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Interim Report January - June 1997
Stadshypotek has been part of the Handelsbanken Group since 26 February 1997 and is thus not included in the comparative figures for 1996.
Substantial rise in profits
The Handelsbanken Group's profits for the period January-June 1997 increased by 26% to SEK 3 776M.
Compared to the second quarter of 1996, the rise in profits for the second quarter is 38%.
Return on shareholders' equity went up to 20.5% (18.4).
Earnings per share rose to SEK 12.38 (9.70) and as a 12-month moving total to SEK 23.99 (17.56).
Income and expenses
Total income increased by 9%.
Net interest income rose by 18%. It includes the fee of SEK 151M (70) to the Swedish government for the deposit protection guarantee.
Most of the increase in net interest income is the result of higher lending volumes following the acquisition of Stadshypotek. The new Group also continued to increase total lending during the second quarter. The increase was SEK 9 bn. Excluding Stadshypotek, the spread between deposit and lending rates was mainly unchanged.
Net commission income went up by 11%, principally due to higher volumes for fund management and securities trading.
The net result on financial operations has dropped substantially, as a result of lower earnings on the Bank's interest rate related trading operations.
Expenses were 19% up, of which 13 percentage points are attributable to the acquisition of Stadshypotek. The remaining part of the increase is due to higher systems development costs, setting up new branches in the Nordic countries and also to exchange rate changes. Swedish branch office operations had unchanged expenses.
The number of employees in the Group, excluding Stadshypotek, has fallen by 159.
Loan losses continue to fall
Loan losses, including changes in value for property taken over to protect claims, fell by 75% to SEK 234M or 0.1% (0.6) of lending.
The proportion of bad debts has fallen to 0.9% (1.0) of lending. The volume of collateral taken over was SEK 7 084M (758). This increase is related to the acquisition of Stadshypotek and consists entirely of property taken over in Stadshypotek Fastigheter AB.
Capital ratio
The Handelsbanken Group's capital ratio is 9.5% (12.2 at the year-end). The decrease is explained by the acquisition of Stadshypotek and a continued increase in the volume of operations. The Tier 1 capital ratio was 5.5% (10.0 at the year-end).
Extra business with Stadshypotek's customers exceeds expectations The work of integrating Stadshypotek's operations with those of Handelsbanken has continued at a fast pace. Part of this process involves moving loans between Stadshypotek, Handelsbanken Hypotek and the Bank with the purpose of achieving the best individual solution for the customer.
In many cases, other banking business has also been moved to Handelsbanken. This extra business with new customers has been much greater than expected and during the second quarter the increase in the volume of bank loans has therefore compensated an anticipated fall in mortgage loans. This implies that the Group's share of the total Swedish lending market was more or less unchanged during the second quarter at 30.4%. Since bank loans have a higher average margin than mortgage loans, the
changed proportion has had a positive impact on the Group's net interest income.
Expanding branch office network
Handelsbanken is a Nordic universal bank. Its operations are based not only on a broad range of products but also on an extensive branch office network. This local presence and proximity to the customer offers an enhanced level of service and better knowledge of the customer's requirements. For this reason, Handelsbanken is expanding its branch office network, both in Sweden and the other Nordic countries.
So far this year, it has been decided to open six new branches in Sweden: Bålsta, Hjo, Lerum, Trosa, Söderköping and Åtvidaberg. Moreover, it has been decided to open another two branches in Denmark: Århus and Copenhagen West, two branches in Finland: Lahtis and Vanda, and two branches in Norway: Kristiansand and Tönsberg. During the same period, three Swedish branches have been closed.
Following this, the number of branches is as follows: 483 in Sweden, 3 in Denmark, 15 in Norway and 12 in Finland.
Stockholm, 19 August 1997
Arne Mårtensson
President and Group Chief Executive
Auditor's report
I have carried out a summary examination of this interim report, and in so doing have followed the recommendation of the Swedish Institute of Authorised Public Accountants. A summary examination is considerably limited in comparison with a full audit. There is nothing to indicate that the interim report does not fulfil the regulations of the Act governing Securities Exchanges and Clearing Operations and the Annual Accounts Act for Credit Institutions and Securities Companies.
Stockholm, 19 August 1997
Sigvard Heurlin
Authorised Public Accountant |
Profit and loss account
Svenska Handelsbanken Group |
| January - June |
| 1997
SEK M | 1996
SEK M | Change
% |
Interest income | 27 611 | 19 940 | + 38 |
Interest expense | - 22 224 | - 15 385 | + 44 |
Net interest income | 5 387 | 4 555 | + 18 |
Dividends received | 146 | 104 | + 40 |
Commission income | 1 896 | 1 642 | + 15 |
Commission expense | - 314 | - 223 | + 41 |
Net commission income | 1 582 | 1 419 | + 11 |
Net result on financial operations Note 1 | 233 | 795 | - 71 |
Other operating income | 311 | 146 | + 113 |
Total income | 7 659 | 7 019 | + 9 |
|
General administrative expenses |
- Staff costs | 2 015 | 1 759 | + 15 |
- Other administrative expenses | 1 373 | 1 140 | + 20 |
Depreciation and write-down in value of
tangible and intangible fixed assets | 261 | 164 | + 59 |
|
Total expenses | 3 649 | 3 063 | + 19 |
Profit before loan losses | 4 010 | 3 956 | + 1 |
|
Net loan losses Note 2 | 229 | 892 | - 74 |
Change in value of property taken over | 5 | 60 | - 92 |
|
Operating profit | 3 776 | 3 004 | + 26 |
Minority interests | - 8 | - | - |
Appropriations |
- Pension provisions | 278 | 85 | + 227 |
Tax on profit for the period | - 1 089 | - 774 | + 41 |
|
Net profit for the period | 2 957 | 2 315 | + 28 |
|
Note 1 Net result on financial operations |
Shares and participations | 61 | 295 |
Interest-bearing securities | - 44 | 556 |
Realised profit | 17 | 851 |
Shares and participations | - 22 | - 234 |
Interest-bearing securities | - 184 | 10 |
Unrealised changes in value | - 206 | - 224 |
Foreign exchange earnings | 422 | 168 |
Net result on financial operations
| 233 | 795 |
Note 2 Loan losses
| 1997
30 june
SEK M | 1996
30 june
SEK M |
A. Individually valued claims: |
The period's write-down for actual loan losses | 764 | 1 044 |
Write-back of previous provisions for possible loan losses which are reported as actual loan losses in the period's accounts | - 572 | - 611 |
The period's write-down relating to possible loan losses | 459 | 753 |
Recovered from actual losses in previous years | - 111 | - 69 |
Write-back of provisions for
possible losses which are no longer necessary | - 257 | - 194 |
Net expense for the period for individually
valued loan losses | 283 | 923 |
B. Claims valued as a group: |
The period's write down for actual loan losses | 20 | 39 |
Recovered from actual losses in previous years | - 7 | - 5 |
Allocation to/dissolution of reserve for loan losses | - 5 | - 58 |
Net expense for the period for loan losses valued as a group | 8 | - 24 |
C. Provisions to general reserve for country risks: | - 62 | - 7 |
Total loan losses (A+B+C) | 229 | 892 |
|
Balance sheet
Svenska Handelsbanken Group |
| 1997
30 June
SEK M | 1996
31 Dec
SEK M | 1996
30 June
SEK M |
|
Lending to the general public | 579 523 | 277 810 | 282 264 |
Lending to credit institutions | 150 885 | 119 166 | 160 852 |
Interest-bearing securities |
- Financial fixed assets | 13 354 | 21 191 | 27 294 |
- Financial current assets | 74 834 | 86 774 | 62 461 |
Other assets | 94 207 | 66 182 | 59 956 |
|
Total assets | 912 803 | 571 123 | 592 827 |
Deposits and funding from the general public | 198 603 | 167 507 | 169 530 |
Liabilities to credit institutions | 305 351 | 170 974 | 194 818 |
Issued securities etc | 265 178 | 129 284 | 123 802 |
Subordinated liabilities | 23 647 | 12 302 | 12 589 |
Other liabilities | 90 696 | 63 499 | 67 340 |
Shareholders' equity | 29 328 | 27 557 | 24 748 |
|
Total liabilities and shareholders' equity | 912 803 | 571 123 | 592 827 |
Bad debts etc |
|
Svenska Handelsbanken Group
|
| 1997
30 June
SEK M | 1996
30 June
SEK M |
|
Bad debts | 12 365 | 7 438 |
Reserve for possible loan losses | - 7 232 | - 4 556 |
Bad debts, net | 5 133 | 2 882 |
Reduced rate loans without a provision for possible loan losses | 325 | 1 196 |
|
Total problem loans | 5 458 | 4 078 |
Bad debt reserve ratio | 58.5% | 61.3% |
Proportion of bad debts | 0.9% | 1.0% |
Problem loans before write-down for
possible loan losses | 12 690 | 8 634 |
Loan loss ratio | 0.1% | 0.6% |
Non-performing loans for which interest is accrued | 2 948 | 494 |
Collateral taken over: |
- Property | 6 676 | 222 |
- Shares | 380 | 517 |
- Other | 28 | 19 |
Total collateral taken over | 7 084 | 758 |
|
Derivatives
30 June 1997, SEK M |
| Interest-rate related | Currency-related | Equity-related |
| Market
value | Book
value | Market
value | Book
value | Market
value | Book
value |
|
Positive values | 19 771 | 17 636 | 38 888 | 36 491 | 33 | 33 |
Negative values | 26 913 | 23 826 | 37 443 | 35 493 | 307 | 307 |
The above table is compiled in accordance with the Swedish Financial Supervisory Authority's regulations and includes all derivative instruments in the Group. For derivative instruments which are part of trading operations, the book value is the same as the market value. The differences between market value and book value reported in the table correspond to the reversed differences between market value and book value in that part of the Group's operations which is subject to hedge accounting.
Quarterly performance of Svenska Handelsbanken Group
|
SEK M | 1996:2 | 1996:3 | 1996:4 | 1997:1 | 1997:2 |
|
Net interest income | 2 325 | 2 341 | 2 484 | 2 593 | 2 794 |
Commission, net | 746 | 554 | 655 | 797 | 785 |
Net result on financial
operations | 303 | 369 | 980 | 20 | 213 |
Other | 128 | 41 | 106 | 165 | 292 |
|
Total income | 3 502 | 3 305 | 4 225 | 3 575 | 4 084 |
Staff costs | 866 | 849 | 869 | 978 | 1 037 |
Other administrative
expenses | 565 | 515 | 582 | 629 | 744 |
Depreciation and write-downs | 81 | 70 | 76 | 105 | 156 |
|
Total expenses | 1 512 | 1 434 | 1 527 | 1 712 | 1 937 |
Profit before loan losses | 1 990 | 1 871 | 2 698 | 1 863 | 2 147 |
Loan losses | 503 | 355 | 499 | 136 | 98 |
Operating profit
| 1 487 | 1 516 | 2 199 | 1 727 | 2 049 |
Financial ratios for the Group |
| | January - June |
| | 1997 | 1996 |
|
Return on shareholders' equity | 20.5% | 18.4% |
Capital ratio | 9.5% | 11.7% |
Tier 1 capital ratio | 5.5% | 8.5% |
Income/expenses (I/E ratio) | |
- before loan losses | 2.10 | 2.29 |
- after loan losses | 1.97 | 1.75 |
Earnings per ordinary share, SEK | 12.38 | 9.70 |
- July 1996-June 1997 | 23.99 |
- July 1995-june 1996 | 17.56 |
|
Return on shareholders' equity is calculated on the net result for the period in relation to average shareholders' equity.
Capital cover computed as the capital base, including the net profit for the period with deduction of a notional amount for recommended dividend, as a percentage of risk-weighted capital.
Earnings per ordinary share are determined by dividing the net profit for the year after appropriations and tax by the number of ordinary shares. An adjustment has been made to take into account preference shares, index shares and full conversion of convertible subordinated notes.
Profit and loss account
Parent Company |
| January - June |
| 1997
SEK M | 1996
SEK M | Change
% |
Interest income | 13 931 | 14 143 | - 1 |
Interest expense | - 10 857 | - 10 834 | . |
Net interest income | 3 074 | 3 309 | - 7 |
Dividends received | 163 | 499 | - 67 |
Commission income | 1 858 | 1 720 | + 8 |
Commission expense | - 295 | - 213 | + 38 |
Net commission income | 1 563 | 1 507 | + 4 |
Net result on financial operations
Note 1 | 217 | 776 | - 72 |
Other operating income
Note 2 | 1 945 | 152 | |
|
Total income | 6 962 | 6 243 | + 12 |
General administrative expenses |
- Staff costs | 1 701 | 1 606 | + 6 |
- Other administrative expenses | 1 120 | 1 036 | + 8 |
Depreciation and write-down in value of tangible and intangible fixed assets | 131 | 425 | - 69 |
|
Total expenses | 2 952 | 3 067 | - 4 |
Profit before loan losses | 4 010 | 3 176 | + 26 |
Net loan losses Note 3 | 64 | 667 | - 90 |
Change in value of property taken over | - | 66 | . |
Operating profit | 3 946 | 2 443 | + 62 |
Appropriations |
- Pension provisions | 278 | 85 | + 227 |
- Other | - 321 | - 458 | - 30 |
Tax on profit for the period | - 527 | - 470 | + 12 |
Net profit for the period | 3 376 | 1 600 | + 111 |
|
Note 1 Net result on financial operations |
Shares and participations | 59 | 292 |
Interest-bearing securities | - 41 | 553 |
Realised profit | 18 | 845 |
Shares and participations | - 35 | - 235 |
Interest-bearing securities | - 184 | 4 |
Unrealised changes in value | - 219 | - 231 |
Foreign exchange earnings | 418 | 162 |
Net result on financial operations | 217 | 776 |
Note 2 Other operating income |
This includes capital gains of SEK 1 796 M in connection with the sale of Handelsbanken Hypotek to Stadshypotek. This amount is eliminated in the consolidated accounts. |
Note 3 Loan losses | 1997
30 June
SEK M | 1996
30 June
SEK M |
A. Individually valued claims: |
The period's write-down for actual loan losses | 351 | 750 |
Write-back of previous provisions for possible loan losses which are reported as actual loan losses in the period's accounts | - 308 | - 411 |
The period's write-down relating to possible loan losses | 269 | 538 |
Recovered from actual losses in previous years | - 63 | - 48 |
Write-back of provisions for possible losses which are no longer necessary | - 124 | - 156 |
Net expense for the period for individually valued loan losses | 125 | 673 |
B. Claims valued as a group: |
The period's write down
for actual loan losses | 2 | 3 |
Recovered from actual losses in previous years | 0 | 0 |
Allocation to/dissolution of reserve for loan losses | - 1 | - 2 |
Net expense for the period for loan losses valued as a group | 1 | 1 |
C. Provisions to general reserve for country risks: | - 62 | - 7 |
Total loan losses (A+B+C) | 64 | 667 | |
Balance sheet
|
| 1997
30 June
SEK M | 1996
31 Dec
SEK M | 1996
30 June
SEK M |
|
Lending to the general public | 193 922 | 160 451 | 164 130 |
Lending to credit institutions | 180 536 | 133 517 | 175 186 |
Interest-bearing securities |
- Financial fixed assets | 27 678 | 35 636 | 46 096 |
- Financial current assets | 75 075 | 86 626 | 62 318 |
Other assets | 94 499 | 66 908 | 59 327 |
|
Total assets | 571 710 | 483 138 | 507 057 |
Deposits and funding from the general public | 211 685 | 175 827 | 180 378 |
Liabilities to credit institutions | 185 146 | 177 362 | 203 967 |
Issued securities etc | 56 506 | 38 264 | 29 548 |
Subordinated liabilities | 15 518 | 8 934 | 9 073 |
Other liabilities | 74 647 | 57 033 | 61 597 |
Untaxed reserves | 5 619 | 5 298 | 4 671 |
Shareholders' equity | 22 589 | 20 420 | 17 823 |
|
Total liabilities and shareholders' equity | 571 710 | 483 138 | 507 057 |
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