Interim Report January-March 2001

Interim Report January-March 2001 Stable result in spite of weak stock market · Operating result* amounted to SEK 2 789 M (3 186). · Net interest income rose by 6 per cent to SEK 3 070 M (2 883). · Net commission income decreased by 21 per cent to SEK 2 933 M (3702). · Return on equity was 18.4 per cent (25.3). Efficiency measures kept costs stable and risks decreased · Total costs, SEK 5 462 M (5 385), were kept stable and staff costs decreased. · Action plan to freeze IT costs was implemented. · Strong result in Merchant Banking. · BfG re-branded to SEB - restructuring ahead of plan. · Today SEB's Volvo Ocean Race yacht will be christened. Operating result includes pension settlements/provisions. ________________________________________________________________________ President's Statement "Despite the weakening trends in the equities markets during the first quarter of the year, SEB is reporting a stable profit for the Group as a whole. It is pleasing to note that our net interest income has increased and that staff costs have declined by 12 per cent compared with the year- earlier period," says Lars H Thunell, President and Group Chief Executive. "Merchant Banking continues to show strong earnings. It is also pleasing that customers-related revenues continue to show a positive trend." "The restructuring of BfG is proceeding faster than planned. The re- branding of BfG to SEB in April got a great deal of attention in Germany. Earnings are satisfactory, taking into account the market conditions. The number of e-banking customers in Germany is now up to 158 000, an increase of 120 per cent since the first quarter of 2000." "We have taken action to freeze the Group's IT costs. These measures will gain effect gradually during the year which means that IT costs will not continue to rise." "Planning efforts prior to the proposed merger with FöreningsSparbanken are intensive and proceeding as planned. As part of the integration efforts, work on developing business plans for the new bank SEB Swedbank's four divisions and other main areas, is under way. The leading star in all integration efforts is to make the changes positive for our various customer groups. Discussions with the Merger Task Force of EU have been initialised." THE GROUP Summary of operating result per division and business area January-March January-March Change per cent SEK M 2001 2000 Personal Banking Sweden 526 615 -14 Personal Banking 12 119 -90 International SEB Germany * 125 124 1 Corporate and Institutions Merchant Banking 917 671 37 Enskilda Securities 150 396 -62 Mid Corporate 331 338 -2 SEB Securities Services 125 173 -28 Investment Management & 118 145 -19 Life The Baltic & Poland 125 72 74 Total all divisions 2 429 2 653 -8 Joint Group incl. capital 360 533 -32 gain and elimination. Operating result 2 789 3 186 -12 Changes in surplus values -251 473 -153 Total result SEB Group 2 538 3 659 -31 *) -excluding capital gains Weaker commissions offset by strong trading Total income decreased by 7 per cent to SEK 8 193 M (8 770) excluding changes in surplus values. Vilniaus Bankas was not consolidated in the first quarter of 2000. Thus, the decrease for comparable units was 9 per cent. The decline is entirely explained by lower commission income due to stock market related development. Compared with the fourth quarter of 2000 the decrease was limited to 1 per cent. Net interest income rose by 6 per cent to SEK 3 070 M (2 883). Personal Banking Sweden showed an increase of 16 per cent, whereas Merchant Banking reported a decrease of 11 per cent. Adjusted for Vilniaus Bankas the increase was 2 per cent. The cost for the governmental deposit guarantee decreased by SEK 50 M. Net commission income decreased by 21 per cent to SEK 2 933 M (3 702). The income varied significantly between different product areas and parts of the Group. Net commission income from payments rose by 4 per cent, while net commission income from securities fell by 22 per cent in comparison with the first quarter of 2000. The decline was especially pronounced within Enskilda Securities. (Full disclosure is provided in note x.) Net result of financial transactions increased by 15 per cent to SEK 1 035 M (SEK 900 M including an one-off item of SEK 153 M from sales of Brady bonds) due to favourable results from trading in shares, bonds and derivatives (see further note x.) A change in market interest rates by one percentage point at 31 March 2001 would result in an increase/decrease in the Group's interest- bearing assets and liabilities, inclusive derivatives, by SEK 2.1 billion. Other income amounted to SEK 1 155 M (1 285). Of this amount capital gains and one off items accounted for SEK 742 M (793). SEK 503 M was from the sales of shares in OM and EUR 26.6 M (approximately 240) from SEB AG´s divestment of shares in Deutsche Börse. Cost level stable or actually decreasing for comparable entities Total costs amounted to SEK 5 462 M (5 385). Adjusted for Vilniaus Bankas, which was not included in the first quarter of 2000, costs decreased by 1 per cent. In local currencies costs decreased by 3 per cent. Efficiency measures within different business areas have decreased costs by 16 percent compared to the fourth quarter 2001. In the e-banking area, for example, development as from January 2001 is carried out within the different divisions. Taken together the costs for e-banking in the first quarter of 2001 amounted to SEK 357 M (184). The cost in the fourth quarter 2000 was SEK 561 M. Total costs for IT (including calculated cost for own personnel etc.) amounted to SEK 1.3 billion compared with SEK 1.1 billion in the first quarter and with SEK 1.7 billion in the fourth quarter of 2000. Of this, external IT costs were SEK 635 M (491). The cost in the fourth quarter 2000 was SEK 767 M. The action plan to freeze IT-development projects both with regard to the planned merger and the weaker market conditions will keep the total IT-costs for the whole year 2001 at an unchanged or lower level than during 2000. Rising staff costs by negotiated salary increases and negative exchange rate effects were offset by efficiency measures mainly in Personal Banking Sweden and Merchant Banking and restructuring in SEB Germany. In addition variable performance-related remuneration decreased by 320 SEK m compared to first quarter 2000. Thereby staff costs, net, decreased by 10 per cent to SEK 2 738 M (3 040). Staff costs, gross, declined by 5 per cent to SEK 3 036 M (3 211). The compensation for the pension costs included in the gross costs increased to SEK 298 M (171). This also includes the pension insurance scheme that has replaced the earlier profit-sharing system. SEB has an overfunded pension fund to support pension costs. At the end of March 2001, total assets in the pension funds amounted to SEK 19.4 billion (23.2 at year-end 2000), while commitments was SEK 8.3 billion (8.0). Accordingly the surplus value as per 31 March 2001 amounted to SEK 11.1 billion. Depreciation amounted to SEK 455 M (427), of which goodwill accounted for SEK 178 M (165). The remaining restructuring reserve for the acquisition of Trygg Hansa in 1997 was SEK 256 M at the beginning of 2001. Of this, SEK 67 M has been utilised during the first quarter. The acquisition of BfG in January 2000 resulted in a difference between equity and purchase price. The allocation and utilisation of the negative goodwill is described in Appendix 1. Lending losses and doubtful claims The Group's lending losses, including changes in the value of assets taken over and write-downs, amounted to SEK 182 M, net (281), of which SEK 100 M, net (310), pertained to SEB Germany. The level of lending losses was 0.08 per cent (0.17). Doubtful claims, net, that is after provisions of possible lending losses, amounted to SEK 8 596 M (8 365 by year-end 2000). The increase is explained by exchange rate changes. The volume of pledges taken over declined to SEK 161 M (213). Credit portfolio SEB's total credit exposure amounted to SEK 948 billion, an increase of 22 billion from year-end 2000. The increase can be seen mainly within the corporate sector where the exposure has grown by close to SEK 16 billion, primarily to Swedish manufacturing companies. The lending to the household sector increased by SEK 5 billion of which SEB AG contributed with approximately half and the remaining part is related to mortgage lending within Sweden. Exposure on banks remained stable. SEB's exposure to the telecommunication industry (operators and manufacturing companies) increased during the first quarter by SEK 2 billion to approximately SEK 14 billion or 1.5 per cent of the credit portfolio. The increase is attributable to short term exposure to existing clients, mainly hedging of foreign exchange exposure. The exposure to the IT sector is stable around SEK 4 billion or 0.4 per cent of the credit portfolio. SEB´s exposure in emerging markets amounted to SEK 10 483 M, net, a decrease of 9 per cent from year-end 2000 (SEK 11 483 M). The decline was mainly due to decreased exposures in Latin America and Eastern and Central Europe. (See further Appendix 2). Non-life insurance business Operating result for non-life insurance operations amounted to SEK 241 M (52). The increase was mainly due to capital gains of SEK 126 M from sales in the bond portfolio. One-off items Total one-off items in the first quarter of 2001 amounted to SEK 869 M (947). Change in surplus in life insurance operations The change in surplus in life insurance operations, which is described in detail in Appendix 3, was influenced by the negative financial effects due to the stock market trend and amounted to SEK -251 M (SEK 473 M). See further in Appendix 3. Capital base and capital adequacy On the 31 March 2001, the capital base for the financial group of undertakings (excluding the insurance companies) amounted to SEK 52.9 billion (53.3). Core capital was SEK 36.4 billion (36.5), of which SEK 1.8 billion constituted core capital contribution. (For calculation of the capital base see Appendix 4). The risk-weighted assets amounted to SEK 514.7 billion (495.6). The core capital ratio amounted to 7.08 per cent (7.37 per cent at year- end 2000) and the total capital ratio to 10.27 per cent (10.76). This is in line with the Group's goal to maintain a core capital ratio of at least 7 per cent and a total capital ratio of not less than 10 per cent. If the first quarter results were to be included in the capital base, the core capital ratio would have been 7.35 per cent and the total capital ratio 10.56 per cent. Rating In connection with the presentation of the proposed merger of FöreningsSparbanken and SEB all major rating institutes placed SEB´s rating under review for a possible upgrade to FöreningsSparbankens´s confirmed ratings. 2001 Annual General Meeting At the Annual General Meeting in April all board members were re- elected. The dividend was set at SEK 4.00 per share. Stockholm, 4 May, 2001 Lars H. Thunell President and Group Chief Executive The interim report for January-June 2001 will be published on 23 August 2001. SEB´s reports are available on the Internet (www.seb.se; www.seb.net). Additional information is available from: Gunilla Wikman, Head of Group Communications, +46 8 763 81 25 Lotta Treschow, Head of Investor Relations, +46 8 763 95 59 This report has not been reviewed by the auditors of the Bank. THE DIVISIONS AND BUSINESS AREAS As of 2001, SEB's operations are organised into six divisions: Personal Banking Sweden, Personal Banking International, SEB Germany (former BfG less merchant banking operations), Corporate & Institutions, Investment Management & Life and The Baltic & Poland. Personal Banking Sweden - rising net interest earnings and lower costs The Personal Banking Sweden division has responsibility for the SEB Group's retail- and private-banking customers in Sweden. The organisation contains the earlier retail operations within SEB - with the branch office network, the telephone bank and the Internet services - as well as SEB Enskilda Banken. For the first quarter of 2001 Personal Banking Sweden shows an operating result of SEK 526 M (pro forma SEK 615 M for the corresponding period of 2000). The result has to a large extent been affected by the sharp decline on the stock market. The contrast is even bigger if the figures are compared with the first quarter of 2000 (pro forma) when the market situation, on the other hand, was extremely favourable. A comparison with the second half of last year, however, shows stable equity earnings - despite the continued weak market situation. The decrease in commissions is also offset by a positive development of net interest income, continued low credit losses and decreasing costs - with, for example, the staff costs at the same level as in January-March 2000. Net interest income increased by 16 per cent. The strong rise comes from increase in both volumes and margins. A specifically strong area is housing loans (mortgages) with growth in both net interest and in volumes. Another example is Enskilda Banken, Private Customers, where the net growth in volumes under management is SEK 2.8 billion, mainly due to an increased "share of wallet" from existing SEB-customers. Since the end of last year, the monthly rate of new internet-customers is growing at a level of 12 500 new private customers and 1 000 new corporate customers. In total, the number of Internet customers of Personal Banking Sweden now is 591 000. Within the Personal Banking Sweden division there is now a number of activities to further increase income and decrease costs. Examples are programmes for intensified and closer activity toward various customer segments, cuts in the project portfolio and continued efficiency measures. Personal Banking International The activities of Personal Banking International include SEB Kort, Private Banking in Luxembourg, the UK, Switzerland, Norway, Denmark and e-banking in Denmark and the UK. SEB AG´s (former BfG´s) private banking business in Luxembourg has been merged with SEB in Luxembourg and is included in the division from 2001. The operating result for the division was SEK 12 M (119). Personal Banking International excluding SEB Kort With the prevailing stock market situation, SEB has chosen to concentrate the resources on markets in which the Group already has broader activities. Thus, the planned marketing launch in spring of the e-banking and e-brokerage service that was recently opened in the UK has been cancelled due to the decision to suspend the launch of a stand- alone e-banking venture. In Denmark the total number of e-banking customers is approximately 10 000. In Norway there will be a soft launch of e-banking in order to support existing Private Banking at the end of the second quarter. The launch will be carried out gradually step by step, just as in Denmark, without any large-scale marketing launch. Development of the e-banking concept in Luxembourg was completed during the first quarter. SEB has an existing private banking business in Luxembourg, with a customer base and skilled advisors. E-banking creates a new channel for the customer to use SEB´s services. According to plan this channel will be operational in late May. In February, e-Asia Finance, a joint venture between SEB, Ankar Capital Management, Tata Consultancy Services and Compass ventures was announced. The aim is to supply Asian corporate customers with the technical platform for e-banking and e-brokerage solutions. The units within Personal Banking International showed a combined result of SEK -69 M (4) consisting of two different parts. One part is the profitable private-banking business in Luxembourg and Switzerland, negatively affected by the low activity level on the financial markets. The other is the development cost for e-banking, generating negative results for the UK, Denmark and Norway. However, with actions taken to suspend further launches under prevailing market conditions, these costs are significantly lower than in the fourth quarter last year and will not increase further. SEB Kort The turnover increased by 6 per cent and the outstanding credit volume increased by 11 per cent, which shows a continued interest for card payments. The total income did not increase correspondingly. A majority of the cards are "pay later" cards which are inversely affected by raising interest rates. Costs increased by 10 per cent due to increased staff costs and IT- related expenditures. The number of personnel has increased primarily within the IT and sales areas. Increased turnover resulted in higher costs for systems operations. There was also ongoing development in new systems. Incurred losses and fraud show a continued negative trend. This increased volume resulted in higher reserves than in previous quarters. The operating result decreased by 28 per cent to SEK 81 M. Eurocard in Sweden has in co-operation with Ericsson developed a mobile payment solution. The test is being carried through now in selective shops. One hundred chosen Eurocard cardholders will be able to pay their purchases with a virtual Eurocard via Ericsson's mobile telephone R520m. The aim of this test is to measure if the customer rates this type of payment as simpler, quicker and more convenient than other methods of payment, for example cash and cards. Corporate & Institutions The Corporate & Institutions division is focused on medium sized and large corporate and financial institutions. The division consists of the business areas Merchant Banking, Mid Corporate, Enskilda Securities and SEB Securities Services (custody). The operating result of the division for January-March 2001 was SEK 1 511 M (SEK 1 574 M) despite the prevailing financial market climate. Merchant Banking is making very good results thanks to good performance within the Fixed Income and Debt Capital Market product areas due to high customer activity. Enskilda Securities is the business area that is most negatively affected by the market conditions. Great effort has been made to increase customer penetration in the Mid Corporate segment. The division has further increased its focus on the use of capital and is still working with the aim of keeping the costs on a competitive level. IT costs have increased during the first quarter due to necessary investments in order to adapt to the new SWIFT-standards. The total costs are lower than last year mainly due to reduced staff costs. Merchant Banking - right on track for the 6th consecutive quarter The strong momentum continued for Merchant Banking. Operating result amounted to SEK 917 M, an increase of 37 per cent compared to the first quarter last year. This was the second best quarterly result to date for Merchant Banking, only exceeded by the fourth quarter of 2000. Customer related income continued to show a positive development, up 9 per cent compared to the first quarter of 2000. Costs were 5 per cent lower than last year and the cost/income-ratio improved to 0,45 (0,54). The growing customer related income was mainly attributable to good performance within the Foreign Exchange and Fixed Income areas. This is the main explanation for the higher net result of financial transactions, but it is also explained buy a strong first quarter for Treasury Operations. The decreased spread between short and long interest rates has had a negative effect on Treasury Operation's net interest income. The lower net interest income is also partly due to a decrease in capital utilisation. The Debt Capital Markets and Structured Finance product areas also performed well despite tough market conditions. This year's customer surveys confirm and enhance the latest years' trend and reinforce Merchant Banking's leading position in its key markets. For example, Greenwich Associates' yearly market survey of the financial markets in Sweden ranked SEB as number one in "overall relationship performance" in the large corporate sector, for both quality and number of important relationships. Also Foreign Exchange Services was ranked number one in overall quality and had the largest estimated market share. The number one position was also achieved within the Cash Management area, which both in terms of overall services index and number of clients outperformed the competitors. In another recent survey, conducted by Euromoney, credit research teams in Europe were ranked and SEB made it into the league tables for the first time and as the only Scandinavian bank. Merchant Banking continued its long-term strategy to lower its utilised capital. This was achieved through lower credit, market and operational risk levels. The risk weighted assets within Merchant Banking's corporate lending portfolio (excluding structured products) have decreased by 6 per cent compared to a year ago. During January-March 2001 the average daily Value at Risk was SEK 58 M, which is the same level as in the first quarter last year. As from January 2001 the result from the German trading activity and the large corporate segment, previously reported within SEB AG (BfG), is included in Merchant Banking. Year 2000 figures have been restated accordingly. SEB Mid Corporate The new business area SEB Mid Corporate comprises two units - Mid Corporate (the corporate part of the former Retail Distribution business area) and the finance company SEB Finans. SEB Mid Corporate is specialising in and focusing on tailor-made solutions for medium-sized companies. The business area reached a result of SEK 331 M, down 2 per cent compared to last year´s pro forma result. Net interest income showed a strong development, primarily due to higher margins on the deposit stock. Commission income decreased due to the recession in the stock market. The majority of the result comes from Mid Corporate SEK 271 M (SEK 257 M pro forma for the first quarter last year). SEB Finans accounted for SEK 60 M compared to SEK 81 M last year. SEB Finans' decreasing result is a consequence of weak sales during the third and fourth quarter of 2000, which backlogs the result to a certain extent. Enskilda Securities - lower result in a weak market In the first quarter stock market activity as well as market capitalisation decreased significantly compared to the first quarter in 2000, which was the best quarter to date in the investment banking industry. The turnover fell on all Nordic exchanges and the equity capital market activity was sharply lower than last year. In these less friendly market conditions, Enskilda Securities continued to strengthen its positions in the Nordic equity markets, especially in Norway, Finland and Denmark. On all these exchanges Enskilda Securities has a market share exceeding 10 per cent. Enskilda Securities' equity trading turnover was the highest ever in the first quarter and increased by 21 per cent compared to the same period in 2000. Enskilda Securities' total income decreased by 44 per cent. All product areas show decreased revenues. However, secondary commission, which is the single most important source, has held up well. The bulk of the fall in revenues is related to trading, which is by nature more volatile. Also Equity Capital Markets and Mergers and Acquisitions experienced revenue losses, but in these areas there is now a healthy and growing order backlog, which should translate into stronger revenues in the coming quarters. Total costs fell by 33 per cent, which is primarily an effect of a reduced provision for bonus payments to employees due to lower earnings. Pre-bonus costs increased by 4 per cent, mainly due to higher IT-costs. The operating result for the first quarter was SEK 150 M, which is 62 per cent down from last year. SEB Securities Services The operating result of SEB´s custody service unit decreased by 28 per cent, to SEK 125 M. Income remained at the same level as in 2000, SEK 247 M, with the help of increased volumes. The number of transactions rose by 15 per cent to 973 000 and assets under custody increased by 18 per cent to SEK 2 089 billion. Total costs increased by 54 per cent, to SEK 122 M as a result of major investments during the first quarter, primarily within the IT-sector, and rising transaction volumes. The market shares of the various segments remained stable, ranging between 30 and 75 per cent. SEB Germany As from 2 April the German subsidiary BfG Bank AG has changed its name to SEB AG. A nation-wide marketing campaign is now ongoing to create customer awareness for the new brand within the future target customer groups. Operations in the old BfG Bank has been changed in the following way: The private banking unit in Luxembourg has been merged with SEB in Luxembourg and is now a part of division Personal Banking International. The merchant banking activities (Corporate Customer Division and Trading) as well as Skandinaviska Enskilda Banken AG in Germany (a subsidiary of SEB AG as from 1 January), have joined the Merchant Banking business area within the Corporate & Institutions division of the SEB Group. Retail and personal banking, institutions and real estate activities, have been formed into division SEB Germany. Total result of SEB Germany amounted to SEK 364 M (SEK 124 M). The profit and loss account in SEK has been affected by exchange rate fluctuations. Total income for SEB Germany rose by 5 per cent in SEK, but was down 1 per cent in euro. Total costs increased by 2 per cent in SEK, but decreased by 4 per cent in euro. The drop in total income depends on the reduction of capital employed by EUR 500, which has reduced net interest income by SEK 54 M. Net interest earnings, SEK 1 027 M, are stable whereas net commission income, SEK 347 M, has been affected by the negative markets. During the first quarter, SEB AG sold its shares in Deutsche Börse, which generated a profit of EUR 26.6 M (approximately SEK 240 M). The mutual funds in BfG Invest and ImmoInvest had a continuously good net inflow (SEK 880 M). In spite of this, and due to the market development, Assets under Management have gone down somewhat to SEK 105 billion. Risk weighted assets have been further reduced by almost SEK 5 billion, and e-banking customers have increased by another 10 000, to over 158 000. The restructuring programme is continuing. The number of full time employees has been reduced by a further 275 compared to year-end 2000. During the first quarter apprentices have been hired, resulting in a net reduction by 170 full time employees. Costs are well under control, down 4 per cent in euro, and credit losses have been moderate. The legal entity SEB AG comprises all activities within SEB Germany and the above-mentioned merchant banking operations including those of Skandinaviska Enskilda Banken AG. The legal entity will be reported as additional information for continuity with the acquired BfG Bank. Figures in euro for the legal German entity are presented in Appendix 4. They correspond to the previous BfG Group, but with the addition of Skandinaviska Enskilda Banken AG in Germany. The figures for 2000 have in both cases been restated for the internal purchase and sale of Skandinaviska Enskilda Banken AG in Germany and BfG Luxembourg respectively, and are hence comparable. Investment Management & Life The division comprises the SEB Invest (former SEB Invest & Funds) and SEB Trygg Liv business areas and accounts for the SEB Group's business within mutual funds, institutional portfolio management and life insurance products. The division is affected by the downward trend on stock markets both concerning the demand of savings products and the effect of the so-called surplus values in the life insurance business. The operating result, before change in surplus values, amounted to SEK 118 M (145). Total result, after change in surplus values, was SEK -133 M (618), where the financial effects, due to the negative stock market development, had an impact of SEK -644 M (294). The division's revenues, excluding change in surplus values, increased to SEK 774 M (772). Costs increased by 4 per cent to SEK 653 M (625). As per 31 March 2001, total assets within the division managed by SEB Invest, amounted to SEK 562 billion (581). Of this total, portfolio management accounted for SEK 132 billion (119), traditional life insurance for SEK 254 billion (246) and mutual funds and unit linked insurance for SEK 176 billion (216). Since year-end total assets under management has decreased by 5 per cent. During the first quarter seven of the ten external funds that where introduced in SEB's range of funds in 2000, were made available as unit linked insurance. Supplementary external funds will be introduced during the spring. SEB Invest SEB Invest (reported together with Private Banking as Asset Management in 2000) showed an operating result of SEK 167 M (162), an improvement of 3 per cent. Revenues increased by 8 per cent to SEK 409 M (380). Lower costs for distribution of mutual funds compensated the drop in stock prices. Net sales increased from SEK 6 billion to SEK 11 billion, above all due to an increase in institutional mandates. Costs rose by 11 per cent to SEK 242 M (218), mainly due to recruitment within asset allocation, hedge products and the mutual fund sales organisation. Costs were 11 per cent lower than in the fourth quarter of 2000. During February it was formally decided that the business area should be incorporated. It is estimated that the incorporation will be completed by 1 January 2002. Two new mutual funds were launched in the first quarter: SEB Opportunity Europe, for the Premium Pension programme, and SEB Global Chance/Risk, to strengthen the range of the prosperous chance/risk concept. The Financial Supervisory Authority granted the permission to merge 19 funds into 9. The purpose is to streamline and simplify the range of funds for the customers. The merger of funds will take place in May 2001. SEB Trygg Liv The negative stock market development and the relatively low expire of bonds during the introduction of 2001, has negatively affected SEB Trygg Liv's sales, compared to the first quarter 2000 when the market situation was exactly the opposite. Sales (new business plus extra premiums on existing insurance contracts) amounted to SEK 2,786 M (4,368), a decrease of 36 per cent (compared with an increase by 70 per cent). Premiums written decreased by 24 per cent to SEK 4,357 M (5,748). The ongoing market conditions mainly affect sales of single premium insurance, which decreased by 41 per cent. The market for current premium insurance is not as sensitive to weakening stock markets and the decrease in sales was limited to 5 per cent. The share of current premium insurance amounted to 24.9 per cent (16.7). A prominent rise was recorded for employer-paid insurance and especially occupational pension that rose by 49 per cent. Revenues decreased by 7 per cent to SEK 364 M (391), mainly due to lower asset values in unit-linked. Costs increased by 1 per cent to SEK 413 M (408), which is 10 per cent lower than in the fourth quarter 2000. The operating result, before change in surplus values, amounted to SEK -49 M (SEK -17 M). Total result after change in surplus value decreased to SEK -300 M (SEK 456 M). This result is heavily affected by the financial effects in calculating the surplus value. Excluding these financial effects, the result increased to SEK 344 M (162) See Appendix 3. In surveys among life insurance brokers made by the company Marknadsindikator, it is stated a more and more positive attitude towards SEB Trygg Life in comparison to other life insurance companies. This is regarded as a result of the deliberate and consequent commitment to improve the relationship with brokers. Sales through brokers, especially employer-paid insurance, rose by 20 per cent compared to last year. SEB Trygg Liv's ambition is to continue to develop the business within occupational pension and other life insurance services and products paid by the employer, and to secure the strong position in the market for private individuals. The main sales focus is on unit linked insurance, which represents the absolute majority of the sales. The Baltic & Poland - continued result improvement The Baltic & Poland division comprises the three Baltic banks, Eesti Ühispank, Latvijas Unibanka and Vilniaus Bankas, as well as SEB´s holding in the Polish Bank Ochrony ¤rodowiska, BOS. The Baltic banks are today wholly owned subsidiaries of SEB. The operating result of the division was SEK 125 M, an increase of 74 per cent compared to the first quarter of 2000, when Vilniaus Bankas was not consolidated. Pro forma, with full consolidation of Vilniaus Bankas during the first quarter of 2000, operating result increased by 25 per cent. In March 2001, SEB acquired another 6 per cent of the shares in BO¤S. SEB's ownership in BOS has thereby increased to 38 per cent¤. The merger with FöreningsSparbanken On 22 February it was announced that the Boards of Directors of FöreningsSparbanken and SEB had proposed to merge the two companies. The name of the new group will be SEB Swedbank. The two groups complement each other well. The merger creates Sweden´s leading financial group with a stronger range of products and services for customers in Sweden and good opportunities for continued growth as a European financial group. The new group will have 35 000 employees, whereof 19 000 in Sweden, total assets of approximately SEK 2 000 billion and SEK 1 300 billion in assets under management, and a joint market value of about SEK 150 billion. FöreningsSparbanken and SEB will merge as equal parties, creating one of the 25 largest banks in Europe. The merger is expected to yield annual cost savings of SEK 2.5-3.0 billion, mainly at a central level, within the IT area, within the product companies but also as a result of overlapping branch office networks. No dismissals will occur as a consequence of the merger. However, the number of employees is expected to be reduced by 2 000 persons during a three-year period, which is expected to happen through natural retirement. The merger is expected to generate restructuring costs of approximately SEK 4 billion, which will be covered over time by payments from pension funds and the sale of branches to independent savings banks and jointly owned banks. Increases in income due to the merger are expected to, by a margin, exceed any reductions in income the merger may cause. The vision of the new group is to create a leading customer oriented European financial group based upon a broad Swedish base, through a combination of personal service/advice, local presence and modern technology. The merger is conditional upon e.g. the approval of the extraordinary general meetings of the two banks and the necessary approval from the Government and the appropriate authorities, including the EU. Depending on whether the EU decides to simply review or thoroughly investigate the merger, a decision will be announced either in late June or in November. Prior to the merger, integration planning will be led by an integration committee. Eighteen project teams, covering the entire new group, have been formed with the assignment to plan the forthcoming integration. The Boards of Directors of both banks have unanimously recommended the shareholders to vote in favour of the merger. The SEB Group Operational Profit and Loss Account January- January- Change Full SEK M March March per cent year 2001 2000 2000 Net interest income 3 070 2 883 6 11 616 Net commission income 2 933 3 702 -21 13 846 Net result of financial 1 035 900 15 3 552 transactions Other operating income 1 155 1 285 -10 3 644 Total income 8 193 8 770 -7 32 658 Staff costs -3 036 -3 211 -5 -12 761 Pension compensation 298 171 74 943 Other operating costs -2 269 -1 918 18 -8 751 Depreciations - 455 - 427 7 -1 763 Total costs -5 462 -5 385 1 -22 332 Net credit losses - 182 - 281 -35 - 890 Net result from associated - 1 30 -103 95 companies Operating profit from non-life insurance operations 241 52 212 Operating result 2 789 3 186 -12 9 743 Change in surplus value in life insurance operations - 251 473 -153 337 Total result 2 538 3 659 -31 10 080 Taxes - 800 - 638 25 -2 856 Taxes on change in surplus 70 - 132 -153 - 94 values Minority interests - 29 - 124 -77 - 245 Total result after tax 1 779 2 765 -36 6 885 According to the Swedish Financial Supervisory Authority´s guidelines and recommendations results from the banking and insurance operations should be separated in the profit and loss account as from 2001. SEB adopted these instructions already in 2000. In addition to the legal accounts SEB is also presenting an operational profit and loss account. As from 2001 SEB has chosen to show the changes in surplus value as a separate item in the income statement. The SEB Group Key figures January- January- Full March March year 2001 2000 2000 Return on equity, % 18.4 25.3 16.9 Return including change in 15.8 27.2 16.5 surplus values, % Return on equity, 12 months 14.5 15.0 16.9 moving average, % Return including change in surplus values, 12 months 13.1 17.1 16.5 moving average, % Earnings per share, SEK 2.78 3.44 9.43 Earnings per share (Total 2.52 3.92 9.77 result after tax), SEK Income/cost ratio, SEB Group 1.50 1.63 1.46 Income/cost ratio, banking 1.45 1.60 1.42 operations Cost/income ratio, SEB Group 0.67 0.61 0.68 Cost/income ratio, banking 0.69 0.62 0.70 operations Lending loss level, % 0.08 0.17 0.12 Provision ratio for doubtful 48.8 51.7 49.1 claims, % Level of doubtful claims, % 1.39 1.09 1.35 Total capital ratio, % 10.27 9.90 10.76 Core capital ratio, % 7.08 6.73 7.37 The SEB Group Operational Profit & Loss Account, quarterly performance SEK M 2001:1 2000:4 2000:3 2000:2 2000:1 Net interest income 3 070 2 898 2 849 2 986 2 883 Net commission income 2 933 3 507 3 400 3 237 3 702 Net result of financial 1 035 1 294 786 572 900 transactions Other operating income 1 155 598 394 1 367 1 285 Total income 8 193 8 297 7 429 8 162 8 770 Staff costs -3 036 -3 391 -3 072 -3 087 -3 211 Pension compensation 298 227 226 319 171 Other operating costs -2 269 -2 847 -1 891 -2 095 -1 918 Depreciations - 455 - 508 - 409 - 419 - 427 Total costs -5 462 -6 519 -5 146 -5 282 -5 385 Net credit losses etc - 182 - 112 - 247 - 250 - 281 Net result from associated - 1 20 23 22 30 companies Operating profit from non-life 241 43 36 81 52 insurance operations Operating result 2 789 1 729 2 095 2 733 3 186 Change in surplus values in life insurance operations - 251 - 269 179 - 46 473 Total result 2 538 1 460 2 274 2 687 3 659 Taxes - 800 - 613 - 719 - 886 - 638 Taxes on change in surplus 70 76 - 50 12 - 132 values Minority interests - 29 - 36 - 64 - 21 - 124 Total result after tax 1 779 887 1 441 1 792 2 765 The SEB Group Net commission income SEK M 2001:1 2000:4 2000:3 2000:2 2000:1 Payments 283 286 296 276 300 Cards 445 426 375 401 375 Issue of securities 49 114 195 156 76 Custody and mutual fund 931 1 170 1 028 1 013 982 Courtage shares 662 659 724 679 1 004 Courtage other 47 47 36 52 51 Lending 105 116 166 129 114 Deposits 16 1 11 27 28 Guarantees 31 35 29 33 34 Advisory 89 241 199 211 293 Derivatives 79 32 46 66 40 Other 106 91 74 40 104 SEB AG and The Baltic 602 756 595 556 727 Commission income 1) 3 445 3 974 3 774 3 639 4 128 Payments - 246 - 209 - 226 - 221 - 210 Securities - 102 - 59 - 66 - 39 - 73 Other - 58 - 69 - 16 - 45 - 44 SEB AG and The Baltic - 106 - 130 - 66 - 97 - 99 Commission costs - 512 - 467 - 374 - 402 - 426 Payments 482 503 445 456 465 Securities 1 587 1 931 1 917 1 861 2 040 Other 368 447 509 461 569 SEB AG and The Baltic 496 626 529 459 628 Net commission income 2 933 3 507 3 400 3 237 3 702 1) Enskilda Securities Issue of securities 34 95 133 142 64 Courtage shares 343 378 456 335 451 Advisory 78 233 177 196 284 Derivatives 71 20 33 51 18 Other 10 18 13 55 4 Commission income 536 744 812 779 821 The SEB Group Net result financial transactions Mkr 2001:1 2000:4 2000:3 2000:2 2000:1 Skandinaviska Enskilda 419 621 288 198 74 Banken 1) Enskilda Securities 181 145 159 67 311 SEB AG 49 64 61 44 148 Other 37 12 1 13 3 Realised and unrealised 686 842 509 322 536 Exchange rate fluctuations 349 448 291 262 367 Redemptions of bonds 4 - 14 - 12 - 3 Net result financial 1 035 1 294 786 572 900 transactions 1) Dividend on shares in trading portfolio amounts to SEK 193 M in 2001:1, in 2000:2 corresponding amount of SEK 134 M was reported as dividend The SEB Group Operational Profit and Loss Account by division Personal Personal Investmen Banking Banking SEB Corporat t The Other January-March 2001, SEK M Sweden Internati German e & Managemen Baltic & incl SEB onal y Institut t & Life Poland eliminat Group ions ions Net interest income 812 73 1 027 1 100 19 278 - 239 3 070 Net commission income 541 409 347 1 001 556 124 - 45 2 933 Net result of financial 17 22 13 915 - 7 71 4 1 035 transactions Other income 45 7 276 54 206 66 501 1 155 Total income 1 415 511 1 663 3 070 774 539 221 8 193 Staff costs - 454 - 171 - 680 - 944 - 274 - 161 - 352 -3 036 Pension compensation 105 3 70 13 1 106 298 Other operating costs - 513 - 275 - 447 - 655 - 368 - 93 82 -2 269 Depreciations - 10 - 15 - 92 - 50 - 24 - 84 - 180 - 455 Total costs - 872 - 458 -1 219 -1 579 - 653 - 337 - 344 -5 462 Net credit losses etc - 17 - 24 - 100 20 - 78 17 - 182 Net result from associated - 17 20 - 3 1 - 2 - 1 companies Operating profit from non-life insurance operations 241 241 Operating result 526 12 364 1 511 118 125 133 2 789 Change in surplus values in - 251 life insurance operations - 251 Total result 526 12 364 1 511 - 133 125 133 2 538 Personal Banking Sweden January- January-March Change per cent SEK M March 2000 2001 Net interest income 812 701 16 Net commission income 541 876 -38 Net result of financial 17 16 6 transactions Other operating income 45 5 Total income 1 415 1 598 -11 Staff costs - 454 - 531 -15 Pension compensation 105 73 44 Other operating costs - 513 - 475 8 Depreciations - 10 - 11 -9 Total costs - 872 - 944 -8 Net credit losses - 17 - 39 -56 Operating result 526 615 -14 Personal Banking International January- January- Change SEK M March March per cent 2001 2000 Net interest income 73 111 -34 Net commission income 409 446 -8 Net result of financial 22 25 -12 transactions Other operating income 7 12 -42 Total income 511 594 -14 Staff costs - 171 - 167 2 Pension compensation 3 8 -63 Other operating costs - 275 - 244 13 Depreciations - 15 - 14 7 Total costs - 458 - 417 10 Net credit losses - 24 - 10 140 Net result from - 17 - 48 -65 associated companies Operating result 12 119 -90 SEB Kort January- January- Change SEK M March March per cent 2001 2000 Net interest income 23 37 -38 Net commission income 293 273 7 Net result of financial transactions Other operating income 3 7 -57 Total income 319 317 1 Staff costs - 91 - 84 8 Pension compensation 3 8 -63 Other operating costs - 118 - 107 10 Depreciations - 8 - 9 -11 Total costs - 214 - 192 11 Net credit losses - 24 - 10 140 Operating result 81 115 -30 Personal Banking International excl SEB Kort January- January- Change SEK M March March per cent 2001 2000 Net interest income 50 74 -32 Net commission income 116 173 -33 Net result of financial 22 25 -12 transactions Other operating income 4 5 -20 Total income 192 277 -31 Staff costs - 80 - 83 -4 Pension compensation Other operating costs - 157 - 137 15 Depreciations - 7 - 5 40 Total costs - 244 - 225 8 Net credit losses - 17 - 48 -65 Operating result - 69 4 SEB Germany January- January- Change SEK M March March per cent 2001 2000 Net interest income 1 027 1 003 2 Net commission income 347 490 -29 Net result of financial 13 - 11 transactions 1) Other operating income 276 99 179 Total income 1 663 1 581 5 Staff costs - 680 - 663 2 Other operating costs - 447 - 446 Depreciations - 92 - 88 5 Total costs -1 219 -1 197 2 Net credit losses - 100 - 310 -65 Net result from 20 50 -60 associated companies Operating result 364 124 194 Corporate & Institutitions January- January- Change SEK M March March per cent 2001 2000 Net interest income 1 100 1 182 -7 Net commission income 1 001 1 435 -30 Net result of financial 915 706 30 transactions Other operating income 54 41 32 Total income 3 070 3 364 -9 Staff costs - 944 -1 221 -23 Pension compensation 70 46 52 Other operating costs - 655 - 574 14 Depreciations - 50 - 43 16 Total costs -1 579 -1 792 -12 Net credit losses 20 2 Operating result 1 511 1 574 -4 Merchant Banking January- January- Change SEK M March March per cent 2001 2000 Net interest income 634 716 -11 Net commission income 324 318 2 Net result of financial 640 381 68 transactions Other operating income 39 24 63 Total income 1 637 1 439 14 Staff costs - 488 - 499 -2 Pension compensation 45 30 50 Other operating costs - 281 - 293 -4 Depreciations - 19 - 19 0 Total costs - 743 - 781 -5 Net credit losses 23 13 77 Operating result 917 671 37 Mid Corporate January- January- Change SEK M March March per cent 2001 2000 Net interest income 466 443 5 Net commission income 72 99 -27 Net result of financial 20 20 0 transactions Other operating income 9 10 -10 Total income 567 572 -1 Staff costs - 118 - 107 10 Pension compensation 17 11 55 Other operating costs - 125 - 117 7 Depreciations - 2 - 2 0 Total costs - 228 - 215 6 Net credit losses - 8 - 19 -58 Operating result 331 338 -2 Enskilda Securities January- January- Change SEK M March March per cent 2001 2000 Net interest income - 48 - 31 55 Net commission income 422 843 -50 Net result of financial 245 289 -15 transactions Other operating income 3 3 0 Total income 622 1 104 -44 Staff costs - 294 - 577 -49 Other operating costs - 155 - 118 31 Depreciations - 28 - 21 33 Total costs - 477 - 716 -33 Net credit losses 5 8 -38 Operating result 150 396 -62 SEB Securities Services January- January- Change SEK M March March per cent 2001 2000 Net interest income 51 57 -11 Net commission income 183 175 5 Net result of financial 10 16 -38 transactions Other operating income 3 4 -25 Total income 247 252 -2 Staff costs - 41 - 35 17 Pension compensation 7 5 40 Other operating costs - 87 - 48 81 Depreciations - 1 - 1 0 Total costs - 122 - 79 54 Operating result 125 173 -28 Investment Management & Life January- January- Change SEK M March March per cent 2001 2000 Net interest income 19 14 36 Net commission income 556 554 0 Net result of financial - 7 transactions Other operating income 206 204 1 Total income 774 772 0 Staff costs - 274 - 255 7 Pension compensation 13 8 63 Other operating costs - 368 - 359 3 Depreciations - 24 - 19 26 Total costs - 653 - 625 4 Net result from - 3 - 2 50 associated companies Operating result 118 145 -19 Change in surplus value in life insurance - 251 473 -153 operations Total result - 133 618 -122 SEB Invest January- January- Change SEK M March March per cent 2001 2000 Net interest income 6 1 Net commission income 401 379 6 Net result of financial 1 -4 -125 transactions Other operating income 1 4 -75 Total income 409 380 8 Staff costs -135 -123 10 Pension compensation 13 8 63 Other operating costs -111 -98 13 Depreciations -9 -5 80 Total costs - 242 -218 11 Net credit losses Operating result 167 162 3 SEB Trygg Liv January- January- Change SEK M March March per cent 2001 2000 Net interest income 13 13 0 Net commission income 12 17 -29 Net result of financial - 8 4 transactions Other operating income 348 358 -3 Total income 365 392 -7 Staff costs - 139 - 132 5 Other operating costs - 257 - 261 -2 Depreciations - 15 - 14 7 Total costs - 411 - 407 1 0 Net result from - 3 - 2 50 associated companies Operating result - 49 - 17 188 Change in surplus value in life insurance - 251 473 -153 operations Total result - 300 456 -166 The Baltic & Poland January- January- Change SEK M March March per cent 2001 2000 Net interest income 278 121 130 Net commission income 124 64 94 Net result of financial 71 26 173 transactions Other operating income 66 13 Total income 539 224 141 Staff costs - 161 - 72 124 Pension compensation 1 Other operating costs - 93 - 54 72 Depreciations - 84 - 43 95 Total costs - 337 - 169 99 Net credit losses - 78 - 1 Net result from 1 18 -94 associated companies Operating result 125 72 74 The SEB Group Balance sheet 31 March 31 March 31 December SEK M 2001 2000 2000 Lending to credit institutions 153 258 197 250 164 673 Lending to the public 612 967 582 512 605 759 Interest-bearing securities 167 051 133 716 158 047 - Financial fixed assets 4 988 7 705 4 736 - Financial current assets 162 063 126 011 153 311 Shares and participations 17 581 21 700 8 688 Assets used in the insurance 64 029 74 669 71 749 operations Other assets 132 059 130 706 113 894 Total assets 1 146 945 1 140 553 1 122 810 Liabilities to credit 205 126 229 938 217 364 institutions Deposits and borrowing from the 439 591 407 093 419 887 public Securities issued, etc. 200 861 205 685 199 103 Liabilities of the insurance 63 070 71 133 66 932 operations Other liabilities and 164 670 155 526 146 505 provisions Subordinated liabilities 29 882 31 682 31 410 Shareholders' equity 1) 43 745 39 496 41 609 Total liabilities and 1 146 945 1 140 553 1 122 810 shareholders' equity 1) Change in shareholders' equity 31 mars 31 mars 31 december Mkr 2001 2000 2000 Opening balance 41 609 33 006 33 006 New share issue 4 067 4 067 Dividend to shareholders -2 466 Result, holding of own shares 21 Translation difference 176 - 1 339 Net profit for the period 1 960 2 424 6 642 Closing balance 43 745 39 496 41 609 The SEB Group Problem loans and seized assets 31 March 31 March 31 December SEK M 2001 2000 2000 Doubtful claims 16 774 15 398 16 437 Provision for possible -8 178 -7 964 -8 072 lending losses Doubtful claims, net 8 596 7 434 8 365 Claims subject to interest 436 321 308 reduction Total volume of problem 9 032 7 755 8 673 loans Level of doubtful claims 1.39 1.09 1.35 (Doubtful claims (net) in relation to lending and leasing (net) at end of period, per cent) Provision ratio for 48.8 51.7 49,1 doubtful claims (Reserve for possible lending losses in relation to doubtful claims (gross), per cent) Pledges taken over Buildings and land 47 94 104 Shares and participations 114 516 109 Total volume of pledges 161 610 213 taken over The soft loans of the Group are included among claims subject to interest reduction. The shortfall in income due to interest deferments was SEK 1 M (SEK 2 M), while unpaid interest on non-performing loans amounted to SEK 59 M (SEK 129 M). On 31 March 2001, the Group had SEK 122 M (SEK 169 M) in non- performing loans in Sweden on which interest income was reported. These loans are not included among the problem loans, since the corresponding collateral covers both interest and principal. The SEB Group Derivative contracts 31 March 2001 Contracts on the asset Contracts on the side liability side SEK M Book value Market Book value Market value value Interest-related 22 334 22 334 23 114 23 114 Currency-related 53 355 55 718 47 559 50 831 Equity-related 1 859 1 859 1 065 1 065 Other 5 5 Total 77 553 79 916 71 738 75 010 On 31 March 2001 the notional value of the Group's derivatives contracts amounted to SEK 4 828 billion (SEK 3 878 billion on 31 March 2000). The book value of derivatives instruments forming part of trading operations is identical with the market value. Those deviations between actual and book values which are reported in the above table are matched by opposite deviations between market and book values in the part of the Group's operations which is the object of hedge accounting. The SEB Group Cash flow analysis SEK M January- January- Full March March year 2001 2000 2000 Cash flow before changes in lending and deposits -12 020 4 502 10 795 Increase in lending to the -7 503 -17 893 -36 262 public Increase in deposits from the 19 704 22 959 27 113 public Cash flow, current operations 181 9 568 1 646 Cash flow, investment -2 414 38 470 41 291 activities Cash flow, financing 230 -10 657 -20 630 activities Cash flow for the period -2 003 37 381 22 307 Liquid funds at beginning of 46 532 24 225 24 225 year Cash flow for the period -2 003 37 381 22 307 Liquid funds at end of period 44 529 61 606 46 532 The SEB Group Statutory Profit and Loss Account January- January- Change Full SEK M March March per year 2001 2000 cent 2000 Income Interest income 13 853 12 350 12 51 196 Interest costs -10 794 -9 482 14 -39 640 Net interest income 3 059 2 868 7 11 556 Dividends received *) 221 18 877 Commission income 3 356 4 066 -17 15 132 Commission costs - 512 - 426 20 -1 669 Net commission income 1) 2 844 3 640 -22 13 463 Net result of financial 850 895 -5 3 544 transactions 2) Other operating income 989 1 145 -14 2 208 Income from banking operations 7 963 8 566 -7 31 648 Costs Staff costs -2 902 -3 092 -6 -12 234 General administrative costs -1 572 -1 390 13 -5 985 Depreciation and write-downs of tangible and intangible fixed - 440 - 412 7 -1 703 assets Other operating costs - 565 - 445 27 -2 360 Costs from banking operations -5 479 -5 339 3 -22 282 Profit/loss from banking operations before credit losses 2 484 3 227 -23 9 366 Net credit losses 3) - 149 - 332 -55 - 858 Change in value of seized assets 15 54 -72 43 Write-down of financial fixed - 48 - 3 - 75 assets Net result from associated 2 32 -94 104 companies Operating profit from banking 2 304 2 978 -23 8 580 operations Operating profit from insurance 187 37 220 operations 4) Operating profit 2 491 3 015 -17 8 800 Pension compensation 298 171 74 943 Taxes - 800 - 638 25 -2 856 Minority interests - 29 - 124 -77 - 245 Net profit for the period **) 1 960 2 424 -19 6 642 *) In 2001 dividend on shares in trading portfolio amounts to SEK 193 M. In 2000 SEK 134 M was reported in second quarter **) Earnings per share, SEK 2.78 3.44 9.43 Number of shares 704 557 704 557 704 557 680 680 680 1) Net commission income SEK M January- January- Change Full March March per year 2001 2000 cent 2000 Payment commissions 658 493 33 2 424 Securities commissions 1 647 1 968 -16 8 137 Other commissions 539 1 179 -54 2 902 Total 2 844 3 640 -22 13 463 2) Net result of financial transactions SEK M January- January- Change Full March March per year 2001 2000 cent 2000 Shares/participations 487 420 16 - 44 Interest-bearing securities 176 190 -7 413 Other financial instruments 47 216 -78 1 693 Realised result 710 826 -14 2 062 Shares/participations - 599 - 72 - 451 Interest-bearing securities 26 - 123 -121 105 Other financial instruments 361 - 96 0 493 Unrealised value changes - 212 - 291 -27 147 Subtotal 498 535 -7 2 209 Exchange rate fluctuations 352 363 -3 1 360 Redemption of bonds - 3 -100 - 25 Total 850 895 -5 3 544 3) Net credit losses SEK M January- January- Change Full March March per year 2001 2000 cent 2000 A. Individually appraised receivables: Reported write-down, incurred - 293 - 217 35 -3 496 losses Reversal of previous provisions 194 67 190 2 569 for possible losses, reported as incurred losses in current years accounts Reported provision for possible - 284 - 426 -33 -1 552 losses Recovered from losses incurred 106 83 28 612 in previous years Reversal of previous provisions 122 131 -7 638 for possible losses Reported net cost for individually appraised - 155 - 362 -57 -1 229 receivables B. Receivables appraised by category: Reported write-down, incurred - 27 - 18 50 - 57 losses Reported provision for possible - 5 - 1 - 8 losses Recovered from losses incurred 7 9 -22 24 in previous years Withdrawal from reserve for lending losses Reported net cost for receivables appraised by - 25 - 10 150 - 41 category C. Allocation to/withdrawal from reserve for political risks 42 61 -31 363 abroad D. Contingent liabilities - 11 - 21 -48 49 Total - 149 - 332 -55 - 858 4) Operating profit from insurance operations January- January- Change Full SEK M March March per year 2001 2000 cent 2000 Non-life operations 242 52 212 Life operations - 55 - 15 8 Total 187 37 220 Skandinaviska Enskilda Banken Profit and Loss Account January- January- Change Full SEK M March March per year 2001 2000 cent 2000 Income Interest income 7 240 6 066 19 27 250 Leasing income 147 110 34 459 Interest costs -6 203 -4 922 26 -22 879 Net interest income 1) Dividends received *) 228 22 2 157 Commission income 1 371 1 874 -27 6 958 Commission costs - 191 - 256 -25 -1 000 Net commission income 2) 1 180 1 618 -27 5 958 Net result of financial 561 373 50 2 298 transactions 3) Other operating income 774 838 -8 1 990 Total income 3 927 4 105 -4 17 233 Costs Staff costs -1 278 -1 544 -17 -6 470 Other administrative expenses -1 189 - 924 29 -3 985 Depreciation and write-downs - 76 - 75 1 - 317 of tangible and intangible fixed assets Other operating costs - 340 - 235 45 -1 282 Total costs -2 883 -2 778 4 -12 054 Profit/loss before credit 1 044 1 327 -21 5 179 losses Net credit losses 4) 32 31 3 144 Change in value of seized - 8 assets Write-down of financial fixed - 658 assets Operating profit 1 076 1 358 -21 4 657 Pension provision 288 171 68 943 Other appropriations**) - 561 - 539 4 -2 307 Taxes *) - 183 - 162 13 - 472 Net profit for the period 620 828 -25 2 821 *) In 2001 dividend on shares in trading portfolio amounts to SEK 193 M. In 2000 SEK 134 M was reported in second quarter. **) Group contributions reported directly against equity 1) Net interest income January- January- Change Full SEK M March March per year 2001 2000 cent 2000 Interest income 7 240 6 066 19 27 250 Leasing income 147 110 34 459 Interest costs -6 203 -4 922 26 -22 879 Leasing depreciation - 44 - 33 33 - 148 Total 1 140 1 221 -7 4 682 2) Net commission income January- January- Change Full SEK M March March per year 2001 2000 cent 2000 Payment commissions 190 356 -47 1 416 Securities commissions 767 1 009 -24 3 580 Other commissions 223 253 -12 962 Total 1 180 1 618 -27 5 958 3) Net result of financial transactions January- January- Change Full SEK M March March per year 2001 2000 cent 2000 Shares/participations 65 Interest-bearing securities 181 74 145 394 Other financial instruments 65 186 -65 725 Realised result 246 260 -5 1 184 Shares/participations - 4 - 106 -96 - 15 Interest-bearing securities - 9 - 77 -88 - 199 Other financial instruments 43 - 4 211 Unrealised value changes 30 - 187 -116 - 3 Exchange rate fluctuations 285 300 -5 1 117 Total 561 373 50 2 298 4) Net credit losses January- January- Change Full SEK M March March per year 2001 2000 cent 2000 A. Individually appraised receivables Reported write-down, incurred - 48 - 42 14 -1 420 losses Reversal of previous 34 34 1 295 provisions for possible losses reported as incurred losses in current period's accounts Reported provision for - 72 - 138 -48 - 520 possible losses Recovered from losses incurred 53 36 47 372 in previous years Reversal of previous 23 83 -72 164 provisions for possible losses Reported net cost for individually appraised - 10 - 27 -63 - 109 receivables B. Receivables appraised by category Reported write-down, incurred - 8 -100 - 52 losses Reported provision for - 4 possible losses Recovered from losses incurred 6 -100 22 in previous years Withdrawal from provision for lending losses Reported net cost for receivables appraised by - 2 -100 - 34 category C. Allocation to/withdrawal from reserve for political 42 60 -30 279 risks abroad D. Contingent liabilities 8 Total 32 31 3 144 Skandinaviska Enskilda Banken Cash flow analysis January- January- Full SEK M March March year 2001 2000 2000 Cash flow before changes in lending and deposits -22 945 2 028 7 813 Increase in lending to the 7 121 -15 681 -31 782 public Increase in deposits from the 13 235 24 188 15 923 public Cash flow, current operations -2 589 10 535 -8 046 Cash flow, investment -167 -17 325 -19 546 activities Cash flow, financing -4 372 -1 270 -3 598 activities Cash flow for the period -7 128 -8 060 -31 190 Liquid funds at beginning of 45 261 76 451 76 451 year Cash flow for the period -7 128 -8 060 -31 190 Liquid funds at end of period 38 133 68 391 45 261 Skandinaviska Enskilda Banken Balance sheet 31 March 31 March 31 December SEK M 2001 2000 2000 Lending to credit institutions 171 147 206 083 184 849 Lending to the public 213 393 204 981 220 493 Interest-bearing securities 132 439 91 832 118 418 - Financial fixed assets 3 567 2 449 2 962 - Financial current assets 128 872 89 383 115 456 Shares and participations 55 319 58 112 44 485 Other assets 108 221 98 957 94 112 Total assets 680 519 659 965 662 357 Liabilities to credit 190 296 183 273 198 618 institutions Deposits and borrowing from the 247 885 242 915 234 650 public Securities issued, etc. 49 762 51 443 52 518 Other liabilities and 136 777 125 715 120 194 provisions Subordinated liabilities 26 591 29 144 28 207 Shareholders' equity 1) 29 208 27 475 28 170 Total liabilities and 680 519 659 965 662 357 shareholders' equity 1) Change in shareholders' equity 31 mars 31 mars 31 december SEK M 2001 2000 2000 Opening balance 28 170 22 294 22 294 New share issue 4 067 4 067 Dividend to shareholders -2 466 Group contributions, net 416 287 1 436 Result, holding of own shares 21 Translation difference 2 - 1 - 3 Net profit for the period 620 828 2 821 Closing balance 29 208 27 475 28 170 The SEB Group Statutory Profit and Loss Operational Profit and Loss Account Account Intern al trans- January- SEB action Reclas January- SEK M March Trygg s bank- si- March SEK M 2001 Liv insura ficati 2001 nce on Net interest income 3 059 11 3 070 Net interest income Dividends received 221 - 221 Net commission income 2 844 89 2 933 Net commission income Net result of financial 850 - 8 193 1 035 Net result of financial transactions transactions Other operating income 989 347 - 209 28 1 155 Other operating income Income from banking operations 7 963 350 - 120 0 8 193 Total income Staff costs -2 902 - 137 3 -3 036 Staff costs 298 298 Pension compensation General administrative costs -1 572 - 194 1 391 Depreciation and write-downs of - 440 - 15 - 455 Depreciations tangible and intangible fixed assets Other operating costs - 565 - 55 117 -1 391 -2 269 Other operating costs Costs from banking operations -5 479 - 401 120 298 -5 462 Total costs Profit/loss from banking 2 484 operations before credit losses Net credit losses - 149 - 48 - 182 Net credit losses etc Change in value of seized assets 15 Write-down of financial fixed - 48 48 assets Net result from associated 2 - 3 - 1 Net result from companies associated companies Operating profit from banking 2 304 operations Operating profit from insurance 187 54 241 Operating profit from non- operations life insurance operations Operating profit 2 491 0 0 298 2 789 Operating result - 251 - 251 Change in surplus value in life insurance operations 2 538 Total result Pension compensation 298 - 298 Taxes - 800 - 800 Taxes 70 70 Taxes on change in surplus values Minority interests - 29 - 29 Minority interests Net profit for the period 1 960 0 0 - 181 1 779 Total result after tax Appendix 1 BfG in the SEB Group - Income Statement and Disposition of negative goodwill. BfG Income Statement (adapted to Swedish Accounting Principles) EUR M Q1 Q1 Q2 Q3 Q4 Full Norma 2001 2000 2000 2000 2000 year l 2000 quart er 2000 Interest net 127 128 142 126 120 516 129 commissions 41 66 48 54 58 226 56 Net financial 7 2 -4 10 10 18 5 transactions Other income 9 13 7 14 5 39 10 Total income 184 209 193 204 193 799 199 Staff cost -82 -84 -87 -85 -77 -333 -83 Other costs -65 -70 -80 -69 -81 -300 -75 Total costs -147 -154 -167 -154 -158 -633 -158 Credit -10 -36 -15 -18 -18 -87 -22 losses Associated companies 2 2 "Normal" 27 19 11 32 19 81 20 Profit One off 27 18 9 27 items "External" 54 37 20 32 19 108 Profit Allocation of negative goodwill and other reserves The acquisition of BfG on January 3, 2000 has given rise to a negative goodwill as the acquisition price was lower than the acquired equity capital. The reason for the existence of the negative goodwill is the expectations that the return of the acquired company is insufficient. Thus, actions will have to be taken to restore the long-term earnings capacity. The negative goodwill is EUR 382 M. In addition to that, there is a general reserve for bad debt of EUR 111 M and a general reserve for restructuring of EUR 83 M established by BfG before the acquisition. Thus, total reserves to be allocated are EUR 576 M. During 2000, measures have also been taken in order to restructure the balance sheet, i.e. by selling out subsidiaries, fixed assets and closing certain positions. Available reserves at time of purchase EUR M Unallocated negative goodwill - 382 opening balance General reserve for credit-losses - 111 opening balance General restructuring reserves - 83 opening balance Total reserves to be allocated 576 Allocation and Opening Utilise Opening Utilise Closing utilisation of reserves balance d balance d in Q1 balance 2000 2000 2001 2001 Re-evaluation and restructuring of 13.9 -3.9 10, 0 10,0 balance-sheet items General reserve for 142.7 -30.4 112,3 0 112,3 credit losses Social Plan 90.1 -23.0 67.1 -23.4 43,7 Reserve for 329.3 -55.2 274.1 -26.7 247,4 restructuring Total 576 -112.5 463.5 -50.1 413,4 The reserve for restructuring will cover the cost of a large number of projects identified during the strategic review of SEB AG: These projects have been estimated to generate the following expenses (EUR M) Restructuring of the retail segment 90 Brand name change 80 IT-structure and MIS 60 Relocation costs 40 Restructuring of subsidiaries 20 Other projects 40 330 Of the EUR 330 M, EUR 55 M was utilised during 2000. Of the remaining EUR 275 M, EUR 27 M has been utilised during the first quarter of 2001. Thus EUR 248 M remains. ________________________________________________________________________ Appendix 2 Exposure on emerging markets, geographical distribution SEK M Total Of which SEB AG Asia1 4 517 458 Hong Kong 933 78 China 941 229 Other Specified 2 018 56 Countries2 Latin America3 3 887 409 Brazil 1 949 20 Eastern and Central 1 916 982 Europe4 Russia 1 071 369 Africa and Middle 2 549 248 East5 Turkey 1 002 31 Total 12 869 2 097 Provision 2 386 1015 Total, Net 10 483 1 082 1. Includes Hong Kong, China, India, Pakistan, Taiwan and Macao and Note 2 2. Including the Philippines, Malaysia, Thailand, Korea and Indonesia 3. Including Brazil, Argentina, Mexico and Peru 4. Including Russia, Estonia, Latvia, Lithuania, Poland and Czech Republic Slovakia, Rumania, Hungary, Slovenia, Croatia, Kazakhstan and Ukraine 5. Includes Turkey, Iran, Saudi Arabia, Egypt, Israel, South Africa, Ethiopia and Algeria Appendix 3 SEB Trygg Liv SEB Trygg Liv focuses on the sale and administration of unit-linked insurance products as well as their equivalent for account of the traditional mutual life insurance business. From an accounting point of view, the life insurance business is separate from the traditional banking activities. SEB Trygg Liv's accounts are presented in this Appendix according to generally accepted accounting standards within the insurance business. SEB Trygg Liv reported a decline in sales of -36 per cent (+70 per cent) during the first quarter. It is primarily single-premium endowment assurance for the private market which accounts for the decline, SEK 1 476 M (3 181). Most sales, 83 per cent (93) pertain to unit-linked insurance, of which 15 per cent (13) is attributable to sales through the subsidiary SEB Trygg Life (Ireland), primarily the investment product Life Assurance Portfolio Bond for the Swedish market. Sales, i.e. new premiums and extra payments under existing insurance contracts, decreased by SEK 1 582 M, or 36 per cent, to SEK 2 786 M (4 368). The share of insurance contracts with regular premiums was 24,9 per cent (16.7) including foreign sales. Premium income (premiums paid) decreased by 24 per cent to SEK 4 357 M (5 748). In total, the value of assets under management decreased by SEK 23 billion or 9 per cent to SEK 229 billion (252) during the twelve- month period. The decrease for unit-linked insurance was 14 per cent. Total income decreased by 7 percent to SEK 364 M (391), primarily as an effect of the lower asset values compared to last year. Operating costs and other costs, after deducting the change in deferred acquisition cost of SEK 59 M (69), rose by 1 per cent to SEK 413 M (408). The operating result, before current period change in surplus values, totalled SEK -49 M (-17). The surplus value in life insurance operations is the present value of expected future profits from signed insurance contracts. The surplus value comprises unit-linked operations as well as commissioning agree ments with traditional life insurance companies. When determining the surplus value in the insurance portfolio an annual unit fund growth of 6 percent, i. e. 1.5 per cent per quarter is assumed. A higher or lower growth rate than assumed will result in positive or negative financial effects when computing the current year change. During the first quarter of 2001, the overall growth in unit funds was -12 per cent (+6 per cent), thus resulting in negative financial effects of SEK -644 M (294). Total result from operations improved by SEK 182 M or 112 per cent to SEK 344 M (162). Total result less current period financial effects was SEK -300 M (456). Volumes, SEK M 2001-03 2000-03 Sales volume Traditional life insurance, regular 472 305 premium 27 (24) % Unit-linked insurance, regular premium 2 314 4 063 17 (17) % 2 786 4 368 Premium income Traditional life insurance 1 292 1 098 Unit-linked insurance 3 065 4 650 4 357 5 748 Savings stock March 31 March 31 Traditional life insurance 173 100 187 700 Unit-linked insurance 55 500 64 500 228 600 252 200 Profit and loss account, SEK M Administration agreements, 91 80 traditional life insurance Unit-linked insurance 242 271 Risk operations and other 31 40 Total income 364 391 Operating expenses -442 -441 Capitalisation of acquisition costs 59 69 Goodwill and other -30 -36 Total costs -413 -408 Operating result -49 -17 Change in surplus values 1) -251 473 Total result -300 456 Total result excl financial effects included in net surplus value change 344 162 Expense ratio per cent 2) 10.0 8.9 Return on allocated capital after tax, per cent 3) Excluding financial effects in surplus value 19.8 11.9 change Including financial effects -5.9 30.0 Notes 1) After deduction for change in capitalised acquisition costs 2) Annual basis. Operating expenses as percentage of premiums earned 3) Annual basis. Allocated capital SEK 4,900 M (3,900) Calculation of surplus value and changes in surplus value Surplus value in life insurance operations is calculated on the basis of assumptions regarding the future development of signed insurance contracts and a risk-adjusted discount rate. The most important assumptions are the following: Discount rate 11 % Return on capital, nominal 4 % assets Return on capital, real 8 % assets Surrender of contracts 5 % Surrender of current premiums 5 % Administrative expenses SEK 250/contract per (Sweden only) year 6 % Mortality According to industry experience Surplus value accounting Deferred acquisition costs are capitalised in the accounts and depreciated according to plan. The reported change in surplus values is therefore adjusted by the net result of the capitalisation and depreciation during the period. Balance of surplus value (after deduction of capitalised 0103 0012 0009 0006 0003 acquisition costs) Opening balance 3 479 3 748 3569 3 615 3 142 Present values of new sales 1) 311 391 229 301 386 Return on existing policies 155 143 173 129 129 Realised surplus value in -161 -188 -188 -187 -166 existing policies 305 346 214 243 349 Change in assumptions 0 2 0 33 -115 Actual outcome compared to 147 160 92 88 14 assumptions 2) Investment return in excess of -644 -700 -75 -333 294 assumptions 3 ) -497 -538 17 -212 193 Total change in surplus values before deduction of capitalised -192 -192 231 31 542 acquisition costs Capitalisation of acquisition -164 -155 -128 -155 -146 cost for the period Amortisation of capitalised 105 78 76 78 77 acquisition cost Total change in surplus values 4 -251 -269 179 -46 473 ) Closing balance 5 ) 3 228 3 479 3 748 3 569 3 615 1) Sales defined as new contracts and extra premiums on existing contracts 2) The reported actual outcome of contracts signed can be placed in relation to the operative assumptions that were made. Thus, the value of the deviations can be estimated. The most important components consist of extensions of contracts as well as cancellations. Also included is the estimated cost of solvency, which increases with growth in fund values. However, the actual income and administrative expenses are included in full in the operating result. 3) Assumed unit growth is 6 per cent, i. e. 1,5 per cent per quarter. Actual for the first quarter of 2001 is - 12 per cent compared to plus 6 per cent in 2000 resulting in the negative financial effects of SEK -644 M (294). 4) Prepaid acquisition costs are capitalised in the accounts and amortised over 5 years. Accordingly, the reported change in surplus values is adjusted by the net effect in the period. 5) Estimated surplus value according to the above is not included in the statutory balance sheet. Appendix 4 Capital base for the SEB Financial Group of Undertakings To note: Minority interest and goodwill is different between the balance sheet and the capital base due to the inclusion of companies in the capital adequacy calculation that are not consolidated in the Group's balance sheet, e.g. BOS S.A. Result for the year and change in the translation difference compared to year end are not included in the core capital and the capital base since the accounts have not been verified by external auditors (1). The deduction 2) from shareholders equity in the consolidated balance sheet consists mainly of non-restricted equity in subsidiaries that are not consolidated in the financial group of undertakings (insurance companies). Goodwill in 3) includes only goodwill from acquisitions of companies in the financial group of undertakings, i.e. not insurance companies. Goodwill from acquisitions of insurance companies is deducted from the capital base 4). ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/05/04/20010504BIT00050/bit0001.doc http://www.bit.se/bitonline/2001/05/04/20010504BIT00050/bit0001.pdf