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SEB Interim Report Q1, January-March 2002


-    The Group's Change Programme on track

-    Operating result* SEK 2 billion, in spite of weak market

-    Total costs down by 9 per cent

-    Credit losses on a low level

-    Total income was down 7 per cent on a comparable basis, whereof:
     -Net interest income rose by 8 per cent to SEK 3,341 M.
     -Net commission income decreased by 13 per cent, to SEK 2,541 M.

-    Return on equity was 12.4 per cent (18.4); earnings per share
     amounted to SEK 1.98 (2.78).

* Includes pension compensation of SEK 294 M (298). The statutory 
  operating profit (excluding pension compensation) amounted to
  SEK 1,722 M (2,491).

Operating result: SEK 2 billion

Operating result, including pension compensation, amounted to SEK 2,016 M (2,789). The comparison with the first quarter 2001 was affected by one-off items, restructuring costs and currency translation differences. Adjusted for these items affecting comparability, the operating result decreased by 5 per cent compared to the first quarter 2001, mainly due to the falling stock markets resulting in lower net commission income. Compared to the fourth quarter 2001 the operating result increased by 4 per cent. Also in comparison with the second and third quarter 2001, the operating result was better. Operating result equals profit before tax.

Net profit (after tax) amounted to SEK 1,393 M (1,960).

Changes in accounting principles

SEB is following the Swedish Financial Supervisory Authority's recommendations regarding reporting of insurance operations for the statutory accounts and from now on also for the operational accounts. This implies that the result from insurance operations are reported according to the same principles as associated companies - one-line accounting. This change has no impact on the Group's or the divisions' operating results.

In order to provide a complete overview of the Group's operations SEB Trygg Liv is reported separately - including changes in surplus values.

Net interest earnings up, net commission income down

Total income amounted to SEK 7,048 M (7,963). Adjusted for one-off items and currency translation differences, income decreased by 7 per cent.

Net interest income amounted to SEK 3,341 M (3,059), an increase by 8 per cent on a comparable basis. The improvement is due to increased volumes and higher margins.

Net commission income decreased by 13 per cent to SEK 2,541 M (2,904). Net commission income decreased, mainly due to the weak stock market development.

Net result of financial transactions decreased to SEK 654 M (983). The result is well in line with the three preceding quarters but lower than the favourable first quarter 2001.

Other income was SEK 512 M (1,017). Capital gains within the normal business operations were SEK 280 M (3). During the same period last year, the group had one-off capital gains amounting to SEK 760 M. Adjusted for one-off items and other items affecting comparability other income was down 11 per cent.

Reduced costs - lowest cost level since 1999

Total costs amounted to SEK 4,811 M (5,144). Adjusted for restructuring costs SEK 91 M and currency translation difference, total costs decreased by 9 per cent.

Staff costs, gross, were virtually unchanged and amounted to SEK 2,899 M (2,902). Staff costs, net, were also unchanged SEK 2,605 M (2,604). In staff costs, gross, compensation for pension costs is not included and amounted to SEK 294 M (298), including the pension insurance scheme that has replaced the previous profit-sharing system. There were no major differences in performance-related compensation between the quarters. This implies that the development of staff costs has fully offset the general salary increase primarily through efficiency improvement measures.

The average number of full time equivalents amounted to 19,439 (19,832) in the first quarter of 2002.

Total IT-costs were reduced to SEK 1.0 billion (1.3). IT-costs are here defined as a calculated cost for all IT-related activities including costs for own personnel. Of these calculated costs SEK 445 M (598) represented external costs.

Depreciation amounted to SEK 368 M (403), of which amortisation of goodwill accounted for SEK 135 M (133).

In addition to the restructuring costs that occurred 2001, another SEK 200 M will arise during 2002, of which SEK 91 M was charged in the first quarter.

The acquisition of BfG in January 2000 resulted in a difference of SEK 3.3 billion between equity and purchase price. The allocation and utilisation of the negative goodwill is described in an appendix on www.seb.net.

Credit losses remained on a low level

The Group's net credit losses, including changes in the value of assets taken over, amounted to SEK 189 M (134), of which SEK 98 M (100), in SEB Germany. The credit loss level was 0.12 per cent (0.08).

Insurance operations

According to the Financial Supervisory Authority's recommendations, the result for the complete insurance operations should be accounted on one line. SEB Group's result for the insurance operations (non-life, life and goodwill amortisation) amounted to a loss of SEK 24 M (gain: 150).

SEB Trygg Liv's total result from ongoing business (excluding financial effects of short-term market fluctuations) was SEK 249 M (349). This result is not consolidated with the SEB Group. The division's operating result is included in the Group's result with a gain of SEK 10 M (loss: 44).

The operating result for non-life insurance, mainly run-off, amounted to SEK 6 M (241). Capital gains of SEK 126 M from bond portfolio sales were included in the first quarter 2001.

Change programme starts yielding result

During 2001 SEB decided to start a change programme called "3 C" which stands for Customer satisfaction, Cross-servicing and Cost efficiency.

The programmes for increased Customer satisfaction and Cross-servicing within and between the divisions, aiming for medium and long-term revenue enhancements, are running according to plan.

The short-term aim for the Cost reduction programme is to reduce SEB's annual total costs by SEK 3 billion, or SEK 2.5 billion net, with full effect as from the first quarter 2003, including external costs for SEB Trygg Liv.

During the first quarter 2001 the annualised cost level was SEK 22.5 billion, while the corresponding cost level for the second half of 2001 amounted to SEK 21.5 billion. The actual costs for the first quarter 2002 imply an annual cost level of slightly below SEK 21 billion. The objective, which should be reached during the first quarter 2003, is an annual cost level of SEK 20 billion (everything else equal and including SEB Trygg Liv).

Examples of activities that have been implemented during the first quarter are: fewer external consultants, close down of one of the Group's call centres, establishment of common shared-service units and close down of old IT-systems.

Excess value of approximately 9 billion in pension funds As of 31 March 2002, total assets in SEB's pension funds amounted to SEK 18.0 billion, while commitments were SEK 9.2 billion. Accordingly the excess value amounted to SEK 8.8 billion.

Credit portfolio

The overall development of the credit portfolio continues to be stable. During the first quarter the total credit exposure, including contingent liabilities and derivative contracts, increased by 3.6 per cent, to SEK 989 billion, with the main part of the increase related to the banking sector.

As per 31 March 2002, SEB's loan and leasing volume, excluding repos, amounted to SEK 726 billion (718).

Credit exposure within the German subsidiary bank SEB AG continued to decline in most segments with the exception of public administration. The household sector still represents the largest segment in the German portfolio, 26 per cent. Overall the property management sector's share remained stable, however SEB Hypothekenbank AG's relative share has increased.

The Baltic credit volumes continued to increase in local currencies. In SEK the Baltic credit portfolio remained at the level of approximately SEK 30 billion.

Credit exposure on the telecommunications industry (operators and manufacturing companies) amounted to approximately SEK 15 billion. Lending to the IT sector totalled approximately SEK 4 billion.

As per 31 March, doubtful claims, gross, amounted to SEK 15,134 M (15,822 in the end of 2001). SEK 7,578 M (8,161) of the doubtful claims are non-performing loans (loans where interest and amortisation are not paid) and SEK 7,556 M (7,661) are performing loans. The level of non- performing loans was 0.56 per cent (0.58). Total level of doubtful claims, net, was 1.33 per cent (1.37). The volume of pledges taken over amounted to SEK 266 M (265).

As from 2002, the Financial Supervisory Authority has introduced regulations for group provisions for individually appraised receivables. Today, the changed regulations do not imply any change for necessary provisions on Group level and therefore have no effect on SEB Group's results. SEB will adjust its accounting of doubtful claims and reserves to the new regulations during 2002.

Capital base and capital adequacy

The capital base for the financial group of undertakings (excluding the insurance companies) amounted to SEK 53.6 billion as of 31 March 2002, (54.4 by the end of 2001). Core capital was SEK 38.7 billion (38.7), of which SEK 1.9 billion constituted so-called core capital contribution. The risk-weighted assets amounted to SEK 479 billion (501). The decline is explained by a strengthened Swedish krona and effects from the capital rationalisation programme within Merchant Banking.

As of 31 March 2002, core capital ratio was 8.1 per cent (7.7) and total capital ratio was 11.2 per cent (10.8). The Group's long-term goals to maintain a core capital ratio of at least 7 per cent and a total capital ratio of not less than 10.5 per cent have thus been met.

Decisions at the Annual General Meeting

At the Annual General Meeting on 10 April 2002, Marcus Wallenberg (CEO Investor) was elected new member of the SEB Board of Directors. Marcus Wallenberg replaced Claes Dahlback, who had declined re-election. Lars Gustafsson, Deputy Group Chief Executive, was appointed new deputy member of the Board of Directors. The dividend was fixed to an unchanged SEK 4.00 per share. Furthermore, the Annual General Meeting resolved to authorise the Board to decide on the acquisition and sale of own shares, via the Stockholm Exchange, for hedging of the employee stock options programme.

Repurchase of own shares

On 6 May, the Board of Directors decided to acquire 7 million of SEB's own Series A shares for hedging of the employee stock options programme as decided at the Annual General Meeting. The acquisition should take place immediately at a price within the registered price interval at any given time on the Stockholm Exchange. The purpose of the repurchase is to achieve a cost efficient hedging arrangement for SEB's employee stock options programme for 2002. SEB has not repurchased own shares earlier, with exception for its equity business.

For 2001, a repurchase would have implied an increase of return on equity from 11.91 per cent to 11.95 per cent and an improvement of earnings per share from SEK 7.17 to SEK 7.24. At the same time the core capital ratio would have decreased from 7.71 per cent to 7.57 per cent and the total capital ratio would have declined from 10.84 per cent to 10.71 per cent.

Stockholm, 7 May 2002

Lars H. Thunell

President and Group Chief Executive

Financial information during 2002
22 August     Interim report January-June
7 November    Interim report January-September

More detailed information including a description of SEB Trygg Liv's development and result is presented on the Internet (www.seb.net).

This Interim Report has not been reviewed by the Auditors of the Bank.

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