Operating profit was SEK 8.5bn (9.1). Excluding the insurance operations, operating profit increased by 8% in the banking operations, from SEK 7.4bn to 8.0bn

Return on equity was 20.0% (23.4)

Income totalled SEK 14.9bn (15.6)

Expenses were unchanged at SEK 6.6bn (6.6)

Profits after tax were SEK 6.6bn (7.3)

Earnings per share were SEK 10.47 (11.29)

Operating profits in branch office operations outside Sweden increased by 41%

Net interest income in branch office operations outside Sweden went up by 15% and in the Swedish branch office operations by 2%

 

Operating profit increased to SEK 4.6bn (3.9)

Return on shareholders' equity increased to 22.7% (17.1)

Operating profits at branch office operations outside Sweden went up by 29% and in the Swedish branch office operations by 3%

Income in the Swedish branch office operations went up by 6% while expenses increased by 1%

Net interest income went up by 3% in the Swedish branch office operations

The Bank opened twelve (four) new branches

 

 

The operating profit was SEK 8,479m (9,130). Net interest income went up by 3% to SEK 7,793m (7,550). It went up both in the Swedish operations - an increase of 2% - and in the branch office operations outside Sweden - an increase of 15%. The average volume of lending in the Group climbed by 13.3%. Net fee and commission income rose by 11% to SEK 4,581m (4,135). Despite this, profits went down, which is mainly due to the fact that last year's profits included a positive effect in the insurance operations regarding the change in the deferred capital contribution, including hedges, of SEK 1,402m. The same item this year was SEK -58m. Expenses were unchanged and recoveries exceeded loan losses.

 

Return on shareholders' equity was 20.0% (23.4) and the C/I ratio was 44.1% (42.3). Earnings per share were SEK 10.47 (11.29).

 

The Group's total income was SEK 14,936m (15,579).

 

Net interest income rose by almost SEK 250m. In the Swedish branch operations, it increased by 2% to SEK 5,703m (5,576) and in the branch office operations out-side Sweden by 15% to SEK 1,939m (1,686). Net interest income in the Swedish operations was negatively affected by SEK 103m. This was due to the remaining effects in connection with previous repurchases of bonds. The increase in net interest income was mainly due to larger business volumes and higher deposit margins. Loans to the public went up by 10.3% to SEK 858bn in Sweden and in the branch office operations outside Sweden by 23.0% to SEK 292bn. The equivalent figures for deposit volumes were increases of 6.4% and 7.5% to SEK 286bn and 153bn respectively. In Sweden, deposits from households went up by almost 16% and in the branch operations outside Sweden by 9.5%.

 

Net commission income was SEK 4,581m (4,135), an increase of 11%. Most types of commission income increased. Insurance commissions represented the largest increase in terms of value, rising by 26% to SEK 886m (702). Card commissions went up by 16%, while the net figure after commission expenses for the card operations went up by 21% to over SEK 350m. Commissions for advisory services represented the highest rate of increase: 132% to SEK 181m (78).

 

Net gains/losses on financial items at fair value went down to SEK 1,998m (3,177). In the corresponding period last year, income of SEK 269m was included which arose when eliminating holdings of the Bank's own securities. There was no corresponding income in the current period. In the first half of 2006, the insurance operations also had income of SEK 1,402m relating to the change in the deferred capital contribution including hedges. In 2007, these items were SEK -58m. From the second half of 2006, the Bank has hedged itself against the impact of changes in the deferred capital contribution due to changes in interest rates and share prices.

 

Capital gains from the sale of shares in the "Available for sale" portfolio were SEK 487m (163). Trading income went down to SEK 1,394m (1,610). The decrease was mainly due to lower income, mainly in fixed income and foreign exchange trading and from structured products.

 

Expenses were unchanged at SEK 6,593m (6,582). Staff costs went down by SEK 180m and other administrative expenses went up by approximately the same amount. The reduced staff costs were primarily due to a lower provision for performance-related remuneration, the figure being SEK 262m (367). The provision for a possible allocation to the Oktogonen profit-sharing foundation was also reduced to SEK 126m (374), of which SEK 49m related to an adjustment for the amount for 2006. Together these items reduced staff costs by SEK 353m compared with the same period in the previous year. The costs of expanding operations outside Sweden, which are mainly staff costs, were SEK 130m (99). The number of employees in the Group rose to 10,684 (10,058).

 

Recoveries exceeded gross loan losses and net recoveries totalled SEK 135m (132). The net loan loss ratio was SEK -0.02% (-0.02). Net bad debts were SEK 898m, a decrease from SEK 1,209m. The proportion of bad debts was 0.07% (0.11) of lending.

 

 

The operating profit was SEK 4,620m (3,859).

The most important income categories increase and income rose by 16% overall, while expenses increased by 11%. Return on shareholders' equity was 22.7% (17.1) and the C/I ratio was 43.2% (45.2). Earnings per share were SEK 6.00 (4.48).

 

Net interest income continued to increase in the branch office operations, both in Sweden and outside Sweden. Net interest income in the Swedish branch operations went up by 3% to SEK 2,888m (2,815) and in the branch office operations outside Sweden by 4% to SEK 989m (950). Both in Sweden and elsewhere, net interest income was boosted by higher business volumes. In Sweden, the average volume of lending increased by 2.5%. There was an increase in both mortgage loans to households and bank loans to companies. Household deposits increased by 7.1% to SEK 119bn (111). In the branch operations outside Sweden, lending volumes continued to grow and totalled SEK 301bn (283), an increase of almost 7%.

 

Net fee and commission income went up by 7% to SEK 2,368m (2,213) and commissions for advisory services increased by SEK 109m to SEK 145m. Otherwise, commissions for loans and deposits and mutual fund commissions represented the largest increase. Lending and deposit commissions increased by 13% to SEK 220m (195) and mutual fund commissions by 8% to SEK 610m (567). Insurance commissions fell to SEK 436m (450), mainly due to a lower yield split.

 

Net financial items at fair value increased between the quarters by SEK 642m to SEK 1,320m. The increase is mainly due to capital gains on sales of equities and the impact of changes in the deferred capital contribution and hedges linked to this which protect the Bank from changes in the profit/loss. These items are attributable for SEK 595m of the difference between the quarters.

 

Expenses rose by 11% between the quarters to SEK 3,468m (3,125). Staff costs increased by SEK 315m, while other administrative expenses grew by SEK 27m. The increase in costs is mainly due to allocations for performance-related remuneration and a provision for a possible allocation to the Oktogonen profit-sharing foundation increasing between the quarters by SEK 302m. Excluding these, expenses increased by approximately 1%.

 

Recoveries exceeded gross loan losses and net recoveries totalled SEK 65m (70). The net loan loss ratio was SEK -0.02% (-0.02). Net bad debts were SEK 898m, a decrease from SEK 937m. The proportion of bad debts was 0.07% (0.07) of lending. The change between the quarters was due to large recoveries in the Danish operations, coupled with a few provisions for probable loan losses.

 

 

Between the quarters, branch office operations in Sweden boosted their profits by 9% before loan losses. After loan losses, profits rose by 3% to SEK 2,572m (2,487). Income increased by 6% and expenses by 1%. Continued strong growth in volumes, commissions remaining at a high level, mainly driven by a strong capital market, and control of costs lay the foundation for a continued positive trend for profits. Margins continued to be under pressure in the mortgage loan market.

 

Time and motion studies at branches were carried out indicating improvements in productivity corresponding to around 150 full-time equivalents.

 

A branch was opened in Gnesta during the quarter, bringing the number of branches in Sweden to 459.

 

Handelsbanken Finans experienced a large inflow of leasing business. The number of outstanding Allkort charge cards has doubled in three years and exceeded 200,000 cards. During the first half of the year, the Bank started replacing customers' ATM cards with a Frikort card. As well as replacing the old Bankomat ATM card, this card also gives the customer the opportunity to use it as a debit card for shopping. As at 30 June 2007, there were 90,000 Frikort cards and the new card will have a positive impact on the Bank's profits.

 

Operating profit increased by 29% compared to the previous quarter and by 41% compared to the equivalent period in the previous year. The operating profit for the quarter was SEK 837m compared with SEK 648m for the previous quarter. Lending volumes increased by two-digit figures in all four regional banks and also at Handelsbanken International. At Handelsbanken International, Germany and Luxembourg showed the largest increases.

 

In Great Britain, operations continued their rapid expansion. Four new branches were opened and eleven new branch managers were recruited to future new branches. Lending volumes rose by almost 56% between the two years and operating profit rose by 52% to SEK 129m (85).

 

In Denmark, another branch was opened in Aalborg. Lending volumes increased, not least in the form of increased volumes for "Priority Loans" (prioritetslån), Handelsbanken's mortgage loan product on the Danish market.

 

In Finland, two equity-linked bonds were issued, a number of major leasing transactions were carried out and Handelsbanken continued to take market shares on the Finnish mortgage loan market. Six new branches were opened during the quarter. Operating profits in Finland were SEK 273m, an increase of 19% compared with the corresponding period last year.

 

In Norway too, business volumes increased: lending rose by just over 26% and deposits by 19%. Operating profits were SEK 518m, an increase of 6% compared with same period of the previous year. Deposit margins continued to improve and an equity-linked bond was issued, the largest so far in Norway. No new branches were opened during the quarter, but managers were recruited for future branches in Lillehammar, Bodø and Kongsberg.

 

Capital Markets' operating profit went up by 30% during the second quarter compared to the previous quarter. Profits were SEK 362m (279). The flow of business was strong. The Bank participated in three IPOs, a number of syndications, of which one was the largest ever in the Nordic countries and a record number of issues of structured products. Equities operations performed well and an increasingly large proportion of Capital Markets' brokerage income was generated through trading with international customers.

 

Operating profits went up by 5% compared to the previous quarter and were SEK 219m (208). Mutual fund assets being managed were SEK 239bn compared with SEK 193bn one year ago. Morningstar, an independent rating agency, lifted two more of the Bank's funds into the top category with 5 stars. The management results in the mutual funds were generally very good. Discretionary operations also increased in size, as a result of value increases and acquisition of new customers.

 

Handelsbanken Pensions & Insurance's operating profits during the second quarter were SEK 270m as compared to SEK 186m for the first quarter of the year. During the second quarter, one of the largest individual occupational pensions transactions in the Swedish insurance business was carried totalling SEK 7.7bn. Annual premiums linked to this transaction are estimated at around SEK 200m. Sales of both endowment insurance and healthcare guarantees increased by over 50%. On 1 July, the new collectively-agreed ITP pensions plans came into force but already this spring SPP could offer companies without collective agreements plans similar to ITP. These are available for both defined-benefit and defined-contribution plans.

 

 

The Bank has decided to step up the pace of its organic growth outside Sweden and aims to open 30-40 new branches in the branch operations outside Sweden during this year. Fourteen branches were opened during the first six months of the year and another 20 branch managers were recruited for future new branches. It is planned that as soon as possible they will be receiving customers at their new branches.

 

The proportion of the Bank's operating profit generated from operations outside Sweden was 20%. Some 25% of the Group's lending to the public is in the branch operations outside Sweden and 47% of the increase in lending between the quarters was generated in the non-Swedish branch operations.

 

 

Starting on 1 February 2007, the Bank reports the capital requirement and capital base in accordance with the Basel II rules. The changed capital requirements have a gradual impact since the transitional rules allow for an adaptation over a period of three years and in the first year, the Bank is only allowed to include 5% as a reduction.

 

Tier 1 capital rose to SEK 63.9bn. SEK 6.8bn of the Tier 1 capital was Tier 1 hybrid capital. Calculated according to the transitional rules, the Bank's capital ratio was 10.0%, while the Tier 1 capital ratio was 7.0%. If no transitional rules had applied, the statutory capital requirement would have been reduced by 41% compared to the requirement in accordance with Basel I.

 

In June 2007, the Bank issued a subordinated loan of almost SEK 1.4bn classified as a Tier 1 hybrid capital. The issue has a structure that offers great flexibility for the Bank's future capital planning since it can be repaid after six years. All else being equal, the issue increased the Bank's Tier 1 capital by 0.15 percentage points.

 

At the AGM in April 2007, the Bank's board received a mandate to repurchase 40 million shares during the period until the 2008 AGM. On 24 April 2007, repurchases started pursuant to this decision and during the second quarter 4,830,000 Class A shares were repurchased.

 

At the AGM, it was also resolved to cancel the 20.7 million shares that the Bank had repurchased since the 2006 AGM. As at 14 May 2007, 20,427,300 Class A shares and 305,500 Class B shares were cancelled.

 

After cancellation and repurchases, there were 620.5 million outstanding shares.

 

 

Handelsbanken's long-term rating was unchanged with all three rating agencies which rate the Bank. Moody's rating for the Bank was Aa1 and from Fitch and Standard & Poor's AA-.

 

 

The accounts comply with the IASB's accounting standards adopted by the EU, the Annual Accounts Act for Credit Institutions and Securities Companies and accounting directives issued by the Swedish Financial Supervisory Authority.

 

Net interest income has changed between the Other  segment and the Swedish branch office operations segment. The change refers only to an allocation between the segments and does not affect the Group's net interest income. This change was made retroactively and the amount in question is SEK 116m for 2006. (SEK 28m for Q1, SEK 29m for Q2, SEK 29m for Q3, SEK 30m for Q4). A change was also made in Q1 2007 amounting to SEK 15m. Net interest income is lower in the Swedish branch office operations segment and higher in the "Other" segment.

 

From 1 January 2007, the full yield split in the insurance operations is reported under Insurance in Net fee and commission income. The figures for 2006 have therefore been adjusted by SEK -276m in Net fee and commission income and SEK +276m in Net gains/losses on financial items at fair value.

 

Pär Boman, Group Chief Executive                                               Bengt Ragnå, Head of Investor Relations

phone: +46 (0)8 - 22 92 20, pabo01@handelsbanken.se           phone: +46 (0)8 - 701 1216, bera02@handelsbanken.se

 

Ulf Riese, Chief Financial Officer

phone: +46 (0)8 - 701 1212, ulri02@handelsbanken.se