Highlights of Handelsbanken's annual report January - December 2007

Summary January - December 2007, compared with January - December
2006
*         Operating profits for total operations* increased by 13% to
  SEK 19.4bn (17.2), while profits after tax rose by 18% to SEK
  15.5bn (13.1)
*         Return on shareholders' equity for total operations* was
  23.3% (20.9)
*         Earnings per share for total operations* were SEK 24.84
  (20.41)
*         Income for total operations* increased by 10% to SEK 32.6bn
  (29.6)
*         Operating profits in branch office operations outside
  Sweden increased by 27% to SEK 2.6bn (2.1)
*         The board adopted targets for capital ratios adapted to
  Basel II
*         The board proposes that the dividend be raised to SEK 8.50,
  plus an extra dividend of SEK 5.00, an increase in the dividend to
  SEK 13.50
*         The board is proposing to the annual general meeting a new
  mandate to repurchase shares
*         The board proposes that the annual general meeting decide
  on an issue of a subordinated convertible loan directed at
  employees

Summary of Q4 2007, compared with Q3 2007
*         Operating profits for total operations* were SEK 7.4bn
  (3.5)
*         Handelsbanken sold SPP to Storebrand ASA for SEK 18.2bn,
  with a capital gain of SEK 4.1bn

*'Total operations refers to continuing operations plus discontinued
operations


The Group
The Bank sold SPP to Storebrand ASA on 21 December 2007. The purchase
price was SEK 18.2bn and the Bank's capital gain after restructuring
and transaction costs was SEK 4.1bn. According to the current rules,
the Bank must report continuing and discontinued operations. Note 5
describes what is included in discontinued operations. All comments
in the end-of-year report refer to the continuing operations, unless
otherwise stated.

JANUARY-DECEMBER 2007 COMPARED WITH JANUARY-DECEMBER 2006
Operating profits for operations including "discontinued operations"
increased by 13% to SEK 19.383m (17,164). The return on shareholders'
equity increased to 23.3% (20.9). The C/I ratio was 40.5% and
earnings per share rose to SEK 24.84 (20.41). In accordance with IFRS
5, accounting for "continuing operations" is separate from"discontinued operations".

The operating profit for "continuing operations" totalled SEK 14,732m
(14,898). Income rose by 3%, and both net interest income and fee and
commission income increased by 6%. Expenses rose by 8% to SEK 12,368m
(11,505). Loan losses were SEK 27m (+55). Return on equity was 16.3%
(17.4). The C/I ratio was 45.6% (43.7). Earnings per share were SEK
17.39 (16.99).

One consequence of complying with IFRS 5 is that almost all the
funding costs for "discontinued operations" are reported under"continuing operations", while the income generated is reported under"discontinued operations". In 2007, the funding cost for"discontinued operations" was SEK 723m (498), this mainly being costs
for subordinated loans raised in connection with the demutualisation
of SPP.

Volume and income increases
Demand for credit remained strong from both companies and private
individuals. The average volume of lending to the public increased by
14%, while in branch office operations outside Sweden it went up by
over 26%. In Sweden, household deposits increased by 15% to SEK 121bn
(105). Total net interest income from lending was lower than the
previous year, since greater volumes did not make up for lower
margins. However, net interest income from deposits grew due to
higher volumes and improved margins. This resulted in the net
interest income in the continuing operations increasing by 6% to SEK
15,608m (14,727). The net interest income has been reduced by SEK
723m (498) related to interest costs for funding the discontinued
operations.

Net fee and commission income increased by 6% to SEK 7,745m (7,316).
The increase was mainly from mutual fund and custody commissions,
brokerage income and payment commissions. At SEK 2,153m (1,983),
payment commissions were the single largest source of income among
commission income. Card commissions, which are included in payment
commissions, have never been higher.

Insurance commissions decreased by SEK 166m to SEK 531m, which was
due to the yield split being SEK 0 (SEK 196m).

Net gains/losses on financial items at fair value decreased by 11% to
SEK 3,054m (3,448). The main reasons were that capital gains from the
available-for-sale portfolio were SEK 228m lower than the previous
year, and that the value change arising through increased credit
spreads on bonds in the Bank's liquidity portfolio reduced the figure
by SEK 490m (30).

Increased rate of expansion outside Sweden
Expenses increased by SEK 863m to SEK 12,368m (11,505). More than one
third of this was due to expansion at the regional banks outside
Sweden and at Handelsbanken International. In addition, Capital
Markets had higher costs and an increased presence, particularly in
Norway.

Staff costs, which were SEK 7,528m (7,184), were affected by new
pension regulations in Norway and accruals of actuarial gains brought
forward. The new regulations in Norway reduced expenses by SEK 69m
and accruals of actuarial gains in the rest of the Group reduced
expenses by SEK 159m. More than one half of the increase in staff
costs is due to the expansion outside Sweden. Performance-related
remunerations were SEK 708m (651).

The number of employees increased and at the year-end totalled 10,464
(9,823), with 2,859 (2,425) of this number outside Sweden. The
increase in other administrative costs was due to the international
expansion, higher costs for premises and IT costs.

Loan losses still low
Loan losses were SEK 27m (+55). The net loan loss ratio was 0.00%
(-0.01). Bad debts continued to fall, the net amount being SEK 624m
(876). The proportion of bad debts was 0.05% (0.07) of lending.

Q4 2007 COMPARED WITH Q3 2007
Operating profits for total operations were SEK 7,360m (3,544) This
profit figure includes a capital gain of SEK 4,082m from the sale of
SPP. Loan losses totalled SEK 166m, as opposed to previous quarters,
which had shown net recoveries on loan losses. Return on
shareholders' equity for the total operations was 37.4% (15.4) and
earnings per share were SEK 10.29 (4.10).

Operating profits for continuing operations were SEK 3,101m (3,532).
Return on shareholders' equity was 13.1% (15.7) and earnings per
share were SEK 3.61 (4.19).

Continued increase in net interest income
Income increased by 3% to SEK 6,616m (6,427). Business volumes
continued to grow. Average lending volumes rose by just under 3% and
deposits by 1.5%. Net interest income increased by 1%, chiefly due to
higher deposit margins. Net interest income was negatively affected
by SEK 44m, due to the remaining effects from previously repurchased
bonds. In Sweden, the margin for mortgages where the rate is newly
set or reset was stable during the second half of the year, while the
average margin for the whole mortgage loan portfolio decreased. Net
interest income rose in Norway, but in the other regional banks
outside Sweden it declined somewhat.

Net fee and commission income went up by 1%. Brokerage income
increased, as did mutual fund commissions. Net gains/losses on
financial items at fair value increased by 26% to SEK 523m (415).
Changes in value in the Bank's liquidity portfolio due to changes in
credit spreads, had a less negative effect on earnings during the
fourth quarter than in the previous quarter: SEK 152m, compared with
SEK 338m. The bank realised profits of SEK 2m (220) from divestments
from the "available for sale" portfolio.

Expenses were SEK 3,349m (2,899). Staff costs, which are low in
seasonal terms in the third quarter, rose by 11% to SEK 1,995m
(1,802). The increase was mainly attributable to higher
performance-related remunerations in Capital Markets. For the group
as a whole, performance-related remunerations amounted to SEK 332m, a
rise of SEK 219m. The change in the Norwegian pensions system was
reported in its entirety in the fourth quarter, and this reduced
costs by SEK 69m.

Other administrative expenses rose by SEK 257m to SEK 1,354m.
External IT services and purchased services accounted for SEK 80m of
the increase, and the cost of premises and properties for SEK 71m.

Bad debts continued to decrease
Loan losses remained low, at SEK 166m (+4), where two exposures
accounted for loan losses of approximately SEK 125m. The net loan
loss ratio was 0.05% (0.00). Bad debts continued to fall, the net
amount being SEK 624m (680). The proportion of bad debts was 0.05%
(0.05) of lending.

TRENDS IN THE BUSINESS SEGMENTS
(refer to January - December 2007 unless otherwise stated)

Branch office operations in Sweden
Operating profit increased by 1% to SEK 9,869m (9,766). Net interest
income grew by 4%, due to higher business volumes. The average volume
of mortgage loans rose by 12% to SEK 358bn (319), while household
deposits increased by 15% to SEK 121bn (105).

Branch office operations outside Sweden
Operating profit increased by 27% to SEK 2,641m (2,086), which
corresponded to 18% of Group operating profits (14).

Forty-one new branches were opened during the year, thirty of them in
the Bank's domestic markets outside Sweden and the remainder in five
other European countries. The average volume of lending increased by
26% to SEK 329bn (261); this was just under 28% of Group loans to the
public. The corresponding figure for the previous year was 25%.

Handelsbanken Capital Markets
Operating profits fell to SEK 761m (1,183). The changes in value of
the bonds in the part of the Bank's liquidity portfolio reported
within Capital Markets had a SEK 364m negative effect on earnings.
Apart from this, during the second half of 2007, Capital Markets
generated higher income than the previous year.

Handelsbanken Asset Management
Operating profits fell to SEK 1,029m (1,137). Since the last quarter,
Handelsbanken Liv has been reported under the Asset Management
business segment; the decrease in operating profits was due to
Handelsbanken Liv not receiving a yield split. The previous year, the
split had been SEK 196m. The average value of the mutual funds
managed by the Bank increased by 15%.

Discontinued operations
Discontinued operations include the activities the Bank sold to
Storebrand ASA and the net amount of the compensation Handelsbanken
received for asset management assignments that it carried out on
behalf of SPP/Storebrand.

The operating profit for the full year decreased by SEK 1,697m to SEK
569m. This was due partly to the change in the deferred capital
contribution and hedges, and partly to a lower yield split. The
effect of the changes in the deferred capital contribution and hedges
was SEK 1,246m lower than the previous year, and the yield split was
SEK 538m lower.

The capital gain from the sale of SPP is included in discontinued
operations. The net capital gain totalled SEK 4,082m, after
restructuring and transaction costs of SEK 357m and a tax expense of
SEK 0.2m. The Bank's funding cost for the discontinued operations,
which totalled SEK 723m (498), are reported under "continuing
operations".

BRANCH OFFICE OPERATIONS OUTSIDE SWEDEN GROW - A NEW BRANCH OPENING
EVERY 8 DAYS
One year ago, the Bank announced its intention to open more branches.
In 2007, 46 new branches were opened, 41 of them outside Sweden.
Thirty of these were opened in the Bank's domestic markets outside
Sweden: 16 in Great Britain, 8 in Finland, 4 in Norway and 2 in
Denmark. The remaining 11 branches were opened within Handelsbanken
International; in three of these cases, established representative
offices were converted into full branches.

By the end of 2007, in addition to the 41 new branches, a further 15
branch managers had been recruited, with the task of establishing new
branches. For 2008, the objective is to open between 35 and 45 new
branches outside Sweden.

FUNDING AND LIQUIDITY
Credit market turbulence had an impact on the Bank in the second half
of 2007. The impact on earnings was mainly due to changes in credit
spreads altering the value of the bonds the Bank keeps in a liquidity
portfolio. The Bank's net interest income is mainly affected by
customer margins, possible increases in the Bank's funding costs and
to what extent these increases can immediately be transferred to the
borrowers. The assessment is that the overall impact of the two
last-mentioned factors negatively affected net interest income by
some SEK 100m. As in the previous quarter, the Bank was able to fund
its day-to-day operations in the normal way. Various types of funding
instruments have been issued on a regular basis.

The Bank's liquidity portfolio comprises bonds that are eligible as
collateral with central banks in order to create immediate liquidity.
The bonds have high credit quality and most of the holdings were
rated AAA or AA, with none lower than A.

The impact on earnings - that is, the realised and unrealised value
changes arising through wider credit spreads for the bonds which were
or are in the Bank's trading portfolio - was SEK 490m, of which SEK
152m affected the fourth quarter. Bonds in the available-for-sale
portfolio affected the Bank's equity negatively by SEK 476m, with SEK
208m of this during the fourth quarter. The total market value of the
Bank's liquidity portfolio was SEK 88.2bn, of which 41% was available
for sale.

CAPITAL ISSUES
Starting on 1 February 2007, the Bank reports the capital requirement
and capital base in accordance with the Basel II rules. The changed
capital requirements have a gradual impact, since the transitional
rules allow for an adaptation over a period of three years - and in
the first year, the Bank is only allowed to include 5% as a
reduction.

Tier 1 capital increased to SEK 65,600m (59,272). SEK 6.8bn of the
Tier 1 capital was Tier 1 hybrid capital. Calculated according to the
transitional rules, the Bank's capital ratio was 10.4%, while the
Tier 1 capital ratio was 6.5%. The corresponding figures, excluding
the transitional rules, were 16.9% and 10.6% respectively. If no
transitional rules had applied, the statutory capital requirement
under Basel II would have been reduced by 42% compared to the
requirement in accordance with Basel I.

According to what is known as Pillar 2 in Basel II, the Bank has
designed a model for its internal capital adequacy assessment process
(ICAAP). In this internal assessment, the Bank must take a broader
approach to risks than is the case in Pillar 1. The capital
requirement for risks is expressed in terms of economic capital (EC)
and as a proportion of available financial resources (AFR). AFR
consists of Handelsbanken's equity and other available financial
values on and off the balance sheet, with a one-year time horizon. As
at 31 December 2007, the AFR/EC ratio was 215% and EC was SEK 55bn.

The board established minimum and maximum target requirements for the
Bank's Tier 1 capital ratio until further notice. Taking into
consideration stress tests and the Bank's conservative attitude to
risk, the board has decided that the Bank's Tier 1 capital ratio
under Basel II must be at least 6% according to the current floor
rules; and in 2010 when the Basel II transition rules cease to apply,
the Tier 1 capital ratio must be between 9% and 11%.

DIVIDEND, REPURCHASES AND ISSUE OF SUBORDINATED CONVERTIBLE LOAN
The board proposes that the 2008 annual general meeting authorise an
ordinary dividend on the class A and B shares of SEK 8.50. In
addition, the board is proposing that the AGM pass a resolution on an
extra dividend of SEK 5.00 on the class A and B shares.

In order to adjust the capital structure, the board is also
requesting that the 2008 AGM mandate the board to repurchase a
maximum of 20 million shares until the 2009 AGM. The board is also
proposing that the AGM resolve that the shares that may come to be
repurchased if the AGM votes in favour of the board's proposal, can
be used to finance possible acquisitions.

The board is also proposing that the AGM authorise an issue of a
subordinated convertible loan directed at Handelsbanken employees on
market terms. The aim is to offer the loan to all employees; however,
legal or other reasons may exist in certain countries that prevent
the offer. The loan is calculated at a maximum of SEK 2.3bn; it will
have hybrid status and can be converted to shares in Handelsbanken.
Assuming that the share price at the time of maturity is higher than
the conversion price, the dilution is calculated to be about 1.8%.

At the 2007 AGM, a resolution was passed to cancel 20.4 million
shares which the Bank had previously repurchased. In connection with
the cancellation, a bonus issue was performed which increased the
quota value of the share from SEK 4.45 to SEK 4.60. At the AGM in
April 2007, the Bank's board received a mandate to repurchase up to
40 million shares during the period until the 2008 AGM. So far the
Bank has repurchased 4.8 million shares. The board is requesting the
2008 AGM to resolve to cancel the repurchased shares as well as any
shares that may be repurchased during the period until the 2008 AGM.

RATING
Handelsbanken's rating was unchanged with the three rating agencies
which rate the Bank. Moody's rating for the Bank was Aa1, and from
Fitch and Standard & Poor's AA-. All three agencies consider the
Bank's outlook to be stable.

ANNUAL GENERAL MEETING AND ANNUAL REPORT
The Bank's annual general meeting in 2008 will be held at the Grand
Hôtel's Winter Garden, Stockholm, at 10.00 a.m. on 23 April 2008.

The annual report and/or annual review will be sent late March/early
April to shareholders who request to receive such publications. Both
publications will be available on the Bank's website
(www.handelsbanken.se/ireng) in mid-March.

Pär Boman
President and group chief executive


For further information please contact:

Pär Boman, President and group chief executive
phone: +46 (0)8 - 22 92 20, pabo01@handelsbanken.se

Ulf Riese, CFO
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 following
link.