Interim report for FöreningsSparbanken 2000

Interim report for FöreningsSparbanken (Swedbank) January - June 2000 August 24, 2000 *Operating profit excluding capital gains more than doubled *Operating profit rose to SEK 5,330 M (3,608) *Operating profit excluding capital gains rose by 105 percent to SEK 4,630 M (2,258) *The return on equity was 24.5 percent (18.1) *Income excluding capital gains rose by 34 percent *Net commission income rose by 43 percent to SEK 3,341 M (2,339) *Net interest income rose to SEK 6,633 M (5,580) *Earnings per share amounted to SEK 7.20 (4.92) *As of June 30 the Group had more than 760,000 Internet bank users *Aggressive efforts in e-business: *Internet bank to be launched in Denmark this autumn *Purchasing portal launched in alliance with Telia *80 percent of staff purchased warrants in the bank *Sale of shareholdings in Bank Handlowy and Svensk Exportkredit AB Group profits The Group's operating profit for the first half of 2000 amounted to SEK 5,330 M (3,608). Excluding capital gains, operating profit rose by SEK 2,372 M or 105 percent. The return on equity amounted to 24.5 percent (18.1) and earnings per share were SEK 7.20 (4.92). Excluding capital gains, the return on equity was 20.9 percent (12.7). Net interest income rose The Group's net interest income amounted to SEK 6,633 M (5,580). FIH and Hansapank, which were not included in the Group in the first half of 1999, contributed SEK 778 M. As a result, other net interest income rose by 5 percent. Higher deposit margins and lending volumes had a positive impact on net interest income, while Swedbank Market's net interest income had a negative impact, in spite of an otherwise strong improvement in income which is reflected in net profit on financial operations. Substantial increase in net commission income Net commission income rose by SEK 1,002 M or 43 percent to SEK 3,341 M (2,339). The improvement is attributable to higher management commissions on fund investments, including the pension and life insurance operations of Robur Försäkring, higher brokerage income and an increase in payment commissions. Net commission income in Hansapank and FIH totaled SEK 229 M. Net profit on financial operations Net profit on financial operations rose to SEK 848 M (128), primarily attributable to Swedbank Markets' strong profit. Other income Other income amounted to SEK 1,104 M in the first half of 2000, compared with SEK 1,734 M in the corresponding period of 1999. The figure for the first half of 2000 includes a capital gain of SEK 250 M on the sale of shares in Svensk Exportkredit AB as well as a gain of approximately SEK 450 M on the sale of the shareholding and convertible debentures in Bank Handlowy. The figure for the first six months of 1999 includes approximately SEK 1,350 M for capital gains on property sales. Expenses Expenses in the first half of 2000 amounted to SEK 6,346 M (6,146). FIH and Hansapank, which were not included in the Group during the first half of 1999, accounted for 1 (19) SEK 618 M. Excluding FIH and Hansapank, the Group's total expenses thus declined by SEK 418 M or 7 percent. Staff costs rose by SEK 126 M or 4 percent to SEK 3,109 M (2,983). At FIH and Hansapank, staff costs amounted to SEK 221 M. Included in staff costs is an increase in profit-related bonuses of approximately SEK 190 M and approximately SEK 70 M in subsidized expenses for the employee warrant program. During the first half of the year SEK 53 M was allocated to the Kopparmyntet profit-sharing fund for 1999. Staff costs for comparable units thus declined by SEK 408 M or 14 percent. Since the mid-1990s the insurance company SPP has generated surpluses due to investment returns in excess of the corresponding rate of increase in pension commitments. The surpluses that arose through 1998 have been redistributed by company. Rules for refunds were established in the spring of 2000, and information is provided in FöreningsSparbanken's reports as of the second quarter of 2000. The discounted present value of the surplus funds, approximately SEK 260 M, is reported separately as a deduction under "General administrative expenses." During the period the Group's total IT expenses, after deducting income from independent savings banks and jointly owned banks, amounted to approximately SEK 1,050 M (1,120). Of IT expenses, Hansapank and FIH accounted for approximately SEK 80 M. Consequently, in other parts of the Group IT expenses declined by SEK 150 M or 13 percent. During the year investments of slightly over SEK 200 M will be made in the bank's Danish Internet banking project, of which approximately SEK 25 M was charged to expenses for the first half year. FöreningsSparbanken is also planning to invest a portion of the funds that were freed up from the sale of shares and convertible debentures in Bank Handlowy in a further expansion of its e-business presence. Change in the number of full-time positions since 1996 June March Dec. Sep. June Dec. Dec. 30 31 31 30 30 31 31 2000 2000 1999 1999 1999 1998 1996 Permanent 9,026 9,040 9,002 8,950 8,978 9,146 12,35 employees 0 Resource Bank 0 0 0 300 383 1,080 0 Early retirement, 0 0 0 307 333 450 0 etc. Temporary 704* 709 820 954 1,052 1,058 399 employees * Subtotal 9,730 9,749 9,822 10,51 10,74 11,73 12,74 1 6 4 9 Hansapank 3,078 2,927 2,825 FIH 151 138 144 Total 12,95 12,814 12,79 9 1 * Including vacation replacements Continued low loan losses The loan loss level was 0.2 percent (0.1). Loan losses amounted to SEK 640 M (260), of which FIH and Hansapank accounted for SEK 107 M. The Group's problem loans, net, amounted to SEK 182 M (2,947) as of June 30, 2000. The share of doubtful claims declined to 0.01 percent (0.5), while the provision ratio for doubtful claims rose to 99 percent (57). Excluding FIH and Hansapank, problem loans, net, amounted to SEK 1,026 M and the provision ratio was 74 percent. A specification of loan losses and problem loans is provided in Notes 3 and 4. Lower tax expense 2 (19) The tax expense for the period amounted to SEK 1,284 M (1,061), or an effective tax rate of 24 percent. The lower tax rate is primarily due to a higher share of non-taxable income and the elimination of corporate taxes in Estonia as of January 2000. For the corresponding period of 1999 the tax rate was 29 percent, mainly due to higher taxable than reported capital gains on property sales. Continued low international risk exposure and interest rate risk FöreningsSparbanken's international risk exposure remains low. An increase in market interest rates of one percentage point as of June 30, 2000 would have reduced the value of the Group's interest-bearing assets and liabilities, including derivatives, by approximately SEK 683 M (490), of which approximately SEK 485 M (535) relates to positions in SEK and approximately SEK 198 M (positive 45) to positions denominated in foreign currency. The increase in the Group's interest rate risk is attributable to foreign currency and primarily to Hansapank and FIH. An increase in interest rates of one percentage point would have reduced the Group's net profit on financial operations by approximately SEK 286 M (110) as of June 30, 2000. The Group also holds positions in inflation-indexed instruments, denominated in SEK, which a one-percent increase in real interest rates would have reduced in value by SEK 36 M (55) as of June 30, 2000, of which SEK 2 M would affect reported net profit on financial operations. Capital adequacy ratio 11.6 percent On June 30, 2000 the capital adequacy ratio amounted to 11.6 percent (11.7), of which the primary capital ratio was 6.8 percent (6.6). Market risks as a share of the total capital adequacy ratio amounted to 0.5 percentage points (0.3). Profit for the first half of 2000 and 1999 is not included in the capital base. Specification of capital adequacy SEK M June 30 Dec. 31 June 30 2000 1999 1999 Primary capital 32,022 26,785 25,496 Supplementary capital 24,278 22,486 22,905 Less shares, etc. - 3,074 -3,650 - 3,067 Expanded portion of capital base 844 854 Capital base 54,070 46,475 45,334 Risk-weighted amount for credit 449,594 429,972 376,327 risks Risk-weighted amount for market 18,742 17,316 10,084 risks Total risk-weighted amount 468,336 447,288 386,411 Capital adequacy ratio, % 11.6 10.4 11.7 Primary capital ratio, % 6.8 6.0 6.6 As of June 30, 2000 the FöreningsSparbanken financial companies group includes the FöreningsSparbanken Group, Eskilstuna Rekarne Sparbank AB, Färs och Frosta Sparbank AB, FöreningsSparbanken Sjuhärad AB, FöreningsSparbanken Söderhamn AB, Bergslagens Sparbank AB, Aktia Sparbank Ab in Finland and Sparebank 1 Gruppen in Norway. The Group's insurance companies are not included. Business volumes Savings Customer savings in FöreningsSparbanken amounted to approximately SEK 535 billion (469) as of June 30, 2000, of which savings in Hansapank and FIH amounted to approximately SEK 14 billion. Savings and investments, the Group 3 (19) SEK billion June 30 Dec. 31 June 30 2000 1999 1999 Deposits from the public Households, SEK 114.8 116.9 123.7 Other, SEK 69.7 71.9 65.2 Households, foreign currency (1) 6.9 5.4 Other, foreign currency (2) 17.5 11.7 8.8 Total 208.9 205.9 197.7 Discretionary management 23.0 24.4 27.5 Fund management 293.0 290.5 231.1 Retail bonds, interest-bearing 4.0 6.0 5.7 Retail bonds, stock index 5.5 5.1 5.6 Unit-linked insurance 45.3 39.6 27.1 of which in own companies -44.5 - 37.9 - 26.0 Total 535.2 533.6 468.7 (1) Of which Hansapank SEK 6.9 billion on June 30, 2000 (SEK 5.4 billion on December 31, 1999). (2) Of which FIH SEK 0.2 billion and Hansapank SEK 6.8 billion on June 30, 2000 (SEK 0.2 and 5.4 billion, respectively, on December 31, 1999). Household deposits Household deposits amounted to approximately SEK 122 billion (124) as of June 30, 2000, of which Hansapank accounted for approximately SEK 7 billion. Other deposits rose to SEK 87 billion (74), of which Hansapank and FIH accounted for approximately SEK 7 billion. Rise in Robur's fund assets and number of customers Net contributions to Robur's funds during the past 12-month period totaled slightly over SEK 8.7 billion, of which SEK 9.1 billion was attributable to insurance savings in Robur Försäkring. Robur's share of net savings in the fund market was 14.4 percent during the same period. Net contributions to Robur's funds during the past quarter amounted to approximately SEK 1.7 billion (6.1), the large part of which was attributable to insurance savings. Robur's share of gross savings in the fund market was 27 percent during the past quarter, while its share of net savings amounted to 10 percent. The difference in large part reflects the current spending tendencies of the bank's customers. For equity funds, Robur's market share during the quarter was 17 percent of net savings and 27 percent of gross savings. Fund management by Robur June Dec. 31 Dec. 31 Dec. 31 30 2000 1999 1998 1997 Assets under management (SEK 293 291 193 158 bn) Number of customers 2,550 2,350 2,200 2,000 (thousands) Swedish equities, % 32.5 33.8 42.1 - Foreign equities, % 46.9 43.6 27.0 - Interest-bearing securities, 20.6 22.6 30.9 - % Insurance savings Robur Försäkring Assets under management (SEK 45 40 19 10 bn) Number of policies 438 360 182 108 (thousands) Assets under management by Robur amounted to SEK 293 billion (231) as of June 30, 2000, an increase of SEK 62 billion or 27 percent during the past 12-month 4 (19) period. Robur's market share for assets under management in the fund market was 32.7 percent on June 30, 2000. The number of customers who invest in Robur's funds has risen to slightly over 2.5 million during the year. The subsidiary FöreningsSparbanken Kapitalförvaltning manages assets of SEK 36.5 billion (37.5), of which SEK 16.0 billion (13.4) in the funds of Robur. Unit-linked insurance growing substantially During the first half of the year sales (premiums paid) of unit-linked insurance rose by 44 percent compared with a year earlier. As of June 30, 2000 assets under management by Robur Försäkring (formerly SparFond) amounted to approximately SEK 45 billion (27), an increase of about SEK 18 billion or 67 percent since June 30, 1999. On a moving 12-month basis the market share for new unit-linked insurance policies was 27.5 percent as of June 30, 2000, making Robur Försäkring the leader in the Swedish market. At the end of June Robur Försäkring had around 438,000 (307,000) policies. In addition, it has around 950,000 group life insurance policyholders. Lending rose The Group's net lending to the public and credit institutions other than banks and the National Debt Office, excluding repurchase agreements (repos), amounted to approximately SEK 579 billion (505) as of June 30, including total lending of approximately SEK 61 billion in Hansapank and FIH. During the first half-year lending rose by approximately SEK 11 billion or 2 percent, the large part of which relates to local banks in Sweden. Loans to the household sector amounted to approximately SEK 261 billion (245). Household lending rose by approximately SEK 7 billion or 3 percent compared with December 31, 1999, of which approximately 5 billion amount to mortgage- lending in Spintab. Lending, the Group SEK billion June 30 Dec. 31 June 30 2000 1999 1999 Households (1) 260.9 254.1 244.9 Of which Spintab 203.3 198.2 193.2 Real estate management 129.5 130.3 123.7 Retail, hotels, restaurants 21.9 21.2 15.7 Construction 9.3 8.2 7.2 Manufacturing 40.8 39.5 12.0 Transportation 9.6 9.1 4.5 Forestry and agriculture 24.2 23.1 21.8 Other service businesses 13.4 14.0 13.1 Other business lending, 40.2 38.6 34.4 incl. credit institutions Municipalities (2) 15.0 16.7 15.5 Other 14.6 12.8 12.2 Total 579.4 567.6 505.0 Repurchase agreements (repos) 27.5 5.9 14.6 Total lending (3) 606.9 573.5 519.6 (1) Of which Hansapank SEK 2.4 billion on June 30, 2000 (SEK 2.1 billion on December 31, 1999). (2) Municipal companies not included. (3) Of which FIH SEK 49.6 billion and Hansapank SEK 11.8 billion on June 30, 2000 (SEK 48.0 and 10.3 billion, respectively, on December 31, 1999). (4) Payments increased Cards 5 (19) FöreningsSparbanken's card operations reported continued growth. As of June 30 the bank had approximately 2.5 million cards in issue, an increase of approximately 60,000 or slightly over 2 percent compared with the first half of 1999. The number of card transactions cleared rose substantially, to approximately 79 million (61), up 30 percent compared with the first half of 1999. Internet payments The number of Internet payments more than doubled during the period and amounted to approximately 14 million during the first half-year, compared with approximately 6 million during the first six months of 1999. E-billing on the rise The popularity of electronic billing (e-billing) among the Bank's business customers continues to rise. With the service, bills are sent directly to customers' online bank accounts, where they can safely and conveniently approve payment. During the second quarter of the year 22 new companies signed up for the service, which means that 43 in all, many in the energy and communication sectors, are now offering e-billing to their customers. Focus on secure payments Secure online payments are an issue that has increased in importance in pace with the growth in electronic commerce. The bank has, among other things, listed all the companies that offer secure payment over the Internet via FöreningsSparbanken's various payment systems on its home page under "Handla på Internet" (Buying online), so that customers can easily find out which companies offer such services. e-Business Internet bank and financial portal to be launched in Danish market this autumn The development and establishment of an Internet bank and financial portal in the Danish retail market is progressing according to plan, with a launch scheduled for November. In addition to becoming the leading Internet bank in Denmark, one goal of the project is to create reproducibility, i.e. to be able to reuse concepts and technologies in other markets. The Internet bank will offer a turn-key solution for the financial needs of retail customers, including a complete range of products, services and advice in the areas of savings (including funds and stock trading), lending and payments. The Internet bank will offer products and services from within the Group as well as from third parties, which will be sold on a commission basis. Development of a common standard for secure online ID Work is under way together with a number of other Swedish banks to develop a common standard for secure online identification. Existing Internet banking methods will be used, and the first application could be ready by year-end. Secure ID facilitates contacts with government agencies and e-commerce. More than 760,000 Internet bank users in the Group As of June 30, 2000 the number of Internet bank users in the Group topped 760,000, of whom 75,000 were telephone banking customers with the simplified Internet banking service and around 140,000 customers of Hansapank. Of the Swedish users with full Internet accounts, approximately 506,000 were retail customers and 40,000 business customers. The growth rate for FöreningsSparbanken's Internet bank has increased since mid-year and in August is between 8,000 and 10,000 customers a week. Customers of the Group's Internet banking services June Mar. Dec. Dec. Dec. 30 31 31 31 31 2000 2000 1999 1998 1997 No. of customers in Sweden 546,00 496,00 387,00 170,00 63,000 0 0 0 0 6 (19) Of whom retail customers 506,00 462,00 361,00 - - 0 0 0 Of whom business customers 40,000 34,000 26,000 - - Telephone bank via the 75,000 100,00 100,00 - - Internet 0 0 No. of customers in Baltic 140,00 120,00 - - - region 0 0 Total no. of customers 761,00 716,00 487,00 170,00 63,000 0 0 0 0 Growing number of Internet transactions The number of Internet payments more than doubled during the first half of 2000 compared with the first half of 1999, from 6 to 14 million. During the first six months of the year 22 percent of giro payments were made online. In the corresponding period of 1999 the share was 11 percent. The number of fund purchases and redemptions via the Internet topped 560,000 during the first half-year, an increase of approximately 368,000 compared with the year-earlier period, corresponding to 20 percent of the total number of fund purchases and redemptions within the Group. Upgrade of online services for small and medium-size businesses By 2005 FöreningsSparbanken has the ambition to be the best banking alternative for small and medium-size businesses. As part of an improvement in services for its 228,000 small and medium-size business customers, the bank is planning to comprehensively upgrade its overall Internet offerings to business customers this autumn. From a single web site, customers will be able to access FöreningsSparbanken via the Internet for Businesses, which will include a number of new functions added during the year, such as electronic salary statements, payroll lists, salary payments, international payments and the opportunity to view foreign currency accounts and related transactions. On the same web site, which will be continuously expanded based on customer needs, the bank's full range of services and expertise will be made available, along with tools, payment calculators, access to government information, etc. Upgrade of FöreningsSparbanken via the Internet for retail market As an element in the overall effort to made the Bank more easily accessible for customers, FöreningsSparbanken via the Internet is being continuously enhanced in terms of functionality and product and service offerings. The latest improvements, launched in June, focus on the dialogue between the bank and customers, in order to increase interactivity. This improves opportunities for online sales, allowing the bank's advisors to send secure, personalized messages, e.g. offers, to select customers. Moreover, a new electronic service, e-salary statements, was introduced, along with increased information on Spintab loans, fund accounts and foreign currency accounts for customers of each product. NetTrade online equity trading As of June 30, 2000 FöreningsSparbanken's online equity trading service, NetTrade, had slightly over 31,000 customers, an increase of about 13,000 or 72 percent since June 30, 1999. During the last quarter NetTrade accounted for approximately 23 percent of stock trades through FöreningsSparbanken's local banks. To ensure the highest level of customer service, the number of new accounts has been limited since NetTrade re-opened in March. Each week approximately 1,000 new customers are being added. Spintab's Internet loan, www.lanet.se Spintab, like other parts of the Group, has actively promoted online sales and information and, as mentioned in the previous interim report, introduced a new Internet-based mortgage loan for private customers in late January 2000. Since it's launch last spring, the online loan has attracted around 1,500 applications. FöreningsSparbanken by Telephone continues to grow 7 (19) As of June 30, 2000 approximately 950,000 customers (750,000) used FöreningsSparbanken by Telephone with personal assistance, an increase of 200,000 or 27 percent during the past year. The goal for 2000 of one million customers using personal assistance should be met as early as this autumn. The number of telephone banking customers who use the self-service option totaled approximately 1.9 million (1.8), an increase of 6 percent in the past year. The number of self-service visits to the Telephone Bank rose by 4 percent compared with the corresponding period of 1999. The number of visitors to the Telephone bank using personal assistance also rose by 4 percent during the first half of 2000 compared with the corresponding period a year earlier. Customers' interest in banking by telephone and Internet is reflected in the many relatively complex questions that have arisen regarding loans, pension savings and endowment insurance. To handle the growing activity and demand for more extensive competence, FöreningsSparbanken by Telephone intends to transfer and hire 150 employees. Other FöreningsSparbanken, SEB, MeritaNordbanken and Handelsbanken acquire Postgirot FöreningsSparbanken, Handelsbanken, MeritaNordbanken and SEB are joining together to form a unified Swedish giro system, Svenska Girot AB. Svenska Girot is acquiring Postgirot and will take over the banks' shares in Bankgirot and Privatgirot. As the largest buyer of services from the giro system, FöreningsSparbanken will benefit greatly from the cost savings resulting from the consolidation of the postal and bank giros. The transaction requires the approval of the appropriate authorities. Sale of interest in Svensk Exportkredit AB has positive impact on earnings Along with Sweden's other commercial banks, FöreningsSparbanken has divested its interest in Svensk Exportkredit AB. For FöreningsSparbanken, this positively impacted operating profit by approximately SEK 250 M. New agreement on cooperation with independent savings banks FöreningsSparbanken has signed a new framework agreement with the independent and jointly owned banks. The agreement extends until year-end 2004, after which it will automatically be extended for two years at a time. Strong interest in employee warrants Slightly over 80 percent of FöreningsSparbanken's employees and members of local bank boards have accepted the offer to buy warrants in FöreningsSparbanken AB. Each warrant, which costs SEK 15 and expires in slightly over five years, carries the right to subscribe for one new share. The subscription price is SEK 187. A total of 8,010,500 warrants were acquired. The warrant program will increase the number of shares in issue by 1.52 percent if all the shares are subscribed for by the time the warrants expire in 2005. In connection with the offer, certain employees received a subsidy to subscribe for the warrants, due to which the second-quarter figures include a subsidy expense of approximately SEK 70 M. Nordic/Baltic alliances Denmark FöreningsSparbanken owns 59.7 percent of FI-Holding, which in turn owns nearly 100 percent of FIH. FIH's operating profit for the first half of 2000 amounted to SEK 378 M (400). Its return on equity was 14.9 percent (16.7). Lending rose by 3.3 percent to SEK 49.6 billion on June 30, 2000. Total assets amounted to SEK 75 billion (64). The work under way to launch an Internet bank in the Danish retail market continues, and plans to launch an Internet banking concept during the autumn 8 (19) remain unchanged (see above). Baltic states FöreningsSparbanken's share of voting rights in AS Hansapank is 52.6 percent. Hansapank reported an operating profit for the first half of 2000 of SEK 326 M (250). The return on equity was 23.6 percent (17.8). Deposits and borrowings from the bank's customers rose by 28 percent during the first six months to SEK 13.7 billion. Total assets as of June 30 amounted to SEK 22.1 billion (17.3). The number of Internet banking customers rose by approximately 40 percent during the period to around 140,000, of a total of approximately 1.1 million retail customers. Norway FöreningsSparbanken owns 25 percent of SpareBank 1 Gruppen. The Norwegian authorities have approved the merger of SpareBank 1 Gruppen and VÅR-gruppen. The acquisition is expected to be implemented during the third quarter of 2000. The financing solution will require an additional investment from FöreningsSparbanken of NOK 325 M in the form of subscribed capital. FöreningsSparbanken's ownership interest will not be affected by the investment. Following the merger, Sparebank 1 Gruppen will be the fourth largest banking and financial group in Norway, with total assets of nearly NOK 200 billion. Poland During the second quarter FöreningsSparbanken agreed to sell its entire holding in Poland's Bank Handlowy to Citibank. The transaction gave FöreningsSparbanken a capital gain of approximately SEK 450 M. Finland FöreningsSparbanken owns 25 percent of Aktia Sparbank in Finland. Aktia reported a substantial improvement in profit in the first half of 2000. Operating profit amounted to approximately SEK 202 M. Excluding nonrecurring income, profit was approximately SEK 162 M, nearly double the previous-year figure. The improvement was primarily due to a strong increase in income. Net interest income rose by 20 percent and net commission income by approximately 53 percent. Highlights after June 30, 2000 Anders Ek new president of Robur As previously announced, Anders Ek on August 1 took over as president of Robur AB with Group Management responsibility for the business area Savings. Alliance formed with Telia to facilitate online purchasing Telia and FöreningsSparbanken are forming a joint company to develop marketplaces that will initially focus on public sector purchasing. The new company, which will take over the operations that Telia started in 1997, will be based on Telia's established technical platform and leading position in the market as well as FöreningsSparbanken's financial expertise and strong ties to the municipal sector. From the start, the new company will have around 30 customers in Sweden and an estimated turnover of SEK 80 M this year. FöreningsSparbanken and Telia will each initially own 50 percent of the new company, but are planning to broaden its ownership base and eventually take the company public. FöreningsSparbanken is acquiring 50 percent of the shares in the company for SEK 250 M. Key ratios for the Group January - June 2000 1999 Return on equity, % 24.5 18.1 9 (19) Earnings per share, SEK 7.20 4.92 Operating profit per share, 6.88 4.92 SEK Equity per share, SEK 61.07 54.87 I/E ratio before loan losses 1.94 1.63 I/E ratio after loan losses 1.76 1.56 Capital adequacy ratio, % 11.6 11.7 Primary capital ratio, % 6.8 6.6 Loan loss ratio, net, % 0.2 0.1 Share of doubtful claims, % 0.0 0.5 BUSINESS AREA REPORT Profit by business area Retail Swedbank Asset Other Group banking Markets Mgmt. incl. insurance SEK M January - June 200 1999 2000 1999 2000 1999 2000 199 2000 1999 0 9 Income 6,4 5,74 1,61 1,15 1,83 1,19 2,23 1,8 12,1 9,92 89 2 2 8 0 7 1 28 62 5 Internal sales 1,1 787 -185 -140 - - commissions 54 969 647 Expenses - - - -553 -352 - - - - - 3,8 4,11 716 308 1,40 1,1 6,34 6,14 78 5 0 70 6 6 Profit before loan losses 3,7 2,41 711 465 509 242 831 658 5,81 3,77 65 4 6 9 Loan losses - - 0 -5 -119 14 - - 521 269 640 260 Share of profit of 47 17 107 72 154 89 associated companies Operating 3,2 2,16 711 460 509 242 819 744 5,33 3,60 profit 91 2 0 8 Estimated 18, 18,4 4,43 5,28 2,04 2,27 6,46 2,6 30,9 28,6 share-holders' 058 43 6 0 0 6 0 09 94 08 equity Return on 26. 16.9 23.1 12.5 35.9 15.3 24.5 18.1 equity after 2% % % % % % % % tax The reported profit per business area includes both external and internal income and expenses. Internal sales commissions refer to market-based compensation paid to customer service units for brokered transactions. Shareholders' equity has been distributed according to capital adequacy regulations with the addition of unamortized goodwill in each business area. The return on equity for the business areas is calculated based on operating profit after minority interests and standard tax. The return on equity for the Group is calculated based on reported profit. Retail Banking Retail Banking comprises Local banks, FöreningsSparbanken by Internet, FöreningsSparbanken by Telephone, Spintab, FöreningsSparbanken Cards, FöreningsSparbanken Finans and jointly owned banks in Sweden. Income including internal sales commissions rose by SEK 1,114 M or 17 percent compared with the first six months of 1999. Net interest income from local 10 (19) banks rose by approximately SEK 370 M due to higher deposit margins, but was affected negatively by approximately SEK 50 M by lower lending margins. Commissions developed very positively, mainly due to growth in fund and insurance savings. Expenses declined by 6 percent, while loan losses increased. Operating profit rose by SEK 1,129 M or 52 percent. The return on equity rose substantially, to 26.2 percent. Swedbank Markets Swedbank Markets comprises the Bank's capital market, international and large corporate customer operations, as well as securities brokerage and corporate finance. Income rose during the year's first six months and exceeded the corresponding period of 1999 by 39 percent due to growth in equity trading and trading operations. Expenses were affected by increased income-related staff costs. The profit improvement compared with 1999 was SEK 251 M, an increase of 55 percent. The return on equity rose substantially, to 23.1 percent. Asset Management Asset Management comprises Robur, including Robur Försäkring and the Group's discretionary asset management. Due to volume growth in fund and insurance savings, income rose by SEK 633 M or 53 percent compared with the first half of 1999. Although internal sales commissions and expenses rose, profit improved by SEK 267 M or 110 percent. The return on equity rose substantially, to 35.9 percent. Other Other comprises income and expenses that do not fall under any of the business areas. This includes the Nordic/Baltic alliances, FöreningsSparbanken Fastighetsbyrå (real estate brokerage) and computer services for independent savings banks and jointly owned banks. Also included are capital gains on the sale of financial fixed assets, for example, the shares in Svensk Exportkredit AB and Bank Handlowy. For quarterly profit trends by business area, see appendix. Profit and loss accounts Group Change The Bank January - June 200 1999 % 2000 1999 0 SEK M Interest receivable 25, 19,58 28 10,92 9,894 132 0 7 Interest payable - - 32 - - 18, 14,00 7,498 6,431 499 0 Net interest income Note 6,6 5,580 19 3,429 3,463 1 33 Dividends received 236 144 64 368 176 Commissions receivable 4,1 2,914 42 2,824 2,166 46 Commissions payable - - 575 40 - 465 - 342 805 Net commission income 3,3 2,339 43 2,359 1,824 41 Net profit on financial Note operations 2 848 128 563 726 97 Other operating income 1,1 1,734 - 1,061 1,702 04 36 Total income 12, 9,925 23 7,943 7,262 162 11 (19) General administrative expenses - Staff costs - - 4 - - 3,1 2,983 2,583 2,702 09 - Surplus insurance 260 160 refund from SPP - Other - - 3 - - 2,8 2,796 2,365 2,527 78 Depreciation and write- down of tangible fixed - 56 assets 308 - 198 - 215 - 180 Amortization of goodwill - - 169 84 - 51 - 50 311 Total expenses - - 3 - - 6,3 6,146 5,054 5,459 46 Profit before loan 5,8 3,779 54 2,889 1,803 losses 16 Loan losses, net Note - - 258 149 - 458 - 215 3 643 Change in value of property Note - taken over 3 3 -2 3 0 Write-downs of financial -105 - 40 fixed assets Share of profit of 154 89 73 associated companies Operating profit 5,3 3,608 48 2,329 1,548 30 Appropriations -15 53 - -16 53 Tax - - 21 - 537 - 475 1,2 1,061 84 Minority interest - - 4 - 231 Profit for the period 3,8 2,596 46 1,776 1,126 00 Note 1. Of which charge for - - 280 -1 - 272 - 273 deposit guarantee. The 278 charge is calculated based on account deposits as of December 31 of the year prior to the year in question and amounts to 0.499 percent (0.516). Note 2. Specification of net profit on financial operations Group The Bank January - June, SEK M 2000 1999 2000 1999 12 (19) Capital gains Shares and participations 326 73 255 54 Interest-bearing 209 -44 194 - 46 securities Other financial -8 3 0 4 instruments Total 527 32 449 12 Unrealized changes in value Shares and participations -66 -3 -37 - 17 Interest-bearing 14 -92 89 - 79 securities Other financial 74 -2 0 -2 instruments Total 22 -97 52 - 98 Exchange rate fluctuations 299 193 225 183 Total 848 128 726 97 Note 3. Specification of loan losses, net, and change in the value of property taken over Group The Bank January - June, SEK M 2000 1999 2000 1999 Claims assessed individually The period's write-down for established loan losses 1,023 1,090 513 701 Reversal of provisions previously made for anticipated loan losses -566 - 603 -275 - 386 The period's provisions for anticipated loan losses 652 1 165 397 499 Recoveries from previous years' established loan losses -233 - 429 -74 - 296 Recovered provisions for anticipated loan losses -260 - 986 -131 - 273 The period's net expense for individually assessed claims 616 237 430 245 Claims assessed collectively The period's established 48 46 47 45 loan losses Recoveries from previous years' established loan losses -7 -6 -6 -6 Allocations/withdrawals from loan loss reserve -11 -20 -2 - 24 The period's net expense for 30 20 39 15 collectively assessed claims Contingent liabilities 13 (19) The period's net expense for discharged guarantees and -3 1 -11 - 45 other contingent liabilities The period's net loan loss expense 643 258 458 215 Change in the value of -3 2 -3 0 property taken over Total loan losses, net, and change in value of 640 260 455 215 property taken over Note 4. Problem loans Group The Bank SEK M 6/30 12/31 6/30 6/30 12/31 6/30 2000 1999 1999 2000 1999 1999 Doubtful claims, gross 3,740 4,544 6,158 1,756 2,129 3,281 Provisions for anticipated 3,711 3,879 3,534 1,600 1,600 2,189 loan losses Doubtful claims, net 29 665 2,624 156 529 1,092 Claims with interest 153 225 323 48 97 139 concessions Problem loans, net 182 890 2,947 204 626 1,231 Unsettled claims for which accrued interest has been entered as income 1,433 1,517 1,832 608 668 765 Property taken over to protect claims: - Buildings and land 6 19 26 4 12 19 - Shares and 14 81 15 6 7 6 participations - Other 0 71 5 0 0 5 Total 20 171 46 10 19 30 Doubtful claims as % of 0.0% 0.1% 0.5% 0.1% 0.2% 0.4% total lending Provision ratio for 99% 85% 57% 91% 75% 67% doubtful claims Quarterly profit trend for the Group SEK M 2Q 1Q 4Q 3Q 2Q 1Q 2000 2000 1999 1999 1999 1999 Net interest income* 3,289 3,344 3,052 2,711 2,717 2,863 Commissions, net 1,629 1,712 1,362 1,202 1,258 1,081 14 (19) Financial operations, net 416 432 267 184 23 105 Other income 1,096 244 185 183 287 1,591 Total income 6,430 5,732 4,866 4,280 4,285 5,640 Staff costs - - - - - - 1,579 1,530 1,360 1,449 1,564 1,419 Surplus insurance refund 260 from SPP Other expenses - - - - - - 1,800 1,697 1,645 1,546 1,631 1,532 Total expenses - - - - - - 3,119 3,227 3,005 2,995 3,195 2,951 Profit before loan losses 3,311 2,505 1,861 1,285 1,090 2,689 Loan losses, incl. changes - 290 - 350 - 272 - 104 - 2 - 258 in value Share of profit of 93 61 16 60 62 27 associated companies Operating profit 3,114 2,216 1,605 1,241 1,150 2,458 * Of which deposit - 138 - 140 - 138 - 138 - 137 - 143 guarantee fee Balance sheets Group The Bank SEK M 6/30 12/31 6/30 6/30 12/31 6/30 2000 1999 1999 2000 1999 1999 Loans to the public 603,2 569,4 515,9 218,5 191,1 202,2 72 09 66 20 62 55 Loans to credit 117,6 104,5 88,69 151,0 135,5 127,8 institutions 14 16 6 87 36 28 Interest-bearing 48,47 58,42 56,06 46,80 44,25 60,53 securities 3 7 3 9 6 5 - Financial fixed assets 2,806 6,135 6,089 2,889 6,035 7,034 - Financial current 45,66 52,29 49,97 43,92 38,22 53,50 assets 7 2 4 0 1 1 Other assets 114,5 101,2 72,25 67,22 67,32 54,16 64 27 5 0 7 7 Total assets 883,9 833,5 732,9 483,6 438,2 444,7 23 79 80 36 81 85 Deposits and borrowings 228,5 210,5 205,8 213,3 197,5 203,2 from 51 37 43 13 39 31 the public Amounts owed to credit 134,4 127,9 111,2 136,8 121,9 122,3 institutions 94 48 06 34 89 56 Debt securities in issue 353,7 344,0 290,5 50,18 40,50 44,36 81 82 48 6 6 2 Subordinated liabilities 29,97 25,35 24,17 19,80 15,20 16,49 3 2 6 3 4 5 Other liabilities 104,8 94,65 72,24 41,92 40,60 38,15 89 3 4 8 4 8 Shareholders' equity 32,23 31,00 28,96 21,57 22,43 20,18 5 7 3 2 9 3 Total liabilities, provisions and shareholders' equity 883,9 833,5 732,9 483,6 438,2 444,7 23 79 80 36 81 85 15 (19) Derivatives The Group uses derivatives in the normal course of business and for the purpose of hedging certain positions with regard to the value of equities, interest rates and currencies. The following specification is prepared in accordance with the directives of the Financial Supervisory Authority and includes all derivatives in the Group. Generally, derivatives are reported at fair value. Exceptions are made for derivatives that are accounted for as hedges. The deviations between book and fair value reported below correspond to opposing deviations for other positions included in the portion of the Group's operations covered by hedge accounting. Specification of derivatives in the Group as of June 30, 2000 Derivatives with positive fair values or nil value Interest- Currency- Equity- Other related related related SEK M FairBook FairBook FairBook FairBook valuvalu valuvalu valuvalu valuvalu e e e e e e e e Derivatives reported entirely 8,086,47 17,613,4 3,051,82 0 0 or partly on the 0 2 70 20 6 1 balance sheet Derivatives not reported 44 54 on the balance sheet Derivatives with negative fair values Interest- Currency- Equity- Other related related related SEK M FairBook FairBook FairBook FairBook valuvalu valuvalu valuvalu valuvalu e e e e e e e e Derivatives reported entirely 7,837,11 9,789,73 3,211,97 0 0 or partly on the 0 0 0 7 0 4 balance sheet Derivatives not reported 12 105 on the balance sheet Condensed statement of cash flows Group The Bank January - June 2000 1999 2000 1999 SEK M Liquid assets at beginning of 75,15 54,486 53,994 54,819 period * 9 Operating activities Operating profit 5,330 3,608 2,329 1,548 Adjustments for non-cash items including taxes paid 3,741 - 6,255 3,933 2,202 16 (19) Increase/decrease in receivables - - - - from credit institutions 16,01 4,783 20,485 24,981 8 Increase/decrease in loans to - - 1,274 3,002 the public 5,098 3,623 Increase/decrease in holdings of securities - 4,275 - 4,969 classified as current assets 3,248 4,286 Increase in deposits and borrowings from 4,216 3,627 7,249 11,541 the public, including retail bonds Increase/decrease in amounts - 1 5,834 8,591 6,602 owned to credit institutions 457 Change in other assets and - 878 904 - liabilities, net 2,037 2,122 Cash flow from operating - 7,614 1,831 4,492 activities 14,57 1 Investing activities Purchase of fixed assets - - - 304 - 1,155 1,541 1,609 Sale of fixed assets 1,865 5,112 1,732 5,262 Branch sales 114 17 114 17 Cash flow from investing 824 3,588 1,542 3,670 activities Financing activities Issuance of interest-bearing 71,29 90,817 4,600 6,652 securities 0 Redemption of interest-bearing - - - - securities 58,26 107,25 2,982 1,684 5 0 Increase/decrease in other - 23,686 4,509 2,873 funding 10,45 9 Dividend paid - 2 - 2 - - 639 463 2,639 2,463 Warrants 120 120 Cash flow from financing 47 4,790 3,608 5,378 activities Cash flow for the period - 15,992 6,981 13,540 13,70 0 Exchange rate differences in - 62 liquid assets Liquid assets at end of period * 61,39 70,478 60,975 68,359 7 * of which securities pledged for OM, etc. at beginning of period 4,657 4,769 4,657 4,769 at end of period 7,312 5,439 7,312 5,439 Liquid assets include cash and balances with central banks, for net claims the net of demand loan receivables and demand loan liabilities with maturities up to five days, and Treasury bills, other bills and mortgage bonds eligible for 17 (19) refinancing with Sveriges Riksbank, taking into account repos and short- selling. Ratings S&P Moody´s Bankwatch FitchIBCA Japan R/I Shor Long ShorLong BFSR* ShortLongIssueShortLongLong t t r FöreningsSparbanken A-1 A P-1 Aa3 B TBW-1AA- B/C F-1 A+ AA- Spintab A-1 - P-1 Aa3 - TBW-1AA- B/C F-1+ AA- - Hansapank A-2 BBB P-2 Baa1 D+ - - - - - - FIH - - P-1 A1 - - - - - - - Stockholm, August 24, 2000 FöreningsSparbanken AB (publ) Birgitta Johansson-Hedberg President and CEO For further information, please contact: Nils-Fredrik Nyblæus, Deputy to the President and CFO, phone +46-8-5859 2532 Staffan Salén, Executive Vice President, Investor Relations and Information, phone +46-8-5859 2779 Auditors' report We have reviewed this interim report in accordance with the recommendations of the Swedish Institute of Authorized Public Accountants. A review is considerably limited in scope in comparison with an audit. Nothing has come to our attention that causes us to believe that the interim report does not comply with the requirements of the Securities and Clearing Operations Act and the Annual Accounts Act for Credit Institutions and Securities Companies. Stockholm, August 24, 2000 Ulf Egenäs Torbjörn Hanson Peter Markborn Authorized Public Authorized Public Authorized Public Accountant Accountant Accountant Appointed by the Swedish Financial Supervisory Authority Financial information The Group's financial reports can be accessed on FöreningsSparbanken's home page on the Internet at http://www. foreningssparbanken.se/ir or at the nearest branch of FöreningsSparbanken. FöreningsSparbanken's next interim report, interim report for the period january - september 2000, is released on October 27, 2000. Appendix to FöreningsSparbanken's interim report January-June 2000 18 (19) Quarterly profit trend by business area SEK M 2Q 1Q 4Q 3Q 2Q 1Q 2000 2000 1999 1999 1999 1998 Retail Banking Income 3,212 3,277 3,253 2,947 2,848 2,894 Internal sales 538 616 491 405 414 373 commissions Expenses - - - - - - 1,949 1,929 2,039 2,049 2,187 1,928 Profit before loan 1,801 1,964 1,705 1,303 1,075 1,339 losses Loan losses - 219 - 302 - 240 - 98 - 1 - 268 Share of profit of 24 23 - 2 12 9 8 associated companies Profit after loan 1,606 1,685 1,463 1,217 1,083 1,079 losses Swedbank Markets Income 788 824 567 375 574 584 Internal sales - 51 - 134 - 85 - 45 - 71 - 69 commissions Expenses - 388 - 328 - 299 - 230 - 276 - 277 Profit before loan 349 362 183 100 227 238 losses Loan losses 0 0 - 4 - 2 - 4 - 1 Share of profit of associated companies Profit after loan 349 362 179 98 223 237 losses Asset Management Income 917 913 804 677 624 573 Internal sales - 487 - 482 - 406 - 360 -343 - 304 commissions Expenses - 181 - 171 - 216 - 158 -159 -149 Profit before loan 249 260 182 159 122 120 losses Loan losses Share of profit of associated companies Profit after loan 249 260 182 159 122 120 losses Other Income 1,513 718 242 281 239 1,589 Internal sales commissions Expenses - 601 - 799 - 451 - 558 - 573 - 597 Profit/loss before 912 - 81 - 209 - 277 - 334 992 loan losses Loan losses -71 - 48 - 28 - 4 3 11 Share of profit of 69 38 18 48 53 19 associated companies Profit/loss after loan 910 - 91 - 219 - 233 - 278 1,022 losses 19 (19) ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/08/24/20000824BIT00750/bit0001.doc The full report http://www.bit.se/bitonline/2000/08/24/20000824BIT00750/bit0002.pdf The full report

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