of with eonstant value

A N N u· A L R E P O R T

The key to shareholder value lies with eonstant

delivery of the best possible service to our customers.

• Operating result increased by 68 per cent

• Earnings pershare rose to SEK 8.91 (SEK 4.80)

• Diligentia was distributed to the shareholders

Result before losses, SEK M lending losses, SEK M Operating result, SEK M Total assets, SEK billion Net interest margin, per cent Return on equity, per cent

The Group's operating result and return on equlty

6000 - - - - ---=-30 4000 - - - - - - ;:O{jl-20

~

2000 lO

l

·200:

_ l ... , ;; - ...-'--- • • '-

-4{)00 - - - --20

~000 - - - -- --30 -8000 - - - - -- -- -40

92 93 94 95 96 - Operaöng resu~

Return on equity

Five-year summary

1996 1995

7,173 7,511 1,303 4,025 5,870 3,486 551 519 1.28 1.40 22.7 10.7 Re!trn 911 total assets, per cent 2.24 1.40

Earnilgs per share, SEK 8.91 4.80

lncomejcosts before losses 1.79 1.91 lncome/costs after losses 1.57 1.28 Lending loss level, per cent 0.52 1.55 Level of doubtful claims, per cent _1.80 2.68 Total caprtal ratlo, per cent 12.7 15.2 Core caPttal ratio, per cent 6.9 9.6

Average no. of employees 9,579 9,697

Number of branch offices 274 288

1994 1993 1992

8,743 10,846 4,367 9,444'' 10,167 11,183 -701'¹ 679 -6,816

411 448 485

1.99 2.09 1.43 -2.2'' 2.6 -24.5 -0.26 'l 0.22 -0.40 'l 3.68 -11.44

2.04 2.37 1.46 0.96'' 1.04 0.67 3.02'¹ 2.90 3.35 3.55'¹ 5.90 7.62

14.2 ·no 8.4

8.8 8.0 5.1

9,804 9,953 10,368

303 320 320

The new form of presentation has been u sed for the years 1995 and 1996 in the above Table, whereas the old form has been kept for the years 1992-1994 (see Accounting principles).

•1 After a speci<ll wnte-down on properties.

FINANCIAL INFORMATION DURING 1997

Publication of the annual results February 14 Publication of Annual Report early April Annual General Meeting April 29 Report January-March Apri129 Report January-June August 12 Report January-September November4 Annual reports and quarterly reports may be ordered from

Group Communications Skandinaviska Enskilda Banken S-106 40 Stockholm

Telephone: +46 8 763 81 30, 763 85 67 Internet: www.sebank.se

Investor relations:

Christine-Charlotte Treschow Telephone: +46 8 763 95 59

E-mail: Christine-Chari.Treschow@enskilda.se

CONTENTS

To the Shareholders

The S-E-Banken share 6

Report of the Directors

Macroeconomics 8

Markel 9

Organisation 12

Private markel 16

Corporate market 20

The S-E -Bank Group statt 27

Environmental work 28

F1nancial review of the Group 30

Accounling principles 40

Definitions 43

Profit and loss accounts 44

Balance sheets 45

Notes to the profit and loss accounts 46 Nates to the balance sheet'i 50 Proposal for the distribution of profrt 67

Audijors' report 67

Five-year summary 69

Board of Directors, Senior Executives

and Auditors 70

Addresses 72

Annual General Meeting Notice

J

TO THE SHAREHOWERS

Operating result increased by 68 per cent

The operating result of SEK 5,870 M is the

Dear Shareholder,

highest in the history of 5-E-Banken. The im-

provement was achieved through falling interest The overriding goal for us working at S-E-Banken is to create an

rates, declining lending losses and growing evenstrongerand ever more profitable bank. In 1996, we could volumes in important areas. reap the fruits of our efforts. With a 22.7 per cent return on equi- ty profitability was quite satisfactory, particularly in an inter-

Eamings pershare rose to SEK 8.91 (SEK 4.80) national perspective.

Following this satisfactory performance the 5-E-Banken's ultimate goal, and our foremost mission as its Board of Directors proposes an increase of more leaders, is to create maximum skareholder value.The key to this than 80 per cent in the dividend to the share- lies in making our customers feel that we deliver the best services

holders, to SEK 2.75 (SEK 1.50) per share. available in the market. The structural and organisational ekanges tkat we have implemented during 1996 will permit the Bank to

Diligentla was distributed to. the shareholders focus on developing its core business, with the help of an organ- The subsidiary Dillgentia was divested from the i5ation that is better equipped to meet customer requirements.

Bank last September through a distri'oution to the This annual report contains a number of features describing shareholders. The book value of the shares real-lifesituations of our clients and colleagues. Transactions that

,,

amounted to SEK 6,945 M. Through this divestitu- we consider typical of 5-E-Banken are presented, which tagether re of the realestateoperations the Bank is now give a good picture of the extent of our activities. They serve as able to focus on its core activities. examples of areas on which we focus, and of activities in which we are particularly strong. In brief, they describe how we work on two fronts in order to create value-among our clients and, in the end, for our shareholders.

SKANDINAVISKA BNSK!LOA BA.NI<BN . _ l _ 1 _ __ _

5-E-Banken in brief

5-E-Banken is a universal bank, w1th a broad range of bankmg bervices for pnvate mdividuals, companies, institutions and municipalities. At year-end 1996, the Bank had a total staff of about 10,000, induding 1,300 in its international network.

In Sweden, S-E-Banken has a network of 274 branch offi- ces across the country. Internationally, the Bank is estab- lished through branches, subsidiaries and representative offices in 15 countries.

The Bank has 18 business units and sub.sidiaries, which serve rustomers in the private and corporate market, respectively The Group has 1.8 million pnvate cust- omers, of which more than 400,000 are Preferred Customers. Banking services are offered around the dock through telephone banking and Internet. Further- more, the Bank has business relationships with 180 mul- tinationals, 850 major campanies and municipalities as well as with 125,000 small and medium-sized compani- es. The organisation has been adapted to customers' dif- ferent requirements and conditions, and the business units have a very clearly defined client responsibility.

As a result of 5-E-Banken's Iong experience from work- ing with the largest export campanies and the most demarrding private customers, the Bank plays a leading role in a number of areas, such as foreign exchange, trading in mterest-related instruments, investment bank- ing, international payments and asset management.

The Group· s operating result

6000 4000 2000

o

·2000 4000 -6000 -8000

Resull before losses, SEK M Lending losses, SEK M Operating result, SEK M Total assets, SEK billion N et interest margin, per cent Return on equity, per cent Return on total assets, per cent Earnings per share, SEK lncome;costs before losses lncorne/costs after losses Lending loss level, pP.r cent Leve! of doubtful claims, per cent Total capital ratio, per cent Core capita! ratio, per cent

Average no. of employees t'bnber of branch offices

and return on equity 30

o

-lO -20 -30

- -- - -- - 40 92 93 94 95 96

_ Operating result Return on equity

Five-year summary

1996 1995 7,173 7,511 1,303 4,025 5,870 3,486

551 519

1.28 1.40 22.7 10.7 2.24 1.40 8.91 4.80 1.79 1.91 1.57 1.28 0.52 1.55 1.80 2.68 12.7 15.2 6.9 9.6

9,579 9,697

274 288

1994 1993 1992 8,743 10,846 4,367 9,444 ., 10,167 11,183 -701 ., 679 -6,816

411 448 485

1.99 2.09 1.43 -2.2'' 2.6 -24.5 -0.26'' 0.22 -0.40'' 3.68 -11.44

2.04 2.37 1.46 0.96¹ 1.04 0.67 3.02'' 2.90 3.35 3.55 ., 5.90 7.62

14.2 13.0 8.4

8.8 8.0 5.1

9,804 9,953 10,368

303 320 320

The new form of presentation has been used for the years 1995 and 1996 in the above Table, whereas the old form has been kept for the years 1992-1994 (see Accounting principles).

'l After a special wrlte-down on properties.

FINANCIALINFOAM~noN OURJNG 1997

Publication of the annual results February 14 Publication of Annual Report early April Annual General Meeting April29 Report January-March April 29 Report January-June August 12 Report January-September November 4 Annual reports and quarterly reports may be ordered from

Group Comn II.nCabcm;

Skandinaviskil €r ~a Banitffl S-106 40 Stock hulm

Telephone: +46 8 763 81 30, 763 85 67 Internet: www.sebank.se

Investor relations:

Christine-Charlotte Treschow Telephone: +46 8 763 95 59

E-mail: Christine-Chari.Treschow@enskilda.se

CONTENTS

To the Shareholders

The S-E~Banken share 6 Report of the Directors

Macroeconomics 8

Market 9

Organisation 12

Private markel 16

Corporate markel 20

The $-E-Bank Group staff 27

Environmental work 28

Financial review of the Group 30

Accounting principles 40

Definitions 43

Profit and loss accounts 44

Balance sheets 45

Notes to the profit and loss accounts 46 Notes to the balance sheets 50 Proposal for the distribution of profit 67

Auditors' report 67

Five-year summary 69

Board of Directors, Senior Executives

and Auditors 70

Addresses 72

Annual General Meet1ng Notice

10 THE SHAREHOLDERS

S

!arge Swedish export campanies and to active individuals poses particularly great demands on us. We must be able to deliver the best solutions to complicated financial problems. We must always be in the forefront in technology and the most professional advi- ser in everythin g from investments and credit proposals to export financing and foreign pay- ments. All our activities are guided by our customers' needs. Our ability of at least coming up to their expectations is what generates value in the Bank.

Our customers are of course not unique because of their demands for competence, access- ibility and good service. However, our Iong tradition and experience from working with the largest and most demanding clients are unique, and have helped us to build up competence that in many respects is unique. This competence is now being efficiently spread also to the medium-sizedfsmall campanies and private individuals.

Today, it is not enough to talk about tradition. That will not give us any new business. The only tradition worth living for is eonstant renewal. During the past year, renewal has to a large extent been about Information Teclmology.

Renewal has a lat to do with people, too. Our colleagues are exposed to new demands for competence and more flexible ways of working. They are faced with a new style of leadership.

The former hierarchical structures that characterised the banking seetar are breaking down.

Our present organisation is de-centralised, in which a large and increasing part of work is being done in the form of projects. Leadership must develop at least at the same pace as the world around us. We have therefore invested heavily in leadership development, invalving both our new and young managers as well as the older and more established ones.

The past year can be summarised as an eventful one. We lejt the banking crisis behind us through the distribution of Diligentia to our shareholders last September. Thanks to this divestiture, the Bank is now able to devote all its efforts to its proper activities, which to a large extent have been marked by development in recent years. In 1996, this work and its

=

^l

•

•

•

•

TO THE SHAREHOLDERS

effects started to show externally.

We mo.y for example mention the Internet Office, which has turned into a great success, and our new Preferred Customer programme, which has been weil received. In the corporate market, our new customer-adapted organisation for large and medium-sized campanies has now really resulted in increasing volumes.

In the field of foreign exchange we have invested in electronic trading, and several important deals were concluded during the year within Corporate Finance. Results are not long in coming. S-E-Banken is rankedas the foremost bank in the world in Nordie currency trading.

In 1996, the Bank was the most important arranger of loans to Nordie companies.

Our establishments in Norway and Finland in 1995 and 1996 have proved quite successful. We will continue to invest in these countries and establish a presence in Denmark this year. Target groups in these three countries are large and medium-sized campanies and private individuals with assets for investment.

Client requirements are decisivefor our organisation, not geography or intemal conditions.

Our branch offices concentrate increasingly on advisory services to private individuals and small/medium-sized companies. Simplebanking matters, such as payments, are being auto- mated to an increasing extent. At the same time, we must never force our clients to use tech- nology. They must be able to ehoase how they wish to have access to our services. Prices, however, will become more fair, i.e. fixed on the basis of the real product or service east and on its value to the client. This means that all customers pay for their own costs, and that a cost basis is created that makes it possible to optimise customer benefit.

Speculation in the media about various structural deals in the bankingworld was prevalent in 1996, and we have seen several new formations being created in early 1997. Structural changes are Iikely to continue. Already today, S-E-Banken has a strong position among large and medium-sized campanies as weil as among financially active private individuals. We

r

will consolidale this position, not least in view of the increased interest in savings and the strong growth among small and medium-sized companies. Our starting-point is to create long-term profitability by taking good care of our existing clients, while strengthening our position within particularly important customer segments. We will closely follow and take an active part in those structural changes which affect the markets of long-term interest to us.

Besides Sweden's economic development at large, interest rate trends and the savings pro- pensity of the Swedish people, the increasing competition and technological changes are Jae- tors that have an impact on the future development of the Bank. During 1996, the competi- tive situation led to strong pressure on both deposit and lending margins. This development will probably continue. An increasing number of our clients are doing their banking trans- actions electronically, e.g through Internet. Already in January this year, five per cent of our payment service transactions for private individuals were done through Internet.

EMU is naturallyanother major matter of cancern to us. We have initiated a programme for the purpose of preparing our customers and ourselves, and have hired leading expertise on the subject. We consider ourselves weil-prepared for EMU and do not see the transitional effects as too dramatic. In case Sweden does not join EMU from start, our access goes through our subsidiary bank in Frankfurt, where we have been established for 20 years. The most important thing to us is to assist our clients with advisory services, so that they can carry on their business safely ana adequatly, regardless of how events will turn.

S-E-Banken's goal is to be the leading international earparate bank, with the Nordie region as its domestic market, and the private market bank with the highest competence and best accessibility. Important steps along the road towards this goal are continued customer seg- mentation, a diversified supply of products offering high customer value and product deve- lopment that is always in the forefront.

Our goal is Jurthermare to become the best employer in the financial seetar by creating the work environment that is needed to stimulate and keep campeten t s taft. We will develop

.-- - -4--'1 SKANDINAVISKA I!.NSXILDA BANKEN

•

•

•

•

10 THE SHAREHOLDBRS

our competence structure in harmony with today's demands on modem banking. We will identify and shape the future leaders of the Bank. The employees of the Bank are indeed responsible for the advances made in recent years, and we hereby wish to thank them for their valuable contribution.

At last, we want our skareholders toregard the Bank as an attractive and shareholder- friendly company. For 1996, it is proposed to raise the dividend by more than 80 per cent to SEK2.75 per share, corresponding to approximately 30 per cent of the net result. We feel that this is a good reflection of o ur Bank' s overrid i ng goal of creating maximum shareholder value.

Stockholm in March, 1997

~~

(;f!

CHAIRMAN OF THE BOARD

1;r f2

BJöRN

SVE DBE :: -;

MANAGING DIRECTOR AND GROUP CHIEF EXECUTIVE

SKANDINAVJSICA ENSKILDA BANKEN Ll _5 - - -

1HE 5-E-BANKEN SHARE

Share price rally and strongly increased dividend

lO

o

Earnings and dividend per SE-Banken share

-5 - - - - -

-lO

-15

92 93 94 95 96

N et earnings - Dividend

Earnings pershare increased to SEK 8.91 (4.80). It is proposed that the dividend be increased by more than 80 per cent to SEK 2.75 per share.

S-E-Banken shares

Data per share 1996 1995

Operating result, ¹¹ SEK 8.02 4.76 Result for the year, SEK 8.91 4.80 Adjusted shareholders' equity,'" SEK 40.85 46.62 Dividend

- per Series A share, SEK " 2.75 1.50 - per Series C share, SEK " 2.75 1.50 Year-end market price

- per Series A share, SEK 70.00 55.00 -per Series C she~re, SEK 65.50 49.50 Dividend per Series A share

e~s a percentage of

- result for period' per s hare, % 30.9 31.2 - adjusted shareholders' equity

per share,% 6.7 3.2

me~rket price Series A share,% 3.9 2.7 Year-end market price per Series

A share as a percentage of

- earnings per share, P/E 7.9 11.5 - adjusted equity per share, % 171.4 118.0

l) See definition on page 43

2) Dividend according to Board proposal

s-E-Banken shares

1994 1993 1992

-D.96 1.49 -11.46 0.40 3.68 -11.44 44.60 44.27 40.33

1.50 1.50

42.50 56.50 7.00 40.00 53.00 6.60

375.0

-

3.4 3.5

106.3 15.4 -

95.3 127.6 17.4

Most of the Bank' s slightly more than 270,000 shareholders are private individuals with small holdings. The major part of the Bank' s share capital is held by institutions, and almost 20 per cent by foreign residents

W,---,---.---.---.---~

Share capital

The S-E-Banken share is listed on the Stockholm Stock Exchange. The share ca pi talamountsto SEK 5,270 M, distri- buted on 527 millionshares of a nominal value of SEK 10 each. There are two Series of shares, SeriesAshares entitling to one vote and Series C shares entitling to 1/10 of a vote.

Stock Exchange trading

The s-E-Banken share rose by 27 per cent during 1996 com- pared with the 36-per cent rise in the General Index of

"Affärsvär Iden". The latter index for bank and financial sha- res increased by 46 per cent. During the year the total tumo- ver in S-E-Banken shares amounted to SEK 29.3 billion. The share reached its highest price, in December, when the A- share was quoted at SEK 70.00, while the lowest price paid for theA-share was SEK 45.60 in March.

, - - --6---'1

70 1----1---1---+---+---...-e--~

60 1---+-- - -

30

20

lO

1992 !993 1994

S-E~Banken's Series A silares - Affärsvärlden General index

1995

- Number of shares traded, in thousands

1996 60000 40000

•

•

•

•

THI! S.E-BANKEN SHARE

Share capital

Share series Number of Number of Percentage of s hares votes capita! votes

A 501,285,395 501,285,395 95.1 99.5

c 25,692,934 2,569,293 4.9 0.5

526,978,329 503,854,688 100.0 100.0

Change in share capital

skandinaviska Enskilda Banken' s share capital has changed as follows since the Bank was started in 1972:

Price Added no Accumulated Share capita!

Y ear Transaction SEK of shares no of shares SEKM

1972 5,430,900 543

1975 New issue 1:5 125 1,086,180 6,517,080 652 1976 New issue l :6 140 1,086,180 7,603,260 760

1977 Split 2:1 7,603,260 15,206,520 760

1981 New 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 New 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 New issue 1A:15 90 8,029,042 128,464,677 1,284¹¹ 1989 Bonus issue 9A+1C:10 128,464,677 256,929,354 2,569 1990 Directed issue " 88.42 6,530,310 263,459,664 2,635 1993 New issue 1:1 20 263,459,664 526,919,328 5,269

1994 Conversion 59,001 526,978,329 5,270

1l The recorded share capita! at December 31, 1986 was still SEK 1,204 M, since the proceeds from the new issue were not paid in until early 1987.

2) The issue was directed at the member-banks of Scandinavian Banking Partners.

Through splits in 1977 (2:1) and 1984 (5:1), the nominal value of the shares has been changed from SEK 100 to SEK 10.

Distribution of shares by size of holding

Size of holding No of shares Per cent Number of shareholders

1- 500 39,452,411 7.49 204,278

501- 1,000 26,262,903 4.98 34,970

1,001- 2,000 26,530,544 5.03 17,625

2,001- 5,000 33,095,948 6.28 10,547

5,001- 10,000 18,264,371 3.47 2,552

10,001- 20,000 12,792,972 2.43 897

20,001- 50,000 12,441,056 2.36 398

50,001-100,000 11,106,808 2.11 151

100,001- 347,031,316 65.85 308

Total 526,978,329 100.00 271,726

Shareholder structure

Percantage shares of equity on December 31, 1996

lnsurance campanies l 0%

Pension funds 9%

Ottler campanies and institutions 11%

Foreign shareholders 18%

Private individuals 28%

Mutual lunds lO%

Foundations 14%

At year-end 1996, S-E-Banken ~ad a little over 270,000 shareholders, a decrease of about 3 per cent campared with the previous year. Sharehol- ders with holdings up to 100,000 shares have accounted for this dec rea- se. The number of shareholders with more than 100,000 shares has incre- ased, and the holdings of this group accounted for around 66 per cent of the shares at year end.

$-E-Banken shares on the Stockholm Stock Exchange

1996 1995 1994 1993 Year-end market

1992

capitalisation, SEK M 36,773 28,842 22,332 29,507 2,892 Volume of shares traded,

SEKM 29,262 16,942 23,299 15,791 2,868

The largest shareholders

December 31, 1996 No of shares Of which Per cent Series C of an

shares snares votes Wallenberg Foundations 63,040,838 1,063,026 12.0 12.3 Försäkringsbolaget SPP 20,857,653 49,758 4.0 4.1

Trygg Hansa Försäkring 18,170,278 3.4 3.6

Sparbankerna's mutual lunds 16,194,000 3.1 3.2

Skandia 13,585,062 1,802,030 2.6 2.4

Investor 12,686,198 2.4 2.5

S-E-Banken's mutual lunds 11,868,565 2.3 2.4

EB-Stiftelsen, skandinaviska Enskilda

Bankens Pensionsstiftelse 8,712,785 1,483,401 1.7 1.5 SB-Stiftelsen, Skandinaviska Enskilda

Bankens Pensionsstiftelse 7,272,700 1,000,000 1.4 1.3

Wasa Försäkring 6,441,009 1.2 1.3

Handelsbanken's mutual funds 5,380,952 1.1 1.1

Zenit, Brummer & Partners 5,000,000 0.9 1.0

AlM Funds, USA 4,150,000 0.8 0.8

AMF Sjukförsäkring AB 3,500,000 0.7 0.7

The Foundation for Knowledge and

Competence Development 3,000,000 0.6 0.6

Banco mutual funds 2,969,100 0.6 0.6

Arbetsmarknadens Försäkrings N3 2,898,200 1,006,200 0.6 0.4

Ratos 2,670,100 0.5 0.5

SKANDINAVISKA ENSKILDA BANXEN

L l_ 7 ___ _

REPORT OF THE DIREC1DRS MACROECONOMICS

Low inflation led to low interest rates

The convergence process towards EMU led to strongly falling interest rates in many European countries.

In Sweden, inflation was extremely low, which led to a sharp drop in interest rates.

Swedish and international interest rates

Per cent

: ~

2

o

94 95 96 97

Repa-rate, Sweden Repa-rate, Germany U.S Federal funds

12 JO

8

6 4

o

Interest rate movements in Sweden Monthly averages per cent

~ _'\

94

+

95 96

Treasury discount nates, 180 days

_ Bands, 5 years

A common trend in the industrial world was that inflation was restricted to a low level. At the same time, several OECD-countries strengthened their finances, not least becau- se most European States endeavoured to make their econo- mies eligible for the European Monetary Union, EMU.

Falling European interest rates

The low inflation enabled most European Centr~l Banks to lower their key interest rates, and the short-term rates showed a falling trend over the year in Europe. During the first six months bond rates rose, e. g. in Germany, bu t fell back during the seeond half of the year. In the U.S., where growth rates were stronger, short-term rates were slightly higher at the end of 1996 than at the beginning of the year, and were clearly higher in December than in January, despite the drop in bond rates. Japanese short-term rates remained largely unchanged during the year, while bond rates dropped. The convergence process towards EMU led to a strong fall in interest rates, par- ticularly in those European countries that used to have high inflation.

The combination of respectable growth (in the U.S.) and falling rates (in several other countries) led to rising stock exchange indices in most countries; New York showed the largest increase among the major stock exchanges of the world. Japan was an exception, due to the problems in its

~!"---8--'1 S.KANDINAVIS~ HNSICILDA BANKEN

financial sector, which continued to east a shadow over both the Tokyo Stock Exchange and the prospects for the future.

Surprising Swedish development

In Sweden, the financial year started badly, with most fore- easters predieting a strong slow-down in the economy.

However, the first six months turned out to be surprisingly t

positive. In particular, the export sector increased more rapidly than expected, which encouraged growth in GDP.

During the seeond half of the year, the situation was the reverse: forecasts were revised upwards, whilst growth rece- ded again. Swedish GDP increased by about l per cent over l

the year as a whole.

The most remarkable feature of Sweden's economy during the year was the extremely low inflation. A stronger krona, high unemployment, lower price expectations, lower interest rates on housing loans and slower cost increases led to an actual drop of 0.2 per cent in the price level during 1996. However, open unemployment rose to 8.7 per cent of the totallabour force; including people in different labour market programrnes, the total unemployment figure at year- end was a little over 13 per cent. The budget deficit was reduced, and the public debt's share of GDP started to con- trad, albeit only marginally.

Positive yield curve

A positive spiral characterised the development of Sweden's financial markets. Lower inflation resulted in lower rates of interest, which led to a reduced budget deficit. This, in tum, t l created increased confidence in the economy and even lower rates of interest The Riksbank was able to lower its repo rate on 25 occasions, from 8.91 per cent in early 1996, to 4.10 per cent at year-end. The bond rate spread relative to Gerrnan • rates fell from approximately 2.5 per cent to l per cent, result- · ing in a sharply positive yield curve.

Strong krona and Stock Exchange rally

Compared with 1995, the Swedish krona strengthened vigo- rously. However, towards the end of the year a weakening set in, partly due to a gradual change in attitude towards the EMU and ERM. During spring, Sweden was considered to be on her way into the exchange rate mechanism ERM. Howe- ver, in the autumn the players in the market increasingly came to the conclusion that Sweden would not join the EMU initially, and that membership of the ERM would take time.

The falling interest rates contributed to theriseon the Stockholm Stock Exchange, where the General Index rose by 36 per cent.

MARKET

Strong market position consolidated

The fight for customers in the Nordie banking markets intensified further during 1996, although the competi- tive situation differs samewhat between the different market segments.

In the expanding market for household savings and invest- ments, the new niche banks continued to increase their share, albeit from a low leve!. At the same time, competition be- tween the major Swedish banks grew tougher, both in the field of traditional deposits and alternative forms of sa vings.

As before, the seeurities companies were very active in the field of asset management. On the lending side the fight was particular ly pronounced in the housing loan market, in which 5-E-Banken Bo Lån gained ground in strong rompeti- tion with the other players.

In the market for small and medium-sized companies, the S-E-Bank Group accounts for about 20 to 25 per cent of total bank deposits and lending. The most important rompe- titors are Swedish banks in the big-city areas, which account for close to three quarters of the corporate market. In recent years, other Nordie banks have started to compete for the small and middle-sized companies.

For many years, fierce international competition has pre- vailed in the large campanies sector. This is particularly true for foreign exchange trading and advisory services. The equi- ties market has recently undergone a rapid internationalisa- tian and the number of players has increased markedly.

Customers more satisfied

There was a clear improvement in rustomer attitudes towards S-E-Banken during 1996, although the Bank has still a long

Market shares in Sweden (Per cent, ranking within brackets!

1996

Deposits 18.7 (3)

Households 12.6 (4)

Companies 24.3 (2)

Lending 23.1 ^(l)

Households 11.5 (5)

Companies 26.7 (l)

Housing loans IS-E·Banken Bolån) 9.2 (6)

Leasing (FinansSkandicl 15.7' In/al

Mutual funds 22.0 (2)

Reta~ bonds 15.8 (3)

Life insurance premiums (new policies) 14.0 (3) 17.8 12.6 23.2 23.5 10.8 28.1 8.2 14.8 23.6 15.7 12.7

Custody service 5~ (l) 50-60

Equities trading 10.8 12) 11.0

Currency trading 35-40 (l) 35-40

International payments 50-55 ^(l) 50-55

Bond trading (retail bands) 32.2 ^(l) 24.5

way to go before reaching the goal of having the banking sec- tor's most satisfied customers. This appears from both the Swedish Customer Barometer and the Bank' s own stud y, cal- led Outlook.

For the first time since 1992, the Bank received higher marks in the measurements of the Swedish Customer Baro- meter than in the preeecting year. In terms of rustomer loyal- ty, S-E-Banken received the highest marks of all banks in the study. In total, however, this year's study showed that the Bank' s strong focus on improved services and products is essential. In the Outlook-study, the share of private custo- mers.giving the Bank a very good or rather goodoverall ran- king increased rompared with 1995.

s-E-Banken' s share of well-educated, wealthy and demanding customers is higher than in other Swedish banks, as illustrated by the annual Consumer Monitor published by SIFO (the Swedish Institute of Public Opinion Research), which measures Swedish attitudes towards banks and insur- ance companies, among other things. Almost one third of the Bank' s rustomers are interested in new products and new technology, using cards and telephone services to a great extent. Furthermore, they have high demands in relation to advisory services and information. The Bank must be in the forefront in terms of information technology and new think- ing in different product areas to meet the demands of such customers.

1995 1994

(4) 17.5 (4) lmrodutnon of Oaposlt Guanantco (5) 12.7 (4)

(2) 23.0 (3) On July l, 1996 the Act on state Support of (l) 24.1 (l) the banks and other credit institutions, which (5) 10.9 (5) was enacted at the end of 1992, was revoked.

(l) 29.0 (l) On January l, 1996 a State Deposit Gua- (6) 8.2 (6) rantee was introduced, proleeting bank

(l) 14.4 (l) account deposits of up to SEK 250,000 per (2) 24.8 (2) customer per bank. The Guarantee, which (3) 16.6 (3) covers deposits from all categories of custo- (3) 17.0 (2) mers with the exception of other banks and (l) 50-60 ^(l) seeurities companies, does not apply to UJ ^{12.2 (l)} savings in securities, mutual lunds and insuran- (l) 35-40 (l) ce schemes. The banks are charged a fee of (l) 50-55 111 0.25 per cent linereased to 0.5 per cent as (l) 29.8 ^(l) from 199 7) on all deposits for this Guarantee.

The s hares for deposits and lending refer to the parent bank and do not include minor savings banks.

*As per september 30, 1996

SKANDINAVISKI\. J!NSKILDA BANKl!N Ll _9 _ _ _ ~