Handelsbanken Pär Boman, CEO UBS Annual Nordic Financial Services Conference September 10, 2009
Higher profitability than the average for comparable banks % 30 Return on shareholder s equity, 1973 2009:H1 Handelsbanken Other comparable banks* 25 20 15 10 5 0 2-5 1973 1979 1985 1991 1997 2003 2009 H1 Return on shareholder's equity after standard tax. * Since 2003 the comparable banks are: SEB, Nordea, Swedbank, Danske Bank samt DnB NOR.
More satisfied customers than for comparable banks 3 Index 80 75 70 65 60 55 50 Index 85 80 75 70 65 60 55 50 Customer satisfaction private customers, 2001 2008 Handelsbanken Sweden 2001 2002 2003 2004 2005 2006 2007 2008 Finland 2001 2002 2003 2004 2005 2006 2007 2008 Source: SKI, Dansk KundeIndex, EPSI Rating and EPSI Norway. In Sweden, the sector average comprises SEB, Nordea and Swedbank. 85 80 75 70 65 60 55 50 Index Index 75 70 65 60 55 50 Sector average, weighted Denmark 2001 2002 2003 2004 2005 2006 2007 2008 2002 / 2003 Norway 2004 2005 2006 2007 2008
Higher cost-effectiveness than in comparable banks C/I-ratio before loan losses, January-June 2009 % Handelsbanken DnB NOR Nordea Swedbank Danske Weighted average excl. Handelsbanken 45 48 49 48 50 SEB 57 Adjusted for items affecting comparability 48 4
Lower loan losses than in comparable banks Loan losses as a percentage of lending, 1994 2009:H1 % 1,75 1,50 1,25 1,00 0,75 0,50 0,25 0,00 Handelsbanken Other Swedish banks* 5-0,25 1994 1997 2000 2003 2006 H1 '09 * Average of SEB, Nordea and Swedbank.
Respect for risks is a cornerstone Credit responsibility Credit responsibility always at branch level Customer and credit responsibility closely related The branch holds full economic responsibility for granting the credit If necessary, the branch obtains support from the regional head office and central credit department Basic guidelines The assessment start with the borrower s repayment capacity Weak repayment capacity can never be offset by collateral or high margins Quality requirements must never be neglected in favour of large volume Credits must normally be adequately secured 6
Our experiences of loan losses Only 30% of the loan losses are related to the initial credit decision As much as 70% of the loan losses are actually related to how you manage and monitor the credits over time Staying close to the customer is crucial 7
Financial strength Assets Liabilities Rating Long-term Short-term Moody s Aa2 P-1 S&P AA- A-1+ Fitch AA- F1+ Liquidity reserve >450 SEK bn Lending etc. Senior funding, deposits etc. Capital base 18.4% 8
Summary January - June 2009 compared with January June 2008 Operating profit increased by 14% till SEK 7,251m (6,352) Return on shareholders equity increased to 13.1% (12.9) Net interest income rose by 24% to SEK 11,031m (8,893) The C/I ratio improved to 45.3% (49.0) The average volume of loans increased by 13% Household deposits rose by 21% The capital ratio increased to 18.4% (16.1) Tier 1 capital according to Basel II went up to 12.6% (10.6) The liquidity reserve exceeded SEK 450bn 9
Capital ratio and Tier I ratio, June 30 2009 2008 Change Capital ratio, Basel II 18.4% 16.1% + 2.3 Tier I ratio, Basel II 12.6% 10.6% + 2.0 Capital base, SEK m 122 105 + 17 Tier I capital, SEK m 83 69 + 14 Shareholders equity, SEK m 77 70 + 7 10
Sum of interest income and loan losses Handelsbanken Peers * SEK m 5 000 SEK m 40 000 4 000 35 000 30 000 3 000 25 000 20 000 2 000 15 000 10 000 1 000 5 000 0 Q2 06 Q4 06 Q2 07 Q4 07 Q2 08 Q4 08 Q2 09 0 Q2 06 Q4 06 Q2 07 Q4 07 Q2 08 Q4 08 ** Q2 09 11 * SEB, Nordea, Swedbank, Danske Bank and DnB NOR ** Q2 09: Danske Bank is included with figures for Q1 2009
Market shares in Sweden, Jan 2007 July 2009 Keeping our credit policy unchanged tends to lead to reduced market shares in corporate lending at the top of the cycle Lending to non-financial companies in Sweden 30% Deposits from households in Sweden 18,0% 18,0% 29% 28% 29,0% 17,7% 17,5% 27% 26% 25% 27,0% 25,7% 26,5% 17,0% 16,5% 24% 23% 15,7% 16,0% 16,0% 22% 21% 15,5% 20% jan-07 apr-07 jul-07 okt-07 jan-08 apr-08 jul-08 okt-08 jan-09 apr-09 jul-09 15,0% 12 Source: Statistics Sweden (www.scb.se)
Branch operations in Sweden increased productivity The average working hours spent on talking to customers has increased by 51% since 2006 Index 2006 = 100 150 +51% 151 The goal of increasing the time spent with customers by 50% between 2006 and 2010 was already achieved in 2009 There is potential for even more improvement 100 50 0 100 2006 2009 13
Branch operations in Sweden Active customers Private customers, thousands 2 000 Corporate customers, thousands 170 1 900 160 150 1 800 140 1 700 130 1 600 2004 2005 2006 2007 2008 2009 120 2004 2005 2006 2007 2008 2009 14 All values as of June 30 in the respective year.
Not a mass market bank Customer category Demand complex and tailormade solutions Healthy financial situation with good income and an adequate buffer in their assets 40% nationally Don t generate much profit 20% nationally - income i medel 220.000,- kr per år - Hushållen äger sin bostad - Customer profitability max + SEK 2,000/yr Generate more costs than income for their bank 40% nationally 15
Growth strategy a repetitive business model 1. Existing branch Covers our segment 2.Existing branch Moves into other segments NO! Increased credit risk 1. Existing branch Covers our segment 2. New branch in other location Financed by profitable branches 3. New branch in other location Covers our segment Surplus from profitable business Surplus from profitable business 16
Branch office operations outside Sweden January June 2009 Operating profit SEK 1,583m RoE 8.6% - excl. operating deficit 10.3% Total income increased by 31% Net interest income increased by 40% C/I ratio 54.0% Number of branch offices 245 Average number of employees 3,013 Average volumes, SEK bn Loans 516 Deposits 171 Handelsbanken has a branch office in Brighton.. and in 61 other locations in Great Britain 17
Net interest income outside Sweden, quarterly SEK m 2 000 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 No 210 200 190 180 170 160 150 140 130 120 110 100 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Branch offices outside Sweden Number of branch offices within regional banks outside Sweden 18 * Lokalbanken s 14 branch offices are included from October 21 2008.
Handelsbanken s organic growth model Handelsbanken Group - Regional banks in Denmark, Finland, Norway and Great Britain Income and expenses trend 153 branches opened 1995-2009 SEK, m Average per branch* 40 35 30 25 20 15 10 5 Number of branch offices Income Expenses No. of branch offices, June 2009 40 35 30 25 20 15 10 5 0 ** Y 0 Y 1 Y 2 Y 3 Y 4 Y 5 Y 6 Y 7 Y 8 Y 9 Y 10 Y 11 Y 12 Y 13 0 19 * Refers to figures for 2000-2008 ** Refers to the period January June 2009
The goodwill problem for banks Acquisitions with goodwill is tricky for banks as the capital adequacy rules requires that you pay twice Acquired risk-weighted assets have to be backed by Tier-1 capital but also goodwill has to be supported by capital from day 1 20
Handelsbanken had 62 branches in Great Britain January June 2009 Net interest income rose by 24% (Q2/Q1 +25%) Lending volumes rose by 18% Loan loss ratio: 0.12% 21 1988 London 1988 London 1989 Manchester 1989 Manchester 1994 Birmingham 1994 Birmingham 2000 Nottingham 2000 Nottingham 2001 Leeds 2001 Reading Leeds Reading 2002 Bristol 2002 Newcastle Bristol upon Tyne Newcastle upon Tyne 2003 Cardiff 2003 Southampton Cardiff Southampton 2004 Norwich 2004 Guildford Norwich Chelmsford Guildford Stoke Chelmsford Hull Stoke Hull 2005 Liverpool 2005 Bournemouth Liverpool Plymouth Bournemouth Maidstone Plymouth Cambridge Maidstone Cambridge 2006 Slough 2006 Sheffield Slough Wolverhampton Sheffield Oxford Wolverhampton Leicester Oxford Swindon Leicester Swindon 2007 Doncaster 2007 Brighton Doncaster Preston Brighton Bath Preston Tees Bath Valley Croydon Tees Valley Portsmouth Croydon London Portsmouth West End Milton London Keynes West End Northampton Milton Keynes Wakefield Northampton Enfield Wakefield Coventry Enfield Basingstoke Coventry Carlisle Basingstoke Chester Carlisle Chester 2008 Exeter 2008 Swansea Exeter St Swansea Albans Crawley St Albans Bradford Crawley Grimsby Bradford Dartford Grimsby Kingston Dartford Shrewsbury Kingston Harrogate Shrewsbury Lincoln Harrogate Scarborough Lincoln Stockport Scarborough Tunbridge Stockport Wells Tunbridge Wells 2009 Derby 2009 Huddersfield Derby Warrington Huddersfield Harrow Warrington Glasgow Harrow Edinburgh Glasgow Edinburgh
Handelsbanken has the most satisfied customers in Great Britain too Customer satisfaction 2009 private customers Other Satisfaction Loyalty 22 Source: EPSI Rating 2009