Handelsbanken increased its operating profit by 4% to SEK 7,080m (6,821). The increase in profits during the second quarter was 15% compared to the same period in the previous year. Increased business volumes and considerably higher income in the insurance operations contributed to income rising by 5% to SEK 12.5bn (12.0). Return on shareholders' equity was 16.6% (16.7) and earnings per share rose to SEK 7.68 (7.21). As a moving 12-month total, earnings per share were SEK 15.02.

 

Net interest income rose by 1% to SEK 7,475m (7,384). Increased business volumes compensated for lower deposit margins and lower margins for mortgage loans to households. The average volume of lending in Sweden increased by 6% and in the other Nordic countries and Great Britain by 15%. Correspondingly, deposits rose by 13% and 16% respectively. The average volume of corporate lending in Sweden increased by 3%. However, it was 7% larger at 30 June 2005 compared to the start of the year.

 

Both net commission income and income from net gains/losses on items at fair value rose. A major contributory reason was increased income at Handelsbanken Liv. Net commission income increased by 13% to SEK 3,356m (2,983). Commission generated at Handelsbanken Liv increased to SEK 413m (245). SPP Liv Fondförsäkring AB, which has been part of Handelsbanken Liv since 1 July 2004, represented SEK 88m of this. Net gains/losses on items at fair value rose by 6% to SEK 1,319m (1,241), which was due to a better risk result at Handelsbanken Liv.

 

Expenses were SEK 5,401m (5,118), an increase of 6%. Staff costs were mainly unchanged, while other costs increased by 13% to SEK 2,149m (1,894). The majority of this cost increase was due to the expansion outside Sweden and the consolidation of SPP Liv Fondförsäkring. These costs represented SEK 166m of the total cost increase of SEK 283m. Without these, the cost increase was 2% and mainly comprised higher costs for system development.

 

Loan losses remained very low and amounted to SEK 28m (18). The loan loss ratio was 0.01% (0.00). The share of bad debts in relation to lending was 0.13% (0.23).

 

The capital ratio was 10.0% (9.9) and the Tier 1 ratio was 7.0% (7.1).

 

The annual general meeting in 2005 resolved that the 23.7 million shares repurchased during 2004 would be cancelled through reduction of the share capital. In connection with the cancellation, a bonus issue was performed whereby the nominal value of the share increased from SEK 4.15 to SEK 4.30. These changes were registered on 24 May 2005, after which the number of outstanding shares in the Bank was 669.6 million.

 

Handelsbanken's rating was unchanged with all three rating agencies which rate the Bank.

 

Handelsbanken Liv increased its operating profit from SEK 77m to SEK 289m, a rise of 275%. The administration result, risk result and financial result increased. The return on policyholders' assets was 6.08% and Handelsbanken's share of the return was SEK 131m (53). The risk result mainly increased because the number of new health insurance cases fell and the provisions could therefore be reduced. Total premiums written at Handelsbanken Liv were SEK 5.8bn (3.4), of which unit-linked insurance represented SEK 3.9bn (1.6). The volume of assets managed was SEK 65bn (39), of which SEK 40bn (19) was invested in unit-linked insurance.

 

The Bank has had representative offices in Russia and China for a long time. During the year, Handelsbanken expanded its operations in Russia and started regular banking operations for Nordic and British corporate customers by opening a branch in Moscow in May. The branch is run in the form of a subsidiary and operations are in full swing with around 30 employees. A representative office will soon be opened in St. Petersburg, and this will eventually be converted into a normal bank branch offering the same service as in Moscow.

 

During the summer, the Bank received the license for its Shanghai branch. This means that also in China, Handelsbanken is the first Nordic bank to start regular banking operations and which can thus offer Nordic and British companies local banking services.

 

During the first half of 2006, the Bank will start a branch in Tallinn, Estonia. The branch will be part of Regional Bank Finland, and will offer services to both companies and private individuals.

 

 

Lars O Grönstedt

President and Group Chief Executive

 

 

 

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 

 

Elisa Saarinen, Head of Corporate Communications         
phone: +46 8 - 701 10 36, e-mail: elsa03@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: