Summary of Q3 2008, compared with Q2 2008
* Operating profits increased by 9% to SEK 3,758m (3,433)
* Net interest income rose by 8% to SEK 4,856m (4,494)
* The average volume of loans to the public increased by 4%
and household deposits in Sweden went up by
4%
* Expenses decreased by 2% to SEK 3,133m (3,195)
* Loan losses were SEK 231m (571)
* Handelsbanken opened 5 new branches and acquired 14
branches through a public offer for Lokalbanken i
Nordsjælland A/S which was completed in October
* Handelsbanken has the most satisfied customers in the
Nordic countries according to the SKI/EPSI 2008
survey
Summary January - September 2008 compared with January - September
2007
* Operating profits were SEK 10,110m (11,631) and the
period's profits after tax for total operations were
SEK 7,576m (9,112)
* Net interest income rose by 19% to SEK 13,749m (11,598)
* The average volume of loans to the public increased by 15%
and household deposits in Sweden went up by
19%
* Income totalled SEK 20,378m (20,510)
* The capital ratio was 15.2%, and the Tier 1 capital ratio
calculated according to Basel II was 10.0%
* Return on shareholders' equity for the total operations was
13.7% (18.4) and earnings per share for the total
operation were SEK 12.16 (14.58)
* All the comments and figures in the interim report refer to
continuing operations, unless otherwise stated.
This interim report has not been examined by the Bank's auditors.
The Group
JANUARY - SEPTEMBER 2008 COMPARED WITH JANUARY - SEPTEMBER 2007
Operating profit was SEK 10,110m (11,631). The figure was negatively
affected by realised and unrealised value changes in the liquidity
portfolio of SEK -1,076m (-338). During the third quarter, the value
changes in the liquidity portfolio were SEK -1,011m, of which SEK
-24m was recognised in profit/loss and SEK -987m was recognised
directly in equity. Parts of the liquidity portfolio were
reclassified during the third quarter. For more details, see the
Accounting policies etc. section on page 36.
Return on equity for total operations after actual tax was 13.7%
(18.4). The C/I ratio for continuing operations was 47.3% (44.0).
The net profit from discontinued operations was SEK 143m (501), and
the period's profit for total operations after tax was SEK 7,576m
(9,112). Earnings per share were SEK 12.16 (14.58).
Net interest income rose by 19%
Net interest income rose by 19% to SEK 13,749m (11,598). Net interest
income went up by 29% in the branch office operations outside Sweden,
and by 13% in the Swedish branch office operations.
The average volume of loans to the public increased by 15% to
SEK 1,351bn (1,174). Average deposits rose by 8% to SEK 484bn (449).
Growth in the Group's deposits from households continued to be
strong, at 18%. Household deposits in Sweden went up by 19% to SEK
141bn (118).
Net fee and commission income went down by SEK 688m or 12% to SEK
5,101m (5,789), which was due to a fall in equity-related commission
income of SEK 801m to SEK 2,298m (3,099). Payment commissions
continued to grow and net income from card payments increased by 13%.
Net gains/losses on financial items at fair value went down to SEK
940m (2,531). The decrease was partly due to the value change in the
liquidity portfolio of SEK 1,076m, and because in the third quarter
of the previous year the Bank had realised capital gains of
SEK 707m when selling shares. The translation differences due to
exchange rate changes also affected profits by SEK -128m (9).
Expenses
Expenses rose by 7% to SEK 9,629m (9,019). Branch office operations
outside Sweden accounted for six percentage points of the increase.
The expansion costs for new branches outside Sweden were SEK 123m to
SEK 333m higher than in the corresponding period the previous year.
Staff costs rose by 7% to SEK 5,944m (5,533). Branch office
operations outside Sweden accounted for five percentage points of
this. The positive effect of calculating pension commitments
according to IAS 19 was SEK 82m lower than in the corresponding
period in the previous year. The provision for performance-related
remuneration decreased by SEK 79m to SEK 184m (263). No provision was
made to the Oktogonen profit-sharing foundation for the first nine
months of 2008.
Loan losses
Loan losses were SEK 909m, as compared to net recoveries of SEK 139m
in the corresponding period in the previous year.
Provisions for collectively assessed receivables were SEK 112m (-51).
Loan losses as a proportion of lending were 0.09% (-0.02). Net bad
debts were 0.14% (0.05) of lending.
Q3 2008 COMPARED WITH Q2 2008
Operating profits increased by 9% to SEK 3,758m (3,433), chiefly due
to higher net interest income and lower costs.
Net interest income continues to increase
Net interest income went up by 8% to SEK 4,856m (4,494) with larger
volumes and improved lending margins making a positive contribution
to this performance.
Net interest income at Swedish branch office operations increased by
6%. The average volume of lending increased by 2% to SEK 938bn (921).
The margin on the mortgage loan portfolio was 0.53%. The average
volume of household deposits increased by 4% to SEK 147bn (141).
Net interest income went up by 18% in the branch office operations
outside Sweden and the average volume of lending and deposits grew by
9% and 2% respectively.
Net fee and commission income decreased by SEK 50m or 3% to SEK
1,656m (1,706). Equity market-related income fell by SEK 126m, which
was partly counteracted by a continuing positive performance for
payment commissions and by higher lending commissions. Fee and
commission income from cards and other payments increased by 6%
during the quarter.
Net gains/losses on financial items at fair value decreased to SEK
483m (634). The change in value due to Stadshypotek's hedge packages
was SEK -192m (245). Translation difference due to exchange rate
differences were SEK -156m (-17).
Expenses decreased
Expenses fell by 2% to SEK 3,133m (3,195). Staff costs increased by
3.5% to SEK 2,015m (1,946). The entire increase of SEK 69m was
attributable to staff cost increases, including performance-related
remuneration, at Handelsbanken Capital Markets.
Performance-related remuneration rose to
SEK 96m (59). The average number of employees rose by 3%, due to
holiday relief staff during the period. No allocation was made to the
Oktogonen profit-sharing foundation (0).
Other administrative expenses fell by 12% to SEK 1,011m (1,147).
Loan losses
Loan losses decreased to SEK 231m (571), of which collectively
assessed provisions were SEK 34m (73m).
The Bank's internal credit analysis indicated a marginal increase in
the credit risks during the third quarter. The average risk weight
according to the Bank's internal risk classification model (IRB
model) increased to 26.8% (26.2). A lower volume of interbank
lending, which has low risk weights, accounts for just over half of
the increase.
Loan losses as a proportion of lending were 0.07% (0.16). Net bad
debts increased to SEK 2,163m (1,680), equivalent to 0.14% (0.12) of
lending. Exchange rate changes explain almost half of the increase.
PERFORMANCE IN THE BUSINESS SEGMENTS
(Q3 2008 compared with Q2 2008)
Branch office operations in Sweden
Operating profits rose by 1% to SEK 2,471m (2,439).
Net interest income went up by 6% to SEK 3,377m (3,200) partly due to
increased lending margins. The average volume of lending rose by 2%
to SEK 938bn (921), while household deposits increased by 4% to SEK
147bn (141).
Net gains/losses on financial items at fair value decreased by SEK
483m to SEK -96m (387) due to value changes in Stadshypotek's hedge
packages.
Expenses decreased by 4% to SEK 1,585m (1,658) and loan losses fell
to SEK 70m (375).
Branch office operations outside Sweden
Operating profits rose by 19% to SEK 674m (568), and income increased
by 7% to SEK 1,898m (1,777).
Net interest income went up by 18% to SEK 1,480m (1,254), with larger
volumes and improved lending and deposit margins making a positive
contribution to this quarter. The average volume of lending increased
by 9% to SEK 447bn (410).
Expenses went up by 5% to SEK 1,062m (1,013), as a result of the
continued expansion. Loan losses fell to SEK 161m (196).
During the third quarter, 5 (10) branches were opened, and 18 branch
managers have been appointed for further new branches. A further 14
branches in Denmark will be added in October as a result of the
acquisition of Lokalbanken. Expansion costs in the third quarter were
SEK 112m (116).
Handelsbanken Capital Markets
Operating profits increased to SEK 684m (75). The underlying
operations reported higher profits, particularly in customer-driven
fixed income and currency trading.
Net fee and commission income was down by 12% to SEK 227m (258). Net
gains/losses on financial items at fair value increased to SEK 830m
(137).
Expenses fell by 3% to SEK 721m (742), mainly due to other
administrative expenses being lower.
Handelsbanken Asset Management
Operating profits decreased to SEK 70m (121), of which SEK 24m (44)
stemmed from Handelsbanken Liv. The decrease in net fee and
commission income by 14% to SEK 252m (292) was due to lower mutual
fund volumes. Expenses decreased by 11% to SEK 252m (284).
Handelsbanken Liv received no yield split during the period (0). A
provision of SEK 65m (92) was made to the deferred capital
contribution in Handelsbanken Liv.
Discontinued operations
The discontinued operations include the net amount of the
compensation Handelsbanken receives for asset management assignments
performed by the Bank on behalf of SPP/Storebrand and also the income
and expenses Handelsbanken pays/incurs for the services that the Bank
still sells to SPP.
Net profits were SEK 51m (48).
Good liquidity
During the third quarter, Handelsbanken continued to have strong
liquidity. Moreover, within 48 hours, the Bank can free up additional
liquid funds of more than SEK 250bn. During the third quarter, the
Bank continued to be a net lender in the overnight market for Swedish
kronor.
During the quarter, the Bank has regularly been able to issue covered
bonds in the Swedish market. The Bank has also had a strong flow of
deposits from households and credit institutions.
Early in 2007, the Bank decided to extend the maturity of its
funding, and this has proved to be an asset in the turbulence of the
past year. Despite the growth in lending, the proportion of
short-term funding from credit institutions has decreased by some 30%
to 20%. The decrease in funding from other credit institutions has
been replaced by long-term market funding.
The market value of the Bank's liquidity portfolio was SEK 65bn (58).
21% of this are available-for-sale assets, 2% with the purpose of
holdings to to maturity and 26% is classified as loans and
receivables. The remainder is held for trading and assets at fair
value in profit/loss.
CAPITAL-RELATED MATTERS
The capital base, including profits generated during the period, was
SEK 108,018m. The capital ratio was 15.2% according to Basel II
excluding the transitional rules, and the corresponding Tier 1 ratio
was 10.0%.
As a result of the major uncertainty which affected the market at the
end of the quarter, the Bank downgraded several of its credit ratings
for banks. This raised the capital requirement for market risks and
reduced the Tier 1 capital ratio by 0.3 percentage points.
The statutory capital requirement under fully implemented Basel II
decreases by 42% compared to the requirement in accordance with
Basel I.
Tier 1 capital, excluding the profit for the period, rose to SEK
69,320m and was SEK 70,780m including the profit for the period. SEK
9,224m of the Tier 1 capital was Tier 1 hybrid capital.
The Bank's equity increased during the period by SEK 1,842m to
71,352m (69,510).
Calculated according to the transitional regulations, the Bank's
capital ratio (including the profit for the period) was 10.3%, while
the Tier 1 capital ratio was 6.7%.
HANDELSBANKEN HAS THE MOST SATISFIED CUSTOMERS
The Swedish Quality Index/EPSI rating measures customer satisfaction
every year. The results of this year's survey published at the
beginning of October show that Handelsbanken continues to be the
major bank in Sweden with the most satisfied customers. The results
apply for both private and corporate customers.
Handelsbanken is also the major Swedish bank where customer
satisfaction has increased the most, and is the only bank to have
more satisfied corporate customers this year than in 2007.
The results for the Nordic countries published so far also rank
Handelsbanken highest in Norway and Finland in terms of customer
satisfaction for both private and corporate customers.
SALE OF NCSD
The sale of NCSD (Nordic Central Securities Depositary) to Euroclear
is expected to be completed in the fourth quarter and will result in
a tax-free capital gain of some SEK 700m for Handelsbanken.
ACQUISITION OF LOKALBANKEN COMPLETED
During the third quarter, Handelsbanken made a public bid for all the
outstanding shares in Lokalbanken i Nordsjælland A/S. On 8 October,
an extraordinary shareholders' meeting of Lokalbanken resolved to
remove the applicable restrictions in voting rights; shareholders
representing 97.7% of the share capital had accepted the offer by the
end of the bid period on 13 October. The transaction is expected to
be completed during October. The total value of the bid is DKK 750m.
RATING
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 AA-. All three agencies consider the
Bank's outlook to be stable.
ACCOUNTING INFORMATION
As a result of a previous decision to close down its trading
operations in New York, Handelsbanken has decided to reclassify parts
of its liquidity portfolio so that the classification better reflects
the purpose of the holding.
In accordance with the decision, long-term holdings of bonds that are
not listed on an active market have been reclassified as loans and
receivables. Other long-term holdings of debt instruments which the
Bank intends to hold to maturity have been reclassified to the
held-to-maturity category. In addition, assets in the trading book
have been reclassified as available-for-sale. In total, assets with a
value of SEK 28bn have been reclassified.
The reclassification is in line with the Bank's strategy to focus the
liquidity portfolio on long-term holdings of high quality and it
increases the stringency of the financial information by applying the
same principles to equivalent holdings. The part of the liquidity
portfolio that is hedged using derivatives is not affected by this
reclassification.
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)8-22 92 20, ulri02@handelsbanken.se
Mikael Hallåker, Head of Investor Relations
phone: +46 (0)8-701 2995, miha11@handelsbanken.se
The full report including tables can be downloaded from the following
link.
Handelsbanken's interim report January - September 2008 *
| Source: Svenska Handelsbanken AB
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