handelsbanken’s interim reportmb.cision.com/main/3555/9344791/73853.pdf · taxes -1 028 -1 358...

PRESS RELEASE 23 APRIL 2007

Handelsbanken’s interim report JANUARY – MARCH 2007

Summary January–March 2007 compared with January–March 2006

Operating profit was SEK 3.9bn (5.0)

Return on equity was 17.1% (26.4)

Earnings per share were SEK 4.48 (6.32)

Income totalled SEK 6.9bn (8.2)

The C/I ratio was 45.2% (39.7)

Profits after tax were SEK 2.8bn (4.1)

The Bank’s statutory capital requirement calculated according to the basic

model for internal risk classification will be reduced by 41% when the Basel II

rules are fully implemented

Summary of first quarter 2007 compared with fourth quarter 2006

Operating profit was SEK 3.9bn (5.0)

Net interest income rose by 3%

The profits from Swedish branch office operations increased by 8% to SEK

2.5bn (2.3)

Operating profit in the branch office operations outside Sweden increased by

22% to SEK 648m (533)

Branch office lending volumes outside Sweden increased by over 8%

The Bank repurchased 5.9 million shares

INTERIM REPORT JANUARY-MARCH 2007

2 Handelsbanken

HANDELSBANKEN GROUP – OVERVIEW

Q 1 Q 4 Change Q 1 Change Jan-Mar Jan-Mar Change Full year

2007 2006 % 2006 % 2007 2006 % 2006

Summary income statement, SEK m

Net interest income 3 853 3 726 3 3 784 2 3 853 3 784 2 14 972

Net fee and commission income 12 213 2 749 -19 2 342 -6 2 213 2 342 -6 8 956

Net gains/losses on financial items at fair value 1

678 1 607 -58 1 837 -63 678 1 837 -63 4 537

Other income 169 265 -36 226 -25 169 226 -25 1 094

Total income 6 913 8 347 -17 8 189 -16 6 913 8 189 -16 29 559

Staff costs -1 844 -1 988 -7 -2 041 -10 -1 844 -2 041 -10 -7 714

Other administrative expenses -1 281 -1 272 1 -1 211 6 -1 281 -1 211 6 -4 737

Total expenses -3 125 -3 260 -4 -3 252 -4 -3 125 -3 252 -4 -12 451

Profit before loan losses 3 788 5 087 -26 4 937 -23 3 788 4 937 -23 17 108

Loan losses/recoveries 70 -55 79 -11 70 79 -11 55

Gains/losses on disposal of property and equipmentand intangible assets 1 0 0 1 0 1

Operating profit 3 859 5 032 -23 5 016 -23 3 859 5 016 -23 17 164

Taxes -1 028 -1 358 -24 -887 16 -1 028 -887 16 -4 036

Profit for the period 2 831 3 674 -23 4 129 -31 2 831 4 129 -31 13 128

Summary balance sheet, SEK m

Loans to the public 1 146 964 1 100 538 1 016 103 1 146 964 1 016 103 1 100 538of which mortgage loans 488 513 480 219 452 976 488 513 452 976 480 219

Deposits and borrowing fromthe public 523 137 533 885 530 273 523 137 530 273 533 885

of which households 167 783 158 759 148 042 167 783 148 042 158 759

Shareholders' equity 68 870 66 226 65 002 68 870 65 002 66 226

Total assets 1 908 340 1 790 008 1 796 954 1 908 340 1 796 954 1 790 008

Key figures

Return on equity, after actual tax 217,1% 23,2% 26,4% 17,1% 26,4% 20,9%

Return on equity, after standard tax 16,8% 22,9% 23,1% 16,8% 23,1% 19,7%

C/I ratio 45,2% 39,0% 39,7% 45,2% 39,7% 42,1%

Earnings per share, SEK 34,48 5,79 6,32 4,48 6,32 20,41

Dividend, SEK 8,00

Adjusted equity per share, SEK 109,41 104,27 100,09 109,41 100,09 104,27

Average number of outstandingshares 632 301 795 634 209 462 653 186 368 632 301 795 653 186 368 643 284 311

Capital ratio according to

transitional rules 2007 4 9,9%

Capital ratio according to


Tier 1 ratio according to


Tier 1 ratio according to


Capital base in relation to

capital requirement Basel II 5 206%

Capital base in relation to

capital requirement Basel I 5 121%Capital base in relation to capital

requirement - trans rules 2007 5 128%

Average number of employees 10 455 10 270 9 956 10 455 9 956 10 163Number of branches in Sweden 458 457 455 458 455 457

Number of branches outsideSweden 161 158 145 161 145 158

1 From 1 January 2007, the full yield split from the insurance operations is reported under Insurance in Net fee and commission income. The full year 2006 has therefore been adjusted by SEK –274m in Net fee and commission income and SEK +274m in Net gains/losses on financial items at fair value.

2 When calculating return on equity, shareholders’ equity is adjusted for the impact of unrealised changes in the value of financial assets classified as “Available for Sale” and for cash flow hedges. When calculating equity per share, shareholders’ equity is adjusted for the impact of cash flow hedges.3 No dilution.

5 Including profit generated during the period. See page 27 Capital base and capital requirement4 Excluding profit generated during the period. See page 27 Capital base and capital requirement


Handelsbanken 3

The Group Q1 2007 compared with Q4 2006 Operating profit SEK 3.9bn The operating profit was SEK 3,859m (5,032). The overall profit

from the Bank’s branch operations, inside and outside Sweden,

rose by SEK 301m or almost 11%. The decline in the Bank‘s

operating profit was mainly due to the fact that the Bank realised

value changes on assets available for sale in the previous quar-

ter, and to a decreased profit in the insurance operations. Ex-

penses were SEK 3,125m (3,260), a decrease of 4%.

Return on equity was 17.1% (23.2). The C/I ratio was 45.2%

(39.0). Earnings per share were SEK 4.48 (5.79).

Net interest income increased Net interest income increased by 3% and totalled SEK 3,853m

(3,726). Volume increases in lending compensated for poorer

margins and in general both deposit margins and volumes

continued to increase. In Sweden, the average volume of lending

rose by 2.6% and in the branch operations outside Sweden, the

increase was 8.3%.

Net fee and commission income was SEK 2,213m (2,749), a

decrease of SEK 536m or 19%. The Bank has never before had

such high income in one quarter from brokerage and fund and

custody operations. The decrease was mainly due to a lower

yield split in the insurance operations. The yield split – the in-

come which the Bank receives when the yield to the policyhold-

ers exceeds the guaranteed level – decreased by SEK 401m to

SEK 117m.

Net gains/losses on financial items at fair value were SEK 678m

(1,607), a decrease of 58%. The decrease was partly due to a

lower writeback for the deferred capital contribution in the insur-

ance operations – SEK 216m – and also that in the previous

quarter the Bank had income of SEK 733m from realised value

changes on assets available for sale.

Income totalled SEK 6,913m (8,347) a decrease of 17%. This

was partly due to a decrease in the value change in the deferred

capital contribution in SPP; that the Bank during the fourth

quarter of 2006 realised value changes related to assets avail-

able for sale and also to a decrease in the yield split in the insur-

ance operations.

Expenses decreased Expenses decreased by 4% to SEK 3,125m (3,260). The de-

crease is mainly because staff costs were SEK 144m lower,

which in turn was due to a lower provision for performance-

related remuneration. The Bank made no provision to the Ok-

togonen profit-sharing foundation. Other administrative costs

were SEK 1,281m (1,272). The costs for expansion were mainly

unchanged. The number of employees rose to 10,500 (10,320).

Recoveries exceeded loan losses

Recoveries exceeded the period’s gross loan losses and net

recoveries totalled SEK 70m (-55). The loan loss ratio was

SEK -0.02% (-0.01). Net bad debts were SEK 937m, an in-

crease from SEK 876m. The proportion of bad debts was

0.07% (0.07) of lending.

Q1 2007 compared with Q1 2006

Profits decreased by 23% to SEK 3,859m (5,016). This was

entirely due to the fact that last year the Bank could write back

the change in value of the previously underfunded insurance

contracts, which reduced the deferred capital contribution.

Expenses fell by 4% and totalled SEK 3,125m (3,252). Return on

equity went down from 26.4% to 17.1%. The C/I ratio was

45.2% (39.7).

Increased net interest income and lower expenses The comparison with the same period last year is similar to that

between the quarters. Income fell by 16% and the whole de-

crease was because net gains/losses on items at fair value were

lower. This was partly because the Bank realised assets avail-

able for sale at the beginning of last year for an amount of SEK

159m and also due to a change in the deferred capital contribu-

tion in SPP by SEK 1,105m.

Net interest income went up by SEK 69m or 2%. The rate of

increase was negatively impacted by SEK 98m due to the re-

purchases the Bank made in connection with the transition to

IFRS. Excluding this the rate of increase would have been over

4%. In the Swedish branch operations, net interest income grew

mainly due to significantly improved deposit margins and outside

Sweden, the increase in volume boosted the net interest in-

come. The average volume of lending in Sweden rose by 11%,

while in the branch operations outside Sweden it increased by

nearly 24%.

Commissions fell by SEK 129m, which was mainly due to a

lower yield split in the insurance operations. This was partly

compensated for by higher fund and custody commissions. The

yield split fell from SEK 284m to SEK 117m.

Expenses decreased by 4% from SEK 3,252m. Staff costs fell

by SEK 197m which also in this comparison was due to a fall in

performance-related remuneration. Other administrative costs

grew by 7% from SEK 1,068m to SEK 1,144m, mainly due to

higher external IT costs.

Recoveries exceeded the period’s gross loan losses and net

recoveries totalled SEK 70m (79). The loan loss ratio was

-0.02% (-0.03). Bad debts fell from SEK 1,441m to SEK 937m.

The proportion of bad debts fell from 0.13% of lending to

0.07%.


4 Handelsbanken

Handelsbanken expands outside Sweden The Bank has decided to step up the pace of its organic growth

outside Sweden. The aim is to open 30-40 branches this year in

the branch operations outside Sweden. Three new branches

were opened during the period: St Petersburg in Russia, and

Mikkeli and Espoo Matinkylä in Finland.

A total of 25% of the Bank’s lending to the public is in the

branch operations outside Sweden and almost 40% of the

increase between the years has been outside Sweden. The

corresponding increase between the quarters was 50%.

Handelsbanken in Great Britain was noticed when the Bank

came 11th in the Sunday Times’ annual awards for Best Em-

ployer. A total of 650 companies participated in the group where

the Bank was represented. This boosts the Bank’s image in

Great Britain and should make it even easier to recruit the best

employees for its rapidly expanding operations.

Higher business volumes Business volumes grew significantly in practically all parts of the

Bank. In total the average volume of lending in the Group rose

by 14% during the last 12 months. Outside Sweden, the in-

crease was 23%. In local currency, lending in the non-Swedish

regional banks rose by between 13% and 63%. The highest rate

of increase was in Great Britain.

The average mutual fund volume grew by 15% to SEK 221bn

(193) and the assets managed at Handelsbanken Pensions &

Insurance rose by 9% to SEK 176bn (162).

Capital ratio Starting on 1 February 2007, the Bank reports the capital re-

quirement and capital base in accordance with the Basel II rules.

Calculated according to the transitional rules, the Bank’s capital

ratio was 10.2%, while the Tier 1 capital ratio was 7.0%. If no

transitional rules had applied, the statutory capital requirement

would have been reduced by 41% compared with the require-

ment in accordance with Basel I. However, the transitional rules

stipulate that banks are only allowed to include 5% as a reduc-

tion in the first year.

The main change in the capital requirement applies to credit

risks. To calculate these, the Bank has elected to use an internal

risk classification method called IRB, where there are two differ-

ent approaches: a basic model and a more advanced model.

Handelsbanken uses the advanced method for household

exposures in Sweden and the basic method for corporate expo-

sures in Sweden and Norway. However, the Bank intends to

change over to the advanced IRB method for corporate expo-

sures during 2010. It is expected that this will further reduce the

statutory capital requirement.

Buybacks and rating Since the 2006 AGM, the Bank has repurchased 20.7 million

shares, of which 5.9 million during the quarter. The number of

outstanding shares was subsequently 628.3 million. The board

is proposing to the 2007 AGM to cancel the repurchased

shares. At the AGM, there will also be a proposal from the board

for a new repurchase programme for a maximum of 40 million

shares.

On condition that the board’s proposal regarding dividend is

accepted by the AGM, the Bank will have transferred 72% of the

profit for 2006, or SEK 9.4bn, to the shareholders.

Handelsbanken’s rating was unchanged with all three rating agencies which rate the Bank. Moody’s rating for the Bank was Aa1 and from Fitch and Standard & Poor’s it was AA-.

Pär Boman President and Group Chief Executive


Handelsbanken 5

Segment information

The branch office segment has been split into two segments: Branch office operations in Sweden and Branch office

operations outside Sweden. As part of the Bank’s increased focus on both its investment banking operations and its

international expansion, Handelsbanken Markets was split into two parts on 1 January 2007. Handelsbanken Capital

Markets continues to run the Bank’s investment banking operations, but now as a separate business segment. Handels-

banken International, which now belongs to the segment called Branch office operations outside Sweden, consists of

three units: International, Financial Institutions and Cash Management and Payments.

Branch

Branch offices

offices in outside Capital Asset Pensions & Other Elimina- Jan-Mar Jan-Mar

SEK m Sweden Sweden Markets Mgmt Insurance operations tions 2007 2006

Net interest income 2 830 950 94 40 66 -123 -4 3 853 3 784

Net fee and commission income 879 306 307 301 440 -20 2 213 2 342

Net gains/losses on financial

items at fair value 222 125 323 5 -58 61 678 1 837

Risk result - insurance 50 50 49

Other income 46 128 156 33 36 922 -1 202 119 177

Total income 3 977 1 509 880 379 534 840 -1 206 6 913 8 189

Total expenses -1 530 -877 -604 -172 -351 -797 1 206 -3 125 -3 252

Profit before loan losses 2 447 632 276 207 183 43 3 788 4 937

Loan losses/recoveries 54 16 - - 70 79

Gains/losses on disposal of

property and equipment and

intangible assets 1 0 - - - 1 0

Operating profit 2 502 648 276 207 183 43 3 859 5 016

Return on equity, % 20,8 13,3 14,9 54,8 7,3 17,1 26,4

Average number of employees 4 559 2 230 900 373 624 1 769 10 455 9 956

Internal income and expenses are included in the respective item on the income statement. Internal income consists of payment for services rendered according to the cost price principle. Expenses also include the distribution of costs made internally within the Group for services from business support operations.

The Other operations business segment includes Treasury and the Central Head Office departments. It also includes capital gains/losses, dividends, and income and expenses that are not attributable to a specific business segment.

Return on shareholders' equity for the business segments is computed after standard tax while for the whole Group and for Pensions & Insurance, it is computed after actual tax. The shareholders' equity, on which calculation of return on equity is based, corresponds to the assessment of the Group’s overall capital requirement.


6 Handelsbanken

Branch office operations in Sweden

Branch office operations in Sweden comprise seven regional banks and Handelsbanken Finans’ operations in Sweden.

At Handelsbanken, the branches are the base of all operations and they co-ordinate services for all customers, including

major corporations. The regional banks are responsible for their own profits and pursue the goal of providing universal

banking services with a higher service level and at lower cost than comparable banks. Handelsbanken Finans has a full

range of finance company services. Handelsbanken Finans works through the Bank’s branches and in financing collabo-

rations with retailers and vendors.

INCOME STATEMENT


SEK m 2007 2006 % 2006 % 2007 2006 % 2006


Net fee and commission income 879 903 -3 859 2 879 859 2 3 316


items at fair value 222 199 12 207 7 222 207 7 880

Other income 46 33 39 105 -56 46 105 -56 213

Total income 3 977 3 912 2 4 000 -1 3 977 4 000 -1 15 545

Total expenses -1 530 -1 555 -2 -1 450 6 -1 530 -1 450 6 -5 796

Profit before loan losses 2 447 2 357 4 2 550 -4 2 447 2 550 -4 9 749



property and equipment

and intangible assets 1 0 100 0 100 1 0 100 0

Operating profit 2 502 2 316 8 2 628 -5 2 502 2 628 -5 9 882

Return on equity, % 20,8 18,9 20,5 20,8 20,5 19,3

Average number of employees 4 559 4 484 2 4 415 3 4 559 4 415 3 4 500

BRANCH OFFICE OPERATIONS IN SWEDEN Branch office operations in Sweden comprise seven regional banks with a total of 458 branches (457) and the Swedish op-eration of Handelsbanken Finans. During the quarter, a new branch was opened in Vadstena.

Q1 2007 compared with Q4 2006 Earnings performance The profits from Swedish branch office operations increased by 8% to SEK 2,502m (2,316). Income increased and expenses were lower.

Net interest income rose by 2% to SEK 2,830m (2,777). Net commission income fell by SEK 24m, mainly due to lower card and payment commissions.

Business development The quarter was characterised by a continued increase in lend-ing, with pressure on margins especially for mortgages to households. At the same time, deposit margins continued to improve. The average volume of lending to the public increased at an annual rate of approximately 11%, while corporate lending increased at a somewhat lower rate.

Increase in volumes compensated for the deteriorating mar-gins and deposit margins improved on variable rate deposits from households. Deposit margins rose by 8bp, while the aver-age margin on the mortgage loan portfolio decreased by 1bp to 70bp.

Q1 2007 compared with Q1 2006 Operating profit decreased by 5% to SEK 2,502m (2,628). Net interest income was unchanged, but it was negatively affected by the bond repurchases the Bank made in connection with the transition to IFRS. This was SEK 98m and net interest income would have increased by over 3% excluding this effect. Ex-penses rose by 6% to SEK 1,530m (1,450). The increase in expenses is mainly attributable to higher staff costs.

The average volume of lending rose by 11% to households and companies. Deposit margins were 33bp higher.

New sales of Handelsbanken Finans’ products increased by nearly 59% to SEK 8.8bn. The average total credit volume, which is included in the volume of branch operations, was SEK 48.7bn – an increase of 15%.

Since October 2006, Handelsbanken has offered customers the opportunity to open savings account products using its online services.


Handelsbanken 7

Business volumes, Sweden

Q1 Q4 Change Q1

Average volumes, SEK bn 2007 2006 % 2006

Deposits and borrowing from the public

Household 111 112 -1 96

Corporate 172 178 -3 162

Total 283 290 -2 258

Loans to the public*

Household 395 384 3 356

of which mortgage loans 342 332 3 306

Corporate 452 441 2 408

of which mortgage loans 142 142 0 142

Total 847 825 3 764

* excl. loans to the National Debt Office


8 Handelsbanken

Branch office operations outside Sweden

Branch office operations outside Sweden comprise the regional banks in Great Britain, Denmark, Finland and Norway,

i.e. the countries which, together with Sweden are regarded as the Bank’s domestic markets. The branch operations in

these countries are run according to the same concept as in Sweden – to provide universal banking services with a

higher service level and at lower cost than comparable banks. This business area also includes Handelsbanken Interna-

tional, which is responsible for branch operations outside the Bank’s domestic markets and also trade, export and pro-

ject finance. Handelsbanken International also includes cash management and payments, which is the Bank’s central

function for development and sales support for payment products. Handelsbanken Finans’ operations outside Sweden

are also part of this business area.

INCOME STATEMENT


SEK m 2007 2006 % 2006 % 2007 2006 % 2006

Net interest income 950 897 6 811 17 950 811 17 3 484

Net fee and commission income 306 287 7 291 5 306 291 5 1 116


items at fair value 125 136 -8 105 19 125 105 19 366

Other income 128 131 -2 114 12 128 114 12 468

Total income 1 509 1 451 4 1 321 14 1 509 1 321 14 5 434

Total expenses -877 -904 -3 -782 12 -877 -782 12 -3 300

Profit before loan losses 632 547 16 539 17 632 539 17 2 134

Loan losses/recoveries 16 -14 1 16 1 -78


property and equipment

and intangible assets 0 0 0 0 0 0 0 0 0

Operating profit 648 533 22 540 20 648 540 20 2 056

Return on equity, % 13,3 13,6 15,4 13,3 15,4 13,8

Average number of employees 2 230 2 149 4 1 941 15 2 230 1 941 15 2 062

BRANCH OFFICE OPERATIONS OUTSIDE SWEDEN

Q1 2007 compared with Q4 2006 Earnings performance Operating profit increased by 22% to SEK 648m (533). The earnings improvement was greatest in Great Britain and Finland. In Great Britain, profits rose 61% or SEK 25m, while in Finland the increase was 40% or SEK 43m.

Profits before loan losses were up 16% from the previous quarter. Net interest income rose by 6% to SEK 950m (897). The increase stemmed mainly from operations in Great Britain and Handelsbanken International.

Business development Handelsbanken had a total of 161 (158) branches outside Swe-den. Of these, 143 (141) were in the Nordic region outside Sweden and in Great Britain. During the first quarter, two new branches were opened in Finland, and the representative office in St. Petersburg became a branch of the Bank.

In Q1, the average volume of lending in the non-Swedish re-gional banks rose by 7% to SEK 253bn (236). In total, the aver-age volume of lending to the public outside Sweden amounted to SEK 280bn.

Deposits from the public in the non-Swedish regional banks rose by 10%, and the average volume in the first quarter was SEK 109bn (99).

Q1 2007 compared with Q1 2006 Earnings performance Operating profit increased by 20% to SEK 648m (540). The earnings improvement was largest in Great Britain and Finland. In Great Britain, profits rose by 74% or SEK 28m, while in Finland the increase was 41% or SEK 44m.

Net interest income rose by 17% to SEK 950m (811). The increase stemmed mainly from Great Britain and Finland.

Over the past 12 months, the average volume of lending in the non-Swedish regional banks has risen by 21% to SEK 253bn (209). The corresponding increase in deposits from the public was 17%, to a total of SEK 109bn (93).


Handelsbanken 9

BRANCH OFFICE OPERATIONS IN GREAT BRITAIN

Q1 2007 compared with Q4 2006 Earnings performance Operating profit improved by 61% to SEK 66m (41). Business volumes continued to grow, in newly opened as well as estab-lished branches, and income rose by 14%. Expenses were basically unchanged.

The number of employees grew in step with the expansion, amounting to 280 staff (267).

Business development The average volume of lending rose by 11% to GBP 3,152m (2,845), with corporate lending growing more rapidly than lend-ing to households.

The number of branches was unchanged at 26, but manag-ers have been recruited for six new branches in Brighton, Pre-ston, Doncaster, Bath, Stockton-on-Tees and Exeter. These

branches will open during the second and third quarters. Further branches are planned, for which recruitment is under way.

For the first time, Handelsbanken in Great Britain took part in the annual “Best Companies to Work For” competition organ-ised by the Sunday Times. Among the 650 companies compet-ing in the ‘small and medium sized’ category, Handelsbanken achieved 11th place. This should make it even easier to attract the top talents in the UK banking sector to Handelsbanken’s rapidly growing British operations.

Q1 2007 compared with Q1 2006 Earnings performance Operating profit increased by 74% to SEK 66m (38). Income grew by 46%, due to increasing volumes in newly opened as well as established branches.

Expenses increased by 35%. The work force increased by 24%.

Branch office operations in Great Britain

Q 1 Q 4 Jan-Mar Jan-Mar Full year

SEK m 2007 2006 2007 2006 2006

Net interest income 138 122 138 93 437

Net fee and commission income 27 21 27 22 89


items at fair value 17 11 17 8 30

Other income 8 12 8 7 35

Total income 190 166 190 130 591

Total expenses -124 -125 -124 -92 -419

Loan losses/recoveries - 0 - - -20

Operating profit 66 41 66 38 152

Business volumes, Great Britain

Q1 Q4 Change Q1

Average volumes, GBP bn 2007 2006 % 2006


Household 148 129 15 86

Corporate 1 236 1 044 18 1 076

Total 1 384 1 173 18 1 162

Loans to the public

Household 531 501 6 378

Corporate 2 621 2 344 12 1 552

Total 3 152 2 845 11 1 930


10 Handelsbanken

BRANCH OFFICE OPERATIONS IN DENMARK

Q1 2007 compared with Q4 2006 Earnings performance Operating profit decreased by 16% to SEK 119m (141). Profits before loan losses were 11% lower, amounting to SEK 108m (121).

The Danish market was still subject to pressure on margins, particularly for deposits. Net interest income rose by 8%, chiefly due to greater business volumes. In total, however, income was lower than in the previous quarter, which had been a successful one in terms of fee and commission income as well as the net result of financial items.

Expenses were SEK 146m (147).

Business development The average volume of lending increased by 6% to DKK 28.6bn. Household lending grew by just over 5% to DKK 12.9bn. The total volume of ‘priority loans’ (prioritetslån), a product which

Handelsbanken was the first bank to introduce in Denmark in 2000, amounted to just over DKK 10bn.

The average volume of deposits increased by 9% to DKK 21.4bn. Corporate deposits grew by 12% to DKK 15.6bn. A currency-linked note was issued. In February, Priority Loan Plus was launched, which includes a family survivor’s pension.

Handelsbanken had 37 branches in Denmark, and further branch openings are planned.

Q1 2007 compared with Q1 2006 Earnings performance Operating profit increased by 12% to SEK 119m (106).

Net interest income rose by 18%, chiefly due to greater business volumes. Average lending volumes rose by 13%, while deposits grew by 18%. Income increased by 5% to SEK 254m (241).

Expenses grew by 7%, mainly due to the increase in staff numbers, more branches, and higher IT costs.

Branch office operations in Denmark


SEK m 2007 2006 2007 2006 2006






Total income 254 268 254 241 972

Total expenses -146 -147 -146 -137 -547

Loan losses/recoveries 11 20 11 2 30


Business volumes, Denmark

Q1 Q4 Change Q1

Average volumes, DKK bn 2007 2006 % 2006


Household 5,8 5,7 2 5,5

Corporate 15,6 13,9 12 12,6

Total 21,4 19,6 9 18,1

Loans to the public

Household 12,9 12,3 5 10,9

Corporate 15,7 14,6 8 14,4

Total 28,6 26,9 6 25,3


Handelsbanken 11

BRANCH OFFICE OPERATIONS IN FINLAND

Q1 2007 compared with Q4 2006 Earnings performance Operating profit improved by 40% to SEK 151m (108). This was the highest quarterly profit figure so far for Handelsbanken in Finland.

The earnings improvement was chiefly attributable to lower expenses and lower loan losses. Expenses fell by 9% to SEK 161m (177). Net interest income grew by 5% and net fee and commission income rose by 7% but total income was un-changed.

Business development During the quarter, the average volume of lending rose by 10% to EUR 8.2bn. Growth on the mortgage market has been high, and Handelsbanken has grown more rapidly than the market average.

Two equity-linked bonds were issued. A new loan product was launched in January, which enables the Bank’s private customers to apply online for unsecured credit.

New branches were opened in Espoo Matinkylä and Mikkeli, bringing the total of Handelsbanken branches in Finland to 38. In addition, the branch in Tallinn, Estonia, is part of the Finnish branch operations. Managers have been recruited for a further six branches, which are due to open in the second quarter.

The Finnish regional bank is responsible for establishing Handelsbanken in the Baltic states. Operations in Latvia and Lithuania will start up in 2008.

Q1 2007 compared with Q1 2006 Earnings performance Operating profit increased by 41% to SEK 151m (107). Net interest income and net fee and commission income each rose by 17%. Total income increased by 16%, while expenses rose by 2%. This includes costs relating to the new branches, as well as substantial investments in IT.

Average lending volumes were up by 18%. The collaboration between the branches and Handelsbanken Finans in Finland was developed. Sales in the Retail Financial Services – Home product area totalled EUR 34m, an increase of 49% from the corresponding period the previous year.

Branch office operations in Finland


SEK m 2007 2006 2007 2006 2006






Total income 312 313 312 269 1 173

Total expenses -161 -177 -161 -158 -664

Loan losses/recoveries 0 -28 0 -4 -58


Business volumes, Finland

Q1 Q4 Change Q1

Average volumes, EUR bn 2007 2006 % 2006


Household 985 969 2 911

Corporate 1 039 935 11 895

Total 2 024 1 904 6 1 806

Loans to the public

Household 2 548 2 443 4 2 192

Corporate 5 687 5 059 12 4 794

Total 8 235 7 502 10 6 986


12 Handelsbanken

BRANCH OFFICE OPERATIONS IN NORWAY

Q1 2007 compared with Q4 2006 Earnings performance Operating profit increased by 4% to SEK 262m (253). Despite increased volumes, net interest income declined. Lending mar-gins decreased, while margins on deposits rose. Some funding is hedged using derivatives, the positive effects of this being some SEK 15m and booked as net gains on financial items. Therefore, the net interest income performance must be consid-ered together with the improvement in net/gains losses on financial items at fair value.

Net fee and commission income totalled SEK 68m, on a par with the previous quarter.

Expenses decreased by 1% to SEK 208m (211).

Business development Lending increased by 4% to NOK 103bn. Although overall credit growth in Norway began to slow down, Handelsbanken contin-ued to gain market share.

Handelsbanken Finans in Norway launched a new opportu-nity for customers to choose the image on their VISA cards. During the quarter an equity-linked bond totalling NOK 140m was issued – the highest volume so far in the Norwegian opera-tions.

At the end of the period, Handelsbanken had 42 branches in Norway, and in 2007 a further 8-10 branches are due to be opened.

Q1 2007 compared with Q1 2006 Earnings performance Operating profits rose by 3% to SEK 262m (254). Income rose by 8%, while expenses went up by 11%. The increase in ex-penses was due to costs for newly opened branches which have not yet reached break-even. The expansion of established branches was also a factor in the increased expenses.

Over the past 12 months, lending has risen by 27%, with corporate lending growing the most. Average deposits increased by 23% to NOK 40bn.

Branch office operations in Norway


SEK m 2007 2006 2007 2006 2006

Net interest income 342 348 342 329 1 393





Total income 477 471 477 440 1 809

Total expenses -208 -211 -208 -187 -805

Loan losses/recoveries -7 -7 -7 1 -32


Business volumes, Norway

Q1 Q4 Change Q1

Average volumes, NOK bn 2007 2006 % 2006


Household 7,9 7,7 3 6,5

Corporate 32,0 30,1 6 26,0

Total 39,9 37,8 6 32,5

Loans to the public

Household 38,1 37,3 2 32,8

Corporate 64,8 61,7 5 48,4

Total 102,9 99,0 4 81,2


Handelsbanken 13

HANDELSBANKEN INTERNATIONAL Handelsbanken had branches and/or representative offices in 15 countries outside the Nordic region and Great Britain. These operations are run by the Handelsbanken International business area, which became an independent unit on 1 January 2007, when Handelsbanken Markets was split into two separate units. This move reflects the increasing importance that the Bank attaches to branch operations outside the Nordic region and Great Britain.

A vital task for Handelsbanken International will be to in-crease the number of markets in which the Bank can start up and by growing organically, run profitable universal banking operations through its own branch network. The countries that are next in line are Poland and Germany, where the infrastruc-ture for building up a branch network already exists, and Russia, where the infrastructure is now being completed.

Q1 2007 compared with Q4 2006 Earnings performance Profits increased by SEK 34m to SEK 59m (25). Expenses fell by 2% while income grew by 10%. In Luxembourg and Poland income grew at a higher rate.

Business development In March, the Bank’s representative office in St. Petersburg became a branch, and in February, the Bank received a deriva-tive licence for foreign exchange transactions in China.

In Poland, two more branches are currently being estab-lished: an additional branch in Warsaw and one in Wroclaw.

Q1 2007 compared with Q1 2006 Earnings performance Operating profit increased by 69% to SEK 59m (35). Income grew by 18%. Expenses rose by 10%, due to continued expan-sion.

Handelsbanken International and Financial Institutions


SEK m 2007 2006 2007 2006 2006





Other income 110 112 110 101 403

Total income 297 269 297 251 997

Total expenses -238 -244 -238 -217 -875

Loan losses/recoveries 0 0 0 1 2



14 Handelsbanken

Handelsbanken Capital Markets

Capital Markets is Handelsbanken’s investment bank. The investment bank focuses on professional investors and risk

managers in the Nordic countries and beyond. The aim of the operations is simple – to be the best Nordic investment

bank. This aim is achieved by providing the best financial solutions for each individual customer and in each specific

transaction. Capital Markets includes advisory services within corporate finance, including debt capital markets, equities,

fixed income, commodities and foreign exchange trading, structured products and financial research. It also includes

support to branch office operations for products in these areas. There are just over 900 employees in seven countries.

INCOME STATEMENT


SEK m 2007 2006 % 2006 % 2007 2006 % 2006

Net interest income 94 71 32 62 52 94 62 52 276

Net fee and commission income 307 448 -31 357 -14 307 357 -14 1 470


items at fair value 323 319 1 416 -22 323 416 -22 1 382

Other income 156 158 -1 145 8 156 145 8 582

Total income 880 996 -12 980 -10 880 980 -10 3 710

Total expenses -604 -692 -13 -635 -5 -604 -635 -5 -2 527

Profit before loan losses 276 304 -9 345 -20 276 345 -20 1 183

Loan losses/recoveries - 0 - - - 0


property, equipment

and intangible assets - 0 0 - 0 0

Operating profit 276 304 -9 345 -20 276 345 -20 1 183

Return on equity, % 14,9 17,2 21,6 14,9 21,6 17,3

Average number of employees 900 883 2 762 18 900 762 18 837

HANDELSBANKEN CAPITAL MARKETS

Q1 2007 compared with Q4 2006 Earnings performance Profits were SEK 276m (304), a decrease of 9%. Income de-creased by 12% and was SEK 880m (996). Income from equity trading increased, while foreign exchange and fixed income trading as well as Corporate Finance operations reported lower income. Income in structured products remained unchanged.

Expenses were SEK 604m (692), a decrease of 13%. The average number of employees was 900.

Business development Beginning 1 January, Handelsbanken Capital Markets is a sepa-rate business area. Previously, Capital Markets was part of Handelsbanken Markets, which also included Handelsbanken International. The change underlines the increased emphasis the Bank is placing on the investment bank’s operations.

Stockbroking operations performed well. Handelsbanken was the second largest player on the Stockholm stock ex-change, and similarly, it was the second largest player on the Nordic Exchange.

The Bank is one of the leading Nordic players for investors outside the Nordic countries – a business that generated more

than 37% of brokerage income in Capital Markets. Handels-banken Capital Markets became a member of the London Stock Exchange.

Although the income level in Corporate Finance fell slightly, the level of activity remained high. Handelsbanken participated as an adviser in four mergers and acquisitions, of which two involved Swedish target companies. In debt capital markets, the Bank is now largest in terms of syndicated loans in Sweden and the Nordic countries. The Bank arranged seven syndicated loans with Nordic issuers, of which five were in Sweden. The total loan amount was EUR 3.6bn. In addition, the Bank participated as book runner in four of the seven transactions. On the warrant and commercial paper market, Handelsbanken Capital Markets’ sales decreased by 9% to SEK 4.2bn. The Bank had a 44% market share in the Nordic countries.

Q1 2007 compared with Q1 2006 Operating profit decreased by 20% to SEK 276m (345). Income fell by SEK 100m to SEK 880m. Income from equity trading increased while income was lower from structured products. The latter development was primarily due to a more favourable market for structured products in Q1 2006. Structured products worth SEK 5.2bn were arranged, which represented an increase of 9%.


Handelsbanken 15

Handelsbanken Asset Management

Handelsbanken Asset Management comprises fund management, discretionary management and Nordic custody ser-

vices. Apart from services aimed at companies, institutions and private individuals, Asset Management provides support

to the branch offices regarding investments, portfolio systems and accounting for foundations. Operations are conducted

in the four Nordic countries, and in Luxembourg, Switzerland, France, Spain and Singapore.

INCOME STATEMENT


SEK m 2007 2006 % 2006 % 2007 2006 % 2006

Net interest income 40 41 -2 33 21 40 33 21 168

External net fee and commission income 480 467 3 447 7 480 447 7 1 808

Internal net fee and commission income -179 -171 5 -152 18 -179 -152 18 -615



items at fair value 5 7 -29 7 -29 5 7 -29 33

Other income 33 29 14 21 57 33 21 57 90

Total income 379 373 2 356 6 379 356 6 1 484

Total expenses -172 -182 -5 -161 7 -172 -161 7 -676

Profit before loan losses 207 191 8 195 6 207 195 6 808

Loan losses/recoveries - - - - - -


property, equipment

and intangible assets - - - - - -

Operating profit 207 191 8 195 6 207 195 6 808

Return on equity % 54,8 28,8 29,6 54,8 29,6 30,5

Average number of employees 373 357 4 325 15 373 325 15 339

HANDELSBANKEN ASSET MANAGEMENT

Q1 2007 compared with Q4 2006 Earnings performance Operating profits rose by 8% to SEK 207m (191). Income, which was 2% higher than the previous quarter was positively affected by rising stock market values, an increased number of transac-tions and new sales. Expenses fell by 5%.

The average volume of mutual fund assets under manage-ment, on which a large share of commission income is based, rose by 7% to SEK 221bn (207). The gross margin, that is, the management commission in relation to the assets under man-agement, fell slightly in the first quarter compared with the previ-ous quarter.

Business development The volume of assets managed by Handelsbanken Asset Man-agement grew to SEK 381bn (371). The total volume of assets under management by the Group was SEK 446bn (435).

Q1 2007 compared with Q1 2006 Earnings performance Operating profit increased by 6% to SEK 207m (195). Income rose by 6%, while expenses went up by 7%.

The average volume of fund assets under management, on which a large share of commission income is based, rose by 15% to SEK 221bn (193).

HANDELSBANKEN MUTUAL FUNDS

Q1 2007 compared with Q1 2006 The Bank's mutual fund management company managed 108 (106) mutual funds with a total value of SEK 221bn (220). Cus-tomers elected to invest 53% (49) of the total fund assets in equity funds, 20% (25) in fixed income funds, 25% (24) in mixed funds, and just over 2% (2) in hedge funds.

Despite some market turbulence at the end of February and in early March, the year had a good start with a good perform-ance on the Nordic stock exchanges. Most of the Bank’s Nordic equity funds rose by between 6 and 12% in the first three months of the year.

The Nordic Small Cap Fund and the small cap fund on the Swedish stock market were acclaimed the best mutual funds in their respective categories by the European Fund Award.

As a result of the improved management performance of the Bank’s mutual funds, a number of strategic agreements were signed in the first quarter where Swedish and international play-ers will distribute selected funds from Handelsbanken's range.


16 Handelsbanken

Sweden Net new savings in the Group’s funds on the Swedish mutual fund market were SEK -6.4bn (6.4). The outflow was due to large withdrawals from the short-term fixed-income funds by a few institutional customers.

Handelsbanken’s “selective fund" concept, which invests in a few high-quality stocks, performed well. Assets managed in-creased by SEK 1.7bn or 63% in the first quarter, of which SEK 1.4bn came from new savings.

In June 2006, Handelsbanken became the first bank in Swe-den to start a guarantee fund (Garantifond Plus) where savers are always guaranteed 80% of the mutual fund’s highest re-corded level. There was great interest in this fund, especially among customers who had not previously saved in mutual funds – these represented 30% of the fund’s customers. Some 10% of savers in this fund were entirely new customers of the Bank.

Monthly regular savings in mutual funds increased by 12% over the past 12 months. The newly started mutual funds and especially Garantifond Plus were strong contributing factors to this increase.

In March, the independent ratings institute Morningstar gave Handelsbanken an average rating of 3.35 (3.31) (three-year rating), which was the highest among the four major Swedish banks.

Finland and Norway The focus on increased sales via the Norwegian and Finnish branch offices continued to produce results.

Net new savings for Finnish customers in the Bank’s mutual funds were EUR 17m and the total volume of funds under man-agement was EUR 390m (367).

Net savings in the Bank’s mutual funds by customers in the Norwegian branch operations were NOK 0.8bn (0.1) and the volume of funds under management rose to NOK 3.0bn (1.9).

Exchange-traded funds The assets managed in the XACT mutual funds increased by 10% to SEK 19bn (17). At the end of the quarter, the first ex-change-traded Swedish fund with a fundamental weighting was listed. In contrast to ordinary mutual funds that weight their holdings based on the market capitalisation of companies, funds with fundamental weighting focus on key figures reported by companies.

XACT Fonder manages nine listed mutual funds, of which seven are traded on the Stockholm stock exchange and the other two on the Oslo and Helsinki stock exchanges respectively.

Volumes in the XACT Bull and XACT Bear funds, which aim to provide a return equivalent to 150% of the change in the underlying index, more than doubled in the first quarter.

DISCRETIONARY MANAGEMENT Discretionary management in Asset Management totalled SEK 175bn (177), of which 33% (34) was exposed to equity markets and the rest to fixed income markets. SEK 29bn (40) of the managed assets were invested in the Group’s mutual funds.

NORDIC CUSTODY SERVICES Transaction volumes at Nordic custody services increased by 66% compared with the same period in 2006.

An increasing number of customers are choosing Handels-banken on a pan-Nordic basis, thus giving them a single point of access to the Nordic market. Since 1 July 2006, the number of pan-Nordic customers has risen by 40%.

In March, Money Markets Magazine acclaimed Handels-banken Nordic Custody Services as best custody bank in Sweden.

ASSET MANAGEMENT OUTSIDE THE NORDIC COUNTRIES AND GREAT BRITAIN Assets managed outside the Nordic countries and Great Britain were SEK 14bn (14).


Handelsbanken 17

Handelsbanken Pensions & Insurance

Handelsbanken Pensions & Insurance comprises Handelsbanken Liv and SPP and the SPP brand name. SPP became a

profit-distributing company on 1 January 2006, as did Handelsbanken Liv in 2002. Together, these companies are one of

the market leaders, with a complete range of life insurance products for occupational and private pensions, and asset

protection schemes for companies, organisations and private individuals. The companies distribute their products via

Handelsbanken’s branch offices, their own sales organisations, insurance brokers, workplaces at corporate customers,

and direct marketing.

INCOME STATEMENT


SEK m 2007 2006 % 2006 % 2007 2006 % 2006

Net interest income 66 68 -3 23 187 66 23 187 139

Net fee and commission income 440 832 -47 614 -28 440 614 -28 2 028


items at fair value -58 160 1 225 -58 1 225 1 183

Risk result - insurance 50 187 -73 49 2 50 49 2 571

Other income 36 42 -14 30 20 36 30 20 153

Total income 534 1 289 -59 1 941 -72 534 1 941 -72 4 074

Total expenses -351 -349 1 -433 -19 -351 -433 -19 -1 489

Profit before loan losses 183 940 -81 1 508 -88 183 1 508 -88 2 585

Loan losses/recoveries


property, equipment

and intangible assets - - - - - -

Operating profit 183 940 -81 1 508 -88 183 1 508 -88 2 585

Return on equity, % 7,3 54,0 86,2 7,3 86,2 34,8

Average number of employees 624 680 -8 687 -9 624 687 -9 681

HANDELSBANKEN PENSIONS & INSURANCE

Q1 2007 compared with Q4 2006 Earnings performance Profits were SEK 183m (940). The SEK 757m decrease in profits was chiefly attributable to three factors. A lower yield split ac-counted for SEK 401m of the profit decrease. In addition, the risk result was SEK 137m lower. SPP’s profits were also af-fected by a change in the deferred capital contribution, i.e. the amount reserved by the company in order to guarantee future commitments. In the fourth quarter of 2006, this change had a positive earnings effect of SEK 135m, whereas the effect in Q1 this year was SEK -81m. In order to reduce financial risks, SPP hedges against the sensitivity in the valuation of underfunded contracts caused by market interest rates and share price movements.

The administration result for both Handelsbanken Liv and SPP improved. This was due to lower costs and the continuing increase in volumes and thus administration income, coupled with lower costs. The administration result was SEK 58m (54).

The risk result totalled SEK 50m. However, in Q4 2006, the risk result was considerably higher at SEK 187m, which was mainly due to a higher result for disability insurance.

For Handelsbanken Liv, the total yield for the first three months of 2007 was 1.45%. SPP has two portfolios. The total yield for traditional insurance with individual calculation of bonus

was 1.19%, while for SPP’s insurance holdings with collective calculation of surplus the total yield was 1.14%. A yield split was received on approximately 85% of the insurance contracts. The total for both companies was SEK 117m, as compared with SEK 518m for the previous quarter.

Business development Net inflow remained positive, amounting to SEK 2,514m (1,788). The total yield, coupled with a positive net inflow, meant that managed assets increased by SEK 5.5bn in Q1. At the end of the quarter they amounted to SEK 61bn in Handelsbanken Liv and SEK 115bn in SPP.

Handelsbanken Life and Pension (formerly Euroben), a sub-sidiary of Handelsbanken Liv, distributes occupational pension schemes via SPP. The volume figures for these products are reported under SPP. In addition to Handelsbanken Liv and SPP, the Pensions & Insurance business segment also includes the SPP brand name, which is in a separate company.

In organisational terms, around 60 insurance advisers were moved from Handelsbanken Liv to Handelsbanken on 1 January 2007.

Q1 2007 compared with Q1 2006 Earnings performance Operating profit decreased by 88% to SEK 183m (1,508). The SEK 1,325m decrease in profits was chiefly attributable to two


18 Handelsbanken

factors. A lower yield split accounted for SEK 167m of the profit decrease. SPP’s profits were also affected by a change in the deferred capital contribution, i.e. the amount reserved by the company in order to guarantee future commitments. In the first quarter of 2006, this change had a positive earnings effect of SEK 1,105m, whereas the effect at SPP in Q1 this year was SEK -81m. In order to reduce financial risks, SPP hedges against the sensitivity in the valuation of previously underfunded contracts caused by market interest rates and share price movements.

The risk result totalled SEK 50m, in line with the correspond-ing quarter of last year.

The administration result increased to SEK 58m (-11).

HANDELSBANKEN LIV

Q1 2007 compared with Q4 2006 Earnings performance Profits totalled SEK 143m (298). The lower profit figure was mainly attributable to the fact that total yield on policyholders’ funds showed a decrease from Q4 2006. The total yield amounted to 1.45% (4.83), thus exceeding the annual guaran-teed yield which is between 3% and 5%, depending on when the contract was entered into. Thus the company received 10% of the total yield for all insurance contracts. The yield split there-fore amounted to SEK 36m (157). The financial result totalled SEK 41m (160m).

The administration result was SEK 29m (33). The risk result fell to SEK 32m (54).

Other income was SEK 41m (51), of which the yield on as-sets corresponding to equity was SEK 28m (39). Interest ex-penses reduced profits by SEK 13m (12).

Business development Net inflow decreased to SEK 1,009m (1,122). The decline was chiefly due to an increase in disbursements. Assets managed

grew by 3% to SEK 61bn (59), of which unit-linked insurance represented SEK 33bn (32).

Premiums written, reported in accordance with IFRS 4, were SEK 245m (212). Insurance claims, reported in accordance with IFRS 4, were SEK 116m (99).

The available solvency margin decreased to SEK 2,920m (3,239) due to a paid dividend. This should be related to the required solvency margin which was SEK 1,693m, implying a solvency ratio of 1.72 (1.94).

At the end of the quarter, 36% of the assets were placed in equities, of which 12 percentage points were in Swedish equities and 24 percentage points in foreign equities.

Handelsbanken Liv, breakdown of results and key figures

Q 1 Q 4 Q 1 Full year

2007 2006 2006 2006

Administration result, SEK m 29 33 14 105

Risk result, SEK m 32 54 26 218

Fi nanci al r esul t , SEK m 41 160 79 213

Ot her , SEK m 41 51 45 100

Operating profit, SEK m 143 298 164 636

Tot al y i el d % 1,45 4,83 3,14 8,24

Asset s managed, SEK bn, end of 61 59 56 59

of whi ch uni t - l i nked 33 32 29 32

Sol v ency r at i o, end of per i od 1,72 1,94 2,46 1,94

Handelsbanken Liv, investment assets

Q 1 Q 1 Full year

Average exposure % 2007 2006 2006

Equities 36 38 37

Fixed income assets 56 55 55

Property 6 6 6

Other 2 1 2

Total 100 100 100


Handelsbanken 19

SPP

Q1 2007 compared with Q4 2006 Earnings performance SPP’s profit totalled SEK 78m (679). The decline in profit was attributable to a lower risk result, a lower yield split, and a nega-tive earnings effect from a change in deferred capital contribu-tion.

The administration result continued to improve, and amounted to SEK 29m (21). This higher figure was attributable to falling costs, coupled with increasing volumes. Operating expenses fell by 2% to SEK 192m (196).

The risk result declined by SEK 115m to SEK 18m (133). The

decrease was due to a lower result from disability insurance. The yield split was lower than in the previous quarter. The to-

tal yield for SPP’s traditional insurance with individual calculation of bonus was 1.19% (3.79), while for SPP’s insurance holdings with collective calculation of surplus the total yield was 1.14% (3.79). Since the yield was higher than the guaranteed yield on nearly 80% of these contracts, SPP received a yield split of SEK 81m (361).

Prior to the demutualisation, some of SPP’s insurance port-folios were underfunded. SPP has elected to hedge against the sensitivity in the valuation of underfunded contracts caused by market interest rates and share price movements. The change in the deferred capital contribution had a negative impact of SEK 81m in the first quarter of the year, compared with a positive effect of SEK 135m in Q4 2006. The financial result was SEK -11m (448).

The Other item in the results breakdown includes the yield on assets equivalent to the company’s equity, which was SEK 42m (77). Amortisation of intangible assets and interest expenses had a negative impact on other income of SEK 30m.

Business development Net inflow increased to SEK 1,505m (667). Premiums written, reported in accordance with IFRS 4, were SEK 100m. Insurance claims reported in accordance with IFRS 4 were SEK 66m (38).

Assets managed increased to SEK 115bn (112), of which

SEK 29bn (27) was invested in unit-linked insurance. The available solvency margin was SEK 7.0bn. This should

be related to the required solvency margin which was SEK 3.5bn, implying a solvency ratio of 2.01 (3.10).

At the end of the quarter, 36% of the assets were placed in equities, of which 12 percentage points were in Swedish equities and 24 percentage points in foreign equities.

SPP, breakdown of results and key figures

Q 1 Q 4 Q 1 l y ear

2007 2006 2006 2006

Admi ni s t r at i on r esul t , SEK m 29 21 - 25 48

Ri sk r esul t , SEK m 18 133 23 353

Fi nanci al r esul t , SEK m - 11 448 #### 1 578

Ot her , SEK m 42 77 72 130

Operating profit, SEK m 78 679 1 392 2 109

Tot al y i e l d % 1, 19 3, 79 2, 69 6, 76

Asset s managed, SEK bn, end of 115 112 106 112

of whi ch uni t - l i nked 29 27 24 27

Sol vency r at i o, end of per i od 2, 01 3, 10 3, 09 3, 10

SPP, investment assets

Q 1 Q 1 Full year

Average exposure % 2007 2006 2006

Equities 36 34 36

Fixed income assets 60 64 60

Property 0 0 0

Other 4 2 4

Total 100 100 100


20 Handelsbanken

Handelsbanken’s shares The Swedish stock market grew by 6% during the first three months of

the year. Bank and insurance shares rose by 3%. The price of Handels-

banken’s class A share rose by SEK 0.50 to SEK 207.50. As at 31 March

2007 Handelsbanken’s total market capitalisation, after buybacks, was

SEK 130bn to be compared with SEK 131bn at the year-end and SEK

141bn at the same date in the previous year.

Handelsbanken’s shares

31 Mar 31 Dec

2007 2006

Share price ordinary class A, SEK 207,50 207,00

Number of outstanding shares, million 628,3 634,2

Market capitalisation, SEK bn 130 131

Handelsbanken’s rating at 31 March 2007

Financial

Long-term Short-term strength

Moody’s Aa1 P-1 A-

Standard & Poor’s AA- A-1+

Fitch AA- F1+

0

50

100

150

200

250

jan-00 jan-01 jan-02 jan-03 jan-04 jan-05 jan-06 jan-07

SHB A AFGX Bank & Insurance AFGX

Share price performance until 31 March 2007Index

Number of shares

Q 1 Q 4 Q 1 Jan-Mar Jan-Mar Full year

2007 2006 2006 2007 2006 2006

Number of outstanding shares, end of period 628 299 462 634 209 462 649 032 262 628 299 462 649 032 262 634 209 462

Number of repurchased shares, end of period 20 732 800 14 822 800 20 609 200 20 732 800 20 609 200 14 822 800

Average number of outstanding shares 632 301 795 634 209 462 653 186 368 632 301 795 653 186 368 643 284 311


Handelsbanken 21

Income statement – Handelsbanken Group

INCOME STATEMENT


SEK m 2007 2006 % 2006 % 2007 2006 % 2006


Net fee and commission income Note 1 2 213 2 749 -19 2 342 -6 2 213 2 342 -6 8 956

Net gains/losses on financial items

at fair value Note 2 678 1 607 -58 1 837 -63 678 1 837 -63 4 537

Risk result - insurance 50 187 -73 49 2 50 49 2 571

Other dividend income 16 9 78 33 -52 16 33 -52 193

Share of profits of associated companies 36 11 227 66 -45 36 66 -45 105

Other income 67 58 16 78 -14 67 78 -14 225

Total income 6 913 8 347 -17 8 189 -16 6 913 8 189 -16 29 559

Staff costs -1 844 -1 988 -7 -2 041 -10 -1 844 -2 041 -10 -7 714

Other administrative expenses Note 3 -1 144 -1 131 1 -1 068 7 -1 144 -1 068 7 -4 180

Depreciation, amortisation and impairments

of property and equipment and

intangible assets -137 -141 -3 -143 -4 -137 -143 -4 -557

Total expenses -3 125 -3 260 -4 -3 252 -4 -3 125 -3 252 -4 -12 451

Profit before loan losses 3 788 5 087 -26 4 937 -23 3 788 4 937 -23 17 108

Loan losses/recoveries Note 4 70 -55 79 -11 70 79 -11 55

Gains/losses on disposal of property,

equipment and intangible assets 1 0 0 1 0 1

Operating profit 3 859 5 032 -23 5 016 -23 3 859 5 016 -23 17 164

Taxes -1 028 -1 358 -24 -887 16 -1 028 -887 16 -4 036

Profit for the period 2 831 3 674 -23 4 129 -31 2 831 4 129 -31 13 128

Attributable to

Holders of ordinary shares 2 831 3 674 -23 4 129 -31 2 831 4 129 -31 13 128

Minority interest - - - - - -

Earnings per share, SEK * 4,48 5,79 -23 6,32 -29 4,48 6,32 -29 20,41

* No dilution.

Note 1 Net fee and commission income


SEK m 2007 2006 % 2006 % 2007 2006 % 2006

Brokerage and other securities commissions 547 532 3 544 1 547 544 1 1 996

Mutual funds and custody 567 554 2 531 7 567 531 7 2 106

Advisory services 36 203 -82 28 29 36 28 29 391

Insurance 450 838 -46 619 -27 450 619 -27 2 062

Payments 510 526 -3 462 10 510 462 10 1 983

Lending and deposits 195 188 4 248 -21 195 248 -21 793

Guarantees 103 103 0 100 3 103 100 3 402

Other 125 129 -3 120 4 125 120 4 512

Commission income 2 533 3 073 -18 2 652 -4 2 533 2 652 -4 10 245

Commission expense -320 -324 -1 -310 3 -320 -310 3 -1 289

Net fee and commission income 2 213 2 749 -19 2 342 -6 2 213 2 342 -6 8 956

From 1 January 2007, the full yield split in the insurance operations is reported under Insurance in Net fee and commission income. There has also been a reclassification by moving items from Other to Advisory services and Brokerage and other securities commissions. The figures for 2006 have been changed retroactively.


22 Handelsbanken

Note 2 Net gains/losses on financial items at fair value


SEK m 2007 2006 % 2006 % 2007 2006 % 2006

Available for sale, realised 0 733 -100 159 -100 0 159 -100 937

Hedge accounting

Fair value hedges 9 22 -59 27 -67 9 27 -67 85

Instruments at fair value -22 -56 61 -35 37 -22 -35 37 -184

Loan receivables, valued at cost 20 56 -64 148 -86 20 148 -86 359

Financial liabilities, valued at cost 18 48 -63 -137 18 -137 -165

Gains/losses on unbundled

insurance contracts -83 133 1 105 -83 1 105 1 042

Trading 736 671 10 570 29 736 570 29 2 463

Total 678 1 607 -58 1 837 -63 678 1 837 -63 4 537

Net gains/losses on financial items at fair value shows the earnings related

to the items which are wholly or partly dependent on changes in market

value.

Available for sale, realised, corresponds to the realised earnings from

disposal of financial assets categorised as “Available for sale”.

Fair value hedges include the net result of unrealised and realised market

value changes on financial assets and liabilities which are part of hedging

packages. Interest income and interest expense for these instruments are

recognised under net interest income.

Instruments at fair value contain the fair value for a small number of

lending portfolios outside Sweden. The change in fair value for these

lending portfolios normally corresponds to equally-sized opposite

changes in value on other financial instruments which are reported under

Trading. Interest income is reported under net interest income.

Loan receivables, valued at cost, consist of the gain/loss arising on loans

which are redeemed ahead of time.

Financial liabilities, valued at cost, contain the gain/loss generated from

repurchases of the Bank’s own issued securities.

Gains/losses on unbundled insurance contracts consists partly of the

result arising when revaluing the liability to policyholders due to changes

in the valuation interest rate and partly of the results of transactions

carried out to hedge against these changes in value. From 1 January

2007, the full yield split in the insurance operations is reported under

Insurance in Net fee and commission income. The figures for 2006 have

been changed retroactively.

Trading contains unrealised and realised changes in market value of

derivative instruments which are not used as hedges, and changes in

market value of other financial assets and liabilities at fair value.

Note 3 Other administrative expenses


SEK m 2007 2006 % 2006 % 2007 2006 % 2006

Property and premises -251 -176 43 -267 -6 -251 -267 -6 -935

External IT costs -344 -374 -8 -285 21 -344 -285 21 -1 263

Communication -115 -102 13 -103 12 -115 -103 12 -386

Travel and marketing -98 -136 -28 -91 8 -98 -91 8 -430

Purchased services -185 -236 -22 -166 11 -185 -166 11 -696

Supplies -60 -67 -10 -51 18 -60 -51 18 -211

Other expenses -91 -40 128 -105 -13 -91 -105 -13 -259

Other administrative expenses -1 144 -1 131 1 -1 068 7 -1 144 -1 068 7 -4 180


Handelsbanken 23

Note 4 Loan losses/recoveries


SEK m 2007 2006 % 2006 % 2007 2006 % 2006

A. Specific provision for individually assessed

loan receivables:

The period's write-off for actual loan losses -93 -137 -32 -88 6 -93 -88 6 -596

Writeback of previous provisions for probable

loan losses reported as actual losses in

the period's accounts 90 109 -17 81 11 90 81 11 499

The period's provision for probable loan

losses -107 -148 -28 -123 -13 -107 -123 -13 -468

Writeback of actual losses in previous years 61 54 13 92 -34 61 92 -34 265

Writeback of provisions for probable loan

losses which are no longer necessary 114 56 104 98 16 114 98 16 302

Net expense for the period for individually

assessed loan receivables 65 -66 60 8 65 60 8 2

B. Provision by group for individually

assessed loan receivables:

Allocation to/dissolution of provision

by group 8 13 -38 29 -72 8 29 -72 77

C. Collectively assessed homogenous

groups of loan receivables with

limited value and similar credit risk:

The period's write-off for actual loan losses -12 -12 0 -14 -14 -12 -14 -14 -44

Paid in from actual losses in previous years 6 10 -40 5 20 6 5 20 22

Allocation to/dissolution of provision for

loan losses 3 0 100 -1 3 -1 -2

Net expense for the period for collectively

assessed homogenous loan receivables -3 -2 50 -10 -70 -3 -10 -70 -24

D. Transfer risk:

Allocation to/dissolution of provision for

transfer risks - - - - - -

Net expense for the period for

loan losses (A+B+C+D) 70 -55 79 -11 70 79 -11 55

Change in value of repossessed property - - - - - -



24 Handelsbanken

Quarterly performance of Svenska Handelsbanken Group

Q 1 Q 4 Q 3 Q 2 Q 1

SEK m 2007 2006 2006 2006 2006

Net interest income 3 853 3 726 3 696 3 766 3 784


Net gains/losses on financial items

at fair value 678 1 607 -247 1 340 1 837

Risk result - insurance 50 187 38 297 49

Other dividend income 16 9 2 149 33

Share of profits of associated companies 36 11 21 7 66


Total income 6 913 8 347 5 633 7 390 8 189

Staff costs -1 844 -1 988 -1 543 -2 142 -2 041

Other administrative expenses -1 144 -1 131 -929 -1 052 -1 068

Depreciation, amortisation and impairments of property

and equipment and intangible assets -137 -141 -137 -136 -143

Total expenses -3 125 -3 260 -2 609 -3 330 -3 252

Profit before loan losses 3 788 5 087 3 024 4 060 4 937

Loan losses/recoveries 70 -55 -22 53 79


property, equipment and intangible assets 1 0 0 1 0

Operating profit 3 859 5 032 3 002 4 114 5 016

Taxes -1 028 -1 358 -887 -904 -887

Profit for the period 2 831 3 674 2 115 3 210 4 129

Earnings per share, SEK * 4,48 5,79 3,31 4,97 6,32

* No dilution.


Handelsbanken 25

Balance sheet – Svenska Handelsbanken Group

31 Mar 31 Dec 30 Sep 31 Mar

SEK m 2007 2006 2006 2006

Loans to the public Note 1 1 146 964 1 100 538 1 076 314 1 016 103

Loans to credit institutions 212 801 177 175 205 044 171 834

Interest-bearing securities 293 540 266 743 234 963 252 208

Other assets 255 035 245 552 249 004 356 809

Total assets 1 908 340 1 790 008 1 765 325 1 796 954

Deposits and borrowing from the public 523 137 533 885 516 439 530 273

Due to credit institutions 404 949 320 482 350 708 338 921

Issued securities etc 643 385 595 001 564 727 569 238

Subordinated liabilities 60 775 51 672 53 417 45 515

Other liabilities 207 224 222 742 217 131 248 005

Shareholders' equity 68 870 66 226 62 903 65 002

Total liabilities and equity 1 908 340 1 790 008 1 765 325 1 796 954

Note 1 Loans to the public


SEK m 2007 2006 2006 2006

SEK loans

- to households 400 153 391 483 379 923 360 463

- to companies etc * 404 661 395 141 392 261 373 970

804 814 786 624 772 184 734 433

Foreign currency loans

- to households 98 949 92 551 90 757 84 332

- to companies etc * 245 106 223 356 215 411 199 681

344 055 315 907 306 168 284 013

Provision for probable loan losses -1 905 -1 993 -2 038 -2 343

Total loans to the public 1 146 964 1 100 538 1 076 314 1 016 103

* of which National Debt Office 1 194 3 820 4 895 8 486

Loans to the public by sector

2006

Lending before Provisions for Lending after Lending after

deduction of probable deduction of deduction of

SEK m provisions loan losses provisions provisions

Private individuals 499 103 -327 498 776 442 172

- Of which mortgage loans 347 111 -14 347 097 310 036

Property management 337 160 -441 336 719 301 492

- Of which housing co-operative associations 78 866 -54 78 812 78 617

Corporate services 49 225 -66 49 159 37 850

Manufacturing 48 561 -276 48 285 38 292

Retail 39 978 -201 39 777 35 547

Transport and communication 19 356 -19 19 337 18 503

Construction 14 094 -42 14 052 12 230

Municipalities 7 794 0 7 794 8 298

Agriculture, hunting and forestry 6 995 -5 6 990 6 502

Hotels and restaurants 5 599 -22 5 577 5 210

Insurance operations 9 476 0 9 476 2 945

Other sectors 111 528 -175 111 353 107 449

Total loans to the public, before taking into

consideration collective provisions 1 148 869 -1 574 1 147 295 1 016 490

Collective provisions -331 -387

Total loans to the public 1 146 964 1 016 103

2007


26 Handelsbanken

Change in shareholders’ equity

Fair

Share Statutory Hedge value Retained

SEK m capital reserves reserve reserve earnings Minority Total

Shareholders' equity 31 December 2005 2 879 2 751 -40 872 59 296 0 65 758

Impact of changed accounting policies in

the insurance operations 2006 -3 652 -3 652

Opening equity 2006 after adjustment 2 879 2 751 -40 872 55 644 0 62 106

Change in available-for-sale instruments

after tax 251 251

Change in instruments for cash flow hedges,

after tax 138 138

Exchange difference -492 -492

Total changes in equity not

reported in the income statement - - 138 251 -492 - -103

Profit for the year 13 128 13 128

Total changes before transactions with the owners - - 138 251 12 636 - 13 025

Dividend -4 543 -4 543

Repurchase of own shares -4 362 -4 362

Reduction of share capital by means of cancellation -89 89 -

Bonus issue 98 -98 -

Shareholders’ equity 31 December 2006 2 888 2 751 98 1 123 59 366 0 66 226

Change in available-for-sale instruments

after tax 628 628

Change in instruments for cash flow hedges,

after tax 26 26

Exchange difference 367 367

Total changes in equity not

reported in the income statement - - 26 628 367 - 1 021

Profit for the period 2 831 2 831

Total changes before transactions with the owners - - 26 628 3 198 - 3 852

Repurchase of own shares -1 208 -1 208

Shareholders’ equity 31 March 2007 2 888 2 751 124 1 751 61 356 0 68 870

Cash flow statement

Jan-Mar Jan-Mar Full year

SEK m 2007 2006 2006

Cash flow from operating activities -5 777 3 824 2 120

Cash flow from investing activities -283 -387 -140

Cash flow from financing activities 7 895 -2 812 -4 029

Cash flow for the period 1 835 625 -2 049

Liquid funds at beginning of period 4 800 7 014 7 014

Cash flow for the period 1 835 625 -2 049

Exchange rate difference on liquid funds 105 21 -165

Liquid funds at end of period 6 740 7 660 4 800


Svenska Handelsbanken 27

Capital base and capital requirement On 1 February 2007, new capital adequacy regulations were imple-

mented – the Basel II rules. The changed capital requirements will have a

gradual impact since the transitional rules allow for an adaptation over

three years.

Under the capital adequacy rules applied before 1 February 2007 (Basel

I), a risk-weighted amount was calculated for credit risks and market

risks. Under Basel I, credit risks were calculated using standardised

measurements which were the same for all banks.

The Basel II rules imply that a minimum capital requirement will be calcu-

lated for credit risks, market risks and operational risks. In addition to this

statutory minimum capital requirement, banks must also make an internal

capital adequacy assessment (ICAAP). Handelsbanken's internal evalua-

tion takes into account risks not managed under Pillar 1, a capital re-

quirement for growth and the rating agencies' view of the Bank's capital

requirement. Handelsbanken has always had a higher capital ratio than

the formal requirement. The supervisory authorities also expect the banks

to have a capital base which exceeds the formal minimum capital re-

quirement.

Credit risks For risk classification and calculation of credit risk, an internal risk classifi-

cation method is used called IRB. The Swedish Financial Supervisory

Authority has approved the Bank's IRB method. There are two different

IRB approaches, a basic approach and an advanced approach. In the

basic approach, the Bank determines the probability of the customer

defaulting within one year (PD), while the other parameters are set by the

Financial Supervisory Authority. In the advanced approach, the Bank also

determines the loss in the case of default (LGD) and the exposure at

default (EAD).

Starting in 2007, Handelsbanken applies the advanced IRB approach for

household exposures (households and small companies) in Sweden and

the basic IRB approach for corporate exposures in Sweden and Norway.

The IRB approach comprises over 60% of the total credit risk exposures

and for the remaining credit risk exposures the capital requirement is

measured according to the Basel I rules. For 2008, the credit risk expo-

sures that are not included in the IRB approach will use the standardised

approach according to Basel II. Handelsbanken has decided to imple-

ment the advanced IRB approach for corporate exposures. The intention

is that this will be possible during 2010.

Operational risks Handelsbanken uses the standard approach according to which calcula-

tion of the capital requirement is based on the Bank's income in various

business segments. Since under the previous capital adequacy regula-

tions there was no separate capital requirement for operational risks, as

these were included in the requirement for other risks, the capital re-

quirement for operational risks must be reduced during 2007 by that part

of the credit risk exposures which are subject to the Basel I rules.

Market risks Market risks are calculated in accordance with the Swedish Financial

Supervisory Authority’s standardised directives and where there are

relatively few differences between Basel I and Basel II.

The quantitative information provided in this section follows the directives

and general guidelines of the Financial Supervisory Authority concerning

publication of information relating to capital adequacy and risk manage-

ment. Figures reported in this section refer to the minimum capital re-

quirements under Pillar 1 of the new capital adequacy rules.

Capital base

31 Mar 31 Mar 3 31 Dec 3

SEK m 2007 2006 2006

Tier 1 capital 1 59 426 55 823

Tier 1 capital 2 62 037 57 344 59 272

Tier 2 capital 52 113 18 103 23 976

Amount of extended capital base

Total gross capital base 1111 539 73 926

Total gross capital base 2114 150 75 447 83 248

Reduction holding in insurance company and VPC clearing house -22 152

Reduction adjustment, unrealised pension obligations -1 763

Total net capital base 187 624 73 926 0

Total net capital base 290 235 75 447 83 248

1 Excluding profit generated during the quarter since the interim report has not been examined by the auditors.

2 Including profit generated during the quarter.

3 Calculated in accordance with regulations applying at the time.


28 Handelsbanken

Capital requirement

31 Mar 31 Mar 31 Dec

SEK m 2007 2006 2006

Credit risk according to standardised approach 14 209

Credit risk according to IRB approach 23 620

Risk in trading book 3 756

Foreign exchange risk 207

Commodities risk 9

Operational risk, reduced according to transitional rules 1 933

Totalt capital requirement according to Basel II 43 734

Adjustment according to transitional rules 26 871

Capital requirement according to Basel II, transitional rules 70 605

Risk-weighted assets according to Basel I 929 016 792 785 876 178

Capital requirement according to Basel I (8% of risk-weighted assets) 74 321

Transitional rules result in lowest permitted capital requirement (95% of Basel I) 70 605

Operational risk, according to Basel II 3 168

Capital adequacy analysis

31 Mar 31 Mar 31 Dec

2007 2006 2006

Capital requirement in Basel II compared to Basel I 59%

Capital requirement in Basel II compared to transitional rules 2007 62%

Capital ratio according to Basel II 1 16,0%

Capital ratio according to Basel I 1 9,4% 9,3%

Capital ratio according to transitional rules 2007 19,9%

Capital ratio according to Basel II 2 16,5%

Capital ratio according to Basel I 2 9,7% 9,5% 9,5%

Capital ratio according to transitional rules 2007 2 10,2%

Tier 1 ratio according to Basel II 1 10,9%

Tier 1 ratio according to Basel I 1 6,4% 7,0%

Tier 1 ratio according to transitional rules 2007 1 6,7%

Tier 1 ratio according to Basel II 2 11,3%

Tier 1 ratio according to Basel I 2 6,7% 7,2% 6,8%

Tier 1 ratio according to transitional rules 2007 27,0%

Capital base in relation to capital requirement Basel II 2 206%

Capital base in relation to capital requirement Basel I 2 121%

Capital base in relation to capital requirement according to transitional rules 2007 2 128%

1 Excluding profit generated during the quarter since the interim report has not been examined by the auditors.

2 Including profit generated during the quarter.

In the table, “According to Basel II “ means that the figures are based on the minimum capital requirements in 2010 after the period of transitional rules for

the minimum capital requirements has ended. All calculations are made according to the IRB method as used during the first quarter of 2007. The Bank

intends to use the advanced approach from 2010 for corporate exposures, which is estimated to lower the capital requirement. There are also transitional

rules for the capital base whereby the composition of the capital base will be different in 2013. These changes are not taken into account in the table. From

1 January 2013, intangible assets (including goodwill) in the company, or arising from acquisition of a company, that are deducted from the total capital

base, must instead be deducted from the Tier 1 capital. Instead, half of the remaining reduction amount will be deducted from the tier 1 capital. The total

capital base will remain unchanged however.


Handelsbanken 29

Information about the companies and consolidation The Group is active in the bank and insurance sector. The Basel II rules refer to banking operations called in this context a banking group. The insurance sector has different capital requirements such as the Swedish Financial Supervisory Authority’s solvency requirements and the traffic light model. Svenska Handelsbanken AB is the parent company in the banking group. In the banking group, the Group’s subsidiaries are fully consolidated, while the associated companies are either fully consoli-dated or consolidated in accordance with the equity method. Compa-nies that are not part of the banking group and thus not included in the capital base are shown in the below table. Stadshypotek AB, corporate identity no. 556459-6715 is a significant subsidiary of Svenska Han-delsbanken AB and is thus obliged to comply with special rules.

OTHER DISCLOSURES The accounts comply with the IASB accounting standards adopted by the EU. In addition to these standards, the provisions in the Annual Accounts Act for Credit Institutions and Securities Companies and the Swedish Financial Supervisory Authority’s accounting directives are applied.

Companies not included in the capital base

Corporate

identity no. Reg. office

SPP Livförsäkring AB (Group) 516401-8524 StockholmHandelsbanken Liv Försäkrings AB (Group) 516401-8284 Stockholm

Handelsbanken Försäkring AB 516401-8326 Stockholm

Svenska Re S.A. RCS Lux B-32053 Luxembourg

Handelsbanken Skadeförsäkrings AB 516401-6767 Stockholm

VPC Holding AB (Group) 556709-1763 Stockholm

Bad debts


SEK m 2007 2006 2006 2006

Bad debts 2 844 2 872 3 113 3 788

Specific provision for individually assessed loan receivables -1 469 -1 550 -1 582 -1 851

Provision for collectively assessed homogenous groups

of loan receivables with limited value -107 -107 -108 -109

Provisions by group for individually assessed loan receivables -331 -339 -352 -387

Bad debts, net 937 876 1 071 1 441

Total bad debt reserve ratio 67,1% 69,5% 65,6% 62,0%

Proportion of bad debts 0,07% 0,07% 0,09% 0,13%

Bad debt reserve ratio excl. group provisions 55,4% 57,7% 54,3% 51,7%

Loan loss ratio -0,02% -0,01% -0,01% -0,03%

Non-perfoming loans which are not bad debts 640 670 611 466

Book value of loan receivables restructured during the period,

before restructure 4 46 21 4

Book value of loan receivables restructured during the period,

after restructure 5 50 24 4

Bad debts which during the period have been reclassified as

normal loans 53 171 128 63

Collateral taken over


SEK m 2007 2006 2006 2006

Buildings and land 32 32 33 34

Shares and other participating interests 0 0 0 0

Other 7 7 18 157

Total collateral taken over 39 39 51 191

Goodwill and other intangible assets

Jan-Mar Jan-Mar Full year

SEK m 2007 2006 2006

Opening residual value 12 649 12 876 12 876

Additional during the period 11 21 121

Amortisation and impairment losses for the period -48 -52 -219

Foreign exchange effect 93 -5 -129

Closing residual value 12 705 12 840 12 649


30 Handelsbanken

Derivative instruments

Fair value Cash flow

SEK m Trading hedge hedge Total

Positive market values 46 557 1 614 241 48 412

Negative market values 50 575 3 646 64 54 285

VALUE-AT-RISK During the period 1 January - 31 March, Handelsbanken Markets’ aver-

age exposure to interest rate and exchange rate risks, measured as

Value-at-Risk (VaR), was SEK 24m (16). During the period, this risk varied

between SEK 14m (9) and 41m (32). During the same period, Handels-

banken Markets’ average exposure to equity price risks, measured as

VaR, was on average SEK 20m (10). This risk varied between SEK 1m (3)

and 49m (21).

TURNOVER OF OWN DEBT INSTRUMENTS AND SHARES The Handelsbanken Group issues and repurchases debt instruments

which it has issued on its account and its own shares. This turnover is

mainly intended for the Bank’s securities operations and also as a com-

ponent in financing its operations. Turnover during the first quarter was as

follows:

Interest-bearing securities, bonds and commercial paper: Issued (sold): SEK 387bn

Repurchased (bought): SEK 65bn

Matured: SEK 277bn

Equity-related securities: Issued (sold): SEK 1.8bn

Repurchased (bought): SEK 3.0bn

COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS Total commitments and contingent liabilities are SEK 113,905m

(100,700). This amount includes SEK 61m (49) relating to a number of

civil actions which the Group is bringing in general courts of law. The

largest individual amount in dispute is SEK 30m (24). The Bank's assess-

ment is that the actions will essentially be settled in its favour. None of the

disputed amounts, nor any insurance compensation, has been recog-

nised in income.

The data for contingent liabilities is reported in nominal amounts and an

assessed expected value is included for the civil actions that the Group is

bringing.

The Group is currently pursuing a tax dispute. The total claim is approx.

SEK 20m, excluding interest, which in the case of a positive outcome

would render the Group income of the same amount.

This interim report has not been examined by the bank’s auditors.

Svenska Handelsbanken AB (publ), Corporate identity no. 502007-7862 SE-106 70 Stockholm, Sweden, Telephone: +46 (0)8-701 10 00, www.handelsbanken.se

Phone conference A phone conference with the Bank’s management will be held on 23 April at 4 p.m. CET. To participate, please call +44 (0)20 153 91 56 ten minutes before the conference is due to start.

To listen to the conference at a later time, call +46 (0)8 506 269 49 and enter the code 163213# or listen from the Bank’s website. Press releases and presentations are available at http://www.handelsbanken.se/ireng The interim report for January-June 2007 will be published on 18 July 2007.

For further information please contact: Pär Boman, Group Chief Executive phone: +46 (0)8 - 22 92 20, [email protected] Ulf Riese, Head of Control and Accounting

Bengt Ragnå, Head of Investor Relations phone: +46 (0)8 - 701 1216, [email protected]

phone: +46 (0)8 - 701 1212, [email protected] Stockholm 23 April 2007

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