Seb Sa Unsp/Adr

Good morning and welcome to this closing of the books for 2024 earnings call. As always, we will run through the PowerPoint presentation that we have posted on our website. Going to highlights, we have seen increased customer activity within corporate and investment banking, still called large corporate and financial institutions division. and some healthy customer activity with low growth in the Baltics. Both costs and capital came in as planned for our full year targets. The cost target for 2025 is set at 33 billion, which will enable us a fair balance between incorporation of Airplus, reinvesting in the business, acknowledging some higher inflation rates going forward, compensated by continuation of extract efficiencies and productivity gains within the Group. The Board has proposed to the AGM an ordinary dividend of 8 kroner and 50 öre per share, combined with a special dividend of an additional 3 kroner per share, And we've also announced the intention and the share buyback program for the full year of 2025 of 10 billion kroner. Going to page three, some of the recent developments when it comes to the all important customer satisfaction scores that we follow very closely. It is very encouraging to see that we maintained the top position for the Nordic Corporate Bank. We also came out and this is a little bit novelty for us because we haven't had this position for some time as the top ranked domestic equity provider, equity service provider in the Nordics. While for financial institutions we came out at number two with the top position in Sweden, Finland, Norway, but a third position in Denmark. The yearly Prospera survey of private banking in Sweden. We came out six, which is something we're not satisfied with. Double clicking on the six, which comprises three different categories. The mass affluent of below 10, we're number two. The affluent, which is 10 to 49 million, we're number six. And the high net worth, about 50 million, we're number one. We also got awarded the best fund company of the year. And also for many years, we have not had any change on the credit ratings, but it's encouraging to see that S&P has moved its outlook for S&P to positive when it comes to our external credit rating. Page 4, we look through the lending and our credit portfolio development and broadly speaking, it is muted and we can see a sideline movement as we have for some time. The recent top line growth, very nice, is of course that FX has worked in favor of SEB. And therefore we note the 5% to 6% increase in the lending portfolio and corporate credit portfolio for corporates. But FX adjustment adjusted, it is still saying that we're moving sidelines. This also goes for households and I would say for the smaller areas within real estate and housing co-ops. With one exception and that is Baltic. So in Baltic, corporate lending is up like for like in local currency. of 4% year-on-year, and Baltic mortgages are up 6%. So there's a clear sign that something positive is happening in the Baltics. With that intro, I'll hand over to our CFO, Christopher Malmer, to run through the financials in more detail.

Thank you very much, Johan, and good morning, everyone. So I'll start on slide number 6, where we'll have the financial summary for the full year 2024. Operating income is up somewhat compared to the previous year at 81.9 billion. Operating expenses at 30.9 is at or as you can see a sliver below our communicated cost target of 31 billion and that's an increase excluding Airplus of 6% on an underlying basis and operating profit of 46 billion down 2% versus last year on excluding the impact of Airplus for the year. Net profit at 35.9 billion, sequentially from last year down 3%, and as you can see from the EPS developments, down 1%. Underlying, you can see the impact of our continuous and ongoing share buyback program that we also announced a new one last night. Return on equity for the full year at 16.2%, and asset quality remains very benign with net ECLs at 3 basis points. Going to page number seven and a closer look at the financial summary for the fourth quarter. Please note that we now continue to provide comparison columns both within, including and excluding Airplus. This will be the last quarter that we'll be doing that. We're now working very hard on the integration and as we are effectively merging Airplus into S&P Card, you will start to see merger effects and synergies in both of those areas. And therefore, we will continue going forward to report this as part of CNPC. Now, having said that, we will, of course, provide an update on the progress and an evaluation of the business case as we progress. And a brief reminder, Q3 had two months of AirPlus, and Q4 has the full period of AirPlus included. Looking at the income line, just under 20 billion. It's down underlying 6% compared with the previous quarter. And if you look at the mix of that, we'll see the net interest income is down 2%, and we'll come back to that in a moment. Fees and commissions at 6.5 billion on an underlying basis, that's an increase of 7% compared to the same period of last year. And because of the seasonality, of course, Q4 of last year is the most relevant comparison. And here we can see underneath that 7% growth that there are some signs, and Johan alluded to them, of activity levels in the Corporate Investment Bank, in LCNFI, Fees around advisory, securities, and secondary trading are up in the region of 25% to 30% compared to the same period of last year. So some encouraging signs of activity levels picking up. Net financial income is down from the Q3 high print. As you will recall, Q3 was a significant increase compared to the average run rate. And here we have the mark-to-market effect, not least of our strategic holdings. which in this quarter is an adverse impact to a decline of negative mark-to-market about 390 million. Against that, we have positive XVA effect of about 150. That takes us to the income line. Looking at the expenses for the quarter of 8.7 billion and then noting that within that 8.7 billion, there is about 500 million of implementation charges related to AirPlus as previously communicated. In note number 16 in the release, you will also see that about 400 of that is actually booked in AirPlus, and the rest, the balance, is booked within SEB Card. As you will recall, we also have 200 million of transaction costs related to AirPlus in Q3, so the total AirPlus-related implementation and transaction costs for 2024 then adds up to 700 million. Going below the profit end before ECLs and imposed levies at 11.3, we come to the ECL number, and there we're reporting 377 million, similar to in line with the previous quarter. And the underlying pattern is quite similar as well. There's a handful of larger exposures that are requiring provisioning, uncorrelated, both geographies and industries. And we're also releasing some of our portfolio overlay to the tune of about 400 million, so similar release as we saw in the third quarter. On imposed levies, there is a decline compared to Q3 and here we have a primarily related to the solidarity levy in Lithuania. Looking forward into our levies going to 2020 for this year 2025, we will continue to see the resolution fund fee and the risk tax roughly at the same level as we are this year. The mortgage levy in Latvia will discontinue and will be replaced by a solidarity levy instead. Largely the same effect, somewhat bigger. And the solidarity levy in Lithuania, we're expecting to decline somewhat and that's a mathematical effect as it is based on an average net interest income over historical run rate. In total, we're estimating this to be somewhere in the region of 3.3 billion for 2025. That takes us to an operating profit of 10.1 billion. You will also note that the tax rate is somewhat higher at 25.6, and there's a couple of reasons for that. First of all, there is some dividend payments between our subsidiary in Estonia up into the mother bank, and that has a tax effect in the quarter. We also have a slightly higher amount of subordinated debt outstanding. You will recall that we did an 81 in October. So the tax on those securities is non-tax deductible, so there's a tax impact of that. And the third effect is also a prudent and cautious treatment of tax assets related to AirPlus. Now having a look at the, and just to mention the ROE for the quarter of 13.2 and we're also providing the ROE adjustment for all the AirPlus effects at 14.6. Now double-clicking on the net interest income and the development in the quarter from 11.1 to 10.8. Looking at the divisional effect, you will see that the large corporate and financial institutions, excluding the effect from IFTP, is largely flat. You will recall that in Q3 we did have some effects from IFTP, internal funds transfer pricing, and we flagged that they would continue into the final quarter of the year, and that's what you're seeing now. We talked in Q3 also about a negative deposit mix effect in LCNFI. That has abated. There's none of that we're seeing in the quarter. However, the yield curve effect that we alluded to in Q3, which had a negative impact at the time with an inverted yield curve, that is now flattening out, and it's actually a small positive contribution, and the steepness of the yield curve is an important development. And as you will recall, the difference between the coupons that we're booking on our fixed income inventory in FICC relative to the mark-to-market effect that goes through the net financial income line. Unlined volumes and margins are largely flat, so adjusted for IFTP, a sideways movement. Looking at the CNPC division, you'll see that the IFTP effect is about 200 million as well. Both of those effects, by the way, are offset in funding and others, so in Treasury, that's a full mirror image of those IFTP effects. Outside of that, there's a decline of 200 million. which reflects the lower rate in the quarter impacting deposit margins somewhat offset by improving mortgage margins. You will also have seen in the quarter that we have had repricing of our wholesale funding at market rates which have been declining linked to Stiber over the course of the quarter and some products which are lending products that are priced off the policy rates have stayed somewhat higher in the quarter resulting in a positive contribution to net interest income from those repricing effects, and we're estimating that somewhere in the region between 100 to 200 million, and they will eventually fade away as rates stabilize and normalize. In the Baltic Division, there's a sequential decline of 100 million, and that is reflecting, as Johan was alluded to, a positive contribution from volume growth, as we have seen some pickup there, offset somewhat by a continuous competitive environment in margins on the lending side. and the lower rates, of course, impacting deposit margins and resulting in the 100 million sequential decline. In the Treasury Funding and Other, you will see the mirror image of the IFTP effect in combination with a positive Treasury net interest income. Turning to page number nine, you will see our normal distribution of net fees and commission trends. And on an underlying basis, as I mentioned, an increase of 7% compared to the fourth quarter of last year. Now, the positive effect is split over two categories in this disclosure. So if you see the Securities and Commission income that is up 17% year-on-year, that does reflect those trends that we've been commenting and those activity levels in combination with continuous good growth in our asset and wealth management business. Net inflows in the fourth quarter amounted to 12 billion, and net inflows for the full year stood at 60 billion SEK. In the advisory fee and lending fee, you'll actually see a drop year-on-year, and that is primarily related to the fact that lending fees in the fourth quarter of last year were very elevated, so the advisory fees are the strongly performing year-on-year contribution. Payment to card fees, largely reflecting the consolidation of AIR+. Turning to phase number 10, you will see the breakdown of our net financial income development. And as I mentioned, the biggest swing factor between the quarters is related to our strategic holdings, and that impact is 390 million of that. Euroclear is the largest contributor, around 350 million of that. You will also recall that the yield curve steepness that we talked about previously would have had a positive effect here in the third quarter. And consequently, when that is reversing, that also presents somewhat of a headwind. Nonetheless, a solid underlying divisional NFI of 2.4 billion, largely in line with the longer-term trend of that line item. Turning to slide number 11, and the development of common equity Tier 1 buffer quarter-on-quarter. We ended the third quarter at a buffer of 470 basis points. And we communicated that our ambition before the end of 2024 is to come in within the management buffer range of 100 to 300 basis points. The developments during the quarter is, of course, our retained earnings after the proposed dividend. And as Johan mentioned, the proposal of the ordinary dividend is 850 per share. We then deduct the impact from the special dividend that was also proposed of 3 krona per share. And then the share buyback. where we have applied for a full-year 2025 buyback program of 10 billion. And since that has been approved, as usual with approved buyback programs, we deduct them in full from the Common Equity Tier 1 ratio. You will see some impacts from REA in the quarter, but perhaps worth calling out is the FX impact with increased REA by about 13 billion in the quarter, primarily as a result of the weaker Swedish Krona. This had a negative impact on the common equity one ratio of 26 basis points in the quarter alone. Another 26 basis points attributable to market risk area, off-risk area, and also some Article 3 add-ons related to IRB models in retail. That takes the management buffer at the end of 2024 to 290 basis points in line with communicated targets. Turning to page number 12, the cost target that we're announcing for 2025, and as Johan mentioned, of 33 billion, and here's a little bit more color behind that. We will start with the reported 2024 full-year cost level of 30.9, so just under the 31 communicated in Q3. Now, bearing in mind, and as I mentioned, this includes the 700 million implementation and transaction costs related to AirPlus. As we're expecting roughly the same size of implementation charges in 2025, there is no delta from the AirPlus implementation cost charges. So the delta we'll go through here is primarily related to inflation, which we expect to have an impact of about 8 to 900 million. And then, of course, the full year consolidation. So for five-month consolidation in 2024, we will have 12 months of AirPlus in 2025. and of course the impact from the ongoing activities consolidating these businesses and reaping the synergies. And just a quick word on that, the integration is running at full speed and as I mentioned it's effectively merging the businesses of Airplus and SDB Card and the synergies will then be realized in both parts of that equation. We've had good progress in negotiations with the unions and we have reached an agreement with the Workers' Council which allows us to proceed with our plans in that area. We can also see that our new offering is attractive. So combining the footprint of Airplaf with that of SEB Coop has allowed us to sign, at this point, two quite sizable whole market customers that otherwise we would not have been able to serve to that same extent with this new offering. And we have a number of exciting prospect discussions with that new offering. We're also proceeding with the exit of 29 markets that we will be leaving as part of the restructuring program. Now having said that, we are of course facing a challenging macroeconomic backdrop in Germany in particular, and that is the biggest and most important market for Airplus. So the range that we're providing on the cost outlook for Airplus in 2025 is really giving us the ability to take action if needed to accelerate the implementation activities in the event of any adverse developments on the revenue side, and therefore allowing us to meet our communicated target of breaking even of that business effective income meeting costs, so a neutral EPS effect excluding implementation charges in 2025. It is a challenging target, but we're committed and we're giving ourselves this flexibility to deliver on that product. So with that, we are concluding the fourth quarter reporting and we're moving into a business plan update, as Yvonne mentioned. And before I hand over to Yvonne to take us through the outlook for 2025 and our business plan activities, going to page number 14, just putting the business plan into context of our longer-term strategy. As you will recall from 2021, we announced SEB's 2030 strategy. based on a number of pillars and this very much is the foundation of what goes into the business plan. The business planning period is in three year cycles and we just concluded the one between 22 and 24 and now Johan will go through our forward-looking ambitions for 25 to 27. In addition to that, as you know, we're also calibrating annually and providing annual cost target guidance just like the one we're providing today. Quick look in the review mirror on page number 15, just a glance of the activities and achievements from the business plan 22 through to 24 across the strategy 2030 for pillars of acceleration, change, partnerships and efficiency. And starting with acceleration, I think it's worth calling out that we continue to expand our corporate banking business carefully but importantly in new markets in Europe. And having added then the Netherlands, Austria and Switzerland categorized as home markets, for large corporates and financial institutions. A new one will talk more about our plans going forward in that area, but that, of course, has been an important accomplishment in terms of accelerating our growth and our ability to address customers across Europe. I would also call out the acquisition, of course, of Airplus, which will create a European leader in corporate accounts, cards, and payment activities, which, of course, is also an important part of the acceleration of our income and profitability ambitions going forward. Under change, I think it's worth mentioning that we have created the new division, Wealth and Asset Management, combining Private Wealth Management and Family Office together with SEB Asset Management and SEB Life to really emphasize our ambitions to grow within this area and underlying the opportunity and the potential that lies therein. We've also continued to work on our digital presence and upgraded activities both in our Swedish mobile app and digital platform as well as in the Baltics where we actually moved to a new digital infrastructure that allowed us to release a number of exciting features and products over the last couple of months. We're also live in production with our banking as a service platform on a cloud-native platform in SDB Embedded. Across partnerships, we continue to work with partnerships to improve our product offering and there we work with partners to both provide products but also to enhance our distribution capabilities. For example, with PE accounting for digital accounting services and also helping our small businesses to open new companies together with Fortnob. So combination with partners allowing us to both expand our product footprint and leverage technology partners and distribution channels. Finally on efficiency, We continue to expand our digital presence and our capabilities around our API infrastructure. This is a critical enabler to be able to tap into new technology capabilities that we would like to add going forward, but also allowing us to more cost-effectively operate our broader technology stack and become more nimble and able also to leverage SaaS partners and SaaS providers. We continue to see an increase in operational productivity by 18% over the last three years. and that is measured as transactions per employee within business services and operations. So a good continuation and focus going forward is to continue to automate and make more efficient anything that can be automated. So with that glance in the review mirror, I'll hand over to Johan to look forward on the horizon.

Thank you, Kristoffer. And then I'll turn to page 16, the strategic priorities for the three-year plan. And just to start off, the 2030 strategy is unchanged and holds firm. And there is no revolution in what we are here to say today about the next three years, but this is the way we work with three-year plans, as Kristoffer just went through. Every plan, in order to anchor it within an organization like SEB, needs something of a campfire to gather around. So this is really our campfire slide where we center the high potential areas in two categories. Generate more profit, income and customer satisfaction in business growth and becoming more efficient and productive and cost efficient in technology. The business growth is centered around the very positive long-term secular situation for wealth and asset management, and we'd like to reorganize ourselves in order to capture it, which has just been done. We continue to hope that we can sit here in three years and say that we have grown our corporate banking efforts in the whole bank, including in business and retail banking, CMPC, and also gain market share. as well as future-proofing and growing our retail bank, where it also has a large degree of technology in it, not at least digital channels. On the technology side, we can divide it into two. One is the tech stack that we currently control and operate to continue to modernize it, and in conjunction with the establishment of the COO function, we really want to speed up here. as well as accelerate the implementation of new technologies. Now I'm going to go through the areas very quickly as one page on each. So on page 7, the COO agenda, more bank for the buck, is really to reorganize and make sure that we have the best possible prerequisites to get everything we can out of this very significant portion of the investment budget and the cost base within the bank. Things are changing rapidly around us, not at least how you adapt to a new cybersecurity and security in general. Every bank and every institution, every firm needs to revisit their strategies and implement new measures in order to be protected. Everyone also needs to acknowledge in this bank that we need to be more software driven. There's always a conflict between hardware mentality and software mentality, but looking into the future, we really want to make a big effort into becoming a better coder and a better software developer in order to meet our customers' demand in the future, as well as implementing next-gen AI, classic AI, machine learning, the new technologies in the best manner, both to achieve better customer satisfaction and experience, but also to improve productivity. And the regulatory environment, not at least, is constantly evolving and changing, and that's very topical as we sit here today. Few priorities for the COO function is, of course, to refine all the roles and responsibilities, to be very clear in who is responsible and accountable for executing what, in order to increase the internal speed of decision-making and clarity. We also want to leverage all the capabilities within data and cloud and obviously implement different type of functionalities that are new to us, particularly within the AI area. And we've done significant investments over the last five years. Many billions of the increased cost base that we have been allowed from shareholders to reinvest has now come to a point where we will take a little bit of a pause and we'll try to consolidate what we have added to make sure that it fits for purpose as best as we can. On page 18, we look at the corporate and the investment bank where we start the foundation in a very strong position. Here are some of the classic surveys that have been done, where we are very strong in effects, domestic equity, sustainability advisor, because we really believe that's to be the highest growth areas in the future, and the general theme of large corporate banking in the four Nordic countries. Focus area going forward, the first one is really around dig where we stand. There's still a lot of potential and in volume terms is actually the most significant one is to do more with the client base you have in Northern Europe. We then also want to add new clients. In the long run, you really need to have an expansive strategy in order to add more clients if you want to gain more of the pie that exists in Europe. So we will continue selectively to grow in whole markets outside the Nordics. And also focus more on the whole private capital market, including private equity. Infrastructure and Private Debt, where there's a lot of things evolving as we speak. All these efforts up to your right-hand corner touch two particular areas. It's the corporate growth, but also the wealth and asset management, and I'll make that point. To grow equity trading in the retail space, to have a good savings and investment platform also benefits a lot the markets division, which is within corporate investment banking. Corporate Investment Banking is also the main provider of all those services that we provide to everyone out there, but also to ourselves. So this is also a very important area for wealth and asset management that we continue to have a formidable equities, fixed income, commodities, derivatives business. The next page is business and retail banking. And first, just the foundation, where do we start? So first, I would like to point out that 50% of what we today called or did call CNPC is corporate banking. 50% is retail banking. The corporate banking here is, of course, SME and mid-corps. We've had some of the weaknesses in the external service, but the one we do internally, which is the Net Promoter Score, both for private and corporate advisory meetings, is exceptionally high, if not the highest we've seen in recent times, of 70 and 63 approval rates. Where we start is a market share in retail banking in Sweden of approximately 13% and in corporate business banking for mid-corps around 31%. So a very strong position in corporate and here we have an ambition to grow both areas modestly. I'd also point out that the retail banking for Sweden is 13% but we are above 20% market share in the three major cities, Stockholm, Gothenburg and Malmö and we have therefore A lower market share, of course, outside the larger three city centers. Focus areas going forward will be to continue to increase our market share within the business banking segment, the corporate banking within business and retail banking, and strengthen our position with some prioritized segments. For retail, we continue to improve our digital offering and deepen the relationship with individuals and it's prioritized to continue to shape an individualized personal banking experience. We also want to, through the acquisition of Airplus, to establish SEB as a European champion within the corporate payments space. Wealth and Asset Management, which is probably the one that a little bit stands out as more of a focus area than we've had in the past, on page 20. The foundation is now, of course, very strong. We haven't had the best performance over the last 5-10 years, but something looks a little bit better as we sit here today. First on performance, which is the key that you have a product worth asking clients to pursue. Performance has been very good in 2024, and we have now 75% of our discretionary mandate portfolios in private wealth management and FO beating the relevant benchmark index. For asset management, when it comes to the actively managed funds, 68% of those beat the relevant benchmark index. As I previously mentioned, we won the Fund Company of the Year. We have over the last 24 months engaged in many interesting complementary partnerships for this area and in this box with the logos you have a few of them that we bought 100%, a few of them we have a minority stake and some of them are more partnerships in distribution like the EQT one and Copenhagen Infrastructure Partners which we also took a stake in their newly formed company. We are a top provider of occupational pensions for corporates and this is really the life division. Our focus area is on distribution for pensions and savings products both to retail and mass affluent clients in Sweden. We'd like to expand our institutional offering as well as work better with third-party sales activities internationally. And as in corporate investment banking, where we have private capital, alternative investments continue to be an area to be further developed, not at least for the more affluent areas. We also need to look inside the bank and make sure that we have the best operational platforms and strengthening the digital capabilities, particularly in the area of self-service. Anyone who's financially literate and like to invest in their own funds or trade equities or such needs to have a better offering from SEB in this plan when we get through it. And we also would like to strike a blow for the personal meeting, which is still very important to us that we want to continue to boost our advisory services. Page 21 is the Baltic division where we conclude on the foundation that we broadly speaking have a quarter of the market in the three Baltic states both in corporates and in private clients. Also here we have a very historically high net promoter score of 65 for private customers and 61 for corporate. And we have just announced the intention to see if we can streamline our Baltic division from three separate wholly owned banks to one. This will of course mean that it becomes governance-wise operationally more efficient and we hope that this can be done in the next couple of years. Focus areas is really to continue to grow the corporate franchise in the Baltics. also have an ambition to have slightly higher market shares within retail through customer experience in the second to none and good advisory. And here we are in the beginning of what I would think is a several decades trend and that is to introduce savings and investment outside the bank system through savings accounts to the populations and institutions of the Baltic countries And very interestingly, we have now seen this quarter where net sales has actually been mirroring numbers we've seen in Sweden, of course, from a very low base, which makes it even more impressive. My second to final slide, page 22, is one of my favorite slides. It's just in this quarterly discussion that we always have to strike also a little bit of long-termism as a final note. SEB is all about the long term. We think 10, 20, 30 years ahead and even longer. And the whole plan that is guiding us when we design plans and business plans is to have operational leverage. In the medium to long term, the design is around having higher income growth than cost growth. And with a cost income significantly below 0.5, that means more than twice that in operational leverage and financial leverage on bottom line. And here I thought it would be just interesting to show the underlying trend before the data helped all banks in the world, particularly in Europe. And that is the years 2016 to 2021, before the interest hike and the shock inflation rates got introduced to the economy. And we have an underlying growth rate of profits around 9%. Obviously, you get a beta that goes up very much in profit when rates go up, and we are now experiencing the opposite. This is exactly as expected. Looking at the NII for 2024, it was down 5%, exactly as one would have expected when rates go down, but also encouraging to see that net fees and commission was up 11%. Almost or around twice as much, which is exactly when we talk about swings and roundabouts in the long-term perspective, how a bank like SEB is put together. Last page is just to conclude that we have unchanged from the board yesterday SEB Group financial targets, 50% payout ratio. This is the last page, 23. But I would point out one change that we have announced as an intention today, and that is that we would like to switch from an annual dividend to a semi-annual dividend, but not for 2025, but for 2026. Or I would say this is prudent in our opinion that everyone knows that this is something we will take on the next AGM March 2026. So the dividend payment for the calendar year 24 will come now as planned, as always, and then we intend to change it. But that will be, of course, subject to approval at the time of the AGM. Dear operator, that concludes the prepared remarks and I'll hand over to you.