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Handelsbanken Pär Boman, CEO UBS 11 th Annual Nordic Financial Services Conference Grand Hotel, September 4 2008. Handelsbanken Group Agenda. Major issues addressed in the last 2.5 years Group level Growth in Branch office operations outside Sweden Swedish branch office operations - PowerPoint PPT Presentation
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HandelsbankenPär Boman, CEO
UBS 11th Annual Nordic Financial Services ConferenceGrand Hotel, September 4 2008
2
Handelsbanken Group
Agenda
Major issues addressed in the last 2.5 years Group level Growth in Branch office operations outside Sweden Swedish branch office operations
Focus looking forward
Current situation in the banking sector
3
Handelsbanken Group
Issues addressed - Group level
Improved transparency in external reporting
Reporting by segment and geography
More details to explain trends in underlying earnings
More supplementary information
More to come in the next 6 months
4
Handelsbanken Group
Issues addressed - Group level
Reduction of macro risk and earnings volatility
Sale of SPP in September 2007 for SEK 18bn
Realised gain of SEK 4.2bn
Sale of credit card-backed bond portfolio in March 2008
Realised loss of SEK 0.8bn
In total, these transactions resulted in a realised gain of SEK 3.4bn and in a
significant reduction of market risk and earnings volatility. In addition, the
sale of SPP partly facilitated the extra dividend of SEK 3.1bn in 2008
The bank’s core risk competence is to assess and assume
credit default risk. All other risks should be minimised
5
Handelsbanken Group
Issues addressed - Group level
Capital structure in Basel II
Our view: Limited potential for banks to reduce capital
First Nordic bank to get Pillar II clearance from supervisory authorities
Targeted Tier1-ratio of 9-11% in Basel II
June 30, 2008
Capital ratio, Basel II 16.1%
Tier I ratio, Basel II 10.6%
Tier I ratio target, Basel II 9 - 11%
6
Jan – Jun 2008 GB DK FIN N Other Total
Number of branches 49 40 44 46 35 214
Of which opened during the year 3 1 - - 6 10
Branch manager appointed 9 - 1 3 5 18
No. of branches which have achieved break-even
20 34 39 41 12 146
Lending growth, H1-08 / H1-07 40% 11% 13% 29% 68% 29%
Deposits growth, H1-08 / H1-07 5% 7% 7% 16% 9% 10%
28
Handelsbanken Group
Growth in Branch office operations outside Sweden
Deposits/lending in Great Britain, Denmark, Finland and Norway refers to average volumes in local currency.
The number of branches outside Sweden has grown
by 38% since Q2 2006 to 214
7
Branch office operations outside Sweden
Fastest growth in Great Britain
The operations in Great Britain is showing a positive development and the current expansion is likely to
continue
Number of branch offices in Great Britain
2225 26 26
3034
4246
49
0
10
20
30
40
50
60
Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08
+123% since Q2-06
Lending volume in Great Britain, GBP bn
1.0
2.0
3.0
4.0
5.0
Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08
GB
P b
n
+124% since Q2-06
8
0
5
10
15
20
25
30
35
40
45
Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr 11
Revenues Costs
SEK m perbranch office
Branch office operations outside Sweden
Revenues & costs – 129 branch offices opened 1995-2007
9
Handelsbanken Group
Branch office operations in Sweden
Three main areas with improvement potential were identified in 2006
Growth
Productivity
The use of new technology
10
Handelsbanken Group
Branch office operations in Sweden
Operating profit SEK4,840m
RoE18.3%
Net interest income increased by 10%
C/I ratio before loan losses 38.7%
Average volumes, bn
Loans to the public 911 (819) +11%
Deposits 276 (234) +18%
January – June 2008
11
Branch office operations in Sweden
Net interest margin – Variable rate household deposits
6065707580859095
100105110115120125130
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
0,60%
1,20%
1,80%
2,40%
3,00%
3,60%
4,20%
Average volumes Margin*
2003 2004 20062005
SEK bn
1.78%
2007
2.11%
*Customer rate compared to 1 month STIBOR
2008
2.03%
+8bp
Market share, household deposits,
increased from 16.0% in December 2007 to 16.6% in July 2008
12
0
100 000
200 000
300 000
400 000
500 000
600 000
Q1-05 Q3-05 Q1-06 Q3-06 Q1-07 Q3-07 Q1-08 Q2-08
Handelsbanken Group
Branch office operations in Sweden – Successful card business
No. of cards
January – June 2008• The no. of Allkort up by 33%, purchase volume up 35%
• The no. of Business cards up by 12%, purchase volume up 14%
• The no. of Frikort cards up by 45%
13
Branch office operations in Sweden
Turnaround in Swedish mortgage sales
16
18
20
22
24
26
28
30
32
2001 2002 2003 2004 2005 2006 2007 Jan-Jun2008
Households - share of new sales
Households - market share
% Stadshypotek
14
Branch office operations in Sweden
Productivity is improving, with more to come
Target 2006: 50% increase in time
spent with customers by 2010
Result April 2008: +34%
The impact from recent system
launches not yet in the figures
Profit / employee +5% in H1 2008
Despite C/I-ratio of 38.7% in H1, there is still scope for further improvement
Time spent with customers in Swedish branch offices
100
134120
0
25
50
75
100
125
150
2006 2007 2008
Ind
ex 2
006
= 1
00
Branch office operations in Sweden 2008* 2007
Profit before loan losses 10,434 9,941
Average number of employees 4,625 4,649
Profit / employee, SEK '000 2,256 2,138* January - June 2008 annualised
+ 118 (+5%)
15
Branch office operations in Sweden
Improved productivity through new technology
The bank is currently running 35,000 clients in a full scale test of a fully integrated internet and telephone bank
TelephoneInternet
Branch office
16
Handelsbanken Group
Focus going forward
Continue the organic international expansion with focus on the UK
Increased efforts towards Swedish large caps
Additional measures to increase market share in the savings area
17
Handelsbanken Group
The current banking environment
Not likely to ease in the near term
Significant liquidity risks in the market but poor transparency
The environment could get worse before it improves
Prudent liquidity planning will be key
18
Handelsbanken Group Prolonged funding since early 2007
Funding sources as % of total funding Jan-07 - Jul-08
0%
5%
10%
15%
20%
25%
30%
35%
jan-07 mar-07 maj-07 jul-07 sep-07 nov-07 jan-08 mar-08 maj-08 jul-08
Credit Institutions C/D Bonds Subordinated loans General Public
19
Handelsbanken Group
Cash flow planning
30 days
Existing cash should last for at least 30 days without any access to the
funding markets
90 days
Existing cash + liquidity portfolio should last for 90 days without any
access to the funding markets
360 days
Existing cash + liquidity portfolio + management actions should provide
enough liquidity to continue the bank’s business for >360 days without
any access to the funding markets
The bank’s liquidity planning and funding activity aims at
fulfilling the 30/90/360 day definitions at all times
20
0
10 000
20 000
30 000
40 000
v 2 v 4 v 6 v 8 v 10 v 12 v 14 v 16 v 18 v 20 v 22 v 24 v 26
SEK m
Handelsbanken Group
Net lending in SEK in the Swedish interbank marketJanuary – June 2008, weekly
21
Handelsbanken Group
Bad debts as a percentage of lending ,net*
* Bad debts, net = Bed debts, gross – specific reserve. (Not adjusted for collective reserve).
** Average Nordea, SEB and Swedbank.
0,00
0,10
0,20
0,30
0,40
0,50
0,60
0,70
0,80
Q1
01
Q2
01
Q3
01
Q4
01
Q1
02
Q2
02
Q3
02
Q4
02
Q1
03
Q2
03
Q3
03
Q4
03
Q1
04
Q2
04
Q3
04
Q4
04
Q1
05
Q2
05
Q3
05
Q4
05
Q1
06
Q2
06
Q3
06
Q4
06
Q1
07
Q2
07
Q3
07
Q4
07
Q1
08
Q2
08
SHB
Peers**
%
Andel osäkra fordringar, netto*Bad debt asdasgsagasgg
Increase related to the same commitmentsthat explain loan losses in the period
22
Handelsbanken