Annual Report 2011 Handelsbanken in brief Handelsbanken is a full-service bank for both private and corporate customers with a nationwide branch network in Sweden, the UK, Denmark, Norway and Finland. The Bank views these countries as its home markets. Handelsbanken was founded in 1871 and currently has almost 11,200 employees working in 22 countries. SATISFIED CUSTOMERS ON ALL HOME MARKETS Every year, Swedish Quality Index (SKI) and EPSI carry out independent surveys of customer satisfaction, based on a European standard. The results for 2011 showed that Handelsbanken had the most satisfied customers of the big four Swedish banks. For private customers, this is the 23rd year running that Handelsbanken is number one in the survey. Handels- banken also had top positions in all the Nordic countries and the UK, among both private and corporate customers. SECOND STRONGEST BANK IN THE WORLD In spring 2011, the international news agency Bloomberg published a report on the world’s strongest banks with assets of over USD 100 billion. This showed Handels- banken to be the second strongest bank in the world 746 and the strongest bank in Europe, the Nordic region branches in and Sweden. Bloomberg used five different financial measurements 22 countries. to arrive at the result, including financial strength, the ability to manage risk and cost-effectiveness. LEADING POSITION ON THE INTERNATIONAL FUNDING MARKET Handelsbanken’s position on the funding market is the strongest in Europe. This was the result of a report in August 2011 by investment bank Morgan Stanley, where Handelsbanken had 203 per cent of the year’s long-term funding secured, while other banks had only met 70 –80 per cent of their funding requirements. There is major international interest in investing in Handelsbanken’s bonds. 140 years of availability. 40 years running with higher profitability than our competitors. 11,184 employees. 23 years with the most satisfied customers according to Swedish Quality Index (SKI) *. * According to SKI (Swedish Quality Index), since surveys started in 1989, Handelsbanken has had the most satisfied customers of the big four Swedish banks: Handelsbanken, Nordea, SEB and Swedbank. Highlights of 2011 PROFIT AFTER TAX OPERATING PROFIT RETURN ON EQUITY Profit after tax for total operations Operating profit for continuing opera- Return on equity for total operations increased by 12 per cent to SEK tions increased by 12 per cent to was 13.5 per cent (12.9). 12,323 million (11,025) and earn- SEK 16,536 million (14,770). ings per share increased by 12 per cent to SEK 19.78 (17.72). INCOME NET INTEREST INCOME C/I RATIO Income rose by 5 per cent to Net interest income rose by 11 per The C/I ratio improved to 47.1 per SEK 32,809 million (31,296). cent to SEK 23,613 million (21,337). cent (48.0). LOAN LOSSES CAPITAL LENDING The loan loss ratio fell to 0.05 Tier 1 capital rose to SEK 93.5 billion The average volume of loans to the per cent (0.10). (87.8) and the tier 1 capital ratio was public grew by 5 per cent to SEK 18.4 per cent (16.5). The core tier 1,552 billion (1,475). 1 capital ratio increased to 15.6 per cent (13.8). UK MUTUAL FUND SAVINGS DIVIDEND In the UK, the operating profit The Bank’s net inflow on the Swedish The Board proposes a dividend of increased by 55 per cent. mutual fund market was SEK 14.4 SEK 9.75 per share (9.00). billion, equivalent to a market share of 90 per cent. BRIEF INFORMATION ABOUT HANDELSBANKEN’S ANNUAL GENERAL MEETING 2012 Location: Grand Hôtel, Winter Garden, telephone +46 8 701 19 84, or online at Dividend entrance Royal, Stallgatan 4, Stockholm. www.handelsbanken.se/ireng, by Thursday, The Board proposes that the record day for Time: Wednesday, 28 March 2012 at 10 a.m. 22 March 2012 at the latest. the dividend be Monday, 2 April 2012, which means that the Handelsbanken share will be Notice of attendance To be entitled to take part in the meeting, traded ex-dividend on Thursday, 29 March Shareholders wishing to attend the AGM must shareholders whose shares are nominee- 2012. If the meeting resolves in accordance be entered in the register of share holders kept registered must also request a temporary with the proposal, Euroclear expects to by Euroclear Sweden AB (formerly VPC AB), entry in the register of shareholders kept by distribute the dividend on Thursday, 5 April by 22 March 2012 at the latest. Notice of Euroclear. Shareholders must notify the 2012. attendance is to be made to Handelsbanken, nominee of this well before 22 March 2012, Corporate Governance, Kungsträd gårds- when this entry must have been effected. gatan 2, SE-106 70 Stockholm, Sweden, HANDELSBANKEN | ANNUAL REPORT 2011 3 Contents THE GROUP CHIEF FINANCIAL REPORTS GROUP EXECUTIVE’S COMMENTS Contents Group 66 Stability, growth and more Income statement Group 67 customer meetings 6 Statement of comprehensive ADMINISTRATION REPORT income Group 68 Contents Administration report 9 Balance sheet Group 69 Concept and goal 11 Statement of changes in equity Group 70 Goal achievement 12 Cash flow statement Group 71 Our concept 14 Notes Group 72 Organisation and working methods 16 140 years of availability 18 FINANCIAL REPORTS PARENT COMPANY Financial overview 2011 20 Contents Parent company 131 Review of operations Group – Overview 21 Income statement Review of operations 22 Parent company 132 Five-year overview Group 24 Statement of comprehensive Key figures per year 26 income Parent company 133 Quarterly performance 27 Balance sheet Parent company 134 Business segments 28 Statement of changes in equity Parent company 135 Branch office operations in Sweden 30 Cash flow statement Parent company 136 Branch office operations outside Sweden 32 Five-year overview UK 33 Parent company 137 Denmark 34 Notes Parent company 139 Norway 35 Recommended appropriation Finland 36 of profits 165 Handelsbanken International 37 Handelsbanken Capital Markets 38 AUDITOR’S REPORT The Handelsbanken share Auditor’s report 166 and shareholders 40 CONTACT US Corporate social responsibility Branches and branch managers 168 Corporate social at Handelsbanken 42 Subsidiaries 174 responsibility – CSR The environment 44 Addresses 175 Employees 46 OTHER Corporate governance report 2011 49 Definitions and explanations 176 Corporate governance report Contents Corporate governance report 49 Board members 62 Group Management, and Svenska Handelsbanken AB (publ) Corporate identity no: 502007-7862 Compliance and Internal Audit 64 Registered office: Stockholm www.handelsbanken.com This Annual Report is also available in Swedish. HANDELSBANKEN | ANNUAL REPORT 2011 5 THE GROUP CHIEF EXECUTIVE'S COMMENTS Stability, growth and more customer meetings Ř Operating profit for 2011 was SEK 16.5 billion. Earnings per share increased from SEK 17.72 to SEK 19.78. Ř Handelsbanken’s return on equity for total operations was 13.5 per cent. Ř The C/I ratio – expenses divided by income – was 47.1. Ř Our tier 1 capital grew by SEK 5.8 billion during the year. The capital base amounted to SEK 106 billion and the capital ratio according to Basel II increased to 20.9 per cent. Ř By the end of 2011, Handelsbanken had already fulfilled the capital requirements stipulated in the future capital adequacy regulations, Basel III, at both European and national level. Ř Over the past five years, Handelsbanken’s equity has grown by an average of 15.6 per cent per year, including dividends paid and share buybacks. Ř There has not been a single quarter during the past five years when return on equity – after loan losses and tax – has fallen below 12 per cent. Handelsbanken has not issued any new shares during this period. Ř The expansion of the branch office network continued, and by the end of the year the number of branches totalled 746. GROWTH IN TURBULENT TIMES for customer meetings and we continued to banken has generated increased shareholder The year 2011 – when Handelsbanken had open branches. value of around SEK 12 billion if we combine been operating for 140 years – was charac- Handelsbanken primarily grows by opening market capitalisation, dividends and buybacks. terised by continued unrest in our business branches in locations where it has not previously environment, with continuing and increasing had operations. In this way, the Bank grows GOOD CUSTOMERS ARE EVERYWHERE problems for several Western countries with branch by branch, customer by customer. Sweden has a population of 9.3 million. Just major budget deficits. This also had serious This organic growth model has proved suc- over 7.5 million of these people live outside the repercussions in the world’s financial and cessful in an increasing number of locations and three main cities: Stockholm, Gothenburg and capital markets, leading to drastic measures an increasing number of countries. Organic Malmö. This is not unique to Sweden; we see a across the banking and financial sectors in growth means that Handelsbanken can grow similar pattern in all our home markets. the form of major write-downs and consider- with a low risk level and good cost control. A In Denmark, around 80 per cent of the able staff reductions. newly opened branch usually reports a positive country’s population lives outside Copenhagen, cash flow within 24 months with a return on Aarhus and Aalborg. In Finland, fewer than allocated capital of around 8 per cent. 20 per cent of the country’s inhabitants live in After that point, income tends to rise at a Helsinki, Turku and Tampere. The Scandinavian “Handelsbanken can much faster rate than expenses. market with the highest level of concentration is This growth model creates a stable bank in Norway, where just over 20 per cent live in Oslo, grow with a low risk level the long term – a bank which, regardless of the Bergen and Trondheim.