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Annual Report
2006 Robust business climate and high customer interaction
Improved efficiency and continued organic growth
Operating profit SEK 15,562m (11,223)
Earnings per share SEK 18.72 (12.58)
Return on equity 20.8 per cent (15.8)
Focused strategy and new organisation as from 2007
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SEBs financial information is
available on www.sebgroup.com
Financial information during 2007
Publication of annual accounts 9 February
Publication of Annual Report on the Internet 6 March
Annual General Meeting 28 March
Interim report JanuaryMarch 4 MayInterim report JanuaryJune 19 July
Interim report JanuarySeptember 26 October
For further information please contact:
Per-Arne Blomquist
Chief Financial Officer
Telephone +46 8 22 19 00
E-mail: [email protected]
Ulf GrunnesjHead of Investor Relations
Telephone +46 8 763 85 01
E-mail: [email protected]
Annika Halldin
Financial Information Officer
Telephone +46 8 763 85 60
E-mail: [email protected]
Contents
2006 in brief 1
Chairmans statement 2
Presidents statement 3
SEB today 4
Markets, competition and customers 8
SEBs employees 14
SEBs role in society 16
The SEB share 18
Report of the Directors
Financial Review of the Group 20
Result and profitability 20
Financial structure 23
Divisions
SEB Merchant Banking 26
Nordic Retail & Private Banking 28
SEB in Gemany (SEB AG Group) 30
German Retail & Mortgage Banking 31
Eastern European Banking 32
SEB Asset Management 34
SEB Trygg Liv 36
Risk and Capital Management 38
Corporate Governance within SEB 45
Board report on the internal
control of the financial reporting for 2006 54
Financial Statements 55
SEB Group
Income statements 56
Balance sheets 57
Statement of changes in equity 58
Cash flow statements 59
Skandinaviska Enskilda Banken
Income statements 60
Balance sheets 61Statements of changes in equity 62
Cash flow statements 63
Notes to the financial statements 64
Five-year summary 121
Definitions 123
Proposal for the distribution of profit 124
Auditors report 125
Board of Directors 126
Group Executive Committee and Auditors 128
Addresses
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SEB annual rEport 2006 1
2006 in brief
res d sed dividedn oeig fi icesed by 39 e ce,
SEK 15,562m.
n ne fi icesed by 50 e ce SEK
12,623m, SEK 18.72 e she.
n the SEB she se by 33 e ce whie he
Swedish SaX-idex icesed by 24 e ce
d he Ee Bk idex by 19 e ce.
n the cedi ss eve emied w.
n re eqiy ws 20.8 e ce.n psed divided is SEK 6.00 (4.75).
Key figures
Im eves dig 2006
n In April, SEB qied he rssi bk
peEegBk.
n In July, SEB sd is 47-e ce weshi i Bk
ochy Sdwisk S.a. d eed bch i
Wsw dig he m.
n In September a ew gisi sce, wih f
csme-ieed divisis d hee s fc-
is, ws eseed. the sce is effecive s f
1 Jy 2007. SEBs ei civiies i five cies
wee ieged d he pive Bkig bsiess e
ws ied wih he asse Mgeme divisi.
n Throughout the year, SEB ceebed is 150h i-
vesy by gig eves f csmes d is
20,000 emyees. these seci ivesy ceeb-
is gve SEB my ccsis f segheig is
csme eis d f ceig ew bsiess
iies.
n SEB cied eceive mbe f wds, sch s
Bes ive bk i he ndic d Bic cies
d Bes csh mgeme bk i he ndic egi.
n SEB hs dvced wihi my es, mg hes
mbe e sii wih mke she i w m
fds e ses f 26 e ce i Swede.
006 2005
re eqiy, % 20.8 15.8
re eqiy exc. e-ff chges,% 20.8 17.0
Bsic eigs e she, SEK1) 18.72 12.58
Cs/icme i 0.58 0.65
Cedi ss eve, % 0.08 0.11
t ci i, % 11.47 10.83
Ce ci i, % 8.19 7.53
nmbe f f ime eqives, vege 19,672 18,948
nmbe f e-bkig csmes, hsds 2,597 2,299
asses de mgeme, SEKb 1,262 1,118
t sses, SEKb 1,934 1,890
1) F fhe ifmi he SEB she, ese see ge 18.
Operating profit per division
SEKm
Net profit per SEB share
SEK
0 2,000 4,000 6,000 8,000
SEB Trygg Liv
SEB Asset Management
Eastern European Banking
German Retail & Mortgage Banking
Nordic Retail & Private Banking
SEB Merchant Banking
20062005
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SEB annual rEport 2006
A year of very satisfactory results for SEB has just passed. 2006
was also a specific year, marked by the fact that the bank has
been in operation for 150 years. It is with a sense of pride and
humility that we now take on the challenges of the future.
The global economy showed strong growth in 2006. Even
though the U.S. slowed down during the second half, Asia and
Europe showed a solid development. The euro-zone picked up
speed and Germany experienced both stronger growth and fall-
ing unemployment.
All the Nordic countries performed very well and the Baltic
countries were among the fastest-growing economies of the world.
Financial markets in general held up well, despite some
nervousness about the U.S. slowdown. The Federal Reserve con-
tinued to hike its interest rate, and in Europe and Asia the trends
in general were also rising. The American residential market
cooled, stock markets were volatile, while overall bond yields
remained at historically low levels. The dollar was sliding as a
result of the U.S. slowdown and narrowing rate spreads. In Swe-
den, repo rates doubled and stock prices rose more than in most
other EU countries.
SEBs share price at all time high
Last years positive economic conditions in combination with
SEBs geographical spread and business mix once again proved
fruitful and SEBs profitability compared well with its peergroup.
With a share price increase of 33 per cent, SEB outperformed
both the Swedish General Index and the European Banking
Index in 2006. For the period 20042006 the market value of SEB
has more than doubled. My fellow Board members and I will
continue to make every effort to create long-term value for SEBs
shareholders.
Industry consolidation and financial integration
The consolidation within the European banking industry contin-
ued in 2006 with a number of mergers and acquisitions. We con-
tinue to follow SEBs stated strategy to develop our attractive
platform for profitable growth through a combination of cost-
efficiency and organic expansion.
The financial industry is working under more regulatory
requirements than many other industries. There is still a long
way to go before global harmonisation of financial services can
be reached. Regulatory demands that currently have an impact
on SEB:s operations include:
n The creation of the Single European Payment Area SEPA
will enable companies and private individuals to make their
cross-border payments within EU as easily as in their domes-
tic markets.
n MiFID (Markets in Financial Instruments Directive) will
replace EUs existing Investment Services Directive (ISD),
with effect from 1 November 2007. MiFID introduces new
and more extensive requirements, particularly for businessconduct and internal organisation.
n Last, but not least, we have the current implementation of
the Basel II capital adequacy rules within the EU. As with
any other major regulatory change, the strategic implications
on the global and European arenas remain to be seen.
On behalf of the Board I would like to thank the President, the
Group Executive Committee and the SEB staff for their commit-
ment and professionalism. We could not have received a better
birthday present for SEBs 150th anniversary than the strong
result and the high return achieved in 2006.
Stockholm in February 2007
Marcus WallenbergChairman of the Board
Chairmans statement
Continued efforts in order to create
long-term shareholder value
We could not have received a better birthdaypresent for SEBs 150th anniversary than the
strong result and the high return achieved
in 006.
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SEB annual rEport 2006
Presidents statement
The past year was a very good year for SEB and its shareholders.
In a buoyant economic climate with high financial market activi-
ties and business volumes, SEB achieved its best result to date.
The combination of strong revenue growth and only moder-
ately increasing costs, which marked 2006, reflects the increasing
scalability of our business model. Improved customer satisfac-
tion continued to be in focus and we intensified our efforts to
offer customers better access to all of SEBs services and product
range. I am proud of what we have accomplished in 2006.
An attractive business mix and customer base
Over the years SEB has established a platform with a diversified
business mix around the Baltic rim. We have a solid customer
franchise in our core areas of strength large corporate and
institutional customers and affluent individuals. We are especial-
ly strong in offering our customers advisory services.
During 2006, intensified customer activities led to increased
operating profits in all divisions. Commissions, including net life
income, overall generated close to 50 per cent of total revenues.
Committed to excellence
Our ambition is to be top-ranked in terms of customer satisfac-
tion within our selected segments, in order to reach leadership
in financial performance. This is a long-term undertaking, build-
ing on the two cornerstones of operational excellence and profit-able growth.
An integrated bank
SEB has expanded considerably over the last ten years. We now
need to consolidate and focus our efforts. In 2006, we narrowed
our strategy to a full universal offering in Sweden, Estonia,
Latvia, Lithuania and Germany, and a more focused offering in
other markets based on our core strengths. In order to better
serve our customers we laid out a roadmap to integrated busi-
nesses and common support functions.
We launched the SEB Way, our operational excellence pro-
gramme which includes installing streamlined processes,
improving quality and encouraging a culture of continuous
improvement.
Several initiatives were taken to address the underlying cost-
base. These are gradually yielding result. We will continue to
increase the resilience of the cost-base in order to cater also for
periods of a more feeble business climate.
SEB well positioned
All in all, these measures aim at strengthening our customer
offerings and increasing efficiency. The work to fully exploit
the SEB platform will continue in 2007. SEB is well positioned
for further profit growth. My own and the whole SEB teams
commitment to long-term leadership remains unchanged.
Stockholm in February 2007
Annika Falkengren
President and Group Chief Executive
Well positioned for reaching
long-term ambitions
Customer satisfaction continues to be a toppriority. We have intensified the efforts to offer
our customers the markets best services and
product range, in our selected areas.
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4 SEB annual rEport 2006
SEB today
Increased ambitions for customer
satisfaction and financial performance
Segic deveme
Expansion between 199 and 001
In the mid-1990s SEB formulated its vision of becoming the lead-
ing North-European bank. SEBs traditionally strong position
among companies and demanding private customers was
strengthened through acquisitions in the area of life insurance
and asset management and through expansion in new markets
in Germany and Eastern Europe.
Consolidation and profit growth between 00 and 005
With the broadened platform in place, several steps were taken
in order to consolidate it, primarily through the so-called 3 C-
programme (Cost efficiency, Customer satisfaction and Cross-
servicing within the Group).
Improved efficiency and organic growth complemented withminor add-on acquisitions around the Baltic rim supportedSEBs profit growth.
Realising the full potential 006
Higher ambitions to realise the full potential of the platform
shall contribute to profitable growth in SEBs existing markets.
Increased pro-activity towards customers in combination with a
better integrated business will form the basis of increased cus-
tomer satisfaction and profitability. By fully realising the whole
SEB, higher quality, more complete services to our customers as
well as cost-efficient operations will be achieved.
SEB serves 400,000 corporate customers and institutions and
more than five million private individuals. SEB has local pres-
ence in the Nordic and Baltic countries, Germany, Poland,
Russia and the Ukraine and has a strategic presence through
its international network in another ten countries.
More than half of SEBs approximately 20,000 employees
are located outside Sweden. On 31 December 2006, total
assets amounted to SEK 1,934bn, while the Groups assets
under management totalled SEK 1,262bn.
Business concept SEBs business concept is to provide
financial services and to handle financial risks and transac-
tions for companies and private individuals in such a way
that customers are satisfied, shareholders get a competitive
return and that SEB is considered a good citizen of society.
Vision, targets and strategy SEBs vision is to be highest
ranked by its customers within the chosen segments in
Northern Europe and leading in terms of financial perform-
ance. These goals shall be reached with the help of motivated
employees, increased co-operation between the Groups dif-
ferent parts and Group-wide support and staff functions.
One SEB shall give customers access to SEBs total com-
petence and supply of services.
As from 2006 SEB has set new financial targets. SEBs
return on equity shall be the highest among its peers, while
its profit growth shall be sustainable. SEBs minimum rating
shall be AA.
SEB is a North-European financial group for corporate customers, institutions and private
individuals. Its activities comprise mainly banking services, but SEB also carries out
significant life insurance operations.
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SEB annual rEport 2006 5
SEB today
The most important non-financial targets to be achieved are:
n t ked i ems f csme sisfci wihi SEBs chse segmes.
n the ms mived emyees mg SEBs ee g.
Fici ges d cme
Csmes d emyees ges d cme
New and higher targets
PULSE (Mivi idex)
Idex shwig emyees mivi d
sisfci wih edeshi, g vege.
80
60
40
20
0
2004 200520032002
Motivation
Leadership
European average
Private individuals1)
KNIX (Csme sisfci idex)
Idex shwig csme sisfci d yy, g vege.
Corporates and institutions)
80
60
40
0
20
European average
2005 2006200420032002
80
60
40
0
20
European average
2005200420032002 2006
1) Icdes Gemy sice 2003
d he Bic cies sice
2004
2) Gemy icded 20032005
Core capital ratio
pe ce
10
8
6
4
0
2
2004 200520032002 2006
Net profit growth
SEK bii
15
12
9
6
0
3
2004 200520032002 2006
Return on equity
pe ce
25
20
15
10
5
0
2004 200520032002 2006
Dividend
pe ce f eigs e she
50
40
30
20
10
0
2004 200520032002 2006
tge: a es 7 e cetge: Ssibe fi gwhtge: Highes mg is ees tge: 40 e ce f e fi e
she ve bsiess cyce
I he fe SEB hs decided
cy hgh ide sveys
mg he sff wih ge
ievs. Dig 2006 svey
ws mde. nex is ed
ke ce dig he m
f 2007.
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6 SEB annual rEport 2006
SEB today
A strategy for growth
SEB has expanded its geographical scope and its busi-
ness mix over the last ten years. In 2006 several steps
were taken to consolidate the platform in order to
better position SEB for future profit growth. These
included initiatives to establish a more integrated
bank, thereby facilitating customers access to SEBs
offerings in different markets. Other key actions
during last year comprised:n Increasing pro-activity in meeting customer
demands
n Installing operational excellencen Improving cost-efficiency.
SEBs ambition is to be top-ranked in terms of custom-
er satisfaction within selected segments in order to
reach leadership in financial performance.
Customer offerings
In Sweden, SEBs original home market, the Bank has a univer-
sal offering and aspires to be leading in all areas. Also in the Bal-
tic countries SEB has a full range of universal banking services
and operates from a strong market position. In Germany SEB
offers retail and wholesale banking as well as asset management
services.
In the rest of the Nordic countries and Poland, SEB will offer
wholesale banking, private banking, asset management, life
insurance and cards to medium sized and large corporate cus-
tomers, financial institutions and affluent private individuals.
A customer-oriented organisation
In order to strengthen customer offerings, increase the integra-
tion of the Group and minimise double functions, SEBs opera-
tions are as from 1 January 2007 carried out through four divi-
sions (compared with six divisions in 2006):
n Merchant Banking wholesale and investment bankingn Retail Banking retail operations in five countries and Card
activities
n Wealth Management asset management and private bankingn Life life and pension insurance operations.
New Markets, i.e. SEB in Ukraine and Russia, is kept separate in
order to take better advantage of the long-term growth potential
in these attractive regions.
All businesses are supported by three cross-divisional sup-port functions Group Operations, Group IT and Group Staff.
Merchant Banking
Merchant Baking has global responsibility within SEB for bank-
ing and capital markets products aimed at large and medium-
sized corporations as well as financial institutions. The division
is also responsible for SEBs international network in the worlds
major financial centres.
Going forward, Merchant Banking will make targeted invest-
ments in products and staff in order to continue growing profita-
bly in its main markets in the Nordic and Baltic countries, Ger-
many and Poland. The division sees further opportunities to sell
additional products to existing customers and to increase market
share in its main markets outside Sweden, not least through
intensified activities aimed at medium-sized corporations and
financial institutions. This will be achieved by pursuing the divi-
sions proven strategy of investing in cutting edge products and
value added financial solutions.
Retail Banking
The new retail division comprises SEBs retail operations in
Sweden, Germany, Estonia, Latvia and Lithuania as well as the
Groups card business. The growth opportunities are to expand
on the market for small and medium-sized companies in Swe-
den, continuing a turn-around of the German retail operations
and sustainable organic growth in the Baltic countries, including
expansion of the card business.
SEBs initiatives to further strengthen customer servicesbased on increased simplicity, clarity and availability the
Enkla-assortment will continue.
A focused strategy
SEB has a broad product mix and an attractive customer franchise in its core areas of
strength large corporations, institutions and affluent individuals.
Business structure
Merchant
Banking
Retail
Banking
Wealth
ManagementLife
Group Operations / Group IT / Group Staff
President and
Chief Executive Officer
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SEB annual rEport 2006
SEB today
Wealth Management
This division includes the former SEB Asset Management divi-
sion and the business area Private Banking within the former
Nordic Retail & Private Banking division. By year-end 2006, the
divisions assets under management amounted to SEK 928bn of
the Groups total assets under management of SEK 1,262bn.Going forward, the ambition is to offer enhanced advisory
service, more alternative products and shorter time-to-market
for new products. SEB has a strong market position within asset
management in Sweden. Building on this franchise and knowl-
edge the division will grow further outside Sweden, primarily in
the Nordic and Baltic countries and Germany. The ambition is to
become the leading North-European wealth manager.
Life
This division is responsible for SEBs life insurance activities and
consists of SEB Trygg Liv (Sweden), SEB Pension (Denmark) and
SEB Life & Pension International. The business concept is to pro-
vide customers with security throughout every phase of their
lives using insurance solutions.
The growth opportunities are within corporate pension and
care business in Sweden and Denmark, maintained quality lead-
ership in Sweden and continued unit-linked transition in Den-
mark. The division is also aiming at a leading position in the
emerging Baltic life insurance market as well as growth in new
East European markets.
Support functions with focus on productivity
The divisions are supported by three common functions Group
Operations, Group IT and Group Staff. The guiding principle is
from now on one function, one solution. Processes will be
streamlined, efficiency increased and the creation of one inte-
grated bank will be facilitated.
With the formation of Group Operations SEB is building scala-
bility and a global process ownership. This means for example a
stepwise integration of all lending, payment and securities proc-
esses operations that have up to now been taking place within
each of the divisions.
The transformation within Group IT comprises for examplea reduction of the number of IT-platforms and a streamlining of
processes.
Within Group staff a separate staff and support project has
been set up in order to create Group wide centres of excellence
based on best practice.
The cost improvement potential is SEK 1.52.0bn over the
next three years, excluding incremental investments. For 2007
the savings are targeted to roughly SEK 300500m.
SEB Way for increased productivity
In order to ensure a continuous productivity work, SEB acceler-
ated its operational excellence programme SEB Way dur-
ing 2006. By SEB Way the Group strives to encourage a culture
of continuous improvement, meeting increased quality demands
from customers and the productivity pressure in the banking
industry.
So called transformations are being rolled out continuously
in small teams of 1050 people at a time after diagnosis of the
divisions and business areas. Up to year-end 2006, the equiva-
lent of 1,500 full time employees has been involved in transfor-
mations and about 6,000 employees have been included in the
roll-out plan.
Examples of achievements reached include the Custody
Services-unit, which could increase its volumes by 150 per cent
without adding staff. Simultaneously, error rates went down by
35 per cent. In the Life division, the first front-end transforma-
tion led to sales staff booking 30 per cent more customer meet-ings with the average premium increasing by almost 20 per cent.
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8 SEB ANNUAL REPORT 2006
Markets, competition and customers
High economic activity and growth characterised SEBs North-
European core markets during 2006. All the Nordic countries
performed well and the Baltic economies were among the fastest
growing ones in the world. Germany experienced a stronger
growth than in previous years. In Poland, Russia and Ukraine
growth was also good.
In the market for large corporations and financial institu-
tions SEB meets tough competition from international financial
groups such as Citigroup, Deutsche Bank, J P Morgan, Royal
Bank of Scotland and Merrill Lynch. In the market for small and
medium-sized companies, the competitors are mostly domestic
or regional banks like Hansabank in the Baltic countries and
Nordea, Handelsbanken and Danske Bank in the Nordic region. In
the private market local banks and insurance companies account
for most of the competition, but various niche players are also
competing for investors and savers.
Sweden
Sweden is still SEBs single largest market, with approximately1.9 million private and 200,000 corporate customers. In 2006, the
Swedish market accounted for approximately 50 per cent of the
Groups operating profit.
In Sweden, SEB occupies a clearly leading position among
large corporations and demanding private individuals, with
substantial market shares of foreign exchange trading, equities
trading, cash management, private banking, asset management,
unit linked insurance and cards, for example. For several years,
SEB has been ranked the best foreign exchange bank in Swedish
kronor on a global scale. SEB was once again the largest broker
on the stock exchange in Stockholm in 2006.
Within the traditional deposit and lending market SEB is
number four. During 2006, SEBs market share of deposits from
and lending to the public decreased, due to a lower share of cor-
porate lending. SEBs market share of household lending was
unchanged. Seen over a five-year period, SEBs share of private
mortgage loans has grown from 12.3 to 14.7 per cent.
In the total Swedish household savings market (excluding
directly owned shares), the Group ended the year as number
two, with a share of 13.0 per cent (12.7).
In 2006, SEB consolidated its market position in the asset
management and private banking areas. The business magazine
Euromoney appointed SEB the best private bank in the Nordic
and Baltic countries. In the biannual Prospera survey, retail cus-
tomers ranked SEB as number two of all major fund companiesoperating in the Swedish market. SEBs market share for new
sales of of mutual funds rose to 26 per cent (17).Within life insurance SEB Trygg Liv is the second largest
player, with a total market share of 18 per cent. As regards newsales of unit-linked funds SEB is No 1 with a market share of
29 per cent in 2006.
Increased growth in all of SEBs markets
The North-European markets account for almost all of SEBs income, result and number
of employees. During 2006, SEB continued to consolidate its position through increased
volumes and high rankings. Approximately 50 per cent of the operating profit emanated
from markets outside Sweden.
Customer segmentation, Nordic banks
Share of total income, per cent
The Nordic banks differ in terms of business structure. Corporate customers
account for a considerably higher share of the business of SEB and DnB NORcompared with the other banks.
Income distribution, Nordic banks
Share of total income, per cent
0
20
40
60
80
100
Net other
income
Net financial
income
Net life insurance
income
Net fee and
commission
income
Danske
Bank
DnB
NOR
NordeaSHBSwedbankSEB
Net interest
income
SEBs commission income traditionally weighs heavier than that
of other Nordic banks due to the Groups specialisation on advi-sory services and more transaction-intensive activities with large
companies and demanding private customers.
0 20 40 60 80 100
DnB NOR
Danske BankAsset Management
Merchant Banking
Retail, The Baltic
Retail, Germany
Retail, Nordic
countries
Life insurance
Nordea
SHB
Swedbank
SEB
Retail, GB/Ireland
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SEB ANNUAL REPORT 2006 9
Markets, competition and customers
The other Nordic countries
In Denmark, Norway and Finland, SEB has a strong position
within selected areas, for example cards, asset management,
wholesale and investment banking as well as life insurance.
The Group has close to 1.4 million customers in these countries.On a Nordic scale, SEB has a leadership position within cor-
porate and investment banking for large corporations and finan-
cial institutions. This is due to SEBs unique position in Sweden,
and the aim is to reach similarly prominent positions within the
Banks chosen areas in the other Nordic markets.
Denmark
In Denmark, SEBs customer offering comprises wholesale and
investment banking, life insurance, asset management, private
banking and cards (Eurocard, Diners Club, MasterCard and
Visa). At year-end 2006, SEB in Denmark had 780 employees andmore than 600,000 customers, accounting for approximately
7 per cent of the Groups operating profit for 2006.
Within investment banking, SEB retained its strong market
position. SEB was market leader in the corporate finance area
and ranked among the top three players in all major equity and
So Paulo
New York
Singapore
Shanghai
Beijing
MoscowSt: Petersburg
Gross income
Geographical distribution, per cent
Sweden 42 (44)
Germany 20 (26)
Rest of theNordic countries 16 (14)
Rest of Europe 6 (6)
The Baltic 8 (6)
Rest of the world 8 (4)
SEBs markets in Northern Europe account
for the dominating part of income.
London
Paris
Geneva
Marbella
St Petersburg
Germany Poland
Estonia
Finland
+57%
+50%
Latvia
Lithuania
Sweden
Denmark
Moscow
Ukraine
+33%
+42%
+96%
+29%
+34%
Luxembourg
Norway
+38%
SEBs markets Profit growth 2006 1)
1) Overall operating profit growth 2006, 39%
Market shares of total savings, Sweden
Per cent
AMF 7.3 (7.5)
Other 25.9 (25.3)
Swedbank 14.2 (13.8)
Skandia 10.2 (10.5)
Alecta 10.1 (10.5)
SEB 13.0 (12.7)
Nordea 8.3 (8.6)
Handelsbanken 11.0 (10.8)
SEB is number two on the Swedish private savings market.
Total assets under management
SEKbn
1,500
1,200
900
600
300
0
2006
2005
DnBNOR
DanskeBank
Nordea
SHBSwedbank
SEB
SEB is one of the largest
asset managers in the
Nordic region.
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10 SEB ANNUAL REPORT 2006
capital market products. The generated profits from the Danish
merchant and investment banking activities have significantly
increased, making 2006 the best year to date.
Assets under management in Denmark amounted to SEK
143bn, primarily on behalf of institutional clients, and SEB is
ranked third in the Danish market after the two major localbanks, Danske Bank and Nordea. SEBs funds were again top
ranked in different ratings and surveys. In the spring, SEB
acquired Prime Management, a smaller Danish private banking
company.
SEB Pension is Denmarks fourth-largest private pension
company with 300,000 customers and assets of SEK 82bn. The
annual gross premiums rose by 21 per cent, to SEK 6.1bn. The
company offers both unit-linked and traditional insurance.
Norway
SEB in Norway offers wholesale and investment banking servic-
es, private banking and cards (Eurocard, MasterCard and Diners
Club). SEB has 500 employees and close to 600,000 customers in
Norway. In 2006, Norway accounted for approximataely 9 per
cent of SEBs operating profit.
The niche bank Privatbanken ASA, acquired in 2005, is serv-
ing affluent private customers under the name of SEB Privat-
banken. In addition, SEB started asset management activities in
Norway in early 2006.
Business flows were strong within most product areas and
prioritised customer segments. Activity on the Oslo Stock
Exchange was high, measured both in trading volumes and
numbers of IPOs. SEB arranged and participated in several
major transactions and SEB maintained its position as one of the
five highest-ranking banks for large corporations. SEB Enskilda
secured its position as the market leader within investment
banking and was No. 3 on the Oslo Stock Exchange (after DnBNOR and Carnegie), with a market share of 7.6 per cent in 2006.
Finland
SEB in Finland comprises wholesale and investment banking,
card operations (Diners Club and MasterCard) and wealth man-
agement (primarily via the subsidiary SEB Gyllenberg). Close to
350 employees serve more than 100,000 customers in total. In
2006, Finland accounted for approximately 3 per cent of SEBs
operating profit.
Markets, competition and customers
0 5,000 15,00010,000 20,000 25,000 30,000
ABN Amro
Lazard
JP Morgan
Merrill Lynch
Lehman Brothers
Morgan Stanley
Carnegie
Goldman Sachs
Deutsche Bank
SEB Enskilda
0 200 400 600 800 1 000
Carnegie
Nordea
Morgan Stanley
Lehman Brothers
Credit Suisse
Pareto Securities
SHB
ABG Sundal Collier
UBS
SEB Enskilda
Source: Thomson Financial Source: Dealogic
Nordic M&A transactions
Deals completed during 2006, USDm
Nordic IPOs
By bookrunner 2006, USDm
Market shares
Per cent 2006 2005 2004
Deposits from general public
Sweden1) 20.5 21.7 21.4
The Baltic countries 27.3 29.0 31.0
Lending to general public
Sweden2) 14.4 15.0 15.0
The Baltic countries 27.2 29.0 29.0
Mortgage loans, total
Sweden 12.6 12.5 12.3
Mortgage loans, private market
Sweden 14.7 14.7 14.8
The Baltic countries 24.1 n.a. n.a.
Mutual funds, new business
Sweden 26.1 17.1 7.4
Finland 4.4 1.7 3.9
Mutual funds, total volumes3)
Sweden 16.6 16.0 16.3
Finland 5.5 5.7 7.3
Estonia 22.2 24.9 27.5Poland 1.6 3.3 4.7
Germany4) 8.2 6.5 6.7
Unit-linked insurance, new business
Sweden 29.1 32.6 34.6
Life insurance, total
Sweden 18.3 19.5 20.9
Denmark 10.0 9.0 9.0
Equity trading
Stockholm 10.1 10.6 10.0
Oslo 7.6 7.9 8.4
Helsinki 3.5 3.8 3.2
Copenhagen 5.9 6.8 6.0
1) Market shares for deposits from households were 12.2 per cent (12.2) and from
companies 25.8 per cent (27.5).
2) Market shares for lending to households were 12.5 per cent (12.5) and to companies16.0 per cent (17.0).
3) Excluding third-party funds.
4) Real estate funds.
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SEB ANNUAL REPORT 2006 11
Within custody services SEB is the second largest bank, afterNordea, but ranked No. 1 in terms of customer satisfaction. SEBEnskilda is also highly ranked within research and equities inFinland and No. 1 within M&A advice.
In 2006, SEB participated in seven (excl. commercial real
estate) syndicated loan transactions, acting as mandated leadarranger for five of these. Other financing transactions in theform of private placements and major leasing transactions werecarried out during the year. The Commercial Real Estate unitfinanced or participated in six important real estate transactionsduring 2006. Trade finance activities were successful and contin-ued growth is expected for this area.
The leasing business ABB Credit Oy (acquired in 2005) wasre-branded SEB Leasing Oy and merged with the financingoperations of SEB Finans Helsinki Branch. SEB, which is theleading provider of large leasing financing in Finland, expandedfurther in the leasing market and diversified its business intostructured receivables financing.
SEBs market share of the Finnish mutual fund market,where the subsidiary SEB Gyllenberg is one of the largest play-ers, was 5.7 per cent in 2006. SEB Gyllenberg has a top positionin the institutional asset management market and is one of theleading providers of private banking services in Finland.
Germany
In Germany, SEB AG is one of ten banks with a nation-wide net-work of branch offices. The bank is focused on private customerswith savings and mortgage loans, merchant banking activities,commercial real estate financing and asset management. SEB hasapproximately 3,400 employees and close to one million custom-ers in Germany. In 2006, SEB AG accounted for approximately 10per cent of the Groups operating profit.
SEB is a strong player in the German market for real estatefunds, with a market share of 8 per cent. The share of the totaldeposit and lending market in Germany is less than one percent.
SEB has a strong position within commercial real estatefinancing in Germany, having been one of the key banks in thisarea for years.
SEBs services to corporate clients and financial institutions inGermany were once again ranked at the very top. Within retailbanking, customer satisfaction improved substantially and SEB isnow one of the highest-ranking banks in Germany in this respect.
Estonia, Latvia and LithuaniaIn the Baltic area SEB has three subsidiary banks SEB Eesti his-pank in Estonia, SEB Unibanka in Latvia and SEB Vilniaus Bankasin Lithuania with 4,500 employees and 2.6 million customers, ofwhom 178,000 corporate customers. In addition, SEB has a lifeinsurance company in each Baltic country. The combined resultfor 2006 corresponds to 15 per cent of SEBs operating profit.
The three banks have strong positions in their respectivemarkets. SEB Eesti hispank is the second largest bank in Esto-nia after Hansabank. SEB Unibanka is number three in size inLatvia but number one in terms of deposits and lending. SEBVilniaus Bankas is the largest bank in Lithuania.
The three banks combined share of the total deposit andlending markets of the Baltic countries is approximately 30 percent. SEB Vilniaus Bankas has a somewhat higher share while
that of SEB Unibanka is slightly lower.
In the Baltic region, SEB has a leading position among large cor-porations, especially in the areas of foreign exchange, trading,cash management and M&A business.
The three Baltic banks have during 2006 sucessfully met theincreased demand for new savings products, such as mutual
funds and unit-linked insurance. The SEB banks have a signifi-cant share of these markets.
Poland, Ukraine and Russia
After the sale of its 47-per cent shareholding in Bank OchronySrodowiska, BOS, SEBs operations in Poland comprise a branch,a wholly-owned mutual fund company, SEB TFI, and a branchof SEBs German leasing company.
In Ukraine, SEB Bank with 500 employees has 21,000 privateand 6,300 corporate customers. The demand for various types ofbanking services is growing. However, only 27 per cent of theinhabitants in Ukraine have an established bank relation today.Thus, the potential for future growth is substantial. SEBs ambi-tion is to open ten branch offices per year and to establish lifeinsurance business in the country during 2007.
In 2006, SEB acquired PetroEnergoBank which in 2007 willbe renamed SEB. Twelve branch offices are planned for the nexttwo years. SEBs other operations in Russia include a representa-tive office in Moscow and a leasing company in St Petersburg SEB Russian Leasing.
Other international locations
SEB runs operations at strategically important locations in suchfinancial centres as London, New York and Singapore to servecorporate customers with international operations. Nordic andGerman private individuals living outside their home countriesmake use of these offices, too.
Markets, competition and customers
50
40
30
0
LithuaniaLatvia2)Estonia1)
10
20
Loans
Deposits
Market share per country 2006
Per cent
Due to signs of potential economic
overheating in Estonia and Latvia,
SEB has increased the focus on
return and loan portfolio quality.As a consequence, the banks lending
market shares have marginally
decreased in these countries.
1) Excluding loans to financial institutions
2) Resident deposits only
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12 SEB ANNUAL REPORT 2006
Markets, competition and customers
Higher customer interaction
The SEB Group serves more than five million private individuals
and 400,000 corporate customers today. In recent years, growth
has primarily taken place in its new markets.SEB offers individual, active and developing banking rela-
tions whenever and wherever customers so desire. This means,
among other things, that SEB solutions by combining products
and services in order to meet different customers needs. SEB
stands for pro-activity, competence and attention to customers
individual needs.
Focus on increased customer satisfaction
In order to realise the vision of being the leading bank in its cho-
sen markets in Northern Europe , SEB strives to improve service
levels and increase activity levels with respect to customers.
SEB is a financial partner to more than 1,500 large companies
that are active in the Nordic countries, Germany and the Baltic
countries. In addition, on a global basis SEB counts approxi-
mately 1,000 banks and more than 200 major institutions among
its customers.
Within the corporate sector SEB occupies a leading position
since long as a bank for large companies and financial institu-
tions in Sweden, in several cases with more than century-old
relations. In recent years SEB has strengthened its position on
the market for large corporations in the rest of the Nordic area
and Germany. During 2006, large companies and institutions
accounted for approximately 40 per cent of SEBs income.
SEB serves 400,000 small and medium-sized corporate cus-
tomers, mainly in Sweden and the Baltic countries. These cus-
tomers can benefit from the knowledge and competence that
SEB has built up in co-operation with the large companies and
adapted to the needs of smaller companies. SEBs customer base
in the market for small and medium-sized companies is impor-
tant and growing in Sweden and the Baltic area. The ambition is
to focus more on these customer groups, both in the rest of the
Nordic region and Germany.
00
0
500,000
1,000,000
1,500,000
2,000,000
3,000,000
2,500,000
The Baltic region
Germany
Denmark
Sweden
03 04 05 060201999897
Number of users of the Banks Internet services
Today, SEBs Internet banks are used by approximately 2.6 million private custom-
ers and small companies in six countries. In addition, the Group offers specialist
services via the Internet such as foreign exchange and interest trading, mainly to
large companies.
After a reduction of the number of branch
offices at the end of the 1990s, the Bank
has more than doubled its branch office
network through acquisitions in Germany
and Eastern Europe. During 2006 the Bank
opened seven new branches offices in the
Nordic region and the Baltic countries.
Branch offices
600
500
300
100
0
400
200
200620011997
300
250
200
150
100
50
200620011997
0
Card transactions
Million
3.0
2.5
1.5
2.0
1.0
0.5
0
20062004 2005
Personal telephone service
Calls to SEBs call centers, million
1.8
1.5
1.2
0.9
0.6
0.3
0
2004 2005 2006
Automatic bank service
machines
Thousands
In Sweden and the Baltic coun-
tries, SEBs private customers
are offered personal service
around the clock. In Sweden,
the service is offered in 17
different languages.
Since 2001 the number of
card transactions has dou-
bled and amounts to 332
million transactions.
Automatic bank service
machines include ATMs,
machines for cash deposits,
transfers, foreign exchange and
recharging cards.
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SEB ANNUAL REPORT 2006 13
Markets, competition and customers
During 2006 small and medium-sized companies accounted for
approximately 25 per cent of SEBs income.
Today, SEB has the privilege of assisting 5 million privateindividuals, providing solutions to their everyday finances,
loans and investments. During 2006, private individuals
accounted for approximately 35 per cent of SEBs income.
When it comes to the private individual customers in Sweden,
SEB has a leading position among financially active people with-
in such areas as asset management, mutual funds and unit-linked
insurance. SEB also has extensive operations in the private mar-
kets of the Baltic countries, where the Groups position is strong,
and in Germany. That also applies to certain niches, e.g. asset
management, cards and life insurance, in the rest of the Nordicregion.
Distribution channels
SEBs customers can keep in contact with the bank around the
clock via branch offices, internet and telephone service. In total,
around 200 million customer meetings take place every year in
the SEB Group, of which a third through the Internet.
SEBs ranking 2006 examples
Area Rank Organisation/publication etc
Best bank at cash management in the Nordic and Baltic region 1 Euromoney
Best bank at cash management in the Nordic region 1 Global Finance Magazine
Best bank at liquidity management in the Nordic region 1 Global Finance Magazine
Best bank at payments and collections in the Nordic region 1 Global Finance Magazine
Best bank for risk management 1 Global Finance Magazine
Best sub-custody bank in Denmark, Finland, Latvia, Lithuania, Norway and Sweden 1 Global Finance Magazine
Best sub-custody bank in Estonia 2 Global Finance Magazine
Best stockbroker in the Nordic region 1 Prospera
Best research house in the Nordic region 1 Prospera
Best European equity team 2 Morningstar
Best Swedish small cap team in Europe 3 Morningstar
Best mututal fund company in Sweden 2 Prospera
Best M&A house in Latvia 1 Euromoney
Best at commercial real estate banking in the Nordic and Baltic region 1 Euromoney Real Estate Awards
Best at investment real estate banking in the Nordic and Baltic region 1 Euromoney Real Estate Awards
Best at advisory financial services in real estate banking in the Nordic and Baltic region 2 Euromoney Real Estate Awards
Best agent bank in the Nordic region 1 Global Custodian
Best research house in the Nordic countries 1 Extel Survey, Thomson Financial
Best bank for Scandinavian currencies 1 FX Week
Best bank in Lithuania 1 Euromoney
Best consumer internet bank in Lithuania 1 Global Finance Magazine
Best internet bank in Estonia 1 Metasite Business Solutions
Best risk manager in the Nordic region 1 TMI
Best private bank in the Nordic and Baltic region 1 Euromoney
Best private bank in Sweden 1 Prospera
Best overall customer service cards 1 Teleperformance Danmark A/S CRM Grand Prix
Best of Europe in Prepaid 1 MasterCard
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14 SEB ANNUAL REPORT 2006
SEBs employees
SEBs employees
SEBs capability to attract, develop and keep the most competent employees is a keycompetitive factor for a successful development of SEB.
SEBs values
The SEB Groups common corporate culture is based upon four
values: Commitment, Continuity, Mutual respect and Profes-
sionalism. These values form a natural part of leadership and a
basis for the daily relations both between the employees of the
Group and between employees and customers. SEBs commit-
ment to customers and society shall be reflected in these values.
The goal is to create value for customers and shareholders and
as a matter of course for the employees, too.
Competence and leadership development
Continuous competence and leadership development are of deci-
sive importance for a growing business operation and a prerequi-
site for enabling SEB to deliver the right solutions to its customers.
To make sure that SEBs development activities are in line with
the objectives set in its business plan, the Bank initiated a process
during 2006, which not only assesses employees and leaders but
also defines the needs for competence development in terms of
individual goals, in view of the Groups overriding objectives.
It is SEBs ambition to create a culture in which managers and
employees constantly are trying new ways of developing the busi-
ness in order to make the Bank an even more effective business
partner. This is why the contents of the leadership programmes of2006 are more clearly focused on change and innovation.
SEB is active in some 20 countries and attaches great impor-
tance to making use of the total competence that exists within
all parts of the Group. Job rotation is encouraged as well as
work across divisional lines and geographical borders.
To mirror the Groups global structure, SEB developed a frame-
work for Group-wide training in 2006. This means that all
employees and managers are offered the same opportunities for
development, regardless of division or geography.In 2006 SEB invested atotal of SEK 252m (250)in competence develop-ment. Almost everyemployee participated insome kind of trainingand 1,800 managers par-ticipated in the Groupsinternal or external lead-ership programmes.
Internal training com-
prises everything from
professional competence
courses to the Groups
own management pro-
grammes such as the
Wallenberg Institute and
the Wallenberg Executive(for high-level managers).
In 2006, SEB imple-
mented a common global process for performance management
for all employees with individual targets, linked to SEBs busi-
ness plan. The same process is used in the annual top manage-
ment review. The purpose is to ensure that SEBs managers
have the appropriate competence and that there exists a good
succession planning for the key managers of the Group.
SEB Licence
In November 2005, SEB launched a common training programme
in order for all employees to become better SEB ambassadors
and strengthening the SEB brand. Improved knowledge about
the Groups products and services would lead to enhanced
customer services and to an incentive to identify new product
needs.
The programme consisted of two parts. The first Internet-
based part gave the participants general knowledge about
almost all the products that SEB has on offer. The second part
consisted of workshops to gain more profound knowledge
about products and processes and to establish contacts between
employees. Nearly all of SEBs 20,000 employees participated in
this programme.
Internal employee survey
SEB has a systematic approach to an open and continuous dia-
logue about employees views on such important matters as
work environment, motivation, leadership and Group perform-
ance in the market. SEB has chosen to carry out attitude surveys
every second year in order to give time for improvement work
to reach good, long-term results. Next survey is planned for the
autumn of 2007.
Equality and diversity
The SEB Group strives to offer everybody equal opportunities
and rights, regardless of gender, national or ethnic origin, age,
sexual orientation and religious faith.According to the equality plan that was adopted by SEB in
Sweden in 1998 the long-term goal is an equal distribution
between men and women. Each sex shall be represented by atleast 40 per cent at each level. SEB has taken several measures inorder to achieve this objective. For example, when a new man-
200620052004
0
3,000
6,000
9,000
12,000
15,000
Training cost per employeeSEK
Post gymnasium/University < 3 years 12
Compulsory school 10
Other/Unspecificed 6
Upper secondary school education 34
Post gymnasium/University > 3 years 38
Educational level
Per cent
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SEB ANNUAL REPORT 2006 15
SEBs employees
ager is appointed both sexes shall be represented among thethree main candidates.
In 2006, 38 per cent (37) of all the Groups managers were
women and the same percentage was true for Sweden. The share
for group and customer service managers was 48 per cent, while it
was 33 per cent for department and branch office heads. At higherlevels, the share of women was 22 per cent.
SEBs diversity plan was established in 2005.
Work environment and health issues
The awareness of the connection between work and health care
is of vital importance for the working environment. In Sweden, a
well-functioning and systematic programme is therefore being
implemented. In co-operation with local, occupational health
care SEB carries out extensive rehabilitation work to help long-
term sick-listed employees return to work. In 2006, the number
of long-term sick-listed employees decreased to 2.4 per cent
(2.8), while total sickness absence dropped to 4.1 per cent (4.6).
SEB and young professionals
In order to secure its position as an attractive employer SEB con-
tinuously works on building long-term relations with the target
groups of young professionals (academics with a few years of
working experience) and last-year university and college stu-
dents. The work consists in communicating the Groups valuesand in defining the desirable profiles of future employees. In Jan-
uary 2007 SEBs first international trainee programme involving
all divisions was concluded. A new programme will start in 2007.
Remuneration within SEB
SEB operates both in global and local environments as well as in
different types of areas, e.g. retail banking, wholesale and invest-
ment banking, life insurance and wealth management. SEBs suc-
cess depends on the commitment and professionalism of its staff.
The remuneration shall aim at meeting the financial objec-
tives of SEB. The total remuneration shall also be competitive
within each market in which SEB is present to attract, motivate
and retain highly skilled individuals. Individual remuneration
levels shall only be based on the factors of experience, compe-
tence, responsibility and performance.
SEBs total remuneration structure consists of the following
main components: base salary, short term incentive compensa-
tion, long-term incentive compensation to senior managers and
other key employees and pension and benefits.
The base salary depends on the complexity of work and theindividuals work performance, experience and competence.
The majority of SEB employees are eligible for short-termincentive compensation. This is based on the achievement of cer-tain predetermined goals, individual and general, qualitativeand quantitative. All employees in Sweden, as an example, canreceive short-term incentive compensation of maximum SEK
30,000 based on the financial result of the Group plus anotherSEK 18,000 based on the result of each respective division and/or local unit and individual/team performance during 2006.Managers and key specialists are generally subject to individualagreements, usually maximized to either a certain percentage ofthe base salary or a fixed amount.
In 2006 approximately 500 senior managers and key special-ists were granted long-term incentive compensation in the formof performance shares. The purpose of this compensation is tostimulate senior managers and other key staff to increasedefforts by aligning their interests and perspectives with those ofthe shareholders. (See page 52 for more information on the SEBlong-term incentive compensation programme)
Pension conditions vary from one country to another. InSweden, the pension conditions are defined by the collectiveagreements. Only a small number of employees at senior man-agement level have pension conditions that go beyond the col-lective agreements. The pension conditions of the Group Execu-tive Committee are specified in note 9.
Employee turnover
YearHeads
Average Starters Leavers Retired
2002 19,994 884 (4.4%) 1,343 (6.7%) 273 (1.4%)
2003 19,411 643 (3.3%) 1,069 (5.5%) 108 (0.6%)
2004 19,108 784 (4.1%) 789 (4.1%) 189 (1.0%)
2005 19,872 2,029 (10.2%) 1,183 (6.0%) 109 (0.5%)
2006 20,689 2,249 (10.9%) 2,012 (9.7%) 228 (1.1%)
Women Men
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
504049303929
8
7
6
0
2
1
5
4
3
50304929
Men, short-term leave
Men, long-term leave
Women, short-term leave
Women, long-term leave
No. of employees
Distributed by age and gender
Sick-leave, SEB in Sweden
Short and long-term leave by gender.
Of regular working hours, per cent.
Total sick leave for SEB in Sweden
2006 was 4.1 per cent and long-
term leave 2.4 per cent.
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16 SEB ANNUAL REPORT 2006
SEBs role in society
An active role in society
In order to achieve the goal of being a good social citizen it is of decisive importance to be-have in a responsible and ethical way towards all interested parties in the daily operations.
In its capacity as a financial group, SEB plays an important role
in society by
acting as an intermediary between companies and/or pri-
vate individuals with surplus capital and those who have
borrowing needs,
providing an effective payment system, which is a condition
for a functioning society and
handling financial risks.
Primarily through carrying out these tasks in an ethical and
responsible manner SEB will gain respect and contribute to a
positive social development.
Being a good social citizen in all countries where it is active is
one of the Groups overriding goals. SEB shall stand for good eth-
ics and openness and contribute to a sustainable development.
SEBs corporate social responsibility
SEB has a policy for the social responsibility of the Bank and
supports the principles of the United Nations Global Compact
and the OECD guidelines for multinational companies. This policy
means that SEB takes long-term responsibility in its day-to-day
work. SEBs operations are based upon the long-term confidence
of customers, employees and society.It applies to ethical issues that have a direct impact on SEBs
customers and business as well as to responsibility for the
employees and, in a broader sense, for the society and environ-
ment.
Several Group-wide policies and instructions govern the
work on SEBs social commitment. All this work is based upon
SEBs common values Commitment, Continuity, Mutual
respect and Professionalism. In addition, targets have been set
for continuous and systematic assessment and follow-up of the
work, which is led by a Group-wide Corporate Social Responsi-
bility Committee, CSR, with representatives from all divisions
and staff functions. The heads of divisions and subsidiaries have
the operative responsibility for social commitment.
Ethics and long-range planning
SEBs activities are based upon trust, continuity and long-term
relations with customers. This means that SEB and its employees
must meet the highest ethical standards and act in a long-term
perspective. It is a matter of course that SEB observes all laws
and other general regulations concerning bank secrecy, treat-
ment of personal information, integrity protection and informa-
tion safety. In addition, the Group has adopted a number of own
rules regarding ethical issues. In early 2007 SEBs Board of Direc-
tors adopted a new Code of Business Conduct.
SEBs role as a lender
SEBs credit policy describes the role and responsibility of the
Group as a lender. SEB strives to increase awareness of the indi-
rect effects and responsibilities that the Groups credit-granting
activities have on the environment and what they mean for a
sustainable development. A special section of the credit policy
stresses SEBs social responsibility beyond the associated impor-
tant issues of confidence in the customer, the credit purpose and
environmental matters.
The Groups Head of Credits has issued special instructions
and prepared follow-up systems to support credit decisions that
involve SEBs social responsibility. Factors that may have a nega-
tive impact on the environment and other issues of importance
are assessed and analysed in connection with credit decisions
and annual follow-up routines. Such analyses and assessmentsare made in a broader perspective than just taking factors that
affect borrowers repayment capacity into account. Special atten-
tion is paid to financings of major infrastructure projects, which
may involve risks for a negative impact upon the population
and environment.
SEBs role as an asset manager
SEB strives to maintain high ethical standards in its relations
with customers, employees, suppliers and other partners. The
Group offers a broad range of asset management products with
a special ethical profile and works actively with corporate gov-
ernance issues. SEB Fonder (Mutual Funds) finds it important
SEBs priority areas within Corporate Social Responsibility
Ethical and sustainable business conduct
SEBs role as a lender
SEBs role as an asset manager
SEBs role as an employer
Social commitment Environmental responsibility
SEBs Code of Business Conduct
The SEB Code of Business Conduct describes and develops SEBs
values and standards of business conduct. The Code provides
guidance on how to live by those values. The aim is to achieve
the following main objectives:
Describe the responsibilities that follow with employment in SEB.
Describe the standards of business conduct.
Provide guidance on how to resolve potentially difficult situations.
Establish procedures for reporting Code-related issues.
Show stakeholders that SEB acts in an ethical and professionalway.
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SEB ANNUAL REPORT 2006 17
that each company in which they choose to invest has an estab-
lished ethical and environmental policy.
As a major manager of savings capital, it is the responsibility
of SEB Fonder to be an active owner and to act in order to give
companies the best possible opportunities for carrying on their
activities.SEBs mutual funds are put under strict obligations as to
which shares its ethical portfolios may include by excluding
such lines of business as weapons, alcohol, tobacco, pornograpy
and gambling. SEBs ethical assortment of funds must follow
certain ethical standards and two different methods are used for
selecting companies: screening by using Global Ethical Standard
and exclusion of companies according to so-called negative crite-
ria.
Global Ethical Standard is based upon international stand-
ards regarding human rights, labour, environment, bribes, cor-
ruption and arms trading. Investments in indexed forwards are
excluded since it is difficult to exclude indirect exposures on
companies that violate SEBs ethical criteria.
Social commitment
Being a good member of society forms part of SEBs business
concept and this is why the Group supports various social
projects both centrally and through its different business areas.
Youth, education, equality and diversity are areas of priority. In
addition to direct grants of SEK 16.2m during 2006, the aim is
that all SEB employees shall actively contribute with knowledge
and personal commitment.
Mentor Sverige and Mentor Lietuva
Since 1997 SEB supports Mentor Sverige, a Swedish foundation
engaged in drug prevention measures for the youth that runs
two drug prevention programmes: a mentorship and a parentaltraining programme. During 2006, 34 persons within SEB partic-
ipated as mentors, while 100 took part in the parental training.
SEB employees can be mentors for pupils at the senior level of
the compulsory school during one school year. SEBs Lithuanian
subsidiary bank, SEB Vilniaus Bankas, was one of the initiators
of a national mentor organisation in Lithuania, Mentor Lietuva.
SEB is trying to broaden its co-operation with Mentor to include
also Germany, Estonia and Latvia.
Other projects
In various ways, wherever SEB is represented, the Bank sup-
ports local projects and initiatives that focus particularly on
school-training and sports-linked childrens and youth issues.In connection with the Rosa Bandet-campaign (Pink Band),
SEB sold about 8,000 pink bands for the benefit of the CancerFund, which also received SEBs Christmas gift, which is givenfor charity purposes instead of sending Christmas cards.
Since 1999, SEBs Baltic Fund/WWF sends an annual contri-
bution to the World Wide Fund for Nature and its Baltic action
programme.
At the annual Swedish Christmas concerts it is a tradition to
collect money for various projects. In 2006, money was collected
for Mentor, Queen Silvias Childrens Hospital and the Child-
rens Cancer Fund in Skne. SEB also gave pictures to the City
Mission of Stockholm for its art auction for the benefit of the
homeless and to the Swedish Church in London.
Environmental matters
According to SEBs environmental policy SEB shall consider
environmental aspects to the greatest extent possible. SEB has
signed the environmental documents of both the United Nations
and the International Chamber of Commerce, under which the
signatories are committed to paying due regard to, and acting for,
a better environment within their respective activities. This work
is led by a Group-wide environmental committee that makesreports on, and follows up, these issues on a continuous basis.
Further information is available at www.sebgroup.com.
SEBs role in society
Social key figures
2006 2005
Overall CSR Employee attitude:
Per cent of employees who think;
SEB is an ethical company 4) 77
it is important that SEB is
an ethical company 4) 76
Customer attitude:
Per cent of customers who think;
SEB is an ethical company 75 65
it is important that SEB is an
ethical company 99 87
Role as an
employer
Motivation index 4) 63
Leadership index 4) 78
Gender equality1) 38 37
Sick leave rate2) 4 5
Health index 62 61
SEB as an attractive employer, rank;
all companies 11 18
banks only 2 2
Social
Commitment
Mentorship programme3) 90 95
Financial support of
social projects, SEKm 17.5 18
1) Per cent female managers 2) In Sweden
3) Internal knowledge in Sweden 4) As from now measured every second year
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18 SEB ANNUAL REPORT 2006
Sales of own shares
In the third quarter 2006 SEB sold approximately 3 million
shares, in excess of needs for the hedging of SEBs long-term
incentive programmes.
SEBs Class C shares
To facilitate foreign ownership the Class C share was introduced
at the end of the 1980s. The trading volumes of the Class C share
are very limited and the number of Class C shares only consti-
tutes 3.5 per cent of the share capital of the Bank. Due to this, the
prerequisites for creating only one class of shares, thus giving
the Class C shares the same rights as the Class A shares, have
been examined. The examination has shown that there are sig-
nificant practical difficulties to implement such a structure.
According to the Swedish Companies Act a proposal that theClass C shares should carry the same rights as the Class A sharesrequires that the proposal is supported by shareholders repre-senting at least 2/3 of the votes cast and shares represented at aGeneral Meeting of Shareholders as well as by 9/10 of the ClassA shares represented at the General Meeting. Furthermore
approval from a majority of all Class A shareholders is required.The reason for this is that a resolution to this effect would lead toa certain dilution for the Class A shareholders. Since the numberof shareholders in SEB is large, obtaining such approval wouldbe a drawn-out and complicated procedure.
The SEB share
Share capital
The SEB share is listed on the Stockholm Stock Exchange. The
share capital amounts to SEK 6,872m, distributed on 687.2
million shares. The Class A share entitles to one vote and the
Class C share to 1/10 of a vote.
Stock Exchange trading
During 2006, the value of the SEB Class A share increased by
33 per cent, while the Swedish General Index rose by 24 per
cent and the European Banking Index by 19 per cent. During
the year, the total turnover in SEB shares amounted to SEK
163bn. SEB thus remained one of the most traded companies
on the Stockholm Stock Exchange. Market capitalisation by
year-end was SEK149bn.
Dividend policy
The size of the dividend in SEB is determined by the financial
position and growth possibilities of the Group. SEB strives to
achieve long-term growth based upon a capital base for the
financial group of undertakings that must not be inferior to a
core capital ratio of 7 per cent. The dividend per share shall,over a business cycle, correspond to around 40 per cent of
earnings per share, calculated on the basis of operating result
after tax.
In 2006 the SEB Class A share rose by 33 per cent. In three years the SEB sharehas more than doubled in value. Earnings per share were SEK 18.72 (12.58). The
proposed dividend is SEK 6.00 (4.75) per share.
SEB Share
SEK
SEB Share, logarithmic scale.
Price equals last closing pricepaid on last day of each month.
SIX General Index
European Bank Index (FTSE)
80
60
40
100120,000
90,000
60,000
30,000
120
140
160
180
200
2002 2003 2004 2005 2006 FINDATADIREKT
Number of shares traded,in thousands, linear scale(incl. after-hours transactions)
250
200
0
150
100
50
Aug Sep Oct Nov DecJulJunMayAprMarFebJan
Highest paid
Lowest paid
Monthly share price 2006
SEK
The SEB share doubled in value
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SEB ANNUAL REPORT 2006 19
The SEB share
SEK 19,000 has grown to SEK 2.6m
Those who bought 100 SEB shares at the price of SEK 190 pershare on 1 January 1972, when Skandinaviska Enskilda Bankenwas formed, would have invested a total of SEK 19,000. Thosewho after that participated in all new issues of shares up to thepresent would have invested another SEK 195,000. On the otherhand, they would have received total dividends of SEK 535,000over the years. Today, the original 100 shares would have grownto 11,350 shares. On 31 January 2007, the share price was SEK230, which means that the original investments represent apresent value of SEK 2.6m.
Distribution of shares by size of holding
Size of holding No. of shares Per cent No. of shareholders
1500 37,742,017 5.4 243,800
5011,000 18,694,359 2.7 25,764
1,0012,000 18,644,235 2.7 13,176
2,0015,000 21,299,129 3.1 6,9345,00110,000 10,917,413 1.6 1,543
10,00120,000 7,868,496 1.1 564
20,00150,000 10,535,204 1.5 338
50,001100,000 11,148,415 1.7 156
100,001 550,307,363 80.1 339
687,156,631 100.0 292,614
Source: SIS garservice
Change in share capital
Skandinaviska Enskilda Bankens share capital has changed as follows since the Bankwas started in 1972:
Year Transaction SEKChange in no.
of sharesAccumulatedno. of shares
SharecapitalSEKm
1972 5,430,900 543
1975 Rights issue 1:5 125 1,086,180 6,517,080 652
1976 Rights issue 1:6 140 1,086,180 7,603,260 760
1977 Split 2:1 7,603,260 15,206,520 760
1981 Rights issue 1B:10 110 1,520,652 16,727,172 837
1982 Bonus issue 1A:5 3,345,434 20,072,606 1,004
1983 Rights issue 1A:5 160 4,014,521 24,087,127 1,204
1984 Split 5:1 96,348,508 120,435,635 1,204
1986 Rights issue 1A:15 90 8,029,042 128,464,677 1,284 1)
1989 Bonus issue 9A+1C:10 128,464,677 256,929,354 2,569
1990 Directed issue2) 88.42 6,530,310 263,459,664 2,6351993 Rights issue 1:1 20 263,459,664 526,919,328 5,269
1994 Conversion 59,001 526,978,329 5,270
1997 Non-cash issue 91.30 61,267,733 588,246,062 5,882
1999 Rights Issue3) 35 116,311,618 704,557,680 7,046
2005 Reduction ofthe share capital 17,401,049 687,156,631 6,872
1) The recorded share capital at 31 December, 1986 was still SEK 1,204m, since theproceeds from the rights issue were not paid in full until early 1987.
2) The issue was directed at the member-banks of Scandinavian Banking Partners. Throughsplits in 1977 (2:1) and 1984 (5:1), the nominal value of the shares has been changed fromSEK 100 to SEK 10.
3) According to the instructions of the Financial Supervisory Authority, subscribed shares thathave been paid will not be registered as share capital in the balance sheet until the rightsissue has been registered (which took place in January, 2000).
SEB share
Data per share 2006 2005 2004 2003 2002
Basic earnings, SEK 18.72 12.58 10.83 8.22 7.60
Diluted earnings, SEK 18.53 12.47 10.82 8.19 7.60
Equity, SEK 98.98 84.84 77.31 70.10 65.51Adjusted equity 112.66 96.44 85.66 75.53 68.88
Net worth, SEK 115.90 102.19 89.50 78.03 70.55
Cash flow, SEK 6.32 52.49 4.95 4.24 4.49
Dividend per A and C share, SEK 6.00 4.75 4.35 4.00 4.00
Year-end market price
per Class A share, SEK 217.50 163.50 128.50 106.00 72.50
per Class C share, SEK 209.00 158.00 124.50 96.50 65.00
Highest price paid during the year
per Class A share, SEK 220.00 165.50 131.00 107.00 110.00
per Class C share, SEK 212.50 159.50 126.50 96.50 99.50Lowest price paid during the yearper Class A share, SEK 152.50 122.50 99.50 66.50 66.00
per Class C share, SEK 145.50 118.00 92.50 61.00 58.50
Dividend as a percentage
of result for the year, % 32.0 37.8 40.2 48.6 52.7Yield, % 2.8 2.9 3.4 3.8 5.5
P/E 11.6 13.0 11.9 12.9 9.5
Number of issued shares, million
average 673.3 667.8 679.8 693.5 700.1at year-end 678.3 668.8 668.5 691.4 697.6
Share capital
Number Number Percentage ofShare series of shares of votes capital votesA 663,004,123 663,004,123 96.5 99.6
C 24,152,508 2,415,251 3.5 0.4
687,156,631 665,419,374 100.0 100.0
Each Class A-share entitles to one vote and each Series C-share to 1/10 of a vote.
The SEB share on the OM Stockholm Stock Exchange
2006 2005 2004 2003 2002 2001
Year-end marketcapitalisation, SEKm 149,251 115,026 90,382 74,391 50,850 66,900
Volume of sharestraded, SEKm 162,707 104,372 86,293 85,648 83,758 75,424
24
12
8
0
4
20
16
2005 2006200420032002
Diluted earnings per share
Basic earnings per share
Dividend
Per SEB share, SEK
6
3
2
0
1
5
4
2005 2006200420032002
Basic and diluted earnings
Per SEB share, SEK
A dividend of SEK 6.00 per share isproposed for 2006.
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20 SEB ANNUAL REPORT 2006
Financial Review of the GroupThe SEB Group continued to develop positively during 2006,
increasing its business volumes and improving both results and
key ratios. Favourable economic development of the markets in
which SEB is active in combination with the Groups broad geo-
graphical base and product mix were the reasons for this
improvement.
A couple of minor acquisitions were made during the year in
the form of the Russian bank PetroEnergoBank in St Petersburg
and the Danish asset management company Prime Manage-
ment.
SEBs sale of its total holding, 47 per cent, of the shares in
Polish Bank Ochrony Srodowiska S.A. to the national fund for
environmental protection and water purification (NFOS) for
about SEK 1.4bn was completed in July, 2006. A few months later
SEB opened a branch in Warsaw.
During 2006 SEBs operations were carried out through six
divisions. SEB Merchant Banking the Groups relations with large
corporations, institutions and real estate companies,
Nordic Retail & Private Banking the Groups Nordic retail
operations, private banking and card activities,
German Retail & Mortgage Banking SEBs German retail
and mortgage business, Eastern European Banking SEBs activities in Estonia,
Latvia, Lithuania, Poland, Russia and Ukraine,
SEB Asset Management mutual fund and asset manage-ment and
SEB Trygg Liv life insurance operations.
As from 1 January 2007, the operations of the SEB Group are
carried out through four divisions and three support functions
(see further the Corporate Governance Report on pages 4554).
Result and profitabilityBest result to date
SEBs operating profit for 2006 increased by SEK 4.3bn or 39 per
cent, to SEK 15,562m (11,223). Approximately 50 per cent of this
was generated outside Sweden. Net profit rose by 50 per cent, to
SEK 12,623m (8,421).
Income up by 13 per cent
Total operating income increased by SEK 4.5bn or 13 per cent to
SEK 38,747m (34,227).Net interest income was flat at SEK 14,281m (14,282). Margin
pressure, although less pronounced, in combination with
increased funding costs due to higher short-term interest rates
were offset by rising volumes. The customer driven proportion
of net interest income increased by 14 per cent.Net fee and commission income improved by 19 per cent, to
SEK 16,146m (13,559). All commission income categories
increased significantly. This was particularly evident for securi-
ties commissions, which net of expenses increased by 24 per
cent, and advisory, up by 36 per cent.
Net financial income rose by 19 per cent to SEK 4,036m (3,392).
The increase was an effect of high customer-driven activity in
the trading and capital markets area.
Net life insurance income improved by 13 per cent, to SEK
2,661m (2,352), principally as a result of continued strong sales
and higher unit-linked volumes. A complete description of SEB
Trygg Livs operations, including changes in surplus values, isfound in Additional information on www.sebgroup.com.
Net other income increased to SEK 1,623m (642), mainly due
to higher capital gains and positive effects from hedge account-
ing. One-off capital gains during 2006 totalled SEK 474m.
Report of the Directors
Sweden, 85%
Other Nordic, 5%
Other, 10%
Operating profit geographical distribution
Per cent
Sweden
Other Nordic
Germany
Eastern Europe
Other
1997
Operating profit
SEK 4.1bn1)
2006Operating profit SEK 15.6bn
1) Excl. restructuring costs of SEK 1,018m
SEB Asset Management 8 (8)
SEB Trygg Liv 9 (7)
German Retail & Mortgage Banking 4 (5)
Eastern European Banking 14 (11)
Nordic Retail & Private Banking 22 (26)
SEB Merchant Banking 43 (43)
Operating profit divisional distribution1)
Per cent
47% (50)
19% (19)
10% (11)
15% (13)
9% (7)
1) Adjusted for eliminations
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SEB ANNUAL REPORT 2006 21
Report of the Directors
Profit and loss account on quarterly basis SEB Group
SEKm 2006:4 2006:3 2006:2 2006:1 2005:4
Net interest income 3,604 3,503 3,578 3,596 3,803
Net fee and commission income 4,274 3,772 4,107 3,993 3,895
Net financial income 1,120 890 1,047 979 890
Net life insurance income 732 739 607 583 644
Net other income 274 538 352 459 305
Total operating income 10,004 9,442 9,691 9,610 9,537
Staff costs 3,735 3,443 3,463 3,722 3,766
Other expenses 1,878 1,820 2,101 1,999 2,904
Net deferred acquisition costs 151 45 144 167 199
Depreciation, amortisation and impairments of
tangible and intangible assets 218 232 217 216 258
Total operating expenses 5,680 5,450 5,637 5,770 6,729
Gains less losses from tangible and intangible assets 22 6 14 28 53
Net credit losses2) 222 136 162 198 331
Operating profit1) 4,124 3,862 3,906 3,670 2,530
Income tax expense 334 803 959 843 560
Net profit from continuing operations 3,790 3,059 2,947 2,827 1,970
Discontinued operations 50
Net profit 3,790 3,059 2,947 2,827 1,920
Attributable to minority interests 3 6 4 5 5
Attributable to equity holders3) 3,787 3,053 2,943 2,822 1,915
1) SEB Trygg Livs operating profit 439 453 295 283 268
Change in surplus values, net 364 381 493 422 643
SEB Trygg Livs business result 803 834 788 705 911
2) Including change in value of seized assets
3) Earnings per share (weighted), SEK 5.61 4.54 4.38 4.22 2.94
Weighted number of shares, millions 675 673 672 670 668
Key ratios
2006 2005 2004 2003 2002
Return on equity, % 20.8 15.8 14.7 14.2 13.7
Return on equity excl. one-off charges, % 20.8 17.0 14.7 14.2 13.7
Return on total assets, % 0.64 0.48 0.51 0.52 0.51
Return on risk-weighted assets, % 1.71 1.31 1.32 1.26 1.24
Basic earnings per share, SEK1) 18.72 12.58 10.83 8.22 7.60
Basic earnings per share,
excl. one-off, SEK1) 18.72 13.54 10.83 8.22 7.60
Diluted earnings per share, SEK 18.53 12.47 10.82 8.19 7.60
Cost/Income ratio 0.58 0.65 0.65 0.65 0.69
Cost/Income ratio, excl. one-off 0.58 0.62 0.65 0.65 0.69
Credit loss level, % 0.08 0.11 0.10 0.15 0.13
Reserve ratio for impaired loans, % 75.1 77.7 79.2 66.3 70.8
Level of impaired loans, % 0.22 0.22 0.31 0.52 0.47
Total capital ratio, incl. net profit, % 11.47 10.83 10.29 10.23 10.47
Core capital ratio, incl. net profit, % 8.19 7.53 7.76 7.97 7.88
Risk-weighted assets, SEKbn 741 705 570 535 503
Number of full time equivalents, average 19,672 18,948 17,772 18,067 19,003
Number of e-banking customers, thousands 2,597 2,299 1,953 1,614 1,332
Assets under management, SEKbn 1,262 1,118 886 822 742
1) Restated to IFRS except for IAS 32 and IAS 39.2) Not prepared under IFRS.
2)2)1)
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22 SEB ANNUAL REPORT 2006
Report of the Directors
Stable costs
Total operating expenses amounted to SEK 22,537m (22,149), an
increase of 2 per cent compared with last year. The increase was
mainly due to higher performance-related remuneration,
increased provisions for the long-term incentive programmes
and for redundancy costs. Approximately SEK 200m of the one-off charges of SEK 890m for unutilised office space and integra-
tion in 2005 was used during 2006.Staff costs rose slightly, excluding performance-related remu-
neration and provisions for
redundancy costs. Including
these effects, total staff costs
amounted to SEK 14,363m
(13,342). The average number
of full time equivalents in
2006 increased to 19,672
(18,948), of which 650 due to
acquisitions and growth in
Eastern Europe.Other expenses decreased
by 7 per cent, to SEK 7,798
(8,383). Adjusted for the
unutilised office space
charges and insurance-
related broker commissions,
other expenses were up by
1 per cent, mainly due to
increased costs for IT and
marketing.
Low credit loss level
The Groups net credit losses, including changes in the value of
assets taken over, decreased to SEK 718m (914). The credit losslevel was 0.08 per cent (0.11). Asset quality remained stable.
Reduced tax rate
Total tax costs amounted to SEK 2,939m (2,770). The total tax
rate was 18.9 per cent (24.7). The reduced tax rate was mainly
due to improved results of business operations subject to a l