25 August 1998 Press release Handelsbanken's interim report January June 1998 In the comparative figures for 1997, Stadshypotek is included in the Handelsbanken Group from 26 February 1997. Summary The Handelsbanken Group's profits increased by 16 % to SEK 4.4bn Return on shareholders' equity went up to 22.0 % (20.5) Net interest income in branch office operations rose by 14 % Net commission income rose by 10 % Loan losses still at low level Profits continue to rise The Handelsbanken Group's profits for January June 1998 increased by 16 % to SEK 4 384m. Return on shareholders' equity went up to 22.0 % (20.5). Earnings per share rose to SEK 14.48 (12.38) and as a 12-month moving total to SEK 27.25 (23.99). Income and expenses Total income increased by 14 %. Net interest income for the Group rose by 6 %. This includes the net interest income pertaining to branch office operations, to Markets' trading operations and to the yield on the bond portfolio. Net interest income for branch office operations increased by 14 %. There are two reasons for this large rise: firstly the average volume of mortgage loans went up by 20 % due to the acquisition of Stadshypotek and secondly the average volume of bank loans increased by as much as 31 %. The branch office operations' net interest income includes the fee of SEK 143m (149) to the Swedish government for the deposit protection guarantee. Net interest income in the bond portfolio has decreased due to falling interest rates and lower volumes. The spread between deposit and lending rates has continued to fall, although at a rather slower rate than before. Net commission income increased by 10 % to SEK 1 735m. This change is mainly due to rising commission on securities and payments including cards, and also to increased income from corporate finance. Expenses rose by 16 %, of which 5 percentage points are attributable to the acquisition of Stadshypotek. The remaining part of the increase is due to substantially increased IT costs which culminate during 1998. 1
Loan losses still at low level Loan losses, including changes in value for property taken over fell by 43 % to SEK134m or 0.04 % of lending (0.08). The proportion of bad debts was 0.5 % (0.9) of lending. The volume of collateral taken over was SEK 375m (7 084). This decrease is related to the distribution of Fastighets AB Balder. The Bank's exposure to the problem countries in South-East Asia (The Philippines, Indonesia, Malaysia, South Korea and Thailand) is SEK 2.3bn as at mid-august. Exposure to Russia was SEK 0.2bn at the same time. In relation to Handelsbanken's size, the Bank's exposure in these countries is small and the necessary provisions have been made. Capital ratio and rating The Handelsbanken Group's capital ratio is 9.8 % (9.5) The Tier 1 capital ratio was 6.1 % (5.5). Handelsbanken continues to have the highest rating of the Swedish banks. Stadshypotek's loan customers Handelsbanken's market share for most products has increased throughout the 1990s. During the first half of 1998, this trend accelerated, mainly as a result of extra business with customers of Stadshypotek. Stadshypotek had some 650 000 private customers at the time of Handelsbanken's acquisition. Around 450 000 of them were not customers of Handelsbanken. These Stadshypotek customers are now being offered the Bank's other products such as mutual funds, deposit accounts, overdraft facilities, insurance, cards etc. Preparations for year 2000 running to plan The review of the Bank's computer systems to make them year 2000 compliant is going according to plan. It is expected that the systems will have been adapted at the end of this year. Testing of the systems has started and is expected to be completed during the first half of 1999. Stockholm 25 August 1998 Arne Mårtensson President and Group Chief Executive For further information please contact Arne Mårtensson, Group Chief Executive of Svenska Handelsbanken, or Sven Grevelius, Head of Accounting and Control, tel: +46 8 22 92 20. The interim report for January-September 1998 will be published on 27 October 1998. Handelsbanken's interim reports and other publications are also available on the Internet (http://www.handelsbanken.se). 2
Profit and loss account - Group January - June 1998 1997 Change SEK m SEK m % Interest income 30 653 27 611 +11 Interest expense -24 917-22 224 +12 Net interest income 5 736 5 387 +6 Dividends received 138 146-5 Commission income 2 063 1 896 +9 Commission expense - 328-314 +4 Net commission income Note 1 1 735 1 582 +10 Net result on financial operations Note 2 609 233 +161 Other operating income 548 311 +76 Total income 8 766 7 659 +14 General administrative expenses - Staff costs 2 215 2 015 +10 - Other Note 3 1 696 1 373 +24 Depreciation and write-down in value of tangible and intangible fixed assets 337 261 +29 Total expenses 4 248 3 649 +16 Profit before loan losses 4 518 4 010 +13 Net loan losses Note 4 134 229-41 Change in value of property taken over 0 5-100 Operating profit 4 384 3 776 +16 Minority interests -11-8 +38 Appropriations - Pension provisions 298 278 +7 Taxes -1 213-1 089 +11 Net profit for the period 3 458 2 957 +17 Note 1 Commission Payments 357 313 Lending 175 170 Deposits 55 70 Guarantees 78 68 Securities 976 886 Other 422 389 Commission income 2 063 1 896 Commission expense -328-314 Net commission income 1 735 1 582 3
January- June 1998 1997 Note 2 Net result on financial operations SEK m SEK m Shares and participations 266 61 Interest-bearing securities - 417-44 Realised profit -151 17 Shares and participations -77-22 Interest-bearing securities 423-184 Unrealised changes in value 346-206 Changes in exchange rates 414 422 Net result on financial operations 609 233 Note 3 Other administrative expenses Property and premises 366 337 External computer costs 583 330 Communication 194 158 Travel and marketing 175 153 Purchased services 229 233 Supplies 73 66 Other expenses 76 96 Other administrative expenses 1 696 1 373 Note 4 Loan losses A. Individually valued claims: The period s write-down for actual loan losses 485 764 Write-back of previous provisions for possible loan losses which are reported as actual loan losses in the period s accounts -407-572 The period s write-down relating to possible loan losses 312 459 Recovered from actual losses in previous years -129-111 Write-back of provisions for possible losses which are no longer necessary -135-257 Net expense for the period for individually valued loan losses 126 283 B. Claims valued as a group: The period s write-down for actual loan losses 14 20 Recovered from actual losses in previous years -11-7 Allocation to/dissolution of reserve for loan losses 5-5 Net expense for the period for loan losses valued as a group 8 8 C. Provisions to general reserve for country risks - -62 Total loan losses (A+B+C) 134 229 4
Quarterly performance of Svenska Handelsbanken Group, SEK m 1997:2 1997:3 1997:4 1998:1 1998:2 Net interest income 2 794 2 783 2 999 2 878 2 858 Commission, net 785 765 990 785 950 Net result on financial operations 213 177 183 268 341 Other 292 133 126 501 185 Total income 4 084 3 858 4 298 4 432 4 334 Staff costs 1 037 1 057 1 078 1 107 1 108 Other administrative expenses 744 660 893 810 886 Depreciation and write-downs 156 166 190 166 171 Total expenses 1 937 1 883 2 161 2 083 2 165 Profit before loan losses 2 147 1 975 2 137 2 349 2 169 Loan losses 98-55 123 65 69 Operating profit 2 049 2 030 2 014 2 284 2 100 Minority interests -8-4 -7-5 -6 Pension provisions 137 146 108 149 149 Taxes -565-602 -635-627 -586 Net result for the period 1 613 1 570 1 480 1 801 1 657 Balance sheet - Group 1998 1997 1997 30 June 30 June 31 Dec SEK m SEK m SEK m Lending to the general public Note 1 616 543 579 523 586 824 Lending to credit institutions 138 350 150 885 134 472 Interest-bearing securities - Financial fixed assets 6 897 13 354 5 790 - Financial current assets 80 317 74 834 60 165 Other assets 74 263 94 207 72 215 Total assets 916 370 912 803 859 466 Deposits and funding from the general public 200 230 198 603 204 747 Liabilities to credit institutions 241 768 305 351 241 436 Issued securities etc 330 218 265 178 284 051 Subordinated liabilities 23 270 23 647 23 231 Other liabilities 89 089 90 696 73 639 Shareholders equity 31 795 29 328 32 362 Total liabilities and shareholders equity 916 370 912 803 859 466 5
1998 1997 1997 30 June 30 June 31 Dec SEK m SEK m SEK m Note 1 Lending to the general public SEK lending - to households 191 840 N.A. 192 244 - to companies etc *) 304 244 N.A. 302 948 496 084 489 754 495 192 Foreign currency lending - to households 10 893 N.A. 8 318 - to companies etc 113 371 N.A. 87 348 124 264 94 844 95 666 Reserve for possible loan losses - 3 805-5 075-4 034 Total lending 616 543 579 523 586 824 *) Of which National Debt Office 7 241 119 12 802 Financial ratios for Svenska Handelsbanken Group January - June 1998 1997 Return on shareholders equity 22.0 % 20.5 % Income/expenses (I/E ratio) - before loan losses 2.06 2.10 - after loan losses 2.00 1.97 Earnings per ordinary share, SEK 14.48 12.38 - July 1997-June 1998 27.25 - July 1996-June 1997 23.99 Number of employees at 30 June 8 485 8 325 Number of branches in Nordic countries, 30 June 512 513 Other information Capital base and requirement 1998 1997 1997 30 June 30 June 31 Dec SEK m SEK m SEK m Tier 1 capital 26 231 23 623 25 906 Total capital base 42 134 40 631 43 196 Risk-weighted volume 427 829 428 445 414 785 Capital ratio 9.8 % 9.5 % 10.4 % Tier 1 ratio 6.1 % 5.5 % 6.2 % Bad debts etc 1998 1997 Group 30 June 30 June SEK m SEK m Bad debts 7 094 12 365 Reserve for possible loan losses -4 012-7 232 Bad debts, net 3 082 5 133 Reduced rate loans without a provision for possible loan losses 241 325 Total problem losses 3 323 5 458 Bad debt reserve ratio 56.5 % 58.5 % Proportion of bad debts 0.5 % 0.9 % Problem loans before write-down for possible loan losses 7 335 12 690 Loan loss ratio 0.04 % 0.08 % Non-performing loans for which interest is accrued 2 618 2 948 Collateral taken over: - Buildings and land 100 6 676 - Shares and other participations 268 380 - Other 7 28 Total collateral taken over 375 7 084 6
Derivatives 30 June 1998, SEK m Interest-rate related Currency-related Equity-related Market Book Market Book Market Book value value value value value value Positive values 26 350 23 404 22 129 19 940 2 382 2 382 Negative values 31 363 28 219 19 260 17 619 485 485 The above table is compiled in accordance with the Swedish Financial Supervisory Authority s regulations and includes all derivative instruments in the Group. For derivative instruments which are part of trading operations, the book value is the same as the market value. The differences between market value and book value reported in the table correspond to the reversed differences between market value and book value in that part of the Group s operations which is subject to hedge accounting. Value-at-Risk During the period l July 1997-30 June 1998, Handelsbanken Markets exposure to interest rate and exchange rate risk (incl. option risk), measured as Value-at Risk (VaR) was on average SEK 28m. During the period, this risk varied between SEK 16m and SEK 51m. Here no account has been taken of the links between the interest rate related and foreign exchange markets. During the same period, Handelsbanken Markets exposure to equity price risks, measured as VaR, was on average SEK 7m. This risk varied between SEK 4m and SEK 14m. 7
Profit and loss account - Parent company January - June 1998 1997 Change SEK m SEK m % Interest income 16 877 13 931 +21 Interest expense -13 973-10 857 +29 Net interest income 2 904 3 074-6 Dividends received 136 163-17 Commission income 1 871 1 858 +1 Commission expense - 295-295 0 Net commission income Note 1 1 576 1 563 +1 Net result on financial operations Note 2 576 217 +165 Other operating income 576 1 945-70 Total income 5 768 6 962-17 General administrative expenses - Staff costs 1 989 1 701 +17 - Other Note 3 1 439 1 120 +28 Depreciation and write-down in value of tangible and intangible fixed assets 177 131 +35 Total expenses 3 605 2 952 +22 Profit before loan losses 2 163 4 010-46 Net loan losses Note 4 48 64-25 Change in value of property taken over 0 0 0 Operating profit 2 115 3 946-46 Appropriations - Pension provisions 300 278 +8 - Other -225-321 -30 Taxes -501-527 -5 Net profit for the period 1 689 3 376-50 Note 1 Commission Payments 356 312 Lending 89 91 Deposits 55 70 Guarantees 77 77 Securities 777 736 Other 517 572 Commission income 1 871 1 858 Commission expense -295-295 Net commission income 1 576 1 563 8
January- June 1998 1997 Note 2 Net result on financial operations SEK m SEK m Shares and participations 258 59 Interest-bearing securities - 421-41 Realised profit -163 18 Shares and participations -88-35 Interest-bearing securities 419-184 Unrealised changes in value 331-219 Changes in exchange rates 408 418 Net result on financial operations 576 217 Note 3 Other administrative expenses Property and premises 323 294 External computer costs 512 296 Communication 145 117 Travel and marketing 139 94 Purchased services 202 189 Supplies 64 55 Other expenses 54 75 Other administrative expenses 1 439 1 120 Note 4 Loan losses A. Individually valued claims: The period s write-down for actual loan losses 359 351 Write-back of previous provisions for possible loan losses which are reported as actual loan losses in the period s accounts -310-308 The period s write-down relating to possible loan losses 194 269 Recovered from actual losses in previous years -118-63 Write-back of provisions for possible losses which are no longer necessary -77-124 Net expense for the period for individually valued loan losses 48 125 B. Claims valued as a group: The period s write-down for actual loan losses 1 2 Recovered from actual losses in previous years - - Allocation to/dissolution of reserve for loan losses -1-1 Net expense for the period for loan losses valued as a group 0 1 C. Provisions to general reserve for country risks - -62 Total loan losses (A+B+C) 48 64 9
Balance sheet Parent company 1998 1997 1997 30 June 30 June 31 Dec SEK m SEK m SEK m Lending to the general public Note 1 261 706 193 922 223 426 Lending to credit institutions 195 581 180 536 175 771 Interest bearing securities - Financial fixed assets 20 604 27 678 30 256 - Financial current assets 79 821 75 075 59 910 Other assets 89 784 94 499 83 025 Total assets 647 496 571 710 572 388 Deposits and funding from the general public 227 543 211 685 222 161 Liabilities to credit institutions 190 077 185 146 172 855 Issued securities etc 109 888 56 506 72 311 Subordinated liabilities 15 727 15 518 15 609 Other liabilities 74 851 74 647 58 441 Untaxed reserves 6 184 5 619 5 959 Shareholders equity 23 226 22 589 25 052 Total liabilities and shareholders equity 647 496 571 710 572 388 Note 1 Lending to the general public SEK lending - to households 31 152 N.A. 29 717 - to companies etc *) 116 660 N.A. 109 156 147 812 109 361 138 873 Foreign currency lending - to households 8 679 N.A. 6 641 - to companies etc 107 011 N.A. 79 897 115 690 87 463 86 538 Reserve for possible loan losses - 1 796-2 902-1 985 Total lending 261 706 193 922 223 426 *) Of which National Debt Office 7 241 119 12 802 10
Business area reporting The Group s results and return on equity reported by business area January-June 1998, SEKm Branch office operations Handelsbanken Markets Handelsbanken Asset Management Handelsbanken Finans Handelsbanken Other Total Liv 1) Income 5 571 1 609 551 355 105 575 8 766 Expenses -2 634-1 141-172 -204-31 -66-4 248 Result before internal commission 2 937 468 379 151 74 509 4 518 Internal commission 499-187 -238-18 -56 0 0 Result before loan losses 3 436 281 141 133 18 509 4 518 Loan losses -136 8 0-6 0 0-134 Operating profit 3 300 289 141 127 18 509 4 384 Return on equity % 21.6 % 10.6 % 43.8 % 20.5 % 8.9 % 22.0 % Return on Equity Q1-98 20.8 % 3.8 % 33.0 % 18.1 % 12.4 % 23.2 % Handelsbanken Liv Försäkrings AB 1) Premium income 948 Investment income 1 859 Insurance claims -440 Change in life insurance provisions -489 Bonuses -76 Operating expenses -89 Result on life assurance business 1 713 Return on shareholders' equity for the business areas is computed after standard tax while it is reported after appropriations and full tax for the whole Group. Income and expenses also include the distribution of costs made internally within the Group for services rendered. These services are paid at cost price. Internal sales commission is credited to the unit which is responsible for a customer. Commission is intended to cover expenses and also to distribute the profit arising on market terms. The shareholders' equity, on which calculation of return on equity is based, is mainly distributed in accordance with the requirements of the Act on Capital Adequacy. "Other" includes capital gains, amortisation of goodwill and Group adjustments. 1) Handelsbanken Liv Försäkrings AB is a mutual life assurance company and is not consolidated. Handelsbanken Liv Fondförsäkrings AB (unit-linked) and commission income from the mutual company are included under the business area "Handelsbanken Liv". Total premium income for both companies was SEK 3.0bn (1.7) during the first half of the year. Most of the increase comes from unitlinked insurance. Total assets were SEK 22bn (17) as at 30 June 1998. 11
Branch office operations Handelsbanken is a Nordic universal bank with a strongly decentralised organisation. The heart of the Bank is its large branch office network. The branches are responsible for all customers within their geographic area - including the largest companies. The branch office co-ordinates all services for each and every customer. Where necessary this is done in close co-operation with the Bank's subsidiaries and with specialists at regional and central level. Handelsbanken conducts complete universal banking operations in the whole of the Nordic area. Branch office operations consist of ten regional banks - seven in Sweden and one each in Norway, Finland and Denmark. Stadshypotek Bank, a telephone bank, is also included in branch office operations. Handelsbanken has 482 branches in Sweden, 15 in Norway, 12 in Finland and 3 in Denmark. Operations in Sweden and the other Nordic countries are run using the same concept to deliver universal banking services with a higher service level and at lower cost than competitors do. It is on this base that the Bank will be able to grow in the whole of the Nordic area. Handelsbanken is already the largest bank in the Nordic countries and locally is the fourth largest commercial bank in Finland and fifth in Norway. During the first half of 1998, net interest income in the branch office operations has increased by 14 % compared to the corresponding period last year. This is due to a substantial increase in volume during the period. Bank lending increased by 31 % and mortgage loans by 20 %, the latter mainly due to the acquisition of Stadshypotek. Compared to the first half of 1997, costs have also increased, mainly because of investments in the area of information technology but also as a result of the Stadshypotek acquisition. Substantial inflow of new customers and formation of customer call centre A large inflow of customers from other banks has led to a high degree of capacity utilisation. This, combined with the extra work caused by selling services to customers of Stadshypotek, has created a need to lighten the workload of the branch offices. All Swedish regional banks have therefore formed customer call centres which takes the majority of incoming phone calls. This enables the branches to spend more time on sales and other work with marketing to customers. Stadshypotek Bank, Sweden's largest telephone bank Since the acquisition of the Stadshypotek Group, the focus of Stadshypotek Bank has been to take care of the existing just over 300 000 customers. The main method for this has been telemarketing and other direct marketing activities aimed at broadening the savings base. The range of products has also been augmented with a selection of Handelsbanken's mutual funds. Stadshypotek Bank is also a complement to Handelsbanken's branch office operations. It aims to provide a small selection of standard and specially-packaged bank and life insurance products which provide added value since they are easy to understand, to link up to and to use. The principal target group is private customers of other banks. Stadshypotek's return on equity has shown a positive trend during the first half of the year compared with the corresponding period last year. 12
Handelsbanken Markets Handelsbanken Markets is responsible for corporate finance, trading in the equity, money and foreign exchange markets, debt capital financing, correspondent banking and trade finance. It also includes the Bank's unit for economic research and banking operations outside the Nordic countries. Operations are conducted in nineteen countries and are organised in four main areas: Investment Banking, Trading, Trade Finance and Financial Institutions, and Banking operations outside the Nordic countries. Operations are focused on the Bank's Nordic customer base. The Bank also offers services to Nordic companies with operations abroad and non-nordic companies with operations in the Nordic countries. Operations have been successful and the result for the second quarter was considerably higher than for the first quarter. Investment Banking The rising trends on the stockmarkets at the beginning of the year slowed down somewhat during the second quarter. The unit has maintained and reinforced its position on the Nordic equity markets. The Corporate Finance unit also performed very well with high volumes in both public and non-public deals. The unit's result has significantly improved since the first quarter of 1998. Trading During the last few years, the Bank has strengthened its position substantially and is now regarded as the leading market player for Nordic currencies and one of the leaders for interestrate related products in the Nordic markets. This sector is characterised by increasing competition. The unit's profitability is still not satisfactory although the result has improved since the first quarter of 1998. Trade Finance and Financial Institutions Operations show a stable trend and the unit has increased its market share. The unit reports higher profits even though the financial crisis in Asia has had a negative impact on business volumes and hence income. Banking operations outside the Nordic countries Operations are subject to increasing competition. Nevertheless, as a result of increased commission income and healthy trends for volumes, profits have increased since the first quarter. 13
Handelsbanken Asset Management Handelsbanken Asset Management comprises Fund Management, Discretionary Management and Custody Services. Discretionary management services and custody services are produced and sold by Handelsbanken Asset Management. The Bank's mutual funds are sold principally via the branch office network. Operations are conducted in the four Nordic countries and in Luxembourg and the UK. Fund management The amount of new savings in the Bank's mutual funds continues to be substantial. Total assets in the funds increased during the first half of 1998 by 24 % to SEK 56bn. The Bank's market share is unchanged at 10 %. Net deposits during the second quarter were SEK 2.2bn. The number of customers saving in mutual funds increased by some 50 000 to a total of 613 000. Of these, 170 000 have monthly savings averaging SEK 800/month. Yield on the funds has performed well in general and in relation to indexes. Discretionary management Assets totalling SEK 36bn are subject to discretionary management by Handelsbanken. Handelsbanken is thus one of the leading asset managers in Sweden. The net addition of managed funds, excluding changes in value, is SEK 2bn for the first half of the year. The management result has performed well compared to benchmark indexes. Custody services At present, Handelsbanken is the only bank which offers its own institutional custody services in all the Nordic countries. Operations in Sweden report healthy profits and Finland is also reporting positive figures after only six months of operations. 14
Handelsbanken Finans Handelsbanken Finans offers a full range of financing services in all the Nordic countries. These services are mainly intended to complement the banking services of the branch offices. During the second quarter, the result was slightly higher than for the first quarter. The result is characterised by a substantial increase in new sales and thus increase in volume in all areas of operations. Due to low interest rates and a very competitive situation, there is still strong pressure on margins. Nevertheless, in the second quarter, margins were rather better than in the first quarter of 1998. The business area which includes leasing and conditional sales for companies, has improved its result compared to the previous quarter. This is due to substantially increased new sales with a somewhat higher profit margin. Retail Financial Services, which provides financing via retailers for private individuals' purchases of capital goods, continues to show good profitability. Increased credit volumes in the core business have not completely counteracted increased pressure on margins. During the year, major investments are being made in order to implement a Nordic IT platform. 15
Handelsbanken Liv Handelsbanken Liv Försäkrings AB (life assurance) and Handelsbanken Liv Fondförsäkrings AB (unit-linked) are wholly-owned subsidiaries. These companies market a complete range of life assurance products under the name Handelsbanken Liv. Insurance is almost without exception sold via the Bank's branch office operations and asset management is conducted by Handelsbanken Asset Management. For legal reasons, the traditional life assurance operations in Handelsbanken Liv Försäkrings AB are run on mutual principles where the whole surplus on operations goes back to policyholders in the form of bonuses. The Ministry of Finance has proposed a number of changes in the law for insurance companies. These proposals are an essential part of a reform of the regulations applying in particular to life assurance companies. One proposal is to abolish the prohibition against distribution of profits. After due consideration by concerned bodies, the proposal will be presented to the Swedish parliament in order to come into force on 1 January 2000. Traditional insurance Handelsbanken Liv Försäkrings AB's operations includes both life and pension insurance and group life, health and accident insurance. The company at present has over 675 000 policies. Premium income for the first half of the year was SEK 0.9bn (1.0) and total assets were SEK 16.3bn (15.1). Market share measured as new premiums was 9 % (13) during the first half of the year. Unit-linked insurance Unlike traditional life assurance, operations in Handelsbanken Liv Fondförsäkrings AB distribute profits. They include both pension and capital insurance. There are over 50 000 insurance policies. Operations are expanding strongly. During the first half of the year, premium income was SEK 2.1bn (0.7) and the total value of the funds was SEK 5.5bn (1.9). Market share measured as new premiums was 16 % (9) during the first half of the year. 16
Auditors' report I have carried out a summary examination of this interim report, and in so doing have followed the recommendation of the Swedish Institute of Authorised Public Accountants (FAR). A summary examination is considerably limited in comparison with a full audit. There is nothing to indicate that the interim report does not fulfil the regulations of the Act governing Securities Exchanges and Clearing Operations and the Annual Accounts Act for Credit Institutions and Securities Companies. Stockholm 25 August 1998 Sigvard Heurlin Authorised Public Accountant Handelsbanken's shares The substantial rise in prices on the Swedish stock market continued during the second quarter of 1998. The rise during the first half of the year measured in the Affärsvärlden general index was 25 %. During the same period, the Bank's ordinary shares (SHB A) increased by 35 %.Handelsbanken's market capitalisation thus increased to SEK 88bn from SEK 65bn at the end of 1997. 30 June 1998 30 December 1997 Share price ordinary class A, SEK 370 274.50 Market capitalisation, SEK bn 88 65.2 600,00 500,00 400,00 300,00 200,00 100,00 SHB A Financial strength Short-term Long-term Moody s B P-1 Aa3 S&P A-1 A+ Fitch IBCA B F1+ AA- Bankwatch B TBW-1 Generalindex Bankindex excl SHB - 89 92 95 98 Handelsbanken s rating as at 30 June 1998 17