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CARNEGIE HOLDING AB
Sustainable growth through knowledge and capital
ANNUAL REPORT 2017
1 The leading Nordic investment FÖRETAG
PRIVAT- and private bank PERSONER
CARNEGIE In 1803, David Carnegie founded a trading house in Gothenburg. A century ago, however, the herring, spices, timber and porter of the day were replaced by financial services. Today, Carnegie is the leading Nordic investment and INSTITU- TIONER KAPITAL- private bank, a meeting place between knowledge and capital. MARKNADEN Carnegie brings investors, entrepreneurs, companies, institutions and private individuals together to create innovative products, new jobs, private wealth and social progress.
With leading research capacity in the Nordics, top-ranked corporate and
wealth advisory services, Carnegie serves2 500 a key function in the Nordic capital
market. 2 000
1 500 Our vision is that Carnegie shall be the leading Nordic investment and private 1 000 bank – recognised and recommended by our clients. 500 800 0 2011 2012 2013 2014 2015 2016 2017 600
400 Income Profit before tax SEKm SEKm 200 2 500 500 0 350 2011 2012 2013 2014 2015 2016 2017 2 000 200 1 500 50 1 000 -100
500 -250 800 0 -400 2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017 600
400
200 500 SEKM SEKM 0 2,472350 4632011 2012 2013 2014 2015 2016 2017 Carnegie’s income increased by 9 percent per year on Carnegie has delivered a positive profit trend over the long average200 over the period of 2011-2017. Income per term. Profitability has continuously improved over the past employee50 has steadily grown during the same period. seven years and the profit margin for 2017 was 19 percent.
-100
-250
-400 2011 2012 2013 2014 2015 2016 2017 Contents
Carnegie at a glance in 2017...... 4
Chairman’s message...... 7 FÖRETAG Letter from the CEO...... 8
Business model...... 10
PRIVAT- Corporate advisory services, PERSONER equity sales and research...... 12
Wealth management advice ...... 16 CARNEGIE Responsibility and sustainability...... 21
Responsible advisory...... 22
Responsible business...... 24
Responsible employer...... 26 INSTITU- TIONER KAPITAL- Corporate governance...... 30 MARKNADEN Board of Directors...... 33
Group management...... 34
Board of Directors’ report...... 36
Risk, liquidity and capital management...... 40
Five-year review...... 45
Consolidated statements of comprehensive income...... 46
Consolidated statements of f inancial position...... 47
Consolidated statements of changes in equity...... 48
Parent company income statements...... 49 2 500 Parent company statements of 2 000 other comprehensive income...... 49
1 500 Parent company balance sheets...... 50 Parent company statements 1 000 Employees of changes in equity...... 51 500 800 Cash flow statements...... 52 0 2011 2012 2013 2014 2015 2016 2017 Accounting principles...... 53 600 Notes...... 60 400 Certification...... 80
200 Auditor’s report...... 81 500 Sustainability notes...... 84 0 350 2011 2012 2013 2014 2015 2016 2017 GRI index...... 90 200 Definitions...... 93 50
-100 Addresses...... 94
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-400 2011 2012 2013 2014 2015 2016 2017 598 Carnegie employees in Sweden, Norway, Denmark, Luxembourg, the United Kingdom, Finland and the United States do their utmost This is Carnegie’s annual report for the 2017 financial year. every single day to guide clients with qualified advice. The annual report also comprises Carnegie’s sustainability report for 2017 as required under the Swedish Annual Accounts Act, ch 6 s 10, (1995:1554). Carnegie at a glance in 2017 Carnegie is the Nordic market leader in Investment Banking, Securities and Private Banking. Along with some 600 extremely knowledgeable and committed employees, we are building a value-creating bank of knowledge where focus is always on the client.
Investment Banking & Securities Private Banking
Carnegie Investment Banking offers pro- Carnegie Securities offers institutional clients Carnegie Private Banking provides compre- fessional advisory services in mergers and several services within research, equity sales hensive financial advisory services to high net acquisitions (M&A) and equity capital mar- and equity capital market transactions (ECM). worth individuals, small businesses, institutions ket (ECM) transactions. The Debt Capital In addition, the Fixed Income unit offers bond and foundations. The Private Banking staff Markets (DCM) unit also provides advisor y research and sales. Carnegie’s top-ranked includes experts in areas including asset allo- services in capital raising via corporate bonds research and equity sales enjoy a globally cation, asset management, law, tax manage- and fixed income instruments. With strong leading position in Nordic equities. ment, pensions and trading in securities and local presence, profound experience and fixed-income bonds. Securities operates in Denmark, Finland, unique understanding of sectors and capital Norway, Sweden, the UK and the US. Operations in Denmark, Luxembourg and markets in the Nordic region, Carnegie is one Sweden. of the leading Nordic advisers in corporate finance. Awards in 2017: • Institutional investors in both Sweden and Awards in 2017: Operations in Denmark, Finland, Norway Finland named Carnegie the best equity • Carnegie was ranked highest among and Sweden. house, overall as well as in research and Swedish Private Banking providers and equity trading (Kantar Sifo Prospera) topped the list in eight out of twelve Awards in 2017: • Nordic portfolio managers named assessed categories (Kantar Sifo Prospera) • Carnegie was named Financial Adviser Carnegie the best equity house in the • Carnegie was ranked first among Swedish of the Year in M&A in Sweden (Merger Nordics (Kantar Sifo Prospera) Private Banking providers (Euromoney) market) • Swedish institutions ranked Carnegie first • Carnegie topped the adviser rankings in the market for equity research, with in the Nordic corporate transactions Lena Österberg named the best individual market, both overall and in M&A and analyst (Financial Hearings) equity capital market transactions • Global investors rated Carnegie the (Kantar Sifo Prospera) highest among all firms in the market in • Carnegie was named Best Investment Nordic equity research, equity sales and Bank in Norway (Euromoney) corporate access (Extel) • Carnegie was ranked highest in relation • Global institutions ranked Carnegie to the Swedish bond market in the High number one in Nordic equity research Yield category (Kantar Sifo Prospera) (Institutional Investors All-Europe)
4 CARNEGIE HOLDING AB | Annual Report 2017 +15% 463SEKM Operating income rose to SEK 2,472 million, up 15 percent Profit before tax increased by 35 percent year-on-year and year-on-year was the strongest result in several years.
110BN 352 Assets under management increased by 10 percent year-on-year. Number of Nordic listed companies covered by Carnegie Research in 2017.
Financial key data, continuing operations Financial position 2017 2016 Operating income, SEKm 2,472 2,157 Operating profit, SEKm 901 692 1,917SEKM Operating C/I ratio, % 64 68 Equity at 31 December 2017 Profit/loss before tax, SEKm 463 342 Operating profit margin, % 36 32 Assets under management, SEKbn 110 100 23.5% Return on equity, % 22 21 Common equity Tier 1 capital ratio at 31 December 2017
Income by business area Geographical distribution of income Employees per unit
Investment Banking Sweden 54% Investment Banking 26% & Securities 74% Norway 14% Securities 19% Private Banking 26% Denmark 11% Private Banking 19% Other 21% Support & Group 36% % % %
CARNEGIE HOLDING AB | Annual Report 2017 5 “Steel group Ovako refinances with bond”
Ovako is a European steel group that manufactures engineering steel for customers in the bearings, transport and manufacturing industries. In the autumn of 2017, Ovako elected to issue senior secured notes in the amount of EUR 310m to refinance existing bonds. There was huge interest in the offer and it was quickly oversubscribed, giving Ovako access to financing at substantially lower cost levels than previously. The transaction also successfully introduced a Special Redemption feature, giving Ovako the opportunity to adjust their financing structure at a reasonable cost if the company is sold or listed. Carnegie acted as joint bookrunner in the transaction.
6 CARNEGIE HOLDING AB | Annual Report 2017 CHAIRMAN’S MESSAGE
“Carnegie is continuing to strengthen its long-term competitive advantage.”
We are building trust for the long term Carnegie’s favourable progress in recent years has generated high client trust, stronger profit ability and good financial stability, creating the conditions for sustainable business development.
The strong performance in recent years is the Growth-oriented investments have been greater transparency and communication result of successes in well-established areas, balanced with ongoing efficiency improve- pertaining to Carnegie’s commitment to along with widening the income base in terms ments and good cost control. social responsibility, as well as our own con- of products and geographies. Combined with viction that sustainability is essential to the stronger client trust in all market, this sets the Market and regulatory adjustments long-term development of our business. stage for an increasingly competitive business The Board and management of Carnegie The financial industry has a key role to model and long-term profitability. have devoted considerable time to ensuring play in global social development in main- The more diversified growth is occur- satisfactory operational integration and com- taining high trust in the financial system and ring in accordance with the long-term strategy pliance with current regulatory adjustments contributing to a responsible transition to a set by the Board and management, where new and industry directives. sustainable economy. focus areas are given the conditions to flourish. In pace with the increased regulation of Carnegie serves a vital function in the These include areas like private wealth man- the financial industry, the ability of the organi- Nordic capital market and will continue to agement advice in Denmark and the concen- sation to adapt is becoming a competitive fac- evolve in the service of sustainability, with tration on corporate bonds. There is tremen- tor. In addition, strong client relationships are long-term profitability, strong client relation dous growth potential here and Carnegie is a prerequisite for underlying stability. Carnegie ships and financial stability. regularly generating higher gains on its invest- is in prime position, with the highest client ments. In parallel, income growth in these are- trust in all areas of operations. as is contributing to more balanced and well- diversified earnings over the long term. Focus on sustainability Bo Magnusson In addition to the Board’s focus on internal Chairman Strong financial position sustainable development of the business, Carnegie’s financial position is high on the efforts have continued to clarify the com- Board agenda and through good profitability, pany’s corporate social responsibility from Carnegie successfully grew the business dur- a wider perspective. This is taking place ing the year while further strengthening key in response to preferences and demands financial figures. expressed by our stakeholders, including for
CARNEGIE HOLDING AB | Annual Report 2017 7 LETTER FROM THE CEO
Clear results from our long-term effort The trust capital that Carnegie has tended for many years advisory services and wealth management advice. This is reflected in multiple ways, created the conditions for sustained healthy growth and including the high percentage of IPOs and improved profitability in 2017. ECM transactions in the Nordic market in which we were involved. It has also had pos- Carnegie’s successes during the year are itive impact on client activity linked to our proof of strength in several aspects. We are equity sales and research services, including continuing to increase profitability in indi- in the London and New York operations. vidual business units and across g eographies, and particularly in our growth areas. At the Focus areas in growth same time, we are strengthening the trust The business areas with the greatest growth within all client groups in Carnegie, where potential, including corporate bonds, Private companies, institutional investors and Banking and our ventures in selected seg- private investors all rank Carnegie highest ments of the real estate sector, delivered the among all market players. And so, the results strongest relative growth during the year. not only reflect the initiatives taken during The corporate bonds business is still the year, they are an expression of a long- developing well and income nearly doubled term effort in which strategic choices of year-on-year. Likewise, Private Banking oper- direction and investments have gradually ations delivered sustained strong develop- strengthened our market position. ment in 2017, with positive inflow of new cli- Our strong impact in 2017 took place ents, record-high income and increased assets under favourable market conditions, with under management. In addition to favourable high investor activity in corporate trans- market conditions during the year, perfor- actions in all Nordic markets. Carnegie mance in the business area should be consid- was also in prime position to manage the ered in the light of the actions taken last year # business opportunities created and we have towards a more client-oriented organisation Carnegie can1 sum up the year with a leading and customised offerings. position in all business areas and markets. achieved high return on continuous invest- ments in equity sales and research, corporate Carnegie’s ventures in the real estate sec-
8 CARNEGIE HOLDING AB | Annual Report 2017 LETTER FROM THE CEO
“Growth is taking place where the potential is greatest.”
tor through property syndications have also Carnegie took further steps during the These eminently worthwhile investments produced results during the year, from rela- year to clarify our stance and approach to will contribute over the long term to tively low income levels last year. sustainability and responsibility in relation strengthening our market position with a Overall, profitability improvements with- to the advice we provide to clients, but also competitive advisory services offering to in both geographies and individual business from a wider perspective in regards to other our clients. In addition, the business has areas during the year advanced diversified stakeholders. committed substantial resources to imple- growth for Carnegie’s business as a whole These included more clearly integrating menting new regulatory adjustments enter- in 2017. sustainability aspects in company research ing into force in 2018, such as MiFID II. and asset management. In addition, we are We are well aware that the strong devel- Stronger trust capital continuing to strengthen our social respon- opment during the year was achieved under Alongside the positive operational trend, sibility in relation to enterprise and entrepre- favourable market conditions, but the growth client trust was strengthened across the neurship, where annually recurring initiatives is diversified and we are building client rela- board, among companies, institutions and like the Entrepreneurs of the Future reflect tionships for the long term. Conditions for private individuals. This was expressed in our commitment to the emergence and Carnegie’s continued positive development business mandates during the year as well as growth of new companies in the market. are good. in several client and market surveys, where Furthermore, Carnegie joined the UN Carnegie is ranked as the top market pro- Global Compact in 2017, in support of its vider in areas including equity analysis, equi- international principles relating to human Björn Jansson ty sales, corporate advisory services, cor- rights, labour law, the environment and CEO and President porate bonds and private banking. Accord- anti-corruption. In conjunction with this ingly, Carnegie can sum up the year with a annual report, we are also initiating applica- leading market position in all areas of oper- tion of Global Reporting Initiative (GRI) ations. This is a testament to the expertise, standards for sustainability reporting. The outstanding commitment and client focus annual report includes Carnegie’s first sus- of our employees. tainability report, in accordance with the standards imposed under the Swedish Responsibility and transparency Annual Accounts Act. We are building trust not only with regard to our clients, but also through understand- Long-term competitive advantage ing external expectations for responsible Carnegie continued to invest in the business conduct based on our position as a leading during the year to respond to high business financial adviser. activity and to streamline internal processes.
CARNEGIE HOLDING AB | Annual Report 2017 9 BUSINESS MODEL
“Carnegie shall be the leading Nordic investment bank and private bank – recognised and recommended by our clients” Carnegie’s vision
Creating value through knowledge and advice
Carnegie is the leading Nordic investment and private bank. A meeting place for knowledge and capital that creates growth through advisory services for clients, shareholders and society.
Carnegie plays a key role in the economy as collective expertise of our staff into client together and make the whole greater than a meeting place for capital and investment relationships that build trust. the sum of its parts. opportunities. By bringing capital, people Carnegie’s top-ranked research, for exam- and ideas together, innovative products Diversified income ple, is essential input for both institutional and services have the capacity to create Carnegie rests on three pillars, Investment and private investors. Likewise, execution value and growth for our clients, owners Banking, Securities and Private Banking, capacity is critically important to both cor- and employees - and for society as a whole. which together offer corporate advisory porate clients and institutional investors. In services, equity sales, research capacity and addition, Carnegie’s high activity in corpo- The need for advice wealth advisory services. The operations rate transactions is playing a key role in the The need for professional advice is growing are market leaders in their fields and their development of many high-growth compa- in pace with the increasing complexity and underlying income streams work together nies and creating unique investment oppor- unpredictability of world development and to promote sound distribution of the earn- tunities for Private Banking and Securities more rigorous financial regulations. ings mix. clients. Carnegie is here, tapping knowledge The Nordic dimension is essential to our of Nordic enterprise, markets and the identity and our business and contributes Low risk profile business environment to guide its clients to balanced income performance over time. A sound risk culture and robust risk man- through this landscape. Local knowledge is Carnegie has long enjoyed a well-established agement are critical to long-term financial combined with global reach, to a wide net- position in a total of seven geographic mar- success, for our clients as well as Carnegie’s work of international investors. kets, where offices in London, New York other stakeholders. Professional advice also requires the and Luxembourg complement our Nordic Carnegie runs the business with a low right expertise, which puts demands on presence. risk appetite and takes only conscious and Carnegie’s opportunities to recruit and controlled financial risks that support our motivate the most talented employees in Business dynamics advisory services operations. the market. Our success is ultimately deter- The various business areas cross-pollinate mined by our capacity to transform the each other, bring our business relationships
10 CARNEGIE HOLDING AB | Annual Report 2017 BUSINESS MODEL
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Efficiency and financial stability A solid financial position is essential to secure the long-term resiliency and development Business principles potential of the business. Carnegie ensures Client focus its capacity to compete on market terms We do our utmost to ensure products and services of the highest quality. by balancing growth-oriented investments with ongoing efficiency improvements and We combine global reach and local presence in our business. good cost control. Every meeting with Carnegie shall enhance the knowledge of our clients.
Sustainable capital market Competence Focus is on the client, but Carnegie must We employ, develop and retain the best employees. also contribute to sustainable global devel- We think outside the box to find the best solutions for our clients. opment. Ensuring efficient capital alloca- We work together and utilise all resources of the firm to find the best solu- tion for companies and bringing wcapital, tions. new technologies and sustainable prod- ucts together is important to overcoming Commitment the new challenges faced by society. Like- Earning our stakeholders’ trust is a joint effort. wise, advisers that can provide assistance with private and business economic issues We have high moral standards and comply with rules and regulations. associated with a sustainable transition are Our professionalism goes all the way down to the last detail. important.
CARNEGIE HOLDING AB | Annual Report 2017 11 CORPORATE ADVISORY SERVICES, EQUITY SALES AND RESEARCH High activity among Nordic companies
2017 brought numerous transactions and listings in the Nordics. Favourable market conditions in Sweden have spread to the other Nordic countries and international interest in the Nordics as an investment region remained strong.
The Nordic corporate transactions mark et Transparent ownership structures performed well, for several structural and In most countries, potential investors know economic reasons. Low interest rates, low nothing about who will be the new major volatility and an ecosystem of advisers, shareholders in a market candidate. In a analysts and investors with an appetite to Swedish phenomenon that has begun to invest in small and medium-cap companies spread to the other Nordic markets, anchor are a few of these. investors are increasing transparency and reducing uncertainty. Politically stable region That major funds or other institutional Political systems in other parts of Europe investors have had the opportunity to + have been challenged with government analyse a candidate and have decided to % crises, distrust of institutions and major, make a substantial long-term investment The number30 of foreign direct investments (FDI) unpredictable impact on voter opinion. In in the company is an unmistakable stamp in the Nordics rose by more than 30% between terms of political stability, the Nordic coun- of quality. It is also an important reason 2015 and 2016. tries are outliers. The same is true for Nordic for the exceptional listing climate in the banks, which are thus contributing to their Nordics. markets’ long-term stability and investment climate. As regards attracting and retaining High activity in the transaction market foreign investors, all Nordic countries are 2017 was another strong transaction demonstrating a positive trend. year for both sales and IPOs. The stock exchanges performed well, resulting in Strong research knowledge attractive valuations. Spinning off and list- The Nordic listing markets, especially Swe- ing companies was one trend. There are + den, can be considered among the most several reasons for doing so, both financial % effective in the world. Advisers with sol- and indust rial. These include bringing atten- The number of corporate. transactions in the Nordics 6 5 id analytical capacity, like Carnegie, have tion to the company, concentrating the core rose by 6.5 percent in 2017, according to Merger- played an important role in successfully business and benefiting fromv alue growth, market. anchoring and launching IPOs. Mutual all aimed at increaasing shareholder value. trust between sellers and buyers is a pre- requisite for effective market function over time. Carnegie has helped instil that trust.
Anchor investors ensure success