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Post-Brexit caution dampens corporate transactions for SEB clients

Brexitcontributed to a "challenging" business environment for and has made clients more cautious, according to the bank's CEO and president.

"Thequarter was marked by increasing market uncertainty relating to the Britishreferendum, the Brexit, which put great pressure on equity markets and interestrates," Annika Falkengren told a July 14 second-quarter earnings call.This has resulted in alower propensity for clients to invest.

Thebank's second-quarter group net profit attributable to shareholders year over year, butthis was boosted by a one-off gain related to the sale of a Visa stake. Over thecourse of the first half, net profit dropped to 2.23 billion kronor from 8.58billion kronor in the first half of 2015, a decline Falkengren attributed tocautious business sentiment and the continued low-interest-rate environment.

Swedenwas one of the first countries to take interest rates into negative territory,cutting its repo rateto negative 0.1% in February 2015, and later to negative 0.5%. The SverigesRiksbank said earlier in July that it was keeping its repo rate unchanged atthat level and that it had postponedfuture rate increases for the foreseeable future, partly as the result ofeconomic uncertainty following Britain's Brexit vote.

Still,Falkengren said the bank had been steadily growing its client base among SMEsand mid-sized corporates, increasing market share by about 1% per year for thelast five years to stand at 15% now. Since December, the number of thesecustomers has grown from 158,000 to about 165,000, she said.

Butlarge corporate deals have been scarce during the second quarter due to acautious mood among investors.

"Asidefrom a few IPOs, there has been less activity within [the] corporate segment,and large loan transactions have, again, been lacking in this quarter for us."

Falkengrenalso spoke about the state of the Swedish housing market, which has been one ofthe world's hottest but is now showing signs of cooling. The CEO said she isanticipating a slowdown rather than a crash.

"Ithink we see now that the mortgage market is settling down," she said."It's cooling off a little bit, which we think is very healthy."

Falkengrenpointed out that the pace of growth in the bank's residential mortgage lendingwas slower than that of its peers, and said this was due to cautiousness ratherthan a lack of interest on the bank's part.

TheSwedish central bank flagged runaway growth in house prices and rising debtamong the general public as a risk in its latest financialstability report in June.

As of July 14, US$1was equivalent to 8.49 Swedish kronor.