Press Release - Highlights of Annual Report 2001

Highlights of Annual Report 2001 Summary Profits were SEK 11.2bn - essentially unchanged, excluding last year's one-off income from the sale of the Bank's shares in Svensk Exportkredit Return on equity was 18.4% (21.6) Total income rose by 6% Net interest income increased by 14% Comparable expenses were almost 7% higher The Board proposes an increase in dividend to SEK 4.50 (4.00) Handelsbanken was acclaimed Bank of the Year Handelsbanken Liv was demutualised with the right for customers to transfer their insurance funds Another successful year for sales of mutual funds Handelsbanken has the most satisfied customers in the Nordic region The Group Essentially unchanged result Handelsbanken's result was essentially unchanged at SEK 11 208m (11 340). All comparisons with the previous year exclude the one-off gain from the sale of the Bank's shares in Svensk Exportkredit AB (Swedish Export Credit Corporation) in 2000. This one-off effect was SEK 343m. Return on equity was 18.4% (21.6). Net interest income up 14% - total income up 6% Net interest income at Handelsbanken increased by 14% to SEK 13 385m (11 791). This is due mainly to an increase in business volumes, where lending to the general public was significantly higher. The rate by which lending increased culminated around the middle of the year. During the fourth quarter, lending increased by nearly 2% and total lending to the general public was SEK 800bn (689). Lending margins increased during the second half of the year which compensated for decreasing margins early in the year. Margins were essentially unchanged. During the fourth quarter, net interest income increased by 17% compared to the equivalent period in the previous year. Net commission income fell by 8% to SEK 5 028m (5 455). Net trading income remained at a stable level, increasing by 1% to SEK 2 656m (2 633). Total income was SEK 21 654m (20 337), an increase of over 6%. Midtbank and SPP affected expenses The Group's total expenses were SEK 10 294m (9 064), which was an increase of just under 14%. During the year, the Bank acquired SPP and Midtbank A/S, which together had a five percentage point impact on the cost increase. Another two percentage points are due to the weaker Swedish krona. This means that the underlying increase in expenses was just over 6.5%. This increase was the result of a rapid expansion of branch office operations outside Sweden and increased costs for IT investments. Total IT costs for 2001 were approximately SEK 2.6bn (2.3). During the year, 16 branches were opened outside Sweden, at an added expense of SEK 87m. Total staff costs increased by 11% to SEK 5 918m (5 308). Performance-related remuneration decreased. The average number of employees in the Group rose by 665 to 9 239, with Midtbank representing 274 of this increase. Loan losses still at a very low level The Bank's loan losses, including changes in value of repossessed property, amounted to SEK 152m, compared to the previous year's recoveries of SEK 67m. The proportion of bad debts decreased to 0.18% (0.33). The volume of collateral taken over totalled SEK 170m (148). Capital ratio, buy-back of shares and rating The Handelsbanken Group's capital ratio was 9.9% (9.5) at year-end. The Tier 1 capital ratio was 6.1% (6.4). The Bank repurchased 5.4 million shares in 2001. At the Annual General Meeting in 2001, the Board of the Bank was authorised to repurchase a maximum of 20 million shares and to sell repurchased shares for the purpose of financing possible acquisitions. Handelsbanken did not buy back any shares after the 2001 Annual General Meeting. However, the bank sold 5.6 million shares in connection with the acquisition of Midtbank. At year-end, the Bank held 21.4 million of its own shares, almost all Class B shares. The number of outstanding shares was 693.4 million. The Board is requesting that the Annual General Meeting authorises the Board to repurchase a maximum of 20 million shares up until the 2003 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 repurchased shares to finance any future acquisitions. Handelsbanken's rating from all three rating agencies was unchanged. Earnings per share and dividend Net earnings per share were SEK 11.99 (12.89). When calculating the earnings per share, the average number of outstanding shares has been used. The Board recommends that the General Meeting resolves on a dividend of SEK 4.50 per share (4.00) for the class A and B shares. Bank of the Year Handelsbanken was acclaimed Bank of the Year by Privata Affärer, a Swedish periodical for private finances. This was the first time in the history of the prize that the award has gone to a so-called "major bank". The jury said that its decision was based on the fact that Handelsbanken - unlike other banks - does not close down branches, that it focuses on personal service at branch offices and does not charge for its Internet services. The jury also observed that Handelsbanken has introduced the right for customers of Handelsbanken Liv to transfer their insurance funds. Demutualisation of Handelsbanken Liv On 1 January 2002, Handelsbanken Liv Försäkrings AB was converted from a mutual life insurance company into a profit-distributing company. This company's insurance stock was merged with that of the unit-linked company, Handelsbanken Fondförsäkrings AB and all operations are now run under the name of Handelsbanken Liv Försäkrings AB. In connection with the demutualisation, Handelsbanken injected new shareholder's equity, bringing the total equity to SEK 1.5bn. As of 1 April, Handelsbanken Liv is also introducing the right for private customers to transfer their insurance funds. The right of transfer applies to both new and existing private customers and between traditional and unit-linked insurance. Handelsbanken is alone on the Swedish insurance market in permitting such extensive transfer of insurance funds. Handelsbanken moves forward in the mutual fund market Handelsbanken's share of the total volume in the Swedish mutual fund market was over 11%. The Bank's share of new savings in mutual funds was 19%, in other words, considerably more than its share of total volume. Excluding new savings in the premium pension system, Handelsbanken's market share was 19.3% - the highest of the players in the Swedish mutual fund market. This was the third year running that Handelsbanken's market share for new mutual fund savings was considerably higher than its share of the total volume. Customer satisfaction surveys in the Nordic countries outside Sweden In Sweden, customer satisfaction is measured by Svenskt Kvalitetsindex. Since customer satisfaction is an important means for Handelsbanken to achieve its overall corporate goal - higher return on equity than its competitors - the results of these surveys are of great interest. The Bank has therefore been eager for equivalent surveys to be performed in the other Nordic countries. In the autumn, the Danish Centre for Management, in collaboration with the Århus School of Business, carried out a survey of how the private customers of Danish banks judge their banks. In other words, this was a survey of the same type as Svenskt Kvalitetsindex conducts in Sweden. Handelsbanken (Midtbank) had the highest customer satisfaction of the six largest Danish banks with an index of 79, while the average for the other banks was an index of 70. A similar survey was performed in Finland by a different company. For Handelsbanken, the survey was performed separately but by the same company using the same methods. In Finland too, Handelsbanken's result was very encouraging and well above the average - much higher than for the largest bank in Finland. In Norway, no survey of this type has yet been conducted, but one is planned for the autumn. In view of the results in Denmark and Finland presented last autumn and the results previously presented in Sweden, there is good reason for claiming that Handelsbanken has the most satisfied bank customers in the Nordic countries. SPP customers become Handelsbanken customers When the insurance company, SPP, was acquired, an important component in the planned acquisition was that the Bank would be able to sell banking services to SPP customers who were not already customers of the Bank. When the Bank acquired the mortgage company Stadshypotek, some 70% of Stadshypotek's customers did not bank with Handelsbanken. Now, five years after the acquisition, around half of these customers are also customers of the Bank. The same successful working methods will be used to approach the SPP customers who are not already Handelsbanken customers. This work started with corporate customers in 2001, while for private customers, more systematic marketing efforts are starting in the first quarter of this year. Marketing aimed at these customers so far has generated almost SEK 5bn in increased business volumes. Handelsbanken Hypotek redeems preference shares When Handelsbanken acquired Stadshypotek AB, the shareholders of Stadshypotek had the option of receiving preference shares issued by Handelsbanken Hypotek instead of cash payment. The Articles of Association of Handelsbanken Hypotek permit the Board to redeem all preference shares as of 1 July 2002. The Board of Directors of Handelsbanken Hypotek intends to adopt a resolution on redemption of preference shares at its meeting on 16 April 2002. There are a total of 1.3 million preference shares and the redemption amount is SEK 252.6m. Handelsbanken's Tier 1 capital will be only marginally affected by this transaction. Stockholm, 12 February 2002 [REMOVED GRAPHICS] Lars O Grönstedt President and Group Chief Executive For further information please contact: Lars O Grönstedt, Group Chief Executive tel: +46 8 22 92 20 e-mail: lagr03@handelsbanken.se Lennart Francke, Head of Accounting and Control tel: +46 8 22 92 20 e-mail: lefr01@handelsbanken.se Lars Lindmark, Head of Corporate Communications tel: +46 8 701 10 36 e-mail: lali12@handelsbanken.se Bengt Ragnå, Head of Investor Relations tel: +46 8 701 12 16 e-mail: bera02@handelsbanken.se The Annual General Meeting of Svenska Handelsbanken AB (publ) will take place at 10 a.m. on 23 April 2002 in Stockholm. The interim report for the first quarter of 2002 will be published on 22 April 2002. Handelsbanken's interim reports and other publications are also available on the Internet (http://www.handelsbanken.se/ireng). ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/02/12/20020212BIT00630/bit0002.doc The full Year-End Report http://www.waymaker.net/bitonline/2002/02/12/20020212BIT00630/bit0002.pdf The full Year-End Report