SEB’s commentary on the economic results of the second quarter of 2016

Today, SEB Group published the economic results for the second quarter of 2016. Information about the results is available here: www.sebgroup.com/ir.

Allan Parik, Chairman of the Management Board of SEB Pank, commented on the results of SEB units in Estonia, as follows:

The situation in Estonia’s economy can be considered satisfactory, it is positive to see signs of revival in the corporate landscape. Compared to last year, the GDP growth improved in the first quarter of 2016 to 1.7 percent, which is less than the economy’s growth potential, but better than the second half of 2015. Economic growth is still held up by private consumption, which in the beginning of the year was influenced by an increase in excise duties. Due to service sales decreasing, export declined in the first quarter, but significantly slower than in previous quarters. Meanwhile, the export of goods even increased a bit. Positive trend in goods export seems to have also continued in the second quarter based on preliminary data.

Corporate investments increasing

As companies are more willing to invest, it is plausible that the economic environment improves. Although according to the GDP statistics the investments decreased in the first quarter by 6 percent, it was caused by a few areas of activity, such as telecommunications and water supply. In most sectors, including the processing industry, investments increased. The 8-percent increase of the loan balance of the companies and continuing increase in the import of capital goods also refers to active investments in the second quarter of the year. In addition, investments are also increased due to more interest in equipment leasing, the number of transactions of which increased in the second quarter by 39 percent.

Investing with the help of loan capital is favoured due to historically low interest rates. In the middle of March, the European Central Bank further decreased its main interest rates in order to boost the area’s slow economic growth and dangerously low inflation. In the light of the results of Great Britain’s referendum, the situation in Europe’s economy shall remain fragile for a while, which in turn does not give hope for interest rates to increase.

Labour market complicated for the entrepreneur, profitable for the employee

Companies are also influenced to make investments due to an intense situation in the labour market. High employment forces companies to pay higher wages to find employees. In the first quarter of 2016, the growth of average wages increased over 8 percent. Although the number of registered unemployed people has continued to increase slowly, as a whole, companies have continued to increase wages at the expense of profits. The risk for the labour market’s sudden adaptation has still increased because salary costs were already 50.4 percent of the GDP in the first quarter. From the positive side, the fast wage increase has been favourable for people’s consumption opportunities. The interest in home loans has remained impetuous, having increased by 21 percent compared to the same period last year. Meanwhile, the number of new transactions with car leasing also increased by 14 percent. In addition to wage increase, people’s purchasing power is also supported by continuous price erosion, which in April-May was -0.8 percent. The recovery of inflation can be expected in the third quarter of the year due to a lower reference base of energy products.

We have noticed a clear change in our clients’ consumption habits. We are moving towards a cash-free society, which is confirmed by the fact that compared to the second quarter of last year the usage of our mobile bank has increased by more than half, 52 percent. Taking into account the wishes of our clients, we shall already launch an updated mobile app this autumn. Moreover, in the last year the volume of our paper-free transactions has also increased by 42 percent. It is a technological solution thanks to which the client can sign all documents in the branch digitally instead of traditional printing and signing papers and these shall be saved directly into the Internet Bank account. We are certain that a paper-free service shall soon become the norm. As changes in the digital world are happening faster and faster, we have created a digital banking unit in our team who focuses on such similar previously mentioned developments and changes in direction.

SEB economic results were increased by single income

In 2015, Visa Inc. announced its intention to acquire Visa Europe. The transaction was conducted in June 2016, during which Visa Inc. bought the member banks’ share in Visa Europe. The single income of AS SEB Pank was a total of EUR 16.3 million.

The units of SEB Estonia finished Q2 2016 with a profit of EUR 32.3 million. SEB finished Q2 2015 with a profit of EUR 18.5 million. In the second quarter, the operating income of SEB Estonia amounted to EUR 48.6 million (EUR 32.8 million in Q2 2015) and operating costs to EUR 17.5 million (EUR 14.2 million in Q2 2015). In Q2 2016, the bank decreased loan loss provisions by EUR 1.1 million (in the same period of 2015, the bank increased provisions by EUR 0.1 million).

For more information:

Kristi Jänes
Project Manager for Communication
Marketing and Communications Division
SEB

Tornimäe 2, 15010 Tallinn
Phone +372 665 5399
Mobile +372 5569 0616
E-mail kristi.janes@seb.ee
www.seb.ee

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