2019 Annual Report 2019 Annual Report Contents 2019 in brief OUR BUSINESS Important events and trends This is SEB Cover The global economy was fragile but gradually stabilised Statement from the Chair 2 while central banks’ quantitative easing continued. Statement from the President 4 At the end of the year, the Swedish central bank ended Business environment 6 a five-year period of negative interest rates. Our customers 8 Strategy and business plan 12 Corporate customers were active with high demand for Sustainability 20 advisory services, banking and capital market financing. SEB in society 23 Financial institutions handled the challenging interest Our employees 24 rate environment with caution, while demand for illiquid Overall targets and outcome 26 investments increased. Long-term value creation 28 SEB as an investment 30 Private customers’ demand for household mortgages grew and SEB’s market share for new mortgage loans REPORT OF THE DIRECTORS in Sweden improved. Sustainability report 32 Sustainability became an even stronger factor for Financial review of the group 39 customers and demand for green products grew. Risk, liquidity and capital management 52 Regulatory requirements 58 SEB signed the UNEP FI Principles for Responsible Corporate governance 60 Banking. FINANCIAL STATEMENTS AND NOTES The fight against financial crime and money laundering continued with further development of advanced Financial statements 76 technology solutions and refined working processes. Notes to the financial statements 86 Five-year summary 170 OTHER INFORMATION Proposal for the distribution of profit 172 Signatures of the Board of Directors Key targets and figures and the President 173 Auditor’s report 174 Board’s financial targets 2019 2018 Definitions 179 Dividend payout ratio at 40 per cent or more of earnings per share, per cent 671) 762) Calendar and publications Cover Common Equity Tier 1 capital ratio of around 150 basis points over requirement3) , basis points 250 270 Pages 32–173 constitute SEB’s formal annual report. Return on equity2) competitive with peers, per cent 13.8 13.4 Key figures Operating income, SEK m 50,134 45,868 Operating profit, SEK m 24,894 27,285 Return on equity, per cent 13.7 16.3 Cost/income ratio 0.46 0.48 Earnings per share, SEK 9.33 10.69 Dividend per share, SEK 6.251) 6.50 Common Equity Tier 1 capital ratio, per cent 17.6 17.6 Leverage ratio, per cent 5.1 5.1 Liquidity Coverage Ratio (LCR), per cent 218 147 1) Based on the Board proposal. 2) Excludes items affecting comparability . 3) Applicable regulatory requirement: 15.1% (14.7). Our customers and stakeholders Our customers’ needs are at the core of our business. Their high expectations for both personal and digital service, for quality advice and for sustainable solutions drive SEB’s business develop- ment and offerings. Our 15,000 employees work as a team to serve our customers and create value for our shareholders as well as society as a whole. Large corporations Shareholders 2,000 265,000 Financial institutions Employees 1,100 15,000 Small and Society medium-sized companies Society at large 400,000 Of these, some 272,000 are home bank customers. Private individuals 4,000,000 Of these some 1.5 million are home bank customers. We have a unique customer base and market position, serving our customers in our home markets and beyond. FINLAND NORWAY SWEDEN St. Petersburg ESTONIA LATVIA DENMARK LITHUANIA UNITED New York Beijing KINGDOM GERMANY Warsaw Kiev Luxembourg New Delhi Shanghai Hong Kong Singapore São Paulo Home markets International network Our business is strong and diversified, creating value for all our stakeholders. Diversified income 2019, % Financial value created 2019, SEK 65 bn 64 40 Retail banking 19 Interest paid to customers and bondholders 14 Dividends paid to shareholders 12 Asset management 12 Salaries, pensions and benefits to employees 7 Life insurance 41 Large corporates and institutions 9 11 Payments to suppliers 4 23 7 Taxes and social security charges 1) Income breakdown for Swedbank, Nordic SHB, Nordea, Danske Bank and DNB. peers1) SEB Business units only (indicative). 2 Regulatory fees We are well positioned versus our peers with a track record of strong profitable growth. Our peers 2019 Our profit development1), SEK bn Cost/income ratio1) 0.8 50 0.6 +5 % 2) 25 +4 % 2) 23 0.4 13 2) Return on 8 +8 % equity (%)1) 0.2 3 2 6 10 14 18 1990 2000 2010 2019 SEB Nordic peers Income Expenses Operating profit European peers Size of circle indicates CET 1 ratio (less or more than 15%) 1) Excluding items affecting comparability. 1) For Nordic banks, excluding items affecting comparability 2) Compound Annual Growth Rate (CAGR). This is SEB SEB enables people to realise their dreams, ambitions Return on equity and business ideas. Being the Nordic region’s leading corporate bank with an international perspective, 13.8% innovation and entrepreneurship are part of our DNA. excluding items affecting comparability We are driven by engagement and curiosity about Cost/income ratio the future. This has been our approach ever since we welcomed our first customer more than 160 years ago. 0.46 Our vision is to provide world-class service to Earnings per share our customers. We do this by building long-term relationships, providing personal and proactive advice SEK and serving our customers on their terms – face to face 9.33 or in the digital realm. Dividend per share We take responsibility for how we conduct our business and how we affect our customers, employees, 6.25 SEK shareholders and society at large. We support our as proposed by the Board of Directors customers in the transition to a more sustainable world and we contribute to the development of the Business bank communities in which we operate. of the year 2019 according to Finansbarometern Our business – Statement from the Chair Long-term partnerships in a changing world At SEB we aim to be a long-term partner to our customers and create shareholder value by building relationships based on mutual trust. As the world around us continues to change at an ever-increasing speed, it is our ambition to stay even closer to our customers and support them with personalised and proactive advice as well as innovative financial services. As we enter the 2020s we can look back and new technologies within artificial investments, and we support our corpo- on a decade of fast-paced technological intelligence, the internet of things, block- rate and institutional customers in their development, macroeconomic turbulence chain and 5G. This shift is transforming transition to more sustainable business and shifting geopolitical power in the companies and entire industries, providing models. world. 2019 was a year characterised by opportunities both for us as a bank and political and economic uncertainty, with for our customers. It is also paving the A business of trust low interest rates and continued expan- way for digital entrepreneurs, dynamic SEB’s most important asset is trust. We sionary monetary policies. The long Brexit start-ups and new, innovative and some- cherish our relationships with customers, process has formally come to an end, and times disruptive businesses. investors and shareholders, and we do our when the UK–EU separation eventually SEB’s role in this digital landscape is utmost to live up to our high internal and does come into effect, there will be tan- to support a new generation of entrepre- external standards of business conduct. gible consequences for both people and neurs looking to quickly grow their busi- The Board of Directors works together businesses. nesses and to contribute to our existing with the Group Executive Committee to Protectionist tendencies in many parts customers’ innovation journeys, support- navigate the changing financial landscape of the world are still of concern. There is ing them in their transformation. As SEB and to make sure that SEB is financially a growing need to safeguard multilateral itself becomes even more data-driven, we stable and competitive in the long term. trade, openness and democracy. The can understand and meet our customers’ SEB’s solid balance sheet is a precondition World Trade Organisation’s e-commerce behaviours and future needs even better. for the bank to safeguard a robust finan- trade negotiations could become an im- We also continue to develop new finan- cial position and to be able to stand by portant regulatory framework for future cial services, enabling our customers to our customers in good times and bad. business opportunities. Fair and free trade engage in new business opportunities The Board continually works to ensure is a prerequisite for business growth and where SEB can be part of their digital that SEB has the highest standards of a foundation upon which our societies rely. ecosystems. corporate governance, compliance and risk management. At SEB we are con- Value creation in the new The future is green stantly improving our ways of working and digital landscape Sustainability has been high on SEB’s sharpening our technological and other For more than 160 years SEB has been agenda for many years. As the effects tools to meet the ever-changing regulato- eager to understand what the future of climate change become more tangible, ry requirements in the financial sector. holds. We embrace innovation and we do our customers’ demand for sustainable These measures are helping SEB to im- our best to predict, understand and adapt products and services is increasing. The prove and strengthen the ongoing work in to the trends of tomorrow so that we can financial industry is now at the verge of compliance, risk mitigation and reporting. create value over time. We live in symbi- a shift towards offering truly sustainable Banks’ and society’s efforts to fight osis with our customers.