Handelsbanken's interim report January - June 1998
Summary
· The Handelsbanken Group's profits increased by 16 % to SEK 4.4bn
· Return on shareholders' equity went up to 22.0 % (20.5)
· Net interest income in branch office operations rose by 14 %
· Net commission income rose by 10 %
· Loan losses still at low level
The Handelsbanken Group's profits for JanuaryJune 1998 increased by 16 % to SEK 4 384m.
Return on shareholders' equity went up to 22.0 % (20.5).
Earnings per share rose to SEK 14.48 (12.38) and as a 12-month moving total to SEK 27.25 (23.99).
Income and expenses
Total income increased by 14 %.
Net interest income for the Group rose by 6 %. This includes the net interest income pertaining to branch office operations, to Markets' trading operations and to the yield on the bond portfolio. Net interest income for branch office operations increased by 14 %.
There are two reasons for this large rise: firstly the average volume of mortgage loans went up by 20 % due to the acquisition of Stadshypotek and secondly the average volume of bank loans increased by as much as 31 %. The branch office operations' net interest income includes the fee of SEK 143m (149) to the Swedish government for the
deposit protection guarantee. Net interest income in the bond portfolio has decreased due to falling interest rates and lower volumes.
The spread between deposit and lending rates has continued to fall, although at a rather slower rate than before.
Net commission income increased by 10 % to SEK 1 735m. This change is mainly due to rising commission on securities and payments including cards, and also to increased income from corporate finance.
Expenses rose by 16 %, of which 5 percentage points are attributable to the acquisition of Stadshypotek. The remaining part of the increase is due to substantially increased IT costs which culminate during 1998.
Loan losses still at low level
Loan losses, including changes in value for property taken over fell by 43 % to SEK134m or 0.04 % of lending (0.08).
The proportion of bad debts was 0.5 % (0.9) of lending. The volume of collateral taken over was SEK 375m (7 084). This decrease is related to the distribution of Fastighets AB Balder.
The Bank's exposure to the problem countries in South-East Asia (The Philippines, Indonesia, Malaysia, South Korea and Thailand) is SEK 2.3bn as at mid-August. Exposure to Russia was SEK 0.2bn at the same time. In relation to Handelsbanken's size, the Bank's exposure in these countries is small and the necessary provisions have been made.
Capital ratio and rating
The Handelsbanken Group's capital ratio is 9.8 % (9.5) The Tier 1 capital ratio was 6.1 % (5.5). Handelsbanken continues to have the highest rating of the Swedish banks.
Stadshypotek's loan customers
Handelsbanken's market share for most products has increased throughout the 1990s. During the first half of 1998, this trend accelerated, mainly as a result of extra business
with customers of Stadshypotek.
Stadshypotek had some 650 000 private customers at the time of Handelsbanken's acquisition. Around 450 000 of them were not customers of Handelsbanken. These Stadshypotek customers are now being offered the Bank's other products such as mutual funds, deposit accounts, overdraft facilities, insurance, cards etc.
Preparations for year 2000 running to plan
The review of the Bank's computer systems to make them year 2000 compliant is going according to plan. It is expected that the systems will have been adapted at the end of this year. Testing of the systems has started and is expected to be completed during the
first half of 1999.
Stockholm 25 August 1998
Arne Mårtensson
President and Group Chief Executive
For further information please contact Arne Mårtensson, Group Chief Executive of Svenska Handelsbanken, or Sven Grevelius, Head of Accounting and Control,
tel: +46 8 22 92 20.
The full Interim Report including tables can be downloaded from the enclosed link.
http://hugin.huginonline.se/SHBA/DR/shba98k2_eng.pdf