Seb Sa Unsp/Adr

Welcome everyone to our Q3 2024 results. As customary, we will refer to the slides or from the slideshow that we posted on SEB on the web. So starting with our highlights on page two, this is clearly a quarter where interest rates continue to fall. Amidst a falling interest rate environment, one can see the diversified business model of SED in play, where both fees and commission and net financial income mitigates the otherwise falling trend in interest rates. We've also now consumed the acquisition of Germany's Airplus, the corporate credit card business, and therefore we reiterate the underlying cost target for 2024 of below or at 29 billion and we now include Airplus which we will come back to and the new target is 31.0 billion. We continue after the decision of the board yesterday with our share buyback program with another 2.5 billion per quarter. And this means that we continue to commit to our capital target of 300 basis points or below as a capital buffer as of year end 2024. And also, this quarter is the first quarter after some reorganization and alignments of the organizational strategy in the bank to support our strategy going forward. Clicking to page 3, just a few words about the two major changes in the organizational change we announced in September. First, it's the establishment of a Chief Operating Officer function, which is really aimed to improve speed, make clearer decision-making in an ever more complex world. If you do look at banking over the last 20 years, you can clearly see that the number of people that you traditionally would think about as bankers meeting clients is now a minority, and banking is becoming much more about the backside of the firm that supports client interaction and client interface. Of course, the most explanatory factor here is the emergence and dominance of digital banking. Hence, in order to adapt to that new reality that we are having more resources in technology and operations in security and financial crime, we would like to streamline decision-making, very clear mandates, and empower the employees to progress forward. The second change is really one of the most fragmented areas in previous time in the bank, and that's savings and investments. We therefore create a division, Wealth and Asset Management, where we put the main areas within this area together and hopefully we'll get a more crystallization of what this means to S&E. This is a very big and important area and definitely a key strategic focus for the future to continue to develop. This means that Wealth and Asset Management will consist of private wealth management and family office. Life, our pension site, and Asset Management, our mutual fund and institutional fund site. Clicking to page number four, we have recently received the SKI. This is the Swedish Quality Index, which is a survey amongst the Swedish population about their perception of banks. This is both for SMEs and it is for retail and more or less represents our CNPC divisions survey. And one can just see that the outright scores for both corporates and private individuals have improved marginally and come up to the highest levels that we've seen in recent history. We can also note that the NPS where we actually measure the clients of SEB is also very constructive at high levels. However, the whole industry have seen a quite strong recovery in general public opinion, and we have relatively underperformed. So both when it comes to our larger bank peers in Sweden and when we compare to all banks in Sweden, both for corporates and for private individuals, we have dropped a notch or two, which is not satisfactory and something we take seriously in order to shape our focus in the future. On page five, a few recent developments, and I'll start at the bottom with customer surveys. These are three minor surveys, not the big ones that we typically track, but they are coming in sporadically during the year, and this is for LCNFI, and it's very comforting to see that we have maintained number one position within FX in the Nordic countries. We also won the number one position for Nordic equities. and also asset management in the Nordics. At the top of the slide, we have two wealth and asset management related investments that we've done during the quarter. The first one is predominantly for private wealth management and family offices, that's Boyer Advisory. It's a very small firm, so it is not necessarily something that is financially meaningful, but it's certainly something that is strategically very important, and that is the non-financial services. Unsp-Adr The other one is in the life division and we will have an InsurTech investment. So this is insurance technology through buying a minority stake in Lumera. Clicking to the credit portfolio on page number 6. Nothing new to report. More or less what we've experienced now for some quarters is a very muted situation where we have a sideline movement on the credit portfolio and the lending per se. A few comments here. We clearly see that the macroeconomic picture for 2025 continues to look very constructive in Sweden. It looks a little bit better and a higher probability for soft landing and recovery in the US. However, I would argue it feels a little bit weaker in Europe, particularly in Germany, which is an important market for the Nordics. We have a little bit of an uptick in mortgage demand in the Baltic countries, but in Sweden it's very much of a sideline, and I would characterize the whole area as wait and see situation. With that, I'd like to hand over to our newly appointed CFO, Kristoffer Malmer. Welcome him to this forum, and then ask him to run through the financials.

Thank you very much Johan and good morning everyone on the call. So I'll start on slide number eight with a financial summary year-to-date 2024. And as you can see we've added some new columns to the slide to reflect, as Johan was referring to, the first time consolidation of the acquisition of Air+. So if we look on the first nine month operating income, it is continued to grow by 3% on an underlying basis to 61.9 billion for the first nine months of the year. Operating expenses are up on an underlying basis by 6% to 22.3. You can see that the increase adjusted including AirPlus is somewhat higher and that is reflecting the operating costs of AirPlus that we've also singled out in the report In conjunction with some of the transaction related costs that have been booked year to date. On the expected credit losses, the reading remains low. So we are two basis points for the period January to September, which results in an operating profit of down 1% compared to the same period of last year. Turning to slide number nine, and we'll look at the development during the third quarter, and also here you will find for comparisons a column where we exclude the impact of AIR+. Here you can see that operating income is at 20.9 billion reported, which means it's the sixth consecutive quarter where we're generating operating income above 20 billion, and that's also true even if you do not include the impact of AIR+, in the quarter. However, if you look at the composition of the income, it differs somewhat from what we have seen in the previous quarter. And most notably, in net interest income, we are seeing a 4% sequential decline, excluding the impact of AIR+, to 11.1 billion. And we'll come back to the net interest income in a moment. Fees and commissions are up, including AirPlus, but they are down, which is very much in keeping with our seasonal pattern, by 4%, excluding the impact of AirPlus on the fee and commission line. For net financial income, it's a significant increase compared to both the same quarter last year as well as the second quarter, and we are going to detail a little bit more what the impact is there, but we are generating some gains, so some of our strategic holdings, But nonetheless, even underlying, it's a strong performance of net financial income in the quarter. So these developments add up to the 20.9 billion that I mentioned. Operating expenses at 7.7 billion reported. That's an increase of 5%, including then, as previously referred to, the operating costs of Airplus, as well as the transaction costs. On an underlying basis, excluding that impact, costs are down sequentially by 4%. which also makes us comfortable to reiterate, as Johan mentioned, our cost target for the year on an underlying basis of at or below 29 billion. Net expected credit losses in the quarter of 393 million reflects on the one hand some reversals of the portfolio overlays and on the other hand some specific provisions we've done on a small number of exposures which are largely uncorrelated in various geographies and markets and the underlying asset quality remains strong. This takes us to a basis point ECL level in the quarter of five basis points. Imposed levies just under a billion, which also is in line with what we previously communicated for the second half levy impact of at or below two billion, which leads to an operating profit of 11.8 billion for the quarter. This is on an underlying basis a decline of 7% compared to the same period last year and a 2% increase underlying versus the second quarter. Return on equity of 17% and we continue to build capital as Johan was referring to this very little movement in the balance sheet. So our common equity to one ratio increases from 19% in the second quarter to 19.4 in the third quarter. Turning to slide number 10. We would like to provide an update on the cost target that Johan was alluding to in his introductory remarks. You will recognize the upper part of the slide where we have previously communicated our cost target for 2024 of at or below 29 billion, consisting of the impact of inflation, our planned investments, and our planned efficiency gains. Now, in addition to the 29 billion, we are now consolidating Air+. Airplus was consolidated in the third quarter for two months, August and September, and it will then be fully consolidated in the fourth quarter. This is estimated to have a full year impact on costs of 1.25 billion. In addition to that, we have booked transaction related costs during the year, and we are also expecting to book an implementation charge in the fourth quarter of about 550 million. So those costs together adds up to 750 million and takes us to the updated cost target of 31 billion. Moving to slide number 11 and the development of the net interest income. And here we have seen a sequential decline as I alluded to previously from 11.6 billion in the second quarter to 11.1. And we would like to try to provide a bit of color on the various movements in the various divisions. As you can see in LCNFI, the decline is just over 300 million and the impact here is coming from a couple of different aspects of the business. Roughly a third of this sequential decline is attributable to change in the deposit mix. So we have seen a shift of deposits from somewhat higher margin impact deposits within our investor services business to an increase in deposits in our traditional corporate term deposits. This is attributable to roughly a third of the sequential drop in the quarter. Another third is attributable to our market NII. And this is something that we have been referring to previously as somewhat communicating between net interest income and net financial income. And we are also seeing this effect in this quarter. Now, we are operating with an inventory of fixed income securities in our FICC business in LC Under 5. And as a result of that and the impact we have seen from an inverted yield curve, i.e. the short end of the curve is higher than the long end, we're seeing a negative impact on net interest income as short-term funding costs is higher than the coupon on the portfolio. This, however, is offset by a contribution in net financial income, and it's also the reason why we're seeing the net financial income being strong. So this is attributable to roughly a third of that change. The last third in the LCNFI development in the quarter is also a communicating effect between the Division and Treasury, attributable to IFTPs, Internal Fund Transfer Prices. Now, if you move to CNPC, we have roughly the same size of sequential decline, just over 300 million. And here, we can say that roughly a third of this decline is the impact of the consolidation of Airplus, which contributed negatively to net interest income, as highlighted. and also the financing cost of the equity that has been used to purchase Airplus, which is then booked in the CNPC division. And we're seeing somewhat lower return on business equity, as well as the IFTP effect that I was also referring to in LC-NR5. Two-thirds, however, is the impact that we've seen from lower rates, and that is primarily visible in our deposit margins in the quarter. On the Baltic division, there is no movement between the division and Treasury because they have their own Treasury in the Baltic. So this is a fully reflective of the various movements in the quarter. And here we have seen an impact of the falling rates in the quarter. As Johan was alluding to, there is some volume growth in the quarter, and the net effect is what you can see on the slide of a drop of about 100 million quarter on quarter. On the funding and other, we see some of the positive effects of the ISTP resulting in the 11.1 billion reported net interest income. Moving to fees and commissions on slide number 12, you can see that our fees and commissions attributable to custody mutual funds and brokerage is small up versus the previous quarter, which is encouraging in a typically seasonally lower quarter. We have seen net outflows from our assets under management in this quarter, and as you will remember, in the second quarter we saw significant inflows. This is primarily in the quarter attributable to somewhat lumpy developments in a couple of mandates, particularly in private wealth and family office business, and this is of course a somewhat lumpy nature of that business. However, this remains a big focus area for us, as Johan was referring to as well, And we continue to see that underlying sales look encouraging, but we continue to focus on this area and we have more work to do. For fees, lending and advisory fees in the quarter, there is a sequential decline of 17% compared to the second quarter, which was strong, but also the impact of slower activity in the third quarter. We were talking in the second quarter about a pickup in activity levels. We continue to see encouraging signs of conversations with customers, but it is not yet translated into activity levels in terms of loan demand or transactions. For the payment in car fees, a sequential increase of just over 30%, and here you see the consolidation of AirPlus, tributing about 360 million of commission income in the quarter. Turning to slide number 13 and the net financial income. And here we, as I mentioned previously, a strong quarter. And as you can see from the breakdown of the slide, it is a contribution also from what we refer to as NFI Other, which is not attributable to the divisions. Here we see a positive impact from some of our strategic holdings. We also collect some dividends from those holdings. And we have also made some exits from investment in our venture capital portfolio within FinTech. So some contributions in there, but nonetheless, the underlying NFI on a divisional basis is strong in the quarter. Turning to side number 14 and the capital development, starting the quarter at a buffer of 430 basis points over the capital adequacy target or minimum regulatory requirement rather. and building up throughout the quarter primarily as a function of retained earnings. The sideway movements of balance sheet that Johan was referring to is effectively leading to a sideway movement also in risk-weighted assets or in REA and we see the consolation impact of AIR plus of 45 basis points. To the right you can see the same development year to date and we close the quarter at the buffer of 470 basis points and a very strong common equity tier one ratio of 19.4%. To a couple of balance sheet measures, as referred to previously, we continue to enjoy strong asset quality with an ECL for the first nine months of two basis points, MSFR and liquidity coverage ratio at stable levels, and the capital position, as mentioned, strong at 19.4%. So to conclude on the outlook, it's a familiar slide to all of you. We finished a quarter on a strong capital position and we are committed to our target of by year end get to the management buffer of 100 to 300 basis points. We retraced our dividend payout ratio which is at 50% and we continue to aspire to a 15% return on equity on our business. So with that, We conclude on the financials and I think we open up for Q&A.

I would like to switch to the next page and just give a little bit of puff for our sustainability event on the 13th of November. So I welcome you all to join if you have the desire where we will talk about sustainable finance with external and internal speakers as we do these days once a year. And finally, I'd just like to thank Christopher for his first presentation and also thank Masi, who is our departing CFO, who has had a tremendous contribution to the bank and to myself. And I think many of you also appreciated him a lot over the years and wish him all the best in the future. And with that, we'll close the prepared remarks and we go to Q&A.