Handelsbanken - interim report January - March 2005
Summary
The Group
Stable earnings
Handelsbanken's operating profit was SEK 3,340m (3,558), a decrease of 6%. The decrease is entirely due to the income categories Net gains/losses on items at fair value and other income. Both net interest income and net commission income rose. Expenses rose by 4% to SEK 2,662m (2,555). Return on shareholders' equity was 15.6% (17.2) The cost/income ratio was 44.1% (41.5). Earnings per share were SEK 3.58 (3.73) and as a 12-month moving total SEK 14.40.
Net interest income rose - small increase in expenses
Net interest income rose by SEK 43m to SEK 3,776m (3,733), an increase of 1%. This improvement was due to the continued rapid rise in business volumes in the non-Swedish regional banks where both lending and deposits rose by 12%. Also in Sweden, business volumes increased, as lending rose by just over 5% and deposits by 14%. The pace of increase for mortgage lending continued to be brisk. The total average volume of lending was SEK 883bn (835).
Net commission income increased by just over 2%, to SEK 1,609m (1,573). This increase was due to higher commissions on mutual funds, insurance and payments. The rise in insurance commissions is partly due to Handelsbanken Liv's acquisition of SPP Liv Fondförsäkring AB as of 1 July 2004. Average assets managed in mutual fund operations totalled SEK 142bn (119), an increase of 19%. Income from corporate finance operations was seasonally low but still much higher than the corresponding period in the previous year. Income from net gains/losses on items at fair value, that is items which are dependent on changes in market value, was SEK 516m (690), a decrease of 25%. The decrease was due to lower income in equities trading and also a slight deterioration in fixed income and foreign exchange trading.
Expenses rose by 4% to SEK 2,662m (2,555). Staff costs were stable while other administrative expenses grew by SEK 92m. The increase was mainly due to the acquisition of SPP Liv Fondförsäkring AB (SEK 39m) and expansion outside Sweden (SEK 33m).
Loan losses still low
Loan losses decreased to SEK 30m (45). The loan loss ratio was 0.01% (0.02). The share of bad debts in relation to lending was 0.15% (0.31).
Capital ratio, buy-back of shares and rating
The capital ratio was 10.2% (10.3) and the Tier 1 ratio was 7.2% (7.5). The ratios include profits generated during the quarter.
The board received a mandate from the annual general meeting in 2004 to repurchase a maximum of 40 million shares. During the quarter, no shares were repurchased but a total of 23.7 million shares have been repurchased during 2004. This is also the total amount of the Bank's holdings of its own shares. At the 2005 AGM, a proposal from the board will be considered for a new repurchase mandate of a maximum of 40 million shares and that 23.7 million shares be cancelled by means of reduction of the share capital.
Handelsbanken's rating was unchanged with the three rating agencies which rate the Bank. Moody's rating for the Bank was Aa1 and from Fitch and Standard & Poor's AA-.
Go-ahead from Finansinspektionen to demutualise SPP
Converting SPP from a life insurance company run on mutual principles to a profit-distributing company requires a vote among the policyholders and approval by the Finansinspektionen (Swedish Financial Supervisory Authority).
On 1 April, the Finansinspektionen gave its approval to the demutualisation of SPP. The vote among the policyholders was carried out in 2004. A large majority voted for demutualisation. The remaining step for the demutualisation to be possible is for the board of the Bank to decide on a capital contribution.
This decision will be taken later this year.
Lars O Grönstedt
President and Group Chief Executive
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
The full report including tables can be downloaded from the following link: