Svenska Handelsbanken's interim report <br>January - September 1999
Summary
Result continues to be strong
The Handelsbanken Group's profits for January September 1999 were SEK 6 295m (6 100). The result for 1998 included a capital gain of SEK 338m from sales of properties. Excluding this, the result improved by 9 %.
Return on shareholders' equity was 16.8 % (17.2). Return on shareholders' equity is calculated as operating profit in relation to average shareholders' equity after standard tax and with an adjustment made for items affecting comparability. The corresponding figure for the whole of 1998 was 16.4 %.
Income and expenses
Operating income amounted to SEK 12 525m (12 696), an increase of 1 %, excluding the capital gain in 1998.
Net interest income increased by 3 % to SEK 8 800m. A fee of SEK 231m (215) to the Swedish government for the deposit protection guarantee has been charged to net interest income.
The interest spread in the Handelsbanken Group was slightly improved.
Net commission income increased by 7 % to SEK 2 744m (2 554). Securities commission from brokerage and fund management fees performed well.
The net result on financial operations fell by SEK 429m to SEK 443m due to a lower result from trading following the rise in interest rates.
Expenses decreased by 1 % compared with the first nine months of 1998 to SEK 6 304m (6 385).
The I/E ratio after loan losses improved to 2.01 (1.87). The I/E-ratio before loan losses increased to 1.99 (1.94).
Loan losses still at low level
Loan losses, including changes in the value of repossessed property, continued to fall and recoveries on previously reported loan losses exceeded loan losses by SEK 74m.
The proportion of bad debts fell to 0.3 % (0.4) of lending. The volume of collateral taken over remained more or less the same at SEK 278m (262).
Capital ratio and rating
The Handelsbanken Group's capital ratio was 9.6 % (9.7). The Tier 1 capital ratio increased to
6.6 % (6.2).
Handelsbanken has a higher long-term rating than any other Nordic bank. In Europe, only two listed universal banks have received a higher rating from Moody's.
Broad options programme for managers
Handelsbanken has decided to offer some 500 branch managers and 200 other managers and key persons the opportunity to acquire synthetic options.
Through its profit-sharing system, the Oktogonen Foundation, established in 1973, Handelsbanken already has an effective incentive scheme, and all staff in Sweden, Norway and Finland receive an equally large share of the Bank's profits. This has contributed to the Bank's return on shareholders' equity being higher than the average for the other Swedish and Nordic banks for the past 27 years. The intention is for the options programme - which is more individual in character - to complement the Oktogonen system.
The number of options will be announced at the end of the subscription period, i.e. in mid-November 1999. The employees in question will be offered between 5 000 and 80 000 options each.
SEK 11.00 will be paid for each option. The expiration date has been set at 25 November 2004. The exercise price will be around 160 % of the average stock exchange price of the class A share over a measurement period that constitutes a part of the subscription period.
At the end of the subscription period, i.e. in mid-November, the exercise price in SEK, the share price during the measurement period and the total number of options will be announced. The options have been valued by Alfred Berg Fondkommission AB. Handelsbanken Markets has arrived at the same result in an internal valuation. The valuations will be followed up by Alfred Berg Fondkommission and Handelsbanken Markets at the end of the measurement period, after which the final exercise price will be announced.
The Bank intends to hedge the exposures arising in connection with the issue of synthetic options. This will greatly limit the maximum possible cost of the options commitment.
If the price of the Handelsbanken class A share rises by more than 30 % during the five-year life of the programme, there will be not be any cost at all. If it rises by less than 30 %, the maximum cost for the Bank will be less than SEK 7m per quarter.
Handelsbanken starts retail banking operations in the UK
Handelsbanken is preparing to set up in the UK the type of retail banking operations that have been so successful in the Nordic countries.
Until now, Handelsbanken has conducted Nordic-related corporate business and private banking services for Nordic customers living in the UK, from its branches in London, Manchester and Birmingham. The Bank will now offer a complete range of banking services to both private and corporate customers.
The Bank's services will be provided not only by the branches, but also via telebanking and the Internet. Cards will be offered for easy access to cash. On the corporate side, the Bank's branches already provide most banking services.
The operations will be launched at Manchester and Birmingham in the first quarter of 2000. The intention is to continue expansion in the UK over the next few years.
Handelsbanken first to demonstrate banking services on WAP phones
As one of the first banks in the world, Handelsbanken has demonstrated the use of working banking services on WAP phones (WAP = Wireless Application Protocol).
In Sweden, a test is currently being carried out in which a number of selected customers and investment advisers at the Bank are using WAP phones to access customised stock exchange information in real time via mobile phones.
In 2000, it will be possible to access most of the Bank's current Internet services via WAP phones. This means that customers will be able to see their balances and transactions, transfer money, pay bills and carry out securities transactions on all types of appliances that use the WAP-protocol.
The new WAP-based banking services are an important part of the Bank's strategy to give customers the opportunity to carry out banking business whenever, wherever and however suits them best.
Highest rating to Handelsbanken's Institutional Custody Services
Every year, Global Custodian, the leading magazine in its field, rates the institutional custody services provided by banks around the world to international customers. The ratings are based on the results of extensive opinion polls carried out among the customers of the banks providing these services, and are influential in the choice of international custody banks.
Handelsbanken was the only Swedish bank in 1999 to receive a Top Rating from Global Custodian. The Bank has received this grade every year since 1992. In Global Custodian's polls, Handelsbanken's customers praised among other things the Bank's highly flexible and customised services.
The millennium shift preparations completed
The Bank's preparations for year 2000 have been carried out according to plan, All application systems, technical platforms, PC systems and embedded systems that will be used over and after the millennium shift have now been analysed, adapted, tested and launched into production.
Tests of external interfaces have been completed and approved and a far-reaching contingency plan for dealing with unforeseen malfunctions has been drawn up.
Within the framework of ordinary development work at the Bank, in autumn 1999, a number of minor systems that are used today will either be adapted or replaced by other systems that are already 2000 compliant. Once these changes have been made, new tests will be carried out.
Stockholm, 26 October 1999
Arne Mårtensson
President and Group Chief Executive
The full Interim Report including tables can be downloaded from the enclosed link.
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> <br>The interim report for 1999 will be published on 22 February 2000. <br>Handelsbanken's interim reports and other publications are also available on the Internet (www.handelsbanken.se) <br>