Financial summary 2015

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2015 in brief Marginalen in brief Comments from the CEO Operating environment Offering – private customers Offering – business customers Sustainability Employees New office Governance, risk and organisation Our security practices Board & management Income statement

M EET OU R NEW CEO We have begun the digital transfer that will characterise the bank in 2016. Find out more on page 4

WE HAV E M OV ED We moved to our new office at the Adolf Fredriks Kyrkogatan in Stockholm.

T HIS IS M A R G INA L EN BA NK Marginalen Bank simplifies day-to-day finances for private individuals, businesses, municipalities and authorities. We offer products and services that our customers truly need and use. Find out more on page 2

Production: Marginalen Bank AB and Narva Photo: Andreas Lübeck, Jann Lipka (cover, page 19, 20 and 21) and Ove Nilsson (inside cover)

Find out more on page 20

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A N N UA L R EPORT 201 5

2015 in brief 2015 was a positive year, with a doubling in earnings and 27,000 new customers. • •

Around 27,000 new customers chose Marginalen Bank.

•

Profit for the year after tax more than doubled, from SEK 48.3 million to SEK 113.9 million, while revenues increased from SEK 619.5 million to SEK 735.2 million. During the year, comprehensive income after tax rose by SEK 12.0 million to SEK 86.4 million.

A new cooperation agreement was signed with Folkspel, which means that Marginalen Bank is supporting Swedish sport and leisure associations.

•

The development of the digital platform for online and mobile banking continued.

•

In order to strengthen the capital base, a bond loan of SEK 100 million was issued on 9 March. This occurred within the framework of the Additional Tier 1 bond that was issued in 2014, and which has now been fully utilised. The bonds are registered for trading on Nasdaq Stockholm.

•

New common head office for the bank at Adolf Fredriks Kyrkogata 8 in Stockholm (January 2016).

•

Torbjörn Jacobsson was appointed Head of Risk Management (January 2016).

•

Lending to the general public grew from SEK 11,922.0 million to SEK 12,991.6 million. Deposits from the general public dropped from SEK 15,206.3 million to SEK 15,191.4 million.

•

Sarah Bucknell was appointed as the new CEO. Sarah brings many years of experience from the financial sector and her most recent position was Head of Business Development at SBAB.

•

Jan Arpi was recruited as the new CFO. Jan’s most recent position was with Swedbank, where he was Head of Group Finance.

2015

2014

2013

Net interest income

572.9

502.3

408.0

Operating income

735.2

619.5

556.1

86.4

74.4

26.5

1,789.5

1,551.4

957.2

Total capital ratio, %

16.3

15.3

10.5

Average number of employees

295

294

273

KEY FIGURES, SEK MILLION

Comprehensive income Capital base

OPERATING INCOME, SEK MILLION

LOANS TO THE PUBLIC, SEK MILLION

DEPOSITS FROM THE GENERAL PUBLIC, SEK MILLION

750

15,000

16,000

600

12,000

12,800

450

9,000

9,600

300

6,000

6,400

150

3,000

3,200

2013

2014

2015

2013

2014

2015

2013

2014

2015

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MA R G IN A L E N IN B RIE F

MA R GI N A LEN B A N K

Why a different bank is needed Marginalen Bank simplifies day-to-day finances for private individuals, entrepreneurs, municipalities and authorities.

300,000

295

customers in Sweden

employees

Stockholm new head office on Adolf Fredriks Kyrkogata

It pays to save with us We believe it is important to offer products and services that our customers truly need and understand. Unfortunately, the trend on the banking market is in many respects moving in the opposite direction. For example, savings products on the market are becoming increasingly specialised and complex, and many also have a complicated fee structure. We think things should be simple and transparent, which is why we have decided to focus on competitive current- and savings accounts. More specifically, we believe that people who invest their savings with us should be rewarded in the form of a reasonable rate of interest.

Every customer is equally important There are groups in society today that for various reasons find themselves excluded from the banking market. We think that is wrong. We feel that as many people as possible should have access to the finance market, and that all customers are equally important. That’s why we don’t exclude anyone for having a record of non-payment. We believe in people, and are just as interested in their futures as we are in their pasts. Our Restart Loan is forward-looking and gives people a financial ‘restart’ in life and helps them on their way to more stable day-to-day finances. The Restart Loan groups together different types of loans and, in most cases, can reduce customers’ overall loan costs. A different focus The reason we are able to build the bank we really want to is largely down to our owner’s long-term approach. Put simply, we have a different focus and there is no pressure to produce short-term earnings in time for the next quarter. Massive dividends, bonuses and quarterly capitalism are just as foreign to us as they are to our customers. Instead, we are able to focus calmly on our customers, products and services.

B U SI N E SS CO N C E PT Marginalen Bank creates time and opportunities for people and companies to develop by simplifying their day-to-day finances. We do this by listening to our customers and offering straightforward, competitive products and services.

Marginalen Bank was established when Marginalen acquired Citibank’s Swedish consumer bank in 2010, but our history extends back to the late 1970s.

One day a week

A small business owner devotes almost a whole working day a week to administration, leaving less time for core operations. We help with administration such as bookkeeping, legal matters and debt collection, as well as banking services such as deposits, loans, business financing and credit cards.

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A N N UA L R EPORT 201 5

OU R VISION Contribute to a better world by giving a financial helping hand to people looking for a bank and partner that looks beyond figures and gives just as much consideration to ideas and future prospects.

Our offering We place considerable emphasis on ensuring our services are easy to use and understand, our terms are transparent and our customer relationships are friendly and helpful. Target group

Services Cards Loans

Private customers

Accounts Insurance

Marginalen’s packages

Delivery & distribution

Simple Smart Modern

Customer service Web

User-friendly

Business customers

Loans Accounts Financing Debt collection Economy service Legal services Insurance

Transparent Knowledge Experience Personal service

Mobile Individual meetings

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CO M M E N TS F R O M TH E CEO

MA R GI N A LEN B A N K

An expanding, modern bank Comments from the CEO Sarah Bucknell, you joined Marginalen Bank as the new CEO back in October. How has it been so far? −− Naturally it’s extremely exciting to join at a stage when the bank and the entire sector are facing new challenges, and internally we have a number of significant development projects under way. I devoted the first few weeks to getting to know the people and the company, then I went on to focus on strategic planning, which includes setting up the guidelines for what we will be concentrating on, both in the short and long term. Digitalisation in the financial sector is fast-paced. How have you been working with this during the year? −− We have begun the digital transfer that will characterise Marginalen Bank in 2016 and going forward. The foundation of our digital strategy is to simplify online banking. The aim is to use creative design, an intuitive interface and short loading times to enable customers to carry out their banking transactions at the touch of a few buttons.

During the year we launched several digital services, including a new version of the online bank and a mobile app (Jan. 2016). In addition, our customer service was improved with a digital customer service portal, which makes an excellent complement to the telephone service. Have you had any reaction from customers to all these initiatives? −− Yes, 27,000 business owners and individuals chose to be our customers in 2015. Furthermore, I was delighted to see that our Customer Satisfaction Index improved during the year. It shows that our customers like what we’re doing and have confidence in our strategy. Has the bank also performed well financially? −− Comprehensive income rose by SEK 12 million to SEK 86.4 million, which is of course very satisfying, since we were making significant investments at the same time in our digital strategy. Lending to the general public grew

A N N UA L R EPORT 201 5

by just over SEK 1 billion to SEK 13 billion. However, we continued to maintain strong cost control and control of capital, and to manage the risk exposure amount in order to meet capital targets with a good margin. What were the reasons for issuing a bond loan in 2015? −− We had opportunities to issue further bonds totalling SEK 100 million within the framework of the Additional Tier 1 bond, which we issued in 2014. Through the issues we hope to create good opportunities for continued growth, which requires a strong capital base. The term ‘sustainability’ appears to have gone from being a fashionable word, to actually being seriously established within the banking world too. How are you working with these issues? −− One of the reasons I accepted the job of CEO of Marginalen Bank is that the business model is sustainable and makes a difference in society. Participants in our talent programme have had the opportunity to come up with ideas as to how to translate sustainability strategies into actual products and services.

Marginalen Bank helps financially vulnerable groups achieve economic stability, which benefits the individuals concerned, but also society as a whole. In what way is your business model sustainable? −− Marginalen Bank helps financially vulnerable groups achieve economic stability, which benefits the individuals concerned, but also society as a whole. We are good at credit scoring and can therefore offer loans to people who are currently outside the lending market, some because they have defaulted on a payment. We are also seeing how our Restart Loan is helping people settle costly small loans and cut their interest costs. It is perhaps one explanation why our Restart Loan customers are our most satisfied customers, and we often get calls from people who tell us how we have saved the house or helped them after a difficult divorce or illness, when bills became unmanageable. Another vulnerable group is Sweden’s small business owners, who often speak up because they are unable to access sufficient funding, which is curbing their growth. We are putting extra effort in here to be even better at helping with exactly this kind of growth financing. Our own history is a huge asset in this work. We have undergone the same growth journey as many of Sweden’s

small business owners are experiencing right now, and we understand the challenges they face. This is a strength. You have just moved to a new, common head office. How is this affecting your work? −− In January we moved into new offices at Adolf Fredriks Kyrkogata 8 in Stockholm, where all operations are under the same roof. We’re working more flexibly in our new office space than we did before, and we don’t have fixed work stations. This means that we can choose our working environment according to the kind of work we plan to do that particular day. Sustainability has been our guiding light throughout the entire moving project, in relation to the environment, people and processes. This approach was expressed in our choice of suppliers, materials and initiatives to minimise paper use. Moving into a common office space will also reduce the amount of travel. What are your views on Marginalen Bank as an employer? −− I think we are an extremely interesting employer, offering plenty of opportunities for professional and career development. We are a contender in the Swedish banking market, and that is reflected in the culture within the bank. The entrepreneurial spirit is thriving and I think that many employees genuinely feel they are making a positive difference for our customers. What challenges will you face in 2016? −− We’ll focus on further improving and developing our digital offering. An important aspect of this work is raising the level of digital expertise within the bank. Whatever their position, employees need to have an insight into how people behave in a digital environment, and what digital development opportunities exist in relation to their own work. Another challenge is all the young, fast-growing companies that are starting to offer financial services and thereby questioning existing business models. As they are exempt from banking regulations, they are often able to grow more rapidly, while the traditional banks compete on different terms. This pushes us to up the tempo of business development, however without compromising on competitive advantages such as low risk, reliability and security.

SA RA H BU CKNEL L CEO, MA RG I N A L E N BA N K

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OP E R AT IN G E N V I RO NM ENT

MA R GI N A LEN B A N K

Changed operating environment breeds new ideas Macroeconomics, regulatory changes and technological advances have a strong impact on the banking sector. Competition is getting tougher, while customer behaviour is changing at an increasingly rapid rate.

Regulatory changes increase costs for banks Regulatory changes for the banking sector, for example higher capital requirements, are pushing up costs for banks. At the same time, regulatory changes are being made that aim to strengthen the position of consumers via greater choice and increased demands for transparency. This generates opportunities for new operators to enter parts of the banking market and compete on price, service and accessibility. This trend increases demand for cost efficiency, while the brand and the ability to differentiate will play an increasingly significant role. Digitalisation We are also seeing how society is becoming rapidly more digitalised and many companies are experiencing a significant shift, where traditional business models are being questioned and evolving. And we are no exception. Social media create the norms for how services should function online. As today’s Instagramming and Snapchatting young people become bank customers, they will expect the same intuitive and simple functions from their bank. And delivering in this area will most likely be the key to success. As a bank we aim to live up to requirements from customers today and in the future. How we will achieve this is a core element of our strategy. Digitalisation improves accessibility and makes it easier to compare prices and offerings, which also fuels competition. Process management gaining significance It is not just increased competition and capital requirements that are putting banks’ business models to the test. Regulation, which has developed from an international

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Den anpassningsbara överlever. T. Jacobsson, 2015.

large bank perspective, has been introduced in recent years for all banks within the EU, regardless of size, with only an extremely limited differentiation between larger and smaller banks. Process management within the banks is expected to take on greater significance as a competitive weapon, and in this regard Marginalen Bank has for many years had an ISO 9001-certified management system in place for effective process management and control. New regulations require new leaders With process-oriented control and bank regulation requirements comes the need to develop leadership. Regulation is designed based on a European bureaucratic leadership perspective. There is an inherent conflict here with traditional Swedish post-bureaucratic leadership, which is distinguished by cooperation, vision and opportunities to influence. Regulation means that managers need a greater regulatory focus, while the customer and business focus is central in a rapidly changing operating environment.1 Over the past few years, Marginalen Bank has been proactively developing its managers and leaders, with the aim of meeting those future needs, which is just one of many success factors for a small bank. Consumption and housing investments fuel market Marginalen Bank operates almost exclusively on the Swedish market. Sweden is a small, export-dependent economy, which is highly sensitive to changes on the global market. Goods exports have stagnated over a number of years as a result of weak global demand, while service exports continue to exhibit healthy growth. The Swedish economy grew by around 3 percent in 2015 measured as GDP,

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A N N UA L R EPORT 201 5

Proportion of small businesses that have applied for and been granted loans and credit in recent years 40 % 35 % 30 % 25 % 20 % 2002

2005

2008

2011

2014

Source: Swedish Agency for Economic and Regional Growth (Tillväxtverket), Everyday Reality and Conditions for Enterprises

primarily through an increase in consumption and housing investments, and growth figures continued to be among the best in Europe. A degree of acceleration is discernible over the past few quarters and GDP growth may rise to over 3 percent for 2016, which is stronger than the long-term trend. Marginalen is affected by the rise in Swedish consumption, which in turn affects demand for loans. The bank is only marginally affected by the trend in housing investment.

Proportion of small businesses that feel that access to loans and credit is a major obstacle to growth

Rising household demand The pace of growth in household consumption slackened in 2015, but households’ healthy financial position, with rising disposable incomes, high levels of saving and higher asset prices, indicates that household demand will continue to grow over the next few years. Households’ consumer loans had a growth rate of 3.7 percent. The annual growth rate in Sweden for lending to non-financial companies was 4.0 percent.2 These figures demonstrate persistent healthy demand for credit from customers for Marginalen’s loan products.

25 %

Tougher financing situation for small businesses Small businesses in Sweden are making fewer applications for loans and credit compared with previous years. The proportion of approved loans has also fallen, which suggests that small businesses are finding it harder to access financing. More than one in five companies that want to take on more staff are faced with major hinders to growth due to difficulties accessing loans and credit. A majority of these companies have applied for loans but been unsuccessful in the past three years.

2)

Statistics Sweden Financial Market Statistics, November 2015

40 % 35 % 30 %

20 % 2008

2011

2014

Some 76,000 companies were established in Sweden in 2015. Although the number of start-ups in Sweden has dropped by 5 percent in two years, over four years the figure has remained largely unchanged. Corporate bankruptcies in Sweden have been in decline for a number of years, with 14 percent fewer bankruptcies in the past year (Jan–Nov 2015: 5,494). Source: Swedish Agency for Economic and Regional Growth (Tillväxtverket), Everyday Reality and Conditions for Enterprises (Source: UC Nordic Data Review, 2012–2015).

ERBJUDA N D E N P R IVAT KU ND ER

R ESTA RT LOA N We offer loans to customers who need a fresh start with their personal finances. Find out more on the next page

A N N UA L R EPORT 201 5

Marginalen Bank simplifies personal finance Managing your finances should be a simple task, and it should take no more than a few clicks to complete banking transactions. Our customers should be offered simple, straightforward and necessary products and services. The terms and conditions should be transparent, the interest rate reasonable and customers should be treated as individuals. Our vision is to simplify our customers’ day-to-day financial transactions in a digital and intuitive environment. We believe that the Swedish banking market needs alternative solutions. Someone who is prepared to take on challenges that others shy away from. We believe in a bank that gives interest on savings accounts, that offers simple products that customers understand and that does not turn its back on people who need help.

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O F F E R IN G – P R IVATE CU STO M E RS

MA R GI N A LEN B A N K

Simple products for all Marginalen Bank offers deposit accounts, lending, cards, payment services and insurance products to private individuals. Customers administrate their banking services via a simple and user-friendly online bank. Secure accounts with interest Developments within the banking sector are heading towards increasingly complex financial products and services. That is why Marginalen Bank is going in the opposite direction, offering simple savings products with low risk. We offer some of the most competitive current and savings accounts on the market, where customers can choose between fixed and variable rates of interest. At the end of 2015, our current account carried an interest rate of 0.60 percent, while our fixed interest accounts offered up to 1.7 percent. In 2014, we were awarded ‘Current Account of the Year’ by Swedish finance magazine Privata Affärer. All accounts are covered by the state deposit guarantee. Loans that cut interest costs Marginalen Bank offers the Personal Loan and the Restart Loan. The Personal Loan is a flexible loan that has many areas of use. It could be to cover the cost of home improvements, buying a car or a dream holiday. There is no collateral attached to the loan, but the customer needs to have a fixed income and pass the usual credit check. The Restart Loan is partly aimed at people who need a fresh start with their finances. It is often a matter of combining and settling expensive small

loans, and reducing interest expenses as a result. There are also people who are excluded from the lending market because they have defaulted on a payment. We do not believe that a record of non-payment should disqualify people from access to the lending market. The important thing as far as we are concerned is that the customer is able to repay their loan, has a fixed income and collateral. Cards and insurance We offer three types of credit card: Classic, which is a perfect basic card, Traveller for customers who enjoy travelling, and Gold, which includes a number of attractive insurance policies. We also have an extensive range of additional insurance, including personal accident insurance, and insurance that pays loans, credit card bills and other bills in the event of illness or unemployment. Customers can also insure themselves against one of the fastest growing crimes in Sweden: identity theft. Together with UC we have developed an insurance policy that guards against identity theft. The insurance provides rapid assistance and compensation for outstanding debts resulting from identity theft. The individual affected is given personal support and avoids all the hassle of having to ring round and contest invoices.

2015 in brief

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Loans to the public grew by SEK 1,070 million to SEK 12,991.6 million, largely due to a favourable trend for Personal Loans.

•

Credit losses dropped to the lowest levels ever, which is proof of our solid credit scoring processes.

• •

11,700 new card customers.

•

February saw the launch of our identity theft insurance.

Launch of a new improved version of our online bank.

Focus for 2016

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Additional focus on improved customer processes (applications and self-service). Being our customer should be simple.

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Launch of a new mobile bank, with simplicity through an intuitive interface as the guiding principle.

•

Launch of a new card system.

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A N N UA L R EPORT 201 5

CUSTOMER COMMENTS We have had lots of positive feedback from our customers during the year.

Hi, sorry I wasn’t home yesterday, but here are the papers and I’d like to add that your service is absolutely brilliant and no other bank comes close.

Thank you so much! You’ve saved my day! I don’t know how to thank you! It was fate that I called you today, as I now have to go to the dentist and need money for it.

I’ve just received written confirmation that my loan has been paid off. I want to thank you for being so friendly and helpful every time I contacted you about the loan. You’ve been a huge help to me in solving the payment problems I was having. Once again: A BIG THANK YOU!

Spoke to a woman who was extremely happy with our service here at customer service :) she thought that we were always quick to respond and very friendly.

I’m so happy with your service, you’ve really helped me a lot.

I’m considering moving all my bank accounts to you, because unlike the big banks, you are always friendly and helpful.

It’s a success story when a call begins with me planning to cancel the card, and ends with me getting an incentive to use the Traveller card more than the other credit cards I have. I’m not even losing my points and can use them for travel.

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OFF E R IN G – B U S INESS CU STO M E RS

MA R GI N A LEN B A N K

A corporate offering based on our own experience Everyday life for a small business owner is complex and there is rarely enough time to focus on growth. Marginalen carried out a survey which reveals that small business owners devote an average of one working day a week to administration. This administrative burden hinders growth and also becomes bigger as the company grows. It is on that basis that we came up with our corporate offering. The aim is simple – to ease the administrative burden from companies and allow them to focus on their core operations and growth. Our breadth makes us a better partner Marginalen offers services for small and medium-sized companies, authorities and organisations. We have an exciting customer offering and are highly committed. We offer everything from banking services, to our Economy Service and debt collection, insurance, legal and HR1). The various disciplines complement one another and having a comprehensive approach to our business customers makes us a better and more long-term partner. We notice that our clients appreciate the simplicity of only having to deal with one partner, thus avoiding the additional work of having several suppliers.

1)

We understand At Marginalen we have the advantage of having completed the growth journey that many of our customers are experiencing right now. We have progressed from being a sole proprietorship to a company with 300 employees. During that journey we came up against the same obstacles and lack of understanding that many small companies face today. Bureaucracy, unsympathetic financers and an increasingly heavy administrative burden also impeded our growth. This situation spawned a concept of the need for a new type of bank on the Swedish market; a bank that understands the daily pressures that small business owners and entrepreneurs are under, and does not just look back but is equally interested in customers’ future plans. Marginalen’s corporate offering emerged from this concept.

Services offered within the Economy Service and HR are provided by Konsult AB Marginalen,

which is part of the Marginalen Group.

ECONOM Y S ERV ICE We help our customers with everything that would normally be carried out by a finance department. Find out more on the next page

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O F F E R IN G – B U SINESS CU STO M E RS

MA R GI N A LEN B A N K

Banking services with a customer focus The corporate bank offers growth capital and financing, including business loans, invoice financing and leasing. Our customers are within building and construction, transport, forestry and agriculture, industry, retail and medical technology. At the end of 2015, total lending amounted to SEK 1,425 million. We believe our customers should earn a reasonable rate of interest on the capital that they deposit with us. The corporate bank therefore offers a large range of deposit accounts carrying both variable and fixed interest rates. At the end of 2015, our transaction account carried an interest rate of 0.40 percent, while at the same time customers’ surplus liquidity could be invested in our fixed interest account at a rate of 1.7 percent. Our accounts are covered by the state deposit guarantee. Running a company is associated with various types of personal risk. In order to reduce these risks, we have a strong range of insurance products offering small business owners basic protection, including accident, illness, healthcare and life insurance.

Debt collection in Sweden and abroad

Economy Service Marginalen has a separate accounting function. We have external assignments and help our customers with everything that would normally be carried out by a finance department. Bookkeeping, payroll and financial reporting are our bread and butter, and we use entirely digitalised solutions for our bookkeeping assignments. Our accounting consultants are authorised and we establish teams based on customer requirements. Customers can choose between outsourcing part or all of their finance function to us. Many companies lack access to specialist expertise within payroll and HR issues. Marginalen’s payroll specialists work with everything from providing labour law advice, to payroll administration. Our legal advisers help our customers with matters such as contract law, company law, damages law and commercial law.

• • • •

New online bank for business customers

•

Digitalisation of our accounting assignments makes work more secure and accessible remotely

•

Development of loan processing system for our factoring customers, which speeds up payments and cuts administration

•

Development of our bank offering to franchise customers, including payments, accounts and insurance

•

Marginalen Bank becomes Gold Partner to Svensk Franchise

Marginalen has been running collection operations for over 35 years and offers various kinds of collection, such as housing debt collection, international collection and collection in Sweden, debt monitoring and acquisition of overdue loan portfolios. Our debt collection agents are certified and our operation is certified in accordance with ISO 9001:2008. We are members of the European Collectors Association, which is a collaboration with European debt collection companies. Our debt collection operation works closely with Marginalen’s legal advisers, who take over should a case go to court.

Marginalen Bank’s corporate offering

Economy Service Accountants & payroll specialists

Legal advisers

Accounts Customer’s company

Loans

Insurance Debt collection

2015 in brief

New additional cover for leasing and instalment customers New credit insurance for our factoring customers New property loan makes it possible to use commercial properties as collateral

Focus for 2016

• • •

Card redemption agreement for our business customers Develop the digital platform and digitalise more services Mobile banking for business customers

A N N UA L R EPORT 201 5

Interview

Björn Naumberg CEO UNILIGHT

Björn Naumburg has been a consultant in the energy sector since the 1970s and has worked for the World Bank and the Swedish International Development Cooperation Agency (Sida) on energy issues. He has lived in the US, Tunisia and France. Now his company, Unilight, which makes LED lighting for industry, shipping and animal housing, has moved operations from the US to Sweden, with the aim of conquering the European market. It all started when Björn was in Las Vegas to receive an award – The best integrated meter in the world – which resulted from the fact that the Danish government ordered 250,000 electricity meters from him. Whilst in Las Vegas he met a researcher who had patented a new type of LED light, which was far more efficient than existing lights on the market. Unilight’s LED lights provide 8–15 percent more energy compared with other LED lights. This enables customers to cut their energy costs by 8–15 percent. Compared with traditional bulbs, the customer saves 90 percent of the cost. −− “Our products can help solve the climate crisis. If England were to replace their old lighting with ours, they could shut down five of six nuclear power stations,” says Björn. Blue light gives more milk “And it’s not just the climate that benefits from LED lighting; cows do too.

We can solve the whole problem for farmers. Our dairy light reduces the animal’s melatonin level, which means the animal is more alert and milk production can increase by up to ten percent as a result,” explains Björn. The dairy lights were launched last spring and the first project was completed in July at Miller’s Court in the UK. Hulterstad in Östergötland is the first farm in Sweden to trial the lights. Next stop Europe So what is it that is required for a successful expansion in Europe? −− “It requires capital. The banks understand my business, but they’re not prepared to take the risk. They don’t even dare finance production when I come with signed agreements. They don’t care about small business owners that want to grow,” says Björn. He adds: −− “But Marginalen Bank is lending a hand by helping my customers finance their purchases through leasing. They also help me with administration such as accounting and bookkeeping. I’m now hoping that Marginalen can help finance the company’s European expansion.” Björn likes Marginalen’s broad company offering. −− “It means I avoid having several suppliers, which saves me time and money,” he concludes.

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S U STA IN A B IL IT Y

MA R GI N A LEN B A N K

An inclusive bank Marginalen Bank has a significant role to play in society and in the market. It is therefore important to have a sustainable business model that takes long-term responsibility for society, the environment and business. This means that we must have satisfied customers and employees, be economical with our resources, contribute towards sustainable social development and reduce our impact on the world around us. We want to pursue operations that benefit both ourselves and others. Our responsibility

FINANCIAL

ENVIRONMENTAL

SOCIAL

• • •

• •

• •

Current activities and initiatives

We share knowledge within the area of banking services and finance with customers and other stakeholders. We aim to be an attractive employer that strives to achieve gender equality and diversity. We contribute time or money to organisations whose mission is to help vulnerable people, particularly within the areas to which we as a bank have a direct link.

Online protection We are involved in the fight against online child pornography through our membership of Finanskoalitionen. The coalition works actively to prevent online trading in child pornography material and is an organisation of Swedish banks that also includes our partner organisation ECPAT and the Swedish Police. We support ECPAT’s work and take an active stance against all forms of the child sex trade.

We work actively to ensure we have a low environmental impact with regard to our services, offices and business travel. We encourage our stakeholders to consider environmental issues in order to achieve a low environmental impact throughout the value chain.

More digital solutions In 2015 we spent time getting more digital solutions up and running for both existing and new customers. This has, for example, resulted in the development of more solutions featuring e-signature functions for new customers, and replacing paper invoices for personal loan customers that pay by direct debit with digital invoices via our online bank.

We have a range of services that is consistent with our work within the environment and society. We choose to cooperate with and invest in organisations and companies that take their social and environmental responsibilities seriously.

Responsible services – such as the Restart Loan Our Restart Loans offer credit to people experiencing payment difficulties, provided they can offer satisfactory collateral for the loan. This also gives people with individual non-payment records access to credit, which is something they can find difficult with other banks. By granting these customers credit, we are helping them get their finances in order. The product is also sustainable for Marginalen, because we only approve the Restart Loan for individuals who can provide satisfactory collateral for the loan, such as in the form of property mortgages. The Restart Loan still only makes up a small portion of Marginalen’s lending portfolio, but the number of loans is gradually growing.

A N N UA L R EPORT 201 5

Marginalen Bank Master Award The Marginalen Bank Master Award is presented to the top graduating student on Stockholm University’s Masters programme within Banking and Finance, to encourage young people to get involved and exert their influence on the financial sector.

Training the leaders of the future In order to be an employer that people enjoy working for, and where they are able to grow professionally, the Marginalen Group has a talent programme to train the leaders and specialists of the future. We give all employees the opportunity to do voluntary work during working hours.

New office with sustainability at the heart We refurbished our new office with sustainability in mind; for example, 88 percent of all the furniture is Swedish-made and the carpets are made from recycled plastic bottles.

Commitment to reducing carbon footprint and environmental impact We have joined the Climate Pact, which is a collaboration between the City of Stockholm and Stockholm-based companies. The city and the business community are combining forces to reduce the carbon footprint and environmental impact of those of us who live and work in Sweden’s capital.

Responsible partnerships – our investment in Jamiibora Marginalen Bank is a co-owner in Jamiibora Scandinavia AB, which invested in Jamii Bora Bank Ltd in Kenya. Jamii Bora Bank’s objective is to provide robust financial services that are easily accessible for their customers, which has not always been the case in Africa, while the price is at such a low level that more people can access financial services. Jamii Bora Bank is one of Kenya’s fastest growing banks and now has around 360,000 savings account customers and 20,000 loan customers. Jamii Bora Bank is continuing to grow in the consumer

segment, SME and agriculture, all of which have been identified as underbanked. Marginalen Bank is delighted that its investment in Jamiibora helps people who were previously excluded from banking services to simplify their day-to-day financial needs, which is entirely in line with Marginalen’s vision. Find out more about Jamii Bora Bank at www.jamiiborabank.co.ke

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MA R GI N A LEN B A N K

Marginalen as a workplace Marginalen Bank is an entrepreneurial company that has developed from a small business into today being a workplace for some 300 employees, thereby establishing its position as one of several contenders on the Swedish banking market. Naturally this leaves its mark on the bank’s culture, which is born out of entrepreneurship, business acumen and a spirit of enterprise. In other words, employees at Marginalen Bank have good opportunities to make a career and develop professionally.

Differences create customer benefit Marginalen Bank does not have any specific targets as regards gender distribution or ethnic diversity because the bank attracts both women and men. In 2015, 52 percent of employees were women and 48 percent were men. As a group, our employees represent a large number of different nationalities. Sweden is a multicultural country, and in order to enable Marginalen to be a bank for everyone, we endeavour to ensure that our employees represent a cross section of the population. We can see how differences build a creative and dynamic workplace that produces exciting results and improves the customer experience. Diversity also means we have a large number of languages at our disposal, so that in most cases we are able to speak the native language of our customers. Meeting the employees of tomorrow Marginalen Bank is continually out visiting universities and colleges in order to meet the employees of tomorrow. Every year we present the Marginalen Bank Master Award in Banking and Finance to the top graduating student on Stockholm University’s Master’s programme in Business Administration, specialising in banking and finance. We also take part in career fairs and work with employer branding company Universum to find out how students perceive Marginalen Bank. Talent lights the way We are quick to identify talent within the organisation and we try to help people as best we can so that they are given opportunities to challenge themselves and help develop the bank. This mainly happens within the scope of the managerial role, but also through our talent programme, where we bring together selected talented

individuals from various sections of the bank. Twelve employees took part in the talent programme during the year, which covered everything from business acumen, leadership and team development, to project and change management. The participants also developed strategies for how we can develop the bank in areas such as sustainability, digitalisation and how to boost our competitive edge within selected segments. Less administration for employees It is important that we practice what we preach, and that what we are trying to achieve for our customers also characterises our own approach. As a bank we aim to simplify customers’ day-to-day finance needs with straightforward products and services that they truly need. Employees should be able to focus on their job without being weighed down by administration. For that reason, we launched a new HR system in 2015 that aims to reduce administrative time for our managers and employees. Leadership forum Our leadership forum is a meeting place for employees with line management responsibility, where they can discuss various aspects of being a leader. Topics include value-based leadership, target and development planning, and systematic efforts to improve the working environment. The leadership forum will be organised once a month in 2016. Digital expertise at all levels The digitalisation of society imposes new requirements on employees’ level of skill within most of the company’s functions. All employees must be capable of transferring their products, processes and tasks to the digital world. 2016 will bring greater demand for digital expertise, a development that will impact both internal training and external recruitment.

ÅR A NSR N UA EDOVI L R EPORT SN I N G 201 20155

Interview

Erica Svensson HEAD OF DEPOSITS AND INSURANCE How would you describe Marginalen Bank as a workplace? −− There is a huge amount of freedom in working for a small, fast-growing bank, as it gives me considerable opportunities both to influence my own duties and also work with related areas outside my basic job description, and affect the bank as a whole. I have a broad remit and I work with processes, customer service and administration in a number of areas. I think that would be quite unusual in a larger company, where you tend to stick to your area. Then there are the employees, who in my experience are extremely committed to their work. There are a lot of people here who are genuinely passionate about their job and want to do everything they can to help the customer. I think that is really satisfying. What’s it like being a manager at Marginalen Bank? −− I like the fact that we are very close to our customers. And I feel that a lot of us enjoy being given a high degree of responsibility pretty much immediately and, as I mentioned earlier, to get the chance to work with a broad spectrum of tasks. For example, I work with administration, development of new products and services, and various types of collaborative projects. How would you describe your managerial style? −− I involve the staff, I listen, I’m committed and I think it’s important to take notice of their results. I also try to take responsibility for their results, whether good or not so good.

What career opportunities do you see here? −− The fact that we are a small bank that is growing means new career opportunities are constantly being created, which is exciting. You don’t know in advance what your career path will be, and that appeals to me. I feel like I’m developing as both a specialist and a leader at Marginalen Bank. Does the bank have a special spirit of entrepreneurship? −− Yes, there is a special spirit at the bank that I think comes from the fact that we’ve been through the same growth journey many of our customers are experiencing right now. And we have an owner who’s been with the company right from the start and created and developed the bank, which is probably the source of that entrepreneurial drive. I feel we are close to our customers and that we understand their everyday needs and work hard to meet them. What advice would you give those who want to be managers in the financial sector? −− Essentially it’s about earning and retaining customers’ confidence, which is something we need to do every day. The finance sector is after all a confidence sector, which is why experiences from working closely with customers is important; you have to be involved in order to understand what the customer wants. Also, I’m noticing how digital skills are gaining significance. It’s important to understand how business processes are implemented online and how customers behave on the internet. Take the opportunity to learn from talented colleagues and try not to specialise too soon; keep an overall view in everything you do instead.

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MA R GI N A LEN B A N K

We have moved In 2016, Marginalen Bank moved into the property Grönlandet (National Social Insurance Institution), which was built in 1931 and designed by Sigurd Lewerentz – one of Sweden’s most high-profile architects with an international reputation. The building is now regarded as one of the most important modern buildings in Sweden.

G R Ö N LA N D E T The imposing yet elegant facade rises from street level with sharply cut recesses in the walls and deep windows, like black holes against the white. As you go through the portico from Adolf Fredriks Kyrkogata you enter the oval atrium, surrounded by glass – a truly impressive sight.

A N N UA L R EPORT 201 5

At the centre of the building, a large spiral staircase leads to the well-planned floors, where the light from the courtyard flows down stairwells and corridors. The ninth floor features terraces facing in towards the courtyard and out onto Wallingatan and Adolf Fredriks Kyrkogata.

The office is activity-based and employees pick the environment that suits them best for the day’s tasks. There are quiet zones for focused work, project stations for collaboration, flexi zones where you can talk quietly with one another, and open meeting spaces. Refurbishments and interior decor have been carried out with environmental and sustainability considerations in mind.

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MA R GI N A LEN B A N K

Governance, risks and organisation Marginalen Bank’s operations feature effective risk management. This is reflected in our organisational structure and our working methods.

Overall corporate governance is based on the General Meeting of shareholders, which elects the Board. The Board in turn elects the CEO, who is responsible for daily operating activities. The governance documents adopted by the Board establish the framework of operational governance and a high level of internal control. Together with our business plan, the internal rules provide a platform for the continued development of the bank.

The internal governance and control of Marginalen Bank is based on the principle of three lines of defence. The first line of defence comprises the company’s risk management, the processes of which manage risk on a daily basis. The second line of defence is the control functions for risk control and regulatory compliance that control the first line. The third line of defence comprises Internal Audit, which reports directly to the Board. Internal Audit evaluates the two first lines of defence.

Shareholders/General meeting

External auditor

Board Audit, Risk and Compliance Committee

Head of internal audit

Chief executive officer Executive management

Head of risk management

Head of compliance

A N N UA L R EPORT 201 5

Our security practices At Marginalen Bank we believe it is important for all our customers to feel secure in their contact with us. We work with security issues at the bank in the following ways.

ISO certified Marginalen Bank is the only bank to have a management system that is certified in accordance with the rules and requirements of the ISO 9001:2008 standard. Marginalen Bank’s management system is reviewed annually by Det Norske Veritas (DNV). The bank’s management system manages the overall internal processes at the bank. The management system is a platform for secure and structured work methods. Permit from Financial Supervisory Authority to conduct banking operations Marginalen Bank has a permit from the Swedish Financial Supervisory Authority to conduct banking operations and is thus subject to the supervision and ongoing control of the Authority. The Authority’s task is to ensure confidence for the financial market by intervening if a company fails to comply with current rules. Swedish Personal Data Act The Personal Data Act contains rules on the use of personal data. The purpose of the Act is to protect people from invasion of privacy through use of their personal data. A key element of Marginalen Bank’s work on privacy protection is that individual customers can find out if their personal data is used, which information is used and how it is used. A customer is always entitled to request a statement from Marginalen Bank detailing such information on use of personal data.

Covered by deposit guarantee The deposit guarantee scheme means that the government guarantees the money you deposit in accounts with Marginalen Bank. This means that as a customer, you will receive compensation from the government if the bank were to go bankrupt or if the Financial Supervisory Authority were to decide that the government deposit scheme is to come into effect. Marginalen Bank is covered by the scheme and has a permit from the Financial Supervisory Authority to receive customer funds in accounts. The deposit guarantee scheme pays compensation for capital and accrued interest up to a maximum of EUR 100,000 per person. The scheme aims to protect the public’s deposits and contribute to ensuring stability of the financial system. The scheme was introduced in Sweden in 1996 and is based on an EU directive. Other EU countries have the same guarantee scheme. A similar scheme is also found in several countries outside the EU. Preventing money laundering Marginalen Bank follows regulations that are intended to prevent money laundering and terrorist financing. Money laundering refers to funds from criminal activities that enter legitimate systems. Terrorist financing is defined as raising, providing or receiving funds or other assets that support terrorism. The bank has procedures in place to prevent transactions that involve criminal activities. For this reason, you may be asked to produce identification or answer questions if you want to make certain transactions. You may also need to show receipts, invoices or other documents. In doing so, you are helping fight criminal activity.

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MA R GI N A LEN B A N K

Board

Bertil Johanson Chairman

Peter Lönnquist Vice Chairman

Hans Lingqvist Member of the Board

Member of Styrelsepoolen and a former partner at PwC. Member of the Board of NGS Group AB and owner of Ardentis AB, which carries out board work and financial consultancy.

Member of the Swedish Bar Association. Chairman of Fastpartner AB, Cellmax Technologies AB, the Baltic Children’s Foundation and the Koalan Foundation. President of Spendrup’s owner foundations and board member of Exensor Technology AB.

Bachelor’s degree in Economics from Stockholm University. Former partner at PwC with responsibility for the company’s Enterprise Risk Management services. Many years’ experience from the banking and insurance sectors.

Ewa Glennow Member of the Board

Anders Fosselius Member of the Board

Anders Folkvard Member of the Board

CEO of Marginalen AB and founder of the Marginalen Group.

Civil Engineer (DIHR) who has previously held senior positions in industrial and export companies and the advertising sector. Now works with business and leadership development.

Economist and authorised financial analyst from the Norwegian School of Economics. CEO and partner at Oslo Finans AS. Has worked in finance and corporate financing at banks and securities companies since 1977.

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A N N UA L R EPORT 201 5

Management

Sarah Bucknell CEO

Charlotte Strandberg Head of Marginalen Core

Noel Cramer Head of Private Banking

Joined Marginalen Bank in 2015. Broad experience from senior positions within the financial sector. Has previously held several roles at SBAB, most recently as Head of Business Development, with 140 employees.

Employed since 1981. Deputy CEO since 2000. Previously head of debt collection department and legal affairs.

Joined Marginalen Bank in 2013. Former CEO of Citibank EMEA, where he led several initiatives. Prior to that he held several senior positions at Citibank, including Head of Lending at Citibank Northern Europe.

Hans Hammar Head of Corporate Banking

Christina Johansson Head of Marketing & Communication

Eleonor Åslund Head of HR

Joined Marginalen Bank in 2013. Prior to that he held several senior positions at Svenska Handelsbanken. Previously at Kaupthing Bank and CEO of Scandinavia’s largest dental laboratory.

Joined Marginalen Bank in 2010. Has held senior positions in sales, marketing, communication and brand management, most recently as the Nordic head for the re:member credit card, part of EnterCard.

Joined Marginalen Bank in 2007. Has more than 25 years of experience in HR. Previously business area manager and manager for consultants at Wise Group. Prior to that head of HR at a number of international companies.

Jan Arpi CFO

Max Mennfort Chief Legal Officer

Bo Andersson Head of IT

Joined Marginalen Bank in 2015. Has many years of varied experience from the financial sector. Previously held several CEO and CFO positions and his most recent position was with Swedbank, where he was Head of Group Finance with responsibility for 220 employees.

Has been with Marginalen Bank since 2013. Many years’ experience from SEB Merchant Banking and Enskilda Securities. Prior to that he worked for business law firm Vinge and for two small banks. Max has a degree in economics and business.

Started at Marginalen Bank in 2016. Has a great deal of experience working with digitalisation in the banking industry, with a focus on creating effective, businessoriented IT organisations. Most recent position was with SBAB Bank and has previously worked in various partnerships with companies such as Preem, ICA Banken, IKANO Banken and Öresundsbanken.

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MA R GI N A LEN B A N K

Income statement 2015-01-01 - 2015-12-31

2014-01-01 - 2014-12-31

776.8

785.7

OPERATING INCOME Interest income Lease income

57.4

60.5

Interest expense

-261.3

-343.9

Net interest income

572.9

502.3

Dividends received

-

9.0

Fee and commission income

109.7

96.0

Fee and commission expense

-6.7

-17.6

Net income from financial transactions

31.0

2.6

Other operating income

28.3

27.2

Total operating income

735.2

619.5

Staff costs

-259.7

-251.4

Other administrative expenses

-187.9

-173.6

OPERATING EXPENSES General administrative expenses:

Depreciation, amortisation and impairment of assets

-17.5

-15.0

-465.1

-440.0

PROFIT BEFORE LOAN LOSSES

270.1

179.5

Loan losses, net

-119.2

-119.7

OPERATING PROFIT

150.9

59.8

Income tax

-37.0

-11.6

NET PROFIT FOR THE YEAR

113.9

48.3

2015-01-01 - 2015-12-31

2014-01-01 - 2014-12-31

113.9

48.3

-35.3

33.5

Total operating expenses before loan losses

Statement of comprehensive income and other comprehensive income Profit for the year recognized in income statement Components that may be reclassified to income statement Change in value of bonds Deferred tax on change in value of bonds

7.8

-7.4

Other comprehensive income for the year after tax

-27.5

26.1

TOTAL COMPREHENSIVE INCOME

86.4

74.4

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A N N UA L R EPORT 201 5

Balance sheet 2015-12-31

2014-12-31

ASSETS Cash Eligible treasury obligations etc. Lending to credit insitutions

0.0

0.0

2,260.6

424.4

831.3

950.3

Lending to the public

12,991.6

11,922.0

Bonds and other interest-bearing securities

1,099.6

3,683.6

Derivatives

9.0

0.1

Shares and participations

5.0

5.0

Intangible assets

36.3

35.4

Property and equipment

18.8

8.0

Other assets Prepaid expenses and accrued income Total assets

70.8

62.5

106.6

83.0

17,429.6

17,174.3

15,191.4

15,206.3

LIABILITIES AND EQUITY Deposits from customers Derivatives

102.9

1.9

Other liabilities

114.0

162.4

Accrued expenses and deferred income

139.8

121.3

23.3

34.9

Provisions Subordinated liabilities Total liabilities

638.1

538.0

16,209.5

16,064.8

52.5

52.5

52.5

52.5

-0.2

27.3

1,053.9

981.4

EQUITY Restricted equity Share capital

Non-restricted equity Reserves for financial assets available for sale Retained earnings Profit of the year

Total equity Total liabilities and equity

113.9

48.3

1,167.6

1,057.0

1,220.1

1,109.5

17,429.6

17,174.3

178.8

74.4

1,026.0

1,075.1

Contingencies Pledged assets Commitments

NARVA

Adolf Fredriks Kyrkogata 8 111 37 Stockholm www.marginalen.se Switchboard: +46 (0)10-495 10 00