Handelsbanken

HandelsbankenA unique bank with a unique growth model

Pär Boman

UBS Annual Nordic Financial Service Conference

August 30, 2007

Handelsbanken2

Handelsbanken Group

What is unique in Handelsbanken?

The international growth model

More satisfied customers

Low costs

Low credit losses

Handelsbanken3

Jan-Jun 2007

RoE, actual tax

20.0 %

after standard tax 18.6 %

C/I ratio, before loan losses 44.1 %

Earnings per share, SEK 10:47

Moving 12-month 19:55

Capital base in relation to capital requirement* 126 %

Capital ratio* 10.0 %

Tier I ratio* 7.0 %

* According to transitional rules 2007

Handelsbanken Group

Key ratios, Jan-Jun 2007

Handelsbanken4

RoE

SEK m Q2 Q1 +/- Q2 Q1

Branch offices in Sweden 2 572 2 487 85 3% 22.5 20.6

Branch offices outside Sweden 837 648 189 29% 16.5 13.3

Capital Markets 362 279 83 30% 17.4 15.0

Asset Management 219 208 11 5% 64.7 55.1

Pension & Insurance 270 186 84 45% 21.9 7.9

Other 360 51 309 -

Operating profit 4 620 3 859 761 20%

Repurchased bonds -37 -37 0

Deferred capital contribution and hedges in Pension & Insurance

-25 83 -108

Gains on assets classified as AFS -487 0 -487

Profit sharing foundation 126 0 126

4 197 3 905 292 7%

Handelsbanken Group

Operating profit by business area, Q2 2007 vs Q1 2007

Handelsbanken5

Handelsbanken Group

Cost-effectiveness, European universal banksComparison of listed European universal banks with lending > EUR 100bn and major Nordic banks.Costs including loan losses Jan-Dec 2006.

1

2

3

4

5

690 80 70 60 50 40

C/I-ratio, %

HypoVereinsbank

Danske Bank

UBS

Société Générale

SEB

BNP Paribas

Swedbank

Deutsche Bank

DnB Nor

CommerzbankNordea

Intesa SanPaoloBBVA

ABN Amro

CS Group

Lloyds TSB

HBOSHSBC

Unicredito

Barclays

Standard Chartered

Royal Bank of Scotland

Banco Santander

Allied Irish BanksBank of Ireland

Capitalia

Bank Austria

KBC

MPS Erste

Credit Agricole SA

Q1-07 Handels-banken

Costs/Total loans* %

Source: Deutsche Bank: European Banks – Running the Numbers, January 2007-edition.* Refers to loans to the public or deposits if deposits > lending.

Handelsbanken6

1105

297

-493

13325

-83

-800

-600

-400

-200

0

200

400

600

800

1 000

1 200

1 400

Q1 Q2 Q3 Q4 Q1 Q2

DCC & HedgeSEKm

Handelsbanken Group

SPP effect on net gains/losses on financial items at fair value

Other contains hedge accounting, instruments at fair value and financial liabilities.

2006 200620062006 2007 2007

Handelsbanken7

SEK m Q2-06 Q3-06 Q4-06 Q1-07 Q2-07

Value-at-Risk 1 774 955 259 218 110

Impact of interest rate shock -100bp parallel shift

-1 886 -1 373 -30 286 144

Impact of share price -20% -2 387 -1 544 -195 -313 -97

Impact of share price +20%* 1 394 288 -88 75 -19

Handelsbanken Group

Reduced financial risks in SPP

* Excl yield split.

Handelsbanken8

-1 100

-900

-700

-500

-300

-100

100

2002 2003 2004 2005 2006 2007 Q2

SEKm

Handelsbanken Group

Improved administration result (incl. SPP Fondförsäkring)

Handelsbanken9

0

500

1 000

1 500

2 000

2 500

3 000

3 500

Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07

Premiums New contractsSEK m

* Excluding a major portfolio transfer of SEK 7.7bn.

*

Handelsbanken Group

Growth in premiums and new contracts, SPP

Handelsbanken10

No macro bets

Not focused on distribution of products

Managing customer expectations

No mass market approach – Cherry picking

Word of mouth – no campaigns

Successive increase of product assortment

Cost efficient

Applicable in all markets

Long experience

Handelsbanken Group

Handelsbanken’s unique growth model

Handelsbanken11

Handelsbanken Group

Branch operations outside Sweden

0

300

600

900

1200

2003 2004 2005 2006 2007

0

10

20

30

40

0

200

400

600

800

2003 2004 2005 2006 2007

0

10

20

30

40

0

500

1 000

1 500

2 000

2 500

2003 2004 2005 2006 2007

0

10

20

30

40

50

0

300

600

900

1200

1500

2003 2004 2005 2006 2007

0

10

20

30

40

50

Total income SEK m (left scale) Number of branches (right scale)2007* = H1 2007 x 2

CAGR 23%CAGR 32%

CAGR 11%CAGR 4%

CAGR 12%CAGR 11%

CAGR 19%CAGR 9%

* *

**

CAGR = Compound Annual Growth Rate.

Handelsbanken12

GB DK FIN N Other Total

Number of branches 30 38 43 42 17 170

Of which opened during the year 4 1 8 0 1 14

Branch manager appointed 11 - - 3 6 20

No. of branches which have achieved break-even

14 35 38 35 7 129

Earnings growth, H1/H1 52% 120% 19% 6% 91% 41%

Lending growth, H1/H1 56% 14% 16% 26% 40% 23%

Deposits growth, H1/H1 8% 5% 6% 19% 4% 8%

Handelsbanken Group

Expansion rate increases outside Sweden

Deposits and lending in GB, Denmark, Finland and Norway refer to volumes in local currency.

Handelsbanken13

SEK m

Jan-Jun

2007

Jan-Jun

2006

Change

06/07 %

Branch operations 1 485 1 052 41

Other operations 244 211 16

Total 1 729 1 263 37

Proportion of total operating profit 20% 14%

Handelsbanken Group

Operating profit from operations outside Sweden

Handelsbanken14

5055606570758085

2001 2002 2003 2004 2005 2006

50

55

60

65

70

75

80

2001 2002 2003 2004 2005 2006

Index Denmark

Handelsbanken Group

Customer satisfaction – private customers in the Nordic countries

Source: SKI, Dansk KundeIndex, EPSI Rating and EPSI Norway. In Sweden, the sector average is SEB, Nordea and Swedbank.

Index Finland

50

55

60

65

70

75

2002/2003 2004 2005 2006

Index Norway

50

55

60

65

70

75

80

2001 2002 2003 2004 2005 2006

Index Sweden

Handelsbanken Sector average, weighted

Handelsbanken15

Sweden

Corporate market – Best of the large banks

Private market – Best of the large banks

Finland

Corporate market – Best

Private market – Best

Handelsbanken Group

The most satisfied customers in the Nordic countries

Source: Svenskt Qalitetsindex, EPSI Norway, Dansk KundeIndex and EPSI Rating in Finland.

Denmark

Corporate market – 2nd place

Private market – 3rd place

Norway

Corporate market – Best

Private market – 2nd place

Handelsbanken16

0

100

200

300

400

2005 2006 2007

0,000

200,000

400,000

600,000

800,000

Monthly savings, SEKm (left scale) No of standing orders, 1 000s (right scale)

Handelsbanken Group

Increase in regular monthly savings in mutual funds

June figures: 2005 - 2007

Monthly savings

+17% p.a.

Number of standing orders

+10% p.a.

Handelsbanken17

* Mainly refers to private individuals' savings

Handelsbanken Group

Savings with Handelsbanken – volumes

SEK bn, end of period

2007 Q2

2007 Q1 +/- +/-, SEK bn

Household deposits [average volume] 117 109 7% 8

Traditional insurance 123 114 8% 9

Unit-linked insurance 67 62 8% 5

Mutual funds, incl PPM 165 152 9% 13

Equity-linked bonds etc 26 22 18% 4

Sub-total 498 459 8% 39

Directly owned shares etc, private customers 204 196 4% 8

Total savings in Sweden* 702 655 7% 47

Other asset management 112 118 -5% -6

TOTAL 814 773 5% 41

Handelsbanken18

Handelsbanken Group

Loan losses as a percentage of loans

-0,10

-0,05

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007-06-30

SHB Other Swedish banks%

Statutory capital requirement will decrease by 41% when Basel II is fully implemented.

Handelsbanken19

Handelsbanken Group

Credit risks

Handelsbanken has a unique credit granting process implying a commitment in

terms of both competence and processing times

Customers are chosen selectively

Analysis done close to customers

Cannot borrow money in Handelsbanken if not approved by the branch

High quality borrowers

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

Handelsbanken20

Handelsbanken Group

Credit risks

Handelsbanken focuses on default risk

Difficult to evaluate credit risk on the top of a business cycle

The most credit worthy borrowers are not in the market

The CDS market

Spread risk vs default risk

00,20,40,60,8

11,2

1st Qtr

Volume

Risk

t1 t2

Handelsbanken21

Handelsbanken Group

What is unique in Handelsbanken?

The international growth model

More satisfied customers

Low costs

Low credit losses