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1 Handelsbanken
PRESS RELEASE 15 July 2020
Handelsbanken’s Interim Report JANUARY – JUNE 2020
Summary January - June 2020, compared with January - June 2019
Strong capital situation and further increase to liquidity reserve. The common equity tier 1 ratio increased to 18.7% (17.1).
The credit loss ratio was 0.04% (0.06).
Operating profit went down by 11% to SEK 10,196m (11,460). Adjusted for items affecting comparability, operating profit decreased by 3%.
Return on equity went down to 10.3% (12.8).
Earnings per share decreased to SEK 3.99 (4.61).
Income went down by 1% till SEK 21,803m (22,075). Net interest income was affected in the amount of SEK -236m by the further strengthening of the liquidity reserve.
Expenses rose by 11% to SEK -10,980m (-9,907). The underlying increase in expenses, adjusted for items affecting comparablity, was 3%.
The C/I ratio rose to 50.4% (44.9). Adjusted for items affecting comparability, the C/I ratio was 50.2% (48.6).
Summary Q2 2020, compared with Q1 2020
Profit after tax rose by 1% to SEK 3,959m (3,937).
Earnings per share amounted to SEK 2.00 (1.99).
Operating profit went down by 2% to SEK 5,054m (5,142). Adjusted for foreign exchange effects, operating profit decreased by 1%.
Return on equity was 10.2% (10.3).
Income went down by 5% to SEK 10,625m (11,178). Adjusted for foreign exchange effects, the decrease was 4%.
Expenses fell by 1% to SEK -5,474m (-5,506). Adjusted for foreign exchange effects, there was no change in expenses between the quarters.
The C/I ratio rose to 51.5% (49.3). Adjusted for foreign exchange effects, the C/I ratio was 51.5% (49.3).
The credit loss ratio was 0.00% (0.08). Expected credit losses in Stage 3 were SEK -11m (-84).
Handelsbanken has the most satisfied private customers of all Swedish banks with regard to its handling of the covid-19 crisis, according to Swedish Quality Index (SKI).
During the first half of 2019, the preliminary provision for the Oktogonen profit-sharing scheme made in 2018, amounting to SEK 829m, was
reversed. In Q2 2019, a restructuring reserve of SEK 30m was recognised. In Q2 2019, the Bank received a dividend of SEK 55m from VISA
Sweden.
SEK mJan-Jun
2020Jan-Jun
2019 ∆% SEK m %Q2
2020Q1
2020 ∆% SEK m %
Net interest income 15,852 15,998 -1% -68 0% 7,622 8,230 -7% -516 -6%
Net fee and commission income 5,230 5,207 0% 24 0% 2,530 2,700 -6% -158 -6%
Other income 721 870 -17% -91 -11% 473 248 91% 229 92%
Total income 21,803 22,075 -1% -135 -1% 10,625 11,178 -5% -445 -4%
Staff costs -6,942 -6,001 16% -138 2% -3,464 -3,478 0% -19 1%
Other expenses -4,038 -3,906 3% -142 4% -2,010 -2,028 -1% -5 0%
Total expenses -10,980 -9,907 11% -280 3% -5,474 -5,506 -1% -24 0%
Credit losses -635 -723 -12% 82 -11% -97 -538 -82% 437 -81%
Operating profit 10,196 11,460 -11% -340 -3% 5,054 5,142 -2% -40 -1%
* Adjusted for exchange effects and, if applicable, non-recurring and special items.
Change after adjustment of items
affecting comparability*
Change after adjustment of items
affecting comparability*
INTERIM REPORT JANUARY – JUNE 2020
2 Handelsbanken
Contents Page Group – Overview 3
Group performance 4
Group – Business segments 11
Handelsbanken Sweden 12
Handelsbanken UK 14
Handelsbanken Norway 16
Handelsbanken Denmark 19
Handelsbanken Finland 21
Handelsbanken the Netherlands 23
Handelsbanken Capital Markets 25
Other units not reported in the business segments 28
Key figures 29
The Handelsbanken share 29
Condensed set of financial statements – Group 30
Income statement 30
Earnings per share 30
Statement of comprehensive income 31
Quarterly performance 32
Balance sheet 33
Statement of changes in equity 34
Condensed statement of Cash flows 35
Note 1 Accounting policies 36
Note 2 Net interest income 37
Note 3 Net fee and commission income 37
Note 4 Net gains/losses on financial transactions 38
Note 5 Other expenses 38
Note 6 Credit losses 39
Note 7 Loans 41
Note 8 Credit risk exposure 46
Note 9 Derivatives 46
Note 10 Offsetting of financial instruments 47
Note 11 Goodwill and other intangible assets 48
Note 12 Due to credit institutions, deposits and borrowing from the public 48
Note 13 Issued securities 48
Note 14 Pledged assets, contingent liabilities and commitments 48
Note 15 Classification of financial assets and liabilities 49
Note 16 Fair value measurement of financial instruments 51
Note 17 Assets and liabilities by currency 53
Note 18 Own funds and capital requirements in the consolidated situation 54
Note 19 Risk and liquidity 61
Note 20 Related-party transactions 65
Note 21 Segment reporting 65
Note 22 Events after the balance sheet date 65
Condensed set of financial statements – Parent company 66
Information on phone conference, etc. 75
Auditors’ report concerning review of interim report 76
Share price performance and other information 77
For definitions and calculation of alternative performance measures, together with specifications of special and non-recurring items,
please see the Fact Book which is available at handelsbanken.com/ir.
INTERIM REPORT JANUARY – JUNE 2020
3 Handelsbanken
Group – Overview
SEK mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 ChangeFull year
2019
Summary income statement
Net interest income 7,622 8,230 -7% 8,064 -5% 15,852 15,998 -1% 32,135
Net fee and commission income 2,530 2,700 -6% 2,695 -6% 5,230 5,207 0% 10,697
Net gains/losses on financial transactions 409 130 215% 355 15% 539 615 -12% 1,299
Risk result - insurance 23 41 -44% 48 -52% 64 82 -22% 145
Other dividend income 15 1 84 -82% 16 93 -83% 113
Share of profit of associates -13 34 10 21 21 0% 32
Other income 39 42 -7% 28 39% 81 59 37% 143
Total income 10,625 11,178 -5% 11,284 -6% 21,803 22,075 -1% 44,564
Staff costs -3,464 -3,478 0% -3,485 -1% -6,942 -6,001 16% -13,549
Other expenses -1,568 -1,587 -1% -1,608 -2% -3,155 -3,103 2% -6,524
Depreciation, amortisation and impairment of property, equipment and intangible assets -442 -441 0% -411 8% -883 -803 10% -1,670
Total expenses -5,474 -5,506 -1% -5,504 -1% -10,980 -9,907 11% -21,743
Profit before credit losses 5,151 5,672 -9% 5,780 -11% 10,823 12,168 -11% 22,821
Net credit losses -97 -538 -82% -435 -78% -635 -723 -12% -1,045
Gains/losses on disposal of property, equipment and intangible assets 0 8 -100% 5 -100% 8 15 -47% 20
Operating profit 5,054 5,142 -2% 5,350 -6% 10,196 11,460 -11% 21,796
Taxes -1,095 -1,205 -9% -1,133 -3% -2,300 -2,487 -8% -4,871
Profit for the period 3,959 3,937 1% 4,217 -6% 7,896 8,973 -12% 16,925
Summary balance sheet
Loans to the public 2,302,177 2,325,993 -1% 2,276,983 1% 2,302,177 2,276,983 1% 2,292,603
of which mortgage loans 1,405,529 1,382,985 2% 1,342,481 5% 1,405,529 1,342,481 5% 1,372,937
of which other loans 896,648 943,008 -5% 934,502 -4% 896,648 934,502 -4% 919,666
Deposits and borrowing from the public 1,375,922 1,382,929 -1% 1,105,365 24% 1,375,922 1,105,365 24% 1,117,825
of which households 560,169 548,064 2% 520,187 8% 560,169 520,187 8% 531,202
Total equity 163,215 161,455 1% 148,197 10% 163,215 148,197 10% 159,832
Total assets 3,533,187 3,596,481 -2% 3,105,511 14% 3,533,187 3,105,511 14% 3,069,667
Summary of key figures
Return on equity 10.2% 10.3% 12.3% 10.3% 12.8% 11.9%
C/I ratio 51.5% 49.3% 48.8% 50.4% 44.9% 48.8%
Earnings per share, SEK 2.00 1.99 2.17 3.99 4.61 8.65
- after dilution 2.00 1.99 2.14 3.99 4.56 8.58
Common equity tier 1 ratio, CRR 18.7% 17.6% 17.1% 18.7% 17.1% 18.5%
Total capital ratio, CRR 23.5% 22.4% 21.7% 23.5% 21.7% 23.2%
INTERIM REPORT JANUARY – JUNE 2020
4 Handelsbanken
Group performance
INTRODUCTION The Bank’s work to sharpen its focus towards core customers, and facilitate profitable growth while maintaining low risk, as well as high efficiency and enhanced efforts within sustainability, continued during the second quarter.
The continuation of the covid-19 pandemic has, in many ways, been the main driving force behind customer needs and the Bank's work during the quarter. The majority of employees have continued to work from home, and a significant proportion of advisory sessions and other customer contact has taken place remotely – often with the help of digital technology. During the quarter, the Bank was quick to launch digital support for our customers in Sweden, to enable applications for temporary dispensations from amortisation. Advisory activity has remained very high, and the Bank's work has resulted in continued gains in terms of private customer satisfaction, as evidenced in the most recent customer satisfaction survey undertaken by Swedish Quality Index (SKI). Among private customers, the view is that Handelsbanken is the bank that has best handled the pandemic.
The large increase in lending to corporate customers faced by the Bank in March continued in the opening stages of the second quarter. The need for new financing among customer companies gradually waned during the latter part of the quarter. Household lending, household deposits and corporate deposits continued to exhibit stable growth during the quarter. Overall, during the period March to May, the Bank was the largest player in new lending to non-financial companies in Sweden, as well as being the largest player in new mortgage lending in Sweden during the period January to May. The effect of volume growth on net interest income during the second quarter was SEK 188m.
The net inflow to the Bank's mutual funds during the second quarter was very large. In spite of large outflows in the market during the first month of the pandemic, the Bank's total net inflow during the first half of 2020 was greater than the net inflow during the corresponding period in 2019. After the first half of 2020, Handelsbanken was one of few players with positive net flows.
Norway and the UK entered into a new low interest rate environment during the quarter, as a result of the ongoing crisis. The immediate effect was that net interest income from deposits in these markets decreased by around SEK 170m during the quarter. From a more long-term perspective, a low interest environment probably entails positive effects for households and companies in Norway and the UK, as well as for the Bank. When the Bank's other home markets have transitioned to low interest environments, this has resulted in volume growth and improved credit quality.
In order to be able to support our customers’ credit demands, and to ensure the Bank's readiness for different crisis scenarios, the Bank took additional actions to guarantee the robustness of its liquidity reserve. For this reason, the average liquidity deposited with central banks was increased during the second quarter by a little more than SEK 100bn, to just over SEK 640bn. Since year-end 2019, the Bank’s total liquid assets have increased from SEK 488bn to SEK 856bn. The extra cost for the liquidity reserve during the quarter amounted to SEK 236m. This extra cost will gradually decrease during the third quarter, and disappear during the fourth quarter, provided unchanged market conditions.
The Bank has issued senior bonds on two occasions during the quarter. On the first of these, the Bank reopened the funding market for European banks with a hugely over-subscribed issue, while with the latter, the Bank set a new benchmark for its lowest funding cost, again with a substantially over-subscribed order book.
The Bank's credit quality remains good. Credit losses were SEK 97m, the lowest level for many years.
Capitalisation continued to be strengthened during the second quarter, and the common equity tier 1 ratio climbed to 18.7%, from 17.6% at the end of Q1.
INTERIM REPORT JANUARY – JUNE 2020
5 Handelsbanken
JANUARY – JUNE 2020 COMPARED WITH JANUARY – JUNE 2019
The Group’s operating profit went down by 11% to SEK 10,196m (11,460). Foreign exchange effects had a negative impact of SEK -70m. Adjusted for foreign exchange effects, non-recurring items and special items during the period of comparison, operating profit decreased by 3%.
Return on equity decreased to 10.3% (12.8). The period’s profit after tax fell by 12% to SEK 7,896m (8,973) and earnings per share declined to SEK 3.99 (4.61).
The C/I ratio rose to 50.4% (44.9), and adjusted for foreign exchange effects and special items during the previous year, was 50.2% (48.6).
The common equity tier 1 ratio rose to 18.7% (17.1).
Non-recurring items and special items in operating profit
Income
Income went down by 1% to SEK 21,803m (22,075). Foreign exchange effects had a negative impact on income of SEK -81m. Adjusted for foreign exchange effects and non-recurring items during the period of comparison, income went down by 1%.
Net interest income went down by 1%, or SEK 146m, to SEK 15,852m (15,998). The special situation in the spring, caused by covid-19, gave rise to effects that had negative impacts on both margins and funding costs, although higher deposit and lending volumes had a positive effect. Higher business volumes made a total contribution of SEK 686m. Foreign exchange effects had a negative impact on net interest income of SEK -78m.
The net effect of changes to margins and funding costs was a reduction of net interest income amounting to SEK -963m, of which SEK -204m was attributable to Sweden and the remainder to the home markets outside Sweden.
Lower government fees had a positive impact of SEK 324m on net interest income, which is explained by a SEK 405m reduction in the fee to the Swedish Resolution Fund, amounting to SEK -523m (-928). As of 1 January 2020, the fee amounts to 0.05% of the basis of calculation (0.09). Starting in 2020, the Bank’s UK operations are no longer considered in the basis of calculation, as these have been undertaken in the form of a subsidiary since late 2018. Including fees for various deposit guarantees, government fees amounted to a total of SEK -744m (-1,066).
Net fee and commission income was essentially unchanged at SEK 5,230m (5,207). Foreign exchange effects were marginal and had a negative impact of SEK -1m. Fund management, custody account management and other asset management commissions increased by 6%, or SEK 145m, to SEK 2,556m (2,410). Brokerage income increased by 5% to SEK 348m (333), while advisory income decreased by 33% to SEK 101m (150). Lending and deposit commissions fell by 2% to SEK 677m (693). Net payment commissions went down by 9% to SEK 860m (950), of which net card commissions decreased by 14% to SEK 514m (595).
Net gains/losses on financial transactions went down by 12% to SEK 539m (615). Net gains/losses on financial transactions was negatively impacted by a provision for a deferred capital contribution of SEK -135m (-) in Handelsbanken Liv’s traditional insurance operations. From the first quarter, changes in CVA and DVA attributable to the valuation of counterparty risks in the Bank’s derivative exposures are recognised on an ongoing basis as a part of the derivative’s fair value on the balance sheet and income statement. The substantial increase in credit spreads in the market during the spring contributed significantly to CVA and DVA having a SEK -186m impact on profit. Adjusted for these two specific effects, net gains/losses on financial transactions increased by 40% to SEK 859m (615). Customer-driven bond trading performed strongly during the period, which partially compensated for the two negative effects.
Other income amounted to SEK 182m (255). The decrease is primarily explained by the dividend of SEK 55m received from VISA Sweden during the period of comparison.
Expenses
SEK m
Jan-Jun 2020
Jan-Jun 2019
Non-recurring items
Restructuring costs - -30
Dividend from VISA Sweden - 55
Total non-recurring items - 25
Special items
Oktogonen profit-sharing scheme
Provision/reversal previous year - 829
Provision current year - -
Total special items - 829
Total - 829
SEK m
Jan-Jun 2020
Jan-Jun 2019 Change
Net interest income 15,852 15,998 -1%
of which government fees -744 -1,066 -30%
Net fee and commission income 5,230 5,207 0%
Net gains/losses on financial trans. 539 615 -12%
Other 182 255 -29%
Total income 21,803 22,075 -1%
SEK m
Jan-Jun 2020
Jan-Jun 2019 Change
Staff costs -6,942 -6,001 16%
of which Oktogonen - 829
Other expenses -3,155 -3,103 2%
of which rental costs -95 -105
Depreciation and amortisation -883 -803 10%
of which right-of-use assets -377 -351
Total expenses -10,980 -9,907 11%
Change after adjustment of foreign exchange effects and Oktogonen 3%
INTERIM REPORT JANUARY – JUNE 2020
6 Handelsbanken
Development costs
Development costs – by category
Total expenses rose by 11% to SEK -10,980m (-9,907). The underlying increase in expenses, adjusted for foreign exchange effects, non-recurring items and special items, was 3%. During the first half of the previous year, the preliminary provision for the Oktogonen profit-sharing scheme made in 2018, amounting to SEK 829m, was reversed. Foreign exchange effects decreased expenses by SEK 6m. The underlying increase in expenses was largely attributable to the further strengthening of the work to protect the Bank and its stakeholders from financial crime.
As previously announced, the measures being taken and planned entail that the underlying cost level at the Bank is expected to decrease by around SEK 1.5bn, all else being equal, with the full effect manifesting in 2022. The measures agreed or implemented in the fourth quarter of 2019 and the first half of 2020 will reduce the annual cost level by around SEK 550m. These initiatives are generally proceeding according plan, although the ongoing pandemic has slightly slowed certain activities.
During the first half of 2020, an amount of SEK 156 m was withdrawn from the restructuring reserve recognised by the Bank during the second and third quarters 2019 (SEK 222m withdrawn in total) and amounting to SEK 930m.
Development costs, including amortisation, rose by 15% to SEK -1,180m (-1,000). Total expenses for the Bank’s development amounted to SEK -1,414m (-1,391). Capitalised costs decreased to SEK 469m (598). The rise in development costs is mainly due to an increase in technical developments. For the full year 2020, the Bank’s estimation remains that development costs will be SEK 2.1-2.2bn.
The expenses incurred by the Bank for its work to prevent financial crime increased to SEK -664m (-531), a figure which refers to the expenses incurred at central units and regional head offices, but which does not include expenses relating to the work conducted at the local branches. The Bank has decided to further accelerate the tempo of this work in the second quarter, including in the UK. For the full year 2020, total expenses related to the prevention of various types of financial crime are therefore estimated to amount to approximately SEK 1.5bn.
Staff costs increased to SEK -6,942m (-6,001), with this figure being positively affected in the amount of SEK 829m by Oktogonen during the period of comparison. No provision for Oktogonen has been made during the first two quarters of the year. Foreign exchange effects decreased staff costs by SEK 5m. The underlying increase in staff costs, adjusted for the items stated above, was 2%, which was primarily due to annual salary adjustments.
Pension costs rose to SEK -979m (-967). Staff costs relating to the Bank’s IT development totalled SEK
-694m (-666). The average number of employees increased by 86 to 12,524 (12,438). The increase is primarily attributable to the UK operations, together with the continued strengthening of the Bank’s work to prevent financial crime.
Other expenses increased by 2% to SEK -3,155m (-3,103). Foreign exchange effects decreased other expenses by SEK 1m. Other costs attributable to the Bank’s development amounted to SEK -720m (-725).
Depreciation and amortisation rose to SEK -883m (-803). The depreciation of right-of-use assets for rented premises amounted to SEK -377m (-351). Amortisation linked to development was SEK -235m (-207).
Credit losses
Credit losses decreased to SEK -635m (-723). This amount includes expert-based calculations that take into account the effects of covid-19, and entail an additional provision requirement of SEK -419m. The credit loss ratio was 0.04% (0.06).
Taxes
The tax rate was 22.6% (21.7). As of 2019, the corporate tax rate in Sweden is 21.4%. The fact that interest expenses on subordinated loans are not tax-deductible had an impact of 1.3 percentage points on the tax rate, compared with the corporate tax rate.
SEK m
Jan-Jun 2020
Jan-Jun 2019 Change
Development spend -1,414 -1,391 2%
of which staff costs -694 -666 4%
of which other costs -720 -725 -1%
Capitalised costs 469 598 -22%
Development spend after capitalised costs -945 -793 19%
Amortisation and impairment -235 -207 14%
Development costs -1,180 -1,000 18%
SEK m
Jan-Jun 2020
Jan-Jun 2019 Change
Regulatory compliance* -302 -352 -14%
Technical development* -612 -534 15%
Business development -388 -368 5%
UK & The Netherlands -112 -137 -18%
Other - -
Total development spend -1,414 -1,391 2%
*Comparative numbers are adjusted compared with previously reported due to program changes
SEK m
Jan-Jun 2020
Jan-Jun 2019 Change
Net credit losses -635 -723 88
of which additional provision requirements -419 -
Credit loss ratio as % of loans 0.04 0.06
INTERIM REPORT JANUARY – JUNE 2020
7 Handelsbanken
Q2 2020 COMPARED WITH Q1 2020 Operating profit went down by 2% to SEK 5,054m (5,142). Foreign exchange effects had a negative impact on operating profit of SEK -48m. Adjusted for foreign exchange effects, operating profit decreased by 1%.
Income, adjusted for foreign exchange effects, decreased by 4%, while expenses, adjusted for foreign exchange effects, were largely unchanged.
The C/I ratio was 51.5% (49.3). Adjusted for foreign exchange effects, the C/I ratio was also 51.5% (49.3).
The period’s profit after tax increased by 1% to SEK 3,959m (3,937). Earnings per share increased to SEK 2.00 (1.99). Return on equity was 10.2% (10.3).
Income
Income went down by 5% to SEK 10,625m (11,178). Foreign exchange effects had a negative impact on income of SEK -108m. Adjusted for foreign exchange effects, income decreased by 4%.
Special negative effects on net interest income in Q2
Net interest income went down by SEK 608m, or 7%, to SEK 7,622m (8,230). Special negative effects had an impact of SEK -635m in net interest income during the second quarter.
Higher business volumes made a positive contribution of SEK 188m. Foreign exchange effects had a negative impact of SEK -92m. The large increase in the liquidity reserve, mainly at the start of the quarter, in the form of increased central bank holdings with market-based funding, resulted in expenses of SEK -236m. This cost will gradually decrease during the third quarter, and disappear during the fourth quarter, provided current market conditions. The major interest rate cuts in Norway and the UK had a negative impact of approximately SEK -170m, in the form of lower deposit margins, primarily caused by the statutory time period before customer interest rates can be cut. Lending margins were negatively affected in the majority of home markets. Overall, the net effect of changes to margins, funding costs and the liquidity reserve was
SEK -588m. Government fees were up by SEK 78m, mainly due to a retroactive adjustment of these fees during the second quarter. The fee for the Swedish Resolution Fund was SEK -273m (-250), while the deposit guarantee amounted to SEK -138m (-83). Net interest income was negatively affected during the second quarter by a non-recurring cost for the deposit guarantee, amounting to SEK -57m.
Net fee and commission income declined by 6% to SEK 2,530m (2,700). Foreign exchange effects had a SEK -12m impact on net fee and commission income. Fund management and custody account management commissions decreased by 6% to SEK 1,237m (1,319). Net payment commissions decreased by SEK 28m to SEK 416m (444), with net card commissions at SEK 250m (264). Annual card discount payments, relating to 2019, were received from the card companies during the quarter and amounted to SEK 31m. Brokerage income decreased to SEK 161m (188), while advisory income decreased to SEK 46m (55). Lending and deposit commissions fell slightly to SEK 332m (345).
Net gains/losses on financial transactions increased to SEK 409m (130). During the first quarter, a provision was made for a deferred capital contribution of SEK -150m in Handelsbanken Liv’s traditional insurance operations. SEK 15m of this provision was reversed during the second quarter. The effects of CVA and DVA had an impact of SEK 76m (-262) on profit. Adjusted for the effects of the deferred capital contribution, as well as CVA and DVA, net gains/losses on financial transactions amounted to SEK 317m (542).
Other income decreased to SEK 64m (118), due to an improvement in the share of profit of associates during the comparison quarter.
Expenses
Development costs
Total expenses fell by 1% to SEK -5,474m (-5,506). Foreign exchange effects decreased expenses by SEK 56m.
SEK m
Q2 2020
Q12020 Change
Net interest income 7,622 8,230 -7%
of which government fees -411 -333 23%
Net fee and commission income 2,530 2,700 -6%
Net gains/losses on financial trans. 409 130 215%
Other 64 118 -46%
Total income 10,625 11,178 -5%
SEK m
Q2 2020
Additional costs for the liquidity reserve -236
-170
Lending margins, home markets -151
Non-recurring government fees -78
Total -635
Deposit margins in Norway and the UKdue to lower central bank's interest rates
SEK m
Q2 2020
Q12020 Change
Staff costs -3,464 -3,478 0%
Other expenses -1,568 -1,587 -1%
Depreciation and amortisation -442 -441 0%
Total expenses -5,474 -5,506 -1%
SEK m
Q2 2020
Q12020 Change
Development spend -721 -693 4%
of which staff costs -347 -347 0%
of which other costs -374 -346 8%
Capitalised costs 185 284 -35%
Development spend after capitalised costs -536 -409 31%
Amortisation and impairment -131 -104 26%
Development costs -667 -513 30%
INTERIM REPORT JANUARY – JUNE 2020
8 Handelsbanken
During the second quarter 2020, an amount of SEK 115m (41) was withdrawn from the restructuring reserve recognised by the Bank during the second and third quarters 2019 and amounting to SEK 930m.
Development costs, including amortisation, rose to SEK -667m (-513). Total expenses for the Bank’s development amounted to SEK -721m (-693). Capitalised costs were SEK 185m (284). The capitalisation rate can vary between quarters, due to the nature of the projects to which the development relates.
The expenses incurred by the Bank for its work to prevent financial crime were SEK -314m (-350).
Staff costs were essentially unchanged at SEK -3,464m (-3,478). Foreign exchange effects reduced staff costs by SEK 33m and, adjusted for foreign exchange effects, staff costs increased by 1%. No provision was made for the Oktogonen profit-sharing scheme during the quarter (-). Staff costs relating to the Bank’s IT development totalled SEK -347m (-347). The average number of employees was largely unchanged at 12,533 (12,514).
Other expenses decreased by 1% to SEK -1,568m (-1,587). Foreign exchange effects decreased other expenses by SEK 21m. Other costs attributable to the Bank’s development increased to SEK -374m (-346).
Depreciation and amortisation amounted to SEK -442m (-441); SEK -186m (-191) of this total was for depreciation of right-of-use assets tied to rented premises, while SEK -131m (-104) was for amortisation linked to development.
Credit losses
Credit losses totalled SEK -97m (-538). The comparison quarter includes an expert-based calculation of SEK -440m, taking into account the effect of covid-19. Many of the effects taken into account in the first quarter expert-based calculation have been factored into the model-based calculation for the second quarter, reducing the additional provision requirement by SEK 21m. The credit loss ratio was 0.00% (0.08).
Taxes
The tax rate for the second quarter was 21.7% (23.4). The lower tax rate compared to the first quarter was primarily explained by a higher profit in Handelsbanken Liv, but also by lower interest expenses on subordinated loans in the second quarter. The fact that interest expenses on subordinated loans are not tax-deductible had an impact of 1.2 percentage points, compared to the corporate tax rate.
BUSINESS DEVELOPMENT
January – June 2020 compared with January – June 2019
The average volume of loans to the public grew by 2%, or SEK 51bn, to SEK 2,319bn (2,268). Foreign exchange movements had a SEK 14bn negative effect on the volume and, adjusted for foreign exchange effects, the average volume of loans to the public grew by 3%. Household lending increased by just over 3% to SEK 1,223bn (1,183), and corporate lending grew by 1% to SEK 1,097bn (1,085).
Average volumes of deposits and borrowing rose by 16%, or SEK 180bn, to SEK 1,290bn (1,110). The effect of foreign exchange movements on average volumes was marginal. The average volume of household deposits went up by 9% to SEK 540bn (496), while corporate deposits increased by 22% to SEK 751bn (614).
The total volume of assets under management in the Group at the end of the quarter amounted to SEK 731bn (706). The net inflow to the Bank’s mutual funds was SEK 6.4bn (5.9), of which SEK 2.2bn (0.2) came from the home markets outside Sweden.
Q2 2020 compared with Q1 2020
The average volume of loans to the public grew by 1% between the quarters and amounted to SEK 2,329bn (2,309). Foreign exchange effects had a negative impact of SEK -22bn on the average volume, and adjusted for foreign exchange effects, the increase was 2%. Household lending increased marginally to SEK 1,223bn (1,222), and corporate lending grew by 2% to SEK 1,106bn (1,087).
Average volumes of deposits and borrowing rose by 5%, or SEK 69bn, to SEK 1,325bn (1,256). Foreign exchange effects had a negative impact of SEK -10bn on average volumes. Household deposits grew by 4%, and the average volume of corporate deposits rose by 7%.
The total volume of assets under management in the Group at the end of the quarter amounted to SEK 731bn (663). The upturn was mainly attributable to a rise in the value of assets under management. The net flow to the Bank’s mutual funds during the quarter was positive at SEK 12.8bn (-6.4), of which SEK 2.2bn (0.0) came from the home markets outside Sweden.
FUNDING AND LIQUIDITY
Bond issues during the first half of the year amounted to SEK 109bn (121), of which SEK 73bn (97) was covered bonds and SEK 36bn (19) was senior bonds. No subordinated loans were issued during the period (SEK 5bn).
The Bank has been active in most funding markets during the ongoing pandemic, primarily markets for covered bonds. Since April, the Bank has issued senior bonds denominated in EUR and USD, for which there has been high demand from investors. In addition to
SEK m
Q2 2020
Q12020 Change
Net credit losses -97 -538 441
of which additional provision requirements 21 -440 461
Credit loss ratio as % of loans 0.00 0.08
INTERIM REPORT JANUARY – JUNE 2020
9 Handelsbanken
long-term funding, the Bank has had a high level of issuances with shorter tenors, aiming to further increase the Bank's liquidity reserve. These funds are held with various central banks. 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. The ratio of non-encumbered assets to all unsecured market funding amounted to 255% at the end of the quarter (253 at the end of Q1 2020).
Cash funds and liquid assets deposited with central banks amounted to SEK 709bn at the end of Q2, as compared to SEK 672bn at the end of Q1 and SEK 346bn at year-end. The volume of liquid bonds and other liquid assets totalled SEK 147bn (192 at the end of Q1 2020). Average holdings deposited with central banks increased during the second quarter to SEK 641bn (533).
At the end of the period, the Group’s liquidity coverage ratio, (LCR), calculated according to the European Commission’s delegated regulation, was 138% (149 at the end of Q1 2020). At the end of the period, the net stable funding ratio (NSFR) according to CRR2 was 116% (113 at the end of Q1 2020).
CAPITAL
The Bank’s capital goal is that its common equity tier 1 ratio should, under normal circumstances, exceed the common equity tier 1 capital requirement communicated to the Bank by the Swedish Financial Supervisory Authority by 1-3 percentage points.
At the end of the second quarter, the common equity tier 1 ratio was 18.7%. In the Bank’s assessment, the Swedish Financial Supervisory Authority’s expected common equity tier 1 capital requirement at the end of Q2 was 14.0% (SEK 98bn), of which 3.9 percentage points (SEK 27bn) comprise the common equity tier 1 capital requirement in Pillar 2. The total capital ratio at the end of Q2 was 23.5%. The Bank’s assessment is that the Swedish Financial Supervisory Authority’s expected total capital requirement amounted to 18.1% (SEK 128bn) on the same date, of which 4.5 percentage points (SEK 32bn) comprises the total capital requirement in Pillar 2. The Bank’s capitalisation was thus above the target range. Given the current situation, the Bank does not deem that this requires rectification at the present time.
On 27 June, the announcement was made by the EU that the introduction of the SME reduction, which has lower capital requirements for lending to small and medium-sized enterprises in European banks, has been brought forward, and the reduction now applies from Q2 2020.
Capital for consolidated situation 30 June 2020 compared with 30 June 2019
Own funds were SEK 165bn (158), and the Bank’s total capital ratio amounted to 23.5% (21.7). The common equity tier 1 capital was SEK 132bn (125), while the common equity tier 1 ratio was 18.7% (17.1).
Earnings during the last 12-month period raised the common equity tier 1 capital ratio by 1.0 percentage point, after a deduction for the dividend generated. The SME reduction had a positive impact of 0.5 percentage points. Conversions of outstanding personnel convertible bonds had a positive impact of 0.3 percentage points on the common equity tier 1 ratio.
Higher exposure volumes reduced the common equity tier 1 ratio by 0.5 percentage points.
The net effect of customer and volume migration had a positive effect of 0.1 percentage point. The change in net pensions had a negative impact of 0.1 percentage point. The discount rate for Swedish pension obligations, based on a basket of bonds, was 1.3% (1.3). Foreign exchange and other effects had a positive impact of 0.3 percentage points on the common equity tier 1 ratio.
Capital for consolidated situation 30 June 2020 compared with 31 March 2020
Own funds amounted to SEK 165bn (166) and the total capital ratio was 23.5% (22.4). The common equity tier 1 capital was SEK 132bn (130), while the common equity tier 1 ratio was 18.7% (17.6). The period’s earnings raised the common equity tier 1 capital ratio by 0.3 percentage points, after a deduction for the dividend payout ratio of 40%. The SME reduction had a positive impact of 0.5 percentage points. Higher exposure volumes reduced the common equity tier 1 ratio by 0.1 percentage point. The net effect of customer and volume migration was neutral. The change in net pensions increased the common equity tier 1 ratio by 0.1 percentage point. Foreign exchange effects reduced the common equity tier 1 ratio by 0.2 percentage points. Other effects had a positive impact of 0.5 percentage points on the common equity tier 1 ratio.
SEK m
30 Jun 2020
30 Jun 2019 Change
Common equity tier 1 ratio, CRR 18.7% 17.1% 1.6
Total capital ratio, CRR 23.5% 21.7% 1.8
Risk exposure amount, CRR 704,880 729,198 -3%
Common equity tier 1 capital 131,918 124,786 6%
Total own funds 165,328 158,172 5%
SEK m
30 Jun 2020
31 Mar 2020 Change
Common equity tier 1 ratio, CRR 18.7% 17.6% 1.1
Total capital ratio, CRR 23.5% 22.4% 1.1
Risk exposure amount, CRR 704,880 740,993 -5%
Common equity tier 1 capital 131,918 130,440 1%
Total own funds 165,328 165,743 0%
INTERIM REPORT JANUARY – JUNE 2020
10 Handelsbanken
Economic capital and available financial resources
The Bank’s internal assessment of its need for capital is based on the Bank’s capital requirement, stress tests, and the Bank’s model for economic capital (EC). This 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 Q2, Group EC totalled SEK 57.3bn (63.0), while AFR was SEK 176.1bn (175.3). Thus, the ratio between AFR and EC was 307% (278). For the consolidated situation, EC totalled SEK 29.3bn (30.6), and AFR was SEK 172.0bn (172.8).
Rating
During the quarter, Handelsbanken’s long-term and short-term senior ratings with the rating agencies which monitor the Bank were unchanged (see the following table). During Q1 2020, Fitch assigned a negative outlook to the ratings of the majority of Nordic banks, including Handelsbanken, indicating a potential downgrading, due to the ongoing pandemic. The outlook for ratings from other agencies is stable.
Long-term Short-termCounterparty risk
rating
Standard & Poor's AA- A-1+ AA-
Fitch AA F1+
Moody's Aa2 P-1 Aa1
DBRS AA (low)
INTERIM REPORT JANUARY – JUNE 2020
11 Handelsbanken
Handelsbanken Group – Business segments
The business segments consist of Handelsbanken Sweden, Handelsbanken UK, Handelsbanken Norway, Handelsbanken Denmark, Handelsbanken Finland, Handelsbanken the Netherlands and Handelsbanken Capital Markets. The income statements by segment include internal items such as internal interest, commissions and payment for internal services rendered, primarily according to the cost price principle. The part of Handelsbanken Capital Markets’ operating profit that does not involve risk-taking is allocated to branches with customer responsibility.
January - June 2020
SEK m Sweden UK Norway Denmark Finland
The Nether-
landsCapital
Markets OtherAdj. & elim.
GroupJan-Jun
2020
Net interest income 9,084 2,996 1,742 812 697 448 196 -123 15,852
Net fee and commission income 3,392 370 244 318 345 61 501 -1 5,230
Net gains/losses on financial transactions 209 89 24 59 26 12 483 -363 539
Risk result - insurance 64 64
Share of profit of associates 21 21
Other income 16 0 3 4 6 1 15 52 97
Total income 12,701 3,455 2,013 1,193 1,074 522 1,259 -414 21,803
Staff costs -1,840 -1,254 -417 -386 -227 -201 -996 -1,536 -85 -6,942
Other expenses -443 -484 -114 -63 -105 -71 -401 -1,474 -3,155
Internal purchased and sold services -2,375 -398 -252 -225 -257 -72 140 3,439
Depreciation, amortisation and impairments of property, equipment and intangible assets -153 -140 -47 -25 -36 -29 -47 -406 -883
Total expenses -4,811 -2,276 -830 -699 -625 -373 -1,304 23 -85 -10,980
Profit before credit losses 7,890 1,179 1,183 494 449 149 -45 -391 -85 10,823
Net credit losses -255 -104 -190 -58 -30 -2 1 3 -635
Gains/losses on disposal of property, equipment and intangible assets 3 -2 5 2 0 - 0 0 8
Operating profit 7,638 1,073 998 438 419 147 -44 -388 -85 10,196
Profit allocation 177 26 21 4 15 3 -246
Operating profit after profit allocation 7,815 1,099 1,019 442 434 150 -290 -388 -85 10,196
Internal income* 119 -686 -1,828 -173 -154 -216 -908 3,846
January - June 2019
SEK m Sweden UK Norway Denmark Finland
The Nether-
landsCapital
Markets OtherAdj. & elim.
GroupJan-Jun
2019
Net interest income 8,785 2,981 1,930 826 669 382 219 206 15,998
Net fee and commission income 3,209 374 256 294 359 74 647 -6 5,207
Net gains/losses on financial transactions 225 101 36 47 28 11 572 -405 615
Risk result - insurance 82 82
Share of profit of associates 21 21
Other income 16 0 9 4 9 1 8 105 152
Total income 12,235 3,456 2,231 1,171 1,065 468 1,528 -79 22,075
Staff costs -1,809 -1,183 -443 -381 -225 -202 -1,056 -577 -125 -6,001
Other expenses -417 -461 -103 -70 -95 -39 -417 -1,501 -3,103
Internal purchased and sold services -2,196 -378 -241 -211 -204 -67 103 3,194
Depreciation, amortisation and impairments of property, equipment and intangible assets -142 -120 -48 -25 -34 -25 -48 -361 -803
Total expenses -4,564 -2,142 -835 -687 -558 -333 -1,418 755 -125 -9,907
Profit before credit losses 7,671 1,314 1,396 484 507 135 110 676 -125 12,168
Net credit losses -696 -17 -63 -7 51 -1 9 1 -723
Gains/losses on disposal of property, equipment and intangible assets 3 5 3 4 0 0 0 0 15
Operating profit 6,978 1,302 1,336 481 558 134 119 677 -125 11,460
Profit allocation 176 17 20 4 18 0 -235
Operating profit after profit allocation 7,154 1,319 1,356 485 576 134 -116 677 -125 11,460
Internal income* -17 -817 -1,741 -155 -147 -195 -1,075 4,147
Home markets
Home markets
During the first quarter of 2020, a reorganisation was carried out entailing that product ownership and business support operations for financial instruments, currencies and products in the fund management group were transferred from Group Products and Services to Handelsbanken Capital Markets. Simultaneously, the remaining operations within Group Products and Services were transferred from other business operations to the Handelsbanken Sweden segment. Also during the first quarter of 2020, the decision was made that mutual fund and insurance commissions received by the branch operations from Capital Markets, which were previously recognised at a net amount in the segment reporting in the income statement item Profit allocation, are to be recognised as gross amounts in the items Net fee and commission income and Internal purchased and sold services. The comparative figures in the table have therefore been recalculated.
INTERIM REPORT JANUARY – JUNE 2020
12 Handelsbanken
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 banking services at
381 branches throughout Sweden.
INCOME STATEMENT
BUSINESS VOLUMES
SEK mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 ChangeFull year
2019
Net interest income 4,480 4,604 -3% 4,429 1% 9,084 8,785 3% 17,505
Net fee and commission income 1,670 1,722 -3% 1,679 -1% 3,392 3,209 6% 6,739
Net gains/losses on financial transactions 87 122 -29% 119 -27% 209 225 -7% 486
Other income 6 10 -40% 6 0% 16 16 0% 52
Total income 6,243 6,458 -3% 6,233 0% 12,701 12,235 4% 24,782
Staff costs -906 -934 -3% -895 1% -1,840 -1,809 2% -3,576
Other expenses -213 -230 -7% -149 43% -443 -417 6% -915
Internal purchased and sold services -1,221 -1,154 6% -1,122 9% -2,375 -2,196 8% -4,436
Depreciation, amortisation and impairments of property, equipment and intangible assets -76 -77 -1% -129 -41% -153 -142 8% -297
Total expenses -2,416 -2,395 1% -2,295 5% -4,811 -4,564 5% -9,224
Profit before credit losses 3,827 4,063 -6% 3,938 -3% 7,890 7,671 3% 15,558
Net credit losses -6 -249 -98% -434 -99% -255 -696 -63% -1,069
Gains/losses on disposal of property, equipment and intangible assets 1 2 -50% 2 -50% 3 3 0% 6
Operating profit 3,822 3,816 0% 3,506 9% 7,638 6,978 9% 14,495
Profit allocation 84 93 -10% 91 -8% 177 176 1% 317
Operating profit after profit allocation 3,906 3,909 0% 3,597 9% 7,815 7,154 9% 14,812
Internal income -43 162 102 119 -17 134
Cost/income ratio, % 38.2 36.6 36.3 37.4 36.8 36.8
Credit loss ratio, % 0.00 0.05 0.13 0.02 0.10 0.08
Allocated capital 91,886 88,356 4% 81,040 13% 91,886 81,040 13% 85,679
Return on allocated capital, % 13.4 13.9 14.0 13.6 13.3 13.8
Average number of employees 3,944 3,934 0% 4,032 -2% 3,939 4,027 -2% 4,027
Number of branches 381 382 0% 384 -1% 381 384 -1% 383
Average volumes, SEK bnQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 Change
Loans to the public*
Household 885 878 1% 855 4% 881 851 4%
of which mortgage loans 845 836 1% 809 4% 840 805 4%
Companies 547 527 4% 532 3% 537 529 2%
of which mortgage loans 352 343 3% 327 8% 347 322 8%
Total 1,432 1,405 2% 1,387 3% 1,418 1,380 3%
Deposits and borrowing from the public
Household 407 386 5% 372 9% 396 366 8%
Companies 306 287 7% 272 13% 297 262 13%
Total 713 673 6% 644 11% 693 628 10%
* Excluding loans to the National Debt Office.
INTERIM REPORT JANUARY – JUNE 2020
13 Handelsbanken
JANUARY – JUNE 2020 COMPARED WITH JANUARY – JUNE 2019
Operating profit was up 9% to SEK 7,638m (6,978), mainly
due to lower credit losses. Return on allocated capital rose
to 13.6% (13.3). The C/I ratio was 37.4% (36.8).
Net interest income rose by 3%, or SEK 299m, to
SEK 9,084m (8,785). Government fees went down by
SEK 115m and amounted to SEK -422m (-537), a decrease
which is mainly due to the lower fee to the Resolution
Fund. Higher lending volumes increased net interest
income by SEK 248m, while higher deposit volumes
contributed SEK 101m. The rest of the change in net
interest income is mainly due to the negative contribution
from the net amount of changed margins and increased
funding costs, amounting to SEK -204m.
Net fee and commission income grew by 6% or
SEK 183m to SEK 3,392m (3,209), where mutual fund
commissions increased by SEK 81m to SEK 1,550m
(1,469). Commission income from custody accounts and
other asset management rose by SEK 26m. Insurance
commissions went up by SEK 13m. Net commission
income from payments fell by SEK 21m, mainly due to
a decline in card business.
Total expenses rose by 5% to SEK -4,811m (-4,564).
Staff costs grew by 2%, mainly due to contractual pay rises,
and amounted to SEK -1,840m (-1,809). The average
number of employees fell by 2% to 3,939 (4,027).
Credit losses totalled SEK -255m (-696). This amount
includes a calculation of additional provision requirements
arising due to the prevailing circumstances, at an amount of
SEK -259m. The credit loss ratio was 0.02% (0.10).
Q2 2020 COMPARED WITH Q1 2020
Operating profit was essentially unchanged at SEK 3,822m
(3,816) and return on allocated capital was 13.4% (13.9).
The C/I ratio was 38.2% (36.6).
Net interest income fell by 3%, or SEK 124m, to SEK
4,480m (4,604). Government fees were SEK 68m higher;
the fee for the Swedish Resolution Fund was up by SEK
21m to SEK -131m (-110), while the deposit guarantee
fee was SEK 47m higher than the previous quarter and
amounted to SEK -114m (-67). Higher lending volumes
increased net interest income by SEK 87m, while higher
deposit volumes increased net interest income by SEK
27m. The gross margin on mortgage loans was marginally
lower during the quarter, at 1.06 (1.08). The net effect of
changed customer interest rates and funding costs on net
interest income was SEK -139m. Lending margins in the
quarter were impacted by the large increase in the volume
of corporate lending, which began at the end of Q1.
Net fee and commission income declined by 3% to SEK
1,670m (1,722), mainly due to a lower net result in mutual
fund and payment business.
Expenses rose by 1% to SEK -2,416m (-2,395). Staff
costs decreased by 3% to SEK -906m (-934). The average
number of employees was 3,944 (3,934). Other expenses
fell by 7% to SEK -213m (-230).
Credit losses totalled SEK -6m (-249). The credit loss ratio
was 0.00% (0.05).
BUSINESS DEVELOPMENT
During the period, the Bank has stayed open as usual in all
branch locations, but due to the covid-19 pandemic, the
branches have channelled customer contact towards digital
meetings, telephone and email as much as possible. Against
the background of covid-19, private customers have been
able to apply for a temporary exemption from mortgage
repayments. As of the end of the period, around 33,000 of
the Bank’s customers in Sweden had been granted for such
an exemption.
The pace of digital developments remains high. The
options available for holding customer meetings remotely
using digital applications were developed further. A fully
automated process for processing applications for temporary
dispensations from amortisation was developed – resulting
in a positive customer response and considerable time
savings for the branches. The processes for applying for
committed mortgage loan offers digitally were further
developed.
According to a survey carried out by the Swedish
Quality Index (SKI), customer satisfaction among the
Bank’s private customers improved by 6.0 index points
during the quarter, increasing since March, to 77.4 –
compared with the sector average of 71.2.
January – June 2020 compared with January – June 2019
The average volume of mortgage loans to private
individuals rose by just over 4% to SEK 840bn (805) in the
period, while households deposits grew by 8% to SEK
396bn (366). During the first five months of the year, 19%
of the net increase in household deposits in Sweden went
into accounts at Handelsbanken. The Bank was also the
largest player in terms of new lending in the Swedish
mortgage loan market during the same period. The average
volume of corporate lending grew by 2% to SEK 537bn
(529). During the period March to May, the Bank was the
largest player in new lending to non-financial companies in
Sweden, according to Statistics Sweden. At the same time,
corporate deposits increased by 13% to SEK 297bn (262).
New savings in the Bank’s mutual funds in Sweden
totalled SEK 4.2bn (5.8), making the Bank one of few
players with a positive net inflow during the first half of
2020.
Q2 2020 compared with Q1 2020
The average volume of mortgage loans to private
individuals rose by 1% to SEK 845bn (836), while
household deposits increased by 5% to SEK 407bn (386).
The average volume of corporate lending grew by 4% to
SEK 547bn (527), while corporate deposits rose by 7% to
SEK 306bn (287).
New savings in the Bank’s mutual funds in Sweden
totalled SEK 10.6bn (-6.4).
INTERIM REPORT JANUARY – JUNE 2020
14 Handelsbanken
Handelsbanken UK Handelsbanken UK is comprised of branch operations in five regional banks and the asset management company
Heartwood. 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
BUSINESS VOLUMES
SEK mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 ChangeFull year
2019
Net interest income 1,443 1,553 -7% 1,508 -4% 2,996 2,981 1% 6,029
Net fee and commission income 174 196 -11% 193 -10% 370 374 -1% 777
Net gains/losses on financial transactions 36 53 -32% 54 -33% 89 101 -12% 222
Other income 0 0 0% 0 0% 0 0 0% 1
Total income 1,653 1,802 -8% 1,755 -6% 3,455 3,456 0% 7,029
Staff costs -613 -641 -4% -596 3% -1,254 -1,183 6% -2,384
Other expenses -231 -253 -9% -221 5% -484 -461 5% -962
Internal purchased and sold services -209 -189 11% -196 7% -398 -378 5% -758
Depreciation, amortisation and impairments of property, equipment and intangible assets -79 -61 30% -91 -13% -140 -120 17% -246
Total expenses -1,132 -1,144 -1% -1,104 3% -2,276 -2,142 6% -4,350
Profit before credit losses 521 658 -21% 651 -20% 1,179 1,314 -10% 2,679
Net credit losses -54 -50 8% -2 -104 -17 10
Gains/losses on disposal of property, equipment and intangible assets -3 1 0 -2 5 1
Operating profit 464 609 -24% 649 -29% 1,073 1,302 -18% 2,690
Profit allocation 12 14 -14% 8 50% 26 17 53% 42
Operating profit after profit allocation 476 623 -24% 657 -28% 1,099 1,319 -17% 2,732
Internal income -354 -332 -7% -411 14% -686 -817 16% -1,549
Cost/income ratio, % 68.0 63.0 62.6 65.4 61.7 61.5
Credit loss ratio, % 0.07 0.07 0.00 0.07 0.01 -0.01
Allocated capital 18,982 18,155 5% 16,059 18% 18,982 16,059 18% 17,293
Return on allocated capital, % 7.9 10.8 12.9 9.3 13.4 13.3
Average number of employees 2,445 2,442 0% 2,326 5% 2,444 2,316 6% 2,361
Number of branches 207 207 0% 207 0% 207 207 0% 207
Average volumes, GBP mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 Change
Loans to the public
Household 6,925 7,020 -1% 6,648 4% 6,972 6,662 5%
Companies 15,177 14,688 3% 14,724 3% 14,932 14,587 2%
Total 22,102 21,708 2% 21,372 3% 21,904 21,249 3%
Deposits and borrowing from the public
Household 5,050 5,218 -3% 4,698 7% 5,134 4,671 10%
Companies 12,198 11,263 8% 10,116 21% 11,731 10,038 17%
Total 17,248 16,481 5% 14,814 16% 16,865 14,709 15%
INTERIM REPORT JANUARY – JUNE 2020
15 Handelsbanken
JANUARY – JUNE 2020 COMPARED WITH JANUARY – JUNE 2019
Operating profit went down by 18%, or SEK 229m, to SEK 1,073m (1,302), mainly due to higher expenses and credit losses. Foreign exchange effects were positive and amounted to SEK 19m. Return on allocated capital was 9.3% (13.4). The C/I ratio rose to 65.4% (61.7).
Income was essentially unchanged at SEK 3,455m (3,456). Expressed in local currency, income fell by 1%.
Net interest income increased by 1% to SEK 2,996m (2,981). Foreign exchange effects had a positive impact of SEK 38m on net interest income, and expressed in local currency, net interest income fell by 1%. Larger business volumes had a positive impact of SEK 153m, while the net amount of changed margins and funding costs decreased net interest income by SEK -250m. No government fees burdened net interest income (-81). From the year 2020, fees to the Swedish Resolution Fund no longer negatively affect profit in the UK.
Net fee and commission income went down by 1% to SEK 370m (374). Foreign exchange effects were positive and amounted to SEK 5m. Net fee and commission income from the fund and asset management company Heartwood increased by 2% to SEK 173m (169). The volume of assets under management in Heartwood Wealth Management at the end of the period totalled GBP 3.7bn (3.8).
Expenses increased by 6% to SEK -2,276m (-2,142). In local currency, expenses increased by 5%.
Staff costs grew by 6%, or SEK 71m, to SEK -1,254m (-1,183), due to an increase in the number of employees. The average number of employees grew by 6% to 2,444 (2,316). The increase was primarily related to head office functions, where the continued reinforcement of the preventive work against financial crime was the function which saw the largest increase. Foreign exchange effects were negative and amounted to SEK 13m. In local currency, staff costs increased by 5%.
Other expenses rose by SEK 23m to SEK -484m (-461). Credit losses totalled SEK -104m (-17). This amount
includes a calculation of additional provision requirements arising due to the prevailing circumstances, at an amount of SEK -40m. The credit loss ratio was 0.07% (0.01).
Q2 2020 COMPARED WITH Q1 2020
Operating profit went down by 24% to SEK 464m (609). The depreciation of the pound decreased operating profit by SEK 17m. Return on allocated capital was 7.9% (10.8).
Income went down by 8% to SEK 1,653m (1,802). Foreign exchange effects decreased income by SEK 51m.
Net interest income fell by 7% to SEK 1,443m (1,553). Foreign exchange effects had a negative impact of SEK 44m on net interest income. Larger business volumes made a positive contribution of SEK 33m. The net amount of changed margins and funding costs decreased net interest income by SEK -95m. Market interest rates fell during the period, due to an interest rate cut by the central bank. The
customer interest rate on deposits in the UK cannot be cut until the expiration of a statutory time period, meaning that declining deposit margins explained the majority of the negative contribution. No government fees burdened net interest income (-).
Net fee and commission income declined by 11% to SEK 174m (196). Foreign exchange effects were negative, amounting to SEK 5m. The lower net fee and commission income was mainly due to lower fund commission income.
Net gains/losses on financial transactions totalled SEK 36m (53).
Expenses fell by 1% to SEK -1,132m (-1,144). Foreign exchange effects were positive and amounted to SEK 33m.
Staff costs fell by 4% to SEK -613m (-641). The average number of employees increased marginally and was 2,445 (2,442).
Credit losses totalled SEK -54m (-50). The credit loss ratio was 0.07% (0.07).
BUSINESS DEVELOPMENT
The Bank’s branches in the UK have stayed open during the ongoing pandemic. Given the situation, the Bank has made efforts to push customer contact towards digital channels. The options available to customers to extend their engagement with the Bank digitally have been expanded and improved. The branches have proactively contacted customers, and have prioritised enquiries about additional support such as loan facilities, while everyday business has continued as usual. As a result of covid-19, private customers have been able to apply for a temporary exemption from mortgage repayments. As of the end of the period, around 1,400 of the Bank’s customers in the UK had been granted for such an exemption. The Bank is participating in the customer financing programme introduced by the government, where this aligns with the Bank’s business model.
January – June 2020 compared with January – June 2019
Business volumes continued to grow. Corporate deposits increased by 17% to GBP 11.7bn, while corporate lending increased by 2% to GBP 14.9bn. Overall, the average volume of lending increased by 3% to GBP 21.9bn (21.2), while total deposits went up by 15% to GBP 16.9bn (14.7).
The net inflow to Heartwood Wealth Management during the period totalled GBP -84m (46).
Q2 2020 compared with Q1 2020
The average volume of corporate lending increased by 3% and amounted to GBP 15.2bn (14.7), while corporate deposits increased by 8% to GBP 12.2bn (11.3). In total, the average volume of deposits and borrowing from the public increased by 5% to GBP 17.2bn (16.5), and loans to the public increased by 2% to GBP 22.1bn (21.7).
The net inflow to Heartwood Wealth Management during the quarter totalled GBP -68m (-16).
INTERIM REPORT JANUARY – JUNE 2020
16 Handelsbanken
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 banking services at 45 branches throughout
Norway.
INCOME STATEMENT
BUSINESS VOLUMES
SEK mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 ChangeFull year
2019
Net interest income 771 971 -21% 973 -21% 1,742 1,930 -10% 3,957
Net fee and commission income 113 131 -14% 134 -16% 244 256 -5% 546
Net gains/losses on financial transactions 9 15 -40% 21 -57% 24 36 -33% 63
Other income 1 2 -50% 8 -88% 3 9 -67% 9
Total income 894 1,119 -20% 1,136 -21% 2,013 2,231 -10% 4,575
Staff costs -198 -219 -10% -221 -10% -417 -443 -6% -884
Other expenses -47 -67 -30% -29 62% -114 -103 11% -190
Internal purchased and sold services -131 -121 8% -126 4% -252 -241 5% -493
Depreciation, amortisation and impairments of property, equipment and intangible assets -19 -28 -32% -44 -57% -47 -48 -2% -94
Total expenses -395 -435 -9% -420 -6% -830 -835 -1% -1,661
Profit before credit losses 499 684 -27% 716 -30% 1,183 1,396 -15% 2,914
Net credit losses -120 -70 71% -55 118% -190 -63 202% -99
Gains/losses on disposal of property, equipment and intangible assets 2 3 -33% 1 100% 5 3 67% 6
Operating profit 381 617 -38% 662 -42% 998 1,336 -25% 2,821
Profit allocation 10 11 -9% 10 0% 21 20 5% 43
Operating profit after profit allocation 391 628 -38% 672 -42% 1,019 1,356 -25% 2,864
Internal income -759 -1,069 29% -933 19% -1,828 -1,741 -5% -3,596
Cost/income ratio, % 43.7 38.5 36.6 40.8 37.1 36.0
Credit loss ratio, % 0.12 0.08 0.01 0.10 0.01 0.02
Allocated capital 17,998 20,885 -14% 18,404 -2% 17,998 18,404 -2% 20,281
Return on allocated capital, % 6.8 9.5 11.5 8.2 11.9 12.0
Average number of employees 700 698 0% 697 0% 699 698 0% 699
Number of branches 45 45 0% 49 -8% 45 49 -8% 47
Average volumes, NOK bnQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 Change
Loans to the public
Household 100.8 99.9 1% 95.2 6% 100.3 94.5 6%
Companies 171.4 167.8 2% 166.2 3% 169.6 163.6 4%
Total 272.2 267.7 2% 261.4 4% 269.9 258.1 5%
Deposits and borrowing from the public
Household 24.7 22.7 9% 21.3 16% 23.7 21.1 12%
Companies 64.8 52.3 24% 45.7 42% 58.5 45.2 29%
Total 89.5 75.0 19% 67.0 34% 82.2 66.3 24%
INTERIM REPORT JANUARY – JUNE 2020
17 Handelsbanken
JANUARY – JUNE 2020 COMPARED WITH JANUARY – JUNE 2019
Operating profit went down by 25% to SEK 998m (1,336), due to lower income and higher credit losses. The depreciation of the Norwegian krone had a negative effect of SEK 107m on operating profit. Expressed in local currency, the decline was 19%. Return on allocated capital went down to 8.2% (11.9). The C/I ratio rose to 40.8% (37.1).
Income went down by 10% to SEK 2,013m (2,231), mainly due to lower net interest income. Foreign exchange effects were SEK -171m, and expressed in local currency, income fell by 2%.
Net interest income went down by SEK 188m, or 10%, to SEK 1,742m (1,930). Foreign exchange effects had a negative impact of SEK 146m on net interest income, and expressed in local currency, net interest income decreased by 2%. Larger business volumes had a positive impact of SEK 97m. The net amount of changed margins and funding costs decreased net interest income by SEK -179m. Fees for the Swedish Resolution Fund decreased by SEK 28m and, together with the deposit guarantees, government fees burdened net interest income in the amount of SEK -82m (-103).
Net fee and commission income decreased by 5% to SEK 244m (256), with foreign exchange movements having a negative effect of SEK 21m. Expressed in local currency, net fee and commission income grew by 3%. Savings-related business exhibited positive development, while card-related commissions developed negatively.
Net gains/losses on financial transactions totalled SEK 24m (36).
Expenses decreased slightly to SEK -830m (-835). Foreign exchange movements decreased expenses by SEK 59m, and expressed in local currency, expenses increased by 8%.
Staff costs fell by 6% to SEK -417m (-443), of which SEK 31m was due to the depreciation of the Norwegian krone. Expressed in local currency, staff costs grew by 2%, which was mainly attributable to contractual pay rises. The average number of employees was largely unchanged at 699 (698).
Credit losses totalled SEK -190m (-63). This amount includes a calculation of additional provision requirements arising due to the prevailing circumstances, at an amount of SEK -58m. The credit loss ratio was 0.10% (0.01).
Q2 2020 COMPARED WITH Q1 2020
Operating profit went down by 38% to SEK 381m (617), primarily due to lower net interest income. The depreciation of the Norwegian krone had a negative effect of SEK -31m on operating profit. Expressed in local currency, operating profit went down by 34%.
Net interest income went down by 21%, or SEK 200m, to SEK 771m (971). Foreign exchange movements had a negative impact of SEK 47m. The net
amount of changed margins and funding costs decreased net interest income by SEK -176m. The customer interest rate on deposits in Norway cannot be cut until the expiration of a statutory time period, meaning that declining deposit margins explained approximately half of the negative contribution. Major price pressure during the quarter also had a negative impact on lending margins. Larger business volumes had a SEK 25m positive impact on net interest income. Government fees burdened net interest income by SEK -42m (-40).
Net fee and commission income declined by 14% to SEK 113m (131). Expressed in local currency, net fee and commission income fell by 9%, with the primary reason being a decrease in card income due to the covid-19 pandemic.
Net gains/losses on financial transactions totalled SEK 9m (15).
Expenses decreased by 9% to SEK -395m (-435), with foreign exchange effects decreasing expenses by SEK 21m. Expressed in local currency, expenses fell by 4%.
Staff costs fell by 10% to SEK -198m (-219). In local currency, staff costs decreased by 5%. The average number of employees was 700 (698).
Credit losses increased to SEK -120m (-70), and the credit loss ratio was 0.12% (0.08).
BUSINESS DEVELOPMENT
During the period, all branches have been staffed and open to the public, but in light of the covid-19 pandemic, the branches have channelled customer contact towards digital meetings, telephone and email as much as possible. Against the background of covid-19, private customers have been able to apply for a temporary exemption from mortgage repayments. As of the end of the period, around 3,000 of the Bank’s customers in Norway had been granted for such an exemption.
The Bank is focusing on its core customers, private and corporate customers, and is maintaining an open dialogue with them. Particularly within savings, the need for advisory services has been significant. The digital support for advisory business has continued to be developed.
January – June 2020 compared with January – June 2019
The average volume of household deposits increased by 12%, while household lending grew by 6%. Also in the corporate segment, deposits grew more than lending, by 29% and 4% respectively. Overall, the average volume of deposits and borrowing from the public increased by 24% to NOK 82.2bn (66.3). The average volume of lending increased by a total of 5% to NOK 270bn (258).
New savings in the Bank’s mutual funds in Norway during the period totalled SEK 0.6bn (-0.7).
INTERIM REPORT JANUARY – JUNE 2020
18 Handelsbanken
Q2 2020 compared with Q1 2020
The average volume of household deposits increased by 9%, while household lending grew by 1%. Corporate deposits grew by 24% and corporate lending grew by 2%. Overall, the average volume of deposits and borrowing from the public increased by 19% to NOK 90bn (75). The average volume of lending increased by a total of 2% to NOK 272bn (268).
New savings in the Bank’s mutual funds in Norway during the quarter totalled SEK 2.0bn (-1.4).
INTERIM REPORT JANUARY – JUNE 2020
19 Handelsbanken
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 banking services at 55 branches throughout
Denmark.
INCOME STATEMENT
BUSINESS VOLUMES
SEK mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 ChangeFull year
2019
Net interest income 403 409 -1% 414 -3% 812 826 -2% 1,666
Net fee and commission income 141 177 -20% 154 -8% 318 294 8% 600
Net gains/losses on financial transactions 30 29 3% 25 20% 59 47 26% 98
Other income 2 2 0% 2 0% 4 4 0% 8
Total income 576 617 -7% 595 -3% 1,193 1,171 2% 2,372
Staff costs -192 -194 -1% -191 1% -386 -381 1% -768
Other expenses -28 -35 -20% -25 12% -63 -70 -10% -140
Internal purchased and sold services -114 -111 3% -111 3% -225 -211 7% -427
Depreciation, amortisation and impairments of property, equipment and intangible assets -13 -12 8% -23 -43% -25 -25 0% -49
Total expenses -347 -352 -1% -350 -1% -699 -687 2% -1,384
Profit before credit losses 229 265 -14% 245 -7% 494 484 2% 988
Net credit losses 10 -68 -1 -58 -7 3
Gains/losses on disposal of property, equipment and intangible assets - 2 2 2 4 -50% 6
Operating profit 239 199 20% 246 -3% 438 481 -9% 997
Profit allocation 2 2 0% 3 -33% 4 4 0% 12
Operating profit after profit allocation 241 201 20% 249 -3% 442 485 -9% 1,009
Internal income -90 -83 -8% -79 -14% -173 -155 -12% -240
Cost/income ratio, % 60.0 56.9 58.5 58.4 58.5 58.1
Credit loss ratio, % -0.09 0.22 0.00 0.07 0.01 -0.01
Allocated capital 7,611 7,124 7% 6,416 19% 7,611 6,416 19% 7,110
Return on allocated capital, % 10.0 8.9 12.2 9.4 12.0 12.0
Average number of employees 590 584 1% 607 -3% 587 609 -4% 600
Number of branches 55 55 0% 56 -2% 55 56 -2% 56
Average volumes, DKK bnQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 Change
Loans to the public
Household 47.2 47.1 0% 47.8 -1% 47.1 47.6 -1%
Companies 30.3 30.0 1% 30.3 0% 30.2 29.8 1%
Total 77.5 77.1 1% 78.1 -1% 77.3 77.4 0%
Deposits and borrowing from the public
Household 17.3 16.4 5% 15.4 12% 16.9 15.1 12%
Companies 20.4 21.5 -5% 17.7 15% 20.9 19.4 8%
Total 37.7 37.9 -1% 33.1 14% 37.8 34.5 10%
INTERIM REPORT JANUARY – JUNE 2020
20 Handelsbanken
JANUARY – JUNE 2020 COMPARED WITH JANUARY – JUNE 2019
Operating profit went down by 9%, or SEK 43m, to SEK
438m (481), as a result of higher credit losses. Profit before
credit losses improved by 2%. Foreign exchange effects
increased operating profit by SEK 8m. Expressed in local
currency, operating profit declined by 10%. Return on
allocated capital was 9.4% (12.0). The C/I ratio was 58.4%
(58.5).
Net interest income decreased by 2% to SEK 812m
(826), and was positively affected at an amount of SEK
12m by foreign exchange effects. Expressed in local
currency, net interest income declined by 3%. Changed
business volumes had a SEK 2m negative impact on net
interest income, and the net amount of changed margins
and funding costs decreased net interest income by SEK
-38m. The fee for the Swedish Resolution Fund was SEK
8m lower than the previous year and, together with the
deposit guarantees, government fees burdened net interest
income in the amount of SEK -38m (-42).
Net fee and commission income rose by 8% to SEK
318m (294). Foreign exchange movements had a positive
impact of SEK 4m and, expressed in local currency, net fee
and commission income climbed by 7%. The increase was
thanks to a high level of activity in the savings business
area.
Net gains/losses on financial transactions totalled
SEK 59m (47).
Expenses increased by 2% to SEK -699m (-687).
Foreign exchange effects amounted to SEK -9m and,
expressed in local currency, expenses were unchanged.
Staff costs increased by 1% to SEK -386m (-381) but,
expressed in local currency, staff costs were unchanged.
The average number of employees fell by 4% to 587 (609).
Credit losses totalled SEK -58m (-7). This amount
includes a calculation of additional provision requirements
arising due to the prevailing covid-19 pandemic, at an
amount of SEK -48m. The credit loss ratio was 0.07%
(0.01).
Q2 2020 COMPARED WITH Q1 2020
Operating profit went up by 20% to SEK 239m (199), due
to lower credit losses. The effect of foreign exchange
movements on operating profit was marginal.
Net interest income went down by 1% to SEK 403m
(409). Larger business volumes had marginal positive
impact on net interest income. The net amount of changed
margins and funding costs also had a marginal impact on
net interest income. The fee for the Swedish Resolution
Fund amounted to SEK -13m (-13), while the deposit
guarantee burdened net interest income by SEK -8m (-4).
Net fee and commission income declined by 20% to
SEK 141m (177), due to weak performance in most areas,
especially payment-related business, caused by the
covid-19 pandemic.
Net gains/losses on financial transactions totalled
SEK 30m (29).
Expenses fell by 1% to SEK -347m (-352). Staff costs fell
by 1% to SEK -192m (-194). The average number of
employees was 590 (584).
Credit losses consisted of net recoveries of SEK 10m
(-68), and the credit loss ratio was -0.09% (0.22).
BUSINESS DEVELOPMENT
Business development activity during the first half of the
year was high compared with the corresponding period
during the previous year, especially in the savings area.
A continued focus on Private Banking resulted in a 11%
increase in customer numbers. However, the second
quarter was affected by the ongoing pandemic and the
implementation of measures to minimise the spread of the
virus, as well as efforts to support the Bank’s customers.
The Bank’s branches in Denmark have stayed open,
and the employees have formed teams that have alternated
between work at the branches and working from home.
At the end of the period, the Bank was able to return to
working from the branches as usual. Customer activity has
been high, and customer meetings have primarily been held
via digital channels. Customers affected financially by
covid-19 have been able to apply for a temporary exemption
from loan repayments. As of the end of the second quarter,
around 400 of the Bank’s customers in Denmark had been
granted for such an exemption.
Work on simplification, efficiency enhancements,
digitalisation and an improved customer experience has
continued, in spite of the pandemic, and a new mobile bank
for corporate customer was launched during the period, for
example.
January – June 2020 compared with January – June 2019
The Bank continued to have stable inflows of new volumes
and customers. The average volume of household deposits
rose by 12%, while household lending decreased by 1%.
The average volume of corporate deposits grew by 8% and
corporate lending grew by 1%. Overall, the average volume
of deposits and borrowing from the public increased by
10% to DKK 38bn, while total lending was largely
unchanged at DKK 77.3bn.
New savings in the Bank’s mutual funds in Denmark
totalled SEK 0.6bn (0.3).
Q2 2020 compared with Q1 2020
The average volume of household deposits rose by 5%,
while household lending was largely unchanged. The
average volume of corporate deposits fell by 5% and the
corresponding lending rose by 1%. Overall, the average
volume of deposits and borrowing from the public
decreased by around one percentage point to DKK 37.7bn,
while total lending went up marginally to DKK 77.5bn.
New savings in the Bank’s mutual funds in Denmark
totalled SEK 0.1bn (0.4).
INTERIM REPORT JANUARY – JUNE 2020
21 Handelsbanken
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 banking services at 32
branches throughout Finland. Handelsbanken Finans offers finance company services and works through the Bank’s
branches.
INCOME STATEMENT
BUSINESS VOLUMES
SEK mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 ChangeFull year
2019
Net interest income 346 351 -1% 332 4% 697 669 4% 1,386
Net fee and commission income 162 183 -11% 185 -12% 345 359 -4% 754
Net gains/losses on financial transactions 13 13 0% 14 -7% 26 28 -7% 46
Other income 2 4 -50% 2 0% 6 9 -33% 17
Total income 523 551 -5% 533 -2% 1,074 1,065 1% 2,203
Staff costs -114 -113 1% -115 -1% -227 -225 1% -446
Other expenses -53 -52 2% -38 39% -105 -95 11% -193
Internal purchased and sold services -139 -118 18% -111 25% -257 -204 26% -441
Depreciation, amortisation and impairments of property, equipment and intangible assets -19 -17 12% -30 -37% -36 -34 6% -70
Total expenses -325 -300 8% -294 11% -625 -558 12% -1,150
Profit before credit losses 198 251 -21% 239 -17% 449 507 -11% 1,053
Net credit losses 72 -102 52 38% -30 51 103
Gains/losses on disposal of property, equipment and intangible assets - 0 0 0 0 -1
Operating profit 270 149 81% 291 -7% 419 558 -25% 1,155
Profit allocation 7 8 -13% 8 -13% 15 18 -17% 35
Operating profit after profit allocation 277 157 76% 299 -7% 434 576 -25% 1,190
Internal income -85 -69 -23% -77 -10% -154 -147 -5% -185
Cost/income ratio, % 61.3 53.7 54.3 57.4 51.5 51.4
Credit loss ratio, % -0.22 0.30 -0.12 0.04 -0.05 -0.09
Allocated capital 8,447 7,634 11% 6,782 25% 8,447 6,782 25% 7,481
Return on allocated capital, % 10.3 6.4 13.9 8.5 13.4 13.3
Average number of employees 500 497 1% 514 -3% 499 505 -1% 506
Number of branches 32 32 0% 36 -11% 32 36 -11% 36
Average volumes, EUR mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 Change
Loans to the public
Household 4,310 4,343 -1% 4,336 -1% 4,327 4,319 0%
Companies 9,917 9,670 3% 9,528 4% 9,794 9,452 4%
Total 14,227 14,013 2% 13,864 3% 14,121 13,771 3%
Deposits and borrowing from the public
Household 1,883 1,759 7% 1,703 11% 1,821 1,677 9%
Companies 3,583 3,159 13% 2,558 40% 3,371 2,654 27%
Total 5,466 4,918 11% 4,261 28% 5,192 4,331 20%
INTERIM REPORT JANUARY – JUNE 2020
22 Handelsbanken
JANUARY – JUNE 2020 COMPARED WITH JANUARY – JUNE 2019
Operating profit went down by 25% to SEK 419m (558), due to higher credit losses. Foreign exchange effects increased operating profit by SEK 9m. Profit before credit losses went down by 11%. Return on allocated capital was 8.5% (13.4). The C/I ratio was 57.4% (51.5).
Income increased by 1% to SEK 1,074m (1,065) and was positively affected by foreign exchange movements in the amount of SEK 15m.
Net interest income rose by 4%, or SEK 28m, to SEK 697m (669). Foreign exchange movements represented SEK 10m of this increase and, expressed in local currency, net interest income grew by 3%. Larger business volumes had a SEK 22m positive impact on net interest income. The net amount of changed margins and funding costs decreased net interest income by SEK -40m. The fee for the Swedish Resolution Fund was SEK 14m lower than during the period of comparison and, together with the deposit guarantees, government fees burdened net interest income in the amount of SEK -42m (-53).
Net fee and commission income declined by 4% to SEK 345m (359). Adjusted for foreign exchange movements, net fee and commission income decreased by 5%, mainly driven by lower brokerage and payment income.
Total expenses increased by 12%, or SEK 67m, to SEK -625m (-558). Foreign exchange effects increased expenses by SEK 7m. Expressed in local currency, expenses were up by 10%. The ongoing replacement of the core banking system was a significant factor behind the rise in expenses. Staff costs increased by 1% to SEK -227m (-225) but, expressed in local currency, staff costs were unchanged. Other expenses increased by 11% to SEK -105m (-95). The average number of employees was 499 (505).
Credit losses totalled SEK -30m (51). This amount includes a calculation of additional provision requirements arising due to the prevailing circumstances, at an amount of SEK -13m. The credit loss ratio was 0.04% (-0.05).
Q2 2020 COMPARED WITH Q1 2020
Operating profit went up by SEK 121m to SEK 270m (149), as a result of lower credit losses. Foreign exchange effects were marginal.
Net interest income fell by 1% to SEK 346m (351). Larger business volumes had a SEK 7m positive impact on net interest income. The net amount of changed margins and funding costs increased net interest income by SEK 4m. The fee for the Swedish Resolution Fund was SEK -16m (-17), while the deposit guarantee burdened net interest income by SEK -5m (-4).
Net fee and commission income went down by 11% to SEK 162m (183), due mainly to lower saving and payment commissions.
Expenses increased by 8% to SEK -325m (-300), with foreign exchange movements having a marginal effect.
Staff costs totalled SEK -114m (-113). The average number of employees was 500 (497).
Credit losses consisted of net recoveries of SEK 72m (-102), and the credit loss ratio was -0.22% (0.30).
BUSINESS DEVELOPMENT
During the period, all branches in Finland have stayed open to the public, but in light of the covid-19 pandemic, the branches have channelled customer contact towards digital meetings. Against the background of covid-19, private customers have been able to apply for a temporary exemption from mortgage repayments. As of the end of the period, around 2,400 of the Bank’s customers in Finland had been granted for such an exemption.
The digital tools and processes for supporting advisory operations have undergone continuous development.
January – June 2020 compared with January – June 2019
The average volume of household deposits rose by 9%, while household lending grew marginally. Corporate deposits grew by 27% and corporate lending grew by 4%. Overall, the average volume of lending rose by 3% to EUR 14bn, while deposits and borrowing from the public grew by 20% to EUR 5bn.
New savings in the Bank’s mutual funds in Finland totalled SEK 0.3bn (0.6).
Q2 2020 compared with Q1 2020
The average volume of household deposits rose by 7%, while household lending fell by 1%. Corporate deposits grew by 13% and corporate lending grew by 3%.
New savings in the Bank’s mutual funds in Finland totalled SEK -0.1bn (0.4).
INTERIM REPORT JANUARY – JUNE 2020
23 Handelsbanken
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 29 branches throughout the Netherlands.
INCOME STATEMENT
BUSINESS VOLUMES
SEK mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 ChangeFull year
2019
Net interest income 225 223 1% 196 15% 448 382 17% 800
Net fee and commission income 30 31 -3% 36 -17% 61 74 -18% 151
Net gains/losses on financial transactions 5 7 -29% 3 67% 12 11 9% 37
Other income 0 1 -100% 0 0% 1 1 0% -2
Total income 260 262 -1% 235 11% 522 468 12% 986
Staff costs -99 -102 -3% -102 -3% -201 -202 0% -400
Other expenses -40 -31 29% -13 208% -71 -39 82% -86
Internal purchased and sold services -37 -35 6% -37 0% -72 -67 7% -142
Depreciation, amortisation and impairments of property, equipment and intangible assets -14 -15 -7% -20 -30% -29 -25 16% -55
Total expenses -190 -183 4% -172 10% -373 -333 12% -683
Profit before credit losses 70 79 -11% 63 11% 149 135 10% 303
Net credit losses -1 -1 0% 0 -2 -1 100% -3
Gains/losses on disposal of property, equipment and intangible assets - - 0 - 0 0
Operating profit 69 78 -12% 63 10% 147 134 10% 300
Profit allocation 2 1 100% -1 3 0 2
Operating profit after profit allocation 71 79 -10% 62 15% 150 134 12% 302
Internal income -111 -105 -6% -101 -10% -216 -195 -11% -366
Cost/income ratio, % 72.5 69.6 73.5 71.0 71.2 69.1
Credit loss ratio, % 0.01 0.01 0.00 0.01 0.00 0.01
Allocated capital 2,642 2,367 12% 1,936 36% 2,642 1,936 36% 2,198
Return on allocated capital, % 8.5 10.4 10.2 9.4 11.0 11.8
Average number of employees 328 318 3% 319 3% 323 319 1% 317
Number of branches 29 29 0% 29 0% 29 29 0% 29
Average volumes, EUR mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 Change
Loans to the public
Household 3,356 3,224 4% 2,854 18% 3,290 2,803 17%
Companies 2,400 2,276 5% 2,116 13% 2,338 2,039 15%
Total 5,756 5,500 5% 4,970 16% 5,628 4,842 16%
Deposits and borrowing from the public
Household 234 208 13% 192 22% 221 181 22%
Companies 1,387 1,354 2% 1,208 15% 1,370 1,152 19%
Total 1,621 1,562 4% 1,400 16% 1,591 1,333 19%
INTERIM REPORT JANUARY – JUNE 2020
24 Handelsbanken
JANUARY – JUNE 2020 COMPARED WITH JANUARY – JUNE 2019
Operating profit improved by 10% to SEK 147m (134). Foreign exchange effects had a positive effect of SEK 2m on operating profit. Expressed in local currency, operating profit increased by 9%. Return on allocated capital was 9.4% (11.0). The C/I ratio was 71.0% (71.2).
Net interest income increased by 17% to SEK 448m (382). Foreign exchange movements represented SEK 5m of this increase and, expressed in local currency, net interest income grew by 16%. Larger business volumes had a SEK 66m positive impact on net interest income. The net amount of changed margins and funding costs decreased net interest income by SEK -9m. The fee for the Swedish Resolution Fund was SEK 3m lower than during the period of comparison and, together with the deposit guarantees, government fees burdened net interest income in the amount of SEK -14m (-16).
Net fee and commission income decreased by 18% to SEK 61m (74), of which the asset manager Optimix accounted for SEK 51m (64). The change is due to a decrease in assets under management at Optimix, from EUR 1.6bn at year-end, to EUR 1.4bn at the end of the first quarter. At the end of the period, assets under management totalled EUR 1.5bn, including the company’s own mutual funds (1.6). Foreign exchange effects had a positive impact on net fee and commission income, of SEK 1m.
Expenses rose by 12% to SEK -373m (-333). In local currency, expenses were up by 10%, mainly as the result of measures linked to financial crime prevention. The average number of employees was largely unchanged at 323 (319).
Credit losses totalled SEK -2m (-1). This amount includes a calculation of additional provision requirements arising due to the prevailing circumstances, at an amount of SEK -1m. The credit loss ratio was 0.01% (0.00).
Q2 2020 COMPARED WITH Q1 2020
Operating profit decreased by 12% to SEK 69m (78). Income went down by 1% to SEK 260m (262). Foreign exchange effects were marginal.
Net interest income grew by 1% to SEK 225m (223). Larger business volumes had a SEK 9m positive impact on net interest income. The net effect of changes to margins and funding costs was a reduction of net interest income amounting to SEK -6m
Net fee and commission income decreased by 3% to SEK 30m (31), due to lower brokerage income.
Expenses increased by 4% to SEK -190m (-183). Staff costs went down by 3% to SEK -99m (-102), and the average number of employees increased by 3% to 328 (318).
Credit losses arising from provisions in Stage 1 and Stage 2 were SEK -1m (-1). The credit loss ratio was 0.01% (0.01). BUSINESS DEVELOPMENT All 29 branches have been kept open and accessible to customers during the period. All employees in the Bank’s Dutch operations have access to working equipment that allows them to have mobile workplaces. In light of the covid-19 pandemic, the branches have channelled customer contact towards digital meetings, telephone and email as much as possible. Against the background of covid-19, private customers have been able to apply for a temporary exemption from mortgage repayments. As of the end of the period, around 30 of the Bank’s customers in the Netherlands had been granted for such an exemption.
The pace of digital developments remains high, in spite of the ongoing pandemic. Among other things, processes and digital tools in the mortgage business have been developed, leading to substantial time savings at the branches and improved customer service.
January – June 2020 compared with January – June 2019
The average volume of household deposits rose by 22%, while household lending grew by 17%. The average volume of corporate deposits rose by 19%, while corporate lending grew by 15%. Overall, the average volume of deposits and borrowing from the public increased by 19% to EUR 1.6bn, while total loans to the public went up by 16% to EUR 5.6bn.
Q2 2020 compared with Q1 2020
The average volume of household deposits increased by 13%, while household lending grew by 4%. The average volume of corporate deposits rose by 2%, while corporate lending grew by 5%. Overall, the average volume of deposits and borrowing from the public increased by 4% to EUR 1.6bn, while total loans to the public went up by 5% to EUR 5.8bn.
INTERIM REPORT JANUARY – JUNE 2020
25 Handelsbanken
Handelsbanken Capital Markets Handelsbanken Capital Markets consists of the four business areas: Markets, Asset Management, Pension & Life, and International.
Markets offers products and services linked to risk management, securities, derivatives, research, debt capital markets and corporate finance.
Asset Management offers a full range of products and services linked to asset management, 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.
International encompasses the Bank’s branches and representative offices outside the Bank’s home markets, as well as the units for Financial Institutions (global banking collaborations) and Transaction Banking.
All commissions from the asset management and insurance operations are reported directly in the respective home market, and are thus not included in the income statement below.
INCOME STATEMENT
GROUP INCOME FROM HANDELSBANKEN CAPITAL MARKETS' PRODUCTS
For Capital Markets, all fee and commission income received by the segment during the period is recognised. For Branch operations and Other, fee and commission income
related to Capital Markets’ products is recognised.
For more financial information about the different business areas within Handelsbanken Capital Markets, please see the Fact Book that is available at handelsbanken.com/ir.
SEK mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 ChangeFull year
2019
Net interest income 89 107 -17% 107 -17% 196 219 -11% 437
Net fee and commission income 240 261 -8% 320 -25% 501 647 -23% 1,135
Net gains/losses on financial transactions 341 142 140% 324 5% 483 572 -16% 1,045
Risk result - insurance 23 41 -44% 48 -52% 64 82 -22% 145
Other income 7 8 -13% 4 75% 15 8 88% 16
Total income 700 559 25% 803 -13% 1,259 1,528 -18% 2,778
Staff costs -488 -508 -4% -536 -9% -996 -1,056 -6% -2,020
Other expenses -209 -192 9% -205 2% -401 -417 -4% -775
Internal purchased and sold services 92 48 92% 59 56% 140 103 36% 150
Depreciation, amortisation and impairments of property, equipment and intangible assets -23 -24 -4% -41 -44% -47 -48 -2% -118
Total expenses -628 -676 -7% -723 -13% -1,304 -1,418 -8% -2,763
Profit before credit losses 72 -117 80 -10% -45 110 15
Net credit losses 1 0 4 -75% 1 9 -89% 9
Gains/losses on disposal of property, equipment and intangible assets 0 0 0 0 0 0
Operating profit 73 -117 84 -13% -44 119 24
Profit allocation -117 -129 -9% -119 -2% -246 -235 5% -451
Operating profit after profit allocation -44 -246 82% -35 -26% -290 -116 -150% -427
Internal income -467 -441 -6% -568 18% -908 -1,075 16% -2,515
Cost/income ratio, % 107.7 157.2 105.7 128.7 109.7 118.7
Credit loss ratio, % 0.02 -0.02 -0.02 0.00 -0.03 -0.02
Allocated capital 6,837 5,813 18% 4,497 52% 6,837 4,497 52% 6,192
Return on allocated capital, % -2.0 -13.3 -2.5 -7.2 -4.1 -6.4
Average number of employees 1,143 1,175 -3% 1,226 -7% 1,159 1,232 -6% 1,223
January - June 2020SEK m Capital Markets Branch operations Other
Total income from Capital Market's products
Change compared to same period last year
Net interest income 196 196 -11%
Commission income 653 2,958 -48 3,563 2%
of which brokerage income 160 184 4 348 5%
of which mutual funds and custody 296 2,300 -40 2,556 6%
of which insurance -85 474 -12 377 -2%
Net fee and commission income 501 2,915 4 3,420 2%
Net result of financial trans. 483 193 2 678 -13%
Risk result - insurance 64 64 -22%
Other income 15 15 88%
Total income 1,259 3,108 6 4,373 -1%
INTERIM REPORT JANUARY – JUNE 2020
26 Handelsbanken
JANUARY – JUNE 2020 COMPARED WITH JANUARY – JUNE 2019
Operating profit went down to SEK -44m (119), due to a SEK 269m, or 18%, drop in income, to SEK 1,259m (1,528). Expenses fell by 8% to SEK 1,304m (-1,418).
Net fee and commission income went down by 23% to SEK 501m (647), primarily due to lower advisory commissions, as well as lower guarantee and payment commissions in the wake of the ongoing discontinuation of business in certain countries within Handelsbanken International.
Net gains/losses on financial transactions decreased to SEK 483m (572), which was due to a provision for a deferred capital contribution of SEK -136m in Handelsbanken Liv’s traditional insurance operations.
Staff costs fell by 6% to SEK -996m (-1,056), due to a decrease in the number of employees. The average number of employees decreased by 6% to 1,159 (1,232).
Other expenses fell by 4% to SEK -401m (-417). Credit losses consisted of marginal net reversals, and
totalled SEK 1m (9). The credit loss ratio was 0.00% (-0.03).
Q2 2020 COMPARED WITH Q1 2020
Operating profit increased by SEK 190m and amounted to SEK 73m (-117), due to increased income and reduced expenses.
Total income increased by 25% to SEK 700m (559). Net fee and commission income declined by 8% to SEK 240m (261). Net gains/losses on financial transactions increased to SEK 341m (142), mainly due to a provision for a deferred capital contribution in Handelsbanken Liv’s traditional insurance operations during the previous quarter.
Total expenses fell by 7% to SEK -628m (-676). Staff costs fell by 4% to SEK -488m (-508). The average number of employees decreased by 3% to 1,143 (1,175). Other expenses were SEK -209m (-192), while services bought and sold internally totalled SEK 92m (48).
Credit losses consisted of net reversals of SEK 1m (0) and the credit loss ratio was 0.02% (-0.02).
BUSINESS DEVELOPMENT
The covid-19 pandemic
As Capital Markets still has a broad geographical presence in Asia, many local continuity plans were put into action as early as the turn of the year. Employees were divided up at an early stage into two or more geographical locations. When the pandemic reached Europe, similar actions were taken at an early stage in the home markets. During the first half of the year, all operations within Capital Markets have continued without any major disruptions. The Bank has thus been able to continue helping customers with their needs, in spite of a very challenging market situation.
Markets
Handelsbanken Markets has continued to perform well. High volatility and uncertainty in the financial markets increase customers' need to manage their risks.
The foreign exchange and equities business has developed strongly, while fixed-income business has been in line with the corresponding period during the previous year. The change of conditions in the market has affected Corporate Finance’s operations negatively, while the Bank’s business volumes in the market for capital market funding are slightly higher than the corresponding period during the previous year. A total of 74 bond issues were arranged during the first half of the year, at a value of EUR 9.2bn. The Bank has seen that interest in sustainable funding remains high.
Asset management
In Sweden, net savings in Handelsbanken’s mutual funds in the first half of the year amounted to SEK 4.2bn (5.8).
Total net savings in the Group’s funds amounted to SEK 6.4bn (5.4). The total fund volume, including exchange-traded funds, decreased during the period by 3% to SEK 654bn (675). Total assets under management in the Group decreased during the first half of the year by 5% to SEK 731bn (767).
Morningstar, a mutual fund research company, ranked Handelsbanken Fonder highest of the Nordic banks when it evaluated the 30 largest fund managers on the Swedish market. According to Kantar SIFO Prospera, Handelsbanken is also ranked as the number one “External Asset Manager” among the 138 largest Swedish institutions.
During the quarter, work on introducing enhanced sustainability requirements in the Bank’s mutual funds has continued, to the extent that 87% of the total mutual fund volume at the end of the quarter was managed according to the enhanced sustainability requirements.
Pension & Life
The Pension & Life business area saw negative development, and operating profit went down by 25% to SEK 469m (625). The decline was exclusively due to the yield within traditionally managed insurance falling below contractually guaranteed rates.
The total premium volume grew by 8% and occupational pensions also grew by 8%. New fund management and custody accounts decreased by 5% compared with the previous year and amounted to SEK 2,435m (2,556). Assets under management at Handelsbanken Liv were essentially unchanged at SEK 174bn (176) compared with year-end.
INTERIM REPORT JANUARY – JUNE 2020
27 Handelsbanken
International
As previously announced, Handelsbanken International will be concentrating its geographical operations outside the home markets to the branches in Luxembourg and the USA. The Luxembourg branch will also be the base for the business operations in France and Spain. Increased regulatory requirements and investment needs, combined with changes to customer behaviour – with customers centralising their administration and decision-making to fewer units – have resulted in the
Bank making the decision to gradually wind down its operations in Asia. This work is ongoing, although the pandemic has slowed progress. Work is also continuing on the previously announced winding down of the branches in the Baltic region, as well as operations in Poland and Germany.
The average volume of deposits in Handelsbanken International was largely unchanged during the period and amounted to SEK 63.7bn (59.6). Lending decreased by 22% to SEK 23.1bn (29.7).
INTERIM REPORT JANUARY – JUNE 2020
28 Handelsbanken
Other units not reported in the business segments Below is an account of income and expenses attributable to units not reported in the business segments. The largest
of these is the Group’s IT department, but this also includes treasury, audit, risk control, compliance, and the unit for
financial crime prevention, as well as the central staff functions for accounting, information, legal affairs, credit, and
HR matters. Provisions for the profit-sharing foundation, Oktogonen, capital gains/losses, dividends, and other
income and expenses that are not attributable to any of the segments are also reported here.
INCOME STATEMENT
JANUARY – JUNE 2020 COMPARED WITH JANUARY – JUNE 2019
Operating profit in other units not reported in the business segments amounted to SEK -388m (677). Expenses of SEK -236m for the further strengthening of the liquidity reserve burdened net interest income.
During the first half of the previous year, the preliminary provision for the Oktogonen profit-sharing scheme for 2019, which amounted to SEK 829m, was reversed.
No provision was made for Oktogonen during the period (-).
Net gains/losses on financial transactions totalled SEK -363m (-405). From the first quarter 2020, changes in CVA and DVA attributable to the valuation of counterparty risks in the Bank’s derivative exposures are recognised on an ongoing basis as a part of the derivative’s fair value on the balance sheet and income statement.
The average number of employees grew by 5% to 2,874 (2,732). The number of employees at the IT department totalled 1,916 (1,934).
Q2 2020 COMPARED WITH Q1 2020
Operating profit was SEK -218m (-170). No provision was made for the Oktogonen profit-sharing scheme during the quarter (-).
The average number of employees totalled 2,883 (2,866); within this figure, the number of employees at the IT department was 1,920 (1,911).
SEK mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 ChangeFull year
2019
Net interest income -135 12 105 -123 206 355
Net fee and commission income 0 -1 -6 -1 -6 83% -5
Net gains/losses on financial transactions -112 -251 55% -205 45% -363 -405 10% -698
Share of profit of associates -13 34 10 21 21 0% 32
Other income 36 16 125% 90 -60% 52 105 -50% 155
Total income -224 -190 -18% -6 -414 -79 -424% -161
Staff costs -808 -728 11% -763 6% -1,536 -577 166% -2,837
Other expenses -747 -727 3% -928 -20% -1,474 -1,501 -2% -3,263
Internal purchased and sold services 1,759 1,680 5% 1,644 7% 3,439 3,194 8% 6,547
Depreciation, amortisation and impairments of property, equipment and intangible assets -199 -207 -4% -33 -406 -361 12% -741
Total expenses 5 18 -72% -80 23 755 -97% -294
Profit before credit losses -219 -172 -27% -86 -155% -391 676 -455
Net credit losses 1 2 -50% 1 0% 3 1 200% 1
Gains/losses on disposal of property, equipment and intangible assets - 0 0 0 0 2
Operating profit -218 -170 -28% -85 -156% -388 677 -452
Profit allocation
Operating profit after profit allocation -218 -170 -28% -85 -156% -388 677 -452
Internal income 1,909 1,937 -1% 2,067 -8% 3,846 4,147 -7% 8,317
Average number of employees 2,883 2,866 1% 2,760 4% 2,874 2,732 5% 2,815
INTERIM REPORT JANUARY – JUNE 2020
29 Handelsbanken
KEY FIGURES – GROUP
THE HANDELSBANKEN SHARE
Q2 2020
Q12020
Q2 2019
Jan-Jun 2020
Jan-Jun 2019
Full year 2019
Return on equity 10.2% 10.3% 12.3% 10.3% 12.8% 11.9%
C/I ratio 51.5% 49.3% 48.8% 50.4% 44.9% 48.8%
C/I ratio, incl. credit losses 52.4% 54.1% 52.6% 53.3% 48.2% 51.1%
Earnings per share, SEK 2.00 1.99 2.17 3.99 4.61 8.65 - after dilution 2.00 1.99 2.14 3.99 4.56 8.58
Dividend, SEK 5.50
Adjusted equity per share, SEK 79.76 78.46 73.38 79.76 73.38 78.60
Common equity tier 1 ratio, CRR 18.7% 17.6% 17.1% 18.7% 17.1% 18.5%
Total capital ratio, CRR 23.5% 22.4% 21.7% 23.5% 21.7% 23.2%
Average number of employees 12,533 12,514 12,481 12,524 12,438 12,548
Number of branches, Sweden 381 382 384 381 384 383
Number of branches outside Sweden 379 379 388 379 388 386
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.com/ir.
Q2 2020
Q12020
Q2 2019
Jan-Jun 2020
Jan-Jun 2019
Full year 2019
Number of converted shares - - 6,940,748 - 6,940,748 35,853,334
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 1,980,028,494 1,980,028,494 1,951,115,908 1,980,028,494 1,951,115,908 1,980,028,494
Number of outstanding shares after dilution, end of period 1,980,047,556 1,980,048,771 1,978,421,423 1,980,047,556 1,978,421,423 1,980,045,524
Average number of shares converted during the period - - 2,883,789 - 1,449,861 12,639,405
Average holdings of own shares (repurchased and holdings in trading book) - - - - - -
Average number of outstanding shares 1,980,028,494 1,980,028,494 1,947,058,949 1,980,028,494 1,945,625,021 1,956,814,565 - after dilution 1,980,048,771 1,980,045,524 1,977,200,315 1,980,045,524 1,976,884,889 1,976,884,889
Share price SHB class A, end of period, SEK 88.44 83.14 91.88 88.44 91.88 100.90
Share price SHB class B, end of period, SEK 93.00 90.10 95.00 93.00 95.00 103.40
Market capitalisation, end of period, SEK bn 175 165 179 175 179 200
INTERIM REPORT JANUARY – JUNE 2020
30 Handelsbanken
Condensed set of financial statements – Group INCOME STATEMENT – GROUP
EARNINGS PER SHARE – GROUP
SEK m
Q2 2020
Q12020 Change
Q2 2019 Change
Jan-Jun 2020
Jan-Jun 2019 Change
Full year 2019
Interest income 11,668 13,669 -15% 13,839 -16% 25,337 27,600 -8% 54,395
of which interest income according to the effective interest method and interest on derivatives for hedging 11,541 13,562 -15% 13,638 -15% 25,103 27,129 -7% 53,798
Interest expense -4,046 -5,439 -26% -5,775 -30% -9,485 -11,602 -18% -22,260
Net interest income Note 2 7,622 8,230 -7% 8,064 -5% 15,852 15,998 -1% 32,135
Net fee and commission income Note 3 2,530 2,700 -6% 2,695 -6% 5,230 5,207 0% 10,697
Net gains/losses on financial transactions Note 4 409 130 215% 355 15% 539 615 -12% 1,299
Risk result - insurance 23 41 -44% 48 -52% 64 82 -22% 145
Other dividend income 15 1 84 -82% 16 93 -83% 113
Share of profit of associates -13 34 10 21 21 0% 32
Other income 39 42 -7% 28 39% 81 59 37% 143
Total income 10,625 11,178 -5% 11,284 -6% 21,803 22,075 -1% 44,564
Staff costs -3,464 -3,478 0% -3,485 -1% -6,942 -6,001 16% -13,549
Other expenses Note 5 -1,568 -1,587 -1% -1,608 -2% -3,155 -3,103 2% -6,524
Depreciation, amortisation and impairment of property, equipment and intangible assets -442 -441 0% -411 8% -883 -803 10% -1,670
Total expenses -5,474 -5,506 -1% -5,504 -1% -10,980 -9,907 11% -21,743
Profit before credit losses 5,151 5,672 -9% 5,780 -11% 10,823 12,168 -11% 22,821
Net credit losses Note 6 -97 -538 -82% -435 -78% -635 -723 -12% -1,045
Gains/losses on disposal of property, equipment and intangible assets 0 8 -100% 5 -100% 8 15 -47% 20
Operating profit 5,054 5,142 -2% 5,350 -6% 10,196 11,460 -11% 21,796
Taxes -1,095 -1,205 -9% -1,133 -3% -2,300 -2,487 -8% -4,871
Profit for the period 3,959 3,937 1% 4,217 -6% 7,896 8,973 -12% 16,925
Attributable to
Shareholders in Svenska Handelsbanken AB 3,958 3,937 1% 4,217 -6% 7,895 8,972 -12% 16,922
Minority interest 1 0 0 1 1 3
Q2 2020
Q12020 Change
Q2 2019 Change
Jan-Jun 2020
Jan-Jun 2019 Change
Full year 2019
Profit for the year, attributable to shareholders in Svenska Handelsbanken AB 3,958 3,937 1% 4,217 -6% 7,895 8,972 -12% 16,922
- of which interest expense on convertible subordinated loan after tax - - -11 - -38 -41
Average number of outstanding shares, million 1,980.0 1,980.0 1,947.1 1,980.0 1,945.6 1,956.8
Average number of outstanding shares after dilution, million 1,980.0 1,980.0 1,977.2 1,980.0 1,976.9 1,976.9
Earnings per share, SEK 2.00 1.99 1% 2.17 -8% 3.99 4.61 -13% 8.65 - after dilution 2.00 1.99 1% 2.14 -7% 3.99 4.56 -13% 8.58
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.
INTERIM REPORT JANUARY – JUNE 2020
31 Handelsbanken
STATEMENT OF COMPREHENSIVE INCOME – GROUP
Other comprehensive income totalled SEK -4,522m (6,833) after tax
for the first half of 2020. In individual periods, the results of all items
within other comprehensive income may fluctuate due to changes in
the discount rate, exchange rates and inflation.
During the January to June period, other comprehensive income was
negatively affected in an amount of SEK -3,285m (791) after tax,
related to defined benefit pension plans. This change is due to a fall
in the value of plan assets, as well as the fact that the discount rate
for the Swedish pension obligations has decreased to 1.3% from
1.7% since year-end.
Most of the Group’s long-term funding is hedged using derivatives,
where all cash flows are matched until maturity. Cash flow hedging
manages the risk of variations in the cash flows related to changes in
variable interest rates and currencies on lending and funding. The
underlying funding and the asset which is being funded are measured
at amortised cost, while the derivatives which are hedging these
items are measured at market value. The impact on profit/loss of the
market valuation is reported under Cash flow hedges. During the
year, these value changes on hedge derivatives in cash flow hedges
were SEK 1,066m (4,261) after tax. The value changes derived partly
from foreign exchange movements, but above all from changes in
the discount rates of the respective currency. During the period,
SEK -1m (-1) was reclassified to the income statement as a result of
ineffectiveness.
Unrealised changes in the value of equity instruments and debt
instruments classified at fair value via other comprehensive income
had impacts of SEK 157m (221) and SEK -2m (10) after tax,
respectively.
Unrealised foreign exchange effects related to the restatement of
foreign branches and subsidiaries to the Group’s presentation
currency and the effect of hedging of net investments in foreign
operations have affected other comprehensive income by SEK
-2,458m (1,550) after tax during the year.
SEK mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 ChangeFull year
2019
Profit for the period 3,959 3,937 1% 4,217 -6% 7,896 8,973 -12% 16,925
Other comprehensive income
Items that will not be reclassified to the income statement
Defined benefit pension plans 1,201 -5,375 1,015 18% -4,174 1,013 4,262
Instruments measured at fair value through other comprehensive income - equity instruments 264 -106 80 158 236 372
Tax on items that will not be reclassified to income statement -267 1,155 -226 -18% 888 -237 -931
of which defined benefit pension plans -260 1,149 -220 -18% 889 -222 -910
of which equity instruments measured at fair value through other comprehensive income -7 6 -6 -1 -15 -21
Total items that will not be reclassified to the income statement
1,198 -4,326 869 38% -3,128 1,012 3,703
Items that may subsequently be reclassified to the income statement
Cash flow hedges -1,051 2,408 3,319 1,357 5,421 -75% 3,741
Instruments measured at fair value through other comprehensive income - debt instruments 12 -15 5 -3 12 7
Translation differences for the period -2,376 11 -66 -2,365 1,387 1,072
of which hedging net investment in foreign operations 999 -562 193 418% 437 -764 -1,509
Tax on items that may subsequently be reclassified to the income statement 9 -392 -752 -383 -999 62% -480
of which cash flow hedges 224 -515 -710 -291 -1,160 75% -801
of which debt instruments measured at fair value through other comprehensive income -2 3 0 1 -2 -2
of which hedging net investment in foreign operations -213 120 -42 -407% -93 163 323
Total items that may subsequently be reclassified to the income statement
-3,406 2,012 2,506 -1,394 5,821 4,340
Total other comprehensive income for the period -2,208 -2,314 5% 3,375 -4,522 6,833 8,043
Total comprehensive income for the period 1,751 1,623 8% 7,592 -77% 3,374 15,806 -79% 24,968
Attributable to
Shareholders in Svenska Handelsbanken AB 1,751 1,622 8% 7,592 -77% 3,373 15,805 -79% 24,965
Minority interest - 1 0 1 1 0% 3
INTERIM REPORT JANUARY – JUNE 2020
32 Handelsbanken
QUARTERLY PERFORMANCE – GROUP
SEK mQ2
2020Q1
2020Q4
2019Q3
2019Q2
2019
Interest income 11,668 13,669 13,366 13,429 13,839
Interest expense -4,046 -5,439 -5,276 -5,382 -5,775
Net interest income 7,622 8,230 8,090 8,047 8,064
Net fee and commission income 2,530 2,700 2,766 2,724 2,695
Net gains/losses on financial transactions 409 130 413 271 355
Risk result - insurance 23 41 48 15 48
Other dividend income 15 1 20 0 84
Share of profit of associates -13 34 1 10 10
Other income 39 42 38 46 28
Total income 10,625 11,178 11,376 11,113 11,284
Staff costs -3,464 -3,478 -3,405 -4,143 -3,485
Other expenses -1,568 -1,587 -1,729 -1,692 -1,608
Depreciation, amortisation and impairment of property, equipment and intangible assets -442 -441 -420 -447 -411
Total expenses -5,474 -5,506 -5,554 -6,282 -5,504
Profit before credit losses 5,151 5,672 5,822 4,831 5,780
Net credit losses -97 -538 -130 -192 -435
Gains/losses on disposal of property, equipment and intangible assets 0 8 3 2 5
Operating profit 5,054 5,142 5,695 4,641 5,350
Taxes -1,095 -1,205 -1,314 -1,070 -1,133
Profit for the period 3,959 3,937 4,381 3,571 4,217
Earnings per share, SEK 2.00 1.99 2.21 1.82 2.17 - after dilution 2.00 1.99 2.21 1.81 2.14
INTERIM REPORT JANUARY – JUNE 2020
33 Handelsbanken
BALANCE SHEET – GROUP
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Assets
Cash and balances with central banks 626,876 623,421 327,958 314,002 271,300
Other loans to central banks Note 7 82,900 50,316 19,547 46,867 27,249
Interest-bearing securities eligible as collateral with central banks 172,234 210,846 103,387 152,409 177,062
Loans to other credit institutions Note 7 30,579 30,484 17,939 35,204 33,573
Loans to the public Note 7 2,302,177 2,325,993 2,292,603 2,296,264 2,276,983
Value change of interest-hedged item in portfolio hedge 18 21 25 30 34
Bonds and other interest-bearing securities 46,477 54,170 42,640 55,726 56,498
Shares 16,751 17,253 21,390 18,472 17,939
Investments in associates 381 310 285 285 276
Assets where the customer bears the value change risk 169,873 150,471 174,988 166,512 161,103
Derivative instruments Note 9,10 53,747 93,528 41,545 67,973 51,377
Reinsurance assets 11 11 11 12 12
Intangible assets Note 11 11,463 11,607 11,185 11,091 10,974
Property and equipment 6,402 6,508 6,645 6,716 6,482
Current tax assets 2,139 1,460 53 2,719 1,635
Deferred tax assets 1,715 2,152 693 1,241 1,122
Net pension assets - - 654 - -
Assets held for sale - - 1 - -
Other assets 6,674 15,663 6,167 9,773 8,160
Prepaid expenses and accrued income 2,770 2,267 1,951 2,974 3,732
Total assets 3,533,187 3,596,481 3,069,667 3,188,270 3,105,511
Liabilities and equity
Due to credit institutions Note 12 254,734 245,904 147,989 210,506 192,494
Deposits and borrowing from the public Note 12 1,375,922 1,382,929 1,117,825 1,157,242 1,105,365
Liabilities where the customer bears the value change risk 169,873 150,471 174,988 166,512 161,104
Issued securities Note 13 1,412,499 1,479,122 1,384,961 1,405,904 1,402,604
Derivative instruments Note 9,10 16,433 18,720 20,642 15,094 15,497
Short positions 5,958 5,451 1,856 4,271 8,055
Insurance liabilities 556 562 578 570 579
Current tax liabilities 895 749 1,284 2,841 2,204
Deferred tax liabilities 6,166 6,524 5,634 7,421 7,081
Provisions 1,155 1,196 1,141 1,168 302
Net pension liabilities 3,432 4,697 - 1,864 2,182
Other liabilities 83,297 97,146 14,038 18,376 18,663
Accrued expenses and deferred income 3,724 4,732 3,353 3,605 3,511
Subordinated liabilities 35,328 36,823 35,546 37,307 37,673
Total liabilities 3,369,972 3,435,026 2,909,835 3,032,681 2,957,314
Minority interest 8 9 8 8 7
Share capital 3,069 3,069 3,069 3,060 3,024
Share premium 8,758 8,758 8,758 8,225 6,292
Reserves 8,618 10,826 13,141 13,805 11,931
Retained earnings 134,867 134,856 117,934 117,949 117,971Profit for the period, attributable to shareholders in Svenska Handelsbanken AB 7,895 3,937 16,922 12,542 8,972
Total equity 163,215 161,455 159,832 155,589 148,197
Total liabilities and equity 3,533,187 3,596,481 3,069,667 3,188,270 3,105,511
INTERIM REPORT JANUARY – JUNE 2020
34 Handelsbanken
STATEMENT OF CHANGES IN EQUITY – GROUP
January – June 2020 SEK m
Share capital
Share premium
Defined benefit
plansHedge
reserve
Fair value
reserveTranslation
reserve
Retained earnings incl profit for the
year Minority Total
Opening equity 2020 3,069 8,758 4,635 4,203 660 3,643 134,856 8 159,832
Profit for the period 7,895 1 7,896
Other comprehensive income -3,285 1,066 155 -2,459 1 -4,522
of which reclassified within equity -11 -11
Total comprehensive income for the period
-3,285 1,066 155 -2,459 7,895 2 3,374
Reclassified to retained earnings 11 11
Change of minority interests -2 -2
Closing equity 3,069 8,758 1,350 5,269 815 1,184 142,762 8 163,215
January – December 2019 SEK m
Share capital
Share premium
Defined benefit
plansHedge
reserve
Fair value
reserveTranslation
reserve
Retained earnings incl profit for the
year Minority Total
Opening equity 2019 3,013 5,629 1,283 1,263 304 2,248 128,509 12 142,261
Profit for the period 16,922 3 16,925
Other comprehensive income 3,352 2,940 356 1,395 0 8,043
of which reclassified within equity 15 -133 -118
Total comprehensive income for the period
3,352 2,940 356 1,395 16,922 3 24,968
Reclassified to retained earnings 118 118
Dividend -10,693 -10,693
Effects of convertible subordinated loans 56 3,129 3,185
Change of minority interests - -7 -7
Closing equity 3,069 8,758 4,635 4,203 660 3,643 134,856 8 159,832
January - June 2019SEK m
Share capital
Share premium
Defined benefit
plansHedge
reserve
Fair value
reserveTranslation
reserve
Retained earnings incl profit for the
year Minority Total
Opening equity 2019 3,013 5,629 1,283 1,263 304 2,248 128,509 12 142,261
Profit for the period 8,972 1 8,973
Other comprehensive income 791 4,261 231 1,550 0 6,833
of which reclassified within equity -155 -155
Total comprehensive income for the period
791 4,261 231 1,550 8,972 1 15,806
Reclassified to retained earnings 155 155
Dividend -10,693 -10,693
Effects of convertible subordinated loans 11 663 674
Change of minority interests - -6 -6
Closing equity 3,024 6,292 2,074 5,524 535 3,798 126,943 7 148,197
The translation reserve includes conversion effects relating to the balance sheets and income statements of the Group´s international branches. Accumulated conversion effects are reported for taxation when an international branch is closed down or divested. The tax regulations for the taxation of conversion effects are highly complex, and therefore subject to different interpretations. Therefore, it cannot be ruled out that conversion effects may need to be reported for taxation at an earlier stage than when a divestment/closedown takes place.
INTERIM REPORT JANUARY – JUNE 2020
35 Handelsbanken
CONDENSED STATEMENT OF CASH FLOWS – GROUP
SEK m
Jan-Jun 2020
Jan-Jun 2019
Full year 2019
Operating profit, total operations 10,196 11,460 21,796
Adjustment for non-cash items in profit/loss 1,322 151 2,837
Paid income tax -4,755 -2,421 -5,325
Changes in the assets and liabilities of operating activities 308,781 -41,023 3,070
Cash flow from operating activities 315,544 -31,833 22,378
Change in shares 644 -26 -95
Change in property and equipment -216 -302 -532
Change in intangible assets -656 -598 -1,120
Cash flow from investing activities -228 -926 -1,747
Repayment of subordinated loans - -17,730 -17,730
Issued subordinated loans - 4,642 4,670
Dividend paid - -10,693 -10,693
Cash flow from financing activities - -23,781 -23,753
Liquid funds at beginning of the period 327,958 317,217 317,217
Cash flow for the period 315,316 -56,540 -3,122
Exchange rate difference on liquid funds -16,398 10,623 13,863
Liquid funds at end of the period* 626,876 271,300 327,958
* Liquid funds are defined as Cash and balances with central banks.
INTERIM REPORT JANUARY – JUNE 2020
36 Handelsbanken
NOTES
Note 1 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, and statements from
the Swedish Financial Reporting Board, are also applied in the
consolidated accounts.
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 the Swedish
Financial Reporting Board’s recommendation RFR 2 Accounting for
legal entities and statements.
Credit Valuation Adjustment (CVA) and Debit Valuation
Adjustment (DVA)
Up until the 2019 financial year, the Bank applied a method entailing
that a continuous stand-alone valuation was made of the total credit
risk component, the counterparty’s credit risk (Credit Valuation
Adjustment, CVA) and own credit risk (Debit Valuation Adjustment,
DVA) in outstanding model-valued derivatives. Changes in fair
value arising from changed credit risk were recognised in profit/loss
to the extent that the total effect exceeded non-recognised day 1
gains/losses.
From the first quarter 2020, a new method has been implemented
whereby the Bank recognises changes in CVA and DVA on an
ongoing basis at transaction level as a part of the derivative’s fair
value on the balance sheet and income statement. In conjunction with
this, a new assessment of the model for calculating CVA was carried
out, resulting in the change from a model using solely historical PD
values to a model using market-implied PD values. These changes
will be applicable to the reporting prospectively. The initial effect of
the transition to the new model for calculating CVA and DVA as at
1 January 2020 was SEK -134m, which affected profit in the first
quarter. The negative impact on profit was compensated for by the
reversal of the part of non-recognised day 1 gains/losses attributable
to CVA, amounting to SEK 87m. The remaining components of non-
recognised day 1 gains/losses following the implementation of the
method for ongoing recognition of CVA and DVA, are accrued over
the remaining maturity of the derivative.
In other respects, 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 2019.
Future regulatory changes
IFRS 17 Insurance Contracts
IFRS 17 Insurance Contracts has been published by the IASB.
Assuming that IFRS 17 is adopted by the EU, this standard is to be
applied as of the 2023 financial year. IFRS 17 entails a change in
how insurance contracts are recognised, presented and valued. It will
also entail extended disclosure requirements. The Bank is currently
working with the financial effects of the new standard.
Others changes in IFRS
None of the other changes in the accounting regulations issued for
application are assessed to have a material impact on
Handelsbanken’s financial reports, capital adequacy, large exposures
or other circumstances according to the applicable regulatory
requirements.
INTERIM REPORT JANUARY – JUNE 2020
37 Handelsbanken
Note 2 Net interest income
Note 3 Net fee and commission income
SEK mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 ChangeFull year
2019
Interest income
Loans to credit institutions and central banks -15 766 811 751 1,733 -57% 3,160
Loans to the public 10,802 11,370 -5% 11,147 -3% 22,172 21,922 1% 44,445
Interest-bearing securities eligible as collateral with central banks 96 69 39% 134 -28% 165 302 -45% 333
Bonds and other interest-bearing securities 97 128 -24% 150 -35% 225 294 -23% 520
Derivative instruments 389 882 -56% 1,166 -67% 1,271 2,520 -50% 4,084
Other interest income 315 316 0% 351 -10% 631 685 -8% 1,341
Total 11,684 13,531 -14% 13,759 -15% 25,215 27,456 -8% 53,883
Interest income reported in Net gains/losses on financial transactions 16 -138 -80 -122 -144 15% -512
Total interest income 11,668 13,669 -15% 13,839 -16% 25,337 27,600 -8% 54,395
of which interest income according to the effective interest method and interest on derivatives for hedging 11,541 13,562 -15% 13,638 -15% 25,103 27,129 -7% 53,798
Interest expense
Due to credit institutions and central banks -192 -258 -26% -238 -19% -450 -528 -15% -871
Deposits and borrowing from the public -303 -790 -62% -513 -41% -1,093 -1,083 1% -2,157
Issued securities -3,166 -4,497 -30% -5,267 -40% -7,663 -10,852 -29% -20,022
Derivative instruments 402 827 -51% 1,154 -65% 1,229 2,665 -54% 4,440
Subordinated liabilities -283 -334 -15% -311 -9% -617 -687 -10% -1,282
Government fees -411 -333 23% -532 -23% -744 -1,066 -30% -2,165
Other interest expenses -60 -60 0% -61 -2% -120 -100 20% -201
Total -4,013 -5,445 -26% -5,768 -30% -9,458 -11,651 -19% -22,258
Interest expense reported in Net gains/losses on financial transactions 33 -6 7 371% 27 -49 2
Total interest expense -4,046 -5,439 -26% -5,775 -30% -9,485 -11,602 -18% -22,260
of which interest expense according to the effective interest method and interest on derivatives for hedging -3,635 -5,106 -29% -5,243 -31% -8,741 -10,536 -17% -20,095
Net interest income 7,622 8,230 -7% 8,064 -5% 15,852 15,998 -1% 32,135
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.
SEK mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 ChangeFull year
2019
Brokerage and other securities commissions 160 188 -15% 162 -1% 348 333 5% 625
Mutual funds 996 1,097 -9% 973 2% 2,093 1,861 12% 3,885
Custody and other asset management fees 241 222 9% 293 -18% 463 549 -16% 1,151
Advisory services 46 55 -16% 75 -39% 101 150 -33% 255
Insurance 183 194 -6% 197 -7% 377 383 -2% 757
Payments 747 859 -13% 953 -22% 1,606 1,801 -11% 3,757
Loans and deposits 332 345 -4% 341 -3% 677 693 -2% 1,401
Guarantees 93 90 3% 103 -10% 183 201 -9% 399
Other 150 148 1% 132 14% 298 260 15% 532
Total fee and commission income 2,948 3,198 -8% 3,229 -9% 6,146 6,231 -1% 12,762
Securities -67 -64 5% -58 16% -131 -123 7% -240
Payments -331 -415 -20% -452 -27% -746 -851 -12% -1,733
Other -20 -19 5% -24 -17% -39 -50 -22% -92
Total fee and commission expenses -418 -498 -16% -534 -22% -916 -1,024 -11% -2,065
Net fee and commission income 2,530 2,700 -6% 2,695 -6% 5,230 5,207 0% 10,697
INTERIM REPORT JANUARY – JUNE 2020
38 Handelsbanken
Note 4 Net gains/losses on financial transactions
Note 5 Other expenses
SEK mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 ChangeFull year
2019
Amortised cost 47 55 -15% 47 0% 102 85 20% 209
of which loans 74 83 -11% 69 7% 157 138 14% 323
of which interest-bearing securities 0 0 0 0% 0 0 0% 0
of which issued securities -27 -28 4% -22 -23% -55 -53 -4% -114
Fair value through other comprehensive income 0 0 0% -1 0 -1 -1
of which expected credit losses 0 0 0% -1 0 -1 -1
Fair value through profit or loss, fair value option 96 299 -68% 691 -86% 395 1,325 -70% 646
of which interest-bearing securities 96 299 -68% 691 -86% 395 1,325 -70%
Fair value through profit or loss, mandatory including FX effects 251 -106 -376 145 -804 553
Hedge accounting -1 34 -6 83% 33 10 230% -58
of which net gains/losses on fair value hedges 0 34 -100% -5 34 16 113% -49
of which cash flow hedge ineffectiveness -1 0 -1 0% -1 -6 83% -9
Result from financial components in insurance contract 16 -152 0 -136 0 -50
Total 409 130 215% 355 15% 539 615 -12% 1,299
SEK mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 ChangeFull year
2019
Property and premises -156 -169 -8% -163 -4% -325 -333 -2% -656
External IT costs -568 -551 3% -559 2% -1,119 -1,086 3% -2,288
Communication -81 -85 -5% -89 -9% -166 -179 -7% -334
Travel and marketing -28 -65 -57% -82 -66% -93 -149 -38% -299
Purchased services -521 -515 1% -517 1% -1,036 -976 6% -2,001
Supplies -46 -42 10% -44 5% -88 -92 -4% -186
Other administrative expenses -168 -160 5% -154 9% -328 -288 14% -760
Other expenses -1,568 -1,587 -1% -1,608 -2% -3,155 -3,103 2% -6,524
INTERIM REPORT JANUARY – JUNE 2020
39 Handelsbanken
Note 6 Credit losses
SEK mQ2
2020Q1
2020 ChangeQ2
2019 ChangeJan-Jun
2020Jan-Jun
2019 ChangeFull year
2019
Expected credit losses on balance sheet items
The period's provision Stage 3 -164 -210 -22% -656 -75% -374 -1,094 -66% -1,585
Reversal of Stage 3 provisions previous years 180 155 16% 225 -20% 335 263 27% 386
Total expected credit losses Stage 3 16 -55 -431 -39 -831 -95% -1,199
The period's net provision Stage 2 -159 -230 -31% -4 -389 10 129
The period's net provision Stage 1 108 -170 -14 -62 -24 158% -48
Total expected credit losses in Stage 1 and Stage 2 -51 -400 -87% -18 183% -451 -14 81
Total expected credit losses on balance sheet items -35 -455 -92% -449 -92% -490 -845 -42% -1,118
Expected credit lossses on off-balance sheet items
The period's net provision Stage 3 -27 -29 -7% -43 -37% -56 -43 30% -107
The period's net provision Stage 2 -55 -30 83% 2 -85 3 -1
The period's net provision Stage 1 1 -32 1 0% -31 8 9
Total expected credit losses on off-balance sheet items -81 -91 -11% -40 103% -172 -32 438% -99
Write-offs
Actual credit losses for the period -88 -258 -66% -99 -11% -346 -215 61% -501
Utilised share of previous provision Stage 3 66 245 -73% 84 -21% 311 194 60% 421
Total write-offs -22 -13 69% -15 47% -35 -21 67% -80
Recoveries 41 21 95% 69 -41% 62 175 -65% 252
Net credit losses -97 -538 -82% -435 -78% -635 -723 -12% -1,045
of which loans to the public -18 -446 -96% -396 -95% -464 -692 -33% -950
SEK mQ2
2020Q1
2020
1) Expected credit losses Stage 3 -11 -84
Change in model-based provision Stage 1 and Stage 2:
Update of macroeconomic scenarios and risk factors -203
Transfer of exposures in exposed sectors from Stage 1 to Stage 2* -37
Change in probablity of default in portfolio at beginning of quarter (net rating changes) -70
Effects of changes in exposures (existing, new and terminated exposures) 154
Other in Stage 1 and Stage 2 30
Model-based credit losses in Stage 1 and Stage 2 -126 -22
Expert-based provision for covid-19 (stress of ECL 12 months, in Stage and Stage 2):
Provision for stress in exposed sectors according to assumptions in Q1 -562 -734
Exclusion of mortgages 65
Exclusion of previously included counterparties 46
Extended list of identified exposed sectors (retail property) -48
Provision for stress of Group exposures towards SME corporates (excl. properties) -25
Reduction, based on 60% probablity for stress 294
Reduction, based on 80% probablity for stress 105
Expert-based calculation of provision -419 -440
Expert-based credit losses in Stage 1 and Stage 2(change in provision versus previous quarter) 21 -440
2) Expected credit losses in Stage 1 and Stage 2 -105 -462
3) Write-offs -22 -13
4) Recoveries 41 21
Net credit losses (1+2+3+4) -97 -538
* expert-based assessment of significant increase in credit risk
INTERIM REPORT JANUARY – JUNE 2020
40 Handelsbanken
Model-based calculations used for agreements in Stages 1 and 2 incorporate better the effects of covid-19 in the second quarter than was the case in the first quarter. More information about the consequences of the pandemic has been available to use in the calculations, in terms of, for example, observed customer behaviour and assumptions about future development, which has allowed for more precise estimations. It has thus been possible to factor many of the effects taken into account in the first quarter expert-based calculations into the model-based calculations for the second quarter. Similar to Q1, relief offered to credit owners under the prevailing circumstances has not, as an individual quantitative factor, caused any transfers from Stage 1 to Stage 2. The macroeconomic scenarios were updated prior to the second quarter, meaning that assumptions based on the prevailing starting point arising due to covid-19 are more accurately reflected than in the first quarter. The weighting of the three different macroeconomic forecasts are unchanged since Q1, with a distribution of 30%/55%/15% for the negative/neutral/ positive scenarios. The selection of macroeconomic risk factors is also unchanged. The effects of the macroeconomic scenarios on the provision requirement in the second quarter relate primarily to the updated values of the macroeconomic risk factors, whereby GDP has decreased, unemployment has increased and the future value of collateral has decreased compared to Q1 (the macroeconomic
forecasts are presented in full in the Fact Book). However, the provision requirement has decreased with the effects of changes in portfolios, where the effect of negative rating migration is more than compensated for by a reduction in exposures and shorter remaining tenors for certain larger exposures. In order to incorporate the estimated impact of covid-19 from factors not covered by the model, an expert-based calculation has been carried out at aggregate level to adjust the model-based calculations for selected sub-portfolios, as was the case in Q1. A stressed scenario for these sub-portfolios has been compared with the model-based calculation as at 30 June 2020, with the difference constituting the expert-based calculation. Thereafter, the Bank has assessed the probability that the outcome of the expert-based calculation will arise, and arrived at an additional provision requirement of SEK 419m, a decrease of SEK 21m compared with the Q1 expert-based calculation, which was SEK 440m. The fact that the expert-based calculation for the second quarter has decreased compared with the first quarter should not be interpreted to mean that the effects of covid-19 are now assessed as being less severe, but rather that is has now become possible to take into account the effects in the model-based calculation to a greater degree. In making the expert-based calculation for companies, portfolios in exposed sectors mainly attributable to the Construction, Retail and Hotel and Restaurant sectors have been included in the calculation. There have been some adjustments to the selection since the first quarter. On the basis of an expert assessment, some counterparties have been excluded, as the provision requirement is deemed to be taken into account in the model-based calculation, while other counterparties have been added, where the assessment is that the effects have a wider impact than previously thought. In addition, contrary to the first quarter, small and medium-sized enterprises have been included in the calculation, regardless of sector, although with less stress than for companies in exposed sectors. For households, mortgage loans are excluded, whereas these were included in the expert-based calculation in the first quarter. For both companies and private individuals, probability of default (PD) is the risk parameter that has been stressed for the coming 12 months, similar to the previous quarter. For private individuals, the increased probability of unemployment has been taken into account in the stressed scenario. An expert-based assessment for companies in exposed sectors was added in the second quarter. Companies are seen to have a significant increase in credit risk whenever they have a credit risk that is higher than normal, regardless of the scale of the change since the granting of the credit. These exposures have thus been placed in Stage 2. This expert-based assessment results in an additional provision requirement of SEK 37m compared with the first quarter. The process of impairment testing for agreements in Stage 3 has not been changed as a result of covid-19, and the customary procedure with individual assessment has continued.
Loans to the public – Key figures
For definitions, please see the Fact Book which is available at handelsbanken.com/ir.
Sectors exposed by covid-19
Exposure, on-balance30 June 2020, SEK bn LendingRetail premises 32.6
Hotel and accommodation 20.1
Specialised building and construction 6.1
Restaurant, catering and bar 4.5
Automotive and motorcycle trade and repair 4.2
Land transport & transport in piping systems 3.9
Retail, excluding automotives and motorcycles 3.5
Maritime transport 3.4Manufacture of bituminous coal products and refined petroleum products 3.0
Sport, leisure and entertainment 2.2
Artistic and cultural operations, and entertainment 1.5
Other consumer services 0.5
Travel agency and arrangement, etc. 0.1
Air transport 0.05
Other 0.05
Total exposure 85.7
30 Jun 2020
31 Mar 2020
31 Dec 2019
30 Sep 2019
30 Jun 2019
Credit loss ratio %, acc 0.04 0.08 0.04 0.05 0.06
Total credit loss reserve ratio, % 0.20 0.20 0.20 0.20 0.20
Credit loss reserve ratio Stage 1, % 0.02 0.02 0.02 0.02 0.02
Credit loss reserve ratio Stage 2, % 0.95 1.13 0.85 0.95 1.05
Credit loss reserve ratio Stage 3, % 39.02 41.62 42.65 44.69 44.20
Proportion of loans Stage 3, % 0.23 0.21 0.22 0.20 0.20
INTERIM REPORT JANUARY – JUNE 2020
41 Handelsbanken
Note 7 Loans
Loans and interest-bearing securities that are subject to impairment testing, net
Loans and interest-bearing securities that are subject to impairment testing, divided into stages
Loans to the public that are subject to impairment testing, divided into stages
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Cash and balances with central banks 626,876 623,421 327,958 314,002 271,300
Other loans to central banks 82,900 50,316 19,547 46,867 27,249
Interest-bearing securities eligible as collateral with central banks 1,623 2,513 1,427 2,396 1,667
Loans to other credit institutions 30,579 30,484 17,939 35,204 33,573
of which reverse repos 2,397 444 4,102 5,334
Loans to the public 2,302,177 2,325,993 2,292,603 2,296,264 2,276,983
of which reverse repos 16,640 16,444 10,438 11,638 10,096
Bonds and interest-bearing securities 3,756 4,950 4,953 5,158 5,175
Total 3,047,911 3,037,677 2,664,427 2,699,891 2,615,947
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Volume, gross 3,052,582 3,042,457 2,668,999 2,704,544 2,620,492
of which Stage 1 2,958,997 2,974,542 2,608,306 2,643,011 2,559,315
of which Stage 2 84,766 59,338 51,862 53,052 52,936
of which Stage 3 8,819 8,577 8,831 8,481 8,241
Provisions -4,672 -4,781 -4,574 -4,655 -4,547
of which Stage 1 -422 -541 -363 -363 -346
of which Stage 2 -809 -671 -444 -503 -559
of which Stage 3 -3,441 -3,569 -3,767 -3,789 -3,642
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Loans to the public, gross 2,306,846 2,330,769 2,297,171 2,300,913 2,281,521
of which Stage 1 2,213,338 2,262,954 2,236,671 2,239,583 2,220,600
of which Stage 2 84,689 59,238 51,669 52,852 52,680
of which Stage 3 8,819 8,577 8,831 8,478 8,241
Provisions -4,669 -4,776 -4,568 -4,649 -4,538
of which Stage 1 -420 -538 -360 -359 -341
of which Stage 2 -808 -669 -441 -501 -555
of which Stage 3 -3,441 -3,569 -3,767 -3,789 -3,642
INTERIM REPORT JANUARY – JUNE 2020
42 Handelsbanken
Change in the provision for expected credit losses – Loans and interest-bearing securities
Change in the provision for expected credit losses – Loans to the public
The change analysis shows the net effect on the provision for the stage in question for each explanatory item during the period. The impact of reversals and write-offs is calculated on the opening balance. The effect of revaluations arising as a result of changes due to updates in the methodology for estimation, foreign exchange effects, etc., is calculated before any transfer of net amounts between stages. Purchased or originated assets and amounts transferred between stages are recognised after the effects of other explanatory items are taken into account. The transfer rows present the effect on the provision for the stated stage.
30 June 2020
SEK m Stage 1 Stage 2 Stage 3
Provision at beginning of year -363 -444 -3,767 -4,574
Derecognised assets 18 43 147 208
Write-offs 0 0 311 311
Remeasurements due to changes in credit risk -204 -157 -34 -395
Changes due to update in the methodology for estimation - - - -
Foreign exchange effect, etc 10 13 66 89
Purchased or originated assets -32 -9 -21 -62
Transfer to Stage 1 -18 30 0 12
Transfer to Stage 2 111 -406 4 -291
Transfer to Stage 3 56 121 -147 30
Provision at end of period -422 -809 -3,441 -4,672
Total
31 December 2019
SEK m Stage 1 Stage 2 Stage 3
Provision at beginning of year -316 -560 -2,937 -3,813
Derecognised assets 35 107 81 223
Write-offs 1 1 419 421
Remeasurements due to changes in credit risk -197 -134 63 -268
Changes due to update in the methodology for estimation -4 -5 - -9
Foreign exchange effect, etc -11 -9 -47 -67
Purchased or originated assets -46 -17 -16 -79
Transfer to Stage 1 -26 52 1 27
Transfer to Stage 2 93 -225 20 -112
Transfer to Stage 3 108 346 -1,351 -897
Provision at end of period -363 -444 -3,767 -4,574
Total
30 June 2020
SEK m Stage 1 Stage 2 Stage 3
Provision at beginning of year -360 -441 -3,767 -4,568
Derecognised assets 17 43 144 204
Write-offs 0 0 311 311
Remeasurements due to changes in credit risk -205 -159 -46 -410
Changes due to update in the methodology for estimation - - - -
Foreign exchange effect, etc 10 13 66 89
Purchased or originated assets -31 -9 -6 -46
Transfer to Stage 1 -18 30 0 12
Transfer to Stage 2 111 -406 4 -291
Transfer to Stage 3 56 121 -147 30
Provision at end of period -420 -808 -3,441 -4,669
Total
31 December 2019
SEK m Stage 1 Stage 2 Stage 3
Provision at beginning of year -312 -552 -2,937 -3,801
Derecognised assets 33 101 81 215
Write-offs 1 1 419 421
Remeasurements due to changes in credit risk -196 -134 63 -267
Changes due to update in the methodology for estimation -4 -5 - -9
Foreign exchange effect, etc -11 -9 -47 -67
Purchased or originated assets -46 -16 -16 -78
Transfer to Stage 1 -26 52 1 27
Transfer to Stage 2 93 -225 20 -112
Transfer to Stage 3 108 346 -1,351 -897
Provision at end of period -360 -441 -3,767 -4,568
Total
INTERIM REPORT JANUARY – JUNE 2020
43 Handelsbanken
Loans to the public – by sector
30 June 2020 Gross Provisions Net
SEK m Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Private individuals 1,138,748 22,592 2,615 -180 -192 -773 1,162,810
of which mortgage loans 938,386 15,099 827 -48 -49 -54 954,161of which other loans with property mortgages 150,298 5,573 681 -15 -19 -145 156,373of which other loans to private individuals 50,064 1,920 1,107 -117 -124 -574 52,276
Housing co-operative associations 245,813 2,110 107 -12 -5 -23 247,990
of which mortgage loans 217,830 1,039 24 -6 -1 -10 218,876
Property management 615,338 29,904 1,748 -89 -202 -315 646,384
Manufacturing 23,837 5,052 1,244 -15 -49 -1,141 28,928
Retail 19,018 4,409 414 -18 -75 -106 23,642
Hotel and restaurant 6,070 4,024 25 -6 -89 -8 10,016
Passenger and goods transport by sea 2,980 1,610 1,580 -1 -5 -568 5,596
Other transport and communication 9,802 1,431 121 -10 -36 -100 11,208
Construction 16,955 2,318 169 -20 -44 -75 19,303
Electricity, gas and water 13,359 1,746 2 -3 -11 -1 15,092
Agriculture, hunting and forestry 20,314 1,352 67 -13 -22 -39 21,659
Other services 17,079 1,645 267 -21 -45 -151 18,774
Holding, investment and insurance companies, funds etc. 58,626 5,122 94 -25 -22 -58 63,737
Government and municipalities 7,878 476 - 0 -1 - 8,353
of which Swedish national debt office 91 - - - - - 91
Other corporate lending 17,521 898 366 -7 -10 -83 18,685
Total 2,213,338 84,689 8,819 -420 -808 -3,441 2,302,177
31 December 2019 Gross Provisions Net
SEK m Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Private individuals 1,130,885 19,804 2,301 -133 -119 -759 1,151,979
of which mortgage loans 924,628 13,901 666 -40 -34 -49 939,072of which other loans with property mortgages 160,282 4,159 575 -14 -17 -155 164,830of which other loans to private individuals 45,975 1,744 1,060 -79 -68 -555 48,077
Housing co-operative associations 243,357 1,825 102 -7 -4 -12 245,261
of which mortgage loans 210,053 709 35 -4 0 -10 210,783
Property management 630,825 14,738 1,746 -104 -115 -336 646,754
Manufacturing 25,801 3,368 1,292 -11 -36 -1,215 29,199
Retail 26,354 2,228 171 -15 -26 -115 28,597
Hotel and restaurant 8,425 418 20 -8 -7 -7 8,841
Passenger and goods transport by sea 5,220 56 1,616 -1 -3 -496 6,392
Other transport and communication 9,893 739 96 -5 -10 -79 10,634
Construction 17,307 1,798 262 -14 -19 -213 19,121
Electricity, gas and water 17,148 2,300 8 -3 -10 -8 19,435
Agriculture, hunting and forestry 17,679 1,491 91 -8 -14 -36 19,203
Other services 18,943 1,217 349 -14 -23 -148 20,324
Holding, investment and insurance companies, funds etc. 57,044 1,051 145 -16 -13 -111 58,100
Government and municipalities 9,773 164 - -1 0 - 9,936
of which Swedish national debt office - - - - - - -
Other corporate lending 18,017 472 632 -20 -42 -232 18,827
Total 2,236,671 51,669 8,831 -360 -441 -3,767 2,292,603
INTERIM REPORT JANUARY – JUNE 2020
44 Handelsbanken
Specification of Loans to the public – Property management
30 June 2020 Gross Provisions Net
SEK m Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Loans in Sweden
State-owned property companies 7,895 14 - 0 0 - 7,909
Municipal-owned property companies 6,917 - - 0 - - 6,917
Residential property companies 122,760 1,379 61 -5 -7 -47 124,141
of which mortgage loans 110,659 1,059 7 -4 -5 -4 111,712
Other property management 124,325 7,732 197 -12 -30 -72 132,140
of which mortgage loans 61,982 1,898 17 -3 -9 -7 63,878
Total loans in Sweden 261,897 9,125 258 -17 -37 -119 271,107
Loans outside Sweden
UK 133,072 12,680 704 -34 -85 -107 146,230
Norway 111,853 3,432 89 -18 -38 -10 115,308
Denmark 21,063 2,317 126 -7 -15 -32 23,452
Finland 44,021 1,465 556 -4 -24 -44 45,970
The Netherlands 39,965 295 - -8 -1 - 40,251
Other countries 3,467 590 15 -1 -2 -3 4,066
Total loans outside Sweden 353,441 20,779 1,490 -72 -165 -196 375,277
Total loans - Property management 615,338 29,904 1,748 -89 -202 -315 646,384
31 December 2019 Gross Provisions Net
SEK m Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Loans in Sweden
State-owned property companies 6,304 35 - 0 0 - 6,339
Municipal-owned property companies 7,291 - - 0 - - 7,291
Residential property companies 118,042 1,456 69 -5 -5 -50 119,507
of which mortgage loans 105,249 1,236 10 -3 -4 -4 106,484
Other property management 122,326 2,791 168 -10 -13 -73 125,189
of which mortgage loans 60,237 1,407 15 -3 -5 -2 61,649
Total loans in Sweden 253,963 4,282 237 -15 -18 -123 258,326
Loans outside Sweden
UK 146,345 6,241 720 -45 -54 -111 153,096
Norway 123,541 1,994 67 -28 -16 -34 125,524
Denmark 22,242 635 151 -5 -11 -34 22,978
Finland 42,854 1,346 555 -3 -14 -31 44,707
The Netherlands 37,485 229 - -7 -1 - 37,706
Other countries 4,395 11 16 -1 -1 -3 4,417
Total loans outside Sweden 376,862 10,456 1,509 -89 -97 -213 388,428
Total loans - Property management 630,825 14,738 1,746 -104 -115 -336 646,754
INTERIM REPORT JANUARY – JUNE 2020
45 Handelsbanken
Specification of Loans to the public – Property management: Type of collateral & country, home markets
Loans to the public – Property management: Commercial properties LTV per country, home markets
Loans to the public – Property management: Residential properties LTV per country, home markets
30 June 2020
SEK m, gross Sweden UK Norway Denmark Finland
The Nether-lands Total
Government guarantees 2,661 - - - 23,397 - 26,058
Residential 146,490 65,612 16,929 12,156 5,874 12,856 259,917
Office, retail, hotel 66,517 51,437 80,654 4,204 9,919 4,477 217,208
Other real estate 16,450 1,844 3,692 4,128 1,308 21,801 49,223
Industry, logistics 22,957 21,432 3,024 541 4,024 952 52,930
Agriculture, forestry 2,211 1,969 37 159 1 - 4,377
Other collateral 2,641 52 413 740 475 0 4,321
Unsecured 11,353 3,131 10,431 1,096 367 174 26,552
Undeveloped - 979 194 482 677 - 2,332
Total 271,280 146,456 115,374 23,506 46,042 40,260 642,918
31 December 2019
SEK m, gross Sweden UK Norway Denmark Finland
The Nether-lands Total
Government guarantees 2,875 - - - 22,727 - 25,602
Residential 140,035 74,745 18,511 12,003 6,766 12,953 265,013
Office, retail, hotel 64,289 57,201 87,999 3,760 7,543 3,016 223,808
Other real estate 14,434 240 2,824 4,567 1,357 21,349 44,771
Industry, logistics 20,632 15,296 3,865 497 4,200 186 44,676
Agriculture, forestry 1,740 1,604 34 113 1 - 3,492
Other collateral 3,114 68 449 865 887 8 5,391
Unsecured 11,363 3,033 11,676 1,071 404 202 27,749
Undeveloped - 1,119 244 152 870 - 2,385
Total 258,482 153,306 125,602 23,028 44,755 37,714 642,887
30 June 2020
LTV, % Sweden UK Norway Denmark Finland
The Netherlands All
0-40 79.9 84.9 76.4 70.8 77.6 81.5 79.9
41-60 17.7 14.4 20.5 22.5 15.8 17.7 17.7
61-75 1.6 0.5 1.9 3.7 3.1 0.6 1.5
>75 0.8 0.3 1.2 2.9 3.5 0.2 0.9
Average LTV 50 46 54 58 51 49 50
31 December 2019
LTV, % Sweden UK Norway Denmark Finland
The Netherlands All
0-40 80.0 84.2 74.1 69.0 73.5 79.4 78.5
41-60 17.6 15.1 21.0 22.6 18.2 19.6 18.4
61-75 1.6 0.5 2.5 4.2 4.1 0.9 1.7
>75 0.8 0.2 2.5 4.2 4.1 0.1 1.3
Average LTV 50 46 57 59 57 50 52
30 June 2020
LTV, % Sweden UK Norway Denmark Finland
The Netherlands All
0-40 79.3 82.9 73.8 59.8 57.3 75.1 77.5
41-60 17.6 16.6 21.2 26.0 20.9 21.9 18.3
61-75 2.7 0.4 3.1 8.8 9.3 2.1 2.8
>75 0.4 0.1 1.9 5.4 12.6 0.9 1.4
Average LTV 50 48 57 66 79 55 53
31 December 2019
LTV, % Sweden UK Norway Denmark Finland
The Netherlands All
0-40 79.0 82.5 73.2 62.7 55.6 74.9 77.1
41-60 17.7 17.0 21.4 25.8 21.2 21.6 18.5
61-75 2.9 0.4 2.9 8.0 10.4 2.5 2.9
>75 0.4 0.1 2.4 3.5 12.8 1.0 1.4
Average LTV 50 48 58 64 81 55 53
INTERIM REPORT JANUARY – JUNE 2020
46 Handelsbanken
Note 8 Credit risk exposure
Note 9 Derivatives
Derivative contracts are presented gross in the table. Amounts offset on the balance sheet consist of the offset market value of contracts for which there is a 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.
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Cash and balances with central banks 626,876 623,421 327,958 314,002 271,300
Other loans to central banks 82,900 50,316 19,547 46,867 27,249
Interest-bearing securities eligible as collateral with central banks 172,234 210,846 103,387 152,409 177,062
Loans to other credit institutions 30,579 30,484 17,939 35,204 33,573
of which reverse repos 2,397 444 4,102 5,334
Loans to the public 2,302,177 2,325,993 2,292,603 2,296,264 2,276,983
of which reverse repos 16,640 16,444 10,438 11,638 10,096
Bonds and other interest-bearing securities 46,477 54,170 42,640 55,726 56,498
Derivative instruments* 53,747 93,528 41,545 67,973 51,377
Contingent liabilities 92,110 98,275 95,186 94,658 95,958
Commitments 464,078 435,579 439,667 464,455 458,288
Total 3,871,178 3,922,612 3,380,472 3,527,558 3,448,288
* Refers to the total of positive market values.
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Positive market values
Trading 35,989 57,989 26,734 43,833 35,043
Fair value hedges 3,242 2,857 2,127 610 318
Cash flow hedges 46,340 62,730 38,016 58,903 48,756
Amounts offset -31,824 -30,048 -25,332 -35,373 -32,740
Total 53,747 93,528 41,545 67,973 51,377
Negative market values
Trading 38,763 38,126 36,151 39,296 38,063
Fair value hedges 636 597 587 859 699
Cash flow hedges 3,994 4,307 3,137 4,039 3,474
Amounts offset -26,960 -24,310 -19,233 -29,100 -26,739
Total 16,433 18,720 20,642 15,094 15,497
Nominal value
Trading 3,140,068 3,343,387 3,550,262 3,762,217 3,913,117
Fair value hedges 206,623 168,170 155,782 131,089 109,579
Cash flow hedges 803,371 863,023 843,629 907,758 915,437
Amounts offset -1,856,014 -2,169,038 -2,147,269 -2,237,868 -2,397,991
Total 2,294,048 2,205,542 2,402,404 2,563,196 2,540,142
INTERIM REPORT JANUARY – JUNE 2020
47 Handelsbanken
Note 10 Offsetting of financial instruments
The amount offset for derivative assets includes offset cash collateral of SEK 9,051m (7,682) derived from the balance sheet item Deposits and borrowing from the public. The amount offset for derivative liabilities includes offset cash collateral of SEK 4,187m (1,583), derived from the balance sheet item Loans to the public.
30 June 2020 SEK m Derivatives Total
85,571 22,094 107,665
-31,824 -2,635 -34,459
53,747 19,459 73,206
-13,904 - -13,904
-29,150 -19,452 -48,602
-43,054 -19,452 -62,506
10,693 7 10,700
43,393 3,388 46,781
-26,960 -2,635 -29,595
16,433 753 17,186
-13,904 - -13,904
-1,659 -753 -2,412
-15,563 -753 -16,316
870 - 870
31 December 2019SEK m Derivatives Total
66,877 18,436 85,313
-25,332 -5,816 -31,148
41,545 12,620 54,165
-12,023 - -12,023
-22,340 -12,620 -34,960
-34,363 -12,620 -46,983
7,182 - 7,182
39,875 5,816 45,691
-19,233 -5,816 -25,049
20,642 - 20,642
Related amounts not offset on the balance sheet-12,023 - -12,023
-5,179 - -5,179
-17,202 - -17,202
3,440 - 3,440
Amounts offset
Net amount
Amounts offset
Carrying amount on the balance sheet
Related amounts not offset on the balance sheet
Financial instruments, netting arrangements
Derivative instruments are offset 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 offset 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.
Gross amount
Amounts offset
Carrying amount on the balance sheet
Related amounts not offset on the balance sheet
Carrying amount on the balance sheet
Related amounts not offset on the balance sheet
Financial assets pledged as collateral
Gross amount
Amounts offset
Carrying amount on the balance sheet
Financial instruments, netting arrangements
Financial assets pledged as collateral
Financial instruments, netting arrangements
Net amount
Total amounts not offset on the balance sheet
Total amounts not offset on the balance sheet
Total amounts not offset on the balance sheet
Total amounts not offset on the balance sheet
Financial assets received as collateral
Net amount
Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements
Financial instruments, netting arrangements
Financial assets received as collateral
Net amount
Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements
Gross amount
Repurchase agreements, securities borrowing and
similar agreements
Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements
Repurchase agreements, securities borrowing and
similar agreements
Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements
Gross amount
INTERIM REPORT JANUARY – JUNE 2020
48 Handelsbanken
Note 11 Goodwill and other intangible assets
Note 12 Due to credit institutions, deposits and borrowing from the public
Note 13 Issued securities
Note 14 Pledged assets, contingent liabilities and commitments
Goodwill Other intangible assets Total
SEK m
Jan-Jun 2020
Jan-Jun 2019
Full year 2019
Jan-Jun 2020
Jan-Jun 2019
Full year 2019
Jan-Jun 2020
Jan-Jun 2019
Full year 2019
Opening residual value 7,007 6,922 6,922 4,178 3,533 3,533 11,185 10,455 10,455
Additional during the period - - - 656 598 1,120 656 598 1,120
The period's amortisation - - - -261 -224 -450 -261 -224 -450
The period's impairments - - - -26 -18 -69 -26 -18 -69
Foreign exchange effect -62 131 85 -29 32 44 -91 163 129
Closing residual value 6,945 7,053 7,007 4,518 3,921 4,178 11,463 10,974 11,185
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Due to credit institutions 254,734 245,904 147,989 210,506 192,494
of which repos 753 - - - 135
Deposits and borrowing from the public 1,375,922 1,382,929 1,117,825 1,157,242 1,105,365
of which repos - - - -
SEK m
Jan-Jun 2020
Jan-Jun 2019
Full year 2019
Issued securities at beginning of year 1,384,961 1,394,647 1,394,647
Issued 478,212 544,500 1,025,300
Repurchased -44,769 -39,291 -35,146
Matured -396,160 -523,945 -1,014,860
Foreign exchange effect etc. -9,745 26,693 15,020
Issued securities at end of period 1,412,499 1,402,604 1,384,961
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Assets pledged for own debt 891,274 881,876 878,457 888,691 893,549
Other pledged assets 58,812 56,673 49,744 45,417 99,774
Contingent liabilities 92,110 98,275 95,186 94,658 95,958
Commitments 464,078 435,579 439,667 464,455 458,288
INTERIM REPORT JANUARY – JUNE 2020
49 Handelsbanken
Note 15 Classification of financial assets and liabilities
30 June 2020
SEK mFair value
option
Derivatives identified as
hedge instruments
Fair value through other
comprehensive income Amortised cost
Total carrying amount Fair value
Assets
Cash and balances with central banks 626,876 626,876 626,876
Other loans to central banks 82,900 82,900 82,900
Interest-bearing securities eligible as collateral with central banks 7,285 163,326 402 1,221 172,234 172,228
Loans to other credit institutions 30,579 30,579 35,565
Loans to the public 2,302,177 2,302,177 2,316,864
Value change of interest-hedged item in portfolio hedge 18 18Bonds and other interest-bearing securities 15,988 26,733 3,756 46,477 46,477
Shares 14,917 1,834 16,751 16,751Assets where the customer bears the value change risk 169,809 64 169,873 169,873
Derivative instruments 20,650 33,097 53,747 53,747
Other assets 7 6,667 6,674 6,674
Total 228,656 190,059 33,097 5,992 3,050,502 3,508,306 3,527,955Investments in associates 381
Non-financial assets 24,500
Total assets 3,533,187
Liabilities
Due to credit institutions 254,734 254,734 255,290
Deposits and borrowing from the public 1,375,922 1,375,922 1,375,966Liabilities where the customer bears the value change risk 169,809 64 169,873 169,873
Issued securities 2,397 1,410,102 1,412,499 1,430,788
Derivative instruments 13,988 2,445 16,433 16,433
Short positions 5,958 5,958 5,958
Other liabilities 11 83,286 83,297 83,297
Subordinated liabilities 35,328 35,328 35,887
Total 22,354 169,809 2,445 3,159,436 3,354,044 3,373,492Non-financial liabilities 15,928
Total liabilities 3,369,972
Fair value through profit or loss
Mandatory
INTERIM REPORT JANUARY – JUNE 2020
50 Handelsbanken
31 December 2019
SEK m MandatoryFair value
option
Derivatives identified as
hedge instruments
Fair value through other
comprehensive income Amortised cost
Total carrying amount Fair value
Assets
Cash and balances with central banks 327,958 327,958 327,958
Other loans to central banks 19,547 19,547 19,547
Interest-bearing securities eligible as collateral with central banks 3,001 98,959 403 1,024 103,387 103,387
Loans to other credit institutions 17,939 17,939 17,940
Loans to the public 2,292,603 2,292,603 2,301,479
Value change of interest-hedged item in portfolio hedge 25 25
Bonds and other interest-bearing securities 8,642 29,045 4,953 42,640 42,640
Shares 19,087 2,303 21,390 21,390
Assets where the customer bears the value change risk 174,926 62 174,988 174,988
Derivative instruments 8,882 32,663 41,545 41,545
Other assets 10 6,157 6,167 6,167
Total 214,548 128,004 32,663 7,659 2,665,315 3,048,189 3,057,041
Investments in associates 285
Non-financial assets 21,193
Total assets 3,069,667
Liabilities
Due to credit institutions 147,989 147,989 148,322
Deposits and borrowing from the public 1,117,825 1,117,825 1,117,732
Liabilities where the customer bears the value change risk 174,926 62 174,988 174,988
Issued securities 3,253 1,381,708 1,384,961 1,395,070
Derivative instruments 18,985 1,657 20,642 20,642
Short positions 1,856 1,856 1,856
Other liabilities 11 14,027 14,038 14,038
Subordinated liabilities 35,546 35,546 35,825
Total 24,105 174,926 1,657 2,697,157 2,897,845 2,908,473
Non-financial liabilities 11,990
Total liabilities 2,909,835
Fair value through profit or loss
INTERIM REPORT JANUARY – JUNE 2020
51 Handelsbanken
Note 16 Fair value measurement of financial instruments
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 external data.
For financial instruments traded on an active market, the fair value is
the same as the current market price. An active market is one where
quoted prices are readily and regularly available from a regulated
market, execution venue, reliable news service or equivalent, and
where the price information received can be verified by means of
regularly occurring transactions. The current market price
corresponds to the price between the bid price and the offer price
which is most representative of fair value under the circumstances.
For groups of financial instruments which are managed on the basis
of the Bank’s net exposure to market risk, the current market price is
presumed to be the same as the price which would be received or
paid if the net position were divested.
For financial instruments where there is no reliable information about
market prices, fair value is established using valuation models. These
models can, for example, be based on price comparisons, present
value calculations or option valuation theory depending on the nature
of the instrument.
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 degree of transparency regarding market data used in the
valuation. The categorisation is shown as levels 1-3 in the tables.
Financial instruments which are valued at a direct and liquid 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 includes the majority
of shares in mutual funds and other assets which are related to
unit-linked insurance contracts and similar agreements and the
corresponding liabilities. Financial instruments which are valued using
valuation models which substantially are based on market data are
categorised as level 2. Level 2 mainly includes interest-bearing
securities and interest- and currency-related derivatives. Financial
instruments whose value to a material extent is affected by input data
that cannot be verified using external market information are
categorised as level 3. Level 3 includes unlisted shares, certain
holdings of private equity funds and certain derivatives.
The categorisation is based on the valuation method used on the
balance sheet date. If the category for a specific instrument has
changed since the previous balance sheet date (31 December 2019),
the instrument has been moved between the levels in the table.
30 June 2020 SEK m Level 1 Level 2 Level 3 Total
167,939 3,074 - 171,013
42,464 4,013 - 46,477
14,947 1,205 599 16,751
168,533 781 495 169,809
325 53,278 144 53,747
394,208 62,351 1,238 457,797
168,533 781 495 169,809
- 2,397 - 2,397
262 16,026 145 16,433
5,773 185 - 5,958
174,568 19,389 640 194,597
31 December 2019SEK m Level 1 Level 2 Level 3 Total
100,814 1,549 - 102,363
38,421 4,219 - 42,640
18,416 1,666 1,308 21,390
173,609 824 493 174,926
402 41,074 69 41,545
331,662 49,332 1,870 382,864
173,609 824 493 174,926
- 3,253 - 3,253
489 20,083 70 20,642
1,708 148 - 1,856
175,806 24,308 563 200,677
Assets
Liabilities
Assets
Interest-bearing securities eligible as collateral with central banks
Total
Liabilities where the customer bears the value change risk
Issued securities
Liabilities where the customer bears the value change risk
Total
Derivative instruments
Interest-bearing securities eligible as collateral with central banks
Bonds and other interest-bearing securities
Shares
Assets where the customer bears the value change risk
Derivative instruments
Bonds and other interest-bearing securities
Shares
Assets where the customer bears the value change risk
Total
Derivative instruments
Short positions
Liabilities
Issued securities
Derivative instruments
Short positions
Total
INTERIM REPORT JANUARY – JUNE 2020
52 Handelsbanken
During January – June 2020, some of the volumes have been moved
between level 1 and level 2, as a result of a new assessment of
market activity. On the assets side, interest-bearing securities worth
SEK 260m and derivatives worth SEK 53m were transferred from
level 1 to level 2. No transfers from level 2 to level 1 have taken
place, on either the assets side or the liabilities side. On the liabilities
side, derivatives worth SEK 70m were transferred from level 1 to level
2. No transfers between levels took place during the period January –
June 2020 due solely to the covid-19 situation. Changes in level 3
holdings during the year are shown in a separate table below. The
reduction in level 3 is primarily due to the sale of the Bank’s shareholding
in Euroclear.
The holdings in level 3 mainly comprise unlisted shares. The Group’s
holdings of unlisted shares are mainly comprised of participating
interests in companies which provide supporting operations to the
Bank. For example, these may be participating interests in clearing
organisations and infrastructure collaboration on Handelsbanken’s
home markets. Such holdings are generally 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 at fair value through other comprehensive
income. Value changes for these holdings are thus reported in Other
comprehensive income.
Certain holdings of private equity funds are categorised in level 3.
These are valued using valuation models mainly based on a relative
valuation of comparable listed companies in the same sector. The
performance measurements used in the comparison are adjusted for
factors which distort the comparison between the investment and the
company used for comparison. Subsequently, the valuation is based
on earnings multiples, such as P/E ratios. Most of these holdings
represent investment assets in the Group’s insurance operations.
Value changes in the investment assets are included in the basis for
calculating the yield split in the insurance operations and are
therefore not reported directly in the income statement.
The derivatives component in some of the Bank’s issued structured
bonds and the related hedging derivatives are also categorised as
belonging to level 3. For these derivatives, internal assumptions have
a material impact on calculation of the fair value. Hedging derivatives
in level 3 are traded under CSA agreements where the market values
are checked and verified with the Bank’s counterparties on a daily
basis.
Differences between the transaction price and the value
measured by a valuation model
The models use input data in the form of market prices and other
variables that are deemed to affect pricing. The models and input
data which form the basis of the valuations are regularly validated to
ensure that they are consistent with market practice and established
financial theory. In cases where there are positive differences
between the value calculated with the help of a valuation model at
initial recognition and the transaction price (day 1 gain/loss), the
difference is accrued over the life of the financial instrument. Such
differences occur when the applied valuation model does not fully
capture all the components which affect the value of the instrument.
During the period January – June 2020, an accrual effect of SEK
116m (82) was recognised under Net gains/losses on financial
transactions, of which SEK 87m was attributable to the initial reversal
of non-recognised day 1 gains/losses in conjunction with the
transition to a new method for reporting CVA (see Note 1 Accounting
policies). At the end of the period, non-recognised day 1 gains/losses
totalled SEK 561m; at year-end 2019, the corresponding figure was
SEK 630m. At year-end 2019, non-recognised day 1 gains/losses
included a component attributable to CVA, which was reversed during
the first quarter in conjunction with the transition to a new method for
reporting CVA, as described above.
January - June 2020SEK m Shares
Derivative assets
Derivative liabilities
Assets where the customer
bears the value change
risk
Liabilities where the customer bears the
value change risk
Carrying amount at beginning of year 1,308 69 -70 493 -493
Acquisitions 5 -14 15 - -
Repurchases/sales -698 - - - -Matured during the period - - - - -Unrealised value change in income statement -5 40 -41 2 -2Unrealised value change in other comprehensive income -11 - - - -Changes in the methodology - - - - -Transfer from level 1 or 2 - 39 -39 - -Transfer to level 1 or 2 - 10 -10 - -
Carrying amount at end of period 599 144 -145 495 -495
January - December 2019SEK m Shares
Derivative assets
Derivative liabilities
Assets where the customer
bears the value change
risk
Liabilities where the customer bears the
value change risk
Carrying amount at beginning of year 1,135 -176 176 484 -484Acquisitions 74 - 1 - -Repurchases/sales -33 2 - - -Matured during the period - - - - -Unrealised value change in income statement -17 -13 10 9 -9Unrealised value change in other comprehensive income 149 - - - -Changes in the methodology - 352 -352 - -Transfer from level 1 or 2 - 4 -4 - -Transfer to level 1 or 2 - -100 99 - -
Carrying amount at end of period 1,308 69 -70 493 -493
Change in holdings in level 3
INTERIM REPORT JANUARY – JUNE 2020
53 Handelsbanken
Note 17 Assets and liabilities by currency
30 June 2020
SEK m SEK EUR NOK DKK GBP USDOther
currencies Total
Assets
Cash and balances with central banks 74,058 151,760 5,325 908 93,627 300,316 882 626,876
Other loans to central banks 7 - 42,242 39,644 1,007 - - 82,900
Loans to other credit institutions 2,012 8,026 2,572 386 1,537 14,795 1,251 30,579
Loans to the public 1,413,616 246,926 260,739 104,630 253,158 19,999 3,109 2,302,177
of which corporates 520,635 158,647 163,876 38,428 174,222 19,794 1,388 1,076,990
of which households 892,981 88,279 96,863 66,202 78,936 205 1,721 1,225,187
Interest-bearing securities eligible as collateral with central banks 157,784 7,443 2,953 21 - 2,830 1,203 172,234
Bonds and other interest-bearing securities 39,433 1,750 2,796 13 - 2,485 - 46,477
Other items not broken down by currency 271,944 271,944
Total assets 1,958,854 415,905 316,627 145,602 349,329 340,425 6,445 3,533,187
Liabilities
Due to credit institutions 39,411 62,338 44,910 4,394 4,811 98,396 474 254,734
Deposits and borrowing from the public 730,519 152,798 78,642 56,261 198,477 155,678 3,547 1,375,922
of which corporates 309,967 126,161 53,456 32,603 139,322 151,398 2,846 815,753
of which households 420,552 26,637 25,186 23,658 59,155 4,280 701 560,169
Issued securities 486,870 389,853 24,958 112 76,554 411,369 22,783 1,412,499
Subordinated liabilities 3,013 15,771 - - - 16,544 - 35,328
Other items not broken down by currency, incl. equity 454,704 454,704
Total liabilities and equity 1,714,517 620,760 148,510 60,767 279,842 681,987 26,804 3,533,187
Other assets and liabilities broken down by currency (net) 204,842 -167,948 -84,752 -69,419 341,430 20,395
Net foreign currency position -13 169 83 68 -132 36 211
31 December 2019
SEK m SEK EUR NOK DKK GBP USDOther
currencies Total
Assets
Cash and balances with central banks 46,552 114,477 22,096 291 85,069 58,039 1,434 327,958
Other loans to central banks 13 182 2,868 15,484 1,000 - - 19,547
Loans to other credit institutions 2,260 5,569 440 366 1,046 7,028 1,230 17,939
Loans to the public 1,372,132 243,507 280,110 104,095 267,214 20,803 4,742 2,292,603
of which corporates 499,072 157,535 176,218 38,050 181,116 20,588 2,832 1,075,411
of which households 873,060 85,972 103,892 66,045 86,098 215 1,910 1,217,192
Interest-bearing securities eligible as collateral with central banks 91,603 8,256 1,144 20 - 1,358 1,006 103,387
Bonds and other interest-bearing securities 32,612 2,032 4,112 12 0 3,872 0 42,640
Other items not broken down by currency 265,593 265,593
Total assets 1,810,765 374,023 310,770 120,268 354,329 91,100 8,412 3,069,667
Liabilities
Due to credit institutions 38,010 89,030 5,384 4,119 2,527 8,428 491 147,989
Deposits and borrowing from the public 649,470 121,251 74,402 50,035 196,003 21,310 5,354 1,117,825
of which corporates 260,874 96,867 50,526 27,568 128,848 17,161 4,781 586,625
of which households 388,596 24,384 23,876 22,467 67,155 4,149 573 531,200
Issued securities 469,814 345,368 25,878 100 68,584 451,930 23,287 1,384,961
Subordinated liabilities 3,003 15,829 - - 19 16,697 -2 35,546
Other items not broken down by currency, incl. equity 383,346 383,346
Total liabilities and equity 1,543,643 571,478 105,664 54,254 267,133 498,365 29,130 3,069,667
Other assets and liabilities broken down by currency (net) 197,540 -204,941 -65,918 -87,015 407,292 20,776
Net foreign currency position 85 165 96 181 27 58 612
INTERIM REPORT JANUARY – JUNE 2020
54 Handelsbanken
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 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. Information regarding the total capital
requirement and common equity tier 1 capital requirements in Pillar 2 is provided in the Group performance section.
Own funds Presentation in accordance with the requirements of Commission Implementing Regulation (EU) No 1423/2013. Excluded rows are deemed not relevant for Handelsbanken at present.
Amount at disclosure dateSEK m
30 Jun 2020
31 Mar 2020
31 Dec 2019
30 Sep 2019
30 Jun 2019
Regulation (EU) No 575/2013 art.
ref.
Common equity tier 1 (CET1) capital: Instruments and reserves
1 Capital instruments and the related share premium accounts 11,827 11,827 11,827 11,206 8,949 26.1, 27, 28, 29
of which: share capital 11,827 11,827 11,827 11,206 8,949 EBA list 26.3
2 Retained earnings 125,634 125,623 119,799 119,814 119,836 26.1 c
3
Accumulated other comprehensive income (and any other reserves, to include unrealised gains and losses according to the applicable accounting standards) 8,641 10,816 13,130 13,884 12,313 26.1
5aIndependently reviewed interim profits net of any foreseeable charge or dividend 4,506 2,283 5,824 3,860 3,005 26.2
6Common equity tier 1 (CET1) capital before regulatory adjustments
150,608 150,549 150,580 148,764 144,103
Common equity tier 1 (CET1) capital: regulatory adjustments
7 Additional value adjustments (negative amount) -563 -693 -399 -392 -434 34, 105
8 Intangible assets (net of related tax liability) (negative amount) -11,375 -11,534 -11,119 -11,036 -10,922 36.1 b, 37
11 Fair value reserves related to gains or losses on cash flow hedges -5,269 -6,096 -4,203 -6,520 -5,524 33.1 a
12Negative amounts resulting from the calculation of expected loss amounts -1,010 -1,319 -1,581 -1,881 -1,937 36.1 d, 40, 159
14Gains or losses on liabilities valued at fair value resulting from changes in own credit standing 0 -11 - - - 33.1 b
15 Defined benefit pension fund assets (negative amount) - - - - - 36.1 e, 41
16Direct and indirect holdings by an institution of own CET1 instruments (negative amount) -473 -456 -527 -474 -478 36.1 f, 42
19
Direct, indirect and synthetic holdings by the institution of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities (amount above 10% threshold and net of eligible short positions) (negative amount) - - - - -
36.1 i, 43, 45, 47, 48.1 b, 49.1-49.3,
79
20aExposure amount of the following items which qualify for a RW of 1250%, where the institution opts for the deduction alternative - - -20 -22 -22 36 (1) (k)
20c of which: securitisation positions (negative amount) - - -20 -22 -22
36 (1) (k) (ii), 243 (1) (b), 244 (1) (b),
258
21
Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability where the conditions in Article 38 (3) are met) (negative amount) - - - - - 36.1 c, 38, 48.1 a
22 Amount exceeding the 15% threshold (negative amount) - - - - - 48.1
23
of which: direct and indirect holdings by the institution of CET1 instruments of financial sector entities where the institution has significant investments in those entities - - - - - 36.1 i, 48.1 b
25 of which: deferred tax assets arising from temporary differences - - - - - 36.1 c, 38, 48.1 a
25a Losses for the current financial year (negative amount) - - - - - 36.1 a
25b Foreseeable tax charges relating to CET1 items (negative amount) - - - - - 36.1 l
27Qualifying AT1 deductions that exceed the AT1 capital of the institution (negative amount) - - - - - 36.1 j
28Total regulatory adjustments to common equity tier 1 (CET1) capital -18,690 -20,109 -17,849 -20,325 -19,317
29 Common equity tier 1 (CET1) capital 131,918 130,440 132,731 128,439 124,786
INTERIM REPORT JANUARY – JUNE 2020
55 Handelsbanken
Own funds, cont
Amount at disclosure dateSEK m
30 Jun 2020
31 Mar 2020
31 Dec 2019
30 Sep 2019
30 Jun 2019
Regulation (EU) No 575/2013 art.
ref.
Additional tier 1 (AT1) capital: instruments
30 Capital instruments and the related share premium accounts 15,844 16,995 15,819 16,618 15,712 51, 52
32of which: classified as liabilities under applicable accounting standards 15,844 16,995 15,819 16,618 15,712
33Amount of qualifying items referred to in Article 484 (4) and the related share premium accounts subject to phase-out from AT1 - - - - - 486.3
36 Additional tier 1 (AT1) capital before regulatory adjustments 15,844 16,995 15,819 16,618 15,712
Additional tier 1 (AT1) capital: regulatory adjustments
37Direct and indirect holdings by an institution of own AT1 instruments (negative amount) - - - - - 52.1 b, 56 a, 57
40
Direct and indirect holdings of the AT1 instruments of financial sector entities where the institution has a significant investment in those entities (amount above 10% threshold and net of eligible short positions) (negative amount) - - - - - 56 d, 59, 79
42Qualifying (T2) deductions that exceed the T2 capital of the institution (negative amount) - - - - - 56 e
43 Total regulatory adjustments to additional tier 1 (AT1) capital - - - - -44 Additional tier 1 (AT1) capital 15,844 16,995 15,819 16,618 15,712
45 Tier 1 capital (T1 = CET1 + AT1) 147,762 147,435 148,550 145,057 140,498Tier 2 (T2) capital: instruments and provisions
46 Capital instruments and the related share premium accounts 18,695 19,437 18,639 19,003 18,803 62, 6350 Credit risk adjustments - - - - - 62 c och d
51 Tier 2 (T2) capital before regulatory adjustments 18,695 19,437 18,639 19,003 18,803
Tier 2 (T2) capital: regulatory adjustments
52Direct and indirect holdings by an institution of own T2 instruments and subordinated loans (negative amount) - - - - - 63 b i, 66 a, 67
55
Direct and indirect holdings of the T2 instruments and subordinated loans of financial sector entities where the institution has a significant investment in those entities (net of eligible short positions) (negative amounts) -1,129 -1,129 -1,129 -1,129 -1,129 66d, 69, 79
57 Total regulatory adjustments to tier 2 (T2) capital -1,129 -1,129 -1,129 -1,129 -1,129
58 Tier 2 (T2) capital 17,566 18,308 17,510 17,874 17,674
59 Total capital (TC = T1 + T2) 165,328 165,743 166,060 162,931 158,172
60 Total risk-weighted assets 704,880 740,993 716,462 737,171 729,198
Capital ratios and buffers
61Common equity tier 1 capital (as a percentage of total risk exposure amount) 18.7 17.6 18.5 17.4 17.1 92.2 a
62 Tier 1 capital (as a percentage of total risk exposure amount) 21.0 19.9 20.7 19.7 19.3 92.2 b
63 Total capital (as a percentage of total risk exposure amount) 23.5 22.4 23.2 22.1 21.7 92.2 c
64
Institution-specific buffer requirement (CET1 requirement in accordance with Article 92 (1) (a) plus capital conservation and countercyclical buffer requirements, plus systemic risk buffer, plus the systemically important institution buffer (G-SII or O-SII buffer) expressed as a percentage of total risk exposure amount) 5.6 5.6 7.4 7.3 7.0
CRD 128, 129, 130, 131, 133
65 of which: capital conservation buffer requirement 2.5 2.5 2.5 2.5 2.566 of which: countercyclical buffer requirement 0.1 0.1 1.9 1.8 1.567 of which: systemic risk buffer requirement 3.0 3.0 3.0 3.0 3.0
67aof which: Global Systemically Important Institution (G-SII) or Other Systemically Important Institution (O-SII) buffer - - - - -
68Common equity tier 1 capital available to meet buffers (as a percentage of risk exposure amount) 14.2 13.1 14.0 12.9 12.6 CRD 128
INTERIM REPORT JANUARY – JUNE 2020
56 Handelsbanken
Own funds, cont.
Amount at disclosure dateSEK m
30 Jun 2020
31 Mar 2020
31 Dec 2019
30 Sep 2019
30 Jun 2019
Regulation (EU) No 575/2013 art.
ref.
Amounts below the thresholds for deduction (before risk weighting)
72
Direct and indirect holdings of the capital of financial sector entities where the institution does not have a significant investment in those entities (amount below 10% threshold and net of eligible short positions) 0 0 0 0 0
36.1 h, 46, 45, 56 c, 59, 60, 66 c, 69,
70
73
Direct and indirect holdings of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities (amount below 10% threshold and net of eligible short positions) - - - - - 36.1 i, 45, 48
75
Deferred tax assets arising from temporary differences (amount below 10% threshold, net of related tax liability where the conditions in Article 38 (3) are met) 0 -1 -2 -2 -2 36.1 c, 38, 48
Applicable caps on the inclusion of provisions tier 2 capital
76
Credit risk adjustments included in T2 in respect of exposures subject to standardised approach (prior to the application of the cap) - - - - - 62
77Cap on inclusion of credit risk adjustments in T2 under standardised approach 1,040 1,128 1,084 1,067 1,083 62
78
Credit risk adjustments included in T2 in respect of exposures subject to internal ratings-based approach (prior to the application of the cap) - - - - - 62
79Cap for inclusion of credit risk adjustments in T2 under internal ratings-based approach 3,236 3,408 3,308 3,417 3,368 62
Capital instruments subject to phase-out arrangements (only applicable between 1 January 2013 and 1 January 2022)
80Current cap on CET1 instruments subject to phase-out arrangements - - - - -
484.3, 486.2, 486.5
81Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities) - - - - -
484.3, 486.2, 486.5
82Current cap on AT1 instruments subject to phase-out arrangements - - - - -
484.4, 486.3, 486.5
83Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities) - - - - -
484.4, 486.3, 486.5
84 Current cap on T2 instruments subject to phase-out arrangements - - - - -484.5, 486.4,
486.5
85Amount excluded from T2 due to cap (excess over cap after redemptions and maturities) - - - - -
484.5, 486.4, 486.5
INTERIM REPORT JANUARY – JUNE 2020
57 Handelsbanken
Capital requirements
Risk exposure amount
Capital requirement credit risks, standardised approach*
* Information about capital requirements for the exposure classes where there are exposures.
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Credit risk according to standardised approach 6,657 7,222 6,940 6,832 6,929
Credit risk according to IRB approach 28,749 31,367 30,216 31,846 31,568
Risk weight floor Swedish mortgage loans 14,392 14,079 13,888 13,714 13,339
Market risks 730 736 662 859 752
Credit valuation adjustment risk (CVA) 373 386 329 441 466
Operational risk 5,489 5,489 5,282 5,282 5,282
Combined buffer requirement 39,380 41,395 53,061 54,149 51,317
Total capital requirement 95,770 100,674 110,378 113,123 109,653
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Credit risk according to standardised approach 83,216 90,273 86,748 85,395 86,616
Credit risk according to IRB approach 359,358 392,088 377,701 398,071 394,595
Risk weight floor Swedish mortgage loans 179,901 175,987 173,604 171,428 166,742
Market risk 9,122 9,203 8,272 10,732 9,398
Credit valuation adjustment risk (CVA) 4,667 4,826 4,114 5,522 5,824
Operational risk 68,616 68,616 66,023 66,023 66,023
Total risk exposure amount 704,880 740,993 716,462 737,171 729,198
SEK m30 Jun
202031 Dec
201930 Jun
202031 Dec
201930 Jun
202031 Dec
201930 Jun
202031 Dec
2019
Sovereign and central banks 772 353 0 7 0 1 0.0 1.9
Municipalities - - - - - - - -
Multilateral development banks 249 274 0 0 0 0 0.0 0.0
International organisations - - - - - - - -
Institutions 9,159 9,639 788 762 63 61 8.6 7.9
Corporates 5,949 8,495 5,564 8,408 445 673 93.5 99.0
Households 8,678 10,226 6,331 7,460 506 597 73.0 72.9
Collateral in real estate 140,040 141,499 48,863 50,655 3,909 4,052 34.9 35.8
Past due items 872 598 1,012 725 81 58 116.0 121.2
High risk items 27 26 40 39 3 3 150.0 150.0
Collective investment undertakings - 151 - 151 - 12 - 100.0
Equities 6,254 6,254 15,636 15,636 1,251 1,251 250.0 250.0
Other items 9,340 3,244 4,982 2,905 399 232 53.4 89.6
Total 181,340 180,759 83,216 86,748 6,657 6,940 45.9 48.0
Exposure amount Capital requirement Average risk weight, %Risk-weighted
exposure amount
INTERIM REPORT JANUARY – JUNE 2020
58 Handelsbanken
Credit risks IRB approach
* The foundation approach refers to the IRB approach without own estimates of LGD and CCF. The advanced approach refers to the IRB approach
with own estimates of LGD and CCF.
** The exposure amount which is affected by the rules for risk weight floor, Swedish mortgage loans was SEK 865,332m at 30 June 2020.
The capital requirement for credit risk is calculated according to the
standardised approach and the IRB approach in accordance with
CRR. There are two different IRB approaches: the IRB approach
without own estimates of LGD and CCF, and the IRB approach with
own estimates of LGD and CCF.
In the IRB approach without own estimates of LGD and CCF, the
Bank uses its own method to determine the probability of the
customer defaulting within one year (PD), while the other parameters
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.
Handelsbanken uses the IRB approach without own estimates of
LGD and CCF for exposures to sovereigns and institutions, for certain
product and collateral types for corporate exposures in the whole of
the regional banking operations, and in the following subsidiaries:
Stadshypotek AB, Handelsbanken Finans AB, Ecster AB,
Handelsbanken plc 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 branch operations (excluding the Netherlands),
Handelsbanken Capital Markets, Stadshypotek AB and
Handelsbanken Finans AB, Ecster AB, Handelsbanken plc, and retail
exposures in Sweden, Norway, Finland and Denmark, as well as in
the subsidiaries Stadshypotek AB, Handelsbanken Finans AB,
Ecster AB, and Rahoitus Oy.
At the end of the quarter, the IRB approach was applied to 86% of
the total risk-weighted exposure amount for credit risk, including the
effect of the risk weight floor on Swedish mortgage loans. For the
remaining credit risk exposures, the capital requirements are
calculated using the standardised approach.
The total average risk weight for exposures approved for the IRB
approach went down slightly during the quarter and amounted to
11.4% (12.4 at 31 March 2020). The decrease was primarily due to
the EU's introduction of expanded SME supporting factor. Adjusted
for the move of the risk weight floor for Swedish mortgage loans from
Pillar 2 to Pillar 1, the total average risk weight is 17.1% (18.0).
Credit quality is good. Of Handelsbanken’s corporate exposures, 98%
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
Bank’s nine-point risk rating scale. The IRB approach is based on
historical losses from both the financial crisis of recent years and the
Swedish banking crisis in the early 1990s. These risk weights reflect
the fact that Handelsbanken has reported low credit losses over a
long period. The risk measurements applied contain margins of
conservatism to ensure that the risk is not underestimated.
SEK m30 Jun
202031 Dec
201930 Jun
202031 Dec
201930 Jun
202031 Dec
201930 Jun
202031 Dec
2019
Sovereign and central banks 787,469 426,414 10,137 7,098 811 568 1.3 1.7
Corporate 908,620 909,304 229,553 246,710 18,363 19,737 25.3 27.1
Corporate lending 896,405 900,795 225,825 244,106 18,065 19,529 25.2 27.1
of which other loans foundation approach * 105,260 110,550 30,392 33,651 2,431 2,693 28.9 30.4
of which other loans advanced approach * 791,145 790,245 195,433 210,455 15,634 16,836 24.7 26.6
of which large companies 150,475 140,751 54,979 51,641 4,398 4,131 36.5 36.7
of which medium-sized companies 89,304 91,926 31,761 37,399 2,541 2,992 35.6 40.7
of which property companies 551,366 557,568 108,693 121,415 8,695 9,713 19.7 21.8
Counterparty risk 12,215 8,509 3,728 2,604 298 208 30.5 30.6
Housing co-operative associations 240,715 235,554 8,454 9,806 678 783 3.5 4.2
Retail 1,139,147 1,119,800 82,589 82,406 6,607 6,593 7.3 7.4
Private individuals 1,116,188 1,095,928 75,164 74,659 6,013 5,973 6.7 6.8
of which property loans 1,070,267 1,046,593 64,965 63,871 5,197 5,110 6.1 6.1
of which other loans 45,921 49,335 10,199 10,788 816 863 22.2 21.9
Small companies 22,959 23,872 7,425 7,747 594 620 32.3 32.5
of which property loans 11,413 11,892 4,040 4,268 323 341 35.4 35.9
of which other loans 11,546 11,980 3,385 3,479 271 279 29.3 29.0
Institutions 64,658 57,663 14,737 14,436 1,179 1,155 22.8 25.0
Lending to institutions 13,301 16,554 4,984 5,920 399 474 37.5 35.8
Counterparty risk 51,357 41,109 9,753 8,516 780 681 19.0 20.7
Equity exposures 2,116 3,028 7,161 10,299 573 824 338.5 340.2
of which listed shares 834 1,129 2,419 3,274 194 262 290.0 290.0
of which other shares 1,282 1,899 4,742 7,025 379 562 370.0 370.0
Non credit-obligation assets 6,667 6,946 6,667 6,946 533 556 100.0 100.0
Securitisation positions 19 - 60 - 5 - 315.0 -
of which Traditional securitisation 19 - 60 - 5 - 315.0 -
of which Synthetic securitisation - - - - - - - -
Total IRB approach 3,149,411 2,758,709 359,358 377,701 28,749 30,216 11.4 13.7
Risk weight floor, Swedish mortgage loans** 179,901 173,604 14,392 13,888
Total IRB approach with impact of risk weight floor, Swedish mortgage loans 3,149,411 2,758,709 539,259 551,305 43,141 44,104 17.1 20.0
Exposure amount Capital requirement Average risk weight, %Risk-weighted
exposure amount
INTERIM REPORT JANUARY – JUNE 2020
59 Handelsbanken
The level of the risk weight in the corporate exposures reflects the
portfolio composition and how various loans are classified into
different exposure classes.
The capital requirements for equity exposures in the IRB approach
are calculated according to a simplified risk weight method.
Capital requirement market risks
The capital requirement for market risks is calculated for the Bank’s consolidated situation. The capital requirements for interest rate risk and equity
price risk are, 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.
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Outright products
Interest rate risk 723 725 651 847 736
of which general risk 603 560 554 674 564
of which specific risk 120 165 97 173 172
Equity price risk 1 4 3 3 6
of which general risk 0 2 1 1 2
of which specific risk 1 2 2 2 4
of which mutual funds 0 0 0 0 0
Exchange rate risk - - - - -
Commodities risk 2 6 4 6 6
Options
Scenario approach 4 1 3 3 4
of which interest rate risk 0 0 0 0 0
of which equity risk 4 1 3 3 4
of which exchange rate risk - - - - -
of which commodity risk - - - 0 0
Securitisation (specific risk) - - - - -
Settlement risk 0 0 1 0 0
Total capital requirement for market risks 730 736 662 859 752
INTERIM REPORT JANUARY – JUNE 2020
60 Handelsbanken
Leverage ratio
Information in this section relates to Handelsbanken’s material risks and capital requirement as of the publication date of this report. A full description of
the Bank’s risks and capital management can be found in Handelsbanken’s Annual Report and in Handelsbanken’s Risk and Capital – Information
according to Pillar 3.
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Balance sheet according to accounting regulations 3,533,187 3,596,481 3,069,667 3,188,270 3,105,511
Deduction for assets not included in the banking group -162,721 -147,898 -168,500 -160,187 -155,110
Adjustment for differences between carrying amount and leverage ratio exposure – derivatives
-22,456 -48,223 -10,743 -20,017 -8,795
Adjustment for differences between carrying amount and leverage ratio exposure – repos and securities loans
6,705 5,085 3,342 6,031 6,042
Assets reported off the balance sheet, gross (before adjustment for conversion factor)
538,352 518,009 522,450 539,204 534,972
Deduction from assets off the balance sheet after application of conversion factor
-372,918 -357,667 -338,171 -344,914 -342,393
Assets reported off the balance sheet, net 165,434 160,342 184,279 194,290 192,579
Additional adjustment -18,690 -20,109 -17,850 -20,325 -19,317
Assets on which the leverage ratio is calculated 3,501,459 3,545,678 3,060,195 3,188,062 3,120,910
Capital on which the leverage ratio can be calculated
Tier 1 capital 147,762 147,435 148,550 145,057 140,498
Leverage ratio
Leverage ratio calculated on tier 1 capital 4.2% 4.2% 4.9% 4.6% 4.5%
INTERIM REPORT JANUARY – JUNE 2020
61 Handelsbanken
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,
exercising a low risk tolerance. The credit process is based on the
conviction that a decentralised organisation with local presence
ensures high quality in credit decisions. Handelsbanken’s exposure to
market risks is also low. Essentially, market risks in the banking
operations are only taken as part of meeting customers’ investment
and risk management needs. The situation with regard to regulatory
developments continues to evolve rapidly. This rate of change,
combined with the scope and complexity of the financial regulations,
is the source of compliance risks for the Bank. Handelsbanken
devotes significant resources to ensuring that the Bank follows
applicable regulations at any given time. The UK has made the
decision to leave the EU. The Bank has prepared for the
implementation of Brexit in close consultation with public authorities
in both Sweden and the UK. The Bank’s low tolerance of risk
means that Handelsbanken is also well-equipped to operate under
substantially more difficult market conditions than those experienced
during the past few years. The current pandemic is causing
particularly large uncertainty regarding economic development in
the countries in which the Bank operates. Given this situation,
Handelsbanken is maintaining its strict view of credit risks and the
normal credit process established at the Bank.
Liquidity and funding Handelsbanken has a low tolerance of liquidity risks and works
actively to minimise them, at aggregate level and also in each
individual currency. The aim is to have good access to liquidity, a low
level of variation in results and a considerable capacity to meet
customers’ funding needs, even in difficult times. This is achieved by
maintaining a good matching of incoming and outgoing cash flows
over time in all currencies essential to the Bank and by maintaining
large liquidity reserves of good quality. The Bank thus minimises the
economic risks in funding and can thereby maintain stable and long-
term internal interest rates to the business-operating units.
Furthermore, the Bank aims for breadth in its funding programmes
and their use. This ensures that the Bank can keep its core business
intact for a long period of time, even if there is extensive disruption in
the financial markets.
To ensure sufficient liquidity to support its core operations in stressed
financial conditions, the Bank holds large liquidity reserves in all
currencies of relevance to the Bank. The liquidity reserve comprises
several different parts. Cash, balances and other lending to central
banks are components which can provide the Bank with immediate
liquidity. The reserve also comprises liquid securities, such as
government bonds, covered bonds and other securities of high credit
quality. These can also provide the Bank with immediate liquidity.
These parts of the liquidity reserve are illustrated in the table and
amounted to SEK 856bn at 30 June 2020. The remainder of the
liquidity reserve comprises an unutilised issue amount for covered
bonds and other liquidity-creating measures.
INTERIM REPORT JANUARY – JUNE 2020
62 Handelsbanken
Balances with central banks and banks, and securities holdings in the liquidity reserve
Market value, SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Level 1 assets 850,657 854,917 480,236 556,338 509,424
Cash and balances with central banks 708,768 672,369 346,206 318,301 297,576
Securities issued or guaranteed by sovereigns, central banks, MDBs and international organisations 102,880 132,608 97,778 181,846 167,132
Securities issued by municipalites and PSEs 869 873 1,012 1,922 1,034
Extremely high quality covered bonds 38,140 49,067 35,240 54,269 43,682
Level 2 assets 5,447 8,607 7,916 8,240 8,840
Level 2A assets 5,367 8,423 7,891 8,184 8,711
Securities issued or guaranteed by sovereigns, central banks, municipalities and PSEs 3,165 1,497 1,739 1,681 1,232
High quality covered bonds 2,202 6,926 6,152 6,501 7,477
Corporate debt securities (lowest rating AA-) - - - 2 2
Level 2B assets 80 184 25 56 129
Asset-backed securities - - - - -
High quality covered bonds - - - - -
Corporate debt securities (rated A+ to BBB-) 80 184 25 56 129
Shares (major stock index) - - - - -
Total liquid assets 856,104 863,524 488,152 564,578 518,264
of which in SEK 204,009 209,273 168,639 187,295 200,666
of which in EUR 160,162 151,328 122,635 138,009 103,118
of which in USD 303,311 361,172 63,156 102,373 93,125
of which in other currencies 188,622 141,751 133,722 136,901 121,355
30 June 2020
Market value, SEK m SEK EUR USD Other Total
Level 1 assets 202,950 159,134 303,170 185,403 850,657
Cash and balances with central banks 74,057 151,765 300,308 182,638 708,768
Securities issued or guaranteed by sovereigns, central banks, MDBs and international organisations 93,264 6,746 2,862 8 102,880
Securities issued by municipalites and PSEs 742 - - 127 869
Extremely high quality covered bonds 34,887 623 - 2,630 38,140
Level 2 assets 1,059 1,028 141 3,219 5,447
Level 2A assets 1,059 948 141 3,219 5,367
Securities issued or guaranteed by sovereigns, central banks, municipalities and PSEs - - - 3,165 3,165
High quality covered bonds 1,059 948 141 54 2,202
Corporate debt securities (lowest rating AA-) - - - - -
Level 2B assets - 80 - - 80
Asset-backed securities - - - - -
High quality covered bonds - - - - -
Corporate debt securities (rated A+ to BBB-) - 80 - - 80
Shares (major stock index) - - - - -
Total liquid assets 204,009 160,162 303,311 188,622 856,104
INTERIM REPORT JANUARY – JUNE 2020
63 Handelsbanken
Maturities for financial assets and liabilities
30 June 2020 SEK m
Up to 30 days
31 days - 6 mths 6 - 12 mths 1 - 2 yrs 2 - 5 yrs 5 yrs -
Unspec. maturity Total
Assets
Cash and balances with central banks 709,808 - - - - - - 709,808
Interest-bearing securities eligible as collateral with central banks * 172,089 - - - - - - 172,089
Bonds and other interest-bearing securities * 46,281 - - - - - - 46,281
Loans to credit institutions 24,501 1,639 389 527 481 3,015 - 30,552
of which reverse repos 2,397 - - - - - - 2,397
Loans to the public 51,061 271,281 200,182 212,279 422,664 1,141,800 - 2,299,267
of which reverse repos 16,640 - - - - - - 16,640
Other ** 21,899 - - - - - 253,291 275,190
of which shares and participating interests 16,751 - - - - - - 16,751
of which claims on investment banking settlements 5,148 - - - - - - 5,148
Total 1,025,639 272,920 200,571 212,806 423,145 1,144,815 253,291 3,533,187
Liabilities
Due to credit institutions *** 131,298 74,132 16,478 3,713 347 986 27,739 254,693
of which repos 753 - - - - - - 753
of which deposits from central banks 21,636 56,771 - - - - 229 78,636
Deposits and borrowing from the public *** 154,526 29,901 6,639 452 325 6,177 1,176,941 1,374,961
of which repos 5 - - - - - - 5
Issued securities 141,388 328,226 211,205 176,073 412,665 135,908 - 1,405,465
of which covered bonds - 21,008 75,685 119,708 306,733 110,284 - 633,418
of which bank certificates (CDS) with original maturity of less than one year 74,325 110,979 43,091 - - - - 228,395
of which corporate certificates (CPS) with original maturity of less than one year 55,334 111,956 40,765 - - - - 208,055
of which senior bonds and other securities with original maturity of more than one year 11,729 84,283 51,664 56,365 105,932 25,624 - 335,597
Subordinated liabilities - - 11,554 - 23,392 - - 34,946
Other ** 79,389 - - - - - 383,733 463,122
of which short positions 5,958 - - - - - - 5,958
of which investment banking settlement debts 73,431 - - - - - - 73,431
Total 506,601 432,259 245,876 180,238 436,729 143,071 1,588,413 3,533,187
* 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. ** “Other” includes market values in derivative transactions.*** Sight deposits are reported under “Unspecified maturity”.
INTERIM REPORT JANUARY – JUNE 2020
64 Handelsbanken
Liquidity coverage ratio (LCR)
The liquidity coverage ratio (LCR) has been a binding requirement for
banks in the EU since the European Commission introduced its
Delegated Regulation. The figure states the ratio between the Bank’s
liquidity buffer and net cash flows in a very stressed scenario during a
30-day period. The requirement applies to LCR at aggregate level
and the ratio must be at least 100%. Minimum requirements for the
net stable funding ratio (NSFR) – the structural liquidity measure that
is the ratio between available stable funding and the stable funding
required – enter into force in the EU in June 2021.
At the end of the quarter, the Group’s aggregated LCR was 138%,
which shows that the Bank has substantial resistance to short-term
disruptions in the funding markets.
Stress test with liquidity-creating measures
The governance of the Bank’s liquidity situation is based on stress
tests, which are performed at an aggregate level and also individually
for the currencies that are essential to the Bank. The stress tests are
designed to ensure that the Bank has sufficient liquidity in various
stressed scenarios and with the implementation of different
measures, which are also included in the Bank’s recovery plan. The
stress tests are carried out with both market-wide and idiosyncratic
stress on a regular basis, as well as on an ad hoc basis. These are
also supplemented with scenario analyses which take substantial falls
in housing prices into account.
Resistance to more long-term disruptions in the market is measured
on a daily basis through stress testing of cash flows based on certain
assumptions. For example, it is assumed that the Bank cannot obtain
funding in the financial markets, at the same time as 10% of non-
fixed-term deposits from households and companies disappears
gradually in the first month. It is further assumed that the Bank will
continue to conduct its core activities, i.e. that fixed-term deposits
from and loans to households and companies will be renewed at
maturity and that issued commitments and credit facilities will be
partly utilised by customers. The Bank also takes into account that
balances with central banks and banks will be utilised and that Group
Treasury’s securities can immediately supply liquidity if provided as
collateral, primarily in the market and as a last resort in central banks.
In addition, the Bank can create liquidity by using its unutilised issue
amount for covered bonds, as well as executing other liquidity-
creating measures to gradually provide the Bank with liquidity. With
these conditions, the Bank will be liquid for more than three years.
Liquidity coverage ratio (LCR) - sub-components, SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
High quality liquidity assets 852,590 858,734 484,489 559,523 513,836
Cash outflows 676,751 651,367 379,970 448,213 416,446
Retail deposits and deposits from small business customers 60,223 59,116 58,136 63,247 61,209
Unsecured wholesale funding 539,454 534,592 264,686 334,075 307,937
Secured wholesale funding 4,872 6,646 3,568 8,554 7,990
Other cash outflows 72,202 51,013 53,580 42,337 39,310
Cash inflows 56,956 75,009 49,911 72,686 56,113
Inflows from fully performing exposures 18,063 23,269 26,619 24,543 21,081
Other cash inflows 38,893 51,740 23,292 48,143 35,032
Liquidity coverage ratio (LCR), % 138 149 147 149 143
INTERIM REPORT JANUARY – JUNE 2020
65 Handelsbanken
Non-encumbered assets, NEA
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 risks and capital management can be found in Handelsbanken’s Annual Report and in Handelsbanken’s
Risk and Capital – 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 11-27.
Note 22 Events after the balance sheet date No significant events occurred after the balance sheet date.
30 June 2020
SEK bn NEA
Holdings with central banks and securities in the liquidity portfolio*** 856 84%
Mortgage loans 708 154%
Other household lending 171 171%
Property company lending lowest risk class (1-3) 278 198%
Other corporate lending lowest risk class (1-3) 137 212%
Loans to credit institutions lowest risk class (1-3) 14 213%
Other corporate lending 306 243%
Other assets 113 255%
Total non-encumbered assets (NEA) 2,583 255%
Encumbered assets without underlying liabilities** 63
Encumbered assets with underlying liabilities 887
Total assets, Group 3,533
Accumulated coverage ratio in % of unsecured funding*
31 December 2019
SEK bn NEA
Holdings with central banks and securities in the liquidity portfolio*** 494 55%
Mortgage loans 699 132%
Other household lending 201 155%
Property company lending lowest risk class (1-3) 299 188%
Other corporate lending lowest risk class (1-3) 145 204%
Loans to credit institutions lowest risk class (1-3) 15 206%
Other corporate lending 289 238%
Other assets 0 238%
Total non-encumbered assets (NEA) 2,142 238%
Encumbered assets without underlying liabilities** 61
Encumbered assets with underlying liabilities 867
Total assets, Group 3,070
* Issued short and long non-secured funding and liabilities to credit institutions.** Over-collateralisation in cover pool (OC).
Accumulated coverage ratio in % of unsecured funding*
*** Relates to eligible as collateral value in central banks.
INTERIM REPORT JANUARY – JUNE 2020
66 Handelsbanken
Condensed set of financial statements – Parent company INCOME STATEMENT – PARENT COMPANY
STATEMENT OF COMPREHENSIVE INCOME – PARENT COMPANY
SEK m
Q2 2020
Q12020 Change
Q2 2019 Change
Jan-Jun 2020
Jan-Jun 2019 Change
Full year 2019
Net interest income 3,060 3,420 -11% 3,260 -6% 6,480 6,458 0% 13,039
Dividends received 310 155 100% 1,005 -69% 465 1,124 -59% 17,338
Net fee and commission income 1,405 1,498 -6% 1,526 -8% 2,903 2,951 -2% 6,011
Net gains/losses on financial transactions 1,962 -1,629 240 333 435 -23% 618
Other operating income 705 686 3% 680 4% 1,391 1,235 13% 2,638
Total income 7,442 4,130 80% 6,711 11% 11,572 12,203 -5% 39,644
Staff costs -2,661 -2,654 0% -2,888 -8% -5,315 -4,619 15% -10,148
Other administrative expenses -1,403 -1,410 0% -1,394 1% -2,813 -2,737 3% -5,808
Depreciation, amortisation and impairment of property, equipment and intangible assets -637 -692 -8% -503 27% -1,329 -989 34% -2,156
Total expenses before credit losses -4,701 -4,756 -1% -4,785 -2% -9,457 -8,345 13% -18,112
Profit before credit losses 2,741 -626 1,926 42% 2,115 3,858 -45% 21,532
Net credit losses -14 -330 -96% -444 -97% -344 -730 -53% -1,059
Impairment of financial assets -79 - -48 65% -79 -137 -42% -148
Operating profit 2,648 -956 1,434 85% 1,692 2,991 -43% 20,325
Appropriations 24 24 0% 31 -23% 48 61 -21% -380
Profit before tax 2,672 -932 1,465 82% 1,740 3,052 -43% 19,945
Taxes -572 145 -168 240% -427 -566 -25% -4,297
Profit for the period 2,100 -787 1,297 62% 1,313 2,486 -47% 15,648
SEK m
Q2 2020
Q12020 Change
Q2 2019 Change
Jan-Jun 2020
Jan-Jun 2019 Change
Full year 2019
Profit for the period 2,100 -787 1,297 62% 1,313 2,486 -47% 15,648
Other comprehensive income
Items that will not be reclassified to the income statement
Instruments measured at fair value through other comprehensive income - equity instruments 264 -106 80 158 236 372
Tax on items that will not be reclassified to income statement -7 6 -6 -1 -15 -21
of which equity instruments measured at fair value through other comprehensive income -7 6 -6 -1 -15 -21
Total items that will not be reclassified to the income statement 257 -100 74 157 221 351
Items that may subsequently be reclassified to the income statement
Cash flow hedges -1,117 1,060 1,022 -57 1,746 1,751
Instruments measured at fair value through other comprehensive income - debt instruments 12 -15 5 -3 12 7
Translation differences for the period -736 -368 -100% 157 -1,104 499 -259
of which hedging net investment in foreign operations 42 -291 -10 -249 -451 45% -826
Tax on items that may subsequently be reclassified to the income statement 228 -162 -216 66 -279 -200
of which cash flow hedges 239 -227 -219 12 -374 -375
of which debt instruments measured at fair value through other comprehensive income -2 3 0 1 -2 -2
of which hedging net investment in foreign operations -9 62 3 53 97 -45% 177
Total items that may subsequently be reclassified to the income statement -1,613 515 968 -1,098 1,978 1,299
Total other comprehensive income for the period -1,356 415 1,042 -941 2,199 1,650
Total comprehensive income for the period 744 -372 2,339 -68% 372 4,685 -92% 17,298
INTERIM REPORT JANUARY – JUNE 2020
67 Handelsbanken
Comment on results – Parent company January – June 2020 compared with January – June 2019
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 and Handelsbanken plc. 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 went down by 43% to SEK 1,692m (2,991), mainly due to higher staff costs and lower dividends. Staff costs
increased by SEK 696m, mainly due to the reversal in Q1 2019 of the preliminary provision for Oktogonen made in 2018, which positively affected
staff costs. Profit for the period decreased by 47% to SEK 1,313m (2,486). Net interest income increased marginally to SEK 6,480m (6,458), and
net fee and commission income decreased by 2% to SEK 2,903m (2,951). Since the start of the year, the parent company’s equity has increased to
SEK 131,307m (115,850).
BALANCE SHEET – PARENT COMPANY
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Assets
Cash and balances with central banks 533,250 543,540 242,889 230,780 187,741
Interest-bearing securities eligible as collateral with central banks 172,216 210,834 103,370 148,949 173,550
Loans to credit institutions 991,955 948,369 890,557 925,555 869,080
Loans to the public 613,071 632,822 620,175 642,351 645,083
Bonds and other interest-bearing securities 51,695 60,241 53,096 59,192 56,610
Shares 10,045 10,575 14,335 17,525 17,068Shares in subsidiaries and investmentsin associates 72,174 72,182 72,138 72,154 72,155
Assets where the customer bears the value change risk 6,713 6,284 6,443 6,158 5,982
Derivative instruments 54,084 93,654 41,840 68,116 51,701
Intangible assets 3,475 3,464 3,190 3,048 3,031
Property, equipment and leasing assets 7,701 7,937 8,145 5,609 5,600
Current tax assets 2,055 1,381 - 2,634 1,545
Deferred tax assets 970 1,064 653 759 589
Other assets 6,377 7,322 21,522 7,818 6,771
Prepaid expenses and accrued income 1,702 1,426 1,152 1,944 2,491
Total assets 2,527,483 2,601,095 2,079,505 2,192,592 2,098,997
Liabilities and equity
Due to credit institutions 310,745 311,851 208,697 264,898 247,654
Deposits and borrowing from the public 1,176,030 1,180,635 918,146 969,990 929,760
Liabilities where the customer bears the value change risk 6,713 6,284 6,443 6,158 5,982
Issued securities 741,663 786,915 724,640 729,773 696,019
Derivative instruments 35,066 44,562 38,669 44,127 39,857
Short positions 5,958 5,451 1,856 4,271 8,055
Current tax liabilities - - 202 - -
Deferred tax liabilities 1,171 1,323 956 1,235 1,105
Provisions 1,084 1,139 1,100 1,108 201
Other liabilities 78,356 91,427 8,790 12,736 13,970
Accrued expenses and deferred income 2,430 2,461 1,847 2,128 2,039
Subordinated liabilities 35,328 36,823 35,546 37,307 37,673
Total liabilities 2,394,544 2,468,871 1,946,892 2,073,731 1,982,315
Untaxed reserves 1,632 1,661 1,678 803 832
Share capital 3,069 3,069 3,069 3,060 3,024
Share premium 8,758 8,758 8,758 8,225 6,292
Other funds 9,867 11,179 10,472 11,018 10,800
Retained earnings 108,300 108,344 92,988 93,178 93,248
Profit for the period 1,313 -787 15,648 2,577 2,486
Total equity 131,307 130,563 130,935 118,058 115,850
Total liabilities and equity 2,527,483 2,601,095 2,079,505 2,192,592 2,098,997
INTERIM REPORT JANUARY – JUNE 2020
68 Handelsbanken
CHANGE IN EQUITY – PARENT COMPANY
January – June 2020 SEK m
Share capital
Statutory reserve
Fund for internally
developed software
Share premium
Hedge reserve *
Fair value reserve *
Translation reserve *
Retained earnings incl.
profit for the year Total
Opening equity 2020 3,069 2,682 3,034 8,758 1,940 660 2,156 108,636 130,935
Profit for the period 1,313 1,313
Other comprehensive income -45 155 -1,051 -941
of which reclassified within equity
Total comprehensive income for the period
-45 155 -1,051 1,313 372
Fund for internally developed software 336 -336
Closing equity 3,069 2,682 3,370 8,758 1,895 815 1,105 109,613 131,307
January – December 2019 SEK m
Share capital
Statutory reserve
Fund for internally
developed software
Share premium
Hedge reserve *
Fair value reserve *
Translation reserve *
Retained earnings incl.
profit for the year Total
Opening equity 2019 3,013 2,682 2,497 5,629 564 304 2,238 104,135 121,062
Profit for the period 15,648 15,648
Other comprehensive income 1,376 356 -82 1,650
of which reclassified within equity 15 -99 -84
Total comprehensive income for the period
1,376 356 -82 15,648 17,298
Reclassified to retained earnings 84 84
Dividend -10,693 -10,693
Group contributions provided -1 -1
Tax effect on Group contribution 0 0
Effects of convertible subordinated loans 56 3,129 3,185
Fund for internally developed software 537 -537
Closing equity 3,069 2,682 3,034 8,758 1,940 660 2,156 108,636 130,935
January – June 2019SEK m
Share capital
Statutory reserve
Fund for internally
developed software
Share premium
Hedge reserve *
Fair value reserve *
Translation reserve *
Retained earnings incl.
profit for the year Total
Opening equity 2019 3,013 2,682 2,497 5,629 564 304 2,238 104,135 121,062
Profit for the period 2,486 2,486
Other comprehensive income 1,372 231 596 2,199
of which reclassified within equity -122 -122
Total comprehensive income for the period
1,372 231 596 2,486 4,685
Reclassified to retained earnings 122 122
Dividend -10,693 -10,693
Effects of convertible subordinated loans 11 663 674
Fund for internally developed software 316 -316
Closing equity 3,024 2,682 2,813 6,292 1,936 535 2,834 95,734 115,850
Restricted equity Unrestricted equity
The translation reserve includes conversion effects relating to the balance sheets and income statements of the parent company´s international branches.Accumulated conversion effects are reported for taxation when an international branch is closed down or divested. The tax regulations for the taxation of conversion effects are highly complex, and therefore subject to different interpretations. Therefore, it cannot be ruled out that conversion effects may need to be reported for taxation at an earlier stage than when a divestment/closedown takes place.
Restricted equity Unrestricted equity
Restricted equity Unrestricted equity
* Included in fair value fund.
INTERIM REPORT JANUARY – JUNE 2020
69 Handelsbanken
CONDENSED STATEMENT OF CASH FLOWS – PARENT COMPANY
SEK m
Jan-Jun 2020
Jan-Jun 2019
Full year 2019
Operating profit 1,693 2,991 20,325
Adjustment for non-cash items in profit/loss 1,399 429 -12,550
Paid income tax -2,720 -1,585 -3,702
Changes in the assets and liabilities of operating activities 284,938 -50,963 67
Cash flow from operating activities 285,310 -49,128 4,140
Change in shares 616 -26 -95
Change in property and equipment -634 -912 -4,373
Change in intangible assets -541 -475 -894
Cash flow from investing activities -559 -1,413 -5,362
Repayment of subordinated loans - -17,730 -17,730
Issued subordinated loans - 4,642 4,670
Dividend paid - -10,693 -10,693
Received Group contributions 15,992 10,104 15,992
Cash flow from financing activities 15,992 -13,677 -7,761
Liquid funds at beginning of the year 242,889 243,824 243,824
Cash flow for the period 300,743 -64,218 -8,983
Exchange rate difference on liquid funds -10,382 8,135 8,048
Liquid funds at end of year* 533,250 187,741 242,889
* Liquid funds are defined as Cash and balances with central banks.
INTERIM REPORT JANUARY – JUNE 2020
70 Handelsbanken
OWN FUNDS AND CAPITAL REQUIREMENT – PARENT COMPANY
Own funds Presentation in accordance with the requirements of Commission Implementing Regulation (EU) No 1423/2013. Excluded rows are deemed not relevant for Handelsbanken
at present.
Amount at disclosure dateSEK m
30 Jun 2020
31 Mar 2020
31 Dec 2019
30 Sep 2019
30 Jun 2019
Regulation (EU) No 575/2013 art.
ref.
Common equity tier 1 (CET1) capital: Instruments and reserves
1 Capital instruments and the related share premium accounts 11,827 11,827 11,827 11,206 8,949 26.1, 27, 28, 29
of which: share capital 11,827 11,827 11,827 11,206 8,949 EBA list 26.3
2 Retained earnings 103,460 103,460 98,702 98,718 98,740 26.1 c
3
Accumulated other comprehensive income (and any other reserves, to include unrealised gains and losses according to the applicable accounting standards) 3,817 5,173 4,758 5,558 5,676 26.1
5aIndependently reviewed interim profits net of any foreseeable charge or dividend 788 -787 4,758 786 758 26.2
6Common equity tier 1 (CET1) capital before regulatory adjustments 119,892 119,673 120,045 116,268 114,123
Common equity tier 1 (CET1) capital: regulatory adjustments
7 Additional value adjustments (negative amount) -321 -547 -131 -132 -271 34, 105
8 Intangible assets (net of related tax liability) (negative amount) -3,375 -3,335 -3,044 -2,872 -2,826 36.1 b, 37
11 Fair value reserves related to gains or losses on cash flow hedges -1,895 -2,772 -1,940 -1,940 -1,936 33.1 a
12Negative amounts resulting from the calculation of expected loss amounts -1,652 -1,957 -2,060 -2,238 -2,216 36.1 d, 40, 159
14Gains or losses on liabilities valued at fair value resulting from changes in own credit standing 0 -11 - - - 33.1 b
15 Defined benefit pension fund assets (negative amount) - - - - - 36.1 e, 41
16Direct and indirect holdings by an institution of own CET1 instruments (negative amount) -473 -456 -527 -474 -478 36.1 f, 42
19
Direct, indirect and synthetic holdings by the institution of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities (amount above 10% threshold and net of eligible short positions) (negative amount) - - - - -
36.1 i, 43, 45, 47, 48.1 b, 49.1-49.3,
79
20aExposure amount of the following items which qualify for a RW of 1250%, where the institution opts for the deduction alternative - - -20 -22 -22 36 (1) (k)
20c of which: securitisation positions (negative amount) - - -20 -22 -22
36 (1) (k) (ii), 243 (1) (b), 244 (1) (b),
258
21
Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability where the conditions in Article 38 (3) are met) (negative amount) - - - - - 36.1 c, 38, 48.1 a
22 Amount exceeding the 15% threshold (negative amount) - - - - - 48.1
23
of which: direct and indirect holdings by the institution of CET1 instruments of financial sector entities where the institution has significant investments in those entities - - - - - 36.1 i, 48.1 b
25 of which: deferred tax assets arising from temporary differences
25a Losses for the current financial year (negative amount) - - - - - 36.1 a
25b Foreseeable tax charges relating to CET1 items (negative amount) - - - - - 36.1 l
27Qualifying AT1 deductions that exceed the AT1 capital of the institution (negative amount) - - - - - 36.1 j
28Total regulatory adjustments to common equity tier 1 (CET1) capital -7,716 -9,078 -7,722 -7,678 -7,749
29 Common equity tier 1 (CET1) capital 112,176 110,595 112,323 108,590 106,374
INTERIM REPORT JANUARY – JUNE 2020
71 Handelsbanken
Own funds – Parent company, cont.
Amount at disclosure dateSEK m
30 Jun 2020
31 Mar 2020
31 Dec 2019
30 Sep 2019
30 Jun 2019
Regulation (EU) No 575/2013 art.
ref.
Additional tier 1 (AT1) capital: instruments
30 Capital instruments and the related share premium accounts 15,844 16,995 15,819 16,618 15,712 51, 52
32of which: classified as liabilities under applicable accounting standards 15,844 16,995 15,819 16,618 15,712
33Amount of qualifying items referred to in Article 484 (4) and the related share premium accounts subject to phase-out from AT1 - - - - - 486.3
36 Additional tier 1 (AT1) capital before regulatory adjustments 15,844 16,995 15,819 16,618 15,712
Additional tier 1 (AT1) capital: regulatory adjustments
37Direct and indirect holdings by an institution of own AT1 instruments (negative amount) - - - - - 52.1 b, 56 a, 57
40
Direct and indirect holdings of the AT1 instruments of financial sector entities where the institution has a significant investment in those entities (amount above 10% threshold and net of eligible short positions) (negative amount) - - - - - 56 d, 59, 79
42Qualifying (T2) deductions that exceed the T2 capital of the institution (negative amount) - - - - - 56 e
43 Total regulatory adjustments to additional tier 1 (AT1) capital - - - - -
44 Additional tier 1 (AT1) capital 15,844 16,995 15,819 16,618 15,712
45 Tier 1 capital (T1 = CET1 + AT1) 128,020 127,590 128,142 125,208 122,086
Tier 2 (T2) capital: instruments and provisions
46 Capital instruments and the related share premium accounts 18,695 19,437 18,639 19,003 18,803 62, 63
50 Credit risk adjustments - - - - - 62 c och d
51 Tier 2 (T2) capital before regulatory adjustments 18,695 19,437 18,639 19,003 18,803
Tier 2 (T2) capital: regulatory adjustments
52Direct and indirect holdings by an institution of own T2 instruments and subordinated loans (negative amount) - - - - - 63 b i, 66 a, 67
55
Direct and indirect holdings of the T2 instruments and subordinated loans of financial sector entities where the institution has a significant investment in those entities (net of eligible short positions) (negative amounts) -1,129 -1,129 -1,129 -1,129 -1,129 66d, 69, 79
57 Total regulatory adjustments to tier 2 (T2) capital -1,129 -1,129 -1,129 -1,129 -1,129
58 Tier 2 (T2) capital 17,566 18,308 17,510 17,874 17,674
59 Total capital (TC = T1 + T2) 145,586 145,898 145,652 143,082 139,760
60 Total risk-weighted assets 543,373 566,001 556,251 578,536 576,150
Capital ratios and buffers
61Common equity tier 1 capital (as a percentage of total risk exposure amount) 20.6 19.5 20.2 18.8 18.5 92.2 a
62 Tier 1 capital (as a percentage of total risk exposure amount) 23.6 22.5 23.0 21.6 21.2 92.2 b
63 Total capital (as a percentage of total risk exposure amount) 26.8 25.8 26.2 24.7 24.3 92.2 c
64
Institution-specific buffer requirement (CET1 requirement in accordance with Article 92 (1) (a) plus capital conservation and countercyclical buffer requirements, plus systemic risk buffer, plus the systemically important institution buffer (G-SII or O-SII buffer) expressed as a percentage of total risk exposure amount) 2.6 2.6 4.5 4.4 4.1
CRD 128, 129, 130, 131, 133
65 of which: capital conservation buffer requirement 2.5 2.5 2.5 2.5 2.566 of which: countercyclical buffer requirement 0.1 0.1 2.0 1.9 1.667 of which: systemic risk buffer requirement - - - - -
67aof which: Global Systemically Important Institution (G-SII) or Other Systemically Important Institution (O-SII) buffer - - - - -
68Common equity tier 1 capital available to meet buffers (as a percentage of risk exposure amount) 16.1 15.0 15.7 14.3 14.0 CRD 128
INTERIM REPORT JANUARY – JUNE 2020
72 Handelsbanken
Own funds – Parent company, cont.
The Bank has changed its reporting to the Swedish Financial Supervisory Authority as regards shares in subsidiaries for all quarters 31 December 2018 – 30 September 2019. Some of these exposures are now reported according to the standardised approach, with a risk weight of 100%, and some are reported according to the standardised approach, with a risk weight of 370%. A consequence of this is that the capital requirement for market risk and own funds is also affected. The net effect is an increase to the capital ratios as at 31 December 2018 and 31 March 2019 and a decrease of the capital ratios as at 30 June 2019 and 30 September 2019.
Amount at disclosure dateSEK m
30 Jun 2020
31 Mar 2020
31 Dec 2019
30 Sep 2019
30 Jun 2019
Regulation (EU) No 575/2013 art.
ref.
Amounts below the thresholds for deduction (before risk weighting)
72
Direct and indirect holdings of the capital of financial sector entities where the institution does not have a significant investment in those entities (amount below 10% threshold and net of eligible short positions) 0 0 0 0 0
36.1 h, 46, 45, 56 c, 59, 60, 66 c, 69,
70
73
Direct and indirect holdings of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities (amount below 10% threshold and net of eligible short positions) - - - - - 36.1 i, 45, 48
75
Deferred tax assets arising from temporary differences (amount below 10% threshold, net of related tax liability where the conditions in Article 38 (3) are met) 0 0 0 -1 -2 36.1 c, 38, 48
Applicable caps on the inclusion of provisions tier 2 capital
76
Credit risk adjustments included in T2 in respect of exposures subject to standardised approach (prior to the application of the cap) - - - - - 62
77Cap on inclusion of credit risk adjustments in T2 under standardised approach 1,456 1,525 1,504 1,497 1,509 62
78
Credit risk adjustments included in T2 in respect of exposures subject to internal ratings-based approach (prior to the application of the cap) - - - - - 62
79Cap for inclusion of credit risk adjustments in T2 under internal ratings-based approach 2,173 2,284 2,226 2,338 2,321 62
Capital instruments subject to phase-out arrangements (only applicable between 1 January 2013 and 1 January 2022)
80Current cap on CET1 instruments subject to phase-out arrangements - - - - -
484.3, 486.2, 486.5
81Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities) - - - - -
484.3, 486.2, 486.5
82Current cap on AT1 instruments subject to phase-out arrangements - - - - -
484.4, 486.3, 486.5
83Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities) - - - - -
484.4, 486.3, 486.5
84 Current cap on T2 instruments subject to phase-out arrangements - - - - -484.5, 486.4,
486.5
85Amount excluded from T2 due to cap (excess over cap after redemptions and maturities) - - - - -
484.5, 486.4, 486.5
Rounding differences may occur in the table
INTERIM REPORT JANUARY – JUNE 2020
73 Handelsbanken
Capital requirement – Parent company
The Bank has changed its reporting to the Swedish Financial Supervisory Authority as regards shares in subsidiaries for all quarters 31 December 2018 – 30 September 2019. Some of these exposures are now reported according to the standardised approach, with a risk weight of 100%, and some are reported according to the standardised approach, with a risk weight of 370%. A consequence of this is that the capital requirement for market risk is also affected.
Capital requirement credit risks, standardised approach * – Parent company
The Bank has changed its reporting to the Swedish Financial Supervisory Authority as regards shares in subsidiaries for all quarters 31 December 2018 – 30 September 2019. Some of these exposures are now reported according to the standardised approach, with a risk weight of 100%, and some are reported according to the standardised approach, with a risk weight of 370%.
Capital requirement credit risks, IRB approach – Parent company
The Bank has changed its reporting to the Swedish Financial Supervisory Authority as regards shares in subsidiaries for all quarters 31 December 2018 – 30 September 2019. Some of these exposures are now reported according to the standardised approach, with a risk weight of 100%, and some are reported according to the standardised approach, with a risk weight of 370%.
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Credit risk according to standardised approach 9,321 9,758 9,628 9,579 9,656
Credit risk according to IRB Approach 28,297 29,878 29,208 30,676 30,470
Risk weight floor Swedish mortgage loans 674 569 478 494 478
Market risk 1,474 1,358 1,407 1,642 1,572
Credit valuation adjustment risk (CVA) 373 386 329 442 466
Operational risk 3,331 3,331 3,450 3,450 3,450
Combined buffer requirement 14,128 14,729 24,803 25,427 23,428
Total capital requirement 57,598 60,009 69,303 71,710 69,520
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Sovereign and central banks - - - - -
Municipalities - - - - -
Multilateral development banks - - - - -
International organisations - - - - -
Institutions 1,135 1,427 1,364 1,414 1,314
Corporates 352 421 518 473 645
Households 252 263 281 234 250
Collateral in real estate 1,881 1,995 1,860 1,843 1,641
Past due items 26 24 24 24 24
High risk items 1 1 1 - -
Equities 5,347 5,258 5,429 5,423 5,416
Other items 327 369 151 168 366
Total 9,321 9,758 9,628 9,579 9,656
* Information about capital requirements for the exposure classes where there are exposures.
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Sovereign and central banks 637 640 391 419 364
Corporates 11,889 13,170 12,871 13,746 13,946
Households 2,153 2,217 2,182 2,457 2,311
Private individuals 1,633 1,672 1,639 1,813 1,777
of which property loans 1,273 1,300 1,252 1,354 1,107
of which other loans 360 372 387 459 670
Small companies 520 545 543 644 534
Institutions 1,137 1,218 1,142 1,455 1,272
Equity exposures 12,417 12,568 12,561 12,536 12,513
of which listed shares 194 141 165 143 153
of which other shares 12,223 12,427 12,396 12,393 12,360
Non credit-obligation assets 59 60 61 63 64
Securitisation positions 5 5 - -
Total IRB approach 28,297 29,878 29,208 30,676 30,470
Risk weight floor Swedish mortgage loans 674 569 478 494 478
Total IRB approach with impact of risk weight floor, Swedish mortgage loans
28,971 30,447 29,686 31,170 30,948
INTERIM REPORT JANUARY – JUNE 2020
74 Handelsbanken
Capital requirement market risks – Parent company
Leverage ratio – Parent company
The Bank has changed its reporting to the Swedish Financial Supervisory Authority as regards shares in subsidiaries for all quarters 31 December 2018 – 30 September 2019. Some of these exposures are now reported according to the standardised approach, with a risk weight of 100%, and some are reported according to the standardised approach, with a risk weight of 370%. A consequence of this is that the own funds are also affected, which further impacts the leverage ratio. The impact on the leverage ratio is an increase as at 31 December 2018 and 31 March 2019 and a decrease as at 30 June 2019 and 30 September 2019.
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Position risk in the trading book 728 730 657 853 746
Interest rate risk 723 725 651 847 736
of which positions in securitisation instruments - - - - -
Equity price risk 5 5 6 6 10
Exchange rate risk 744 622 745 783 820
Commodities risk 2 6 4 6 6
Settlement risk 0 0 1 0 0
Total capital requirement for market risks 1,474 1,358 1,407 1,642 1,572
SEK m30 Jun
202031 Mar
202031 Dec
201930 Sep
201930 Jun
2019
Balance sheet according to accounting regulations 2,527,483 2,601,095 2,079,505 2,192,592 2,098,997
Adjustment for differences between carrying amount and leverage ratio exposure - derivatives -20,078 -45,583 -8,146 -16,966 -6,002
Adjustment for differences between carrying amount and leverage ratio exposure - repos and securities loans 18,956 7,766 3,553 6,031 6,167
Assets reported off the balance sheet, gross (before adjustment for conversion factor) 517,220 497,451 495,337 514,518 509,471
Deduction from assets off the balance sheet after application of conversion factor -342,747 -326,771 -306,790 -315,449 -334,331
Assets reported off the balance sheet, net 174,473 170,680 188,547 199,069 175,140
Additional adjustment -765,354 -736,757 -743,613 -717,197 -688,063
Assets on which the leverage ratio is calculated 1,935,480 1,997,200 1,519,846 1,663,529 1,586,239
Capital on which the leverage ratio can be calculated
Tier 1 capital 128,020 127,590 128,142 125,208 122,086
Leverage ratio
Leverage ratio calculated on tier 1 capital 6.6% 6.4% 8.4% 7.5% 7.7%
INTERIM REPORT JANUARY – JUNE 2020
75 Handelsbanken
SUBMISSION OF REPORT
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, 15 July 2020 Pär Boman Fredrik Lundberg Jon Fredrik Baksaas Chairman of the Board Vice Chairman of the Board Board Member Hans Biörck Kerstin Hessius Anna Hjelmberg Board Member Board Member Board Member Lise Kaae Lena Renström Ulf Riese Board Member Board Member Board Member Arja Taaveniku Carina Åkerström Board Member President and Group Chief Executive Board Member
PRESS AND TELEPHONE CONFERENCE
A press conference will be held at the Bank’s head office on 15 July at 8:30 a.m. (CET). A telephone conference will be held on 15 July at 11:00 a.m. (CET). Press releases, presentations, a fact book and a recording of the telephone conference are available at handelsbanken.com/ir. This report has been subject to review by the company’s auditors. The interim report for January – September 2020 will be published on 21 October 2020. For further information, please contact: Carina Åkerström, President & Group Chief Executive Tel: +46 (0)8 22 92 20 Carl Cederschiöld, CFO Tel: +46 (0)8 22 92 20 Lars Höglund, Head of Investor Relations Tel: +46 (0)8 701 51 70, [email protected]
INTERIM REPORT JANUARY – JUNE 2020
76 Handelsbanken
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 2020 and for the six-month period ending as at this date. 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.
FOCUS AND SCOPE OF THE REVIEW
We have conducted our review in accordance with the International Standard on Review Engagements ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily to persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review differs from and is substantially
less in scope 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 accompanying interim report is not, in all material respects, in accordance with IAS 34 and the Annual Accounts Act for Credit Institutions and Securities Companies for the Group and in accordance with the Annual Accounts Act for Credit Institutions and Securities Companies for the parent company.
Stockholm, 15 July 2020
Ernst & Young AB PricewaterhouseCoopers AB Jesper Nilsson, Authorised Public Accountant Johan Rippe, Authorised Public Accountant
INTERIM REPORT JANUARY – JUNE 2020
77 Handelsbanken
Share price performance and other information In the wake of the coronavirus pandemic, the Swedish stock market (OMX Stockholm 30 index) fell by 5% during the
first half of the year. The Stockholm stock exchange’s bank index fell by 13%. Handelsbanken’s class A shares
closed at SEK 88.44, a decline of 12 per cent.
SHARE PRICE PERFORMANCE PREVIOUS 10 YEARS
ANALYSTS WHO MONITOR THE BANK
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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Index 100 = 31 December 2008
SHB A OMX Stockhom Banks OMX Stockholm 30 Index
Company Analyst Email address
ABG SUNDAL COLLIER Magnus Andersson [email protected]
ARCTIC SECURITIES Roy Tilley [email protected]
AUTONOMOUS Jacob Kruse [email protected]
BANK OF AMERICA MERRILL LYNCH David Taranto [email protected]
BARCLAYS Chris Manners [email protected]
BERENBERG BANK Adam Barrass [email protected]
CARNEGIE Jens Hallen [email protected]
CITIGROUP Ronit Ghose [email protected]
CREDIT SUISSE Findlay Williams [email protected]
DANSKE BANK Andreas Håkansson [email protected]
DEUTSCHE BANK Kazim Andac [email protected]
DNB Nicholas McBeath [email protected]
EXANE BNP PARIBAS Nick Davey [email protected]
GOLDMAN SACHS Pawel Dziedzic [email protected]
JEFFERIES INTERNATIONAL Aqil Taiyeb [email protected]
J P MORGAN Sofie Peterzens [email protected]
KEEFE, BRUYETTE & WOODS Hari Sivakumaran [email protected]
KEPLERCHEUVREUX Robin Rane [email protected]
MEDIOBANCA Riccardo Rovere [email protected]
MORGAN STANLEY Antonio Reale [email protected]
NORDEA Rickard Henze [email protected]
REDBURN Chris Hartley [email protected]
SOCIETE GENERALE Geoff Dawes [email protected]
UBS Johan Ekblom [email protected]