Svenska Handelsbanken

Transcription

1 26 October 1999 Press release 's interim report January - September 1999 Summary The result was SEK 6.3 billion, an increase of 9 % compared with the first nine months of 1998 excluding items affecting comparability Net interest income rose by 3 % Net commission income increased by 7 % Expenses decreased by 1 % Broad options programme for Handelsbanken's managers Decision to develop retail banking operations in the UK including Internet banking The Group Result continues to be strong The Handelsbanken Group's profits for January September 1999 were SEK 6 295m (6 100). The result for 1998 included a capital gain of SEK 338m from sales of properties. Excluding this, the result improved by 9 %. Return on shareholders' equity was 16.8 % (17.2). Return on shareholders' equity is calculated as operating profit in relation to average shareholders' equity after standard tax and with an adjustment made for items affecting comparability. The corresponding figure for the whole of 1998 was 16.4 %. Income and expenses Operating income amounted to SEK m (12 696), an increase of 1 %, excluding the capital gain in Net interest income increased by 3 % to SEK 8 800m. A fee of SEK 231m (215) to the Swedish government for the deposit protection guarantee has been charged to net interest income. The interest spread in the Handelsbanken Group was slightly improved. Net commission income increased by 7 % to SEK 2 744m (2 554). Securities commission from brokerage and fund management fees performed well. 1

2 The net result on financial operations fell by SEK 429m to SEK 443m due to a lower result from trading following the rise in interest rates. Expenses decreased by 1 % compared with the first nine months of 1998 to SEK 6 304m (6 385). The I/E ratio after loan losses improved to 2.01 (1.87). The I/E-ratio before loan losses increased to 1.99 (1.94). Loan losses still at low level Loan losses, including changes in the value of repossessed property, continued to fall and recoveries on previously reported loan losses exceeded loan losses by SEK 74m. The proportion of bad debts fell to 0.3 % (0.4) of lending. The volume of collateral taken over remained more or less the same at SEK 278m (262). Capital ratio and rating The Handelsbanken Group's capital ratio was 9.6 % (9.7). The Tier 1 capital ratio increased to 6.6 % (6.2). Handelsbanken has a higher long-term rating than any other Nordic bank. In Europe, only two listed universal banks have received a higher rating from Moody's. Broad options programme for managers Handelsbanken has decided to offer some 500 branch managers and 200 other managers and key persons the opportunity to acquire synthetic options. Through its profit-sharing system, the Oktogonen Foundation, established in 1973, Handelsbanken already has an effective incentive scheme, and all staff in Sweden, Norway and Finland receive an equally large share of the Bank's profits. This has contributed to the Bank's return on shareholders' equity being higher than the average for the other Swedish and Nordic banks for the past 27 years. The intention is for the options programme - which is more individual in character - to complement the Oktogonen system. The number of options will be announced at the end of the subscription period, i.e. in mid- November The employees in question will be offered between and options each. SEK will be paid for each option. The expiration date has been set at 25 November The exercise price will be around 160 % of the average stock exchange price of the class A share over a measurement period that constitutes a part of the subscription period. At the end of the subscription period, i.e. in mid-november, the exercise price in SEK, the share price during the measurement period and the total number of options will be announced. The options have been valued by Alfred Berg Fondkommission AB. Handelsbanken Markets has arrived at the same result in an internal valuation. The valuations will be followed up by Alfred Berg Fondkommission and Handelsbanken Markets at the end of the measurement period, after which the final exercise price will be announced. 2

3 The Bank intends to hedge the exposures arising in connection with the issue of synthetic options. This will greatly limit the maximum possible cost of the options commitment. If the price of the Handelsbanken class A share rises by more than 30 % during the five-year life of the programme, there will be not be any cost at all. If it rises by less than 30 %, the maximum cost for the Bank will be less than SEK 7m per quarter. Handelsbanken starts retail banking operations in the UK Handelsbanken is preparing to set up in the UK the type of retail banking operations that have been so successful in the Nordic countries. Until now, Handelsbanken has conducted Nordic-related corporate business and private banking services for Nordic customers living in the UK, from its branches in London, Manchester and Birmingham. The Bank will now offer a complete range of banking services to both private and corporate customers. The Bank's services will be provided not only by the branches, but also via telebanking and the Internet. Cards will be offered for easy access to cash. On the corporate side, the Bank's branches already provide most banking services. The operations will be launched at Manchester and Birmingham in the first quarter of The intention is to continue expansion in the UK over the next few years. Handelsbanken first to demonstrate banking services on WAP phones As one of the first banks in the world, Handelsbanken has demonstrated the use of working banking services on WAP phones (WAP = Wireless Application Protocol). In Sweden, a test is currently being carried out in which a number of selected customers and investment advisers at the Bank are using WAP phones to access customised stock exchange information in real time via mobile phones. In 2000, it will be possible to access most of the Bank's current Internet services via WAP phones. This means that customers will be able to see their balances and transactions, transfer money, pay bills and carry out securities transactions on all types of appliances that use the WAP-protocol. The new WAP-based banking services are an important part of the Bank's strategy to give customers the opportunity to carry out banking business whenever, wherever and however suits them best. 3

4 Highest rating to Handelsbanken's Institutional Custody Services Every year, Global Custodian, the leading magazine in its field, rates the institutional custody services provided by banks around the world to international customers. The ratings are based on the results of extensive opinion polls carried out among the customers of the banks providing these services, and are influential in the choice of international custody banks. Handelsbanken was the only Swedish bank in 1999 to receive a Top Rating from Global Custodian. The Bank has received this grade every year since In Global Custodian's polls, Handelsbanken's customers praised among other things the Bank's highly flexible and customised services. The millennium shift preparations completed The Bank's preparations for year 2000 have been carried out according to plan, All application systems, technical platforms, PC systems and embedded systems that will be used over and after the millennium shift have now been analysed, adapted, tested and launched into production. Tests of external interfaces have been completed and approved and a far-reaching contingency plan for dealing with unforeseen malfunctions has been drawn up. Within the framework of ordinary development work at the Bank, in autumn 1999, a number of minor systems that are used today will either be adapted or replaced by other systems that are already 2000 compliant. Once these changes have been made, new tests will be carried out. Stockholm, 26 October 1999 Arne Mårtensson President and Group Chief Executive For further information please contact Arne Mårtensson, Group Chief Executive of Svenska Handelsbanken, or Sven Grevelius, Head of Accounting and Control, tel: Lars Lindmark, Head of Corporate Communications tel: The interim report for 1999 will be published on 22 February Handelsbanken's interim reports and other publications are also available on the Internet ( 4

5 Business areas Result per business area January - September Group Branch Markets Asset Finans Liv S-hyp Central Other Total Total Full year SEK m offices Mgmt. Bank Treasury Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration 718 included in income Net internal remuneration deducted from income Total expenses Result before loan losses Loan losses Operating result Return on equity 19.8 % 14.5 % 27.3 % 23.4 % 7.4 % 16.8 % 15.7 % 16.8 % 17.2 % 16.4 % The net amount of received/paid remuneration between the business areas is included in/deducted from the income categories for the business areas. The net amount of received/paid renumeration is shown above. The internal remuneration is credited to the business area which is responsible for the customer and reduces the income of the unit paying the remuneration. The remuneration is intended to cover expenses and also to ensure that the profit arisen is distributed on market terms. Expenses also include the distribution of costs made internally within the Group for services rendered by business support operations. Return on shareholders' equity is computed after standard tax and adjusted for items affecting comparability. The shareholders' equity on which the calculation of return on equity is based is mainly distributed in accordance with the requirements of the Act on Capital Adequacy. Other includes capital gains, dividends, amortisation of goodwill and Group adjustments. Handelsbanken Liv Fondförsäkrings AB and commission income from the mutual company are included under the business area Liv. 5

6 Branch office operations Handelsbanken is a Nordic universal bank with a strongly decentralised organisation. The heart of the Bank is its large branch office network. Each branch is responsible for all customers within its geographic area - including the largest companies and co-ordinates all services for each and every customer. Where necessary, this is done in close co-operation with the Bank's subsidiaries and with specialists at regional and central level. Handelsbanken conducts complete universal banking operations in the whole of the Nordic area. The branch office operation consists of ten regional banks seven in Sweden and one each in Norway, Finland and Denmark. At the end of the period, Handelsbanken had 466 branches in Sweden, 16 in Norway, 15 in Finland and 5 in Denmark. Operations in Sweden and the other Nordic countries are run using the same concept to deliver universal banking services with a higher service level and at lower cost than competitors. It is on this base that the Bank will be able to grow in the whole of the Nordic area. Handelsbanken is not only the largest bank in the Nordic countries but also the fourth largest local commercial bank in Finland and the fifth largest in Norway. Result, January - September Branch office operations SEK m Full year /- % 1998 Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration included in income Total expenses Result before loan losses Loan losses Operating profit Return on equity 19.8 % 20.7 % 20.0 % The profits of branch office operations rose by 3 % to SEK 4 810m (4 660). Net interest income was unchanged at SEK 6 988m (6 991). This is due to lower interest rates and thus lower return on the regional banks' surplus liquidity. A fee of SEK 217m (201) to the Swedish government for the deposit protection guarantee has been charged to net interest income. Net commission income rose by 4 %. Expenses increased by 2 % compared with the corresponding period last year. Loan losses were still low and amounted to SEK 16m (218). The regional banks in Denmark, Norway and Finland again reported higher profits. 6

7 The Norwegian financial supervisory authority has recommended that Handelsbanken be granted a permit after the acquisition of Bergensbanken. The Norwegian Ministry of Finance is expected to announce its decision later this year. The flow of new customers - both private and corporate - continues. Many of them are customers of Stadshypotek who have transferred the rest of their banking business to Handelsbanken. Customers of other banks also continue to spontaneously move their business to the Bank. Handelsbanken has begun to operate a data warehouse containing extensive banking-related information about customers. This allows the branches to do direct selective marketing. They will be able to tailor their offers to meet each customer s needs in a simple and costeffective way. 7

8 Handelsbanken Markets Handelsbanken Markets is responsible for corporate finance, trading in the equity, money and foreign exchange markets, debt capital financing, correspondent banking and trade finance. It also includes the Bank's unit for economic research and banking operations outside the Nordic countries. Operations are conducted in nineteen countries and are organised in four main areas: Investment Banking, Trading, Trade Finance and Financial Institutions, and Banking operations outside the Nordic countries. Operations are focused on the Bank's Nordic customer base. The Bank also offers services to Nordic companies with operations abroad and non-nordic companies with operations in the Nordic countries. Result, January September Handelsbanken Markets Full year SEK m /- % 1998 Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration deducted from income Total expenses Result before loan losses Loan losses Operating profit Return on equity 14.5 % 8.7 % 9.4 % The result increased by 80 % to SEK 649m (360). Income increased by 9 % to SEK 1 977m (1 814). Expenses decreased by 4 % to SEK 1 409m (1 470), which was mainly attributable to the trading operation. Investment Banking Handelsbanken Investment Banking reported considerably higher profits for the third quarter of 1999 compared to the same period last year when unrest in South-East Asia had a negative impact on the result. The equities area was particularly successful which is also evidenced by the increase of Handelsbanken s market share of the Stockholm Stock Exchange. Investment banking operations in the other Nordic countries, France, the UK and the USA made a larger contribution to the result than in previous years. This autumn, Handelsbanken has carried out several successful IPOs for IT companies one of the business sectors which has been given high priority by the Bank s corporate finance and research departments. Handelsbanken has been accepted as a member of Deutsche Börse Xetra and of EUREX (derivatives exchange) in Frankfurt. The Bank is already a member of the stock exchanges in the four Nordic capitals: Stockholm, Helsinki, Copenhagen and Oslo, and the Paris stock exchange. 8

9 Trading The result on trading operations was higher than for the corresponding period last year, mainly due to lower expenses. Foreign exchange trading performed well and volumes were retained at a high level in spite of the introduction of the euro. The bond market, however, was characterised by a shortage of liquidity, particularly during the third quarter, which was negative for profitability. Trade Finance and Financial Institutions This operation continues to perform well with higher income mainly from clearing services to foreign banks. This combined with a very small increase in costs made for a good increase in profits compared to the corresponding period last year. Banking operations outside the Nordic countries The operation continued to develop well with higher margins. Combined with lower costs, this led to an improved result compared with the corresponding period last year. The work of developing retail banking in the UK and starting a bank in Poland is going according to plan. 9

10 Handelsbanken Asset Management Handelsbanken Asset Management comprises Fund Management, Discretionary Management and Institutional Custody Services. Operations are conducted in the four Nordic countries and in Luxembourg and the UK. Result, January September Handelsbanken Asset Management Full year SEK m /- % 1998 Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration deducted from income Total expenses Result before loan losses Loan losses Operating profit Return on equity 27.3 % 44.9 % 46.7 % Profits for the period increased to SEK 308m (216). Income increased by 30 % from SEK 416m for the first nine months of 1998 to SEK 539m for the same period in 1999, after the deduction of SEK 370m (351) which was paid in net internal compensation. Assets managed by Handelsbanken Asset Management were SEK 116bn as at 30 September. Fund management At the end of September, the Bank's fund management company managed 48 mutual funds. The assets managed rose from SEK 55bn at 31 December to SEK 68bn, an increase of 24 %. Handelsbanken's proportion of total net new savings in the Swedish mutual fund market was 13.5 %. During the first nine months of the year, the number of unit holders increased by some to approximately Four new mutual funds were launched during the period: Värdefonden, Europa Aggressiv, Svenska Selection Swedish Fixed Income and Svenska Selection Fund Euro Aktiv. The latter fund invests solely in the euro-zone. Custody services For the eight year running, Institutional Custody Services was top rated by Global Custodian. Handelsbanken was the only Swedish bank to receive this rating this year. The Bank has also been chosen as subcustodian in Sweden by two major new international customers. The custody account service offered via branch offices continued to attract many customers. As at 30 September, there were custody accounts with a total value of more than SEK 500bn. This is an increase of 53 % compared with the end of September last year. 10

11 More than 41 % of new custody accounts and 28 % of the total number of accounts were linked to the Internet. All customers with these accounts can access Market Information via the Internet. This service was launched during the third quarter and has received a very positive response. The increased number of custody accounts reflects the Bank s continued focus on investment operations. 11

12 Handelsbanken Finans Handelsbanken Finans is a leading finance company in the Nordic area offering a complete range of local finance company services in the four Nordic countries: Leasing/conditional sales, collaboration with vendors of investment assets, car finance and administration, factoring (with and without financing), consumer credits and private label cards in collaboration with retailers. Finance company services are an established feature of the branch offices range of products. Handelsbanken Finans collaboration with vendors and retailers has also attracted new corporate customers to the Handelsbanken Group. Structured Lease Finance Services offers solutions for new infrastructure in the Nordic area, for example in the power industry. The Internet is becoming used increasingly as a means of extending customer relations, for example when offering finance support to retailers for consumer capital goods. Factoring & Collection Services administers the company s invoices from invoice production and credit to debt collection routines. Result, January September Handelsbanken Finans Full year SEK m /- % 1998 Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration deducted from income Total expenses Result before loan losses Loan losses Operating profit Return on equity 23.4 % 20.4 % 19.2 % The result for the first nine months increased by 32 % to SEK 244m (185). Return on equity rose to 23.4% (20.4 %). Income increased by 8 % to SEK 543m (502). Expenses were at the same level as last year, despite a rise in credit volumes of just over 17 %. For the Swedish operation, leasing and conditional sales to companies have seen a very large flow of new business both from branch offices and from existing and new vendor collaboration. For example, Handelsbanken Finans has participated in the financing and construction of a new ecofriendly bottle return system for the food retail trade in Sweden. The credit volume for leasing and conditional sales to companies rose by a full 21 % in the Swedish operation. Credit volumes for Retail Financial Services increased by 16 % compared with last year. In the Factoring & Collection Services area, the pan-nordic project for a joint factoring system has been launched. This means that Swedish and Finnish factoring services are now run on the same system. 12

13 The Finnish finance company operation has started a highly successful new collaboration with the electrical retail goods company Gigantti. The Finnish operation has also launched Internet-based support for retailers. Credit volumes were SEK 4.2bn which is an increase of a full 26 % compared to last year. In Norway, Handelsbanken s pending acquisition of Bergensbanken has led to increased interest in finance company services. Initially, collaboration has started in the field of leasing and car leasing. The Norwegian business operations have performed well and volumes have increased by 17 % compared to last year. 13

14 Handelsbanken Liv A complete range of life insurance products is marketed under the name Handelsbanken Liv via Handelsbanken s branch office network. These products include occupational and private pensions, asset protection schemes and employee pension insurance for companies, private customers and organisations. Handelsbanken Liv also offers a small range of life insurance products in the other Nordic countries. For legal reasons, the traditional life insurance operations in Handelsbanken Liv Försäkrings AB are run on mutual principles where the whole surplus on operations goes back to policy-holders in the form of bonuses. Result, January September Handelsbanken Liv Full year SEK m /- % 1998 Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration deducted from income Total expenses Result before loan losses Loan losses Operating result Return on equity 7.4 % 2.4 % 5.2 % Handelsbanken Liv Fondförsäkrings AB and commission income from the mutual company are included under the business area Liv. The result of the profit-distributing operation, Handelsbanken Liv Fondförsäkrings AB, rose by 214 % from SEK 7m to SEK 22m. Return on equity for Handelsbanken Liv Fondförsäkrings AB alone was 23 % (7.6). The main contribution to this was a healthy performance for net commission income as a result of successful sales of unit-linked insurance. Net commission income rose by 84 %. Expenses rose by SEK 42m to 57m due to increased investments in information technology and lower capitalised acquisition costs. Most of these investments were made in order to improve the efficiency of insurance administration and to simplify the handling of unit-linked insurance at branch offices. Total premium income for traditional insurance and unit-linked insurance for the period January to September was SEK 4 798m (3 950), an increase of 21 %. Premium income for the third quarter rose by 40 % compared to the same period in Unit-linked insurance represented 67 % of total premium income. Premium income for unit-linked business was SEK 3 237m (2 638), a rise of 23 %. This was mainly attributable to a good performance by a savings product called Fondkapitalspar which represented over 40 % of premium income. As at 30 September the capital managed in unitlinked insurance was SEK 9.8bn (5.1). 14

15 For traditional insurance too, premium income continued to rise and totalled SEK 1 561m (1 312), an increase of 19 %. Profits were lower, mainly because rising market rates led to lower return on interest-bearing instruments. The new law on insurance company operations which will come into force on 1 January 2000 will allow traditional insurance companies to distribute profits. Handelsbanken Liv is preparing to convert its traditional life insurance operation into a profit-distributing operation, and plans to implement this on 1 January Result January September Handelsbanken Liv Försäkrings AB SEK m Premium income Investment income Insurance claims Changes in life insurance provisions Bonus Operating expenses Result on technical account life insurance business Handelsbanken Liv Försäkrings AB is a mutual life insurance company and is not consolidated. 15

16 Stadshypotek Bank Stadshypotek Bank is the largest independent telebank in Sweden with some SEK 21 bn in customer funds. Stadshypotek Bank is active under its own brand name and provides its own range of services. Stadshypotek Bank offers a limited selection of bank and insurance services to customers who do not require the full range of services and individually adapted services offered by the branch offices. Result, January September Stadshypotek Bank SEK m Full year /- % 1998 Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration deducted from income Total expenses Result before loan losses Loan losses Operating result Return on equity 16.8 % 41.0 % 37.2 % Profits fell to SEK 10m (23). Net interest income, which amounted to SEK 37m (33) has been charged with a fee of SEK 14m (14) to the Swedish government for the deposit protection guarantee. Commission fell by 25 % from SEK 75m to 56m, due mainly to a fall in the sale of retail bonds as long-term yields declined. Sales of FondSpar, a savings product comprising a selection of Handelsbanken mutual funds, have continued to go very well. At the end of September over customers had savings amounting to some SEK 400m. Since the beginning of the year, there has been an increase of over 50 % in the number of customers and more than 80 % in terms of kronor. Over 30 % of the customers had monthly savings averaging SEK 540, which is a large amount for this sector. Stadshypotek Bank s system for saving in individual shares, AktieSpar, is one of the best on the market for customers wishing to save small amounts every month in individual shares. Some customers have signed up for Aktiespar. The newly-launched Internet Service continued to do well. The number of customers grew by over 800 per month and totalled at the end of the period. Customers can carry out most of their transactions over the Internet. In a SIFO survey, reported at the end of June, Stadshypotek Bank was the niche bank which customers knew the best and were most positively inclined to. 16

17 Handelsbanken Central Treasury Central Treasury manages the Group s liquidity in Swedish kronor, the internal bank, funding in the capital market, and funding and clearing at the Riksbank, as well as measuring and controlling financial risks within the Group. The activity that has a direct and tangible effect on the profit and loss account is cash management in Swedish kronor. Result, January September Handelsbanken Central Treasury Full year SEK m /- % 1998 Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration deducted from income Total expenses Result before loan losses Loan losses Operating profit Return on equity 15.7 % 30.2 % 29.9 % The Central Treasury's result fell to SEK 297m (493). The lower result was due to a decline in the return on the Bank's liquidity at the current low interest rates. 17

18 Financial ratios for the Group January September Full year Return on shareholders equity after standard tax * 16.8 % 17.2 % 16.4 % Return on shareholders equity 16.9 % 20.5 % 18.6 % Income/expenses (I/E ratio)* - before loan losses after loan losses Earnings per ordinary share, SEK *** - January September *** mth moving total *** No. of ordinary shares ** Adjusted equity per share, SEK *** Tier 1 capital Risk-weighted volume Capital ratio 9.6 % 9.7 % 9.8 % Average number of employees Number of branches in Nordic countries, 30 Sept * Excl items affecting comparability ** Split *** Adjusted for split Quarterly performance of Group SEK m 1999:3 1999:2 1999:1 1998:4 1998:3 Net interest income Commission, net Net result on financial operations Other income Total income Staff costs Other administrative expenses Depreciation and write-downs Total expenses Profit before loan losses Loan losses Operating profit Minority interests Pension provisions Tax on the period's profit Net result for the period

19 Profit and loss account - Group January September Change Full year SEK m % 1998 Interest income Interest expense Net interest income Dividends received Commission income Commission expense Net commission income Note Net result on financial operations Note Other operating income Total income General administrative expenses - Staff costs Other Note Depreciation and write-down in value of tangible and intangible fixed assets Total expenses Profit before loan losses Net loan losses Note Change in value of repossessed property Operating profit Minority interests Pension provisions Taxes Net profit for the period

20 Profit and loss account Group (cont.) January September Full year SEK m Note 1 Commission Payments Lending Deposits Guarantees Securities Other Commission income Commission expense Net commission income Note 2 Net result on financial operations Shares and participations Interest-bearing securities Capital gain/loss Shares and participations Interest-bearing securities Unrealised changes in value Changes in exchange rates Net result on financial operations Note 3 Other administrative expenses Property and premises External computer costs Communication Travel and marketing Purchased services Supplies Other expenses Other administrative expenses Note 4 Loan losses Individually valued claims: The period s write-down for actual loan losses Write-back of previous provisions for possible loan losses which are reported as actual loan losses in the period s accounts The period s provision relating to possible loan losses Recovered from actual loan losses in previous years Write-back of provisions for possible loan losses which are no longer necessary General reserve for possible but non-identified loan losses Net expense for the period for individually valued claims Claims valued as a group: The period's write-down for actual loan losses Recovered from actual loan losses in previous years Allocation to/dissolution of reserve for loan losses Net expense for the period for claims valued as a group Total loan losses

21 Balance sheet - Group SEK m 30 Sep 30 Sep 31 Dec Lending to the general public Note Lending to credit institutions Interest-bearing securities - Financial fixed assets Financial current assets Other assets Total assets Deposits and funding from the general public Liabilities to credit institutions Issued securities etc Subordinated liabilities Other liabilities Shareholders equity Total liabilities and shareholders equity Note 1 Lending to the general public SEK lending - to households to companies etc *) Foreign currency lending - to households to companies Reserve for possible loan losses Total lending *) Of which National Debt Office

22 Cash flow statement - Group January September SEK m Cash flow on operating activities Cash flow on investing activities Cash flow on financing activities Cash flow for the period Liquid funds at beginning of period Cash flow for the period Exchange rate difference on liquid funds Liquid funds at end of period Other information Some minor reclassifications have been made in the profit and loss account. The comparative figures have been recalculated. January September Full year SEK m Capital base and requirement Tier 1 capital Total capital base Risk-weighted volume Capital ratio 9.6 % 9.7 % 9.8 % Tier 1 ratio 6.6 % 6.2 % 6.3 % Problem loans Bad debts Reserve for possible loan losses Bad debts, net Reduced-rate loans without a provision for possible loan losses Total problem loans Bad debt reserve ratio 66.0 % 60.7 % 58.8 % Proportion of bad debts 0.30 % 0.41 % 0.45 % Problem loans before write-down for possible loan losses Loan loss ratio % 0.04 % 0.05 % Non-performing loans for which interest is reported as income Collateral taken over: - Buildings and land Shares and other participations Other Total collateral taken over

23 Derivative instruments SEK m Interest-rate related Currency-related Equity-related Market value Book Value Market value Book value Market value Book value Positive values Negative values The above table is compiled in accordance with the Swedish Financial Supervisory Authority s regulations and includes all derivative instruments in the Group. For derivative instruments which are part of trading operations, the book value is the same as the market value. The differences between market value and book value reported in the table correspond to the reversed differences between market value and book value in that part of the Group s operations which is subject to hedge accounting. Value-at-Risk During the period l October September 1999, Handelsbanken Markets exposure to interest rate and exchange rate risk (incl. option risk), measured as Value-at-Risk (VaR) was on average SEK 32m. During the period, this risk varied between SEK 11m and SEK 58m. During the same period, Handelsbanken Markets exposure to equity price risks, measured as VaR, was on average SEK 12m. This risk varied between SEK 7m and SEK 19m. 23

24 Handelsbanken's shares The rise for the Swedish stock market during the third quarter of the year, measured by the Affärsvärlden general index (AFGX) was 1 %. The bank index excluding Handelsbanken was unchanged during the same period. The Bank's ordinary shares (SHB A) rose by 12 %. The market capitalisation of Handelsbanken s shares thereby increased to SEK 81bn from SEK 72bn as at 30 June. 30 September June 1999 Share price ordinary class A, SEK Market capitalisation SEK bn , Index 600 Share price trend until 30 September SHB A 300 Generalindex 200 Bankindex exkl. SHB Handelsbanken's rating as at 30 September 1999 Financial strength Short-term Long-term Moody s B+ P-1 Aa2 S&P A-1 A+ Fitch IBCA B F1+ AA- Bankwatch B TBW-1 24

25 Auditors report I have carried out a summary examination of this interim report in accordance with the recommendation which the Swedish Institute of Authorised Public Accountants (FAR) has issued. A summary examination is considerably limited compared to a full audit. There is nothing to indicate that the interim report does not fulfil the regulations of the Act governing Securities Exchanges and Clearing Operations and the Annual Accounts Act for Credit Institutions and Securities Companies. Stockholm, 26 October 1999 Åke Danielsson Authorised Public Accountant 25