CARNEGIE HOLDING AB
INTERIM REPORT 1 January – 30 June 2020
Carnegie continued to demonstrate high business activity during the first half of the year and income rose marginally in relation to the corresponding period in the record year of 2019,” says President and CEO Björn Jansson.
▪ Operating income amounted to SEK 1,438 million (1,429). ▪ Operating costs amounted to SEK 831 million (830) ▪ Operating profit rose by 1 percent to SEK 607 million (599). ▪ Profit before tax fell by 9 percent to SEK 312 million (343) excluding a capital gain of SEK 153 million. ▪ Assets under management increased by 22 percent to SEK 138 billion (113). ▪ The Common Equity Tier 1 capital ratio was 21.7 percent (21.3).
FINANCIAL KEY DATA
Operating income (SEKm) Operating profit before tax (SEKm)
343 1 429 1 438 313 312 1 302 1 189 1 127 1 184 253 970 168 158 65
H1-17 H2-17 H1-18 H2-18 H1-19 H2-19 H1-20 H1-17 H2-17 H1-18 H2-18 H1-19 H2-19 H1-20
Assets under management (SEKbn) Common Equity Tier 1 capital ratio (%) 138 128 110 110 116 110 113 25,2 24,2 23,5 23,8
21,7 21,3 21,7
H1-17 H2-17 H1-18 H2-18 H1-19 H2-19 H1-20 H1-17 H2-17 H1-18 H2-18 H1-19 H2-19 H1-20
THE PERIOD IN BRIEF The report refers to the Carnegie Group (“Carnegie”) and its parent company Carnegie Holding AB. Unless otherwise stated, the report covers Group performance excluding profit from assets held for sale.
▪ Carnegie is reporting good earnings in the first half and moderately higher income than last year. − Income in Investment Banking & Securities fell 2 percent. − Private Banking is reporting income growth of 11 percent. ▪ Operating costs are on par with the same period last year. Proactive IT investments, higher personnel and rental expenses were offset by lower costs in other areas. ▪ The first half was characterised by changes in the earnings mix and geographical distribution: − Measured in both volume and total transaction value, Carnegie had high activity in equity capital market transactions in the Nordic market. − Sales in mergers and acquisitions declined in relation to the first half of 2019. − Carnegie demonstrated a strong trend in the corporate bond market and outperformed income in the preceding year. − On the strength of higher trading volumes and high client activity, commission income from the brokerage business rose during the first six months of the year. − Private Banking continued to generate positive new client inflow and higher net inflows of assets under management. − In terms of geographies, the highest income growth expressed as a percentage occurred in the British, Finnish and Swedish operations in the first half. ▪ In the light of the Covid-19 pandemic and out of an abundance of caution, the general meeting of shareholders resolved not to distribute dividends for 2019. ▪ The Group’s financial position remains strong, with a capital adequacy ratio of 21.7 percent. The Common Equity Tier 1 capital ratio and the liquidity coverage ratio both exceed legal requirements by a healthy margin.
SUSTAINED HIGH BUSINESS ACTIVITY
President and CEO Björn Jansson comments on the report
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 2
Carnegie continued to demonstrate high business activity during the first half and income rose marginally in relation to the corresponding period in the record year of 2019.
The worldwide spread of Covid-19 and the actions taken by political leaders and central banks to mitigate the effects of the virus have impacted every aspect of the world in which we live and do business. Despite the resulting uncertainty that characterised the financial markets in the first half, demand for advisory from Carnegie has been high. This is due to Carnegies client centric approached combined with a strong position as advisor. This applies especially to capital market transactions for companies and investment advisory and brokerage services for retail and institutional investors.
Consequent upon high market volatility, secondary commission rose markedly during the first six months of the year compared to the same period in 2019. Institutional and retail investors alike demonstrated high activity and Carnegie’s trading volumes rose by 30 percent.
Investment appetite remained good and Carnegie acted as an adviser for several corporate bond issuances and numerous equity capital market transactions in the Nordic market. We executed three IPOs; Musti Group in Finland, Pexip in Norway and Genova Property Group in Sweden, all of which have developed well since flotation. However, at the same time, we do see a lower activity in mergers and acquisitions. As a result, the overall earnings mix changed somewhat during the first half.
We are steadfast in our commitment to supporting the growth of new enterprise, with focus on sustainable companies and business models. We are active partners to Ung Företagsamhet Sweden and the Svenska Dagbladet “Affärsbragden” business award. This is also the second year running that Carnegie has presented its Sustainable Company of the Year award. The winners this year were Neste (Finland), Scatec Solar (Norway) and K2A (Sweden). The Sustainable Company of the Year award is intended to put the spotlight on sustainability parameters that create shareholder value and present good examples to inspire companies and investors. The award is presented within the framework of our equity research and the 350 companies we cover.
We continued investing during the period to manage the high business activity and further develop our offering over the long term. We have added a few employees since the beginning of the year and our IT-related costs are higher than last year. As the cost increases in these areas were offset by lower costs in others, total operating costs have not changed since 2019. Operating profit was marginally higher than during the corresponding period in 2019, which was a record year.
The events in early 2020 have reminded us that while market conditions are beyond our control, the high quality advice we provide to our clients is more relevant than ever. We thus have every reason to remain optimistic about Carnegie’s long-term development.
Björn Jansson
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 3
SIGNIFICANT EVENTS DURING THE PERIOD
▪ External recognition and client trust Carnegie has received the following client recognition and awards during the period. • Carnegie was named Financial IPO Adviser of the Year in the Swedish market, in terms of both quality and share price performance for the largest companies on the stock exchange. (Source: Affärsvärlden, May 2020). • For the fourth year running, Carnegie was again ranked highest among Swedish private banking providers (Source: Euromoney, February 2020). ▪ New director Anna-Karin Celsing Anna-Karin Celsing took her seat as a newly elected director of Carnegie in April 2020. Celsing has previous experience from leading positions with companies including Ratos and Föreningssparbanken, as well as board service for SVT AB and the Swedish Financial Supervisory Authority. ▪ Sustainability Award The Carnegie Sustainability Award was presented for the second consecutive year. The award is intended to put the spotlight on sustainability parameters that create shareholder value and present good examples to inspire companies and investors. The award is based on all companies covered by Carnegie in three categories. The 2020 winners were Neste, Scatec Solar and K2A.
EVENTS AFTER THE END OF THE PERIOD ▪ External awards • In July, Carnegie was named the Best Investment Bank in Sweden for the third year running by the international Euromoney magazine. • Also in July 2020, international magazine World Finance named Carnegie the Best Private Bank in Sweden. THIS IS CARNEGIE
Carnegie is one of the foremost financial advisers in the Nordics. Separately, all of our business areas are among the leaders in their fields. Together, they build a combination of integrated knowledge that is hard to beat. Experts in capital acquisition, business acquisitions, initial public offerings, corporate bonds, research and equity sales work side-by-side at Carnegie with specialists in wealth management advisory and asset management towards a single objective: guiding our clients to better business. SECURITIES & INVESTMENT BANKING Securities Carnegie Securities targets mainly institutional clients and offers services within research, equity sales and equity capital market transactions. The Fixed Income unit offers bond research and sales. Carnegie’s top-ranked research, brokerage and equity sales enjoy a globally leading position in Nordic equities. Operations in Denmark, Finland, Norway, the UK, Sweden and the US. Investment Banking
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 4
Carnegie Investment Banking offers professional advisory services in mergers and acquisitions (M&A) and equity capital market (ECM) transactions. The Debt Capital Markets (DCM) unit provides advisory in capital acquisition via corporate bonds and fixed income instruments. Carnegie has a long-established local presence, with unique understanding and expertise concerning industries and equity markets in the Nordic region. Operations in Denmark, Finland, Norway and Sweden. PRIVATE BANKING Carnegie Private Banking provides comprehensive financial advisory to high net worth individuals, small businesses, institutions and foundations. The business unit staff includes experts in asset allocation, asset management, structured instruments, law, tax management, pensions and trading in securities. Operations in Denmark and Sweden.
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 5
OPERATING INCOME STATEMENT and KEY DATA
Jan-Jun Jan-Dec
(SEKm) 2020 2019 % 2019 Continuing operations Investment Banking & Securities 1,109 1,132 -2 2,018 Private Banking 329 297 11 595 Operating income 1,438 1,429 1 2,613
Personnel expenses before variable remuneration -589 -540 9 -1,114 Other expenses -242 -290 -16 -592 Operating expenses -831 -830 0 -1,706
Operating profit 607 599 1 907
Financing costs, variable remuneration, etc. -294 -256 15 -407 Profit before tax 312 343 -9 501
Tax -69 -77 -11 -78 Profit for the period from continuing operations 243 266 -8 422
Profit from assets held for sale1) - 153 171 Net profit for the period 243 419 593
Financial key data, continuing operations Operating C/I ratio, percent 58 58 65 Operating income per employee, SEKm 2.4 2.5 4.6 Operating expenses per employee, SEKm 1.4 1.5 3.0 Operating profit margin, % 42 42 35 Assets under management, SEKbn 138 113 128 Return on equity, %2) 22 17 23 Total assets 15,527 12,148 11,285
Financial position Common Equity Tier 1 capital ratio, % 21.7 21.3 25.2 Equity, SEKm 1,950 1,854 1,725
Employees Average number of employees 593 563 569 Number of employees at the end of the period 593 556 585
1 ) Refers to Banque Carnegie Luxembourg (BCL). 2) Profit and equity for 2019 are adjusted for profit from assets held for sale. The key data are calculated based on 12 months rolling profit.
See page 23 for definitions and calculations of key data
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 6
MARKET & POSITION
CORPORATE TRANSACTIONS MARKET Equity capital market transactions (ECM) After a strong start to the year, the opportunity to close ECM deals was impeded by the global spread of Covid-19 and its effect on the financial markets at the end of the first quarter. Thereafter, the stock market recovered quickly, which created good conditions for ECM deals in the second quarter of the year. Overall, this resulted in high activity in ECM transactions during the first half. Carnegie has participated in numerous new issues and equity investments, as well as three Nordic IPOs, and was involved in more equity capital market transactions than any other financial services provider in the Nordics during the first half (Source: Refinitiv).
In July, Carnegie was named best Investment Bank in Sweden and best IPO adviser in Sweden (Source: Euromoney, Affärsvärlden).
Mergers, acquisitions & sales (M&A) The mergers and acquisitions market was characterised by a softer business climate in the first half, which affected Carnegie’s business activity. Nevertheless, Carnegie executed the most transactions of any provider in the first half and reinforced its position as the market leader. (Source: Refinitiv).
Nordic equity market (Equity Research & Trading) Carnegie’s total trading in the Nordic equity market rose sharply in the first half of 2020. When volatility in the financial markets accelerated in conjunction with the global spread of Covid-19, Carnegie benefited from its strong market position in Nordic equity trading and research.
Corporate bonds and fixed income instruments (DCM/Fixed Income) The corporate bond market was adversely affected by Covid-19 during the first half, but regained strength at the end of the second quarter. In these extraordinary circumstances, Carnegie is reporting higher income in the market compared to the preceding year.
THE CAPITAL AND WEALTH MANAGEMENT MARKET Despite the turbulence of the period, Carnegie has been able to offer private investors attractive investment opportunities both on and outside the stock exchange.
The favourable development of the business persisted, with positive new client inflow and higher net inflows of client assets under management. Carnegie’s leading market position among Swedish private banking providers was once again confirmed in various market surveys during the first half (Source: Euromoney, World Finance).
Total assets under management (AuM) with Carnegie at the end of the period amounted to SEK 138 billion (113), up 22 percent compared to corresponding time last year.
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 7
GROUP FINANCIAL PERFORMANCE
INCOME Group operating income amounted to SEK 1,438 million (1,429) for the first half of 2020, an increase of 1 percent year-on-year. The chart below illustrates incomes per six-month period for the last five years, expressed as rolling 12- month figures, and shows an increase of better than 40 percent between H1 2016 and H1 2020.
Operating income, rolling 12 months (SEKm) 2 613 2 623 2 429 2 315 2 399 2 230 2 273 1 989 1 851
H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018 H1 2019 H2 2019 H1 2020
Investment Banking & Securities Income within Investment Banking & Securities is generated primarily via the following types of income: advisory fees related to equity capital market transactions and mergers & acquisitions, bond-related advisory income and commissions related to brokerage services and equity capital market transactions and charges related to equity research. Investment Banking & Securities is reporting income of SEK 1,109 million (1,132) for the first six months of the year, representing a marginal decline. The British, Finnish and Swedish units delivered good percentage growth. The chart below illustrates incomes per six-month period for the last five years, expressed as rolling 12- month figures, and shows an increase of nearly 40 percent between H1 2016 and H1 2020.
Operating income Investment Banking & Securities, rolling 12 months (SEKm)
2 018 1 995 1915 1 871 1769 1 822 1 610 1 759 1459
H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018 H1 2019 H2 2019 H1 2020
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 8
Private Banking Income in Private Banking is generated mainly from discretionary management, advisory, net interest income and charges related to securities transactions. Income in Private Banking amounted to SEK 329 million (297) during the first half, an increase of 11 percent year-on-year. The income growth was driven partially by high client activity in conjunction with investment opportunities in the corporate transactions market. In addition, savings capital is increasing within our advisory and discretionary services. The chart below illustrates incomes per six-month period for the past five years, expressed as rolling 12- month figures, and shows an increase of better than 18 percent between H1 2015 and H1 2019.
Operating income Private Banking, rolling 12 months (SEKm) 627 595 528 493 514 514 460 392 379
H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018 H1 2019 H2 2019 H1 2020
COSTS Operating costs for the first half amounted to SEK 831 million (830), on par with the corresponding period last year. Proactive IT investments, higher personnel and rental expenses were offset by lower costs in other areas. The chart below illustrates the relationship between operating costs and operating income for the past seven half-years.
Operating costs/Income, rolling 12 months
0,74 0,72 0,68 0,69 0,64 0,65 0,62 0,64 0,62
H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018 H1 2019 H2 2019 H1 2020
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 9
PROFIT
Profit before tax for the period was SEK 312 million (343*), down 9 percent from the same period last year. Operating profit before tax was SEK 607 million (599), an increase of 1 percent compared with the same period last year. Profit after tax for the period amounted to SEK 243 million (266*).
INVESTMENTS Consolidated investments in non-current assets amounted to SEK 16 million (4) during the period.
*) Excluding profit from the sale of Banque Carnegie Luxembourg.
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 10
FINANCIAL POSITION
The Group has a strong financial position with persistently good profitability and low exposure to financial risks. Two thirds of consolidated risk-weighted assets are comprised of operational risk and structural risk arising from ownership of foreign subsidiaries. Risk in the trading book makes up only 3 percent of consolidated risk-weighted assets.
In the light of the Covid-19 pandemic, Carnegie reviewed the IFRS 9 model that is used as the basis for allocating allowances for statistically expected credit losses during the first half of the year. Risk parameters in the model were adjusted upwards despite the lack of actual credit losses or defaults. This has had no material impact on the loss allowance due to the strong collateral coverage that characterises the credit exposures.
The Group’s liquidity investments continue to have a low risk profile, including low duration, institutional exposure and instruments with low credit risk. As another effect of Covid-19, there was a substantial increase in clients’ surplus liquidity during the first half of the year. Surplus liquidity is invested primarily in certificates, government and municipal bonds and senior secured notes with a minimum AAA rating. All investments have short maturities.
The Common Equity Tier 1 capital ratio (CET1) and the capital adequacy ratio were both 21.7 percent (21.3). Further information and comparative figures are presented in Note 3. A more detailed description of Carnegie’s capital adequacy and liquidity is available online at www.carnegie.se.
The Group’s financing comprises equity and deposits from the public. Equity accounts for 13 percent (15), deposits from the public account for 70 percent (72) and other debt accounts for 17 percent (13) of the balance sheet total. OVERVIEW OF THE PARENT COMPANY
Net sales in the parent company amounted to SEK 0 million (0). Net financial income amounted to SEK 0 million (350) and the for the period was SEK -1 million (349).
There were no investments in fixed assets during the period (-). Liquidity, defined as cash and bank balances, was SEK 422 thousand (1,284) as of 30 June 2020. Equity amounted to SEK 1,812 million (1,784) as of 30 June 2020. RISKS AND UNCERTAINTIES
By nature of its business activities, the Carnegie Group is exposed to market, credit, liquidity and operational risks. ▪ Market risk is defined as the risk of loss due to, among else, the impact of movements in equity prices, interest rates or exchange rates. ▪ Credit risk is defined as the risk of loss due to failure of counterparties to fulfil contractual obligations. Credit risk originates mainly from lending to clients with shares as underlying collateral. ▪ Liquidity risks are linked to the need for, and access to, liquidity in operations. ▪ Operational risk refers to the risk of loss resulting from inadequate and/or failed processes or systems, the human factor, or external events.
No significant events have occurred in 2020.
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 11
A more detailed description of risk and risk management at Carnegie is provided in the 2019 annual report and online at www.carnegie.se. RELATED PARTY TRANSACTIONS
Carnegie’s transactions with related parties are reported in Note 25 of the 2019 annual report. No material changes have subsequently occurred.
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 12
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Jan-Jun Jan-Dec (SEKm) 2020 2019 2019 Commission income 1,416 1,442 2,593 Commission expenses -5 -8 -10 Net commission income 1,411 1,434 2,583
Interest income 38 33 72 Interest expenses -13 -25 -43 Net interest income 24 9 29
Net profit from financial transactions 0 23 33 Other operating income 0 172 186 Total operating income 1,436 1,638 2,830
Personnel expenses -873 -838 -1,541 Other administrative expenses -214 -265 -540 Depreciation and amortisation of assets -36 -37 -72 Total operating expenses -1,123 -1,140 -2,153
Profit before credit losses 312 498 677
Credit losses, net 0 -1 -5 Profit before tax 312 496 672
Tax -69 -77 -78 Profit for the period 243 419 593
Other comprehensive income Items that may subsequently be reclassified to the income statement Translation differences relating to foreign operations -18 11 9 Total comprehensive income for the period 225 430 602
The profit is attributablein its entirety to the owners of the parent company.
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 13
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
30 Jun 30 Jun 31 Dec (SEKm) Note 2020 2019 2019
Assets Cash and bank deposits with central banks 29 71 83 Negotiable government securities 1 3,301 3,507 2,290 Loans to credit institutions1) 3,268 2,387 2,226 Loans to the public 2,711 2,294 2,663 Bonds and other interest-bearing securities 1 2,384 2,611 2,482 Shares and participations 1 464 279 595 Derivative instruments 1 61 17 11 Intangible assets 14 0 0 Tangible fixed assets 259 297 272 Current tax assets 51 46 35 Deferred tax assets 161 160 165 Other assets 2 2,655 388 350 Prepaid expenses and accrued income 170 91 113 Total assets 15,527 12,148 11,285
Liabilities and equity Liabilities to credit institutions 42 73 49 Deposits and borrowing from the public1) 10,852 8,797 8,007 Short positions, shares 1 29 55 70 Derivative instruments 1 17 8 90 Current tax liabilities 94 24 32 Deferred tax liabilities 0 3 4 Other liabilities 2 1,840 601 543 Accrued expenses and prepaid income 674 699 732 Other provisions 28 34 33 Equity 1,950 1,854 1,725 Total liabilities and equity 15,527 12,148 11,285
Pledged assets and contingent liabilities Pledged assets 943 1,090 1,067 Contingent liabilities 517 362 454
1) Whereof client funds SEK 216 million (H1 2019: SEK 145 million. Full year 2019: 194.
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 14
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Jan-Jun Jan-Dec
(SEKm) 2020 2019 2019 Equity - at beginning of period 1,725 2,024 2,024 Dividends paid - -600 -900 Total comprehensive income for the period 225 430 602 Equity - at end of period 1,950 1,854 1,725
CONSOLIDATED CASH FLOW STATEMENTS Jan-Jun Jan-Dec
(SEKm) 2020 2019 2019 Cash flow from operating activities 1,587 1,698 566 Cash flow from investing activities -16 -4 -10 Cash flow from financing activities -30 -637 -966 Cash flow for the period 1,541 1,057 -410
Cash and cash equivalents at beginning of period1) 4,117 4,468 4,468 Translation differences in cash and cash equivalents -17 56 59 Cash and cash equivalents at the end of the period1) 5,641 5,581 4,117
1) Excluding cash and cash equivalents pledged as collateral and client funds.
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 15
PARENT COMPANY INCOME STATEMENT Jan-Jun Jan-Dec (SEKm) 2020 2019 2019 Net sales - - - Other external costs 0 -1 -1 Personnel expenses -1 -0 -1
Operating loss -1 -1 -2
Interest expenses and similar expenses 0 0 0 Profit/loss from participations in subsidiaries - 350 650 Profit/loss from financial items 0 350 650
Profit before tax -1 349 648
Tax 0 0 29 Profit or loss for the period -1 349 677
PARENT COMPANY STATEMENT OF OTHER COMPREHENSIVE INCOME Jan-Jun Jan-Dec (SEKm) 2020 2019 2019 Profit or loss for the period -1 349 677 Other comprehensive income - - - Total comprehensive income or loss for the period -1 349 677
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 16
PARENT COMPANY BALANCE SHEET
(SEKm) 30 Jun 2020 30 Jun 2019 31 Dec 2019
Assets Shares and participations in group companies 1,780 1,780 1,780 Deferred tax assets 30 1 30 Total financial non-current assets 1,810 1,781 1,810
Receivables due from group companies 0 0 0 Current tax assets 2 2 1 Other current receivables 0 5 0 Cash and bank 0 1 1 Total current assets 2 8 3
Total assets 1,813 1,789 1,814
Equity and liabilities Equity 1,812 1,784 1,813 Liabilities to group companies 0 0 0 Trade accounts payable 0 0 0 Other current liabilities 0 0 0 Accrued expenses and prepaid income 1 0 1 Pension provisions - 5 0 Total equity and liabilities 1,813 1,789 1,814
Pledged assets and contingent liabilities Pledged assets - - - Contingent liabilities 113 112 113
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
Jan-Jun Jan-Dec
(SEKm) 2020 2019 2019 Equity - at beginning of period 1,813 2,035 2,035 Dividends paid - -600 -900 Total comprehensive income for the period -1 349 677 Equity - at end of period 1,812 1,784 1,813
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 17
ACCOUNTING POLICIES
With respect to the Group, this report was prepared in compliance with IAS 34 Interim Reporting, the Swedish Act on Annual Reports of Credit Institutes and Securities Companies (ÅRKL 1995:1559) and the Regulations and general recommendations regarding annual reporting of credit institutions and securities companies issued by the Swedish Financial Supervisory Authority (FFFS 2008:25). RFR 1, Supplementary Accounting Regulations for Corporate Groups, issued by the Swedish Financial Accounting Standards Council, was also applied. The parent company’s accounts were prepared in accordance with the Swedish Annual Accounts Act (1995:1554, ÅRL) and recommendation RFR 2 Accounting of Legal Entities issued by the Swedish Financial Accounting Standards Council.
The accounting policies and calculation methods applied in this report are identical to those applied in the 2019 annual report.
Please note that rounding in the report may result in amounts in SEK millions not agreeing when summed. Unless otherwise specified, all comparison figures in the report refer to the corresponding period in 2019.
New and amended accounting standards effective 1 January 2020
Amendments to IFRS 9, IAS 39 and IFRS 7 based on the interest rate benchmark reform have had no impact on Carnegie’s financial statements.
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 18
NOTE 1 FINANCIAL ASSETS AND LIABILITIES – MEASUREMENT METHOD
Amortised Valuation method, 30 June 2020 Fair value through profit and loss cost
Valuation Valuation Quoted prices in technique using technique using (SEKm) active markets Total observable non-observable (Level 1) inputs (Level 2) inputs (Level 3)
Assets Cash and bank deposits with central - - - 29 29 banks Negotiable government securities - - - 3,301 3,301 Loans to credit institutions - - - 3,268 3,268 Loans to the general public - - - 2,711 2,711 Bonds and other interest-bearing - 17 - 2,368 2,384 securities Shares and participations 459 5 - - 464 Derivative instruments - 61 - - 61 Total 459 83 - 11,676 12,218
Liabilities Liabilities to credit institutions - - - 42 42 Deposits and borrowing from the - - - 10,852 10,852 general public Short positions, shares 29 - - - 29 Derivative instruments - 17 - - 17 Total 29 17 - 10,894 10,941
Financial assets for which fair value is stated for purposes of disclosure: Negotiable government securities of SEK 3,300 million (Level 2). Bonds and other interest-bearing securities SEK 2,368 million (Level 1).
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 19
Amortised Valuation method, 30 June 2019 Fair value through profit and loss cost
Valuation Valuation Quoted prices in technique using technique using (SEKm) active markets Total observable non-observable (Level 1) inputs (Level 2) inputs (Level 3)
Assets Cash and bank deposits with central - - - 71 71 banks Negotiable government securities - - - 3,507 3,507 Loans to credit institutions - - - 2,387 2,387 Loans to the general public - - - 2,294 2,294 Bonds and other interest-bearing - 39 - 2,571 2,611 securities Shares and participations 274 5 - - 279 Derivative instruments - 17 - - 17 Total 274 61 - 10,829 11,165
Liabilities Liabilities to credit institutions - - - 73 73 Deposits and borrowing from the - - - 8,797 8,797 general public Short positions, shares 55 - - - 55 Derivative instruments - 8 - - 8 Total 55 8 - 8,869 8,933
Financial assets for which fair value is stated for purposes of disclosure: Negotiable government securities of SEK 3,507 million (Level 2). Bonds and other interest-bearing securities SEK 2,570 million (Level 1).
Amortised Valuation method, 31 Dec 2019 Fair value through profit and loss cost
Valuation Valuation Quoted prices in technique using technique using (SEKm) active markets Total observable non-observable (Level 1) inputs (Level 2) inputs (Level 3)
Assets Cash and bank deposits with central - - - 83 83 banks Negotiable government securities - - - 2,290 2,290 Loans to credit institutions - - - 2,226 2,226 Loans to the general public - - - 2,663 2,663 Bonds and other interest-bearing - 24 - 2,458 2,482 securities Shares and participations 589 6 - - 595 Derivative instruments - 11 - - 11 Total 589 41 - 9,719 10,349
Liabilities Liabilities to credit institutions - - - 49 49 Deposits and borrowing from the - - - 8,007 8,007 general public Short positions, shares 70 - - - 70 Derivative instruments - 90 - - 90 Total 70 90 - 8,057 8,216
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 20
Financial assets for which fair value is stated for purposes of disclosure: Negotiable government securities of SEK 3,889 million (Level 2). Bonds and other interest-bearing securities of SEK 2,456 million (Level 1).
NOTE 2 OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES
The table below presents the financial assets and liabilities that are presented net in the balance sheet. At the closing date, these financial instruments comprised trade and client receivables and trade and client payables. Since the scope of financial assets and liabilities for which gross accounting is applied in the balance sheet, but which are subject to legally binding master netting agreements or the like, is marginal, these disclosures have been omitted.
30 Jun 2020
Financial assets and liabilities subject to offsetting
Net amounts in (SEKm) Gross amounts Offset balance sheet Assets Trade and client receivables1) 4,259 -2,412 1,848
Liabilities Trade and client payables2) 3,235 -2,422 814
30 Jun 2019 Financial assets and liabilities subject to offsetting Net amounts in (SEKm) Gross amounts Offset balance sheet Assets Trade and client receivables1) 2,720 -2,561 160
Liabilities Trade and client payables2) 2,725 -2,593 132
31 Dec 2019
Financial assets and liabilities subject to offsetting Net amounts in (SEKm) Gross amounts Offset balance sheet Assets Trade and client receivables1) 1,426 -1,361 65
Liabilities Trade and client payables2) 1,398 -1,357 40
1) Included in the balance sheet item Other assets 2) Included in the balance sheet item Other liabilities
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 21
NOTE 3 CAPITAL ADEQUACY
Carnegie Group
30 Jun 31 Dec
(SEKm) 2020 2019 2019
Capital base Equity instruments and associated premium reserve 922 922 922 Retained earnings and reserves 1,087 1,030 904 Other comprehensive income -59 -98 -101 Less unreviewed interim results -243 - - Less predictable costs - -349 0 Goodwill and intangible assets -14 0 0 Deferred tax asset -45 -39 -46 Prudent valuation -1 0 -1 Common Equity Tier 1 capital 1,648 1,465 1,678
Tier 1 capital 1,648 1,465 1,678
Capital base for capital adequacy purposes 1,648 1,465 1,678
Capital requirement Credit risk (standardised method) 188 163 157 Trading book risk 18 27 15 Currency risk 38 32 33 Operational risk (base method) 361 328 328 Total capital requirement 606 550 533
Surplus capital 1,041 915 1,145
Financial position Equity, SEKm 1,950 1,854 1,725 Common Equity Tier 1 capital, SEKm 1,648 1,465 1,678 Capital base, SEKm 1,648 1,465 1,678 Risk-weighted assets, SEKm 7,577 6,872 6,659 Common Equity Tier 1 capital ratio, % 21.7 21.3 25.2 Capital adequacy ratio, % 21.7 21.3 25.2
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 22
HISTORICAL DATA – GROUP1)
H1 H2 Income statement, SEKm H1 2019 H2 2018 H1 2018 H2 2017 H1 2017 2020 2019 Continuing operations Total income 1,436 1,192 1,638 1,040 1,408 1,204 1,268
Personnel expenses -873 -704 -838 -660 -820 -723 -750 Other expenses -250 -310 -302 -311 -271 -303 -235 Expenses before credit losses -1,123 -1,013 -1,140 -970 -1,091 -1,026 -985
Operating profit before credit losses 312 179 498 69 317 178 283
Credit losses, net 0 -4 -1 1 3 -0 2 Profit before tax 312 175 496 70 320 178 285
Tax -69 -1 -77 -16 -74 -59 -65 Profit for the period from continuing 243 174 419 54 246 119 220 operations
Discontinued operations1) Profit for the period from discontinued operations ------4 11 Profit for the period 243 174 419 54 246 115 231
Whereof profit or loss from assets held for sale - 18 153 -6 -7 - - Profit for the period excluding profit or loss from 243 156 266 60 253 115 231 assets held for sale
Financial key data, continuing operations C/I ratio, % 78 85 70 93 77 85 78 Income per employee, SEKm 2.4 2.1 2.9 1.7 2.4 2.0 2.1 Costs per employee, SEKm 1.9 1.8 2.0 1.6 1.8 1.7 1.7 Profit margin, % 22 15 30 7 23 15 22 Assets under management, SEKbn 138 128 113 110 116 110 110 Return on equity, %2) 22 23 17 16 21 22 26 Total assets, SEKm 15,527 11,285 12,148 12,611 13,227 12,363 11,027
Financial position Common Equity Tier 1 capital ratio, % 21.7 25.2 21.3 24.2 23.8 23.5 21.7 Equity, SEKm 1,950 1,725 1,854 2,024 1,987 1,917 1,798
Employees, continuing operations Average number of FTE employees 593 575 563 601 597 590 592 Number of FTE employees at end of period 593 585 556 606 593 598 581
1) The historical overview is based on the statutory statements of comprehensive income. Discontinued operations include operations within third-party distribution of structured products for 2017. 2) Profit and equity for H1 and H2 2019 are adjusted for profit from assets held for sale.
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 23
DEFINITIONS – ALTERNATIVE PERFORMANCE MEASURES*
Operating income* Capital requirement Operating income excluding income not generated by our A measure of how much capital an institution must have business areas. given the risks involved in the business. Operating costs* Common equity Tier 1 capital ratio Operating costs excluding variable remuneration, financing Total regulatory common equity Tier 1 capital as a percentage costs and credit losses. of risk-weighted assets. Operating profit or loss* Capital adequacy* Operating profit or loss excluding variable remuneration, Total regulatory capital base as a percentage of risk-weighted financing costs and credit losses. assets. Operating C/I ratio* Number of employees at end of period Operating expenses as a percentage of operative income. The number of annual employees (full-time equivalents) at the end of the period. Operating income per employee* Average number of employees Operating income for the period divided by the average The number of employees at the end of each month divided number of employees in continuing operations. by number of months. Operating costs per employee* Cost/income (C/I) ratio* Operating expenses for the period divided by the average Total costs before credit losses as a percentage of total number of employees in continuing operations. income. Operating profit margin* Profit margin Operating profit as a percentage of operating income. Profit or loss before tax as a percentage of total income. Income per employee Return on equity* Total income for the period divided by the average number Twelve months’ rolling profit or loss divided by average of employees. equity, adjusted for the effect of deferred tax on loss carryforwards.
Bridge between alternative performance measures and the financial statements A more detailed description of the calculation method is required for some of the performance measures above. Return on equity, continuing operations – To calculate average equity adjusted for the effect of deferred tax on loss carryforwards, we have used equity for the past 13 months and loss carryforwards for the past 13 months, divided thereafter by the number of months, ∑ (equity – loss carryforwards)/13
Return on equity – To calculate average equity adjusted for the effect of deferred tax on loss carryforwards; see above.
Operating income statement – The differences between the Consolidated statements of comprehensive income on page 12 and the Operating income statement on page 6 are: − SEK 284 million has been moved from Operating costs to the line item Financing costs, variable remuneration, etc. − SEK 11 million has been moved from Operating income to the line item Financing costs, variable remuneration, etc. − SEK 8 million has been moved from Operating income to Operating costs. − Net credit losses of SEK 0 million are included in the line item Financing costs, variable remuneration, etc. The net change is SEK 295 million, which comprises variable remuneration of SEK -294 million, a loss of SEK -11 million unrelated to the business areas and a cost of SEK 0 million from a loss allowance adjustment under IFRS 9. *Alternative Performance Measures, APM, are financial measures of historical or future financial performance, financial position, or cash flows that are not defined in the applicable reporting framework (IFRS) or in the EU Capital Requirements Directive (CRD)/Capital Requirements Regulation (CRR). Carnegie uses APM when it is relevant to track and describe Carnegie's financial performance and position and to provide further relevant information and tools to enable analysis of the same. APMs that describe Operating C/I ratio, Operating income and expenses per employee, Operating profit margin, like the profit margin and return on equity measures, provide information about Carnegie's earnings capacity and efficiency from various angles. All of these measures may differ from similar key data presented by other entities. How the performance measures are calculated is noted above.
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 24
REVIEW
This report has not been reviewed by the company’s auditors.
Carnegie Holding AB Stockholm, 27 August 2020
Björn Jansson Chief Executive Officer
Carnegie Holding AB, 103 38 Stockholm. Corporate registration number 556780-4983, registered office in Stockholm. Parent company of Carnegie Investment Bank AB (publ). 25