SEB s Swedish Residential Mortgage Lending and Covered Bonds

Transcription

1 SEB s Swedish Residential Mortgage Lending and Covered Bonds Stockholm November 16, 2012 More information: / investor relations

2 Content Status of Swedish Residential Mortgage Market Household Mortgage Lending in focus SEB s total Credit Portfolio SEB s Swedish Residential Mortgage Lending and Strategy going forward Risk Management Cover Pool, Covered Bonds and Funding Strategy 2

3 Status of Swedish Residential Mortgage Market: Household Mortgage Lending in focus Johan Andersson

4 Price development and Household indebtedness A steady and sustained increase in Swedish house prices House prices (index 1992=100) UK Denmark Spain Germany Netherlands Norway USA Sweden 400 Sweden = green line Source: Reuters EcoWin Important factors for Swedish market Reduced subsidies at the beginning of the 1990s caused a decline in residential construction which eventually led to an upward pressure on equilibrium price levels Structural lack of supply in particular in the larger cities Abolition of residential real estate and wealth tax in the mid- 2000s Low debt servicing costs Interest costs deductible to 30% (20% on amount above SEK 100th) Swedish household indebtedness lower than in many other countries Householddebtas % of disposableincome Householddebtas % of GDP Sweden = red line Sweden = red line 4

5 Current market development Dampened price development and a downward sloping trend of lending growth to households Swedish house price update, 30 Oct 2012 Lending growth to Swedish Households Price change Total 1m 3m 12m Sweden -1.7% 0.0% 2.9% Tenant rights Sweden 0.1% 0.6% 6.3% Stockholm 0.4% 0.8% 7.6% Göteborg -0.1% 2.3% 9.5% Malmö -1.8% 0.9% 0.1% Middle-size cities -0.1% -0.3% 4.8% Single-family homes Sweden -2.5% -0.3% 0.9% Stockholm -0.8% -0.4% 2.0% Göteborg -1.7% 1.4% 2.6% Malmö -3.1% -1.3% -1.9% Middle-size cities -3.9% -0.7% 0.0% Source: Valueguard-KTH Source: Sweden statistics 5

6 General risk mitigating factors in the Swedish market Key factors Affordability remains strong as a result of higher salaries, low inflation, tax cuts and low interest rates Household total wealth is almost three times larger than household debt Low new construction activity in relation to demand Socio-economic factors such as: the credit information agency UC (provides unique financial information on Swedish private persons, companies and institutions), no buy-to-let market, personal liability for life, two bread-winners a mortgage loan is typically a joint liability 6

7 Development of SEB s Credit Portfolio Johan Andersson

8 Development of SEB s total Credit Portfolio Strong growth in Sweden Non-bank credit portfolio composition (Dec 07 and Sep 12) SEK 1,304bn SEK 1,578bn 4% 4% 13% 8% 14% Other Baltics 24% 14% Germany 11% 4% 16% Sweden 49% 61% 7% 24% 29% 30% Other Nordics Swedish multi-family Swedish household mortgage Sweden excl. residential mortgage Dec '07 Sep '12 8

9 SEB s Swedish Residential Mortgage Lending and Strategy going forward Mats Torstendahl

10 SEB s Swedish Household Mortgage Lending Substantial growth has been achieved Mortgage lending by property type (SEK bn) QoQ Single-family homes Tenant owners' rights Second homes % 3% 2% 3% 4% 4% 4% 5% 3% 2% 2% Why SEB has taken market shares? Dec '09 Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12 Jun '12 Sep '12 SEB quarterly development relative total market 4,0% 3,0% 2,0% 1,0% 0,0% Mar '10 Jun '10 Sep '10 Overall market development is 0 (zero) Acquisition of DnB NOR s Swedish Household mortgage portfolio Dec '10 Mar '11 SEB Mortgage Lending Jun '11 Sep '11 Dec '11 Mar '12 Jun '12 Sep '12 Total Market = SCB.SE 1. Monetära finansinstitut (MFI) 1B30151A Utlåning Sv, Säkerhet bostad, Hushåll, Household mortgage lending market shares SEB s Household strategy remained the same Growth case for Retail Mortgage product is key for long term loyalty 25% 20% 15% 10% SEB ~15.5% Efficient mortgage process 5% 0% Source: Sweden Statistics Sep

11 SEB s Swedish Household Mortgage Lending Strong economic profile of new customers SEB s typical mortgage customer Urban single-family homes Main age span years old High income households Dual income with kids Personal savings above average Stronger credit rating vs. market average of mortgage customers Age distribution of customers 30% Portfolio New loans** 25% 20% 15% 10% 5% 0% SEB s mortgage customers have a relatively stronger credit quality than market average UC scoring* Oct '10 Nov '10 Dec '10 Jan '11 Feb '11 Mar '11 Apr '11 May '11 Jun '11 Jul '11 Total market Source: Upplysningscentralen ( UC ) * UC scoring is defined as the probability of getting a payment remark within one year Aug '11 ** New loans paid out during Q Sep '11 SEB Oct '11 Nov '11 Dec '11 Jan '12 Feb '12 Mar '12 Apr '12 May '12 Jun '12 11

12 SEB s Swedish Household Mortgage Lending Strongest growth in greater urban regions where there is a lack of supply Distribution of lending, % Geographic split of the growth, % SEK 273bn SEK 346bn SEK 346bn 32% 31% 24% 24% SEK 273bn 50% 20% 30% 44% 45% Dec '10 Sep '12 Greater Stockholm Greater Göteborg & Malmö Other Dec '10 Greater Stockholm Greater Göteborg & Malmö Other Sep '12 12

13 SEB s Lending to Swedish Multi-family Growth also in the Multi-family housing segment Housing co-operative associations (SEK bn) Residential real estate management (SEK bn) Lending Lending QoQ 3% 5% 5% 8% 10% 6% 12% 9% 6% 2% 3% 2% QoQ 7% 1% 2% 11% 7% 9% 4% -1% 6% 1% 2% 0%

14 SEB s Lending to Swedish Multi-family Lending growth in greater urbans areas Distribution of lending, % Geographic split of the growth, % SEK 72bn SEK 95bn 35% 38% 20% SEK 72bn 35% 26% 24% 45% SEK 95bn 39% 38% Dec '10 Sep '12 Greater Stockholm Greater Göteborg & Malmö Other Dec '10 Greater Stockholm Greater Göteborg & Malmö Other Sep '12 14

15 Pricing Models Swedish Household mortgage lending Swedish Housing co-operative associations and Residential real estate management Individual pricing based on risk; Repayment capacity (PD) Loss given default (LGD) Loan-to-value (LTV) Collateral type List price only an indication Individual pricing based on risk; Repayment capacity (PD) Internal RoBE requirements LTV Location Level of relationship Size of loan 15

16 Strategy going forward Swedish Households and Multi-family housing Swedish Household Mortgagelendingis a natural consequence of SEB s long-term strategy Mortgage lending a main driver within Household market creates cross selling opportunities Drives customer relationships loyalty and long term revenue Continue growing market shares supported by deposit growth Lending to Swedish Multi-family housing part of SEB s long-term SME strategy Real estate owners important customer segment in our local geographical markets Low risk segment Rewarding relationships with construction companies New housing co-operative associations give opportunity to acquire new private customers (tenants) Strong counterparties with relatively low risk 16

17 Risk Management Johan Andersson

18 Underwriting Principles and Stress Testing Swedish Household Mortgage portfolio credit assessment process supports continued robust asset quality Mortgage lending based on affordability and LTV Credit assessment criteria Customer should afford 7% interest rate and a straight amortisation over a period of 60 years Max loan amount 5x total gross household income irrespective of LTV and no more than one payment remark Kvar att leva på amount adjusted in June 2012 Loan >75% of market value to be amortized over maximum 10 years 85% LTV regulatory cap Sell first and buy later Stress Testing In-house stress tests show that even under circumstances with both unemployment rates and interest rates substantially above current levels, in combination with falling market values, net credit loss levels will be moderate The recorded credit loss level during the early 90s crisis peaked at around 0.30% 18

19 Asset Quality Swedish Household Mortgage LTV development stable Loan-to-value distribution ( bucket method ) LTV Share of portfolio >85% 3% 51-85% 22% 0-50% 75% Weighted average max LTV by property type Peer review: Weighted average max LTV (for total Swedish household mortgage portfolio single-family and tenant rights) SEB: 64.3% (Dec 11), 65.2% (Sep 12) Swedbank: 62.2% (Dec 11), 63.8% (Sep 12) SHB: 63.1% (Dec 11) Source: Interim reports and fact books 80% 75% 70% 65% 60% 55% Portfolio WA max LTV Tenant owners' rights, Portfolio Single-family homes, Portfolio Mar'09 Jun'09 Sep'09 Dec'09 Mar'10 Jun'10 Sep'10 Dec'10 Mar'11 Jun'11 Sep'11 Dec'11 69,3% 65,2% 63,3% Mar'12 Jun '12 Sep '12 Nordea: n/a 19

20 Asset Quality Swedish Household Mortgage: Negligible losses in the portfolio after the 90s crisis Past due 60 days and net credit loss level Past Due 60 days/lending Net credit loss level 0.11% 0.17% 0.13% 0.10% 0.15% 0.14% 0.00% 0.01% 0.00% 0.01% 0.02% 0.01% * Net credit loss level for SEB s Swedish Household mortgage portfolio 0.40% 0.30% 0.20% 0.10% 0.00% -0.10% * Net credit losses = the aggregated net of write-offs, recoveries and provisions * Annualised YTD 20

21 Asset Quality Swedish Multi-family: Very low levels of impaired loans and negligible credit losses Level of impaired loans and net credit loss level Impaired loans/lending Net credit loss level 0.10% 0.08% 0.03% 0.03% 0.00% 0.00% 0.02% 0.00% 0.04% 0.04% 0.01% 0.00% * Net credit loss level for SEB s Multi-family portfolio 1,40% 1,20% 1,00% 0,80% 0,60% 0,40% 0,20% 0,00% -0,20% -0,40% Sep '12 * Net credit losses = the aggregated net of write-offs, recoveries and provisions Sep 12 annualised YTD 21

22 Cover Pool, Covered Bonds and Funding Strategy John Arne Wang

23 Benchmarking the large Swedish banks Swedish Cover Pools SEB more Households than Multi-family housing Large Swedish banks cover pool Sep % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% SEK 388bn SEK 692bn SEK 406bn SEK 599bn 15% 23% 28% 32% 85% 77% 72% 68% SEB Swedbank Nordea* SHB * Nordea as of Q Weighted average max LTV for the Swedish cover pool 59% 58% 55% 47% Multi-family etc. Households Over collateralisation** 56% 32% 38% 15% ** Nominal based OC Source: Association of Swedish Covered Bond issuers ( ASCB ) 23

24 Cover Pool Only Swedish Residential Mortgages in SEB s Cover Pool Highlights SEB has by far the highest OC of all the Swedish peers, currently 56% Only Swedish Residential mortgages in the Cover Pool, which historically have had very low credit losses SEB s Cover Pool has slightly higher LTV than peer average level SEB s Cover Pool is more concentrated towards Single Family and Tenant rights, which generally have somewhat higher LTVs All eligible Swedish residential mortgages are in the Cover Pool, i.e. no cherry picking of mortgages from balance sheet to Cover Pool Over collateralization LTV distribution* SEK bn Mar-10 Jun-10 Sep-10 OC OC % Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 80% 70% 60% 50% 40% 30% 20% 10% 0% 0-10% 10-20% 20-30% 30-40% 40-50% 50-60% 60-70% 70-75% >75% 2% 0% 20% 18% 16% 14% 12% 10% 7% * Distribution in different LTV buckets based on exact order of priority for the individual mortgage deeds according to the Association of Swedish Covered Bond issuers 24

25 SEB wholesale funding mix Wholesale funding SEK 692bn as of Sep 12 Wholesale funding distribution Short-term funding programs Long-term funding programs Commercial paper (CP) programs Swedish French Global European US SEB AB Domestic MTN program Global MTN programs Structured Notes Program 144a/3(a)2 Covered and senior unsecured 41% 36% US Extendible notes Commercial deposit (CD) programs Yankee CDs Sterling CDs SEB AG Covered bond and senior unsecured programs SEB Vilnius senior unsecured bonds 3% 4% 12% 4% Mortgage Covered Bonds Sweden Mortgage Covered Bonds Germany Senior unsecured bonds Retail index linked Subordinated Debt Short term funding (CPs/CDs) SEB strives to keep a high level of funding diversification in terms of products, markets, currencies and duration 25

26 Covered Bonds Profile of outstanding Covered Bonds SEB AB Mortgage Covered Bonds Outstanding Covered Bonds (SEK bn) Loans originated by Skandinaviska Enskilda Banken AB (publ) 300 Pool type Dynamic 250 Moodys Rating Aaa 200 Total outstanding SEK 249bn FX distribution Benchmark SEK 77% non-sek 23% Benchmark 92.6% Currency mix, % Issued Benchmark and Non-Benchmark all ccy SEK m 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Non-Benchmark EUR Benchmark SEK Benchmark 26 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Non Benchmark 7.4% Sep-12 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Covered Bond SEK Covered Bond Non-SEK 77% 23% 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q

27 Funding Strategy Issuance and Maturity profile Upcoming refinancing needs Issued Matured Matured Senior Unsecured Matured Covered Bonds Issued Senior Unsecured Issued Covered Bonds YTD Maturing 27

28 Funding Strategy Covered Bonds Key factors After Deposits, Covered Bonds is our most important funding source Primary wholesale funding source is SEK Covered Bonds Issuance of non-sek Covered Bonds for diversification and duration management SEB s duration target is on average around 4 years SEB seeks to keep as flat maturity profile as possible Maturity profile Q (SEK m) Maturity profile Q (SEK m) 70,000 70,000 60,000 60,000 50,000 50,000 40,000 40,000 30,000 30,000 20,000 20,000 10,000 10,

29 Conclusions Affordability of Swedish Households remains strong High asset quality of SEB s credit portfolio Strong economic profile of SEB s mortgage loan borrowers Strict underwriting and credit assessment based on affordability SEK Covered Bonds most important wholesale funding source 29