Svenska Handelsbanken
Svenska Handelsbanken AB (publ) Registered no. 502007-7862 www.handelsbanken.se
NOTICE OF ATTENDANCE AT ANNUAL GENERAL MEETING
Shareholders wishing to attend the Meeting must:
• be entered in the Register of Shareholders kept by VPC AB (Swedish Central Securities Depository and Clearing Organisation), on or before Friday, 12 April 2002, and
• give notice of attendance to the Chairman's Office at the Head Office of the Bank, Kungsträdgårdsgatan 2, SE-106 70 Stockholm, telephone +46 8 701 19 84, or via the Internet www.handelsbanken.se/bolagsstamma (Swedish only), by 3 p.m. on Wednesday, 17 April 2002.
In order to be entitled to take part in the Meeting, any share- holders whose shares are nominee-registered must also request a temporary entry in the register of shareholders kept by the VPC. Shareholders must notify the nominee about this well before 12 April 2002, when this entry must have been effected.
DIVIDEND
The Board of Directors recommends that the record day for the dividend be Friday, 26 April 2002. If the Annual General Meeting votes in accordance with this recommendation, the VPC expects to be able to send the dividend to shareholders on Thursday, 2 May 2002.
PUBLICATION DATES FOR INTERIM REPORTS
January–March 22 April 2002 January–June 20 August 2002 January–September 22 October 2002
HANDELSBANKEN’S SHARES...10
OBJECTIVES, POLICY AND ORGANISATION...12
Objectives and principles...12
Policy and organisation...12
Environmental issues...14
Social responsibility...15
Ethical guidelines...16
Our staff...17
2001 IN AN ECONOMIC PERSPECTIVE 19 REVIEW OF OPERATIONS...20
General...20
Result and profitability...20
Business volume trend...21
Loan losses and bad debts...23
Financial risk...23
Capital ratio...25
Acquisition of SPP and Midtbank...26
IT development...26
REVIEW OF BUSINESS AREAS 27
Branch office operations 27
Handelsbanken Markets 31
Handelsbanken Securities 33
Handelsbanken Asset Management 35
Handelsbanken Finans 37
Handelsbanken Pension and Insurance 39
Stadshypotek Bank 42
Handelsbanken Treasury 43
RISK AND RISK CONTROL 44
Credit risk 44
Financial risk 45
Operational risk 48
DIRECTORS’ REPORT 49
ACCOUNTING PRINCIPLES 50
PROFIT AND LOSS ACCOUNTS 52
CASH FLOW STATEMENT 54
NOTES TO THE PROFIT AND LOSS ACCOUNT 55
NOTES TO THE BALANCE SHEET 61
FIVE-YEAR REVIEW 76
RECOMMENDATION FOR DISTRIBUTION
OF PROFITS 78
AUDIT REPORT 79
BRANCHES IN THE NORDIC COUNTRIES 80
REGIONAL HEAD OFFICES
IN THE NORDIC COUNTRIES 82
UNITS OUTSIDE THE NORDIC COUNTRIES 84
CENTRAL HEAD OFFICE 85
BOARD OF DIRECTORS 86
SENIOR MANAGEMENT 88
AUDITORS 88
ADDRESSES Inside back cover
DEFINITIONS Fold-out inside back cover
■ Profits for 2001 were SEK 11.2 billion
■ Return on shareholders’ equity was 18.4%.
■ The Board proposes that the dividend be raised to SEK 4.50
■ Handelsbanken acquired the Danish bank Midtbank A/S
■ The Bank repurchased 5.4 million shares in 2001
■ The Bank sold 5.6 million shares in connection with the acquisition of Midtbank
■ According to the Svenskt Kvalitetsindex survey, Handelsbanken again had the greatest proportion of satisfied customers in Sweden – both corporate and private
■ According to an equivalent survey in Denmark, Handelsbanken/Midtbank had the highest proportion of satisfied private customers
■ Over 50% of corporate customers and over 30% of private customers were linked to the Bank’s Internet services
■ Handelsbanken had the highest share of the net flows to the Swedish mutual fund market, excluding the PPM pension system
■ Sixteen new units were started outside Sweden: eight in Finland, two in Denmark, two in Norway, two in the UK, one in Poland and one in Austria
■ Handelsbanken Liv was demutualised on 1 January 2002
■ Handelsbanken was acclaimed Bank of the Year by Privata Affärer, a Swedish periodical for private finances
Nowadays we count among our competitors all the listed banks in the four Nordic countries where we are active. This is the first time Denmark is in- cluded, since our Danish operations are now sufficiently large (today we are the fifth largest bank in Denmark), that we can safely say that we con- duct full universal banking operations there too.
Satisfied shareholders begin with satisfied customers and cost-efficiency. Cost-efficiency leads to high profitability today.
Satisfied customers bring more of their business to us and become goodwill ambassadors for the Bank and thus also contribute to higher growth.
This is why it is so important for us to ensure that we are efficient and that our customers are satisfied.
Our view of efficiency Some people claim that cost- efficiency and satisfied customers are an impossible combination.
That low costs entail a view of service which cannot possibly simultaneously result in satisfied customers. The fact that
Handelsbanken has nevertheless managed to combine the two is, of course, practical proof of the contrary.
But I am convinced that this incompatibility does not exist even in theory. Proponents of this theory have probably not taken sufficient account of the fundamental difference between turning thrifty and being thrifty.
It is true that companies wishing to slash their costs quickly, find it very difficult to keep their customer focus while embark- ing on such a tough process
and thus they will almost certainly endure a period of deteriorated customer relations.
But being thrifty means that you have always had to be focused. If you are thrifty, you have a strong incentive to get things right the first time. Mistakes are just too expensive. A frugal person finds ways of getting things right the first time around.
Something else which is very expensive is organisational muddle. If nobody is really responsible, there are lots of things that will be only almost right, almost in time. Thus, in order to be thrifty, you need a strong accounting and control system. The representation of income and expenses reported by such a system must be seen as fair by everyone in the orga- nisation. This in turn means that the system must not be open to manipulation by cen- tral units seeking a certain goal, however desirable this goal may be to many people in the organisation. The reported expenses and revenues must be correct. It must also be quite clear who is responsible. The person who is responsible must be able to compare his or her performance, not with some- thing unreal like a plan or a budget, but with something tangible, such as the result achieved by people with similar responsibilities over the same period of time. That is why benchmarking is such an important instrument for Handelsbanken, where we have survived perfectly well without budgets for thirty years.
In a thrifty company, the employees must be proficient at many things. To be pro- ficient and knowledgeable, employees need long and broad professional experience. Thus, in a thrifty company, it is important to create the sort of working conditions where the employees are happy, want to stay with the company for a long time and are keen on learning new things. Product- ivity will then increase so that the thrifty company manages with fewer employees.
A thrifty company also cares about its customers.
It is better to keep a satisfied customer than to rely on the continuous acquisition of new customers, because you have lost your old ones.
And in a company where the employees are happy, it is easy for the customers to feel comfortable.
LARS O GRÖNSTEDT
Last year was the thirtieth year running that Handelsbanken could
yet again please shareholders by achieving its corporate goal – higher
return on shareholders’ equity than the average for peer banks.
“
”
In a world where everything seems to be measured, weighed and computed in terms of internal return, it is easy to forget how attractive a welcoming smile is to customers.
Of course, good service has its technical side. When we meet our customers less often face-to-face, it becomes increasingly important that our technology always works and that it is smooth and user-friendly. To achieve this, we need the best technical specialists in central positions.
But it is difficult for financial services companies to use technology as the base for a long-term competitive advantage, since technological advances are not patented in the financial world. IT is also an area where it is easy to spend a lot of money without achieving all that much in terms of customer benefit. A thrifty company does not adopt new ideas hastily. Thrift is also a question of saying no, of deciding what you should not do. This is not as easy as it sounds. In big companies there are always plenty of ideas about how to develop operations.
Ingenious analyses of future developments are often used to back this up, combined with arguments that it is all desperately urgent.
In this situation, a critical attitude is very beneficial to thrift. It means that you say no to many proposals after only a brief period of indecision. Of course, sometimes the idea may then mature and turn into a much better worked-out concept.
There are a few exceptions to this general rule.
For highly specialised services aimed at a small number of customers, it is often quite profitable to be an early innovator. You gain market share and you can also charge a good price. Since few people are involved and, initially, modest volumes are sold, the service can be virtually hand- crafted at the outset without major initial investments.
A good example of our innovative abilities in the last few years is in investment banking. By being first in Sweden with a new product, such as equity-linked bonds or equity buy-back programmes, we have been able to take large shares in these markets and also advance our positions in the whole investment banking field.
Our property bidding service on the Internet, “e-bud”, is another area where we are convinced that being first with this useful idea has contributed to our success in the mortgage market.
But isn’t the result of all this oh-so-sensible scrimping and saving, a sleepy, rather dull organisation? We don’t think so. A thrifty company can least of all afford to neglect its customers. On the contrary, the work with customers permeates the thrifty organisation. Such an organisation cannot afford large central units. Thus, work with customers has much more impact on the whole company, since a greater proportion of the staff work directly with customers.
Svenska Handelsbanken
Other listed banks
Standard tax 50% 1985–1988 30% 1989–1993 28% 1994–2001
1985 1987 1989 1991 1993 1995 1997 1999 2001 30
25
20
15
10
5
0
-5
%
General Index
Nordix bank index excl.
Handelsbanken Svenska Handelsbanken Index
1999
1997 1998 2000 2001
300
200 250
100 150
C O S T- E F F I C I E N C Y O F S O M E N O R D I C B A N K I N G G R O U P S
31 December
Cost/ Expenses income expressed as a percentage of total assets
Handelsbanken 47 0.9
Danske Bank 56 1.1
FöreningsSparbanken 59 1.4
Nordea 62 1.4
Den norske Bank 64 2.2
SEB 79 1.9
Average excl.
Handelsbanken 66 1.6
Excl. loan losses and adjusted for items affecting comparability.
H A N D E L S B A N K E N ’ S S H A R E P E R F O R M A N C E RETURN ON SHAREHOLDERS’ EQUITY AFTER STANDARD TAX
It is possible to combine the highest profitability in the banking sector with the most satisfied customers
“ ”
Sometimes, people are concerned that customers do not like thrift. But the fact is that customers like banks who stick to their own ideals. It is natural for banks to sing the praises of saving money. So it is natural for them to practice what they preach.
This is why I do not find it so surprising that it is possible to combine the highest profitability in the banking sector with the most satisfied customers.
Satisfied customers
Cost-efficiency leads to high profitability, and satisfied customers lead to strong growth. In 2001, we were named “Bank of the Year” by Privata Affärer, a periodical for private finances. We were delighted, since it was a public acknowledgement that we are working in a way which our customers appreciate.
But it is important that we not only achieve this in one single year but also sustainably over a longer period of time. That is why the annual customer satisfaction sur- veys are so vital for us. They have been conducted in Sweden since 1989, using the same methodology.
Every year we have been number one for household cus- tomers and every year but one for corporate customers.
Handelsbanken was again judged best in 2001 and we also had the satisfaction of seeing our lead increase.
For the first time, we have also participated in a similar survey in Denmark. Here, too, we had the most satisfied private customers of the six major banks.
A digression on statistics might be appropriate at this point. It is true that in this kind of survey, small banks are normally more appreciated by their customers than large ones. This is partly explained by the fact that the benefits of economies of scale are often exaggerated in banking operations. But it is also a statistical effect where the smaller a group is, the more homogenous it is, and the easier it is to meet the group’s demands.
Imagine for a moment a bank with just one customer whose smallest demand can be met in every detail.
A bank like this would of course get the highest possible ranking from its one and only customer.
And then imagine the other extreme, a bank where everyone is a customer. In statistical terms, this bank could never raise its ranking above the average since it is the average.
Our insurance operations
Last year, we took two major steps in our insurance operations. We completed the acquisition of the insur- ance company SPP and as of 1 January 2002, we demutualised Handelsbanken Liv.
Handelsbanken Liv was acquired by Handelsbanken in 1992. In 2001, Handelsbanken Liv contributed SEK 328m to our income, through commission income for asset management and sales.
The demutualisation is good for the Bank’s share- holders since in normal years it will contribute to the Bank’s profits. But, above all, it is good for our insurance customers. The risks in being a customer of a mutual company became very apparent in autumn 2001 when
Our international operations
With the acquisition of the Danish bank, Midtbank, we completed the first phase of our Nordic expansion.
We are now sufficiently large in Sweden, Norway, Finland and Denmark to serve all customers – both companies and households – with all the products they demand. We can offer a wide range of services to com- panies across the Nordic borders, international services which are still closely integrated with the personal service in our local branch office network in each country.
In recent years, we have been testing our concept in a non-Nordic country – the UK. Our non-Nordic ope- rations had previously focused on service to customers with a Nordic connection.
So far, I am very encouraged by the reception given to our UK operations. Our customers there seem overwhelmingly sympathetic to the local way we run a bank, focusing on personal service and rapid response.
And good UK banking staff are also genuinely interested in working our way.
Our view of growth
Handelsbanken enjoyed some major market successes in 2001. This also applied to our Swedish core market, where we increased our share in all important market segments: household deposits, household credits, mort- gage loans, corporate loans and mutual funds.
Achieving a specific market share is not a goal in itself for Handelsbanken. Our corporate goal is profit- ability, not size. But when market shares increase, this is proof that customers are satisfied, and that is important.
We aim to grow organically: customer by customer, product by product, branch by branch. Our customers must know that wherever they meet Handelsbanken, they meet the same fundamental principle of overall responsibility for each customer at the customer’s own branch. The commitment and competence of the staff at the local branch are the keys to success in this respect.
There are no shortcuts when it comes to developing this competence. Like so many of the good things in life, competence matures slowly to achieve the best results.
But since our competitive advantage is mainly cultural; in other words, more a matter of how we do things rather than what we do; of implementation rather than strategy, this sets limits to our growth. We cannot grow more quickly than the pace at which we can train and develop our employees. At first sight, it would appear to be a troublesome constraint on growth which otherwise would be able to proceed at a much quicker rate. Indeed, it might seem like a constraint that is much more serious than financial restrictions – you can issue new shares, but nobody has yet issued a new corporate culture.
But if we consider the development of the Swedish banks in the past five years, several have certainly grown more quickly than Handelsbanken in terms of total assets and income. But their expenses have also grown quickly. In terms of what really matters – profits almost all Swedish life insurance companies had a nega-
tive solvency margin – the reserves did not cover the bonuses previously allocated to the insurance holders.
Furthermore, we are convinced that a hands-on, recognisable owner runs operations more efficiently and is more sensitive to customers’ wishes than is the case in a mutual company. We also considered it important to be the first company in Sweden to offer savers the right of transfer of insurance funds if they are not satisfied with the way we manage their money. We strongly believe that they should have this opportunity, and we are happy that Swedish legislation now permits it.
Since almost 80% of Handelsbanken Liv’s customers voted in favour of demutualisation, it is obvious that this conviction is not only our own but is also shared by our customers.
The demutualisation was implemented without problems on 1 January 2002.
In 2001, we completed the acquisition of SPP, thus becoming the second biggest company in the Swedish insurance market. With this acquisition, our assets under management doubled to SEK 236bn.
This is in itself good, since there are considerable economies of scale in asset management, although in practice they are not quite as large as many people are wont to believe. But the acquisition of a major asset management assignment was not the main reason why we wanted to buy SPP.
In SPP, we see good opportunities for extra sales as we did with our acquisition of Stadshypotek. When we bought Stadshypotek in 1997, around 30% of the customers were already customers of Handelsbanken.
Five years after the acquisition, over 60% of Stads- hypotek’s customers also used another Handelsbanken product. This achievement is the result of a strong brand name, competitive services and prices, but above all the methodical work at all our Swedish branches.
Now we are using the same formula with SPP’s cus- tomers. It is true that the link between insurance and banking is not as obvious as that between mortgages and banking. But we have learnt quite a lot from the years with Stadshypotek. SPP also has many more corporate customers than Stadshypotek ever did.
We hope to be able to demutualise SPP in a few years’ time, to the benefit of policy-holders and the Bank’s shareholders.
Just as we assumed in the acquisition calculation, the financial result of the SPP acquisition was slightly negative in 2001. The cost of amortising the brand name, financing the purchase price and the deficit in SPP Fonder (mutual funds) were major items.
Handelsbanken enjoyed some major market successes
in 2001
“ ”
– Handelsbanken has had by far the best growth in earnings per share. And in the world of banking, the bank which has built up its credit portfolio with care and without making volume its primary goal, tends to end up with the best portfolio. In fact, I think that some of the vast and complex structures which have emerged as a result of mergers and acquisitions among the world’s banks in recent years are not sustainable in the long term, since they do not offer sufficient benefit to the customers.
But although our fundamental strategy is organic growth, we have also carried out a number of acquisi- tions during the past decade. Of the 87 branches we have outside Sweden today, 34 were gained through acquisi- tion and 53 we have started ourselves. Our insurance operations are the result of two acquisitions: RKA in 1992 and SPP in 2001. And the acquisition of Stads- hypotek in 1997 doubled the Bank’s credit portfolio.
We will continue with our fundamental approach – along the path of organic growth. But if we find a com- pany where we think we can develop the operations, and where the price is right, we will also continue to take advantage of such acquisition opportunities.
To develop an operation, we must have leadership capacity and for that, we must understand the market where we are making the acquisition. This makes it unlikely that we would carry out a number of major acquisitions in quick succession, or that we would move by acquisition into a market where we lack previous experience.
Employee input is vital
I have emphasised many times, in these, my first com- ments to the Annual Report as CEO, that the foundation of so many successful years is the way we work; the corporate culture we have built up; the way we treat our customers and our colleagues, the approach which we continue to build and reinforce every day. A corpor- ate culture is not something tangible which you can put in the balance sheet, but nor is it something so intangible that it just lives on whatever we do. Our employees are imbued with this culture and they actualise its value in their daily work. So when we have succeeded better than the rest of the banking sector, it is natural to end these words with a tribute to the source of our success – with my sincere thanks to all the staff for their devoted and loyal work during 2001.
Stockholm, February 2002
LARS O GRÖNSTEDT
Handelsbanken has had by far the best growth in
earnings per share
“ ”
Ulf Hinds
P R O F I T A N D L O S S A C C O U N T – G R O U P
SEK m 2001 2000 Change %
Net interest income 13 385 11 791 14
Commission, net 5 028 5 455 – 8
Trading, net 2 656 2 633 1
Other income 585 801 – 27
Total income 21 654 20 680 5
Staff costs excl. performance-related – 5 580 – 4 844 15
Performance-related staff costs – 338 – 464 – 27
Other expenses – 4 376 – 3 756 17
Total expenses – 10 294 – 9 064 14
Result before loan losses 11 360 11 616 – 2
Loan losses incl. change in value of repossessed property – 152 67
Operating profit 11 208 11 683 – 4
Pension settlement 306 797 – 62
Taxes – 3 202 – 3 353 – 5
Minority interests – 22 – 22 —
Profit for the year 8 290 9 105 – 9
P R O F I T A N D L O S S A C C O U N T B Y B U S I N E S S A R E A – G R O U P
Branch Handels- Handels- Handels- Handels- Handels- Stads- Treasury Other Total Total Change
offices banken banken banken banken banken hypotek 2001 2000 %
Markets Securities Asset Finans Pension and Bank
SEK m Management Insurance
Net interest income 12 355 1 506 – 121 186 499 15 87 215 – 320 14 422 11 306 28
Commission, net 2 646 218 767 900 285 171 32 – 42 51 5 028 5 455 – 8
Net result on financial
operations 274 690 499 23 – 1 – 18 0 – 33 107 1 541 3 029 – 49
Other income 106 15 158 23 17 8 14 13 309 663 890 – 26
Total income 15 381 2 429 1 303 1 132 800 176 133 153 147 21 654 20 680 5
Net internal remuneration included in income 906 Net internal remuneration
deducted from income 41 63 518 3 259 22 —
Total expenses – 6 441 – 1 071 – 947 – 572 – 450 – 110 – 110 – 15 – 578 – 10 294 – 9 064 14 Profit before
loan losses 8 940 1 358 356 560 350 66 23 138 – 431 11 360 11 616 – 2
Loan losses incl.
change in value of
repossessed property – 232 88 – 10 – 5 – 1 8 – 152 67 —
Operating profit 8 708 1 446 356 550 345 66 22 138 – 423 11 208 11 683 – 4
Return on equity, % 20.6 23.6 35.6 28.4 29.4 15.6 30.6 14.6 18.4 22.3
Average number
of employees 5 549 768 447 372 436 11 109 38 1 509 9 239 8 574
In order to illustrate the development of operations more clearly, the profit and loss account is shown above with the various income categories, excluding that which is generated in the trading operation. The “Net result on financial operations” (equity-, interest rate- and currency-related) and trading-related income from other income categories are reported under “Trading, net”. Performance-related staff costs are reported separately. The result of insurance operations has been allocated to the respective income/expense categories.
Participations in associated companies’ results are reported under “Other income”.
The net amount of received/paid remunerations between the business areas is included in/deducted from the income categories for the business areas. The net amount of received/paid remuneration is shown above. The internal remuneration is credited to the business area which is responsible for the customer and reduces the income of the unit paying the remuneration. The remuneration is intended to cover expenses and also to distribute the profit arising on market terms.
Expenses also include the distribution of costs made internally within the Group for services rendered by business support operations.
Return on shareholders’ equity for the business areas is computed after standard tax, while for the whole Group it is computed after appropriations and full tax.
The shareholders’ equity, on which calculation of return on equity is based, is mainly distributed in accordance with the requirements of the Act on Capital Adequacy.
“Other” includes capital gains, dividends, amortisation of goodwill and Group adjustments, which are not attributable to an individual business area.
Handelsbanken Liv Fondförsäkrings AB (unit-linked) and commission income from the mutual company, Handelsbanken Liv Försäkrings AB, are included in the
K E Y F I G U R E S F O R T H E H A N D E L S B A N K E N G R O U P
2001 2000 1999 1998 1997
Profit before loan losses, SEK m 11 360 11 616 8 388 8 031 8 123
Loan losses, SEK m – 152 67 219 – 319 – 302
Operating profit, SEK m 11 208 11 683 8 607 7 712 7 821
Total assets, SEK m 1 174 521 1 020 353 936 256 932 845 862 448
Shareholders’ equity, SEK m 48 112 42 466 38 570 34 431 32 353
Return on shareholders’ equity, % 18.4 22.3 18.4 18.6 20.2
Return on shareholders’ equity, %1) 18.4 21.6 18.4 17.9 20.2
Return on shareholders’ equity
after standard tax, %1) 17.8 19.9 17.0 16.3 18.8
Cost/income ratio before loan losses, % 47.5 43.8 50.8 52.3 48.6
Cost/income ratio after loan losses, % 48.2 43.5 49.5 54.2 50.6
Cost/income ratio before loan losses, %1) 47.5 44.6 50.8 53.4 48.6
Cost/income ratio after loan losses, %1) 48.2 44.2 49.5 55.3 50.6
Loan loss ratio, % 0.02 – 0.01 – 0.03 0.05 0.05
Bad debt reserve ratio, % 70.9 58.2 66.8 58.8 52.6
Proportion of bad debts, % 0.18 0.33 0.27 0.45 0.64
Capital ratio, % 9.9 9.5 9.4 9.8 10.4
Tier 1 capital ratio, % 6.1 6.4 6.5 6.3 6.2
Return on total assets. % 0.99 1.17 0.93 0.85 0.95
Average number of employees 9 239 8 574 8 520 8 546 8 184
Number of branches in Sweden 458 460 465 480 485
Number of branches in other Nordic countries 87 52 43 33 30
1) Adjusted for items affecting comparability.
For definitions see fold-out inside back cover.
Q U A R T E R L Y P E R F O R M A N C E – G R O U P
SEK m 2001:4 2001:3 2001:2 2001:1 2000:4
Net interest income 3 529 3 392 3 224 3 240 3 010
Commission, net 1 299 1 150 1 366 1 213 1 288
Trading, net 662 532 649 813 665
Other income 155 98 179 153 157
Total income 5 645 5 172 5 418 5 419 5 120
Staff costs excl. performance-related – 1 472 – 1 449 – 1 367 – 1 292 – 1 278
Performance-related staff costs – 20 – 59 – 130 – 129 – 5
Other expenses – 1 298 – 1 099 – 1 024 – 955 – 985
Total expenses – 2 790 – 2 607 – 2 521 – 2 376 – 2 268
Profit before loan losses 2 855 2 565 2 897 3 043 2 852
Loan losses incl. change in value
of repossessed property – 203 – 14 – 13 78 – 42
Operating profit 2 652 2 551 2 884 3 121 2 810
Pension settlement – 26 – 14 184 162 304
Taxes – 672 – 732 – 852 – 946 – 839
Minority interests – 5 – 6 – 5 – 6 – 5
Profit for the period 1 949 1 799 2 211 2 331 2 270
S H A R E S D I V I D E D I N T O S H A R E C L A S S E S 3 1 D E C E M B E R 2 0 0 1
Share class Number % of % of Average prices Nominal
capital votes Repurchased value
amount SEK
Class A 649 949 619 90.93 99.01 2 599 798 476
Class B 64 797 321 9.07 0.99 259 189 284
714 746 940 100.00 100.00 2 858 987 760
Repurchases
Class A 400 0.00 0.00 SEK 120.30 1 600
Class B 21 359 125 2.99 0.33 SEK 142.87 85 436 500
21 359 525 2.99 0.33 3 051 720 496 85 438 100 After repurchases
Class A 649 949 219 93.74 99.34 2 599 796 876
Class B 43 438 196 6.26 0.66 173 752 784
Total after
repurchases 693 387 415 100.00 100.00 2 773 549 660
Repurchased during the year
Class A — — — — —
Class B 5 417 625 0.76 0.08 SEK 158.54 21 670 500
5 417 625 0.76 0.08 858 930 192 21 670 500
Sold during the year
Class A 1 664 000 0.23 0.25 SEK 151.11 6 656 000
Class B 3 900 000 0.55 0.06 SEK 144.00 15 600 000
5 564 000 0.78 0.31 813 039 000 22 256 000
S H A R E S P E R S H A R E H O L D E R 3 1 D E C E M B E R 2 0 0 1
Number of shares Shareholders Shareholdings
Number Percentage of Number of shares Percentage of Average number all shareholders in thousands share capital per holder
1 – 500 shares 45 779 53.5 8 266 1.2 181
501 – 2 500 shares 27 880 32.6 32 671 4.6 1 172
2 501 – 25 000 shares 11 106 13.0 65 865 9.2 5 931
25 001 – 250 000 shares 631 0.7 46 135 6.4 73 114
250 001 – shares 212 0.2 540 450 75.6 2 549 295
Shares repurchased by Handelsbanken 21 360 3.0
Total 85 608 100.0 714 747 100.0 8 349
K E Y F I G U R E S P E R S H A R E
2001 2000 1999 1998 1997
Net earnings per share, SEK 11.99 12.89 9.31 8.41 8.38
Dividend per share, SEK 4.501) 4.00 3.00 2.67 2.17
Dividend growth, % 12.50 33.3 12.4 23.0 30.0
Adjusted shareholders’ equity per share, SEK 69.50 61.35 53.97 47.56 44.66
Price of class A share, 31 Dec, SEK 154.00 161.50 107.00 114.00 91.00
Average daily turnover on Stockholm Stock Exchange
Class A, number of shares 1 892 366 1 482 206 1 317 270 1 141 320 1 205 370
Class B, number of shares 85 252 121 059 63 101 57 434 78 078
Highest/lowest price paid, class A shares, SEK 170/132 173/94 132/91 131/83 100/61
Direct yield, % 2.9 2.5 2.8 2.3 2.4
P/E ratio 12.8 12.5 11.5 13.6 10.9
Stock exchange price/Equity, % 222 263 198 240 205
1) Dividend as recommended by the Board.
Figures for 1998 and previous years have been adjusted for the 3:1 split carried out during 1999.
Adjusted to take account of current accounting principles and definitions. For definitions see fold-out inside back cover.
THE MAJOR SWEDISH SHAREHOLDERS 31 DECEMBER 2001
% of votes
The Oktogonen Foundation 10.1
Industrivärden 7.4
Robur funds (29) 4.5
Alecta 3.4
AMF Pension 3.2
Nordea funds (31) 2.7
Handelsbanken funds (33) 2.3
Skandia Liv 2.3
The average number of outstanding shares in 2001 was 691 205 879.
General Index
Nordix bank index excl.
Handelsbanken Svenska Handelsbanken Index
1999
1997 1998 2000 2001
300
200 250
100 150
10 12 14
8
6
4
2
0
1996 1997 1998 1999 2000 2001 SEK
Net earnings per share
Dividend per share (For 2001, as recommended by the Board) Mdkr
90 100 110 120
80 70 60 50 40 30 25 20 15 10 5
1996 1997 1998 1999 2000 2001
S H A R E P R I C E P E R F O R M A N C E A N D D I V I D E N D In 2001, the Swedish stock market fell by 17%, mea- sured by the Affärsvärlden General Index. In the same period, Nordic bank shares, measured by the Nordix bank index, fell by 18%. Handelsbanken’s Class A shares, however, fell by only 5%, which was better than any of the other major Nordic banks.
Even when comparing over a more extended period of time, Handelsbanken’s shares outperformed the general index. Since the beginning of 1997, Handels- banken’s share price has risen by 138%, which is twice as much as the General Index.
Handelsbanken’s long-term dividend policy reflects the ambition to raise dividends at a pace which is above the average for the banking sector. The Board recom- mends a dividend of SEK 4.50 for 2001, which is an increase of 12.5% compared with the previous year.
M A R K E T C A P I T A L I S A T I O N
As at 31 December 2001, the market capitalisation of Handelsbanken’s shares was SEK 106bn, a decrease of 5%. The Bank’s market capitalisation was almost seven times more than at the start of 1990.
T H E S H A R E S
In the first quarter of 2001, Handelsbanken repurchased 5.4 million shares. At the Annual General Meeting in April 2001, the board of the Bank was authorised to repurchase up to 20 million shares during the year until the next Meeting, and to be able to sell shares which had already been repurchased for the purpose of financing any future acquisitions. Since then, Handelsbanken has not repurchased any shares, but has sold 5.6 million shares in connection with the acquisition of Midtbank.
H A N D E L S B A N K E N ’ S S H A R E P E R F O R M A N C E MARKET CAPITALISATION 31 DECEMBER 1996–2001 N E T E A R N I N G S A N D D I V I D E N D P E R S H A R E
The Bank has repurchased 21.4 million shares net.
As at 31 December 2001, the number of outstanding shares was 693.4 million.
Class A shares each carry one vote and class B shares carry one-tenth of a vote each. At the Annual General Meeting, no shareholder is allowed to vote for more than 10% of the total number of votes in the Bank.
Handelsbanken’s shares are listed on the Stockholm Stock Exchange. One trading unit is equivalent to 100 shares.
T H E S H A R E H O L D E R S
At the end of 2001, Handelsbanken had over 85 000 shareholders, most of them private individuals. As shown in the adjoining table, the majority of share- holders owned only a small number of shares. The larger shareholders included a number of asset managers representing foreign private individuals and institutional investors. At the end of 2001, around 30% of the shares were owned by investors outside Sweden.
In April 2001, Handelsbanken acquired Midtbank, a Danish bank. Each shareholder who accepted Handels- banken’s cash offer, also received one class A share in Handelsbanken. Around 20 000 shareholders in Midt- bank received a Handelsbanken Class A share in this way. Since these shares are collected in a custody account in Denmark, they are not included in the ad- joining table.
Just over 50% of the total number of shares were owned by major Swedish institutional holders. These mainly comprise insurance companies, investment com- panies and equity funds representing a large number of private individuals. Holdings of the largest Swedish shareholders are reported in the adjoining table.
SEK bn
O B J E C T I V E S A N D P R I N C I P L E S Handelsbanken’s overall objective is to have higher profitability than a weighted average of the other listed Nordic banks.
The quality of the Group’s services should meet the expectations of demanding customers. Handelsbanken should charge a fair price for its services. The cost level should be lower than in other banks.
Profitability must always be given higher priority than volumes. When granting credit, this means that the quality of the credits must never be neglected in favour of a large lending volume.
Higher profitability should benefit the shareholders via greater growth in dividends than the average for other Swedish banks.
Handelsbanken aims to have more satisfied customers than other banks.
The Bank seeks to employ young, well-educated staff and train them within the Group. As far as possible, managers should be recruited internally.
The Bank’s activities should benefit its customers, the Bank itself and society as a whole.
At Handelsbanken, we work within the formal and ethical frameworks which apply to banking operations, taking into account environmental responsibility.
P O L I C Y
Overall customer responsibility close to the customer The business operations of the Handelsbanken Group are strongly decentralised. The most important means of control are a basic corporate policy which is deeply rooted throughout the entire Group and an efficient financial control system.
The main concept is that the organisation and methods of work should be based on the branches’ responsibility for individual customers and not on the central units’
responsibility for product areas or market segments.
The Bank assigns overall responsibility for each indi- vidual customer to a single place in the Group, as close to the customer as possible – at the customer’s local branch. Responsibility for providing the customer with expert and co-ordinated services from all units in the
Handelsbanken Group lies there, as does the responsibi- lity for all loans held in the Group by each individual person, company or group of companies. There, too, lies the responsibility for profitability within the Group for the overall business relationship with the customer.
This also means that the responsibility for the Group’s marketing is held by the individual branch.
There is no central marketing department. The Bank does not make central marketing plans or control the branches’ marketing activities at central level by giving priority to customer categories or product areas.
For many years, Handelsbanken has consistently and successfully applied and developed this basic concept. It has proved to work flexibly and efficiently during major changes in the conditions affecting banking operations.
Universal banking operations expand gradually
Handelsbanken aims to be a universal bank, i.e to cover the entire banking area: traditional corporate transac- tions, investment banking, as well as consumer banking including life insurance.
With 458 branches, Handelsbanken is strong in the Swedish market. During the past ten years, the Bank has expanded universal banking operations into the other Nordic countries. Handelsbanken has a total of 87 branches in the Nordic countries outside Sweden.
Norway, Finland and Denmark are natural domestic markets where Handelsbanken can apply its experience of running profitable universal banking operations.
The Bank will gradually be able to continue using its experience from the Nordic countries in markets outside the region. In the UK, operations have been expanded to offer retail banking services to individual customers and local companies.
Apart from this, the Bank’s network of units outside the Nordic countries is adapted to give Nordic customers good service and to do Nordic-related business with international customers.
O R G A N I S A T I O N
Handelsbanken’s organisation aims at promoting the interplay between strong branches, highly-trained specialists and efficient support functions.
T H E H A N D E L S - B A N K E N G R O U P ’ S
O R G A N I S A T I O N Branches
See inside back cover for addresses.
Regional Head Offices Central
Head Office and subsidiaries
Customer
Central Head Office
Subsidiaries
The other Nordic countries
Units outside the Nordic countries Regional
Head Offices
Branches in Sweden
GROUP MANAGEMENT
BUSINESS OPERATION DEPARTMENTS Asset Management Markets
BUSINESS SUPPORT DEPARTMENTS Administration Asset Management Auditing
Business Development Control and Accounting Corporate Communications Credits
Human Resources IT Operations Legal Markets Treasury
Handelsbanken Finans Handelsbanken Fonder Handelsbanken Liv SPP
Stadshypotek – Handelsbanken
Hypotek Stadshypotek Bank
NORTHERN NORRLAND Umeå
SOUTHERN NORRLAND Gävle
STOCKHOLM CITY Stockholm CENTRAL SWEDEN Stockholm EASTERN SWEDEN Linköping WESTERN SWEDEN Göteborg
SOUTHERN SWEDEN Malmö
DENMARK Copenhagen FINLAND Helsinki NORWAY Oslo
458
Denmark (32) Finland (28) Norway (27)
Austria China Estonia France (2) Germany (2) Hong Kong Luxembourg Poland Russia Singapore Spain Switzerland Taiwan U.K. (6) U.S.A
On the preceding page, the Handelsbanken Group’s organisation is presented as a combined unit focusing on the individual customer and with the individual branch office at the forefront.
E N V I R O N M E N T A L I S S U E S Environmental policy
Environmental issues are a vital element in the Handels- banken Group’s operations. This applies both to the Bank’s responsibility for the environment in its own operations and consideration of environmental risks when granting credits.
Handelsbanken aims to promote long-term sustain- able development and to take measures to minimise any negative impact on the environment, as far as techni- cally and financially possible, and to the extent that it is compatible with the Bank’s undertakings. Consistent and long-term improvements will generate benefits to the environment and cost savings. An important principle is to reduce any environmental damage from the Bank’s operations and purchased goods and services. Key con- cepts in the Bank’s environmental work are “thrift – renewability – biodegradability – recyclability”.
Handelsbanken has signed and complies with voluntary agreements, such as the ICC Business Charter for Sustain- able Development and the UN Environment Programme – Banks and the Environment.
Environmental responsibility and work organisation As with other areas at Handelsbanken, responsibility is decentralised for environmental issues on a practical level. All managers in the Handelsbanken Group have primary responsibility for environmental issues at their units and all employees have a responsibility for the environment as part of their duties.
An environmental manager has been appointed at all regional banks, subsidiaries and at various units at the Central Head Office. The managers are responsible for environmental issues at their respective unit. For the Group as a whole, internal environmental issues are co- ordinated by the Central Administration Department and business-related environmental issues are co-ordinated by the Central Credit Department.
Environmental training
The staff of the Bank and its subsidiaries have been trained in environmental issues with internal material based on information from the Swedish Business Develop- ment Agency and the Swedish Environmental Protection Agency. Environmental issues are now included in the introduction programme for new employees. Environ- mental issues are also a natural component of the Bank’s training programme in the area of loan operations.
IT reduces negative impact on the environment The opportunity for customers to carry out banking transactions on the Internet and for employees of the Bank to use IT tools has contributed to more efficient work, reduced use of paper and transport, and thus reduced negative impact on the environment.
Conference calls and video conferencing are used extensively to reduce the number of business trips for meetings and conferences. Some 75% of the approxi- mately 400 different forms used in branch office opera- tions have been converted to electronic forms. This work will continue in 2002.
Since February 2001, most of a customer’s state- ments of accounts are collected together so that he/she receives only one envelope per dispatch date regardless of the number of accounts. This results in cost savings as well as reduced impact on the environment. For newly-opened accounts, the number of statements of account dispatched has declined by 50%.
Purchasing
Environmental requirements are always made on suppliers when procuring goods and services. Environmental con- siderations are included in decisions on all investments and purchases. Handelsbanken maintains an ongoing dialogue with the Bank’s suppliers to promote and develop environmental issues.
Environmentally-adapted guidelines are applied in planning the Bank’s buildings, premises and furnishings.
The Bank requires declarations of environmental and material content. Materials and components must be long-life, recyclable and low-energy.
UJ
Energy and climate issues
Handelsbanken constantly seeks to reduce the amount of freons in the cooling systems of its buildings. In addition, all electricity used at the head office in Stockholm and the regional main offices in Malmö is labelled Bra Miljöval (Good environmental choice).
The Bank saves energy by optimising operations for computer equipment and heat and cooling plants, recycling energy, and using low-energy products. Energy utilisation is continuously monitored. To reduce the amount of energy used in cooling plants and to comply with the Swedish Environmental Protection Agency’s requirements for removing freons, the Bank has arranged nationwide service agreements for its cooling plants.
The Bank is designing routines for work with climate issues, for example, in the areas of electricity and heating.
This purpose of this is to monitor and report carbon dioxide emissions generated from the purchase of these services.
Waste separation, recycling, recovery and reuse, and destruction
In support of local measures, the Bank has entered into a number of central nationwide agreements on recycling, reuse and recovery, and destruction. These agreements cover electronic equipment – PCs and office machines – toner cassettes, paper, plastic packaging, light sources and other environmentally hazardous waste. Refuse, paper and environmentally hazardous waste are separated at the workplace. Disposable material and items are used as little as possible. Glass and paper are recycled, while batteries, fluorescent lights and chemicals are returned to be destroyed. Only eco-labelled cleaning materials, floor-cleaning products, paper and returnable cassettes are used.
In Stockholm, there is an internal environmental group comprising various business areas at the Bank.
The group works on a co-ordinated and joint strategy for handling, separating, recycling and destroying waste, paper and environmentally hazardous waste.
City of Göteborg International Environment Prize The Western Sweden Regional Bank, together with other major companies in western Sweden and the City of Göteborg, award the City of Göteborg International Environment Prize (GIMP). The prize for 2001 was awarded to KRAV, a Swedish control organisation that certifies products from organic farming, and to the International Forestry Stewardship Council, which pro- motes responsible use of the world’s forests with respect to environmental, social and ecological issues. By par- ticipating in GIMP, Handelsbanken supports environ- mental work and makes clear its social responsibility.
Environmental issues associated with granting loans Banking operations have a limited impact on the environ- ment. However, the Bank can influence the environment in a broader perspective in the application of its loan policy. Even though such traditional business economic factors as earnings capacity, equity ratios, business plans and goal achievement are core elements in a bank’s credit analysis, environmental issues play an important role. In concrete terms, this means that environmental issues will be taken into consideration in the yearly eval- uation of credit commitments and for each customer, an assessment is made of the economic consequences of potential environmental hazards. This is, of course, especially important when taking into account the repayment capacity of a customer engaged in environ- mentally hazardous activities or who sells products that involve environmental or health risks. The assessment might concern the required governmental authorisations, adherence to the prescribed limits for emissions, and that the products in question remain competitive after environmental and health risks are taken into account.
Of course, the customer is responsible for how ope- rations are conducted, but repayment capacity and thus the Bank’s credit risk is affected by the customer’s desire or ability to manage these risks.
S O C I A L R E S P O N S I B I L I T Y
The success of Handelsbanken in the market derives from the trust it enjoys from the public and authorities.
The Bank’s work methods are based on a fundamental human outlook characterised by trust and respect. All employees are clearly responsible for their actions pro- fessionally as well as in social and ethical issues. There- fore, it is important that business decisions at the Bank can be also justified from a social and ethical perspective.
Working conditions and union rights
Handelsbanken complies with the laws and agreements on working hours in each country. In the Nordic countries, where 95% of the Bank’s employees work, Handelsbanken adheres to the collective bargaining agreements which clearly regulate working hours, over- time, rest periods, breaks and vacations. The Handels- banken Group has established a fixed set of employee rights throughout the Group, such as a minimum wage.
Child labour is not accepted at Handelsbanken.
All employees in the Handelsbanken Group have the right to organise and join a union. Employees are repre- sented in the central Board of Directors through the Oktogonen profit-sharing foundation. Employee repre- sentatives are also found on the local boards of directors of the regional banks.
At Handelsbanken, all individuals with the same competence have the same right to employment, promo- tion, salary and professional development, regardless of gender, age, ethnic background or sexual orientation.
Equality
Handelsbanken’s Equal Opportunity Policy states that equal conditions shall apply for men and women for personal development within the Handelsbanken Group. An important element of equal opportunity work takes place at the recruiting stage, where the same demands exist for competence, skills and education regardless of gender. At Handelsbanken, work on equality is carried out with the union organisations.
The Handelsbanken Group’s long-term goals are:
• that the proportion of women managers corresponds to the proportion of women in the total staff force;
• the same demands for education apply to women as for men in the recruitment of new staff members;
• to employ an equal share of men and women;
• that men and women receive the same salary for similar work, taking into account experience and competence.
Each year, every regional bank, central unit, and sub- sidiary establishes a local equal opportunity plan that describes the short-term and long-term goals and how these are to be achieved.
Sexual harassment is unacceptable at Handelsbanken.
All employees have access to Handelsbanken’s guidelines for preventing sexual harassment.
Work environment, health and security
Handelsbanken has supplemented the Swedish Work Environment Act and its provisions and recommenda- tions with a work environment agreement made between the Bank and the local union committees. This states that the Bank will provide the necessary resources for investigating and removing work environment problems.
The Bank also ensures that the work environment does not expose employees to unhealthy conditions or accidents.
Responsibility for the work environment has been delegated to managers/supervisors at the workplace level. Handelsbanken’s health services and recreational club provide specialist courses in the work environment area. Handelsbanken’s goal is that employees can influ- ence their work assignments so that they enjoy their work and gain a sense of well-being.
Handelsbanken is a drug-free and alcohol-free work- place. A position at Handelsbanken cannot be combined with drug abuse. It is the manager’s responsibility to ensure that action is taken concerning alcohol and drug abuse problems which have been identified. Guidance and treatment in some form are always offered to an employee with alcohol or drug abuse problems.
E T H I C A L G U I D E L I N E S
Handelsbanken’s ethical guidelines establish that all operations at the Bank are to be characterised by high ethical standards. Bank employees must conduct them- selves in a manner that upholds confidence in the Bank.
The ethical guidelines are laid down by the Central Board.
A basic, self-evident rule is that the Bank and its employees must comply with the laws and regulations that govern its operations in various ways. General recommendations and statements from Finansinspektionen (Swedish Financial Supervisory Authority) and other authorities must be observed and incorporated into routines and instructions as necessary.
Economic crime
The Bank must not participate in transactions involving funds which may be suspected of originating from crim- inal activities, nor must it participate in transactions, the implication of which its employees do not understand.
It is the duty of managers to keep employees regularly informed of the content of the principal laws that deal with combating economic crime. The legal requirements for the prevention of money laundering must be given special emphasis. For example, the Bank must not participate in securities transactions which can be perceived as assisting tax evasion.
Customer relations
Financial advice must always be based on the customer’s needs, financial position and risk propensity. It is important that the employee makes certain that the customer understands the implications of the decisions that he/she takes. The advice given aims to provide the customer with the most suitable product from the Bank’s range, irrespective of whether it is best for the Bank in the short term.
It is especially important in relations with private customers that the Bank does not take advantage of its greater expertise and financial position. Sound business practices, acting in a consistent manner and fair treat- ment of customers are key concepts at the Bank.
Customers must be treated with respect. There must be no discrimination of customers on such grounds as gender, age or ethnic background.
In some cases, for example securities trading, where the Bank is acting on behalf of both customers and itself, a conflict of interests may arise. Operations must be directed in such a way as to avoid such conflicts. If a conflict of interests nonetheless should arise, it must never be used to the customer’s disadvantage.
Conduct of employees
It is important that the Bank’s employees are not suspected of taking improper advantage of knowledge about the financial markets which they obtain in the course of their work. All employees must be familiar
