per share
Net profit attributable to shareholders in relation to the weighted average2) diluted number of shares. The calculated dilution is based on the estimated economic value of the longterm incentive programmes.
Net worth per share
Shareholders' equity plus the equity portion of any surplus values in the holdings of interest-bearing securities and the surplus value in life insurance operations in relation to the number of shares outstanding.
Equity per share
Shareholders' equity in relation to the number of shares outstanding.
Credit loss level
Net credit losses as a percentage of the opening balance of loans to the public, loans to credit institutions and loan guarantees less specific, collective and off balance sheet reserves.
Gross level of impaired loans
Individually assessed impaired loans, gross, as a percentage of loans to the public and loans to credit institutions before reduction of reserves.
Net level of impaired loans
Individually assessed impaired loans, net (less specific reserves), as a percentage of net loans to the public and loans to credit institutions less specific reserves and collective reserves.
Specific reserve ratio for individually assessed impaired loans
Specific reserves as a percentage of individually assessed impaired loans.
Total reserve ratio for individually assessed impaired loans
Total reserves (specific reserves and collective reserves for individually assessed loans) as a percentage of individually assessed impaired loans.
Reserve ratio for portfolio assessed loans
Collective reserves for portfolio assessed loans as a percentage of portfolio assessed loans past due more than 60 days or restructured.
Non-performing loans (NPL)
SEB's term for loans that are either impaired or not performing according to the loan contract. Includes individually assessed impaired loans, portfolio assessed loans, past due > 60 days and restructured portfolio assessed loans (based on IFRS concessions).
NPL coverage ratio
Total reserves (specific, collective and off balance sheet reserves) as a percentage of non-performing loans.
NPL per cent of lending
Non-performing loans as a percentage of loans to the public and loans to credit institutions before reduction of reserves.
* Alternative Performance Measures, APMs, are financial measures of historical or future financial performance, financial position, or cash flows, other than those defined in the applicable financial reporting framework (IFRS) or in the EU Capital Requirements Regulation and Directive CRR/CRD IV. APMs are used by SEB when relevant to assess and describe the performance of SEB and provide additional relevant information and tools to enable a view on SEB's performance. APMs on basic earnings per share, diluted earnings per share, net worth per share, equity per share, return on equity, return on total assets and return on risk exposure amount provide relevant information on the performance in relation to different investment measurements. The cost/income ratio provides information on SEB's cost efficiency. APMs related to lending provide information on provisions in relation to credit risk. All these measures may not be comparable to similarly titled measures used by other companies. The excel file Alternative Performance Measures, available on sebgroup.com/ir, provides information on how the measures are calculated.
1) Average year to date, calculated on month-end figures.
2) Average, calculated on a daily basis.
Definitions
According to the EU Capital Requirements Regulation no 575/2013 (CRR)
Risk exposure amount
STOCKHOLM 3 MAY 2011 Total assets and off balance sheet items, weighted in accordance with capital adequacy regulations for credit risk and market risk. The operational risks are measured and added as risk exposure amount. Risk exposure amounts are only defined for the consolidated situation, excluding insurance entities and items deducted from own funds.
Common Equity Tier 1 capital
Shareholders' equity excluding proposed dividend, deferred tax assets, intangible assets and certain other regulatory adjustments defined in EU Regulation no 575/2013 (CRR).
Tier 1 capital
Common Equity Tier 1 capital plus qualifying forms of subordinated loans.
Tier 2 capital
Mainly subordinated loans not qualifying as Tier 1 capital contribution.
Own funds
The sum of Tier 1 and Tier 2 capital.
Common Equity Tier 1 capital ratio
Common Equity Tier 1 capital as a percentage of risk exposure amount.
Tier 1 capital ratio
Tier 1 capital as a percentage of risk exposure amount.
Total capital ratio
Total own funds as a percentage of risk exposure amount.
Leverage ratio
Tier 1 capital as a percentage of total assets including off balance sheet items with conversion factors according to the standardised approach.
Liquidity Coverage Ratio (LCR)
High-quality liquid assets in relation to the estimated net cash outflows over the next 30 calendar days.
This is SEB
| Our vision | To deliver world-class service to our customers. |
|---|---|
| Our purpose | We believe that entrepreneurial minds and innovative companies are key to creating a better world. We are here to enable them to achieve their aspirations and succeed through good times and bad. |
| Our overall ambition | To be the undisputed leading Nordic bank for corporations and institutions and the top universal bank in Sweden and the Baltic countries. |
| Whom we serve | 2,300 large corporations, 700 financial institutions, 267,000 SME and 1.4 million private full-service customers bank with SEB. |
| Our strategic priorities | Leading customer experience – develop long-term relationships based on trust so that customers feel that the services and advice offered are insightful about their needs, are convenient and accessible on their terms and that SEB shares knowledge and acts proactively in their best interest. |
| Growth in areas of strength – pursue growth in three selected core areas – offering to all customer segments in Sweden, large corporations and financial institutions in the Nordic countries and Germany and savings offering to private individuals and corporate customers. |
|
| Resilience and flexibility – maintain resilience and flexibility in order to adapt operations to the prevailing market conditions. Resilience is based upon cost and capital efficiency. |
|
| Values | Guided by our Code of Business Conduct and our core values: customers first, commitment, collaboration and simplicity. |
| People | Around 15,000 highly skilled employees serving customers from locations in some 20 countries; covering different time zones, securing reach and local market knowledge. |
| History | 160 years of business, trust and sharing knowledge. The Bank has always acted responsibly in society promoting entrepreneurship, international outlook and long-term relationships. |
Additional financial information is available in SEB's Fact Book which is published quarterly on www.sebgroup.com/ir