Interim report for FöreningsSparbanken (Swedbank) January - September 2000

Interim report for FöreningsSparbanken (Swedbank)January - September 2000 October 27, 2000 Operating profit excluding capital gains rose 109% * Operating profit rose by 65 percent to SEK 8,004 M (4,849) * Operating profit excluding capital gains rose by 109 percent to SEK 7,304 M (3,499) * The return on equity was 23.7 percent (16.2) * The return on equity excluding capital gains was 21.5 percent (12.7) * Income excluding capital gains rose by 36 percent * Net interest income rose by 22 percent to SEK 10,129 M (8,291) * Net commission income rose by 42 percent to SEK 5,011 M (3,541) * Expenses for comparable units declined by SEK 900 M or 10 percent * Earnings per share amounted to SEK 10.70 (6.64) * More than 900,000 Internet banking customers in the Group * More than 1 million customers use FöreningsSparbanken by Telephone with Personal Assistance * Successful start for Robur in new premium pension selection process Very strong profit trend for Group The Group's operating profit for the first three quarters of 2000 amounted to SEK 8,004 M (4,849). Excluding capital gains, operating profit rose by SEK 3,805 M or 109 percent to SEK 7,304 M (3,499). The return on equity amounted to 23.7 percent (16.2) and earnings per share were SEK 10.70 (6.64). Excluding capital gains, the return was 21.5 percent (12.7). Net interest income rise The Group's net interest income rose by SEK 1,838 M or 22 percent to SEK 10,129 M (8,291). FIH and Hansapank, which were not included in the Group during the corresponding period of 1999, contributed SEK 1,200 M. As a result, other net interest income rose by 8 percent. Higher deposit margins and lending volumes contributed positively to net interest income. A decline in Swedbank Markets' net interest income was more than compensated by an otherwise strong income trend, which is reflected in net profit on financial operations. Substantial increase in net commission income Net commission income rose by SEK 1,470 M or 42 percent to SEK 5,011 M (3,541). The improvement is attributable to higher commissions on fund investments, including the pension and life insurance operations of Robur Försäkring, higher brokerage income and an increase in payment processing commissions. Net commission income in Hansapank and FIH totaled SEK 356 M. Net profit on financial operations Net profit on financial operations rose substantially, to SEK 1,299 M (312), primarily due to Swedbank Markets' strong profit. Other income Other income amounted to SEK 1,469 M during the first three quarters of 2000, compared with SEK 1,904 M in the corresponding period of 1999. The third quarter 2000 includes a VAT recovery of SEK 168 M. The figure for the year's first three quarters also includes capital gains of SEK 700 M on the sale of shares in Svensk Exportkredit AB and Bank Handlowy. The figure for the first three quarters of 1999 includes approximately SEK 1,350 M in capital gains on property sales. Expenses for comparable units decline substantially Expenses for the first three quarters of 2000 amounted to SEK 9,452 M (9,141). FIH and Hansapank, which were not included in the Group during the first three quarters of 1999, accounted for SEK 965 M. Excluding FIH and Hansapank, the Group's total expenses thus declined by SEK 654 M or 7 percent. Staff costs rose by SEK 101 M or 2 percent to SEK 4,533 M (4,432). At FIH and Hansapank, staff costs amounted to SEK 339 M. Included in staff costs is an increase in profit-related bonuses of approximately SEK 235 M and SEK 70 M in subsidies 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 and excluding items affecting profitability thus declined by SEK 596 M or 13 percent. IT expenses are included in part in staff costs and in part in other expenses. During the period the Group's total IT expenses, after deducting income from independent savings banks and jointly owned banks, amounted to SEK 1,621 M (1,615). Of the IT expenses, Hansapank, FIH and the Internet bank in Denmark accounted for SEK 188 M. Consequently, in other parts of the Group IT expenses declined by SEK 182 M or 11 percent. During the year other expenses were charged with approximately SEK 44 M for the disposal of employees' home PCs. Excluding Hansapank, FIH and the Internet bank in Denmark, the higher profit-related bonus, the subsidy for the employee warrant program, the charge for disposal of employees' home PCs, the allocation to the profit- sharing fund for 1999 and the surplus insurance refund from SPP, expenses declined by approximately SEK 900 M or 10 percent. Change in the number of full-time positions since 1996 Sept June Dec 31 June Dec 31 Dec 31 30 30 30 2000 2000 1999 1999 1998 1996 Permanent employees 9,010 9,026 9,002 8,978 9,146 12,350 Resource Bank 0 0 0 383 1,080 0 Early retirement, 0 0 0 333 450 0 etc. Temporary employees 654 704 820 1,052 1,058 399 Subtotal 9,664 9,730 9,822 10,746 11,734 12,749 Hansapank 3,121 3,078 2,825 FIH 162 151 144 Total 12,947 12,959 12,791 Expected allocation to profit-sharing fund during fourth quarter If FöreningsSparbanken's return on equity exceeds that of a weighted average of other major Nordic banks, an allocation to the employees' profit-sharing fund, Kopparmyntet, will be made. Because of the Group's strong profit trend and high return on equity, an allocation is likely to be made to Kopparmyntet during the fourth quarter. If current levels are maintained, the allocation will probably be in the range of SEK 350 - 500 M. On top of this, a special employer's contribution of 24.26 percent has to be added. The yearly allocation is limited to at the most the equivalent of 1.5 basic amounts per employee (approximately SEK 55,000) and can not exceed more than one third of the year's dividend to shareholders. Loan losses remain low The loan loss level for the first three quarters of the year was 0.2 percent (0.1). Loan losses amounted to SEK 880 M (364), of which FIH and Hansapank accounted for SEK 201 M. The Group's problem loans, net, amounted to SEK 92 M (2,398) as of September 30, 2000. The share of doubtful claims declined to 0.0 percent (0.4), while the provision ratio for doubtful claims rose to 102 percent (59). Excluding FIH and Hansapank, problem loans, net, amounted to SEK 935 M and the provision ratio was 75 percent. A specification of loan losses and problem loans is provided in Notes 4 and 5. Tax expense 25 percent The tax expense for the period amounted to SEK 1,984 M (1,387), or an effective tax rate of 25 percent (28). 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 28 percent, mainly due to higher taxable than reported capital gains on property sales. Continued low international risk exposure and interest rate risk An increase in market interest rates of one percentage point as of September 30, 2000 would have reduced the value of the Group's interest- bearing assets and liabilities, including derivatives, by approximately SEK 637 M (431), of which approximately SEK 551 M (469) relates to positions in SEK. A similar increase in interest rates would have reduced the value of the Group's positions in foreign currency by approximately SEK 86 M. As of September 30, 1999 such an increase in interest rates would have raised the value of the Group's positions in foreign currency by approximately SEK 38 M. The Group's higher interest rate risk is attributable primarily to the operations of 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 255 M (111) as of September 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 approximately SEK 40 M (44) as of September 30, 2000, of which approximately SEK 8 M would affect reported net profit on financial operations. Capital adequacy ratio 11.0 percent On September 30, 2000 the capital adequacy ratio amounted to 11.0 percent (11.7), of which the primary capital ratio was 6.6 percent (6.6). Market risks as a share of the total capital adequacy ratio amounted to 0.5 percentage points (0.4). Profit for the first half of 2000 is included in the capital base as of September 30, 2000. Specification of capital adequacy SEK M Sept 30 Dec 31 Sept 30 2000 1999 1999 Primary capital 33,000 26,785 25,725 Supplementary capital 25,646 22,486 22,980 Less shares, etc. - 4,874 - 3,650 - 3,017 Expanded portion of capital base 849 854 Capital base 54,621 46,475 45,688 Risk-weighted amount for credit risks 476,456 429,972 377,124 Risk-weighted amount for market risks 20,412 17,316 12,174 Total risk-weighted amount 496,868 447,288 389,298 Capital adequacy ratio, % 11.0 10.4 11.7 Primary capital ratio, % 6.6 6.0 6.6 As of September 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 552 billion (467) as of September 30, 2000, of which savings in Hansapank and FIH amounted to approximately SEK 16 billion. Savings and investments, the Group SEK billion Sept 30 Dec 31 Sept 30 2000 1999 1999 Deposits from the public Households, SEK 118.8 116.9 124.6 Other, SEK 73.2 71.9 65.9 1) Households, foreign currency 7.0 5.4 0 2) Other, foreign currency 22.4 11.7 4.1 Total 221.4 205.9 194.6 Discretionary management 22.3 24.4 24.7 Fund management 297.2 290.5 234.9 Retail bonds, interest-bearing 4.1 6.0 5.9 Retail bonds, stock index 5.1 5.1 5.7 Unit-linked insurance 48.1 39.6 28.8 of which in own companies - 46.5 - 37.9 - 27.6 Total 551.7 533.6 467.0 1) Of which Hansapank SEK 7 billion on September 30, 2000 (SEK 5.4 billion on December 31, 1999). 2) Of which FIH SEK 0.2 billion and Hansapank SEK 8.5 billion on September 30, 2000 (SEK 0.2 and 5.4 billion, respectively, on December 31, 1999) Household deposits Household deposits amounted to SEK 126 billion (125) as of September 30, 2000, of which Hansapank accounted for approximately SEK 7 billion. Other deposits rose to SEK 96 billion (70), of which Hansapank and FIH accounted for SEK 9 billion. Fund management, Robur Sept Dec 31 Sept Dec 31 Dec 31 30 30 2000 1999 1999 1998 1997 Assets under management (SEK 297 291 235 193 158 bn) Number of customers 2,594 2,350 2,300 2,200 2,000 (thousands) Swedish equities, % 32.8 33.8 34.7 42.1 - Foreign equities, % 46.8 43.6 37.1 27.0 - Interest-bearing securities, 20.4 22.6 28.2 30.9 - % Insurance savings, Robur Försäkring Assets under management (SEK 48 40 29 19 10 bn) Number of policies thousands) 465 360 331 182 108 Robur's fund assets and customers increase During the past 12-month period net contributions to Robur's funds totaled slightly over SEK 9.2 billion, of which SEK 10 billion was insurance savings in Robur Försäkring. Robur's share of net investments in the fund market was 14 percent during the corresponding period. Robur's share of gross fund investments during the first nine months of 2000 was 27 percent, while its share of net investments during the same period was approximately 14 percent. The differences largely reflect the current spending tendencies of the bank's customers. Approximately 38 percent of the fund redemptions during the period were for reinvestment purposes. Of those 38 percent, only 10 percent was reinvested with other fund management firms. During the last quarter net contributions to Robur's funds amounted to approximately SEK 2.4 billion (1.9), in large part attributable to insurance savings. Robur's share of gross investments in the fund market was 27 percent, while its share of net investments was 16 percent in the last quarter. For equity funds, Robur's market share of net investments was 22 percent during the last quarter. Assets under management by Robur amounted to SEK 297 billion (235) as of September 30, 2000, an increase of SEK 62 billion or 26 percent during the past 12-month period. Of the last year's increase, approximately 84 percent relates to the appreciation in the value of the funds and 16 percent to net contributions. Robur's share of assets under management in the fund market was 32.7 percent as of June 30, 2000. The number of customers who invest in Robur's funds has risen by around 250,000 to nearly 2.6 million during the year. The subsidiary FöreningsSparbanken Kapitalförvaltning manages assets of SEK 35.6 billion (35.7), of which SEK 13.4 billion (11.0) is in Robur funds. Unit-linked insurance growing substantially Sales (premiums paid) of unit-linked insurance rose by 33 percent during the first nine months of the year compared with the corresponding period of 1999. Sales amounted to SEK 11.0 billion (8.3) during the period. As of September 30, 2000 assets under management by Robur Försäkring (formerly SparFond) amounted to approximately SEK 48 billion (28.8), an increase of about SEK 19 billion or approximately 67 percent since September 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 September Robur Försäkring had around 465,000 (330,000) policies, in addition to 950,000 (900,000) group life insurance policyholders. Lending 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 594 billion (504) as of September 30, including total lending of approximately SEK 68 billion in Hansapank and FIH. During the first three quarters of the year lending rose by approximately SEK 27 billion or 5 percent, approximately half of which relates to local banks in Sweden. Loans to the household sector amounted to approximately SEK 265 billion (248). Household lending rose by approximately SEK 11 billion or 4 percent compared with the beginning of the year, of which about SEK 8 billion is mortgage lending in Spintab. During the first three quarters of the year Spintab again increased its lending volume, primarily loans for private homes and agricultural loans arranged through the bank's branch network. Online mortgage sales have steadily risen since the first half of the year, when this sales channel was introduced. Internet sales are now supported by a new portal containing special customer offers and information from Spintab and a number of its partners. Lending, the Group SEK billion Sept Dec 31 Sept 30 30 2000 1999 1999 1) Households 264.9 254.1 247.8 Of which Spintab 205.9 198.2 195.6 Real estate management 130.3 130.3 120.6 Retail, hotels, restaurants 22.6 21.2 15.7 Construction 9.4 8.2 7.2 Manufacturing 41.4 39.5 12.3 Transportation 10.0 9.1 4.8 Forestry and agriculture 24.8 23.1 22.6 Other service businesses 16.3 14.0 13.6 Other business lending, incl. 46.6 38.6 29.9 credit institutions 2) Municipalities 14.4 16.7 16.0 Other 13.6 12.8 13.8 Total 594.3 567.6 504.3 Repurchase agreements (repos) 26.4 5.9 11.1 3) Total lending 620.7 573.5 515.4 1) Of which Hansapank SEK 3.0 billion on September 30, 2000 (SEK 2.1 billion on December 31, 1999). 2) Municipal companies not included. 3) Of which FIH SEK 54.6 billion and Hansapank SEK 13.2 billion on September 30, 2000 (SEK 48.0 and 10.3 billion, respectively, on December 31, 1999). 4) Payments Cards FöreningsSparbanken's card operations reported continued growth. As of September 30 the bank had approximately 2.5 million cards in issue, an increase of 160,000 or slightly over 7 percent compared with September 30, 1999. The number of card transactions cleared rose substantially, to 125 million (96), up 30 percent from the corresponding period of 1999. Internet payments The number of Internet payments continues to grow substantially, more than doubling during the period to 22 million, compared with approximately 10 million during the first three quarters of 1999. e-billing The use of electronic billing (e-billing) among the Bank's business customers continues to grow. With the service, bills are sent directly to customers' online bank accounts, where they can safely and conveniently approve payment. During the third quarter of the year 26 new companies signed up for the service, which means that 69 in all, many in the energy and municipal sectors, are now offering e-billing to their customers. e-Business 909,000 Internet bank users in the Group As of September 30, 2000 the number of Internet bank users in the Group topped 909,000, of whom 73,000 were telephone banking customers with the simplified Internet banking service and around 170,000 customers of Hansapank. Of the Swedish users with full Internet accounts, approximately 619,000 were private customers and 47,000 business customers. The growth rate for FöreningsSparbanken's Internet bank was between 8,000 and 10,000 customers a week in October. Customers of the Group's online banking services Sept 30 June 30 Mar 31 Dec 31 Dec 31 2000 2000 2000 1999 1998 No. of customers in Sweden 666,000 546,000 496,000 387,000 170,000 Of whom private customers 619,000 506,000 462,000 361,000 - Of whom business customers 47,000 40,000 34,000 26,000 - Telephone bank via the 73,000 75,000 100,000 100,000 - Internet No. of customers in Baltic 170,000 140,000 120,000 - - region Total no. of customers 909,000 761,000 716,000 487,000 170,000 Customers conduct growing share of their transactions online The number of Internet payments more than doubled during the first three quarters of 2000 compared with the corresponding period of 1999, from 10 to 22 million. During the year's first nine months 24 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 totaled 784,000 during the first three quarters of 2000, an increase of 454,000 from the year-earlier period, corresponding to 21 percent (14) of the total number of fund purchases and redemptions within the Group. Upgrade of online services for small and medium-size businesses This autumn FöreningsSparbanken is upgrading its service for business customers. A number of new Internet banking features and a completely new online business service will be launched on the bank's homepage on November 7. In the process, business customers will gain access to several new services. They will also have easy access to information on the bank's products and expertise, along with tools, payment calculators, access to government information, etc. NetTrade online equity trading As of September 30, 2000 FöreningsSparbanken's online brokerage service, NetTrade, had approximately 40,000 customers, an increase of about 20,000 or 100 percent since September 30, 1999. During the year's first nine months NetTrade accounted for 24 percent (17.5) of equity trades through FöreningsSparbanken's local banks. e-commerce alliance with Telia Telia and FöreningsSparbanken's cooperative e-commerce and public sector purchasing project is developing well, as the formal establishment of a joint company is being finalized. The influx of new customers is good and includes a strategically important agreement with the city of Gothenburg on the use of the new company's services. Internet bank and financial portal for the Danish retail market Work on the development of an Internet bank and financial portal in the Danish retail market is progressing according to plan, with a launch scheduled for just after year-end, under the name Firstviewbank. 1 million customers for telephone banking with personal assistance On Monday, September 25 the one millionth customer signed on for FöreningsSparbanken by Telephone with personal assistance. In total, 1.9 million customers are now able to handle their day-to-day banking business by telephone. Of them, one million can also access a bank representative 18 hours a day, seven days a week. The rate at which new customers are signing on remains very high. Around 5,000 customers a week are choosing add to their banking alternatives by using the personal assistance option. As of September 30, 2000 around one million customers (775,000) used FöreningsSparbanken by Telephone with personal assistance, an increase of 225,000 or 29 percent during the past year. The number of telephone banking customers who use the self-service option totaled approximately 1.9 million (1.8), an increase of 6 percent compared with the corresponding period of 1999. The number of self-service visits to the telephone bank rose by 6 percent compared with the corresponding period of 1999. During the first three quarters of 2000 the number of visitors to the telephone bank using personal assistance rose by 16 percent compared with a year earlier. 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 period January-September 2000 amounted to SEK 570 M (498). Its return on equity was 14.7 percent. Lending amounted to SEK 55 billion on September 30, 2000. Total assets amounted to approximately SEK 73 billion. Baltic states FöreningsSparbanken holds 52.6 percent of the voting rights in AS Hansapank, which reported an operating profit for the period January- September 2000 of SEK 503 M (384). Its return on equity was 23.7 percent. Deposits from and lending to Hansapank's customers each amounted to SEK 16 billion as of September 30. Total assets were approximately SEK 24 billion on the same date. Of a total of around 1.1 million retail customers, 170,000 were Internet banking customers. Hansapank has issued a cash offer for 90.75 percent of the shares in Lithuanian Savings Bank, Lithuania's second largest bank, with total assets of approximately SEK 8.5 billion. Norway FöreningsSparbanken owns 25 percent of SpareBank 1 Gruppen. The acquisition of VÅR-gruppen has now been finalized, after which Sparebank 1, together with its underlying owners' bank, is the fourth largest banking and financial group in Norway, with total assets of nearly NOK 200 billion. Finland FöreningsSparbanken owns 25 percent of Aktia Sparbank in Finland. Aktia reported a substantial improvement in profit in the first nine months of 2000. Operating profit amounted to approximately SEK 309 M (142). Excluding nonrecurring income, profit was approximately SEK 271 M, nearly double the previous-year figure. The improvement was primarily due to a strong increase in income. Net interest income rose by 28 percent and net commission income by 43 percent. Other Cooperation with independent savings banks and jointly owned banks The boards of directors of FöreningsSparbanken and Vimmerby Sparbank have signed a letter of intent on a merger in Vimmerby. The plan is to convert Vimmerby Sparbank to a banking corporation and have FöreningsSparbanken, via a new share issue, become a co-owner with 40 percent of the shares. In the process, the new banking corporation will acquire FöreningsSparbanken's local bank. After the necessary decisions and approvals, the conversion and acquisition are expected to take place in the spring of 2001. Internet-based equity trading FöreningsSparbanken, Handelsbanken, MeritaNordbanken and SEB plan to establish a jointly owned electronic network that includes a matching function. Buy and sell orders from all four banks' private customers will be brokered and matched in this network. As a result, the banks will be able to offer online trading even when the market is closed. The potential exists to expand the concept to the rest of the Nordic region, to improve efficiency in trading by private customers and to offer trading in foreign stocks. Highlights after September 30, 2000 Robur the most popular premium pension fund manager to date As of October 24 FöreningsSparbanken's fund management company, Robur, had by far the largest market share in the country's new premium pension system. Robur had received 21 percent of the total amount invested after 9 percent of the selections had been made. The nearest competitor had obtained 11 percent of the total amount invested. Revised financial objectives FöreningsSparbanken has decided to revise the Group's financial objectives whereby the primary capital ratio will fall in the range 6.5 - 7.5 percent (previously 6.5 - 8.5 percent with a target of 7.5 percent) and the capital adequacy ratio will be no less than 10.5 percent (11 percent). Moreover, the return on equity shall exceed a weighted average for large, listed banking groups in Sweden, Denmark, Finland and Norway (previously just Sweden). Key ratios for the Group Jan - Sept Jan - Sept Full year 2000 1999 1999 Return on equity, % 23.7 16.2 15.7 Return on equity, excluding capital gains % 21.5 12.7 13.2 Return on total capital, % 1.19 0.89 0.83 Earnings per share, SEK * 10.70 6.64 8.70 Operating profit per share, 10.32 6.61 8.74 SEK * Equity per share, SEK 64.69 56.60 58.75 I/E ratio before loan losses 1.94 1.57 1.58 I/E ratio after loan losses 1.77 1.51 1.50 E/I ratio before loan losses 0.52 0.64 0.63 E/I ratio after loan losses 0.56 0.66 0.66 Capital adequacy ratio, % 11.0 11.7 10.4 Primary capital ratio, % 6.6 6.6 6.0 Loan loss ratio, net, % 0.2 0.1 0.1 Share of doubtful claims, % 0.0 0.4 0.1 Provision ratio for doubtful 102 59 85 claims, % No. of shares at beginning of 527,808,843 351,872,562 351,872,562 period No. of shares at end of period 527,808,843 527,808,843 527,808,843 * No. of shares in calculation 527,808,843 527,808,843 527,808,843 Business area report Profit by business area 9 (19) Retail Swedbank Asset Mgmt. Other Group banking Markets incl. insurance SEK M January - 2000 1999 2000 1999 2000 1999 2000 1999 2000 199 September Income 9,770 8,689 2,253 1,533 2,749 1,874 3,374 2,109 18,146 14,20 Internal sales 1,730 1,192 - 274 - 185 - - commissions 1,456 1,007 Expenses -5,848 -6,164 - 990 - 783 - 556 - 466 - -1,728 -9,452 -9,14 2,058 Profit before loan losses 5,652 3,717 989 565 737 401 1,316 381 8,694 5,06 Loan losses - 684 - 367 0 - 7 - 196 10 - 880 - 36 Share of 62 29 128 120 190 14 profit of associated companies Operating 5,030 3,379 989 558 737 401 1,248 511 8,004 4,84 profit Estimated 18,307 18,889 4,762 5,209 1,994 2,206 6,749 2,620 31,812 28,92 share-holders' equity Return on 26.3% 17.2% 19.9% 10.3% 35.5% 17.5% 23.7% 16.2 equity after 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 1,619 M or 16 percent compared with the first three quarters of 1999. Net interest income from local banks rose by approximately SEK 560 M thanks to higher deposit margins, but was affected negatively by approximately SEK 180 M by lower lending margins. Higher lending volumes raised net interest income by approximately SEK 190 M. Commissions developed very positively, mainly due to growth in fund and insurance savings. Expenses declined by 5 percent, while loan losses increased. Operating profit rose by SEK 1,651 M or 49 percent. The return on equity rose substantially, to 26.3 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 third quarter, exceeding the corresponding period of 1999 by 47 percent thanks to continued growth in equity, fixed income and currency trading. Expenses were affected by increased revenue-related staff costs. The profit improvement compared with 1999 was SEK 431 M, an increase of 77 percent. The return on equity rose substantially, to 19.9 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 875 M or 47 percent compared January - September 1999. Despite higher internal sales commissions and expenses, profit improved by SEK 336 M or 84 percent. The return on equity rose substantially, to 35.5 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. Quarterly profit trend by business area SEK M 3Q 2Q 1Q 4Q 3Q 2Q 2000 2000 2000 1999 1999 1999 Retail Banking Income 3,281 3,212 3,277 3,253 2 947 2,848 Internal sales 576 538 616 491 405 414 commissions Expenses - - - - 2,039 - 2,049 - 2,187 1,970 1,949 1,929 Profit before loan 1,887 1,801 1,964 1,705 1,303 1,075 losses Loan losses - 163 -219 - 302 - 240 - 98 -1 Share of profit of 15 24 23 - 2 12 9 associated companies Profit after loan losses 1,739 1,606 1,685 1,463 1,217 1,083 Swedbank Markets Income 641 788 824 567 375 574 Internal sales - 89 -51 - 134 - 85 - 45 - 71 commissions Expenses - 274 -388 - 328 - 299 - 230 - 276 Profit before loan 278 349 362 183 100 227 losses Loan losses 0 0 0 - 4 - 2 - 4 Share of profit of associated companies Profit after loan losses 278 349 362 179 98 223 Asset Management Income 919 917 913 804 677 624 Internal sales - 487 -487 - 482 -406 - 360 -343 commissions Expenses - 204 -181 - 171 -216 - 158 -159 Profit before loan 228 249 260 182 159 122 losses Loan losses Share of profit of associated companies Profit after loan losses 228 249 260 182 159 122 Other Income 1,143 1,513 718 242 281 239 Internal sales commissions Expenses - 658 -601 - 799 - 451 - 558 - 573 Profit/loss before loan 485 912 - 81 - 209 - 277 - 334 losses Loan losses - 77 -71 - 48 -28 - 4 3 Share of profit of 21 69 38 18 48 53 associated companies 11 (19) Profit/loss after loan 429 910 -91 - 219 - 233 - 278 losses Profit and loss accounts Group The Bank Period Jan- Jan- Full Jan- Jan- Sept Sept Year Sept Sept 2000 1999 % 1999 2000 1999 SEK M Interest receivable 39,011 29,014 34 40,197 17,487 14,718 Interest payable - 28,882 - 39 -28,854 -12,224 -9,579 20,723 Net interest income 10,129 8,291 22 11,343 5,263 5,139 (Note 1) Dividends received 238 157 52 159 369 189 Commissions receivable 6,195 4,388 41 6,119 4,190 3,212 Commissions payable - 1,184 - 847 40 - 1,216 - 672 - 498 Net commission income 5,011 3,541 42 4,903 3,518 2,714 (Note 2) Net profit on financial 316 Operations (Note 3) 1,299 312 579 1,077 278 Other operating income 1,469 1,904 - 23 2,087 1,405 1,901 Total income 18,146 14,205 28 19,071 11,632 10,221 General administrative expenses - Staff costs - 4,533 - 2 - 5,792 -3,759 -4,006 4,432 - Surplus insurance 260 178 refund from SPP - Other - 4,242 - 2 - 5,556 -3,493 -3,740 4,142 Depreciation and write- down of 50 tangible fixed assets - 469 - 312 - 439 - 324 - 285 Amortization of goodwill - 468 - 255 84 - 359 - 76 - 76 Total expenses - 9,452 9,141 3 12,146 -7,474 8,107 Profit before loan 8,694 5,064 72 6,925 4,158 2,114 losses Loan losses, net (Note - 883 - 363 143 - 635 - 574 - 298 4) Change in value of property taken over (Note 4) 3 -1 - 1 3 0 Write-downs of financial - 105 - 40 fixed assets Share of profit of 190 149 28 165 associated companies Operating profit 8,004 4,849 65 6,454 3,482 1,776 Appropriations - 17 49 70 - 18 62 Tax -1,984 - 43 - 1,904 - 855 - 537 1,387 Minority interest - 354 - 7 - 28 Profit for the period 5,649 3,504 61 4,592 2,609 1,301 Note 1. 12 (19) Of which charge for - 415 - 418 -1 - 556 - 406 - 409 deposit guarantee The 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). Quarterly profit trend for the Group 3Q 2Q 1Q 4Q 3Q 2Q SEK M 2000 2000 2000 1999 1999 1999 Net interest income* 3,496 3,289 3,344 3,052 2,711 2,717 Commissions, net 1,670 1,629 1,712 1,362 1,202 1,258 Financial operations, net 451 416 432 267 184 23 Other income 367 1,096 244 185 183 287 Total income 5,984 6,430 5,732 4,866 4,280 4,285 Staff costs - - - - - - 1,424 1,579 1,530 1,360 1,449 1,564 Surplus insurance refund 260 from SPP Other expenses - - - - - - 1,682 1,800 1,697 1,645 1,546 1,631 Total expenses - - - - - - 3,106 3,119 3,227 3,005 2,995 3,195 Profit before loan losses 2,878 3,311 2,505 1,861 1,285 1,090 Loan losses, incl. changes - 240 - 290 - 350 - 272 - 104 - 2 in value Share of profit of 36 93 61 16 60 62 associated companies Operating profit 2,674 3,114 2,216 1,605 1,241 1,150 * Of which deposit - 137 - 138 - 140 - 138 - 138 - 137 guarantee fee Note 2. Specification of net commission income Group The Bank January - September, SEK M 2000 1999 2000 1999 Payment processing 1,634 1,095 1,391 1,088 commissions Brokerage 656 360 613 330 Asset management 2,543 1,792 1,220 895 Other securities 96 125 104 123 commissions Other commissions 1,266 1,016 862 776 receivable Total commissions 6,195 4,388 4,190 3,212 receivable Payment processing - 589 - 419 - 538 - 413 commissions Securities commissions - 145 - 68 - 104 - 50 Other commissions payable - 450 - 360 - 30 - 35 Total commissions payable - - 847 - 672 - 498 1,184 Total commissions, net 5,011 3,541 3,518 2,714 Note 3. Specification of net profit on financial operations 13 (19) Group The Bank January - September, SEK M 2000 1999 2000 1999 Realized gains Shares/participating 371 79 291 55 interests Interest-bearing 328 - 94 309 - 85 securities Other financial 29 2 - 1 4 instruments Total 728 - 13 599 - 26 Unrealized changes in value Shares/participating - 24 107 - 18 97 interests Interest-bearing 19 - 33 101 - 29 securities Other financial 47 - 1 1 - 1 instruments Total 42 73 84 67 Change in exchange rates 529 252 394 237 Total 1,299 312 1,077 278 Note 4. Specification of loan losses, net, and change in the value of property taken over Group The Bank January - September, SEK M 2000 1999 2000 1999 Claims assessed individually The period's write-down for established loan losses 1,350 1,719 663 1,143 Reversal of provisions previously made for anticipated loan losses - 678 - 893 - 330 - 607 The period's provisions for anticipated loan losses 833 1 174 462 503 Recoveries from previous years' established loan losses - 341 - 525 - 100 - 342 Recovered provisions for - 1 anticipated loan losses - 314 156 - 164 - 390 The period's net expense for individually assessed claims 850 319 531 307 Claims assessed collectively The period's established 72 73 72 72 loan losses Recoveries from previous years' established loan losses - 11 - 10 - 10 - 9 Allocations/withdrawals - 26 - 22 - 9 - 32 14 (19) from loan loss reserve The period's net expense for 35 41 53 31 collectively assessed claims Contingent liabilities The period's net expense for discharged guarantees and -2 3 - 10 - 40 other contingent liabilities The period's net loan loss 883 363 574 298 expense Change in the value of property taken over -3 1 -3 0 Total loan losses, net, and change in value of 880 364 571 298 property taken over Note 5. Problem loans Group The Bank 9/30 12/31 9/30 9/30 12/31 9/30 SEK M 2000 1999 1999 2000 1999 1999 Doubtful claims, gross 3,63 4,544 5,200 1,661 2,129 2,520 8 Provisions for anticipated 3,71 3,879 3,076 1,576 1,600 1,842 loan losses 0 Doubtful claims, net - 72 665 2,124 85 529 678 Claims with interest 164 225 274 49 97 106 concessions Problem loans, net 92 890 2,398 134 626 784 Unsettled claims for which accrued interest has been entered as income 1,27 1,517 2,038 579 668 935 1 Property taken over to protect claims: 6 19 21 3 12 15 - Buildings and land 14 81 18 7 7 8 - Shares and participations 0 71 11 0 0 11 - Other 20 171 50 10 19 34 Doubtful claims as % of 0.0% 0.1% 0.4% 0.0% 0.2% 0.3% total lending Provision ratio for 102% 85% 59% 95% 75% 73% doubtful claims Balance sheets Group The Bank 9/30 12/31 9/30 9/30 12/31 9/30 SEK M 2000 1999 1999 2000 1999 1999 Loans to the public 617,279 569,409 520,118 220,159 191,162 204,133 15 (19) Loans to credit 107,415 104,516 105,164 133,638 135,536 142,996 institutions Interest-bearing 65,131 58,427 40,795 63,468 44,256 39,786 securities - Financial fixed 2,850 6,135 6,081 2,344 6,035 6,963 assets - Financial current 62,281 52,292 34,714 61,124 38,221 32,823 assets Other assets 117,036 101,227 73,019 68,544 67,327 51,961 Total assets 906,861 833,579 739,096 485,809 438,281 438,876 Deposits and borrowings 242,452 210,537 206,699 225,250 197,539 203,953 from public Amounts owed to credit 118,656 127,948 107,482 110,659 121,989 123,523 institutions Debt securities in 371,018 344,082 295,919 59,370 40,506 38,811 issue Subordinated 30,603 25,352 24,244 21,256 15,204 16,564 liabilities Other liabilities 109,989 94,653 74,880 46,745 40,604 35,666 Shareholders' equity 34,143 31,007 29,872 22,529 22,439 20,359 Total liabilities, provisions and shareholders' 906,861 833,579 739,096 485,809 438,281 438,876 equity 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 September 30, 2000 Derivatives with positive fair values or nil value Interest- Currency- Equity- Other related related related SEK M Fair Book Fair Book Fair Book Fair Book value valuevalue value value valuevalue value Derivatives reported7,8686,734 31,88724,008 2,2041,795 0 0 entirely or partly on the balance sheet Derivatives not 31 1,037 reported on the balance sheet Derivatives with negative fair values Interest- Currency- Equity- Other related related related SEK M Fair Book Fair Book Fair Book Fair Book value valuevalue value value valuevalue value 16 (19) Derivatives reported8,2477,710 13,43214,109 2,0611,644 0 0 entirely or partly on the balance sheet Derivatives not 11 16 reported on the balance sheet Statement of cash flows Group The Bank January - September 2000 1999 2000 1999 SEK M Liquid assets at beginning of 75,159 54,486 53,994 54,819 period * Operating activities Operating profit 8,004 4,849 3,482 1,776 Adjustments for non-cash items 2,528 363 5,507 6,269 including taxes paid Increase/decrease in receivables - 10,896 - - - from credit institutions 6,507 9,582 25,406 Increase/decrease in loans to the - 15,627 1,396 2,945 10,452 public Increase/decrease in holdings of - 7,345 3,177 - 5,414 securities classified 5,717 as current assets Increase in deposits and 961 545 2,690 8,265 borrowings from the public, including retail bonds Increase/decrease in amounts - 5,155 4,655 - 10,314 owned to 4,495 credit institutions Change in other assets and - 7,893 3,455 - - liabilities, net 4,534 1,184 Cash flow from operating -35,423 11,933 - 15,900 activities 9,704 Investing activities Purchase of fixed assets - 1,643 - - 720 - 2,165 2,141 Sale of fixed assets 2,305 5,078 2,766 4,955 Branch sales 114 17 114 17 Cash flow from investing 776 2,930 2,160 2,831 activities Financing activities Issuance of interest-bearing 92,006 82,538 7,957 6,736 securities Redemption of interest-bearing - 72 230 - - - securities 94,000 3,507 1,894 Increase/decrease in other 251 17,838 12,939 - funding 8,739 Dividend paid - 2,639 - - - 2,463 2,639 2,463 Employee warrants 120 120 Cash flow from financing 17,508 3,913 14,870 -6,360 activities Cash flow for the period -17,139 18,776 7,326 12,371 17 (19) Exchange rate differences in - 122 liquid assets Liquid assets at end of period * 57,898 73,262 61,320 67 190 * of which securities pledged for OM, etc. at beginning of period 4,657 4,769 4,657 4,769 at end of period 7,564 7,357 7,564 7,357 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 refinancing with Sveriges Riksbank, taking into account repos and short-selling. Ratings S&P Moody´s Bankwatch FitchIBCA Japan R/I ShortLong ShorLong BFSR* ShortLongIssueShortLongLong 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, October 27, 2000 FöreningsSparbanken AB (publ) Birgitta Johansson-Hedberg President and Chief Executive Officer This interim report has not been reviewed by the Bank's auditors. For further information, please contact: Nils-Fredrik Nyblæus, Deputy President, Accounting and Finance, phone + 46 8 5859 2532 Staffan Salén, Vice President, Investor Relations and Information, phone + 46 8 5859 2779 Financial information The Group's financial reports can be accessed on FöreningsSparbanken's home page at http://www. foreningssparbanken.se/ir or at the nearest branch of FöreningsSparbanken. Current financial information is also published in Sweden on TV4's text- TV, page 182. The next issue of the Swedish shareholder magazine Banktidningen will be published in February 2001. FöreningsSparbanken will release earnings reports on the following dates 2001: Year-end report for 2000 February 15 Interim report January-March 2001 April 27 Interim report January-June 2001 August 23 Interim report January-September 2001 October 23 The 2001 Annual General Meeting will be held in Stockholm on April 5. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/10/27/20001027BIT00180/bit0001.doc The full report http://www.bit.se/bitonline/2000/10/27/20001027BIT00180/bit0002.pdf The full report