Handelsbanken: Highlights of Annual Report 2003 - January - December 2003


  •  Operating profits increased by 13% to SEK 11.6bn (10.2)
  •  Return on shareholders' equity rose to 14.9% (14.6)
  •  Income increased by 2% to SEK 22.1bn (21.7)
  •  Expenses fell by 5% to SEK 10.3bn (10.9)
  •  The C/I ratio improved and was 46.5% (50.2) before loan losses
  •  The loan loss ratio was 0.06% (0.05)
  •  Profits after tax increased to SEK 8.1bn (7.3)
  •  Earnings per share rose to SEK 11.70 (10.50)
  •  The Board proposes an increase in dividend by 11% to SEK 5.25 (4.75)
  •  The Board proposes to the AGM a new and increased mandate to repurchase shares
  •  The Bank has decided to start banking operations in Russia
    The Group
    Income up - expenses down
    Operating profits were SEK 11 550m (10 190), an increase of 13%. Income increased by 2% while expenses fell by 5%. Expenses in 2003 were lower than in 2001. The increase in income would have been one percentage point higher, if the Bank had not decided to allocate SEK 229m to avoid, at present, reducing pensions being disbursed in Handelsbanken Liv. The allocation is reported as a negative item under other income.
    Operating profits were positively affected by a write-up of the Bank's equity portfolio by SEK 199m. This write-up corresponds to the write-down which was made by the same amount during the third quarter of 2002. The C/I ratio before loan losses was 46.5% (50.2) and after loan losses 48.7% (52.0), in both cases excluding the write-up/write-down of the equity portfolio. Return on shareholders' equity was 14.9% (14.6).
    Income increased by 2%
    Income increased by 2% to SEK 22 130m (21 664). Net interest income rose to SEK 14 480m (14 285). Net interest income was positively affected by larger business volumes, while it was negatively affected by decreased margins and the impact of the stronger Swedish krona. Net commission income showed a rising trend during the year and was SEK 5 224m (5 134). Lending and payment commissions represented the largest increase between the two years. Net trading income rose by 31% to SEK 2 222m (1 702). This was mainly due to strong foreign exchange and fixed income trading and good total return on policyholders' funds in Handelsbanken Liv, of which the company received 10%. Other income decreased, which was mainly due to the allocation made to maintain the level of pensions being disbursed in Handelsbanken Liv.
    Business volumes increased. The underlying rise in average lending volumes in the Group was SEK 33bn, an increase of over 4%; but currency effects had a negative impact of SEK 7bn on the reported increase. In Sweden, average volumes rose by just over 4% to SEK 673bn (647), where private lending represented 6% and corporate lending 3%. In other domestic markets, the increase in lending, expressed in local currencies, was larger. The average volume of deposits increased by nearly 3%, of which deposits from private individuals represented 5% and corporate deposits 1%.
    Expenses lower than in 2001
    Expenses were SEK 10 287m (10 883), a decrease of 5%.
    Expenses were lower than in 2001, even though the Bank has opened 26 branches outside Sweden in the past three years and Handelsbanken Liv is included in the consolidated accounts.
    Staff costs  went down as did practically every cost category within other administrative expenses. The low cost level was mainly because the number of employees continued to fall.
    The number of employees fell by 401 to 9 057, a decrease of 4.2%. All units, apart from the Great Britain regional bank, reduced the number of employees. Among other administrative expenses, external IT costs decreased most, both in percentage terms and in absolute figures. IT expenses were SEK 2 534m (2 801).
    Loan losses still at low level
    Loan losses, including changes in the value of repossessed property, amounted to SEK 492m (392). This corresponded to 0.06% (0.05) of lending. The proportion of bad debts was 0.28% (0.23).
    Capital ratio, buy-back of shares and rating
    The Group's capital ratio was 10.0% (9.3) and the Tier 1 capital ratio was 7.1% (6.4).
    The Bank neither repurchased shares nor sold previously
    repurchased shares. In order to adjust the capital structure, the Board is requesting that the Annual General Meeting authorise it to repurchase a maximum of 40 million shares. On condition that the AGM decides in accordance with the Board's proposal, the Board also announces that the Bank will repurchase shares for a maximum of SEK 5bn. A maximum of SEK 2.5bn will be repurchased between the AGM and the publication of the report for the first half of 2004. The Board also proposes that the AGM cancel the 21.4 million shares which the Bank has repurchased so far. Finally the Board proposes that the AGM decide that shares which may come to be repurchased if the AGM decides in accordance with its proposal, can be used for financing potential company acquisitions.
    Handelsbanken's ratings from all three rating agencies was unchanged. However, both Moody's and Standard & Poor's changed their outlook for Handelsbanken from stable to positive.
    Earnings per share
    Net earnings per share were SEK 11.70 (10.50). The Board recommends that the General Meeting resolve on a dividend of SEK 5.25 per share (4.75) for the class A and B shares, an increase of 10.5%.
    Handelsbanken aims to have the most satisfied customers of the Nordic banks
    Customer satisfaction surveys are very important for Handelsbanken. In the autumn, the Swedish survey was presented and Handelsbanken continued to take number one position among the banks with nationwide branch networks. In Finland, the corresponding survey was presented at the beginning of 2003, showing that Handelsbanken has the most satisfied private customers in Finland. In Denmark a survey was carried out where the participating banks were only informed of the perceived satisfaction of their customers in relation to average for the whole Danish market. Handelsbanken in Denmark was also well above the average for the Danish market.
    Handelsbanken Liv - profit distribution that works
    The Pension and Insurance business area, which in practice is Handelsbanken Liv, reported an operating result of SEK -80m (-175). This amount includes an allocation of SEK 229m. The allocation enabled the company not to reduce, at present, pensions being disbursed.
    The amount represents an estimated cost for a five-year period. The allocation was made to demonstrate the flexibility which exists in a demutualised company where no policyholder or collective of policyholders is negatively affected by such action. It was also intended to draw attention to the fact that Handelsbanken's customers can rely on their bank - including the insurance operation. Without this allocation, the life insurance company would have reported a surplus of almost SEK 150m, which is the level indicated by the Bank for Handelsbanken Liv's contribution to the consolidated results under normal market conditions. Investment income on policyholders' funds was 6.27%, which was well above the guaranteed level. Handelsbanken therefore received 10% of the income. The administration result was also positive and the risk result was considerably better than the previous year.
    Handelsbanken Markets' profits almost doubled
    Handelsbanken Markets' operating profit was SEK 1 009m (533), an increase of 89%. This increase was due to higher income by 3%, reduced expenses by 10% and a small amount of recoveries instead of loan losses. This cost reduction was achieved at the same time as the new organisation with Handelsbanken Capital Markets and Handelsbanken Markets International was implemented, which included recruiting a number of key personnel. Capital Markets benefited from a gradually improved equity market but where public transactions were conspicuous by their absence. At Markets International, banking operations outside the Nordic countries and Great Britain performed much better than the previous year.
    Handelsbanken starts banking operations in Russia
    Handelsbanken has had a representative office in Moscow since 1974. The Board of Handelsbanken has now decided that the Bank will start banking operations in Russia. An application for a full banking license will be submitted to the appropriate authorities as soon as practically possible. Banking operations will be based on the experiences which the Bank gained when building up its operations in Poland. The present General Manager of Handelsbanken in Poland has been appointed head of the operations in Russia. Banking operations in Russia will focus on companies with Nordic and British links.
    Lars O Grönstedt
    President and Group Chief Executive
    The full report including tables can be downloaded from the following link:

    For further information please contact: <!-- hugin-supplied --><br> Lars O Grönstedt, Group Chief Executive <!-- hugin-supplied --><br> phone: +46 8 - 22 92 20, e-mail: lagr03@handelsbanken.se <!-- hugin-supplied --><br> <!-- hugin-supplied --><br> Lennart Francke, Head of Control and Accounting <!-- hugin-supplied --><br> phone: +46 8 - 22 92 20, e-mail: lefr01@handelsbanken.se <!-- hugin-supplied --><br> <!-- hugin-supplied --><br> Lars Lindmark, Head of Corporate Communications <!-- hugin-supplied --><br> phone: +46 8 - 701 10 36, e-mail: lali12@handelsbanken.se <!-- hugin-supplied --><br> <!-- hugin-supplied --><br> Bengt Ragnå, Head of Investor Relations <!-- hugin-supplied --><br> phone: +46 8 -701 12 16, e-mail: bera02@handelsbanken.se

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