Skandinaviska Enskilda Banken AB (publ)

Good morning everyone and welcome to SEB's financial results presentation for the full year of 2025 and Q4. I'll take this opportunity before we go into the material just to mention a few highlights of 2025 that we are particularly proud about. First, it is the very strong position in customer satisfaction surveys not at least within financial institutions and corporate and investment banking. Even though we're not at the very top of private banking, we still made a meaningful improvement. Secondly, the employee engagement hit a new all-time high compared to our peers. We are now solidly placed in the top decile of happy employees within the financial industry. Also very constructive is to see our market position within CIB when it comes to league tables that we record a top level, particularly now as we've seen an activity pick up within this area. A meaningful symbolic event is that we've also established and opened our Amsterdam office. And lastly, after more than 10 years in the making, We achieved an upgrade by S&P to a weak AA rating, and we now join a very small group of banks in the world that has this formidable position when it comes to credit quality. Now flicking to page two and the highlights for Q4. First, we saw a pickup in fees and commission across all divisions, offsetting the continuation of net interest income headwinds. As I mentioned, we got an upgrade by S&P. We are meeting our annual cost target and AirPlus is in line with plan. We have set the new cost target for 2026 to 33.4 billion plus minus 250 million, particularly to have some room for variable compensation and other unforeseen events. The board has proposed an ordinary dividend for 2025 of 8.50 per share, plus a special dividend of 2.50 per share. In addition to this, the board has proposed a 1.25 billion share buyback program for the first quarter of 2026. Clicking to page three, we have now received the full suite of the major customer satisfaction service and We can conclude that we have maintained our position on large corporates as number one in the Institutional banking segment. We were number one in Sweden Finland Norway number three in Denmark and number two just like last year in total and we achieved a first position in syndicated loans private banking improved from position six to four and and we also got an award for the best Swedish equity fund of the year. On the next page we go through the loan and exposure development and we continue to see a predominantly sideline movement during the fourth quarter with some signs of improvement. Corporate lending on an FX adjusted basis increased 3% year on year and the total lending for the group increased by two percent compared to last year flicking to page five just a very short update that we can now conclude 25 that we have adjusted or excluding all restructuring costs a positive contribution from air plus and therefore this is eps accretive we are also now very well placed to grow our fee income from european payments industry given our exposure that we get with airplus we also on track to be eps accretive including implementation cost in 2026. flicking to page 6 our business plan update for 2026 we divided in three simple areas wealth and asset management, corporates and financial institutions and retail banking. And here is a selection of particular focus areas for the next year. In WAM we want to improve our digital capabilities and we have formed investment and trading solutions unit to faster develop these capabilities. We want to have more international distribution capabilities and improve our position within the pension market. For corporate and financial institution we will continue to maintain a position which is very strong in the Nordics and continue to selectively carefully grow outside the Nordics. We will have targeted efforts around the private capital markets and As I previously mentioned, we expect Airplus to contribute a bit more meaningfully during the year for the corporate payment area. In retail banking, it's focused on digital transformation, use data to increase sales, and also go back to basics and have a simplified way of working. Flicking to page seven, we just double click on technology where we divide it into two areas. One is to work with what we have. We call that modernization of the tech stack. We have several core infrastructure transforming projects this year and together with efficiency initiatives we also need to increase speed of development and technological capabilities build out. We also want to embrace new technologies and particularly they're going to be around AI tools both for the people that works in the bank, but also to try to get AI capabilities in front of our customers. And two particular projects we will focus on in the years to come. One is Spherical AI, which is the NVIDIA consortium. The other one is Kivalis, which is the Stablecoin consortium with other European banks. Next page is just to say that whatever we design now in this business plan and for the future, we aim to come back to a medium to long-term positive jaws. The last two years after the extreme uplift of profits coming from the sharp rate increases, we now see that we will have a different future. And whatever we do in the planning period right now, it is to at least have cost control in order to achieve positive jewels, but we do not dictate income, albeit we see some tentative signs of improvement in the year to come. With that, I'd like to hand over to Kristoffer.

Thank you, Johan. I'd now like to turn to the financials on the next slide. Before we look closer at the results for the fourth quarter, I'd like to comment briefly on the full year performance 2025. I think the year is a good example of how our diversified revenue mix provides stability over a business cycle. Lower rates continue to weigh on net interest income, and net fee and commission income increased both organically and as a result of the consolidation of Air+. The impact from the stronger Krona on our operating income has been meaningful during the year and the stronger Krona has had an impact on our operating income of about 1 billion affecting negatively both net interest income and fees and commissions. As a result of the stronger Krona, the 2025 cost target has also been adjusted downwards by around 500 million during the course of the year. and the final FX adjusted cost target came to 32.5 billion plus minus 300 million. The reported operating expenses for the full year of 32.6 billion is hands in line with our FX adjusted cost targets and this includes the impact from the accelerated implementation program of AIR+, which we mentioned as a potential action already in the previous quarter. This acceleration has added around 100 million compared to our initial implementation cost guidance and took the total charges to around 800 million for the full year. We'll come back to the annual cost target for 26 in a moment. The return on equity for the full year adjusting for those items affecting comparability came to 14% with a cost income ratio of 42%. Turning to the next slide and the results for the fourth quarter. The operating income of 18.9 billion increased somewhat from the previous quarter, despite lower interest rates continuing to weigh on our net interest income as fees and commissions increased by 8% or around 500 million quarter on quarter. Compared to the same quarter of last year, the increase in fees and commission was 5%. and 8% in constant FX. Net financial income in the quarter of 2 billion is somewhat below our historical quarterly average. Operating expenses for the fourth quarter came in at 8.5 billion taking the full year cost base to 32.6 inside our FX adjusted cost target as I just mentioned. We can see that our efforts to continue consolidating the cost base as stated earlier in the year are having effects. The total number of FTEs declined during 2025 for the first time since 2018 and we will maintain the external hiring pause to continue challenge our need for external replacement hiring across the bank with continued exceptions for business critical roles. So as such, our strategy to make room for investments in prioritized areas through consolidating prior investments remains intact. This means that even though we expect to see higher FTEs in a number of focus areas in 2026, the total FTEs in the group should remain stable. net expected credit losses of just under 400 million corresponds to five basis points and overall asset quality remains stable and the development in the quarter follows the pattern from earlier in the year with a handful of counterparties requiring provisions in specific portfolios imposed levies at 812 million just under our full year guidance of around 3.5 billion for the year And for 2026, we expect levies to decline slightly to around 3.4 billion. So under items affecting comparability that I mentioned previously, we report a negative 400 million attributable to the outcome of our annual impairment test of intangible assets. More specifically, this write-down relates to an acquisition within the Norwegian consumer card business back in 2002. And it is continued pressure on returns that has triggered a revaluation of the asset. The goodwill is written off in full. We do not see any other intangible assets at the risk of impairment at this point. This particular asset was highlighted in our annual disclosure last year as an asset at the risk of impairment. The tax rate for the fourth quarter at 17.2%. This is, as you notice, below our normal tax rate of around 21%. And it reflects a positive tax effect that occurred in connection with the full year closing. And going forward, we expect that the tax rate should revert to around 21%. ROE for the quarter in isolation at 13.6%, excluding those items affecting comparability, i.e. the goodwill write-down. On the next slide, we take a closer look at the development of our net interest income for the quarter. Average cyber rates declined by around 20 basis points over the period, which impacted our rate sensitive deposits, particularly in corporate investment banking and in business and retail banking. And as Johan mentioned, FX adjusted lending volumes in these two divisions were moving largely sideways. in the quarter the results of the lower lower cyber impacted those divisions by between 150 to 200 million respectively this delta also reflects the impact from fx headwinds within cib the net interest income in our markets business performed well and benefited from favorable market conditions partly mitigating the negative effects from the lower rates and effects In the Baltics, average euro rates remained largely unchanged during the quarter, and net interest income in local currency increased slightly from Q3. So this represents the first quarter-on-quarter increase in net interest income in the Baltic division since 2023. Now, due to the stronger krona versus the euro, the NII for the quarter in krona was largely flat. The NII in the Baltics was supported by continued strong volume growth, offsetting some of the lagging headwinds on deposit margins that has been triggered by rate cuts earlier in the year. And the volume growth innovation is broad-based across all three countries and spans both retail, mortgages, and corporates. Mortgage sales in particular continue to be strong, up 43% from the same quarter of last year in local FX. The contribution from our treasure operations, including some of the benefits that we enjoyed from short-term funding during Q3, remained largely unchanged and supported NII in Q4 as well. Looking forward, we continue to expect the impact from lower rates on our NII to bottom out some three to six months after the last rate cut, which then, based on current rate expectations, should occur sometime in the first half of this year. also bear in mind that the first quarter have some technical headwinds for example a two day lower day count and we also expect a slight increase in our cost of the deposit insurance guarantee for seasonality and of course the fx effects will continue to monitor Turning to the next slide and fee and commission income, the fourth quarter saw an increase of just over 500 million compared to Q3, and this increase is broad-based with all operating divisions reporting a positive development. Within CIB, the increase was notably driven by corporate finance, equities, and debt capital markets. Within BRB, the business and retail banking, card fees in particular represented the strongest increase quarter on quarter partly seasonality but also a pickup both in the SEB quotes traditional markets as well as in the markets of Airplus which of course has an emphasis on continental Europe and Germany. In wealth and asset management there was higher asset values and also performance fees which drove the increase quarter on quarter. Net new money for the quarter came in at six billion with a largely even distribution from wealth management, retail, and the Baltic divisions. Fee and commission income in the Baltics continue to develop positively and remains on a positive trajectory supported by a number of different savings initiatives. Turning to the next slide, we'll look at the net financial income. The income came at 2 billion for the quarter, which is, as I mentioned, below our 16-quarter average rate. but still inside the standard deviation that we have seen movements around in the past. During the final quarter, we saw good performance from both FX and commodities, and fixed income was more in line with its seasonal pattern of a stronger first half and a lower second half. We also had some lower market volatility impacting income in NFI. On the next slide, before we go on to the cost target for 26, just coming back to some of the AI developments and priorities that Johan mentioned briefly in the business plan presentation. In the last quarter, we introduced the SEB AI triangle that we use more as a framework as to how we engage with AI in a couple of different dimensions. We're talking about billing AI into our offering, Secondly, to build it into our business and running our operations more effectively. And thirdly, importantly, also supporting the AI community and growing together with AI related companies in our part of the world. During 25, we did scale up some of our early use cases from pilots to production tools. And at the same time, we continue to roll out general purpose AI tools. So GitHub for developers and Microsoft 365 Copilot for non-developers. to help our employees integrate AI into their everyday workflows. As we now head into 26, we'll put emphasis on a few areas where then building on the experience that we had from last year, we look to implement at larger scale and get AI powered automation as a result. It's early days, but it is looking encouraging and the areas in particular are the process heavy parts of our value chain. and on the other hand, customer-facing capabilities and ideally looking to apply AI where we get a combination of productivity gains and enhanced customer experience. Some examples include some of the customer service processes, onboarding, KYC, and also parts of the mortgage process. And then finally, we'll continue to support the AI community through offering both scale-up products and services like venture debt in CIB everyday banking, and also supporting both founders and entrepreneurs in the WAM division. On the next slide, we'll look through the cost targets for 2026. And when we arrive at the number for the year, we take a couple of factors into consideration. First, we expect inflation to add around a billion to the cost base. We expect part of this increase to be offset by efficiency gains around 700 million. This is a combination of the effects from our continued external hiring pause, efficiency gains that we've achieved through increased degree of automation, as well as improved ways of working through closer integration between operating divisions, technology and business support. Now turning to investments, we make here a distinction between the ongoing investments in the business. They include the continuous work on our technology roadmaps, the regular system upgrades, selected hiring, incremental product development, etc. And this is expected to amount to about 400 million. So if we add these factors together, the increase from inflation, efficiency gains, and those investments will come to an underlying cost increase of around 2%. And this is then also excluding the positive effects we're going to get from lower implementation charges at Air+. Now, in addition to those ongoing operations, we plan to take a couple of dedicated investments in AI, regulatory and technological resilience, and also building out our digital asset capabilities. So this is expected to around 500 million for the year. And some of these investments we've already communicated. And a couple of them include, first of all, initiative to secure access to sovereign compute, as Johan also mentioned, the spherical initiative that we're expecting to ramp up during the year. Secondly, we're also investing in AI specific tools for specific initiatives that I mentioned previously, where we're looking to scale up our activities. Thirdly, also ramping up our IRB roadmap initiative and here to obtain regulatory approval from relevant authorities as swiftly as possible addressing the capital add-ons that we currently carry. Fourthly, we're also looking to invest in our operational contingency, considering the geopolitical uncertainty and the backdrop we're operating in. And finally, also the build-out of the digital asset capabilities, and notably our initiative that Johan also alluded to, to launch a Euro-denominated stablecoin in a European banking consortium. So these are the prioritized investments which we have wanted to make room for through our ongoing cost consolidation and the restrictive external hiring. And this, we expect, will allow us to enhance operational efficiency over time. So in total, it takes the full year cost target to 33.4 plus minus 250 million for the reasons Johan mentioned. And we expect some of these additional investments to have a peak year in 2026. So the cost trajectory for the coming three-year period should taper out. On the next slide, we turn to the development of our capital position. We closed the third quarter at the end of September with a CE21 buffer above the regulatory minimum of 360 basis points on a reported level. We also showed that we are at 290 basis points on a pro forma level taking into account the announced, but not yet fully phased in, impact from our Baltic IRB models. During the quarter, we then added around 20 basis points from our retained earnings, and FX contributed positively by roughly the same amount. While going the other way, the continued phasing in the Baltics had a negative impact of around 20 as well, and other REA movements had a total impact of negative 15 basis points. Now that includes the operational risk area that we flagged in Q3, which actually in the end came in at seven basis points, so lower than our initial estimate. So to finish the year back at our target capital range of 100 to 300, we deduct the approved buyback program of 1.25 billion, which corresponds to 13 basis points. and then the special dividend of 250 which is another 50 basis points. So that takes us to the 300 basis points above the minimum and implying a buffer of 250 basis points on a pro forma level adjusting for the remaining phase-in in the Baltics. On the next slide we are looking at our financial targets and this is a familiar picture and the targets remain unchanged. So from left to right, the payout ratio with an ordinary dividend of 850, the ratio comes out at around 54%. So in line with our target of around 50%. Secondly, the 100 to 300 basis point management buffer. We remain committed to operate within this range. And as we've said, to take action if the buffer exceeds 300 basis points and Therefore, just like this year, we use a combination of continued buybacks and a special dividend to ensure that we arrive at the management buffer in line with our target. From an ROE perspective, our ROE came to 14% underlying, which is below our 15% ROE target, and we are committed to enhancing our returns going forward, including some of the actions that Johan presented as part of the upcoming business plan. In the context of our ROE development, it is worth noting that the surplus capital in our defined benefits pension plan has continued to expand. And at the end of the year, that surplus was substantial and there is some 24 billion deducted from our CET1 capital, but included in shareholders funds. So we have for 2025 increased the upstreaming of capital from the pension fund to the bank. to around 2 billion, and this compares to between 1 and 1.5 billion over the last couple of years. This additional contribution will become visible in our capital base gradually during 2026, and we'll be adding around 10 basis points. Nonetheless, the impact on our ROE from the pension fund surplus, which is, as I mentioned, part of our share as equity, is around 1.2 percentage points on our stated ROE. So bearing in mind this impact was effectively negligible up until 2021 when the surplus was considerably smaller. So therefore for comparability of the development of our underlying profitability we quantify this effect. So with that, we're concluding our prepared remarks and we are happy to take your questions and I'll hand over to the operator.

Thank you.