New accounting principles apply for credit institutions as of 1996. The most important changes were detailed in the March 31 interim report. Comparative figures and financial ratios have been converted in accordance with the new principles.
Sharp rise in profits
The Handelsbanken Group's profit
for the period January-September 1996 increased by 19% to
SEK 4 520M. The improved result is chiefly due to higher
net interest income and net commission income. Loan
losses continued to fall.
The result before loan losses went up by 5% to SEK 5 827M.
Return on shareholders' equity rose to 18.4% (15.1).
Earnings per share increased to SEK 14.57 (11.39) and as a 12-month moving total, to SEK 18.56 (14.74).
Income and expenses
Total income increased by 5%.
Net interest income rose by 6%, mainly due to higher volumes of deposits and lending. The costs of the Swedish mandatory deposit guarantee, SEK 105M, have been charged to net interest income.
Net commission income went up by 19% compared to the previous year, due mainly to larger volumes of stock market transactions and of corporate finance and custody operations.
The net result on financial operations was unchanged. An unrealised appreciation in value of the bond portfolio amounting to just over SEK 600M is not included to any extent in the result for the period. This is because Handelsbanken, unlike other Swedish banks, has not classified any part of the old investment portfolio as a current asset.
The fall in other operating income is due to the distribution of Näckebro.
Expenses rose by 5%, of which 2 percentage points is attributable to higher depreciation in Handelsbanken Finans' leasing operations. Increases in leasing volumes entail higher leasing assets depreciation which, since 1 January 1996, must be posted as expenses instead of under income as a deduction. The true increase in expenses was therefore 3%. A large proportion of this is attributable to the Bank's acquisitions in Finland.
Since 1 January 1996, the number of employees in Sweden has decreased by 217 and the Group's total expenses have fallen each quarter.
Loan losses continue to fall
Loan losses, including changes
in value of property taken over, fell by 26% to SEK
1 307M or 0.6% of lending (0.8%). Bad debts went down by
28% to SEK 2 639M or 0.9% of lending (1.3%). The volume
of collateral taken over fell to SEK 677M (7 425). The
decrease was due to the distribution of Näckebro.
Capital ratio
The Handelsbanken Group's
capital ratio remains high at 11.7% (14.2% at year-end).
Tier 1 capital ratio was 8.7% (10.3% at year-end). This
change is due to the distribution of Näckebro, the
introduction of capital adequacy requirements to cover
market risks and increased operating volume.
Continued Nordic expansion
During the third quarter the Bank
opened more branches in the Nordic countries. Operations
in Denmark, which previously focused on the corporate
market, have been expanded to include full-range private
banking services by the opening of a new branch in
Copenhagen. In Finland, the Bank has started branches in
Tornio and Jakobstad (Pietarsaari), and in Norway, a
branch in Skårer outside Oslo.
The Bank has also decided to open a representative office in Warsaw.
Stockholm, 29 October 1996
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 | January - September | ||
| 1996 | 1995 | Change | |
| SEK M | SEK M | % |
|
 |
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|
|
|
|
| Interest receivable 1) | 29 622 | 29 486 | - |
| Leasing income 1) | 895 | 773 | + 16 |
| Interest payable 1) | - 22 666 | - 22 870 | - 1 |
| Dividents received | 105 | 56 | + 88 |
| Commission receivable 2) | 2 303 | 1 930 | + 19 |
| Commission payable 2) | - 330 | - 270 | + 22 |
| Net result on financial operations | 906 | 910 | - |
| Other operating income | 186 | 493 | - 62 |
|
|||
| Total income | 11 021 | 10 508 | + 5 |
General administrative expenses |
|||
| - Staff costs | 2 608 | 2 547 | + 2 |
| - Other administrative expenses | 1 655 | 1 547 | + 7 |
| Depreciation and write-down in value of tangible and intangible fixed assets 1) | 931 | 856 | + 9 |
|
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| Total expenses 3) | 5 194 | 4 950 | + 5 |
Profit before loan losses |
5 827 | 5 558 | + 5 |
Net loan losses 4) |
1 241 | 1 770 | - 30 |
| Change in value of property taken over | 66 | - 6 | . |
Operating profit |
4 520 | 3 794 | + 19 |
| Allocations | |||
| - Pension provisions | 131 | - 27 | |
| - Other | 0 | 2 | . |
| Tax on profit for the period | - 1 172 | - 1 070 | + 10 |
Net profit for the period |
3 479 | 2 699 | + 29 |
1) Net interest income |
7 154 | 6 775 | + 6 |
| 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 |
1 973 | 1 660 | + 19 |
3) Increase in expenses excluding leasing deprication amounts to 3% |
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4) Actual loan losses |
1 667 | 1 523 | 9% |
Write back of previous provisions for possible loan losses posted as actual losses |
- 955 | - 1 009 | - 5% |
| Provision for possible loan losses | 976 | 1 440 | - 32% |
| Recovered from actual loan losses | - 111 | - 122 | - 9% |
| Write back of provisions for possible loan losses | - 278 | - 201 | 38% |
| Allocation to/dissolution of reserve for claims valued as a group (incl. general reserve) | - 58 | + 139 | . |
Net loan losses |
1 241 | 1 770 | - 30% |
|
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| Balance Sheet | |||
| Svenska Handelsbanken Group | 1996 | 1995 | |
| 30 Sept | 30 Sept | Change | |
| SEK M | SEK M | % | |
|
|||
|
|
|
|
| Loans to the general public | 282 588 | 269 333 | + 5 |
Loans to the credit institutions |
138 068 | 106 701 | + 29 |
| Interest-bearing securities | |||
| Financial fixed assets | 30 783 | 34 879 | - 12 |
| Financial current assets | 62 740 | 48 669 | + 29 |
| Other assets | 50 100 | 61 992 | - 19 |
|
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| Total assets | 564 279 | 521 574 | + 8 |
Desposits and funding from the general public |
168 120 | 141 944 | + 18 |
| Liabilities to credit institutions | 167 453 | 160 829 | + 4 |
| Issued securities etc | 129 275 | 120 137 | + 8 |
| Subordinated liabilities | 12 253 | 13 772 | - 11 |
| Other liabilities | 61 268 | 60 199 | + 2 |
| Shareholders' equity | 25 910 | 24 693 | + 5 |
|
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| Total liabilities and shareholders' equity | 564 279 | 521 574 | + 8 |
|
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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 |
|
|
||||||
|
|
|
|
|
|
|
| Positive values | 22 819 | 21 247 | 15 262 | 14 995 | 47 | 47 |
| Negative values | 27 740 | 25 096 | 16 414 | 16 118 | 12 | 12 |
|
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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 Sept | 30 Sept | |
| SEK M | SEK M | |
|
||
|
|
|
| Bad debts, gross | 7 099 | 9 096 |
| Minus reserve for possible loan losses | - 4 460 | - 5 451 |
Bad debts, net |
2 639 | 3 645 |
Reduced rate loans without a provision for possible loan losses |
967 | 2 018 |
|
||
| Total problem loans | 3 606 | 5 663 |
Bad debt reserve ratio |
62.8% | 59.9% |
| Proportion of bad debts | 0.9% | 1.3% |
Loan loss ratio |
0.6% | 0.8% |
Non-performing loans for which interest is reported as income |
574 | 727 |
Collateral taken over |
||
| - Property | 176 | 6 784 |
| - Shares | 501 | 641 |
|
||
| Total collateral taken over | 677 | 7 425 |
|
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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 | |||||
| 1995:3 | 1995:4 | 1996:1 | 1996:2 | 1996:3 | |
|
|||||
|
|
|
|
|
|
| Interest receivable | 9 983 | 10 400 | 10 231 | 9 735 | 9 656 |
| Leasing income | 309 | 324 | 300 | 307 | 288 |
| Interest payable | -7 882 | -8 112 | -7 994 | -7 391 | -7 281 |
| Commission, net | 562 | 706 | 673 | 746 | 554 |
| Net result of financial operations |
438 | 279 | 411 | 222 | 273 |
| Other | 172 | 204 | 121 | 129 | 41 |
|
|||||
| Total income | 3 582 | 3 801 | 3 742 | 3 748 | 3 531 |
Personnel expenses |
867 | 866 | 893 | 866 | 849 |
| Other administrative expenses |
530 | 701 | 575 | 565 | 515 |
| Depreciations and write-downs | 332 | 355 | 308 | 327 | 296 |
|
|||||
| Total expenses | 1 729 | 1 922 | 1 776 | 1 758 | 1 660 |
Profit before loan losses |
1 853 | 1 879 | 1 966 | 1 990 | 1 871 |
Loan losses |
631 | 628 | 449 | 503 | 355 |
Operating profit |
1 222 | 1 251 | 1 517 | 1 487 | 1 516 |
Net interest income |
2 166 | 2 355 | 2 312 | 2 405 | 2 437 |
|
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| Financial ratios for the Group | |||
| January - September | |||
| 1996 | 1995 | ||
|
|||
|
|
|
|
| Return on shareholders' equity | 18.4% | 15.1% | |
| Capital cover ratio | 11.7% | 12.1% | |
| Tier 1 capital ratio | 8.7% | 8.4% | |
| Income/expenses (I/E ratio) | |||
| - before loan losses | 2.30 | 2.28 | |
| - after loan losses | 1.78 | 1.62 | |
| Earnings per ordinary share, SEK | 14.57 | 11.39 | |
| - October 1995-September 1996 | 18.56 | ||
| - October 1994-September 1995 | 14.74 | ||
|
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Return on shareholders' equity is calculated on the net result for the period in relation to average shareholders' equity. |
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Capital cover ratio for 1996 computed as capital base, including net profit at 30 June 1996 minus standard computed dividend, as a percentage of risk-weighted capital. |
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When computing the income/expenses ratio (I/E ratio), income and expenses are adjusted by depreciation of leasing assets according to plan. |
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Earnings per ordinary share are determined by dividing the net profit for the period 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. |
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This interim report has not been examined by the Bank's auditors.