Handelsbanken's profits were SEK 13,056m (11,550), an increase of 13%. Net interest income decreased marginally, net commission income increased substantially and net trading income was at almost the same high level as the early 2000s. Expenses were SEK 10,758m (10,449), a rise of 3%, but still below the level of 2002. The already low loan losses fell to SEK 167m (492). Return on shareholders' equity improved to 15.8% (14.9).

 

Total income rose by 8% despite net interest income falling by 1% to SEK 14,462m (14,642). The lower net interest income figure was mainly due to lower margins on deposits in Sweden, which had a negative impact on net interest income of SEK 632m. Lending margins remained generally unchanged. Both deposit and lending volumes increased. Lending to the general public rose by almost 5% to SEK 861bn (823). Deposit volumes went up by almost 6% to SEK 321bn (303). Business volumes increased considerably more quickly outside Sweden than in Sweden.

 

Net commission income rose by 17% to SEK 6,126m (5,224). Net commission income for the fourth quarter was excellent, with particularly strong commission income for mutual fund and custody services, insurance, payments and the Other services category, which includes Corporate Finance transactions. Brokerage income was high, especially during the first quarter.

 

Net trading income rose by 17% to SEK 2,608m (2,222). The high level of net trading income in the fourth quarter was partly due to improved currency and fixed income trading, and also to a significantly better performance in managing policyholders' funds at Handelsbanken Liv. Other income rose to SEK 785m (204). This was partly the result of a considerably improved risk result for Handelsbanken Liv (SEK 65m) and reversed insurance premiums (SEK 82m). The comparison with last year is also affected by a provision of SEK 229m in 2003 at Handelsbanken Liv to enable the company to retain, for the time being, pensions being disbursed at an unchanged level.

 

Expenses rose by SEK 309m to SEK 10,758m (10,449), an increase of nearly 3%. Almost one third of the increase was due to higher performance-related staff costs and almost one half - SEK 140m - to increased costs due to the acquisition of SPP Liv Fondförsäkring AB. Total IT costs rose to SEK 2.6bn (2.5). Costs for system development increased, while current IT expenses and cost for hardware investments fell. Twenty new branches were opened during the year, nineteen of them outside Sweden.

The total number of employees rose by 169 to 9,226 (9,057). The non-Swedish regional banks and the IT departments represented most of the increase. At SPP, which the Bank plans to consolidate next year and which is thus not yet included in the Group's figures, the number of employees fell by 98 to 547.

The cost/income ratio before loan losses improved and was 44.9% (46.9). After loan losses, the figure was 45.6% (49.1).

 

Loan losses, including changes in the value of repossessed property, were SEK 167m (492). This corresponded to 0.02% (0.06) of lending. The net bad debt reserve ratio, that is after a deduction for probable loan losses, was 0.21% (0.28) of lending.

 

The Group's capital ratio was 10.0% (10.2) and the Tier 1 capital ratio was 7.6% (7.3).

 

During the fourth quarter, Standard & Poor's raised the Bank's rating to AA- from A+. This means that Handelsbanken now has an AA rating from all agencies which rate the Bank. Moody's has rated the Bank at this level for a long time and during 2004, raised the rating another notch to Aa1 (Aa2). Fitch Ratings had an unchanged rating at AA-. No listed Nordic bank has a higher rating than Handelsbanken.

 

At the 2003 annual general meeting, the board was given a mandate to repurchase up to 20 million shares. Part of the mandate was utilised in the first quarter of 2004 and before the AGM, the Bank repurchased 7.2 million shares. At the AGM in 2004, the board received a new and increased mandate to repurchase a maximum of 40 million shares and after the 2004 AGM, the Bank repurchased a total of 16.5 million shares under this mandate. The Bank thus repurchased a total of 23.7 million shares during 2004.

 

The AGM in 2004 also resolved to cancel 21.4 million shares which the Bank had repurchased during 2000 and 2001. Following this, the number of outstanding shares was 693.4 million and after the repurchases during 2004, the number of outstanding shares was 669.6 million. The AGM also resolved, in connection with the cancellation of shares, to increase the nominal value of the share from SEK 4.00 to SEK 4.15 by means of a bonus issue.

 

The board proposes to the AGM in 2005, to cancel the 23.7 million shares which the Bank repurchased in 2004. With the purpose of adjusting the capital structure, the board is also requesting the AGM to authorise the board to repurchase a maximum of 40 million shares. The board also states that the Bank, on condition that the AGM resolves in accordance with the board's proposal, will repurchase shares for a maximum of SEK 5bn until the AGM in 2006. Finally, if the AGM resolves in accordance with the board's proposal, the board proposes that the AGM resolve that shares which may come to be repurchased can be used for financing possible company acquisitions.

 

Net earnings per share were SEK 13.81 (11.70). The board recommends that the AGM resolve on a dividend of SEK 6.00 per share (5.25) for the class A and B shares, an increase of 14%.

 

Handelsbanken Liv reported earnings of SEK 150m (-80). When Handelsbanken Liv was demutualised, the Bank estimated that normal earnings for the company would be between SEK 150m and SEK 200m. This level has been achieved two years running, excluding items affecting comparability. This has been possible at the same time as the value of the insurance savings of Handelsbanken Liv's policyholders have increased in value more than at competitors.

 

Starting in 2005, listed companies in the EU, must adapt their consolidated accounts to the IASB standards. The new standards will have an impact on shareholders' equity and profits. The opening balances for 2005 have been restated in accordance with the new standards.

The main effects for the Bank are the new rules applying to goodwill, measurement of financial assets and liabilities (IAS 39), consolidation of insurance companies and group provisions for individually assessed receivables. Earnings for 2004 would have been some SEK 501m higher if the new accounting standards had been applied for the whole of 2004, mainly because goodwill is no longer amortised. The impact on opening equity for 2005 is estimated to be a reduction of SEK 584m.

 

 

 

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,