Annual Report 2001 Svenska Handelsbanken THE ANNUAL GENERAL MEETING OF SVENSKA HANDELSBANKEN will be held at the Grand Hôtel, Vinterträdgården, Royal entrance, Stallgatan 4, Stockholm, at 10.00 a.m. on Tuesday, 23 April 2002. NOTICE OF ATTENDANCE AT ANNUAL GENERAL MEETING Shareholders wishing to attend the Meeting must: • be entered in the Register of Shareholders kept by VPC AB (Swedish Central Securities Depository and Clearing Organisation), on or before Friday, 12 April 2002, and • give notice of attendance to the Chairman's Office at the Head Office of the Bank, Kungsträdgårdsgatan 2, SE-106 70 Stockholm, telephone +46 8 701 19 84, or via the Internet www.handelsbanken.se/bolagsstamma (Swedish only), by 3 p.m. on Wednesday, 17 April 2002. In order to be entitled to take part in the Meeting, any share- holders whose shares are nominee-registered must also request a temporary entry in the register of shareholders kept by the VPC. Shareholders must notify the nominee about this well before 12 April 2002, when this entry must have been effected. DIVIDEND The Board of Directors recommends that the record day for the dividend be Friday, 26 April 2002. If the Annual General Meeting votes in accordance with this recommendation, the VPC expects to be able to send the dividend to shareholders on Thursday, 2 May 2002. PUBLICATION DATES FOR INTERIM REPORTS January–March 22 April 2002 January–June 20 August 2002 January–September 22 October 2002 Svenska Handelsbanken AB (publ) Registered no. 502007-7862 www.handelsbanken.se Contents HIGHLIGHTS OF THE YEAR 2 THE GROUP CHIEF EXECUTIVE’S COMMENTS........... 3 HANDELSBANKEN GROUP PERFORMANCE ................. 8 HANDELSBANKEN’S SHARES ............................................... 10 OBJECTIVES, POLICY AND ORGANISATION............... 12 Objectives and principles...................................................... 12 Policy and organisation .......................................................... 12 Environmental issues ............................................................... 14 Social responsibility.................................................................. 15 Ethical guidelines ...................................................................... 16 Our staff..................................................................... 17 2001 IN AN ECONOMIC PERSPECTIVE 19 REVIEW OF OPERATIONS ....................................................... 20 General........................................................................................... 20 Result and profitability............................................................. 20 Business volume trend............................................................ 21 Loan losses and bad debts.................................................. 23 Financial risk ................................................................................ 23 Capital ratio .................................................................................. 25 Acquisition of SPP and Midtbank....................................... 26 IT development........................................................................... 26 REVIEW OF BUSINESS AREAS 27 Branch office operations 27 Handelsbanken Markets 31 Handelsbanken Securities 33 Handelsbanken Asset Management 35 Handelsbanken Finans 37 Handelsbanken Pension and Insurance 39 Stadshypotek Bank 42 Handelsbanken Treasury 43 RISK AND RISK CONTROL 44 Credit risk 44 Financial risk 45 Operational risk 48 DIRECTORS’ REPORT 49 ACCOUNTING PRINCIPLES 50 PROFIT AND LOSS ACCOUNTS 52 CASH FLOW STATEMENT 54 NOTES TO THE PROFIT AND LOSS ACCOUNT 55 NOTES TO THE BALANCE SHEET 61 FIVE-YEAR REVIEW 76 RECOMMENDATION FOR DISTRIBUTION OF PROFITS 78 AUDIT REPORT 79 BRANCHES IN THE NORDIC COUNTRIES 80 REGIONAL HEAD OFFICES IN THE NORDIC COUNTRIES 82 UNITS OUTSIDE THE NORDIC COUNTRIES 84 CENTRAL HEAD OFFICE 85 BOARD OF DIRECTORS 86 SENIOR MANAGEMENT 88 AUDITORS 88 ADDRESSES Inside back cover DEFINITIONS Fold-out inside back cover Highlights of the year Highlights of the year I Profits for 2001 were SEK 11.2 billion I Return on shareholders’ equity was 18.4%. I The Board proposes that the dividend be raised to SEK 4.50 I Handelsbanken acquired the Danish bank Midtbank A/S I The Bank repurchased 5.4 million shares in 2001 I The Bank sold 5.6 million shares in connection with the acquisition of Midtbank I According to the Svenskt Kvalitetsindex survey, Handelsbanken again had the greatest proportion of satisfied customers in Sweden – both corporate and private I According to an equivalent survey in Denmark, Handelsbanken/Midtbank had the highest proportion of satisfied private customers I Over 50% of corporate customers and over 30% of private customers were linked to the Bank’s Internet services I Handelsbanken had the highest share of the net flows to the Swedish mutual fund market, excluding the PPM pension system I Sixteen new units were started outside Sweden: eight in Finland, two in Denmark, two in Norway, two in the UK, one in Poland and one in Austria I Handelsbanken Liv was demutualised on 1 January 2002 I Handelsbanken was acclaimed Bank of the Year by Privata Affärer, a Swedish periodical for private finances 2 Svenska Handelsbanken Annual Report 2001 The group chief executive’s comments The group chief executive’s comments Nowadays we count among our Something else which is very competitors all the listed banks expensive is organisational in the four Nordic countries muddle. If nobody is really where we are active. This is responsible, there are lots of the first time Denmark is in- things that will be only almost cluded, since our Danish right, almost in time. Thus, operations are now sufficiently in order to be thrifty, you need large (today we are the fifth a strong accounting and control largest bank in Denmark), that system. The representation of we can safely say that we con- income and expenses reported duct full universal banking by such a system must be seen operations there too. as fair by everyone in the orga- Satisfied shareholders begin nisation. This in turn means with satisfied customers and that the system must not be cost-efficiency. Cost-efficiency open to manipulation by cen- leads to high profitability today. tral units seeking a certain goal, Satisfied customers bring more however desirable this goal of their business to us and may be to many people in the become goodwill ambassadors organisation. The reported for the Bank and thus also expenses and revenues must be contribute to higher growth. correct. It must also be quite This is why it is so important clear who is responsible. The for us to ensure that we are person who is responsible must efficient and that our customers be able to compare his or her are satisfied. performance, not with some- thing unreal like a plan or a Our view of efficiency budget, but with something Some people claim that cost- tangible, such as the result efficiency and satisfied customers achieved by people with similar are an impossible combination. responsibilities over the same That low costs entail a view of period of time. That is why service which cannot possibly benchmarking is such an simultaneously result in satisfied important instrument for customers. The fact that Handelsbanken, where we have Handelsbanken has nevertheless survived perfectly well without managed to combine the two is, budgets for thirty years. of course, practical proof of the In a thrifty company, the LARS O GRÖNSTEDT contrary. employees must be proficient But I am convinced that this at many things. To be pro- incompatibility does not exist Last year was the thirtieth year ficient and knowledgeable, even in theory. Proponents of employees need long and broad this theory have probably not running that Handelsbanken could professional experience. Thus, taken sufficient account of the “ in a thrifty company, it is fundamental difference between yet again please shareholders by important to create the sort turning thrifty and being thrifty. achieving its corporate goal – higher of working conditions where It is true that companies wishing the employees are happy, want to slash their costs quickly, find return on shareholders’ equity than to stay with the company for it very difficult to keep their the average for peer banks. a long time and are keen on customer focus while embark- learning new things. Product- ing on such a tough process ivity will then increase so that the thrifty company” manages with fewer employees. and thus they will almost certainly endure a period of deteriorated customer relations. A thrifty company also cares about its customers. But being thrifty means that you have always had to It is better to keep a satisfied customer than to rely on be focused. If you are thrifty, you have a strong incentive the continuous acquisition of new customers, because to get things right the first time. Mistakes are just too you have lost your old ones. expensive. A frugal person finds ways of getting things And in a company where the employees are happy, right the first time around. it is easy for the customers to feel comfortable. Svenska Handelsbanken Annual Report 2001 3 The group chief executive’s comments In a world where everything seems to be measured, weighed COST-EFFICIENCY OF SOME NORDIC and computed in terms of internal return, it is easy to BANKING GROUPS forget how attractive a welcoming smile is to customers. 31 December Of course, good service has its technical side. When Cost/ Expenses we meet our customers less often face-to-face, it becomes income expressed