Handelsbanken s interim report January-March 2007

Summary January-March 2007 compared with January-March 2006

*         Operating profit was SEK 3.9bn (5.0)
*         Return on equity was 17.1% (26.4)
*         Earnings per share were SEK 4.48 (6.32)
*         Income totalled SEK 6.9bn (8.2)
*         The C/I ratio was 45.2% (39.7)
*         Profits after tax were SEK 2.8bn (4.1)
*         The Bank's statutory capital requirement calculated
  according to the basic model for internal risk classification will
  be reduced by 41% when the Basel II rules are fully implemented

Summary of first quarter 2007 compared with fourth quarter 2006

*         Operating profit was SEK 3.9bn (5.0)
*         Net interest income rose by 3%
*         The profits from Swedish branch office operations increased
  by 8% to SEK 2.5bn (2.3)
*         Operating profit in the branch office operations outside
  Sweden increased by 22% to SEK 648m (533)
*         Branch office lending volumes outside Sweden increased by
  over 8%
*         The Bank repurchased 5.9 million shares

The Group

Q1 2007 compared with Q4 2006

Operating profit SEK 3.9bn
The operating profit was SEK 3,859m (5,032). The overall profit from
the Bank's branch operations, inside and outside Sweden, rose by SEK
301m or almost 11%. The decline in the Bank's operating profit was
mainly due to the fact that the Bank realised value changes on assets
available for sale in the previous quarter, and to a decreased profit
in the insurance operations. Expenses were SEK 3,125m (3,260), a
decrease of 4%.

Return on equity was 17.1% (23.2). The C/I ratio was 45.2% (39.0).
Earnings per share were SEK 4.48 (5.79).

Net interest income increased
Net interest income increased by 3% and totalled SEK 3,853m (3,726).
Volume increases in lending compensated for poorer margins and in
general both deposit margins and volumes continued to increase. In
Sweden, the average volume of lending rose by 2.6% and in the branch
operations outside Sweden, the increase was 8.3%.

Net fee and commission income was SEK 2,213m (2,749), a decrease of
SEK 536m or 19%. The Bank has never before had such high income in
one quarter from brokerage and fund and custody operations. The
decrease was mainly due to a lower yield split in the insurance
operations. The yield split - the income which the Bank receives when
the yield to the policyholders exceeds the guaranteed level -
decreased by SEK 401m to SEK 117m.

Net gains/losses on financial items at fair value were SEK 678m
(1,607), a decrease of 58%. The decrease was partly due to a lower
writeback for the deferred capital contribution in the insurance
operations - SEK 216m - and also that in the previous quarter the
Bank had income of SEK 733m from realised value changes on assets
available for sale.

Income totalled SEK 6,913m (8,347) a decrease of 17%. This was partly
due to a decrease in the value change in the deferred capital
contribution in SPP; that the Bank during the fourth quarter of 2006
realised value changes related to assets available for sale and also
to a decrease in the yield split in the insurance operations.

Expenses decreased
Expenses decreased by 4% to SEK 3,125m (3,260). The decrease is
mainly because staff costs were SEK 144m lower, which in turn was due
to a lower provision for performance-related remuneration. The Bank
made no provision to the Oktogonen profit-sharing foundation. Other
administrative costs were SEK 1,281m (1,272). The costs for expansion
were mainly unchanged.  The number of employees rose to 10,500
(10,320).

Recoveries exceeded loan losses
Recoveries exceeded the period's gross loan losses and net recoveries
totalled SEK 70m (-55). The loan loss ratio was SEK -0.02% (-0.01).
Net bad debts were SEK 937m, an increase from SEK 876m. The
proportion of bad debts was 0.07% (0.07) of lending.

Q1 2007 compared with Q1 2006

Profits decreased by 23% to SEK 3,859m (5,016). This was entirely due
to the fact that last year the Bank could write back the change in
value of the previously underfunded insurance contracts, which
reduced the deferred capital contribution. Expenses fell by 4% and
totalled SEK 3,125m (3,252). Return on equity went down from 26.4% to
17.1%. The C/I ratio was 45.2% (39.7).

Increased net interest income and lower expenses
The comparison with the same period last year is similar to that
between the quarters. Income fell by 16% and the whole decrease was
because net gains/losses on items at fair value were lower. This was
partly because the Bank realised assets available for sale at the
beginning of last year for an amount of SEK 159m and also due to a
change in the deferred capital contribution in SPP by SEK 1,105m.

Net interest income went up by SEK 69m or 2%. The rate of increase
was negatively impacted by SEK 98m due to the repurchases the Bank
made in connection with the transition to IFRS. Excluding this the
rate of increase would have been over 4%. In the Swedish branch
operations, net interest income grew mainly due to significantly
improved deposit margins and outside Sweden, the increase in volume
boosted the net interest income. The average volume of lending in
Sweden rose by 11%, while in the branch operations outside Sweden it
increased by nearly 24%.

Commissions fell by SEK 129m, which was mainly due to a lower yield
split in the insurance operations. This was partly compensated for by
higher fund and custody commissions. The yield split fell from SEK
284m to SEK 117m.

Expenses decreased by 4% from SEK 3,252m. Staff costs fell by SEK
197m which also in this comparison was due to a fall in
performance-related remuneration. Other administrative costs grew by
7% from SEK 1,068m to SEK 1,144m, mainly due to higher external IT
costs.

Recoveries exceeded the period's gross loan losses and net recoveries
totalled SEK 70m (79). The loan loss ratio was -0.02% (-0.03). Bad
debts fell from SEK 1,441m to SEK 937m. The proportion of bad debts
fell from 0.13% of lending to 0.07%.

Handelsbanken expands outside Sweden
The Bank has decided to step up the pace of its organic growth
outside Sweden. The aim is to open 30-40 branches this year in the
branch operations outside Sweden. Three new branches were opened
during the period: St Petersburg in Russia, and Mikkeli and Espoo
Matinkylä in Finland.

A total of 25% of the Bank's lending to the public is in the branch
operations outside Sweden and almost 40% of the increase between the
years has been outside Sweden. The corresponding increase between the
quarters was 50%.

Handelsbanken in Great Britain was noticed when the Bank came 11th in
the Sunday Times' annual awards for Best Employer. A total of 650
companies participated in the group where the Bank was represented.
This boosts the Bank's image in Great Britain and should make it even
easier to recruit the best employees for its rapidly expanding
operations.

Higher business volumes
Business volumes grew significantly in practically all parts of the
Bank. In total the average volume of lending in the Group rose by 14%
during the last 12 months. Outside Sweden, the increase was 23%. In
local currency, lending in the non-Swedish regional banks rose by
between 13% and 63%. The highest rate of increase was in Great
Britain.

The average mutual fund volume grew by 15% to SEK 221bn (193) and the
assets managed at Handelsbanken Pensions & Insurance rose by 9% to
SEK 176bn (162).

Capital ratio
Starting on 1 February 2007, the Bank reports the capital requirement
and capital base in accordance with the Basel II rules.
Calculated according to the transitional rules, the Bank's capital
ratio was 10.2%, 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 with the requirement in
accordance with Basel I. However, the transitional rules stipulate
that banks are only allowed to include 5% as a reduction in the first
year.

The main change in the capital requirement applies to credit risks.
To calculate these, the Bank has elected to use an internal risk
classification method called IRB, where there are two different
approaches: a basic model and a more advanced model. Handelsbanken
uses the advanced method for household exposures in Sweden and the
basic method for corporate exposures in Sweden and Norway. However,
the Bank intends to change over to the advanced IRB method for
corporate exposures during 2010. It is expected that this will
further reduce the statutory capital requirement.

Buybacks and rating
Since the 2006 AGM, the Bank has repurchased 20.7 million shares, of
which 5.9 million during the quarter. The number of outstanding
shares was subsequently 628.3 million. The board is proposing to the
2007 AGM to cancel the repurchased shares. At the AGM, there will
also be a proposal from the board for a new repurchase programme for
a maximum of 40 million shares.

On condition that the board's proposal regarding dividend is accepted
by the AGM, the Bank will have transferred 72% of the profit for
2006, or SEK 9.4bn, to the shareholders.

Handelsbanken's 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 it was AA-.

Pär Boman
President and Group Chief Executive


For further information please contact:

Pär Boman, Group Chief Executive
phone: +46 (0)8 - 22 92 20, pabo01@handelsbanken.se

Ulf Riese, Head of Control and Accounting
phone: +46 (0)8 - 701 1212, ulri02@handelsbanken.se

Bengt Ragnå, Head of Investor Relations
phone: +46 (0)8 - 701 1216, bera02@handelsbanken.se


The full report including tables can be downloaded from the attached
link.