Handelsbanken's interim report January - March 1999
Summary
* The Handelsbanken Group result was SEK 2.2 billion, an increase of
- 35 % compared with the fourth quarter 1998
- 12 % compared with the first quarter 1998 excluding items affecting comparability
* Net interest income rose by 2 %
* Net commission income rose by 11 %
* Expenses
- increased by 3 % compared with the first quarter 1998, but
- decreased by 11 % compared with the fourth quarter 1998
* Loan losses still at low level
Substantial improvement in result
The Handelsbanken Group's profits for January - March 1999 amounted to SEK 2 173m (2 284). The result for the first quarter of 1998 included capital gains of SEK 338m from the sale of properties. Excluding these capital gains, profits rose by 12 %. Compared with the fourth quarter of 1998, profits rose by 35 %.
For almost three decades, Handelsbanken's corporate objective has been to have higher return on shareholders' equity than the average of the other listed banks in its domestic market. Return on equity is computed as operating profit after standard tax in relation to shareholders' equity. The figure is adjusted for items which affect comparability. Return on shareholders' equity was 17.8 % (18.0). For the whole of 1998, the figure was 16.4 %.
Earnings per share were SEK 6.62 (7.54) and as a 12-month moving total, SEK 24.31 (27.06).
Income and expenses
Operating income amounted to SEK 4 353m, which is an increase of 6 % excluding capital gains in the first quarter of 1998.
Net interest income increased by 2 % to SEK 2 954m. A fee of SEK 72m (80) to the Swedish government for the deposit protection guarantee has been charged to net interest income.
The interest spread in the Handelsbanken Group was unchanged.
Net commission income increased by 11 % to SEK 868m. Commission on securities trading and mutual fund management has developed well over the period. The net result on financial operations also rose, thanks mainly to an improved result in money market trading.
Expenses were 3 % higher than the first quarter of 1998, but 11 % lower than in the fourth quarter of 1998. IT costs were more or less unchanged compared with the same period last year, but fell by 19 % compared with the fourth quarter of 1998.
The I/E ratio before loan losses excluding items affecting comparability was 2.02 (1.97).
The I/E ratio after loan losses also improved significantly to 2.00 (1.91).
Loan losses still at a very low level
Loan losses, including changes in the value of repossessed property, continued to fall and amounted to SEK 25m (65) or 0.02 % (0.04) of lending.
The proportion of bad debts was 0.4 % (0.6) of lending. The volume of collateral taken over fell to SEK 258m (385).
Capital ratio and rating
The Handelsbanken Group's capital ratio rose to 9.9 % (9.7). The Tier 1 capital ratio increased to 6.4 % (5.8).
Handelsbanken continues to have the highest rating of the Swedish banks.
Successful sales of Handelsbanken's mutual funds
Handelsbanken's share of the dynamically expanding mutual funds market has increased from just over 8 % at the beginning of the 1990s to 10 % in the last few years. New sales increased significantly in the first quarter of 1999. Net new savings in Handelsbanken mutual funds rose to SEK 2 600m from SEK 1 900m in the corresponding period in 1998. Handelsbanken's share of total new savings thereby rose to 14.4 % (10.2).
Use of Internet increasingly important
Handelsbanken has offered Internet services to private customers since autumn 1997 and to companies since autumn 1998. Customers are now able to carry out most of their ordinary banking business via the Internet: payments, transfers, purchases and sales of shares and mutual fund units. 11 % of all payments and 12 % of all share transactions at the Bank are made via the Internet. Via the individual branch's home page, customers can also access information about all branch products and services and information about the Handelsbanken Group.
Handelsbanken's Internet service is not a separate operation, but an integral part of the branch office operations. The customer remains a customer of his or her branch office and, via the Internet service, has rapid, simple and effective access to the branch and his/her accounts. For the Bank, the Internet is a highly cost-effective means of carrying out customer transactions.
Adaptations for year 2000
Handelsbanken's project to make the Group's computer systems year 2000 compliant is going according to plan.
In mid-April 1999, 99 % of the central application systems in Sweden that will be used over and after the millennium shift had been analysed, adapted, tested and launched into production. About ten minor systems will be replaced by systems that are already year 2000 compliant. A contingency plan for dealing with unforeseen interruptions has been drawn up. Supplementary tests on e.g. the interfaces between systems at the Bank and on external interfaces have been in progress since the beginning of the year.
No special difficulties have arisen during the adaptation of the systems or during testing.
All adaptation measures within the Group will be completed according to plan by
30 June 1999 at the latest.
Information about the Bank's year 2000-project is available on the Bank's Internet pages, and is updated on a regular basis.
Stockholm, 26 April 1999
Arne Mårtensson
President and Group Chief Executive
The full interim report including tables is available to download from the enclosed link below.
For further information please contact Arne Mårtensson, Group Chief Executive of Svenska Handelsbanken, <br>or Sven Grevelius, Head of Accounting and Control, tel: +46 8 22 92 20 <br> <br>Lars Lindmark, Head of Corporate Communications tel: +46 8 701 10 36 <br>Gustaf Elmstedt, Head of Investor Relations tel: +46 8 701 51 42 <br> <br>The interim report for the first half of 1999 will be published on 24 August 1999. <br>Handelsbanken's interim reports and other publications are also available on the Internet (www.handelsbanken.se). <br>