President’s statement ................................................................ ......................................I In 2007 the prolonged period of abundant liquidity and historically low risk premiums came to an end. During the first half of the year, a positive market sentiment spurred activity levels in all segments. The second half of the year followed a downward spiral of rising uncertainty, faltering confidence among market participants and widening credit spreads. As is often the case with market corrections, few predicted the triggering event, the sharpness of the correction and the repercussions on the wider markets and economy. The credit spread widening affected SEB through mark-to- market valuation losses on the fixed-income securities portfolios. These portfolios reflect SEB’s size and position within wholesale banking and are held for investment, treasury and, to a lesser extent, client trading purposes. Portfolios are also held to secure liquidity through pledging operations with central banks. A diversified business mix Despite the turbulent financial market, continued high customer activity generated strong income growth, reflecting SEB’s diversified business mix. Retail Banking, Wealth Management and Life all delivered record results and double digit profit growth. Within Retail Banking the controlled slowdown of credit growth in the Baltic countries continued, reflecting SEB’s view on the macroeconomic imbalances; quarterly credit growth was more than halved during the year. Continued high customer activity within Merchant Banking yielded strong results in equity and transaction-related areas. However, operating profit was weakened by valuation losses in the division’s fixed-income portfolios. Improved integration and higher customer satisfaction SEB has taken several steps in the past year to create a more integrated bank in order to make all of ours services and product offerings more accessible to our customers. The new Group structure, with common support functions, have enabled us to leverage on our size and free-up resources which can be reapplied in customer interaction, product development and growth segments. SEB Way, our operational excellence programme striving to drive continuous improvement, involved more than a third of all employees. Last year steps were also taken towards a more consolidated IT-platform. We have edged closer to our goal of having the most satisfied customers within our selected segments. SEB was again top ranked in areas such as Nordic investment banking and custody as well as within retail banking in Estonia and Lithuania. The recognised global lead of our FX research and cash management products are important landmarks in the highly competitive international banking market. Within Swedish retail banking, customer satisfaction improved. In terms of market share, SEB was number one or two within unit-linked not only in Sweden and Denmark but also in all Baltic countries. SEB confirmed its leading position among institutional clients within asset management. “We have edged closer to our goal to have the most satisfied customers within our selected segments. The recognised global lead of our foreign exchange research and cash management products are important landmarks. SEB is well prepared for more uncertain times ahead.” A solid capital base supports profitable growth Concurrently with the past years’ expansion and strong income growth, we have lowered costs, established a more efficient organisation and raised the quality of our product offering. The capital base has been strengthened in order to further enhance SEB’s creditworthiness and the execution of our growth strategy. SEB is well prepared for more uncertain times ahead. The aim remains the same – to be the leading North European bank in terms of customer satisfaction and financial performance. Stockholm in March 2008 Annika Falkengren President and Chief Executive Officer SEB ANNUAL REPORT 2007 3
