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-June 1996 increased by 17% to SEK
3 004M. The improved result is chiefly due to higher net
commission income. Net income from financial transactions
and net interest income also increased. Loan losses
continued to fall.
The result before loan losses went up by 7% to SEK 3 956M.
Return on shareholders' equity climbed to 18 .4% (15.2).
Earnings per share rose to SEK 9.70 (7.52) and as a 12-month moving total, to SEK 17.56 (13.29).
Income and expenses
Total income increased by 8%.
Net interest income rose by 2%, due to higher lending volume. The costs of the Swedish mandatory deposit guarantee, SEK 70M, have been charged to net interest income. The gap between lending and deposit rates was lower in the first half of 1996 than in the same period in 1995.
Net commission income went up by 29%, due mainly to larger volumes of stock market transactions and of corporate finance and custody operations. Since 1993, Handelsbanken has continually strengthened its trading position on the Stockholm Stock Exchange, and was the leading participant in the first and second quarters of 1996. In the second quarter, the Bank's share of turnover grew to over 16%.
The net result on financial operations rose by 34%. An unrealised appreciation in value on financial fixed assets of SEK 330M is not included to any extent in the result for the period. According to new accounting principles, banks may include, in operating profit/loss, unrealised appreciation in value on financial current assets. In connection with the transition to the new principles, the banks had the opportunity to classify bonds in the existing investment portfolio as fixed assets or current assets. Unlike other banks, Handelsbanken has not classified any part of the Swedish investment portfolio as current assets.
The fall in other operating income was due to the distribution of Näckebro.
Expenses rose by 10%, of which 3 percentage points is attributable to higher depreciation in Handelsbanken Finans' leasing operations. Increases in leasing volumes entail growing leasing assets depreciation which, since January 1st 1996 must be posted as expenses instead of under income as a deduction. The true increase in expenses was therefore 7%, of which a considerable share is attributable to the Bank's acquisitions in Finland. Apart from this, expenses rose by 4%.
In comparison with the second half of 1995, when the Finnish acquisitions are included in the figures, the Group's total expenses have fallen in 1996.
Loan losses continue to fall
Loan losses, including changes
in value on property taken over, fell by 16% to SEK 952M
or 0.6% of lending (0.8%). Bad debts went down by 38% to
SEK 2 422M or 0.8% of lending (1.4%). The volume of
collateral taken over fell to SEK 739M (7 596). 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 8.5% (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.
Stockholm, 27 August, 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.
The interim report for January-September 1996 will be published on 29 October 1996.
| Profit and loss account | |||
| Svenska Handelsbanken Group | January - June | ||
| 1996 | 1995 | Change | |
| SEK M | SEK M | % | |
 |
|||
|
|
|
|
| Interest receivable 1) | 19 966 | 19 503 | + 2 |
| Leasing income 1) | 607 | 464 | + 31 |
| Interest payable 1) | - 15 385 | - 14 988 | + 3 |
| Dividends received | 104 | 56 | + 86 |
| Commission receivable | 1 642 | 1 273 | + 29 |
| Commission payable | - 223 | - 175 | + 27 |
| Net result on financial operations | 633 | 472 | + 34 |
| Other operating income | 146 | 321 | - 55 |
|
|||
| Total income | 7 490 | 6 926 | + 8 |
General administrative expenses |
|||
| - Staff costs | 1 759 | 1 680 | + 5 |
| - Other administrative expenses | 1 140 | 1 017 | + 12 |
| Depreciation and write-down in value of tangible and intangible fixed assets 1) | 635 | 524 | + 21 2) |
|
|||
| Total expenses | 3 534 | 3 221 | + 10 3) |
Profit before loan losses |
3 956 | 3 705 | + 7 |
Net loan losses 4) |
892 | 1 136 | - 21 |
| Change in value of property taken over | 60 | - 3 | . |
|
|||
| Operating profit | 3 004 | 2 572 | + 17 |
Allocations |
|||
| - Pension provisions | + 85 | - 14 | . |
| - Other | 0 | - 6 | . |
| Tax on profit for the period | - 774 | - 770 | + 1 |
|
|||
| Net profit for the period | 2 315 | 1 782 | + 30 |
1) Net interest income |
4 717 | 4 609 | + 2 |
| 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) Increase in expenses excluding leasing depreciation amounts to 6%. |
|||
3) Increase in expenses excluding leasing depreciation amounts to 7%. |
|||
4) Actual loan losses |
1 083 | 969 | + 12 |
Write back of previous provisions for possible loan losses posted as actual losses |
- 641 | - 699 | - 8 |
| Provision for possible loan losses | 764 | 974 | - 22 |
| Recovered from actual loan losses in previous periods | - 80 | - 79 | + 1 |
| Write back of provisions for possible loan losses | - 176 | - 174 | + 1 |
| Allocation to/dissolution of reserve for claims valued as a group (incl. general reserve) | - 58 | 145 | . |
Net loan losses |
892 | 1 136 | - 21 |
|
|||
| Balance Sheet | |||
| Svenska Handelsbanken Group | 1996 | 1995 | |
| 30 June | 30 June | Change | |
| SEK M | SEK M | % | |
|
|||
|
|
|
|
| Loans to the general public | 282 305 | 268 189 | + 5 |
| Loans to the credit institutions | 160 941 | 85 472 | + 88 |
| Interest-bearing securities | |||
| - Financial fixed assets | 27 294 | 32 958 | - 17 |
| - Financial current assets | 62 461 | 44 845 | + 39 |
| Other assets | 59 956 | 64 961 | - 8 |
|
|||
| Total assets | 592 957 | 496 425 | + 19 |
Desposits and funding from the general public |
169 530 | 140 337 | + 21 |
| Liabilities to credit institutions | 194 818 | 152 996 | + 27 |
| Issued securities etc | 123 802 | 104 871 | + 18 |
| Subordinated liabilities | 12 589 | 13 811 | - 9 |
| Other liabilities | 67 470 | 60 167 | + 12 |
| Shareholders' equity | 24 748 | 24 243 | + 2 |
|
|||
| Total liabilities and shareholders' equity | 592 957 | 496 425 | + 19 |
|
|||
| Derivatives | ||||||
| 30 June 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 | 19 061 | 17 975 | 19 045 | 18 687 | 85 | 85 |
| Negative values | 23 032 | 21 085 | 20 359 | 19 660 | 35 | 35 |
|
||||||
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. |
||||||
| Bad debts etc | ||
| Svenska Handelsbanken Group | 1996 | 1995 |
| 30 June | 30 June | |
| SEK M | SEK M | |
|
||
|
|
|
| Bad debts, gross | 6 978 | 9 237 |
| Minus reserve for possible loan losses | - 4 556 | - 5 324 |
|
||
| Bad debts, net | 2 422 | 3 913 |
Reduced rate loans without a provision for possible loan losses |
1 196 | 2 080 |
|
||
| Total problem loans | 3 618 | 5 993 |
Bad debt reserve ratio |
65.3% | 57.6% |
| Proportion of bad debts | 0.8% | 1.4% |
Loan loss ratio |
0.6% | 0.8% |
Non-performing loans for which interest is reported as income |
494 | 745 |
Collateral taken over |
||
| - Property | 222 | 6 935 |
| - Shares | 517 | 661 |
|
||
| Total collateral taken over | 739 | 7 596 |
|
||
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 | |||||
| 1995:2 | 1995:3 | 1995:4 | 1996:1 | 1996:2 | |
|
|||||
|
|
|
|
|
|
| Interest receivable | 10 058 | 9 983 | 10 400 | 10 231 | 9 735 |
| Leasing income | 238 | 309 | 324 | 300 | 307 |
| Interest payable | -7 863 | -7 882 | -8 112 | -7 994 | -7 391 |
| Commission, net | 526 | 562 | 706 | 673 | 746 |
| Net result on financial operations | 227 | 438 | 279 | 411 | 222 |
| Other | 220 | 172 | 204 | 121 | 129 |
|
|||||
| Total income | 3 456 | 3 582 | 3 801 | 3 742 | 3 748 |
Staff costs |
868 | 867 | 866 | 893 | 866 |
| Other administrative expenses | 511 | 530 | 701 | 575 | 565 |
| Depreciations and write-downs | 267 | 332 | 355 | 308 | 327 |
|
|||||
| Total expenses | 1 646 | 1 729 | 1 922 | 1 776 | 1 758 |
Profit before loan losses |
1 810 | 1 853 | 1 879 | 1 966 | 1 990 |
|
|||||
| Loan losses | 578 | 631 | 628 | 449 | 503 |
|
|||||
| Operating profit | 1 232 | 1 222 | 1 251 | 1 517 | 1 487 |
|
|||||
| Net interest income | 2 243 | 2 166 | 2 355 | 2 312 | 2 405 |
|
|||||
In comparison with the interim report of March 31, 1996, a certain redistribution has been made between interest items and net result on financial operations within the respective quarterly periods. The change is due to a stricter application of the effect of hedge accounting on the consolidated accounts. |
|||||
| Financial ratios for the Group | |||
| January - June | |||
| 1996 | 1995 | ||
|
|||
|
|
|
|
| Return on shareholders' equity | 18.4% | 15.2% | |
| Capital cover ratio | 11.7% | 12.1% | |
| Tier 1 capital ratio | 8.5% | 8.3% | |
| Income/expenses (I/E ratio) | |||
| - before loan losses | 2.29 | 2.30 | |
| - after loan losses | 1.75 | 1.65 | |
| Earnings per ordinary share, SEK | 9.70 | 7.52 | |
| - July 1995-June 1996 | 17.56 | ||
| - July 1994-June 1995 | 13.29 | ||
|
|||
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 capital base, including net profit for 1996 minus standard computed 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 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. |
|||
| Profit and loss account | |||
| Svenska Handelsbanken | January - June | ||
| 1996 | 1995 | Change | |
| SEK M | SEK M | % | |
|
|||
|
|
|
|
| Interest receivable 1) | 14 300 | 14 399 | - 1 |
| Interest payable 1) | - 10 829 | - 10 820 | - |
| Dividends received | 499 | 56 | . |
| Commission receivable | 1 720 | 1 379 | + 25 |
| Commission payable | - 213 | - 175 | + 22 |
| Net result on financial operations | 614 | 473 | + 30 |
| Other operating income | 152 | 74 | + 105 |
|
|||
| Total income | 6 243 | 5 386 | + 16 |
General administrative expenses |
|||
| - Staff costs | 1 606 | 1 526 | + 5 |
| - Other administrative expenses | 1 036 | 946 | |
| Depreciation and write-down in value of tangible assets and intangible fixed assets | 425 | 110 | . |
|
|||
| Total expenses | 3 067 | 2 582 | + 19 |
Profit before loan losses |
3 176 | 2 804 | + 13 |
Net loan losses 2) |
667 | 824 | - 19 |
| Change in value of property taken over | 66 | 2 | . |
|
|||
| Operating profit | 2 443 | 1 978 | + 24 |
Allocations |
|||
| - Pension provisions | + 85 | - 14 | |
| - Other | - 458 | - 504 | |
| Tax on profit for the period | - 470 | - 439 | |
|
|||
| Net profit for the period | 1 600 | 1 021 | + 57 |
1) Net interest income |
3 471 | 3 579 | - 3 |
| The net of interest receiveable and interest payable | |||
2) Actual loan losses |
753 | 643 | + 17 |
Write back of previous provisions for possible loan losses posted as actual losses |
- 411 | - 506 | - 19 |
| Provision for possible loan losses | 538 | 717 | - 25 |
| Recovered from actual loan losses in previous periods | - 54 | - 54 | - |
| Write back of provisions for possible loan losses | - 157 | - 147 | +7 |
| Allocation to/dissolution of reserve for claims valued as a group (incl. general reserve) | - 2 | 171 | . |
Net loan losses |
667 | 824 | + 13 |
|
|||
| Balance Sheet | |||
| Svenska Handelsbanken | 1996 | 1995 | |
| 30 June | 30 June | Change | |
| SEK M | SEK M | % | |
|
|||
|
|
|
|
| Loans to the general public | 164 170 | 166 652 | - 1 |
Loans to the credit institutions |
175 274 | 111 125 | + 58 |
| Interest-bearing securities | |||
| - financial fixed assets | 46 096 | 52 413 | - 12 |
| - financial current assets | 62 318 | 44 845 | + 39 |
| Other assets | 59 328 | 59 297 | - |
|
|||
| Total assets | 507 186 | 434 332 | + 17 |
Desposits and funding from the general public |
180 379 | 154 321 | + 17 |
| Liabilities to credit institutions | 203 967 | 159 681 | + 28 |
| Issued securities etc | 29 548 | 31 396 | - 6 |
| Subordinated liabilities | 9 073 | 10 438 | - 13 |
| Other liabilities | 66 396 | 60 197 | + 10 |
| Shareholders' equity | 17 823 | 18 299 | - 3 |
|
|||
| Total liabilities and shareholders' equity | 507 186 | 434 332 | + 17 |
|
|||
Auditor's report
I have carried out a summary
examination of this interim report and in so doing have
followed the recommendation made by the Swedish Institute
of Authorized 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 requirements of the Act concerning
Exchanges and Clearing Activities and the Act concerning
Annual Reports in Credit Institutions and Securities
Companies.
Stockholm, 27 August 1996
Sigvard Heurlin
Authorized Public Accountant