1. CONSUMER LENDING IN SWEDEN Analysis July 14, 2003 Notice: This Executive Briefing Report presentation is compiled from the World Wide Web and other sources solely for internal use by the client for the specific and limited informational and research purpose described above. Crystalyse Services locates and organizes this information so that the clients can directly access the sources and proceed with their own analysis and evaluation. Crystalyse Services does not espouse any opinion or make any recommendations as to the significance of the data provided or its use by the client. Nor does it make any representation regarding the accuracy or completeness of the information selected. Analyst Commentary:

2. . 2 TABLE OF CONTENTS I.EXECUTIVE SUMMARY II.FINANCIAL INFORMATION III.CORPORATE INFORMATION IV.PRODUCT PORTFOLIO V.MARKET INFORMATION VI.SOURCES

3. . 3 I. EXECUTIVE SUMMARY Swedish economy has stabilized in terms of growth. In fact, GDP growth is expected to leap to 2.7% from the current 1.4 to 1.5 % levels. It compares favorably with rates in Germany and EU-15 countries though it lags behind that of the US. Inflation is expected to stabilize after 2003 summer and see a temporary decline in 2004. But business investment is expected to go down in 2003 for the third consecutive year. Households seem optimistic. Retail sales rose 3.7% in Q1 2003 yoy. During the same period, car sales were 8% higher, though wage rate increase is expected to decelerate in 2003. In 2004, wage rate is expected to rise by 4%. Unemployment rate may dip slightly to 4.4% in 2004 from 4.3% in 2003. Four big banks - Svenska Handelsbanken, Nordea Bank Sweden, Skandinaviska Enskilda Banken (SEB) and FöreningsSparbanken (known internationally as Swedbank) - account for most of the deposits and loans in the banking sector. Merger moves among the big four in the past did not fructify. S&P does not expect mergers in the near future. Household borrowing has been rising compared to general public borrowing. Households account for only about 20% of total lending by banks and 40% of loans of mortgage institutions. Credit cards are less popular compared to debit cards. There are fewer bank branches now thanks to increasingly popular alternative distributions channels like phone banking and Internet banking. In 2000, Giro payments accounted for 7562 bn SEK or 94% of account based retail payment instruments. Global giants GE Capital and Citibank occupy 9 th and 32 nd position among lenders in the retail segment.

4. . 4 II. SWEDISH ECONOMY  The Swedish economy and political environment are marked by stability. Swedish Central Bank Riksbank forecasts a 1.4% GDP growth rate in 2003. Investment bank Nordea Market expects a marginally higher GDP growth of 1.5% in 2003, projecting it even higher at 2.7% in 2004.  Services accounted for 44% of employment and 70% of the GDP.  Sweden is getting ready for a referendum on joining the EMU in September 2003. Nordea Markets expects Sweden to join the EMU in early 2004.  Inflation is on target. It is expected to stabilize after 2003 summer and see a temporary decline in 2004.  Business investment is expected to decrease in 2003 for the third consecutive year. Building investment in 2003 will remain at the same level as 2002, with the public sector offsetting the decrease in private sector investment.  Households seem optimistic. Retail sales rose 3.7% in Q1 2003 yoy. During the same period, car sales were 8% higher, though wage rate increase is expected to decelerate in 2003. In 2004, wage rate is expected to rise by 4% according to Nordea.  Unemployment rate is likely to rise from 4% in 2002 to 4.5% in 2003 but dip to 4.4% in 2004.

5. . 5 II. SWEDISH ECONOMY: HOUSEHOLD LOAN GROWTH  Household borrowing has been rising compared to general public borrowing while business borrowing has declined markedly.

6. . 6 II. SWEDISH ECONOMY: GDP  Sweden’s GDP growth rate has been lagging behind the US rate for the last two years. But it compares favorably with GDP growth rates of Germany and the EU-15 countries. Figures for 2003 are forecast

7. . 7 II. LENDING ENVIRONMENT  According to Riksbank, fie types of lenders extend credit to the general public, with banks and mortgage institutions accounting for 87% of loans. Type of lenderLoans to general public (SEK bn) Banks1,345 Mortgage institutions1,126 Other credit market companies307 Securities companies6 Insurance companies46 Total2,830 General public includes non-financial companies, municipalities, non-residents and households

8. . 8 II. LENDING ENVIRONMENT: BANKS  Swedish Banking System is resilient and is well-equipped to handle further economic downturn.  There are no apparent systemic risks. Regulation and supervision are in line with international standards.  At the end of 2001, there were 128 banks operating in Sweden. Of these 26 are public limited banking companies, 77 are savings banks, 23 are foreign-owned banks and 2 are co-operative banks.  Four universal banks hold more than 85% of loans and deposits, but margins remain low as there are new entrants. The top ten banks account for almost 95% of balance sheet total.  The big four are Svenska Handelsbanken, Nordea Bank Sweden, Skandinaviska Enskilda Banken (SEB) and FöreningsSparbanken (known internationally as Swedbank).  There has been consolidation in the Swedish banking industry via mergers and acquisitions since the second half of the 1990s. The merger of two of the top four banks was called off in 2001 due to restrictive conditions placed by the EU. S&P does not expect further mergers.  Alternative distribution channels such as telephone banking and Internet banking have come up. Consequently the number of branches has come down from 3,700 in 1980 to 1,900 in 2001.  New retail banks such as Ikanobanken and ICA Banken are wholly-owned by parent companies.

9. . 9 II. LENDING ENVIRONMENT: BANKS  About 20% of total bank lending is to households, which includes unincorporated enterprises. BankLending to the public (SEK mn) Handelsbanken414,485 SEB223,357 Swedbank211,473 Nordea Bank180,451 Danske Bank85,187 Postgirot Bank18,792 SkandiaBanken15,470 ABN AMRO19,325 GE Capital Bank18,392 Dexia Crédit16,229 Top Ten Lenders in 2001 Notes: 1) Lending to the public includes households, companies and local governments 2) Postgirot Bank was acquired by Nordea in December 2001 Households includes unincorporated enterprises

10. . 10 LENDING ENVIRONMENT: MORTGAGE INSTITUTIONS  After banks, mortgage companies are the second largest lenders to general public in Sweden.  There are 10 mortgage finance institutions, most of which are owned by the banks. Two companies are state-owned.  About 40% of the lending is to businesses. Household lending accounts for 60% of lending.  The top four banks control 87% of the mortgage market.  SBAB is a state-owned company with 11% share.  65% of Spintab’s loans are to private individuals.

11. . 11 LENDING ENVIRONMENT: OTHER CREDIT MARKET COMPANIES  Other credit market companies include finance companies, corporate and municipality-financial institutions.  There are 60 finance companies in Sweden, offering products like leasing and factoring to companies, and promissory note loans and credit cards to individuals. Some of these are owned by banks, with the big four having a presence even here.  The top three companies are corporate financial institutions.  The finance companies extend loans for auto/boat purchases and cards. CompanyBalance Sheet Size (SEK bn) Svensk Exportkredit150 Kommuninvest i Sverige48 Landshypotek35 Nordea Finans Sverige29 Handelsbanken Finans29 Volvofinans24 SEB Finans22 Föreningssparbanken Jordbrukskredit 19 ABB Credit Finans10 Telia Finans9 Total 10 largest375 Total other credit market companies 468

12. . 12 LENDING ENVIRONMENT: CREDIT CARDS  The usage of credit cards is low in Sweden at 68 bn SEK in 2000. There is a preference for debit cards, which also offer lines of credit to customers.  In 2000, Giro payments accounted for 7562 bn SEK or 94% of account based retail payment instruments.  Of the 490 bn SEK, the break-up is shown below: Source: Data Monitor Source: Riksbank

13. . 13 PLAYERS: SVERGIA HANDELSBANKEN Svergia Handelsbanken This is the largest bank in Sweden with a balance sheet size of SEK 1277 bn in December 2002 and lending assets to general public of SEK 839 bn. It is a universal bank with a mortgage company, finance company and also has presence in asset management, investment banking, pension and insurance. Its has outstanding loans of SEK 284 bn to private individuals, bulk of it - SEK 234 bn in December 2002 – in mortgage loans. Finance company Handelsbanken Finans had loans to individuals amounting to SEK 4.7 bn. It has grown through acquisitions. It acquired Skanska Banken in Sweden and Oslo Handelsbank in 1990. In 1992, it acquired life insurance company RKA and parts of Skopbank in Finland. In 1996, it purchased Swedish mortgage company Stadshypotek. In 1999, it bought Bergensbanken in Norway and in 2000, it acquired insurance company SPP Liv. In 2001, it acquired Midtbank.

14. . 14 PLAYERS: SEB Skandinaviska Enskilda Banken (SEB) This is the second largest bank with a balance sheet size of SEK 1241 bn in December 2002. It has presence in mortgage, finance, investment banking, asset management, insurance and pension. It has outstanding loans of SEK 230 bn to households in December 2002. This bank was formed when Stockholms Enskilda Bank and Skandinaviska Banken merged in 1972. In 1997, it acquired Trygg-Hansa Insurance. In 2000, it acquired BfG Bank in Germany. It also acquired a bank each in Latvia, Estonia and Lithuania in 1999 and 2000. Other acquisitions include Diners Club Nordic (1994), private bank Gyllenberg, Finland (1997), Orkla Finans in Norway (2000) and the Eurocard brand company Europay in Norway (2002).

15. . 15 PLAYERS: SWEDBANK FöreningsSparbanken (SwedBank) This bank is the largest retail bank with a 30% market share in retail. It has presence in mortgage, finance, investment banking, asset management and insurance. It has a balance sheet size of SEK 957 bn in December 2002. It has outstanding loans of SEK 306 bn to households in December 2002, of which mortgage loans through its mortgage company Spintab amount to SEK 248 bn. Its finance subsidiary had loans to households amounting to SEK 2.2 bn. SwedBank was formed when Föreningsbanken and Sparbanken Sverige merged in 1997. It has subsidiaries in mortgage, finance, investment banking, and asset management. It has 25% stake in two banks, each in Norway and Finland. It subsidiary Hansabank is present in the Baltic states and the Denmark subsidiary specializes in business financing.

16. . 16 PLAYERS: NORDEA Nordea Bank Nordea Bank is part of the pan-Nordic Nordea group. Nordea Bank Sweden had a balance sheet size of SEK 607 bn. It has outstanding loans of SEK 153 bn to households in December 2002. This bank was formed when Föreningsbanken and Sparbanken Sverige merged in 1997. It acquired the post office-owned bank Postgirot Bank, which was merged with Nordea in 2002. It also divested from some of its insurance investments in 2002. It has presence in investment banking, insurance, asset management through the group. It also has a finance company in Sweden.

17. . 17 PLAYERS: THE NEW PLAYERS GE Capital Bank became the 9 th largest bank in 2001 from 14 th in 2000. It is a niche player specializing in small consumer credit. It provides consumer loans, affinity loans to members of a affinity groups such as a teachers’ association, sales finance (closed-end secured and unsecured personal loans) and credit insurance, to protect consumers if they experience payment hardship. In 2001, its lending stood at SEK 18 bn. It has three branches, 440 employees and operates through a distribution channel Citibank is a small player, ranked 32 nd in 2001 with a loan portfolio of SEK 1 bn. It provides auto loans and issues credit cards. It had one branch and 29 employees and operates through a distribution channel. A few new players such as Ikano Bank,

18. . 18  Swedish Finance Ministry  Link to Finance Ministry Link to Finance Ministry  Swedish Central Bank  Link to Sveriges Riksbank Link to Sveriges Riksbank  Statistics Sweden  Link to Statistics Sweden Link to Statistics Sweden  Swedish Bankers’ Association  Link to Swedish Bankers’ Association Link to Swedish Bankers’ Association  Dialog  LexisNexis Sources  Swedish Banks  Link to Handelsbank Link to Handelsbank  Link to SEB Link to SEB  Link to ForeningsSparbanken Link to ForeningsSparbanken  Link to Nordea Bank Link to Nordea Bank  Link to GE Capital Bank Link to GE Capital Bank  Link to Citibank Link to Citibank