Svenska Handelsbanken: Highlights of Annual Report 2002
Summary
- Profits were SEK 10.2bn (11.2)
- Return on equity was 14.6% (18.4)
- Income was unchanged at SEK 21.7bn (21.7)
- Expenses for comparable units were unchanged
- Branch office operations increased their profit by 8%. This represented 95% of the Bank's total profits
- Net commission income rose although commissions related to the equity markets continued to fall
- The Bank's market share of new sales of mutual funds was 29%
- The Board recommends that the dividend is increased to SEK 4.75 (4.50)
Strong ending to the year
Handelsbanken's profits were SEK 10 190m (11 208), which was a decrease of 9%. The result for the fourth quarter was the best since the second quarter of 2001, which was due to both lower expenses and increasing income. During this quarter, expenses for comparable units were just over 4% lower than the last quarter of 2001. For the full year, the C/I ratio before loan losses was 50.2% (47.5) and after loan losses 52.0% (48.2). Return on equity was 14.6% (18.4).
Net interest income rose by 7% - total income unchanged
The Bank's total income was SEK 21 664m (21 654). Net interest income continued to rise and was SEK 14 285m (13 385), an increase of 7%. The increase was mainly due to larger business volumes for both deposits and lending. Lending to the general public increased by 5% to SEK 839bn. The increase was mainly due to credit demand from households, particularly for mortgages. Credit demand gradually declined during the year, both from households and companies. Margins increased slightly on the Bank's lending to companies and on mortgage loans to households. Total deposits increased by 3%, which was entirely due to higher deposits from households. Net commission income rose by 2% to SEK 5 134m (5 028). Securities related commission decreased by almost SEK 350m, which could
however be compensated by higher insurance and payment commission, and also lending and deposit commission. Net trading income fell by 36% to SEK 1 702m (2 656), mainly due to the weak market in the late summer and autumn. Currency and interest-rate related trading represented some 85% of net trading income. The deficit arising at Handelsbanken Liv is also included in net trading income, as total yield in the company did not reach the
level which the company guaranteed its policy-holders. This had a negative impact on net trading income of SEK 113m (0).
Increase in expenses ceased
The increase in costs slowed down throughout the year and expenses for comparable units were unchanged. Total expenses were SEK 10 883m (10 294), a rise of nearly 6%, which was entirely due to the inclusion of Handelsbanken Liv and the acquisitions of SPP and Midtbank in the consolidated accounts. Expenses for the last two quarters were lower than for the corresponding period in the previous year, despite the inclusion of Handelsbanken Liv's expenses. The main explanation for the lower cost level is that the number of employees has decreased by 364 or 4%. The number of employees was reduced in all parts of the Bank. Expenses include certain restructuring costs, and therefore the full impact of staff reductions will not be seen until 2003. There were 9 458 employees at the year-end.
Loan losses still at low level
Loan losses, including the change in value of repossessed property, were SEK 392m (152) corresponding to a loan loss ratio of 0.05%. The proportion of bad debts decreased to 0.23% (0.25).
Capital ratio, buy-back of shares and rating
The Group's capital ratio was 9.3% (9.9). The Tier 1 capital ratio was 6.4% (6.1).
The Bank neither repurchased shares nor sold shares previously bought back. The Board is requesting that the Annual General Meeting authorises the Board to repurchase a maximum of 20 million shares up until the 2004 Annual General Meeting. The Board also states that the maximum amount for the repurchase of shares is SEK 2bn. It is also proposed that the Annual General Meeting authorises the Board to use the repurchased shares to finance any future acquisitions. If the Meeting resolves in accordance with the Board's proposal, the mandate for 2003 will be identical with that which the Board of the Bank had during 2002.
Handelsbanken's rating from all three rating agencies was unchanged.
Earnings per share
Net earnings per share were SEK 10.50 (11.99). The Board recommends that the General Meeting resolves on a dividend of SEK 4.75 per share (4.50) for the class A and B shares.
Branch office operations continue to boost profits
The Bank's branch office operations increased their profits to SEK 9 702m (8 963), a rise of 8%. Branch office operations' proportion of the Bank's total surplus was 95%. Throughout the turbulent period in the securities markets, branch office operations have succeeded in generating steadily rising surpluses. Falling net income from financial operations and commission was more than compensated for by net interest income rising by 14% to SEK 14 286m (12 564). This means that total income rose by 7% to SEK 16 840m (15 731) while the number of employees fell by 4%.
Handelsbanken aims to have the most satisfied customers
of the Nordic banks
Svenskt Kvalitetsindex presented its survey of customer satisfaction in Sweden at the beginning of October and for the thirteenth year running, Handelsbanken was in top posi-tion. For the first time, the same type of survey was conducted for the private market in all four Nordic countries. Handelsbanken's performance was generally very good. In Finland, Handelsbanken had the most satisfied customers of all the nationwide banks. In Denmark, customer satisfaction was still high and considerably higher than the main competitors. However the index for Handelsbanken/Midtbank had fallen slightly and the Bank was no longer the best. In Norway, Handelsbanken was better than its main competitor but the Bank's index was only at the Norwegian average. In all countries, the results of the surveys will be analysed and followed up in various ways. The Bank is convinced that having the most satisfied customers of the Nordic banks is a cornerstone for achieving its goal of a long-term superior profitability lead.
Market shares increased on the mutual fund market
Handelsbanken had a share of almost 29% of net savings in the Swedish mutual fund market. A large part of the new volume was invested in various types of fixed income funds. This was the fourth year running that Handelsbanken's market share for net mutual fund savings was higher than the Bank's share of total fund holdings. The Bank's share of the total fund market increased to 12.4%. The Bank was the only one of the major players on the mutual fund market to increase its market share.
Stockholm, 18 February 2003
Lars O Grönstedt
President and Group Chief Executive
The full report including tables can be downloaded from the following link.
For further information please contact: <!-- hugin-supplied --><br> <!-- hugin-supplied --><br> Lars O Grönstedt, Group Chief Executive <!-- hugin-supplied --><br> tel: +46 8 22 92 20 e-mail: lagr03@handelsbanken.se <!-- hugin-supplied --><br> <!-- hugin-supplied --><br> Lennart Francke, Head of Control and Accounting <!-- hugin-supplied --><br> tel: +46 8 22 92 20 e-mail: lefr01@handelsbanken.se <!-- hugin-supplied --><br> <!-- hugin-supplied --><br> Lars Lindmark, Head of Corporate Communications <!-- hugin-supplied --><br> tel: +46 8 701 10 36 e-mail: lali12@handelsbanken.se <!-- hugin-supplied --><br> <!-- hugin-supplied --><br> Bengt Ragnå, Head of Investor Relations <!-- hugin-supplied --><br> tel: +46 8 701 12 16 e-mail: bera02@handelsbanken.se <!-- hugin-supplied --><br> <!-- hugin-supplied --><br> <!-- hugin-supplied --><br> The Annual General Meeting of Svenska Handelsbanken AB (publ) will take place in Stockholm at 10 a.m. on Tuesday, 29 April 2003. <!-- hugin-supplied --><br> <!-- hugin-supplied --><br> The interim report for the first quarter of 2003 will be published on 28 April 2003. <!-- hugin-supplied --><br> Handelsbanken's interim reports and other publications are also available on the Internet (http://www.handelsbanken.se/ireng).