Summary
In 1995, the Handelsbanken Group increased its profit by 21% to SEK 5 billion. The result before loan losses went up by 6%. Return on shareholders’ equity after tax rose to 14.7%.

The capital ratio increased to 14.2% and the tier 1 capital ratio to 10.3%.

The Board of Directors recommends that the dividend be raised to SEK 3.75 per share and that the shares in Näckebro be distributed to the shareholders.

Increased result before and after loan losses
The Handelsbanken Group’s profit went up to SEK 4 960M (4 107). The improved result is due to higher income and lower loan losses.

The result before loan losses turned upwards, increasing by 6%.

Income went up by 9%.

Net interest income increased by 7% in spite of shrinking interest margins. This was due to a rise in the Bank’s lending volume, chiefly through significantly increased corporate lending. Net interest income was also positively affected by a decrease in bad debts.

Commission rose by 18%. International commission showed a sharp rise while investment banking commission fell slightly.

Of other income, net operating income in the Näckebro Group was SEK 444M (434).

Total expenses were up by 11%, mainly as a result of the expansion of the Bank’s Nordic operations and contractual salary increments.

Lower loan losses
Loan losses fell by 15% to SEK 2 392M or 0.8% of lending (1.0).

Bad debts fell by 42% to SEK 2 777M or 1.0% of lending (1.8).

Increased capital ratio
The Handelsbanken Group’s capital ratio went up to 14.2% (13.7). The tier 1 capital ratio increased to 10.3% (9.3).

Earnings per share and dividend
Operating profit per ordinary share after standard national tax was SEK 15.11 (12.41). Net earnings per ordinary share were SEK 17.85 (10.14).

The Board recommended a dividend on the ordinary shares, series A and B, of SEK 3.75 (3.00). 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 871.8M (700.6).

In addition, the Board proposes that the shares in Fastighets AB Näckebro be distributed to the holders of ordinary shares, which represents SEK 3 005.1M.

Distribution of Näckebro
The Board of Directors of Handelsbanken is proposing to the 1996 Annual General Meeting that all shares in the Bank’s property company, Fastighets AB Näckebro, be distributed to the Bank’s holders of ordinary shares. For shareholders in Sweden, this is possible without tax being payable, as a result of a change in the legal situation last autumn. It is expected that Näckebro will be listed on the Stockholm Stock Exchange at the end of June 1996.

The procedure and preliminary schedule appear in an appendix to this press release (see page 12). Further information will be sent to Handelsbanken’s shareholders at the beginning of April in order to assist them in the decision-making process ahead of the Annual General Meeting.

Background and reasons
Näckebro is a wholly-owned subsidiary of Handelsbanken. Since 1992, Näckebro has owned and managed properties which the Handelsbanken Group has acquired to protect its claims. The company has not acquired any properties of this kind since 1994.

For Handelsbanken, the separation of Näckebro means that the Bank can concentrate on its banking operations. Property management is not part of the core operations of a universal bank.

Näckebro will be able to structure its property stock by both buying and selling properties - as a bank-owned property company, Näckebro is not allowed to buy properties in the market.

For the shareholders, the distribution means that they will themselves be able to decide whether they want to own a property company.

Näckebro
At the year-end, Näckebro’s property stock consisted of 186 properties with a total rentable area of around 820 000 sq.m., most of them centrally-situated in Stockholm, Göteborg, Malmö and London. Properties in these locations represented 70% of total rental income during 1995 and 68% of total rentable area at the year-end. The remaining properties were situated in a total of 33 locations. Commercial premises represented 71% of total rental income during 1995 and 68% of total rentable area at the year-end.

At the end of 1995, the vacancy rate was 9.4% measured as lost rental income and 12.4% measured as a proportion of the total rentable area.

Näckebro’s property income including state interest subsidies was SEK 698M in 1995. Net operating income before depreciation was SEK 431M. Direct yield (net operating surplus including interest subsidies as a percentage of book value) was 7.1% in Sweden, 6.8% abroad and 7.0% for the whole of Näckebro. The book value of the property stock was SEK 6 448M after depreciation of SEK 93M.

Before the shares in Näckebro are distributed, the company will be given a capital injection from Handelsbanken amounting to SEK 3 000M. After this, Näckebro’s equity will be SEK 3 383M, of which around SEK 2 000M is restricted. The equity/assets ratio is nearly 50%, which gives Näckebro a good opportunity of participating actively in structural transactions in the property market. After the stock market launch, Näckebro will be one of the strongest property companies on the Stockholm Stock Exchange. A new Board will be appointed for Näckebro. The present President of Näckebro, Bo Strage, will return to Handelsbanken after a new President has been appointed.

Consequences for Handelsbanken and Näckebro
In order to clarify the consequences of the distribution for the Handelsbanken Group and Näckebro, the Bank has drawn up pro-forma profit and loss accounts for 1995 and balance sheets as at 31 December 1995 as they would have been if the distribution of Näckebro had taken place in 1995. These appear below under the heading Handelsbanken and Näckebro pro-forma 1995. With the assumptions made there, the following effects can be seen.

FOR THE HANDELSBANKEN GROUP

• Return on shareholders’ equity increases from 14.7% to 16.7%.
• Operating profit per ordinary share decreases from SEK 15.11 to SEK 14.73.
• Net earnings per ordinary share decrease from SEK 17.85 to SEK 17.30.
• Shareholders’ equity per ordinary share decreases from SEK 110.08 to SEK 95.88.
• The capital ratio decreases from 14.1% to 12.9%.
• Tier 1 capital ratio decreases from 10.3% to 9.0%.

FOR THE NÄCKEBRO GROUP

• Net earnings per share are SEK 2.75.
• Equity/assets ratio is 47.8%.
• Shareholders’ equity per share is SEK 142.00.

A forecast for Näckebro in 1996 will be given in the information material sent out before the Annual General Meeting.

Arne Mårtensson
President and Group Chief Executive

The Bank’s Annual Report will be sent to shareholders in April. The interim report for the first quarter of 1996 will be published on 22 April 1996. The Annual General Meeting of Svenska Handelsbanken will be held in Stockholm on Tuesday, 23 April 1996.

Profit and loss account
Svenska Handelsbanken Group	1995	1994	Change
	SEK M	SEK M	%
Net interest income 1)	9 904	9 273	+ 7
Commission	3 012	2 561	+ 18
Other income	786	788	-
Total operating income	13 702	12 622	+ 9
Personnel expenses	3 383	3 001	+ 13
Other expenses	2 967	2 705	+ 10
Total expenses	6 350	5 706	+ 11
Profit before loan losses	7 352	6 916	+ 6
Loan losses	2 392	2 809	- 15
Operating profit	4 960	4 107	+ 21
Minority interests	10	- 17	-
Settlement of pensions	- 72	- 85	- 15
Change in value adjustment reserve 2)	+903	- 1 217	-
Taxes	- 1 569	- 384	+ 309
Net profit	4 232	2 404	+ 76
1) Interest income	37 815	31 880	+ 19
Interest payable	27 911	22 607	+ 23
2) The remaining value adjustment reserve is SEK 314M at December 31, 1995. The calculation has taken into account the value of off-balance-sheet instruments pertaining to the investment portfolio.

Balance sheet
Svenska Handelsbanken Group	1995	1994	Change
	31 Dec	31 Dec
	SEK M	SEK M	%
Government securities and bonds	85 961	60 126	+ 43
Lending	269 536	258 185	+ 4
Banks	78 833	52 673	+ 50
Other	41 987	34 868	+ 20
Total assets	476 317	405 852	+ 17
Funding	191 675	156 105	+ 23
Deposits	203 386	184 554	+ 10
Other liabilities	42 464	30 097	+ 41
Subordinated loans	12 826	12 325	+ 4
Shareholders' equity	25 966	22 771	+ 14
Total liabilities and shareholders' equity	476 317	405 852	+ 17

Quarterly performance of the Handelsbanken Group
	1994:1	1994:2	1994:3	1994:4
	SEK M	SEK M	SEK M	SEK M
Net interest income	2 157	2 086	2 440	2 590
Commission	784	722	507	548
Other income	332	349	54	53
Total operating income	3 273	3 157	3 001	3 191
Personnel expenses	741	744	763	753
Other expenses	617	659	593	836
Total expenses	1 358	1 403	1 356	1 589
Result before loan losses	1 915	1 754	1 645	1 602
Loan losses	839	621	683	666
Operating profit	1 076	1 133	962	936
	1995:1	1995:2	1995:3	1995:4
	SEK M	SEK M	SEK M	SEK M
Net interest income	2 365	2 393	2 444	2 702
Commission	777	712	815	708
Other income	153	217	181	235
Total operating income	3 295	3 322	3 440	3 645
Personnel expenses	805	861	860	857
Other expenses	661	681	709	916
Total expenses	1 466	1 542	1 569	1 773
Result before loan losses	1 829	1 780	1 871	1 872
Loan losses	555	578	632	627
Operating profit	1 274	1 202	1 239	1 245

Key figures for the Group
	1995	1994
Return on shareholders' equity after standard national tax	14.7%	13.4%
Income/expenses (I/E ratio)
- before loan losses	2.16	2.21
- after loan losses	1.57	1.48
Operating profit per ordinary share 1), SEK	15.11	12.41
Net earnings per ordinary share, SEK	17.85	10.14
Dividend per ordinary share, SEK	3.75	3.00
1) Operating profit after deduction of minority interest and after standard national tax (28%), divided 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.

Bad debts etc
Svenska Handelsbanken Group	1995	1994
	SEK M	SEK M
Bad debts, gross	7 459	9 832
Minus reserve for possible loan losses	- 4 682	- 5 071
Bad debts, net	2 777	4 761
Reduced rate loans without a provision for possible loan losses	1 872	1 919
Total problem loans	4 649	6 680
Bad debt reserve ratio	62.8%	51.6%
Proportion of bad debts	1.0%	1.8%
Loan loss ratio	0.8%	1.0%
Non-performing loans for which interest is reported as income	602	610
Collateral taken over
- Property	6 643	6 956
- Shares	643	700
Total collateral taken over	7 286	7 656

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

LOAN LOSS RATIO
Loan losses as a percentage of the balance brought forward for lending to the general public, lending to financial institutions other than banks, leasing assets, property taken over and credit guarantees.

Profit and loss account
Svenska Handelsbanken	1995	1994	Change
	SEK M	SEK M	%
Net interest income 1)	7 463	7 588	- 2
Commission	3 559	2 607	+ 37
Other income	591	445	+ 33
Total operating income	11 613	10 640	+ 9
Personnel expenses	3 070	2 622	+ 17
Other expenses	2 682	2 419	+ 11
Total expenses	5 752	5 041	+ 14
Profit before loan losses	5 861	5 599	+ 5
Loan losses	1 672	1 900	- 12
Operating profit	4 189	3 699	+ 13
Settlement of pensions	- 72	- 78	- 8
Change in value adjustment reserve	+ 2 015	- 2 543	-
Other appropriations	- 1 476	+ 4 149	-
Taxes	- 1 174	- 1 291	- 9
Net profit	3 482	3 936	- 12
1) Interest income	29 101	23 794	+ 22
Interest payable	21 638	16 206	+ 34

Balance sheet
Svenska Handelsbanken	1995	1994	Change
	31 Dec	31 Dec
	SEK M	SEK M	%
Government securities and bonds	104 520	84 098	+ 24
Lending	177 000	170 375	+ 4
Banks	83 864	57 673	+ 45
Other	29 944	21 162	+ 42
Total assets	395 328	333 308	+ 19
Funding	148 720	122 351	+ 22
Deposits	182 777	163 148	+ 12
Other liabilities	30 268	17 661	+ 71
Subordinated loans	10 126	10 521	- 4
Untaxed reserves	4 216	3 217	+ 31
Shareholders' equity	19 221	16 410	+ 17
Total liabilities and shareholders' equity	395 328	333 308	+ 19

Handelsbanken and Näckebro pro-forma 1995

ASSUMPTIONS
The pro-forma reporting is based on the following assumptions:

* The distribution of Näckebro shares is assumed to have taken place as at 1 January 1995.

* Handelsbanken has made a capital injection of SEK 3 000M to Näckebro as at 1 January 1995. This amount has been used to pay off short-term liabilities at an assumed interest rate of 8.7% corresponding to the average cost of Näckebro’s short-term funding in Swedish kronor in 1995.

* All the adjusted internal transactions in the 1995 accounts between Handelsbanken and Näckebro have been reversed.

* From an accounting point of view, Näckebro’s properties have been reclassified as fixed assets, whereby depreciation has been made corresponding to 1% of the book value of the properties.

* Näckebro’s group contribution from Handelsbanken amounting to SEK 290M has been excluded from the pro-forma profit and loss accounts.

* In the pro-forma profit and loss accounts, the tax expense has been adjusted by 28% tax on corrections made excluding depreciation.

* Shareholders’ equity in Näckebro’s pro-forma balance sheet corresponds to shareholders’ equity in the actual balance sheet as at 31 December 1995 plus the capital injection of SEK 3 000 M. When computing the pro-forma return on shareholders’ equity, capital brought forward has been calculated as capital carried forward reduced by the pro-forma net profit for the year.

Pro-forma profit and loss accounts and balance sheets
Svenska Handelbanken Group	1995	Pro-forma after distribution
Profit and loss accounts	SEK M	SEK M
Net interest income	9 904	10 142
Commission	3 012	3 012
Other income	786	343
Total income	13 702	13 497
Personnel expenses	3 383	3 371
Other expenses	2 967	2 965
Total expenses	6 350	6 336
Result before loan losses	7 352	7 161
Loan losses	2 392	2 324
Operating profit	4 960	4 837
Appropriations etc	841	841
Taxes	- 1 569	- 1 575
Net profit	4 232	4 103
Return on shareholders' equity after standard national tax	14.7%	16.7%
Operating profit per ordinary share, SEK	15.11	14.73
Net earnings per ordinary share, SEK	17.85	17.30

Balance sheets
Svenska Handelsbanken Group	1995	Pro-forma after distribution
	31 Dec	31 Dec
	SEK M	SEK M
Government securities and bonds	85 961	85 961
Lending	269 536	272 719
Banks	78 833	78 829
Other	41 987	35 540
Total assets	476 317	473 049
Funding	191 675	191 362
Deposits	203 386	203 914
Other liabilities	42 464	42 364
Subordinated loans	12 826	12 826
Shareholders' equity	25 966	22 583
Total liabilities and shareholders' equity	476 317	473 049
Equity/assets ratio	5.5%	4.8%
Capital ratio	14.2%	12.9%
Tier 1 capital ratio	10.3%	9.0%
Shareholders' equity per ordinary share	110.08	95.88
After full conversion, the number of ordinary shares is assumed to be 238 250 390.

The Näckebro Group's pro-forma profit and loss account for 1995
	Pro-forma
	SEK M
Property income (incl. interest subsidies)	697.9
Operations, maintenance and property tax	- 216.7
Administration	- 50.1
Operating profit before depreciation	431.1
Depreciation	- 65.7
Write-downs and capital gains on property sales	- 68.3
Profit before net financial items	297.1
Net financial items	- 237.7
Profit after net financial items 1)	59.4
Taxes	6.0
The year's profit	65.4
Return on shareholders' equity
• after full tax	2.0%
• after standard national tax	1.3%
Net earnings per share, SEK	2.75
1) Näckebro’s pro-forma result has been affected by SEK 93M in respect of write-downs of property in accordance with the Swedish Financial Supervisory Authority's regulations. If Näckebro had not been owned by the Bank during 1995, the profit after net financial items would thus have been SEK 152.4 M.

The Näckebro Group's pro-forma balance sheet 31 December 1995
	Pro-forma
	SEK M
Liquid assets	261.3
Other current assets	348.0
Property	6 447.6
Other fixed assets	13.7
Total assets	7 070.6
Non interest-bearing liabilities	179.9
Interest-bearing liabilities	3 505.7
Deferred tax liability	1.8
Shareholders' equity	3 383.2
Total liabilities and shareholders' equity	7 070.6
Equity/assets ratio	47.8%
Shareholders' equity per share, SEK	142.00
The number of shares in Näckebro is assumed to be 23 825 039. Appendix to Highlights of Handelsbanken’s Annual Report for 1995.

Procedure and preliminary schedule for the proposed distribution of shares in Näckebro

PROCEDURE
For each ordinary share, a share unit in Näckebro is received. 10 share units entitle the holder to one share in Näckebro.

Over a period of a few weeks, trade in the share units can take place (see schedule). After this, the following occurs:

a. Holders of at least 200 units per securities account (VP-konto) automatically receive shares in Näckebro (at least 20).

b. Holders of less than 200 units also receive shares in Näckebro if the holder has requested this (see schedule).

c. For other holders of less than 200 share units, the units are converted to shares in Näckebro which the Bank helps to sell. The proceeds of the sale, without deduction of brokerage commission, will be paid by the Swedish Securities Register (VPC).

d. Individual share units are totalled for all holders and converted to shares in Näckebro which the Bank helps to sell. The proceeds of the sale, without deduction of brokerage commission, will be paid by the Swedish Securities Register (VPC).

All holders of share units will receive the same price in the sale by the Bank.

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