Handelsbanken A unique bank with a unique growth
Handelsbanken A unique bank with a unique growth model Pär Boman UBS Annual Nordic Financial Service Conference August 30, 2007 Handelsbanken
Handelsbanken Group What is unique in Handelsbanken? n The international growth model n More satisfied customers n Low costs n Low credit losses 2 Handelsbanken
Handelsbanken Group Key ratios, Jan-Jun 2007 * According to transitional rules 2007 3 Handelsbanken
Handelsbanken Group Operating profit by business area, Q 2 2007 vs Q 1 2007 4 Handelsbanken
Handelsbanken Group Cost-effectiveness, European universal banks Comparison of listed European universal banks with lending > EUR 100 bn and major Nordic banks. Costs including loan losses Jan-Dec 2006. Costs/Total loans* % Danske Bank Swedbank Bank of Ireland Dn. B Nor Allied Irish Banks Commerzbank Q 1 -07 Handelsbanken Nordea SEB Hypo. Vereinsbank KBC Banco Santander Credit Agricole SA Royal Bank of Scotland Bank Austria Intesa San. Paolo Unicredito BBVA Lloyds TSB Standard Chartered MPS Erste Capitalia BNP Paribas ABN Amro Deutsche Bank HBOS Barclays HSBC Société Générale UBS 90 5 80 70 CS Group 60 50 40 C/I-ratio, % Source: Deutsche Bank: European Banks – Running the Numbers, January 2007 -edition. * Refers to loans to the public or deposits if deposits > lending. Handelsbanken
Handelsbanken Group SPP effect on net gains/losses on financial items at fair value 2006 2007 Other contains hedge accounting, instruments at fair value and financial liabilities. 6 Handelsbanken
Handelsbanken Group Reduced financial risks in SPP * Excl yield split. 7 Handelsbanken
Handelsbanken Group Improved administration result (incl. SPP Fondförsäkring) 8 Handelsbanken
Handelsbanken Group Growth in premiums and new contracts, SPP SEK m * * Excluding a major portfolio transfer of SEK 7. 7 bn. 9 Handelsbanken
Handelsbanken Group Handelsbanken’s unique growth model n No macro bets n Not focused on distribution of products n Managing customer expectations n No mass market approach – Cherry picking n Word of mouth – no campaigns n Successive increase of product assortment n Cost efficient n Applicable in all markets n Long experience 10 Handelsbanken
Handelsbanken Group Branch operations outside Sweden Total income SEK m (left scale) Number of branches (right scale) 2007* = H 1 2007 x 2 CAGR 11% CAGR 4% CAGR 23% CAGR 32% * * CAGR 12% CAGR 11% CAGR 19% CAGR 9% * 11 CAGR = Compound Annual Growth Rate. * Handelsbanken
Handelsbanken Group Expansion rate increases outside Sweden Deposits and lending in GB, Denmark, Finland Norway refer to volumes in local currency. 12 Handelsbanken
Handelsbanken Group Operating profit from operations outside Sweden 13 Handelsbanken
Handelsbanken Group Customer satisfaction – private customers in the Nordic countries Handelsbanken Sector average, weighted Index Sweden Index Denmark Index Finland Index Norway Source: SKI, Dansk Kunde. Index, EPSI Rating and EPSI Norway. In Sweden, the sector average is SEB, Nordea and Swedbank. 14 Handelsbanken
Handelsbanken Group The most satisfied customers in the Nordic countries Sweden Denmark n Corporate market – Best of the large banks n Corporate market – 2 nd place n Private market – Best of the large banks n Private market – 3 rd place Finland Norway n Corporate market – Best n Private market – 2 nd place Source: Svenskt Qalitetsindex, EPSI Norway, Dansk Kunde. Index and EPSI Rating in Finland. 15 Handelsbanken
Handelsbanken Group Increase in regular monthly savings in mutual funds Monthly savings, SEKm (left scale) No of standing orders, 1 000 s (right scale) n n Monthly savings +17% p. a. Number of standing orders +10% p. a. June figures: 2005 - 2007 16 Handelsbanken
Handelsbanken Group Savings with Handelsbanken – volumes * Mainly refers to private individuals' savings 17 Handelsbanken
Handelsbanken Group Loan losses as a percentage of loans Statutory capital requirement will decrease by 41% when Basel II is fully implemented. 18 Handelsbanken
Handelsbanken Group Credit risks n n n 19 Handelsbanken has a unique credit granting process implying a commitment in terms of both competence and processing times n Customers are chosen selectively n Analysis done close to customers n Cannot borrow money in Handelsbanken if not approved by the branch n High quality borrowers n Long-term customer relationships Handelsbanken assesses business and credit risk with the objective of keeping the credit risk in the books focusing on default risk Handelsbanken’s business model implies investments in relationships with customers – counter productive to sell of credits Handelsbanken
Handelsbanken Group Credit risks n Handelsbanken focuses on default risk n Difficult to evaluate credit risk on the top of a business cycle n The most credit worthy borrowers are not in the market t 1 n The CDS market n 20 t 2 Spread risk vs default risk Handelsbanken
Handelsbanken Group What is unique in Handelsbanken? n The international growth model n More satisfied customers n Low costs n Low credit losses 21 Handelsbanken
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