SEB Q4 2025 Pre-Close Call Summary Company Overview - **Company**: SEB (OTCPK:SVKE.F) - **Date of Call**: December 17, 2025 - **Speaker**: Paul Wyszyski, Head of Investor Relations Key Points Macro Environment - Average three-month STIBOR is lower in Q4 compared to Q3, with the Swedish central bank lowering the policy rate by 25 basis points effective October 1st [1] - SEB adjusted some lending and deposit rates in Sweden following the rate cuts [1] - The European Central Bank kept the deposit facility rate unchanged, affecting Baltic operations primarily on the deposit side [2] Interest Rate Sensitivity - SEB's equity is approximately SEK 220 billion, with private and corporate transaction accounts and savings accounts totaling around SEK 370 billion, and Baltic transaction accounts around SEK 200 billion, leading to a total of roughly SEK 800 billion sensitive to rate changes [2] - Net interest income (NII) is expected to bottom out three to six months after the last rate cut, influenced by balance sheet dynamics [3] Profit and Loss Overview - The P&L and balance sheet are impacted by FX movements; a stronger SEK results in lower income and costs, while a weaker SEK has the opposite effect [4] - The SEK strengthened marginally against the euro compared to Q3, resulting in a smaller headwind on the P&L [4] - NII increased slightly despite downward trending interest rates due to higher day count, positive FX effects, lower deposit insurance fees, and reduced short-term funding costs [6] Division Performance - Business and retail banking NII declined by around SEK 100 million compared to the previous quarter due to lower interest rates on deposit margins [6] - Baltic division's NII remained largely unchanged as lower rates were offset by higher lending and deposit volumes [6] - Treasury NII benefited from favorable yield curve and funding conditions [7] Net Fee and Commission Income - A significant portion of net fee and commission income is linked to assets under management, which correlates with stock market performance [7] - Advisory and securities-related fees were seasonally softer in Q3, with no larger transactions reported in Q4 [8] Expenses and Credit Losses - Total expenses target for 2025 is SEK 33 billion, with potential for acceleration in cost implementation programs [9] - Net expected credit losses reported at three basis points, with an additional SEK 100 million in portfolio overlays [10] Capital and Risk Exposure - Current share buyback program amounts to SEK 2.5 billion, expected to conclude by January 27, 2026 [10] - CET1 capital ratio is affected by share buybacks, with a dividend payout ratio target of around 50% [11] - Remaining impact from the risk exposure amount (REA) increase in the Baltics is around 70 basis points, expected to phase in over the next three quarters [12] Additional Notes - The call concluded with a reminder of the silent period starting January 1, with the Q4 2025 interim report scheduled for publication on January 29, 2026 [13] Conclusion - SEB is navigating a challenging macro environment with interest rate adjustments and FX movements impacting its financial performance. The bank is focused on managing its capital effectively while preparing for upcoming financial disclosures.

Core Insights - The JPMorgan Equity Premium Income ETF (JEPI) is popular for its substantial yield, while the Invesco KBW High Dividend Yield Financial ETF (KBWD) offers an even higher yield by focusing on financial sector dividend payers [1][2] - Investors should analyze KBWD's concentrated holdings and expense structure before investing [1] Group 1: Fund Characteristics - KBWD generates income through dividend distributions from its holdings, unlike JEPI, which uses options strategies [2] - The fund has a concentrated focus on financial sector equities, particularly mortgage REITs and business development companies, which presents both opportunities and risks [2][8] Group 2: Top Holdings and Performance - ARMOUR Residential REIT (ARR) declared a $0.24 monthly dividend, with a book value of $19.02 per share, reporting $194.5 million in revenue and $159.3 million in net income for Q3 2025 [3] - AGNC Investment Corp (AGNC) announced a $0.36 quarterly dividend, yielding 13.70% annually, with a $90.8 billion agency MBS portfolio and $903 million in revenue for Q3 [4] - Annaly Capital Management (NLY) paid a $0.70 per share dividend, managing a $97.8 billion portfolio and reporting $1.79 billion in revenue for Q3 [5] Group 3: Risk Factors - Mortgage REITs operate with significant leverage, making them sensitive to interest rate movements and yield curve dynamics [6] - KBWD's concentration in financial sector holdings exposes investors to interest rate sensitivity and leverage risks [8][11] Group 4: Alternative Options - The JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) offers a diversified alternative by employing a covered call strategy on Nasdaq-100 stocks, generating income through option premiums [12]

Joining me right now, Jim Thorne, chief market strategist, Wellington Altus Private Wealth is with me. Um, I know we're going to get to an array of stories, including even Bitcoin and and a play that you have there, but first, let's just talk big picture and how you think the markets are behaving. >> Well, we're really close to 7,000, which is my year end target. Um, you know, uh, we're in a bullish phase, 8,000 to 8,400 by the end of next year.I think the big trade for next year is when do you put the earl ...

Core Viewpoint - Investors are facing a challenging market environment with numerous factors to consider for capital allocation [1] Group 1 - The current market is described as difficult to predict, indicating high volatility and uncertainty [1]

Group 1 - There is a significant investment boom in AI infrastructure, indicating that current interest rates may not be as restrictive as previously thought, potentially leading to further rate cuts and concerns about market bubbles [1] - Major US companies are heavily investing in data centers to leverage AI technology, which is expected to have a substantial impact on their business operations [2][3] - The spending on data centers is not particularly sensitive to interest rates, as it is driven by long-term assessments of productivity and investment potential in the AI sector [3] Group 2 - The company is utilizing various data sources to track inflation and growth in the absence of government data, including price statistics and wage inflation data from ADP [4][5] - The Beige Book is also referenced as a valuable source of information, providing insights into economic conditions, although it does not replace government data [5]

Financial Highlights - The company's market capitalization is $90 billion[5] - Total assets reached $719 billion[5] - Gross loans amounted to $377 billion[5] - Total deposits reached $601 billion[5] - Institutional Assets Under Administration (AUA) totaled $6415 billion[5] - Fee income accounted for 300% of revenue[5] Q3 2025 Performance - Commercial & Personal Banking Services revenue was $5020 million, with average deposits of $393 billion[8] - Institutional Banking Services revenue was $1764 million, with average deposits of $175 billion[10] - Net interest income, as reported, reached $4750 million[50] - Noninterest income, excluding securities gains, was $2074 million[50]

Core Viewpoint - Employees are increasingly expected to manage their own retirement planning, with the Central Provident Fund (CPF) in Singapore being a primary source of retirement savings, but it should be supplemented with income-generating equities [1] Group 1: CapitaLand Integrated Commercial Trust (CICT) - CICT is the first and largest real estate industrial trust (REIT) listed on the Singapore Exchange, owning a diverse portfolio of malls, offices, and integrated developments primarily in Singapore, with additional assets in Australia and Germany [3][4] - The REIT currently offers a yield of 4.7%, with an average lease term exceeding three years, ensuring a stable income stream [4] - CICT benefits from a strong sponsor, Capitaland Investment, which provides a pipeline of assets for future growth, although it is sensitive to interest rate changes that can affect borrowing costs and property values [5][6][7] Group 2: DBS Group Holdings - DBS is Singapore's largest bank and company by market capitalization, significantly influencing the Straits Times Index [8] - The bank has shown impressive growth, with net profit increasing by 142% from S$4.7 billion in 2020 to S$11.4 billion in 2024, and dividends per share rising by 181% from S$0.79 to S$2.22 [9] - Currently, DBS offers a yield of around 5% and has a strong track record of increasing dividends, alongside a S$3 billion share buyback program [9][10] Group 3: Singapore Exchange (SGX) - SGX has performed well financially over the past five years, with net profit increasing by nearly 46% from S$445 million in FY2021 to S$648 million in FY2025, despite previous perceptions of being primarily a dividend stock [13] - The exchange operates as a "toll gate" business, generating revenue from transaction fees, with only 2% of FY2025 revenue coming from listing fees [14] - SGX maintains a strong dividend yield of around 2.2% and has consistently increased dividends since FY2009, benefiting from its monopoly status in a major financial hub [14][16][17]

Financial Performance - The company's net income was a loss of $(5628) million, but adjusted net income was $649 million, a 16% increase compared to the last quarter[11] - Adjusted total revenue reached $2325 million, up 9% from the previous quarter[11] - Adjusted PPNR (Pre-Provision Net Revenue) increased by 20% to $928 million[11] - Net interest margin (NIM) increased by 44 bps to 350%[11] Balance Sheet and Capital - Total assets amounted to $242 billion, with total deposits of $198 billion[3] - Total loans reached $172 billion, with a loan to deposit ratio of 87%[3] - The total risk-based capital ratio stood at 1507%, and the TCE (Tangible Common Equity) ratio was 853%[3] - The company completed balance sheet repositioning, deleveraging the balance sheet by paying down higher cost deposits and wholesale borrowings[9, 12] Loan Portfolio and Credit Quality - Total loans increased by 2% on a linked quarter annualized basis, reaching $172 billion[12] - The ACL (Allowance for Credit Losses) ratio ended the quarter at 150%, up 2 bps[12] - The NCO (Net Charge-Off) ratio was 25 bps, with provision expense exceeding net charge-offs by $45 million[12] - Nonperforming loans represented 090% of total loans[11] Deposits and Funding - Total deposits decreased due to deleveraging, while the deposit mix and costs improved[12] - Noninterest-bearing deposits accounted for 221% of total deposits[57] - The cost of deposits decreased by 11 bps on a linked quarter basis[59] Interest Rate Sensitivity and Hedging - The company executed $1625 billion of interest rate swaps in 3Q25 to reduce the negative impact of falling rates by approximately 50%[76] - The company expects 4Q25 NIM to be 365% or higher[16]

SEB (OTCPK:SVKE.F) Q3 2025 Conference Call Summary Industry Overview - The call discusses the macroeconomic environment affecting SEB, including interest rates and foreign exchange (FX) movements, which are critical for the banking sector [2][4][14]. Key Points and Arguments Macro Environment - The average 3-month Stibor rate decreased in Q3 compared to Q2, with the Riksbank lowering the policy rate by 25 basis points to 1.75% [2][3]. - The average 3-month Euribor also saw a decline, while the European Central Bank maintained the deposit facility rate, impacting SEB's Baltic operations primarily on the deposit side [2][3]. Profit and Loss (P&L) Insights - FX movements significantly influence both the P&L and balance sheet, with a stronger SEK leading to lower income and costs, while a weaker SEK has the opposite effect [4][5]. - The P&L was affected by a negative impact from FX of approximately SEK 600 million, offset by a positive day effect of a similar magnitude [7][8]. - Net interest income (NII) was positively impacted by higher lending volumes and elevated NII from investor services, particularly during the dividend season [8][9]. - Business and retail banking experienced a decline of around SEK 200 million in NII compared to Q1 due to lower deposit margins and pressure on mortgage margins, although some stability was noted towards the end of the quarter [9][10]. Capital and Risk Exposure - SEB's current share buyback program amounts to SEK 2.5 billion, expected to conclude by October 21, 2025 [13]. - A transitory increase in risk exposure amount (REA) of about SEK 50 billion is anticipated due to Baltic IRB models, impacting the CET1 capital ratio by approximately 80 to 90 basis points [13][14]. - The dialogue with the European Central Bank regarding the approval of these models is ongoing, with gradual recognition of this effect expected starting late 2025 or early 2026 [14]. Costs and Expenses - Total expenses for 2025 are targeted at or below SEK 33 billion, with adjustments based on FX rates [11][12]. - Imposed levies are expected to decline, with an estimated total of around SEK 3.5 billion for the full year, similar to the previous year [12][19]. Market Activity and Outlook - The call noted that summer months typically see lower activity in capital markets, but SEB is positioned to capture opportunities as they arise [10][11]. - The competition in the Baltic region remains stiff, but loan growth is healthy [9][21]. Additional Insights - The sensitivity of the CET1 capital ratio to currency fluctuations was highlighted, with a 5% change in SEK affecting the ratio by around 40 basis points [5]. - The impact of share price on costs was discussed, indicating that a higher share price increases costs related to long-term incentive programs, although this is not a significant portion of total expenses [12][28][31]. Conclusion - The call provided a comprehensive overview of SEB's performance and outlook for Q3 2025, emphasizing the effects of macroeconomic factors, FX movements, and competitive dynamics in the banking sector. The management remains cautious yet optimistic about future growth opportunities while navigating the challenges posed by the current economic environment.

Group 1 - The stock market has reached new highs despite weaker labor market data, indicating a potential path for the Federal Reserve to lower interest rates [1][2] - The concentration of the stock market in mega-cap global tech stocks has created a tension, as profit growth cycles of benchmark indices have decoupled from the U.S. economic cycle [2] - Increased interest rate sensitivity, referred to as equity duration, presents new challenges for asset allocators in aligning portfolio decisions with macro indicators [2]