Transcript SEB401E - Hugin Online

Press conference
25 October 1999
Jacob Wallenberg
Chairman of the Board, SEB
Main strategies
Leading
corporate
bank in the
Nordic region
Active participation
in the growing
savings markets of
Northern Europe
Merchant
Banking
Asset
Management
Enskilda
Securities
Trygg Liv
Financial Services
Retail Distribution
INTERNET
Internet
• Second generation of
Internet Service
• Log ins > branch
visits
• SEB Trading Station
• 25% stake in Self Trade
• SEB’s Travel Plaza
(e-commerce)
Internet
customers
300,000
• E-commerce
payment solution
250,000
• Internet office for
small businesses
200,000
150,000
• Internet service
for individuals
100,000
50,000
0
Dec 1996
Dec 1997
Dec 1998
Oct 1999
Assets under management
50% compounded annual growth
Gyllenberg
Finland
Asset
management
Norway
ABB
BfG Germany
Investment
Management Codan
EUR 83bn
Denmark
SEK 720bn
Trygg-Hansa
Sweden
EUR 22bn
Dec 96
Jan 00
SEK 194bn
Sweden
93%
Other countries 7%
65%
35%
Dec 1996
Dec 1997
Dec 1998
Aug 1999 Jan 2000
Lars H Thunell
President and Group
Chief Executive, SEB
SEB January – September 1999
• Total result excluding non-life insurance
SEK 4,859 (SEK 2,505) million
• Income increase 7%
• Costs increase 12%
• Recovered lending losses SEK 231 million
(lending losses SEK 2,034) million
• Return on equity 14.5 % (13.4 %)
• Prioritised areas show good development
• Sale of Trygg-Hansa completed
• Expanded ownership in the Baltic region
Focused growth
INTERNET
Sweden
Nordic
countries
Leading
corporate bank
in the Nordic
region
Baltic
countries
Germany
Euroland
Active
participation
in the growing
savings
markets of
Northern
Europe
Internet strategy
• Build on first mover advantage from
Sweden
• Develop Paneuropean IT platform
• Access to local
– banking infrastructure
– customers
• Multichannel strategy with Internet
focus
• Build up financial services gateway
through e-commerce
Market size
Inhabitants, million
4.5
8.9
5.3
82.0
5.2
7.7
Germany high growth potential
Total personal
financial assets,
1997
EUR billion
UK
Shares of assets
held in equities
%
3,938
Germany
2,699
France
20
9
2,354
34
Sweden
304
Denmark
187
9
Finland
115
9
Norway
111
20
14
Large market size
and low
penetration
German mutual funds market
Compared to GDP
32%
29%
15%
Germany
Sweden
UK
Large
Large market
market size
size
and
and low
low
penetration
penetration
German Internet market
Internet users
Internet banking
accounts
Penetration
Millions of users
1999 Q1
2000E
German
y
16.0 20%
UK
14.9
France
Sweden
Millions
11.8
4.5
0.8
25%
N/A
20%
0.1
50%
0.7
Large market size and low
penetration
Source: JP Morgan
Germany – 3,000 banks
Market share by deposits
Other banks 26%
Savings &
Landesbank
39%
BfG 1%
Deutsche Bank
HypoVereinsbank
Dresdner Bank
Commerzbank
6%
4%
3%
2%
Co-operative banks 19%
Highly fragmented market
Source: Deutsche Bundesbank, June 1999
Thorough due diligence process
First phase
• Asset quality review
• Financial performance and potential review
• Tax review
• Assess current Internet systems and development
potential
• Portfolio review
Confirmatory due diligence September-October
• “Audit” of the accounts by PWC
• Examination of loan book and leasing portfolio
• Valuation of real estate by external real estate
evaluator
• Examination of Treasury and Trading
SEB acquires BfG
• BfG will become a 100% subsidiary of
SEB
• Purchase price
SEK 13.9 (DEM 3.1, EUR 1.6) billion
• Contract signed, share transfer on
3 January, 2000
BfG in brief
SEB
1998 EUR billion
Total assets
Assets under
management*
Customers millions
Employees
Branches
* 1999 Q3
** Excluding Baltic banks
+
BfG
42
13
1.0
5,300
177
SEB
84
70
1.5
11,700 **
260 **
BfG
126
83
2.5
17,000
437
BfG assets under management
EUR billion
1998 1999 (August)
Funds
Mutual, special, real estate
8
10
Other
Portfolio management,
investment centres,
BfG Luxembourg
3
3
11
13
> 70 % in funds
BfG mutual funds growth
28.3%
German
Market
BfG
22.8%
15.9%
15.9%
17.3%
15.5%
13.5%
6.8%
1996
1997
1998
1999
6 months
Transaction rationale
• Fits well with SEB’s strategic goals as
regards asset gathering and Internet
banking
• Attractive financial terms
• Access to the German market with high
growth potential in asset gathering
• Strengthens SEB’s position for further
growth in Internet banking
Karl-Heinz Hülsmann
President, BfG
BfG change programme
“Old BfG”
1991
•
•
•
•
•
Restructuring
New position
New customers
New services
Competitive
marketing
“New BfG”
1999
BfG’s geographic coverage
Kiel
Neumünster
Rostock
Bad Schwaren
Wismar
Lübeck
Wilhelmshaven
Bremerhaven
Emden
Norderstedt
Hamburg
Harburg
Schwerin
Oldenburg
Bremen
• 177 branches in
120 towns and cities
Osnabrück
Herford
Bielefeld
Münster
Gütersloh
Bocholt
Masl Lunen
Duxlaken
Recklingh.
Hamm
Gelsenk. C-Rauxel
Bergkommen
MeersOberh.
Dortmund
Herne
Duisburg
Gottingen
Bochum
Krefeld Mülheim Essen Witten
Ratingen Wuppertal Hagen
Neuss Düsseldorf Lüdenscheid
Kassel
Remscheld
Mönchen- Solingen
Langenfeld
gladbach
Köln Leverkusen
Siegen
Düren Brühl
Aachen
Bonn
Bad Godesberg
Gießen
Wetzlar
Neuwied
Koblenz
Bad Homburg
Sulzbach
Frankfurt
Hanau
Wiesbaden Offenbach
Mainz
Heusersramm
Schweinfurt
Neu Isenburg
Rüsselsheim
Aschaffenburg Würzburg
Trier
Darmstadt
Worms
Mannheim
Heidelberg
Kaiserslautern
Ludwigshafen
Saarbrücken
Pirmasens
Heilbronn
Karlsruhe
Local reach 62% of total
population
Pforzheim
Stuttgart
Sindelfingen
Göppingen
Esslingen
Reutlingen
Offenburg
Ulm
Freiburg
Lörrach
Berlin
Potsdam
Wolfsburg
Braunschweig
Hildesheim
Magdeburg
Hamelin
Salzgitter
Hanover
Minden
Cottbus
Halle
Leipzig
 Dresden
Erfurt
 Chemnitz
Zwickau
Mannheim
Regensburg
Ingolstadt
Augsburg
Albstadt
Schaffhausen
Munich
Geveesried
Konstanz
Kempten
Friedrichshafen
BfG today
5,300 employees per December 1998
Service, IT,
Central Staff
1,408
Trading/Treasury
129
Institutional 98
Real estate 111
Corporate 299
Retail 1,923
Plus
subsidiaries
1,332
BfG new customer growth
240,000
200,000
160,000
100,000
1996
1997
1998
1999 Oct
Unique selling
position
BfG customers
Age structure
• Younger
Salary structure
(net DEM/month)
15%
> 64
35%
45-64
20%
> 5,000
50%
2,500-5,000
30%
< 2,500
• Higher income
• Higher education
• More frequent
Internet users
43%
7%
20-44
< 20
BfG customers used to direct channels
Internet
- 16,000 customers
- 60,000 transactions/month
Telephone bank
- 130,000 customers
- 145,000 transactions/month
Online
- 49,000 customers
- 92,000 transactions/month
Advanced usage
compared with other
German institutions
BfG - satisfied and loyal customers
Customer satisfaction
BfG
69%
Big four banks*
58%
Customer loyalty
BfG
Big four banks*
* Deutsche Bank, Commerzbank, Dresdner
Bank, Hypo Vereinsbank
** ICON Werbetracking 95-98
85%
72%
92% of Germans know BfG**
BfG mission statement
”We are a sales-driven bank.
Offering qualified advice proactively is
imperative to sell our excellent
products and services.
Excellent business results are the
objective.
Our yardstick and key to success are
customer and staff satisfaction.”
Lars H Thunell
President and Group
Chief Executive, SEB
SEB’s intentions
• Build on BfG’s existing clients and
infrastructure
• Distribute savings products through
BfG’s distribution channels
• Expand our leading position in Internet
banking to the German market
• Strategic review of other areas
SEB and BfG management resources
Karl-Heinz
Hülsmann
Chairman of the
Supervisory
Board
Lars H
Thunell
President
Lars
Lundquist
Deputy
President
BfG
Management
Team
SEB
Project
Teams
SEB
Change/
Integration
Support
Team
Lars Lundquist
Executive Vice President and
Head of SEB Asset
Management
Cost synergies
• EUR 15 (SEK 130) million/year from 2002
• Treasury and Trading integrated with group
functions
• BfG’s and SEB’s German corporate banking
reviewed, focused and integrated
• BfG’s investment management co-ordinated with
SEB Asset Management
• BfG Bank Luxembourg merged with SEB
Luxembourg
• Faster development of BfG Internet
Continued improved cost efficiency
• EUR 30 (SEK 260) million/year
from year 2002
• Review of
– back-office operations
– organisational structure
– credit processes
• Migration to direct channels
• Improved management reporting
system
Other synergies
• Enhanced asset management growth by
supplementing BfG product range with
SEB products EUR 10 (SEK 90) million
from 2005
• Funding synergies owing to SEB’s increased
presence in local German market and
access to BfG’s deposit surplus EUR 5 (SEK
45) million first year
Growth potential
• Internet banking and further asset
management growth by extending
upscale and institutional customer base
EUR 60 (SEK 520) million per year by
2005
Total profit improvement until 2005
Cost synergies
EUR million
15
Further operational improvement
30
Other synergies
15
Growth potential
60
120
SEB target ROE 15%
Lars H Thunell
President and Group
Chief Executive, SEB
Favourable transaction terms
• Purchase price SEK 13.9 (DEM 3.1, EUR 1.6)
billion for 100 % of BfG´s equity
–Values BfG at approximately 0.8 times adjusted
equity
• Restructuring reserve SEK 3.0 (DEM 0.7, EUR
0.35) billion
• Marginal increase in earnings per share year 2000
thereafter stronger growth in earnings per share
* As of June 30, 1999
Financing
• Rights issue of SEK 4.1 billion
• Agreements regarding hybrid capital (core
capital/subordinated debt)
• SEB intends to raise subordinated debt (total
SEK 5.8, EUR 0.7 billion) in order to strengthen
its capital adequacy
• Decrease of risk/weighted volume by SEK 36
(EUR 4) billion before closing the deal
SEB after BfG acquisition
Leading corporate
bank in the Nordic
region
Euroland platform for
further expansion in
Asset Management
Major step in
Paneuropean
Internet strategy