Summary
In 1996, the Handelsbanken
Group increased its profit by 33% to SEK 6.7 bn.
The result before loan losses went up by 15%.
Expenses were unchanged.
Return on shareholders' equity after tax rose to 19.8%.
The capital ratio decreased to 12.2% as a result of the distribution of the Bank's property company, Näckebro and the holding of Stadshypotek shares.
The Board of Directors recommends that the dividend be raised to SEK 5.00 (3.75) per share.
Purchase of Stadshypotek finalised - Handelsbanken has over 98%.
Increased result
before and after loan losses
The Handelsbanken Group's
profit rose by 33% to SEK 6 719M (5 045). The improved
result is due to higher income, unchanged expenses and
lower loan losses.
The result before loan losses went up by 15%.
Income and expenses
Income rose by 8%.
Net interest income increased by 8% in spite of a shrinking interest spread. The improvement is due to increased volumes. Net interest income has been charged with the costs of the mandatory deposit guarantee amounting to SEK 139M.
Net commission income was up by 11%, due mainly to larger volumes in both equity trading and custody operations.
The net result on financial operations went up by 34% to SEK 2 114M. In preparation for the acquisition of Stadshypotek - in accordance with the Swedish Financial Supervisory Authority's regulations - parts of the bond portfolio have been reclassified as a current asset. The impact on the result is SEK 621M. These securities were sold in January 1997. This action made the Swedish banks' results more comparable - other banks had already classified parts of their previous investment portfolios as current assets at the beginning of the year.
The fall in other operating income is due to the distribution of Näckebro.
Expenses, excluding leasing assets depreciation, were unchanged.
Personnel expenses rose by 2%, mainly as a result of contractual salary increments and the Bank's Nordic expansion. The average number of employees was unchanged, with a decrease in Sweden and an increase in the other Nordic countries.
Other administrative expenses, excluding leasing assets depreciation, fell by 1%.
Lower loan losses
Loan losses, including changes
in value, fell by 25% to SEK 1 799M or 0.6% of lending
(0.8).
Bad debts decreased by 27% to SEK 2 195M or 0.8% of lending (1.1).
Capital ratio still
high
Tier 1 capital ratio fell to
10.0% (10.3) due to the distribution of Näckebro and the
new capital adequacy requirement for market risks. The
capital ratio, which was also affected by the holding of
Stadshypotek shares, dropped to 12.2% (14.2).
Earnings per share and
dividend
Net earnings per ordinary share
were SEK 21.32 (15.38).
The Board recommends a dividend on the ordinary shares, series A and B, of SEK 5.00 (3.75). The dividend on the index shares, which according to the Bank's Articles of Association is to follow the consumer price index, will be SEK 0.80 (0.80). In accordance with the Articles of Association, the dividend on preference shares will be SEK 0.45 on series A and SEK 0.60 on series B.
The recommended dividend represents SEK 1 207.6M (871.8 plus 3 005.1 in respect of Näckebro).
Purchase of
Stadshypotek finalised - over 98%
On 12 December 1996,
Handelsbanken made a bid for all the shares in
Stadshypotek AB. The application period for the offer
closed on 14 February 1997. The counting of the outcome
has not yet been completed but as previously announced,
Handelsbanken will own over 98% of the shares.
Handelsbanken will thus carry out the acquisition.
The outcome exceeds all expectations. Of 465 000 minor shareholders in Stadshypotek, with 13.7% of the shares, 444 000 or 96% have replied. 96% of these have accepted the offer.
All public authorities concerned have accepted the acquisition.
Stockholm 18 February 1997
Arne Mårtensson
President and Group Chief Executive
For further information please contact Mr Arne Mårtensson, President and Group Chief Executive, or Mr Sven Grevelius, Executive Vice President and Head of Central Control and Accounting Department, tel: +46 8 22 92 20.
| Profit and loss account | |||
| Svenska Handelsbanken Group | 1996 | 1995 | Change |
| SEK M | SEK M | % | |
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| Interest receivable 1) | 39 942 | 39 886 | - |
| Leasing income 1) | 1 227 | 1 097 | + 12 |
| Interest payable 1) | - 30 798 | - 31 368 | - 2 |
| Dividends received | 107 | 65 | + 65 |
| Commission receivable 2) | 3 294 | 2 770 | + 19 |
| Commission payable 2) | - 666 | - 404 | + 65 |
| Net result on financial operations 5) | 2 114 | 1 574 | + 34 |
| Other operating income | 290 | 689 | - 58 |
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| Total income | 15 510 | 14 309 | + 8 |
General administrative expenses |
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| - Staff costs | 3 477 | 3 413 | + 2 |
| - Other administrative expenses | 2 237 | 2 248 | - |
| Depreciation and write-down in value of tangible and intangible fixed assets 1) | 1 278 | 1 211 | + 6 |
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| Total expenses 3) | 6 992 | 6 872 | + 2 |
Profit before loan losses |
8 518 | 7 437 | + 15 |
Net loan losses 4) |
1 710 | 2 297 | - 26 |
| Change in value of property taken over | 89 | 95 | - 6 |
| Operating profit | 6 719 | 5 045 | + 33 |
Allocations |
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| - Pension provisions | 201 | - 72 | - |
| - Other | - 1 | 10 | - |
| Tax on profit for the period | - 1 829 | - 1 340 | + 36 |
| Net profit for the period | 5 090 | 3 643 | + 40 |
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1) Net interest income |
9 410 | 8 744 | + 8 |
| The net of interest receivable, leasing income and interest payable, with deduction of depreciation according to plan for leasing assets (part of the item Depreciation and write-down in value of tangible and intangible fixed assets). | |||
2) Net commission income |
2 628 | 2 366 | + 11 |
3) Expenses are unchanged excluding leasing assets |
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4) Actual loan losses |
2 499 | 2 709 | - 8 |
| Write back of previous provisions for possible loan losses posted as actual losses | - 1 471 | - 1 554 | - 5 |
| Provision for possible loan losses | 1 244 | 1 576 | - 21 |
| Recovered from actual loan losses in previous periods | - 132 | - 151 | - 13 |
| Write back of provisions for possible loan losses | - 350 | - 369 | - 5 |
| Allocation to/dissolution of reserve for claims valued as a group (incl. general reserve) | - 80 | + 86 | - |
| Net loan losses | 1 710 | 2 297 | - 26 |
5) For 1996, SEK 621M is included which arose due to a reclassification during the fourth quarter. See note 1) in the Group's balance sheet. |
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| Balance Sheet | |||
| Svenska Handelsbanken Group | 1996 | 1995 | |
| 31 Dec | 31 Dec | Change | |
| SEK M | SEK M | % | |
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| Loans to the general public | 272 753 | 255 237 | + 7 |
| Loans to credit institutions | 119 166 | 92 286 | + 29 |
Interest-bearing securities 1) |
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| Financial fixed assets | 21 191 | 21 928 | - 3 |
| Financial current assets | 86 774 | 65 830 | + 32 |
| Other assets | 71 239 | 71 273 | - |
| Total assets | 571 123 | 506 554 | + 13 |
Desposits and funding from the general public |
167 507 | 137 452 | + 22 |
| Liabilities to credit institutions | 170 974 | 143 646 | + 19 |
| Issued securities etc | 129 284 | 120 741 | + 7 |
| Subordinated liabilities | 12 302 | 12 826 | - 4 |
| Other liabilities | 63 499 | 65 934 | - 4 |
| Shareholders' equity | 27 557 | 25 955 | + 6 |
| Total liabilities and shareholders' equity | 571 123 | 506 554 | + 13 |
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1) During 1996 interest-bearing securities with a book value of SEK 16 bn have been reclassified from financial fixed assets to financial current assets. These securities were sold in January 1997. The reason for the reclassification was the planned acquisition of Stadshypotek. |
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| Derivatives | ||||||
| 30 September 1996, SEK M | ||||||
| Interest-rate related | Exchange-rate related | Equity-price related | ||||
| Market value |
Book value |
Market value |
Book value |
Market value |
Book value |
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| Positive values | 26 751 | 25 009 | 20 657 | 20 365 | 76 | 76 |
| Negative values | 32 042 | 28 477 | 20 142 | 19 774 | 243 | 243 |
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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. |
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| Bad debts etc | ||
| Svenska Handelsbanken Group | 1996 | 1995 |
| 30 Dec | 30 Dec | |
| SEK M | SEK M | |
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| Bad debts, gross | 6 312 | 7 671 |
| Minus reserve for possible loan losses | - 4 117 | - 4 682 |
| Bad debts, net | 2 195 | 2 989 |
Reduced rate loans without a provision for possible loan losses |
357 | 1 872 |
| Total problem loans | 2 552 | 4 861 |
Bad debt reserve ratio |
65.2% | 61.0% |
| Proportion of bad debts | 0.76% | 1.11% |
Loan loss ratio |
0.6% | 0.8% |
Non-performing loans for which interest is reported as income |
884 | 602 |
Collateral taken over |
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| - Property | 69 | 6 643 |
| - Shares | 390 | 643 |
| Total collateral taken over | 459 | 7 286 |
Definitions
NON-PERFORMING LOANS
Loans where interest,
repayments or overdrafts have been due for payment for
more than 60 days.
BAD DEBTS
A non-performing loan, or a
loan where other circumstances lead to doubt concerning
its value and where the value of the collateral does not
cover the principal amount and the accrued interest by a
satisfactory margin.
REDUCED RATE LOANS
Loans for which the interest
rate has been reduced relative to market rates.
PROBLEM LOANS
The total of net bad debts and
reduced rate loans.
BAD DEBT RESERVE RATIO
Reserve for possible loan
losses in relation to gross bad debts.
PROPORTION OF BAD DEBTS
Net bad debts in relation to
total lending to the general public and credit
institutions (excl. banks) as well as leasing assets.
LOAN LOSS RATIO
Loan losses and changes in
value of property taken over as a percentage of the
balance brought forward for lending to the general
public, credit institutions (excl. banks) as well as
property taken over and credit guarantees.
| Quarterly performance of Svenska Handelsbanken Group SEK M | |||||
| 1995:4 | 1996:1 | 1996:2 | 1996:3 | 1996:4 | |
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| Interest receivable | 10 400 | 10 150 | 9 654 | 9 575 | 10 563 |
| Leasing income | 324 | 300 | 307 | 288 | 332 |
| Interest payable | -8 112 | -7 994 | -7 391 | -7 281 | - 8 132 |
| Commission, net | 706 | 673 | 746 | 554 | 655 |
| Net result on financial operations | 279 | 492 | 303 | 354 | 965 |
| Other | 204 | 121 | 129 | 41 | 106 |
| Total income | 3 801 | 3 742 | 3 748 | 3 531 | 4 489 |
Personnel expenses |
866 | 893 | 866 | 849 | 869 |
| Other administrative expenses | 701 | 575 | 565 | 515 | 582 |
| Depreciation and write-downs | 355 | 308 | 327 | 296 | 347 |
| Total expenses | 1 922 | 1 776 | 1 758 | 1 660 | 1 798 |
Profit before loan losses |
1 879 | 1 966 | 1 990 | 1 871 | 2 691 |
Loan losses |
628 | 449 | 503 | 355 | 492 |
| Operating profit | 1 251 | 1 517 | 1 487 | 1 516 | 2 199 |
Net interest income |
2 355 | 2 231 | 2 324 | 2 356 | 2 499 |
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Compared to previous information provided during 1996, the effect of distributing premiums/discounts over time in the trading portfolio has led to minor adjustments in the allocation between interest receivable and the net result on financial operations. |
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| Financial ratios for the Group | ||
| 1996 | 1995 | |
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| Return on shareholders' equity | 19.8% | 14.9% |
| Capital cover ratio | 12.2% | 14.2% |
| Tier 1 capital ratio | 10.0% | 10.3% |
| Income/expenses (I/E ratio) | ||
| - before loan losses | 2.41 | 2.24 |
| - after loan losses | 1.86 | 1.60 |
| Earnings per ordinary share, SEK | 21.32 | 15.38 |
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Return on shareholders' equity is calculated on the net result for the period in relation to average shareholders' equity.
Capital cover ratio for 1996 computed as the capital base, including the net profit for the year with a deduction for recommended dividend, as a percentage of risk-weighted capital.
When computing the income/expenses ratio (I/E ratio), income and expenses are adjusted by depreciation of leasing assets according to plan.
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.