Handelsbanken Group What is unique in Handelsbanken?
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Transcript of Handelsbanken Group What is unique in Handelsbanken?
Handelsbanken
HandelsbankenA unique bank with a unique growth model
Pär Boman
UBS Annual Nordic Financial Service Conference
August 30, 2007
Handelsbanken2
Handelsbanken Group
What is unique in Handelsbanken?
The international growth model
More satisfied customers
Low costs
Low credit losses
Handelsbanken3
Jan-Jun 2007
RoE, actual tax
20.0 %
after standard tax 18.6 %
C/I ratio, before loan losses 44.1 %
Earnings per share, SEK 10:47
Moving 12-month 19:55
Capital base in relation to capital requirement* 126 %
Capital ratio* 10.0 %
Tier I ratio* 7.0 %
* According to transitional rules 2007
Handelsbanken Group
Key ratios, Jan-Jun 2007
Handelsbanken4
RoE
SEK m Q2 Q1 +/- Q2 Q1
Branch offices in Sweden 2 572 2 487 85 3% 22.5 20.6
Branch offices outside Sweden 837 648 189 29% 16.5 13.3
Capital Markets 362 279 83 30% 17.4 15.0
Asset Management 219 208 11 5% 64.7 55.1
Pension & Insurance 270 186 84 45% 21.9 7.9
Other 360 51 309 -
Operating profit 4 620 3 859 761 20%
Repurchased bonds -37 -37 0
Deferred capital contribution and hedges in Pension & Insurance
-25 83 -108
Gains on assets classified as AFS -487 0 -487
Profit sharing foundation 126 0 126
4 197 3 905 292 7%
Handelsbanken Group
Operating profit by business area, Q2 2007 vs Q1 2007
Handelsbanken5
Handelsbanken Group
Cost-effectiveness, European universal banksComparison of listed European universal banks with lending > EUR 100bn and major Nordic banks.Costs including loan losses Jan-Dec 2006.
1
2
3
4
5
690 80 70 60 50 40
C/I-ratio, %
HypoVereinsbank
Danske Bank
UBS
Société Générale
SEB
BNP Paribas
Swedbank
Deutsche Bank
DnB Nor
CommerzbankNordea
Intesa SanPaoloBBVA
ABN Amro
CS Group
Lloyds TSB
HBOSHSBC
Unicredito
Barclays
Standard Chartered
Royal Bank of Scotland
Banco Santander
Allied Irish BanksBank of Ireland
Capitalia
Bank Austria
KBC
MPS Erste
Credit Agricole SA
Q1-07 Handels-banken
Costs/Total loans* %
Source: Deutsche Bank: European Banks – Running the Numbers, January 2007-edition.* Refers to loans to the public or deposits if deposits > lending.
Handelsbanken6
1105
297
-493
13325
-83
-800
-600
-400
-200
0
200
400
600
800
1 000
1 200
1 400
Q1 Q2 Q3 Q4 Q1 Q2
DCC & HedgeSEKm
Handelsbanken Group
SPP effect on net gains/losses on financial items at fair value
Other contains hedge accounting, instruments at fair value and financial liabilities.
2006 200620062006 2007 2007
Handelsbanken7
SEK m Q2-06 Q3-06 Q4-06 Q1-07 Q2-07
Value-at-Risk 1 774 955 259 218 110
Impact of interest rate shock -100bp parallel shift
-1 886 -1 373 -30 286 144
Impact of share price -20% -2 387 -1 544 -195 -313 -97
Impact of share price +20%* 1 394 288 -88 75 -19
Handelsbanken Group
Reduced financial risks in SPP
* Excl yield split.
Handelsbanken8
-1 100
-900
-700
-500
-300
-100
100
2002 2003 2004 2005 2006 2007 Q2
SEKm
Handelsbanken Group
Improved administration result (incl. SPP Fondförsäkring)
Handelsbanken9
0
500
1 000
1 500
2 000
2 500
3 000
3 500
Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07
Premiums New contractsSEK m
* Excluding a major portfolio transfer of SEK 7.7bn.
*
Handelsbanken Group
Growth in premiums and new contracts, SPP
Handelsbanken10
No macro bets
Not focused on distribution of products
Managing customer expectations
No mass market approach – Cherry picking
Word of mouth – no campaigns
Successive increase of product assortment
Cost efficient
Applicable in all markets
Long experience
Handelsbanken Group
Handelsbanken’s unique growth model
Handelsbanken11
Handelsbanken Group
Branch operations outside Sweden
0
300
600
900
1200
2003 2004 2005 2006 2007
0
10
20
30
40
0
200
400
600
800
2003 2004 2005 2006 2007
0
10
20
30
40
0
500
1 000
1 500
2 000
2 500
2003 2004 2005 2006 2007
0
10
20
30
40
50
0
300
600
900
1200
1500
2003 2004 2005 2006 2007
0
10
20
30
40
50
Total income SEK m (left scale) Number of branches (right scale)2007* = H1 2007 x 2
CAGR 23%CAGR 32%
CAGR 11%CAGR 4%
CAGR 12%CAGR 11%
CAGR 19%CAGR 9%
* *
**
CAGR = Compound Annual Growth Rate.
Handelsbanken12
GB DK FIN N Other Total
Number of branches 30 38 43 42 17 170
Of which opened during the year 4 1 8 0 1 14
Branch manager appointed 11 - - 3 6 20
No. of branches which have achieved break-even
14 35 38 35 7 129
Earnings growth, H1/H1 52% 120% 19% 6% 91% 41%
Lending growth, H1/H1 56% 14% 16% 26% 40% 23%
Deposits growth, H1/H1 8% 5% 6% 19% 4% 8%
Handelsbanken Group
Expansion rate increases outside Sweden
Deposits and lending in GB, Denmark, Finland and Norway refer to volumes in local currency.
Handelsbanken13
SEK m
Jan-Jun
2007
Jan-Jun
2006
Change
06/07 %
Branch operations 1 485 1 052 41
Other operations 244 211 16
Total 1 729 1 263 37
Proportion of total operating profit 20% 14%
Handelsbanken Group
Operating profit from operations outside Sweden
Handelsbanken14
5055606570758085
2001 2002 2003 2004 2005 2006
50
55
60
65
70
75
80
2001 2002 2003 2004 2005 2006
Index Denmark
Handelsbanken Group
Customer satisfaction – private customers in the Nordic countries
Source: SKI, Dansk KundeIndex, EPSI Rating and EPSI Norway. In Sweden, the sector average is SEB, Nordea and Swedbank.
Index Finland
50
55
60
65
70
75
2002/2003 2004 2005 2006
Index Norway
50
55
60
65
70
75
80
2001 2002 2003 2004 2005 2006
Index Sweden
Handelsbanken Sector average, weighted
Handelsbanken15
Sweden
Corporate market – Best of the large banks
Private market – Best of the large banks
Finland
Corporate market – Best
Private market – Best
Handelsbanken Group
The most satisfied customers in the Nordic countries
Source: Svenskt Qalitetsindex, EPSI Norway, Dansk KundeIndex and EPSI Rating in Finland.
Denmark
Corporate market – 2nd place
Private market – 3rd place
Norway
Corporate market – Best
Private market – 2nd place
Handelsbanken16
0
100
200
300
400
2005 2006 2007
0,000
200,000
400,000
600,000
800,000
Monthly savings, SEKm (left scale) No of standing orders, 1 000s (right scale)
Handelsbanken Group
Increase in regular monthly savings in mutual funds
June figures: 2005 - 2007
Monthly savings
+17% p.a.
Number of standing orders
+10% p.a.
Handelsbanken17
* Mainly refers to private individuals' savings
Handelsbanken Group
Savings with Handelsbanken – volumes
SEK bn, end of period
2007 Q2
2007 Q1 +/- +/-, SEK bn
Household deposits [average volume] 117 109 7% 8
Traditional insurance 123 114 8% 9
Unit-linked insurance 67 62 8% 5
Mutual funds, incl PPM 165 152 9% 13
Equity-linked bonds etc 26 22 18% 4
Sub-total 498 459 8% 39
Directly owned shares etc, private customers 204 196 4% 8
Total savings in Sweden* 702 655 7% 47
Other asset management 112 118 -5% -6
TOTAL 814 773 5% 41
Handelsbanken18
Handelsbanken Group
Loan losses as a percentage of loans
-0,10
-0,05
0,00
0,05
0,10
0,15
0,20
0,25
0,30
0,35
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007-06-30
SHB Other Swedish banks%
Statutory capital requirement will decrease by 41% when Basel II is fully implemented.
Handelsbanken19
Handelsbanken Group
Credit risks
Handelsbanken has a unique credit granting process implying a commitment in
terms of both competence and processing times
Customers are chosen selectively
Analysis done close to customers
Cannot borrow money in Handelsbanken if not approved by the branch
High quality borrowers
Long-term customer relationships
Handelsbanken assesses business and credit risk with the objective of keeping
the credit risk in the books focusing on default risk
Handelsbanken’s business model implies investments in relationships with
customers – counter productive to sell of credits
Handelsbanken20
Handelsbanken Group
Credit risks
Handelsbanken focuses on default risk
Difficult to evaluate credit risk on the top of a business cycle
The most credit worthy borrowers are not in the market
The CDS market
Spread risk vs default risk
00,20,40,60,8
11,2
1st Qtr
Volume
Risk
t1 t2
Handelsbanken21
Handelsbanken Group
What is unique in Handelsbanken?
The international growth model
More satisfied customers
Low costs
Low credit losses