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Interim Report January-March 2001

Stable result in spite of weak stock market
  •          Operating result* amounted to SEK 2 789 M (3 186).
  •          Net interest income rose by 6 per cent to SEK 3 070 M (2 883).
  •          Net commission income decreased by 21 per cent to SEK 2 933 M (3 702).
  •          Return on equity was 18.4 per cent (25.3).
    Efficiency measures kept costs stable and risks decreased
  •          Total costs, SEK 5 462 M (5 385), were kept stable and staff costs decreased.
  •          Action plan to freeze IT costs was implemented.
  •          Strong result in Merchant Banking.
  •          BfG re-branded to SEB - restructuring ahead of plan.
  •          Today SEB's Volvo Ocean Race yacht will be christened.
    Operating result includes pension settlements/provisions.
    President's Statement
    "Despite the weakening trends in the equities markets during the first quarter of the year, SEB is reporting a stable profit for the Group as a whole. It is pleasing to note that our net interest income has increased and that staff costs have declined by 12 per cent compared with the year-earlier period," says Lars H Thunell, President and Group Chief Executive.
    "Merchant Banking continues to show strong earnings. It is also pleasing that customers-related revenues continue to show a positive trend."
    "The restructuring of BfG is proceeding faster than planned. The re-branding of BfG to SEB in April got a great deal of attention in Germany. Earnings are satisfactory, taking into account the market conditions. The number of e-banking customers in Germany is now up to 158 000, an increase of 120 per cent since the first quarter of 2000."
    "We have taken action to freeze the Group's IT costs. These measures will gain effect gradually during the year which means that IT costs will not continue to rise."
    "Planning efforts prior to the proposed merger with FöreningsSparbanken are intensive and proceeding as planned. As part of the integration efforts, work on developing business plans for the new bank SEB Swedbank's four divisions and other main areas, is under way. The leading star in all integration efforts is to make the changes positive for our various customer groups. Discussions with the Merger Task Force of EU have been initialised."

    Summary of operating result per division and business area

    per cent
    SEK M
    Personal Banking Sweden
    Personal Banking International
    SEB Germany *
    Corporate and Institutions
    Merchant Banking
    Enskilda Securities
    Mid Corporate
    SEB Securities Services
    Investment Management & Life
    The Baltic & Poland
    Total all divisions
    2 429
    2 653
    Joint Group incl. capital gain and elimination.
    Operating result
    2 789
    3 186
    Changes in surplus values
    Total result SEB Group
    2 538
    3 659
    *) -excluding capital gains
    Weaker commissions offset by strong trading
    Total income decreased by 7 per cent to SEK 8 193 M (8 770) excluding changes in surplus values. Vilniaus Bankas was not consolidated in the first quarter of 2000. Thus, the decrease for comparable units was 9 per cent. The decline is entirely explained by lower commission income due to stock market related development. Compared with the fourth quarter of 2000 the decrease was limited to 1 per cent.
    Net interest income rose by 6 per cent to SEK 3 070 M (2 883). Personal Banking Sweden showed an increase of 16 per cent, whereas Merchant Banking reported a decrease of 11 per cent. Adjusted for Vilniaus Bankas the increase was 2 per cent. The cost for the governmental deposit guarantee decreased by SEK 50 M.
    Net commission income decreased by 21 per cent to SEK 2 933 M (3 702). The income varied significantly between different product areas and parts of the Group. Net commission income from payments rose by 4 per cent, while net commission income from securities fell by 22 per cent in comparison with the first quarter of 2000. The decline was especially pronounced within Enskilda Securities. (Full disclosure is provided in note x.)
    Net result of financial transactions increased by 15 per cent to SEK 1 035 M (SEK 900 M including an one-off item of SEK 153 M from sales of Brady bonds) due to favourable results from trading in shares, bonds and derivatives (see further note x.)
    A change in market interest rates by one percentage point at 31 March 2001 would result in an increase/decrease in the Group's interest-bearing assets and liabilities, inclusive derivatives, by SEK
    2.1 billion.
    Other income amounted to SEK 1 155 M (1 285). Of this amount capital gains and one off items accounted for SEK 742 M (793). SEK 503 M was from the sales of shares in OM and EUR 26.6 M (approximately 240) from SEB AG´s divestment of shares in Deutsche Börse.
    Cost level stable or actually decreasing for comparable entities
    Total costs amounted to SEK 5 462 M (5 385). Adjusted for Vilniaus Bankas, which was not included in the first quarter of 2000, costs decreased by 1 per cent. In local currencies costs decreased by 3 per cent.
    Efficiency measures within different business areas have decreased costs by 16 percent compared to the fourth quarter 2001. In the e-banking area, for example, development as from January 2001 is carried out within the different divisions. Taken together the costs for e-banking in the first quarter of 2001 amounted to SEK 357 M (184). The cost in the fourth quarter 2000 was SEK 561 M.
    Total costs for IT (including calculated cost for own personnel etc.) amounted to SEK 1.3 billion compared with SEK 1.1 billion in the first quarter and with SEK 1.7 billion in the fourth quarter of 2000. Of this, external IT costs were SEK 635 M (491). The cost in the fourth quarter 2000 was SEK 767 M. The action plan to freeze IT-development projects both with regard to the planned merger and the weaker market conditions will keep the total IT-costs for the whole year 2001 at an unchanged or lower level than during 2000.
    Rising staff costs by negotiated salary increases and negative exchange rate effects were offset by efficiency measures mainly in Personal Banking Sweden and Merchant Banking and restructuring in SEB Germany. In addition variable performance-related remuneration decreased by 320 SEK m compared to first quarter 2000. Thereby staff costs, net, decreased by 10 per cent to SEK 2 738 M (3 040). Staff costs, gross, declined by 5 per cent to SEK 3 036 M (3 211). The compensation for the pension costs included in the gross costs increased to SEK 298 M (171). This also includes the pension insurance scheme that has replaced the earlier profit-sharing system.
    SEB has an overfunded pension fund to support pension costs. At the end of March 2001, total assets in the pension funds amounted to SEK 19.4 billion (23.2  at year-end 2000), while commitments was SEK 8.3 billion (8.0). Accordingly the surplus value as per 31 March 2001 amounted to SEK 11.1 billion.
    Depreciation amounted to SEK 455 M (427), of which goodwill accounted for SEK 178 M (165).
    The remaining restructuring reserve for the acquisition of Trygg Hansa in 1997 was SEK 256 M at the beginning of 2001. Of this, SEK 67 M has been utilised during the first quarter.
    The acquisition of BfG in January 2000 resulted in a difference between equity and purchase price. The allocation and utilisation of the negative goodwill is described in Appendix 1.
    Lending losses and doubtful claims
    The Group's lending losses, including changes in the value of assets taken over and write-downs, amounted to SEK 182 M, net (281), of which SEK 100 M, net (310), pertained to SEB Germany. The level of lending losses was 0.08 per cent (0.17).
    Doubtful claims, net, that is after provisions of possible lending losses, amounted to SEK 8 596 M
    (8 365 by year-end 2000). The increase is explained by exchange rate changes. The volume of pledges taken over declined to SEK 161 M (213).
    Credit portfolio
    SEB's total credit exposure amounted to SEK 948 billion, an increase of 22 billion from year-end 2000. The increase can be seen mainly within the corporate sector where the exposure has grown by close to SEK 16 billion, primarily to Swedish manufacturing companies. The lending to the household sector increased by SEK 5 billion of which SEB AG contributed with approximately half and the remaining part is related to mortgage lending within Sweden. Exposure on banks remained stable.

    SEB's exposure to the telecommunication industry (operators and manufacturing companies) increased during the first quarter by SEK 2 billion to approximately SEK 14 billion or 1.5 per cent of the credit portfolio. The increase is attributable to short term exposure to existing clients, mainly hedging of foreign exchange exposure. The exposure to the IT sector is stable around SEK 4 billion or 0.4 per cent of the credit portfolio.
    SEB´s exposure in emerging markets amounted to SEK 10 483 M, net, a decrease of 9 per cent from year-end 2000 (SEK 11 483 M). The decline was mainly due to decreased exposures in Latin America and Eastern and Central Europe. (See further Appendix 2).
    Non-life insurance business
    Operating result for non-life insurance operations amounted to SEK 241 M (52). The increase was mainly due to capital gains of SEK 126 M from sales in the bond portfolio.
    One-off items
    Total one-off items in the first quarter of 2001 amounted to SEK 869 M (947).
    Change in surplus in life insurance operations
    The change in surplus in life insurance operations, which is described in detail in Appendix 3, was influenced by the negative financial effects due to the stock market trend and amounted to SEK -251 M (SEK 473 M). See further in Appendix 3.
    Capital base and capital adequacy
    On the 31 March 2001, the capital base for the financial group of undertakings (excluding the insurance companies) amounted to SEK 52.9 billion (53.3). Core capital was SEK 36.4 billion (36.5), of which SEK 1.8 billion constituted core capital contribution. (For calculation of the capital base see Appendix 4). The risk-weighted assets amounted to SEK 514.7 billion (495.6).
    The core capital ratio amounted to 7.08 per cent (7.37 per cent at year-end 2000) and the total capital ratio to 10.27 per cent (10.76). This is in line with the Group's goal to maintain a core capital ratio of at least 7 per cent and a total capital ratio of not less than 10 per cent.
    If the first quarter results were to be included in the capital base, the core capital ratio would have been 7.35 per cent and the total capital ratio 10.56 per cent.
    In connection with the presentation of the proposed merger of FöreningsSparbanken and SEB all major rating institutes placed SEB´s rating under review for a possible upgrade to FöreningsSparbankens´s confirmed ratings.
    2001 Annual General Meeting
    At the Annual General Meeting in April all board members were re-elected. The dividend was set at SEK 4.00 per share.
    Stockholm, 4 May, 2001
    Lars H. Thunell
    President and Group Chief Executive
    The interim report for January-June 2001 will be published on 23 August 2001. SEB´s reports are available on the Internet (www.seb.se; www.seb.net).
    Additional information is available from:
    Gunilla Wikman, Head of Group Communications, +46 8 763 81 25
    Lotta Treschow, Head of Investor Relations, +46 8 763 95 59
    This report has not been reviewed by the auditors of the Bank.

    As of 2001, SEB's operations are organised into six divisions: Personal Banking Sweden, Personal Banking International, SEB Germany (former BfG less merchant banking operations), Corporate & Institutions, Investment Management & Life and The Baltic & Poland.
    Personal Banking Sweden - rising net interest earnings and lower costs
    The Personal Banking Sweden division has responsibility for the SEB Group's retail- and private-banking customers in Sweden. The organisation contains the earlier retail operations within SEB - with the branch office network, the telephone bank and the Internet services - as well as SEB Enskilda Banken.
    For the first quarter of 2001 Personal Banking Sweden shows an operating result of SEK 526 M
    (pro forma SEK 615 M for the corresponding period of 2000).
    The result has to a large extent been affected by the sharp decline on the stock market. The contrast is even bigger if the figures are compared with the first quarter of 2000 (pro forma) when the market situation, on the other hand, was extremely favourable. A comparison with the second half of last year, however, shows stable equity earnings - despite the continued weak market situation.
    The decrease in commissions is also offset by a positive development of net interest income, continued low credit losses and decreasing costs - with, for example, the staff costs at the same level as in January-March 2000.
    Net interest income increased by 16 per cent. The strong rise comes from increase in both volumes and margins. A specifically strong area is housing loans (mortgages) with growth in both net interest and in volumes. Another example is Enskilda Banken, Private Customers, where the net growth in volumes under management is SEK 2.8 billion, mainly due to an increased "share of wallet" from existing SEB-customers.
    Since the end of last year, the monthly rate of new internet-customers is growing at a level of 12 500 new private customers and 1 000 new corporate customers. In total, the number of Internet customers of Personal Banking Sweden now is 591 000.
    Within the Personal Banking Sweden division there is now a number of activities to further increase income and decrease costs. Examples are programmes for intensified and closer activity toward various customer segments, cuts in the project portfolio and continued efficiency measures.
    Personal Banking International
    The activities of Personal Banking International include SEB Kort, Private Banking in Luxembourg, the UK, Switzerland, Norway, Denmark and e-banking in Denmark and the UK. SEB AG´s (former BfG´s) private banking business in Luxembourg has been merged with SEB in Luxembourg and is included in the division from 2001.
    The operating result for the division was SEK 12 M (119).
    Personal Banking International excluding SEB Kort
    With the prevailing stock market situation, SEB has chosen to concentrate the resources on markets in which the Group already has broader activities. Thus, the planned marketing launch in spring of the e-banking and e-brokerage service that was recently opened in the UK has been cancelled due to the decision to suspend the launch of a stand-alone e-banking venture.
    In Denmark the total number of e-banking customers is approximately 10 000. In Norway there will be a soft launch of e-banking in order to support existing Private Banking at the end of the second quarter. The launch will be carried out gradually step by step, just as in Denmark, without any large-scale marketing launch.
    Development of the e-banking concept in Luxembourg was completed during the first quarter. SEB has an existing private banking business in Luxembourg, with a customer base and skilled advisors. E-banking creates a new channel for the customer to use SEB´s services. According to plan this channel will be operational in late May.
    In February, e-Asia Finance, a joint venture between SEB, Ankar Capital Management, Tata Consultancy Services and Compass ventures was announced. The aim is to supply Asian corporate customers with the technical platform for e-banking and e-brokerage solutions.
    The units within Personal Banking International showed a combined result of SEK -69 M (4) consisting of two different parts. One part is the profitable private-banking business in Luxembourg and Switzerland, negatively affected by the low activity level on the financial markets. The other is the development cost for e-banking, generating negative results for the UK, Denmark and Norway. However, with actions taken to suspend further launches under prevailing market conditions, these costs are significantly lower than in the fourth quarter last year and will not increase further.
    SEB Kort
    The turnover increased by 6 per cent and the outstanding credit volume increased by 11 per cent, which shows a continued interest for card payments. The total income did not increase correspondingly. A majority of the cards are "pay later" cards which are inversely affected by raising interest rates. 
    Costs increased by 10 per cent due to increased staff costs and IT-related expenditures. The number of personnel has increased primarily within the IT and sales areas. Increased turnover resulted in higher costs for systems operations. There was also ongoing development in new systems.
    Incurred losses and fraud show a continued negative trend. This increased volume resulted in higher reserves than in previous quarters. The operating result decreased by 28 per cent to SEK 81 M.
    Eurocard in Sweden has in co-operation with Ericsson developed a mobile payment solution.  The test is being carried through now in selective shops. One hundred chosen Eurocard cardholders will be able to pay their purchases with a virtual Eurocard via Ericsson's mobile telephone R520m. The aim of this test is to measure if the customer rates this type of payment as simpler, quicker and more convenient than other methods of payment, for example cash and cards.
    Corporate & Institutions
    The Corporate & Institutions division is focused on medium sized and large corporate and financial institutions. The division consists of the business areas Merchant Banking, Mid Corporate, Enskilda Securities and SEB Securities Services (custody).
    The operating result of the division for January-March 2001 was SEK 1 511 M (SEK 1 574 M) despite the prevailing financial market climate. Merchant Banking is making very good results thanks to good performance within the Fixed Income and Debt Capital Market product areas due to high customer activity. Enskilda Securities is the business area that is most negatively affected by the market conditions.
    Great effort has been made to increase customer penetration in the Mid Corporate segment.
    The division has further increased its focus on the use of capital and is still working with the aim of keeping the costs on a competitive level. IT costs have increased during the first quarter due to necessary investments in order to adapt to the new SWIFT-standards. The total costs are lower than last year mainly due to reduced staff costs.
    Merchant Banking - right on track for the 6th consecutive quarter
    The strong momentum continued for Merchant Banking. Operating result amounted to SEK 917 M, an increase of 37 per cent compared to the first quarter last year. This was the second best quarterly result to date for Merchant Banking, only exceeded by the fourth quarter of 2000. Customer related income continued to show a positive development, up 9 per cent compared to the first quarter of 2000. Costs were 5 per cent lower than last year and the cost/income-ratio improved to 0,45 (0,54).

    The growing customer related income was mainly attributable to good performance within the Foreign Exchange and Fixed Income areas. This is the main explanation for the higher net result of financial transactions, but it is also explained buy a strong first quarter for Treasury Operations. The decreased spread between short and long interest rates has had a negative effect on Treasury Operation's net interest income. The lower net interest income is also partly due to a decrease in capital utilisation.
    The Debt Capital Markets and Structured Finance product areas also performed well despite tough market conditions.
    This year's customer surveys confirm and enhance the latest years' trend and reinforce Merchant Banking's leading position in its key markets. For example, Greenwich Associates' yearly market survey of the financial markets in Sweden ranked SEB as number one in "overall relationship performance" in the large corporate sector, for both quality and number of important relationships. Also Foreign Exchange Services was ranked number one in overall quality and had the largest estimated market share. The number one position was also achieved within the Cash Management area, which both in terms of overall services index and number of clients outperformed the competitors. In another recent survey, conducted by Euromoney, credit research teams in Europe were ranked and SEB made it into the league tables for the first time and as the only Scandinavian bank.
    Merchant Banking continued its long-term strategy to lower its utilised capital. This was achieved through lower credit, market and operational risk levels. The risk weighted assets within Merchant Banking's corporate lending portfolio (excluding structured products) have decreased by 6 per cent compared to a year ago. During January-March 2001 the average daily Value at Risk was SEK 58 M, which is the same level as in the first quarter last year.
    As from January 2001 the result from the German trading activity and the large corporate segment, previously reported within SEB AG (BfG), is included in Merchant Banking. Year 2000 figures have been restated accordingly.
    SEB Mid Corporate
    The new business area SEB Mid Corporate comprises two units - Mid Corporate (the corporate part of the former Retail Distribution business area) and the finance company SEB Finans. SEB Mid Corporate is specialising in and focusing on tailor-made solutions for medium-sized companies.
    The business area reached a result of SEK 331 M, down 2 per cent compared to last year´s pro forma result. Net interest income showed a strong development, primarily due to higher margins on the deposit stock. Commission income decreased due to the recession in the stock market.
    The majority of the result comes from Mid Corporate SEK 271 M (SEK 257 M pro forma for the first quarter last year). SEB Finans accounted for SEK 60 M compared to SEK 81 M last year.
    SEB Finans' decreasing result is a consequence of weak sales during the third and fourth quarter of 2000, which backlogs the result to a certain extent.
    Enskilda Securities - lower result in a weak market
    In the first quarter stock market activity as well as market capitalisation decreased significantly compared to the first quarter in 2000, which was the best quarter to date in the investment banking industry. The turnover fell on all Nordic exchanges and the equity capital market activity was sharply lower than last year.
    In these less friendly market conditions, Enskilda Securities continued to strengthen its positions in the Nordic equity markets, especially in Norway, Finland and Denmark. On all these exchanges Enskilda Securities has a market share exceeding 10 per cent. Enskilda Securities' equity trading turnover was the highest ever in the first quarter and increased by 21 per cent compared to the same period in 2000.

    Enskilda Securities' total income decreased by 44 per cent. All product areas show decreased revenues.  However, secondary commission, which is the single most important source, has held up well. The bulk of the fall in revenues is related to trading, which is by nature more volatile. Also Equity Capital Markets and Mergers and Acquisitions experienced revenue losses, but in these areas there is now a healthy and growing order backlog, which should translate into stronger revenues in the coming quarters.
    Total costs fell by 33 per cent, which is primarily an effect of a reduced provision for bonus payments to employees due to lower earnings. Pre-bonus costs increased by 4 per cent, mainly due to higher IT-costs.
    The operating result for the first quarter was SEK 150 M, which is 62 per cent down from last year.
    SEB Securities Services
    The operating result of SEB´s custody service unit decreased by 28 per cent, to SEK 125 M. Income remained at the same level as in 2000, SEK 247 M, with the help of increased volumes. The number of transactions rose by 15 per cent to 973 000 and assets under custody increased by 18 per cent to SEK 2 089 billion. Total costs increased by 54 per cent, to SEK 122 M as a result of major investments during the first quarter, primarily within the IT-sector, and rising transaction volumes.
    The market shares of the various segments remained stable, ranging between 30 and 75 per cent.
    SEB Germany
    As from 2 April the German subsidiary BfG Bank AG has changed its name to SEB AG. A nation-wide marketing campaign is now ongoing to create customer awareness for the new brand within the future target customer groups.
    Operations in the old BfG Bank has been changed in the following way:
    The private banking unit in Luxembourg has been merged with SEB in Luxembourg and is now a part of division Personal Banking International. The merchant banking activities (Corporate Customer Division and Trading) as well as Skandinaviska Enskilda Banken AG in Germany (a subsidiary of SEB AG as from 1 January), have joined the Merchant Banking business area within the Corporate & Institutions division of the SEB Group.
    Retail and personal banking, institutions and real estate activities, have been formed into division SEB Germany.
    Total result of SEB Germany amounted to SEK 364 M (SEK 124 M). The profit and loss account in SEK has been affected by exchange rate fluctuations. Total income for SEB Germany rose by 5 per cent in SEK, but was down 1 per cent in euro. Total costs increased by 2 per cent in SEK, but decreased by
    4 per cent in euro. The drop in total income depends on the reduction of capital employed by EUR 500, which has reduced net interest income by SEK 54 M.
    Net interest earnings, SEK 1 027 M, are stable whereas net commission income, SEK 347 M, has been affected by the negative markets.
    During the first quarter, SEB AG sold its shares in Deutsche Börse, which generated a profit of EUR 26.6 M (approximately SEK 240 M).
    The mutual funds in BfG Invest and ImmoInvest had a continuously good net inflow (SEK 880 M). In spite of this, and due to the market development, Assets under Management have gone down somewhat to SEK 105 billion.
    Risk weighted assets have been further reduced by almost SEK 5 billion, and e-banking customers have increased by another 10 000, to over 158 000.

    The restructuring programme is continuing. The number of full time employees has been reduced by a further 275 compared to year-end 2000. During the first quarter apprentices have been hired, resulting in a net reduction by 170 full time employees.
    Costs are well under control, down 4 per cent in euro, and credit losses have been moderate.
    The legal entity SEB AG comprises all activities within SEB Germany and the above-mentioned merchant banking operations including those of Skandinaviska Enskilda Banken AG. The legal entity will be reported as additional information for continuity with the acquired BfG Bank.
    Figures in euro for the legal German entity are presented in Appendix 4. They correspond to the previous BfG Group, but with the addition of Skandinaviska Enskilda Banken AG in Germany.
    The figures for 2000 have in both cases been restated for the internal purchase and sale of Skandinaviska Enskilda Banken AG in Germany and BfG Luxembourg respectively, and are hence comparable.
    Investment Management & Life
    The division comprises the SEB Invest (former SEB Invest & Funds) and SEB Trygg Liv business areas and accounts for the SEB Group's business within mutual funds, institutional portfolio management and life insurance products. The division is affected by the downward trend on stock markets both concerning the demand of savings products and the effect of the so-called surplus values in the life insurance business. The operating result, before change in surplus values, amounted to SEK 118 M
    (145). Total result, after change in surplus values, was SEK -133 M (618), where the financial effects, due to the negative stock market development, had an impact of SEK -644 M (294).
    The division's revenues, excluding change in surplus values, increased to SEK 774 M (772).
    Costs increased by 4 per cent to SEK 653 M (625).
    As per 31 March 2001, total assets within the division managed by SEB Invest, amounted to SEK 562 billion (581). Of this total, portfolio management accounted for SEK 132 billion (119), traditional life insurance for SEK 254 billion (246) and mutual funds and unit linked insurance for SEK 176 billion (216). Since year-end total assets under management has decreased by 5 per cent.
    During the first quarter seven of the ten external funds that where introduced in SEB's range of funds in 2000, were made available as unit linked insurance. Supplementary external funds will be introduced during the spring.
    SEB Invest
    SEB Invest (reported together with Private Banking as Asset Management in 2000) showed an operating result of SEK 167 M (162), an improvement of 3 per cent.
    Revenues increased by 8 per cent to SEK 409 M (380). Lower costs for distribution of mutual funds compensated the drop in stock prices. Net sales increased from SEK 6 billion to SEK 11 billion, above all due to an increase in institutional mandates. Costs rose by 11 per cent to SEK 242 M (218), mainly due to recruitment within asset allocation, hedge products and the mutual fund sales organisation. Costs were 11 per cent lower than in the fourth quarter of 2000.
    During February it was formally decided that the business area should be incorporated. It is estimated that the incorporation will be completed by 1 January 2002.
    Two new mutual funds were launched in the first quarter: SEB Opportunity Europe, for the Premium Pension programme, and SEB Global Chance/Risk, to strengthen the range of the prosperous chance/risk concept. The Financial Supervisory Authority granted the permission to merge 19 funds into 9. The purpose is to streamline and simplify the range of funds for the customers. The merger of funds will take place in May 2001.
    SEB Trygg Liv
    The negative stock market development and the relatively low expire of bonds during the introduction of 2001, has negatively affected SEB Trygg Liv's sales, compared to the first quarter 2000 when the market situation was exactly the opposite. Sales (new business plus extra premiums on existing insurance contracts) amounted to SEK 2,786 M (4,368), a decrease of 36 per cent (compared with an increase by 70 per cent). Premiums written decreased by 24 per cent to SEK 4,357 M (5,748).
    The ongoing market conditions mainly affect sales of single premium insurance, which decreased by 41 per cent. The market for current premium insurance is not as sensitive to weakening stock markets and the decrease in sales was limited to 5 per cent. The share of current premium insurance amounted to 24.9 per cent (16.7). A prominent rise was recorded for employer-paid insurance and especially occupational pension that rose by 49 per cent.
    Revenues decreased by 7 per cent to SEK 364 M (391), mainly due to lower asset values in unit-linked. Costs increased by 1 per cent to SEK 413 M (408), which is 10 per cent lower than in the fourth quarter 2000. The operating result, before change in surplus values, amounted to SEK -49 M (SEK -17 M). Total result after change in surplus value decreased to SEK -300 M (SEK 456 M). This result is heavily affected by the financial effects in calculating the surplus value. Excluding these financial effects, the result increased to SEK 344 M (162) See Appendix 3
    In surveys among life insurance brokers made by the company Marknadsindikator, it is stated a more and more positive attitude towards SEB Trygg Life in comparison to other life insurance companies. This is regarded as a result of the deliberate and consequent commitment to improve the relationship with brokers. Sales through brokers, especially employer-paid insurance, rose by 20 per cent compared to last year.
    SEB Trygg Liv's ambition is to continue to develop the business within occupational pension and other life insurance services and products paid by the employer, and to secure the strong position in the market for private individuals. The main sales focus is on unit linked insurance, which represents the absolute majority of the sales.
    The Baltic & Poland - continued result improvement
    The Baltic & Poland division comprises the three Baltic banks, Eesti Ühispank, Latvijas Unibanka and Vilniaus Bankas, as well as SEB´s holding in the Polish Bank Ochrony Srodowiska, BOS.
    The Baltic banks are today wholly owned subsidiaries of SEB.
    The operating result of the division was SEK 125 M, an increase of 74 per cent compared to the first quarter of 2000, when Vilniaus Bankas was not consolidated. Pro forma, with full consolidation of Vilniaus Bankas during the first quarter of 2000, operating result increased by 25 per cent.
    In March 2001, SEB acquired another 6 per cent of the shares in BOSS. SEB's ownership in BOS has thereby increased to 38 per cent.

    The merger with FöreningsSparbanken
    On 22 February it was announced that the Boards of Directors of FöreningsSparbanken and SEB had proposed to merge the two companies. The name of the new group will be SEB Swedbank.
    The two groups complement each other well. The merger creates Sweden´s leading financial group with a stronger range of products and services for customers in Sweden and good opportunities for continued growth as a European financial group.
    The new group will have 35 000 employees, whereof 19 000 in Sweden, total assets of approximately SEK 2 000 billion and SEK 1 300 billion in assets under management, and a joint market value of about SEK 150 billion. FöreningsSparbanken and SEB will merge as equal parties, creating one of the 25 largest banks in Europe.
    The merger is expected to yield annual cost savings of SEK 2.5-3.0 billion, mainly at a central level, within the IT area, within the product companies but also as a result of overlapping branch office networks. No dismissals will occur as a consequence of the merger. However, the number of employees is expected to be reduced by 2 000 persons during a three-year period, which is expected to happen through natural retirement. The merger is expected to generate restructuring costs of approximately SEK 4 billion, which will be covered over time by payments from pension funds and the sale of branches to independent savings banks and jointly owned banks. Increases in income due to the merger are expected to, by a margin, exceed any reductions in income the merger may cause.
    The vision of the new group is to create a leading customer oriented European financial group based upon a broad Swedish base, through a combination of personal service/advice, local presence and modern technology.
    The merger is conditional upon e.g. the approval of the extraordinary general meetings of the two banks and the necessary approval from the Government and the appropriate authorities, including the EU. Depending on whether the EU decides to simply review or thoroughly investigate the merger, a decision will be announced either in late June or in November.
    Prior to the merger, integration planning will be led by an integration committee. Eighteen project teams, covering the entire new group, have been formed with the assignment to plan the forthcoming integration.
    The Boards of Directors of both banks have unanimously recommended the shareholders to vote in favour of the merger
    The full report including tables can be downloaded from the following link:.