2012 Highlights of Handelsbanken s Annual Report. January December

Transcription

1 Highlights of Handelsbanken s Annual Report January December

2 HIGHLIGHTS OF ANNUAL REPORT Highlights of Handelsbanken s Annual Report JANUARY DECEMBER Summary January December, compared with January December The period s profit after tax for total operations went up by 18 per cent to SEK 14,548 million (12,323) and earnings per share rose to SEK (19.78) Changed corporate tax in Sweden resulted in a reversal of previously booked deferred tax of SEK 1,682 million; excluding this, earnings per share rose to SEK (19.78) Operating profit increased by 6 per cent to SEK 17,564 million (16,536) Operating profit rose by 47 per cent in Branch operations outside Sweden and by 2 per cent in Swedish branch operations Return on equity for total operations rose to 14.7 per cent (13.5) Income increased by 7 per cent to SEK 35,062 million (32,809) Net interest income rose by 10 per cent to SEK 26,081 million (23,613) The C/I ratio improved to 46.3 per cent (47.1) The loan loss ratio was 0.08 per cent (0.05) The tier 1 capital ratio according to Basel II rose to 21.0 per cent (18.4) and the core tier 1 capital ratio increased to 18.4 per cent (15.6) All bonds maturing up to the end of February 2014 have been prefinanced and the Bank s liquidity reserve exceeded SEK 750 billion 29 new branches were opened in the UK bringing the total to 133 The Bank is acquiring UK asset manager Heartwood Wealth Group and creating a platform for growth in wealth management in the UK operations The Netherlands will become a new home market with a new regional bank The Board proposes a dividend of SEK per share (9.75) Summary of, compared with The period s profit after tax for total operations rose to SEK 4,540 million (3,246) and earnings per share increased to SEK 7.18 (5.15) Operating profit decreased by 8 per cent to SEK 4,060 million (4,405) Income increased by 5 per cent to SEK 8,891 million (8,466) Return on equity for total operations was 17.7 per cent (13.2) The loan loss ratio was 0.09 per cent (0.07) 2 Handelsbanken

3 HIGHLIGHTS OF ANNUAL REPORT Contents Page Group Overview 4 Group performance 5 Group Business segments 9 Branch office operations in Sweden 10 Branch office operations outside Sweden 12 Branch office operations in the UK 14 Branch office operations in Denmark 15 Branch office operations in Finland 16 Branch office operations in Norway 17 Handelsbanken International 18 Handelsbanken Capital Markets 19 Other 21 Condensed set of financial statements The Group 22 Key figures 22 The Handelsbanken share 22 Income statement 23 Earnings per share 23 Statement of comprehensive income 24 Quarterly performance 24 Balance sheet 25 Statement of changes in equity 26 Cash flow statement 26 Note 1 Accounting policies 27 Note 2 Net interest income 27 Note 3 Net fee and commission income 28 Note 4 Net gains/losses on financial items at fair value 28 Note 5 Other administrative expenses 28 Note 6 Loan losses and impaired loans 29 Note 7 Discontinued operations 30 Note 8 Loans and credit exposure 31 Note 9 Derivatives 32 Note 10 Goodwill and other intangible assets 33 Note 11 Due to credit institutions, deposits and borrowing from the public 33 Note 12 Assets managed 33 Note 13 Turnover of own debt instruments and shares 33 Note 14 Pledged assets, contingent liabilities and other commitments 34 Note 15 Classification of financial assets and liabilities 34 Note 16 Fair value measurement of financial assets and liabilities 36 Note 17 Assets and liabilities by currency 37 Note 18 Related-party transactions 37 Note 19 Capital base and capital requirement in the banking group 38 Note 20 Risk and capital management 41 Condensed set of financial statements Parent company 44 Information on phone conference, etc 46 Share price performance and other information 47 3 Handelsbanken 2 Handelsbanken

4 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Handelsbanken Group Overview Change Summary income statement Net interest income 6,484 6,357 2% 6,462 0% 26,081 23,613 10% Net fee and commission income 1,910 1,877 2% 1,742 10% 7,369 7,673-4% Net gains/losses on financial items at fair value % % 1,120 1,016 10% Risk result - insurance % % % Other dividend income % % Share of profit of associates % Other income % 29 21% % Total income 8,891 8,374 6% 8,466 5% 35,062 32,809 7% Staff costs -2,811-2,510 12% -2,562 10% -10,711-9,942 8% Other administrative expenses -1,511-1,392 9% -1,108 36% -5,069-5,060 0% Depreciation, amortisation and impairments of property, equipment and intangible assets % % % Total expenses -4,434-4,022 10% -3,783 17% -16,244-15,464 5% Profit before loan losses 4,457 4,352 2% 4,683-5% 18,818 17,345 8% Net loan losses % % -1, % Gains/losses on disposal of property, equipment and intangible assets % -3 7 Operating profit 4,060 4,110-1% 4,405-8% 17,564 16,536 6% Taxes 544-1,096-1,167-3,038-4,372-31% Profit for the period from continuing operations 4,604 3,014 53% 3,238 42% 14,526 12,164 19% Profit for the period pertaining to discontinued operations, after tax % Profit for the period 4,540 3,046 49% 3,246 40% 14,548 12,323 18% Summary balance sheet Loans to the public 1,680,479 1,591,128 6% 1,620,505 4% 1,680,479 1,591,128 6% of which mortgage loans 891, ,929 6% 868,726 3% 891, ,929 6% Deposits and borrowing from the public 682, ,888-6% 728,572-6% 682, ,888-6% of which households 267, ,942 4% 266,233 0% 267, ,942 4% Total equity 106,897 94,524 13% 100,987 6% 106,897 94,524 13% Total assets 2,387,858 2,454,366-3% 2,513,322-5% 2,387,858 2,454,366-3% Summary of key figures Return on equity, total operations * 17.7% 13.0% 13.2% 14.7% 13.5% Return on equity, continuing operations * 18.0% 12.8% 13.2% 14.6% 13.4% C/I ratio, continuing operations 49.9% 48.0% 44.7% 46.3% 47.1% Earnings per share, total operations, SEK after dilution Tier 1 ratio, Basel II 21.0% 18.4% 20.5% 21.0% 18.4% * When calculating return on equity, equity is adjusted for the impact of unrealised changes in the value of financial assets classified as "Available for Sale" and for cash flow hedges. 4 Handelsbanken 3 Handelsbanken

5 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Group performance JANUARY DECEMBER COMPARED WITH JANUARY DECEMBER Profit after tax for total operations increased during the period by 18 per cent to SEK 14,548 million (12,323). Earnings per share increased by 17 per cent to SEK (19.78). Changed corporate tax in Sweden led to a reversal of previously booked deferred tax amounting to SEK 1,682 million. Excluding this, earnings per share increased to SEK Return on equity for total operations increased to 14.7 per cent (13.5). The Group s operating profit for increased by 6 per cent to SEK 17,564 million (16,536). Operating profit went up by 47 per cent in Branch office operations outside Sweden and by 2 per cent in Swedish branch office operations. The C/I ratio for continuing operations improved to 46.3 per cent (47.1). The Board proposes a dividend of SEK per share (9.75). Income Net interest income 26,081 23,613 10% Net fee and commission income 7,369 7,673-4% Net financial items 1,120 1,016 10% Other income % Total income 35,062 32,809 7% Income increased by 7 per cent to SEK 35,062 million as a result of rising net interest income. Exchange rate movements had only a marginal impact on income. Net interest income rose by 10 per cent to SEK 26,081 million, mainly due to rising business volumes. Net interest income increased by 25 per cent in Branch office operations outside Sweden and by 6 per cent in Swedish branch office operations. The Group s costs for the Stabilisation Fund and various deposit guarantees were SEK -1,066 million (-1,118). Deposit volumes grew more than lending volumes during the year. The average volume of deposits grew by 7 per cent to SEK 690 billion (645) and the average volume of loans to the public rose by 4 per cent to SEK 1,616 billion (1,552). In the corporate sector, the deposit volume grew by 8 per cent, while lending rose by 4 per cent. In the household sector, the increase in deposits was 6 per cent and lending grew by 4 per cent. Net fee and commission income went down by SEK 304 million, or 4 per cent, to SEK 7,369 million (7,673). The fall was mainly because brokerage income went down by SEK 263 million to SEK 1,137 million (1,400), a lower yield split in the life insurance operations reduced insurance commissions by SEK 64 million to SEK 583 million (647) and there were lower lending commissions. However, mutual fund commissions rose by 3 per cent to SEK 1,680 million (1,639), and net income from card operations increased by 4 per cent to SEK 1,036 million (996). Somewhat more stable market conditions compared to the previous year, contributed to a rise in net gains/losses on financial items at fair value of 10 per cent to SEK 1,120 million (1,016). Expenses Staff costs -10,711-9,942 8% Other administrative expenses -5,069-5,060 0% Depreciation and amortisation % Total expenses -16,244-15,464 5% Total expenses rose by 5 per cent to SEK -16,244 million. Staff costs increased by 8 per cent to SEK -10,711 million while other administrative expenses were unchanged. Three percentage points of the increase in staff costs is due to the fact that the allocation to the Oktogonen Foundation rose to SEK -1,020 million (-913), and that the cost for the corridor effect when calculating pensions in accordance with IAS 19 rose to SEK -220 million (-31). Variable compensation, including social security costs and other payroll overheads, was SEK -127 million (-125). The remainder of the increase in staff costs is mainly due to a higher number of employees outside Sweden and the annual salary adjustment. The average number of employees was more or less unchanged at 11,192 (11,184). Other administrative expenses were unchanged at SEK -5,069 million (-5,060). Loan losses Net loan losses -1, Loan loss ratio as a % of loans Impaired loans, net 3,197 2,697 19% Proportion of impaired loans, % Loan losses were SEK -1,251 million (-816) and the credit quality remained stable. The loan loss ratio was 0.08 per cent (0.05). Net impaired loans rose to SEK 3,197 million (2,697), equivalent to 0.18 per cent (0.16) of lending. 5 Handelsbanken 4 Handelsbanken

6 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT COMPARED WITH The period s profit after tax for total operations increased to SEK 4,540 million (3,246). Earnings per share rose to SEK 7.18 (5.15) and return on equity increased to 17.7 per cent (13.2). The changed corporate tax rate in Sweden generated a reversal of previously booked tax of SEK 1,682 million. Operating profit decreased by 8 per cent to SEK 4,060 million (4,405), due partly to seasonally higher expenses and partly to non-recurring expenses of SEK 168 million and a higher allocation to Oktogonen of SEK 104 million. The C/I ratio was 49.9 percent (44.7). Income Change Net interest income 6,484 6,462 0% Net fee and commission income 1,910 1,742 10% Net financial items % Other income % Total income 8,891 8,466 5% Income increased by 5 per cent to SEK 8,891 million, chiefly due to improved net fee and commission income and higher net gains/losses on financial items. Net interest income rose by SEK 22 million to SEK 6,484 million. Adjusted for positive exchange rate effects of SEK 33 million, net interest income was more or less unchanged. Compared with the previous quarter, lower interest rates meant that deposit margins in Swedish branch operations went down by SEK 153 million while higher lending margins contributed SEK 85 million. Net interest income in branch office operations outside Sweden rose by 7 per cent. The Group s costs for the Stabilisation Fund and various deposit guarantees increased to SEK -255 million (-242) and the benchmark effect in Stadshypotek amounted to SEK -16 million (-4). The average volume of loans to the public increased by SEK 30 billion, or 2 per cent, to SEK 1,641 billion (1,611). The effect of exchange rate movements was marginal. Total average deposits decreased by 1 per cent to SEK 691 billion (698) as a result of the volume of volatile corporate deposits falling by 2 per cent. The average volume of household deposits rose by 1 per cent. Net fee and commission income rose by 10 per cent to SEK 1,910 million (1,742), due to increases in most categories of income. For example, brokerage income increased by 12 per cent to SEK 273 million (243) while advisory income doubled to SEK 51 million (26). Net payment commissions increased by 2 per cent. Net gains/losses on financial items at fair value rose to SEK 366 million (191). This was partly attributable to increased customer activity in the fourth quarter which resulted in higher profits for the fixed income and currency operations. Other income rose to SEK 131 million (71), mainly because the risk result in the insurance operations increased to SEK 88 million (33). Expenses Change Staff costs -2,811-2,562 10% Other administrative expenses -1,511-1,108 36% Depreciation and amortisation % Total expenses -4,434-3,783 17% Analysis of changes Change % points Non-recurring costs Oktogonen Exchange rate movements Costs for variable compensation Total Other expenses Total change The Bank s expenses are seasonally higher in the fourth quarter and total expenses rose by 17 per cent to SEK -4,434 million. Exchange rate effects increased expenses by SEK 23 million. Staff costs rose by SEK 249 million or 10 per cent to 2,811 million. An increased allocation to the Oktogonen profit-sharing foundation, staff costs of a non-recurring nature and exchange rate movements explain eight percentage points of the increase. The remaining increase is due to higher salary costs in Branch operations outside Sweden. The allocation to the Oktogonen profit-sharing foundation rose by SEK 104 million to SEK -333 million (-229). Non-recurring expenses, mainly attributable to pension charges, were SEK 77 million. The period s provision for variable compensation increased by SEK 19 million to SEK -41 million (-22) and exchange rate movements raised staff costs by SEK 13 million. Other administrative expenses increased by 36 per cent to SEK -1,511 million. Non-recurring costs relating to terminated rental contracts were the cause of SEK 91 million or eight percentage points of the increase. The remainder of the increase was due to a seasonally higher level of activity in the fourth quarter of the year, leading to higher costs in most categories. The average number of employees decreased to 11,156 (11,381), chiefly due to a lower number of holiday staff and temporary employees. Loan losses Change Net loan losses Loan loss ratio as a % of loans Impaired loans, net 3,197 3,067 4% Proportion of impaired loans, % Loan losses increased to SEK -395 million and the loan loss ratio was 0.09 per cent (0.07). Net impaired loans were SEK 3,197 million (3,067), equivalent to 0.18 per cent (0.18) of lending. 6 Handelsbanken 5 Handelsbanken

7 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Taxes In the fourth quarter, the Swedish Riksdag voted to lower corporate tax in Sweden to 22 per cent from the previous level of 26.3 per cent starting on 1 January This change meant that in the fourth quarter, the Bank recalculated the Group s net deferred tax liability to the new lower tax rate. This generated a positive nonrecurring effect of SEK 1,682 million. PERFORMANCE IN THE BUSINESS SEGMENTS ( compared with ) In Branch office operations in Sweden operating profit went down by 8 per cent to SEK 3,067 million (3,324), due to seasonally higher costs and slightly higher loan losses. Income was unchanged and the loan loss ratio was 0.06 per cent (0.03). Operating profit in Branch office operations outside Sweden went down by 3 per cent to SEK 1,170 million (1,208). Income increased by 7 per cent, while expenses which are higher in the fourth quarter of the year grew by 16 per cent. The loan loss ratio was 0.22 per cent (0.18). Handelsbanken Capital Markets increased its operating profit to SEK 197 million (56), due to improved net fee and commission income and higher net gains/losses on financial items. Income rose by 28 per cent, while expenses went up by 11 per cent. The Bank was the largest player in new savings in mutual funds in Sweden during the year, with a net inflow of SEK 21 billion, corresponding to a market share of 28 per cent. FUNDING AND LIQUIDITY The short- and long-term fixed income markets stabilised during the fourth quarter. The risk premium continued to fall and investors had a greater appetite for risk resulting in many banks being active in the debt market. Due to the high level of issue activity earlier in the year, the Bank had a limited funding requirement in the fourth quarter. In total during the last quarter of the year, bonds with a value of SEK 28 billion were issued. For the whole of, the issued bond volume was SEK 231 billion, with SEK 148 billion of this in covered bonds, SEK 80 billion in senior bonds and SEK 3 billion in subordinated debt. The average maturity for the issued volume during the year was 4.7 years, as compared to 4.1 years in the previous year. The volumes issued during the period meant that all bonds maturing up to and including February 2014 have been prefinanced. The Bank s bonds due to reach maturity in 2013 amount to SEK 164 billion, which is considerably less than the issued volume of SEK 231 billion in. Issues during the year included the US market s first 7-year covered bond issue since 2008 and the Bank s first covered bond issue on the Australian market. In the fourth quarter, the Bank issued subordinated debt in Swedish kronor for SEK 3 billion, with its terms adapted to meet the requirements of the future capital regulations. The Bank s total liquidity reserve exceeded SEK 750 billion. Cash funds and liquid assets invested with central banks amounted to SEK 246 billion, while the volume of liquid bonds totalled SEK 114 billion. The remainder of the reserve mainly comprised an unutilised issue amount for covered bonds at Stadshypotek. According to the current Swedish definition from 1 January 2013, the Handelsbanken Group s liquidity coverage ratio (LCR) at the end of the period was 136 per cent. In USD the LCR was 174 per cent and in EUR it was 301 per cent. In January, the Basel Committee decided on certain relaxations to the definition of LCR and based on the new international definition, the Group s LCR was around 160 per cent. CAPITAL Core tier 1 ratio, Basel II 18.4% 15.6% 2.8 Tier 1 ratio, Basel II 21.0% 18.4% 2.6 Capital ratio, Basel II 20.9% 20.9% 0.0 Equity 106,897 94,524 13% Tier 1 capital 102,333 93,548 9% January December The capital base decreased to SEK 102 billion (106) because the Bank redeemed subordinated loans for a net amount of SEK 12.3 billion during the year. At the end of the period, 88 per cent of the capital base was core tier 1 capital. The capital ratio calculated according to Basel II was 20.9% (20.9). The profit for the period was the main reason for equity increasing by SEK 12.4 billion to SEK billion. Tier 1 capital rose by 9 per cent to SEK billion (93.5) and core tier 1 capital increased by SEK 10.7 billion to SEK 90.1 billion (79.4). The core tier 1 capital ratio according to Basel II rose during the year by 2.8 percentage points to 18.4 per cent (15.6) and the tier 1 capital ratio increased by 2.6 percentage points to 21.0 per cent (18.4). Increased tier 1 capital contributed 1.7 percentage points to the change and higher lending volumes contributed -0.3 percentage points. The mix effect of the fact that new lending volumes are of higher credit quality than the portfolio average and that volumes which leave the portfolio are of lower credit quality than the average, had a 1.1 percentage point positive impact. Credit risk migration in the loan portfolio also had a negative impact on the tier 1 ratio of 0.3 percentage points. The migration was mainly between better risk classes. The loan volume in the lower risk classes continued to fall. Exchange rate movements had a positive effect of 0.4 percentage points. 7 Handelsbanken 6 Handelsbanken

8 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT In the fourth quarter, the tier 1 and core tier 1 capital ratios increased by 0.5 percentage points to 21.0 per cent (20.5) and 18.4 per cent (17.9) respectively. Higher lending volumes reduced the tier 1 capital ratio by 0.3 percentage points and the period s profit made a positive contribution of 0.5 percentage points. The mix effects in the lending portfolio added a further 0.5 percentage points, while credit risk migration had a negative effect of 0.3 percentage points. CAPITAL EFFECTS OF CHANGED REGULATIONS At the end of the period, the core tier 1 ratio according to CRD 4 (Basel III), including all IAS 19 effects, was 16.4 per cent. The total impact of the changes in IAS 19 was 0.5 percentage points, of which 0.4 percentage points were already included in the calculated effects of CRD 4. Until the implementation of CRD 4, IAS 19, which comes into effect on 1 January 2013, will thus lower the core tier 1 ratio by 0.5 percentage points. The transitional rules which the Swedish banks have applied regarding how deductions for insurance holdings are made from the capital base, ceased to apply on 1 January Investments made before 20 June 2006 were previously deducted in their entirety from the capital base, but now these are to be deducted in equal parts from the tier 1 and tier 2 capital. This is expected to temporarily reduce the Bank s core tier 1 ratio by 0.4 percentage points. Since management of insurance holdings is also included in CRD 4, the effect is neutralised when CRD 4 is implemented. The total effect of CRD 4, IAS 19 and the removed transitional rules regarding insurance holdings is expected to reduce the Bank s core tier 1 capital ratio by two percentage points, of which 0.9 percentage points (IAS 19 and the removed transitional rules) from the first quarter of 2013 inclusive, and a further 1.1 percentage points when CRD 4 is implemented. CHANGED IAS 19 RULES As of 1 January 2013, changed accounting regulations for pensions apply, IAS 19. The new regulations mean that actuarial gains and losses will be reported directly in other comprehensive income, and it will therefore no longer be possible to defer the recognition of gains and losses in what is known as the corridor method. This will create greater volatility in both other comprehensive income and in reported equity. The reported pension costs will also increase, since the calculated return on the pension assets, according to the new regulations, will be the same as the discount rate on the pension liability (3.0 per cent for ) and no longer an estimate of expected return. If the changed regulations had been in force in, staff costs would have increased by SEK 457 million. In the Bank s interim reports for 2013, comparative figures will be adjusted and recalculated figures will be distributed during the first quarter. For other effects of the change in IAS 19, see Note 1. RATING In the fourth quarter, Standard & Poor s changed its view of the Swedish economy to a negative outlook. As a consequence of this, the outlook for the major Swedish banks was also changed to negative. Otherwise, Handelsbanken s long-term and short-term ratings were unchanged with the rating agencies which monitor the Bank. Long-term Short-term Standard & Poor's AA- A-1+ Fitch AA- F1+ Moody's Aa3 P-1 C DBRS AA (low) Financial strength NETHERLANDS NEW HOME MARKET Branch operations in the Netherlands continue to perform well and the Bank has decided to start a regional bank with its head office in Amsterdam. This means that the Netherlands with 13 branches at present will become the Bank s sixth home market and operations will be reported separately starting in the first quarter of HANDELSBANKEN ACQUIRES UK ASSET MANAGER Handelsbanken has entered into an agreement to acquire the UK private wealth manager Heartwood Wealth Group Limited. The company mainly conducts discretionary wealth management with assets under management of around GBP 1.5 billion. This deal adds advanced wealth management services to the customer offering in the UK and creates a platform for the UK branch operations growth in the area of asset management. The transaction, which is subject to the customary permits from the regulatory authorities, will initially only have a marginal impact on the Bank s financial position and is expected to be completed during the second quarter. HANDELSBANKEN S ANNUAL GENERAL MEETING ON 20 MARCH The Board is proposing to the annual general meeting that the dividend be raised to SEK per share (9.75) and that the existing share repurchase programme for a maximum of 40 million shares be extended for an additional year. The Board proposes that the record day for the dividend be 25 March 2013, which means that the Handelsbanken share will be traded ex-dividend on 21 March Handelsbanken 7 Handelsbanken

9 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Handelsbanken Group Business segments January - December Branch office operations in Sweden Branch office operations outside Sweden Capital Markets Other Adjustments & eliminations Group Net interest income 16,781 8, ,081 Net fee and commission income 3,375 1,442 2, ,369 Net gains/losses on financial items at fair value ,120 Risk result - insurance Share of profit of associates 8 8 Other income Total income 20,753 10,461 3, ,062 Staff costs -3,157-2,959-2,255-2, ,711 Other administrative expenses -1, ,144-5,069 Internal purchased and sold services -2,828-1, , Depreciation and amortisation Total expenses -7,293-5,084-3,204-1, ,244 Profit before loan losses 13,460 5, , ,818 Net loan losses ,251 Gains/losses on disposal of property, equipment and intangible assets Operating profit 13,040 4, , ,564 Profit allocation Operating profit after profit allocation 13,681 4, , ,564 Internal income * -2,828-6,295-1,167 10,290 - January - December Branch office operations in Sweden Branch office operations outside Sweden Capital Markets Other Adjustments & eliminations Group Net interest income 15,827 6, ,613 Net fee and commission income 3,630 1,428 2, ,673 Net gains/losses on financial items at fair value ,016 Risk result - insurance Share of profit of associates 9 9 Other income Total income 19,987 8,734 4, ,809 Staff costs -3,118-2,766-2,111-2, ,942 Other administrative expenses -1, ,950-5,060 Internal purchased and sold services -2,734-1, , Depreciation and amortisation Total expenses -7,188-4,871-3, ,464 Profit before loan losses 12,799 3,863 1,051-1, ,345 Net loan losses Gains/losses on disposal of property, equipment and intangible assets Operating profit 12,752 3,095 1,051-1, ,536 Profit allocation Operating profit after profit allocation 13,416 3, , ,536 Internal income * -2,804-6, ,140 * Internal income which is included in total income comprises income from transactions with other operating segments. Since interest income and interest expense are reported net as income, this means that internal income includes the net amount of the internal funding cost among segments. The business segments are Branch office operations in Sweden, Branch office operations outside Sweden and Capital Markets. The income statements by segment include internal items such as internal interest, commissions and payment for internal services rendered, primarily according to the cost price principle. The part of Capital Markets operating profit that does not involve risk-taking is distributed to the branch in the branch office operations that is responsible for the customer. 9 Handelsbanken 8 Handelsbanken

10 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Branch office operations in Sweden Branch office operations in Sweden comprise six regional banks, as well as Handelsbanken Finans s and Stadshypotek s operations in Sweden. At Handelsbanken, the branches are the base of all operations, with responsibility for all customers. The regional banks offer a full range of banking services at 461 branches throughout Sweden. Handelsbanken Finans offers a full range of finance company services and works through the Bank s branches and in financing collaborations with retailers and vendors. Stadshypotek is the Bank s mortgage company, and is completely integrated with the branch operations. INCOME STATEMENT Change Net interest income 4,148 4,172-1% 4,191-1% 16,781 15,827 6% Net fee and commission income % 819 3% 3,375 3,630-7% Net gains/losses on financial items at fair value % % % Other income % 3 133% % Total income 5,153 5,221-1% 5,148 0% 20,753 19,987 4% Staff costs % % -3,157-3,118 1% Other administrative expenses % % -1,218-1,245-2% Internal purchased and sold services % % -2,828-2,734 3% Depreciation and amortisation % % % Total expenses -1,931-1,843 5% -1,743 11% -7,293-7,188 1% Profit before loan losses 3,222 3,378-5% 3,405-5% 13,460 12,799 5% Net loan losses % % Gains/losses on disposal of property, equipment and intangible assets 0 0 0% 0 0% 0 0 0% Operating profit 3,067 3,349-8% 3,324-8% 13,040 12,752 2% Profit allocation % % % Operating profit after profit allocation 3,264 3,535-8% 3,468-6% 13,681 13,416 2% Internal income % % -2,828-2,804-1% Cost/income ratio, % Loan loss ratio, % Allocated capital 57,244 50,408 14% 54,124 6% 57,244 50,408 14% Return on allocated capital, % Average number of employees 4,332 4,391-1% 4,527-4% 4,378 4,478-2% Number of branches % 461 0% % BUSINESS VOLUMES Average volumes, SEK bn Change Loans to the public* Household % 588 1% % of which mortgage loans % 535 1% % Corporate % 480 0% % of which mortgage loans % 226 3% % Total 1,075 1,069 1% 1,068 1% 1,068 1,049 2% Deposits and borrowing from the public Household % 210 1% % Corporate % 160 3% % Total % 370 2% % * Excluding loans to the National Debt Office. 10 Handelsbanken 9 Handelsbanken

11 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT JANUARY DECEMBER COMPARED WITH JANUARY DECEMBER Financial performance Operating profit rose by 2 per cent to SEK 13,040 million (12,752), due to higher income and good control of costs. Net interest income rose by 6 per cent to SEK 16,781 million (15,827). The effect of larger deposit and lending volumes amounted to SEK 388 million and the change in deposit and lending margins negatively affected net interest income by SEK -104 million. The fees to the Stabilisation Fund and the deposit guarantee fell by SEK 20 million and burdened net interest income by SEK -679 million (-699). The benchmark effect in Stadshypotek amounted to SEK -14 million (-9). Net fee and commission income fell by 7 per cent to SEK 3,375 million (3,630), mainly due to lower securities-related commissions. Net gains/losses on financial items at fair value increased by 14 per cent to SEK 579 million (510). Total expenses rose by 1 per cent to SEK -7,293 million (-7,188). The C/I ratio improved to 34.1 per cent (34.8). Loan losses were SEK -420 million (-47). The loan loss ratio was 0.04 per cent (0.00). Business development For Handelsbanken, being available for customers is vital. Personal meetings with the customer are key, and to get even closer to their customers, several branches are planning to open new physical meeting-places. During the year, ten new meeting-places were opened and more are planned. The average volume of deposits from households continued to increase, amounting to SEK 207 billion (196), a rise of 6 per cent compared with the previous year. At the same time, figures from Svensk Fondstatistik showed that Handelsbanken s share of the mutual fund market continues to grow. During the year, new savings in the Bank s mutual funds in Sweden amounted to SEK 21 billion, corresponding to a market share of 28 per cent. The average volume of mortgage loans to private individuals grew by 3 per cent to SEK 534 billion (517). The average volume of corporate lending was SEK 2 billion more than the corresponding period in the previous year and amounted to SEK 481 billion (479). COMPARED WITH Operating profit decreased by 8 per cent to SEK 3,067 million (3,324) due to seasonally higher administrative costs and higher loan losses. Net interest income declined by 1 per cent compared with the previous quarter to SEK 4,148 million (4,191). Deposit margins declined by SEK 153 million as a result of falling short-term interest levels. The negative effect was offset slightly by slightly increasing deposit and lending volumes and a SEK 85 million improvement in lending margins during the period. Fees for the Swedish Stabilisation Fund and the deposit guarantee increased to SEK -149 million (-136). At Stadshypotek, the benchmark effect declined to SEK -16 million (-4). Loans to households continued to grow, although the rate of growth continued to decline compared with the previous year. The average volume of mortgages to private individuals increased to SEK 542 billion (535). The gross margin on the mortgage portfolio before advisory, administration and other expenses amounted to 0.89 per cent (0.86) during the fourth quarter. The average volume of corporate lending was unchanged at SEK 480 billion (480). Net fee and commission income increased by 3 per cent to SEK 847 million (819), mainly due to higher securities commissions and payment commissions. Net gains/losses on financial items at fair value improved to SEK 151 million (135). Total expenses increased by 11 per cent to SEK 1,931 million (1,743), as a result of other administrative expenses being seasonally higher in the fourth quarter of the year. Due to the seasonal effect of higher costs during the holiday months of the third quarter, staff costs fell slightly. The average number of employees went down by 195 as a result of the extra employment of temporary staff in the summer. Compared with the corresponding quarter of the previous year, the average number of employees fell by 59 persons, or 1 per cent. Loan losses increased to SEK -155 million (-81) and the loan loss ratio was 0.06 per cent (0.03). 11 Handelsbanken 10 Handelsbanken

12 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Branch office operations outside Sweden Branch office operations outside Sweden comprised the three regional banks in the UK, and the regional banks in Denmark, Norway and Finland. These countries, together with Sweden, are regarded as the Bank s home markets. The branch operations in these countries are run according to the same concept as in Sweden to provide a full range of banking services with a higher service level and at lower cost than peer banks. This business segment also includes Handelsbanken International as well as Handelsbanken Finans s and Stadshypotek s operations outside Sweden. Handelsbanken International is responsible for branch operations outside the Bank s home markets. INCOME STATEMENT Change Net interest income 2,318 1,939 20% 2,162 7% 8,612 6,863 25% Net fee and commission income % % 1,442 1,428 1% Net gains/losses on financial items at fair value % 82 4% % Other income % 14-86% % Total income 2,788 2,395 16% 2,596 7% 10,461 8,734 20% Staff costs % % -2,959-2,766 7% Other administrative expenses % % % Internal purchased and sold services % % -1,105-1,059 4% Depreciation and amortisation % % % Total expenses -1,376-1,329 4% -1,191 16% -5,084-4,871 4% Profit before loan losses 1,412 1,066 32% 1,405 0% 5,377 3,863 39% Net loan losses % % % Gains/losses on disposal of property, equipment and intangible assets % -3 1 Operating profit 1, % 1,208-3% 4,543 3,095 47% Profit allocation % % % Operating profit after profit allocation 1, % 1,234-1% 4,681 3,240 44% Internal income -1,363-1,034-32% -1,541 12% -6,295-6,425 2% Cost/income ratio, % Loan loss ratio, % Allocated capital 32,645 28,053 16% 32,082 2% 32,645 28,053 16% Return on allocated capital, % Average number of employees 3,376 3,206 5% 3,335 1% 3,304 3,144 5% Number of branches % 304 3% % BUSINESS VOLUMES Average volumes, SEK bn Change Loans to the public Household % 170 5% % Corporate % 340 3% % Total % 510 4% % Deposits and borrowing from the public Household % 45 0% % Corporate % 131 2% % Total % 176 2% % 12 Handelsbanken 11 Handelsbanken

13 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT JANUARY DECEMBER COMPARED WITH JANUARY DECEMBER Financial performance Operating profit rose by 47 per cent to SEK 4,543 million (3,095). The improved profit was mainly due to increased net interest income. Income increased by 20 per cent, while expenses grew by only 4 per cent. All units improved their profits. The effect of exchange rate movements was marginal. Net interest income increased by 25 per cent to SEK 8,612 million (6,863) as a result of both higher business volumes and improved margins. Fees for state guarantees and deposit guarantees which are charged to net interest income decreased to SEK -274 million (-329). Net fee and commission income increased by SEK 14 million to SEK 1,442 million (1,428) while net gains/losses on financial items decreased by SEK 37 million to SEK 351 million (388). Expenses rose by 4 per cent to SEK -5,084 million (-4,871). Increased costs due to the continued expansion in the UK were partly offset by lower costs in Branch office operations in Denmark and at Handelsbanken International. Loan losses increased to SEK -831 million (-769) and the loan loss ratio was 0.19 per cent (0.18). Lending volumes increased in all home markets and average lending volumes rose by 10 per cent to SEK 513 billion (468). COMPARED WITH Operating profit decreased by 3 per cent to SEK 1,170 million (1,208) due to higher expenses and loan losses. The weaker Swedish krona increased the profit figure by SEK 20 million. Profit before loan losses grew by SEK 7 million to SEK 1,412 million (1,405). Net interest income rose by 7 per cent to SEK 2,318 million (2,162) due to rising business volumes and better lending margins. Exchange rate movements positively affected net interest income by SEK 35 million. In local currency, net interest income increased by 6 per cent. Net fee and commission income rose by 13 per cent to SEK 383 million (338) and net gains/losses on financial items increased to SEK 85 million (82). Expenses rose by 16 per cent to SEK -1,376 million (-1,191). Exchange rate movements accounted for SEK -18 million. Expansion costs for new branch offices amounted to SEK -77 million (-72). Loan losses increased to SEK -240 million (-196), and the loan loss ratio was 0.22 per cent (0.18). 13 Handelsbanken 12 Handelsbanken

14 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Branch office operations in the UK INCOME STATEMENT Change Net interest income % % 2,142 1,540 39% Net fee and commission income % 25-16% % Net gains/losses on financial items at fair value % 22 9% % Other income % 15 0 Total income % 595 9% 2,342 1,700 38% Staff costs % % % Other administrative expenses % % % Internal purchased and sold services % % % Depreciation and amortisation % -2 50% % Total expenses % % -1, % Profit before loan losses % 305 9% 1, % Net loan losses % % % Gains/losses on disposal of property, equipment and intangible assets Operating profit % % 1, % Profit allocation % 3 100% % Operating profit after profit allocation % % 1, % Average number of employees 1, % 964 6% % Number of branches % 124 7% % BUSINESS VOLUMES Average volumes, GBP m Change Loans to the public Household 2,780 2,197 27% 2,608 7% 2,537 1,936 31% Corporate 7,703 6,326 22% 7,327 5% 7,119 5,692 25% Total 10,483 8,523 23% 9,935 6% 9,656 7,628 27% Deposits and borrowing from the public Household % 483 5% % Corporate 2,586 1,763 47% 2,564 1% 2,326 1,461 59% Total 3,094 2,163 43% 3,047 2% 2,789 1,828 53% JANUARY DECEMBER COMPARED WITH JANUARY DECEMBER Financial performance Operating profit went up by 57 per cent to SEK 1,006 million (639) as a result of the continued expansion with increasing business volumes and a larger number of customers. Adjusted for exchange rate movements, profit before loan losses rose by 44 per cent. Income rose by 38 per cent and net interest income increased by 39 per cent to SEK 2,142 million (1,540), mainly due to larger business volumes. Net fee and commission income rose by 16 per cent to SEK 94 million (81) due to larger business volumes contributing to increased payment commissions. Net gains/losses on financial items also grew as a result of an increase in the number of customer transactions and amounted to SEK 91 million (79). Expenses rose by 29 per cent to SEK -1,184 million (-919) as a result of the continued expansion of the branch network and the average number of employees increased by 25 per cent to 944 (753). Loan losses were SEK -151 million (-142). Business development Business volumes continued to increase, and for the second successive year deposits increased at a faster rate than lending. Average lending volumes rose by 27 per cent and deposits increased by 53 per cent. During the year, 29 new branches were opened and at the end of the period, the Bank had 133 branches. On 1 January 2013, a fourth regional bank was started with its head office in Bristol. After the end of the period, the Bank agreed to acquire the wealth manager Heartwood Wealth Group Ltd with some GBP 1.5 billion of assets under management. This acquisition allows the Bank to expand its customer offering and take a major step forward for further growth also in its savings business. COMPARED WITH Operating profit decreased by 14 per cent to SEK 230 million (268). The effect of exchange rate movements was marginal. Profits before loan losses increased by 9 per cent to SEK 332 million (305). Income increased by 9 per cent due to improved net interest income which rose by 11 per cent to SEK 602 million (544). Expenses rose by 10 per cent to SEK -318 million (-290) and loan losses totalled SEK -101 million (-37). 14 Handelsbanken 13 Handelsbanken

15 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Branch office operations in Denmark INCOME STATEMENT Change Net interest income % 342 5% 1,397 1,225 14% Net fee and commission income % 68 7% % Net gains/losses on financial items at fair value % 17-18% % Other income % % Total income % 430 5% 1,761 1,564 13% Staff costs % % % Other administrative expenses % % % Internal purchased and sold services % % % Depreciation and amortisation % -4 0% % Total expenses % % ,005-4% Profit before loan losses % 207-2% % Net loan losses % % % Gains/losses on disposal of property, equipment and intangible assets Operating profit % % % Profit allocation % 6 67% % Operating profit after profit allocation % % % Average number of employees % 617 0% % Number of branches % 54 0% % BUSINESS VOLUMES Average volumes, DKK bn Change Loans to the public Household % % % Corporate % % % Total % % % Deposits and borrowing from the public Household % 8.8 0% % Corporate % % % Total % % % JANUARY DECEMBER COMPARED WITH JANUARY DECEMBER Financial performance Operating profit increased by 24 per cent to SEK 432 million (349). Income increased by 13 per cent, while expenses fell by 4 per cent. Adjusted for exchange rate effects, operating profit grew by 28 percent. Net interest income rose by 14 per cent, or SEK 172 million, to SEK 1,397 million (1,225). In local currency, the increase was 18 per cent and was due to higher business volumes and improved lending margins. Fees for the Swedish Stabilisation Fund and the deposit guarantee, together with the Danish state deposit guarantee burdened net interest income by SEK -45 million (-46). Expenses fell by SEK 44 million, or 4 per cent, to SEK -961 million (-1,005), partly because the previous year included fees to cover the Danish government s losses arising when failed Danish banks were wound down. This charged expenses with SEK 22 million. Loan losses rose to SEK -368 million (-210). Business development The Bank continued to have a stable inflow of new customers. The average volume of lending increased by 19 per cent to DKK 52.9 billion (44.4). The Bank s lending to households increased by 16 per cent and corporate lending increased by 22 per cent. The average volume of deposits from the public grew by 12 per cent to DKK 22.3 billion (20.0). COMPARED WITH Operating profit decreased by 38 per cent to SEK 115 million (184), chiefly due to higher loan losses. Profit before loan losses fell by 2 per cent. Income rose by 5 per cent, or SEK 22 million, to SEK 452 million (430). Adjusted for exchange rate movements, income increased by 2 per cent. Net interest income increased by 5 per cent to SEK 360 million (342), partly due to higher net interest income from lending. Exchange rate movements explain SEK 7 million of the increase. Expenses rose by 12 per cent to SEK -250 million (-223) as a result of seasonally lower expenses during the quarter of comparison. Expressed in local currency, the increase in expenses was 9 per cent. Loan losses increased to SEK -87 million (-23). 15 Handelsbanken 14 Handelsbanken

16 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Branch office operations in Finland INCOME STATEMENT Change Net interest income % 260 7% 1, % Net fee and commission income % 85 26% % Net gains/losses on financial items at fair value 7 7 0% 6 17% % Other income % 1-100% % Total income % % 1,442 1,310 10% Staff costs % % % Other administrative expenses % % % Internal purchased and sold services % % % Depreciation and amortisation % -5 0% % Total expenses % % % Profit before loan losses % 197-3% % Net loan losses % % % Gains/losses on disposal of property, equipment and intangible assets Operating profit % % % Profit allocation % 8 125% % Operating profit after profit allocation % % % Average number of employees % 489-3% % Number of branches % 45 0% % BUSINESS VOLUMES Average volumes, EUR m Change Loans to the public Household 3,534 3,262 8% 3,486 1% 3,480 3,239 7% Corporate 7,524 6,887 9% 7,391 2% 7,152 6,768 6% Total 11,058 10,149 9% 10,877 2% 10,632 10,007 6% Deposits and borrowing from the public Household 1,277 1,348-5% 1,276 0% 1,287 1,266 2% Corporate 1,949 2,120-8% 2,051-5% 2,135 1,936 10% Total 3,226 3,468-7% 3,327-3% 3,422 3,202 7% JANUARY DECEMBER COMPARED WITH JANUARY DECEMBER Financial performance Operating profit improved by 3 per cent to SEK 616 million (596) as a result of improved net interest income. Profit before loan losses increased by 19 per cent to SEK 744 million (625). Net interest income went up by SEK 136 million, or 15 per cent, as a result of both growing volumes and higher lending margins and volumes. In local currency, net interest income rose by 19 per cent. The fee to the Stabilisation Fund burdened net interest income by SEK -36 million (-45). Net fee and commission income rose by 5 per cent to SEK 375 million (356) while net gains/losses on financial items went down to SEK 30 million (51). Total expenses rose by 2 per cent due to an increase in other administrative expenses. Staff costs were lower. In local currency, total expenses rose by 5 per cent. Loan losses increased to SEK -128 million (-29). Business development Average lending increased by 6 per cent compared with the previous year. The total average volume of deposits rose by 7 per cent, mainly as a result of a 10 per cent increase in corporate deposits. COMPARED WITH Operating profit decreased by 21 per cent to SEK 134 million (169). Profit before loan losses fell by SEK 5 million or 3 per cent. Net interest income rose by 7 per cent to SEK 277 million (260), as a result of increasing lending volumes and margins. In local currency, the increase in net interest income was 4 per cent. Expenses increased by SEK 44 million to SEK -199 million (-155), mainly because expenses are seasonally lower during the quarter of comparison. Loan losses increased to SEK -58 million (-28). 16 Handelsbanken 15 Handelsbanken

17 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Branch office operations in Norway INCOME STATEMENT Change Net interest income % % 3,098 2,382 30% Net fee and commission income % 84 13% % Net gains/losses on financial items at fair value % 19 11% % Other income % Total income % % 3,529 2,829 25% Staff costs % % % Other administrative expenses % % % Internal purchased and sold services % % % Depreciation and amortisation % -3 0% % Total expenses % % -1,263-1,232 3% Profit before loan losses % 591 7% 2,266 1,597 42% Net loan losses % -63-6% % Gains/losses on disposal of property, equipment and intangible assets 0 0 0% 0 0% 0 1 Operating profit % 528 8% 2,066 1,209 71% Profit allocation % 6 100% % Operating profit after profit allocation % 534 9% 2,097 1,239 69% Average number of employees % 645-1% % Number of branches % 49 0% % BUSINESS VOLUMES Average volumes, NOK bn Change Loans to the public Household % % % Corporate % % % Total % % % Deposits and borrowing from the public Household % % % Corporate % % % Total % % % JANUARY DECEMBER COMPARED WITH JANUARY DECEMBER Financial performance Operating profit rose by 71 per cent to SEK 2,066 million (1,209) mainly due to higher net interest income and lower loan losses. Profits before loan losses increased by 42 per cent. Net interest income increased by 30 per cent, or SEK 716 million, due to rising lending volumes and higher loan margins. The fee for the Swedish Stabilisation Fund burdened net interest income by SEK -85 million (-111). Net fee and commission income increased by 6 per cent to SEK 329 million (311). Expenses rose by 3 per cent to SEK -1,263 million (-1,232). Staff costs increased by 5 per cent, partly due to annual salary adjustments and higher actuarial pension costs. Other expenses fell slightly. Loan losses fell to SEK -200 million (-389). Business development The average volume of deposits from households increased by 16 per cent, while lending grew by 7 per cent. Corporate lending increased by 6 per cent, while corporate deposits went down by 3 per cent. COMPARED WITH Operating profit increased by 8 per cent to SEK 571 million (528). Profit before loan losses increased by 7 per cent. Net interest income rose by 10 per cent, or SEK 82 million, to SEK 865 million (783), mainly as a result of increased lending margins. The exchange rate effect amounted to SEK 19 million, and in local currency, net interest income increased by 8 per cent. Net fee and commission income increased by 13 per cent to SEK 95 million (84), partly due to higher guarantee commissions and lower commission expenses. Expenses rose by 15 per cent to SEK -346 million (-300) due to higher development costs and staff costs. Loan losses fell to SEK -59 million (-63). 17 Handelsbanken 16 Handelsbanken

18 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Handelsbanken International The main task of Handelsbanken International is to support the Bank s customers in the Nordic region and the UK with their international business and, in the long term, to develop prioritised countries operations into regional banks in line with the Bank s business model. The Bank has 32 branches and nine representative offices in a total of 19 countries outside the Nordic countries and the UK. INCOME STATEMENT Change Net interest income % 233-8% % Net fee and commission income % 76 14% % Net gains/losses on financial items at fair value % 18 6% % Other income % Total income % 328-3% 1,387 1,331 4% Staff costs % % % Other administrative expenses % % % Internal purchased and sold services % % % Depreciation and amortisation % % % Total expenses % % ,030-5% Profit before loan losses % % % Net loan losses Gains/losses on disposal of property, equipment and intangible assets % -2 0 Operating profit % % % Profit distribution % 3 200% % Operating profit after profit allocation % % % Average number of employees % 620 1% % Number of branches % 32 0% % BUSINESS VOLUMES Average volumes, SEK bn Change Loans to the public Household % % % Corporate % % % Total % % % Deposits and borrowing from the public Household % 2.9 3% % Corporate % % % Total % % % JANUARY DECEMBER COMPARED WITH JANUARY DECEMBER Financial performance Operating profit improved by 40 per cent to SEK 423 million (302) as a result of increased net interest income and lower costs. Profit before loan losses increased by 36 per cent to SEK 409 million (301). Net interest income increased by 15 per cent, or SEK 123 million, mainly due to higher net interest income in the Netherlands and the Bank s good creditworthiness attracting large volumes of deposits from corporate and institutional customers. Expenses decreased by 5 per cent to SEK -978 million (-1,030), partly due to lower staff and IT costs. Recoveries exceeded loan losses and totalled SEK 16 million (1). Business development The average volume of lending decreased by 4 per cent to SEK 51.2 billion (53.2) compared with the corresponding period of the previous year. At the same time, deposits went up by 54 per cent to SEK 32.4 billion (21.0), mainly due to increased corporate volumes. During the fourth quarter, the Bank opened its 13th branch in the Netherlands and branch managers have been recruited for a further two branches. It was decided to start a regional bank with its head office in Amsterdam, making the Netherlands Handelsbanken s sixth home market. COMPARED WITH Operating profit decreased by SEK 61 million to SEK 120 million (59). Income went down by 3 per cent and expenses increased by 18 per cent. The period s recoveries exceeded loan losses and the net amount was SEK 65 million (-45). 18 Handelsbanken 17 Handelsbanken

19 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Handelsbanken Capital Markets Capital Markets consists of Handelsbanken s investment bank and asset management operations, including insurance savings. The unit has a functional and product responsibility throughout the Group for trading in financial instruments, structured products, cash management, corporate finance and debt capital markets, economic and financial research, and for all savings products except bank account savings. In the table below, the income figures for Capital Markets products throughout the Group are presented first, followed by comments on the figures for the Handelsbanken Capital Markets segment. INCOME DISTRIBUTION IN THE GROUP FOR HANDELSBANKEN CAPITAL MARKETS PRODUCTS January - December Capital Markets Net interest income 517 Branch office operations in Sweden Branch office operations outside Sweden Other Total Capital Markets products in the group Commission income 2,944 1, ,255 Change -12/- 12 Change Jan-Dec / Jan-Dec of which brokerage income ,137 12% -19% of which mutual funds and custody 1, ,028 5% 1% of which insurance % -10% Net fee and commission income 2,438 Net financial items ,178 66% -1% Risk result - insurance 196 Other income 11 Total income 3,820 JANUARY DECEMBER COMPARED WITH JANUARY DECEMBER The Group s brokerage income fell by 19 per cent to SEK 1,137 million (1,400), mainly as a result of low activity on the equity markets. Asset management commissions increased by 1 per cent to SEK 2,028 million (2,009), of which mutual fund commissions rose by 3 per cent to SEK 1,680 million (1,639) as a result of larger asset management volumes. Insurance commissions went down to SEK 583 million (647), due to fewer policies with guaranteed rates of return. Net gains/losses on financial items fell by 1 per cent to SEK 1,178 million (1,189). Currency transactions related to branch operations, which are included in net gains/losses on financial items, resulted in a currency gain of SEK 522 million (561). COMPARED WITH Brokerage income increased by 12 per cent to SEK 273 million (243), as a result of higher stock market turnover and customer activity. Asset management commissions rose by 5 per cent to SEK 530 million (507), chiefly due to larger asset management volumes. Net gains/losses on financial items increased by SEK 152 million to SEK 383 million (231), with increased volumes in fixed income and currency trading. Currency transactions for customers in the branch operations gave a net gain of SEK 142 million (113). Business development For the third year running, the Bank was the largest player in new savings in mutual funds in Sweden, with a net inflow of SEK 21 billion. For the market as a whole, net inflow in Sweden totalled SEK 74 billion, and the Bank s share of new savings was thus 28 per cent. During the year, the Bank started five generation funds which are free of management fees in the Swedish premium pensions system. In, net new savings in Handelsbanken s funds in the Group totalled SEK 23 billion. XACT Fonder is the largest player on the Nordic market for exchange-traded funds, with a market share of 85 per cent of assets under management. Handelsbanken s total mutual fund volume, including XACT funds, increased during the year by SEK 35 billion to SEK 224 billion (189). Total assets under management in the Group rose during the year by SEK 59 billion from SEK 529 billion to SEK 588 billion. In its three-year performance reviews, the Morningstar rating institute ranked Handelsbanken s funds as best of the major Swedish banks mutual funds. According to TNS Sifo Prospera, Handelsbanken Fonder is the most appreciated fund management company among Swedish mutual fund savers. Private Banking operations performed well and the Bank strengthened its position. TNS Sifo Prospera ranked Handelsbanken best in Sweden for Private Banking & Wealth Management. There was a high level of interest in capital market funding and the Bank made 133 bond issues for a value of just over EUR 15 billion. Corporate Finance performed well despite the market in general being weak. The Bank was the largest Nordic player for corporate mergers and acquisitions in Sweden. 19 Handelsbanken 18 Handelsbanken

20 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT INCOME STATEMENT IN HANDELSBANKEN CAPITAL MARKETS BUSINESS SEGMENT Change Net interest income % 98-55% % Net fee and commission income % % 2,438 2,611-7% Net gains/losses on financial items at fair value % % Risk result - insurance % % % Other income % 1 200% % Total income 1, % % 3,820 4,177-9% Staff costs % % -2,255-2,111 7% Other administrative expenses % % % Internal purchased and sold services % % % Depreciation and amortisation % -13 8% % Total expenses % % -3,204-3,126 2% Profit before loan losses % % 616 1,051-41% Net loan losses Gains/losses on disposal of property, equipment and intangible assets Operating profit % % 616 1,051-41% Profit allocation % % % Operating profit after profit allocation % % Internal income % % -1, % Cost/income ratio, % Allocated capital 4,187 7,174-42% 4,581-9% 4,187 7,174-42% Return on allocated capital, % Average number of employees 1,481 1,617-8% 1,553-5% 1,550 1,626-5% INCOME DISTRIBUTION Change Asset management * % 414 8% 1,684 1,701-1% Investment banking % % 2,136 2,476-14% Total income 1, % % 3,820 4,177-9% * Including Handelsbanken Liv. JANUARY DECEMBER COMPARED WITH JANUARY DECEMBER Operating profit decreased to SEK 616 million (1,051). Asset management operations reported a profit of 722 million (850), while the earnings figure for the investment bank was SEK -106 million (201). Net fee and commission income fell by 7 per cent to SEK 2,438 million (2,611). The decrease was chiefly attributable to lower brokerage income as a result of reduced turnover and activity on the equity market. Net gains/losses on financial items at fair value increased by 5 per cent to SEK 658 million (628), as a result of higher business flows compared with the previous year. The risk result in Handelsbanken Liv went down to SEK 196 million (209), due to lower mortality and longevity results. Total income decreased by 9 per cent to SEK 3,820 million (4,177) of which the asset management business went down by 1 per cent and the investment bank by 14 per cent. Expenses rose by 2 per cent to SEK -3,204 million (-3,126). The average number of employees fell by 5 per cent to 1,550 (1,626). COMPARED WITH Operating profit rose to SEK 197 million (56), which was entirely due to an improved result in the investment bank owing to seasonally lower activity during the summer months of the previous quarter. Asset management s operating profit was SEK 194 million (195), while profit from the investment bank was SEK 3 million (-139). Net fee and commission income increased by 18 per cent to SEK 637 million (539), largely due to increased customer activity. Net gains/losses on financial items increased to SEK 242 million (119), with increased business volumes in fixed income and currency trading. Expenses rose by 11 per cent to SEK -817 million (-734). Other administrative expenses increased by 20 per cent as a result of seasonally higher expenses. Staff costs increased by 13 per cent, which was mainly attributable to non-recurring costs. The average number of employees fell by 5 per cent to 1,481 (1,553). 20 Handelsbanken 19 Handelsbanken

21 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Other Reported below are the income and expenses related to treasury and the central head office departments and also provisions to the Oktogonen profit-sharing foundation. Capital gains/losses, dividends, and income and expenses that are not attributable to any of the segments are also reported here. INCOME STATEMENT Change Net interest income % Net fee and commission income % 46-7% Net gains/losses on financial items at fair value % % % Share of profit of associates % Other income % 19 26% % Total income % -58 5% Staff costs % % -2,745-2,632 4% Other administrative expenses % % -2,144-1,950 10% Internal purchased and sold services 1,104 1,018 8% % 4,022 3,836 5% Depreciation and amortisation % % % Total expenses % % -1, % Profit before loan losses % % -1,040-1,053 1% Net loan losses Gains/losses on disposal of property, equipment and intangible assets % 0 0% % Operating profit % % -1,040-1,047 1% Profit allocation 0 0 0% 0 0% 0 0 0% Operating profit after profit allocation % % -1,040-1,047 1% Internal income 2,122 2,058 3% 2,447-13% 10,290 10,140 1% Average number of employees 1,967 1,933 2% 1,966 0% 1,960 1,936 1% JANUARY DECEMBER COMPARED WITH JANUARY DECEMBER Operating profit/loss was SEK -1,040 million (-1,047). This figure includes the allocation to the Oktogonen profit-sharing foundation. Excluding this allocation, the figure was SEK -20 million (-134). Income rose to SEK 66 million (-55), chiefly due to a better result from the liquidity portfolio. Expenses rose to SEK -1,106 million (-998), which is mainly a result of the allocation to the Oktogonen Foundation increasing to SEK -1,020 million (-913). COMPARED WITH Operating profit/loss fell to SEK -463 million (-290). The result was charged with the Group s allocation to the Oktogonen profit-sharing foundation, which amounted to SEK -333 million (-229). 21 Handelsbanken 20 Handelsbanken

22 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Condensed set of financial statements The Group KEY FIGURES THE GROUP Return on equity, total operations * 17.7% 13.0% 13.2% 14.7% 13.5% Return on equity, continuing operations * 18.0% 12.8% 13.2% 14.6% 13.4% C/I ratio, continuing operations 49.9% 48.0% 44.7% 46.3% 47.1% C/I ratio, continuing operations, incl. loan losses 54.3% 50.9% 48.0% 49.9% 49.6% Earnings per share, total operations, SEK after dilution Dividend, SEK *** Adjusted equity per share, SEK ** Capital ratio, Basel II 20.9% 20.9% 21.0% 20.9% 20.9% Tier 1 ratio, Basel II 21.0% 18.4% 20.5% 21.0% 18.4% Capital base in relation to capital requirement Basel II 261% 261% 263% 261% 261% Average number of employees, continuing operations 11,156 11,146 11,381 11,192 11,184 Number of branches in Sweden Number of branches outside Sweden * When calculating return on equity, equity is adjusted for the impact of unrealised changes in the value of financial assets classified as "Available for Sale" and for cash flow hedges. ** When calculating equity per share, equity is adjusted for the impact of cash flow hedges and for dilution. *** Dividend for as proposed by the Board. THE HANDELSBANKEN SHARE Number of converted shares 822,942 1,118 3,090,412 8,744, ,180 Number of repurchased shares Holding of own shares in trading book, end of period - 79, ,520 Number of outstanding shares after repurchases and deduction for trading book, end of period 632,807, ,983, ,984, ,807, ,983,122 Number of outstanding shares after dilution, end of period 648,210, ,295, ,210, ,210, ,295,566 Average holdings of shares converted during the year 8,474, ,444 6,606,531 4,879, ,498 Average holdings of own shares (repurchased and holdings in trading book) 424, , , , ,659 Average number of outstanding shares 632,113, ,853, ,219, ,498, ,079,301 - after dilution 647,786, ,074, ,763, ,930, ,427,248 Share price ordinary class A, SEK Market capitalisation, SEK bn Handelsbanken 21 Handelsbanken

23 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT INCOME STATEMENT THE GROUP Change Interest income 14,428 16,618-13% 15,448-7% 62,814 61,560 2% Interest expense -7,944-10,261-23% -8,986-12% -36,733-37,947-3% Net interest income Note 2 6,484 6,357 2% 6,462 0% 26,081 23,613 10% Net fee and commission income Note 3 1,910 1,877 2% 1,742 10% 7,369 7,673-4% Net gains/losses on financial items at fair value Note % % 1,120 1,016 10% Risk result - insurance % % % Other dividend income % % Share of profit of associates % Other income % 29 21% % Total income 8,891 8,374 6% 8,466 5% 35,062 32,809 7% Staff costs -2,811-2,510 12% -2,562 10% -10,711-9,942 8% Other administrative expenses Note 5-1,511-1,392 9% -1,108 36% -5,069-5,060 0% Depreciation, amortisation and impairments of property, equipment and intangible assets % % % Total expenses -4,434-4,022 10% -3,783 17% -16,244-15,464 5% Profit before loan losses 4,457 4,352 2% 4,683-5% 18,818 17,345 8% Net loan losses Note % % -1, % Gains/losses on disposal of property, equipment and intangible assets % -3 7 Operating profit 4,060 4,110-1% 4,405-8% 17,564 16,536 6% Taxes 544-1,096-1,167-3,038-4,372-31% Profit for the period from continuing operations 4,604 3,014 53% 3,238 42% 14,526 12,164 19% Profit for the period pertaining to discontinued operations, after tax Note % Profit for the period 4,540 3,046 49% 3,246 40% 14,548 12,323 18% Attributable to Shareholders in Svenska Handelsbanken AB 4,539 3,046 49% 3,246 40% 14,547 12,323 18% Minority interest EARNINGS PER SHARE THE GROUP Change Profit for the period, total operations, 4,540 3,046 49% 3,246 40% 14,548 12,323 18% of which interest expense on convertible subordinated loan after tax % -38 8% % Average number of outstanding shares, millions Average number of outstanding shares after dilution, millions Earnings per share, continuing operations, SEK % % % - after dilution % % % Earnings per share, discontinued operations, SEK % - after dilution % Earnings per share, total operations, SEK % % % - after dilution % % % Earnings per share after dilution is calculated by taking in account the effects of a conversion of outstanding convertible debt instruments. This means that the average number of shares is adjusted by potential shares and that the period s earnings are adjusted by the period s interest expense on the outstanding convertible debt instruments after tax. 23 Handelsbanken 22 Handelsbanken

24 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT STATEMENT OF COMPREHENSIVE INCOME THE GROUP Change Profit for the period 4,540 3,046 49% 3,246 40% 14,548 12,323 18% Other comprehensive income Cash flow hedges % 2, Available-for-sale instruments % 379-2% 984-1,318 Translation differences for the period Tax related to other comprehensive income % % Total other comprehensive income 1, ,335-1,176 Total comprehensive income for the period 5,760 2, % 3,414 69% 16,883 11,147 51% Attributable to Shareholders in Svenska Handelsbanken AB 5,759 2, % 3,414 69% 16,882 11,147 51% Minority interest Discontinued operations only affects Translation differences for the period in Other comprehensive income. QUARTERLY PERFORMANCE THE GROUP Q2 Q1 Interest income 14,428 15,448 16,106 16,832 16,618 Interest expense -7,944-8,986-9,531-10,272-10,261 Net interest income 6,484 6,462 6,575 6,560 6,357 Net fee and commission income 1,910 1,742 1,825 1,892 1,877 Net gains/losses on financial items at fair value Risk result - insurance Other dividend income Share of profit of associates Other income Total income 8,891 8,466 8,839 8,866 8,374 Staff costs -2,811-2,562-2,670-2,668-2,510 Other administrative expenses -1,511-1,108-1,236-1,214-1,392 Depreciation, amortisation and impairments of property, equipment and intangible assets Total expenses -4,434-3,783-4,023-4,004-4,022 Profit before loan losses 4,457 4,683 4,816 4,862 4,352 Net loan losses Gains/losses on disposal of property, equipment and intangible assets Operating profit 4,060 4,405 4,528 4,571 4,110 Taxes 544-1,167-1,143-1,272-1,096 Profit for the period from continuing operations 4,604 3,238 3,385 3,299 3,014 Profit for the period pertaining to discontinued operations, after tax Profit for the period 4,540 3,246 3,414 3,348 3,046 Earnings per share, continuing operations, SEK after dilution Earnings per share, discontinued operations, SEK after dilution Earnings per share, total operations, SEK after dilution Handelsbanken 23 Handelsbanken

25 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT BALANCE SHEET THE GROUP 30 Sep Assets Cash and balances with central banks 236, , , , ,857 Other loans to central banks Note 8 12,370 35, , , ,122 Interest-bearing securities eligible as collateral with central banks 48,906 50,005 49,316 55,657 43,971 Loans to other credit institutions Note 8 89,511 84,364 90,927 86, ,823 Loans to the public Note 8 1,680,479 1,620,505 1,632,464 1,627,093 1,591,128 Value change of interest-hedged item in portfolio hedge 5,271 5,792 5,042 5,121 4,490 Bonds and other interest-bearing securities 68,354 69,738 62,657 64,185 60,231 Shares 30,146 25,748 24,892 26,022 27,236 Investments in associates Assets where the customer bears the value change risk 69,590 68,788 66,424 66,698 62,721 Derivative instruments Note 9 110, , , , ,074 Reinsurance assets Intangible assets Note 10 7,206 7,068 7,145 7,118 7,079 Property and equipment 2,209 2,201 2,243 3,431 3,507 Current tax assets Deferred tax assets Net pension assets 4,673 5,133 5,023 4,925 4,775 Assets held for sale 854 1,019 1, Other assets 12,812 50,924 25,342 41,962 14,267 Prepaid expenses and accrued income 7,399 8,691 7,854 9,134 8,512 Total assets 2,387,858 2,513,322 2,546,583 2,459,932 2,454, Jun 31 Mar Liabilities and equity Due to credit institutions Note , , , , ,889 Deposits and borrowing from the public Note , , , , ,888 Liabilities where the customer bears the value change risk 69,638 68,835 66,472 66,755 62,800 Issued securities 1,151,426 1,150,503 1,167,523 1,141,561 1,140,074 Derivative instruments Note 9 106, , , , ,303 Short positions 16,201 19,504 24,626 15,280 21,397 Insurance liabilities , Current tax liabilities 497 1, , Deferred tax liabilities 9,573 9,922 9,683 9,589 9,466 Provisions Liabilities related to assets held for sale Other liabilities 17,848 23,583 24,778 36,905 13,847 Accrued expenses and deferred income 21,264 23,857 23,041 22,121 20,977 Subordinated liabilities 21,167 24,406 25,530 25,907 35,317 Total liabilities 2,280,961 2,412,335 2,449,569 2,367,205 2,359,842 Minority interest Share capital 2,943 2,939 2,924 2,914 2,902 Share premium 2,337 2,191 1,647 1, Reserves ,063-1,545-2,010 Retained earnings 86,743 86,743 86,743 86,743 80,516 Profit for the period, attributable to shareholders in Svenska Handelsbanken AB 14,547 10,008 6,762 3,348 12,323 Total equity 106, ,987 97,014 92,727 94,524 Total liabilities and equity 2,387,858 2,513,322 2,546,583 2,459,932 2,454, Handelsbanken 24 Handelsbanken

26 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT STATEMENT OF CHANGES IN EQUITY THE GROUP Jan - Dec Share capital Share premium Hedge reserve Fair value reserve Translation reserve Retained earnings Minority Total Opening equity 2, ,163 86, ,391 Profit for the period 12, ,323 Other comprehensive income ,176 Total comprehensive income for the period , ,147 Dividend -5,611-5,611 Conversion of the convertible subordinated loan issued in Equity component of the convertible subordinated loan issued in Change of own shares in trading book Change of minority interests 0 0 Closing equity 2, ,167 92, ,524 Jan - Dec Share capital Share premium Hedge reserve Fair value reserve Translation reserve Retained earnings Minority Total Opening equity 2, ,167 92, ,524 Profit for the period 14, ,548 Other comprehensive income 1, ,335 Total comprehensive income for the period 1, , ,883 Dividend -6,110-6,110 Conversion of the convertible subordinated loan issued in ,544 1,585 Change of own shares in trading book Change of minority interests 1 1 Closing equity 2,943 2,337 1, , , ,897 During the period January to December, convertibles for a nominal value of SEK 1,641 million (111) relating to the 2008 subordinated convertible bond had been converted into 8,744,470 Class A shares (593,180). At the end of the year, the number of Handelsbanken shares in the trading book was 0 (79,520). CONDENSED STATEMENT OF CASH FLOWS THE GROUP Cash flow from operating activities 10, ,097 Cash flow from investing activities 3,912-3,659 Cash flow from financing activities -18,010-13,934 Cash flow for the period -3, ,504 Liquid funds at beginning of the period 251,857 56,637 Cash flow for the period -3, ,504 Exchange rate differences on liquid funds -11,538 12,716 Liquid funds at end of period 236, , Handelsbanken 25 Handelsbanken

27 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT NOTES Note 1 Accounting policies Information relating to the Group has been stated in accordance with IAS 34. For both the Group and the parent company, the contents of this report also comply with the applicable provisions of the Swedish Act on Annual Reports in Credit Institutions and Securities Companies, the Swedish Financial Supervisory Authority s regulations and general guidelines FFFS 2008:25 on annual reports in credit institutions and securities companies and recommendations from the Swedish Financial Reporting Board. The report of the Group and the parent company has been prepared in accordance with the same accounting policies and calculation methods that were applied in the annual report for. As of the 2013 financial year, the revised IAS 19 Employee benefits comes into effect for application within the EU. This will have an impact on how Handelsbanken reports defined-benefit pension plans since the corridor method for accounting of actuarial gains and losses is being removed. Actuarial effects will instead be recognised directly in Other comprehensive income. The revised standard also has an impact on the calculation of the pension cost reported in the income statement, in that the current assumption for the return on plan assets is being replaced by an estimated yield equivalent to the discount rate for the pension liability. The revised IAS 19 would have led to an initial adjustment of the equity by SEK -4,552 million as at 1 January. If the staff costs were recalculated for the period January December to adjust for the impact of the revised IAS 19, these would have increased by SEK 456 million (SEK 336 million after tax). An adjustment would also need to be made for other comprehensive income which would have been affected by SEK 1,841 million after tax for the period January December. An adjustment of the items affected would have had a total impact on equity of SEK -3,047 million as at ember. As at 31 December, the plan assets would have exceeded the pension liability by SEK 766 million, this being the amount which would have been reported as net pension assets. The revised IAS 19 regulations also mean that pension costs for defined-benefit plans are expected to rise by SEK 429 million in 2013 compared with booked costs in. Note 2 Net interest income Change Interest income Credit institutions and central banks % 549-9% 2,295 2,375-3% General public 13,819 15,487-11% 14,598-5% 59,084 57,336 3% Treasury bills and other eligible bills % % 1,534 3,187-52% Interest-bearing securities ,967 4,652-58% Derivative instruments recognised as hedges % % -1,198-1,509 21% Other interest income % % 1,498 1,270 18% Total interest income 13,546 17,598-23% 16,618-18% 65,180 67,311-3% Of which interest income reported in Net gains/losses on financial items ,170 2,366 5,751-59% Interest income according to income statement 14,428 16,618-13% 15,448-7% 62,814 61,560 2% Interest expense Credit institutions and central banks % % -2,066-3,485-41% General public -1,398-2,190-36% -1,766-21% -7,151-7,387-3% Issued securities -6,174-6,477-5% -6,271-2% -25,527-24,366 5% Derivative instruments recognised as hedges % 1,529 1,603-5% Subordinated liabilities % % -1,359-1,656-18% Other interest expense 462-1,350-1,627-4,481-8,384-47% Total interest expense -6,901-11,230-39% -10,132-32% -39,055-43,675-11% Of which interest income reported in Net gains/losses on financial items 1, ,146-2,322-5,728-59% Interest expense according to income statement -7,944-10,261-23% -8,986-12% -36,733-37,947-3% Net interest income 6,484 6,357 2% 6,462 0% 26,081 23,613 10% 27 Handelsbanken 26 Handelsbanken

28 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Note 3 Net fee and commission income Change Brokerage and other securities commissions % % 1,137 1,400-19% Mutual funds % 425 3% 1,680 1,639 3% Custody % 82 12% % Advisory services % 26 96% % Insurance % 142-4% % Payments % 685 4% 2,676 2,568 4% Loans and deposits % 281 9% 1,195 1,239-4% Guarantees % % % Other % % % Commission income 2,277 2,215 3% 2,088 9% 8,750 8,976-3% Securities commissions % % % Payment commissions % % -1, % Other commission expenses % % % Commission expense % % -1,381-1,303 6% Net fee and commission income 1,910 1,877 2% 1,742 10% 7,369 7,673-4% Note 4 Net gains/losses on financial items at fair value Change Available for sale, realised % Hedge accounting Fair value hedges % Hedge ineffectiveness % % Instruments at fair value % % 732 2,781-74% Loans at amortised cost % 71 80% % Financial liabilities at amortised cost % % % Gains/losses on unbundled insurance contracts % % Trading / Other ,984 Total % % 1,120 1,016 10% Note 5 Other administrative expenses Change Property and premises % % -1,232-1,089 13% External IT costs % % -1,588-1,533 4% Communication % % % Travel and marketing % % % Purchased services % % -1, % Supplies % % % Other expenses % % % Other administrative expenses -1,511-1,392 9% -1,108 36% -5,069-5,060 0% 28 Handelsbanken 27 Handelsbanken

29 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Note 6 Loan losses and impaired loans Loan losses Change Specific provision for individually valued loan receivables Provision for the period % % -1,460-1,341 9% Reversal of previous provisions % % % Total % % -1,116-1,006 11% Collective provisions Net provision for the period for % % individually valued receivables Net provision for the period for % % homogenous loan receivables Total % % Other provisions Losses on off-balance sheet items Reversal of losses on off-balance-sheet items Change in collective provision for off-balance-sheet items % % Total % % Write-offs Actual loan losses for the period % % -1,383-2,669-48% Utilised share of previous provisions % % 975 2,271-57% Recoveries % 33 48% % Total % % Net loan losses % % -1, % Impaired loans Impaired loans includes all loans for which not all the contracted cash flows will probably be fulfilled. The full amount of all loans which give rise to a specific provision is included in impaired loans, including amounts which are covered by collateral. This means that the impaired loans reserve ratio is stated without taking into account collateral received. Thus this key figure may vary substantially between the quarters, even though the provisioning policies are unchanged. 30 Sep 30 Jun 31 Mar Impaired loans 7,325 7,171 6,872 6,762 6,858 Specific provision for individually assessed loans -3,725-3,673-3,608-3,527-3,680 Provision for collectively assessed homogenous groups of loans with limited value Collective provisions for individually assessed loans Impaired loans, net 3,197 3,067 2,782 2,744 2,697 Total impaired loans reserve ratio 56.4% 57.2% 59.5% 59.4% 60.7% Proportion of impaired loans, % 0.18% 0.18% 0.16% 0.16% 0.16% Impaired loans reserve ratio excl. collective provisions 52.4% 52.9% 54.1% 53.8% 55.3% Loan loss ratio as a % of loans, accumulated 0.08% 0.07% 0.07% 0.07% 0.05% Non-performing loans 6,988 7,029 6,814 6,490 6,357 Non-performing loans which are not impaired loans 2,563 2,715 2,852 2,753 2, Handelsbanken 28 Handelsbanken

30 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Impaired loans and/or non-performing loans, by sector ember Impaired loans Non-performing loans Gross Provisions Net* Of which nonperforming which are not impaired loans Private individuals 1, ,611 Housing co-operative associations Property management 1, Manufacturing Retail 1, Hotel and restaurant Passenger and goods transport by sea Other transport and communication Construction Electricity, gas and water Agriculture, hunting and forestry Other services Holding, investment and insurance companies, funds etc. 1, Other corporate lending Credit institutions Total 7,325-3,840 3,485 2,068 2,563 * Book value after deduction of specific provisions. ember Impaired loans Non-performing loans Gross Provisions Net* Of which nonperforming which are not impaired loans Private individuals 1, ,464 Housing co-operative associations Property management 1, Manufacturing Retail Hotel and restaurant Passenger and goods transport by sea Other transport and communication Construction Electricity, gas and water Agriculture, hunting and forestry Other services Holding, investment and insurance companies, funds etc. 1, Other corporate lending Credit institutions Total 6,858-3,795 3,063 1,919 2,161 * Book value after deduction of specific provisions. Note 7 Discontinued operations Discontinued operations comprise the results from the Plastal Industri AB subsidiary, including the acquired parts of the Plastal Group. The Bank intends to divest Plastal Industri AB. 30 Handelsbanken 29 Handelsbanken

31 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Note 8 Loans and credit exposure 30 Sep Loans to the public 1,680,479 1,620,505 1,632,464 1,627,093 1,591, Jun 31 Mar of which reverse repos 33,799 14,295 24,219 23,440 13,669 Loans to other credit institutions 89,511 84,364 90,927 86, ,823 of which reverse repos 59,241 56,132 54,747 55,234 60,585 Other loans to central banks 12,370 35, , , ,122 of which reverse repos 2,820 1, , Loans to the public, by sector ember ember Loans gross Provisions Loans net Loans gross Provisions Private individuals 743, , , ,317 of which mortgage loans 607, , , ,629 of which other loans with property mortgages 67, ,916 64, ,022 of which other loans to private individuals 69, ,567 67, ,666 Housing co-operative associations 129, , , ,843 of which mortgage loans 105, , , ,330 Property management 436, , , ,551 Manufacturing 45, ,697 49, ,724 Retail 33, ,205 35, ,388 Hotels and restaurants 8, ,198 7, ,081 Passenger and goods transport by sea 17, ,433 18, ,154 Other transport and communication 32, ,224 37, ,196 Construction 13, ,289 12, ,201 Electricity, gas, water 23, ,940 22, ,076 Agriculture, hunting and forestry 8, ,902 7, ,311 Other services 25, ,345 24, ,338 Holding, investment, insurance comp., funds, etc. 89, ,618 85, ,296 Government and municipalities 36,711-36,711 21,654-21,654 Other corporate lending 40, ,160 39, ,364 Total loans to the public, before collective provisions 1,684,607-3,840 1,680,767 1,595,289-3,795 1,591,494 Collective provisions Total loans to the public 1,680,479 1,591,128 Loans net 31 Handelsbanken 30 Handelsbanken

32 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Specification of Loans to the public Property management ember ember Loans in Sweden Loans gross Provisions Loans net Loans gross Provisions State-owned property companies 9,213-9,213 11,808-11,808 Municipal-owned property companies 14,468-14,468 15,566-15,566 Residential property companies 72, ,881 65, ,544 of which mortgage loans 52, ,756 46, ,402 Other property management 145, , , ,123 of which mortgage loans 61, ,092 58, ,028 Total loans in Sweden 241, , , ,041 Loans outside Sweden Denmark 10, ,527 9, ,360 Finland 19, ,471 18,718-18,718 Norway 80, ,475 74, ,542 UK 69, ,679 56, ,826 Other countries 14, ,678 14, ,064 Total loans outside Sweden 195, , , ,510 Total loans - Property management 436, , , ,551 Loans net Credit risk exposure 30 Sep Loans to the public 1,680,479 1,620,505 1,632,464 1,627,093 1,591,128 of which reverse repos 33,799 14,295 24,219 23,440 13,669 Loans to other credit institutions 89,511 84,364 90,927 86, ,823 of which reverse repos 59,241 56,132 54,747 55,234 60,585 Unutilised part of granted overdraft facilities 132, , , , ,392 Committed loan offers 239, , , , ,415 Other commitments 20,779 8,214 12,080 7,974 9,035 Guarantees, credits 10,723 10,702 15,346 16,817 17,161 Guarantees, other 39,913 39,310 41,456 43,254 42,657 Documentary credits 30,164 33,686 33,650 32,249 36,712 Derivative instruments * 110, , , , ,074 Treasury bills and other eligible bills 48,906 50,005 49,316 55,657 43,971 Bonds and other interest-bearing securities 68,354 69,738 62,657 64,185 60,231 Total 2,471,987 2,415,952 2,429,896 2,452,185 2,456,599 * Refers to the total of positive market values. 30 Jun 31 Mar Note 9 Derivative instruments 30 Sep Positive market values Trading 83, ,761 99,919 90, ,588 Fair value hedges 21,702 23,255 20,232 19,512 23,888 Cash flow hedges 5,791 6,474 5,752 3, Total 110, , , , ,074 Negative market values Trading 85, , ,132 98, ,286 Fair value hedges 12,112 13,495 8,907 8,918 7,783 Cash flow hedges 7,999 8,725 6,473 6,191 1,234 Total 106, , , , ,303 Nominal value Trading 7,185,555 9,714,008 11,049,529 11,742,363 12,015,694 Fair value hedges 518, , , , ,234 Cash flow hedges 268, , , ,940 42,603 Total 7,972,655 10,535,326 11,784,374 12,420,139 12,591, Jun 31 Mar 32 Handelsbanken 31 Handelsbanken

33 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Note 10 Goodwill and other intangible assets Opening residual value 7,079 6,905 Additional during the period The period's amortisation The period's impairments -3-2 Foreign exchange effect Closing residual value 7,206 7,079 Note 11 Due to credit institutions, deposits and borrowing from the public 30 Sep 30 Jun 31 Mar Due to credit institutions 183, , , , ,889 of which repos 2,391 1,326 4,271 4,041 4,055 Deposits and borrowing from the public 682, , , , ,888 of which repos 12,294 9,004 11,854 10,589 8,001 Note 12 Assets managed SEK bn, end of period 30 Sep 30 Jun 31 Mar Mutual funds, excl. PPM PPM Unit-linked insurance XACT (Exchange-traded funds) Total mutual funds Portfolio bond insurance Traditional insurance Institutional of which in Handelsbanken mutual funds Structured products Directly owned shares in custody Other securities in custody Handelsbanken's foundations of which in Handelsbanken mutual funds Total assets under management, Handelsbanken Group Note 13 Turnover of own debt instruments and shares The Handelsbanken Group issues and repurchases debt instruments and equity-related securities which it has issued on its own account. This turnover is mainly intended as part of the Bank s securities operations and also as a component in financing its operations. During the period January to December, the turnover was: Interest-bearing securities, bonds and certificates (SEK billion): Group Parent company Issued (sold): 1,714 1,153 Repurchased (bought): Repaid: 1,370 1,087 Equity-related securities (SEK billion): Issued (sold): 3.0 Repurchased (bought): Handelsbanken 32 Handelsbanken

34 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Note 14 Pledged assets, contingent liabilities and other commitments 30 Sep Pledged assets for own debt 750, , , , ,288 Other pledged assets 2,564 5,154 5,434 4,640 5,323 Contingent liabilities 80,823 83,708 90,462 92,326 96,536 Other commitments 393, , , , , Jun 31 Mar The total contingent liabilities mainly consist of credit guarantees. This amount includes SEK 20 million (3) relating to a number of civil actions which the Group is bringing in general courts of law. Note 15 Classification of financial assets and liabilities The tables show valuation categories for financial instruments in accordance with IAS 39. ember At fair value in income statement divided into Trading Other Assets Derivatives identified as hedge instruments Investments held to maturity Loans and receivables Financial assets available for sale Other financial assets/ liabilities Total carrying amount Cash and balances with central banks 236, ,545 Other loans to central banks 12,370 12,370 Interest-bearing securities eligible as collateral with central banks 26,474 17,622 3,759 1,051 48,906 Loans to other credit institutions 89,511 89,511 Loans to the public 4,078 1,676,401 1,680,479 Value change of interest hedged item in portfolio hedge 5,271 5,271 Bonds and other interest-bearing securities 30,535 35,073 1,340 1,406 68,354 Shares 23,078 1,863 5,205 30,146 Investments in associates Assets where the customer bears the value change risk 68,565 1,025 69,590 Derivative instruments 83,357 27, ,850 Other assets 28 12,784 12,812 Prepaid expenses and accrued income 229 1, ,009 7,399 Total financial assets 163, ,244 27,493 5,217 2,039,916 7, ,372,436 Non-financial assets 15,422 Total assets 2,387,858 Liabilities Due to credit institutions 183, ,945 Deposits and borrowing from the public 682, ,223 Liabilities where the customer bears the value change risk 68,613 1,025 69,638 Issued securities 13,756 1,137,670 1,151,426 Derivative instruments 85,933 20, ,044 Short positions 16,201 16,201 Other liabilities 19 17,829 17,848 Accrued expenses and deferred income 54 21,210 21,264 Subordinated liabilities 21,167 21,167 Total financial liabilities 115,963 68,613 20,111 2,065,069 2,269,756 Non-financial liabilities 11,205 Total liabilities 2,280, Handelsbanken 33 Handelsbanken

35 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT ember At fair value in income statement divided into Trading Other Derivatives identified as hedge instruments Investments held to maturity Loans and receivables Financial assets available for sale Other financial assets/ liabilities Total carrying amount Assets Cash and balances with central banks 251, ,857 Other loans to central banks 124, ,122 Interest-bearing securities eligible as collateral with central banks 14,350 21,435 6,461 1,725 43,971 Loans to other credit institutions 106, ,823 Loans to the public 4,945 1,586,183 1,591,128 Value change of interest hedged item in portfolio hedge 4,490 4,490 Bonds and other interest-bearing securities 14,401 35,751 3,339 6,740 60,231 Shares 20,345 2,597 4,294 27,236 Investments in associates Assets where the customer bears the value change risk 61,212 1,509 62,721 Derivative instruments 117,588 24, ,074 Other assets 43 14,224 14,267 Prepaid expenses and accrued income 173 1, , ,512 Total financial assets 166, ,245 24,486 9,972 2,096,069 12, ,437,637 Non-financial assets 16,729 Total assets 2,454,366 Liabilities Due to credit institutions 201, ,889 Deposits and borrowing from the public 724, ,888 Liabilities where the customer bears the value change risk 61,291 1,509 62,800 Issued securities 9,125 1,130,949 1,140,074 Derivative instruments 118,286 9, ,303 Short positions 21,397 21,397 Other liabilities 46 13,801 13,847 Accrued expenses and deferred income ,809 20,977 Subordinated liabilities 35,317 35,317 Total financial liabilities 149,022 61,291 9,017 2,129,162 2,348,492 Non-financial liabilities 11,350 Total liabilities 2,359, Handelsbanken 34 Handelsbanken

36 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Note 16 Fair value measurement of financial assets and liabilities The tables show the valuation technique applied for financial assets and liabilities at fair value. Level 1 comprises instruments for which there are listed prices on an active market. Level 2 comprises instruments which have been indirectly valued using market information. Level 3 consists of instruments whose valuation depends materially upon a variable that has not been obtained directly on the market. ember Level 1 Level 2 Level 3 Total Assets Interest-bearing securities eligible as collateral with central banks Loans to the public Bonds and other interest-bearing securities Shares Assets where the customer bears the value change risk Derivative instruments Total financial assets at fair value 44, ,147-4, ,078 53,204 13,810-67,014 28, ,560 30,146 68, ,565 1, , , , ,337 1, ,800 Liabilities Liabilities where the customer bears the value change risk Issued securities Derivative instruments Short positions Total financial liabilities at fair value 68, , , ,756 2, , ,044 15, ,201 86, , ,614 ember Level 1 Level 2 Level 3 Total Assets Interest-bearing securities eligible as collateral with central banks Loans to the public Bonds and other interest-bearing securities Shares Assets where the customer bears the value change risk Derivative instruments Total financial assets at fair value 37, ,510-4, ,945 46,003 10,889-56,892 24, ,802 27,236 61, ,212 1, , , , ,579 1, ,869 Liabilities Liabilities where the customer bears the value change risk Issued securities Derivative instruments Short positions Total financial liabilities at fair value 61, , , ,125 3, , ,303 20,386 1,011-21,397 85, , , Handelsbanken 35 Handelsbanken

37 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Note 17 Assets and liabilities by currency ember SEK EUR NOK DKK GBP USD Other currencies Total Assets Cash and balances with central banks 1,333 77,689 8, , ,545 Other loans to central banks 2, , ,370 Loans to other credit institutions 9,928 11,844 2, ,822 3,688 89,511 Loans to the public 1,126, , ,231 54, ,953 27,488 11,232 1,680,479 of which corporates 529, , ,970 23,374 80,975 27,426 9, ,419 of which households 596,907 36,165 83,261 31,263 29, , ,060 Interest-bearing securities eligible as collateral with central banks 28,612 3, ,727 1,047 48,906 Bonds and other interest-bearing securities 57,812 5,971 3, , ,354 Other items not broken down by currency 251, ,693 Total assets 1,478, , ,343 64, , ,608 16,597 2,387,858 Liabilities Due to credit institutions 27,773 46,440 12,076 12,109 3,811 66,438 15, ,945 Deposits and borrowing from the public 413,908 65,822 57,421 23,578 43,836 72,803 4, ,223 of which corporates 192,469 53,594 41,591 13,088 37,894 71,543 4, ,810 of which households 221,439 12,228 15,830 10,490 5,942 1, ,413 Issued securities 478, ,211 15, , ,628 13,659 1,151,426 Subordinated liabilities 10,896 4,655 4, ,130 21,167 Other items not broken down by currency 349, ,097 Total liabilities and equity 1,279, ,128 85,496 36, , ,055 34,942 2,387,858 Other assets and liabilities broken down by currency and off-balance sheet items 136, ,745-28,910 5, ,266 18,627 Net foreign currency position ember SEK EUR NOK DKK GBP USD Other currencies Total Assets Cash and balances with central banks 1,302 3,169 7, , ,857 Other loans to central banks 13,108 83,974 9,406 17, ,122 Loans to other credit institutions 22,456 14, ,410 3, ,823 Loans to the public 1,073, , ,275 51,510 90,875 34,989 14,087 1,591,128 of which corporates 490, , ,463 23,489 67,022 34,909 12, ,931 of which households 582,837 34,862 76,812 28,021 23, , ,197 Interest-bearing securities eligible as collateral with central banks 34,868 3, ,214 1,719 43,971 Bonds and other interest-bearing securities 46,275 6,926 1, , ,231 Other items not broken down by currency 276, ,234 Total assets 1,467, , ,628 69,836 91, ,702 20,171 2,454,366 Liabilities Due to credit institutions 41,594 61,476 11,797 12,626 5,552 60,366 8, ,889 Deposits and borrowing from the public 400,176 78,267 53,125 25,250 31, ,509 6, ,888 of which corporates 189,106 64,689 38,713 14,860 26, ,261 6, ,947 of which households 211,070 13,578 14,412 10,390 5,001 1, ,941 Issued securities 485, ,320 9, , ,179 8,542 1,140,074 Subordinated liabilities 9,562 16, , ,338 35,317 Other items not broken down by currency 352, ,198 Total liabilities and equity 1,289, ,427 74,353 38,444 90, ,265 24,795 2,454,366 Other assets and liabilities broken down by currency and off-balance sheet items 143, ,221-31, ,701 4,705 Net foreign currency position Note 18 Related-party transactions There have been no business transactions of material importance with related parties during the period. All business transactions with associated companies are made on market terms. 37 Handelsbanken 36 Handelsbanken

38 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Note 19 Capital base and capital requirement in the banking group The quantitative information provided in this section follows the directives and general guidelines of the Swedish Financial Supervisory Authority concerning publication of information relating to capital adequacy and risk management. Figures reported in this section refer to the minimum capital requirements under Pillar 1 of Basel II. Capital base * In an intra-group transaction, the parent company sold subsidiary shares to Handelsbanken Liv during the second quarter. In connection with this, a capital contribution of SEK 2,500 million was made to the life insurance company. The transaction strengthens the life insurance company s equity but does not affect the assets held on behalf of the policyholders. 30 Sep 30 Jun 31 Mar TIER 1 CAPITAL Equity, group 106, ,987 97,014 92,727 94,524 Accrued dividend, current year -6,804-4,621-3,066-1,528-6,085 Dividend for previous year (unpaid) Deduction of equity outside the banking group -1,167-1,183-1,189-1, Difference in earnings between the banking group and the Group 2,853 2,954 3, Minority interests, group Equity, capital base 101,777 98,136 95,799 89,946 87,361 Innovative tier 1 capital contributions 9,323 9,513 10,298 10,609 11,254 Non-innovative tier 1 capital contributions 2,903 2,905 2,906 2,908 2,910 Minority interests, banking group Deducted items Goodwill and other intangible assets -7,458-7,285-7,350-7,302-7,234 Revaluation reserve Deferred tax assets Price adjustments for positions reported at fair value Special deduction for IRB institutions -1,094-1,050-1,097-1, Capital contribution in companies outside the banking group -1,483-1,483-1, Positions in securitisation Adjustments in accordance with stability filter Cash flow hedges -1, Unrealised accumulated gains, shares Unrealised accumulated gains/losses, fixed income instruments Total tier 1 capital 102,333 99,971 98,781 95,432 93,548 TIER 2 CAPITAL Perpetual subordinated loans 3,133 3,155 3,233 3,165 11,710 Dated subordinated loans 4,274 7,588 7,803 7,914 7,957 Additional items Unrealised accumulated gains, shares Revaluation reserve Deducted items Special deduction for IRB institutions -1,094-1,050-1,097-1, Capital contribution in companies outside the banking group -1,483-1,483-1, Positions in securitisation Total tier 2 capital 5,487 8,636 8,634 10,377 18,517 Total tier 1 and tier 2 capital 107, , , , ,065 Deductible items from total capital base Capital contribution in insurance companies -4,417-4,417-4,417-4,417-4,417 Surplus value pension assets -1,524-1,707-1,837-1,999-1,471 Total capital base for capital adequacy purposes 101, , ,161 99, , Handelsbanken 37 Handelsbanken

39 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Capital requirement 30 Sep Credit risk according to standardised approach 3,799 3,817 3,954 3,964 3,760 Credit risk according to IRB approach 30,174 30,127 31,596 30,868 31,904 Interest rate risk Equity price risk Exchange rate risk Commodities risk Settlement risk Operational risk 4,181 4,181 4,181 4,181 4,117 Total capital requirement according to Basel II 39,072 39,041 40,650 39,986 40,665 Adjustment according to transitional rules 41,426 40,444 39,878 39,542 38,389 Capital requirement according to Basel II, transitional rules 80,498 79,485 80,528 79,528 79,054 Risk-weighted assets, transitional rules 1,006, ,559 1,006, , ,180 Risk-weighted assets, Basel II 488, , , , , Jun 31 Mar Capital adequacy analysis 30 Sep Capital requirement in Basel II compared to transitional rules 49% 49% 50% 50% 51% Capital ratio, Basel II 20.9% 21.0% 19.9% 19.9% 20.9% Capital ratio, transitional rules 10.1% 10.3% 10.0% 10.0% 10.7% Tier 1 ratio, Basel II 21.0% 20.5% 19.4% 19.1% 18.4% Tier 1 ratio, transitional rules 10.2% 10.1% 9.8% 9.6% 9.5% Core tier 1 ratio, Basel II 18.4% 17.9% 16.8% 16.4% 15.6% Capital base in relation to capital requirement Basel II 261% 263% 249% 249% 261% Capital base in relation to capital requirement according to transitional rules 127% 129% 126% 125% 134% 30 Jun 31 Mar Figures reported in this section refer to the minimum capital requirements under Pillar 1 of the capital adequacy rules, Basel II. In the table, According to Basel II means that the figures are based on the minimum capital requirements after the transitional rules have ceased to apply. 39 Handelsbanken 38 Handelsbanken

40 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Credit risks IRB Exposure after credit risk protection (EAD) Average risk weight, % Capital requirement Corporates 944, , ,026 24,529 of which repos and securities loans 23,286 6, of which other loans foundation approach 341, , ,137 13,052 of which other loans advanced approach 580, , ,877 11,469 of which medium-sized companies 72,467 75, ,549 3,949 of which property companies 380, , ,612 6,812 of which housing co-operative associations 128, , Households 752, , ,530 4,217 of which property loans 665, , ,885 2,795 of which other loans 86,207 87, ,645 1,422 Small companies 28,596 29, Institutions 128, , ,559 of which repos and securities loans 76,588 79, of which other loans 52,160 78, ,527 Equity exposures 5,206 4, Exposures without a counterparty 2,279 2, Securitisation positions 1,323 1, of which Traditional securitisation 1,323 1, of which Synthetic securitisation Total IRB 1,863,315 1,845, ,174 31,904 of which repos and securities loans 99,874 85, of which other loans foundation approach 402, , ,845 15,251 of which other loans advanced approach 1,361,425 1,297, ,279 16,613 Handelsbanken is implementing the IRB model for its credit exposures in stages. Swedish, Danish, Finnish and Norwegian exposures to households and small companies, and corresponding exposures in the Handelsbanken Finans and Stadshypotek Groups have been approved for IRB reporting. For corporate and institutional exposures, the exposures at all regional banks, Stadshypotek and Handelsbanken Finans have been approved for calculation of the capital requirement according to the IRB model, as have exposures to institutions and large companies at Handelsbanken s foreign branches that are not part of the regional banking operations. In 2010, Handelsbanken received permission from the Swedish Financial Supervisory Authority to report parts of its corporate portfolio according to the advanced IRB approach, with the first reporting occasion as at ember The permit refers to counterparties which are categorised as medium-sized companies, property companies and housing co-operative associations. The table presents the corporate exposures as at ember, split into the foundation and the advanced approaches. In addition, repos and securities loans are reported separately, since they give rise to very low capital requirements, while the volume varies considerably over time. The low capital requirement is due to the fact that the exposure in repos and securities loans is reported gross and the exposure is secured. The average risk weight for IRB exposures went down by 1.4 percentage points during the year, which was mainly due to a lower average risk weight for corporate exposures. The credit volume to corporate counterparties with a low risk weight increased during the year, while the volume to counterparties with high risk weights decreased. Some 95.4 per cent of Handelsbanken s corporate exposures was to customers with a repayment capacity assessed as normal or better than normal, i.e. with a rating grade between one and five on the Bank s ten-point rating scale. The advanced IRB models are based on historical losses from both the recent financial crisis and the Swedish banking crisis of the early 1990s. These risk weights reflect the fact that Handelsbanken has reported low loan losses over a long period. The risk measurements applied also contain safety margins to ensure that the risk is not underestimated. The level of the risk weight in the corporate exposures should also be seen in the light of the portfolio composition and how various loans are classified in the different exposure classes. Handelsbanken has classified its lending to housing co-operative associations as companies while some other banks have opted to classify this as retail lending. 40 Handelsbanken 39 Handelsbanken

41 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Note 20 Risk and capital management Risks and uncertainty factors was marked by the debt crisis in the eurozone, stressed financial markets and a slowdown of the global business cycle. As long as the imbalances prevail in the global economy with many indebted countries, the unstable situation will continue to affect the economic trend and the financial markets. Handelsbanken does not have any sovereign exposures to the PIIGS countries, but may be affected indirectly if the crisis were to worsen significantly. However, Handelsbanken s historically low tolerance of risks, sound capitalisation and strong liquidity mean that the Bank is well equipped to operate under these conditions. Turbulence in the financial markets affects the financial sector s opportunities to access mainly long-term funding. Handelsbanken has a strong liquidity situation both as a whole and in all currencies which are of importance for the Bank; it has continually had full access to the capital markets. The Bank is therefore well equipped to manage situations of increased financial turbulence. Handelsbanken has low tolerance of market risks. For the fourth quarter of, the average total exposure in the trading book, measured as Value-at-Risk (VaR), was SEK 13 million ( : SEK 16 million). During the period, the risk varied between SEK 7 million (8) and 24 million (25). Handelsbanken s liquidity situation is healthy and is described in more detail under the heading Liquidity and funding. Other aspects of the Bank s risk and capital management are described in Handelsbanken s annual report and in Handelsbanken s Risk and capital management Information according to Pillar 3 for. No material changes have occurred since the publication of these documents that are not presented in this report. Liquidity and funding Handelsbanken s liquidity situation is healthy. For a long period of time, the Bank has actively worked with liquidity measures and has adopted a conservative approach. Part of this work has involved centralising liquidity management with the purpose of strengthening control of the liquidity risks and of guaranteeing and optimising the Bank s funding in all scenarios. The Bank has worked for a long time on extending the maturities of its funding by increasing bond issues and ensuring that liquidity risks are included in internal pricing. The Bank s funding programme covers the entire maturity spectrum in SEK, EUR and USD that the Bank needs to finance its lending and also creates the opportunity for issues in all currencies that are relevant for the Bank. Funding programmes/limits as at ember Group Programme (in millions) Programme size Currency Unutilised amount Countervalue Latest issue ECP * 5,000 EUR 2,080 17,892 Dec-12 ECP (Stadshypotek) * 4,000 EUR 2,421 20,825 Dec-12 French Commercial Paper 5,000 EUR 2,107 18,124 Dec-12 EMTCN (Stadshypotek) * 20,000 EUR 7,060 60,728 Aug-12 MTN* 100,000 SEK 69,794 69,794 Dec-12 Swedish Commercial Paper 25,000 SEK 21,930 21,930 Dec-12 Swedish Commercial Paper (Stadshypotek) 90,000 SEK 87,070 87,070 Dec-12 EMTN * 50,000 USD 28, ,969 Dec-12 General funding > 1 y * 15,000 USD 12,960 84,285 Jul-12 USCP 15,000 USD 6,645 43,216 Dec-12 Extendible Notes 15,000 USD 14,230 92,545 Oct-12 US 144A / 3(a)(2) 15,000 USD 9,650 62,759 Apr-12 Stadshypotek US 144A 15,000 USD 11,900 77,392 Oct-12 Stadshypotek AUD Covered Bond Programme 5,000 AUD 4,250 28,688 Oct-12 Total 868,217 Total program (or limited) amounts, 1,354,148 Amount free to use, 868,217 Unutilised amount 64% * Under these programmes it is possible to issue in other currencies than the original programme currency. Currency conversion takes place at the time of issue. As at ember, total liquidity reserves exceeded SEK 750 billion. Balances with central banks and banks, as well as holdings of securities that are eligible as collateral with central banks, totalled SEK 377 billion (see table below). In addition, there was an unutilised issue amount for covered bonds and other liquidity-creating measures. 41 Handelsbanken 40 Handelsbanken

42 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Balances with central banks and banks, and securities holdings in the liquidity reserve Cash and balances with and other lending to central banks 246, , , , ,751 Balances with banks & the National Debt Office, overnight (before Dec- 12: incl. repos) 17,288 20,836 14,217 37,675 22,113 Securities issued by governments and public entities 36,087 42,326 35,988 49,771 30,978 Covered bonds 73,541 53,878 45,337 43,686 38,954 Securities issued by non-financial companies 1, ,821 1,122 Securities issued by financial companies 2,706 4,155 4,029 2,737 11,524 Total 376, , , , ,442 of which in SEK 98, ,944 97, ,366 98,373 of which in EUR 85, , ,433 90,858 95,739 of which in USD 166, , , , ,751 of which in other currencies 26,455 28,650 60,088 39,967 38,579 Market value 30 Sep 30 Jun 31 Mar ember Market value, SEK EUR USD Other Total Cash and balances with and other lending to central banks 1,398 77, ,312 19, ,094 Balances with other banks, overnight 12, ,451 17,288 Securities issued by governments 20,463 3,830 10, ,450 Securities issued by municipalities and other public entities Covered bonds 47,557 2,268 4,525 1,846 56,196 Own covered bonds 15, ,773 17,345 Securities issued by non-financial companies - - 1,233-1,233 Securities issued by financial companies 660 1, ,706 Other securities Total 98,661 85, ,328 26, ,949 Maturities for USD assets and liabilities ember ember Up to 3 mths 3-12 mths 1-5 yrs 5 yrs - Unspecified maturity Total Cash and balances with central banks 148, ,320 Bonds and other interest-bearing securities 16, ,978 Loans to credit institutions 57, ,423-60,822 Loans to the public 5,515 1,742 15,944 4, ,488 Other, including derivatives 131,535 26,994 25,794 11, ,266 Total assets 360,008 29,055 42,158 18, ,874 Due to credit institutions 63, ,116 66,438 Deposits and borrowing from the public 60, ,081 72,803 Issued securities 199,422 58,008 36,385 16, ,628 Subordinated liabilities Total liabilities 323,551 58,891 36,603 16,813 14, ,055 Liquidity coverage ratio (LCR) Liquidity Coverage Ratio (LCR), % Q2 Q1 EUR USD Total * *As of, calculated according to the new regulations as at 1 January As a measure of short-term disruptions in the funding market, the Basel Committee and the Swedish Financial Supervisory Authority have proposed a risk ratio called the Liquidity Coverage Ratio (LCR). The Basel Committee s proposal and FFFS :6 decided on by the Swedish Financial Supervisory Authority do not define the ratio in the same way. Handelsbanken reports according to the Swedish Financial Supervisory Authority s definition. The figure states the ratio between the Bank's liquidity buffer and net cash flows in a very 42 Handelsbanken 41 Handelsbanken

43 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT stressed scenario during a 30-day period. The ratio must be more than 100 per cent. A short-term liquidity ratio may display a degree of volatility over time, for example when funding that was originally longterm and that finances mortgage loans is replaced by new long-term funding, or when the composition of counterparty categories in the short-term funding varies. As at ember, Handelsbanken s LCR according to the Swedish Financial Supervisory Authority s current definition was 136 per cent, which shows that the Bank has high resistance to short-term disruptions in the funding market. This also applies in US dollars and euros. Stress test with liquidity-creating measures The Bank s liquidity position is regularly subjected to a stress test. In the test, the Bank s cash flows are stressed, based on certain defined assumptions. The stress test shows resistance to more long-term market disruptions. For example, it is assumed in the stress test that the Bank cannot obtain funding in the financial markets while there is a gradual disappearance of ten per cent of deposits from households and companies over the first month. It is further assumed that the Bank continues to conduct its core activities, i.e. loans to households and companies are renewed at maturity and that committed loan offers and other credit facilities are partly utilised by customers. Account is also taken of the fact that holdings with central banks are utilised and that the Central Treasury liquidity portfolio can provide immediate additional liquidity. In addition, liquidity-creating measures for example, unutilised facilities to issue covered bonds are used in order to gradually provide liquidity to the Bank. The result of the stress test shows that also in a stressed scenario, the liquidity reserves cover the Bank s liquidity requirement for over two years, even if access to new funding in the markets were to disappear. 450,000 Stress test with liquidity-creating measures 400, , , , , , ,000 50,000 0 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Non-Encumbered Assets (NEA) SEK bn Holdings with central banks and securities in the liquidity portfolio % Mortgage loans % Other household lending % Property company lending lowest risk class (1-3) % Other corporate lending lending lowest risk class (1-3) % Loans to credit institutions lowest risk class (1-3) % Other corporate lending % Other assets % Total Non-Encumbered Assets (NEA) 1, % Encumbered assets without underlying claim ** 51 Encumbered assets with underlying claim 702 Total assets, Group 2,388 * Issued short and long non-secured funding and due to credit institutions ** Over-collateralisation in cover pool (OC) NEA Accumulated coverage ratio in % of unsecured funding * 43 Handelsbanken 42 Handelsbanken

44 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Condensed set of financial statements Parent company PARENT COMPANY S INCOME STATEMENT Change Net interest income 3,964 4,231-6% 4,114-4% 16,431 15,684 5% Dividends received 8,240 4,895 68% 30 9,152 5,733 60% Net fee and commission income 1,490 1,523-2% 1,331 12% 5,724 6,026-5% Net gains/losses on financial items % % 3, Other operating income % % % Total income 14,367 10,926 31% 5, % 36,059 28,541 26% Staff costs -2,102-1,909 10% -2,497-16% -9,808-9,247 6% Other administrative expenses -1,458-1,291 13% -1,112 31% -5,157-4,723 9% Depreciation, amortisation and impairments of property, equipment and intangible assets % % % Total expenses before loan losses -3,681-3,339 10% -3,731-1% -15,483-14,508 7% Profit before loan losses 10,686 7,587 41% 2, % 20,576 14,033 47% Net loan losses % % -1,154-1,081 7% Impairments of financial assets % Operating profit 9,599 7,042 36% 1, % 18,602 12,577 48% Appropriations -4, , Profit before tax 5,457 7,069-23% 1, % 14,537 12,683 15% Taxes -1,227-1,923-36% % -2,985-3,470-14% Profit for the period 4,230 5,146-18% 1, % 11,552 9,213 25% PARENT COMPANY S STATEMENT OF COMPREHENSIVE INCOME Change Profit for the period 4,230 5,146-18% 1, % 11,552 9,213 25% Other comprehensive income Cash flow hedges % 2, Available-for-sale instruments % 378-2% 983-1,319 Translation differences for the period % Tax related to other comprehensive income % % Total other comprehensive income 1, % 2,533-1,112 Total comprehensive income for the period 5,297 5,138 3% 1, % 14,085 8,101 74% In an intra-group transaction during the second quarter of, the parent company sold subsidiary shares to Handelsbanken Liv. The subsidiary includes properties. The transaction resulted in a net capital gain in the parent company of SEK 2,815 million, but has no impact on the Group s income statement or on the assets held on behalf of the policyholders. Other information for the parent company with comments concerning financial performance, significant events and risk is covered by the report provided for the whole of the Handelsbanken Group. 44 Handelsbanken 43 Handelsbanken

45 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT PARENT COMPANY S BALANCE SHEET Assets 30 Sep 30 Jun 31 Mar Cash and balances with central banks 236, , , , ,592 Interest-bearing securities eligible as collateral with central banks 45,259 45,764 44,878 51,060 38,144 Loans to credit institutions 422, , , , ,713 Loans to the public 731, , , , ,827 Bonds and other interest-bearing securities 62,939 64,192 56,968 59,000 56,093 Shares 28,269 23,117 22,377 23,427 24,636 Shares in subsidiaries and investments in associates 45,734 46,452 46,452 44,020 44,020 Assets where the customer bears the value change risk 2,011 1,950 2,146 2,127 2,644 Derivative instruments 122, , , , ,972 Intangible assets 1,643 1,575 1,604 1,588 1,564 Property and equipment ,027 2,093 Current tax assets Deferred tax assets Other assets 18,428 33,141 23,181 32,227 17,208 Prepaid expenses and accrued income 5,347 6,375 5,739 7,001 6,395 Total assets 1,724,766 1,828,430 1,891,626 1,811,685 1,813,261 Liabilities and equity Due to credit institutions 243, , , , ,806 Deposits and borrowing from the public 668, , , , ,565 Liabilities where the customer bears the value change risk 2,059 1,997 2,194 2,183 2,673 Issued securities 531, , , , ,876 Derivative instruments 126, , , , ,421 Short positions 16,201 19,504 24,626 15,280 21,397 Current tax liabilities Deferred tax liabilities Provisions Other liabilities 17,154 22,976 24,244 41,095 13,058 Accrued expenses and deferred income 9,531 13,184 11,999 10,361 9,693 Subordinated liabilities 21,167 24,406 25,530 25,915 35,325 Total liabilities 1,637,496 1,750,768 1,816,423 1,741,681 1,739,606 Untaxed reserves 5, Share capital 2,943 2,939 2,924 2,914 2,902 Share premium 2,337 2,191 1,647 1, Other funds 3,110 2,043 1,643 1, Retained earnings 62,290 62,290 62,290 62,290 59,172 Profit for the period 11,552 7,322 5,764 1,475 9,213 Total equity 82,232 76,785 74,268 69,036 72,657 Total liabilities and equity 1,724,766 1,828,430 1,891,626 1,811,685 1,813,261 Memorandum items Assets pledged for own debt 59,195 64,487 72,489 76,895 72,007 Other assets pledged 2,564 5,066 5,348 4,557 5,236 Contingent liablilities and commitments 131, , , , ,061 Other commitments 475, , , , , Handelsbanken 44 Handelsbanken

46 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT SUBMISSION OF REPORT I hereby submit this financial report. Stockholm, 6 February 2013 Pär Boman President and Group Chief Executive PRESS AND PHONE CONFERENCE A press and analyst conference is being arranged at the Bank s head office at 9 a.m. (CET) on 6 February. A phone conference will be held at 11 a.m. (CET) on 6 February. Press releases, presentations, a fact book and a recording of the phone conference are available at The 2013 Annual General Meeting will be held at Grand Hôtel, Winter Garden, Royal Entrance, Stallgatan 4, Stockholm on 20 March at 10 a.m. (CET). The interim report for January March 2013 will be published on 24 April For further information, please contact: Pär Boman, President and Group Chief Executive Tel: +46 (0) Ulf Riese, CFO Tel: +46 (0) Mikael Hallåker, Head of Investor Relations Tel: +46 (0) , miha11@handelsbanken.se 46 Handelsbanken 45 Handelsbanken

47 HIGHLIGHTS OF ANNUAL REPORT HIGHLIGHTS OF ANNUAL REPORT Share price performance and other information The Swedish stock market grew by 12 per cent during the year. The Stockholm stock exchange s bank index rose by 28 per cent. Handelsbanken s class A shares closed at SEK , a rise of 28 per cent, but including dividends paid, the total return was 34 per cent. Since 1 January 2000, Handelsbanken s share price has increased by 117 per cent, excluding dividends, while the Stockholm Stock Exchange has fallen by 8 per cent. SHARE PRICE PERFORMANCE, 31 DECEMBER DECEMBER INDEX, = dec/99 jun/00 dec/00 jun/01 dec/01 jun/02 dec/02 jun/03 dec/03 jun/04 dec/04 jun/05 dec/05 jun/06 dec/06 jun/07 dec/07 jun/08 dec/08 jun/09 dec/09 jun/10 dec/10 jun/11 dec/11 jun/12 dec/12 SHB A OMX Stockholm Banks PI OMX Stockholm 30 Index ANALYSTS WHO MONITOR THE BANK Company Analyst address ABG SUNDAL COLLIER Magnus Andersson & Rickard Henze magnus.andersson@abgsc.se ARCTIC SECURITIES Fridtjof Berents fridtjof.berents@arcticsec.no AUTONOMOUS Jacob Kruse jkruse@autonomous-research.com BERENBERG BANK Nick Anderson nick.anderson@berenberg.de CARNEGIE Asbjørn Nicholas Mørk asbjoern.moerk@carnegie.dk CHEUVREUX Mats Anderson manderson@cheuvreux.com CITIGROUP Henrik Christiansson henrik.christiansson@citi.com CREDIT SUISSE Masih Yazdi masih.yazdi@credit-suisse.com DANSKE BANK Lars Holm laho@danskebank.com DEUTSCHE BANK Jan Wolter jan.wolter@db.com DNB NOR Hakon Reistad Fure hakon.reistad.fure@dnb.no EVLI BANK PLC Kimmo Rämä kimmo.rama@evli.com EXANE BNP PARIBAS Andreas Håkansson andreas.hakansson@exanebnpparibas.com GOLDMAN SACHS Pawel Dziedzic pawel.dziedzic@gs.com J P MORGAN Sofie Peterzens sofie.c.peterzens@jpmorgan.com KEEFE, BRUYETTE & WOODS Ronny Rehn & Aldo Comi rrehn@kbw.com MACQUARIE SECURITIES Dave Johnston dave.johnston@macquarie.com MEDIOBANCA Riccardo Rovere riccardo.rovere@mediobanca.it MERRILL LYNCH Johan Ekblom johan_ekblom@ml.com MORGAN STANLEY Alvaro Serrano alvaro.serrano@morganstanley.com NOMURA INTERNATIONAL PLC Chintan Joshi & Omar Keenan chjoshi@nomura.com NORDEA Pawel Wyszynski pawel.wyszynski@nordea.com NYKREDIT MARKETS Mads Thinggaard madt@nykredit.dk PARETO Jon David Gjertsen jon.gjertsen@pareto.no ROYAL BANK OF CANADA Claire Kane claire.kane@rbccm.com SEB ENSKILDA EQUITIES Bengt Claesson bengt.claesson@enskilda.se SOCIETE GENERALE Geoff Dawes geoff.dawes@sgcib.com UBS Nick Davey nick.davey@ubs.com Svenska Handelsbanken AB (publ), Corporate identity no SE Stockholm, Sweden, Telephone: +46 (0) , Handelsbanken

48 HIGHLIGHTS OF ANNUAL REPORT Handelsbanken 48 handelsbanken.com SE Stockholm Handelsbanken