Interim report for Sparbanken Sverige (Swedbank) with Föreningsbanken

Interim report for Sparbanken Sverige (Swedbank) with Föreningsbanken January-September 1997 FöreningsSparbanken on schedule 120 of approximately 150 Föreningsbanken branches sold to date for more than SEK 3 billion Operating income rises to SEK 4,730 M (4,627) Earnings per share SEK 9.38 (10.06 in the old Group) Return on equity 16.3 percent (16.5) Moody's raises both banks' long-term ratings to A1 Mandamus prepared for stock market listing Branch sales soon complete The sale of branch operations to independent savings banks is continuing according to plan. The results are better than previously announced. To date, agreements in principle have been reached on the equivalent of slightly more than 75 percent of the business volume of the operations involved. The agreements that have been reached comprise 120 branches and an aggregate purchase price of slightly more than SEK 3 billion. The branches will gradually be handed over during the first half of 1998. MERGER WITH FÖRENINGSBANKEN In October the Government gave Sparbanken Sverige and Föreningsbanken its approval to implement their merger plan. An extraordinary general meeting in August of the shareholders of Sparbanken Sverige elected a new Board of Directors and approved a change in the Bank´s name to FöreningsSparbanken. The new name will be used beginning on the date that the merger is registered with the Financial Supervisory Authority, which is expected to take place at the end of November 1997. 200 new managers appointed In September and October managers were appointed for FöreningsSparbanken's 137 local banks and over 70 managers and specialists for the Bank's central staffs. The appointed managers will assume their posts immediately or no later than January 1, 1998. Other managers are expected to be appointed in January 1998. IT coordination begun The integration of Föreningsbanken's and Sparbanken Sverige's computer systems is proceeding according to plan. One result will be that as of January 1, 1998 customers will be able to receive service at the branch offices of both former banks regardless of which one they now use. By mid-year 1999 all of Föreningsbanken's current customers are expected to be serviced with the help of Sparbanken's system, at which time the operation and maintenance of Föreningsbanken's current system will have been completely discontinued. Customers of the current Föreningsbanken who wish to use Internet banking services in the interim will immediately be offered such services through Sparbanken. On October 1 the operations of FB Data's production facility were transferred to IBM. FöreningsSparbanken has committed to purchasing certain services from this unit during the period 1997 to 2001. Other coordination efforts In October the operations of Föreningsbanken Fond, Finans and Utland (fund management, financial services and international operations) and Swedbank Markets were moved into shared offices. Before the end of 1997 both banks' fund management companies will be coordinated organizationally under Robur Kapitalförvaltning. All functions at headquarters and subsidiaries will be coordinated in shared offices before the end of 1997. STABLE EARNING CAPACITY IN BRANCH OPERATIONS The new Group's operating income amounted to SEK 4,730 M (4,627). The return on equity was 16.3 percent (16.5), and earnings per share (after estimated tax) amounted to SEK 9.38 (10.06 in the old Group), based on the average number of shares during the first three quarters. Revenue unchanged Group revenue was unchanged compared with the corresponding period of 1996 and amounted to SEK 14,725 M (14,703) for the first three quarters of 1997. The Group's net interest income amounted to SEK 9,648 M (10,260). Net interest income from the Banks´ branch operations was stable. The decrease of six percent is due to, among other things, the fact that expenses for the state's compulsory deposit guarantee doubled compared with 1996, to SEK 510 M (260). The decrease in financial fixed assets, which resulted in a large nonrecurring item in net income from financial operations during the second quarter, adversely affected net interest income by approximately SEK 20 M per month. Spintab's net interest income was adversely affected by lower market interest rates, which resulted in a lower return on liquid assets. Similarly, lower lending margins had a negative impact on Spintab's earnings, although they were compensated in part by increased lending volumes. Net commission income rose by SEK 711 M to SEK 3,119 M or by 30 percent compared with the corresponding period of 1996. Higher fund savings in Robur and Föreningsbanken Fond accounted for a large part of the increase. Revenue from payment services and insurance operations also rose. The Group's net income from financial operations amounted to SEK 820 M (1,034), of which SEK -309 M consisted of unrealized changes in value (SEK +528 M). An increase in market interest rates of one percentage point, on September 30, 1997 would have resulted in a decline in the value of the Group's assets and liabilities in SEK with fixed interest rates, including derivatives, of approximately SEK 490 M. The corresponding effect on the value of the Bank's positions in foreign currency amounted to approximately SEK 32 M. With an interest rate increase of one percentage point the Group´s net income from financial operations would decrease with approximately SEK 65 M. ------------------------------------------------------------ http://www.bit.se/bitonline/1998/10/20/19981020BIT00190/Form3q97.doc