Handelsbanken Capital Markets

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1 Handelsbanken Capital Markets Handelsbanken Capital Markets is a full-service investment bank, and at the same time an integrated part of Handelsbanken. The focus and business objectives are to provide the best financial solutions for customers with Nordic requirements. The operations comprise trading in equities, fixed income, commodities and foreign exchange, as well as structured products, Debt Capital Markets, cash management, advisory services within Corporate Finance and macro and financial research. More than 1,100 staff in six countries specialise in Nordic conditions and companies. Handelsbanken s branch network, with over 600 branches worldwide, gives Handelsbanken Capital Markets a unique competitive edge. Handelsbanken s branches in the Nordic region provide a proximity to customers and the Nordic market, while Capital Markets offices in London and New York offer contact with major global investors. Since Capital Markets is an integral part of Handelsbanken, it has access to the Bank s strong balance sheet. This is vital, since transactions are becoming more complex, and market volatility is increasing. It is also vital as it enables Capital Markets to compete effectively with international players. The financial big picture and specialised skills Research conducted by Handelsbanken Capital Markets shows that customers will increasingly turn to a few major, well-known investment banks to meet their Nordic needs. In addition, the ability of customers to compare products and services will set high demands for client-oriented product development and reduced costs all the way to end-customers. The ability of investment banks to combine specialised skills with general know-how, while maintaining high theoretical and technical competence, will be crucial for customers with Nordic needs. The future belongs to the investment banks which can offer complete financial solutions, in parallel with individual products and services. The drive at Handelsbanken Capital Markets focuses on building two levels: the specialist level, where each function must be of the absolute highest quality; and the overall level, this being the ability to meet the overall financial needs of customers. Handelsbanken Capital Markets

2 Research Research at Handelsbanken Capital Markets encompasses traditional equity and credit research as well as macroeconomic and quantitative analyses. The Nordic economies and markets are largely driven by international events. Therefore, Handelsbanken Capital Markets has focused on global macroeconomic research that measures up well in the international marketplace. Handelsbanken Capital Markets macroeconomic research is top-ranked in the Nordic region. Research that takes a broad view coupled with in-depth analysis The different departments of Handelsbanken Capital Markets collaborate closely. Macroeconomic research takes a broad view, describing and projecting the major trends, while equity and credit research perform in-depth analyses of sectors and companies. Handelsbanken Capital Markets has active coverage of around 300 listed companies in the Nordic region. Corporate Finance The operations provide advisory and implementation services in the fields of corporate acquisitions and divestments, IPOs and raising equity in public companies. Meets competition Handelsbanken s financial strength and extensive branch network provide a substantial competitive advantage in terms of managing financial risk and proximity to customers. Equity trading Equity trading is focused on Nordic stockbroking to provide investors private as well as institutional customers with added value in terms of thorough analysis and knowledge of the Nordic markets. The broadest coverage Handelsbanken s expertise in the Nordic business world is based on the knowledge of local conditions which only daily contact can give. Over 70 analysts cover around 300 Nordic companies at our offices in Stockholm, Oslo, Copenhagen and Helsinki. Nordic and international distribution Handelsbanken Capital Markets has a very broad customer base for equity products via our branch offices as well as our sales offices in London and New York. This provides valuable information and at the same time, the Bank can offer high-quality distribution of equity products. Approximately 40% of brokerage income is generated by business with customers from outside the Nordic region. An integrated organisation Equity Trading works closely with other parts of Handelsbanken Capital Markets. This means that the Bank can customise solutions according to the client s needs. An equity transaction, for example, can include currency transactions, short selling, hedging currency risks for an equity purchase or other financial building blocks that combine to form the correct solution. Handelsbanken Capital Markets 2

3 Corporate Capital Markets Handelsbanken Capital Markets has gathered the entire treasury business under one roof to be able to offer better solutions to the largest companies and institutions. This includes fixed income, foreign exchange, credit and commodity products, Debt Capital Markets and cash management. Local presence, where customer and credit responsibility lie with the Bank s local offices, combines with global resources and specialists to create world-class solutions for payments, risk management and finance. 24-hour trading Handelsbanken Capital Markets has a broad range of products and services in trading in fixed income and foreign exchange instruments. Traders in Stockholm, New York and London can provide you with 24-hour information and prices from global markets. Since August 2008, 24-hour trading in foreign exchange is offered from Stockholm. Handelsbanken Capital Markets has specialists who can provide individual and customised solutions. These solutions cover a range of products from plain foreign exchange trading to non-sovereign bonds and various types of derivatives. Analysts deal with questions ranging from macroeconomic issues to quantitative problems. Credit market analysts closely follow market developments and individual issuers. Global solutions for Nordic business Handelsbanken Capital Markets is one of the leading Nordic players in fixed income, foreign exchange, commodity and credit products, and related derivatives. Institutional investors and companies turn to Handelsbanken Capital Markets to use these products to manage their risk exposure and develop business. Since Nordic businesses are broadly international, the range and quality of these products must be global. Handelsbanken Capital Markets can offer its customers all the currencies they need and offer investors a comprehensive range of products. Leading in debt financing Within Debt Capital Markets, advisory and implementation services are provided for capital marketrelated debt financing, syndication of loans, acquisition financing and related activities such as bond programmes, commercial paper programmes, securitisation, etc. Handelsbanken s financial strength and extensive branch network provide a significant competitive advantage in terms of managing financial risk and proximity to customers. Effective solutions for financial flows Cash flow in a company is a process that requires careful attention, monitoring, and supervision. Handelsbanken Capital Markets helps corporate customers to streamline their cash resources and reduce costly credits. Handelsbanken Capital Markets offers a complete set of cash management solutions, extending from basic services to the markets most advanced tools. Over 70 employees in three continents supply customised solutions that can meet the specific needs of each customer. Handelsbanken Capital Markets 3

4 Structured products The Structured products business area covers all asset classes and risk categories. By combining different financial instruments cost effective solutions are offered with various risk profiles. These include everything from customised institutional solutions to listed savings products for the public. To maintain a market leading position, this business area focuses on a forward-looking product development strategy and a commitment to offer the best primary and secondary pricing in the market. Product range The product range includes equity-linked bonds, multi-asset bonds, hedge fund notes, convertible subordinated loans, credit-linked notes, reverse convertibles, interest index-linked notes, FX-linked notes commercial paper, and warrants and turbo warrants. Handelsbanken Capital Markets Figures Profits were SEK 761m (1,183), a decrease of 36%. Income fell to SEK 3,635m (3,710). The decrease in earnings is partly due to lower net gains on financial items at fair value and partly due to higher expenses. The change on net gains/losses on financial items at fair value was mainly due to value changes, realised and unrealised, in a portfolio of securities eligible as collateral which is part of Handelsbanken s liquidity portfolio. This was responsible for SEK 364m of the total decrease in profits. The portfolio has a high credit quality and most of the holdings were rated AAA or AA, with no part less than A. Expenses rose by 14% to SEK 2,874m (2,527). The increase was primarily attributable to costs in Norway, where the increase in staff costs was SEK 108m. An increase in performance-related remuneration also contributed to the increased costs. The average number of employees increased by 12% to 935 (837). Brokerage income increased by 5%, and Handelsbanken was the second largest player on the Stockholm Stock Exchange. Handelsbanken became a member of the London Stock Exchange. The number of institutional customers outside the Nordic region increased to over 300, and the proportion of brokerage income generated from business with non-nordic investors rose to 41% (38). The number of organised road shows, that is, arrangements where companies or institutions meet international investors, was 649, representing a 12% increase. For the first time, institutional customers ranked Handelsbanken no. 1 for Swedish equities trading and no. 2 for Danish equities trading. In Finland, Handelsbanken retained its first place from the previous year. Prospera conducted the surveys. In addition, the international survey company AQ Research ranked Handelsbanken Capital Markets as best in the analysis of Scandinavian equities. Income rose and Capital Markets was the largest player in providing advisory services for corporate acquisitions with a Swedish connection, and it was the largest Nordic player on the Nordic market. Handelsbanken was an advisor to 36 public transactions for a value of approximately EUR 14bn. A new share issue and five IPOs were carried out on the Nordic stock exchange with a total value of EUR 1.7bn. Capital Markets served as the mandated lead arranger for 22 syndicated loans for a total value of EUR 19.9bn, of which it was the book runner for 10 transactions for the amount of EUR 13.4bn. This made Handelsbanken the largest player in terms of arranging and placing investment grade syndicated loans (at least BBB-) in Sweden and the Nordic region. Handelsbanken Capital Markets 4

5 Adjusted for the above-mentioned change in bond values, earnings were basically unchanged. Handelsbanken had a 21% market share for both Swedish government bonds and mortgage bonds. The Bank was the second largest Nordic player in foreign exchange trading in Swedish kronor (SEK). The number of foreign exchange customers was 10% higher than at year-end 2006, and the volumes for spot trading in SEK increased by 20%. The turbulence on financial markets also resulted in increased business volumes for derivatives trading. Handelsbanken is the first Nordic bank to launch a number of publicly listed, foreign exchange indexes. This offers customers, professional investors as well as a wider public, the possibility of investing in various foreign exchange strategies. The strategies comply with a rule-based framework and offer a possibility of investing in an asset type that is largely uncorrelated with other markets. So far, over SEK 1.2bn has been invested. Capital Markets is the leading commodities broker in the Nordic region and continued to expand its operations. Customer volumes have quadrupled. Handelsbanken was the first player in the Nordic region to offer management of certain price risks in the agricultural sector. For many years, Handelsbanken Capital Markets has led the Nordic market in structured products. Commission income increased by 16% from this business area. A total of 234 issues were arranged at a nominal value of SEK 20.9bn, an increase of 12%. Capital Markets arranged 20% of all capital-protected products on the Swedish exchanges, and its proportion of the outstanding volume was 21%. The Bank retained its position as market leader in the warrant and certificate markets, where its market share was 59% in Sweden and 38% in the Nordic region. Change % (SEK m) * Income 3,635 3,710 2,572 2,617 2,167 2,023-2 Expenses -2,874-2,527-1,886-1,704-1,602-1, Loan losses Operating profit 761 1, * Due to a divisional split in January 2007, figures have been adjusted to reflect only Handelsbanken Capital Markets (before 2007, one of two units in one business area) to achieve comparable figures in comparing change on an annual basis. Handelsbanken Capital Markets 5