Highlights of Annual Report 1994

Summary

  • The Handelsbanken Group's profit for 1994 went up to SEK 4.1 billion.
  • Loan losses were down by 59% and bad debts by 42%.
  • Return on shareholders' equity after tax increased to 13.7%
  • Capital cover rose to 13.7% and tier 1 capital ratio to 9.3%
  • Recommended dividend up to SEK 3.00 per share.

Sharp increase in profits
The Handelsbanken Group's profit went up to SEK 4 107M (724) 1). This increase was mainly due to a steep drop in loan losses.

Net interest income rose in spite of a shrinking margin between lending and deposit rates. Total lending volume fell slightly due to a continued drop in foreign currency lending volume. On the other hand, Swedish kronor lending volume started to rise during the second half of the year. At year-end, it was 6% higher than at the beginning of the year. The volume of bad debts decreased, which had a favourable effect on net interest income. International commission dropped sharply while investment banking commission showed a substantial increase. Other income included net operating income of SEK 423M (310) from the Näckebro Property Group.

Total expenses rose by 5%, because of contractual salary increments and the expansion of the Bank's Nordic operations.

The profit before loan losses fell by 8%.

1) Figure for comparison recalculated due to changed accounting principle.

Loan losses down 59%
Loan losses fell by 59% to SEK 2 809M or 0.96% of lending (2.20).

Bad debts were down by 42% to SEK 4 761M or 1.9% of lending (3.1).

Collateral taken over
The Näckebro Group's acquisition of properties has practically ceased. During the year, Näckebro acquired property worth SEK 359M and sold for SEK 187M. The book value of holdings at December 31, 1994 was SEK 6 862M. Direct yield was 7.3% in Sweden, 6.0% outside Sweden and 6.8% for the whole of Näckebro.

The Handelsbanken Group's holdings of shares taken over to protect claims fell from SEK 2 191M to SEK 700M. AB Handel och Industri's share holdings, which are included in the above, dropped from SEK 1 394M to SEK 486M.

Capital cover up to 13.7%
The Handelsbanken Group's capital cover rose to 13.7% (12.6). Tier 1 capital ratio was 9.3% (8.4).

Earnings and dividend per share
The operating profit per ordinary share after standard national tax was SEK 12.41 (2.44). Net earnings per ordinary share were SEK 10.14 (4.00).

The Board recommends a dividend on the ordinary shares, series A and B, of SEK 3.00 (2.00). Dividend on the index shares which in accordance with the Bank's Articles of Association follows the consumer price index will be SEK 0.80 (0.75). In accordance with the Articles of Association, dividend on the preference shares will be SEK 0.45 for series A and SEK 0.60 for series B shares.

The recommended dividend represents SEK 700.6M (469.7M).

Stockholm, February 21, 1995

Arne Mårtensson
President and Group Chief Executive

Key figures for the Group
  1994 1993
Return on equity after standard national tax
(28% 1994, 30% 1993)
13.7% 2.8%
Income/expenses (I/E ratio)
- before loan losses 2.18 2.35
- after loan losses 1.47 1.06
Operating profit per ordinary share, SEK 1) 12.41 2.44
Net earnings per ordinary share, SEK 1) 10.14 4.00
Dividend per ordinary share 3.00 2.00

1) After full conversion of convertible subordinated notes.

The Bank's Annual Report will be sent to shareholders in April.

The interim report for the first quarter of 1995 will be published on April 25, 1995.

The Annual General Meeting of Svenska Handelsbanken will be held in Stockholm on Wednesday, April 26, 1995.

Profit and loss account
Svenska Handelsbanken Group
  1994 1993*) change 1993 according
to
previous
accounting
principle
  SEK M SEK M % SEK M
Net interest income 1) 9 273 9 028 + 3 9 917
Commission 2 561 2 830 -10 2 804
Other income 937 1 237 -24 1 425
Total income 12 771 13 095 -2 14 146
Personnel expenses 3 001 2 846 +5 2 820
Other expenses 2 854 2 724 +5 2 724
Total expenses 5 855 5 570 +5 5 544

Result before loan losses 6 916 7 525 -8 8 602
Loan losses 2 809 6 801 -59 6 801
Net operating profit 4 107 724 +467 1 801
Appropriations -1 319 +452   +452
Taxes -384 -247 -549
Net profit 2 404 929 1 704

1) Interest income
31 880 35 296 36 185
Interest expenses 22 607 26 268 26 268

*) Recalculated in accordance with the changed accounting principles.

Balance sheet
Svenska Handelsbanken Group     1993 according
to
previous
accounting
  1994 1993*) principle
  31 Dec 31 Dec Change
  SEK M SEK M % SEK M
Government securities and bonds 60 721 63 239 -4 64 316
Lending 255 963 263 569 -3 263 569
Banks 48 101 30 884 +56 30 884
Other 34 867 41 497 -16 41 497
Total assets 399 652 399 189 +0 400 266
Funding 151 951 164 773 -8 164 773
Deposits 182 508 171 213 +7 171 213
Other liabilities 30 097 31 043 -3 31 345
Subordinated loans 12 325 11 358 +9 11 358
Shareholders' equity 22 771 20 802 +9 21 577
Total liabilities and shareholders' equity 399 652 399 189 +0 400 266

Lending includes lending to the general public and financial institutions other than banks as well as leasing assets.

The book value of the investment portfolio is the same as its market value at year-end. A write-down of SEK 1 217M has been made and this is reported as an appropriation.

*) Recalculated in accordance with the changed accounting principles.

Bad debts etc
Svenska Handelsbanken Group 1994 1993
  SEK M SEK M
Bad debts, gross 9 832 15 080
(non-performing loans for which interest is not reported as income until payment is received + reduced rate loans with a provision for possible loan losses)
Minus reserve for possible loan losses -5 071 -6 876
Bad debts, net 4 761 8 204
Reduced rate loans without a provision for possible loan losses 1 919 1 502
Total problem loans 6 680 9 706
Bad debt reserve ratio 51.6% 45.6%
Proportion of bad debts 1.9% 3.1%
Non-performing loans for which interest is reported as income 610 1 821
Collateral taken over:
- Property 6 956 7 005
- Shares 700 2 191

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 DEBTS 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, lending to financial institutions (excl. banks) and leasing assets.

LOANS LOSS RATIO
Loan losses in relation to balance brought forward for lending to the general public, lending to financial institutions (excl. banks), and leasing assets, property taken over and credit guarantees.

Changed accounting principles
The Swedish Financial Supervisory Authority has stated in a directive which is to apply from January 1, 1995, that intra-Group bonds in the investment portfolio must be eliminated in the Consolidated Accounts, i.e. be reported net. For this reason, the Bank has departed from the principle where such bonds are reported gross in interim reports during 1994 and has returned to reporting them net as in previous years. Furthermore, as from 1994, in accordance with international practice, the difference which arises on elimination between the book value of intra-Group bonds and the book value of the corresponding liabilities is entered as income/expense. This means that the impact on earnings affects net interest income.

As from 1994, in accordance with the directives of the Financial Supervisory Authority, surpluses/deficits on acquired coupon instruments included in the investment portfolio are distributed on a straight-line basis until maturity. In previous years, surpluses/ deficits were entered as income/expense on sale/maturity. In accordance with Recommendation No. 5 from the Swedish Financial Accounting Standards Board, the comparative figures for 1993 have been recalculated on the basis of the new accounting principles. Certain minor reclassifications have been made. The figures for 1993 have been revised accordingly.

Back


Copyright 1997 © Svenska Handelsbanken