AI assistant
SEB — Interim / Quarterly Report 2017
Jan 31, 2018
2966_iss_2018-01-31_7bc09ee0-dd09-4028-ae69-c4b719b08fa5.pdf
Interim / Quarterly Report
Open in viewerOpens in your device viewer
Annual Accounts 2017
STOCKHOLM 31 JANUARY 2018
Annual Accounts 2017
The fourth quarter result included several items affecting comparability that are described on page 9. In order to simplify the reporting and analysis of SEB's result, the net of operating income and operating expenses is presented in a new line in the income statement – Operating profit before items affecting comparability. Below this line, another new line is presented – Items affecting comparability.
Full year 2017
(Compared with the full year 2016)
- Operating income SEK 45.6bn (43.3), operating expenses SEK 21.9bn (21.8), operating profit before items affecting comparability SEK 22.7bn (20.3) and net profit SEK 16.2bn (10.6).
- Net credit losses SEK 808m (993) with a credit loss level of 0.05 per cent (0.07).
- Return on equity 11.5 per cent (7.8), return on equity excluding items affecting comparability 12.7 per cent (11.3) and earnings per share SEK 7.49 (4.88).
Fourth quarter 2017
(Compared with the third quarter 2017)
- Operating income SEK 11.9bn (11.1), operating expenses SEK 5.6bn (5.4), operating profit before items affecting comparability SEK 6.1bn (5.4) and net profit SEK 3.2bn (4.2).
- Net credit losses SEK 105m (284) with a credit loss level of 0.03 per cent (0.07).
- Return on equity 8.8 per cent (12.1), return on equity excluding items affecting comparability 13.5 per cent (12.1) and earnings per share SEK 1.47 (1.96).
Dividend
The Board of Directors proposes a dividend to the shareholders of SEK 5.75 per share (5.50).
Volumes and key ratios
Liquidity coverage & Leverage ratios Per cent
CET 1 capital ratio/Return on equity Per cent
SEB Annual Accounts 2017 2
President's comment
As we close the books on 2017 we can conclude that the macroeconomic sentiment – and thereby business sentiment – has grown more positive. Spurred by more jobs, higher asset prices and higher investment levels as well as increased trade, the world economy is gearing up despite heightened geopolitical uncertainty. The Eurozone as well as Sweden have now experienced negative rates for more than three years. Global equity markets have risen by more than 50 per cent in the past two years while market volatility has remained low. At the same time, long-term trends such as the demographic shift with ageing populations and technology change seem to affect the global economic environment towards an extended period of increased savings and low interest rates. Central banks have a difficult balancing act to return to a more conventional monetary policy going forward.
High customer activity and diverse business mix generate robust profit growth
SEB has set the strategic aspiration to be the leading Nordic bank for corporations and institutions and the top universal bank in Sweden and the Baltic countries. During the year, all customer segments increased their activity levels. Large corporate clients benefitted from favourable financing conditions and improved growth prospects. IPO and M&A activity picked up and debt capital markets saw high activity, albeit demand for traditional bank financing was subdued. Financial institution customers continued to enjoy strong equity markets but were also challenged by the abundance of liquidity and diverging bond markets. Financial institutions face an increasingly complex regulatory environment and here we have been able to support them through our broad custody offering including also administrative and back office services. In the more positive business sentiment, small and medium-sized corporate customers in Sweden and the Baltic countries increased their demand for lending. As part of the implementation of the new MiFID regulation, we enhanced our offering to private banking customers. Assets under management increased by SEK 80bn to SEK 1,830bn. The Swedish housing market seem to be stabilising and SEB grew the mortgage portfolio below market pace.
All in all, operating income grew by 5 per cent, while underlying operating expenses were stable at below SEK 22bn. Asset quality remained very high and operating profit before items affecting comparability grew by 12 per cent. This means that with the Common Equity Tier 1 capital ratio at 19.4 per cent, return on equity reached 12.7 per cent.
Growing SEB's core business and stepping up the transformation agenda
Since the start of our business plan for 2016-2018, we have grown corporate lending by 6 per cent, FX-adjusted. In the LC&FI division, new clients account for 15 per cent of client income. In Sweden we have broadened our corporate foothold with 16 500 more SME customers. In the private segment, we see that digital on-boarding is appreciated by customers. Close to one third of all digital mortgage applications are converted into loans. We have stepped up our transformation agenda by increasingly focusing on areas where we have scale and can add value as well as simplifying processes and increasing customer convenience and accessibility.
In an environment of rapid technological development but also more complexity, speed, agility and transparency are increasingly important. Two weeks ago, we communicated the impact of new accounting principles, impairment of IT assets and restructuring costs for the transformation of our German business into a branch with full focus on German corporate and financial institution customers. In December, we signed an agreement with Danica (a subsidiary to Danske Bank) to divest SEB Pension in Denmark – a business that we have developed considerably over the past ten years. The regulatory approval is pending. The divestment creates further flexibility to continue to grow and invest in our core customer segments.
We are well positioned to continue to deliver solid customer value and profit growth as we are now starting the work to set the direction for the next phase from 2019 and onwards for our Vision 2025. However, first we want to continue to deliver on the last year of our current business plan and financial targets including our cost cap of SEK 22bn. The whole SEB team is deeply committed to deliver world-class service in everything we do so that we can be the preferred choice over the long-term in the eyes of our customers.
SEB Annual Accounts 2017 3
The Group
The full year 2017
Operating profit before items affecting comparability increased by 12 per cent and amounted to SEK 22,702m (20,296). Net profit (after tax) amounted to SEK 16,244m (10,618).
Operating income
Total operating income increased by 5 per cent to SEK 45,609m (43,251).
Net interest income amounted to SEK 19,893m representing an increase of 6 per cent year-on-year (18,738). Both the Swedish repo rate and the ECB euro refinancing interest rate remained unchanged, at -0.5 and zero per cent, respectively.
| Jan–Dec | Change | ||
|---|---|---|---|
| SEK m | 2017 | 2016 | % |
| Customer-driven NII | 21 794 | 20 464 | 6 |
| NII from other activities | -1 901 | -1 726 | 10 |
| Total | 19 893 | 18 738 | 6 |
Year-on-year, customer-driven net interest income increased by SEK 1,330m. Lending volumes and lending margins contributed positively in roughly equal parts. Deposit margins were down due to effects from the negative interest rates that were not reflected in customer pricing. The deposit volume effect on the change in net interest income was negligible.
Net interest income from other activities decreased by SEK 175m, year-on-year. Regulatory fees, including resolution fund and deposit guarantee fees were SEK 436m higher than 2016 and amounted to SEK 1,798m (1,362). In 2016, a resolution fund fee of 4.5 basis points applied to the adjusted balance sheet volumes was charged, versus 9 basis points for the year 2017. In 2018, the fee will be 12.5 basis points. The resolution fund fee beyond 2018 is outlined on page 10.
Net fee and commission income increased by 7 per cent and amounted to SEK 17,725m (16,628). Corporate customers were active in the capital markets taking advantage of the low interest rate levels. The gross related fees from the issue of securities and advisory fees increased by SEK 367m year-on-year. Corporate demand for new traditional lending was lower, especially among large corporations, and gross
lending fees were down by 11 per cent compared to 2016. The stock market values increased during the year. Both market values and new business volumes combined led to an increase in gross fee income related to custody and mutual funds in the amount of SEK 776m to SEK 8,040m. Out of this amount, total performance and transaction fees increased by SEK 81m to SEK 356m (275). Net payments and card fees increased by 6 per cent, SEK 191m, year-on-year. Gross life insurance commissions related to the unit-linked insurance business increased by SEK 54m.
Net financial income decreased by 3 per cent to SEK 6,880m (7,056). High volatility and market activity characterised the beginning of 2017, but this subsided to a low level for the rest of the year. The market conditions affected credit spreads which in turn led to a positive change in the fair value credit adjustment1). Compared to 2016, this adjustment increased by SEK 429m to SEK 210m (-219).
Net other income increased by 34 per cent to SEK 1,112m (829). Realised capital gains as well as unrealised valuation and hedge accounting effects were included in this line item.
Operating expenses
Total operating expenses were stable at SEK 21,936m (21,812). A 3 per cent decrease in staff costs was offset by an increase in other expenses. The average number of full time equivalents decreased by 333 compared to 2016, to 14,946. SEB's cost cap remains unchanged at SEK 22bn for 2018.
Net credit losses and provisions
Net credit losses were low at SEK 808m (993). The credit loss level was 5 basis points (7).
Items affecting comparability
The net total of items affecting comparability, was an expense of SEK -1,896m (-5,429). See page 9 for detailed information.
Comparative numbers (in parenthesis):
The result for the full year 2017 is compared to the full year 2016. The fourth quarter 2017 result is compared to the third quarter 2017. Business volumes are compared to year-end 2016, unless otherwise stated.
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 (OCA).
Income tax expense
Income tax expense increased by 7 per cent and amounted to SEK 4,562m (4,249). The effective tax rate for the year was 22 per cent. In both 2017 and 2016, there were tax effects from the items affecting comparability (see page 9). In 2017, new legislation was introduced in Sweden, which discontinued the tax deductibility of interest expenses on subordinated debt that qualifies as Tier 1 or Tier 2 capital. This increased income tax expenses by SEK 362m.
A dividend from the subsidiary in Estonia in the first quarter 2017 was taxed at the time of pay-out to the parent company. The tax amounted to SEK 72m.
Return on equity
Return on equity for the full year was 11.5 per cent (7.8). Excluding items affecting comparability return on equity was 12.7 per cent (11.3).
Other comprehensive income
Other comprehensive income amounted to SEK -1,036m (-946).
The value of the pension plan assets exceeds the defined benefit obligations. The discount rate used for the pension obligation in Sweden was 2.2 per cent (2.4 at year-end 2016). The net value of the defined benefit pension plan assets and liabilities increased since year-end leading to other comprehensive income of SEK 784m (-1,875).
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 and amounted to SEK -1,820m (929). A dividend in the amount of SEK 494m was received from Visa Sweden and was reported as an item affecting comparability (see page 9). The dividend reduced the valuation of the holdings in Visa Sweden, which was recognised in the line item available-for-sale.
The fourth quarter 2017
Operating profit before items affecting comparability increased by 14 per cent compared with the third quarter to SEK 6,112m (5,380). Compared with the fourth quarter 2016, operating profit before items affecting comparability increased by 10 per cent. Net profit (after tax) decreased by 25 per cent to SEK 3,184m (4,243).
Operating income
Total operating income increased by 6 per cent to SEK 11,858m compared with the third quarter (11,141) and increased by 2 per cent from SEK 11,618m in the fourth quarter 2016.
Net interest income, which amounted to SEK 5,184m, increased by 2 per cent compared with the previous quarter (5,080) and increased by 8 per cent year-on-year. Both the Swedish repo rate and the ECB euro refinancing interest rate were unchanged, at -0.5 and zero per cent respectively.
| Q4 | Q3 | Q4 | |
|---|---|---|---|
| SEK m | 2017 | 2017 | 2016 |
| Customer-driven NII | 5 487 | 5 481 | 5 424 |
| NII from other activities | -303 | -401 | -626 |
| Total | 5 184 | 5 080 | 4 798 |
Customer-driven net interest income was virtually unchanged compared with the third quarter 2017. Both lending volumes and margins contributed positively at an equal degree to the net interest income, but this contribution was offset by a negative deposit margin effect.
Net interest income from other activities improved by SEK 98m compared to the third quarter 2017. Resolution fund and deposit guarantee fees combined decreased by SEK 64m to SEK 389m (453) since the actual deposit guarantee fee debited for the year was lower than expected. Compared with the fourth quarter 2016, the resolution fund and deposit guarantee fees increased by SEK 58m.
Net fee and commission income increased by 18 per cent to SEK 4,739m (4,026) and increased by 3 per cent compared with the fourth quarter 2016.
The seasonal slowdown in customer activity noted in the third quarter reversed and corporate activity both in capital markets and customer demand for traditional lending increased. Gross fees from the issue of securities and advisory fees increased by SEK 180m compared to the third quarter and by SEK 86m year-onyear while gross lending fees were up by SEK 83m in the quarter.
Average stock market values increased during the quarter and gross fee income from custody and mutual funds at SEK 2,210m increased by 14 per cent, SEK 268m. Total performance and transaction fees increased by SEK 186m and amounted to SEK 225m (39). Net payments and card fees increased by 8 per cent, while net commissions relating to the unit-linked life insurance business were almost flat.
Net financial income decreased by 6 per cent to SEK 1,630m (1,726) and was down by 20 per cent compared to the fourth quarter 2016. The fair value credit adjustment1) decreased by SEK 230m in the fourth quarter and amounted to SEK 61m (291). The financial markets were calm with low volatility and activity levels. Institutional customers had a limited need to reallocate their portfolios or adjust their hedging solutions. The net financial income relating mainly to the traditional life insurance operations in Sweden and Denmark decreased by SEK 65m to SEK 429m (494).
Net other income was virtually unchanged at SEK 305m (308) in the fourth quarter and increased by 76 per cent compared to the fourth quarter 2016. Realised capital gains and unrealised valuation as well as hedge accounting effects were included in this line item.
Operating expenses
Total operating expenses increased by 3 per cent to SEK 5,605m (5,423). There was a seasonal increase in staff costs in the amount of SEK 145m.
Net credit losses and provisions
Net credit losses decreased by 63 per cent to SEK 105m (284). The credit loss level was 3 basis points (7).
Items affecting comparability
The net total of items affecting comparability was an expense of SEK 1,896m (0). See page 9 for detailed information.
Income tax expense
Total income tax expense decreased by 9 per cent to SEK 1,032m (1,138). The effective tax rate for the fourth quarter was 24 per cent (21).
Return on equity
Return on equity for the fourth quarter was 8.8 per cent (12.1). Excluding items affecting comparability, the return on equity was 13.5 per cent (12.1).
Other comprehensive income
The other comprehensive income amounted to SEK -1,688m (-75).
The value of the pension plan assets exceeds the defined benefit obligations. The discount rate for the pension obligation in Sweden at 2.2 per cent was unchanged in the quarter. In Germany, the discount rate was unchanged at 1.9 per cent. The defined benefit obligation decreased while the market value of the pension assets was virtually unchanged. The net effect from the net defined benefit obligation on other comprehensive income was SEK -927m (266).
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 -760m (-340). A dividend in the amount of SEK 494m was received from Visa Sweden and was reported as an item affecting comparability (see page 9). The dividend reduced the valuation recognised in the line item available-for-sale with the same amount.
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 (OCA).
Business volumes
Total assets at the end of the year were SEK 2,560bn, which was a decrease by SEK 61bn during the year (2,621).
Loans
| Dec | Dec | |
|---|---|---|
| SEK bn | 2017 | 2016 |
| General governments | 34 | 28 |
| Households | 576 | 549 |
| Corporates | 805 | 786 |
| Repos | 42 | 63 |
| Debt securities | 13 | 15 |
| Other | 14 | 12 |
| Loans to the public | 1 485 | 1 453 |
Loans to the public (on the balance sheet) amounted to SEK 1,485bn, an increase of SEK 32bn during the year. The credit portfolio (in which loans, commitments and derivatives are included), excluding banks, increased by SEK 25bn to SEK 2,061bn (2,036).
The credit portfolio increased mainly due to growth in Swedish and Baltic household mortgage lending in the amount of SEK 22bn and Swedish housing cooperative associations by SEK 7bn. The real estate management credit portfolio decreased by SEK 8bn year-on-year, while the corporate credit portfolio remained stable.
Deposits
| Dec | Dec | |
|---|---|---|
| SEK bn | 2017 | 2016 |
| General governments | 17 | 35 |
| Households | 300 | 277 |
| Corporates | 645 | 605 |
| Repos | 6 | 1 |
| Other | 37 | 44 |
| Deposits and borrowings from the public | 1 005 | 962 |
Deposits and borrowings from the public amounted to SEK 1,005bn. Corporate deposits increased by SEK 40bn during the year. Household deposits increased by SEK 23bn.
Assets under management and custody
Total assets under management amounted to SEK 1,830bn (1,749). The net inflow of assets during the year was SEK 14bn and the market value increased by SEK 66bn.
Assets under custody increased partly reflecting the increased stock market values since year-end and amounted to SEK 8,046m (6,859).
Risk and capital Market risk
SEB's business model is driven by customer demand. Value-at-Risk (VaR) in the trading operations averaged SEK 91m in 2017 (112). 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 year as the volatility across all asset classes continued to be limited while exposure from equity options was reduced. In the fourth quarter, tighter credit spreads and smaller FX exposures also contributed to lower VaR.
Liquidity and long-term funding
Short-term funding in the form of commercial paper and certificates of deposit decreased by SEK 44bn from year-end 2016.
SEK 87bn of long-term funding matured during 2017 (of which SEK 47bn covered bonds, SEK 28bn senior debt and SEK 12bn subordinated debt). During the year new issues amounted to SEK 80bn (of which SEK 55bn constituted covered bonds, SEK 20bn senior debt and SEK 5bn additional tier 1 subordinated debt). SEB's inaugural own green bond in the amount of EUR 500m was part of the senior funding raised.
The liquidity reserve, as defined by the Swedish Bankers' Association, amounted to SEK 340bn at the end of the year (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 145 per cent (168). The USD and EUR LCRs were 284 and 217 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 108 per cent (114).
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 well diversified earnings in terms of geography and business areas.
Capital position
SEB's Common Equity Tier 1 (CET1) capital ratio was 19.4 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 17.2 per cent per year-end 2017. In the first quarter, the SFSA increased the countercyclical buffer requirement by 0.5 percentage points to 2.0 per cent. The Bank aims to 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, which currently is 0.5 per cent, will be discontinued.
On 7 December 2017, the Group of Governors and Heads of Supervision agreed a package to complete the revisions to Basel III standards ("Basel IV"). The standards cover the standardised and internal ratings based approaches to credit risk, operational risk, and the application of an output floor. The output floor was set at 72.5 per cent based on the standardised approaches with a gradual phase-in starting in 2022 with full application in 2027.
SEB has a solid capital position as well as capital generation which, combined with the long phase-in period, provides the bank with a strong basis to comply with the finalised Basel III standards and the current dividend policy can be maintained. There are, however, still large uncertainties regarding the final calibration of the proposals and possible implications for SEB. These uncertainties mainly consist of how the standards might be revised when implemented into EU legislation and to what degree the SFSA might change the calibration of the current Swedish capital requirements.
The following table shows the REA and capital ratios according to Basel III:
| Dec | Dec | |
|---|---|---|
| Own funds requirement, Basel III | 2017 | 2016 |
| Risk exposure amount, SEK bn | 611 | 610 |
| Common Equity Tier 1 capital ratio, % | 19.4 | 18.8 |
| Tier 1 capital ratio, % | 21.6 | 21.2 |
| Total capital ratio, % | 24.2 | 24.8 |
| Leverage ratio, % | 5.2 | 5.1 |
Total REA remained unchanged over the year. The increase in credit volumes led to higher credit risk REA, which however was largely offset by foreign exchange movements and improved asset quality. Market risk REA decreased by SEK 4bn.
The total capital ratio decreased when issued Tier 2 subordinated debt in the amount of EUR 750m was repaid in September. SEB also called subordinated debt in the amount of EUR 500m in December. The capital base reflected this event already as of 30 September, since SEB had applied for approval from the SFSA to call the capital.
The effects from the items affecting comparability are included in the CET1 ratio for 2017. The effects from IFRS 9 and 15 will be included in the first quarter 2018.
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.
Dividend
The Board proposes to the Annual General Meeting a dividend of SEK 5.75 per Class A and Class C share, which corresponds to a pay-out ratio of 77 per cent. Excluding items affecting comparability the pay-out ratio was 70 per cent. The total dividend amounts to SEK 12.5bn (11.9), calculated on the total number of issued shares as per 31 December 2017, excluding own shares held. The proposal shall be seen with reference to the dividend policy, the outlook for the economic environment, the Group's earnings generation and capital situation.
The SEB share will be traded ex-dividend on 27 March 2018. The proposed record date for the dividend is 28 March 2018 and dividend payments will be disbursed on 4 April 2018.
Other information
On 19 January 2018, SEB communicated the financial impact of items affecting comparability and changes in accounting policies.
Items affecting comparability
In order to facilitate the comparison of SEB's underlying operating profit between time periods, SEB has moved items affecting comparability to be presented as a separate line in the income statement.
For a summary and an analysis of which lines in the income statement that would have been impacted without the presentation change, see table Items affecting comparability on page 27.
Items affecting comparability 2017
The total expense in the income statement from Items affecting comparability was SEK 1,896m before tax and SEK 1,681m after tax.
In total, the items affecting comparability, including the effect on other comprehensive income of SEK 494m, decreased equity by SEK 2,175m.
Visa Sweden
The settlement of the acquisition of Visa Europe by Visa Inc. consists of a combination of cash and shares to be paid to the different Visa Europe members. In Sweden, SEB is an indirect member. In the fourth quarter a dividend of SEK 494m was received after an agreement was reached regarding the allocation of the settlement between the members. There was no tax effect.
The holdings in Visa have been classified as an Available-for-sale asset where the change in value was recognised in Other comprehensive income. The dividend received has reduced the amount in Other comprehensive income by SEK 494m.
SEB's German business
In line with previous communication, the core business in Germany was transferred from SEB AG to the German branch of the parent company, Skandinaviska Enskilda Banken AB, as per 2 January 2018. The purpose of the change is to simplify the reporting and administration of the German operations. The non-core business that was not transferred to the branch from SEB AG will be dismantled over time.
The provisions related to redundancy and excess premises amounting to a total of SEK 521m were recognised in the fourth quarter. In addition, SEB entered into an agreement to transfer the pension obligations under the defined benefit plan in SEB AG to Versicherungsverein des Bankgewerbes a.G (BVV) at a cost of SEK 891m in the fourth quarter. The transfer will take place in the second quarter 2018.
Impairment and derecognition of intangible IT assets In the fourth quarter, an impairment and a derecognition of intangible IT assets led to an expense in an amount of SEK 978m. The positive tax effect was SEK 215m.
Items affecting comparability 2016
The total effect of Items affecting comparability in 2016 was a cost in the amount of SEK 5,429m before tax and SEK 5,352m after tax.
Visa Baltic
The settlement of the transaction of SEB's Baltic holdings in Visa Europe resulted in a gain of SEK 520m in the second quarter 2016. The gain generated a tax expense of SEK 24m.
Reorganisation and restructuring
SEB implemented a new customer-oriented organisation which resulted in an impairment of goodwill in the amount of SEK 5,334m in the first quarter 2016. This expense was not tax deductible.
There were financial effects from restructuring activities in the Baltic and German businesses as well as an impairment and derecognition of intangible IT assets no longer in use. The total amount was SEK 615m and there was a positive tax effect amounting to SEK 101m in the first quarter 2016.
Changes in accounting policies in 2018
As of 1 January 2018, IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers came into force. IFRS 9 replaced IAS 39 Financial Instruments: Recognition and Measurement and IFRS 15 replaced IAS 18 Revenue.
The impact from IFRS 9 will be recognised as an adjustment to retained earnings at 1 January 2018. The impact from IFRS 15 will be recognised as an adjustment of retained earnings at 1 January 2017. The adjustments will reduce retained earnings by SEK 5 967m.
IFRS 9 Financial Instruments
IFRS 9 introduces new requirements in mainly three areas that are described below. The total effect will reduce the 2018 opening retained earnings balance by SEK 3,281m.
1. Classification and measurement
The requirements imply a smaller change in the classification and measurement of financial assets. The Available-for-sale category under IAS 39, where market valuations were reported in Other comprehensive income, will cease and valuations of fair value will going forward be reported in Net financial income. Certain holdings in Treasury that were classified as Availablefor-sale will now be measured at amortised cost. As a result, the positive fair value in the amount of SEK 264m will be derecognised.
Regarding the classification and measurement of financial liabilities the rules entail a change of reporting own credit risk adjustment (OCA). Under IAS 39, the change in OCA was reported in Net financial income but will going forward be reported in Other comprehensive income. The classification of bonds issued by SEB AG maturing beyond the year 2020 will be changed to fair value through profit or loss from amortised cost. This will reduce opening balance of retained earnings by SEK 1,847m.
2. Impairment of credit losses
The impairment model for credit losses was changed from an incurred loss model to an expected loss model. The increase in the credit loss reserves is driven by three main factors: Firstly, all items in scope are each assigned a reserve. Secondly, an increase of credit reserves on the retail portfolios. Thirdly, the incorporation of a negative scenario in the calculation of the expected losses.
The change will lead to an increase of the credit reserves at an amount of SEK 1,578m. The net effect after tax will be a SEK 1,170m reduction of retained earnings. Going forward the application of the IFRS 9 requirements will probably increase volatility in profit and loss.
3. Hedge accounting
The new hedge accounting rules do not yet cover macro hedge accounting. There is an option to remain with IAS 39 accounting standards which SEB has chosen to utilise.
IFRS 15 Revenue from Contracts with Customers As communicated in the third quarter interim report, the main effect from IFRS 15 on SEB is that the treatment of contract costs for investment contracts within Life will change so that a smaller part of deferred acquisition costs (DAC) is recognised as an asset. The change will result in a decrease of the deferred acquisition cost in the balance sheet of SEK 2,640m. The effect will be recognised in the first quarter 2018, as a reduction of the opening balance of retained earnings as per 1 January 2017. Similarly, net fees and commissions in the 2017 income statement will be restated reducing income by SEK 47m.
Changes in resolution fund fee requirements
Swedish authorities have decided that the resolution fund fee for 2018 shall be 0.125 per cent applied to the adjusted 2016 balance sheet volumes. The fee will be reduced to 0.09 per cent for 2019 and to 0.05 per cent from 2020 until the fund target is met. The fund target level, which is proposed to be 3 per cent of guaranteed deposits, is expected to be reached by the year 2025.
Divestment of SEB Pension Denmark
On 14 December 2017 SEB signed an agreement to sell all shares in SEB Pensionsforsikring A/S and SEB Administration A/S (SEB Pension) to Danica Pension livsforsikringsaktieselskab (Danica, a subsidiary to Danske Bank) for total proceeds of DKK 6.5bn, consisting of a cash consideration of DKK 5.0bn and a pre-closing dividend of DKK 1.5bn. The pre-closing dividend will be in addition to the dividend of DKK 1.1bn which SEB received in the first six months of 2017.
As per year-end 2017, assets under management by SEB Pension amounted to DKK 101bn, and the net profit contribution was DKK 490m for the year. The effect on key financial ratios, on a pro forma basis will be limited. The Common Equity Tier 1 ratio will improve by approximately 0.60 percentage points and earnings per share will see a limited negative impact. The divestment reduces SEB's exposure to market risk.
The completion of the sale is among other things conditional upon regulatory approvals and certain preparations for separation and is currently expected to occur during the summer of 2018.
There was no profit or loss effect from the transaction in 2017, but the assets and liabilities pertaining to SEB Pension were reclassified to Assets and liabilities held for sale as of the fourth quarter.
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), in the Capital Adequacy and Risk Management Report for 2016 and the quarterly additional Pillar 3 disclosures for 2017. Further information is presented in the Fact Book on a quarterly basis.
The outlook for the world economy is increasingly positive and 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 introduce a hike during the autumn 2018. Geopolitical uncertainty has increased. The process forward for Brexit has added to the uncertainty. Recently there have been signs of a slow-down in the residential Swedish real estate market.
The German Federal Ministry of Finance issued a circular on 17 July 2017 with administrative guidance in relation to withholding taxes on dividends in connection with certain cross-border securities lending and derivative transactions. The circular states an intention to examine transactions executed prior to the change in tax legislation that was enacted 1 January 2016. Following a review, SEB is of the opinion that the cross-border securities lending and derivative transactions of SEB up until 1 January 2016 were conducted in compliance with then prevailing rules. It can nevertheless not be ruled out that a change in policy of German authorities may have financial effects on SEB.
Stockholm, 31 January 2018
The President declares that the Annual Accounts for the year 2017 provide 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 9.30 CET on 31 January 2018, at Kungsträdgårdsgatan 8 with the President and CEO Johan Torgeby can be followed live in Swedish on sebgroup.com/sv/ir. A simultaneous translation into English will be available on sebgroup.com/ir. A replay will be available afterwards.
Access to telephone conference
The telephone conference at 13.00 CET 31 January 2018 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)1452 541 003. Please quote conference id: 9890317 and call at least 10 minutes in advance. A replay of the conference call will be available on 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 70 550 35 00
Skandinaviska Enskilda Banken AB (publ.)
SE-106 40 Stockholm, Sweden Telephone: +46 771 62 10 00 sebgroup.com Corporate organisation number: 502032-9081
Further financial information is available in SEB's Fact Book and in the additional Pillar 3 disclosures which are published quarterly on sebgroup.com/ir.
Financial information calendar 2018
| 5 March | Annual Report 2017 published on sebgroup.com | |
|---|---|---|
| 26 March | Annual General Meeting | |
| 30 April | Interim Report January-March | The silent period starts 10 April |
| 17 July | Interim Report January-June | The silent period starts 7 July |
| 25 October | Interim Report January-September | The silent period starts 8 October |
The financial information calendar for 2019 will be published in conjunction with the Interim Report for January-September 2018.
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. The EU has endorsed the amendment to IAS 12 and IAS 7, but not yet the amendment of IFRS 12. The changes have not had a material effect on the financial statements of the Group or on capital adequacy and large exposures.
See page 9, Changes in accounting policies in 2018, for information on the impact from IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers.
The Group changed the presentation of the income statement in the fourth quarter 2017 by adding a line, Items affecting comparability. The Group also added a line with the net of operating income and operating expenses, Operating profit before items affecting comparability. See page 42 for a definition of items affecting comparability.The purpose of the change is to simplify reporting and facilitate the comparison of operating profit between time periods. The change applies as of 1 January 2017 and comparative numbers have been changed.
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 December 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 31 January 2018
PricewaterhouseCoopers AB
Peter Nyllinge Martin By Authorised Public Accountant Authorised Public Accountant Partner in charge
The SEB Group
Income statement – SEB Group
| Q4 | Q3 | Q4 | Jan–Dec | |||||
|---|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2017 | % | 2016 | % | 2017 | 20161) | % |
| Net interest income | 5 184 | 5 080 | 2 | 4 798 | 8 | 19 893 | 18 738 | 6 |
| Net fee and commission income | 4 739 | 4 026 | 18 | 4 609 | 3 | 17 725 | 16 628 | 7 |
| Net financial income | 1 630 | 1 726 | -6 | 2 038 | -20 | 6 880 | 7 056 | -3 |
| Net other income | 305 | 308 | -1 | 173 | 76 | 1 112 | 829 | 34 |
| Total operating income | 11 858 | 11 141 | 6 | 11 618 | 2 | 45 609 | 43 251 | 5 |
| Staff costs | -3 523 | -3 378 | 4 | -3 774 | -7 | -14 025 | -14 422 | -3 |
| Other expenses | -1 830 | -1 719 | 6 | -1 727 | 6 | -6 947 | -6 619 | 5 |
| Depreciation, amortisation and | ||||||||
| impairment of tangible and intangible | ||||||||
| assets | - 252 | - 325 | -23 | - 208 | 21 | - 964 | - 771 | 25 |
| Total operating expenses | -5 605 | -5 423 | 3 | -5 709 | -2 | -21 936 | -21 812 | 1 |
| Profit before credit losses | 6 253 | 5 719 | 9 | 5 909 | 6 | 23 672 | 21 439 | 10 |
| Gains less losses from tangible and | ||||||||
| intangible assets | - 37 | - 54 | -32 | - 67 | -45 | - 162 | - 150 | 8 |
| Net credit losses | - 105 | - 284 | -63 | - 284 | -63 | - 808 | - 993 | -19 |
| Operating profit before | ||||||||
| items affecting comparability | 6 112 | 5 380 | 14 | 5 558 | 10 | 22 702 | 20 296 | 12 |
| Items affecting comparability | -1 896 | -1 896 | -5 429 | |||||
| Operating profit | 4 216 | 5 380 | -22 | 5 558 | -24 | 20 806 | 14 867 | 40 |
| Income tax expense | -1 032 | -1 138 | -9 | -1 314 | -21 | -4 562 | -4 249 | 7 |
| Net profit | 3 184 | 4 243 | -25 | 4 244 | -25 | 16 244 | 10 618 | 53 |
| 1) Items affectecting comparability reclassified. | ||||||||
| Attributable to shareholders | 3 184 | 4 243 | -25 | 4 244 | -25 | 16 244 | 10 618 | |
| Basic earnings per share, SEK | 1.47 | 1.96 | 1.96 | 7.49 | 4.88 | |||
| Diluted earnings per share, SEK | 1.46 | 1.95 | 1.95 | 7.46 | 4.85 |
Statement of comprehensive income – SEB Group
| Q4 | Q3 | Q4 | Jan–Dec | |||||
|---|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2017 | % | 2016 | % | 2017 | 2016 | % |
| Net profit | 3 184 | 4 243 | -25 | 4 244 | -25 | 16 244 | 10 618 | 53 |
| Items that may subsequently be reclassified to the income statement: | ||||||||
| Available-for-sale financial assets | - 729 | - 84 | - 91 | - 909 | 990 | |||
| Cash flow hedges | - 261 | - 286 | -9 | - 473 | -45 | -1 207 | - 811 | 49 |
| Translation of foreign operations | 230 | 30 | - 94 | 296 | 750 | -61 | ||
| Items that will not be reclassified to the income statement: | ||||||||
| Defined benefit plans | - 927 | 266 | 1 883 | 784 | -1 875 | |||
| Other comprehensive income | ||||||||
| (net of tax) | - 1 688 | - 75 | 1 225 | - 1 036 | - 946 | 10 | ||
| Total comprehensive income | 1 495 | 4 168 | -64 | 5 469 | -73 | 15 208 | 9 672 | 57 |
| Attributable to shareholders | 1 495 | 4 168 | -64 | 5 469 | -73 | 15 208 | 9 672 | 57 |
Balance sheet – SEB Group
| 31 Dec | 31 Dec | |
|---|---|---|
| SEK m | 2017 | 2016 |
| Cash and cash balances with central banks | 177 222 | 151 078 |
| Other lending to central banks | 12 778 | 66 730 |
| Loans to credit institutions1) | 34 715 | 50 527 |
| Loans to the public | 1 484 803 | 1 453 019 |
| Financial assets at fair value through profit or loss 2) | 575 955 | 785 026 |
| Fair value changes of hedged items in a portfolio hedge | 93 | 111 |
| Available-for-sale financial assets2) | 27 776 | 35 747 |
| Investments in subsidiaries and associates | 1 314 | 1 238 |
| Tangible and intangible assets | 12 052 | 20 158 |
| Other assets | 48 877 | 56 425 |
| Non-current assets and disposal groups classified as held for sale | 184 011 | 587 |
| Total assets | 2 559 596 | 2 620 646 |
| Deposits from central banks and credit institutions3) | 89 076 | 119 864 |
| Deposits and borrowing from the public3) | 1 004 721 | 962 028 |
| Liabilities to policyholders | 303 202 | 403 831 |
| Debt securities issued | 614 033 | 668 880 |
| Financial liabilities at fair value through profit or loss | 114 313 | 213 496 |
| Fair value changes of hedged items in a portfolio hedge | 1 046 | 1 537 |
| Other liabilities | 75 170 | 67 082 |
| Provisions | 3 009 | 2 233 |
| Subordinated liabilities | 32 390 | 40 719 |
| Liabilities of disposal groups classified as held for sale | 178 710 | |
| Total equity | 143 925 | 140 976 |
| Total liabilities and equity | 2 559 596 | 2 620 646 |
| 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. | 162 827 | 252 421 |
| 3) Deposits covered by deposit guarantees. | 285 439 | 252 815 |
A more detailed balance sheet is included in the Fact Book.
Pledged assets, contingent liabilities and commitments – SEB Group
| 31 Dec | 31 Dec | |
|---|---|---|
| SEK m | 2017 | 2016 |
| Pledged assets for own liabilities1) | 477 220 | 478 998 |
| Pledged assets for liabilities to insurance policyholders | 436 890 | 403 831 |
| Other pledged assets2) | 136 998 | 154 518 |
| Pledged assets | 1 051 109 | 1 037 347 |
| Contingent liabilities3) | 122 896 | 120 231 |
| Commitments | 563 181 | 655 350 |
| Contingent liabilities and commitments | 686 077 | 775 581 |
1) Of which collateralised for covered bonds SEK 355,587m (346,585).
2) Of which securities lending SEK 59,443m (61,498) and pledged but unencumbered bonds SEK 57,390m (80,718).
3) Of which credit guarantees SEK 11,419m (14,309).
Key figures – SEB Group
| Q4 | Q3 | Jan–Dec | |||
|---|---|---|---|---|---|
| 2017 | 2017 | 2016 | 2017 | 2016 | |
| Return on equity, % | 8.83 | 12.13 | 12.28 | 11.53 | 7.80 |
| Return on equity excluding items affecting | |||||
| comparability1), % | 13.45 | 12.13 | 11.75 | 12.67 | 11.30 |
| Return on total assets, % | 0.45 | 0.59 | 0.60 | 0.57 | 0.37 |
| Return on risk exposure amount, % | 2.08 | 2.76 | 2.76 | 2.65 | 1.80 |
| Cost/income ratio | 0.47 | 0.49 | 0.49 | 0.48 | 0.50 |
| Basic earnings per share, SEK | 1.47 | 1.96 | 1.96 | 7.49 | 4.88 |
| Weighted average number of shares2), millions | 2 168 | 2 168 | 2 168 | 2 168 | 2 178 |
| Diluted earnings per share, SEK | 1.46 | 1.95 | 1.95 | 7.46 | 4.85 |
| Weighted average number of diluted shares3), | 2 179 | 2 179 | 2 178 | 2 178 | 2 188 |
| Net worth per share, SEK | 74.84 | 73.91 | 73.00 | 74.84 | 73.00 |
| Equity per share, SEK | 66.42 | 65.80 | 65.00 | 66.42 | 65.00 |
| Average shareholders' equity, SEK, billion | 144.2 | 139.9 | 138.2 | 140.9 | 136.2 |
| Credit loss level, % | 0.03 | 0.07 | 0.08 | 0.05 | 0.07 |
| Liquidity Coverage Ratio (LCR)4), % | 145 | 120 | 168 | 145 | 168 |
| Own funds requirement, Basel III | |||||
| Risk exposure amount, SEK m | 610 819 | 614 619 | 609 959 | 610 819 609 959 | |
| Expressed as own funds requirement, SEK m | 48 866 | 49 169 | 48 797 | 48 866 | 48 797 |
| Common Equity Tier 1 capital ratio, % | 19.4 | 19.2 | 18.8 | 19.4 | 18.8 |
| Tier 1 capital ratio, % | 21.6 | 21.5 | 21.2 | 21.6 | 21.2 |
| Total capital ratio, % | 24.2 | 24.0 | 24.8 | 24.2 | 24.8 |
| Leverage ratio, % | 5.2 | 4.7 | 5.1 | 5.2 | 5.1 |
| Number of full time equivalents5) | 14 951 | 14 752 | 15 087 | 14 946 | 15 279 |
| Assets under custody, SEK bn | 8 046 | 7 801 | 6 859 | 8 046 | 6 859 |
| Assets under management6), SEK bn | 1 830 | 1 850 | 1 749 | 1 830 | 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. Settlement of sale of shares in VISA Europe in Sweden, transformation of SEB's German business and impairments and derecognitions of intangible IT assets in Q4 2017.
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 6,986,000 shares and 5,037,770 shares have been sold. Thus, at 31 December 2017 SEB owned 27,125,923 Class A-shares with a market value of SEK 2,612m.
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
| Q4 | Q3 | Q2 | Q1 | Q4 | |
|---|---|---|---|---|---|
| SEK m | 2017 | 2017 | 2017 | 2017 | 2016 |
| Net interest income | 5 184 | 5 080 | 4 913 | 4 716 | 4 798 |
| Net fee and commission income | 4 739 | 4 026 | 4 691 | 4 268 | 4 609 |
| Net financial income | 1 630 | 1 726 | 1 461 | 2 063 | 2 038 |
| Net other income | 305 | 308 | 341 | 157 | 173 |
| Total operating income | 11 858 | 11 141 | 11 405 | 11 204 | 11 618 |
| Staff costs | -3 523 | -3 378 | -3 533 | -3 590 | -3 774 |
| Other expenses | -1 830 | -1 719 | -1 741 | -1 657 | -1 727 |
| Depreciation, amortisation and impairment of | |||||
| tangible and intangible assets | - 252 | - 325 | - 199 | - 189 | - 208 |
| Total operating expenses | -5 605 | -5 423 | -5 473 | -5 436 | -5 709 |
| Profit before credit losses | 6 253 | 5 719 | 5 933 | 5 767 | 5 909 |
| Gains less losses from tangible and intangible assets | - 37 | - 54 | - 37 | - 34 | - 67 |
| Net credit losses | - 105 | - 284 | - 214 | - 204 | - 284 |
| Operating profit before | |||||
| items affecting comparability | 6 112 | 5 380 | 5 681 | 5 529 | 5 558 |
| Items affecting comparability | -1 896 | ||||
| Operating profit | 4 216 | 5 380 | 5 681 | 5 529 | 5 558 |
| Income tax expense | -1 032 | -1 138 | -1 153 | -1 239 | -1 314 |
| Net profit | 3 184 | 4 243 | 4 528 | 4 290 | 4 244 |
| Attributable to shareholders | 3 184 | 4 243 | 4 528 | 4 290 | 4 244 |
| Basic earnings per share, SEK | 1.47 | 1.96 | 2.09 | 1.98 | 1.96 |
| Diluted earnings per share, SEK | 1.46 | 1.95 | 2.08 | 1.97 | 1.95 |
Income statement by division – SEB Group
| Large | |||||||
|---|---|---|---|---|---|---|---|
| Corporates | Corporate & | Life & | |||||
| & Financial | Private | Investment | |||||
| Jan-Dec 2017, SEK m | Institutions | Customers | Baltic | Management | Other1) | Eliminations | SEB Group |
| Net interest income | 8 043 | 9 442 | 2 373 | - 90 | 76 | 48 | 19 893 |
| Net fee and commission income | 6 236 | 5 678 | 1 320 | 4 519 | 27 | - 54 | 17 725 |
| Net financial income | 3 465 | 441 | 231 | 1 674 | 1 008 | 60 | 6 880 |
| Net other income | 573 | 87 | - 10 | 17 | 448 | - 4 | 1 112 |
| Total operating income | 18 318 | 15 648 | 3 914 | 6 120 | 1 558 | 51 | 45 609 |
| Staff costs | -3 862 | -3 298 | - 724 | -1 561 | -4 616 | 35 | -14 025 |
| Other expenses | -5 046 | -3 872 | - 965 | - 963 | 3 984 | - 85 | -6 947 |
| Depreciation, amortisation and | |||||||
| impairment of tangible and intangible | |||||||
| assets | - 59 | - 57 | - 78 | - 37 | - 734 | - 964 | |
| Total operating expenses | -8 967 | -7 226 | -1 766 | -2 561 | -1 365 | - 51 | -21 936 |
| Profit before credit losses | 9 351 | 8 422 | 2 148 | 3 558 | 193 | 0 | 23 672 |
| Gains less losses from tangible and | |||||||
| intangible assets | 1 | - 164 | 1 | - 162 | |||
| Net credit losses | - 529 | - 276 | - 7 | 4 | - 808 | ||
| Operating profit before | |||||||
| items affecting comparability | 8 823 | 8 146 | 1 977 | 3 558 | 198 | 0 | 22 702 |
| Items affecting comparability | -1 896 | -1 896 | |||||
| Operating profit | 8 823 | 8 146 | 1 977 | 3 558 | -1 698 | 0 | 20 806 |
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, in the Nordic region, Germany and the United Kingdom. Customers are also served through an international network in some 20 offices.
Income statement
| Q4 | Q3 | Q4 | Jan — Dec | |||||
|---|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2017 | % | 2016 | % | 2017 | 2016 | % |
| Net interest income | 1 972 | 1 971 | 0 | 2 202 | - 10 | 8 043 | 8 307 | - 3 |
| Net fee and commission income | 1 619 | 1 306 | 24 | 1 690 | - 4 | 6 236 | 6 095 | 2 |
| Net financial income | 866 | 913 | - 5 | 1 219 | - 29 | 3 465 | 4 187 | - 17 |
| Net other income | 205 | 137 | 50 | 137 | 50 | 573 | 389 | 47 |
| Total operating income | 4 662 | 4 327 | 8 | 5 248 | - 11 | 18 318 | 18 978 | - 3 |
| Staff costs | - 959 | - 951 | 1 | -1 032 | - 7 | -3 862 | -3 922 | - 2 |
| Other expenses | -1 265 | -1 242 | 2 | -1 208 | 5 | -5 046 | -4 972 | 1 |
| Depreciation, amortisation and impairment of tangible | ||||||||
| and intangible assets | - 16 | - 15 | 5 | - 11 | 42 | - 59 | - 34 | 74 |
| Total operating expenses | -2 240 | -2 208 | 1 | -2 251 | 0 | -8 967 | -8 928 | 0 |
| Profit before credit losses | 2 422 | 2 119 | 14 | 2 997 | - 19 | 9 351 | 10 050 | - 7 |
| Gains less losses from tangible and intangible assets | 1 | - 95 | - 1 | 1 | 0 | 130 | ||
| Net credit losses | - 20 | - 210 | - 90 | - 200 | - 90 | - 529 | - 563 | - 6 |
| Operating profit before Items affecting comparability | 2 402 | 1 910 | 26 | 2 796 | - 14 | 8 823 | 9 487 | - 7 |
| Items affecting comparability | 0 | 0 | 0 | 0 | - 354 | |||
| Operating profit | 2 402 | 1 910 | 26 | 2 796 | - 14 | 8 823 | 9 133 | - 3 |
| Cost/Income ratio | 0,48 | 0,51 | 0,43 | 0,49 | 0,47 | |||
| Business equity, SEK bn | 64,9 | 66,0 | 64,9 | 65,8 | 62,4 | |||
| Return on business equity, % | 11,1 | 8,7 | 13,3 | 10,1 | 11,3 | |||
| Number of full time equivalents1) | 2 028 | 2 031 | 2 063 | 2 049 | 2 134 |
1) Quarterly numbers are for end of quarter. Accumulated numbers are average for the period.
Active primary markets, low volatility and subdued demand for traditional bank financing during the year
- New regulatory rules dampened institutional activity but increased demand for custody-related services
- Operating profit amounted to SEK 8,823m and return on business equity was 10.1 per cent
Comments on 2017
Business sentiment improved during the year supported by a positive macroeconomic outlook in Europe as well as continued favourable capital markets and access to liquidity.
Large Corporate clients were active during the year, benefitting from low interest rates, favourable financing conditions and improved growth prospects. Demand for traditional bank financing was subdued except within the private equity segment. However, debt capital markets saw high issuance volumes and there was a pick-up in M&A activity. As in 2016, equity capital market activity was high. Customers showed continued increased interest in sustainability matters and SEB's role as advisor became even more important.
Financial Institutions' activity was in general dampened as a consequence of low volatility and adaptation to new regulations such as MiFID II and EMIR. However, in the active primary markets institutional clients played an important role participating in new issues. Excess liquidity challenged insurance and pension funds searching for high-yield
investments – a trend that was present throughout the year. The increasingly complex regulatory environment for financial institutions drove demand for administrative and back office services such as clearing, collateral management and reporting. These services are part of the custody offering – one of SEB's focus areas. Assets under custody amounted to SEK 8,046bn (6,859).
SEB is continuously exploring new open banking related opportunities through the use of APIs. They are the basis for distributing products on new market platforms and allow third party developers to build applications and services on top of SEB's infrastructure.
Net interest income decreased due to higher resolution fund fees. Net fee and commission income was higher as a result of corporate clients being more active. Net financial income decreased as a consequence of low market activity with investors in a wait-and-see mode. Operating expenses were stable. Credit losses were SEK 529m, corresponding to 8 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
| Q4 | Q3 | Q4 | Jan — Dec | |||||
|---|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2017 | % | 2016 | % | 2017 | 2016 | % |
| Net interest income | 2 320 | 2 415 | - 4 | 2 331 | 0 | 9 442 | 8 982 | 5 |
| Net fee and commission income | 1 472 | 1 342 | 10 | 1 425 | 3 | 5 678 | 5 414 | 5 |
| Net financial income | 113 | 98 | 16 | 111 | 2 | 441 | 394 | 12 |
| Net other income | 23 | 35 | - 33 | 19 | 23 | 87 | 55 | 59 |
| Total operating income | 3 929 | 3 890 | 1 | 3 886 | 1 | 15 648 | 14 845 | 5 |
| Staff costs | - 827 | - 804 | 3 | - 850 | - 3 | -3 298 | -3 339 | - 1 |
| Other expenses | -1 017 | - 944 | 8 | -1 009 | 1 | -3 872 | -3 713 | 4 |
| Depreciation, amortisation and impairment of | ||||||||
| tangible and intangible assets | - 13 | - 14 | - 2 | - 18 | - 25 | - 57 | - 69 | - 18 |
| Total operating expenses | -1 857 | -1 762 | 5 | -1 877 | - 1 | -7 226 | -7 121 | 1 |
| Profit before credit losses | 2 072 | 2 128 | - 3 | 2 009 | 3 | 8 422 | 7 724 | 9 |
| Gains less losses from tangible and intangible | ||||||||
| assets | 0 | 0 | - 93 | 0 | 0 | 0 | ||
| Net credit losses | - 60 | - 86 | - 30 | - 63 | - 5 | - 276 | - 376 | - 27 |
| Operating profit before Items affecting comparabilit | 2 012 | 2 042 | - 1 | 1 946 | 3 | 8 146 | 7 348 | 11 |
| Items affecting comparability | 0 | 0 | 0 | 0 | 0 | |||
| Operating profit | 2 012 | 2 042 | - 1 | 1 946 | 3 | 8 146 | 7 348 | 11 |
| Cost/Income ratio | 0.47 | 0.45 | 0.48 | 0.46 | 0.48 | |||
| Business equity, SEK bn | 40.7 | 40.4 | 38.7 | 40.6 | 37.3 | |||
| Return on business equity, % | 14.8 | 15.2 | 15.5 | 15.0 | 15.2 | |||
| Number of full time equivalents1) | 3 548 | 3 485 | 3 551 | 3 531 | 3 667 |
1) Quarterly numbers are for end of quarter. Accumulated numbers are average for the period.
- All-time high usage of mobile services
- Continued growth in both the private and corporate lending portfolios
- Operating profit amounted to SEK 8,146m and return on business equity was 15 per cent
Comments on 2017
Customer activity increased throughout the year, driven by positive market sentiment. Customers also appreciated the proactive contacts from the bank and that service was more accessible through the continued digitalisation. Customers' usage of mobile services reached an all-time high as mobile interactions, measured as monthly average, increased by more than 25 per cent compared to last year. Open-banking based functions are being developed and examples of this are the collaboration with Tink and on the card side, Fitbit.
In the private segment, the launch of an all-digital customer on-boarding process and the continued enhancement of a digital mortgage application process enabled 22,500 new private customers to on-board digitally and the rate of digital household mortgage applications to more than double. The growth rate in household mortgage lending was 4.5 per cent and total volumes amounted to SEK 468bn (449*).
In the corporate segment, SEB enhanced its value proposition through the launch of the service concept Greenhouse, targeting companies with growth
ambitions, where SEB provides both seminars and external partners. Corporate lending, partly driven by financing of residential properties, increased to SEK 221bn (210*) and the number of full-service corporate customers reached 175,000 (168,000).
Within the savings area, assets under management increased as a result of positive asset price development and new net inflows, mainly driven by Private Banking. Total deposit volumes from corporate and private customers amounted to SEK 385bn (371).
Year-on-year, operating profit increased by 11 per cent to SEK 8,146m, mainly driven by continued growth in net interest income which amounted to SEK 9,442m and net fee and commission income which reached SEK 5,678m. Operating expenses increased marginally to SEK 7,226m, while credit losses remained low at SEK 276m, corresponding to a credit loss level of 3 basis points.
________________________
* The real estate loan portfolio for the customer segment sole traders was reclassified in the division. As a result, the year-end 2016 reported corporate lending of SEK 224bn was adjusted to SEK 210bn and similarly the year-end 2016 reported mortgage balance of SEK 433bn was adjusted to SEK 449bn. The reclassification was already reflected on group level.
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)
| Q4 | Q3 | Q4 | Jan — Dec | |||||
|---|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2017 | % | 2016 | % | 2017 | 2016 | % |
| Net interest income | 640 | 603 | 6 | 588 | 9 | 2 373 | 2 150 | 10 |
| Net fee and commission income | 355 | 334 | 6 | 325 | 9 | 1 320 | 1 171 | 13 |
| Net financial income | 60 | 56 | 7 | 38 | 58 | 231 | 218 | 6 |
| Net other income | 0 | -1 | - 102 | -5 - 100 | 2 | - 1 | ||
| Total operating income | 1 055 | 992 | 6 | 946 | 11 | 3 926 | 3 538 | 11 |
| Staff costs | - 183 | - 171 | 7 | - 197 | - 7 | - 711 | - 734 | - 3 |
| Other expenses | - 217 | - 250 | - 13 | - 231 | - 6 | - 959 | - 948 | 1 |
| Depreciation, amortisation and impairment of tangible | ||||||||
| and intangible assets | - 34 | - 13 | 156 | - 23 | 47 | - 77 | - 62 | 23 |
| Total operating expenses | - 434 | - 435 | 0 | - 451 | - 4 | -1 746 | -1 744 | 0 |
| Profit before credit losses | 621 | 557 | 12 | 495 | 25 | 2 180 | 1 794 | 21 |
| Gains less losses from tangible and intangible assets | 0 | - 7 | - 95 | 1 - 134 | - 5 | 9 | - 159 | |
| Net credit losses | - 26 | 11 | - 22 | 17 | - 7 | - 57 | - 88 | |
| Operating profit before Items affecting comparability | 595 | 561 | 6 | 474 | 25 | 2 167 | 1 746 | 24 |
| Items affecting comparability | 0 | 0 | 0 | 0 | - 68 | |||
| Operating profit | 595 | 561 | 6 | 474 | 25 | 2 167 | 1 678 | 29 |
| Cost/Income ratio | 0.41 | 0.44 | 0.48 | 0.44 | 0.49 | |||
| Business equity, SEK bn | 8.1 | 7.9 | 7.7 | 7.8 | 7.6 | |||
| Return on business equity, % | 26.0 | 25.0 | 21.6 | 24.4 | 19.3 | |||
| Number of full time equivalents1) | 2 386 | 2 405 | 2 456 | 2 406 | 2 534 |
1) Quarterly numbers are for end of quarter. Accumulated numbers are average for the period.
| Baltic Division (incl. RHC) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Operating profit before Items affecting comparability Items affecting comparability |
552 0 |
507 0 |
9 | 386 0 |
43 | 1 977 0 |
1 519 -68 |
30 -100 |
| Operating profit | 552 | 507 | 9 | 386 | 43 | 1 977 | 1 451 | 36 |
| Cost/Income ratio | 0.42 | 0.44 | 0.49 | 0.45 | 0.51 | |||
| Business equity, SEK bn | 8.1 | 8.0 | 7.9 | 8.0 | 7.9 | |||
| Return on business equity, % | 23.9 | 22.3 | 17.1 | 21.9 | 16.2 | |||
| Number of full time equivalents1) | 2 409 | 2 430 | 2 484 | 2 431 | 2 565 |
1) Quarterly numbers are for end of quarter. Accumulated numbers are average for the period.
Synchronised growth in all three Baltic countries
- Continued strategic focus on service digitalisation and process automation
- Operating profit amounted to SEK 2,167m and return on business equity was 24.4 per cent
Comments on 2017
In the Baltic countries, GDP growth rates were above the EU average. Unemployment rates dropped and salary inflation was high in all Baltic countries. Household debt rose in tandem with disposable income and household deposit growth.
Customers increasingly appreciated and used digital services. SEB held more than 1,500 remote advisory sessions with high customer satisfaction and there were 250,000 bank mobile app users and 210,000 Smart ID users at the end of the year. An EU Instant payments functionality, launched in Estonia and Latvia, and an automated credit decision process for consumer loans simplified banking for customers. The launch of an open banking information page and a developer portal with API for cooperation with external parties will lead to new service solutions.
The number of home banking customers was 1,019,000 (1,003,000). Loan volumes amounted to SEK 129bn (118) and there was an increase in all three Baltic banks. Deposits increased to SEK 114bn (106), mainly driven by increased savings in the private segment. Net interest income increased by 10 per cent year-on-year due to increased volumes and higher margins on new lending. Net fee and commission income was 13 per cent higher year-on-year as a result of overall increased customer cards and payments activity. The asset quality was high and the operating profit was 24 per cent higher than 2016.
The real estate holding companies (RHC) held assets with a total book value of SEK 279m (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
| Q4 | Q3 | Q4 | Jan — Dec | |||||
|---|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2017 | % | 2016 | % | 2017 | 2016 | % |
| Net interest income | - 24 | - 24 | 1 | - 17 | 42 | - 90 | - 60 | 50 |
| Net fee and commission income | 1 306 | 1 053 | 24 | 1 229 | 6 | 4 519 | 4 059 | 11 |
| Net financial income | 404 | 481 | - 16 | 484 | - 17 | 1 674 | 1 764 | - 5 |
| Net other income | 5 | 0 | - 82 | - 106 | 17 | - 17 | ||
| Total operating income | 1 691 | 1 509 | 12 | 1 614 | 5 | 6 120 | 5 746 | 7 |
| Staff costs | - 402 | - 383 | 5 | - 415 | - 3 | -1 561 | -1 560 | 0 |
| Other expenses | - 264 | - 243 | 9 | - 243 | 9 | - 963 | - 984 | - 2 |
| Depreciation, amortisation and impairment of | ||||||||
| tangible and intangible assets | - 10 | - 10 | - 2 | - 10 | - 3 | - 37 | - 45 | - 17 |
| Total operating expenses | - 676 | - 636 | 6 | - 668 | 1 | -2 561 | -2 589 | - 1 |
| Profit before credit losses g g |
1 014 | 874 | 16 | 946 | 7 | 3 558 | 3 157 | 13 |
| assets | 0 | 0 | 0 | 0 | ||||
| Net credit losses | 0 | 0 | 0 | 0 | ||||
| Operating profit before Items affecting comparabili | 1 014 | 874 | 16 | 946 | 7 | 3 558 | 3 157 | 13 |
| Items affecting comparability | 0 | 0 | #REF! | ### | 0 | #REF! | ||
| Operating profit | 1 014 | 874 | 16 | 946 | 7 | 3 558 | 3 157 | 13 |
| Cost/Income ratio | 0.40 | 0.42 | 0.41 | 0.42 | 0.45 | |||
| Business equity, SEK bn | 11.1 | 11.0 | 11.7 | 11.0 | 11.6 | |||
| Return on business equity, % | 31.5 | 27.4 | 27.9 | 27.8 | 23.5 | |||
| Number of full time equivalents1) | 1 491 | 1 451 | 1 491 | 1 478 | 1 468 |
1) Quarterly numbers are for end of quarter. Accumulated numbers are average for the period.
- Strong demand for both insurance and asset management related products
- SEB signed an agreement to divest SEB Pension to Danica
- Operating profit amounted to SEK 3,558m and return on business equity was 27.8 per cent
Comments on 2017
Demand for insurance solutions remained on a high level throughout the year, at the same time as competition intensified. In this landscape, customers increasingly appreciated SEB's accessible offering. SEB increased insurance sales by 10 per cent and continued to attract assets under management.
Life: In Sweden, continued steps were taken within the digital agenda aiming at improving the accessibility for the corporate clients and as per 30 September the annual new sales reached SEK 21bn, corresponding to a market share of 9.3 per cent. In Denmark, the strong portfolio management enabled SEB Pension to deliver the highest return for savings products on the market. At the end of 2017, an agreement to divest all shares in SEB Pension was signed with Danica (see page 10).
In the Baltic region, new products were launched and the customer experience was strengthened within the pension area. In addition, efficiency in providing the full
service offering, covering both insurance products as well as banking products increased.
Investment Management: The fourth quarter continued in line with the previous quarters of 2017 in terms of strong institutional inflow. The high demand spanned across several products. The strong performance strengthened the institutional offering. The focus on sustainability continued throughout the year, in line with the increasing client interest for products with an emphasis on climate and social responsibility.
Net fee and commission income increased by 11 per cent due to higher asset values during the year. Operating expenses decreased by 1 per cent, thereby improving operating profit by 13 per cent to a recordhigh SEK 3,558m. Total assets in the unit-linked insurance business increased by SEK 29bn to SEK 348bn from year-end 2016.
SEB's markets
In Sweden and the Baltic countries, SEB offers universal financial advice and a wide range of financial services. In Denmark, Finland, Norway, Germany and the United Kingdom, the operations focus on a full-service offering to corporate and institutional clients. SEB also serves its corporate and institutional customers through its international network.
| Distribution by country Jan - Dec | Operating profit | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total operating income | Total operating expenses | Operating profit | in local currency | |||||||||
| SEK m | 2017 | 2016 | % | 2017 | 2016 | % | 2017 | 2016 | % | 2017 | 2016 | % |
| Sweden | 27 890 | 25 397 | 10 | -14 235 | -13 992 | 2 | 12 333 | 4 917 | 151 | 12 333 | 4 917 | 151 |
| Norway | 3 075 | 3 659 | - 16 | -1 194 | -1 234 | - 3 | 1 859 | 2 366 | - 21 | 1 800 | 2 319 | - 22 |
| Denmark | 3 411 | 3 563 | - 4 | -1 409 | -1 421 | - 1 | 1 918 | 2 142 | - 10 | 1 481 | 1 684 | - 12 |
| Finland | 1 954 | 1 807 | 8 | - 771 | - 745 | 4 | 1 171 | 1 043 | 12 | 122 | 110 | 10 |
| Germany1) | 2 010 | 1 994 | 1 | -1 108 | -1 315 | - 16 | - 433 | 507 | - 185 | - 45 | 54 | |
| Estonia | 1 475 | 1 339 | 10 | - 596 | - 581 | 3 | 927 | 916 | 1 | 96 | 97 | - 1 |
| Latvia | 976 | 954 | 2 | - 525 | - 536 | - 2 | 371 | 468 | - 21 | 39 | 49 | - 22 |
| Lithuania | 1 778 | 1 559 | 14 | - 737 | - 760 | - 3 | 1 014 | 831 | 22 | 105 | 88 | 20 |
| Great Britain | 1 477 | 1 187 | 24 | - 409 | - 445 | - 8 | 1 076 | 727 | 48 | 98 | 63 | 56 |
| International network and eliminations | 1 562 | 1 790 | - 13 | - 953 | - 784 | 21 | 571 | 951 | - 40 | |||
| Total | 45 609 | 43 251 | 5 | -21 936 | -21 812 | 1 | 20 806 14 867 | 40 |
Profit per country
1) Excluding Treasury operations.
- Positive macroeconomic development in all home markets
- Transformation of the German business into a branch structure
- Profitable growth in the United Kingdom
Comments on 2017
Sweden: Positive macroeconomic factors and growing business volumes improved outcome in all income categories. Non-recurring costs relating to the move to new premises in Arenastaden increased operating expenses. Many of the items affecting comparability are reflected in the outcome for Sweden.
Norway: The development in parts of the Norwegian economy receded, for instance within the oil and gas industry. SEB was however chosen as business partner both for refinancing and new loans, by existing as well as new customers. The bank was involved in several large corporate transactions.
Denmark: An improved business climate led to enhanced demand for investment banking related products and services, while historically low volatility led to lower activity in Markets. Investment Management continued to attract large foreign inflows of funds. The divestment of SEB Pension was announced (see page 10).
Finland: Improving macroeconomic conditions had a positive effect on customer activity across all segments. Among several important transactions, SEB acted as joint global coordinator in the largest private equity IPO to date in Finland and the largest IPO of the year in the Nordic countries.
Germany: There were few signals of change regarding competition, margins and excess liquidity in the markets. Corporate borrowers enjoyed extremely competitive pricing. The main activities of companies and institutions were refinancing and bond issues.
Nevertheless, SEB was involved in both leveraged and structured finance deals. See page 9 for information on the transformation of SEB AG to a branch.
United Kingdom: The profitable growth continued from adding new clients and deepening existing client relationships. UK corporate clients welcomed SEB's focused efforts and demanded all types of service offerings, but in particular capital markets products.
Baltic countries: In Lithuania, income increased due to growth in lending volumes and margins as well due to higher client activity. There was a positive trend in Latvia - portfolio growth with somewhat higher income. In Estonia, the household and corporate loan portfolio growth continued, with low credit provisions. See Baltic division.
International network: Global economic optimism resulted in good customer activity in SEB's international sites, particularly in Asia. Many customers have large cash balances which minimise their need for financing. During the year, progress was made in broadening the customer base and strengthening the product offering.
The SEB Group
Net interest income – SEB Group
| Q4 | Q3 | Q4 | Jan–Dec | |||||
|---|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2017 | % | 2016 | % | 2017 | 2016 | % |
| Interest income | 9 185 | 9 161 | 0 | 8 860 | 4 | 36 472 | 35 202 | 4 |
| Interest expense | -4 001 | -4 080 | - 2 | -4 062 | - 2 | -16 580 | -16 464 | 1 |
| Net interest income | 5 184 | 5 080 | 2 | 4 798 | 8 | 19 893 | 18 738 | 6 |
Net fee and commission income – SEB Group
| Q4 | Q3 | Q4 | Jan–Dec | |||||
|---|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2017 | % | 2016 | % | 2017 | 2016 | % |
| Issue of securities and advisory | 317 | 137 | 131 | 231 | 37 | 1 167 | 800 | 46 |
| Secondary market and derivatives | 561 | 547 | 2 | 842 | - 33 | 2 565 | 3 353 | - 24 |
| Custody and mutual funds | 2 210 | 1 942 | 14 | 1 950 | 13 | 8 040 | 7 264 | 11 |
| Whereof performance and transaction fees | 225 | 39 | 212 | 6 | 357 | 275 | 30 | |
| Payments, cards, lending, deposits, | ||||||||
| guarantees and other | 2 570 | 2 350 | 9 | 2 586 | - 1 | 9 717 | 9 430 | 3 |
| Whereof payments and card fees | 1 429 | 1 366 | 5 | 1 356 | 5 | 5 460 | 5 203 | 5 |
| Whereof lending | 602 | 519 | 16 | 723 | - 17 | 2 254 | 2 527 | - 11 |
| Life insurance commissions | 429 | 424 | 1 | 438 | - 2 | 1 707 | 1 653 | 3 |
| Fee and commission income | 6 087 | 5 400 | 13 | 6 047 | 1 | 23 196 | 22 500 | 3 |
| Fee and commission expense | -1 348 | -1 373 | - 2 | -1 438 | - 6 | -5 472 | -5 872 | - 7 |
| Net fee and commission income | 4 739 | 4 026 | 18 | 4 609 | 3 | 17 725 | 16 628 | 7 |
| Whereof Net securities commissions | 2 356 | 1 986 | 19 | 2 308 | 2 | 8 889 | 8 378 | 6 |
| Whereof Net payments and card fees | 908 | 840 | 8 | 847 | 7 | 3 454 | 3 263 | 6 |
| Whereof Net life insurance commissions | 296 | 264 | 12 | 276 | 7 | 1 109 | 1 039 | 7 |
Net financial income – SEB Group
| Q4 | Q3 | Q4 | Jan–Dec | |||||
|---|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2017 | % | 2016 | % | 2017 | 2016 | % |
| Equity instruments and related derivatives | - 32 | 473 | 456 | 1 410 | 1 173 | 20 | ||
| Debt securities and related derivatives | 170 | - 7 | - 68 | - 369 | 228 | |||
| Currency and related derivatives | 1 049 | 740 | 42 | 1 114 | - 6 | 4 023 | 3 699 | 9 |
| Other life insurance income, net | 429 | 494 | -13 | 549 | - 22 | 1 738 | 1 919 | -9 |
| Other | 13 | 27 | -50 | - 13 | 78 | 37 | 111 | |
| Net financial income | 1 630 | 1 726 | -6 | 2 038 | - 20 | 6 880 | 7 056 | -3 |
| Whereof unrealized valuation changes from | ||||||||
| counterparty risk and own credit standing in derivatives and own issued securities. |
61 | 291 | -79 | 223 | -73 | 210 | - 219 |
The result within Net financial income is presented on different rows based on type of underlying financial instrument.
For the fourth quarter the effect from structured products offered to the public was approximately SEK 5m (Q3 2017: 205, Q4 2016: 535) in Equity related derivatives and a corresponding effect in Debt related derivatives SEK 110m (Q3 2017: -75, Q4 2016: -355).
Staff costs – SEB Group
| Jan–Dec | |||
|---|---|---|---|
| SEK m | 2017 | 2016 | % |
| Salaries1) | -10 251 -10 267 | 0 | |
| Short-term incentive1) | - 862 | - 853 | 1 |
| Long-term incentive1) | - 743 | - 962 | -23 |
| Pension costs | -1 354 | -1 368 | -1 |
| Redundancy costs1) 2) | - 221 | - 397 | -44 |
| Other staff costs | - 594 | - 575 | 3 |
| Staff costs | -14 025 -14 422 | -3 |
1) Including social charges.
2) Restructuring activities in 2016 reclassified to Items affecting comparability.
| Jan–Dec | |||
|---|---|---|---|
| SEK m | 2017 | 2016 | % |
| Short-term incentive (STI) to staff | - 666 | - 684 | -3 |
| Social benefit charges on STI | - 196 | - 169 | 16 |
| Short-term incentive remuneration | - 862 | - 853 | 1 |
| Jan–Dec | |||
|---|---|---|---|
| SEK m | 2017 | 2016 | % |
| Long-term incentive (LTI) to staff | - 616 | - 702 | -12 |
| Social benefit charges on LTI | - 127 | - 260 | -51 |
| Long-term incentive remuneration | - 743 | - 962 | -23 |
Defined benefit pension plans
| Jan–Dec | |||
|---|---|---|---|
| Balance sheet, SEK m | 2017 | 2016 | % |
| Defined benefit obligation | 30 821 | 29 081 | 6 |
| Fair value of plan assets | 34 775 | 32 277 | 8 |
| Net amount recognised in the | |||
| balance sheet | 3 955 | 3 196 | 24 |
| Jan–Dec | |||
|---|---|---|---|
| Income statement, SEK m | 2017 | 2016 | % |
| Service costs | - 548 | - 480 | 14 |
| Interest costs | - 651 | - 733 | -11 |
| Calculated interest on plan assets | 727 | 900 | -19 |
| Included in staff costs | - 472 | - 313 | 51 |
| Jan–Dec | |||
|---|---|---|---|
| Other comprehensive income, SEK m | 2017 | 2016 | % |
| Defined benefit pension plans | 784 | -1 875 |
Net credit losses – SEB Group
| Q4 | Q3 Q4 |
Jan–Dec | ||||||
|---|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2017 | % | 2016 | % | 2017 | 2016 | % |
| Provisions: | ||||||||
| Net collective provisions for individually | ||||||||
| assessed loans | 206 | 172 | 20 | 45 | 423 | - 218 | ||
| Net collective provisions for portfolio | ||||||||
| assessed loans | 149 | 34 | 108 | 38 | 168 | 260 | -35 | |
| Specific provisions | 14 | - 469 | - 169 | -1 309 | - 734 | 78 | ||
| Reversal of specific provisions no longer | ||||||||
| required | 33 | 64 | -48 | 74 | -55 | 760 | 338 | 125 |
| Net provisions for contingent liabilities | - 26 | 5 | 2 | - 30 | 43 | |||
| Net provisions | 377 | - 195 | 60 | 12 | - 311 -104 | |||
| Write-offs: | ||||||||
| Total write-offs | - 628 | - 196 | - 602 | 4 | -1 367 | -1 480 | -8 | |
| Reversal of specific provisions utilized | ||||||||
| for write-offs | 110 | 34 | 206 | -47 | 318 | 584 | -46 | |
| Write-offs not previously provided for | - 519 | - 162 | - 396 | -1 050 | - 896 | 17 | ||
| Recovered from previous write-offs | 37 | 73 | -50 | 52 | -29 | 230 | 214 | 7 |
| Net write-offs | - 482 | - 89 | - 344 | 40 | - 820 | - 682 | 20 | |
| Net credit losses | - 105 | - 284 | -63 | - 284 | -63 | - 808 | - 993 | -19 |
Items affecting comparability – SEB Group
| Q4 | Q3 | Q4 | Jan–Dec | ||
|---|---|---|---|---|---|
| SEK m | 2017 | 2017 | 2016 | 2017 | 2016 |
| Other income | 494 | 494 | 520 | ||
| Total operating income | 494 | 0 | 0 | 494 | 520 |
| Staff costs | -1 320 | -1 320 | - 140 | ||
| Other expenses | - 92 | - 92 | - 84 | ||
| Depreciation, amortisation and | |||||
| impairment of tangible and intangible | |||||
| assets | - 978 | - 978 | -5 725 | ||
| Total operating expenses | -2 390 | 0 | 0 | -2 390 | -5 949 |
| Items affecting comparability | -1 896 | 0 | 0 | -1 896 | -5 429 |
| Income tax on IAC | 215 | 215 | 77 | ||
| Items affecting comparability after tax | -1 681 | 0 | 0 | -1 681 | -5 352 |
Items affecting comparability 2017
The total expense in the income statement from Items affecting comparability was SEK 1,896m before tax and SEK 1,681m after tax.
In total, the items affecting comparability, including the effect on other comprehensive income of SEK 494m, decreased equity by SEK 2,175m.
Visa Sweden (2017 Q4)
The settlement of the acquisition of Visa Europe by Visa Inc. consisted of a combination of cash and shares to be paid to the different Visa Europe members. In Sweden, SEB was an indirect member. In the fourth quarter a dividend of SEK 494m was received. There was no tax effect.
The holdings in Visa have been classified as Available-for-sale asset where the change in value is recognised in Other comprehensive income. The dividend received has reduced the amount in Other comprehensive income by SEK 494m.
SEB's German business (2017 Q4)
In line with previous communication, the operations in Germany were transformed and the core business was transferred from SEB AG to the German branch of the parent company, Skandinaviska Enskilda Banken AB, as per 2 January 2018. The purpose of the change is to simplify the reporting and administration of the German operations. The non-core business that was not transferred to the branch from SEB AG will be dismantled over time.
The provisions related to redundancy and excess premises amounting to a total of SEK 521m were recognised in the fourth quarter. In addition, SEB entered into an agreement to transfer the pension obligations under the defined benefit plan in SEB AG to Versicherungsverein des Bankgewerbes a.G (BVV) at a total cost of SEK 891m in the fourth quarter. The transfer will take place in the second quarter 2018.
Impairment and derecognition of intangible IT assets (2017 Q4)
In the fourth quarter, an impairment and a derecognition of intangible IT assets led to an expense in an amount of SEK 978m. The positive tax effect was SEK 215m.
Items affecting comparability 2016
The total effect of Items affecting comparability in 2016 was a cost in the amount of SEK 5,429m before tax and SEK 5,352m after tax.
Visa Baltic (2016 Q2)
The settlement of the transaction of SEB's Baltic holdings in Visa Europe resulted in a gain of SEK 520m. The gain generated a tax expense of SEK 24m.
Reorganisation and restructuring (2016 Q1)
SEB implemented a new customer-oriented organisation which resulted in an impairment of goodwill in the amount of SEK 5,334m in the first quarter 2016. This expense was not tax deductible.
There were financial effects from restructuring activities in the Baltic and German businesses as well as an impairment and derecognition of intangible IT assets no longer in use. The total amount was SEK 615m and there was a positive tax effect amounting to SEK 101m in the first quarter 2016.
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-Dec 2017 | |||||||||
| Opening balance | 21 942 | 1 638 | 2 399 | -1 193 | 2 595 | 113 595 | 140 976 | 140 976 | |
| Net profit | 16 244 | 16 244 | 16 244 | ||||||
| Other comprehensive income (net of tax) | -909 | -1 207 | 296 | 784 | -1 036 | -1 036 | |||
| Total comprehensive income | -909 | -1 207 | 296 | 784 | 16 244 | 15 208 | 15 208 | ||
| Dividend to shareholders | -11 935 | -11 935 | -11 935 | ||||||
| Equity-based programmes3) | -246 | -246 | -246 | ||||||
| Change in holdings of own shares | -78 | -78 | -78 | ||||||
| Closing balance | 21 942 | 729 | 1 192 | -897 | 3 379 | 117 581 | 143 925 | 143 925 | |
| 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 |
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-Dec | Jan-Dec | |
|---|---|---|
| Number of shares owned by SEB, million | 2017 | 2016 |
| Opening balance | 25.2 | 0.9 |
| Repurchased shares for equity-based programmes | 7.0 | 29.8 |
| Sold/distributed shares | -5.0 | -5.5 |
| Closing balance | 27.1 | 25.2 |
Market value of shares owned by SEB, SEK m 2 612 2 406
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–Dec | |||
|---|---|---|---|
| SEK m | 2017 | 2016 | % |
| Cash flow from operating activities | 41 526 | 42 591 | - 3 |
| Cash flow from investment activities | 7 964 | 852 | |
| Cash flow from financing activities | - 20 030 | - 2 198 | |
| Net increase in cash and cash equivalents | 29 460 | 41 245 | - 29 |
| Cash and cash equivalents at the beginning of year | 158 315 | 110 770 | 43 |
| Exchange rate differences on cash and cash equivalents | - 3 346 | 6 300 | |
| Net increase in cash and cash equivalents | 29 460 | 41 245 | - 29 |
| Cash and cash equivalents at the end of period1) | 184 429 | 158 315 | 16 |
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 Dec 2017 | 31 Dec 2016 | |||
|---|---|---|---|---|
| Carrying | Carrying | |||
| SEK m | amount | Fair value | amount | Fair value |
| Loans | 1 694 524 | 1 698 735 | 1 704 291 | 1 715 801 |
| Equity instruments | 59 203 | 59 203 | 74 173 | 74 173 |
| Debt securities | 169 268 | 169 368 | 253 443 | 253 653 |
| Derivative instruments | 104 868 | 104 868 | 212 355 | 212 355 |
| Financial assets–policyholders bearing the risk | 283 420 | 283 420 | 295 908 | 295 908 |
| Other | 34 100 | 34 100 | 38 942 | 38 942 |
| Financial assets | 2 345 383 | 2 349 694 | 2 579 112 | 2 590 832 |
| Deposits | 1 093 798 | 1 098 491 | 1 045 056 | 1 046 864 |
| Equity instruments | 14 228 | 14 228 | 10 071 | 10 071 |
| Debt securities issued | 657 232 | 662 160 | 755 984 | 768 613 |
| Derivative instruments | 85 432 | 85 432 | 174 651 | 174 651 |
| Liabilities to policyholders–investment contracts | 284 291 | 284 291 | 296 618 | 296 618 |
| Other | 51 800 | 51 800 | 60 297 | 60 297 |
| Financial liabilities | 2 186 781 | 2 196 402 | 2 342 677 | 2 357 114 |
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 Dec 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 | 275 737 | 7 053 | 630 | 283 420 | 275 894 | 15 589 | 4 425 | 295 908 |
| Equity instruments at fair value | 52 333 | 4 573 | 3 006 | 59 912 | 50 331 | 13 215 | 11 101 | 74 647 |
| Debt instruments at fair value | 71 626 | 84 041 | 571 | 156 238 | 102 894 | 133 664 | 1 779 | 238 337 |
| Derivative instruments at fair value | 1 250 | 102 930 | 688 | 104 868 | 2 593 | 201 621 | 8 141 | 212 355 |
| Investment properties | 0 | 7 401 | 7 401 | |||||
| Assets held for sale | 89 229 | 63 657 | 29 550 | 182 436 | 587 | 587 | ||
| Total | 490 175 | 262 254 | 34 445 | 786 874 | 431 712 | 364 676 | 32 847 | 829 235 |
| Liabilities | ||||||||
| Liabilities to policyholders - investment contracts | 276 482 | 7 185 | 624 | 284 291 | 276 666 | 15 542 | 4 410 | 296 618 |
| Equity instruments at fair value | 13 984 | 244 | 14 228 | 9 798 | 2 | 271 | 10 071 | |
| Debt instruments at fair value | 6 206 | 28 991 | 35 197 | 7 027 | 33 514 | 40 541 | ||
| Derivative instruments at fair value | 910 | 83 723 | 799 | 85 432 | 2 808 | 168 207 | 3 636 | 174 651 |
| Other financial liabilities | 3 842 | 3 842 | 19 225 | 19 225 | ||||
| Liabilities held for sale | 21 055 | 42 536 | 8 899 | 72 490 | 0 | |||
| Total | 318 637 | 166 277 | 10 566 | 495 480 | 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 ARC (Accounting Reporting Committee).
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.
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.
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.
When valuing financial liabilities at fair value own credit standing is reflected.
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. As a result of the decision to divest SEB Pension a re-classifications in the balance sheet have been performed. All assets and liabilities belonging to SEB Pension has been re-classified to Assets- and liabilities held for sale in accordance with IFRS 5.The re-classifications was executed at the end of the fourth quarter 2017.
| Gain/loss in | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Closing | Other | Closing | |||||||||
| balance | Gain/loss in | compre | Transfers | Transfers | Exchange | balance | |||||
| 31 Dec | Income | hensive | Settle | into | out of | Reclassifi | rate | 31 Dec | |||
| Changes in level 3 | 2016 | statement | income Purchases | Sales | ments | Level 3 | Level 3 | cation | differences | 2017 | |
| Assets | |||||||||||
| Financial assets - policyholders bearing | |||||||||||
| the risk | 4 425 | -65 | 3 | -1 | -40 | -3 735 | 43 | 630 | |||
| Equity instruments at fair value | 11 101 | 369 | -9 | 1 212 | -911 | 61 | -229 | -8 655 | 67 | 3 006 | |
| Debt instruments at fair value | 1 779 | 29 | 184 | -20 | -227 | -1 181 | 7 | 571 | |||
| Derivative instruments at fair value | 8 141 | -146 | 47 | -7 413 | 59 | 688 | |||||
| Investment properties | 7 401 | -7 454 | 53 | 0 | |||||||
| Total | 32 847 | 187 | -9 | 1 399 | -932 | 47 | 61 | -496 | -28 438 | 229 | 4 895 |
| Liabilities | |||||||||||
| Liabilities to policyholders - investment | |||||||||||
| contracts | 4 410 | -66 | -40 | -3 724 | 44 | 624 | |||||
| Equity instruments at fair value | 271 | -18 | -14 | 3 | 2 | 244 | |||||
| Derivative instruments at fair value | 3 636 | -1003 | -12 | 28 | -1875 | 25 | 799 | ||||
| Total | 8 317 | -1 087 | 0 | -26 | 3 | 28 | 0 | -40 | -5 599 | 71 | 1 667 |
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 Dec 2017 | 31 Dec 2016 | |||||||
|---|---|---|---|---|---|---|---|---|
| SEK m | Assets | Liabilities | Net Sensitivity | Assets | Liabilities | Net Sensitivity | ||
| Derivative instruments1) 2) 4) | 688 | -798 | -110 | 38 | 780 | -940 | -160 | 49 |
| Equity instruments3) 6) | 1 245 | -244 | 1 001 | 209 | 1 441 | -271 | 1 170 | 229 |
| Insurance holdings - Financial instruments4) 5) 7) | 2 380 | 2 380 | 331 | 18 477 | -2 695 | 15 782 | 1 807 | |
| Insurance holdings - Investment properties6) 7) | 7 401 | 7 401 | 740 | |||||
| Assets-liabilities held for sale 4 5 6 7) | 16 070 | -2 395 | 13 675 | 1 657 |
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 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Other | ||||||||
| Related arrangements | instruments in | |||||||
| Net amounts | balance sheet | |||||||
| in | Master | Collaterals | not subject to | Total in | ||||
| Gross | balance | netting | received/ | netting | balance | |||
| SEK m | amounts | Offset | sheet | arrangements | pledged Net amounts | arrangements | sheet | |
| 31 Dec 2017 | ||||||||
| Derivatives | 111 634 | -7 826 | 103 808 | -58 922 | -29 374 | 15 512 | 1 060 | 104 868 |
| Reversed repo receivables | 104 354 | -61 735 | 42 620 | -6 613 | -36 007 | 42 620 | ||
| Securities borrowing | 3 782 | 3 782 | -3 165 | -512 | 105 | 12 955 | 16 736 | |
| Client receivables | 11 817 | 11 817 | ||||||
| Assets | 219 770 | -69 560 | 150 210 | -68 701 | -65 892 | 15 617 | 25 832 | 176 042 |
| Derivatives | 92 496 | -7 826 | 84 670 | -58 922 | -18 293 | 7 455 | 763 | 85 434 |
| Repo payables | 68 348 | -61 735 | 6 613 | -6 613 | 0 | 6 613 | ||
| Securities lending | 9 604 | 9 604 | -3 165 | -6 152 | 287 | 911 | 10 515 | |
| Client payables | 10 894 | 10 894 | ||||||
| Liabilities | 170 448 | -69 560 | 100 888 | -68 701 | -24 445 | 7 742 | 12 569 | 113 456 |
| 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 |
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 Dec | 31 Dec | |
|---|---|---|
| SEK m | 2017 | 2016 |
| Individually assessed loans | ||
| Impaired loans | 5 999 | 5 037 |
| Specific reserves | - 2 187 | - 1 928 |
| Collective reserves | - 1 120 | - 1 539 |
| Impaired loans net | 2 692 | 1 570 |
| Specific reserve ratio for individually assessed impaired loans | 36.5% | 38.3% |
| Total reserve ratio for individually assessed impaired loans | 55.1% | 68.8% |
| Net level of impaired loans | 0.25% | 0.21% |
| Gross level of impaired loans | 0.39% | 0.33% |
| Portfolio assessed loans | ||
| Loans past due > 60 days | 2 273 | 2 597 |
| Restructured loans | 11 | 9 |
| Collective reserves for portfolio assessed loans | - 1 170 | - 1 322 |
| Reserve ratio for portfolio assessed loans | 51.2% | 50.7% |
| Non-performing loans1) | ||
| Non-performing loans | 8 283 | 7 643 |
| NPL coverage ratio | 54.9% | 63.2% |
| NPL per cent of lending | 0.54% | 0.51% |
| 1) Consists of impaired loans, portfolio assessed loans past due more than 60 days and restructured portfolio | ||
| Reserves | ||
| Specific reserves | - 2 187 | - 1 928 |
| Collective reserves | - 2 290 | - 2 861 |
| Reserves for off-balance sheet items | - 75 | - 44 |
| Total reserves | - 4 552 | - 4 833 |
Seized assets – SEB Group
| 31 Dec | 31 Dec | |
|---|---|---|
| SEK m | 2017 | 2016 |
| Properties, vehicles and equipment | 207 | 417 |
| Shares | 42 | 46 |
| Total seized assets | 249 | 463 |
Assets and liabilities held for sale – SEB Group
| 31 Dec | 31 Dec | |
|---|---|---|
| SEK m | 2017 | 2016 |
| Financial assets at fair value through profit or loss | 175 506 | |
| Other assets | 8 505 | 587 |
| Non-current assets and disposal groups classified as held for sale | 184 011 | 587 |
| Liabilities to policyholders | 133 688 | |
| Financial liabilities at fair value through profit or loss | 34 469 | |
| Other liabilities | 10 553 | |
| Liabilities of disposal groups classified as held for sale | 178 710 | 0 |
As announced on 14 December 2017, SEB has signed an agreement to sell all shares in SEB Pensionsforsikring A/S and SEB Administration A/S (SEB Pension) to Danica Pension Livsforsikringsaktieselskab (Danica, a subsidiary to Danske Bank). SEB Pension consists of a portfolio of life and pension contracts and approximately 275 employees. The completion of the sale is among other things conditional upon regulatory approvals and certain preparations for separation and is currently expected to occur around the summer of 2018. In the consolidated balance sheet, assets and liabilities relating to SEB Pension are separated from other assets and liabilities. SEB Pension is reported in the Life & Investment Management division.
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 fourth quarter was SEK -49m.
SEB consolidated situation
Capital adequacy analysis for SEB consolidated situation
| 31 Dec | 31 Dec | |
|---|---|---|
| SEK m | 2017 | 2016 |
| Own funds | ||
| Common Equity Tier 1 capital | 118 204 | 114 419 |
| Tier 1 capital | 132 127 | 129 157 |
| Total own funds | 147 849 | 151 491 |
| Own funds requirement | ||
| Risk exposure amount | 610 819 | 609 959 |
| Expressed as own funds requirement | 48 866 | 48 797 |
| Common Equity Tier 1 capital ratio | 19.4% | 18.8% |
| Tier 1 capital ratio | 21.6% | 21.2% |
| Total capital ratio | 24.2% | 24.8% |
| Own funds in relation to own funds requirement | 3.03 | 3.10 |
| Regulatory Common Equity Tier 1 capital requirement including buffer | 10.9% | 10.7% |
| of which capital conservation buffer requirement | 2.5% | 2.5% |
| of which systemic risk buffer requirement | 3.0% | 3.0% |
| of which countercyclical capital buffer requirement | 0.9% | 0.7% |
| Common Equity Tier 1 capital available to meet buffer 1) | 14.9% | 14.3% |
| Transitional floor 80% of capital requirement according to Basel I | ||
| Minimum floor own funds requirement according to Basel I | 89 774 | 86 884 |
| Own funds according to Basel I | 149 030 | 151 814 |
| Own funds in relation to own funds requirement Basel I | 1.66 | 1.75 |
| Leverage ratio | ||
| Exposure measure for leverage ratio calculation | 2 519 532 | 2 549 149 |
| of which on balance sheet items | 2 140 093 | 2 120 587 |
| of which off balance sheet items | 379 439 | 428 562 |
| Leverage ratio | 5.2% | 5.1% |
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 December 2017, the internally assessed capital requirement including insurance risk amounted to SEK 64bn (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 Dec | 31 Dec | |
|---|---|---|
| SEK m | 2017 | 2016 |
| Shareholders equity according to balance sheet 1) | 143 925 | 140 976 |
| Deductions related to the consolidated situation and other foreseeable charges | -14 357 | -14 303 |
| Common Equity Tier 1 capital before regulatory adjustments 2) | 129 568 | 126 673 |
| Additional value adjustments | -663 | -1 169 |
| Intangible assets | -6 225 | -6 835 |
| Deferred tax assets that rely on future profitability | -75 | -208 |
| Fair value reserves related to gains or losses on cash flow hedges | -1 192 | -2 400 |
| Negative amounts resulting from the calculation of expected loss amounts | -1 307 | -381 |
| Gains or losses on liabilities valued at fair value resulting from changes in own credit standing | 99 | -115 |
| Defined-benefit pension fund assets | -1 807 | -920 |
| Direct and indirect holdings of own CET1 instruments | -193 | -191 |
| Securitisation positions with 1,250% risk weight | -35 | |
| Total regulatory adjustments to Common Equity Tier 1 | -11 364 | -12 254 |
| Common Equity Tier 1 capital | 118 204 | 114 419 |
| Additional Tier 1 instruments | 13 922 | 9 959 |
| Grandfathered additional Tier 1 instruments | 4 779 | |
| Tier 1 capital | 132 127 | 129 157 |
| Tier 2 instruments | 18 171 | 24 851 |
| Net provisioning amount for IRB-reported exposures | 126 | 58 |
| Holdings of Tier 2 instruments in financial sector entities | -2 575 | -2 575 |
| Tier 2 capital | 15 722 | 22 334 |
| Total own funds | 147 849 | 151 491 |
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 Dec | 31 Dec | |||
|---|---|---|---|---|
| SEK m | 2017 2016 |
|||
| Risk exposure | Own funds | Risk exposure | Own funds | |
| Credit risk IRB approach | amount | requirement 1) | amount | requirement 1) |
| Exposures to central governments or central banks | 9 319 | 745 | ||
| Exposures to institutions | 32 838 | 2 627 | 26 254 | 2 100 |
| Exposures to corporates | 326 317 | 26 105 | 335 413 | 26 833 |
| Retail exposures | 62 296 | 4 984 | 55 617 | 4 449 |
| of which secured by immovable property | 36 558 | 2 925 | 34 079 | 2 726 |
| of which retail SME | 7 033 | 563 | 4 723 | 378 |
| of which other retail exposures | 18 704 | 1 496 | 16 815 | 1 345 |
| Securitisation positions | 838 | 67 | 3 066 | 246 |
| Total IRB approach | 431 607 | 34 529 | 420 350 | 33 628 |
| Credit risk standardised approach | ||||
| Exposures to central governments or central banks | 4 060 | 325 | 1 801 | 144 |
| Exposures to regional governments or local authorities | 51 | 4 | ||
| Exposures to public sector entities | 29 | 2 | ||
| Exposures to institutions | 844 | 68 | 1 316 | 105 |
| Exposures to corporates | 18 197 | 1 456 | 16 422 | 1 314 |
| Retail exposures | 12 084 | 967 | 16 186 | 1 295 |
| Exposures secured by mortgages on immovable property | 2 539 | 203 | 3 803 | 304 |
| Exposures in default | 112 | 9 | 384 | 31 |
| Exposures associated with particularly high risk | 866 | 69 | 1 477 | 118 |
| Securitisation positions | 222 | 18 | 216 | 17 |
| Exposures in the form of collective investment undertakings (CIU) | 41 | 3 | 66 | 5 |
| Equity exposures | 1 972 | 158 | 2 119 | 170 |
| Other items | 7 801 | 624 | 8 880 | 711 |
| Total standardised approach | 48 739 | 3 899 | 52 750 | 4 220 |
| Market risk | ||||
| Trading book exposures where internal models are applied | 24 892 | 1 991 | 30 042 | 2 403 |
| Trading book exposures applying standardised approaches | 9 881 | 790 | 9 398 | 752 |
| Foreign exchange rate risk | 4 022 | 322 | 3 773 | 302 |
| Total market risk | 38 794 | 3 104 | 43 213 | 3 457 |
| Other own funds requirements | ||||
| Operational risk advanced measurement approach | 48 219 | 3 858 | 47 901 | 3 832 |
| Settlement risk | 38 | 3 | ||
| Credit value adjustment | 6 767 | 541 | 7 818 | 625 |
| Investment in insurance business | 16 633 | 1 331 | 16 633 | 1 331 |
| Other exposures | 4 219 | 338 | 6 547 | 524 |
| Additional risk exposure amount 2) | 15 802 | 1 264 | 14 747 | 1 180 |
| Total other own funds requirements | 91 678 | 7 334 | 93 646 | 7 492 |
| Total | 610 819 | 48 866 | 609 959 | 48 797 |
1) Own funds requirement 8% of risk exposure amount according to the Capital Requirements Regulation (EU) No 575/2013 (CRR).
2)The Additional REA was established in 2015 in agreement with the SFSA as a measure of prudence. Capital Requirements Regulation (EU) No 575/2013 (CRR) Article 3.
Change in risk exposure amount (REA)
Total REA remained unchanged over the year.The increase in credit volumes led to higher credit risk REA, which however was offset by foreign exchange movements and improved asset quality. Also contributing to higher credit risk REA was the Swedish FSA's requirement in the second quarter that all Swedish IRB (internal ratings based) banks shall use the IRB approach for sovereigns and municipalities. Market risk REA was stable over the first three quarters but decreased by SEK 4bn before year-end.
The Additional REA that was established in 2015 in agreement with the SFSA as a measure of prudence, increased by SEK 1.1bn to SEK 15.8bn.
| 31 Dec | |
|---|---|
| SEK bn | 2017 |
| Balance 31 Dec 2016 | 610 |
| Asset size | 10 |
| Asset quality | -6 |
| Foreign exchange movements | -3 |
| Model updates, methodology & policy, other | 6 |
| Underlying market and operational risk changes | -5 |
| Balance 31 Dec 2017 | 611 |
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 Dec | 31 Dec |
|---|---|---|
| Average risk-weight | 2017 | 2016 |
| Exposures to central governments or central banks | 3.3% | |
| Exposures to institutions | 24.0% | 25.1% |
| Exposures to corporates | 31.6% | 31.4% |
| Retail exposures | 10.4% | 9.9% |
| of which secured by immovable property | 7.0% | 6.9% |
| of which retail SME | 59.6% | 73.4% |
| of which other retail exposures | 30.7% | 28.0% |
| Securitisation positions | 10.6% | 50.6% |
Skandinaviska Enskilda Banken AB (publ.)
Income statement – Skandinaviska Enskilda Banken AB (publ.)
| In accordance with FSA regulations | Q4 | Q3 | Q4 | Jan–Dec | ||||
|---|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2017 | % | 2016 | % | 2017 | 2016 | % |
| Interest income | 7 990 | 8 170 | -2 | 7 493 | 7 | 32 285 | 29 022 | 11 |
| Leasing income | 1 382 | 1 375 | 1 | 1 377 | 0 | 5 481 | 5 443 | 1 |
| Interest expense | -4 311 | -4 427 | -3 | -4 140 | 4 | -17 750 | -15 223 | 17 |
| Dividends | 1 207 | 1 018 | 19 | 1 252 | -4 | 6 981 | 6 581 | 6 |
| Fee and commission income | 3 176 | 2 750 | 15 | 3 350 | -5 | 12 153 | 11 648 | 4 |
| Fee and commission expense | - 649 | - 576 | 13 | -1 005 | -35 | -2 596 | -2 805 | -7 |
| Net financial income | 962 | 1 075 | -10 | 1 459 | -34 | 4 493 | 4 642 | -3 |
| Other income | 509 | 258 | 98 | 261 | 95 | 1 342 | 817 | 64 |
| Total operating income | 10 267 | 9 643 | 6 | 10 047 | 2 | 42 390 | 40 125 | 6 |
| Administrative expenses | -3 571 | -3 350 | 7 | -3 909 | -9 | -14 252 | -15 039 | -5 |
| Depreciation, amortisation and | ||||||||
| impairment of tangible and intangible | ||||||||
| assets Total operating expenses |
-2 332 -5 903 |
-1 384 -4 733 |
69 25 |
-1 319 -5 228 |
77 13 |
-6 377 -20 629 |
-5 775 -20 814 |
10 -1 |
| Profit before credit losses | 4 364 | 4 909 | -11 | 4 819 | -9 | 21 761 | 19 311 | 13 |
| Net credit losses | - 162 | - 326 | -50 | - 248 | -35 | - 749 | - 789 | -5 |
| Impairment of financial assets1) | -1 347 | - 54 | - 144 | -1 497 | -3 841 | -61 | ||
| Operating profit | 2 855 | 4 529 | -37 | 4 427 | -36 | 19 515 | 14 681 | 33 |
| Appropriations | 664 | 355 | 87 | 1 882 | -65 | 1 885 | 2 437 | -23 |
| Income tax expense | - 713 | - 935 | -24 | -1 202 | -41 | -3 633 | -2 877 | 26 |
| Other taxes | 19 | 0 | 128 | -86 | 43 | 137 | -69 | |
| Net profit | 2 825 | 3 949 | -28 | 5 235 | -46 | 17 811 | 14 378 | 24 |
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.)
| Q4 | Q3 | Q4 | Jan–Dec | |||||
|---|---|---|---|---|---|---|---|---|
| SEK m | 2017 | 2017 | % | 2016 | % | 2017 | 2016 | % |
| Net profit | 2 825 | 3 949 | -28 | 5 235 | -46 | 17 811 | 14 378 | 24 |
| Items that may subsequently be reclassified to the income statement: | ||||||||
| Available-for-sale financial assets | - 759 | - 79 | 16 | - 878 | 1 130 -178 | |||
| Cash flow hedges | - 261 | - 286 | -9 | - 473 | -45 | -1 207 | - 811 | 49 |
| Translation of foreign operations | - 10 | 4 | - 36 | -72 | - 8 | 25 -132 | ||
| Other comprehensive income | ||||||||
| (net of tax) | -1 030 | - 361 | 185 | - 493 | 109 | -2 093 | 344 | |
| Total comprehensive income | 1 795 | 3 588 | -50 | 4 742 | -62 | 15 718 | 14 722 | 7 |
| Condensed | 31 Dec | 31 Dec |
|---|---|---|
| SEK m | 2017 | 2016 |
| Cash and cash balances with central banks | 97 741 | 70 671 |
| Loans to credit institutions | 192 591 | 287 059 |
| Loans to the public | 1 196 824 | 1 172 095 |
| Financial assets at fair value | 261 857 | 322 195 |
| Fair value changes of hedged items in a portfolio hedge | 32 | |
| Available-for-sale financial assets | 10 521 | 12 063 |
| Investments in associates | 1 032 | 1 025 |
| Shares in subsidiaries | 50 567 | 50 611 |
| Tangible and intangible assets | 36 084 | 37 186 |
| Other assets | 44 914 | 46 939 |
| Total assets | 1 892 163 | 1 999 844 |
| Deposits from credit institutions | 127 539 | 168 852 |
| Deposits and borrowing from the public1) | 822 151 | 782 584 |
| Debt securities | 610 292 | 664 186 |
| Financial liabilities at fair value | 115 869 | 172 678 |
| Other liabilities | 57 618 | 47 610 |
| Provisions | 113 | 80 |
| Subordinated liabilities | 32 390 | 40 719 |
| Untaxed reserves | 21 429 | 21 761 |
| Total equity | 104 762 | 101 374 |
| Total liabilities, untaxed reserves and shareholders' equity | 1 892 163 | 1 999 844 |
| 1) Private and SME deposits covered by deposit guarantee | 186 674 | 177 381 |
| Private and SME deposits not covered by deposit guarantee | 135 254 | 127 507 |
| All other deposits | 500 224 | 477 696 |
| Total deposits from the public | 822 151 | 782 584 |
Balance sheet - Skandinaviska Enskilda Banken AB (publ.)
Pledged assets, contingent liabilities and commitments - Skandinaviska Enskilda Banken AB (publ.)
| 31 Dec | 31 Dec | |
|---|---|---|
| SEK m | 2017 | 2016 |
| Pledged assets for own liabilities | 447 925 | 392 227 |
| Other pledged assets | 114 494 | 152 317 |
| Pledged assets | 562 419 | 544 544 |
| Contingent liabilities | 103 059 | 97 642 |
| Commitments | 435 488 | 468 953 |
| Contingent liabilities and commitments | 538 547 | 566 595 |
Statement of changes in equity – Skandinaviska Enskilda Banken AB (publ.)
| 31 Dec | 31 Dec | |
|---|---|---|
| SEK m | 2017 | 2016 |
| Share capital | 21 942 | 21 942 |
| Other restricted reserves | 13 425 | 12 701 |
| Equity, restricted | 35 367 | 34 643 |
| Change in holdings of own shares | -2 657 | -2 269 |
| Other reserves | 1 476 | 3 571 |
| Other non-restricted equity | 52 765 | 51 051 |
| Net profit for the year | 17 811 | 14 378 |
| Equity, non-restricted1) | 69 395 | 66 731 |
TOTAL 104 762 101 374
1) The opening balance is equivalent to Distributable items according to Regulation (EU) No 575/2013 (CRR
Capital adequacy - Skandinaviska Enskilda Banken AB (publ.)
| 31 Dec | 31 Dec | |
|---|---|---|
| SEK m | 2017 | 2016 |
| Own funds | ||
| Common Equity Tier 1 capital | 101 810 | 97 144 |
| Tier 1 capital | 115 733 | 111 882 |
| Total own funds | 131 328 | 134 384 |
| Own funds requirement | ||
| Risk exposure amount | 514 328 | 515 826 |
| Expressed as own funds requirement | 41 146 | 41 266 |
| Common Equity Tier 1 capital ratio | 19.8% | 18.8% |
| Tier 1 capital ratio | 22.5% | 21.7% |
| Total capital ratio | 25.5% | 26.1% |
| Own funds in relation to capital requirement | 3.19 | 3.26 |
| Regulatory Common Equity Tier 1 capital requirement including buffers | 8.2% | 7.9% |
| of which capital conservation buffer requirement | 2.5% | 2.5% |
| of which countercyclical capital buffer requirement | 1.2% | 0.9% |
| Common Equity Tier 1 capital available to meet buffers 1) | 15.3% | 14.3% |
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 Measures1 Items affecting comparability
To facilitate the comparison of operating profit between current and previous periods, items with significant impact that management considers affect the comparability or are relevant for the understanding of the financial result, are identified and presented separately, for example impairment of goodwill, restructuring, net profit from divestments and other income or costs that are not recurring.
Operating profit
Total profit before tax.
Operating profit before items affecting comparability
Total profit before items affecting comparability and tax.
Return on equity
Net profit attributable to shareholders in relation to average2 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 average2 shareholders' equity.
Return on business equity
Operating profit by division, reduced by a standard tax rate, in relation to the divisions' average2 business equity (allocated capital).
Return on total assets
Net profit attributable to shareholders, in relation to average2 total assets.
Return on risk exposure amount
Net profit attributable to shareholders in relation to average2 risk exposure amount.
Cost/income ratio
Total operating expenses in relation to total operating income.
Basic earnings per share
Net profit attributable to shareholders in relation to the weighted average3 number of shares outstanding before dilution.
Diluted earnings per share
Net profit attributable to shareholders in relation to the weighted average3 diluted number of shares. The calculated dilution is based on the estimated economic value of the longterm equity-based programmes.
Net worth per share
The sum of shareholders' equity and 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 in relation to the sum of the opening balances 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, in relation to the sum 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), in relation to the sum 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 in relation to individually assessed impaired loans.
Total reserve ratio for individually assessed impaired loans
Total reserves (specific reserves and collective reserves for individually assessed impaired loans) in relation to individually assessed impaired loans.
Reserve ratio for portfolio assessed loans
Collective reserves for portfolio assessed loans in relation to portfolio assessed loans past due more than 60 days or restructured loans.
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 more than 60 days and restructured portfolio assessed loans .
NPL coverage ratio
Total reserves (specific, collective and off balance sheet reserves) in relation to non-performing loans.
NPL per cent of lending
Non-performing loans in relation to the sum of loans to the public and loans to credit institutions before reduction of reserves.
1 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 SEB's financial situation and provide additional relevant information and tools to enable analysis of 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.
2Average year-to-date, calculated on month-end figures. 3Average, calculated on a daily basis.
The excel file Alternative Performance Measures, available on sebgroup.com/ir, provides information on how the measures are calculated.
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, Germany and the United Kingdom 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 sebgroup.com/ir