Interim Report

Interim Report January–June

2017

INTERIM REPORT JANUARY – JUNE 2017

Handelsbanken’s Interim Report JANUARY – JUNE 2017 SUMMARY JANUARY – JUNE 2017, COMPARED WITH JANUARY – JUNE 2016 • Operating profit rose by 4% to SEK 10,604m (10,244) • The period’s profit after tax for total operations decreased by 1% to SEK 8,167m (8,237) • Earnings per share for total operations decreased to SEK 4.20 (4.31) • Return on equity for total operations declined to 12.6% (13.7) • Income increased by 1% to SEK 20,274m (20,165) and by 5% after adjustment for capital gains in the period of comparison • Net interest income rose by 6% to SEK 14,402m (13,603) • Net fee and commission income rose by 9% to SEK 4,862m (4,450) • The C/I ratio decreased to 45.8% (47.2) • The loan loss ratio was unchanged at 0.04% (0.04) • The common equity tier 1 ratio increased to 23.4% (23.0) and the total capital ratio was 29.0% (28.9) SUMMARY OF Q2 2017, COMPARED WITH Q1 2017 • Operating profit fell by 2% to SEK 5,257m (5,347), but increased by 3% after adjustments for non-recurring items in the quarter of comparison • The period’s profit after tax for total operations decreased by 1% to SEK 4,056m (4,111), and earnings per share were SEK 2.09 (2.11) • Return on equity for total operations rose to 12.9% (12.4) • Income increased by 2% to SEK 10,238m (10,036) • Net interest income increased by 3% to SEK 7,321m (7,081) • The loan loss ratio was 0.04% (0.04)

2

Handelsbanken

INTERIM REPORT JANUARY – JUNE 2017 INTERIM REPORT JANUARY – JUNE 2017

Contents

Page

Group – Overview

4

Group performance

5

Group – Business segments

9

Handelsbanken Sweden

10

Handelsbanken UK

12

Handelsbanken Denmark

14

Handelsbanken Finland

16

Handelsbanken Norway

18

Handelsbanken the Netherlands

20

Handelsbanken Capital Markets

22

Other units not reported in the business segments

24

Key figures

25

The Handelsbanken share

25

Condensed set of financial statements – Group

26

Income statement

26

Earnings per share

26

Statement of comprehensive income

27

Quarterly performance

28

Balance sheet

29

Statement of changes in equity

30

Cash flow statement

31

Note 1 Accounting policies

31

Note 2 Net interest income

32

Note 3 Net fee and commission income

32

Note 4 Net gains/losses on financial transactions

33

Note 5 Other expenses

33

Note 6 Loan losses and impaired loans

34

Note 7 Discontinued operations

35

Note 8 Loans and credit exposure

35

Note 9 Derivatives

37

Note 10 Offsetting of financial instruments

38

Note 11 Goodwill and other intangible assets

39

Note 12 Due to credit institutions, deposits and borrowing from the public

39

Note 13 Issued securities

39

Note 14 Pledged assets, contingent liabilities and other commitments

39

Note 15 Classification of financial assets and liabilities

40

Note 16 Fair value measurement of financial instruments

42

Note 17 Assets and liabilities by currency

44

Note 18 Own funds and capital requirements in the consolidated situation

45

Note 19 Risk and liquidity

49

Note 20 Related-party transactions

53

Note 21 Segment reporting

53

Note 22 Events after the balance sheet date

53

Condensed set of financial statements – Parent company

54

Information on phone conference, etc.

61

Auditors’ review report

62

Share price performance and other information

63

For definitions and calculation of key figures, as well as specifications of separate items and non-recurring items, please see the Fact Book which is available at handelsbanken.se/ireng.

3

Handelsbanken

2

Handelsbanken


Handelsbanken Group – Overview SEK m

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

Summary income statement Net interest income

7,321

7,081

3%

6,808

8%

14,402

13,603

6%

Net fee and commission income

2,508

2,354

7%

2,280

10%

4,862

4,450

9%

9,156

317

547

-42%

523

-39%

864

1,685

-49%

3,066

Risk result - insurance

53

36

47%

35

51%

89

111

-20%

142

Other dividend income

11

2

450%

222

-95%

13

225

-94%

228

Share of profit of associates

-3

-27

89%

13

Other income

31

43

-28%

41

-3%

203

Total income

10,238

10,036

2%

Staff costs

-3,242

-2,918

11%

Other expenses Depreciation, amortisation and impairment of property, equipment and intangible assets

-1,410

-1,430

-1%

-145

-150

Total expenses

-4,797

-4,498

5,441 -186

Net gains/losses on financial transactions

Profit before loan losses Net loan losses Gains/losses on disposal of property, equipment and intangible assets Operating profit Taxes Profit for the period from continuing operations Profit for the period pertaining to discontinued operations, after tax Profit for the period

27,943

-30

15

-24%

74

76

25

9,922

3%

20,274

20,165

1%

40,763

-2,952

10%

-6,160

-6,620

-7%

-12,542

-1,346

5%

-2,840

-2,649

7%

-5,401

-3%

-119

22%

-295

-244

21%

-495

7%

-4,417

9%

-9,295

-9,513

-2%

-18,438

5,538

-2%

5,505

-1%

10,979

10,652

3%

22,325

-196

-5%

-229

-19%

-382

-416

-8%

-1,724

2

5

-60%

1

100%

7

8

-13%

32

5,257

5,347

-2%

5,277

0%

10,604

10,244

4%

20,633

-1,201

-1,236

-3%

-1,091

10%

-2,437

-2,020

21%

-4,401

4,056

4,111

-1%

4,186

-3%

8,167

8,224

-1%

16,232

-

13

-1%

4,194

-3%

8,167

8,237

-1%

16,245

-

-

4,056

4,111

8

13

Summary balance sheet Loans to the public of which mortgage loans

Deposits and borrowing from the public of which households

Total equity Total assets

1,182,790

1,163,833

1,120,291 1,049,699 429,725

409,694

134,900 131,741 2,961,094 2,922,929

1% 1,937,155

4% 2,011,455 1,937,155

2%

6%

1,117,514

4% 1,963,622

1,117,514

6%

1,150,594

7% 1,134,500

-1% 1,120,291 1,134,500

-1%

829,336

5%

10%

10%

404,112

391,701

2% 129,582 1% 3,030,645

1,182,790 429,725

391,701

4% 134,900 129,582 -2% 2,961,094 3,030,645

4% 136,381 -2% 2,627,580

Summary of key figures Return on equity, total operations

12.9%

12.4%

14.2%

12.6%

13.7%

13.1%

Return on equity, continuing operations

12.9%

12.4%

14.2%

12.6%

13.7%

13.1%

C/I ratio, continuing operations

46.9%

44.8%

44.5%

45.8%

47.2%

45.2%

2.09 2.06

2.11 2.10

2.19 2.15

4.20 4.16

4.31 4.22

8.43 8.31

Earnings per share, total operations, SEK - after dilution

4

2,011,455 1,991,434

Common equity tier 1 ratio, CRR

23.4%

23.8%

23.0%

23.4%

23.0%

25.1%

Total capital ratio, CRR

29.0%

29.7%

28.9%

29.0%

28.9%

31.4%

3

Handelsbanken Handelsbanken


Group performance

commissions increased by 24% to SEK 1,744m (1,412), and other custody and asset management commissions grew by 13%. Brokerage income rose by 10% to SEK 507m (462), and net payment commissions decreased by 1% to SEK 908m (920). Net fee and commission income from card operations declined to SEK 572m (620). Net gains/losses on financial transactions declined to SEK 864m (1,685), because the period of comparison included capital gains from the sale of shares totalling SEK 908m. Other income decreased to SEK 146m (427). The decrease was primarily attributable to lower dividend income.

JANUARY – JUNE 2017 COMPARED WITH JANUARY – JUNE 2016

The Group’s operating profit grew by 4% to SEK 10,604m (10,244). The period’s profit after tax for total operations decreased by 1% to SEK 8,167m (8,237), and earnings per share were SEK 4.20 (4.31). The common equity tier 1 ratio increased to 23.4% (23.0), and the return on equity for total operations decreased to 12.6% (13.7). The C/I ratio decreased to 45.8% (47.2). Income Jan-Jun 2017

Jan-Jun 2016

Change

14,402

13,603

6%

4,862

4,450

9%

Net gains/losses on financial trans.

864

1,685

-49%

Other income

146

427

-66%

Total income

20,274

20,165

1%

SEK m Net interest income Net fee and commission income

Income increased by 1% to SEK 20,274m (20,165). Adjusted for capital gains on the sale of shares in the period of comparison, the increase was 5%. The effect of exchange rate movements was marginal. Net interest income rose by 6% to SEK 14,402m (13,603). Starting from 2017, the Bank defines its lending and deposit margins as the customer interest rate minus the internal interest rates which are either debited or credited to branch operations. Greater lending volumes increased net interest income by SEK 573m. At the same time, lending margins in branch operations had a negative impact of SEK -53m. Net interest income from deposit operations increased by SEK 141m. The benchmark effect in Stadshypotek decreased to SEK -39m (6), and the doubled fee to the Resolution Fund amounted to SEK -865m (-491). Including fees for various deposit guarantees, government fees increased by SEK 389m to SEK -1,043m (-654). The remainder of the improvement in net interest income was chiefly attributable to lower funding costs. Total average volume of loans to the public grew by 5% to SEK 2,002bn (1,911). Exchange rate effects increased average volumes by SEK 9bn. Household lending increased by 7% to SEK 1,047bn (980), while corporate lending grew by 3% to SEK 955bn (932). In local currencies, lending increased in all home markets. The average volumes of deposits and borrowing rose by 2% to SEK 1,000bn (985). The average volume of household deposits increased by 12% to SEK 410bn (366), while corporate deposits decreased by 5% to SEK 589bn (619). Net fee and commission income rose by 9% to SEK 4,862m (4,450), primarily due to higher fund and asset management commissions. Fund management

5

4

Expenses Jan-Jun 2017

Jan-Jun 2016

Change

Staff costs

-6,160

-6,620

-7%

Other expenses

-2,840

-2,649

7%

-295

-244

21%

-9,295

-9,513

-2%

SEK m

Depreciation and amortisation Total expenses

Total expenses decreased by 2% to SEK -9,295m (-9,513). Exchange rate effects reduced expenses by SEK 1m. Staff costs fell by 7% to SEK -6,160m (-6,620). In the first quarter, staff costs declined by SEK 239m as a result of the transition to a defined contribution pension plan in the Norwegian operations and the period of comparison including a provision of SEK -700m. Adjusted for these items, underlying staff costs rose by 8%, because of the resumption of provisions to the Oktogonen Foundation, which totalled SEK 486m (-). Variable remuneration, including social security costs and other payroll overheads, decreased to SEK -47m (-56). The average number of employees fell by 139, to 11,636 (11,775). Excluding the expanding operations in the UK and the Netherlands, the average number of employees decreased by 2%, and the ongoing work to improve efficiency continues according to plan. Other expenses rose by 7% to SEK -2,840m (-2,649), chiefly due to higher costs for IT development. Loan losses SEK m Net loan losses Loan loss ratio as a % of loans, acc. Impaired loans, net Proportion of impaired loans, %

Jan-Jun 2017

Jan-Jun 2016

Change

-382

-416

-34

0.04

0.04

0.00

2,952

3,383

-13%

0.15

0.17

-0.02

Loan losses decreased to SEK -382m (-416), and the loan loss ratio was 0.04% (0.04). Net impaired loans decreased by 13% to SEK 2,952m (3,383), equivalent to 0.15% (0.17) of lending.



Q2 2017 COMPARED WITH Q1 2017

Expenses

Operating profit fell by 2% to SEK 5,257m (5,347), but increased by 3% after adjustments for non-recurring items in the quarter of comparison. The period’s profit after tax for total operations totalled SEK 4,056m (4,111). Earnings per share fell to SEK 2.09 (2.11), and return on equity rose to 12.9% (12.4). The C/I ratio rose to 46.9% (44.8). Q1 2017

Change

Net interest income

7,321

7,081

3%


2,508

2,354

7%

317

547

-42%

Other income

92

54

70%

Total income

10,238

10,036

2%

Income grew by 2% to SEK 10,238m (10,036). Net interest income grew by 3%, or SEK 240m, to SEK 7,321m (7,081). Rising lending volumes contributed SEK 79m, while lending margins in the branch operations lifted net interest income by SEK 13m. Increased deposit volumes contributed SEK 21m, while deposit margins had a negative impact of SEK -20m. Exchange rate effects had a positive impact of SEK 18m on net interest income, and an extra day in the quarter contributed SEK 29m. Government fees totalled SEK -516m (-527). The benchmark effect in Stadshypotek decreased to SEK -31m (-8). The average volume of loans to the public grew by 1% to SEK 2,017bn (1,988). Household lending rose by 2%, and the average volume of corporate lending grew by 1%. The total average volume of deposits and borrowing rose by 8% to SEK 1,037bn (962). The effect of exchange rate movements was marginal. Household deposits increased by 4% and the average volume of corporate deposits increased by 11%. Net fee and commission income increased by 7% to SEK 2,508m (2,354). The increase was mainly due to rising fund management commissions and increased payment and advisory commissions. Fund management commissions increased by 5% to SEK 895m (849). Commissions on custody accounts and other asset management rose to SEK 169m (164). Net payment commissions rose by 12% to SEK 479m (429), chiefly due to an improvement in net income from card operations to SEK 306m (266). Advisory commissions increased by 88% to SEK 105m (56). Net gains/losses on financial transactions decreased to SEK 317m (547). Profits in the comparison quarter were positively impacted by market turbulence at yearend. The negative effects arising in Q4 2016 were reversed at the start of Q1 2017 when the market returned to normal. Other income equalled SEK 92m (54).

6

5

Change

Staff costs

-3,242

-2,918

11%

Other expenses

-1,410

-1,430

-1%

-145

-150

-3%

-4,797

-4,498

7%

Total expenses

Q2 2017

Net gains/losses on financial trans.

Q1 2017

Depreciation and amortisation

Income SEK m

Q2 2017

SEK m

Expenses increased by 7% to SEK -4,797m (-4,498). Exchange rate effects increased expenses by SEK 24m. Staff costs rose by 11% to SEK -3,242m (-2,918). During the first quarter, the Norwegian operations transitioned to a defined contribution pension plan. This transition involved a non-recurring item which reduced staff costs by SEK 239m in the first quarter. Adjusted for this item, staff costs rose by 3%, of which 1 percentage point was due to exchange rate movements. The provision to the Oktogonen profit-sharing foundation was SEK -243m (-243). The period’s provision for variable remuneration increased to SEK -27m (-20). The average number of employees increased to 11,687 (11,584). The number of employees is increasing outside Sweden and in IT development but decreasing slightly in the Swedish branch operations. Other expenses decreased by 1% to SEK -1,410m (-1,430), chiefly due to lower costs of premises and properties. Loan losses SEK m

Q2 2017

Q1 2017

Net loan losses

-186

-196

-10

Loan loss ratio as a % of loans

0.04

0.04

0.00

2,952

3,164

-7%

0.15

0.16

-0.01

Impaired loans, net Proportion of impaired loans, %

Change

Loan losses decreased to SEK -186m (-196), and the loan loss ratio was 0.04% (0.04). The underlying credit quality remained stable. Net impaired loans decreased to SEK 2,952m (3,164), equivalent to 0.15% (0.16) of lending. Taxes

The tax rate in the second quarter was 22.8% (23.1). A normal tax rate for the Group is 22-23%. Starting in 2017, interest expenses on subordinated loans are no longer tax-deductible. On an annual basis, this has increased the Bank’s corporate tax by about SEK 280m. FUNDING AND LIQUIDITY

Handelsbanken’s bond issues during the first six months decreased to SEK 75bn (120), consisting of SEK 65bn (93) in covered bonds and SEK 10bn (27) in senior bonds. The Bank has large volumes of liquid funds, mortgage loans and other assets that are not encumbered and therefore represent protection for the Bank’s senior lenders. At the end of the period, the ratio of non-



reduced the common equity tier 1 ratio by -0.5 percentage points. Conversions of the 2011 staff convertible bond increased the ratio by 0.1 percentage point. The period’s profit contributed 1.0 percentage point after a deduction for the dividend generated. Implementation of new PD models reduced the common equity tier 1 ratio by -1.8 percentage points. Higher lending volumes reduced the common equity tier 1 ratio by -0.1 percentage point, and credit risk migration in the loan portfolio had an additional impact of -0.2 percentage points. At the same time, as a result of new lending volumes having lower risk than the exposures leaving the credit portfolio (known as volume migration), the common equity tier 1 ratio increased by 0.3 percentage points. The effect of IAS 19 increased the common equity tier 1 capital ratio by 1.7 percentage points, due to both higher asset values and raised discount rates. The sale of AFS shares had a positive effect of 0.6 percentage points. Exchange rate effects were neutral, and the net effect of other factors reduced the common equity tier 1 ratio by -0.7 percentage points.

encumbered assets to all non-encumbered market funding was 236% (210% at year-end 2016). The Bank has a strong liquidity position. Cash funds and liquid assets invested with central banks amounted to SEK 489bn, while the volume of liquid bonds and other liquid assets totalled SEK 175bn. According to the current Swedish definition from January 2013, the Handelsbanken Group’s liquidity coverage ratio (LCR) at the end of the second quarter was 120% (139). In USD, the LCR was 177% (121), and in EUR it was 132% (181). The Group’s LCR, calculated according to the European Commission’s delegated act, was 136% (146). At the end of the second quarter, the net stable funding ratio (NSFR) was 106% (102% at year-end). CAPITAL

The Bank’s goal is that its common equity tier 1 ratio under normal circumstances should exceed by 1-3 percentage points the common equity tier 1 capital requirement communicated to the Bank by the Swedish Financial Supervisory Authority. At the end of March, the Swedish Financial Supervisory Authority approved the Bank’s new PD models for corporate exposures. During the second quarter, the Authority approved the Bank’s models for capital adequacy for sovereign exposures applying the IRB Approach. Capital adequacy for these exposures was previously calculated using the standardised approach and their risk weight was zero. Introduction of the new models increases the Bank’s risk exposure by SEK 9.6bn. The common equity tier 1 ratio at the end of the second quarter was 23.4%. At the end of the first quarter, the Swedish Financial Supervisory Authority’s common equity tier 1 capital requirement was 20.3%. Thus the Bank’s common equity tier 1 ratio slightly exceeded the upper limit of the target interval.

Capital situation 30 June 2017 compared with 31 March 2017

Capital situation 30 June 2017 compared with 30 June 2016 SEK m

30 Jun 2017

30 Jun 2016

Change


23.4%

23.0%

0.4


29.0%

28.9%

0.1

Risk exposure amount CRR

504,199

474,500

6%

Common equity tier 1 capital

117,851

109,006

8%

Total own funds

146,164

137,057

7%

Capital requirement, Basel I floor

100,575

97,459

3%

Total own funds, Basel I floor

148,436

138,600

7%

Own funds increased to SEK 146bn (137), putting the Bank’s total capital ratio at 29.0% (28.9). The common equity tier 1 capital increased to SEK 118bn (109), and the common equity tier 1 ratio rose by 0.4 percentage points to 23.4% (23.0). The implementation of new models for sovereign exposures

7

6

SEK m

30 Jun 2017

31 Mar 2017


23.4%

23.8%

-0.4


29.0%

29.7%

-0.7


504,199

489,456

3%


117,851

116,529

1%

Total own funds

146,164

145,291

1%


100,575

98,946

2%


148,436

147,561

1%

Change

Own funds increased to SEK 146bn (145), and the total capital ratio declined to 29.0% (29.7). The common equity tier 1 capital increased to SEK 118bn (117), and the common equity tier 1 ratio according to CRR fell by -0.4 percentage points to 23.4% (23.8). The implementation of new models for sovereign exposures reduced the common equity tier 1 ratio by -0.5 percentage points. The period’s profit contributed 0.3 percentage points after a deduction for the dividend generated. Rising lending volumes reduced the common equity tier 1 ratio by -0.2 percentage points. Volume migration had a neutral effect, while credit risk migration had a negative impact of -0.2 percentage points. The effect of IAS 19 increased the common equity tier 1 capital ratio by 0.2 percentage points, mainly due to higher asset values. The discount rate for Swedish pension obligations was 2.30% (2.30). The effects of exchange rate movements were neutral.



8

Economic capital and available financial resources

RATING

Handelsbanken’s internal assessment of the capital need is based on the Bank’s capital requirement, stress tests, and the Bank’s model for economic capital (EC). Economic capital is measured in relation to the Bank’s available financial resources (AFR). The Board stipulates that the AFR/EC ratio for the Group must exceed 120%. At the end of the second quarter, EC for the Group totalled SEK 60.8bn, while AFR was SEK 155.6bn. Thus, the ratio between AFR and EC was 256%. For the parent company, EC totalled SEK 51.7bn, and AFR was SEK 129.8bn. For the consolidated situation, EC totalled SEK 33.4bn, and AFR was SEK 154.8bn.

During the first quarter, Standard & Poor’s changed their outlook for Handelsbanken to stable from negative. Otherwise, Handelsbanken’s short-term and long-term ratings with the rating agencies which monitor the Bank were unchanged.

7

Long-term

Short-term

Standard & Poor's

AA-

A-1+

Fitch

AA

F1+

Moody's

Aa2

P-1

DBRS

AA (low)

Counterparty risk assessment

Aa1



Handelsbanken Group – Business segments January - June 2017

Home markets

Sweden

UK

Denmark

Finland

Norway

Net interest income

8,022

2,257

842

583

1,783

260

236

419

14,402


2,175

290

229

234

205

65

1,641

23

4,862

323

94

53

27

46

5

627

-311

864

-32

-30

SEK m

Net gains/losses on financial transactions Risk result - insurance

Capital Markets

Other

Adj. & elim.

Group Jan-Jun 2017

Netherlands

89


2

89

Other income

27

0

8

10

10

0

10

22

87

Total income

10,547

2,641

1,132

854

2,044

332

2,603

121

20,274

Staff costs

-1,704

-914

-329

-194

-177

-141

-1,132

-1,461

-558

-238

-75

-86

-107

-38

-448

-1,290

-1,565

-301

-163

-151

-200

-46

23

2,403

Other expenses Internal purchased and sold services Depreciation, amortisation and impairments of property, equipment and intangible assets Total expenses Profit before loan losses Net loan losses Gains/losses on disposal of property, equipment and intangible assets Operating profit Profit allocation Operating profit after profit allocation Internal income*

-108

-6,160 -2,840

-44

-32

-7

-9

-7

-5

-40

-125

-26

-295

-3,871

-1,485

-574

-440

-491

-230

-1,597

-473

-134

-9,295

6,676

1,156

558

414

1,553

102

1,006

-352

-134

10,979

-99

-35

-70

-12

-102

0

-64

-382

0

-1

8

0

0

-

0

0

6,577

1,120

496

402

1,451

102

942

-352

624

15

48

70

44

2

-803

-

7,201

1,135

544

472

1,495

104

139

-352

166

-584

-174

-174

-1,284

-122

-1,449

3,621

Capital Markets

Other

January - June 2016

7 -134

10,604

-134

10,604

Adj. & elim.

Group Jan-Jun 2016

Home markets

Sweden

UK

Denmark

Finland

Norway

Netherlands

Net interest income

7,572

2,218

814

612

1,566

195

271

355

13,603


2,084

251

191

195

175

11

1,513

30

4,450

374

126

35

58

68

1

578

445

1,685

SEK m

Net gains/losses on financial transactions Risk result - insurance

111

Share of profit of associates Other income

15

1

9

Total income

10,045

2,596

Staff costs

-2,526

-935

-590 -1,335

Other expenses Internal purchased and sold services Depreciation, amortisation and impairments of property, equipment and intangible assets Total expenses Profit before loan losses Net loan losses Gains/losses on disposal of property, equipment and intangible assets Operating profit Profit allocation Operating profit after profit allocation Internal income*

111 15

15

3

195

301

6

72

-

1,049

871

1,881

207

2,476

1,040

-314

-185

-321

-89

-1,207

-928

-211

-85

-120

-98

-24

-429

-1,092

-257

-138

-118

-176

-39

-22

2,085

20,165 -115

-6,620 -2,649

-37

-24

-7

-6

1

-3

-39

-129

-4,488

-1,427

-544

-429

-594

-155

-1,697

-64

-115

-9,513

-244

5,557

1,169

505

442

1,287

52

779

976

-115

10,652

-108

-67

-44

-34

-167

1

3

-416

0

2

1

0

0

-

0

5

5,449

1,104

462

408

1,120

53

782

981

-115

10,244

8

426

15

37

62

39

2

-581

5,875

1,119

499

470

1,159

55

201

981

-115

10,244

10

-677

-199

-147

-1,242

-108

-1,281

3,644

* Internal income which is included in total income comprises income from transactions between other operating segments and Other. Since interest income and interest expense are reported net as income, this means that internal income includes the net amount of the internal funding cost between segments and Other. The business segments consist of Handelsbanken Sweden, Handelsbanken UK,

commissions and payment for internal services, primarily according to the cost

Handelsbanken Denmark, Handelsbanken Finland, Handelsbanken Norway,

price principle. The part of Handelsbanken Capital Markets’ operating profit that

Handelsbanken the Netherlands and Handelsbanken Capital Markets. The

does not involve risk-taking is allocated to branches with customer responsibility.

income statements by segment include internal items such as internal interest,

9

8



Handelsbanken Sweden Handelsbanken Sweden comprises branch operations in five regional banks, as well as the operations of Handelsbanken Finans, Ecster and Stadshypotek in Sweden. At Handelsbanken, the branches are the base of all operations, with responsibility for all customers of the Bank. The regional banks offer a full range of banking services at 423 branches throughout Sweden. Handelsbanken Finans offers finance company services and works through the Bank’s branches. INCOME STATEMENT SEK m

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

Net interest income

4,076

3,946

3%

3,813

7%

8,022

7,572

6%

15,519


1,117

1,058

6%

1,080

3%

2,175

2,084

4%

4,233

176

147

20%

242

-27%

323

374

-14%

725

Other income

16

11

45%

4

300%

27

15

80%

47

Total income

5,385

5,162

4%

5,139

5%

10,547

10,045

5%

20,524

Staff costs

-848

-856

-1%

-920

-8%

-1,704

-2,526

-33%

-3,671

Other expenses

-279

-279

0%

-310

-10%

-558

-590

-5%

-1,153

Internal purchased and sold services

-773

-792

-2%

-677

14%

-1,565

-1,335

17%

-2,645


Depreciation, amortisation and impairments of property, equipment and intangible assets Total expenses Profit before loan losses Net loan losses Gains/losses on disposal of property, equipment and intangible assets Operating profit Profit allocation Operating profit after profit allocation

-17

-27

-37%

-17

0%

-44

-37

19%

-67

-1,917

-1,954

-2%

-1,924

0%

-3,871

-4,488

-14%

-7,536

3,468

3,208

8%

3,215

8%

6,676

5,557

20%

12,988

-39

-60

-35%

-84

-54%

-99

-108

-8%

-416

0

0

0%

1

-100%

0

0

3,429

3,148

9%

3,132

9%

6,577

5,449

21%

12,572

330

294

12%

224

47%

624

426

46%

997

3,759

3,442

9%

3,356

12%

7,201

5,875

23%

13,569

50%

Internal income

182

-16

121

Cost/income ratio, %

33.5

35.8

35.9

Loan loss ratio, % Allocated capital

0.01

0.02

74,464

78,736

Return on allocated capital, %

15.7

13.6

Average number of employees Number of branches

3,990 423

4,006 425

0.03 -5%

68,642

0% 0%

4,300 472

166

10

116

34.7

42.9

35.0

0.02

0.02

8%

74,464

68,642

14.7

12.8

-7% -10%

3,998 423

4,356 472

15.3

0

0.03 8%

77,800

-8% -10%

4,293 435

14.7

BUSINESS VOLUMES Average volumes, SEK bn

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

Loans to the public* Household of which mortgage loans Corporate of which mortgage loans

775

765

1%

736

5%

770

728

6%

725

714

2%

681

6%

719

674

7%

740 687

486

479

1%

481

1%

482

482

0%

479

280

275

2%

272

3%

278

273

2%

271

1,261

1,244

1%

1,217

4%

1,252

1,210

3%

1,219

Household

316

307

3%

291

9%

312

286

9%

295

Corporate

229

217

6%

200

15%

223

199

12%

201

Total

545

524

4%

491

11%

535

485

10%

496

Total Deposits and borrowing from the public

* Excluding loans to the National Debt Office.

10

9



JANUARY – JUNE 2017 COMPARED WITH JANUARY – JUNE 2016 Financial performance

Operating profit increased by 21% to SEK 6,577m (5,449). Adjusted for the staff cost provision of SEK -700m in Q1 2016, the increase was 7%. Net interest income increased by 6% to SEK 8,022m (7,572). Greater lending volumes increased net interest income by SEK 251m and improved lending margins by an additional SEK 54m. Deposit operations contributed SEK 60m thanks to volumes and SEK 16m thanks to improved margins. Fees for the Resolution Fund and the deposit guarantee rose by SEK 214m to -544m (-330), and the benchmark effect in Stadshypotek was SEK -39m (6). The remainder of the increase in net interest income was mainly due to lower funding costs. Net fee and commission income rose by 4% to SEK 2,175m (2,084). The increase was chiefly due to higher fund management, payment and insurance commissions. Net gains/losses on financial transactions declined by 14% to SEK 323m (374), mainly as a result of capital gains on equities in the period of comparison. Total expenses decreased by 14% to SEK -3,871m (-4,488), as a result of the preceding year’s staff cost provision of SEK -700m. Adjusted for the provision, staff costs decreased by 7%. The average number of employees fell by 8% to 3,998 (4,356). Expenses for services bought and sold internally increased by 17% to SEK -1,565m, mainly due to higher IT development costs. The C/I ratio improved to 34.7% (42.9). Loan losses declined to SEK -99m (-108), and the loan loss ratio was unchanged at 0.02% (0.02). Business development

At the beginning of April, Kantar Sifo presented the 2017 Company Reputation Index. This shows the degree of trust and quality that the Swedish public attaches to different companies. As in previous years, Handelsbanken was the major bank in which the general public had the most confidence. Handelsbanken is the only bank among the 10 companies with the best reputation in Sweden. In addition, confidence in the Bank increased, and Handelsbanken was given an index value of 58 (54). This can be compared with the average for the other three major banks, which went down to 31 (35).

11

10

During the first six months of the year, new savings in the Bank’s mutual funds in Sweden were SEK 10.8bn (5.5), corresponding to a market share of 18.1%. The average volume of deposits from households rose by 9% to SEK 312bn (286). The average volume of mortgage loans to private individuals increased by 7% to SEK 719bn (674), while the average volume of lending to companies was unchanged at SEK 482bn (482). During the second quarter, the Bank continued to adapt its branch operations, partly as a result of changed customer behaviour resulting from digitalisation. Handelsbanken had 423 branches (472) in Sweden. Q2 2017 COMPARED WITH Q1 2017

Operating profit increased by 9% to SEK 3,429m (3,148), and return on allocated capital rose to 15.7% (13.6). Net interest income rose by 3%, or SEK 130m, to SEK 4,076m (3,946). Increased lending volumes contributed SEK 49m, while lending margins reduced net interest income by SEK -3m. Net interest income from deposit operations increased by SEK 16m. The benchmark effect in Stadshypotek decreased to SEK -31m (-8). The average volume of mortgage loans to private individuals grew by 2% to SEK 725bn (714). The gross margin on the mortgage portfolio – before advisory and administration expenses – was unchanged at 1.06% (1.06). The average volume of corporate lending increased by 1% to SEK 486bn (479). Net fee and commission income grew by 6% to SEK 1,117m (1,058), due to increased fund management and payment commissions. Net gains/losses on financial transactions rose to SEK 176m (147), due to improved gains on bond repurchases in Stadshypotek. Expenses decreased by 2% to SEK -1,917m (-1,954), attributable to somewhat lower staff costs and reduced costs for services bought and sold. The average number of employees decreased to 3,990 (4,006). Loan losses fell to SEK -39m (-60), and the loan loss ratio fell to 0.01% (0.02).



Handelsbanken UK Handelsbanken UK comprises branch operations in five regional banks and the asset management company Heartwood. Handelsbanken Finans’s operations in the UK are also included. At Handelsbanken, the branches are the base of all operations, with responsibility for all customers of the Bank. The regional banks offer banking services at 207 branches throughout the UK. INCOME STATEMENT SEK m Net interest income Net fee and commission income Net gains/losses on financial transactions

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

1,178

1,079

9%

1,102

7%

2,257

2,218

2%

150

140

7%

132

14%

290

251

16%

4,414 519

48

46

4%

76

-37%

94

126

-25%

219

0

1

-100%

3

5%

2,641

2,596

2%

5,155

Other income

0

0

0%

0

Total income

1,376

1,265

9%

1,310

Staff costs

-461

-453

2%

-462

0%

-914

-935

-2%

-1,849

Other expenses

-126

-112

13%

-105

20%

-238

-211

13%

-463


-151

-150

1%

-137

10%

-301

-257

17%

-545

Depreciation, amortisation and impairments of property, equipment and intangible assets

-16

-16

0%

-11

45%

-32

-24

33%

-46

-754

-731

3%

-715

5%

-1,485

-1,427

4%

-2,903

Profit before loan losses

622

534

16%

595

5%

1,156

1,169

-1%

2,252

Net loan losses

-23

-12

92%

-26

-12%

-35

-67

-48%

-160

-1

2

568

5%

1,120

1,104

1%

2,094

Total expenses

Gains/losses on disposal of property, equipment and intangible assets Operating profit Profit allocation

0

-1

599

521

15%

-1

2

7

8

-13%

7

0%

15

15

0%

35

606

529

15%

575

5%

1,135

1,119

1%

2,129

Internal income

-286

-298

4%

-327

13%

-584

-677

14%

-1,195


54.5

57.4

54.3

55.9

54.7

Loan loss ratio, %

0.05

0.02

0.05

0.04

0.07

12,144

12,914

18%

12,144

10,263

Operating profit after profit allocation

Allocated capital

-6%

10,263

0.08 18%

11,426


15.6

12.8

14.1

16.5

Average number of employees

2,022

1,991

2%

1,957

3%

2,006

1,934

4%

1,959

207

207

0%

205

1%

207

205

1%

207

Q2 2017

Q1 2017 Change

Number of branches

17.5

55.9

15.4

BUSINESS VOLUMES Average volumes, GBP m

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

Loans to the public Household

6,073

5,916

3%

5,456

11%

5,994

5,372

12%

5,527

Corporate

12,050

11,719

3%

10,847

11%

11,885

10,706

11%

11,007

Total

18,123

17,635

3%

16,303

11%

17,879

16,078

11%

16,534

Household

3,603

3,297

9%

2,425

49%

3,450

2,242

54%

2,569

Corporate

8,490

7,840

8%

7,051

20%

8,165

6,898

18%

7,218

12,093

11,137

9%

9,476

28%

11,615

9,140

27%

9,787

Deposits and borrowing from the public

Total

12

11




Operating profit increased by 1% to SEK 1,120m (1,104). Exchange rate movements reduced operating profit by SEK -69m; expressed in local currency operating profit grew by 9%. The return on allocated capital decreased to 14.1% (16.5). Income rose by 2%. In local currency, income rose by 9%. Net interest income improved by 2% to SEK 2,257m (2,218). Exchange rate movements had a negative impact of SEK -145m on net interest income, while net interest income grew by 9% expressed in local currency. Increased lending volumes contributed SEK 175m, and deposit volumes contributed SEK 55m. Lower lending margins negatively affected net interest income by SEK -66m and deposit margins by SEK -19m. Government fees which affected net interest income rose to SEK -90m (-43). Net fee and commission income rose by 16% to SEK 290m (251). In local currency, the increase was 24%, mainly due to higher payment and asset management commissions but also to higher deposit and lending commissions. Net gains/losses on financial transactions decreased to SEK 94m (126), chiefly because the period of comparison included one-off income related to the sale of Visa Europe. Expenses rose by 4% to SEK -1,485m (-1,427). In local currency, expenses were up by 11%, as a result of expanding operations as well as costs related to Brexit and preparations for the possible conversion of the UK branch into a subsidiary. The average number of employees grew by 4% to 2,006 (1,934). Loan losses fell to SEK -35m (-67), and the loan loss ratio fell to 0.04% (0.07). Business development

Business volumes continued to grow. The average volume of deposits from households climbed by 54%, and lending to households grew by 12%, compared

13

12

with the first half of 2016. Overall, the average volume of lending increased by 11% to GBP 17.9bn, while total deposits grew by 27% to GBP 11.6bn. Therefore the loan-to-deposit ratio continued to decrease and was 150% at the end of Q2 2017, compared with 172% at the end of Q2 2016. Heartwood’s assets under management totalled GBP 3.2bn, compared with GBP 2.9bn at the year-end. The number of branches in the UK was unchanged during the first six months, at 207. Q2 2017 COMPARED WITH Q1 2017

Operating profit rose by 15% to SEK 599m (521), chiefly due to improved net interest income. Exchange rate effects had a positive impact of SEK 12m on operating profit. The return on allocated capital increased to 15.6% (12.8). Income grew by 9% to SEK 1,376m (1,265). Net interest income rose by 9%, or SEK 99m, to SEK 1,178m (1,079), of which SEK 20m was attributable to exchange rate effects and SEK 11m to there being fewer days in the comparison quarter. An adjustment of interest income attributable to impaired loans increased net interest income by SEK 37m. Adjusted for these items, net interest income rose by 3%. Greater business volumes had a positive impact of SEK 34m, while lower deposit margins had an impact of SEK -10m on net interest income. Lending margins improved somewhat, increasing net interest income by SEK 2m. Net fee and commission income increased to SEK 150m (140), chiefly due to higher commissions on deposits and lending as well as on payments. Net gains/losses on financial transactions rose to SEK 48m (46). Expenses increased by 3% to SEK -754m (-731). Just over half the increase was attributable to exchange rate effects. The remainder of the increase was partly attributable to preparations for Brexit. The average number of employees rose to 2,022 (1,991). Loan losses were SEK -23m (-12), and the loan loss ratio was 0.05% (0.02).



Handelsbanken Denmark Handelsbanken Denmark consists of the branch operations in Denmark, which are organised as a regional bank, as well as Stadshypotek’s operations in Denmark. At Handelsbanken, the branches are the base of all operations, with responsibility for all customers of the Bank. The regional bank offers a full range of banking services at 57 branches throughout Denmark. INCOME STATEMENT SEK m

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

Net interest income

425

417

2%

405

5%

842

814

3%

1,686


121

108

12%

93

30%

229

191

20%

379

29

24

21%

18

61%

53

35

51%

75

Other income

1

7

-86%

6

-83%

8

9

-11%

15

Total income

576

556

4%

522

10%

1,132

1,049

8%

2,155


Staff costs

-163

-166

-2%

-155

5%

-329

-314

5%

-655

Other expenses

-36

-39

-8%

-41

-12%

-75

-85

-12%

-194


-83

-80

4%

-69

20%

-163

-138

18%

-287


-4

-3

33%

-4

0%

-7

-7

0%

-14

-286

-288

-1%

-269

6%

-574

-544

6%

-1,150


290

268

8%

253

15%

558

505

10%

1,005

Net loan losses

-66

-4

-38

74%

-70

-44

59%

-716

296

Total expenses

Gains/losses on disposal of property, equipment and intangible assets Operating profit Profit allocation Operating profit after profit allocation Internal income

2

6

-67%

1

100%

8

1

226

270

-16%

216

5%

496

462

7%

24

24

0%

18

33%

48

37

30%

85

250

294

-15%

234

7%

544

499

9%

381

2%

-95

9%

13%

-334

-86

-88

-174

-199


47.7

49.7

49.8

48.6

50.1

Loan loss ratio, %

0.27

0.02

0.18

0.14

0.10

5,535

6,382

5,535

6,146


14.1

14.4

14.3

12.8


605

611

-1%

626

-3%

608

57

57

0%

57

0%

57

Allocated capital

Number of branches

7

-13%

6,146

-10%

11.9

51.3 0.85 -10%

6,221

626

-3%

624

57

0%

57

4.8

BUSINESS VOLUMES Q2 2017

Q1 2017 Change

Q2 2016 Change

Household

43.8

43.4

1%

40.1

9%

43.6

39.6

10%

40.8

Corporate

28.8

29.6

-3%

28.8

0%

29.2

28.7

2%

28.8

Total

72.6

73.0

-1%

68.9

5%

72.8

68.3

7%

69.6

Household

12.9

12.2

6%

12.0

8%

12.5

11.6

8%

11.9

Corporate

18.6

18.5

1%

13.5

38%

18.6

15.3

22%

15.7

Total

31.5

30.7

3%

25.5

24%

31.1

26.9

16%

27.6

Average volumes, DKK bn

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

Loans to the public


14 13




Operating profit grew by 7% to SEK 496m (462), as a result of increased income. Exchange rate movements had a positive impact of SEK 15m on operating profit. The return on allocated capital increased to 14.3% (12.8). Net interest income increased by 3% to SEK 842m (814). Adjusted for exchange rate movements, net interest income was more or less unchanged. Increased lending volumes contributed SEK 47m, while lower lending margins reduced net interest income by SEK -25m. Improved deposit margins and higher deposit volumes increased net interest income by SEK 3m. Fees for the Swedish Resolution Fund and the deposit guarantee increased by SEK 15m, burdening net interest income by SEK -38m (-23). Net fee and commission income rose by 20% to SEK 229m (191). The increase was attributable to a high level of customer activity in all commission areas and especially to higher brokerage income and increased asset management commissions. Exchange rate movements had a positive impact of SEK 6m on net fee and commission income. Net gains/losses on financial transactions increased to SEK 53m (35), partly a result of increased early repayment charges as well as larger earnings in the foreign exchange business. Expenses rose by 6% to SEK -574m (-544). Adjusted for the effect of exchange rate movements, the increase was 2%.

Loan losses were SEK -70m (-44), and the loan loss ratio was 0.14% (0.10).

15

14

Business development

The Bank continued to have a stable inflow of new customers, and business volumes continued to increase. During the year, the average volume of lending to households increased by 10%, and deposits from households increased by 8%. Corporate lending grew by 2%, while corporate deposits grew by 22%. Overall the average volume of lending increased by 7% to DKK 72.8bn (68.3), and deposits increased by 16% to DKK 31.1bn (26.9). Q2 2017 COMPARED WITH Q1 2017

Operating profit declined to SEK 226m (270) as a result of higher loan losses. Profit before loan losses grew by 8% to SEK 290m (268), due to higher income and lower expenses. Net interest income increased by 2% to SEK 425m (417). Adjusted for exchange rate effects of SEK 8m and a day effect of SEK 4m, net interest income fell by 1%. Lower lending volumes reduced net interest income by SEK -4m, while lending margins remained largely unchanged. Net interest income from deposits was unchanged. Net fee and commission income increased by 12% to SEK 121m (108). The increase was attributable to robust customer activity that resulted in higher brokerage income and increased payment commissions. Net gains/losses on financial transactions rose to SEK 29m (24). Expenses fell by 1% to SEK -286m (-288). Exchange rate effects increased expenses by SEK 5m. Staff costs fell by 2%, and the average number of employees fell by 1%.

Loan losses rose to SEK -66m (-4). The loan loss ratio was 0.27% (0.02).



Handelsbanken Finland Handelsbanken Finland consists of the branch operations in Finland, which are organised as a regional bank, as well as Handelsbanken Finans’s and Stadshypotek’s operations in Finland. At Handelsbanken, the branches are the base of all operations, with responsibility for all customers of the Bank. The regional bank offers a full range of banking services at 45 branches throughout Finland. Handelsbanken Finans offers finance company services and works through the Bank’s branches. INCOME STATEMENT SEK m

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

Net interest income

291

292

0%

294

-1%

583

612

-5%

1,218


121

113

7%

102

19%

234

195

20%

419

13

14

-7%

45

-71%

27

58

-53%

87

Other income

6

4

50%

3

100%

10

6

67%

10

Total income

431

423

2%

444

-3%

854

871

-2%

1,734


Staff costs

-100

-94

6%

-95

5%

-194

-185

5%

-380

Other expenses

-44

-42

5%

-50

-12%

-86

-120

-28%

-210


-78

-73

7%

-60

30%

-151

-118

28%

-239


-5

-4

25%

-3

67%

-9

-6

50%

-14

-227

-213

7%

-208

9%

-440

-429

3%

-843


204

210

-3%

236

-14%

414

442

-6%

891

Net loan losses

-15

3

-11

36%

-12

-34

-65%

-36

0

0

-16%

402

408

-1%

855 131

Total expenses


0

-

189

213

-11%

0 225

0

38

32

19%

30

27%

70

62

13%


227

245

-7%

255

-11%

472

470

0%

986

Internal income

-87

-87

0%

-62

-40%

-174

-147

-18%

-262


48.4

46.8

43.9

47.6

46.0

Loan loss ratio, %

0.05

-0.01

0.04

0.02

0.06

5,283

6,169

5,283

5,568


13.4

12.4

12.9

12.7


505

482

5%

496

2%

493

492

0%

491

45

45

0%

45

0%

45

45

0%

45

Allocated capital

Number of branches

-14%

5,568

-5%

14.3

45.2 0.03 -5%

6,252 13.0

BUSINESS VOLUMES Average volumes, EUR m

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016


4,053

4,024

1%

3,952

3%

4,039

3,952

2%

Corporate

9,061

8,922

2%

8,733

4%

8,992

8,738

3%

8,761

13,114

12,946

1%

12,685

3%

13,031

12,690

3%

12,736

Household

1,642

1,625

1%

1,432

15%

1,633

1,406

16%

1,451

Corporate

2,556

2,771

-8%

1,766

45%

2,663

1,909

39%

1,991

Total

4,198

4,396

-5%

3,198

31%

4,296

3,315

30%

3,442

Total

3,975


16

15




Operating profit decreased by 1% to SEK 402m (408). Exchange rate effects increased profit by SEK 12m. The return on allocated capital rose slightly to 12.9% (12.7). Income fell by 2%. Net interest income declined by 5% to SEK 583m (612). Reduced margins on lending had a negative impact of SEK -53m on net interest income. At the same time, higher lending volumes had a positive impact of SEK 8m. Government fees to the Resolution Fund and the deposit guarantee reduced net interest income by SEK -53m (-27). Exchange rate movements increased net interest income by SEK 19m. Net fee and commission income rose by 20% to SEK 234m (195), due to higher payment commissions and rising commissions on deposits and lending. The savings business also developed favourably. Net gains/losses on financial transactions decreased to SEK 27m (58), chiefly because the period of comparison included one-off income related to the sale of Visa Europe. Total expenses rose by 3% to SEK -440m (-429). Adjusted for movements in exchange rates, expenses fell 1%. Staff costs increased by 5%, equivalent to an increase of almost 3% expressed in local currency. The total of other expenses and internal costs for services bought and sold were largely unchanged. The average number of employees totalled 493 (492). Loan losses were SEK -12m (-34), and the loan loss ratio decreased to 0.02% (0.06).


The average volume of deposits from households was 16% more than in the corresponding period of the preceding year, while lending to households grew by 2%. The average volume of corporate deposits climbed by 39%, while corporate lending grew by 3% compared with the corresponding period in the preceding year. Q2 2017 COMPARED WITH Q1 2017

Operating profit decreased by 11% to SEK 189m (213), chiefly due to higher loan losses. Expressed in local currency, profit before loan losses decreased by 4%. Net interest income was largely unchanged at SEK 291m (292). Adjusted for exchange rate effects and fewer days in the comparison quarter, net interest income fell by -3%. Net fee and commission income grew by 7% to SEK 121m (113), due to higher payment commissions. Net gains/losses on financial transactions were largely unchanged at SEK 13m (14). Expenses increased by 7% to SEK -227m (-213). Adjusted for exchange rate movements, expenses expressed in local currency increased by 4%.

Loan losses were SEK -15m, compared to net recoveries of SEK 3m in the preceding quarter. The loan loss ratio was 0.05% (-0.01).

.

17

16



Handelsbanken Norway Handelsbanken Norway consists of the branch operations in Norway, which are organised as a regional bank, as well as Stadshypotek’s operations in Norway. At Handelsbanken, the branches are the base of all operations, with responsibility for all customers of the Bank. The regional bank offers a full range of banking services at 49 branches throughout Norway. INCOME STATEMENT SEK m

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

Net interest income

898

885

1%

797

13%

1,783

1,566

14%

3,355


102

103

-1%

91

12%

205

175

17%

381

19

27

-30%

30

-37%

46

68

-32%

114

Other income

6

4

50%

68

-91%

10

72

-86%

81

Total income

1,025

1,019

1%

986

4%

2,044

1,881

9%

3,931


Staff costs Other expenses Internal purchased and sold services Depreciation, amortisation and impairments of property, equipment and intangible assets

-192

15

-158

22%

-177

-321

-45%

-676

-53

-54

-2%

-50

6%

-107

-98

9%

-206

-103

-97

6%

-90

14%

-200

-176

14%

-379

-7

1

19%

-491

-594

-17%

-1,269

-3

-4

-25%

4

-351

-140

151%

-294


674

879

-23%

692

-3%

1,553

1,287

21%

2,662

Net loan losses

-56

-46

22%

-64

-13%

-102

-167

-39%

-347

0

0

1,451

1,120

30%

2,315

Total expenses


0

0

0%

0

618

833

-26%

628

-2%

-8

0

23

21

10%

16

44%

44

39

13%

91

641

854

-25%

644

0%

1,495

1,159

29%

2,406

Internal income

-618

-666

7%

-558

-11%

-1,284

-1,242

-3%

-2,463


33.5

13.5

29.3

23.5

30.9

Loan loss ratio, %

0.09

0.08

0.12

0.08

0.16

15,521

16,808

15,521

12,870


12.9

15.9

14.4

13.8


662

662

0%

658

1%

662

661

0%

668

49

49

0%

50

-2%

49

50

-2%

50


Allocated capital

Number of branches

-8%

12,870

21%

15.6

31.6 0.17 21%

15,883 13.3

BUSINESS VOLUMES Average volumes, NOK bn

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016


88.4

88.0

0%

85.3

4%

88.2

84.8

4%

85.9

Corporate

148.7

145.8

2%

142.7

4%

147.3

141.0

4%

143.1

Total

237.1

233.8

1%

228.0

4%

235.5

225.8

4%

229.0

Household

19.7

19.6

1%

19.1

3%

19.6

18.9

4%

19.3

Corporate

49.0

48.8

0%

44.2

11%

48.9

42.5

15%

46.3

Total

68.7

68.4

0%

63.3

9%

68.5

61.4

12%

65.6


18

17




Operating profit increased by 30% to SEK 1,451m (1,120). It was affected by a non-recurring item in the first quarter which reduced staff costs by SEK 206m, as a result of the transition to a defined contribution pension plan in the Norwegian operations. Lower loan losses and exchange rate movements also had a positive impact on profit. The period of comparison included non-recurring items resulting from the sale of Visa Europe. Adjusted for the aforementioned items, profit before loan losses improved by 6% expressed in local currency. Return on allocated capital was 14.4% (13.8). Adjusted for exchange rate effects, income rose by 3%. Net interest income increased by SEK 217m, or 14%, to SEK 1,783m (1,566), of which SEK 88m was attributable to exchange rate movements. Lending margins rose by SEK 43m, while increased lending volumes had a positive effect of SEK 32m on net interest income. Improved deposit margins and higher deposits had a positive effect of SEK 25m on net interest income. The fees for the Swedish Resolution Fund and the deposit guarantee reduced net interest income by SEK -97m (-53). Net fee and commission income increased by 17% to SEK 205m (175). Adjusted for exchange rate movements, net fee and commission income rose by 11%, chiefly due to higher fund management commissions. Net gains/losses on financial transactions decreased by 32% to SEK 46m (68). The decrease was chiefly attributable to capital gains in the period of comparison related to the sale of Visa Europe. Adjusted for the aforementioned transition to a defined contribution pension plan, staff costs rose by SEK 62m, or 19%, of which SEK 20m was attributable to exchange rate effects. The new financial sector tax in Norway – a 5% charge payable on wage costs – had an impact of SEK -17m on staff costs. Adjusted for these effects, staff costs increased by 8% compared to the corresponding period in the preceding year. Loan losses fell to SEK -102m (-167), and the loan loss ratio fell to 0.08% (0.16).

19

18


Business volumes continued to grow during the first six months. The average volume of deposits from households climbed by 4% compared to the corresponding period in the preceding year, while lending to households grew by 4%. The average volume of corporate lending increased by 4%, while corporate deposits grew by 15%. In total, the average volume of lending rose by 4% to NOK 235.5bn (225.8), while total deposits rose by 12% to NOK 68.5bn (61.4). Handelsbanken has 49 branches (50) in Norway. Q2 2017 COMPARED WITH Q1 2017

Operating profit decreased by SEK 215m to SEK 618m (833), of which SEK 206m was attributable to the nonrecurring item in the preceding quarter that resulted from the transition to a defined contribution pension plan. Exchange rate effects had a negative impact of SEK 17m on operating profit. Adjusted for both these effects, operating profit rose by just over 1%. Net interest income rose by 1%, or SEK 13m, to SEK 898m (885). Exchange rate movements had a negative impact of SEK -19m, while fewer days in the preceding quarter had a positive impact of SEK 8m on net interest income during the second quarter. Higher lending margins contributed SEK 20m, and rising lending volumes SEK 9m. Net interest on deposits declined by SEK -9m, chiefly due to lower deposit margins. Net fee and commission income was largely unchanged at SEK 102m (103). Net gains/losses on financial transactions decreased to SEK 19m (27), chiefly as a result of weaker profits in the foreign exchange business. Expenses totalled SEK -351m (-140). Adjusted for the non-recurring item that reduced staff costs for the preceding quarter by SEK 206m and for exchange rate effects of SEK 3m, expenses increased by 2%.

Loan losses increased to SEK -56m (-46), and the loan loss ratio was 0.09% (0.08).



Handelsbanken the Netherlands Handelsbanken the Netherlands consists of the branch operations in the Netherlands, which are organised as a regional bank, as well as asset management operations in Optimix Vermogensbeheer. The regional bank offers banking services at 27 branches throughout the Netherlands. INCOME STATEMENT SEK m Net interest income Net fee and commission income Net gains/losses on financial transactions

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

135

125

8%

100

35%

260

195

33%

438

33

32

3%

6

450%

65

11

491%

75

3

2

50%

0

5

1

400%

5


1

1

0%

-

2

-

Other income

0

0

0%

-

0

-

Total income

172

160

7%

106

62%

332

207

60%

521

Staff costs

-74

-67

10%

-45

64%

-141

-89

58%

-210

Other expenses

-20

-18

11%

-16

25%

-38

-24

58%

-60


-24

-22

9%

-19

26%

-46

-39

18%

-77

Depreciation, amortisation and impairments of property, equipment and intangible assets Total expenses Profit before loan losses Net loan losses Gains/losses on disposal of property, equipment and intangible assets Operating profit Profit allocation Operating profit after profit allocation Internal income

-3

-2

50%

-2

50%

-5

-3

67%

-7

-121

-109

11%

-82

48%

-230

-155

48%

-354

51

51

0%

24

113%

102

52

96%

167

2

-2

0

1

-100%

0

92%

167

-

-

53

49

1 -

-

53

2

0%

2

2

0%

3

27

104%

104

55

89%

170

-56

-11%

-13%

-210

2

0 49

12% -3%

-62

-60

-122

-108

68.1

75.9

68.9

74.2

Loan loss ratio, %

-0.02

0.02

-0.02

0.00

-0.01

Allocated capital

1,375

1,276

1,375

956


12.4

12.0


274 27

Number of branches

-

25

55

112%

102

8%

69.5


1

44%

67.6 0.00

8%

956

12.2

9.2

259

6%

188

46%

266

185

44%

206

26

4%

23

17%

27

23

17%

25

8.6

44%

1,251 12.5

BUSINESS VOLUMES Average volumes, EUR m

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016


1,891

1,780

6%

1,367

38%

1,836

1,302

41%

1,434

Corporate

1,717

1,695

1%

1,397

23%

1,706

1,335

28%

1,519

Total

3,608

3,475

4%

2,764

31%

3,542

2,637

34%

2,953


20

Household

84

78

8%

58

45%

81

55

47%

62

Corporate

727

768

-5%

440

65%

748

424

76%

420

Total

811

846

-4%

498

63%

829

479

73%

482

19




Operating profit improved by 92% to SEK 102m (53), chiefly due to continuing growth in business volumes. Income rose by 60%, while expenses increased by 48%. Adjusted for exchange rate movements, operating profit improved by 83% expressed in local currency. Return on allocated capital was 12.2% (9.2). Net interest income increased by 33% to SEK 260m (195). Increased lending volumes contributed SEK 60m, while lower lending margins reduced net interest income by SEK -7m. Higher deposit volumes and improved deposit margins increased net interest income by SEK 4m. Net fee and commission income increased to SEK 65m (11), as a result of the acquisition of the Optimix asset management company, which has been a part of Handelsbanken the Netherlands since 1 September 2016 and contributed SEK 56m. Expenses rose by 48% to SEK -230m (-155), as a result of the continuing expansion, including the acquisition of the Optimix asset management company. The C/I ratio improved to 68.9% (74.2), and the average number of employees increased by 44% to 266 (185).

Loan losses were SEK 0m (1), and the loan loss ratio was 0.00% (-0.01).

21

20


The average volume of lending to households grew by 41% to EUR 1,836m (1,302), while deposits from households increased by 47% to EUR 81m (55). Corporate lending climbed 28% to EUR 1,706m (1,335). The average volume of corporate deposits rose by 76% to EUR 748m (424). Business volumes with small and medium-sized companies continued to grow. In May, the Bank opened a branch in Alkmaar, bringing the total of Handelsbanken branches in the Netherlands to 27. The Optimix asset management company was acquired on 1 September 2016. Assets under management totalled EUR 2.1bn at 30 June 2017, including the company’s own mutual funds. Q2 2017 COMPARED WITH Q1 2017

Operating profit increased by 8% to SEK 53m (49), of which SEK 1m was due to exchange rate movements. Income grew by 7% to SEK 172m (160). Net interest income rose by 8% to SEK 135m (125). Net fee and commission income increased by 3% to SEK 33m (32). Expenses rose by SEK 12m, or 11%, to SEK -121m (-109); this was attributable to a SEK 7m increase in staff costs. The average number of employees grew by 6% to 274 (259). Loan losses consisted of net recoveries and equalled SEK 2m (-2). The loan loss ratio was -0.02% (0.02).



Handelsbanken Capital Markets Handelsbanken Capital Markets consists of Markets & Asset Management, Pension & Life, Handelsbanken International and Business Support. It has employees in 21 countries. Markets & Asset Management offers a full range of products and services linked to risk management, securities, derivatives, mutual funds, research, debt capital markets and corporate finance, as well as co-ordinating the Bank’s offering in the savings area. Pension & Life comprises the Handelsbanken Liv subsidiary and offers pension solutions and other insurance solutions for private and corporate customers. Handelsbanken International encompasses the Bank’s branches and representative offices in 16 countries outside the Bank’s home markets, as well as the units for Financial Institutions (global banking collaborations) and Transaction Banking (cash management, trade finance and export finance). A large part of the income from Handelsbanken Capital Markets’ products, including asset management commissions and income from currency conversions, is booked directly in branch operations at the branch with customer responsibility, and is thus not included in the income statement below. INCOME STATEMENT SEK m

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

Net interest income

118

118

0%

134

-12%

236

271

-13%

557


859

782

10%

771

11%

1,641

1,513

8%

3,081


228

399

-43%

338

-33%

627

578

8%

984

53

36

47%

35

51%

89

111

-20%

142

Other income

3

7

-57%

1

200%

10

3

233%

8

Total income

1,261

1,342

-6%

1,279

-1%

2,603

2,476

5%

4,772

Staff costs

-588

-544

8%

-597

-2%

-1,132

-1,207

-6%

-2,368

Other expenses

-225

-223

1%

-217

4%

-448

-429

4%

-871

4

19

-79%

-22

23

-22


Internal purchased and sold services Depreciation, amortisation and impairments of property, equipment and intangible assets Total expenses Profit before loan losses Net loan losses Gains/losses on disposal of property, equipment and intangible assets Operating profit Profit allocation Operating profit after profit allocation Internal income Cost/income ratio, %

-22

-18

22%

-19

16%

-40

-39

3%

-76

-831

-766

8%

-855

-3%

-1,597

-1,697

-6%

-3,371

430

576

-25%

424

1%

1,006

779

29%

1,401

11

-75

-64

3

0

-

441

501

-424 17

-7 0

0

0

6%

942

782

-297

43%

-803

120

-86%

139

-702

0%

-1,449

-12%

417

-379

12%

122

-86%

-699

-750

7%

-581

38%

-1,342

201

-31%

10

-1,281

-13%

-2,851

99.3

79.5

87.1

88.7

89.6

0.67

0.06

0.28

-0.01

Allocated capital

4,478

4,972

-11%

4,478

5,038

4.6

6.3

-3%

1,635

1,700


1.1

7.7

1,627

1,643

5,038

-1%

1,681

7.5

0 1,352

-0.10

-10%

-49

20%

Loan loss ratio, % Return on allocated capital, %

-56

98.3 0.10 -11%

5,033

-4%

1,678

0.2

For more financial information about the different business areas within Handelsbanken Capital Markets, please see the Fact Book that is available at handelsbanken.se/ireng.

22

21

Handelsbanken

Handelsbanken



Operating profit increased by 20% to SEK 942m (782). Total income grew by 5% to SEK 2,603m (2,476). Net fee and commission income grew by 8% to SEK 1,641m (1,513), driven mainly by higher mutual fund commissions. Net gains/losses on financial transactions went up by 8% to SEK 627m (578). Total expenses decreased by 6% to SEK -1,597m (-1,697). The decrease was mainly attributable to staff costs falling by 6% to SEK -1,132m (-1,207), partly as a result of a 4% fall in the average number of employees to 1,635 (1,700). Loan losses amounted to SEK -64m (3), corresponding to a loan loss ratio of 0.28% (-0.01). Business development

Asset management operations continued to show a strong performance. In Sweden, net savings in Handelsbanken’s mutual funds during the first six months of 2017 amounted to SEK 10.8bn, corresponding to a market share of 18.1%. Net savings in the Bank’s mutual funds elsewhere in the Nordic region showed strong growth, increasing to SEK 4.4bn. Total net savings in the Group’s funds amounted to SEK 15bn. Xact Kapitalförvaltning remained the largest player as regards Nordic exchange-traded funds. The total fund volume, including exchange-traded funds, increased by 10% from the beginning of the year to SEK 468bn (425). Total assets under management in the Group rose during the same period by 7% to SEK 582bn (542). Morningstar, a mutual fund research company, ranked Handelsbanken’s mutual funds highest of the Nordic banks when it evaluated the 30 largest fund managers on the Swedish market. In addition, during the year, Lipper Fund Awards ranked four of the Bank’s funds as the best in their respective categories. The Pension & Life business area showed positive performance, with its income increasing and expenses decreasing. The occupational pension area showed particularly strong performance, with a 30% increase in

23

premiums paid in. The net flow during the first six months was SEK 3.1bn. In the first half of 2017, the volume of assets under management by Handelsbanken Liv grew to SEK 133bn (122). As of 1 July 2017, all the Bank’s global index funds track new, more sustainable indexes. This change of indexes means, among other things, that a large number of companies are excluded as investment alternatives for mutual funds. Corporate Finance business showed a strong performance, and according to Mergermarket, the Bank was No.1 for M&A transactions involving Swedish companies. The Bank’s business volumes in terms of capital market funding also showed strong performance. The Bank arranged a total of 69 bond issues during the quarter for a value of EUR 8.3bn. The average volume of lending in Handelsbanken International, i.e. the operations outside the Bank’s home markets, totalled SEK 33.7bn (35.1). During the same period, deposits rose by 11% to SEK 49.0bn (44.2). Q2 2017 COMPARED WITH Q1 2017

Operating profit fell by 12% to SEK 441m (501), due to lower income and higher expenses than in the preceding quarter. Total income fell by 6% to SEK 1,261m (1,342), as a result of higher net gains/losses on financial transactions during the quarter of comparison. During the first quarter, net profit was positively affected by the market turbulence around the turn of the year, as the negative effects arising in Q4 2016 were reversed in early 2017 when the market returned to normal. Total expenses rose by 8% to SEK -831m (-766), chiefly due to higher staff costs. Staff costs rose by 8%, mainly due to a non-recurring item in the preceding quarter that reduced staff costs in Norway due to the transition to a defined contribution pension plan. The average number of employees totalled 1,627 (1,643). Loan losses consisted of net recoveries, and totalled SEK 11m (-75), corresponding to a loan loss ratio of -0.10% (0.67).

Handelsbanken

22

Handelsbanken


Other units not reported in the business segments Reported below are the income and expenses related to Treasury and the central staff functions, and also provisions to the Oktogonen profit-sharing foundation. Capital gains/losses, dividends, and other income and expenses that are not attributable to any of the segments are also reported here. INCOME STATEMENT SEK m Net interest income

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

200

219

-9%

163

23%

419

355

18%

5

18

-72%

5

0%

23

30

-23%

-199

-112

-78%

-226

12%

-311

445


-4

-28

86%

13

Other income

10

12

-17%

181

-94%

12

109

-89%

136

-763

-698

9%

-459

-627

-663

-5%

1,208

1,195

1%

Net fee and commission income Net gains/losses on financial transactions

Total income Staff costs Other expenses Internal purchased and sold services Depreciation, amortisation and impairments of property, equipment and intangible assets

Full year 2016 756 69 857

-32

15

22

195

-89%

23

-91%

121

1,040

-88%

1,971

66%

-1,461

-928

57%

-2,335

-557

13%

-1,290

-1,092

18%

-2,244

1,074

12%

2,403

2,085

15%

4,228

-10%

-3%

-248

266

-60

-65

-8%

-67

-125

-129

Total expenses

-242

-231

5%

-9

-473

-64

-599


-230

-122

-89%

127

-352

976

1,372

Net loan losses Gains/losses on disposal of property, equipment and intangible assets Operating profit

0

0

0%

0

0

5

23

-230

-122

-89%

127

-352

981

1,395

Profit allocation

-

-

0

-

0

-

-230

-122

-89%

127

-352

981

1,395

Internal income

1,656

1,965

-16%

1,679

-1%

3,621

3,644

-1%

7,199


2,003

1,930

4%

1,810

11%

1,966

1,821

8%

1,840


JANUARY – JUNE 2017 COMPARED WITH JANUARY – JUNE 2016

Operating profit in other units not reported in the business segments amounted to SEK -352m (981). The provision for the Oktogonen profit-sharing foundation was resumed in the first quarter, and for the first six months it amounted to SEK 486m (-). Capital gains from the sale of shares totalling SEK 812m were included in the comparison period. The average number of employees rose to 1,966 (1,821), chiefly due to increased activity in IT development.

24

23

Q2 2017 COMPARED WITH Q1 2017

Operating profit declined to SEK -230m (-122), chiefly due to lower net gains/losses on financial transactions at Treasury, where the market turbulence around the turn of the year had a positive effect on the comparison period. The average number of employees totalled 2,003 (1,930).



KEY FIGURES – GROUP Q2 2017

Q1 2017

Q2 2016

Jan-Jun 2017

Jan-Jun 2016

Return on equity, total operations

12.9%

12.4%

14.2%

12.6%

13.7%

Return on equity, continuing operations

12.9%

12.4%

14.2%

12.6%

13.7%

C/I ratio, continuing operations

46.9%

44.8%

44.5%

45.8%

47.2%

C/I ratio, continuing operations, incl. loan losses

48.7%

46.8%

46.8%

47.7%

49.2%

2.09 2.06

2.11 2.10

2.19 2.15

4.20 4.16

4.31 4.22

Adjusted equity per share, SEK

68.82

66.77

62.83

68.82

62.83


23.4%

23.8%

23.0%

23.4%

23.0%


29.0%

29.7%

28.9%

29.0%

28.9%

Own funds in relation to capital requirement according to Basel I floor

148%

149%

142%

148%

142%

Earnings per share, total operations, SEK - after dilution Ordinary dividend, SEK Total dividend

Average number of employees, continuing operations

11,687

11,584

11,716

11,636

11,775

Number of branches, Sweden

423

425

472

423

472

Number of branches outside Sweden

398

397

393

398

393

In addition to financial definitions according to IFRS, alternative performance measures are used to describe the performance of the underlying operations and to increase comparability between periods. For definitions and calculation of these performance measures, please see the Fact Book which is available at handelsbanken.se/ireng.

THE HANDELSBANKEN SHARE Q2 2017

Q1 2017

Q2 2016

Jan-Jun 2017

Jan-Jun 2016

Number of converted shares

-

22,151

28,800,955

22,151

28,800,955

Number of repurchased shares

-

-

-

-

-

Holding of own shares in trading book, end of period

-

-

-

-

-

Number of outstanding shares after repurchases and deduction for trading book, end of period

1,944,173,551 1,944,173,551 1,935,847,037 1,944,173,551 1,935,847,037

Number of outstanding shares after dilution, end of period

1,975,025,212 1,975,278,248 1,975,789,501 1,975,025,212 1,975,789,501

Average number of shares converted during the period Average holdings of own shares (repurchased and holdings in trading book) Average number of outstanding shares - after dilution

17,718

12,852,916

19,947

6,426,458

-

-

-

-

-

1,944,173,551 1,944,169,118 1,919,898,998 1,944,171,347 1,913,472,540 1,975,278,248 1,974,290,244 1,976,193,169 1,974,290,244 1,972,745,117

Share price SHB class A, end of period, SEK

120.60

122.90

101.80

120.60

101.80

Share price SHB class B, end of period, SEK

119.20

123.40

105.70

119.20

105.70

234

239

197

234

197

Market capitalisation, end of period, SEK bn

25

22,151

24



Condensed set of financial statements – Group INCOME STATEMENT – GROUP Q2 2017

SEK m

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

Interest income

10,398

10,210

2%

9,451

10%

20,608

19,787

4%

39,950

Interest expense

-3,077

-3,129

-2%

-2,643

16%

-6,206

-6,184

0%

-12,007 27,943

Net interest income

Note 2

7,321

7,081

3%

6,808

8%

14,402

13,603

6%


Note 3

2,508

2,354

7%

2,280

10%

4,862

4,450

9%

9,156


Note 4

317

547

-42%

523

-39%

864

1,685

-49%

3,066


53

36

47%

35

51%

89

111

-20%

142


11

2

450%

222

-95%

13

225

-94%

228


-3

-27

89%

13

-30

15

Other income

31

43

-28%

41

-24%

74

76

-3%

203

Total income

10,238

10,036

2%

9,922

3%

20,274

20,165

1%

40,763

Staff costs

-3,242

-2,918

11%

-2,952

10%

-6,160

-6,620

-7%

-12,542

-1,410

-1,430

-1%

-1,346

5%

-2,840

-2,649

7%

-5,401


Note 5

Total expenses Profit before loan losses Net loan losses Gains/losses on disposal of property, equipment and intangible assets

Note 6

Operating profit Taxes Profit for the period from continuing operations Profit for the period pertaining to discontinued operations, after tax

Note 7

Profit for the period

25

-145

-150

-3%

-119

22%

-295

-244

21%

-495

-4,797

-4,498

7%

-4,417

9%

-9,295

-9,513

-2%

-18,438

5,441

5,538

-2%

5,505

-1%

10,979

10,652

3%

22,325

-186

-196

-5%

-229

-19%

-382

-416

-8%

-1,724

2

5

-60%

1

100%

7

8

-13%

32

5,257

5,347

-2%

5,277

0%

10,604

10,244

4%

20,633

-1,201

-1,236

-3%

-1,091

10%

-2,437

-2,020

21%

-4,401

4,056

4,111

-1%

4,186

-3%

8,167

8,224

-1%

16,232

-

-

-

13

4,056

4,111

-1%

4,194

8 -3%

8,167

8,237

-1%

16,245

13

4,056

4,111

-1%

4,194

-3%

8,167

8,236

-1%

16,244

0

0

0

1

Attributable to Shareholders in Svenska Handelsbanken AB Minority interest

0

1

EARNINGS PER SHARE – GROUP Q2 2017 Profit for the year, attributable to shareholders in Svenska Handelsbanken AB

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

4,056

4,111

-1%

4,194

-3%

8,167

8,236

-1%

16,244

-18

-31

-42%

-41

-56%

-49

-87

-44%

-139

Average number of outstanding shares, million

1,944.2

1,944.2

1,919.9

1,944.2

1,913.5

1,927.1

Average number of outstanding shares after dilution, million

1,975.3

1,974.3

1,976.2

1,974.3

1,972.7

1,972.7

2.09 2.06

2.11 2.10

4.20 4.16

4.30 4.21

-

-

-

0.01 0.01

2.09 2.06

2.11 2.10

4.20 4.16

4.31 4.22

- of which interest expense on convertible subordinated loan after tax

Earnings per share, continuing operations, SEK - after dilution Earnings per share, discontinued operations, SEK - after dilution Earnings per share, total operations, SEK - after dilution

-1% -2%

2.18 2.14

-4% -4%

0.01 0.01 -1% -2%

2.19 2.15

-5% -4%

-2% -1%

8.42 8.30 0.01 0.01

-3% -1%

8.43 8.31

Earnings per share after dilution are calculated by taking into account the effects of a conversion of outstanding convertible debt instruments. This means that the average number of shares is adjusted by potential shares and that the period’s earnings are adjusted by the period’s interest expense on the outstanding convertible debt instruments after tax.

26

25

Handelsbanken

Handelsbanken


STATEMENT OF COMPREHENSIVE INCOME – GROUP SEK m

Q2 2017

Q1 2017 Change

Q2 2016 Change


4,056

4,111

-1%

4,194

1,013

2,318

-56%

-223

-511

790

1,807

-1,070

336

21

37

-869 -24

-3%

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

8,167

8,237

-1%

16,245

-2,597

3,331

-1,096

3,993

56%

568

-734

240

-876

-56%

-2,029

2,597

-856

3,117

-734

4,968

-3,145

58

-572

-1,160

Other comprehensive income Items that may not subsequently be reclassified to profit or loss Defined benefit plans Taxes on items that cannot be reclassified into profit or loss Total items that may not subsequently be reclassified to profit or loss

Items that can be reclassified into profit or loss Cash flow hedges Available-for-sale instruments Translation differences for the period

529

-1,310

34%

1,063

-795

97%

-10

230

99

132%

228

-74

of which hedging net investment in foreign operations Taxes on items that can be reclassified into profit or loss of which cash flow hedges of which available-for-sale instruments

-96% -140%

-2,179

45

-819

-218

329

-988

833

154

-1,093

692

-2

0%

-1

-100%

-4

57

175

-98%

2

100%

179

48

-1,688

-838

-101%

2,718

-2,526

3,453

Total comprehensive income for the period

-142

-316

4

Total other comprehensive income for the period

1,183 -276%

-317

-2

of which hedging net investment in foreign operations Total items that can be reclassified into profit or loss

1,442 -43%

689

110 273%

31 -2,289

-898

969

71

2,597

-97%

828

3,158

5,080

-38%

4,883

-35%

8,238

10,834

-24%

17,073

3,158 0

5,080 0

-38% 0%

4,883 0

-35% 0%

8,238 0

10,833 1

-24% -100%

17,072 1

Attributable to Shareholders in Svenska Handelsbanken AB Minority interest

In the first half of 2017, other comprehensive income totalled

items are measured at market value. The impact on profit/loss of the

SEK 71m (2,597) after tax. In individual periods, the results of all

market valuation is reported under cash flow hedges. Over time,

items within other comprehensive income may fluctuate due to

these values become zero at maturity for each individual hedge, but

changes in the discount rate, exchange rates and inflation.

lead to volatility in other comprehensive income during their term.

At year-end, net pensions, net of pension obligations and plan assets, were a liability. At the end of the second quarter, net pensions were an asset. During the January–June period, other comprehensive income increased by SEK 2,597m (-856) after tax, related to defined benefit pension plans. The main reason for the change during the period is that the plan assets have increased in value since 31

an effect on other comprehensive income of SEK -580m (3,875) after tax. The value changes derived partly from exchange rate movements, but above all from increasing discount rates in foreign currency. During the period, SEK -4m (24) was reclassified to the income statement as a result of ineffectiveness.

December 2016. This has been offset to a certain extent by the

Unrealised changes in the value of financial assets classified as

pension obligations increasing as a result of a decrease in the

available for sale had an effect on other comprehensive income of

discount rate for the Swedish pension obligations, to 2.30% from

SEK 54m (-515) after tax during the year. The preceding year’s

2.40%, since 31 December 2016.

negative result was mainly due to gains from selling shares having

Most of the Group’s long-term funding is hedged using derivatives,

27

Changes in the value of hedge derivatives in cash flow hedges had

been recognised in the income statement.

where all cash flows are matched until maturity. Cash flow hedging

Unrealised exchange rate effects related to the restatement of foreign

manages the risk of variations in the cash flows related to changes in

branches and subsidiaries to the Group’s presentation currency and

variable interest rates and currencies on lending and funding. The

the effect of hedging of net investments in foreign operations have

underlying funding and the asset which is being funded are measured

affected other comprehensive income by SEK -2,000m (93) after tax

at amortised cost, while the derivatives which are hedging these

during the year.

26

Handelsbanken

Handelsbanken


QUARTERLY PERFORMANCE – GROUP Q2 2017

Q1 2017

Q4 2016

Interest income

10,398

10,210

10,220

9,943

9,451

Interest expense

-3,077

-3,129

-2,921

-2,902

-2,643

SEK m

Q3 2016

Q2 2016

Net interest income

7,321

7,081

7,299

7,041

6,808


2,508

2,354

2,447

2,259

2,280 523


317

547

269

1,112


53

36

6

25

35


11

2

2

1

222


-3

-27

0

10

13

Other income

31

43

102

25

41

Total income

10,238

10,036

10,125

10,473

9,922

Staff costs

-3,242

-2,918

-2,981

-2,941

-2,952


-1,410

-1,430

-1,518

-1,234

-1,346

-145

-150

-114

-137

-119

Total expenses

-4,797

-4,498

-4,613

-4,312

-4,417

5,441

5,538

5,512

6,161

5,505

-186

-196

-832

-476

-229

Profit before loan losses Net loan losses Gains/losses on disposal of property, equipment and intangible assets Operating profit Taxes Profit for the period from continuing operations Profit for the period pertaining to discontinued operations, after tax Profit for the period Earnings per share, continuing operations, SEK - after dilution Earnings per share, discontinued operations, SEK - after dilution Earnings per share, total operations, SEK - after dilution

28

2

5

18

6

1

5,257

5,347

4,698

5,691

5,277

-1,201

-1,236

-1,254

-1,127

-1,091

4,056

4,111

3,444

4,564

4,186

-

-

-

-

8

4,056

4,111

3,444

4,564

4,194

2.09 2.06

2.11 2.10

1.77 1.76

2.36 2.32

2.18 2.14

-

-

-

-

0.01 0.01

2.09 2.06

2.11 2.10

1.77 1.76

2.36 2.32

2.19 2.15

Handelsbanken

27

Handelsbanken


BALANCE SHEET – GROUP SEK m

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

436,848

387,092

52,718

79,245

199,362

353,680

501,744

25,527

103,113

119,603

97,262

81,267

97,205

119,532

117,753

Assets Cash and balances with central banks Other loans to central banks

Note 8

Interest-bearing securities eligible as collateral with central banks Loans to other credit institutions

Note 8

33,526

34,542

31,347

41,410

48,479

Loans to the public

Note 8

2,011,455

1,991,434

1,963,622

1,965,649

1,937,155

33

31

35

51

45

Bonds and other interest-bearing securities

Value change of interest-hedged item in portfolio hedge

61,243

65,436

63,909

53,855

46,223

Shares

21,353

23,397

20,412

35,964

52,541

212

218

255

259

257

128,870

123,595

118,646

115,532

107,004

61,940

73,111

82,633

78,688

92,381

9

9

9

10

10

9,579

9,460

9,393

9,293

8,450

Property and equipment

2,353

2,363

2,387

2,323

2,264

Current tax assets

1,379

518

38

2,409

1,575

Deferred tax assets

436

534

962

1,978

1,979

Net pension assets

1,368

379

-

-

-

Assets held for sale

3

3

1

2

-

12,302

29,034

5,615

19,496

25,810

Investments in associates Assets where the customer bears the value change risk Derivative instruments

Note 9,10

Reinsurance assets Intangible assets

Note 11

Other assets Prepaid expenses and accrued income Total assets

5,864

5,266

6,222

5,691

5,708

2,961,094

2,922,929

2,627,580

2,908,935

3,030,645

Liabilities and equity Due to credit institutions

Note 12

202,681

205,971

178,781

205,274

207,312


Note 12

1,120,291

1,049,699

829,336

1,009,427

1,134,500

128,962

123,653

118,745

115,600

107,054

Issued securities

Note 13

1,264,536

1,295,668

1,261,765

1,315,684

1,320,083

Derivative instruments

Note 9,10

31,654

24,297

31,738

33,296

37,283

7,876

11,753

1,572

11,441

8,581

562

599

574

583

591

Current tax liabilities

1,388

809

514

1,657

1,008

Deferred tax liabilities

7,749

7,842

7,875

9,788

10,006

426

615

731

734

773

-

-

2,161

6,547

6,544

Liabilities where the customer bears the value change risk

Short positions Insurance liabilities

Provisions Net pension liabilities Other liabilities

13,851

21,684

9,427

16,452

18,817

Accrued expenses and deferred income

13,436

15,399

14,580

15,359

15,608

Subordinated liabilities Total liabilities Minority interest

32,782

33,199

33,400

33,008

32,903

2,826,194

2,791,188

2,491,199

2,774,850

2,901,063

6

6

6

6

5

Share capital

3,013

3,013

3,013

3,008

3,001

Share premium

5,629

5,629

5,628

5,410

5,081

Reserves

9,339

10,237

9,268

10,639

11,037

Retained earnings Profit for the period, attributable to shareholders in Svenska Handelsbanken AB

108,746

108,745

102,222

102,222

102,222

8,167

4,111

16,244

12,800

8,236

Total equity

134,900

131,741

136,381

134,085

129,582

2,961,094

2,922,929

2,627,580

2,908,935

3,030,645

Total liabilities and equity

29

Handelsbanken

28

Handelsbanken


STATEMENT OF CHANGES IN EQUITY – GROUP Share capital

Share premium

Defined benefit plans

3,013

5,628

1,656

2,487

Other comprehensive income

2,597


2,597

January - June 2017 SEK m Opening equity

Fair Hedge value reserve reserve

Translation reserve

Retained earnings

Minority

Total

974

4,151

118,466

6

136,381

8,167

0

8,167

-580

54

-2,000

0

71

-580

54

-2,000

0

8,238


Dividend Effects of convertible subordinated loans

-9,721 0

1

3,013

5,629

4,253

Share capital

Share premium


2,956

3,204

-1,461

4,940


3,117


3,117

January - December 2016 SEK m Opening equity

1,907


Translation reserve

Retained earnings

Minority

Total

2,024

2,937

113,664

4

128,268

16,244

1

16,245

-2,453

-1,050

1,214

0

828

-2,453

-1,050

1,214

1

17,073 -11,442

2,424

2,481 1,656

Share capital

Share premium


2,956

3,204

-1,461

4,940

2,487


-856


-856

0

1

1 136,381

974

4,151

118,466

6


Translation reserve

Retained earnings

Minority

Total

2,024

2,937

113,664

4

128,268

3,875

-515

93

3,875

-515

93


8,236

Dividend

8,236

1

8,237

0

2,597

1

10,834

-11,442 45 3,001

-11,442

1,877

1,922

Change of minority interests Closing equity

16,244 -11,442

57

5,628

Effects of convertible subordinated loans

134,900

6

3,013

Opening equity

1

116,913

Change of minority interests

January - June 2016 SEK m

0

2,151

Dividend

Closing equity

1 1,028



-9,721

1

Change of minority interests Closing equity

8,167

5,081

-2,317

8,815

1,509

3,030

0

0

0

110,458

5

129,582

During the January–June 2017 period, convertibles for a nominal value of SEK 1m (1,951) relating to subordinated convertible bonds were converted into 22,151 class A shares (28,800,955). At the end of the period, the number of Handelsbanken shares in the trading book was 0 (0).

30

Handelsbanken

29

Handelsbanken


CASH FLOW STATEMENT, CONDENSED – GROUP Jan-Jun 2017

Jan-Jun 2016

Full year 2016

10,604

10,286

20,674

1,300

-1,371

89

-2,909

-3,591

-5,544

Changes in the assets and liabilities of operating activities

252,433

299,035

-11,167

Cash flow from operating activities

261,428

304,359

4,052

SEK m Operating profit, total operations Adjustment for non-cash items in profit/loss Paid income tax

Aquisition / disposal of subsidiaries

-

-

-408

Change in shares

7

1,026

5,462 1,003

Change in interest-bearing securities

-

1,000

Change in property and equipment

-164

563

385

Change in intangible assets

-355

-207

-546

Cash flow from investing activities

-512

2,382

5,896

Repayment of subordinated loans

-

1,951

-2,512

Issued subordinated loans

-

-

-

Dividend paid

-9,721

-11,442

-11,442

Cash flow from financing activities

-9,721

-9,491

-13,954

Liquid funds at beginning of the period

199,362

202,630

202,630

Cash flow for the period

251,195

297,250

-4,006

Exchange rate difference on liquid funds

-13,709

1,864

738

Liquid funds at end of the period*

436,848

501,744

199,362

* Liquid funds are defined as Cash and balances with central banks.

NOTES

Note 1 Accounting policies Accounting policies This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting. The consolidated accounts have been prepared in accordance with international financial reporting standards (IFRS) and interpretations of these standards as adopted by the EU. The accounting policies also follow the Swedish Annual Accounts Act for Credit Institutions and Securities Companies (1995:1559), and the regulations and general guidelines issued by the Swedish Financial Supervisory Authority, FFFS 2008:25 Annual reports in credit institutions and securities companies. RFR 1 Supplementary accounting rules for groups as well as statements

losses, and not on incurred loan losses as in the current IAS 39 regulations. The provisions will also be based on a probabilityweighted outcome, unlike the current IAS 39 where the provision is based on the most expected outcome. All in all, in the transition to IFRS 9, this may entail higher provisions for loan losses. This regulatory change may lead to an adjustment of equity. No final decision has yet been taken as to how these effects will be dealt with as regards the relationship between the expected loan loss provisions in accounting terms and the expected loan losses in capital adequacy terms. The Bank is currently analysing the financial effects of the new standard in more detail.

from the Swedish Financial Reporting Board are also applied in the

IFRS 15 Revenue from Contracts with Customers has also been

consolidated accounts.

adopted for application in the EU. The standard will be applied as of

The interim report for the parent company has been prepared in accordance with the Swedish Annual Accounts Act for Credit Institutions and Securities Companies, and the regulations and general guidelines issued by the Swedish Financial Supervisory Authority, FFFS 2008:25 Annual reports in credit institutions and securities companies. The parent company also applies RFR 2 Accounting for legal entities, as well as statements issued by the Swedish Financial Reporting Board. The interim report of the Group and the parent company has been prepared in accordance with the same accounting policies and calculation methods that were applied in the annual report for 2016. Future regulatory changes IFRS 9 Financial Instruments, which is to replace IAS 39 Financial Instruments: Recognition and Measurement, has been adopted for application by the EU. The standard will be applied as of the 2018 financial year. The standard encompasses three areas: classification and measurement, impairment, and general hedge accounting. The

the 2018 financial year. IFRS 15 introduces a five-step model to establish how and when revenue must be recognised. However, the standard does not apply to financial instruments, insurance contracts or leases. IFRS 15 also contains increased disclosure requirements relating to revenue. The Bank’s assessment is that the new standard will not have any material impact on Handelsbanken’s financial reports, capital adequacy or large exposures. IFRS 16 Leases has also been published by the IASB. Assuming that IFRS 16 is adopted by the EU, and the date of implementation proposed by the IASB is not changed, this standard will be applied as of the 2019 financial year. The main change due to the new standard is that all lease contracts (with the exception of short-term and minor lease contracts) must be recognised as an asset (right-of-use asset) and as a liability in the lessee’s balance sheet. The lease payment must be reported as depreciation and interest expense. There are also increased disclosure requirements. For lessors, the requirements are largely unchanged. The Bank is analysing the financial effects of the new standard.

forthcoming regulations on impairment are based on expected loan

31

Handelsbanken

30

Handelsbanken


In addition, IFRS 17 Insurance contracts has been published by the

change in how insurance contracts are reported and measured.

IASB. Assuming that IFRS 17 is adopted by the EU, and the date of

The Bank is analysing the financial effects of the new standard.

implementation proposed by the IASB is not changed, this standard

None of the other changes in the accounting regulations issued

will be applied as of the 2021 financial year. IFRS 17 will mean a

for application are expected to have any material impact on Handelsbanken’s financial reports, capital adequacy, large exposures or other circumstances under the applicable operating rules.

Note 2 Net interest income SEK m

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

Interest income Loans to credit institutions and central banks Loans to the public Interest-bearing securities eligible as collateral with central banks Interest-bearing securities Derivative instruments Other interest income

522

347

50%

391

34%

869

872

0%

1,422

9,750

9,695

1%

9,759

0%

19,445

19,571

-1%

39,333 229

43

57

-25%

109

-61%

100

227

-56%

164

176

-7%

232

-29%

340

425

-20%

783

-380

-326

-17%

-1,218

69%

-706

-1,637

57%

-2,629

359

320

12%

329

9%

679

640

6%

1,317

10,458

10,269

2%

9,602

9%

20,727

20,098

3%

40,455

60

59

2%

151

-60%

119

311

-62%

505

10,398

10,210

2%

9,451

10%

20,608

19,787

4%

39,950

Due to credit institutions and central banks

-309

-299

3%

-261

18%

-608

-543

12%

-1,086

Deposits and borrowing from the general public

-398

-294

35%

-382

4%

-692

-786

-12%

-1,423

Total interest income Of which interest income reported in Net gains/losses on financial transactions Interest income according to income statement Interest expense

Issued securities

-4,023

-4,157

-3%

-4,582

-12%

-8,180

-8,974

-9%

-17,740


2,454

2,432

1%

3,210

-24%

4,886

5,423

-10%

10,771

Subordinated liabilities

-356

-360

-1%

-384

-7%

-716

-773

-7%

-1,534

State fees

-516

-527

-2%

-318

62%

-1,043

-654

59%

-1,300

Other interest expense Total interest expense Of which interest expense reported in Net gains/losses on financial transactions Interest expense according to income statement Net interest income

-19

-28

-32%

-124

-85%

-47

-195

-76%

-279

-3,167

-3,233

-2%

-2,841

11%

-6,400

-6,502

-2%

-12,591

-90

-104

-13%

-198

-55%

-194

-318

-39%

-584

-3,077

-3,129

-2%

-2,643

16%

-6,206

-6,184

0%

-12,007

7,321

7,081

3%

6,808

8%

14,402

13,603

6%

27,943

The derivative instrument rows include net interest income related to hedged assets and liabilities. These may have both a positive and a negative impact on interest income and interest expense.

Note 3 Net fee and commission income SEK m

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

Brokerage and other securities commissions

246

261

-6%

229

7%

507

462

10%

916

Mutual funds

895

849

5%

717

25%

1,744

1,412

24%

3,023

Custody and other asset management fees

169

164

3%

148

14%

333

295

13%

623

Advisory services

105

56

88%

98

7%

161

202

-20%

317

Insurance

168

160

5%

151

11%

328

309

6%

634

Payments

847

760

11%

795

7%

1,607

1,513

6%

3,185

Loans and deposits

308

301

2%

290

6%

609

570

7%

1,172

Guarantees Other Total fee and commission income Securities Payments Other Total fee and commission expense Net fee and commission income

32

99

97

2%

108

-8%

196

207

-5%

422

125

124

1%

127

-2%

249

246

1%

488

2,962 -70

2,772 -72

7% -3%

2,663 -70

11% 0%

5,734 -142

5,216 -136

10% 4%

10,780 -260

-368

-331

11%

-293

26%

-699

-593

18%

-1,289

-16

-15

7%

-20

-20%

-31

-37

-16%

-75

-454

-418

9%

-383

19%

-872

-766

14%

-1,624

2,508

2,354

7%

2,280

10%

4,862

4,450

9%

9,156

Handelsbanken

31

Handelsbanken


Note 4 Net gains/losses on financial transactions SEK m Trading, derivatives, FX effect etc Other financial instruments at fair value in profit/loss of which interest-bearing securities of which loans Financial instruments at amortised cost of which loans of which liabilities Financial instruments available for sale Hedge accounting of which net gains/losses on fair value hedges

Q2 2017

Q1 2017 Change

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

439

706

-38%

-90

1,145

-357

832

-132 -123 -9

-139 -129 -10

5% 5% 10%

447 455 -8

-13%

-271 -252 -19

1,030 1,040 -10

466 502 -36

32

13

146%

56

-43%

45

92

-51%

182

86

84

2%

127

-32%

170

213

-20%

446

-54

-71

24%

-71

24%

-125

-121

-3%

-264

4

2

100%

89

-96%

6

916

-99%

1,689

3

-10

36

-92%

-7

36

-3

6

-6

10

-40%

-

12

-8

-90%

of which cash flow hedge ineffectiveness

-3

-4

25%

26

-7

24

Gains/losses on unbundled insurance contracts

-29

-25

-16%

-15

-93%

-54

-32

-69%

-100

5

Total

317

547

-42%

523

-39%

864

1,685

-49%

3,066

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

Note 5 Other expenses SEK m

Q1 2017 Change

Property and premises

-290

-318

-9%

-303

-4%

-608

-611

0%

-1,234

External IT costs

-489

-478

2%

-420

16%

-967

-828

17%

-1,698

Communication

-75

-84

-11%

-80

-6%

-159

-165

-4%

-317

Travel and marketing

-88

-68

29%

-85

4%

-156

-153

2%

-306

-317

-318

0%

-298

6%

-635

-562

13%

-1,159

-38

-48

-21%

-43

-12%

-86

-88

-2%

-173

-113

-116

-3%

-117

-3%

-229

-242

-5%

-514

-1,410

-1,430

-1%

-1,346

5%

-2,840

-2,649

7%

-5,401

Purchased services Supplies Other administrative expenses Other expenses

33

Q2 2017

32



Note 6 Loan losses and impaired loans Loan losses Q2 2017

Q1 2017 Change

Q2 2016 Change

-165

-301

-45%

-297

-44%

-466

-641

-27%

64

61

5%

76

-16%

125

133

-6%

377

-101

-240

-58%

-221

-54%

-341

-508

-33%

-1,522

-67

6

-4

-61

3

-62

-3

1

0

-2

1

-10

-70

7

-4

-63

4

-72

Losses on off-balance-sheet items

0

-1

-2

-1

-4

-75%

-16

Reversal of previous losses on off-balance-sheet items

9

1

2

350%

10

2

400%

2

-9

12

-10

-10%

3

5

-40%

-26

0

12

-100%

-10

12

3

300%

-40

-253

-410

-38%

-142

78%

-663

-1,357

-51%

-2,183

195

396

-51%

114

71%

591

1,309

-55%

1,863

5%

34

24%

SEK m

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

Specific provision for individually assessed loans Provision for the period Reversal of previous provisions Total

-1,899

Collective provisions Net provision for the period for individually assessed loans Net provision for the period for homogeneous loans Total Off-balance-sheet items

Change in collective provision for off-balance-sheet items Total Write-offs Actual loan losses for the period Utilised share of previous provisions Recoveries Total Value change for the period Net loan losses

42

40

82

133

-38%

230

-16

26

6

10

85

-88%

-90

1

-1

-

-

-

-186

-196

-382

-416

-8%

-1,724

-5%

-229

-19%

-

Impaired loans Impaired loans includes all loans in respect of which all contracted cash flows will probably not be fulfilled. The full amount of all loans which give rise to a specific provision is included in impaired loans, including amounts which are covered by collateral. This means that the impaired loans reserve ratio is stated without taking into account collateral received. Thus, this key figure may vary substantially between the quarters, even though the provisioning policies are unchanged. SEK m Impaired loans Specific provision for individually assessed loans Provision for collectively assessed homogeneous groups of loans with limited value Collective provisions for individually assessed loans

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

7,303

7,594

7,746

7,710

7,427

-3,840

-3,985

-4,188

-3,972

-3,671

-108

-105

-107

-107

-94

-403

-340

-348

-310

-279

2,952

3,164

3,103

3,321

3,383

Total impaired loans reserve ratio

59.6%

58.3%

59.9%

56.9%

54.4%

Proportion of impaired loans

0.15%

0.16%

0.16%

0.17%

0.17%

Impaired loans reserve ratio excl. collective provisions

54.1%

53.9%

55.4%

52.9%

50.7%

Loan loss ratio as a % of loans, acc.

0.04%

Impaired loans, net

0.04%

0.04%

0.09%

0.06%

Loans past due > 60 days

4,067

3,925

4,123

4,928

4,629

Loans past due > 60 days, which are not impaired

1,116

946

1,061

1,381

1,229

For definitions and calculation of key figures, please see the Fact Book which is available at handelsbanken.se/ireng.

34

33



Impaired loans and loans which are past due by more than 60 days, by sector 30 June 2017

Impaired loans Loans past due > 60 days, which are not impaired 657

SEK m

Gross

Provisions

Net*

Of which past due >60 days

Private individuals

1,306

-708

598

411

39

-19

20

4

27

1,782

-611

1,171

323

278

Housing co-operative associations Property management Manufacturing

640

-474

166

19

27

Retail

349

-187

162

57

24

Hotel and restaurant

111

-38

73

71

-

1,564

-1,020

544

0

-

Passenger and goods transport by sea Other transport and communication

53

-36

17

10

2

Construction

225

-150

75

40

47

Electricity, gas and water

260

-104

156

56

-

76

-41

35

7

17 28

Agriculture, hunting and forestry Other services

259

-211

48

21

Holding, investment and insurance companies, funds etc.

572

-307

265

14

2

67

-42

25

22

7

Other corporate lending Credit institutions Total

-

-

-

-

-

7,303

-3,948

3,355

1,055

1,116

Loans past due > 60 days, which are not impaired 721

* Book value after deduction of specific provisions.

31 December 2016

Impaired loans

SEK m

Gross

Provisions

Net*

Of which past due >60 days

Private individuals

1,405

-745

660

435

41

-20

21

5

-

1,793

-691

1,102

263

240

Manufacturing

719

-522

197

26

18

Retail

457

-270

187

45

0

96

-32

64

64

6

1,849

-1,244

605

0

-

52

-36

16

7

5 13

Housing co-operative associations Property management

Hotel and restaurant Passenger and goods transport by sea Other transport and communication Construction

269

-161

108

46

Electricity, gas and water

68

-39

29

4

9

Agriculture, hunting and forestry

53

-31

22

11

2 18

Other services

214

-113

101

94

Holding, investment and insurance companies, funds etc.

601

-316

285

30

6

Other corporate lending

129

-75

54

14

23

Credit institutions Total

-

-

-

-

-

7,746

-4,295

3,451

1,044

1,061

* Book value after deduction of specific provisions.

Note 7 Discontinued operations The Bank divested its ownership of Plastal Industri AB in Q2 2016. Discontinued operations refer to the results from the Plastal Industri AB subsidiary for the time before the divestment, as well as the profits from the divestment of the company.

Note 8 Loans and credit exposure SEK m Loans to the public of which reverse repos Loans to other credit institutions of which reverse repos Other loans to central banks of which reverse repos

35

34

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

2,011,455

1,991,434

1,963,622

1,965,649

1,937,155

8,322

11,182

7,493

14,041

11,360

33,526

34,542

31,347

41,410

48,479

11,175

10,805

4,088

16,984

19,330

52,718 -

79,245 1,003

25,527 -

103,113 -

81,267 -



Loans to the public, by sector 30 June 2017

SEK m Private individuals

31 December 2016

Loans gross

Provisions

Loans net

Loans gross

Provisions

Loans net

1,009,125

-708

1,008,417

982,640

-745

981,895

of which mortgage loans

821,232

-37

821,195

800,092

-33

800,059

of which other loans with property mortgages

122,856

-132

122,724

120,121

-146

119,975

65,037

-539

64,498

62,427

-566

61,861

Housing co-operative associations

195,283

-19

195,264

187,016

-20

186,996

of which mortgage loans

163,882

-12

163,870

156,835

-12

156,823

Property management

548,610

-611

547,999

540,194

-691

539,503

Manufacturing

25,923

-474

25,449

27,633

-522

27,111

Retail

23,775

-187

23,588

21,947

-270

21,677

Hotels and restaurants

8,482

-38

8,444

8,516

-32

8,484

Passenger and goods transport by sea

8,506

-1,020

7,486

9,375

-1,244

8,131

of which other loans to private individuals

Other transport and communication

15,461

-36

15,425

14,614

-36

14,578

Construction

18,600

-150

18,450

18,103

-161

17,942

Electricity, gas, water

24,078

-104

23,974

25,224

-39

25,185

Agriculture, hunting and forestry

11,757

-41

11,716

11,727

-31

11,696

Other services

18,935

-211

18,724

19,608

-113

19,495

Holding, investment, insurance, funds, etc.

72,507

-307

72,200

66,730

-316

66,414

Government and municipalities

13,361

-

13,361

15,891

-

15,891

Other corporate lending

21,403

-42

21,361

19,047

-75

18,972

2,015,806

-3,948

2,011,858

1,968,265

-4,295

1,963,970

Total loans to the public, before collective provisions

Collective provisions Total loans to the public

-403

-348

2,011,455

1,963,622

Specification of Loans to the public – Property management 30 June 2017

31 December 2016

Loans gross

Provisions

Loans net

Loans gross

Provisions

Loans net

State-owned property companies

4,427

-

4,427

3,228

-

3,228

Municipal-owned property companies

8,999

-

8,999

9,771

-

9,771

101,706

-24

101,682

99,598

-26

99,572

SEK m Loans in Sweden

Residential property companies of which mortgage loans Other property management of which mortgage loans

88,507

-

88,507

85,134

-1

85,133

128,088

-129

127,959

127,578

-130

127,448

55,094

-2

55,092

52,925

-2

52,923

243,220

-153

243,067

240,175

-156

240,019

Denmark

20,269

-100

20,169

19,755

-118

19,637

Finland

35,948

-4

35,944

33,891

-4

33,887

Total loans in Sweden Loans outside Sweden

36

Norway

101,267

-100

101,167

103,767

-108

103,659

UK

116,519

-251

116,268

111,800

-289

111,511 23,194

The Netherlands

24,635

-

24,635

23,194

-

Other countries

6,752

-3

6,749

7,612

-16

7,596

Total loans outside Sweden

305,390

-458

304,932

300,019

-535

299,484

Total loans - Property management

548,610

-611

547,999

540,194

-691

539,503

35



Credit risk exposure SEK m Loans to the public of which reverse repos Loans to other credit institutions of which reverse repos Interest-bearing securities eligible as collateral with central banks

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

2,011,455

1,991,434

1,963,622

1,965,649

1,937,155

8,322

11,182

7,493

14,041

11,360

33,526

34,542

31,347

41,410

48,479

11,175

10,805

4,088

16,984

19,330 117,753

119,603

97,262

97,205

119,532


61,243

65,436

63,909

53,855

46,223

Derivative instruments*

61,940

73,111

82,633

78,688

92,381

Contingent liabilities

75,293

80,481

78,530

82,361

78,459

of which guarantees, credits

10,088

9,839

9,643

10,110

10,440

of which guarantees, other

58,620

64,512

63,108

67,122

63,551

6,585

6,130

5,779

5,129

4,468

441,532

427,927

425,267

431,564

425,390

of which letters of credit Other commitments of which unutilised part of granted overdraft facilities

131,721

132,366

128,967

128,930

130,525

of which loan commitments

290,250

273,876

272,729

274,810

268,866

19,561 2,804,592

21,685 2,770,193

23,571 2,742,513

27,824 2,773,059

25,999 2,745,840

436,848

387,092

199,362

353,680

501,744

52,718

79,245

25,527

103,113

81,267

3,294,158

3,236,530

2,967,402

3,229,852

3,328,851

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016 66,498

of which other Total Cash and balances with central banks Other loans to central banks Total * Refers to the total of positive market values.

Note 9 Derivatives SEK m Positive market values Trading

35,432

37,290

44,703

53,324

Fair value hedges

133

96

79

15

22

Cash flow hedges

48,394

60,151

64,905

60,986

62,328

-22,019

-24,426

-27,054

-35,637

-36,467

61,940

73,111

82,633

78,688

92,381 63,037

Amounts set off Total Negative market values Trading

37,676

40,050

47,824

58,556

Fair value hedges

78

91

82

146

129

Cash flow hedges

15,651

8,512

9,689

8,264

8,096

-21,751

-24,356

-25,857

-33,670

-33,979

31,654

24,297

31,738

33,296

37,283 3,390,582

Amounts set off Total Nominal value Trading

3,610,265

3,665,721

3,167,735

3,370,296

Fair value hedges

59,903

53,248

42,228

26,073

24,725

Cash flow hedges

1,080,938

1,092,773

1,058,071

925,397

891,575

-1,621,005

-1,967,179

-1,747,179

-1,671,455

-1,575,310

3,130,101

2,844,563

2,520,855

2,650,311

2,731,572

Amounts set off Total

Derivative contracts are presented gross in the table. Amounts set off on the balance sheet consist of the set-off market value of contracts for which the Bank has the legal right and intention to settle contractual cash flows net (including cleared contracts). These contracts are presented on a net basis on the balance sheet per counterparty and currency.

37

36



Note 10 Offsetting of financial instruments 30 June 2017 SEK m

Derivatives

Repurchase agreements, securities borrowing and similar agreements

Total

Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements Gross amount Amounts set off Carrying amount on the balance sheet

83,959

25,068

109,027

-22,019

-4,701

-26,720

61,940

20,367

82,307

Related amounts not set off on the balance sheet Financial instruments, netting arrangements

-16,938

-

-16,938

Financial assets received as collateral

-33,025

-20,358

-53,383

Total amounts not set off on the balance sheet

-49,963

-20,358

-70,321

11,977

9

11,986

Net amount Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements

53,405

5,033

58,438

-21,751

-4,701

-26,452

31,654

332

31,986

-16,938

-

-16,938

-4,310

-332

-4,642

-21,248

-332

-21,580

10,406

0

10,406

Derivatives

Repurchase agreements, securities borrowing and similar agreements

Total

Gross amount

109,687

13,427

123,114

Amounts set off

-27,054

-1,030

-28,084

82,633

12,397

95,030

Gross amount Amounts set off Carrying amount on the balance sheet Related amounts not set off on the balance sheet Financial instruments, netting arrangements Financial assets pledged as collateral Total amounts not set off on the balance sheet Net amount

31 December 2016 SEK m Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements

Carrying amount on the balance sheet Related amounts not set off on the balance sheet Financial instruments, netting arrangements

-20,643

-

-20,643

Financial assets received as collateral

-42,238

-12,397

-54,635

Total amounts not set off on the balance sheet

-62,881

-12,397

-75,278

19,752

-

19,752

Net amount Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements Gross amount Amounts set off Carrying amount on the balance sheet

57,595

1,032

58,627

-25,857

-1,030

-26,887

31,738

2

31,740

-20,643

-

-20,643

-3,807

-2

-3,809

-24,450

-2

-24,452

Related amounts not set off on the balance sheet Financial instruments, netting arrangements Financial assets pledged as collateral Total amounts not set off on the balance sheet

7,288 7,288 Net amount Derivative instruments are set off on the balance sheet when the settlement of two or more derivatives reflects the Bank’s anticipated cash flows. Repurchase agreements and reverse repurchase agreements with central counterparty clearing houses are set off on the balance sheet when this reflects the Bank's anticipated cash flows in the settlement of two or more agreements. This occurs when the Bank has both a contractual right and intention to settle the agreed cash flows with a net amount. The remaining counterparty risk in derivatives is reduced through netting agreements if payments are suspended, i.e. netting positive values against negative values in all derivative transactions with the same counterparty in a bankruptcy situation. Handelsbanken’s policy is to sign netting agreements with all bank counterparties. Netting agreements are supplemented with agreements for issuing collateral for the net exposure. The collateral used is mainly cash, but government securities are also used. Collateral for repurchase agreements and borrowing and lending of securities is normally in the form of cash or other securities.

The amount set off for derivative assets includes set-off cash collateral of SEK 2,438m (3,565), derived from the balance sheet item deposits and borrowing from the public. The amount set off for derivative liabilities includes set-off cash collateral of SEK 914m (2,367), derived from the balance sheet item loans to the public.

38

37



Note 11 Goodwill and other intangible assets

SEK m Opening residual value Additional during the period

Jan-Jun 2017

Goodwill Jan-Jun 2016

Full year 2016

Other intangible assets Jan-Jun Jan-Jun Full year 2017 2016 2016

6,761

6,460

6,460

2,632

1,794

1,794

9,393

8,254

8,254

-

-

147

355

219

1,070

355

219

1,217 -198

Jan-Jun 2017

Total Jan-Jun Full year 2016 2016

The period's amortisation

-

-

-

-130

-86

-198

-130

-86

The period's impairments

-

-

-

-9

-1

-1

-9

-1

-1

Foreign exchange effect

-24

90

154

-6

-26

-33

-30

64

121

Closing residual value

6,737

6,550

6,761

2,842

1,900

2,632

9,579

8,450

9,393

Note 12 Due to credit institutions, deposits and borrowing from the public SEK m Due to credit institutions of which repos Deposits and borrowing from the public of which repos

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

202,681

205,971

178,781

205,274

207,312

-

1,003

-

450

912

1,120,291 332

1,049,699 4,861

829,336 2

1,009,427 5,559

1,134,500 4,522

Note 13 Issued securities

SEK m Issued securities at beginning of year

Jan-Jun 2017

Jan-Jun 2016

1,261,765

1,245,367

Issued

641,229

717,771

Repurchased

-34,557

-21,664

-566,205

-625,066

Matured Foreign exchange effect etc. Issued securities at end of period

-37,696

3,675

1,264,536

1,320,083

Note 14 Pledged assets, contingent liabilities and other commitments SEK m Assets pledged for own debt

39

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

812,294

852,739

839,982

822,426

829,996

Other pledged assets

31,755

53,558

33,375

38,286

34,969

Contingent liabilities Other commitments

75,293 441,532

80,481 427,927

78,530 425,267

82,361 431,564

78,459 425,390

38



Note 15 Classification of financial assets and liabilities The tables show valuation categories for financial instruments in accordance with IAS 39.

30 June 2017

SEK m

At fair value in income statement divided into

Trading

Other

Derivatives identified as hedge instruments

Investments held to maturity

Financial assets available for sale

Total carrying amount

Fair value

436,848

436,848

436,848

52,718

52,718

52,718

119,603

119,603

Loans and other receivables

Other financial liabilities

Assets Cash and balances with central banks Other loans to central banks Interest-bearing securities eligible as collateral with central banks

9,203

109,258

1,142

Loans to other credit institutions Loans to the public

664


33,526

33,526

33,491

2,010,791

2,011,455

2,023,367

33

33


18,783

36,998

5,462

61,243

61,243

Shares Assets where the customer bears the value change risk

18,732

947

1,674

21,353

21,353

128,870

128,870


15,865

61,940

61,940

12,302

12,302

Other assets Prepaid expenses and accrued income

Total financial assets

128,813

57 46,075

25 152 62,760

12,277 478

277,158

46,075

5,230

4

5,864

5,864

2,551,480

8,282

2,945,755

2,957,599

Investments in associates

212

Other non-financial assets

15,127 2,961,094

Total assets Liabilities Due to credit institutions Deposits and borrowing from the public Liabilities where the customer bears the value change risk Issued securities Derivative instruments

128,902 5,722 17,158

Short positions

7,876

Other liabilities

29

Accrued expenses and deferred income

Other non-financial liabilities

Total liabilities

40 39

202,681

204,582

1,120,291

1,120,284

60

128,962

128,962

1,258,814

1,264,536

1,280,830

31,654

31,654

14,496

7,876

7,876

13,822

13,851

13,851

50

13,386

13,436

13,436

30,835

32,782 2,641,836

32,782 2,816,069

2,835,693

Subordinated liabilities

Total financial liabilities

202,681 1,120,291

128,902

14,496

34,218

10,125 2,826,194



31 December 2016

SEK m

At fair value in income statement divided into

Trading

Other

Derivatives identified as hedge instruments

Investments held to maturity

Financial assets available for sale

Total carrying amount

Fair value

199,362

199,362

199,362

25,527

25,527

25,527

97,205

97,205

Loans and other receivables

Other financial liabilities

Assets Cash and balances with central banks Other loans to central banks Interest-bearing securities eligible as collateral with central banks

13,000

83,458

747

Loans to other credit institutions Loans to the public

926


31,347

31,347

31,148

1,962,696

1,963,622

1,978,834

35

35


22,328

36,117

5,464

63,909

63,909

Shares

17,727

1,067

1,618

20,412

20,412

118,646

118,646

82,633

82,633

5,616

5,616

Assets where the customer bears the value change risk Derivative instruments Other assets Prepaid expenses and accrued income

Total financial assets

118,588 19,742

58 62,891

32

5,584

170

520

72,999

240,676

62,891

-

5,528

4

6,222

6,222

2,230,137

7,833

2,614,536

2,629,514

Investments in associates

255

Other non-financial assets

12,790

Total assets

2,627,581

Liabilities Due to credit institutions

178,781

178,781

180,648


829,336

829,336

829,303

Liabilities where the customer bears the value change risk Issued securities Derivative instruments

118,687 5,763 23,272

118,745

118,745

1,261,765

1,280,523

31,738

31,738

1,572

1,572

8,466

Short positions

1,572

Other liabilities

21

9,407

9,428

9,428

2

14,578

14,580

14,580

Accrued expenses and deferred income Subordinated liabilities

Total financial liabilities Other non-financial liabilities

Total liabilities

41

58 1,256,002

40

30,630

118,687

8,466

33,400

33,400

35,330

2,321,562

2,479,345

2,501,867

11,855 2,491,200



Note 16 Fair value measurement of financial instruments 30 June 2017 SEK m

Level 1

Level 2

Level 3

Total

117,526 -

2,077

-

119,603

648

16

664

57,188

4,055

-

61,243

13,061

6,522

1,770

21,353

128,359

-

454

128,813

Assets Interest-bearing securities eligible as collateral with central banks Loans to the public Bonds and other interest-bearing securities Shares Assets where the customer bears the value change risk Derivative instruments Total financial assets at fair value

286

61,654

-

61,940

316,420

74,956

2,240

393,616

128,448

-

454

128,902

-

5,722

-

5,722

413

31,241

-

31,654

Liabilities Liabilities where the customer bears the value change risk Issued securities Derivative instruments Short positions Total financial liabilities at fair value

31 December 2016 SEK m

7,799

77

-

7,876

136,660

37,040

454

174,154

Level 1

Level 2

Level 3

Total

95,511

1,694

-

97,205

-

909

17

926

61,514

2,395

-

63,909

11,528

7,047

1,837

20,412

117,826

-

762

118,588

Assets Interest-bearing securities eligible as collateral with central banks Loans to the public Bonds and other interest-bearing securities Shares Assets where the customer bears the value change risk Derivative instruments Total financial assets at fair value

408

82,225

-

82,633

286,787

94,270

2,616

383,673

117,925

-

762

118,687

-

5,763

-

5,763

443

31,295

-

31,738

Liabilities Liabilities where the customer bears the value change risk Issued securities Derivative instruments Short positions Total financial liabilities at fair value

Valuation process The risk control function checks that the Group’s financial instruments are correctly valued. As far as is possible, the valuations are based on externally generated data.

475

-

1,572

37,533

762

157,760

shown as levels 1–3 in the tables. Financial instruments which are valued at the current market price are categorised as level 1. These financial instruments mainly comprise government instruments and other interest-bearing securities that are traded actively, listed shares and short-term positions in corresponding assets. Level 1 also

Financial instruments for which price information is easily available,

includes the majority of shares in mutual funds and other assets

and which are representative of real and frequently occurring

which are related to unit-linked insurance contracts and similar

transactions, are valued at their current market price. The current bid

agreements and the corresponding liabilities. Financial instruments

price is used for financial assets and the current ask price is used for

which are valued using valuation models which substantially are

financial liabilities. For groups of financial instruments which are

based on market data are categorised as level 2. Level 2 mainly

managed on the basis of the Bank’s net exposure to market risk, the

includes interest-bearing securities and interest- and currency-related

current market price is presumed to be the same as the price which

derivatives. Financial instruments whose value to a material extent is

would be received or paid if the net position were divested.

affected by input data that cannot be verified using external market

For financial instruments where there is no reliable information about

information are categorised as level 3.

market prices, fair value is established using valuation models. These

The categorisation is based on the valuation method used on the

models can, for example, be based on price comparisons, present

balance sheet date. If the category for a specific instrument has

value calculations or option valuation theory depending on the nature

changed since the previous balance sheet date (31 December 2016),

of the instrument.

the instrument has been moved between the levels in the table.

Valuation hierarchy In the tables, financial instruments at fair value have been categorised in terms of how the valuations have been carried out and the extent of market data used in the valuation. The categorisation is

42

1,097 119,465

41

During the January–June 2017 period, some of the volumes were moved between level 1 and level 2, as a result of a new assessment of market activity. On the assets side, equities worth SEK 68m were moved from level 2 to level 1. Derivatives with a value of SEK 5m


INTERIM REPORT JANUARY JUNE 2017 INTERIM REPORT JANUARY – JUNE–2017

were moved from level 1 to level 2. On the liabilities side, derivatives

Differences between the transaction price and the value

with a value of SEK 30m were transferred from level 1 to level 2.

produced using a valuation model

The holdings in level 3 mainly comprise unlisted shares and holdings

The models use input data in the form of market prices and other

in private equity funds. Holdings in private equity funds are valued

variables that are deemed to affect pricing. The models and input

using valuation models mainly based on a relative valuation of

data which form the basis of the valuations are regularly validated to

comparable listed companies in the same sector. The performance

ensure that they are consistent with market practice and established

measurements used in the comparison are adjusted for factors which

financial theory. In cases where there are material positive differences

distort the comparison between the investment and the company

between the value calculated with the help of a valuation model at

used for comparison. Subsequently, the valuation is based on

initial recognition and the transaction price (day 1 gain/loss), the

earnings multiples, e.g. P/E ratios. Most of these holdings represent

difference is distributed over the maturity period of the financial

investment assets in the Group’s insurance operations. Value

instrument. Such differences occur when the applied valuation model

changes on the investment assets are included in the basis for

does not fully capture all the components which affect the value of the

calculating the yield split in the insurance operations and are

instrument.

therefore not reported directly in the income statement.

As a consequence of the application of this principle, SEK 63m (76)

The Group’s holdings of unlisted shares consist mainly of the Bank’s

has been amortised in net gains/losses on financial transactions

participating interests in various types of jointly owned operations

during the January–June 2017 period. At the end of the period, non-

which are related to the Bank’s business. For example, these may be

recognised day 1 gains/losses amounted to SEK 601m; at the

participating interests in clearing organisations and infrastructure

previous year-end, the corresponding figure was SEK 585m.

collaboration on Handelsbanken’s home markets. In general, such holdings are valued at the Bank’s share of the company’s net asset value, or alternatively at the price of the last completed transaction. In all material respects, unlisted shares are classified as available for sale. Value changes for these holdings are thus reported in other comprehensive income.

The Bank regularly conducts separate valuations of the total credit risk component (own credit risk as well as counterparty risk) in outstanding model-valued derivatives. Changes in fair value due to changed credit risk are recognised in profit/loss to the extent that the overall effect exceeds non-recognised day 1 gains/losses.

Reconciliation of financial instruments in level 3

January – June 2017 SEK m Carrying amount at beginning of year

Shares

Loans to the public

Assets where the customer bears the value change risk

Liabilities where the customer bears the value change risk -762

1,837

17

762

Acquisitions/issues

11

-

-

-

Repurchases/sales

-54

-

-312

312

-

-2

-

-

-68

-

4

-4

Matured during the period Unrealised value change in income statement

44

-

-

-

Transfer from level 1 or 2

Unrealised value change in other comprehensive income

-

1

-

-

Transfer to level 1 or 2

-

-

-

-

1,770

16

454

-454

Shares

Loans to the public

Assets where the customer bears the value change risk

Liabilities where the customer bears the value change risk

Carrying amount at end of period

January – December 2016 SEK m Carrying amount at beginning of year

1,283

10

732

-732

Acquisitions/issues

14

-

-

-

Repurchases/sales

-90

-

-

-

-

-2

-

-

Unrealised value change in income statement

-55

0

30

-30

Unrealised value change in other comprehensive income

685

1

-

-

Transfer from level 1 or 2

-

8

-

-

Transfer to level 1 or 2

-

-

-

-

1,837

17

762

-762

Matured during the period

Carrying amount at end of period

43

Handelsbanken

42

Handelsbanken


Note 17 Assets and liabilities by currency 30 June 2017 SEK m

SEK

EUR

NOK

DKK

GBP

Other USD currencies

Total

Assets 167

113,121

4,169

1,752

95,545

220,625

1,469

Other loans to central banks

Cash and balances with central banks

4,774

64

25,116

22,175

429

-

160

52,718

Loans to other credit institutions

1,658

7,090

750

38

938

21,160

1,892

33,526 2,011,455

Loans to the public

436,848

1,264,946

192,936

228,488

90,496

199,777

26,045

8,767

of which corporates

479,876

130,075

139,198

33,585

133,080

25,788

7,904

949,506

of which households

785,070

62,861

89,290

56,911

66,697

257

863

1,061,949 119,603

Interest-bearing securities eligible as collateral with central banks

93,925

6,747

-

11

-

17,991

929


44,427

2,340

1,173

-

1,668

11,635

-

Other items not broken down by currency Total assets

245,701 1,655,598

61,243 245,701

322,298

259,696

114,472

298,357

297,456

13,217

2,961,094

Liabilities Due to credit institutions Deposits and borrowing from the public

74,025

65,955

6,305

15,901

14,614

19,756

6,125

202,681

554,035

103,244

72,713

40,510

145,862

198,543

5,384

1,120,291

of which corporates

223,411

85,483

51,814

23,753

104,966

196,231

4,909

690,567

of which households

330,624

17,761

20,899

16,757

40,896

2,312

475

429,724

436,694

254,931

24,262

442

86,677

425,266

36,264

1,264,536

8,308

14,432

-

-

-

10,042

-

Issued securities Subordinated liabilities Other items not broken down by currency, incl. equity Total liabilities and equity

340,804 1,413,866

32,782 340,804

438,562

103,280

56,853

247,153

653,607

47,773

116,415

-156,285

-57,490

-51,084

356,199

34,600

151

131

129

120

48

44

623

SEK

EUR

NOK

DKK

GBP

Other USD currencies

Total

6,199

Other assets and liabilities broken down by currency (net) Net foreign currency position

2,961,094

31 December 2016 SEK m Assets 140

99,547

Other loans to central banks

Cash and balances with central banks

4,820

-

Loans to other credit institutions

7,630

6,983

Loans to the public

360

102

61,774

30,463

1,137

20,269

394

-

44

199,362 25,527

5

976

14,127

1,266

31,347 1,963,622

1,220,175

187,649

232,704

92,299

192,953

28,636

9,206

of which corporates

460,084

128,416

139,985

36,741

128,371

28,413

8,287

930,297

of which households

760,091

59,233

92,719

55,558

64,582

223

919

1,033,325


72,683

6,431

-

11

-

17,344

736

97,205


43,464

2,181

1,329

-

1,701

15,234

-

63,909

1,595,520

302,791

240,592

112,686

257,798

105,804

12,389

2,627,580

178,781

Other items not broken down by currency Total assets

246,608

246,608

Liabilities Due to credit institutions

36,630

73,200

4,454

17,700

4,775

27,768

14,254

503,890

78,736

59,761

34,733

122,374

23,181

6,661

829,336

of which corporates

192,720

61,542

38,662

19,051

86,076

21,003

6,170

425,224

of which households

311,170

17,194

21,099

15,682

36,298

2,178

491

404,112

463,704

240,231

30,826

324

84,338

405,286

37,056

1,261,765

8,230

14,355

-

-

-

10,815

-


Issued securities Subordinated liabilities Other items not broken down by currency, incl. equity Total liabilities and equity Other assets and liabilities broken down by currency (net) Net foreign currency position

44

43

324,298 1,336,752

33,400 324,298

406,522

95,041

52,757

211,487

467,050

57,971

103,917

-145,364

-59,815

-46,342

361,349

45,650

186

187

114

-31

103

68

2,627,580

627



Note 18 Own funds and capital requirements in the consolidated situation The requirements for the calculation of own funds and capital requirements are regulated in Regulation (EU) No 575/2013 (CRR) and Directive 2013/36/EU, which comprise the EU’s implementation of the international Basel III regulations. All references to CRR in this interim report refer to these regulations in their entirety, regardless of legislative form (regulation, directive, executive decree or national implementation). Figures reported in this section refer to the minimum capital requirements under Pillar 1 and meet the requirements for publication of information relating to capital adequacy in CRR Part Eight, as well as in the Swedish Financial Supervisory Authority’s regulation FFFS 2014:12.

Own funds SEK m TIER 1 CAPITAL Equity, Group Accrued unpaid dividend last year Accrued dividend current year

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

134,900

131,741

136,381

134,085

129,582

-

-

-

-

-

-5,127

-2,595

-9,721

-6,400

-4,118

Adjustment of Group result

-429

-195

3,829

-162

34

Adjustment of Group equity

3,289

3,267

-593

3,532

3,518

Minority interests

-6

-6

-6

-6

-5

132,627

132,212

129,890

131,049

129,011

-9,513

-9,409

-9,355

-9,268

-8,433

-477

-633

-645

-637

-685

-2,272

-2,270

-1,527

-1,567

-1,543

Positions in securitisation

-

-

-

-

-

Net pension assets

-

-

-

-

-

-607

-622

-636

-593

-529

-1,907

-2,749

-2,487

-7,850

-8,815

-

-

-

-

-

117,851

116,529

115,240

111,134

109,006

Capital contributions to unconsolidated financial entities >10% CET1

-

-

-

-

-

Deferred tax assets >10% CET1

-

-

-

-

-

Amount of capital contributions and deferred tax assets >15%

-

-

-

-

-

117,851

116,529

115,240

111,134

109,006

12,011

12,598

12,768

12,156

12,045

Total tier 1 capital

129,862

129,127

128,008

123,290

121,051

TIER 2 CAPITAL Subordinated loans

17,431

17,293

17,354

17,392

17,135

Equity (consolidated entities) Deducted items Goodwill and other intangible assets Value adjustments (fair value) Special deduction for IRB institutions

Own shares Adjustments in accordance with stability filter Cash flow hedges Unrealised accumulated gains, shares Common equity tier 1 capital, gross Threshold deductions

Common equity tier 1 capital Additional tier 1 instruments

Deducted items Tier 2 contribution in unconsolidated financial entities Total tier 2 capital Total own funds

45

44

-1,129

-1,129

-1,129

-1,129

-1,129

16,302

16,164

16,225

16,263

16,006

146,164

145,291

144,233

139,553

137,057



Capital ratios and buffers 30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016


23.4%

23.8%

25.1%

24.0%

23.0%

Tier 1 ratio, CRR

25.8%

26.4%

27.9%

26.6%

25.5%


29.0%

29.7%

31.4%

30.1%

28.9%


504,199

489,456

458,787

463,675

474,500

Own funds in relation to capital requirement according to Basel I floor

148%

149%

148%

144%

142%

Institution-specific buffer requirements*

6.6%

6.6%

6.4%

6.4%

6.4%

of which capital conservation buffer requirement

2.5%

2.5%

2.5%

2.5%

2.5%

of which countercyclical capital buffer requirement

1.1%

1.1%

0.9%

0.9%

0.9%

3.0% 18.9%

3.0% 19.3%

3.0% 20.6%

3.0% 19.5%

3.0% 18.5%

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

of which systemic risk buffer requirement Common equity tier 1 capital available for use as a buffer * Information is only provided regarding the buffer requirements which have come into force.

Capital requirement SEK m Credit risk according to standardised approach Credit risk according to IRB Approach

6,609

6,330

6,472

6,336

6,186

27,560

26,334

23,950

24,476

25,603

Market risks

800

936

873

817

711

Credit valuation adjustment risk (CVA)

438

627

594

650

645

Operational risk Total capital requirement Adjustment according to Basel I floor

4,929

4,929

4,815

4,815

4,815

40,336

39,156

36,704

37,094

37,960

60,239

59,790

61,531

61,134

59,499


100,575

98,946

98,235

98,228

97,459


148,436

147,561

145,760

141,120

138,600

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

Risk exposure amount SEK m Credit risk according to standardised approach Credit risk according to IRB Approach Market risk Credit valuation adjustment risk (CVA) Operational risk Total risk exposure amount

82,608

79,126

80,896

79,204

77,323

344,497

329,180

299,370

305,951

320,041

10,004

11,705

10,910

10,216

8,890

5,477

7,832

7,429

8,122

8,064

61,613

61,613

60,182

60,182

60,182

504,199

489,456

458,787

463,675

474,500

Capital requirement credit risks, standardised approach**

SEK m Sovereign and central banks Municipalities Multilateral development banks International organisations Institutions

Exposure amount 30 Jun 31 Dec 2017 2016

Risk-weighted exposure amount 30 Jun 31 Dec 2017 2016

Capital requirement 30 Jun 31 Dec 2017 2016

Average risk weight, % 30 Jun 31 Dec 2017 2016

98

255,748

0

77

0

6

0.0

1

54,908

0

22

0

2

0.0

0.0 0.0

592

636

0

0

0

0

0.0

0.0

0

49

0

0

0

0

0.0

0.0

6,257

4,215

373

343

30

27

6.0

8.1

Corporates

11,458

10,640

11,348

10,017

908

801

99.0

94.1

Households

16,990

17,042

12,703

12,737

1,016

1,019

74.8

74.7

Collateral in real estate

97,700

92,087

35,095

33,316

2,808

2,665

35.9

36.2

255

199

333

258

27

21

130.6

129.6

Past due items Collective investment undertakings Equities Other items Total

88

0

88

0

7

0

100.0

0.0

6,784

6,796

16,114

16,126

1,289

1,290

237.5

237.3

7,148

8,571

6,554

8,000

524

641

91.7

93.4

147,371

450,891

82,608

80,896

6,609

6,472

56.1

17.9

** Information about capital requirements for the exposure classes where there are exposures.

46

45



Credit risks IRB

SEK m

Exposure amount 30 Jun 31 Dec 2017 2016

Risk-weighted exposure amount 30 Jun 31 Dec 2017 2016

Average risk weight, % 30 Jun 31 Dec 2017 2016

Sovereign and central banks

581,859

Corporate

840,765

821,000

230,800

194,650

18,464

15,572

27.5

23.7

Corporate lending

818,366

798,330

226,639

190,709

18,131

15,257

27.7

23.9

of which other loans foundation approach *

109,110

116,048

30,858

35,946

2,469

2,876

28.3

31.0

of which other loans advanced approach *

709,256

682,282

195,781

154,763

15,662

12,381

27.6

22.7

149,881

126,774

55,131

57,176

4,411

4,574

36.8

45.1

of which large companies of which medium-sized companies of which property companies

Retail Private individuals of which property loans

772

1.7

78,803

81,640

37,042

32,486

2,963

2,599

47.0

39.8

480,572

473,868

103,608

65,101

8,288

5,208

21.6

13.7

22,399

22,670

4,161

3,941

333

315

18.6

17.4

186,293

187,897

8,871

7,555

710

604

4.8

4.0

1,000,376

982,270

71,523

72,398

5,722

5,792

7.1

7.4

Counterparty risk Housing co-operative associations

9,659

Capital requirement 30 Jun 31 Dec 2017 2016

974,568

955,346

64,412

65,258

5,153

5,221

6.6

6.8

897,973

874,253

50,295

48,178

4,024

3,854

5.6

5.5

76,595

81,093

14,117

17,080

1,129

1,367

18.4

21.1

25,808

26,924

7,111

7,140

569

571

27.6

26.5

7,317

7,650

1,846

1,706

148

137

25.2

22.3 28.2

of which other loans Small companies of which property loans

18,491

19,274

5,265

5,434

421

434

28.5

Institutions

of which other loans

86,065

105,185

14,007

17,397

1,121

1,392

16.3

16.5

Lending to institutions

15,523

20,066

5,128

6,175

410

494

33.0

30.8 13.2

Counterparty risk

70,542

85,119

8,879

11,222

710

898

12.6

of which repos and securities loans

18,069

14,070

312

631

25

50

1.7

4.5

of which derivatives

52,473

71,049

8,567

10,591

685

848

16.3

14.9 370.0

Equity exposures

2,128

1,340

7,262

4,959

581

397

341.2

of which listed shares

766

-

2,220

-

178

-

290.0

-

of which other shares

1,362

1,340

5,042

4,959

403

397

370.0

370.0

2,353

2,387

2,353

2,387

188

191

100.0

100.0

21

22

22

24

2

2

106.0

105.9

21

22

22

24

2

2

106.0

105.9

Non credit-obligation assets Securitisation positions of which Traditional securitisation of which Synthetic securitisation Total IRB Approach

-

-

-

-

-

-

-

-

2,699,860

2,100,101

344,497

299,370

27,560

23,950

12.8

14.3

* The foundation approach means the IRB Approach without own estimates of LGD and CCF. The advanced approach means the IRB Approach with own estimates of LGD and CCF.

The capital requirement for credit risk is calculated according to the

Handelsbanken Finans AB, Ecster AB, and retail exposures in

standardised approach and the IRB Approach in accordance with

Sweden, Norway, Finland and Denmark, as well as in the

CRR. There are two different IRB Approaches: the IRB Approach

subsidiaries Stadshypotek AB, Handelsbanken Finans AB, Ecster

without own estimates of LGD and CCF, and the IRB Approach with

AB, and Rahoitus Oy.

own estimates of LGD and CCF.

the total risk-weighted exposure amount for credit risk. For the

Bank uses its own method to determine the probability of the

remaining credit risk exposures, the capital requirement is calculated

customer defaulting within one year (PD), while the other parameters

using the standardised approach.

are set out in CRR rules. In the IRB Approach with own estimates of LGD and CCF, the Bank uses its own methods to calculate the loss given default (LGD) and the exposure amount.

Repos and securities loans for institutions are reported separately in the Credit risk exposures approved for the IRB Approach table, since they give rise to very low capital requirements, while the volumes

Handelsbanken uses the IRB Approach without own estimates of

vary considerably over time. The low capital requirement is due to the

LGD and CCF for exposures to institutions and for certain product

exposure being reported gross and being secured.

and collateral types for corporate exposures and, starting from Q2 2017, for sovereign exposures in the whole of the regional banking operations and in the following subsidiaries: Stadshypotek AB, Handelsbanken Finans AB, Ecster AB, Handelsbanken Finans (Shanghai) Financial Leasing Co. Ltd and Rahoitus Oy. The IRB Approach with own estimates of LGD and CCF is applied to the majority of exposures to large corporates, medium-sized companies, property companies and housing co-operative associations in regional bank operations (excluding the Netherlands), Handelsbanken Capital Markets, Stadshypotek AB and

47

At the end of the quarter, the IRB Approach was applied to 81% of

In the IRB Approach without own estimates of LGD and CCF, the

46

The total average risk weight for exposures approved for the IRB Approach decreased during the quarter, amounting to 12.8% (15.6). The reason why the average risk weight has decreased is that sovereign exposures began to be reported in accordance with the IRB Approach during the quarter, and these have an average risk weight of 1.7%. Credit quality is good. Of Handelsbanken’s corporate exposures, 97% were customers with a repayment capacity assessed as normal or better than normal, i.e. with a rating grade between 1 and 5 on the Handelsbanken Handelsbanken


Bank’s ten-point risk rating scale. The IRB Approach is based on

The level of the risk weight in the corporate exposures reflects the

historical losses from both the financial crisis of recent years and the

portfolio composition and how various loans are classified into

Swedish banking crisis in the early 1990s. These risk weights reflect

different exposure classes.

the fact that Handelsbanken has reported low loan losses over a long period. The risk measurements applied contain margins of conservatism to ensure that the risk is not underestimated.

The capital requirement for equity exposures in the IRB Approach is calculated according to a simplified risk weight method.

Capital requirement market risks 30 Jun 2017

31 Mar 2017

31 Dec 2016

Position risk in the trading book

793

928

864

810

703

Interest rate risk

784

917

855

801

694

SEK m

30 Sep 2016

30 Jun 2016

of which general risk

497

616

598

651

534

of which specific risk

287

300

256

149

158

of which positions in securitisation instruments

-

-

-

-

-

0

1

1

1

2

Equity price risk

9

11

9

9

9

of which general risk

1

2

1

1

1

of which specific risk

4

4

3

4

3

of which mutual funds

1

0

0

0

1

of which non-delta risk

3

5

5

4

4

Exchange rate risk

-

-

-

-

-


-

-

-

-

-

Commodities risk

7

8

9

7

8


0

0

0

0

0

Settlement risk

0

-

0

0

0

800

936

873

817

711


Total capital requirement for market risks

The capital requirement for market risks is calculated for the Bank’s consolidated situation. The capital requirement for interest rate risks and equity price risks is, however, only calculated for positions in the trading book. When calculating the capital requirement for market risks, the standardised approach is applied.

Capital requirement operational risk Handelsbanken uses the standardised approach, to calculate the capital requirement for operational risk. According to the standardised approach, the capital requirement is calculated by multiplying a factor specified in the regulations by the average operating income during the last three years of operation. Different factors are applied in different business segments.

Leverage ratio The provisions of CRR include a reporting requirement regarding a non-risk-based leverage ratio. The measurement is to undergo evaluation and no decision to make it mandatory has yet been taken. SEK m Balance sheet according to accounting regulations Deduction for assets not included in the banking group

30 Jun 2017 2,961,094

31 Mar 2017 2,922,929

31 Dec 2016 2,627,580

30 Sep 2016 2,908,935

30 Jun 2016 3,030,645

-123,620

-120,443

-114,858

-112,161

-103,215

Adjustment for differences between carrying amount and leverage ratio exposure – derivatives

-21,485

-26,092

-20,341

-27,185

-24,710

Adjustment for differences between carrying amount and leverage ratio exposure – repos and securities loans

3,342

3,860

4,436

5,295

6,252

500,667

485,559

492,788

494,872

486,570

-321,387

-312,461

-314,413

-313,706

-309,195

Assets reported off the balance sheet, net

179,280

173,098

178,375

181,166

177,375

Additional adjustment

-14,775

-15,683

-14,650

-19,915

-21,106

2,983,836

2,937,669

2,660,542

2,936,135

3,065,241

129,862

129,127

128,008

123,290

121,051

4.4%

4.4%

4.8%

4.2%

3.9%

Assets reported off the balance sheet, gross (before adjustment for conversion factor) Deduction from assets off the balance sheet after application of conversion factor

Assets on which the leverage ratio is calculated Capital on which the leverage ratio can be calculated Tier 1 capital Leverage ratio Leverage ratio calculated on tier 1 capital

48

Handelsbanken

47

Handelsbanken


Information in this section relates to Handelsbanken’s material risks and capital requirements at the time that this interim report is published. A full description of the Bank’s risk and capital management can be found in Handelsbanken’s Annual Report and in Handelsbanken’s Risk and Capital Management – Information according to Pillar 3.

Note 19 Risk and liquidity Figures reported in this section meet the requirements for publication of information relating to risk and capital management in CRR Part Eight.

Risk and uncertainty factors Handelsbanken provides credit through its branch operations,

The situation with regard to regulatory developments continues to

exercising a low risk tolerance. The credit process is based on the

evolve rapidly. The UK’s decision to leave the EU means there is

conviction that a decentralised organisation with local presence

uncertainty regarding the regulations that will apply to the Bank’s

ensures high quality in credit decisions. Handelsbanken’s exposure

British operations. The Bank is preparing for the implementation of

to market risks is also low. Essentially, market risks in the banking

Brexit in close consultation with public authorities in both Sweden

operations are only taken as part of meeting customers’ investment

and the UK. The Bank’s low tolerance of risk, sound capitalisation

and risk management needs. During the past few years, the Bank

and strong liquidity situation mean that Handelsbanken is also well-

has worked actively to reduce the market risks on its balance sheet.

equipped to operate under substantially more difficult market

One result of this is that a much smaller part of the Bank’s earnings

conditions than those experienced during the last few years. The

comes from net gains/losses on financial transactions.

Bank’s liquidity position is described in more detail below under the heading Liquidity and funding.

Liquidity and funding Handelsbanken has a strong liquidity position. For many years, the

For many years, the Bank has worked on extending the maturities of

Bank has actively worked with liquidity measures and has adopted a

its funding by increasing bond issues and ensuring that liquidity risks

conservative approach. Part of this work has involved centralising

are included in internal pricing. Handelsbanken’s funding programme

liquidity management with the purpose of strengthening control of the

covers the maturities in all currencies that the Bank needs to fund its

liquidity risks and of guaranteeing and optimising the Bank’s funding

lending and enables the Bank to issue in all currencies of relevance

in all scenarios.

to the Bank.

Funding programmes/limits as at 30 June 2017 – Group Currency

Programme size

Utilised amount

Countervalue SEK m

ECP*

EUR

15,000

5,981

57,602

ECP (Stadshypotek)*

EUR

4,000

-

-

French Commercial Paper

EUR

7,500

1,839

17,706

Programme (in millions)

Swedish Commercial Paper

SEK

25,000

-

-

Swedish Commercial Paper (Stadshypotek)

SEK

90,000

-

-

USCP

USD

15,000

5,462

46,063

AMTN

AUD

5,000

1,275

8,266

AMTCN (Stadshypotek)

AUD

5,000

750

4,863

EMTN*

USD

50,000

20,983

176,964

EMTCN (Stadshypotek)*

EUR

20,000

10,002

96,327

US 144A/3(a)(2)

USD

20,000

10,650

89,819

Stadshypotek US 144A

USD

15,000

5,000

42,169

Samurai

JPY

400,000

160,700

12,084

MTN*

SEK

100,000

10,979

10,979 29,071

General funding >1 Y*

USD

15,000

3,447

Extendible Notes

USD

15,000

-

Total Total programme (or limited) amounts, SEK m

1,854,124

Unutilised amount, SEK m

1,262,211

Available amount

591,913

68%

* Under these programmes it is possible to issue in other currencies than the original programme currency. Currency conversion takes place at the time of issue.

49

48




Balances with central banks and banks, as well as securities that are

issue amount for covered bonds and other liquidity-creating

eligible as collateral with central banks, totalled SEK 664bn as at 30

measures.

June 2017 (see table below). In addition, there was an unutilised

Balances with central banks and banks, and securities holdings in the liquidity reserve Market value SEK m Cash and balances with and other lending to central banks Balances with banks and the National Debt Office, overnight Securities issued by governments and public entities Covered bonds

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

489,210

465,038

224,533

456,491

582,590

1,555

2,301

7,712

803

1,807

123,699

99,652

96,217

106,938

104,133 50,101

48,011

53,093

53,647

53,458

Securities issued by non-financial companies

934

287

27

797

614

Securities issued by financial companies

106

301

124

242

142

Total

663,515

620,672

382,260

618,729

739,387

of which in SEK

135,228

151,277

126,241

192,224

160,997

of which in EUR

122,095

123,353

108,380

135,707

83,698

of which in USD of which in other currencies

246,228 159,964

195,289 150,753

47,449 100,190

179,920 110,878

366,669 128,023

30 June 2017 Market value, SEK m Cash and balances with and other lending to central banks Balances with other banks and the National Debt Office, overnight Securities issued by governments Securities issued by municipalities and other public entities Covered bonds, external issuers Own covered bonds Securities issued by non-financial companies Securities issued by financial companies Total

50

49

SEK

EUR

USD

Other

Total

4,773

113,069

220,621

150,747

489,210

1,380

26

22

127

1,555

88,338

6,829

19,565

-

114,732

2,927

-

6,020

20

8,967

33,710

2,092

-

9,070

44,872 3,139

3,139

-

-

-

899

35

-

-

934

62

44

-

-

106

135,228

122,095

246,228

159,964

663,515



Maturities for financial assets and liabilities 30 June 2017 SEK m

Up to 1 mth

1 - 6 mths 6 - 12 mths

1 - 2 yrs

2 - 5 yrs

5 yrs -

Unspec. maturity

Total

-

-

-

-

489,566 119,603

Assets Cash and balances with central banks

489,566


-

-

119,603

-

-

-

-

-

-


61,243

-

-

-

-

-

-

61,243

Loans to credit institutions

26,897

1,282

1,256

129

1,627

2,335

-

33,526

-of which reverse repos

11,175

-

-

-

-

-

-

11,175

Loans to the public

45,187

239,645

179,395

176,293

373,101

997,834

-

2,011,455

8,322

-

-

-

-

-

-

8,322

Other

29,361

-

-

-

-

-

216,340

245,701

-of which shares and participating interests

21,353

-

-

-

-

-

-

21,353

8,008

-

-

-

-

-

-

8,008

771,857

240,927

180,651

176,422

374,728

1,000,169

216,340

2,961,094

119,339

53,237

1,774

4,612

281

4,864

18,574

202,681

-

-

-

-

-

-

-

0

-of which deposits from central banks

34,140

28,576

518

-

-

-

1,722

64,956


192,488

44,486

4,863

754

2,346

5,806

869,548

1,120,291

332

-

-

-

-

-

-

332

98,518

307,128

178,904

183,164

417,331

79,491

-

1,264,536

-

11,464

108,556

114,238

287,725

48,220

-

570,203

-of which certificates and other securities with original maturity of less than one year

81,484

271,853

37,952

-

-

-

-

391,289

-of which senior bonds and other securities with original maturity of more than one year

17,034

23,811

32,396

68,926

129,606

31,271

-

303,044

-

2,971

-

19,787

10,024

-

-

32,782

12,518

-

-

-

-

-

328,286

340,804 7,876

-of which reverse repos

-of which claims on investment banking settlements

Total Liabilities Due to credit institutions -of which repos

-of which repos

Issued securities -of which covered bonds

Subordinated liabilities Other -of which short positions

7,876

-

-

-

-

-

-

-of which investment banking settlement debts

4,642

-

-

-

-

-

-

4,642

422,863

407,822

185,541

208,317

429,982

90,161

1,216,408

2,961,094

Total

The table shows holdings of bonds and other interest-bearing securities in the time intervals in which they can be converted to liquidity if they are pledged as collateral or sold. This means that the table does not reflect the actual maturities for the securities included. In “Other”, assets and liabilities are reported as maturing in the time intervals that correspond to the contractual maturity dates, taking into account contractual amortisation plans. Sight deposits are reported under “Unspecified maturity”. “Other” includes market values in derivative transactions.

For maturity tables in SEK, EUR and USD, please see the Fact Book which is available at handelsbanken.se/ireng.

51

50



Liquidity coverage ratio (LCR) 30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

EUR

132

178

136

178

181

USD

177

236

322

164

121

Total*

120

148

126

162

139

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

Liquidity coverage ratio (LCR), %

* In accordance with the Swedish Financial Supervisory Authority's directive FFFS 2012:6.

Liquidity coverage ratio (LCR) - decomposition, SEK m Liquid assets

650,117

606,507

290,058

416,189

433,824

Liquid assets level 1

613,808

565,626

251,189

375,318

394,887

Liquid assets level 2

36,309

40,881

38,869

40,871

38,937

Cash outflows

593,185

489,050

359,659

514,967

697,349

Deposits from customers

242,608

220,330

173,496

191,610

169,582

Market funding

308,352

228,791

151,735

284,083

486,320

Other cash flows

42,225

39,929

34,428

39,274

41,447

Cash inflows

50,132

79,554

129,176

258,526

384,619

Inflows from maturing lending to non-financial customers

14,486

22,186

21,146

18,618

26,985

Other cash inflows

35,646

57,368

108,030

239,908

357,634

The components are defined in accordance with the Swedish Financial Supervisory Authority's regulations and requirements for the liquidity coverage ratio and reporting of liquid assets and cash flows (FFFS 2012:6). Liquid assets level 1 corresponds to Chapter 3, Section 6. Liquid assets level 2 corresponds to Chapter 3, Section 7. Deposits from customers corresponds to Chapter 4, Sections 4-9. Market funding corresponds to Chapter 4, Sections 10-13. Other cash flows corresponds to Chapter 4, Sections 14-25. Loans to non-financial customers corresponds to Chapter 5, Section 4. Other cash inflows corresponds to Chapter 5, Sections 6-12.

As of 1 October 2015, due to the European Commission’s delegated

the same regulation, was 132% during the first six months. The

act, there is a European minimum requirement for banks’ liquidity in

Bank’s LCR, calculated according to the European Commission’s

the form of a short-term liquidity buffer: liquidity coverage ratio (LCR).

delegated act, was 136%.

The minimum requirement in 2017 is 80%, and this will be raised to 100% by 2018, when the delegated act will be fully implemented. However, according to the delegated act, the LCR is based on the less stringent LCR proposed by the Basel Committee in 2013 and certain EU-specific changes, for example, that the liquidity reserve may include a higher proportion of covered bonds. By making requirements for a short-term liquidity buffer in FFFS 2012:6 as early as 2013, Sweden has moved more quickly than required by the EU. The requirement amounts to 100%, but the definition of what comprises a short-term liquidity buffer differs from what applies at EU level. The LCR which the Swedish Financial Supervisory Authority has implemented is a stricter LCR measurement, mainly in terms of deposit outflow assumptions and the composition of the liquidity portfolio. The minimum requirement for the net stable funding ratio is expected to be introduced in the EU

Stress test with liquidity-creating measures The Bank’s liquidity position is regularly subjected to stress tests. In these tests, the Bank’s cash flows are stressed, based on certain defined assumptions. For example, in the stress test aimed at demonstrating resistance to more long-term market disruptions, it is assumed that the Bank is unable to obtain funding in the financial markets at the same time as it experiences a gradual disappearance of 10% of deposits from households and companies over the first month. It is further assumed that the Bank continues to conduct its core activities, i.e. loans to households and companies, and that committed loan offers and other credit facilities are partly utilised by customers. Account is also taken of the fact that holdings with central banks are utilised and that the Group Treasury liquidity portfolio can provide immediate additional liquidity. In addition, liquidity-creating

in 2018 at the earliest.

measures – for example, unutilised facilities to issue covered bonds –

At the end of the second quarter, Handelsbanken’s LCR according to

of the stress test shows that the liquidity reserves, even in a stressed

the Swedish Financial Supervisory Authority’s regulation FFFS 2012:6 was 120%, which shows that the Bank has high resistance to short-term disruptions in the funding market. This also applies in USD

are used in order to gradually provide liquidity to the Bank. The result scenario, cover the Bank’s liquidity requirement for over three years, even if access to new funding in the markets were to disappear.

and EUR. The LCR, as an average of daily observations according to

52

Handelsbanken

51

Handelsbanken


Non-encumbered assets, NEA 30 June 2017 SEK bn

NEA

Accumulated coverage ratio in % of unsecured funding*

Holdings with central banks and securities in the liquidity portfolio

664

74%

Mortgage loans

553

136%

Other household lending

185

156%

Property company lending lowest risk class (1-3)

265

186%

Other corporate lending lowest risk class (1-3)

150

203%

28

206%

249

234%

Loans to credit institutions lowest risk class (1-3) Other corporate lending Other assets Total non-encumbered assets (NEA) Encumbered assets without underlying liabilities** Encumbered assets with underlying liabilities Total assets, Group

23

236%

2,117

236%

57 787 2,961

31 December 2016 SEK bn

NEA

Accumulated coverage ratio in % of unsecured funding*

Holdings with central banks and securities in the liquidity portfolio

382

46%

Mortgage loans

470

102%

Other household lending

182

124%

Property company lending lowest risk class (1-3)

260

155%

Other corporate lending lowest risk class (1-3)

144

172%

32

176%

241

205%

Loans to credit institutions lowest risk class (1-3) Other corporate lending Other assets Total non-encumbered assets (NEA) Encumbered assets without underlying liabilities** Encumbered assets with underlying liabilities Total assets, Group

44

210%

1,755

210%

61 812 2,628

* Issued short and long non-secured funding and liabilities to credit institutions. ** Over-collateralisation in cover pool (OC).

Information in this section relates to Handelsbanken’s material risks and risk management at the time that this interim report is published. A full description of the Bank’s risk and capital management can be found in Handelsbanken’s Annual Report and in Handelsbanken’s Risk and Capital Management – Information according to Pillar 3.

Note 20 Related-party transactions There have been no business transactions of material importance with related parties during the period.

Note 21 Segment reporting Information about the Bank’s segment reporting is provided on pages 9-23.

Note 22 Events after the balance sheet date No significant events occurred after the balance sheet date.

53

52



Condensed set of financial statements – Parent company INCOME STATEMENT – PARENT COMPANY SEK m

Q2 2017

Q1 2017 Change

Net interest income

4,131

3,845

Dividends received

1,043

-3


1,731

1,620


263

Other operating income

419

Total income

7%

Q2 2016 Change

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

3,644

13%

7,976

7,233

10%

15,011

2,481

-58%

1,040

4,783

-78%

17,045

7%

1,665

4%

3,351

3,228

4%

6,509

602

-56%

469

-44%

865

1,667

-48%

3,076

394

6%

392

7%

813

775

5%

1,647

7,587

6,458

17%

8,651

-12%

14,045

17,686

-21%

43,288

Staff costs

-3,122

-2,631

19%

-2,604

20%

-5,753

-5,661

2%

-10,427

Other administrative expenses

-1,372

-1,379

-1%

-1,310

5%

-2,751

-2,555

8%

-5,224

Depreciation, amortisation and impairment of property, equipment and intangible assets Total expenses before loan losses Profit before loan losses Net loan losses Impairment of financial assets Operating profit Appropriations Profit before tax Taxes Profit for the period

-261

-270

-3%

-133

96%

-531

-265

100%

-591

-4,755

-4,280

11%

-4,047

17%

-9,035

-8,481

7%

-16,242

2,832

2,178

30%

4,604

9,205

-46%

27,046

-188

3%

-259

-38% -25%

5,010

-194

-382

-435

-12%

-1,730

-

-

-

-

2,638

1,990

4,628

8,770

-47%

25,296

33%

4,345

-39%

-20

29

28

4%

13

123%

57

50

14%

-193

2,667

2,018

32%

4,358

-39%

4,685

8,820

-47%

25,103

-447

-527

-15%

-432

3%

-974

-775

26%

-4,503

2,220

1,491

49%

3,926

-43%

3,711

8,045

-54%

20,600

Jan-Jun 2017

Jan-Jun 2016 Change

Full year 2016

STATEMENT OF COMPREHENSIVE INCOME – PARENT COMPANY Q2 2017

Q1 2017 Change

Q2 2016 Change

2,220

1,491

49%

3,926

-286

1,010

21

37

-43%

536

-850

-1,187

28%

686

-2,037

-467

-336%

-18

-802

98%

29

-820

-174

-371%

57

-48

-226

9

-546

of which cash flow hedges

55

-222

-219

-167

-641

of which available-for-sale instruments

-2

-2

0%

0

-4

57

SEK m Profit for the period

-43%

3,711

8,045

-54%

724

2,913

-75%

58

-564

20,600

Other comprehensive income Items that may subsequently be reclassified to profit or loss Cash flow hedges Available-for-sale instruments Translation differences for the period of which hedging net investment in foreign operations Tax related to other comprehensive income

996 -96%

of which hedging net investment in foreign operations Total items that may subsequently be reclassified to profit or loss

4

176

-98%

-7

180

38

-1,058

-188

-463%

1,992

-1,246

1,336

Total other comprehensive income for the period

-1,058

-188

-463%

1,992

-1,246

1,336

1,162

1,303

-11%

5,918

2,465

9,381


-80%

-1,882 -1,152 387 -65 538

74%

414 110

374%

14 -2,109 -2,109

-74%

18,491

Comment on results for parent company, January – June 2017 compared with January – June 2016 The parent company’s accounts cover parts of the operations that, in organisational terms, are included in branch operations within and outside Sweden, Capital Markets, and central departments and staff functions. Although most of Handelsbanken’s business comes from the local branches and is co-ordinated by them, in legal terms a sizeable part of business volumes are outside the parent company in wholly-owned subsidiaries – particularly in the Stadshypotek AB mortgage institution. Thus, the performance of the parent company is not equivalent to the performance of business operations in the Group as a whole. The parent company’s operating profit decreased by 47% to SEK 4,628m (8,770), chiefly owing to reduced dividends, as well as lower net gains/losses on financial transactions. Profit for the period decreased by 54% to SEK 3,711m (8,045). Net interest income rose by 10% to SEK 7,976m (7,233), and net fee and commission income increased by 4% to SEK 3,351m (3,228). Since the start of the year, the parent company’s equity has decreased to SEK 109,358m (116,642).

54 53



BALANCE SHEET – PARENT COMPANY 30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

Cash and balances with central banks Interest-bearing securities eligible as collateral with central banks

436,848

387,092

199,362

353,680

501,696

116,399

94,096

94,236

116,301

114,485

Loans to credit institutions

692,429

670,211

593,125

684,565

638,845

Loans to the public

SEK m Assets

779,600

778,918

763,567

781,690

770,214


57,779

61,788

60,311

50,394

42,794

Shares Shares in subsidiaries and investments in associates

20,400

22,363

19,339

34,838

51,704

47,205

46,358

46,363

46,382

45,773

4,079

3,969

4,172

3,860

3,743

66,804

77,322

87,061

82,232

96,260

Intangible assets

2,428

2,336

2,268

2,146

2,056

Property, equipment and leasing assets

2,911

2,914

2,970

1,101

1,081

Current tax assets

1,313

448

-

2,322

1,484

Assets where the customer bears the value change risk Derivative instruments

Deferred tax assets Other assets Prepaid expenses and accrued income Total assets

310

365

425

472

471

8,968

12,727

16,713

13,307

20,061

4,139

3,761

4,792

4,075

4,068

2,241,612

2,164,668

1,894,704

2,177,365

2,294,735

212,715

209,637

189,176

218,830

217,291

1,118,658

1,048,659

827,753

1,007,257

1,132,359

Liabilities and equity Due to credit institutions Deposits and borrowing from the public Liabilities where the customer bears the value change risk Issued securities Derivative instruments Short positions Current tax liabilities Deferred tax liabilities Provisions Other liabilities Accrued expenses and deferred income

4,027

4,271

3,927

3,793

674,987

648,977

712,465

707,071

48,645

44,266

54,491

57,377

59,539

7,876

11,753

1,572

11,441

8,581

-

-

184

-

-

932

1,066

1,066

2,026

2,234

328

307

429

426

455

12,909

20,939

8,786

12,931

14,383

7,717

6,841

7,164

8,343

8,614

32,782

33,199

33,400

33,008

32,903

2,131,520

2,055,681

1,777,269

2,068,031

2,187,223

734

762

793

535

539

Share capital

3,013

3,013

3,013

3,008

3,001

Share premium

5,629

5,629

5,628

5,410

5,081

Subordinated liabilities Total liabilities Untaxed reserves

Other funds Retained earnings Profit for the period Total equity Total liabilities and equity

55

4,166 684,792

54

8,218

9,156

9,242

12,056

12,456

88,787

88,936

78,159

78,285

78,390

3,711

1,491

20,600

10,040

8,045

109,358

108,225

116,642

108,799

106,973

2,241,612

2,164,668

1,894,704

2,177,365

2,294,735



CHANGE IN SHAREHOLDER’S EQUITY – PARENT COMPANY Restricted equity

January – June 2017 SEK m Opening equity

Share capital

Statutory reserve

Fund for internally developed software

3,013

2,682

1,766

Unrestricted equity Share premium 5,628

Hedge Fair value reserve * reserve *

Translation reserve *

Retained earnings 98,759

-119

974

3,939


557

54

-1,857


557

54

-1,857


3,711

Dividend Group contributions provided Tax effect on Group contribution Effects of convertible subordinated loans

0

Closing equity

2,682 Restricted equity

January – December 2016 SEK m Opening equity

Share capital

Statutory reserve

2,956

2,682

1,988


5,629

438

1,028

Share premium 3,204

Hedge Fair value reserve * reserve *


Total 107,112

20,600

20,600

-1,468

-1,042

401


-1,468

-1,042

401

Dividend 57

Restricted equity

18,491

-11,442

-11,442

Share capital

Statutory reserve

2,956

2,682

1,766


-1,766 5,628

-119

974

3,939

98,759



Share premium 3,204

Hedge Fair value reserve * reserve * 2,016

3,538


2,272

-507

-429


2,272

-507

-429


8,045

Dividend 45

2,682

1,535

8,045

8,045

9,381

-11,442

-11,442 1,922

1,535 3,001

Total 107,112 1,336

1,877


116,642

Unrestricted equity

1,349

Closing equity

20,600

2,481

1,766 2,682

109,358

-2,109

2,424



8



Opening equity

-37

8

Unrestricted equity


January – June 2016 SEK m

-9,721

-37

92,498

3,538

3,013

-9,721

2,082

2,016

Closing equity

2,465

-222

1,349


3,711

1

222 3,013

3,711 -1,246

1


Total 116,642

-1,535 5,081

3,621

1,509

3,109

86,435

106,973

* Included in fair value fund.

During the January–June 2017 period, convertibles for a nominal value of SEK 1m (1,951) relating to subordinated convertible bonds were converted into 22,151 class A shares (28,800,955). At the end of the period, the number of Handelsbanken shares in the trading book was 0 (0).

56

55



CASH FLOW STATEMENT, CONDENSED – PARENT COMPANY SEK m

Jan-Jun 2017

Jan-Jun 2016

Full year 2016

Operating profit

4,628

8,770

25,296

Adjustment for non-cash items in profit/loss

1,465

-1,554

-12,351

Paid income tax

-2,477

-3,132

-5,281

Changes in the assets and liabilities of operating activities

246,605

290,041

-11,861

Cash flow from operating activities

250,221

294,125

-4,197

Acquisition / divestment of subsidiaries Change in shares Change in interest-bearing securities Change in property and equipment Change in intangible assets

-

-

-408

-843

950

5,437

-

1,000

1,000

-363

-149

-2,257

-319

-204

-598

-1,525

1,597

3,174

Repayment of subordinated loans

-

1,951

-2,512

Issued subordinated loans

-

-

-

Dividend paid

-9,721

-11,442

-11,442

Received group contributions

12,220

10,971

10,971

2,499

1,480

-2,983

Cash flow from investing activities

Cash flow from financing activities Liquid funds at beginning of the year

199,362

202,630

202,630

Cash flow for the period

251,195

297,202

-4,006

Exchange rate difference on liquid funds

-13,709

1,864

738

Liquid funds at end of year

436,848

501,696

199,362

57

Handelsbanken

56

Handelsbanken


OWN FUNDS AND CAPITAL REQUIREMENT – PARENT COMPANY

Own funds and capital ratios – Parent company 30 Jun 2017

31 Mar 2017

31 Dec 2016


101,639

101,698

102,883

96,742

95,408


113,650

114,296

115,651

108,898

107,453

SEK m


30 Sep 2016

30 Jun 2016

16,302

16,164

16,225

16,263

16,006

129,952

130,460

131,876

125,161

123,459


21.8%

22.3%

23.4%

21.8%

20.8%

Tier 1 ratio, CRR

24.4%

25.0%

26.3%

24.5%

23.5%


27.9%

28.5%

30.0%

28.2%

27.0%

Total own funds Capital ratios and buffers

Risk exposure amount, CRR

466,443

456,975

439,657

444,468

457,600

Own funds in relation to capital requirement according to transitional rules

255%

258%

260%

244%

241%

Institution-specific buffer requirements

3.7%

3.6%

3.4%

3.4%

3.4%

of which capital conservation buffer requirement

2.5%

2.5%

2.5%

2.5%

2.5%

of which countercyclical capital buffer requirement

1.2%

1.1%

0.9%

0.9%

0.9%

-

-

-

-

-

17.3%

17.8%

18.9%

17.3%

16.3%

SEK m

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

Credit risk according to standardised approach

11,367

11,136

11,258

11,390

11,190

Credit risk according to IRB Approach

21,317

20,466

19,043

19,295

20,657

Market risk

800

936

873

817

711

Credit valuation adjustment risk (CVA)

438

627

594

650

645

3,393

3,393

3,405

3,405

3,405

Total capital requirement

37,315

36,558

35,173

35,557

36,608

Adjustment according to Basel I floor

14,421

14,686

16,010

16,137

15,147


51,736

51,244

51,183

51,694

51,755

131,739

132,262

133,016

126,315

124,606

of which systemic risk buffer requirement Common equity tier 1 capital available for use as a buffer

Capital requirement – Parent company

Operational risk


Capital requirement credit risks, standardised approach * – Parent company SEK m

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016 5

Sovereign and central banks

0

14

6

4

Municipalities

0

2

2

3

1

Multilateral development banks

0

0

0

0

0

0

0

0

0

0

Institutions

International organisations

65

61

64

65

58

Corporates

903

771

783

917

818

Households

995

992

1,011

957

938

2,808

2,762

2,665

2,574

2,487

27

26

21

19

19

6,115

6,111

6,111

6,354

6,372

Collateral in real estate Past due items Equities Other items Total

455

397

595

497

492

11,367

11,136

11,258

11,390

11,190

* Information about capital requirements for the exposure classes where there are exposures.

58

57



Capital requirement credit risks IRB – Parent company SEK m Sovereign and central banks

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016 15,314

587

Corporates

16,429

15,875

14,512

15,107

Households

2,050

2,261

2,265

2,343

2,335

1,575

1,779

1,788

1,847

1,831

of which property loans

845

821

812

836

830

of which other loans

730

958

976

1,011

1,001

Private individuals

475

482

477

496

504

Institutions

Small companies

1,121

1,443

1,392

1,301

1,381

Equity exposures

1,038

794

780

456

1,541

of which listed shares

-

-

-

-

949

of which other shares

1,038

794

780

456

593

90

91

92

88

86

2

2

2

0

0

21,317

20,466

19,043

19,295

20,657

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

793

928

864

810

703

784

917

855

801

694

Non credit-obligation assets Securitisation positions Total IRB

Capital requirement market risks – Parent company SEK m Position risk in the trading book Interest rate risk

-

-

-

-

0

Equity price risk

of which positions in securitisation instruments

9

11

9

9

9

Exchange rate risk

-

-

-

-

-

Commodities risk

7

8

9

7

8

Settlement risk Total capital requirement for market risks

0

-

0

0

0

800

936

873

817

711

30 Jun 2017

31 Mar 2017

31 Dec 2016

30 Sep 2016

30 Jun 2016

Leverage ratio – Parent company SEK m

2,241,612

2,164,668

1,894,704

2,177,365

2,294,735

Adjustment for differences between carrying amount and leverage ratio exposure - derivatives

Balance sheet according to accounting regulations

-23,522

-24,891

-12,825

-18,977

-16,621

Adjustment for differences between carrying amount and leverage ratio exposure - repos and securities loans

3,342

3,856

4,440

5,447

8,471

541,924

530,052

539,468

539,151

531,167

-352,673

-345,307

-348,431

-347,254

-343,000

189,251

184,745

191,037

191,897

188,167

-619,930 1,790,753

-574,506 1,753,872

-572,136 1,505,220

-563,981 1,791,751

-8,361 2,466,391

113,650

114,296

115,651

108,898

107,453

6.3%

6.5%

7.7%

6.1%

4.4%

Assets reported off the balance sheet, gross (before adjustment for conversion factor) Deduction from assets off the balance sheet after application of conversion factor Assets reported off the balance sheet, net Additional adjustment Assets on which the leverage ratio is calculated Capital on which the leverage ratio can be calculated Tier 1 capital Leverage ratio Leverage ratio calculated on tier 1 capital

59

58



We hereby declare that this half-yearly report provides a true and fair view of the Bank’s and the Group’s operations, financial position and performance and describes material risks and uncertainty factors faced by the Bank and the companies that are part of the Group. Stockholm, 18 July 2017

Pär Boman Chairman of the Board

60

Fredrik Lundberg Vice Chairman

Karin Apelman Board Member

Jon Fredrik Baksaas Board Member

Kerstin Hessius Board Member

Jan-Erik Höög Board Member

Ole Johansson Board Member

Lise Kaae Board Member

Benthe Rathe Board Member

Charlotte Skog Board Member

Anders Bouvin Group Chief Executive

59




PRESS AND TELEPHONE CONFERENCE

A press and analyst conference is being arranged at the Bank’s head office at 9 a.m. (CET) on 18 July. A phone conference will be held at 10:30 a.m. (CET) on 18 July. Press releases, presentations, the Fact Book and a recording of the telephone conference will be available at handelsbanken.se/ireng. The interim report for January–September 2017 will be published on 18 October 2017.

For further information, please contact: Anders Bouvin, President and Group Chief Executive Tel: +46 (0)8 22 92 20 Rolf Marquardt, CFO Tel: +46 (0)8 22 92 20 Mikael Hallåker, Head of Investor Relations Tel: +46 (0)8 701 29 95, [email protected]

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Auditors’ review report To the Board of Svenska Handelsbanken AB (publ), corporate identity number 502007-7862 INTRODUCTION

We have reviewed the interim report for Svenska Handelsbanken AB (publ) as at 30 June 2017 and for the six-month period then ended. The Board of Directors and the Chief Executive are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Swedish Annual Accounts Act for Credit Institutions and Securities Companies. Our responsibility is to express a conclusion on this interim report based on our review. SCOPE OF THE REVIEW

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410 Review of Interim Financial Statements Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope

Ernst & Young AB Jesper Nilsson, Authorised Public Accountant

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than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act for Credit Institutions and Securities Companies regarding the Group, and in accordance with the Swedish Annual Accounts Act for Credit Institutions and Securities Companies regarding the parent company.

Stockholm, 18 July 2017

PricewaterhouseCoopers AB Johan Rippe, Authorised Public Accountant



Share price performance and other information The Swedish stock market grew by 6% during the first six months of the year. The Stockholm stock exchange’s bank index rose by 1%. Handelsbanken’s class A shares closed at SEK 120.60, a decline of 5%, but including the dividend paid amounting to SEK 5.00, the total return was -1%. Since 1 January 2000, Handelsbanken’s share price has increased by 238%, excluding dividends, while the Stockholm stock exchange has risen by 34%. SHARE PRICE PERFORMANCE SINCE 31 DEC 1999 Index 100 = 31 December1999 450 400 350 300 250 200 150 100 50

SHB A

OMX Stockhom Banks

Dec-16

Dec-15

Dec-14

Dec-13

Dec-12

Dec-11

Dec-10

Dec-09

Dec-08

Dec-07

Dec-06

Dec-05

Dec-04

Dec-03

Dec-02

Dec-01

Dec-00

Dec-99

0

OMX Stockholm 30 Index

ANALYSTS WHO MONITOR THE BANK Company

Analyst

Email address

ABG SUNDAL COLLIER

Magnus Andersson

[email protected]

ARCTIC SECURITIES

Roy Tilley

[email protected]

AUTONOMOUS

Jacob Kruse

[email protected]

BARCLAYS

Paulina Sokolova

[email protected]

BERENBERG BANK

Adam Barrass

[email protected]

CARNEGIE

Jens Hallen

[email protected]

CITIGROUP

Ronit Ghose

[email protected]

CREDIT SUISSE

Jan Wolter

[email protected]

DANSKE BANK

Matti Ahokas

[email protected]

DEUTSCHE BANK

Benjamin Goy

[email protected]

DNB

Nicholas McBeath

[email protected]

EVLI

Jaakko Tyrväinen

[email protected]

EXANE BNP PARIBAS

Andreas Håkansson

[email protected]

BANK OF AMERICA MERRILL LYNCH

GOLDMAN SACHS

Willis Palermo

[email protected]

JEFFERIES INTERNATIONAL

Kapilan Pillai

[email protected]

J P MORGAN

Vivek Gautam

[email protected]

KEEFE, BRUYETTE & WOODS

Karl Morris

[email protected]

MACQUARIE SECURITIES

Edward Firth

[email protected]

MEDIOBANCA

Riccardo Rovere

[email protected]

MORGAN STANLEY

Alice Timperley

[email protected]

NORDEA

Maths Liljedahl

[email protected]

PARETO

Robin Rane

[email protected]

REDBURN

Amal Shah

[email protected]

ROYAL BANK OF CANADA

Adrian Cighi

[email protected]

SEB ENSKILDA EQUITIES

Peter Kessiakoff

[email protected]

SOCIETE GENERALE

Geoff Dawes

[email protected]

SPAREBANK 1 MARKETS

Odd Weidel

[email protected]

SWEDBANK

Bengt Kirkøen

[email protected]

UBS

Anton Kryachok

[email protected]

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

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handelsbanken.com | +46 (0)8 701 10 00 | SE-106 70 Stockholm, Sweden

Interim Report

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