SEB Annual Report 2006

8/14/2019 SEB Annual Report 2006

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Annual Report

2006 Robust business climate and high customer interaction

Improved efficiency and continued organic growth

Operating profit SEK 15,562m (11,223)

Earnings per share SEK 18.72 (12.58)

Return on equity 20.8 per cent (15.8)

Focused strategy and new organisation as from 2007


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SEBs financial information is

available on www.sebgroup.com

Financial information during 2007

Publication of annual accounts 9 February

Publication of Annual Report on the Internet 6 March

Annual General Meeting 28 March

Interim report JanuaryMarch 4 MayInterim report JanuaryJune 19 July

Interim report JanuarySeptember 26 October

For further information please contact:

Per-Arne Blomquist

Chief Financial Officer

Telephone +46 8 22 19 00

E-mail: [email protected]

Ulf GrunnesjHead of Investor Relations

Telephone +46 8 763 85 01


Annika Halldin

Financial Information Officer

Telephone +46 8 763 85 60


Contents

2006 in brief 1

Chairmans statement 2

Presidents statement 3

SEB today 4

Markets, competition and customers 8

SEBs employees 14

SEBs role in society 16

The SEB share 18

Report of the Directors

Financial Review of the Group 20

Result and profitability 20

Financial structure 23

Divisions

SEB Merchant Banking 26

Nordic Retail & Private Banking 28

SEB in Gemany (SEB AG Group) 30

German Retail & Mortgage Banking 31

Eastern European Banking 32

SEB Asset Management 34

SEB Trygg Liv 36

Risk and Capital Management 38

Corporate Governance within SEB 45

Board report on the internal

control of the financial reporting for 2006 54

Financial Statements 55

SEB Group

Income statements 56

Balance sheets 57

Statement of changes in equity 58

Cash flow statements 59

Skandinaviska Enskilda Banken

Income statements 60

Balance sheets 61Statements of changes in equity 62

Cash flow statements 63

Notes to the financial statements 64

Five-year summary 121

Definitions 123

Proposal for the distribution of profit 124

Auditors report 125

Board of Directors 126

Group Executive Committee and Auditors 128

Addresses


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SEB annual rEport 2006 1

2006 in brief

res d sed dividedn oeig fi icesed by 39 e ce,

SEK 15,562m.

n ne fi icesed by 50 e ce SEK

12,623m, SEK 18.72 e she.

n the SEB she se by 33 e ce whie he

Swedish SaX-idex icesed by 24 e ce

d he Ee Bk idex by 19 e ce.

n the cedi ss eve emied w.

n re eqiy ws 20.8 e ce.n psed divided is SEK 6.00 (4.75).

Key figures

Im eves dig 2006

n In April, SEB qied he rssi bk

peEegBk.

n In July, SEB sd is 47-e ce weshi i Bk

ochy Sdwisk S.a. d eed bch i

Wsw dig he m.

n In September a ew gisi sce, wih f

csme-ieed divisis d hee s fc-

is, ws eseed. the sce is effecive s f

1 Jy 2007. SEBs ei civiies i five cies

wee ieged d he pive Bkig bsiess e

ws ied wih he asse Mgeme divisi.

n Throughout the year, SEB ceebed is 150h i-

vesy by gig eves f csmes d is

20,000 emyees. these seci ivesy ceeb-

is gve SEB my ccsis f segheig is

csme eis d f ceig ew bsiess

iies.

n SEB cied eceive mbe f wds, sch s

Bes ive bk i he ndic d Bic cies

d Bes csh mgeme bk i he ndic egi.

n SEB hs dvced wihi my es, mg hes

mbe e sii wih mke she i w m

fds e ses f 26 e ce i Swede.

006 2005

re eqiy, % 20.8 15.8

re eqiy exc. e-ff chges,% 20.8 17.0

Bsic eigs e she, SEK1) 18.72 12.58

Cs/icme i 0.58 0.65

Cedi ss eve, % 0.08 0.11

t ci i, % 11.47 10.83

Ce ci i, % 8.19 7.53

nmbe f f ime eqives, vege 19,672 18,948

nmbe f e-bkig csmes, hsds 2,597 2,299

asses de mgeme, SEKb 1,262 1,118

t sses, SEKb 1,934 1,890

1) F fhe ifmi he SEB she, ese see ge 18.

Operating profit per division

SEKm

Net profit per SEB share

SEK

0 2,000 4,000 6,000 8,000

SEB Trygg Liv

SEB Asset Management

Eastern European Banking

German Retail & Mortgage Banking

Nordic Retail & Private Banking

SEB Merchant Banking

20062005


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SEB annual rEport 2006

A year of very satisfactory results for SEB has just passed. 2006

was also a specific year, marked by the fact that the bank has

been in operation for 150 years. It is with a sense of pride and

humility that we now take on the challenges of the future.

The global economy showed strong growth in 2006. Even

though the U.S. slowed down during the second half, Asia and

Europe showed a solid development. The euro-zone picked up

speed and Germany experienced both stronger growth and fall-

ing unemployment.

All the Nordic countries performed very well and the Baltic

countries were among the fastest-growing economies of the world.

Financial markets in general held up well, despite some

nervousness about the U.S. slowdown. The Federal Reserve con-

tinued to hike its interest rate, and in Europe and Asia the trends

in general were also rising. The American residential market

cooled, stock markets were volatile, while overall bond yields

remained at historically low levels. The dollar was sliding as a

result of the U.S. slowdown and narrowing rate spreads. In Swe-

den, repo rates doubled and stock prices rose more than in most

other EU countries.

SEBs share price at all time high

Last years positive economic conditions in combination with

SEBs geographical spread and business mix once again proved

fruitful and SEBs profitability compared well with its peergroup.

With a share price increase of 33 per cent, SEB outperformed

both the Swedish General Index and the European Banking

Index in 2006. For the period 20042006 the market value of SEB

has more than doubled. My fellow Board members and I will

continue to make every effort to create long-term value for SEBs

shareholders.

Industry consolidation and financial integration

The consolidation within the European banking industry contin-

ued in 2006 with a number of mergers and acquisitions. We con-

tinue to follow SEBs stated strategy to develop our attractive

platform for profitable growth through a combination of cost-

efficiency and organic expansion.

The financial industry is working under more regulatory

requirements than many other industries. There is still a long

way to go before global harmonisation of financial services can

be reached. Regulatory demands that currently have an impact

on SEB:s operations include:

n The creation of the Single European Payment Area SEPA

will enable companies and private individuals to make their

cross-border payments within EU as easily as in their domes-

tic markets.

n MiFID (Markets in Financial Instruments Directive) will

replace EUs existing Investment Services Directive (ISD),

with effect from 1 November 2007. MiFID introduces new

and more extensive requirements, particularly for businessconduct and internal organisation.

n Last, but not least, we have the current implementation of

the Basel II capital adequacy rules within the EU. As with

any other major regulatory change, the strategic implications

on the global and European arenas remain to be seen.

On behalf of the Board I would like to thank the President, the

Group Executive Committee and the SEB staff for their commit-

ment and professionalism. We could not have received a better

birthday present for SEBs 150th anniversary than the strong

result and the high return achieved in 2006.

Stockholm in February 2007

Marcus WallenbergChairman of the Board

Chairmans statement

Continued efforts in order to create

long-term shareholder value

We could not have received a better birthdaypresent for SEBs 150th anniversary than the

strong result and the high return achieved

in 006.


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Presidents statement

The past year was a very good year for SEB and its shareholders.

In a buoyant economic climate with high financial market activi-

ties and business volumes, SEB achieved its best result to date.

The combination of strong revenue growth and only moder-

ately increasing costs, which marked 2006, reflects the increasing

scalability of our business model. Improved customer satisfac-

tion continued to be in focus and we intensified our efforts to

offer customers better access to all of SEBs services and product

range. I am proud of what we have accomplished in 2006.

An attractive business mix and customer base

Over the years SEB has established a platform with a diversified

business mix around the Baltic rim. We have a solid customer

franchise in our core areas of strength large corporate and

institutional customers and affluent individuals. We are especial-

ly strong in offering our customers advisory services.

During 2006, intensified customer activities led to increased

operating profits in all divisions. Commissions, including net life

income, overall generated close to 50 per cent of total revenues.

Committed to excellence

Our ambition is to be top-ranked in terms of customer satisfac-

tion within our selected segments, in order to reach leadership

in financial performance. This is a long-term undertaking, build-

ing on the two cornerstones of operational excellence and profit-able growth.

An integrated bank

SEB has expanded considerably over the last ten years. We now

need to consolidate and focus our efforts. In 2006, we narrowed

our strategy to a full universal offering in Sweden, Estonia,

Latvia, Lithuania and Germany, and a more focused offering in

other markets based on our core strengths. In order to better

serve our customers we laid out a roadmap to integrated busi-

nesses and common support functions.

We launched the SEB Way, our operational excellence pro-

gramme which includes installing streamlined processes,

improving quality and encouraging a culture of continuous

improvement.

Several initiatives were taken to address the underlying cost-

base. These are gradually yielding result. We will continue to

increase the resilience of the cost-base in order to cater also for

periods of a more feeble business climate.

SEB well positioned

All in all, these measures aim at strengthening our customer

offerings and increasing efficiency. The work to fully exploit

the SEB platform will continue in 2007. SEB is well positioned

for further profit growth. My own and the whole SEB teams

commitment to long-term leadership remains unchanged.

Stockholm in February 2007

Annika Falkengren

President and Group Chief Executive

Well positioned for reaching

long-term ambitions

Customer satisfaction continues to be a toppriority. We have intensified the efforts to offer

our customers the markets best services and

product range, in our selected areas.


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4 SEB annual rEport 2006

SEB today

Increased ambitions for customer

satisfaction and financial performance

Segic deveme

Expansion between 199 and 001

In the mid-1990s SEB formulated its vision of becoming the lead-

ing North-European bank. SEBs traditionally strong position

among companies and demanding private customers was

strengthened through acquisitions in the area of life insurance

and asset management and through expansion in new markets

in Germany and Eastern Europe.

Consolidation and profit growth between 00 and 005

With the broadened platform in place, several steps were taken

in order to consolidate it, primarily through the so-called 3 C-

programme (Cost efficiency, Customer satisfaction and Cross-

servicing within the Group).

Improved efficiency and organic growth complemented withminor add-on acquisitions around the Baltic rim supportedSEBs profit growth.

Realising the full potential 006

Higher ambitions to realise the full potential of the platform

shall contribute to profitable growth in SEBs existing markets.

Increased pro-activity towards customers in combination with a

better integrated business will form the basis of increased cus-

tomer satisfaction and profitability. By fully realising the whole

SEB, higher quality, more complete services to our customers as

well as cost-efficient operations will be achieved.

SEB serves 400,000 corporate customers and institutions and

more than five million private individuals. SEB has local pres-

ence in the Nordic and Baltic countries, Germany, Poland,

Russia and the Ukraine and has a strategic presence through

its international network in another ten countries.

More than half of SEBs approximately 20,000 employees

are located outside Sweden. On 31 December 2006, total

assets amounted to SEK 1,934bn, while the Groups assets

under management totalled SEK 1,262bn.

Business concept SEBs business concept is to provide

financial services and to handle financial risks and transac-

tions for companies and private individuals in such a way

that customers are satisfied, shareholders get a competitive

return and that SEB is considered a good citizen of society.

Vision, targets and strategy SEBs vision is to be highest

ranked by its customers within the chosen segments in

Northern Europe and leading in terms of financial perform-

ance. These goals shall be reached with the help of motivated

employees, increased co-operation between the Groups dif-

ferent parts and Group-wide support and staff functions.

One SEB shall give customers access to SEBs total com-

petence and supply of services.

As from 2006 SEB has set new financial targets. SEBs

return on equity shall be the highest among its peers, while

its profit growth shall be sustainable. SEBs minimum rating

shall be AA.

SEB is a North-European financial group for corporate customers, institutions and private

individuals. Its activities comprise mainly banking services, but SEB also carries out

significant life insurance operations.


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SEB annual rEport 2006 5

SEB today

The most important non-financial targets to be achieved are:

n t ked i ems f csme sisfci wihi SEBs chse segmes.

n the ms mived emyees mg SEBs ee g.

Fici ges d cme

Csmes d emyees ges d cme

New and higher targets

PULSE (Mivi idex)

Idex shwig emyees mivi d

sisfci wih edeshi, g vege.

80

60

40

20

0

2004 200520032002

Motivation

Leadership

European average

Private individuals1)

KNIX (Csme sisfci idex)

Idex shwig csme sisfci d yy, g vege.

Corporates and institutions)

80

60

40

0

20

European average

2005 2006200420032002

80

60

40

0

20

European average

2005200420032002 2006

1) Icdes Gemy sice 2003

d he Bic cies sice

2004

2) Gemy icded 20032005

Core capital ratio

pe ce

10

8

6

4

0

2

2004 200520032002 2006

Net profit growth

SEK bii

15

12

9

6

0

3

2004 200520032002 2006

Return on equity

pe ce

25

20

15

10

5

0

2004 200520032002 2006

Dividend

pe ce f eigs e she

50

40

30

20

10

0

2004 200520032002 2006

tge: a es 7 e cetge: Ssibe fi gwhtge: Highes mg is ees tge: 40 e ce f e fi e

she ve bsiess cyce

I he fe SEB hs decided

cy hgh ide sveys

mg he sff wih ge

ievs. Dig 2006 svey

ws mde. nex is ed

ke ce dig he m

f 2007.


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6 SEB annual rEport 2006

SEB today

A strategy for growth

SEB has expanded its geographical scope and its busi-

ness mix over the last ten years. In 2006 several steps

were taken to consolidate the platform in order to

better position SEB for future profit growth. These

included initiatives to establish a more integrated

bank, thereby facilitating customers access to SEBs

offerings in different markets. Other key actions

during last year comprised:n Increasing pro-activity in meeting customer

demands

n Installing operational excellencen Improving cost-efficiency.

SEBs ambition is to be top-ranked in terms of custom-

er satisfaction within selected segments in order to

reach leadership in financial performance.

Customer offerings

In Sweden, SEBs original home market, the Bank has a univer-

sal offering and aspires to be leading in all areas. Also in the Bal-

tic countries SEB has a full range of universal banking services

and operates from a strong market position. In Germany SEB

offers retail and wholesale banking as well as asset management

services.

In the rest of the Nordic countries and Poland, SEB will offer

wholesale banking, private banking, asset management, life

insurance and cards to medium sized and large corporate cus-

tomers, financial institutions and affluent private individuals.

A customer-oriented organisation

In order to strengthen customer offerings, increase the integra-

tion of the Group and minimise double functions, SEBs opera-

tions are as from 1 January 2007 carried out through four divi-

sions (compared with six divisions in 2006):

n Merchant Banking wholesale and investment bankingn Retail Banking retail operations in five countries and Card

activities

n Wealth Management asset management and private bankingn Life life and pension insurance operations.

New Markets, i.e. SEB in Ukraine and Russia, is kept separate in

order to take better advantage of the long-term growth potential

in these attractive regions.

All businesses are supported by three cross-divisional sup-port functions Group Operations, Group IT and Group Staff.

Merchant Banking

Merchant Baking has global responsibility within SEB for bank-

ing and capital markets products aimed at large and medium-

sized corporations as well as financial institutions. The division

is also responsible for SEBs international network in the worlds

major financial centres.

Going forward, Merchant Banking will make targeted invest-

ments in products and staff in order to continue growing profita-

bly in its main markets in the Nordic and Baltic countries, Ger-

many and Poland. The division sees further opportunities to sell

additional products to existing customers and to increase market

share in its main markets outside Sweden, not least through

intensified activities aimed at medium-sized corporations and

financial institutions. This will be achieved by pursuing the divi-

sions proven strategy of investing in cutting edge products and

value added financial solutions.

Retail Banking

The new retail division comprises SEBs retail operations in

Sweden, Germany, Estonia, Latvia and Lithuania as well as the

Groups card business. The growth opportunities are to expand

on the market for small and medium-sized companies in Swe-

den, continuing a turn-around of the German retail operations

and sustainable organic growth in the Baltic countries, including

expansion of the card business.

SEBs initiatives to further strengthen customer servicesbased on increased simplicity, clarity and availability the

Enkla-assortment will continue.

A focused strategy

SEB has a broad product mix and an attractive customer franchise in its core areas of

strength large corporations, institutions and affluent individuals.

Business structure

Merchant

Banking

Retail

Banking

Wealth

ManagementLife

Group Operations / Group IT / Group Staff

President and

Chief Executive Officer


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SEB today

Wealth Management

This division includes the former SEB Asset Management divi-

sion and the business area Private Banking within the former

Nordic Retail & Private Banking division. By year-end 2006, the

divisions assets under management amounted to SEK 928bn of

the Groups total assets under management of SEK 1,262bn.Going forward, the ambition is to offer enhanced advisory

service, more alternative products and shorter time-to-market

for new products. SEB has a strong market position within asset

management in Sweden. Building on this franchise and knowl-

edge the division will grow further outside Sweden, primarily in

the Nordic and Baltic countries and Germany. The ambition is to

become the leading North-European wealth manager.

Life

This division is responsible for SEBs life insurance activities and

consists of SEB Trygg Liv (Sweden), SEB Pension (Denmark) and

SEB Life & Pension International. The business concept is to pro-

vide customers with security throughout every phase of their

lives using insurance solutions.

The growth opportunities are within corporate pension and

care business in Sweden and Denmark, maintained quality lead-

ership in Sweden and continued unit-linked transition in Den-

mark. The division is also aiming at a leading position in the

emerging Baltic life insurance market as well as growth in new

East European markets.

Support functions with focus on productivity

The divisions are supported by three common functions Group

Operations, Group IT and Group Staff. The guiding principle is

from now on one function, one solution. Processes will be

streamlined, efficiency increased and the creation of one inte-

grated bank will be facilitated.

With the formation of Group Operations SEB is building scala-

bility and a global process ownership. This means for example a

stepwise integration of all lending, payment and securities proc-

esses operations that have up to now been taking place within

each of the divisions.

The transformation within Group IT comprises for examplea reduction of the number of IT-platforms and a streamlining of

processes.

Within Group staff a separate staff and support project has

been set up in order to create Group wide centres of excellence

based on best practice.

The cost improvement potential is SEK 1.52.0bn over the

next three years, excluding incremental investments. For 2007

the savings are targeted to roughly SEK 300500m.

SEB Way for increased productivity

In order to ensure a continuous productivity work, SEB acceler-

ated its operational excellence programme SEB Way dur-

ing 2006. By SEB Way the Group strives to encourage a culture

of continuous improvement, meeting increased quality demands

from customers and the productivity pressure in the banking

industry.

So called transformations are being rolled out continuously

in small teams of 1050 people at a time after diagnosis of the

divisions and business areas. Up to year-end 2006, the equiva-

lent of 1,500 full time employees has been involved in transfor-

mations and about 6,000 employees have been included in the

roll-out plan.

Examples of achievements reached include the Custody

Services-unit, which could increase its volumes by 150 per cent

without adding staff. Simultaneously, error rates went down by

35 per cent. In the Life division, the first front-end transforma-

tion led to sales staff booking 30 per cent more customer meet-ings with the average premium increasing by almost 20 per cent.


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8 SEB ANNUAL REPORT 2006

Markets, competition and customers

High economic activity and growth characterised SEBs North-

European core markets during 2006. All the Nordic countries

performed well and the Baltic economies were among the fastest

growing ones in the world. Germany experienced a stronger

growth than in previous years. In Poland, Russia and Ukraine

growth was also good.

In the market for large corporations and financial institu-

tions SEB meets tough competition from international financial

groups such as Citigroup, Deutsche Bank, J P Morgan, Royal

Bank of Scotland and Merrill Lynch. In the market for small and

medium-sized companies, the competitors are mostly domestic

or regional banks like Hansabank in the Baltic countries and

Nordea, Handelsbanken and Danske Bank in the Nordic region. In

the private market local banks and insurance companies account

for most of the competition, but various niche players are also

competing for investors and savers.

Sweden

Sweden is still SEBs single largest market, with approximately1.9 million private and 200,000 corporate customers. In 2006, the

Swedish market accounted for approximately 50 per cent of the

Groups operating profit.

In Sweden, SEB occupies a clearly leading position among

large corporations and demanding private individuals, with

substantial market shares of foreign exchange trading, equities

trading, cash management, private banking, asset management,

unit linked insurance and cards, for example. For several years,

SEB has been ranked the best foreign exchange bank in Swedish

kronor on a global scale. SEB was once again the largest broker

on the stock exchange in Stockholm in 2006.

Within the traditional deposit and lending market SEB is

number four. During 2006, SEBs market share of deposits from

and lending to the public decreased, due to a lower share of cor-

porate lending. SEBs market share of household lending was

unchanged. Seen over a five-year period, SEBs share of private

mortgage loans has grown from 12.3 to 14.7 per cent.

In the total Swedish household savings market (excluding

directly owned shares), the Group ended the year as number

two, with a share of 13.0 per cent (12.7).

In 2006, SEB consolidated its market position in the asset

management and private banking areas. The business magazine

Euromoney appointed SEB the best private bank in the Nordic

and Baltic countries. In the biannual Prospera survey, retail cus-

tomers ranked SEB as number two of all major fund companiesoperating in the Swedish market. SEBs market share for new

sales of of mutual funds rose to 26 per cent (17).Within life insurance SEB Trygg Liv is the second largest

player, with a total market share of 18 per cent. As regards newsales of unit-linked funds SEB is No 1 with a market share of

29 per cent in 2006.

Increased growth in all of SEBs markets

The North-European markets account for almost all of SEBs income, result and number

of employees. During 2006, SEB continued to consolidate its position through increased

volumes and high rankings. Approximately 50 per cent of the operating profit emanated

from markets outside Sweden.

Customer segmentation, Nordic banks

Share of total income, per cent

The Nordic banks differ in terms of business structure. Corporate customers

account for a considerably higher share of the business of SEB and DnB NORcompared with the other banks.

Income distribution, Nordic banks

Share of total income, per cent

0

20

40

60

80

100

Net other

income

Net financial

income

Net life insurance

income

Net fee and

commission

income

Danske

Bank

DnB

NOR

NordeaSHBSwedbankSEB

Net interest

income

SEBs commission income traditionally weighs heavier than that

of other Nordic banks due to the Groups specialisation on advi-sory services and more transaction-intensive activities with large

companies and demanding private customers.

0 20 40 60 80 100

DnB NOR

Danske BankAsset Management

Merchant Banking

Retail, The Baltic

Retail, Germany

Retail, Nordic

countries

Life insurance

Nordea

SHB

Swedbank

SEB

Retail, GB/Ireland


11/132

SEB ANNUAL REPORT 2006 9


The other Nordic countries

In Denmark, Norway and Finland, SEB has a strong position

within selected areas, for example cards, asset management,

wholesale and investment banking as well as life insurance.

The Group has close to 1.4 million customers in these countries.On a Nordic scale, SEB has a leadership position within cor-

porate and investment banking for large corporations and finan-

cial institutions. This is due to SEBs unique position in Sweden,

and the aim is to reach similarly prominent positions within the

Banks chosen areas in the other Nordic markets.

Denmark

In Denmark, SEBs customer offering comprises wholesale and

investment banking, life insurance, asset management, private

banking and cards (Eurocard, Diners Club, MasterCard and

Visa). At year-end 2006, SEB in Denmark had 780 employees andmore than 600,000 customers, accounting for approximately

7 per cent of the Groups operating profit for 2006.

Within investment banking, SEB retained its strong market

position. SEB was market leader in the corporate finance area

and ranked among the top three players in all major equity and

So Paulo

New York

Singapore

Shanghai

Beijing

MoscowSt: Petersburg

Gross income

Geographical distribution, per cent

Sweden 42 (44)

Germany 20 (26)

Rest of theNordic countries 16 (14)

Rest of Europe 6 (6)

The Baltic 8 (6)

Rest of the world 8 (4)

SEBs markets in Northern Europe account

for the dominating part of income.

London

Paris

Geneva

Marbella

St Petersburg

Germany Poland

Estonia

Finland

+57%

+50%

Latvia

Lithuania

Sweden

Denmark

Moscow

Ukraine

+33%

+42%

+96%

+29%

+34%

Luxembourg

Norway

+38%

SEBs markets Profit growth 2006 1)

1) Overall operating profit growth 2006, 39%

Market shares of total savings, Sweden

Per cent

AMF 7.3 (7.5)

Other 25.9 (25.3)

Swedbank 14.2 (13.8)

Skandia 10.2 (10.5)

Alecta 10.1 (10.5)

SEB 13.0 (12.7)

Nordea 8.3 (8.6)

Handelsbanken 11.0 (10.8)

SEB is number two on the Swedish private savings market.

Total assets under management

SEKbn

1,500

1,200

900

600

300

0

2006

2005

DnBNOR

DanskeBank

Nordea

SHBSwedbank

SEB

SEB is one of the largest

asset managers in the

Nordic region.


12/132


capital market products. The generated profits from the Danish

merchant and investment banking activities have significantly

increased, making 2006 the best year to date.

Assets under management in Denmark amounted to SEK

143bn, primarily on behalf of institutional clients, and SEB is

ranked third in the Danish market after the two major localbanks, Danske Bank and Nordea. SEBs funds were again top

ranked in different ratings and surveys. In the spring, SEB

acquired Prime Management, a smaller Danish private banking

company.

SEB Pension is Denmarks fourth-largest private pension

company with 300,000 customers and assets of SEK 82bn. The

annual gross premiums rose by 21 per cent, to SEK 6.1bn. The

company offers both unit-linked and traditional insurance.

Norway

SEB in Norway offers wholesale and investment banking servic-

es, private banking and cards (Eurocard, MasterCard and Diners

Club). SEB has 500 employees and close to 600,000 customers in

Norway. In 2006, Norway accounted for approximataely 9 per

cent of SEBs operating profit.

The niche bank Privatbanken ASA, acquired in 2005, is serv-

ing affluent private customers under the name of SEB Privat-

banken. In addition, SEB started asset management activities in

Norway in early 2006.

Business flows were strong within most product areas and

prioritised customer segments. Activity on the Oslo Stock

Exchange was high, measured both in trading volumes and

numbers of IPOs. SEB arranged and participated in several

major transactions and SEB maintained its position as one of the

five highest-ranking banks for large corporations. SEB Enskilda

secured its position as the market leader within investment

banking and was No. 3 on the Oslo Stock Exchange (after DnBNOR and Carnegie), with a market share of 7.6 per cent in 2006.

Finland

SEB in Finland comprises wholesale and investment banking,

card operations (Diners Club and MasterCard) and wealth man-

agement (primarily via the subsidiary SEB Gyllenberg). Close to

350 employees serve more than 100,000 customers in total. In

2006, Finland accounted for approximately 3 per cent of SEBs

operating profit.


0 5,000 15,00010,000 20,000 25,000 30,000

ABN Amro

Lazard

JP Morgan

Merrill Lynch

Lehman Brothers

Morgan Stanley

Carnegie

Goldman Sachs

Deutsche Bank

SEB Enskilda

0 200 400 600 800 1 000

Carnegie

Nordea

Morgan Stanley

Lehman Brothers

Credit Suisse

Pareto Securities

SHB

ABG Sundal Collier

UBS

SEB Enskilda

Source: Thomson Financial Source: Dealogic

Nordic M&A transactions

Deals completed during 2006, USDm

Nordic IPOs

By bookrunner 2006, USDm

Market shares

Per cent 2006 2005 2004

Deposits from general public

Sweden1) 20.5 21.7 21.4

The Baltic countries 27.3 29.0 31.0

Lending to general public

Sweden2) 14.4 15.0 15.0

The Baltic countries 27.2 29.0 29.0

Mortgage loans, total

Sweden 12.6 12.5 12.3

Mortgage loans, private market

Sweden 14.7 14.7 14.8

The Baltic countries 24.1 n.a. n.a.

Mutual funds, new business

Sweden 26.1 17.1 7.4

Finland 4.4 1.7 3.9

Mutual funds, total volumes3)

Sweden 16.6 16.0 16.3

Finland 5.5 5.7 7.3

Estonia 22.2 24.9 27.5Poland 1.6 3.3 4.7

Germany4) 8.2 6.5 6.7

Unit-linked insurance, new business

Sweden 29.1 32.6 34.6

Life insurance, total

Sweden 18.3 19.5 20.9

Denmark 10.0 9.0 9.0

Equity trading

Stockholm 10.1 10.6 10.0

Oslo 7.6 7.9 8.4

Helsinki 3.5 3.8 3.2

Copenhagen 5.9 6.8 6.0

1) Market shares for deposits from households were 12.2 per cent (12.2) and from

companies 25.8 per cent (27.5).

2) Market shares for lending to households were 12.5 per cent (12.5) and to companies16.0 per cent (17.0).

3) Excluding third-party funds.

4) Real estate funds.


13/132


Within custody services SEB is the second largest bank, afterNordea, but ranked No. 1 in terms of customer satisfaction. SEBEnskilda is also highly ranked within research and equities inFinland and No. 1 within M&A advice.

In 2006, SEB participated in seven (excl. commercial real

estate) syndicated loan transactions, acting as mandated leadarranger for five of these. Other financing transactions in theform of private placements and major leasing transactions werecarried out during the year. The Commercial Real Estate unitfinanced or participated in six important real estate transactionsduring 2006. Trade finance activities were successful and contin-ued growth is expected for this area.

The leasing business ABB Credit Oy (acquired in 2005) wasre-branded SEB Leasing Oy and merged with the financingoperations of SEB Finans Helsinki Branch. SEB, which is theleading provider of large leasing financing in Finland, expandedfurther in the leasing market and diversified its business intostructured receivables financing.

SEBs market share of the Finnish mutual fund market,where the subsidiary SEB Gyllenberg is one of the largest play-ers, was 5.7 per cent in 2006. SEB Gyllenberg has a top positionin the institutional asset management market and is one of theleading providers of private banking services in Finland.

Germany

In Germany, SEB AG is one of ten banks with a nation-wide net-work of branch offices. The bank is focused on private customerswith savings and mortgage loans, merchant banking activities,commercial real estate financing and asset management. SEB hasapproximately 3,400 employees and close to one million custom-ers in Germany. In 2006, SEB AG accounted for approximately 10per cent of the Groups operating profit.

SEB is a strong player in the German market for real estatefunds, with a market share of 8 per cent. The share of the totaldeposit and lending market in Germany is less than one percent.

SEB has a strong position within commercial real estatefinancing in Germany, having been one of the key banks in thisarea for years.

SEBs services to corporate clients and financial institutions inGermany were once again ranked at the very top. Within retailbanking, customer satisfaction improved substantially and SEB isnow one of the highest-ranking banks in Germany in this respect.

Estonia, Latvia and LithuaniaIn the Baltic area SEB has three subsidiary banks SEB Eesti his-pank in Estonia, SEB Unibanka in Latvia and SEB Vilniaus Bankasin Lithuania with 4,500 employees and 2.6 million customers, ofwhom 178,000 corporate customers. In addition, SEB has a lifeinsurance company in each Baltic country. The combined resultfor 2006 corresponds to 15 per cent of SEBs operating profit.

The three banks have strong positions in their respectivemarkets. SEB Eesti hispank is the second largest bank in Esto-nia after Hansabank. SEB Unibanka is number three in size inLatvia but number one in terms of deposits and lending. SEBVilniaus Bankas is the largest bank in Lithuania.

The three banks combined share of the total deposit andlending markets of the Baltic countries is approximately 30 percent. SEB Vilniaus Bankas has a somewhat higher share while

that of SEB Unibanka is slightly lower.

In the Baltic region, SEB has a leading position among large cor-porations, especially in the areas of foreign exchange, trading,cash management and M&A business.

The three Baltic banks have during 2006 sucessfully met theincreased demand for new savings products, such as mutual

funds and unit-linked insurance. The SEB banks have a signifi-cant share of these markets.

Poland, Ukraine and Russia

After the sale of its 47-per cent shareholding in Bank OchronySrodowiska, BOS, SEBs operations in Poland comprise a branch,a wholly-owned mutual fund company, SEB TFI, and a branchof SEBs German leasing company.

In Ukraine, SEB Bank with 500 employees has 21,000 privateand 6,300 corporate customers. The demand for various types ofbanking services is growing. However, only 27 per cent of theinhabitants in Ukraine have an established bank relation today.Thus, the potential for future growth is substantial. SEBs ambi-tion is to open ten branch offices per year and to establish lifeinsurance business in the country during 2007.

In 2006, SEB acquired PetroEnergoBank which in 2007 willbe renamed SEB. Twelve branch offices are planned for the nexttwo years. SEBs other operations in Russia include a representa-tive office in Moscow and a leasing company in St Petersburg SEB Russian Leasing.

Other international locations

SEB runs operations at strategically important locations in suchfinancial centres as London, New York and Singapore to servecorporate customers with international operations. Nordic andGerman private individuals living outside their home countriesmake use of these offices, too.


50

40

30

0

LithuaniaLatvia2)Estonia1)

10

20

Loans

Deposits

Market share per country 2006

Per cent

Due to signs of potential economic

overheating in Estonia and Latvia,

SEB has increased the focus on

return and loan portfolio quality.As a consequence, the banks lending

market shares have marginally

decreased in these countries.

1) Excluding loans to financial institutions

2) Resident deposits only


14/132



Higher customer interaction

The SEB Group serves more than five million private individuals

and 400,000 corporate customers today. In recent years, growth

has primarily taken place in its new markets.SEB offers individual, active and developing banking rela-

tions whenever and wherever customers so desire. This means,

among other things, that SEB solutions by combining products

and services in order to meet different customers needs. SEB

stands for pro-activity, competence and attention to customers

individual needs.

Focus on increased customer satisfaction

In order to realise the vision of being the leading bank in its cho-

sen markets in Northern Europe , SEB strives to improve service

levels and increase activity levels with respect to customers.

SEB is a financial partner to more than 1,500 large companies

that are active in the Nordic countries, Germany and the Baltic

countries. In addition, on a global basis SEB counts approxi-

mately 1,000 banks and more than 200 major institutions among

its customers.

Within the corporate sector SEB occupies a leading position

since long as a bank for large companies and financial institu-

tions in Sweden, in several cases with more than century-old

relations. In recent years SEB has strengthened its position on

the market for large corporations in the rest of the Nordic area

and Germany. During 2006, large companies and institutions

accounted for approximately 40 per cent of SEBs income.

SEB serves 400,000 small and medium-sized corporate cus-

tomers, mainly in Sweden and the Baltic countries. These cus-

tomers can benefit from the knowledge and competence that

SEB has built up in co-operation with the large companies and

adapted to the needs of smaller companies. SEBs customer base

in the market for small and medium-sized companies is impor-

tant and growing in Sweden and the Baltic area. The ambition is

to focus more on these customer groups, both in the rest of the

Nordic region and Germany.

00

0

500,000

1,000,000

1,500,000

2,000,000

3,000,000

2,500,000

The Baltic region

Germany

Denmark

Sweden

03 04 05 060201999897

Number of users of the Banks Internet services

Today, SEBs Internet banks are used by approximately 2.6 million private custom-

ers and small companies in six countries. In addition, the Group offers specialist

services via the Internet such as foreign exchange and interest trading, mainly to

large companies.

After a reduction of the number of branch

offices at the end of the 1990s, the Bank

has more than doubled its branch office

network through acquisitions in Germany

and Eastern Europe. During 2006 the Bank

opened seven new branches offices in the

Nordic region and the Baltic countries.

Branch offices

600

500

300

100

0

400

200

200620011997

300

250

200

150

100

50

200620011997

0

Card transactions

Million

3.0

2.5

1.5

2.0

1.0

0.5

0

20062004 2005

Personal telephone service

Calls to SEBs call centers, million

1.8

1.5

1.2

0.9

0.6

0.3

0

2004 2005 2006

Automatic bank service

machines

Thousands

In Sweden and the Baltic coun-

tries, SEBs private customers

are offered personal service

around the clock. In Sweden,

the service is offered in 17

different languages.

Since 2001 the number of

card transactions has dou-

bled and amounts to 332

million transactions.

Automatic bank service

machines include ATMs,

machines for cash deposits,

transfers, foreign exchange and

recharging cards.


15/132



During 2006 small and medium-sized companies accounted for

approximately 25 per cent of SEBs income.

Today, SEB has the privilege of assisting 5 million privateindividuals, providing solutions to their everyday finances,

loans and investments. During 2006, private individuals

accounted for approximately 35 per cent of SEBs income.

When it comes to the private individual customers in Sweden,

SEB has a leading position among financially active people with-

in such areas as asset management, mutual funds and unit-linked

insurance. SEB also has extensive operations in the private mar-

kets of the Baltic countries, where the Groups position is strong,

and in Germany. That also applies to certain niches, e.g. asset

management, cards and life insurance, in the rest of the Nordicregion.

Distribution channels

SEBs customers can keep in contact with the bank around the

clock via branch offices, internet and telephone service. In total,

around 200 million customer meetings take place every year in

the SEB Group, of which a third through the Internet.

SEBs ranking 2006 examples

Area Rank Organisation/publication etc

Best bank at cash management in the Nordic and Baltic region 1 Euromoney

Best bank at cash management in the Nordic region 1 Global Finance Magazine

Best bank at liquidity management in the Nordic region 1 Global Finance Magazine

Best bank at payments and collections in the Nordic region 1 Global Finance Magazine

Best bank for risk management 1 Global Finance Magazine

Best sub-custody bank in Denmark, Finland, Latvia, Lithuania, Norway and Sweden 1 Global Finance Magazine

Best sub-custody bank in Estonia 2 Global Finance Magazine

Best stockbroker in the Nordic region 1 Prospera

Best research house in the Nordic region 1 Prospera

Best European equity team 2 Morningstar

Best Swedish small cap team in Europe 3 Morningstar

Best mututal fund company in Sweden 2 Prospera

Best M&A house in Latvia 1 Euromoney

Best at commercial real estate banking in the Nordic and Baltic region 1 Euromoney Real Estate Awards

Best at investment real estate banking in the Nordic and Baltic region 1 Euromoney Real Estate Awards

Best at advisory financial services in real estate banking in the Nordic and Baltic region 2 Euromoney Real Estate Awards

Best agent bank in the Nordic region 1 Global Custodian

Best research house in the Nordic countries 1 Extel Survey, Thomson Financial

Best bank for Scandinavian currencies 1 FX Week

Best bank in Lithuania 1 Euromoney

Best consumer internet bank in Lithuania 1 Global Finance Magazine

Best internet bank in Estonia 1 Metasite Business Solutions

Best risk manager in the Nordic region 1 TMI

Best private bank in the Nordic and Baltic region 1 Euromoney

Best private bank in Sweden 1 Prospera

Best overall customer service cards 1 Teleperformance Danmark A/S CRM Grand Prix

Best of Europe in Prepaid 1 MasterCard


16/132


SEBs employees

SEBs employees

SEBs capability to attract, develop and keep the most competent employees is a keycompetitive factor for a successful development of SEB.

SEBs values

The SEB Groups common corporate culture is based upon four

values: Commitment, Continuity, Mutual respect and Profes-

sionalism. These values form a natural part of leadership and a

basis for the daily relations both between the employees of the

Group and between employees and customers. SEBs commit-

ment to customers and society shall be reflected in these values.

The goal is to create value for customers and shareholders and

as a matter of course for the employees, too.

Competence and leadership development

Continuous competence and leadership development are of deci-

sive importance for a growing business operation and a prerequi-

site for enabling SEB to deliver the right solutions to its customers.

To make sure that SEBs development activities are in line with

the objectives set in its business plan, the Bank initiated a process

during 2006, which not only assesses employees and leaders but

also defines the needs for competence development in terms of

individual goals, in view of the Groups overriding objectives.

It is SEBs ambition to create a culture in which managers and

employees constantly are trying new ways of developing the busi-

ness in order to make the Bank an even more effective business

partner. This is why the contents of the leadership programmes of2006 are more clearly focused on change and innovation.

SEB is active in some 20 countries and attaches great impor-

tance to making use of the total competence that exists within

all parts of the Group. Job rotation is encouraged as well as

work across divisional lines and geographical borders.

To mirror the Groups global structure, SEB developed a frame-

work for Group-wide training in 2006. This means that all

employees and managers are offered the same opportunities for

development, regardless of division or geography.In 2006 SEB invested atotal of SEK 252m (250)in competence develop-ment. Almost everyemployee participated insome kind of trainingand 1,800 managers par-ticipated in the Groupsinternal or external lead-ership programmes.

Internal training com-

prises everything from

professional competence

courses to the Groups

own management pro-

grammes such as the

Wallenberg Institute and

the Wallenberg Executive(for high-level managers).

In 2006, SEB imple-

mented a common global process for performance management

for all employees with individual targets, linked to SEBs busi-

ness plan. The same process is used in the annual top manage-

ment review. The purpose is to ensure that SEBs managers

have the appropriate competence and that there exists a good

succession planning for the key managers of the Group.

SEB Licence

In November 2005, SEB launched a common training programme

in order for all employees to become better SEB ambassadors

and strengthening the SEB brand. Improved knowledge about

the Groups products and services would lead to enhanced

customer services and to an incentive to identify new product

needs.

The programme consisted of two parts. The first Internet-

based part gave the participants general knowledge about

almost all the products that SEB has on offer. The second part

consisted of workshops to gain more profound knowledge

about products and processes and to establish contacts between

employees. Nearly all of SEBs 20,000 employees participated in

this programme.

Internal employee survey

SEB has a systematic approach to an open and continuous dia-

logue about employees views on such important matters as

work environment, motivation, leadership and Group perform-

ance in the market. SEB has chosen to carry out attitude surveys

every second year in order to give time for improvement work

to reach good, long-term results. Next survey is planned for the

autumn of 2007.

Equality and diversity

The SEB Group strives to offer everybody equal opportunities

and rights, regardless of gender, national or ethnic origin, age,

sexual orientation and religious faith.According to the equality plan that was adopted by SEB in

Sweden in 1998 the long-term goal is an equal distribution

between men and women. Each sex shall be represented by atleast 40 per cent at each level. SEB has taken several measures inorder to achieve this objective. For example, when a new man-

200620052004

0

3,000

6,000

9,000

12,000

15,000

Training cost per employeeSEK

Post gymnasium/University < 3 years 12

Compulsory school 10

Other/Unspecificed 6

Upper secondary school education 34

Post gymnasium/University > 3 years 38

Educational level

Per cent


17/132


SEBs employees

ager is appointed both sexes shall be represented among thethree main candidates.

In 2006, 38 per cent (37) of all the Groups managers were

women and the same percentage was true for Sweden. The share

for group and customer service managers was 48 per cent, while it

was 33 per cent for department and branch office heads. At higherlevels, the share of women was 22 per cent.

SEBs diversity plan was established in 2005.

Work environment and health issues

The awareness of the connection between work and health care

is of vital importance for the working environment. In Sweden, a

well-functioning and systematic programme is therefore being

implemented. In co-operation with local, occupational health

care SEB carries out extensive rehabilitation work to help long-

term sick-listed employees return to work. In 2006, the number

of long-term sick-listed employees decreased to 2.4 per cent

(2.8), while total sickness absence dropped to 4.1 per cent (4.6).

SEB and young professionals

In order to secure its position as an attractive employer SEB con-

tinuously works on building long-term relations with the target

groups of young professionals (academics with a few years of

working experience) and last-year university and college stu-

dents. The work consists in communicating the Groups valuesand in defining the desirable profiles of future employees. In Jan-

uary 2007 SEBs first international trainee programme involving

all divisions was concluded. A new programme will start in 2007.

Remuneration within SEB

SEB operates both in global and local environments as well as in

different types of areas, e.g. retail banking, wholesale and invest-

ment banking, life insurance and wealth management. SEBs suc-

cess depends on the commitment and professionalism of its staff.

The remuneration shall aim at meeting the financial objec-

tives of SEB. The total remuneration shall also be competitive

within each market in which SEB is present to attract, motivate

and retain highly skilled individuals. Individual remuneration

levels shall only be based on the factors of experience, compe-

tence, responsibility and performance.

SEBs total remuneration structure consists of the following

main components: base salary, short term incentive compensa-

tion, long-term incentive compensation to senior managers and

other key employees and pension and benefits.

The base salary depends on the complexity of work and theindividuals work performance, experience and competence.

The majority of SEB employees are eligible for short-termincentive compensation. This is based on the achievement of cer-tain predetermined goals, individual and general, qualitativeand quantitative. All employees in Sweden, as an example, canreceive short-term incentive compensation of maximum SEK

30,000 based on the financial result of the Group plus anotherSEK 18,000 based on the result of each respective division and/or local unit and individual/team performance during 2006.Managers and key specialists are generally subject to individualagreements, usually maximized to either a certain percentage ofthe base salary or a fixed amount.

In 2006 approximately 500 senior managers and key special-ists were granted long-term incentive compensation in the formof performance shares. The purpose of this compensation is tostimulate senior managers and other key staff to increasedefforts by aligning their interests and perspectives with those ofthe shareholders. (See page 52 for more information on the SEBlong-term incentive compensation programme)

Pension conditions vary from one country to another. InSweden, the pension conditions are defined by the collectiveagreements. Only a small number of employees at senior man-agement level have pension conditions that go beyond the col-lective agreements. The pension conditions of the Group Execu-tive Committee are specified in note 9.

Employee turnover

YearHeads

Average Starters Leavers Retired

2002 19,994 884 (4.4%) 1,343 (6.7%) 273 (1.4%)

2003 19,411 643 (3.3%) 1,069 (5.5%) 108 (0.6%)

2004 19,108 784 (4.1%) 789 (4.1%) 189 (1.0%)

2005 19,872 2,029 (10.2%) 1,183 (6.0%) 109 (0.5%)

2006 20,689 2,249 (10.9%) 2,012 (9.7%) 228 (1.1%)

Women Men

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

504049303929

8

7

6

0

2

1

5

4

3

50304929

Men, short-term leave

Men, long-term leave

Women, short-term leave

Women, long-term leave

No. of employees

Distributed by age and gender

Sick-leave, SEB in Sweden

Short and long-term leave by gender.

Of regular working hours, per cent.

Total sick leave for SEB in Sweden

2006 was 4.1 per cent and long-

term leave 2.4 per cent.


18/132


SEBs role in society

An active role in society

In order to achieve the goal of being a good social citizen it is of decisive importance to be-have in a responsible and ethical way towards all interested parties in the daily operations.

In its capacity as a financial group, SEB plays an important role

in society by

acting as an intermediary between companies and/or pri-

vate individuals with surplus capital and those who have

borrowing needs,

providing an effective payment system, which is a condition

for a functioning society and

handling financial risks.

Primarily through carrying out these tasks in an ethical and

responsible manner SEB will gain respect and contribute to a

positive social development.

Being a good social citizen in all countries where it is active is

one of the Groups overriding goals. SEB shall stand for good eth-

ics and openness and contribute to a sustainable development.

SEBs corporate social responsibility

SEB has a policy for the social responsibility of the Bank and

supports the principles of the United Nations Global Compact

and the OECD guidelines for multinational companies. This policy

means that SEB takes long-term responsibility in its day-to-day

work. SEBs operations are based upon the long-term confidence

of customers, employees and society.It applies to ethical issues that have a direct impact on SEBs

customers and business as well as to responsibility for the

employees and, in a broader sense, for the society and environ-

ment.

Several Group-wide policies and instructions govern the

work on SEBs social commitment. All this work is based upon

SEBs common values Commitment, Continuity, Mutual

respect and Professionalism. In addition, targets have been set

for continuous and systematic assessment and follow-up of the

work, which is led by a Group-wide Corporate Social Responsi-

bility Committee, CSR, with representatives from all divisions

and staff functions. The heads of divisions and subsidiaries have

the operative responsibility for social commitment.

Ethics and long-range planning

SEBs activities are based upon trust, continuity and long-term

relations with customers. This means that SEB and its employees

must meet the highest ethical standards and act in a long-term

perspective. It is a matter of course that SEB observes all laws

and other general regulations concerning bank secrecy, treat-

ment of personal information, integrity protection and informa-

tion safety. In addition, the Group has adopted a number of own

rules regarding ethical issues. In early 2007 SEBs Board of Direc-

tors adopted a new Code of Business Conduct.

SEBs role as a lender

SEBs credit policy describes the role and responsibility of the

Group as a lender. SEB strives to increase awareness of the indi-

rect effects and responsibilities that the Groups credit-granting

activities have on the environment and what they mean for a

sustainable development. A special section of the credit policy

stresses SEBs social responsibility beyond the associated impor-

tant issues of confidence in the customer, the credit purpose and

environmental matters.

The Groups Head of Credits has issued special instructions

and prepared follow-up systems to support credit decisions that

involve SEBs social responsibility. Factors that may have a nega-

tive impact on the environment and other issues of importance

are assessed and analysed in connection with credit decisions

and annual follow-up routines. Such analyses and assessmentsare made in a broader perspective than just taking factors that

affect borrowers repayment capacity into account. Special atten-

tion is paid to financings of major infrastructure projects, which

may involve risks for a negative impact upon the population

and environment.

SEBs role as an asset manager

SEB strives to maintain high ethical standards in its relations

with customers, employees, suppliers and other partners. The

Group offers a broad range of asset management products with

a special ethical profile and works actively with corporate gov-

ernance issues. SEB Fonder (Mutual Funds) finds it important

SEBs priority areas within Corporate Social Responsibility

Ethical and sustainable business conduct

SEBs role as a lender

SEBs role as an asset manager

SEBs role as an employer

Social commitment Environmental responsibility

SEBs Code of Business Conduct

The SEB Code of Business Conduct describes and develops SEBs

values and standards of business conduct. The Code provides

guidance on how to live by those values. The aim is to achieve

the following main objectives:

Describe the responsibilities that follow with employment in SEB.

Describe the standards of business conduct.

Provide guidance on how to resolve potentially difficult situations.

Establish procedures for reporting Code-related issues.

Show stakeholders that SEB acts in an ethical and professionalway.


19/132


that each company in which they choose to invest has an estab-

lished ethical and environmental policy.

As a major manager of savings capital, it is the responsibility

of SEB Fonder to be an active owner and to act in order to give

companies the best possible opportunities for carrying on their

activities.SEBs mutual funds are put under strict obligations as to

which shares its ethical portfolios may include by excluding

such lines of business as weapons, alcohol, tobacco, pornograpy

and gambling. SEBs ethical assortment of funds must follow

certain ethical standards and two different methods are used for

selecting companies: screening by using Global Ethical Standard

and exclusion of companies according to so-called negative crite-

ria.

Global Ethical Standard is based upon international stand-

ards regarding human rights, labour, environment, bribes, cor-

ruption and arms trading. Investments in indexed forwards are

excluded since it is difficult to exclude indirect exposures on

companies that violate SEBs ethical criteria.

Social commitment

Being a good member of society forms part of SEBs business

concept and this is why the Group supports various social

projects both centrally and through its different business areas.

Youth, education, equality and diversity are areas of priority. In

addition to direct grants of SEK 16.2m during 2006, the aim is

that all SEB employees shall actively contribute with knowledge

and personal commitment.

Mentor Sverige and Mentor Lietuva

Since 1997 SEB supports Mentor Sverige, a Swedish foundation

engaged in drug prevention measures for the youth that runs

two drug prevention programmes: a mentorship and a parentaltraining programme. During 2006, 34 persons within SEB partic-

ipated as mentors, while 100 took part in the parental training.

SEB employees can be mentors for pupils at the senior level of

the compulsory school during one school year. SEBs Lithuanian

subsidiary bank, SEB Vilniaus Bankas, was one of the initiators

of a national mentor organisation in Lithuania, Mentor Lietuva.

SEB is trying to broaden its co-operation with Mentor to include

also Germany, Estonia and Latvia.

Other projects

In various ways, wherever SEB is represented, the Bank sup-

ports local projects and initiatives that focus particularly on

school-training and sports-linked childrens and youth issues.In connection with the Rosa Bandet-campaign (Pink Band),

SEB sold about 8,000 pink bands for the benefit of the CancerFund, which also received SEBs Christmas gift, which is givenfor charity purposes instead of sending Christmas cards.

Since 1999, SEBs Baltic Fund/WWF sends an annual contri-

bution to the World Wide Fund for Nature and its Baltic action

programme.

At the annual Swedish Christmas concerts it is a tradition to

collect money for various projects. In 2006, money was collected

for Mentor, Queen Silvias Childrens Hospital and the Child-

rens Cancer Fund in Skne. SEB also gave pictures to the City

Mission of Stockholm for its art auction for the benefit of the

homeless and to the Swedish Church in London.

Environmental matters

According to SEBs environmental policy SEB shall consider

environmental aspects to the greatest extent possible. SEB has

signed the environmental documents of both the United Nations

and the International Chamber of Commerce, under which the

signatories are committed to paying due regard to, and acting for,

a better environment within their respective activities. This work

is led by a Group-wide environmental committee that makesreports on, and follows up, these issues on a continuous basis.

Further information is available at www.sebgroup.com.

SEBs role in society

Social key figures

2006 2005

Overall CSR Employee attitude:

Per cent of employees who think;

SEB is an ethical company 4) 77

it is important that SEB is

an ethical company 4) 76

Customer attitude:

Per cent of customers who think;

SEB is an ethical company 75 65

it is important that SEB is an

ethical company 99 87

Role as an

employer

Motivation index 4) 63

Leadership index 4) 78

Gender equality1) 38 37

Sick leave rate2) 4 5

Health index 62 61

SEB as an attractive employer, rank;

all companies 11 18

banks only 2 2

Social

Commitment

Mentorship programme3) 90 95

Financial support of

social projects, SEKm 17.5 18

1) Per cent female managers 2) In Sweden

3) Internal knowledge in Sweden 4) As from now measured every second year


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Sales of own shares

In the third quarter 2006 SEB sold approximately 3 million

shares, in excess of needs for the hedging of SEBs long-term

incentive programmes.

SEBs Class C shares

To facilitate foreign ownership the Class C share was introduced

at the end of the 1980s. The trading volumes of the Class C share

are very limited and the number of Class C shares only consti-

tutes 3.5 per cent of the share capital of the Bank. Due to this, the

prerequisites for creating only one class of shares, thus giving

the Class C shares the same rights as the Class A shares, have

been examined. The examination has shown that there are sig-

nificant practical difficulties to implement such a structure.

According to the Swedish Companies Act a proposal that theClass C shares should carry the same rights as the Class A sharesrequires that the proposal is supported by shareholders repre-senting at least 2/3 of the votes cast and shares represented at aGeneral Meeting of Shareholders as well as by 9/10 of the ClassA shares represented at the General Meeting. Furthermore

approval from a majority of all Class A shareholders is required.The reason for this is that a resolution to this effect would lead toa certain dilution for the Class A shareholders. Since the numberof shareholders in SEB is large, obtaining such approval wouldbe a drawn-out and complicated procedure.

The SEB share

Share capital

The SEB share is listed on the Stockholm Stock Exchange. The

share capital amounts to SEK 6,872m, distributed on 687.2

million shares. The Class A share entitles to one vote and the

Class C share to 1/10 of a vote.

Stock Exchange trading

During 2006, the value of the SEB Class A share increased by

33 per cent, while the Swedish General Index rose by 24 per

cent and the European Banking Index by 19 per cent. During

the year, the total turnover in SEB shares amounted to SEK

163bn. SEB thus remained one of the most traded companies

on the Stockholm Stock Exchange. Market capitalisation by

year-end was SEK149bn.

Dividend policy

The size of the dividend in SEB is determined by the financial

position and growth possibilities of the Group. SEB strives to

achieve long-term growth based upon a capital base for the

financial group of undertakings that must not be inferior to a

core capital ratio of 7 per cent. The dividend per share shall,over a business cycle, correspond to around 40 per cent of

earnings per share, calculated on the basis of operating result

after tax.

In 2006 the SEB Class A share rose by 33 per cent. In three years the SEB sharehas more than doubled in value. Earnings per share were SEK 18.72 (12.58). The

proposed dividend is SEK 6.00 (4.75) per share.

SEB Share

SEK

SEB Share, logarithmic scale.

Price equals last closing pricepaid on last day of each month.

SIX General Index

European Bank Index (FTSE)

80

60

40

100120,000

90,000

60,000

30,000

120

140

160

180

200

2002 2003 2004 2005 2006 FINDATADIREKT

Number of shares traded,in thousands, linear scale(incl. after-hours transactions)

250

200

0

150

100

50

Aug Sep Oct Nov DecJulJunMayAprMarFebJan

Highest paid

Lowest paid

Monthly share price 2006

SEK

The SEB share doubled in value


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The SEB share

SEK 19,000 has grown to SEK 2.6m

Those who bought 100 SEB shares at the price of SEK 190 pershare on 1 January 1972, when Skandinaviska Enskilda Bankenwas formed, would have invested a total of SEK 19,000. Thosewho after that participated in all new issues of shares up to thepresent would have invested another SEK 195,000. On the otherhand, they would have received total dividends of SEK 535,000over the years. Today, the original 100 shares would have grownto 11,350 shares. On 31 January 2007, the share price was SEK230, which means that the original investments represent apresent value of SEK 2.6m.

Distribution of shares by size of holding

Size of holding No. of shares Per cent No. of shareholders

1500 37,742,017 5.4 243,800

5011,000 18,694,359 2.7 25,764

1,0012,000 18,644,235 2.7 13,176

2,0015,000 21,299,129 3.1 6,9345,00110,000 10,917,413 1.6 1,543

10,00120,000 7,868,496 1.1 564

20,00150,000 10,535,204 1.5 338

50,001100,000 11,148,415 1.7 156

100,001 550,307,363 80.1 339

687,156,631 100.0 292,614

Source: SIS garservice

Change in share capital

Skandinaviska Enskilda Bankens share capital has changed as follows since the Bankwas started in 1972:

Year Transaction SEKChange in no.

of sharesAccumulatedno. of shares

SharecapitalSEKm

1972 5,430,900 543

1975 Rights issue 1:5 125 1,086,180 6,517,080 652

1976 Rights issue 1:6 140 1,086,180 7,603,260 760

1977 Split 2:1 7,603,260 15,206,520 760

1981 Rights issue 1B:10 110 1,520,652 16,727,172 837

1982 Bonus issue 1A:5 3,345,434 20,072,606 1,004

1983 Rights issue 1A:5 160 4,014,521 24,087,127 1,204

1984 Split 5:1 96,348,508 120,435,635 1,204

1986 Rights issue 1A:15 90 8,029,042 128,464,677 1,284 1)

1989 Bonus issue 9A+1C:10 128,464,677 256,929,354 2,569

1990 Directed issue2) 88.42 6,530,310 263,459,664 2,6351993 Rights issue 1:1 20 263,459,664 526,919,328 5,269

1994 Conversion 59,001 526,978,329 5,270

1997 Non-cash issue 91.30 61,267,733 588,246,062 5,882

1999 Rights Issue3) 35 116,311,618 704,557,680 7,046

2005 Reduction ofthe share capital 17,401,049 687,156,631 6,872

1) The recorded share capital at 31 December, 1986 was still SEK 1,204m, since theproceeds from the rights issue were not paid in full until early 1987.

2) The issue was directed at the member-banks of Scandinavian Banking Partners. Throughsplits in 1977 (2:1) and 1984 (5:1), the nominal value of the shares has been changed fromSEK 100 to SEK 10.

3) According to the instructions of the Financial Supervisory Authority, subscribed shares thathave been paid will not be registered as share capital in the balance sheet until the rightsissue has been registered (which took place in January, 2000).

SEB share

Data per share 2006 2005 2004 2003 2002

Basic earnings, SEK 18.72 12.58 10.83 8.22 7.60

Diluted earnings, SEK 18.53 12.47 10.82 8.19 7.60

Equity, SEK 98.98 84.84 77.31 70.10 65.51Adjusted equity 112.66 96.44 85.66 75.53 68.88

Net worth, SEK 115.90 102.19 89.50 78.03 70.55

Cash flow, SEK 6.32 52.49 4.95 4.24 4.49

Dividend per A and C share, SEK 6.00 4.75 4.35 4.00 4.00

Year-end market price

per Class A share, SEK 217.50 163.50 128.50 106.00 72.50

per Class C share, SEK 209.00 158.00 124.50 96.50 65.00

Highest price paid during the year

per Class A share, SEK 220.00 165.50 131.00 107.00 110.00

per Class C share, SEK 212.50 159.50 126.50 96.50 99.50Lowest price paid during the yearper Class A share, SEK 152.50 122.50 99.50 66.50 66.00

per Class C share, SEK 145.50 118.00 92.50 61.00 58.50

Dividend as a percentage

of result for the year, % 32.0 37.8 40.2 48.6 52.7Yield, % 2.8 2.9 3.4 3.8 5.5

P/E 11.6 13.0 11.9 12.9 9.5

Number of issued shares, million

average 673.3 667.8 679.8 693.5 700.1at year-end 678.3 668.8 668.5 691.4 697.6

Share capital

Number Number Percentage ofShare series of shares of votes capital votesA 663,004,123 663,004,123 96.5 99.6

C 24,152,508 2,415,251 3.5 0.4

687,156,631 665,419,374 100.0 100.0

Each Class A-share entitles to one vote and each Series C-share to 1/10 of a vote.

The SEB share on the OM Stockholm Stock Exchange

2006 2005 2004 2003 2002 2001

Year-end marketcapitalisation, SEKm 149,251 115,026 90,382 74,391 50,850 66,900

Volume of sharestraded, SEKm 162,707 104,372 86,293 85,648 83,758 75,424

24

12

8

0

4

20

16

2005 2006200420032002

Diluted earnings per share

Basic earnings per share

Dividend

Per SEB share, SEK

6

3

2

0

1

5

4

2005 2006200420032002

Basic and diluted earnings

Per SEB share, SEK

A dividend of SEK 6.00 per share isproposed for 2006.


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Financial Review of the GroupThe SEB Group continued to develop positively during 2006,

increasing its business volumes and improving both results and

key ratios. Favourable economic development of the markets in

which SEB is active in combination with the Groups broad geo-

graphical base and product mix were the reasons for this

improvement.

A couple of minor acquisitions were made during the year in

the form of the Russian bank PetroEnergoBank in St Petersburg

and the Danish asset management company Prime Manage-

ment.

SEBs sale of its total holding, 47 per cent, of the shares in

Polish Bank Ochrony Srodowiska S.A. to the national fund for

environmental protection and water purification (NFOS) for

about SEK 1.4bn was completed in July, 2006. A few months later

SEB opened a branch in Warsaw.

During 2006 SEBs operations were carried out through six

divisions. SEB Merchant Banking the Groups relations with large

corporations, institutions and real estate companies,

Nordic Retail & Private Banking the Groups Nordic retail

operations, private banking and card activities,

German Retail & Mortgage Banking SEBs German retail

and mortgage business, Eastern European Banking SEBs activities in Estonia,

Latvia, Lithuania, Poland, Russia and Ukraine,

SEB Asset Management mutual fund and asset manage-ment and

SEB Trygg Liv life insurance operations.

As from 1 January 2007, the operations of the SEB Group are

carried out through four divisions and three support functions

(see further the Corporate Governance Report on pages 4554).

Result and profitabilityBest result to date

SEBs operating profit for 2006 increased by SEK 4.3bn or 39 per

cent, to SEK 15,562m (11,223). Approximately 50 per cent of this

was generated outside Sweden. Net profit rose by 50 per cent, to

SEK 12,623m (8,421).

Income up by 13 per cent

Total operating income increased by SEK 4.5bn or 13 per cent to

SEK 38,747m (34,227).Net interest income was flat at SEK 14,281m (14,282). Margin

pressure, although less pronounced, in combination with

increased funding costs due to higher short-term interest rates

were offset by rising volumes. The customer driven proportion

of net interest income increased by 14 per cent.Net fee and commission income improved by 19 per cent, to

SEK 16,146m (13,559). All commission income categories

increased significantly. This was particularly evident for securi-

ties commissions, which net of expenses increased by 24 per

cent, and advisory, up by 36 per cent.

Net financial income rose by 19 per cent to SEK 4,036m (3,392).

The increase was an effect of high customer-driven activity in

the trading and capital markets area.

Net life insurance income improved by 13 per cent, to SEK

2,661m (2,352), principally as a result of continued strong sales

and higher unit-linked volumes. A complete description of SEB

Trygg Livs operations, including changes in surplus values, isfound in Additional information on www.sebgroup.com.

Net other income increased to SEK 1,623m (642), mainly due

to higher capital gains and positive effects from hedge account-

ing. One-off capital gains during 2006 totalled SEK 474m.


Sweden, 85%

Other Nordic, 5%

Other, 10%

Operating profit geographical distribution

Per cent

Sweden

Other Nordic

Germany

Eastern Europe

Other

1997

Operating profit

SEK 4.1bn1)

2006Operating profit SEK 15.6bn

1) Excl. restructuring costs of SEK 1,018m

SEB Asset Management 8 (8)

SEB Trygg Liv 9 (7)

German Retail & Mortgage Banking 4 (5)

Eastern European Banking 14 (11)

Nordic Retail & Private Banking 22 (26)

SEB Merchant Banking 43 (43)

Operating profit divisional distribution1)

Per cent

47% (50)

19% (19)

10% (11)

15% (13)

9% (7)

1) Adjusted for eliminations


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Profit and loss account on quarterly basis SEB Group

SEKm 2006:4 2006:3 2006:2 2006:1 2005:4

Net interest income 3,604 3,503 3,578 3,596 3,803

Net fee and commission income 4,274 3,772 4,107 3,993 3,895

Net financial income 1,120 890 1,047 979 890

Net life insurance income 732 739 607 583 644

Net other income 274 538 352 459 305

Total operating income 10,004 9,442 9,691 9,610 9,537

Staff costs 3,735 3,443 3,463 3,722 3,766

Other expenses 1,878 1,820 2,101 1,999 2,904

Net deferred acquisition costs 151 45 144 167 199

Depreciation, amortisation and impairments of

tangible and intangible assets 218 232 217 216 258

Total operating expenses 5,680 5,450 5,637 5,770 6,729

Gains less losses from tangible and intangible assets 22 6 14 28 53

Net credit losses2) 222 136 162 198 331

Operating profit1) 4,124 3,862 3,906 3,670 2,530

Income tax expense 334 803 959 843 560

Net profit from continuing operations 3,790 3,059 2,947 2,827 1,970

Discontinued operations 50

Net profit 3,790 3,059 2,947 2,827 1,920

Attributable to minority interests 3 6 4 5 5

Attributable to equity holders3) 3,787 3,053 2,943 2,822 1,915

1) SEB Trygg Livs operating profit 439 453 295 283 268

Change in surplus values, net 364 381 493 422 643

SEB Trygg Livs business result 803 834 788 705 911

2) Including change in value of seized assets

3) Earnings per share (weighted), SEK 5.61 4.54 4.38 4.22 2.94

Weighted number of shares, millions 675 673 672 670 668

Key ratios

2006 2005 2004 2003 2002

Return on equity, % 20.8 15.8 14.7 14.2 13.7

Return on equity excl. one-off charges, % 20.8 17.0 14.7 14.2 13.7

Return on total assets, % 0.64 0.48 0.51 0.52 0.51

Return on risk-weighted assets, % 1.71 1.31 1.32 1.26 1.24

Basic earnings per share, SEK1) 18.72 12.58 10.83 8.22 7.60

Basic earnings per share,

excl. one-off, SEK1) 18.72 13.54 10.83 8.22 7.60

Diluted earnings per share, SEK 18.53 12.47 10.82 8.19 7.60

Cost/Income ratio 0.58 0.65 0.65 0.65 0.69

Cost/Income ratio, excl. one-off 0.58 0.62 0.65 0.65 0.69

Credit loss level, % 0.08 0.11 0.10 0.15 0.13

Reserve ratio for impaired loans, % 75.1 77.7 79.2 66.3 70.8

Level of impaired loans, % 0.22 0.22 0.31 0.52 0.47

Total capital ratio, incl. net profit, % 11.47 10.83 10.29 10.23 10.47

Core capital ratio, incl. net profit, % 8.19 7.53 7.76 7.97 7.88

Risk-weighted assets, SEKbn 741 705 570 535 503

Number of full time equivalents, average 19,672 18,948 17,772 18,067 19,003

Number of e-banking customers, thousands 2,597 2,299 1,953 1,614 1,332

Assets under management, SEKbn 1,262 1,118 886 822 742

1) Restated to IFRS except for IAS 32 and IAS 39.2) Not prepared under IFRS.

2)2)1)


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Stable costs

Total operating expenses amounted to SEK 22,537m (22,149), an

increase of 2 per cent compared with last year. The increase was

mainly due to higher performance-related remuneration,

increased provisions for the long-term incentive programmes

and for redundancy costs. Approximately SEK 200m of the one-off charges of SEK 890m for unutilised office space and integra-

tion in 2005 was used during 2006.Staff costs rose slightly, excluding performance-related remu-

neration and provisions for

redundancy costs. Including

these effects, total staff costs

amounted to SEK 14,363m

(13,342). The average number

of full time equivalents in

2006 increased to 19,672

(18,948), of which 650 due to

acquisitions and growth in

Eastern Europe.Other expenses decreased

by 7 per cent, to SEK 7,798

(8,383). Adjusted for the

unutilised office space

charges and insurance-

related broker commissions,

other expenses were up by

1 per cent, mainly due to

increased costs for IT and

marketing.

Low credit loss level

The Groups net credit losses, including changes in the value of

assets taken over, decreased to SEK 718m (914). The credit losslevel was 0.08 per cent (0.11). Asset quality remained stable.

Reduced tax rate

Total tax costs amounted to SEK 2,939m (2,770). The total tax

rate was 18.9 per cent (24.7). The reduced tax rate was mainly

due to improved results of business operations subject to a l

SEB Annual Report 2006

Documents

Transcript of SEB Annual Report 2006