Handelsbanken's interim report January - September 2004

*Operating profit increased by 12% to SEK 9.8bn (8.7)
*Return on equity was 15.8% (15.2)
*Income increased by 6% to SEK 17.8bn (16.8)
*Recoveries were greater than loan losses for the period
*Profit after tax totalled SEK 7.0bn (6.1)
*Earnings per share rose to SEK 10.26 (8.86)
*Swedish Quality Index measures satisfaction among Swedish bank customers
- Handelsbanken best among the nationwide banks
*In Finland, an equivalent survey ranked Handelsbanken as number one among all banks
The Group
Operating profit up 12% - strong increase in profits in third quarter
Operating profit rose by 12% to SEK 9,794m (8,726). Income increased by 6% and expenses by 2%. Recoveries were larger than loan losses. Return on shareholders' equity for the period was 15.8% (15.2). The return on equity for the third quarter was 15.5% (14.3). Operating profit in the third quarter increased by 14% compared to the equivalent period in the previous year. Compared to the second quarter this year, profits rose by 1%. The C/I ratio, both before and after loan losses, was 44.9% (46.4 and 48.1 respectively). Earnings per share were SEK 10.26 (8.86) and as a 12-month moving total SEK 13.10 (11.70).
Income continued to rise - low cost increases
Income was SEK 17,773m (16,820), an increase of 6%. Net interest income fell by 2%, while other types of income increased. The commission categories which increased most were insurance and securities. Net commission income totalled SEK 4,503m (3,794), an increase of 19%. Net trading income rose by 12% to SEK 1,797m (1,601). The increase is due to higher net trading income at Handelsbanken Markets, particularly in equity-related trading and at the regional banks outside Sweden. Net trading income fell slightly in the third quarter compared to the second quarter.
Expenses rose by 2% to SEK 7,987m (7,797). Staff costs, excluding performance-related staff costs, fell by 1% while other expenses rose by 5%. The number of employees was 9,282 (9,252). The increase was mainly due to a higher number of temporary staff and expansion at the regional banks outside Sweden.
Business volumes increased
The average volume of lending increased by 3% to SEK 852bn (830). In Sweden, lending was SEK 682bn (673), of which SEK 301bn (286) was to households and SEK 381bn (387) to companies. Corporate lending in Sweden, however, has been stable during the year, and the average volume during the third quarter was some SEK 10bn higher than in the first quarter. In the other Nordic countries and Great Britain, lending grew by 13% to SEK 148bn (131). The rate of increase for household lending was significantly higher than to companies.
Private deposits rose by 10% to SEK 111bn (101). Deposits from households outside Sweden rose by 31%. Total deposits from companies and households were SEK 305bn (292).
No loan losses
Loan losses continued to fall and recoveries exceeded loan losses. Net recoveries were SEK 8m (-297). In the corresponding period in the previous year, the loan loss ratio was 0.04%. The share of bad debts in relation to lending fell to 0.23% (0.25).

Capital ratio, buy-back of shares and rating
The capital ratio was 9.8% (9.8) and the Tier 1 ratio was 7.3% (6.9). These ratios include profits generated during the period.
The Annual General Meeting in April gave the board a mandate to buy back shares, and during the second quarter, 16.5 million shares were repurchased. The number of outstanding shares as at 30 September was 669.6 million. Handelsbanken's rating from all rating agencies was unchanged.
IAS 39
Later this year, it is expected that the EU will adopt the accounting recommendation for IAS 39 which will then come into force on 1 January 2005. IAS 39 concerns valuations of financial assets and liabilities and implies that more items than previously will be valued marked to market. This may result in larger fluctuations in the result than previously. However, the assessment for Handelsbanken is that the changes will not have any major impact on the reported profit or reported financial position.
Highest customer satisfaction for Handelsbanken's customers in Sweden and Finland
At the beginning of October, Svenskt Kvalitetsindex AB (Swedish Quality Index) presented its annual survey of customer satisfaction among banking customers in Sweden, both private and corporate. Handelsbanken attaches great importance to the results of this and equivalent surveys in the other Nordic countries.
Again this year, Handelsbanken has the most satisfied customers in Sweden - both private and corporate - when comparing the four Swedish banks with nationwide branch networks. Handelsbanken boosted its position as the bank with the most satisfied corporate customers while for private customers, the lead on its competitors was basically unchanged.
In an equivalent private customer survey in Finland, Handelsbanken was successful in defending its position among all the Finnish banks as the bank with the most satisfied private customers. 
Lars O Grönstedt
President and Group Chief Executive
For further information please contact:

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

The full report including tables can be downloaded from the following link:

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