Highlights of Annual Report 1999


Record result for Handelsbanken

· The Handelsbanken Group result was SEK 8.6 billion, an increase of 17 % excluding items affecting comparability. This result is the best ever - both on a yearly and quarterly basis

· Return on shareholders' equity was 18.4 %

· Income increased by over 3 %, excluding items affecting comparability

· Net commission income rose by 17 %

· Expenses fell by 2 % - 20 % of the Bank's transactions go via the Internet

· The surplus value in the Bank's pension foundation and pension fund increased by 90 % to SEK 19 billion

· The Board proposes that the dividend be raised to SEK 3.00 per share

· The Board proposes buy-back of up to 50 million shares

Best result ever
The Handelsbanken Group's operating profit was SEK 8 607m (7 712) an increase of 17 % excluding items affecting comparability. Both the annual and quarterly results were the best ever for the Bank. Income increased by over 3 % while expenses fell by 2 %. Return on shareholders' equity was 18.4 % (18.6).

Favourable income performance
Income increased by 3 % excluding items affecting comparability. Net interest income went up by 1 % in spite of the fact that generally lower interest rates reduced the return on the Bank's liquid funds. The interest spread in the Handelsbanken Group was slightly improved. Net commission income rose by 17 %. The increase was particularly strong in the last quarter of the year. It mainly originates from products relating to equities and mutual funds.

The lowest expenses in the Swedish banking sector fell even more
Expenses fell by 2 %. Staff costs rose by 7 % and other expenses fell by 11 %. The rise in staff costs includes contractual salary increases and also refers to an increase in the number of employees in the IT area as a result of a decrease in the number of consultants.

The total number of employees in the Group fell by 112 during the year in spite of the addition of 189 employees through the acquisition of Bergensbanken. The main part of the decrease was in the Swedish regional banks - 235 employees. An important reason for this is the increased use of the Internet service.

More Internet transactions than branch transactions this year
The Bank currently offers Internet services in the four Nordic countries with two separate services in Sweden (Handelsbanken and Stadshypotek Bank). In 1999, Internet services were introduced for corporate customers in Sweden. They were given a very good reception. Less than one year after these services were launched, 25 % of the Bank's corporate customers are using them. Internet services will be launched in the UK in 2000.

Approximately 20 % of the Bank's business is done via the Internet and during 2000, the number of Internet transactions will exceed the number of transactions carried out at branch offices. Use of Internet banking services at Handelsbanken is one of the highest of the European banks.

Handelsbanken has the lowest costs among European listed universal banks. Since the early 1990s, Handelsbanken has put around 25 % of its total expenses into the IT field. This is very high in an international perspective and more than the average for the major Swedish banks. The Bank's long-term investments in IT are a contributory factor to its low level of expenses.

Loan losses at historically low levels
Loan losses are now down at very low levels and in 1999, recoveries including changes in value of repossessed property exceeded the year's loan losses by SEK 219m (-319). The proportion of bad debts fell to 0.27 % (0.45) of lending. The bad debt reserve ratio rose to 66.8 % (58.8 %). The volume of collateral taken over fell to SEK 152m (193).

Capital ratio and rating
The Handelsbanken Group's capital ratio was 9.4 % (9.8) at the year-end. The Tier 1 capital ratio rose to 6.5 % (6.3). Handelsbanken has the highest long-term rating of the Nordic banks and in Europe, only two of the thirty largest listed universal banks have received a higher rating from Moody's.

Surplus value of SEK 19bn in the Bank's pension foundation and pension fund
The Bank's pension commitments are secured through the pension foundation and through insurance in the pension fund For many years, the market value of the assets which secure these commitments has well exceeded the actual insurance liabilities. The rise in the stockmarket in 1999 increased the surplus by 90 % and at the end of the year the surplus was SEK 19bn. It is possible to transfer this surplus to the Bank by each year taking out a maximum amount corresponding to the Bank's pension expense for that particular year. In 1999, this amount was SEK 750m. This sum has been transferred to the Bank from the pension foundation. This does not affect the Bank's operating profit but is reported as an appropriation which has a positive impact on return on equity and earnings per share. It is the Bank's intention to continue transferring the maximum permitted amount from the pension foundation in future years.

Earnings per share and dividend
Net earnings per share were SEK 9.31 (8.41) The Board recommends a dividend on the ordinary shares, class A and B of SEK 3,00 (2.67).

Buy-back of shares
The Bank has a sufficiently strong capital situation and earnings capacity to permit repurchase of the Bank's shares. The Board is therefore proposing that the Annual General Meeting authorises the Board to repurchase a maximum of 50 million shares. The Board also states that it does not intend to buy back shares for an amount in excess of SEK 4bn. It is the Bank's intention to continue working on its capital base in the years ahead, so that it is at all times optimal from the point of view of the company and the shareholders.

Best service and most satisfied customers
In the annual survey of various business sectors carried out by Svenskt Kvalitetsindex, Handelsbanken again had the most satisfied customers, both private and corporate. The business periodical Privata Affärer acclaimed Handelsbanken the customers' favourite bank. Handelsbanken was considered to have the best service and was the bank most people - as many as 29 % - would change to if they were changing banks. Handelsbanken also topped the list of banks which customers had already transferred to and was the major bank which by far the greatest number of people had confidence in.

The same result was reported in the leading Swedish consumer periodical Råd och Rön. Handelsbanken has more satisfied customers than the other major banks and no fewer than 35 % of those who had Handelsbanken as their main bank had changed to the Bank in the past five years. The same survey reported that 84 % of the Bank's customers would recommend Handelsbanken to acquaintances.

In another business magazine's (Veckans Affärer) brand name survey, Handelsbanken came top of the banks and is the only major bank with an upward trend.

Growth in the Nordic countries
In 1999, Handelsbanken purchased Bergensbanken, a Norwegian bank. The acquisition represents a substantial increase in Handelsbanken's Norwegian operations. Following the acquisition, the Bank's market share in Bergen, the second largest city in Norway, became 15 %. Bergensbanken's operating profit for 1999 was SEK 237m, which was considerably higher than the previous year. Through the purchase of Bergensbanken and growth elsewhere, the Bank's lending in the Nordic countries excluding Sweden has increased by 80 % to SEK 54bn.

Successful asset management
In 1999, the Bank's asset management was successful. Most of the Bank's mutual funds performed better than their benchmark indexes. Total yield on Handelsbanken Liv's traditional life insurance portfolio outperformed the sector average: 21.6 % compared to the average of 20.2 %. In 1999, Handelsbanken's market share of the net inflow to the Swedish mutual fund market was 13.2 %, which is higher than the Bank's total share of this market.

Stockholm, 22 February 2000

Arne Mårtensson
President and Group Chief Executive

The full report including tables is available to download from the enclosed link.

For further information please contact: <br> <br>Arne Mårtensson, Group Chief Executive tel: +46 8 - 22 92 20 <br> e-post arma01@handelsbanken.se <br> <br>Sven Grevelius, Head of Accounting and Control tel: +46 8 - 22 92 20 <br> e-post svgr01@handelsbanken.se <br> <br>Lars Lindmark, Head of Corporate Communications tel: +46 8 - 701 10 36 <br> e-post lali12@handelsbanken.se <br> <br>Bengt Ragnå, Head of Investor Relations tel: +46 8 - 701 12 16 <br> e-post bera02@handelsbanken.se <br> <br> <br>The interim report for the first quarter of 2000 will be published on 13 April 2000. <br>Handelsbanken's interim reports and other publications are also available on the Internet (www.handelsbanken.se). <br> <br>The Annual General Meeting of Svenska Handelsbanken AB (publ) will take place at 10 a.m. on 14 April 2000 in Stockholm. <br>

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