Handelsbanken's Interim Report January - June 2003

Tue, Aug 19, 2003 11:43 CET

Summary

Operating profit increased by 11% to SEK 5.9bn (5.4)
0perating profit for the second quarter rose by 14% to SEK 3.1bn (2.7)
Income increased by 2% to SEK 11.2bn (11.0)
Net interest income increased by 5%
Expenses fell by 7%
Loan losses remained low
Profits after tax totalled SEK 4.2bn (3.9)
Earnings per share were SEK 6.04 (5.65)

The Group

Profits increased by 11% to SEK 5.9bn

0perating profit was SEK 5 937m (5 360), an increase of 11%. 0perating profit for the second quarter amounted to SEK 3 080m (2 701), an increase of 14% compared with the corresponding quarter last year. Return on equity was 15.7% (15.9). Return on equity for the second quarter was 16.2% (16.5). The cost/income ratio before loan losses improved to 46.1% (50.4) and after loan losses to 47.0% (51.3). For the second quarter, the cost/income ratio before loan losses was 45.1% (50.6). Earnings per share were SEK 6.04 (5.65) and as a 12-month moving total SEK 10.90.

Higher income

Income increased by 2% to SEK 11 203m (11 002). Net interest income and net trading income rose, while net commission and other income fell slightly. Net interest income rose to SEK 7 363m (7 025), an increase of 5%. Net interest income for the second quarter was up on both the corresponding period last year and on the first quarter of 2003. This increase in net interest income is attributable to changes in margins and higher business volumes. Deposit margins deteriorated during the second quarter, whereas lending margins improved.

Net trading income increased by 5% to SEK 1 105m (1 049). The improvement in net trading income was mainly due to the fact that Handelsbanken Liv reported total return that was higher than the guaranteed return for policyholders. Handelsbanken Liv's share of investment income is reported under Trading, net.

The decline in net commission income was mainly due to lower equities commission and lower commissions on mutual fund operations and custodian services. Despite positive developments on the stock exchange during the first six months of the year, both the turnover on the stock market and the stock exchange index in Sweden were lower than during the corresponding period last year. The average volume of mutual funds managed was also down on last year, and the product mix shifted towards fixed income funds and mixed funds.

Lower expenses

Expenses, excluding loan losses, were down 7% and amounted to SEK 5 164m (5 542). The cost levels for the second quarter remained unchanged in relation to the preceding quarter. Staff costs continued to decline, whereas other expenses were slightly higher. At the end of the second quarter, the Bank had 9 192 employees, 530 fewer than the corresponding period last year. The number of employees has been reduced by 266 during the year.

Lending volumes continued to grow

Average lending volumes to the general public rose by 4% and totalled SEK 826bn (794). Measured in local currency, average volumes rose on the bank's domestic markets, whereas there was a decline in lending in other parts of the world.

Lending as at 30 June compared to the same date in the previous year increased by 4.5% to SEK 831bn (795).

Average deposit volumes from the general public rose by just under 2% to SEK 291bn (286). The bank's deposits from Swedish households rose by just under 4%.

Low loan losses

Loan losses remained low and amounted to SEK 102m (100). The loan loss ratio was 0.02% (0.02) and the proportion of bad debts in relation to lending was 0.28% (0.25).

Capital ratio, buy-back of shares and rating

The general meeting in April granted the Board authority to buy back shares. There has been no buy-back of shares during the period.

The capital ratio was 9.6% (9.4) and the Tier 1 ratio was 6.6% (6.3).

Handelsbanken's rating remained unchanged. Moody's changed its outlook for Handelsbanken from "stable" to "positive" during the quarter.

Handelsbanken's pension foundation and pension fund

At the end of the first six months of the year, Handelsbanken's pension foundation and pension fund had assets of SEK 15.3bn. The total pension commitments amounted to SEK 12.6bn. Thus the surplus was SEK 2.7bn. From 2004 onwards, new accounting standards (RR 29/IAS 19) will apply, whereby the Bank's pension foundation and pension fund will be consolidated in the Bank's balance sheet. Assuming unchanged share prices at current levels, this is expected to increase shareholders' equity by some SEK 1bn.

Handelsbanken Liv acquires 50% of Euroben Life and Pension Limited

Euroben Life and Pension Limited (Euroben) is jointly owned by SPP and the Norwegian insurance company Storebrand, which each has a 50% stake. Euroben is an Irish insurance company that offers a range of life insurance policies to both private and corporate customers. An agreement has been reached regarding Handelsbanken Liv's acquisition of Storebrand's shares in Euroben. The purchase price is just over SEK 70m.

Euroben, which is a demutualised company, will enable
Handelsbanken to offer insurance solutions to Nordic customers with international business operations.

Lars O Grönstedt

The full report including tables can be downloaded from the following link:

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  e-mail: bera02@handelsbanken.se

Handelsbanken's Interim Report January - June 2003

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