Svenska Handelsbanken

Transcription

1 20 February 2001 Press release Highlights of Annual Report 2000 Summary Profits were SEK 11.7 billion, an increase of 36 % Return on shareholders' equity went up to 22.2 % (18.4) Income increased by 21 % Net interest income rose by 10 % Expenses for comparable units and excluding performance-related remuneration increased by 0.5 %. Total expenses rose by 5 % Handelsbanken Liv s customers voted to demutualise the life insurance company Handelsbanken acquired SPP Liv AB Earnings per share were SEK 12.87, an increase of 38 % The Board recommends that the dividend is raised to SEK 4.00 (3.00) per share The Board recommends the repurchase of a maximum of 20 million of the Bank s shares Strong result also in the last quarter The operating profit of the Handelsbanken Group was SEK m (8 607), which was an increase of 36 %. The sale of the Bank s shares in Svensk Exportkredit gave rise to a one-off item of SEK 343m. Excluding this, operating profit was SEK m, an increase of 32 %. The result for the final quarter of the year was a strong SEK 2 810m. Return on shareholders equity for the entire year increased to 22.2 % (18.4). Increased income more or less unchanged expenses Income increased by 21 %. Net interest income rose by 10 %. For branch office operations, the increase was 13 %. This is attributable mainly to increased lending volumes while margins remained unchanged. Net commission income rose by 37 %, reaching its highest point in the first quarter of the year. Net trading income went up by 42 %. 1

2 Expenses for comparable units and excluding performance-related remuneration rose by slightly more than 0.5 % to SEK 8 382m. The equivalent figure for 1998 was SEK 8 625m. This means that, over a two-year period, and disregarding the acquisition of Bergensbanken and performance-related remuneration, the Bank reduced its expenses by SEK 243m or almost 3 %. Total expenses in the Handelsbanken Group increased by 5 % to SEK 9 064m. For comparable parts of the group, the average number of staff continued to fall. There was a total reduction of 4 % or 189 in the average number of staff in the Swedish branch office operation and 105 in the entire Group. In view of the significant increase in volumes over the year, there has been a strong increase in productivity. Loan losses still low Recoveries, including changes in value of repossessed property, exceeded loan losses by SEK 67m (219). The proportion of bad debts rose to 0.33 % (0.27) of lending. The volume of collateral taken over fell to SEK 148m (152). Capital ratio, share buybacks and rating The Handelsbanken Group s capital ratio was 9.5 % (9.4) at the year-end. Tier 1 capital ratio was 6.4 % (6.5). The Bank repurchased a total of 21.5 million shares up until 31 December at an average price of SEK 137 per share. The Bank believes that the buybacks will amount to around SEK 4bn before the Annual General Meeting in 2001, i.e. the maximum amount that the Board decided on when the repurchase programme was initiated. The Board recommends that the AGM authorise the Board for the present year and up until the AGM in 2002 to repurchase up to 20 million shares. At the same time, the Board states that it intends to buy back shares for an amount of at most SEK 2bn. The AGM will also be recommended to empower the Board to use the repurchased shares to finance any future acquisitions. Handelsbanken s ratings from the leading rating agencies remained unchanged. In Europe only two of the thirty largest listed universal banks have a higher rating from Moody s than Handelsbanken. Earnings per share and dividend Net earnings per share rose to SEK (9.31). In this calculation, the average number of outstanding shares has been used. The Board recommends a dividend on class A and B shares of SEK 4.00 per share (3.00). 2

3 Internet and automation The Group had almost Internet banking users in five countries. A quarter of the private customers had access to the Internet services and around 45 % of the corporate customers. The proportion of private customers connected to the Internet services was slightly higher in the rest of the Nordic region, compared with Sweden. The inflow of new customers to the Internet services continued to be strong during the year, and there are no signs of any slowing down in the rate of connection. The use of the Internet services was an important factor behind the strong increase in productivity in the Swedish branch office operations. While the average number of staff fell by 4 %, business volumes increased, and Handelsbanken continued to gain share in important markets. The Bank regards the Internet services as one of several means for customers to maintain contact with their local branch of Handelsbanken. Bank charges Handelsbanken chose not to charge for its Internet services when they were launched. The Bank has not changed its attitude on this point. It is part of Handelsbanken s basic philosophy that customers should not be charged fees for utilising basic services such as Internet banking, Datasvar (telephone banking), Bankomat (cash dispensers) and Privatgiro (giro payment) services. Unlike most other banks, Handelsbanken does not charge fees for these services. Nor does the Bank charge for arranging mortgage loans. Handelsbanken has the most satisfied customers In the annual survey carried out by Svenskt Kvalitetsindex, Handelsbanken again had the most satisfied customers, both private and corporate. Handelsbanken considers these surveys important and the figures are analysed carefully in the Swedish branch office operation. The results are broken down at regional level. The Bank s aim is to continue having the most satisfied customers. Handelsbanken aims to offer better services than the other banks, while at the same time having lower expenses. Other surveys confirmed the findings of the Svenskt Kvalitetsindex survey. In its annual survey of Swedish banks, Privata Affärer, a periodical for private finances, found that Handelsbanken had the most satisfied customers and is in a class of its own among the major banks. In the same survey, 38 % of the people interviewed said that they would change to Handelsbanken if they were to change banks today. Handelsbanken Liv s customers voted to demutualise the life insurance company One of the conditions that must be fulfilled before a mutual life insurance company is demutualised, is that the customers are given an opportunity to express their opinion. A ballot was held among the customers of the company who are entitled to vote. Almost 80 % participated in the ballot. Of these, 98 % voted in favour of demutualisation and the establishment of a profit-sharing company. The Swedish Financial Supervisory Authority (Finansinspektionen) approved the proposal at the beginning of February 2001 and, it being a matter of principle, handed it over to the government for a final decision. Handelsbanken Liv plans to start operating as a demutualised company in

4 Handelsbanken acquired SPP At the end of December, Handelsbanken acquired SPP Liv AB, the part of the mutual life insurance company SPP that was exposed to competition. Through the acquisition of SPP Liv, the Handelsbanken Group attained a fifth of the Swedish life insurance market, roughly the same level as the largest player. Stockholm, 20 February 2001 Arne Mårtensson President and Group Chief Executive For further information please contact: Arne Mårtensson, Group Chief Executive tel: arma01@handelsbanken.se Lennart Francke, Head of Accounting and Control tel: lefr01@handelsbanken.se Lars Lindmark, Head of Corporate Communications tel: lali12@handelsbanken.se Bengt Ragnå, Head of Investor Relations tel: bera02@handelsbanken.se The Annual General Meeting of AB (publ) will take place at 10 a.m. on Tuesday, 24 April 2001 in Stockholm. The interim report for the first quarter 2001 will be published on 23 April Handelsbanken's interim reports and other publications are also available on the Internet ( 4

5 Profit and loss account Group The profit and loss account on page 21 is prepared in accordance with Finansinspektionen s directives. In order to illustrate the development of operations more clearly, the profit and loss account is shown below with the various income categories excluding that which is generated in the trading operation. The Net result on financial operations (equity, interest rate and currency-related) and trading-related income from other income categories are reported under Trading, net. Performancerelated staff costs are reported separately. January December Change SEK m % Net interest income Commission, net Note 1a Trading, net Other income Total income Staff costs excl performance-related costs Other expenses Total expenses excl performance-related staff costs Performance-related staff costs Total expenses Profit before loan losses Net recoveries incl change in value of repossessed property Operating profit Pension settlement Taxes Minority interests Profit for the year Notes to the Profit and Loss Account January - December Change SEK m % Note 1a Commission, net Brokerage Mutual funds and custody Payments Lending and deposits Other Commission income Commission expense Commission, net

6 Business areas Profit and loss account by business area Group Branch Markets Investm. Asset Finans Liv S-hyp Central Other Total Total SEK m offices Banking Management Bank Treasury Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration included in income Net internal remuneration deducted from income Total expenses Profit before loan losses Net recoveries incl. change in value of repossessed property Operating profit Return on equity, % The net amount of received/paid remunerations between the business areas is included in/deducted from the income categories for the business areas. The net amount of received/paid remuneration 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 distribute the profit arising 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 for the business areas is computed after standard tax while for the whole Group it is reported after appropriations and full tax. The shareholders' equity, on which 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, which are not attributable to an individual business area. Handelsbanken Liv Fondförsäkrings AB and commission income from the mutual company are included under the business area "Liv". 6

7 Branch office operations Handelsbanken is a Nordic universal bank with a strongly decentralised organisation. The branch is responsible for all customers within its geographic area - including the largest companies. The branch office 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. Branch office operations consist of ten regional banks - seven in Sweden and one each in Norway, Finland and Denmark. The regional banks are responsible for their own profits and are run using the same concept to deliver universal banking services with a higher service level for its customers compared with other banks in the Nordic area, at the same time as Handelsbanken has the lowest expenses. It is on this foundation that the Bank will be able to grow in the whole of the Nordic area. Handelsbanken has 460 branches in Sweden, 25 in Norway, 20 in Finland and 7 in Denmark. Handelsbanken is the largest bank in Sweden, the fourth largest commercial bank in Finland, fifth in Norway and seventh in Denmark. Quarterly performance Total Total Change SEK m 2000:4 2000:3 2000:2 2000: % Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration included in income Total expenses Profit before loan losses Net recoveries incl. change in value of repossessed property Operating profit Return on equity, % Average number of employees Handelsbanken s branch office operations represented over 70 % of the Group s total profits. Profits increased by 29 % to SEK 8 705m. Net interest income rose by 13 % due among other things to higher market shares. Commission income also rose due to a high level of activity, particularly on the stock markets. Branch office operations in Sweden Handelsbanken continued to reap success in the Swedish market. Market shares in several areas increased, e.g. household deposits, total lending (excluding mortgage lending) and net flow to the mutual funds market. Privata Affärer, a periodical for private finances, acclaimed the Bank Best bank with a branch office network in its annual survey of the Swedish banks. Handelsbanken was also number one in the Svenskt Kvalitetsindex annual survey of how private and corporate customers view the service level of the Swedish banks. In the last few years, no other bank has been able to seriously threaten Handelsbanken s leading position where service is concerned. 7

8 The Bank s outstanding loans to telecom operators and manufacturers of telecommunications equipment were SEK 13.4bn. Most of this lending comprised three exposures. The companies in question are all rated A or higher, by Moody's. Branch office operations in Norway, Finland and Denmark In the other Nordic countries, nine new branches were opened during the year. In general the period of time before a branch starts to report a profit is very short. This period is even shorter in the other Nordic countries than in Sweden. In Norway the work of integrating Bergensbanken with Handelsbanken progressed. Three new branches were opened. Branch office operations in Norway reported a surplus of over half a billion Swedish kronor. Four new branches were opened in Finland. There was a very large increase in the number of new customers during the year. The Bank had almost private customers in Finland at the year-end. Two new branches were established in Denmark, one in Kongens Lyngby (northern Copenhagen) and one in Ålborg. Income increased by almost 50 %. During the year, a number of new products were launched for the private market, such as mortgage loans, credit cards and Internet-based equity trading, directly with the Copenhagen Stock Exchange. The Bank offers Internet services in all four Nordic countries. 8

9 Handelsbanken Markets Handelsbanken Markets operations are organised into three business areas: Trading, Financial institutions and trade finance, and Banking operations outside the Nordic countries. From an organisational point of view, Handelsbanken Investment Banking is also part of Handelsbanken Markets, but since 1 July 2000, Investment Banking has been reported as a separate business area in the interim and annual reports. The Bank s economic research unit is also included in Handelsbanken Markets as a resource. Handelsbanken Markets has just over 700 employees in 16 countries. Quarterly performance Total Total Change SEK m 2000:4 2000:3 2000:2 2000: % Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration deducted from income Total expenses Profit before loan losses Net recoveries incl change in value of repossessed property Operating profit Return on equity, % Average number of employees Handelsbanken Markets' operating profit was SEK 953m, an increase of 57 %. The result was higher in the second than in the first half of the year. Income increased by 12 % mainly due to larger market shares and growth in volumes. Expenses fell by 16 % mainly due to the action programme initiated a few years ago in the area of trading. All three business areas which are part of Handelsbanken Markets reported higher results. Trading Trading increased its income by 11 % while lowering expenses by 24 %. The result therefore improved. Trading in foreign exchange and money market instruments developed well during According to Greenwich Associates, an independent firm of analysts, Handelsbanken was one of the 30 largest banks in New York in the trading area, and the Bank s turnover in Scandinavian currencies in New York was as large as that of the other Nordic banks combined. 9

10 The result for trading in bonds and interest rate derivatives improved. Measures were taken to further improve profitability within this area. During the autumn, Handelsbanken arranged the repurchase and exchange of some of Stora Enso s outstanding private placement in Swedish kronor. Handelsbanken was the sole agent, and this was the first time an industrial company launched a Swedish krona benchmark bond. Financial institutions and trade finance The business area improved its result mainly by increasing income. Banking operations outside the Nordic countries In autumn 1999, the Bank made the decision to offer a complete range of services to corporate and individual customers on the UK market. Individual customers are offered a basic range of banking services including telephone banking and bank cards. As part of this expansion, a new branch was opened in Nottingham in October. In December, Internet banking services were introduced. 10

11 Handelsbanken Investment Banking Handelsbanken Investment Banking is responsible for corporate finance and equity sales and trading. Apart from its activities aimed at companies and institutional investors, Investment Banking also provides support to the branches in the field of equity-related products for small institutional investors and private customers. This support comprises research, development of new products, IT support and back office services. Operations are run in seven countries with a focus on the Nordic markets. Marketing aimed at international investors is mainly done via the units in Stockholm, Paris, London and New York. Investment Banking had some 450 employees at the year-end. Quarterly performance Total Total Change SEK m 2000:4 2000:3 2000:2 2000: % Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration deducted from income Total expenses Profit before loan losses Net recoveries incl change in value of repossessed property Operating profit Return on equity, % Average number of employees Handelsbanken Investment Banking reported a result of SEK 754m, an increase of 124 %. Despite turbulence in the equity markets during the autumn, the final quarter was as strong as the first quarter of the year. Equity sales and trading Handelsbanken strengthened its position in equity trading in all Nordic countries. Handelsbanken considers profitability more important than market share. In spite of this and much tougher international competition, Handelsbanken was one of the leading players on the Nordic stock exchanges. Handelsbanken s market share of structured equity products was in many cases more than 60 %. These products represented a considerable proportion of the total result for Investment Banking. In 2000, it became possible for Swedish companies to buy back their own shares. Handelsbanken was the leading player in this field, which involves both equity sales and Corporate Finance. Corporate Finance For Corporate Finance, market conditions were less favourable in the second half of the year compared with the beginning of the year. Handelsbanken s strong position in the market for share buybacks and incentive programmes meant however that the department also had a good result for the second half of the year. 11

12 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. Quarterly performance Total Total Change SEK m 2000:4 2000:3 2000:2 2000: % Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration deducted from income Total expenses Profit before loan losses Net recoveries incl change in value of repossessed property Operating profit Return on equity, % Average number of employees Higher volumes of managed assets and increased transaction intensity led to a rise in income of 45 % during the year. Expenses rose by 27 % mainly due to higher staff costs. The volume of assets managed by Handelsbanken Asset Management was SEK 149bn (147). The total volume of assets under management by the Group amounted to SEK 211bn. Mutual fund management At the end of 2000, the Bank s fund management company managed 66 mutual funds worth approximately SEK 90bn (88). Handelsbanken s share of net savings on the Swedish mutual fund market was 11.4 %, which was higher than the Bank s share of total fund holdings. Excluding deposits to premium pension savings the Bank s share of new savings increased to 14.1 % (13.2). Handelsbanken was the only major bank to increase its proportion of new savings in The premium pension selection process dominated the year. In terms of its share of invested capital, Handelsbanken came in second place among the four major banks with 6.3 %. The most popular funds in the premium pension selection process were the newly-started generation funds. Handelsbanken offers 19 funds in its premium pension range. 12

13 Discretionary management Discretionary management continued its strong growth. Handelsbanken Asset Management received new assignments during the year worth SEK 5.6bn including some from a number of local authorities and county councils. As at 31 December, the volume of assets under management amounted to SEK 51bn, an increase of 3 %. During the year a decision was made to start operations in Norway. Operations outside the Nordic countries Outside the Nordic countries, Asset Management has units in London and Luxembourg. Operations continued to expand and profits increased significantly. Custody services The strong growth in the number of custody accounts continued. Handelsbanken had a total of custody accounts with a total value of SEK 667bn. This is an increase of 56 % in the number of accounts. More than 90 % of newly-opened custody accounts and almost half of the total number of accounts are now linked to the Internet. Institutional custody services In 2000, there was an increase in the number of remote members on the Nordic stock exchanges, particularly in Finland and Sweden. Handelsbanken in Finland was very successful and had a market share of some 40 % for remote members and around 15 % for ordinary custody services. 13

14 Handelsbanken Finans Handelsbanken Finans offers a full range of local finance company services in four Nordic countries: leasing, conditional sales, financing in collaboration with vendors of investment assets, car financing and administration services, factoring and collection services, consumer credits and private label cards for retailer partners. Quarterly performance Total Total Change SEK m 2000:4 2000:3 2000:2 2000: % Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration deducted from income Total expenses Profit before loan losses Net recoveries incl change in value of repossessed property Operating profit Return on equity, % Average number of employees Profits increased by 9 % to SEK 331m (305). The improvement in the result is attributable to higher income due to volume growth and lower expenses. Credit volumes rose during the year by 20 % to SEK 20.3bn. An independent company, Image Survey International, investigated Swedish decisionmakers opinions of the twelve largest finance companies in Sweden. This is the first time a survey of this kind has been performed in the finance company sector. Handelsbanken Finans was ranked highest of all the finance companies. The survey reported that Handelsbanken Finans is considered to have much more competent staff, better customer service and greater reliability than average. In October, a Danish finance company Spartacus A/S was acquired together with its subsidiary Spartacus Finans A/S. The company operates in the areas of consumer finance via retailers and leasing for companies. It has a credit volume of just over SEK 500m. Handelsbanken Finans financed the 14 trains that will run on the Øresund bridge. Credit volumes amounted to SEK 800m. 14

15 The Swedish Köpkort credit card was a major success in The card is valid at points of sale in Sweden. Following a strong increase in the final quarter of the year, the number of cards with the Köpkort symbol was almost In the fourth quarter of 2000, the Bank s corporate customers were offered access to debt collection services via the Internet. 15

16 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. The traditional life insurance operations in Handelsbanken Liv Försäkrings AB are run on mutual principles where the whole surplus from operations goes back to policy-holders in the form of bonuses and collective risk capital. Quarterly performance Total Total Change SEK m 2000:4 2000:3 2000:2 2000: % Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration deducted from income Total expenses Profit before loan losses Net recoveries incl change in value of repossessed property Operating profit Return on equity, % Average number of employees Handelsbanken Liv Fondförsäkrings AB (unit-linked) and commission income from the mutual company are included under the business area "Handelsbanken Liv". The result for the profit-distributing unit-linked operation rose by 62 % to SEK 102m (63). Income rose by 38 %, mainly due to an increase in assets managed in unit-linked insurance from slightly more than SEK 13bn to SEK 17bn. The increase in expenses of 16 % is mainly due to the need for extra resources in the sales organisation. Total premium income for Handelsbanken Liv was SEK 9bn, an increase of 31 %. Unit-linked insurance represented the largest increase, with premium income rising from SEK 4.7bn to 6.7bn. At year-end, the volume of insurance assets under management amounted to SEK 37bn (33). 16

17 Yes to demutualisation On 1 January 2000, the Swedish legislation on insurance operations was changed. The new law allows traditional life insurance operations to be demutualised. Before a mutual company can be demutualised, a ballot must be held among the customers. A ballot was arranged accordingly in the fourth quarter. The rate of response was high. Around 80 % of the customers who were entitled to vote, made an active choice by voting with 98 % of them in favour of the proposed change. The proposal was submitted to Finansinspektionen, who recommended it in February 2001 before handing over the matter to the government for a final decision. Sales of endowment insurance got off to a good start at the beginning of the year. The reason for the large increase was the good performance on the stockmarket and the fact that a large proportion of the retail bonds maturing during the first quarter were invested in unit-linked insurance. New sales declined during the year when the stockmarket turbulence set in. Sales of Handelsbanken s Private Insurance Plan increased. This was mainly an effect of greater knowledge about pension issues and the interest aroused by the Premium Pension selection process. The market for employee pension insurance received another SEK 8bn when local authority and county council employees were given the opportunity to choose insurance companies for their occupational pensions. Handelsbanken Liv carried out several focused marketing activities during the year which yielded good results. Of the people who made an active choice, 5.4 % chose Handelsbanken Liv. Handelsbanken Liv Försäkrings AB Profit and loss account January - December SEK m Premium income Investment income Insurance claims Changes in life insurance provisions Bonus Operating expenses Other 33 Result on technical account life insurance business Handelsbanken Liv Försäkrings AB is a mutual life insurance company and is not consolidated. 17

18 Stadshypotek Bank Stadshypotek Bank is one of the leading Internet and telephone banks in Sweden. It is active under its own brand name and provides its own range of services. The Bank specialises in tailored offers of basic bank and insurance services. Quarterly performance Total Total Change SEK m 2000:4 2000:3 2000:2 2000: % Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration deducted from income Total expenses Profit before loan losses Net recoveries incl change in value of repossessed property Operating profit Return on equity, % Average number of employees Profits were SEK 15m (15). Although the income from retail bonds fell sharply, Stadshypotek Bank was able to report an unchanged result. This is mainly due to higher net interest income and increased income from Fondspar (savings in mutual funds), AktieSpar (savings in individual shares) and the VISA payment card. Stadshypotek Bank continued the work of developing its contact centre which was set up in late This offers customers a more personalised service when they contact the Bank and the opportunity to do banking transactions themselves by automated telephone services and the Internet. The Bank s Internet service grew significantly. Over customers were linked up to it at year-end, which is an increase of 134 %. At the end of the year, more than half of Stadshypotek Bank s customers made their private payments over the Internet. During the year, collaboration was initiated with Industrivärden, a Swedish investment company, for saving in shares. In this savings programme, private individuals who are shareholders in Industrivärden are offered a custody account with Stadshypotek Bank free of charge. Industrivärden views the share savings programme as a service to its present and future shareholders and a simple way of saving in the company s shares. Stadshypotek Bank FondSpar, a savings product comprising a selection of Handelsbanken s mutual funds, continued to do very well. During the year, the number of accounts increased by 73 % to Assets managed as at 31 December were SEK 723m, an increase of 35 %. 18

19 Handelsbanken Central Treasury Central Treasury is the Group's internal bank for Swedish kronor. Its task is to match the various cash flows within the Group. Quarterly performance Total Total Change SEK m 2000:4 2000:3 2000:2 2000: % Net interest income Commission, net Net result on financial operations Other income Total income Net internal remuneration deducted from income Total expenses Profit before loan losses Net recoveries incl change in value of repossessed property Operating profit Return on equity, % Average number of employees Central Treasury s result fell by 49 % to SEK 173m. The decrease must be seen in the light of the earnings made by the department in the first half of 1999 on fixed-term lending made at the higher interest rates which prevailed in previous years. Since the second quarter of 1999, when the last holdings of securities with two-digit interest rates matured, the quarterly results have stabilised. The task of the internal bank is also to earn money on the Group s cash flows. This is achieved by taking certain positions in connection with internal transactions. One example of this is fixed-term lending to Stadshypotek which can be funded with liabilities with shorter interest-fixing periods. The Central Treasury Department is responsible for the Group s funding in the capital market. The most important feature in this is issuing securities in the name of Stadshypotek in order to finance mortgage lending. In 2000, Handelsbanken/Stadshypotek continued to be the second largest issuer in the Swedish bond market. The Group also borrows in foreign currencies. This is done in the name of Handelsbanken and usually for the purpose of funding Stadshypotek. When necessary, foreign currency loans are converted into Swedish kronor through swaps. 19

20 Financial ratios for Group January December Return on shareholders' equity 22.2 % 18.4 % Return on shareholders' equity, operating profit after standard tax* 19.8 % 17.0 % Cost/Income (C/I ratio) - before loan losses 43.8 % 50.8 % - after loan losses 43.5 % 49.5 % - before loan losses * 44.6 % 50.8 % - after loan losses * 44.2 % 49.5 % Earnings per share, SEK - January December Number of shares, end of period of which repurchased Average no. of outstanding shares Adjusted equity per share, SEK Tier 1 capital Risk-weighted volume Capital ratio 9.5 % 9.4 % Tier 1 ratio 6.4 % 6.5 % Average number of employees No. of branches in Nordic countries, year-end * Excluding items affecting comparability Quarterly performance of Group SEK m 2000:4 2000:3 2000:2 2000:1 1999:4 Net interest income Commission, net Trading, net Other income Total income Staff costs Other administrative expenses Depreciation and write-downs Total expenses Profit before loan losses Net recoveries incl. change in value of repossessed property Operating profit Pension settlement Taxes Minority interests Net profit for the period

21 Profit and loss account Group In accordance with Finansinspektionen's regulations January - December Change SEK m % Interest income Interest expense Net interest income Dividends received Commission income Commission expense Commission, net Note Net result on financial operations Note Other operating income Total income General administrative expenses - Staff costs Other expenses 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 Pension settlement Taxes Minority interests Profit for the year

22 Notes to the Profit and Loss Accounts in accordance with Finansinspektionen's regulations January - December SEK m Note 1 Commission, net Payments Lending Deposits Guarantees Securities Other Commission income Commission expense Commission, net 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 IT costs Communication Travel and marketing Purchased services Supplies Other expenses Other administrative expenses Note 4 Loan losses Individually valued claims The year s write-down for actual loan losses Writeback of previous provisions for possible loan losses which are reported as actual loan losses in the year s accounts The year 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 Net expense for the year for individually valued claims Claims valued as a group: The year 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 year for claims valued as a group 13-3 Loan losses

23 Balance sheet Group 31-Dec 31-Dec SEK m Lending to the general public Note Lending to credit institutions Interest-bearing securities - Financial fixed assets Financial current assets Other assets Note Total assets Deposits and funding from the general public Liabilities to credit institutions Issued securities etc Subordinated liabilities Other liabilities Note Shareholders' equity Total liabilities and shareholders' equity Notes to the balance sheet 31 Dec 31 Dec SEK m Note 1 Lending to the general public SEK lending - to households to companies etc *) Foreign currency lending - to households to companies etc Reserve for possible loan losses Total lending to the general public *) Of which National Debt Office 0 0 Note 2 Other assets, Other liabilities Previously, assets in the unit-linked insurance operations where the policy-holder bears the investment risk were set off against the corresponding liability. Starting this year, they are reported gross under Other assets and Other liabilities. 23

24 Other information Some minor reclassifications have been made in the balance sheet and the profit and loss account. The comparative figures have been recalculated January - December SEK m Cash flow statement Cash flow on operating activities Cash flow on investing activities Cash flow on financing activities Cash flow for the year Liquid funds at beginning of year Cash flow for the year Exchange rate difference on liquid funds Liquid funds at end of year Capital base and requirement Tier 1 capital Total capital base Risk-weighted volume Capital ratio 9.5 % 9.4 % Tier 1 ratio 6.4 % 6.5 % 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 58,2 % 66.8 % Proportion of bad debts 0,33 % 0.27 % Problem loans before write-down for possible loan losses Loan loss ratio -0,01 % % Non-performing loans for which interest is accrued Collateral taken over: - Buildings and land Shares and other participations Other Total collateral taken over

25 Derivative instruments SEK m Interest-rate related Currency-related Equity-related Market Book Market Book Market Book value value value value value value Positive values Negative values The above table is compiled in accordance with Finansinspektionen 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 January December 2000, Handelsbanken Markets exposure to interest rate and exchange rate risk (incl. option risk), measured as Value-at-Risk (VaR) was on average SEK 37m. During the period, this risk varied between SEK 16m and SEK 51m. During the same period, Handelsbanken Markets exposure to equity price risks, measured as VaR, was on average SEK 14m. This risk varied between SEK 3m and SEK 27m. 25

26 Handelsbanken's shares According to the Affärsvärlden s General Index, the Swedish stockmarket fell by 12 % during the year. Handelsbanken s share rose by 51 %, which is more than any other share included in the Affärsvärlden s bank and insurance index. The bank index, excluding Handelsbanken, rose by just under 30 %. As at 31 December 2000, Handelsbanken had a total market value of SEK 112bn. 31 December December 1999 Share price SHB A, SEK Market capitalisation SEK bn Index Share price performance until 31 December Handelsbanken General index 300 Bank index excl Handelsbanken Handelsbanken's rating at 31 December 2000 Financial strength Short-term Long-term Moody s B+ P-1 Aa2 S&P A-1 A+ Fitch B F1+ AA- 26