annual report 2006 handelsbanken has 615 branches worldwide
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annual report 2006 handelsbanken has 615 branches worldwide
ALFTA ALINGSÅS ALVESTA ALVIKS TORG ANDERSTORP ARBOGA ARBRÅ ARLANDA SKY CITY ARLÖV ARVIDSJAUR ARVIKAAVESTA BACKE BANKERYD BERGBY BERGSJÖ BJURHOLM BJURSÅS BJÄSTA BJÖRBO BJÖRNA BLACKEBERG BODEN BO LLE BYGD BOLLNÄS BORENSBERG BORGHOLM BORLÄNGE BORÅS: HULTA NORRBY STORA TORGET VIARED BREDBYN BROBY BROMMAPLAN BRÄCKE BUREÅ BURTRÄSK BYSKE BÅLSTA BÅSTA DALARÖ DELSBO DJURSHOLM DOMSJÖ DOROTEA ED SBYN EKERÖ EKSJÖ EMMABODA ENKÖPING ESKILSTUNA: FRISTADSTORGET ÖSTERMALM ESLÖV FAGERSTA FALKENBERG FALKÖPING FALUN FARSTA CENTRUM FELLINGSBRO FILIPSTAD FINNERÖDJA FINSPÅNG FJUGESTA FLEN FRISTAD FRÄNSTA FRÖSUNDA FRÖVI FURUDAL FÅRÖSUND FÄRGELANDA FÄRJESTADEN FÖLLINGE GAGNEF GAMMELSTAD GISLAVED GLOBEN GNARP GNESTA GRANGÄRDE GRÄNGESBERG GÄLLIVARE GÄLLSTAD GÄLLÖ GÄVLE CITY GÖTEBORG: ALMEDAL AVENYN BACKA RINGÖN CITY ERIKSBERG FRÖLUNDA FÖRSTA LÅNGGATAN GÅRDA HISINGS KÄRRA HJÄLLBO HÖGSBO KORTEDALA LANDALA LILLA BOMMEN MAJORNA MARIEHOLM ODINSGATAN SISJÖN TORSLANDA VOLVO PVB ÖRGRYTE ÖVRE HUSARGATAN HAGFORS HALLSBERG HALLSTAVIK HALLUNDA TORG HALMSTAD HAMMARBY HAMMARSTRAND HAMMERDAL HANINGE CENTRUM HAPARANDA HEBY HEDE HEDEMORA HEDESUNDA HELSINGBORG: NORR STORTORGET SÖDERPORT HEMSE HERRLJUNGA HJO HOLMSUND HOTING HUDDINGE CENTRUM HUDIKSVALL HULTSFRED HUSKVARNA HUSUM HÄGERSTEN HÄRNÖSAND HÄSSELBY GÅRD HÄSSLEHOLM HÖGANÄS HÖGDALEN HÖGSBY HÖLLVIKEN HÖÖR INSJÖN JAKOBSBERG JOKKMOKK JUNSELE JÄRNA JÄRPEN JÄRVSÖ JÖNKÖPING KALIX KALMAR: BERGA K VARNHOLMEN KARLSHAMN KARLSKOGA KARLSKRONA KARLSTAD: VÅXNÄS KATRINEHOLM KILAFORS KIRUNA KISTA KIVIK KLINTEHAMN KLIPPANKNISLINGE KNIVSTA KOLBÄCK KOPPARBERG KRAMFORS KRISTIANSTAD KRISTINEHAMNKROKOM KUMLA KUNGSBACKA KUNGSÄNGEN KUNGSÖR KUNGÄLV KVISSLEBY KÄRRTORP KÄVLINGE KÖPING LAHOLM LAMMHULT LANDSBRO LANDSKRONA LANDVETTER LEKSAND LERUM LIDEN LIDINGÖ: CENTRUM LARSBERG NÄSET LIDKÖPING LILLA EDET LIMA LINDESBERG LINKÖPING CITY TORNBY LIT LJUNGBY LJUNGBYHED LJUSDAL LJUSNE LOMMA LUDVIKA LUGNVIK LULEÅ: STORGATAN ÖRNÄSETLUND: CITY IDEON LYCKSELE LÖVÅNGER MALMÖ AMIRALSGATAN CITY DALAPLAN FOSIE FRIDHEM KÖPENHAMNSVÄGEN LIMHAMN LUNDAVÄGEN TRIANGELN VÄRNHEM MALUNG MALÅ MARIESTAD MARIEVIK MARKARYD MATFORS MELLERUD MJÖLBY MOCKFJÄRD MORA MOTALA MÄRSTA MÖLNDAL MÖLNLYCKE MÖNSTERÅS MÖRBY CENTRUM MÖRBYLÅNGA MÖRLUNDA MÖRSIL NACKA FORUM NACKA NORBERG NORDINGRÅ NORDMALING NORRKÖPING: DROTTNINGGATAN ENEBY CENTRUM HAGEBY CENTRUM NORRTÄLJE NORSJÖ NYBRO NYKÖPING NYNÄSHAMN NÄSBY PARK NÄSSJÖ NÄSÅKER NÖDINGE OCKELBO OFFERDAL OLOFSTRÖM ORSA OSBY OSKARSHAMN PAJALA PARTILLE PITEÅ PÅLSBODA RAMSELE RIMBO ROBERTSFORS RONNEBY ROTEBRO RÅNEÅ RÄTTVIK RÖRVIK SALA SALEM SALTSJÖ-BOO SANDVIKEN SIGTUNA SIMRISHAMN SJÖBO SKANÖR SKARA SKELLEFTEÅ SKINNSKATTEBERG SKULTUNA SKURUP SKUTSKÄR SKÄRHOLMEN SKÄRPLINGE SKÖNDAL SKÖNSBERG SKÖVDE SLITE SOLLEBRUNN SOLLEFTEÅ SOLLENTUNA CENTRUM SOLNA SORSELE SPÅNGA STAFFANSTORP STENUNGSUND STOCKHOLM: BIRGER JARLSGATAN FLEMINGGATAN FRIDHEMSPLAN FRIHAMNEN GAMLA STAN GUSTAV ADOLFS TORG GÖTGATSBACKEN HORNSBERG HORNSGATAN HUMLEGÅRDEN HÖGALID KARLAPLAN KARLAVÄGEN KUNGSHOLMSTORG KUNGSTRÄDGÅRDEN MARIEBERG NORRMALMSTORG NORRTULL ODENGATAN ODENPLAN RENSTIERNAS GATA S:T ERIKSPLAN SERGEL SKANSTULL STRANDVÄGEN STUREPLAN SVEAVÄGEN TESSINPARKEN UPPLANDSGATAN VANADISPLAN VÄRTAVÄGEN VÄSTERMALM ÖSTERMALMSTORG ÖSTRA STATION STORA TUNA STORUMAN STORVIK STRÄNGNÄS STRÖMSUND STUVSTA SUNDBYBERG SUNDSVALL SUNNE SURTE SVEDALA SVEG SVENLJUNGA SVENSTAVIK SÄFFLE SÄTER SÄVSJÖ SÖDERHAMN SÖDERKÖPING SÖDERTÄLJE SÖLVESBORG SÖRBERGE SÖSDALA TIBRO TIDAHOLM TIERP TIMRÅ TINGSRYD TOMELILLA TORSBY TORSÅKER TORSÅS TRANEMO TRANÅS TREHÖRNINGSJÖ TRELLEBORG TROLLHÄTTAN TROSA TRÅNGSUND TULLINGE TYRESÖ TYRINGE TÄBY CENTRUM UDDEVALLA ULLÅNGER ULRICEHAMN ULVSUNDA UMEÅ: CITY TEG VÄSTRA UPPLANDS VÄSBY UPPSALA: CITY ERIKSBERG INDUSTRIOMRÅDE LUTHAGEN VADSTENA VAGGERYD VALLENTUNA VANSBRO VARA VARBERG VASAGATAN VAXHOLM VEBERÖD VELLINGE VETLANDA VILHELMINA VIMMERBY VINDELN VIRSERUM VISBY: ADELSGATAN ÖSTER VISLANDA VITTSJÖ VOLLSJÖ VRETEN VÅRGÅRDA VÄLLINGBY VÄNERSBORG VÄNNÄS VÄRMDÖ VÄRNAMO VÄSTANFORS VÄSTERHANINGE VÄSTERVIK VÄSTERÅS: CITY EMAUSGATAN KÖPINGSVÄGEN STORA GATAN VÄXJÖ YSTAD ÅHUS ÅKERSBERGA ÅLEM ÅMÅL ÅNGE ÅNÄSET ÅRE ÅRJÄNG ÅRSTA ÅSEDA ÅSELE ÅTVIDABERG ÄLMHULT ÄLVSBYN ÄLVSJÖ ÄLVÄNGEN ÄNGELHOLM ÖREBRO: EKERSGATAN STORTORGET VÅGHUSTORGET ÖRNSKÖLDSVIK ÖSMO ÖSTERBYBRUK ÖSTERSUND ÖSTERVÅLA ÖSTHAMMAR ÖVERKALIX ÖVERTORNEÅ ALFTA ALINGSÅS ALVESTA ALVIKS TORG ANDERSTORP ARBOGA ARBRÅ ARLANDA SKY CITY ARLÖV ARVIDSJAUR ARVIKA AVESTA BACKE BANKERYD BERGBY BERGSJÖ BJURHOLM BJURSÅS BJÄSTA BJÖRBO BJÖRNA BLACKEBERG BODEN BOLLE BYGD BOLLNÄS BORENSBERG BORGHOLM BORLÄNGE BORÅS: HULTA NORRBY STORA TORGET VIARED BREDBYN BROBY BROMMA PLAN BRÄCKE BUREÅ BURTRÄSK BYSKE BÅLSTA BÅSTA DALARÖ DELSBO DJURSHOLM DOMSJÖ DOROTEA EDSBYN EKERÖ EKSJÖ EMMABODA ENKÖPING ESKILSTUNA: FRISTADSTORGET ÖSTERMALM ESLÖV FAGERSTA FALKENBERG FALKÖPING FALUN FARSTA CENTRUM FELLINGSBRO FILIPSTAD FINNERÖDJA FINSPÅNG FJUGESTA FLEN FRISTAD FRÄNSTA FRÖSUNDA FRÖVI FURUDAL FÅRÖSUND FÄRGELANDA FÄRJESTADEN FÖLLINGE GAGNEF GAMMELSTAD GISLAVED GLOBEN GNARP GNESTA GRANGÄRDE GRÄNGESBERG GÄLLIVARE GÄLLSTAD GÄLLÖ GÄVLE CITY GÖTEBORG: ALMEDAL AVENYN BACKA RINGÖN CITY ERIKSBERG FRÖLUNDA FÖRSTA LÅNGGATAN GÅRDA HISINGS KÄRRA HJÄLLBO HÖGSBO KORTEDALA LANDALA LILLA BOMMEN MAJORNA MARIEHOLM ODINSGATAN SISJÖN TORSLANDA VOLVO PVB ÖRGRYTE ÖVRE HUSARGATAN HAGFORS HALLSBERG HALLSTAVIK HALLUNDA TORG HALMSTAD HAMMARBY HAMMARSTRAND HAMMERDAL HANINGE CENTRUM HAPARANDA HEBY HEDE HEDEMORA HEDESUNDA HELSINGBORG: NORR STORTORGET SÖDERPORT HEMSE HERRLJUNGA HJO HOLMSUND HOTING HUDDINGE CENTRUM HUDIKSVALL HULTSFRED HUSKVARNA HUSUM HÄGERSTEN HÄRNÖSAND HÄSSELBY GÅRD HÄSSLEHOLM HÖGANÄS HÖGDALEN HÖGSBY HÖLLVIKEN HÖÖR INSJÖN JAKOBSBERG JOKKMOKK JUNSELE JÄRNA JÄRPEN JÄRVSÖ JÖNKÖPING KALIX KALMAR: BERGA KVARNHOLMEN KARLSHAMN KARLSKOGA KARLSKRONA KARLSTAD: STORA TORGET VÅXNÄS KATRINEHOLM KILAFORS KIRUNA KISTA KIVIK KLINTEHAMN KLIPPAN KNISLINGE KNIVSTA KOLBÄCK KOPPARBERG KRAMFORS KRISTIANSTAD KRISTINEHAMN KROKOM KUMLA KUNGSBACKA KUNGSÄNGEN KUNGSÖR KUNGÄLV KVISSLEBY KÄRRTORP KÄVLINGE KÖPING LAHOLM LAMMHULT LANDSBRO LANDSKRONA LANDVETTER LEKSAND LERUM LIDEN LIDINGÖ: CENTRUM LARSBERG NÄSET LIDKÖPING LILLA EDET LIMA LINDESBERG LINKÖPING: CITY TORNBY LIT LJUNGBY LJUNGBYHED LJUSDAL LJUSNE LOMMA LUDVIKA LUGNVIK LULEÅ: STORGATAN ÖRNÄSETLUND: CITY IDEON LYCKSELE LÖVÅNGER MALMÖ: AMIRALSGATAN CITY DALAPLAN FOSIE FRIDHEM KÖPENHAMNSVÄGEN LIMHAMN LUNDAVÄGEN TRIANGELN VÄRNHEM MALUNG MALÅ MARIESTAD MARIEVIK MARKARYD MATFORS MELLERUD MJÖLBY MOCKFJÄRD MORA MOTALA MÄRSTA MÖLNDAL MÖLNLYCKE MÖNSTERÅS MÖRBY CENTRUM MÖRBYLÅNGA MÖRLUNDA MÖRSIL NACKA: FORUM NACKA ALFTA ALINGSÅS ALVESTA ALVIKS TORG ANDERSTORP ARBOGA ARBRÅ ARLANDA SKY CITY ARLÖV ARVIDSJAUR ARVIKAAVESTA BACKE BANKERYD BERGBY BERGSJÖ BJURHOLM BJURSÅS BJÄSTA BJÖRBO BJÖRNA BLACKEBERG BODEN BOLLE BYGD BOLLNÄS BORENSBERG BORGHOLM BORLÄNGE BORÅS: HULTA NORRBY STORA TORGET VIARED BREDBYN BROBY BROMMA PLAN BRÄCKE BUREÅ BURTRÄSK BYSKE BÅLSTA BÅSTA DALARÖ DELSBO DJURSHOLM DOMSJÖ DOROTEA ED SBYN EKERÖ EKSJÖ EMMABODA ENKÖPING ESKILSTUNA: FRISTADSTORGET ÖSTERMALM ESLÖV FAGERSTA FALKENBERG FALKÖPING FALUN FARSTA CENTRUM FELLINGSBRO FILIPSTAD FINNERÖDJA FINSPÅNG FJUGESTA FLEN FRISTAD FRÄNSTA FRÖSUNDA FRÖVI FURUDAL FÅRÖSUND FÄRGELANDA FÄRJESTADEN FÖLLINGE GAGNEF GAMMELSTAD GISLAVED GLOBEN GNARP GNESTA GRANGÄRDE GRÄNGESBERG GÄLLIVARE GÄLLSTAD GÄLLÖ GÄVLE CITY GÖTEBORG: ALMEDAL AVENYN BACKA RINGÖN CITY ERIKSBERG FRÖLUNDA FÖRSTA LÅNGGATAN GÅRDA HISINGS KÄRRA HJÄLLBO HÖGSBO KORTEDALA LANDALA LILLA BOMMEN MAJORNA MARIEHOLM ODINSGATAN SISJÖN TORSLANDA VOLVO PVB ÖRGRYTE ÖVRE HUSARGATAN HAGFORS HALLSBERG HALLSTAVIK HALLUNDA TORG HALMSTAD HAMMARBY HAMMARSTRAND HAMMERDAL HANINGE CENTRUM HAPARANDA HEBY HEDE HEDEMORA HEDESUNDA HELSINGBORG: NORR STORTORGET SÖDERPORT HEMSE HERRLJUNGA HJO HOLMSUND HOTING HUDDINGE CENTRUM HUDIKSVALL HULTSFRED HUSKVARNA HUSUM HÄGERSTEN HÄRNÖSAND HÄSSELBY GÅRD HÄSSLEHOLM HÖGANÄS HÖGDALEN HÖGSBY HÖLLVIKEN HÖÖR INSJÖN JAKOBSBERG JOKKMOKK JUNSELE JÄRNA JÄRPEN JÄRVSÖ JÖNKÖPING KALIX KALMAR: BERGA KVARNHOLMEN KARLSHAMN KARLSKOGA KARLSKRONA KARLSTAD: VÅXNÄS KATRINEHOLM KILAFORS KIRUNA KISTA KIVIK KLINTEHAMN KLIPPAN KNISLINGE KNIVSTA KOLBÄCK KOPPARBERG KRAMFORS KRISTIANSTAD KRISTINEHAMN KROKOM KUMLA KUNGSBACKA KUNGSÄNGEN KUNGSÖR KUNGÄLV KVISSLEBY KÄRRTORP KÄVLINGE KÖPING LAHOLM LAMMHULT LANDSBRO LANDSKRONA LANDVETTER LEKSAND LERUM LIDEN LIDINGÖ: CENTRUM LARSBERG NÄSET LIDKÖPING LILLA EDET LIMA LINDESBERG LINKÖPING: CITY TORNBY LIT LJUNGBY LJUNGBYHED LJUSDAL LJUSNE LOMMA LUDVIKA LUGNVIK LULEÅ: STORGATAN ÖRNÄSETLUND: CITY IDEON LYCKSELE LÖVÅNGER MALMÖ AMIRALSGATAN CITY DALAPLAN FOSIE FRIDHEM KÖPENHAMNSVÄGEN LIMHAMN LUNDAVÄGEN TRIANGELN VÄRNHEM MALUNG MALÅ MARIESTAD MARIEVIK MARKARYD MATFORS MELLERUD MJÖLBY MOCKFJÄRD MORA MOTALA MÄRSTA MÖLNDAL MÖLNLYCKE MÖNSTERÅS MÖRBY CENTRUM MÖRBYLÅNGA MÖRLUNDA MÖRSIL NACKA: FORUM NACKA NORBERG NORDINGRÅ NORDMALING NORRKÖPING: DROTTNINGGATAN ENEBY CENTRUM HAGEBY CENTRUM NORRTÄLJE NORSJÖ NYBRO NYKÖPING NYNÄSHAMN NÄSBY PARK NÄSSJÖ NÄSÅKER NÖDINGE OCKELBO OFFERDAL OLOFSTRÖM ORSA OSBY OSKARSHAMN PAJALA PARTILLE PITEÅ PÅLSBODA RAMSELE RIMBO ROBERTSFORS RONNEBY ROTEBRO RÅNEÅ RÄTTVIK RÖRVIK SALA SALEM SALTSJÖ-BOO SANDVIKEN SIGTUNA SIMRISHAMN SJÖBO SKANÖR SKARA SKELLEFTEÅ SKINNSKATTEBERG SKULTUNA SKURUP SKUTSKÄR SKÄRHOLMEN SKÄRPLINGE SKÖNDAL SKÖNSBERG SKÖVDE SLITE SOLLEBRUNN SOLLEFTEÅ SOLLENTUNA CENTRUM SOLNA SORSELE SPÅNGA STAFFANSTORP STENUNGSUND STOCKHOLM: BIRGER JARLSGATAN FLEMINGGATAN FRIDHEMSPLAN FRIHAMNEN GAMLA STAN GUSTAV ADOLFS TORG GÖTGATSBACKEN HORNSBERG HORNSGATAN HUMLEGÅRDEN HÖGALID KARLAPLAN KARLAVÄGEN KUNGSHOLMSTORG KUNGSTRÄDGÅRDEN MARIEBERG NORRMALMSTORG NORRTULL ODENGATAN ODENPLAN RENSTIERNAS GATA S:T ERIKSPLAN SERGEL SKANSTULL STRANDVÄGEN STUREPLAN SVEAVÄGEN TESSINPARKEN UPPLANDSGATAN VANADISPLAN VÄRTAVÄGEN VÄSTERMALM ÖSTERMALMSTORG ÖSTRA STATION STORA TUNA STORUMAN STORVIK STRÄNGNÄS STRÖMSUND STUVSTA SUNDBYBERG SUNDSVALL SUNNE SURTE SVEDALA SVEG SVENLJUNGA SVENSTAVIK SÄFFLE SÄTER SÄVSJÖ SÖDERHAMN SÖDERKÖPING SÖDERTÄLJE SÖLVESBORG SÖRBERGE SÖSDALA TIBRO TIDAHOLM TIERP TIMRÅ TINGSRYD TOMELILLA TORSBY TORSÅKER TORSÅS TRANEMO TRANÅS TREHÖRNINGSJÖ TRELLEBORG TROLLHÄTTAN TROSA TRÅNGSUND TULLINGE TYRESÖ TYRINGE TÄBY CENTRUM UDDEVALLA ULLÅNGER ULRICEHAMN ULVSUNDA UMEÅ: CITY TEG VÄSTRA UPPLANDS VÄSBY UPPSALA: CITY ERIKSBERG INDUSTRIOMRÅDE LUTHAGEN VADSTENA VAGGERYD VALLENTUNA VANSBRO VARA VARBERG VASAGATAN VAXHOLM VEBERÖD VELLINGE VETLANDA VILHELMINA VIMMERBY VINDELN VIRSERUM VISBY: ADELSGATAN ÖSTER VISLANDA VITTSJÖ VOLLSJÖ VRETEN VÅRGÅRDA VÄLLINGBY VÄNERSBORG VÄNNÄS VÄRMDÖ VÄRNAMO VÄSTANFORS VÄSTERHANINGE VÄSTERVIK VÄSTERÅS: CITY EMAUSGATAN KÖPINGSVÄGEN STORA GATAN VÄXJÖ YSTAD ÅHUS ÅKERSBERGA ÅLEM ÅMÅL ÅNGE ÅNÄSET ÅRE ÅRJÄNG ÅRSTA ÅSEDA ÅSELE ÅTVIDABERG ÄLMHULT ÄLVSBYN ÄLVSJÖ ÄLVÄNGEN ÄNGELHOLM ÖREBRO: EKERSGATAN STORTORGET VÅGHUSTORGET ÖRNSKÖLDSVIK ÖSMO ÖSTERBYBRUK ÖSTERSUND ÖSTERVÅLA ÖSTHAMMAR ÖVERKALIX ÖVERTORNEÅ ALFTA ALINGSÅS ALVESTA ALVIKS TORG ANDERSTORP ARBOGA ARBRÅ ARLANDA SKY CITY ARLÖV ARVIDSJAUR ARVIKA AVESTA BACKE BANKERYD BERGBY BERGSJÖ BJURHOLM BJURSÅS BJÄSTA BJÖRBO BJÖRNA BLACKEBERG BODEN BO LLE BYGD BOLLNÄS BORENSBERG BORGHOLM BORLÄNGE BORÅS: HULTA NORRBY STORA TORGET VIARED BREDBYN BROBY BROMMA PLAN BRÄCKE BUREÅ BURTRÄSK BYSKE BÅLSTA BÅSTA DALARÖ DELSBO DJURSHOLM DOMSJÖ DOROTEA ED SBYN EKERÖ EKSJÖ EMMABODA ENKÖPING ESKILSTUNA: FRISTADSTORGET ÖSTERMALM ESLÖV FAGERSTA FALKENBERG FALKÖPING FALUN FARSTA CENTRUM FELLINGSBRO FILIPSTAD FINNERÖDJA FINSPÅNG FJUGESTA FLEN FRISTAD FRÄNSTA FRÖSUNDA FRÖVI FURUDAL FÅRÖSUND FÄRGELANDA FÄRJESTADEN FÖLLINGE GAGNEF GAMMELSTAD GISLAVED GLOBEN GNARP GNESTA GRANGÄRDE GRÄNGESBERG GÄLLIVARE GÄLLSTAD GÄLLÖ GÄVLE CITY GÖTEBORG: ALMEDAL AVENYN BACKA RINGÖN CITY ERIKSBERG FRÖLUNDA FÖRSTA LÅNGGATAN GÅRDA HISINGS KÄRRA HJÄLLBO HÖGSBO KORTEDALA LANDALA LILLA BOMMEN MAJORNA MARIEHOLM ODINSGATAN SISJÖN TORSLANDA VOLVO PVB ÖRGRYTE ÖVRE HUSARGATAN HAGFORS HALLSBERG HALLSTAVIK HALLUNDA TORG HALMSTAD HAMMARBY HAMMARSTRAND HAMMERDAL HANINGE CENTRUM HAPARANDA HEBY HEDE HEDEMORA HEDESUNDA HELSINGBORG: NORR STORTORGET SÖDERPORT HEMSE HERRLJUNGA HJO HOLMSUND HOTING HUDDINGE CENTRUM HUDIKSVALL HULTSFRED HUSKVARNA HUSUM HÄGERSTEN HÄRNÖSAND HÄSSELBY GÅRD HÄSSLEHOLM HÖGANÄS HÖGDALEN HÖGSBY HÖLLVIKEN HÖÖR INSJÖN JAKOBSBERG JOKKMOKK JUNSELE JÄRNA JÄRPEN JÄRVSÖ JÖNKÖPING KALIX KALMAR: BERGA KVARNHOLMEN KARLSHAMN KARLSKOGA KARLSKRONA KARLSTAD: VÅXNÄS KATRINEHOLM KILAFORS KIRUNA KISTA KIVIK KLINTEHAMN KLIPPAN KNISLINGE KNIVSTA KOLBÄCK KOPPARBERG KRAMFORS KRISTIANSTAD KRISTINEHAMN KROKOM KUMLA KUNGSBACKA KUNGSÄNGEN KUNGSÖR KUNGÄLV KVISSLEBY KÄRRTORP KÄVLINGE KÖPING LAHOLM LAMMHULT LANDSBRO LANDSKRONA LANDVETTER LEKSAND LERUM LIDEN LIDINGÖ: CENTRUM LARSBERG NÄSET LIDKÖPING LILLA EDET LIMA LINDESBERG LINKÖPING: CITY TORNBY LIT LJUNGBY LJUNGBYHED LJUSDAL LJUSNE LOMMA LUDVIKA LUGNVIK LULEÅ: STORGATAN ÖRNÄSETLUND: CITY IDEON LYCKSELE LÖVÅNGER MALMÖ: AMIRALSGATAN CITY DALAPLAN FOSIE FRIDHEM KÖPENHAMNSVÄGEN LIMHAMN LUNDAVÄGEN TRIANGELN VÄRNHEM MALUNG MALÅ MARIESTAD MARIEVIK MARKARYD MATFORS MELLERUD MJÖLBY MOCKFJÄRD MORA MOTALA MÄRSTA MÖLNDAL MÖLNLYCKE MÖNSTERÅS MÖRBY CENTRUM MÖRBYLÅNGA MÖRLUNDA MÖRSIL NACKA: FORUM NACKA ALFTA ALINGSÅS ALVESTA ALVIKS TORG ANDERSTORP ARBOGA ARBRÅ ARLANDA SKY CITY ARLÖV ARVIDSJAUR ARVIKAAVESTA BACKE BANKERYD BERGBY BERGSJÖ BJURHOLM BJURSÅS BJÄSTA BJÖRBO BJÖRNA BLACKEBERG BODEN BOLLE BYGD BOLLNÄS BORENSBERG BORGHOLM BORLÄNGE BORÅS: HULTA NORRBY STORA TORGET VIARED BREDBYN BROBY BROMMA PLAN BRÄCKE BUREÅ BURTRÄSK BYSKE BÅLSTA BÅSTA DALARÖ DELSBO DJURSHOLM DOMSJÖ DOROTEA ED SBYN EKERÖ EKSJÖ EMMABODA ENKÖPING ESKILSTUNA: FRISTADSTORGET ÖSTERMALM ESLÖV FAGERSTA FALKENBERG FALKÖPING FALUN FARSTACENTRUM FELLINGSBRO FILIPSTAD FINNERÖDJA FINSPÅNG FJUGESTA FLEN FRISTAD FRÄNSTA FRÖSUNDA FRÖVI FURUDAL FÅRÖSUND FÄRGELANDA FÄRJESTADEN FÖLLINGE GAGNEF GAMMELSTADGISLAVED GLOBEN GNARPGNESTA GRANGÄRDE GRÄNGESBERG GÄLLIVARE GÄLLSTAD GÄLLÖ GÄVLE CITY GÖTEBORG: ALMEDAL AVENYN BACKA RINGÖN CITY HANDELSBANKEN HAS 615 BRANCHES WORLDWIDE ANNUAL REPORT 2006 ERIKSBERG FRÖLUNDA FÖRSTA LÅNGGATAN GÅRDA HISINGS KÄRRA HJÄLLBO HÖGSBO KORTEDALA LANDALA LILLA BOMMEN MAJORNA MARIEHOLM ODINSGATAN SISJÖN TORSLANDA VOLVO PVB ÖRGRYTE ÖVRE HUSARGATAN HAGFORS HALLSBERG HALLSTAVIK HALLUNDA TORG HALMSTAD HAMMARBY HAMMARSTRAND HAMMERDAL HANINGE CENTRUM HAPARANDA HEBY HEDE HEDEMORA HEDESUNDA HELSINGBORG: NORR STORTORGET SÖDERPORT HEMSE HERRLJUNGA HJO HOLMSUND HOTING HUDDINGE CENTRUM HUDIKSVALL HULTSFRED HUSKVARNA HUSUM HÄGERSTEN HÄRNÖSAND HÄSSELBY GÅRD HÄSSLEHOLM HÖGANÄS HÖGDALEN HÖGSBY HÖLLVIKEN HÖÖR INSJÖN JAKOBSBERG JOKKMOKK JUNSELE JÄRNA JÄRPEN JÄRVSÖ JÖNKÖPING KALIX KALMAR: BERGA KVARNHOLMEN KARLSHAMN KARLSKOGA KARLSKRONA KARLSTAD: VÅXNÄS KATRINEHOLM KILAFORS KIRUNA KISTA KIVIK KLINTEHAMN KLIPPAN KNISLINGE KNIVSTA KOLBÄCK KOPPARBERG KRAMFORS KRISTIANSTAD KRISTINEHAMN KROKOM KUMLA KUNGSBACKA KUNGSÄNGEN KUNGSÖR KUNGÄLV KVISSLEBY KÄRRTORP KÄVLINGE KÖPING LAHOLM LAMMHULT LANDSBRO LANDSKRONA LANDVETTER LEKSAND LERUM LIDEN LIDINGÖ: CENTRUM LARSBERG NÄSET LIDKÖPING LILLA EDET LIMA LINDESBERG LINKÖPING: CITY TORNBY LIT LJUNGBY LJUNGBYHED LJUSDAL LJUSNE LOMMA LUDVIKA LUGNVIK LULEÅ: STORGATAN ÖRNÄSETLUND: CITY IDEON LYCKSELE LÖVÅNGER MALMÖ: AMIRALSGATAN CITY DALAPLAN FOSIE FRIDHEM KÖPENHAMNSVÄGEN LIMHAMN LUNDAVÄGEN TRIANGELN VÄRNHEM MALUNG MALÅ MARIESTAD MARIEVIK MARKARYD MATFORS MELLERUD MJÖLBY MOCKFJÄRD MORA MOTALA MÄRSTA MÖLND MÖLNLYCKE MÖNSTERÅS MÖRBY CENTRUM MÖRBYLÅNGA MÖRLUNDA MÖRSIL NACK A : FORUM NACK A NORBERG NORDINGRÅ NORDMALING NORRKÖPING: DROTTNINGGATAN Annual general meeting (Shareholders’ meeting) Grand Hôtel, Vinterträdgården, Royal entrance, Stallgatan 4, Stockholm TIME : Tuesday, 24 April 2007, 10 a.m. LOCATION : NOTICE OF ATTENDANCE Shareholders wishing to attend the AGM must: • be entered in the register of shareholders kept by VPC AB (Swedish Central Securities Depository and Clearing) by Wednesday, 18 April 2007 • give notice of their attendance at the latest by 3 p.m. on Wednesday, 18 April 2007, to Handelsbanken, Kungsträdgårdsgatan 2, SE-106 70 Stockholm, tel: +46 8 701 19 84, or online at www.handelsbanken.se/bolagsstamma To be entitled to take part in the AGM, any shareholders 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 18 April 2007, when this entry must have been effected. DIVIDEND The board of directors proposes that the record day for the dividend be Friday, 27 April 2007. If the AGM votes in accordance with this proposal, the VPC expects to send the dividend to shareholders on Thursday, 3 May 2007. Contents Handelsbanken in brief 2 Highlights of 2006 3 The group chief executive’s comments 4 Goals, methods and outcome 8 Economic outlook 10 The market 11 Our customers 12 Our employees 13 Business concept, working methods and organisation 15 Svenska Handelsbanken AB (publ) Corporate identity no. 502007-7862 www.handelsbanken.com Income statement Administration report 40 Balance sheet 41 Review of operations 16 Statement of changes in equity 42 Key figures and quarterly performance 18 Cash flow statement 43 The Handelsbanken share and shareholders 19 Notes Segment information – review of business areas 21 Branch office operations 22 Handelsbanken Markets 26 Handelsbanken Asset Management 29 Handelsbanken Pensions & Insurance 31 Financial reports Risks and risk control 44 1 Net interest income and net gains/losses on financial items at fair value 54 2 Net fee and commission income 55 3 Risk result – insurance 55 4 Other income 55 5 Staff costs 55 6 Other expenses 58 Accounting policies 34 7 Loan losses/recoveries 58 The Group’s income statement and balance sheet and notes 40 8 Gains/losses on disposal of property, equipment and intangible assets 59 Five-year review – Group 82 9 Earnings per share 84 Five-year review – Parent company 111 Recommendation for appropriation of profits 112 Audit report Ethical standards and corporate social responsibility 64 16 Derivative instruments 66 17 Intangible assets 68 18 Property and equipment 69 114 19 Other assets 69 115 20 Prepayments and accrued income 69 117 21 Due to credit institutions 70 22 Liabilities where the customer bears the value change risk 70 23 Issued securities 71 118 122 The board 13 Interest-bearing securities 65 Corporate governance report * Corporate governance 62 63 66 Corporate social responsibility Environmental issues 11 Loans to credit institutions 12 Lending and deposits, the public 15 Assets where the customer bears the value change risk 113 Handelsbanken in the community 60 14 Shares and participating interests Other Senior management 124 Branches and branch managers 125 Definitions and explanations 59 10 Classification of financial assets and financial liabilities The parent company’s income statement and balance sheet and notes Inside back cover 24 Other trading liabilities 71 25 Insurance obligations 72 26 Taxes 72 27 Provisions 72 28 Other liabilities 72 29 Accruals and deferred income 72 30 Subordinated liabilities 73 31 Specification of changes in equity 73 Other disclosures – Group 74 * The corporate governance report is not part of the statutory annual report. HANDELSBANKEN ■ ANNUAL REPORT 2006 1 HANDELSBANKEN IN BRIEF Satisfied customers lead to higher profitability HANDELSBANKEN’S GOAL HANDELSBANKEN’S CORPORATE PHILOSOPHY • Handelsbanken’s financial goal is to have higher • A strongly decentralised organisation – the branch profitability than the average of its competitors. HANDELSBANKEN’S STRENGTHS • For the past 35 years, Handelsbanken has had higher profitability than the average for its competitors. • Since the survey began 16 years ago, Handelsbanken has had the highest level of customer satisfaction of the four largest banks in Sweden. • For many years, Handelsbanken has been one of the most cost-effective universal banks in Europe. • For a long period of time, Handelsbanken has had a lower loan loss ratio than its competitors. HANDELSBANKEN’S BRANCHES ON ITS DOMESTIC MARKETS IN THE NORDIC COUNTRIES AND GREAT BRITAIN 457 branches in Sweden 42 branches in Norway 36 branches in Finland 37 branches in Denmark 26 branches in Great Britain Handelsbanken has seven representative offices: Beijing La Nucia Marbella Mumbai 2 Nice St. Petersburg Taipei HANDELSBANKEN ■ ANNUAL REPORT 2006 is the Bank. • Focus on the customer. • Profitability always has higher priority than volume. • A long-term perspective. HANDELSBANKEN TODAY • • • • • Total assets: SEK 1,790bn Operating profit: SEK 17.2bn Number of employees: over 10,000 Number of branches: 615 Number of countries with operations: 20 Three branches in Poland. Two branches in France and Germany. One branch in each of Austria, China, Estonia, Hong Kong, Luxembourg, Netherlands, Russia, Singapore, Switzerland and USA. HIGHLIGHTS OF 2006 Highest profit ever SEK 17.2bn Operating profit increased by 10% to SEK 17.2bn – the highest ever. 20.9% Return on equity was 20.9%. 19 new branches and two new representative offices Nineteen new branches were opened: six in Great Britain, five in Norway, three in Sweden, two in Denmark, two in Poland and one in Estonia. Representative offices were opened in India and in Spain. Over SEK 2bn For the first time, the branch office operations outside Sweden had profits of more than SEK 2bn. SEK 8.00 The board proposes increasing the dividend by 14% to SEK 8.00. The most international Nordic bank Handelsbanken has operations in 20 countries. Satisfied customers Handelsbanken had the most satisfied customers in the Nordic region, when weighing together the autumn surveys in Sweden, Norway, Denmark and Finland. Source: SKI, EPSI, Dansk KundeIndex. HANDELSBANKEN ■ ANNUAL REPORT 2006 3 THE GROUP CHIEF EXECUTIVE’S COMMENTS The branches are the Bank A brief summary of our figures for 2006: • Return on shareholders’ equity was 20.9%. • Never before has the Bank had so many branches – at the end of the year there were 615 branches, 158 of them outside Sweden. • Operating profit was SEK 17.2bn. Our fi nancial statements with all their figures really say three things: We have achieved our corporate goal, we have grown, and we earn more money than ever before. But the annual report doesn’t really explain how we did it, and it defi nitely doesn’t answer what is probably the most important question – how can we do it again in future years? I will instead try to respond to these two questions here. We should also see the answers in light of the fact that we have increased our profits and our business volumes in a year when running a bank was unusually free of risks. In times like this, our skill in assessing business and credit risks would in fact tend to hamper our growth, rather than favour it – at least in Sweden. To fi nd the answers I think you need to look further than the plain, black figures of the annual report. For behind all these summaries lie hundreds of thousands of meetings with customers, advisory sessions, business arrangements and fi rm handshakes. But above all, we fi nd people there – people who have met, gained confidence in each other and therefore started doing business together. OUR BEST ADVICE LEADS TO SATISFIED CUSTOMERS You can gain people’s confidence in many different ways. Our advice to customers is always based on their personal conditions, their risk propensity, their goals – it is not based on the Bank’s goals, margins or the profit it can make. For this reason, none of our 615 branch managers receives a bonus, nor does anyone else in the branch operations. The same applies to the senior management of the Bank including myself. But we do have written instructions stating that our advice must always be in the customer’s best interests, even if that advice is not the most profitable for the Bank in the short term. In the long run, we all benefit from this. This is because we are convinced that running a bank cannot only be a matter of wanting to earn money. It must also be combined with a desire to serve people. I am convinced that there is a direct link between our ability to earn money and the fact that, according to the Swedish Quality Index (SKI) and its counterpart in the other Nordic countries, we have the most satisfied customers in the Nordic countries. In the Prospera survey we were ranked number one by Swedish mutual fund savers, and the Swedish business weekly Affärsvärlden acclaimed us Commercial Bank of the Year. The list could be made longer but I think I have made my point. Customers like us and what we do. The explanations for this are many and could be expressed at length, but they can also be summarised in two words – our branches. THE BRANCH IS THE BANK Handelsbanken is its branches and the branches are Handelsbanken. This is not a marketing strategy, a concept, or some other temporary idea we are testing at present. It is much, much more. 4 HANDELSBANKEN ■ ANNUAL REPORT 2006 The branches are where our customers are, in their everyday lives. Thus our branches know their customers well, know their personal circumstances and limitations, their opportunities and goals. The branches know better than anyone else at the Bank what their customers need and desire. It is therefore natural that the business decisions are also taken there, close to the customer, close to real life, at the branches. This gives better service, greater effectiveness and not least higher quality credit decisions. This is why responsibility for customers always lies with a branch office. These strengths are enough for most customers. Even a multinational group belongs to the branch of Handelsbanken situated closest to the head office of that corporate group – and these large companies are happy with this. Our position among small and medium-sized companies is very strong. I believe this is because these enterprises have a strong, genuine local presence where “being local” is important. At the same time I would stress that today’s small and medium-sized companies have become much more international in the last few years. Their need of advanced fi nancial advice and business support is often on a par with that of the major industrial groups. But even these small and medium-sized companies continue to belong to “their” branch of Handelsbanken. The way we meet customers has given us a network of contacts with Swedish business and industry which no other bank can approach. Almost one-third of all corporate lending in Sweden is done by Handelsbanken. Our clients are among the best in the Swedish business world, which is one reason why the international rating agency Moody’s gives the Bank its high Aa1 rating. WITH OUR EARS TO THE GROUND Another advantage of the fact that business decisions are taken at the local level, close to customers, is that this creates a greater awareness of the market which runs right through our organisation. To put it simply, you could describe this as continuous market research, where the lead-times between identifying needs and fi nding solutions are extremely short. Each individual branch determines its own mix of products and services that it offers its local market. This is logical, as only the branch knows exactly what its customers want, need or are lacking. This gives our specialists at our central units a continuous challenge to develop, discontinue or change our various products and solutions, according to the needs and wishes of the market. The fact that the specifications are made by experienced bank staff with daily customer contact means that the feedback during the entire process is well-informed, detailed and completely ruthless. We can point to a number of examples where the branches together with central specialists have carved out new products and refined THE GROUP CHIEF EXECUTIVE’S COMMENTS “ Handelsbanken is its branches and the branches are Handelsbanken. This is not a marketing strategy, a concept, or some other temporary idea we are testing at present. It is much, much more.” old products. Examples of the former are equity-linked bonds and other capital-protected products where the branches together with Capital Markets have designed various products. Handelsbanken introduced equity-linked bonds to Sweden, and the Bank dominates the market in Sweden and in some of its neighbouring countries. The product has steadily been refi ned, and different variations have been tested and approved by branch customers. This would not have been possible without continuous market research in the form of close collaboration between the branches and Capital Markets. The importance of this collaboration was emphasised even more when Capital Markets became a separate business segment on 1 January this year. This change denotes the Bank’s increased level of ambition in the area of investment banking. Another example is mortgages, where the Bank has improved its product range and the branches have worked hard with existing and new customers. Mortgage business is vital to the Bank, not only through its direct contribution to Group earnings, but also via the extra business that it generates. Buying a house is often a private customer’s largest transaction, and therefore a mortgage is nearly always an excellent fi rst stage to gaining all of a customer’s banking business. A third example is credit and charge cards, where the Bank’s operations weren’t quite up to the rest of the market. But in 2006, our Allkort was the credit card with the highest turnover per card in the whole of Europe. It is an excellent card, giving access to a range of good services. Handelsbanken Finans, whose responsibility includes the Bank’s card services, made more improvements. Our customers with Bankomat ATM cards were given the opportunity to swap these for our new Frikort ATM/debit card, at no extra charge. In less than three months, 70,000 customers accepted the offer. Finally, I would like to mention Handelsbanken Asset Management, where fund management performance has improved over the past few years. This has been reflected in a sharply improved rating from the independent rating institute Morningstar, and a maintained level for the Bank’s high market share of new savings in mutual funds. Morningstar ranks Handelsbanken’s range of products highest among all the major Swedish players. WE GO OUR OWN WAY Handelsbanken also challenges what is generally accepted. One example is our work to make Handelsbanken Liv and SPP profitdistributing, in complete contrast to how the rest of the sector functioned – and largely still does. When we demutualised Handelsbanken Liv in 2002, it was the fi rst time that a mutually run life insurance company had been reorganised on profit-distributing lines. Profit-distributing life insurance companies are good for customers, and good for the Bank. Every year since then, HANDELSBANKEN ■ ANNUAL REPORT 2006 5 THE GROUP CHIEF EXECUTIVE’S COMMENTS “ We have written instructions stating that our advice must always be that which is best for the customer, even if that advice is not the most profitable for the Bank in the short term.” Handelsbanken Liv has given its customers higher yields than the average for mutually run life insurance companies. On many annual ranking lists, Handelsbanken has been right at the top. SPP, which has only been a profit-distributing company for one year, also generated higher than average yields for the mutually run companies. At the same time as the policyholders received good yields on their savings, SPP delivered a large contribution to the Group’s profits and the fi nancial risks were reduced. However, it is not just the form of the companies that is important, but also how they work. A commercially run company aiming to make a profit must be transparent and simple for the customer to comprehend. Here, the Bank has helped to set new standards for the market. A commercially run company must offer its customers freedom of choice such as the option of transferring their insurance to another company. Handelsbanken Liv and SPP have been pioneers in this respect, and it should be self-evident that customers are entitled to transfer their insurance funds. A further example of Handelsbanken going its own way concerns collaboration with estate agents. Handelsbanken has not acquired an estate agent or entered into a central agreement with any fi rm of estate agents. This is because our branches decide how they wish to market their products and services, and thus centrally issued directives are not appropriate. But what we have done is develop e-bud, our electronic property bidding service, (www.e-bud.nu) into an efficient and effective means for local collaboration with estate agents – completely in line with the Bank’s basic philosophy. Today, 10% of properties sold via estate agents go through e-bud. The Bank collaborates locally with almost 800 estate agents, and during 2006, over 30,000 bidders – customers or potential customers – made roughly 85,000 bids on properties. The success of e-bud is one of many reasons why the Bank’s mortgage operations have performed so well. Possibly the prime example of us going our own way is our untiring effort to ensure that private customers can open an account, pay their bills (by Privatgiro or online) have access to their money (e.g. the Frikort cards) at no extra charge. An added benefit of the Frikort card is that it can be used for point-of-sale purchases. Handelsbanken is almost alone in making this effort. WORLD-CLASS EVERYDAY SERVICE But products and solutions must be combined with world-class service. The fact that this is one of our main strengths is corroborated by all customer surveys, and in my view, this is also due to our decentralised way of working. The high degree of independence that the branches enjoy gives the staff the feeling that the customers of the branch really are the branch’s own. Customers appreciate being able to talk directly to the employee who makes the decision, and not merely to someone who has to ask a central department for approval. I often hear from our branches that a high service level is not always the same thing as high level banking transactions. It’s actually the 6 HANDELSBANKEN ■ ANNUAL REPORT 2006 customer who decides what is regarded as advanced service. And not all customers are the same. Some customers are very familiar with the banking market, while others need considerably more advice. This actually has nothing to do with what the customer regards as advanced service on any given occasion. Sometimes, a simple, common transaction, such as transferring money between two accounts can, for a customer with high demands, suddenly turn into an insurmountable task. This is where we come into the picture. By solving the problem in a smooth, unbureaucratic manner, we are a highly qualified business partner – in the customer’s eyes. And that is the most important thing. If we can deal with these seemingly unglamourous tasks then and there, we will be the best bank in town. And we’ll be the customer’s fi rst choice when they want to do some business which is really profitable for us – business that often involves expert advisory services and asset management. With our everyday service we build up customer relationships, increase customer satisfaction, and create security for customers in their relationship with the Bank. This is very difficult for our competitors to copy, since it assumes familiarity with and experience of the customer, as well as the staff’s ability to make their own decisions. We create these conditions by consistently applying our decentralised way of working. DOMESTIC MARKETS OUTSIDE SWEDEN Finland, Denmark, Norway and Great Britain The strength of our business model becomes, perhaps, even clearer abroad than in Sweden. Outside Sweden we could be regarded as an anonymous bank, with its head office far away in a foreign country. But we are not. Decisions are taken close to the customer outside Sweden too. In fact, our newly opened branches outside Sweden have nothing else with which to compete, since the Handelsbanken name is unknown there. The range of products we offer is – at least initially – limited, we have few reference customers and we have little experience of the local area. In short, the only factor that can differentiate us from our competitors is our ability to satisfy a customer. In Norway, our operating profit for 2006 was up 13% to SEK 965m – our best ever result in that country. Here, too, there was a strong link to customer satisfaction. In 2006, EPSI, which conducts annual customer satisfaction surveys in Norway, named Handelsbanken as “the clear winner in the corporate market”. Just as in Sweden, customers are drawn towards an efficient bank. In Norway, our cost/income ratio was 44.9% – an efficiency figure that is the envy of many of our competitors. The Finnish regional bank also raised its operating profit to SEK 447m, compared with SEK 381m in 2005. Among the major banks in Finland, Handelsbanken had the most satisfied customers – both private and corporate. Satisfied customers do more business. In Finland, a great deal of effort has been put into improving our range of savings products. We have never sold so many capital- THE GROUP CHIEF EXECUTIVE’S COMMENTS protected products, and new sales of mutual funds increased in Finland.In Denmark, operating profit climbed 8% to SEK 456m. At the beginning of the decade, Handelsbanken launched a long-term mortgage loan called a priority loan, and at year-end 2006, volumes exceeded DKK 10bn. Also in Denmark, private customer business was developed, and the Bank had success with sales of capital-protected products.In 2006, our British operations maintained their rapid growth. The Bank opened six new branches in Great Britain, and at year-end we had 26 branches there. More branch managers have been recruited, and these branches will open in the fi rst half of 2007. Business volumes grew very rapidly, with lending increasing by more than 50% to GBP 2.4bn. HANDELSBANKEN – THE MOST INTERNATIONAL NORDIC BANK Handelsbanken has units – branch offices and/or representative offices – in 15 countries outside the Nordic region and Great Britain, making us the most international Nordic bank. These operations are run by the Handelsbanken International business area, which became an independent unit when Handelsbanken Markets was split into two separate units. A vital task for Handelsbanken International will be to increase the number of markets in which the Bank can start up and grow organically by running profitable universal banking operations through its own branch network. And the Bank will continue to grow internationally – and even more quickly than before. In 2006, our operations in the Nordic countries and Great Britain contributed over SEK 2bn to our operating profits. We are continuing our international drive and will open more branches in Great Britain, Finland and Norway, probably around ten in each country during 2007. There will probably be some in Denmark too, but not as many. In Germany and Poland we will double the number of branches and start universal banking operations. In countries where Handelsbanken has not (yet) established a regional bank, we are still making advances. For example, we have now established an infrastructure for opening more offices in Russia through our branches in Moscow and St Petersburg. We were the fi rst Nordic bank to start up in Russia, we were the fi rst in China, and we were also fi rst on another rapidly growing market – India, where we opened a representative office in Mumbai, the country’s fi nancial capital. There was a record amount of interest, even before the office had opened for business, above all from clients in our domestic markets which have, or will be starting up, operations in India. Our model of running a bank on markets outside Sweden works, as confi rmed by 300,000 active customers outside Sweden. We are much better at starting branches abroad now. We see that their earnings grow every year and that the return on equity of the regional banks outside Sweden is approaching that of the Swedish branches. Growing organically is cost-effective. The average cost of a new branch is SEK 5m. This includes paying for the initial investments, while taking into account the deficit arising before the branch breaks even. This takes on average between 16 and 18 months. WE AIM TO BE EVEN BETTER It must become even simpler to contact the Bank, and it must become even simpler to do business with us. Last year, we began a major project to expand our online banking services, and now each branch’s web page is even more focused on business and customer service. We started up Handelsbanken Direct, a new service for customers whose fi rst contact with us is via the internet. We must always – 24 hours a day, seven days a week – be prepared to do business when the customer wants. We will continue to make things simpler, for ourselves and for our customers. During the year, the branches submitted 400 suggestions for changes, with the aim of creating more time to meet customers and do business; 160 of these suggestions have already been implemented. This is how Handelsbanken fits together: we are all dependent on each other to achieve our common corporate goal – a higher return on equity than the weighted average of other banks on our domestic markets. With pride I can say that once again – for the 35th consecutive year – we have achieved this corporate goal. I am proud of the extraordinary expertise, versatility and commitment that I encounter every day in my contacts with staff. This is the base from which we have achieved our corporate goal, and I thank you all. And I am convinced that we will continue to achieve it. How? By continuing to be Handelsbanken – only a little more so, and in even more locations around the world. Stockholm, February 2007 Pär Boman HANDELSBANKEN ■ ANNUAL REPORT 2006 7 GOALS, METHODS AND OUTCOME Creating sustainable profitability Handelsbanken’s financial goal is to have higher profitability than other banks. The Bank will achieve this goal by having more satisfied customers, while having lower costs than its competitors. High profitability GOAL Handelsbanken’s overall financial goal is to have higher return on equity than a weighted average of comparable listed Nordic and British banks. GOAL ACHIEVEMENT Handelsbanken’s return on equity after standard tax was 19.7% for the whole of 2006. Return on equity for a weighted average of comparable banks was just over 18%. This means that 2006 was the 35th consecutive year that Handelsbanken met its overall financial goal. Return on shareholders’ equity 1973–2006 (ANDELSBANKEN /THER3WEDISHBANKS Most satisfied customers METHOD Customer satisfaction index, private customers in Sweden The Bank aims to achieve this goal by having the most satisfied customers. The quality of the Handelsbanken Group’s services must therefore meet the expectations of demanding customers. )NDEX OUTCOME Once again in 2006, Handelsbanken had the most satisfied customers in Sweden – both private and corporate – when compared with the four largest Swedish banks. An overall weighting of the results of surveys in Denmark, Finland and Norway showed that Handelsbanken had the most satisfied customers in the Nordic region. 8 HANDELSBANKEN ■ ANNUAL REPORT 2006 (ANDELSBANKEN 3%".ORDEAAND3WEDBANK GOALS, METHODS AND OUTCOME Most effective bank METHOD Cost-effectiveness Cost-effectiveness should be higher than in comparable banks. #OSTSINCOMEEXCLLOANLOSSES OUTCOME Costs as a proportion of income were 42%. Thus, as in previous years, Handelsbanken was the listed Nordic bank with the highest cost-effectiveness level. (ANDELSBANKEN !VERAGEn.ORDICBANKSEXCL(ANDELSBANKEN Lowest loan losses METHOD Profitability is always more important than volumes. This means that when granting credits, the credit quality must never be disregarded in order to achieve higher volume. Loan losses as a percentage of lending OUTCOME Handelsbanken had no loan losses – it had net recoveries. The loan loss ratio was –0.01%. The corresponding figure for other Swedish banks was –0.05%. (ANDELSBANKEN /THER3WEDISHBANKS HANDELSBANKEN ■ ANNUAL REPORT 2006 9 ECONOMIC OUTLOOK 2006 – another strong year for the global economy Handelsbanken’s chief economist Jan Häggström sums up the past year. How would you sum up the trends in 2006? “2006 was another strong year for the global economy in many respects. Company earnings reached record levels, and several stock exchange indices reached all-time highs. This was against a backdrop of continued strong growth in the global economy. In 2006, global GDP growth was at roughly the same level as the year before, i.e. among the highest of the past 20 years. However, the global pattern of growth began to change. The US economy showed clear signs of the cooling effect that recent years’ interest rate hikes have had. House prices stopped rising, and activity on the housing market was more subdued in terms of sales and new construction. During the autumn, industry also began to be affected by the weak housing construction market.” stronger GDP growth than Finland and Sweden in 2006. The Nordic countries were buoyed by low interest rates and robust government fi nances. This also provided stimulus for fiscal policy.” “A normalisation of central banks’ key rates began in the eurozone, as well as in Norway and Sweden. Despite this, lending to households and companies continued to show double-digit growth. House prices in the Nordic countries rose sharply, and price increases in the UK picked up again. The historically low interest rates meant that households experienced few credit problems in 2006, despite the high debt levels.” And the trend in Europe? At the beginning of 2006, you were one of the few analysts who predicted that the Riksbank’s repo rate would double during the year, from 1.50% on January 1 to 3.00% at the end of 2006. This turned out to be the case. What is your forecast for 2007? “Europe, on the other hand, experienced a surprisingly sharp upswing, driven by rising corporate earnings and investments. The long-standing decline in the German construction sector was turned around. At the same time, emerging markets in Asia and Eastern Europe were the locomotive for many European industrial companies, particularly Nordic players.” “Many factors suggest that there is a fair way to go before key rates in Norway and Sweden reach a neutral level, and that 2007 will also see rapid credit growth and rising house prices. This also means that the level of household debt in the Nordic countries will rise from already high levels, except possibly in Denmark, where the peak may have been reached.” And what about the trends on the corporate side? “ In Western Europe, only the Republic of Ireland showed stronger GDP growth than Finland and Sweden.” How are Sweden and the other Nordic countries being affected by increasing globalisation?“The structure of industry in the Nordic region is particularly well suited to fulfi l the increasing demand in emerging markets, with its focus on infrastructural investments, transport and raw materials. This is one reason why the Nordic region as a whole has grown much more rapidly than the OECD average. In Western Europe, only the Republic of Ireland showed 10 HANDELSBANKEN ■ ANNUAL REPORT 2006 “The combination of companies’ strong return on capital, bond yields remaining low, and small credit risk premiums created favourable conditions for acquisition calculations. Thus, 2006 became another record year for corporate acquisitions. A large proportion of these were carried out in Europe, with the Nordic region receiving its due share. These transactions were a vital driving force for growth in corporate loans, counteracting the tendency for companies to use their strong cash flows to reduce the debt side of their balance sheets. The corporate sector enters 2007 with key ratios still looking good, which indicates that activity levels in mergers and acquisitions will remain high.” THE MARKET Handelsbanken – a major player in the financial markets Handelsbanken took market share in a growing savings market. MARKETS Handelsbanken offers a full range of fi nancial products and services in Sweden, Denmark, Finland, Norway and since 2002, in Great Britain. The Bank regards these countries as domestic markets. Sweden is the largest fi nancial market in the Nordic region, and Handelsbanken’s position here is strong. Seventy-five percent of Handelsbanken’s income is generated in Sweden. The other Nordic countries and Great Britain accounted for 19% of Group income, as compared with 16% two years ago. by 14% per year. In 2006, it grew by a further 13% to SEK 1,241bn (1,102). Competition remained intense. Handelsbanken had a 27% share of the market in new lending which was the same as its share of total lending volume (adjusted for securitisation). The Bank had 24% of the total market for household lending, that is mortgage loans and bank loans. During the year, lending to non-fi nancial companies in Sweden was 7% higher at the end of the year than the beginning. Handelsbanken was the largest player on the corporate market, with a 30% share. MARKET TRENDS The fi nancial market can be divided into various segments. The most important of these are the credit market and the savings market. Handelsbanken has no volume goals, either in absolute figures or as market share; instead, it always gives priority to profitability over volumes. THE SAVINGS MARKET The Swedish mortgage market continued to grow. Between 2001 and 2005, the household mortgage lending market in Sweden grew In the past five years, Swedish households’ fi nancial savings (excluding directly-owned shares) have increased by an average of 9% per year. As at 31 December 2006, they amounted to SEK 4,171bn. Handelsbanken had an 11% share of the total market, and has an 18% share of new savings since 1 January 2000. Thus, over the course of this decade, Handelsbanken has increased its share of the overall market, and in terms of new savings, Handelsbanken has a larger share than any of its competitors. The Swedish savings market, 31 December 2006 The Swedish market for loans to the public, 31 December 2006 Lending Total lending to households, SEK 1,635bn Mutual funds (incl PPM and unit-linked insurance) SEK 1,775bn Bonds SEK 144bn Bank deposits SEK 680bn Total lending to non-financial companies, SEB 1,227bn Traditional insurance SEK 1,572bn OF WHICH: OF WHICH: Handelsbanken’s market shares Bonds 19 % Bank deposits 16 % Handelsbanken’s market shares Mutual funds (incl PPM and unit-linked insurance) 12 % Traditional insurance 7 % Household lending, 24 % Corporate lending, 30 % Source: SEB Sparbarometern Source: Statistics Sweden, refers to total lending, i.e. mortgages and bank loans HANDELSBANKEN ■ ANNUAL REPORT 2006 11 OUR CUSTOMERS Handelsbanken has the highest customer satisfaction Handelsbanken is a service company that focuses on its customers – not on individual products. Handelsbanken’s organisation and methods of work are based on customers’ needs and on the branches’ responsibility for individual customers – not on the central units’ responsibility for product areas or market segments. The local branch is responsible for the profitability of the Group’s overall exchange of business with the customer. The branch is responsible for providing the customer with expert and co-ordinated services from all units in the Handelsbanken Group. CUSTOMER SATISFACTION Handelsbanken aims to have the most satisfied customers of the Nordic banks. The Bank therefore attaches great importance to customer satisfaction surveys and acts on the results. In Sweden, independent surveys of customer satisfaction in the banking field have been performed every year since 1989. They are carried out by Svenskt Kvalitetsindex (Swedish Quality Index). The survey weighs together a number of variables such as image, expectations, product and service quality and value for money. Originally, the survey only covered the large nationwide banks, and compared with these, Handelsbanken has been in top position every year for private customers and every year but one for corporate customers. This year’s survey reached the same conclusion. Corresponding surveys in Denmark, Finland and Norway showed that Handelsbanken has the highest customer satisfaction levels in the Nordic region. Among private customers, Handelsbanken had more satisfied customers than the sector average in all countries, showing results which are well above those of its main competitors. RESPONSIBILITY FOR FINANCIAL ADVICE Many of Handelsbanken’s employees have long experience and excellent knowledge of the investment area. In Sweden, the Bank has 913 investment advisers who are licensed by the Swedish Security Dealers’ Association. The Swedish legislation on consumer fi nancial advice stipulates that the Bank must be able to show that its employees who provide advice on fi nancial instruments have relevant knowledge appropriate to their work tasks. Handelsbanken offers a licensing course which complies with these requirements. Over 4,200 employees, more than 3,200 of them in the branch operations, have completed the course and are now licensed. Employees are regularly trained and CUSTOMER COMPLAINTS Dealing with customer complaints is one way of focusing on routines and services that do not function as they should. The Bank’s website informs customers how to draw the Bank’s attention to any problems. Customers should fi rst talk to their local branch, where the problem will normally be solved directly. The Bank also has a designated complaints manager to whom customers can turn if they wish to have their case reconsidered. The Bank’s management is kept regularly informed about complaints cases. All branch employees, both in Sweden and abroad, attend annual training courses on complaints management. For several years, Handelsbanken has had the lowest proportion of complaints submitted to the National Board for Consumer Complaints of all the major banks. Once again in 2006, of the four major Swedish banks, Handelsbanken was the one with the lowest proportion of complaints in relation to its business volume (household deposits). Number of active customers Thousands Active private customers Sweden Other Nordics and Great Britain Total 1 823 253 2 076 149 46 195 Active corporate customers Definition of an active customer: A customer who makes at least one transaction a month on their own account, has a balance of at least SEK 1,000 at the end of the month, has a loan with the Handelsbanken Group or has mutual fund savings of at least SEK 1,000. Customers who appear in several categories are only counted once. Customer satisfaction, Private customers Customer satisfaction, Corporate customers Index 80 Index 80 Handelsbanken SEB, Nordea and Swedbank 75 75 70 70 65 65 60 60 55 55 50 12 authorised in the investment and insurance field, so that they can meet the requirements of customers and also their own and external competence demands. In addition, more than 3,300 employees of the Handelsbanken Group are authorised in accordance with the Insurance Mediation Act. Handelsbanken’s financial advisory services are based on the individual customer’s needs. The adviser obtains an overall picture of the customer’s circumstances and financial situation, and the Bank can then make an investment proposal which is individually adapted to the customer’s needs, investment horizon and risk level. As in other areas, customers themselves are responsible for the actual decision. 91 93 95 97 HANDELSBANKEN ■ ANNUAL REPORT 2006 00 02 04 06 50 -91 Handelsbanken SEB, Nordea and Swedbank -93 -95 -97 -00 -02 -04 -06 OUR EMPLOYEES Committed employees make for satisfied customers Handelsbanken aims to recruit the best people, develop them and keep them within the Group. The Bank has over 10,000 employees active in 20 countries. RECRUITMENT INDIVIDUAL SALARY DIALOGUE REVIEWS Handelsbanken sees each recruitment as a vital investment. The Bank aims to recruit the best people, develop them and keep them within the Group. “Best” means people who have the personal qualities for further development at the Bank. They should also have an education which is broad and appropriate for the Bank’s operations, usually at university level. To attract potential employees when they are students, the Bank has regular local contact with students and universities. The Bank aims to meet its need for employees at various levels through internal recruitment and promotion. Some 96% of all managers in Sweden were recruited internally. The corresponding figure for the whole Group was 91%, including the markets where the Bank is relatively new. One of the most important tasks for managers is to stimulate employees to develop their career within the Bank. Internal mobility is highly valued both within and across national borders. External employee turnover was 5% (3). Individual salary reviews are an expression of the Bank’s aim to further decentralise responsibility and powers. All employees in Sweden have individual salary reviews with their immediate superior with no central directives concerning defi ned salary levels. The reviews are based on the individual action plans and follow-up of these plans. COMPETENCE DEVELOPMENT Every year, all employees have a planned and structured development review with their immediate superior. Based on the unit’s business/operational plan, they discuss the employee’s skills and competence, how he or she should contribute to the goals of the operation and any skills development needed. The dialogue results in an action plan describing how the individual goals are to be achieved. The dialogue also includes a discussion of the next step in the employee’s development. The action plan is regularly followed up by the manager and the employee. Handelsbanken defines competence as the ability to acquire, use, develop and pool knowledge, skills and experience. All employees are required to take responsibility for their own competence development and for sharing their competence with others. The most important means of improving professional skills is, and always has been, learning from daily work. Average number of employees EQUALITY Handelsbanken’s equal opportunity policy states that equal conditions must apply to men and women regarding career development within the Handelsbanken Group. One long-term goal is that the proportion of women and men who are managers will be the same as the overall gender distribution at the Bank. At the year-end, 36% (35) of managers at the Handelsbanken Group were women. The proportion of women among the total number of employees was 54% (52). To make it easier for both men and women to combine a career with parenthood, the Bank offers household services to all employees with children under the age of eight. In Sweden, the Bank also compensates employees on parental leave with 80% of that part of their salary which is not compensated by national insurance. Employees who take parental leave have the same right to salary development as other employees. WORKING ENVIRONMENT AND HEALTH PROMOTION Handelsbanken has various types of programmes for health promotion among its employees. The Bank’s recreation programme is a vital ingredient in caring for its employees and their health. The purpose of this is to make the employees active, mainly through health promotion measures. It is considered very important to reach out to all employees and to increase the feeling of community at the Bank. The Bank’s overall goal in its working environment efforts is for the Age and gender distribution 2006 4HOUSANDS Men Women 65– 60–64 55–59 50–54 45–49 40–44 35–39 30–34 3WEDEN $ENMARK &INLAND .ORWAY 'REAT"RITAIN /THERCOUNTRIES 25–29 –24 1,200 1,000 800 600 400 200 0 200 400 600 800 1,000 1,200 HANDELSBANKEN ■ ANNUAL REPORT 2006 13 OUR EMPLOYEES employees to enjoy good health, to develop on a personal level and to function in an optimal way. This is a long-term goal based on several factors that will help to keep the employees healthy. Examples of this are the importance of keeping an appropriate balance between work and leisure time, having the right skills and competence to perform tasks and manage various work-related situations, clear and honest communication and showing individuals trust and respect. In line with the Bank’s decentralised way of operating, work tasks which may imply responsibility for the working environment are delegated to managers and supervisors at workplace level. The regional banks, subsidiaries and central units have working environment committees, and at central level, there is also a working environment and safety committee. OKTOGONEN – THE BANK’S PROFIT-SHARING SYSTEM In order to achieve its overall goal – higher profitability than comparable banks – Handelsbanken is dependent on high-quality performance from its employees. It is therefore reasonable that the employees receive part of any extra profits. Every year but one since 1973, the Bank has allocated part of its profit to a profit-sharing scheme for its employees. The funds are managed by the Oktogonen Foundation. A condition for making an allocation is that the Handelsbanken Group achieves its goal of higher return on shareholders’ equity after standard tax than a weighted average of other listed Nordic and British banks. One third of the extra profits can then be allocated to the employees. The amount is limited to 15% of the dividends to shareholders. All employees receive an equal part of the allocated amount and the scheme includes all employees in the Nordic countries and since 2004, also employees in Great Britain. Disbursement can be made when the employee reaches the age of 60. In spring 2006, the board approved the allocation for the 2005 fi nancial year of SEK 22,000 (35,000) for each full-time employee in Sweden. Staff who have worked full-time since the profit-sharing scheme was introduced in 1973, have received over SEK 855,000 in allocations. Through share price increases, however, mainly in the Handelsbanken share, the value of the allocations has risen to over SEK 8m. The corresponding value for a person fi rst employed in 1990, was almost SEK 2.4m at the year-end. One of the fundamental concepts in managing the foundation is that a considerable part of the funds are invested in shares in Handelsbanken. Oktogonen is one of the Bank’s largest shareholders. The board of the Oktogonen Foundation is appointed by the local organisation of the Union of Finance Sector Employees. Business plan process Business plan Salary dialogue review Customer Individual follow-up 14 HANDELSBANKEN ■ ANNUAL REPORT 2006 Action plan PLUS review The Wheel depicts the interplay between the Bank’s operations and the employee’s career development as a continual process in order to achieve Handelsbanken’s overall objectives. Every year, each unit at the Bank makes a business plan. Based on this, all employees have a planned development review (PLUS) with their immediate superior. The discussion results in an individual action plan presenting the employee’s goals and possible needs for support and skills development. The action plan is then followed up and forms the basis of the individual salary dialogue review between employee and manager. BUSINESS CONCEPT, WORKING METHODS AND ORGANISATION Overall customer responsibility at one place in the Handelsbanken Group Handelsbanken is a universal bank with strongly decentralised business operations. BUSINESS CONCEPT Handelsbanken is a universal bank and its business concept is to offer private and corporate customers in the Nordic countries and Great Britain a complete range of fi nancial services, based on the customer’s needs. A basic concept is that for every customer – private and corporate – there is overall responsibility at one place in the Handelsbanken Group. The overall customer responsibility is at the local branch of the Bank in the locations where the customer operates. WORKING METHODS The business operations of the Handelsbanken Group are strongly decentralised. The Bank’s organisation and work methods are based on the branches’ responsibility for individual customers and not on the central units’ responsibility for product areas or market segments. The most important means of control are a deep-seated corporate culture, and an effective fi nancial control system. Central departments 6 central business areas The Bank does not make central marketing plans, nor does it control the branches’ marketing activities at the central level by giving priority to certain customer categories or product areas. For many years, Handelsbanken has consistently and successfully applied and developed this basic concept. ORGANISATION Handelsbanken’s organisation aims at promoting the interplay between branches, support functions, specialists and central units with business responsibility. The Bank’s organisation should be viewed as a single unit focusing on the individual customer and with the local branch office at the forefront. 11 regional head offices 615 branches “Always responsible for the customer” CUSTOMER HANDELSBANKEN ■ ANNUAL REPORT 2006 15 ADMINISTRATION REPORT ■ REVIEW OF OPERATIONS Highest profit ever Operating profit rose by 10% to SEK 17.2bn (15.7). The Bank’s insurance operations boosted their profits by 356% to SEK 2.6bn (0.6), of which SPP contributed SEK 2.1bn. Operating profit increased by 10% to SEK 17,164m (15,650). Return on shareholders’ equity increased to 20.9% (17.9). Income rose by 12% to SEK 29,559m (26,323). Expenses were SEK 12,451m (10,938). Starting on 1 January 2006, SPP is included in the Group’s consolidated accounts, and thus affects both expenses and income. The cost/income ratio was 42.1% (41.6). Earnings per share were SEK 20.41 (16.98). mainly consist of equities and interest-bearing assets. The change in the deferred capital contribution was SEK 1,045m. Trading operations performed well, and net fi nancial items at Capital Markets increased by 43% to SEK 1,378m (964). In particular, currency trading and structured products generated higher income. REDUCED RISKS IN SPP INCREASING BUSINESS VOLUMES BUT SQUEEZED LENDING MARGINS Average lending volumes in the Group rose by 13% and deposits by 14%. Branch office operations outside Sweden continued their rapid growth: lending rose by 25% and deposits by 22%. The rapid growth in lending volumes could not compensate for poorer lending margins, particularly as regards mortgage loans to households. Net interest income was positively affected by higher deposit margins but in total, net interest income in the Group fell by SEK 118m to SEK 14,972m (15,090). Net interest income in the branch office operations outside Sweden increased by 17% to SEK 2,951m (2,525). Net interest income was lower in the Swedish branch office operations at SEK 10,722m (11,511). Net interest income includes the impact of previous decisions concerning repurchases of bonds, the funding of Stadshypotek’s mortgage loans and other aspects of the operations which cannot be directly influenced by the branches. RECORD HIGH NET FEE AND COMMISSION INCOME Net fee and commission income increased by 31% to SEK 9,232m (7,055). This high rate of increase was mainly due to higher insurance commissions and equity-related commissions. Insurance commissions totalled SEK 2,338m (937). SPP accounted for SEK 1,316m of this amount. The positive yield split was SEK 1,023m, with SPP’s share being SEK 752m and Handelsbanken Liv’s SEK 271m (263). Equity-related commissions – comprising equity commissions, equity-related income in mutual fund and custody operations, corporate fi nance and structured products – were SEK 4,151m (3,308). This was 25% higher, where the increase for structured products was 72% to SEK 279m (162). Total commissions from mutual fund management rose by 26% to SEK 1,548m (1,232). CONSOLIDATION OF SPP AFFECTED NET FINANCIAL ITEMS AT FAIR VALUE Net gains/losses on fi nancial items at fair value were SEK 4,261m (3,459), with most of the increase due to the effects of SPP. At the time SPP became a profit-distributing company on 1 January 2006, certain insurance contracts were underfunded since the market value of the assets did not cover the insurance liability. This underfunding was reported in liabilities as a deferred capital contribution. When calculating the insurance liability, this is discounted by using a longterm market yield as the discount rate and fluctuations in this rate affect the amount of the liability. The deferred capital contribution is also affected by changes in the market value of the assets which 16 HANDELSBANKEN ■ ANNUAL REPORT 2006 SPP’s stated goal has been to reduce the effects on the company’s results of interest rate fluctuations. For this reason, in the second quarter, SPP started to conduct transactions with the purpose of hedging against changes in market value with respect to the deferred capital contribution. Value-at-Risk (VaR), which is the most common measurement of aggregated risks, was SEK 1,276m before SPP started to reduce its risks and at the end of 2006, the amount was SEK 259m. This means that with a confidence level of 99%, the maximum possible loss in an individual month has been reduced from SEK 1.3bn to SEK 0.3bn. VaR can be complemented by simulating the effect of an interest rate shock. In the case of a parallel shift in all interest rates in all currencies of 100bp, SPP’s earnings would be affected by SEK 30m. Finally, it is also possible to view the capital requirement in relation to the Swedish Financial Supervisory Authority’s so-called traffic light model. At the end of the year, only SEK 1,078m, i.e. less than 10% of the company’s capital base, was required to obtain a green light in the traffic light model. At the end of Q1 2006, the corresponding figure was SEK 4,196m. SPP AND PERFORMANCE-RELATED REMUNERATION ACCOUNTED FOR MOST OF THE INCREASE IN COSTS Expenses were SEK 12,451m (10,938), an increase of 14%. The underlying increase in expenses was just under 2.6%, excluding SPP, performance-related remuneration and cost increases in operations outside Sweden. SPP’s expenses, which were not included in the Bank in the previous year, were SEK 734m, or almost 6.7 percentage points of the cost increase. Performance-related remuneration rose by SEK 169m to SEK 589m, corresponding to 1.5 percentage points of the increase. Although the Bank opened more branches in 2006 than in the previous year, expenses for new branches were unchanged. The growth in operations outside Sweden meant that expenses, excluding performance-related remuneration, went up by SEK 327m, corresponding to 3.0 percentage points of the cost increase. Part of this is due to an increase in the number of employees outside Sweden by 145. The number of employees increased and totalled 10,320 (9,922) at the year-end. NET RECOVERIES ON LOAN LOSSES Recoveries exceeded loan losses and totalled SEK 55m (261). Gross losses continued to decline. The loan loss ratio was –0.01 (–0.03). Net bad debts decreased to SEK 876m (1,256), equivalent to 0.07% (0.12) of lending. ADMINISTRATION REPORT ■ REVIEW OF OPERATIONS CAPITAL RATIO AND RATING The Bank’s capital ratio was 9.5% (11.6) and the Tier 1 capital ratio was 6.8%. The reason for the decrease in the capital ratio between 2005 and 2006 is that at the end of 2005, the Bank raised a loan with the purpose of contributing capital to SPP in connection with converting it into a profit-distributing company. Thus the capital ratio was unusually high at the end of 2005. Handelsbanken’s rating was unchanged with all three rating agencies which rate the Bank. Rating as at 31 December 2006 Long-term Short-term Moody´s Aa1 P-1 Standard & Poor´s AA- A-1+ Fitch AA- F1+ BUYBACK AND CANCELLATION OF SHARES At the 2006 annual general meeting, a resolution was passed to cancel 20.6 million shares which the Bank had previously repurchased. In connection with the cancellation, the nominal value of the share was increased from SEK 4.30 to SEK 4.45. The AGM also resolved to authorise the Board to repurchase a maximum of 40 million shares during the period until the 2007 AGM. During the second and third quarters, the Bank repurchased 14.8 million shares. The board is requesting the 2007 AGM to cancel the repurchased shares and any shares repurchased before the 2007 AGM, and also to authorise the board to repurchase a maximum of 40 million shares during the period up to the 2008 AGM. The purpose of this is to adjust the capital structure. BRANCH OPERATIONS OUTSIDE SWEDEN EARNED OVER SEK 2BN Branch office operations outside Sweden boosted their total profits by SEK 205m to SEK 2,018m, an increase of more than 11%. This increase took place at the same time as 14 (9) new branches were opened. Income rose by SEK 571m or more than 14%, while the increase in expenses was slightly less. However, the Bank opened more branches than the 14 started in Denmark, Finland, Norway and Great Britain. Three new branches were opened in Sweden, two in Poland, and also two representative offices, one in Spain and one in Mumbai, India. Thus the Bank started up operations in 21 new locations during the year. The rate of expansion will increase. Some 30–40 branches will be opened during 2007 with the focus on Great Britain, Finland and Norway. New markets will be opened up for universal banking operations. HANDELSBANKEN ■ ANNUAL REPORT 2006 17 ADMINISTRATION REPORT ■ KEY FIGURES AND QUARTERLY PERFORMANCE Key figures and quarterly performance Key figures for the Handelsbanken Group Profit before loan losses, SEK m Loan losses/recoveries, SEK m 2006 2005 2004 2003 2002 17 108 15 385 13 718 11 843 10 781 55 261 -167 -492 -392 199 -199 10 190 Impairment losses/reversals on financial non-current assets, SEK m Operating profit, SEK m 17 164 15 650 13 553 11 550 Profit for the year, SEK m 13 128 11 354 9 860 8 116 7 282 1 790 008 1 582 907 1 316 789 1 260 454 1 277 514 52 192 Total assets, SEK m Shareholders’ equity, SEK m 66 226 65 758 61 372 56 835 Return on equity, % 20.9 17.9 16.6 14.9 14.6 Return on equity after standard tax, % 19.7 17.8 16.4 15.3 14.6 Return on total assets, % 0.99 1.08 1.05 0.90 0.83 Cost/income ratio, % 42.1 41.6 42.8 46.9 50.2 -0.01 -0.03 0.02 0.06 0.05 Bad debt reserve ratio, % 69.5 65.9 53.4 51.4 60.9 Proportion of bad debts, % 0.07 0.12 0.21 0.28 0.23 Capital ratio, % 9.5 11.6 10.0 10.2 9.3 Tier 1 ratio, % 6.8 7.6 7.6 7.3 6.4 10 163 9 395 9 150 9 258 9 752 Loan loss ratio, % Average number of employees No. of branches in Sweden 457 455 453 453 456 No. of branches in Nordic countries and Great Britain 141 128 120 101 96 17 14 11 11 11 No. of branches in other countries For definitions, see inside back cover. 2004 has been restated in accordance with IFRS. For 2002 and 2003, the figures are presented according to the previous format. Quarterly performance for the Handelsbanken Group SEK m 2006:4 2006:3 2006:2 2006:1 2005:4 Interest income 14 672 12 871 11 743 10 847 13 551 Interest expense -10 946 -9 175 -7 977 -7 063 -9 758 Net interest income 3 726 3 696 3 766 3 784 3 793 Fee and commission income 3 073 2 417 2 379 2 652 2 284 Fee and commission expense -324 -345 -310 -310 -305 Net fee and commission income 2 749 2 072 2 069 2 342 1 979 Net gains/losses on financial items at fair value 1 607 -247 1 064 1 837 1 517 Risk result – insurance 187 38 297 49 38 Other dividend income 9 2 149 33 0 11 21 7 66 4 Share of profit of associated companies Other income 58 51 38 78 81 Total income 8 347 5 633 7 390 8 189 7 412 Staff costs -1 988 -1 543 -2 142 -2 041 -1 775 Other expenses -1 131 -929 -1 052 -1 068 -995 -141 -137 -136 -143 -70 -3 260 -2 609 -3 330 -3 252 -2 840 5 087 3 024 4 060 4 937 4 572 -55 -22 53 79 37 0 0 1 0 0 5 032 3 002 4 114 5 016 4 609 Administrative expenses Depreciation, amortisation and impairments of property, equipment and intangible assets Total expenses Profit before loan losses Loan losses/recoveries Gains/losses on disposal of property, equipment and intangible assets Operating profit Taxes Profit for the period -1 358 -887 -904 -887 -1 289 3 674 2 115 3 210 4 129 3 320 3 674 2 115 3 210 4 129 3 320 - - - - - 5.79 3.31 4.97 6.32 4.98 Attributable to Ordinary shareholders Minority interest Earnings per share * * No dilution. 18 HANDELSBANKEN ■ ANNUAL REPORT 2006 ADMINISTRATION REPORT ■ SHARE AND SHAREHOLDERS The Handelsbanken share Handelsbanken’s higher profitability has benefited shareholders through greater growth in dividends than the average for other listed Nordic banks. Handelsbanken’s share was first listed on the Stockholm stock exchange in 1873, and is the share that has been listed longest on the Swedish stock market. THE HANDELSBANKEN SHARE DIVIDEND Handelsbanken’s share is listed on the Nordic stock exchange in Stockholm and on the Nordic Large Cap list. One trading unit is equivalent to 100 shares. The share capital amounts to SEK 2,888m, divided over 649 million shares. Each share thus represents SEK 4.45 of the share capital. There are two classes of shares: class A and class B. Of the total number of outstanding shares, 98% are class A. Handelsbanken’s policy is that the dividend should be competitive in relation to other listed Nordic bank shares. For 2006, the board recommends a dividend of SEK 8.00 (7.00), an increase of 14%, corresponding to a payout ratio of 39% (41). The board proposes that the record day for dividend be 27 April 2007, implying that the share will be traded ex-dividend from 25 April 2007. If the annual general meeting resolves in accordance with the board’s proposal, this will mean that Handelsbanken’s dividend will have increased by 78% over the past five years. The corresponding rate of increase for comparable Nordic banks is 68%. VOTING RIGHTS Class A shares each carry one vote, while class B shares have onetenth of a vote each. At the annual general meeting, no shareholder is allowed a greater voting power than 10% of the total number of votes in the Bank. OWNERSHIP STRUCTURE Handelsbanken has approximately 100,000 shareholders. As at 31 December 2006, most of these, or around 60% of the total number of shareholders, owned fewer than 500 shares. The 10% of shareholders (approx.) whose holdings exceeded 2,500 shares each, together held just over 90% of the share capital. The two largest owners, Industrivärden and the Oktogonen Foundation, each owned just over 10% of the shares. As at 31 December 2006, roughly 50% of the outstanding shares were owned by large Swedish institutions. International investors owned some 28% (25). SHARE PRICE PERFORMANCE As at 31 December 2006, Handelsbanken’s market capitalisation was SEK 131bn (129). The Swedish stock market grew by 24% during the year. The OMX Bank Index climbed by 21%. The price of Handelsbanken’s class A share rose by 5%. The total yield, including dividends paid, was 9%. Over the past five years, Handelsbanken’s share price has climbed by 34%, while the Stockholm stock exchange as a whole has grown by 57% and the Bank Index has increased by 82%. The largest Swedish shareholders as at 31 December 2006 % of votes % of capital Industrivärden 10.7 10.5 REPURCHASING OF SHARES Oktogonen Foundation 10.4 10.2 For a company, repurchasing its own shares is a way of transferring capital to shareholders. It also allows the company to adjust its capital structure continuously throughout the year. The latter factor is particularly important for a bank whose fi nancial objective is higher return on shareholders’ equity. The scope and size of the buyback depends on the Bank’s fi nancial position, its net earnings trend, investments and credit demand. At the annual general meeting on 25 April 2006, it was resolved to cancel the 20.6 million shares that the Bank had repurchased since the 2005 AGM. At the same time, the Bank’s board received a mandate to repurchase 40 million shares during the period until the 2007 AGM. The buybacks were begun on 26 April 2006, and by the end of the year, 14.8 million shares had been repurchased. Since 2000, the Bank has bought back 80.5 million shares (net), which has led to capital totalling SEK 13.3bn being transferred to Handelsbanken’s shareholders. Alecta 5.3 5.2 AMF and funds 2.6 2.6 Swedbank Robur funds 2.6 2.5 Handelsbanken’s funds incl. XACT 1.9 1.8 SEB funds 1.8 1.8 Livförsäkrings AB Skandia 1.7 1.7 AFA Försäkring 1.6 1.6 Lundbergs etc. 1.6 1.6 1st National Swedish Pension Fund 1.1 1.0 4th National Swedish Pension Fund 1.0 1.0 Nordea funds 1.0 0.9 Folksam/KPA/Förenade Liv 0.9 0.9 2nd National Swedish Pension Fund 0.9 0.9 HANDELSBANKEN ■ ANNUAL REPORT 2006 19 ADMINISTRATION REPORT ■ SHARE AND SHAREHOLDERS Market capitalisation 1997–2006 Share price performance 1997–2006 SEK bn 140 350 120 300 100 250 80 200 60 150 40 100 20 50 Index ■ SHB A ■ AFGX Bank & Insurance ■ AFGX 0 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 1997 2006 Key figures Earnings per share, SEK 1998 1999 2000 2001 2002 2003 2004 2005 2006 2006 2005 2004 2003 2002 20.41 16.98 14.55 11.70 10.50 Dividend per share, SEK 8.00* 7.00 6.00 5.25 4.75 Dividend growth, % 14.3* 16.7 14.3 10.5 5.6 Adjusted shareholders’ equity per share, SEK 104.27 100.23 92.30 82.61 75.48 Price of class A share, 31 December, SEK 207.00 197.00 173.00 147.00 116.00 Class A, number of shares 3 180 486 2 573 108 2 550 130 2 663 856 2 488 517 Class B, number of shares 41 024 59 610 154 003 57 964 52 986 240.0/173.0 199.5/156.5 174.5/136.5 148.5/103.5 162.5/97 Average daily turnover on Stockholm stock exchange Highest/lowest price paid, class A shares, SEK 3.9* Dividend yield, % 3.6 3.5 3.6 4.1 P/E ratio 10.1 11.6 11.9 12.6 11.0 Stock exchange price/equity, % 199 197 187 178 154 * Dividend as recommended by the board. In all material respects, the figures have been adjusted to take account of current accounting policies and definitions. For definitions, see inside back cover. Shares per shareholder 31 December Shareholdings No. in thousands Number of shareholders Number of shares Class A shares Class B shares % of share capital % of votes 1.4 1–500 shares 59 058 8 560 1 828 1.6 501–2 500 shares 28 236 29 386 3 379 5.0 4.7 2 501–25 000 shares 9 373 50 979 4 226 8.5 8.0 25 001–250 000 shares 617 44 997 1 034 7.1 7.1 shares 221 488 537 1 283 75.5 76.5 14 517 306 2.3 2.3 97 505 636 976 12 056 100.0 100.0 250 001– Shares repurchased by Handelsbanken Total Shares divided into share classes 31 December Average prices/ repurchased amount No. % of capital % of votes Class A 636 976 319 98.14 99.81 Class B 12 055 943 1.86 0.19 53 648 946 649 032 262 100.00 100.00 2 888 193 566 Share class Share capital 2 834 544 620 Repurchased during the year Class A 14 517 300 2.23 2.28 at 190.63 Class B 305 500 0.05 0.00 at 206.56 64 601 985 1 359 475 14 822 800 2.28 2.28 2 830 475 672 65 961 460 Class A 622 459 019 98.15 99.81 Class B 11 750 443 1.85 0.19 52 289 471 634 209 462 100.00 100.00 2 822 232 106 After repurchases Total after repurchases As at 13 June 2006, 12,972,900 Class A shares and 7,636,300 Class B shares were cancelled. The quotient value of the shares was simultaneously increased from SEK 4.30 to 4.45 through a bonus issue. During the year, 14,517,300 Class A shares and 305,500 class B shares were repurchased. The average number of outstanding shares in 2006 was 643,284,311. 20 HANDELSBANKEN ■ ANNUAL REPORT 2006 2 769 942 635 ADMINISTRATION REPORT ■ SEGMENT INFORMATION Segment information Segment information SEK m Net interest income Branch operations Markets Asset Management Pensions & Insurance Other operations Eliminations Total 2006 Total 2005 -15 Change % 14 324 572 168 139 -216 14 972 15 090 -1 Net fee and commission income 4 174 1 728 1 193 2 304 -167 9 232 7 055 31 Net gains/losses on financial items at fair value 1 206 1 422 33 907 693 4 261 3 459 23 571 194 194 Risk result - insurance 571 Other income 391 839 90 153 3 526 -4 476 523 525 0 Total income 20 095 4 561 1 484 4 074 3 836 -4 491 29 559 26 323 12 Of which internal -8 841 9 634 -240 -262 4 200 4 491 3 890 15 Administrative expenses -8 241 -3 244 -677 -1 297 -2 926 4 491 -11 894 -10 425 14 -557 -513 9 4 491 -12 451 -10 938 14 Depreciation, amortisation and impairments of property, equipment and intangible assets -153 -21 -2 -199 -182 Total expenses -8 394 -3 265 -679 -1 496 -3 108 Profit before loan losses 11 701 1 296 805 2 578 728 17 108 15 385 11 53 2 - - 55 261 -79 Loan losses/recoveries Gains/losses on disposal of property, equipment and intangible assets Operating profit Return on equity, % 0 0 - - 1 1 4 -75 11 754 1 298 805 2 578 729 17 164 15 650 10 18.5 14.0 30.4 34.7 20.9 17.9 Assets 1 119 346 702 974 24 133 216 669 297 568 -570 682 1 790 008 1 582 907 Liabilities 1 074 401 696 177 22 227 209 669 291 990 -570 682 1 723 782 1 517 149 Other disclosures Investments in non-financial assets Average number of employees 152 33 4 30 283 502 4 436 6 155 1 244 339 681 1 744 10 163 9 395 Internal income and expenses are included in the respective item on the income statement. Internal income consists of payment for services rendered according to the cost price principle. Expenses also include the distribution of costs made internally within the Group for services from business support operations. The Other operations business area includes Treasury and the central head office departments. It also includes capital gains/losses, divdends and income and expenses that are not attributable to a specific segment. Return on equity for the segments is computed after standard tax while for the whole Group and Pensions & Insurance, it is computed after full tax. The shareholders’ equity, on which calculation of return on equity is based, corresponds to the assessment of the Group’s overall actual capital requirement. HANDELSBANKEN ■ ANNUAL REPORT 2006 21 ADMINISTRATION REPORT ■ BRANCH OFFICE OPERATIONS Branch office operations Branch office operations comprise a total of 599 branches in eleven regional banks, and also include Handelsbanken Finans. Seven of the regional banks are in Sweden, with the remaining four in Great Britain, Denmark, Finland and Norway. At Handelsbanken, the branches are the base of all operations and co-ordinate services for all customers, including major corporations. The regional banks are responsible for their own profits and all pursue the same goals – to provide universal banking services with a higher service level and at lower cost than comparable banks. Handelsbanken Finans offers a full range of finance company services in the four Nordic countries and in Great Britain. Handelsbanken Finans works through the Bank’s branches and in financing collaborations with retailers and vendors. EARNINGS PERFORMANCE Demand for credit remained strong, while margins on mortgage loans in particular remained under pressure. Deposit margins improved slightly on practically all markets. Operating profit decreased by 5% to SEK 11,754m (12,416). Income was generally unchanged, while expenses increased at the same time as recoveries were slightly lower than the previous year. A total of 17 new branches were opened. BRANCH OFFICE OPERATIONS IN SWEDEN Earnings performance Operating profit was SEK 9,764m (10,583), a decrease of 8%. Net interest income fell in the Swedish branch office operations. Lending volumes rose by 10%, household lending by 11% and corporate lending by 9%. The increase in lending volumes could not compensate for the pressure on margins but higher deposit margins boosted net interest income. The margin on floating rate household deposits was 38bp higher during the fourth quarter than in the same quarter one year previously. In terms of lending margins, the margin on mortgage loans to private individuals was under particular pressure throughout the year. The average margin was 77 bp, a decrease of 17 bp. Fee and commission income rose, particularly equity-related commission income. Expenses increased, while recoveries were SEK 134m lower and totalled SEK 55m (189). Quarterly performance Branch office operations SEK m 2006:4 2006:3 2006:2 2006:1 Total 2006 Total 2005 Net interest income 3 624 3 550 3 609 3 541 14 324 14 655 -2 Net fee and commission income 1 123 917 1 047 1 087 4 174 3 803 10 -4 Net gains/losses on financial items at fair value 297 172 412 325 1 206 1 261 Other income 78 89 127 97 391 369 6 Total income 5 122 4 728 5 195 5 050 20 095 20 088 0 Of which internal -2 589 -2 513 -1 946 -1 793 -8 841 -6 399 38 Administrative expenses -2 235 -1 841 -2 158 -2 007 -8 241 -7 797 6 Depreciation, amortisation and impairments of property, equipment and intangible assets Total expenses Profit before loan losses Loan losses/recoveries Gains/losses on disposal of property, equipment and intangible assets Operating profit Return on equity, % Average number of employees 22 Change % HANDELSBANKEN ■ ANNUAL REPORT 2006 -57 -32 -32 -32 -153 -138 11 -2 292 -1 873 -2 190 -2 039 -8 394 -7 935 6 2 830 2 855 3 005 3 011 11 701 12 153 -4 -55 -22 52 78 53 259 -80 0 0 0 0 0 4 -100 2 775 2 833 3 057 3 089 11 754 12 416 -5 17.8 18.1 18.5 19.6 18.5 16.6 6 193 6 364 6 055 6 007 6 155 6 018 2 ADMINISTRATION REPORT ■ BRANCH OFFICE OPERATIONS Balance sheet Operating profit Branch office operations 31 December SEK m 2006 Loans to credit institutions 2005 Change % Branch office operations in Sweden SEK m 2006 2005 Change % -3 39 998 35 127 14 Income 15 943 16 354 1 042 171 946 997 10 Expenses -6 234 -5 959 5 Interest-bearing securities 9 985 12 164 -18 55 189 -71 Assets where the customer bears the value change risk 1 437 0 Other assets 25 755 33 523 -23 Total assets 1 119 346 1 027 811 9 Due to credit institutions 367 602 367 722 0 Deposits and borrowing from the public 322 321 286 185 13 Issued securities 351 381 288 231 22 Loans to the public Liabilities where the customer bears the value change risk Disposal of property, equipment/intangible assets 0 -1 100 9 764 10 583 -8 2006 2005 Change % 278 246 13 of which households 105 93 13 companies 173 153 13 Operating profit Business volumes Sweden Average volumes SEK bn Deposits from the public 1 437 0 31 660 29 175 9 44 945 56 498 -20 Loans to the public* 797 727 10 1 119 346 1 027 811 9 of which households 369 333 11 of which mortgage loans 319 285 12 companies 428 394 9 of which mortgage loans 142 142 0 Other liabilities Shareholders’ equity Total liabilities and equity Loan losses/recoveries Business development in Sweden As shown in the table, business volumes increased, to both households and companies. The rate of increase was high throughout 2006, except for lending to companies where the rate of increase decreased between the last two quarters of the year. The average volume of deposits from households increased by 13%. Credit volumes at Handelsbanken Finans, reported under branch office operations, increased by 14% to SEK 42bn. Handelsbanken was acclaimed Commercial Bank of the Year by Affärsvärlden, a Swedish business periodical. This award is based on a survey among major companies in Sweden. During the autumn, Swedish Quality Index (SKI) presented its annual survey of how satisfied bank customers are. This survey has been carried out since 1989, when only the four major Swedish banks were included. Among these four, Handelsbanken has always been in top position, among both private and corporate customers. This was the case again in this year’s survey. Three new branches were started during the year, in Frösunda and Ekerö outside Stockholm and in Viared, outside Borås. Thus the Bank had 457 branches in Sweden. More branches will be opened in 2007. Within the organisation of Handelsbanken Finans, Handelsbanken Direct was started on 1 October with the aim of increasing availability for customers, existing and potential, who use the Bank’s online services. The intention is to develop the online banking service so that more transactions can be generated via the service, customers can be given personal service by phone 24 hours a day, 7 days a week, and the branches’ administration is also made easier. The range of offerings via the online banking service will gradually be increased. So far, customers can apply for loans and card services, or sign up for a selection of the Bank’s savings products. The volume of purchases made using the Bank’s Allkort credit card increased, and it had the highest purchase volume per card in Europe in its class. The total number of Allkort cards was 179,000, an increase of 20%. The Frikort ATM and debit card, which replaced the Bankomat ATM card, has been a success. Since its launch in October, around 70,000 cards have been distributed to customers. It is particularly gratifying that these customers, who previously used cash dispensers, have started to use their cards when shopping instead of using it solely as an ATM card. In 2006, Handelsbanken was fi rst to launch private label corporate cards. * excl. loans to the National Debt Office GREAT BRITAIN Earnings performance in Great Britain Operating profits fell to SEK 150m (154). The decrease was mainly due to a provision for probable loan losses. The operating profit before loan losses increased by 6%, despite the continuing rapid expansion in the form of new branches and costs for upgrading IT systems. The number of employees grew in line with the expansion, and at the end of 2006 there were 267 employees, an increase of 23%. The increase in income was mainly due to the continued strong growth in business volumes, in both newly-opened and existing branches. The average volume of lending rose by 51% to GBP 2.4bn, while deposits rose by 25% to GBP 1.3bn. Operating profit Branch operations in Great Britain SEK m Income 2006 2005 Change % 20 591 493 -421 -332 27 Loan losses/recoveries -20 -7 186 Operating profit 150 154 -3 Expenses Business volumes, Great Britain Average volumes GBP m 2006 2005 Change % 1 254 1 004 25 Of which households 102 70 46 companies 1 152 934 23 51 Deposits from the public 2 403 1 591 Of which households 432 301 44 companies 1 971 1 290 53 Loans to the public Business development in Great Britain Six new branches were opened – in Slough, Sheffield, Oxford, Leicester, Swindon and Wolverhampton. This brought the number of branches to 26. Managers have been recruited for several new branches and premises acquired. These branches will start up in the fi rst half of 2007, and discussions are in progress to open branches in other locations. Handelsbanken in Great Britain was assessed for the Best Companies accreditation. This is based on a detailed questionnaire to all HANDELSBANKEN ■ ANNUAL REPORT 2006 23 ADMINISTRATION REPORT ■ BRANCH OFFICE OPERATIONS employees with a response rate of 88% – which is considered a high figure. The outcome was the highest possible rating – three stars – which is only awarded to companies which are assessed as being ”extraordinary”. The results of this survey reflect the fact that Handelsbanken’s business model is popular with its staff. Customers also showed their appreciation in a survey arranged by the “Forum of Private Business”, where Handelsbanken was one of the banks customers least wanted to leave. Business volumes, Denmark Average volumes DKK bn 2006 2005 Change % 19.4 16.3 19 Of which households 5.7 5.3 8 companies 13.7 11.0 25 19 Deposits from the public 26.2 22.0 Of which households 11.6 9.5 22 companies 14.6 12.5 17 Loans to the public DENMARK Earnings performance in Denmark FINLAND Earnings performance in Finland Operating profits rose, despite pressure on margins. The operating profit for the fourth quarter was the highest ever. The increase in profits was mainly generated through higher business volumes. The average volume of lending was DKK 26.2bn, with lending to households representing DKK 11.6bn. The average volume of lending to households went up by 22%, while the average volume of total lending increased by 19%. One reason for the growth in household lending was the strong demand for priority loans, Handelsbanken’s mortgage loan on the Danish market. The average volume of deposits from households increased by 8% to DKK 5.7bn, and total deposits rose by 19% to DKK 19.4bn. The positive trend in the area of securities continued. Turnover on the Danish stock market was at a record high level with rising share prices, although the third quarter had temporarily lower activity. Fee and commission income rose by 8% overall. Net gains/losses on fi nancial items increased, mainly due to a positive trend for foreign exchange trading and the fair value measurement of interest rate derivatives. In 2006, two structured products were launched: an equitylinked bond worth DKK 168m and a commodity-indexed bond with sales of DKK 186m. The volume of priority loans – a product which Handelsbanken was the fi rst bank to introduce in Denmark in 2000 – exceeded DKK 10bn in December. The number of currency transactions and leasing transactions with companies increased substantially, particularly in the second half of the year. In parallel with the increased level of business activity, there was a significantly heightened interest in Handelsbanken in the Danish media. Handelsbanken was mentioned in the nationwide media twice as often in 2006 as in 2005. In Dansk Kundeindex, which is an independent survey of satisfaction among Danish banking customers, Handelsbanken was once again very highly rated by both private and corporate customers. Two new branches were opened in 2006, one in Hillerød, north of Copenhagen, and one in Køge, south of Copenhagen. This brought the number of branches in Denmark to 37. Operating profit increased by 17% to SEK 447m (381). Increased business volumes – resutling in higher net interest income – and higher commissions mainly on investment operations, led to an overall increase in income of 16% to SEK 1,173m. Costs rose by 10%, due mainly to the ongoing change of bank systems, but also to higher staff costs. Demand for credit by households remained strong in 2006, particularly for mortgage loans. The average volume of lending to households climbed by 19%. In corporate lending, Handelsbanken reinforced its position as one of the largest corporate fi nanciers in Finland. One example of this is fi nancing the local trains in the Helsinki region. A fi nancing agreement for 32 trains worth some EUR 300m was Handelsbanken’s largest ever leasing transaction in Finland. Operating profit Branch operations in Finland SEK m 2006 2005 Change % 1 173 1 011 16 -668 -608 10 Loan losses/recoveries -58 -22 164 Operating profit 447 381 17 Income Expenses Business volumes, Finland Average volumes EUR m Deposits from the public Of which households companies Loans to the public 2006 2005 Change % 1 967 1 778 11 942 894 5 1 025 884 16 7 286 6 636 10 Of which households 2 323 1 955 19 companies 4 963 4 681 6 Business development in Finland Operating profit Branch operations in Denmark SEK m Income Expenses Loan losses/recoveries Disposal of property, equipment/ intangible assets Operating profit 24 HANDELSBANKEN ■ ANNUAL REPORT 2006 2006 2005 Change % 972 907 7 -546 -492 11 30 4 0 4 -100 456 423 8 EPSI’s survey of satisfaction among Finnish bank customers showed that Handelsbanken had Finland’s most satisfied customers among the large banks. The Bank had the best ratings from both private and corporate customers. For some time Handelsbanken in Finland has been developing its product range in the area of savings and investments. The Bank started to see the result of these investments during the year. Alongside its traditional savings and investment accounts, the Bank offers several different mutual funds and structured products as investment options. A commodity index bond issued in April was subscribed for some EUR 40m. This bond issue was the largest so far issued in Finland by Handelsbanken. New sales in the Bank’s mutual funds were EUR 66m (47) and the total volume in mutual funds was ADMINISTRATION REPORT ■ BRANCH OFFICE OPERATIONS EUR 367m (269) at the end of the year. A Private Banking operation was started in 2006. In addition to structured products, two new retail bond loans were issued during the year. On 1 June, the branch in Tallinn, Estonia was opened. In organisational terms, this branch is part of Regional Bank Finland, bringing the number of branches to 37. Handelsbanken in Finland decided to expand its operations with a major drive on opening new branches in 2007. It is planned to open around 10 branches in 2007. Defi nite decisions were taken to open a branch in Mikkeli and a third branch in Espoo. Handelsbanken in Finland ordered a local banking system from Samlink. Since its collaboration with Samlink is long-term and strategic, Handelsbanken acquired an 8% stake in Samlink. Handelsbanken Finans boosted sales in Retail Finance Consumer by 28%. An important reason for the successes was the transfer to MasterCard, which led to more active and loyal customers and thus increased turnover and higher profits. NORWAY The average lending volume increased by 33% to NOK 90.0bn (67.7), as compared to the overall increase among Norwegian banks which was 15%. The Bank’s lending to households rose by 22%. One contributory factor to this was the increasing proportion of “boligkrediter” (housing credits), a product well received by the market. Lending to corporate clients rose by 41%. Average deposits were up 31%, of which household deposits grew by 21% to NOK 7.4bn (6.1). Handelsbanken Finans also showed strong growth in Norway. The most important factor for sustainable profitable growth is satisfied customers. It is therefore pleasing that EPSI, in its yearly survey of customer satisfaction among Norwegian banking customers, in 2006 acclaimed Handelsbanken as the “outstanding winner in the corporate market”. In the private market too, Handelsbanken’s customer satisfaction ratings were considerably higher than for the other universal banks on the Norwegian market. Branches were opened in Kolbotn, Asker, Moss, on Sotra, and in Molde, bringing the total number of branches in Norway to 42. Key figures Operating profit for 2006 was up by 13% to SEK 965m (855), the highest ever figure. Income increased by 16% to SEK 1,809m. Higher business volumes for both deposits and lending created higher net interest income, despite increasing pressure on the margin for loans. Interest margins were adversely affected by Norges Bank raising key rates on five occasions during the year. These rate increases did not have a direct impact on lending rates, due to the long periods of notice that banks are obliged to give private customers under Norwegian law. The full-year effect is estimated at SEK 35m. Fee and commission income also increased significantly, as Handelsbanken Norway is doing more and more business with households. The increase in costs was 13%, due mainly to the establishment of new branches, but also to the rapid rate of expansion. Handelsbanken Norway invested in a corporate profi le marketing campaign, including TV advertising, which was one factor in the increase in costs. The underlying cost trend was moderate, and the C/I ratio improved to 44.9% (45.9). Branch office operations outside Sweden Number of branches Number of employees Number of active customers, private, 1000s Number of active customers, corporate, 1000s Total assets, SEK bn 2006 2005 142 128 1 568 1 423 255 244 44 42 299 251 Loans to households, SEK bn 87 77 Loans to corporates, SEK bn 154 124 94 83 Deposits from the public, SEK bn Operating profit Branch operations in Norway SEK m 2006 2005 Change % 1 809 1 563 16 -812 -718 13 Loan losses/recoveries -32 10 Operating profit 965 855 13 Change % Income Expenses Business volumes, Norway Average volumes NOK bn 2006 2005 Deposits from the public 34.7 26.5 31 Of which households 7.4 6.1 21 companies 27.3 20.4 34 90.0 67.7 33 Of which households 35.0 28.7 22 companies 55.0 39.0 41 Loans to the public Business development in Norway The Norwegian economy maintained its positive trend during 2006. Almost all sectors showed high activity and good profitability, which helped to boost consumer purchasing power. This provided good conditions for the Norwegian banking sector. HANDELSBANKEN ■ ANNUAL REPORT 2006 25 ADMINISTRATION REPORT ■ HANDELSBANKEN MARKETS Handelsbanken Markets Handelsbanken Markets is organised into four business areas: Capital Markets, Markets International, Financial Institutions and Cash Management and Payments. Capital Markets is the Bank’s investment bank comprising corporate finance, including debt capital markets, equities, fixed income, commodities and foreign exchange trading, structured products and research. It also includes support to the branch office operations for products in these areas. Markets International comprises banking operations outside the Nordic countries and Great Britain, trade finance, export and project finance. Financial Institutions is responsible for monitoring countries, banks and other financial institutions. Cash Management and Payments is the Bank’s central function for development and sales support for payment products. There are just over 1,300 employees in 16 countries. EARNINGS PERFORMANCE Profits increased by 34% to SEK 1,298m (969). Handelsbanken Capital Markets reported significantly higher earnings, while Handelsbanken Markets International reported slightly lower earnings, mainly due to the fact that the new units opened in 2005 and 2006 have not yet reached break-even. Total income rose by 29% to SEK 4,561m (3,536), while expenses were up by 27%. Changes in organisational structure at year-end 2006 As part of the Bank’s increased focus on both its investment banking operations and its international expansion, Handelsbanken Markets was split into two on 1 January 2007. Handelsbanken Capital Markets continues to run the Bank’s investment banking operations, but as a separate business area. Handelsbanken International consists of three units: International, Financial Institutions and Cash Management and Payments. Balance sheet Handelsbanken Markets 31 December SEK m 2006 2005 395 713 424 604 -7 52 457 28 689 83 Interest-bearing securities 151 993 158 839 -4 Other assets 102 811 93 386 10 Total assets 702 974 705 518 0 Due to credit institutions 301 351 301 870 0 Loans to credit institutions Loans to the public Deposits and borrowing from the public Change % 88 403 78 023 13 Issued securities 166 070 175 869 -6 Other liabilities 140 353 144 490 -3 6 797 5 266 29 702 974 705 518 0 Change % Shareholders’ equity Total liabilities and equity Quarterly performance Handelsbanken Markets 2006:4 2006:3 2006:2 2006:1 Total 2006 Total 2005 Net interest income SEK m 150 145 145 132 572 482 19 Net fee and commission income 515 353 440 420 1 728 1 523 13 Net gains/losses on financial items at fair value 328 235 427 432 1 422 1 010 41 Other income 231 182 281 145 839 521 61 Total income 1 224 915 1 293 1 129 4 561 3 536 29 Of which internal 2 580 2 653 2 460 1 941 9 634 6 344 52 -891 -679 -938 -736 -3 244 -2 550 27 Administrative expenses Depreciation, amortisation and impairments of property, equipment and intangible assets Total expenses Profit before loan losses Loan losses/recoveries Gains/losses on disposal of property, equipment and intangible assets Operating profit Return on equity, % Average number of employees 26 HANDELSBANKEN ■ ANNUAL REPORT 2006 -6 -5 -5 -5 -21 -20 5 -897 -684 -943 -741 -3 265 -2 570 27 327 231 350 388 1 296 966 34 0 0 1 1 2 3 -33 0 0 0 0 0 0 0 327 231 351 389 1 298 969 34 13.9 10.0 14.8 17.6 14.0 13.8 1 321 1 332 1 213 1 111 1 244 1 102 13 ADMINISTRATION REPORT ■ HANDELSBANKEN MARKETS HANDELSBANKEN CAPITAL MARKETS Earnings performance Earnings increased by 41% to SEK 965m (686), the highest figure since Capital Markets was formed in 2003. Virtually all business units improved their earnings. Income rose by 24%, while expenses went up by 18%. The increase in costs was mainly a result of higher staff costs, partly due to higher performance-related remuneration and partly to the average number of staff rising from 518 to 540. Operating profit Handelsbanken Capital Markets SEK m Income Expenses Loan losses/recoveries Operating profit 2006 2005 Change % 3 198 2 572 24 -2 233 -1 886 18 0 0 0 965 686 41 Business development Capital Markets’ objective is to be the leading Nordic investment bank. During the year, it advanced its positions and is one of the top three investment banks in virtually every area of operations, and market leader in several areas. This was particularly evident in brokerage income, which increased by 28%. Brokerage operations in the Nordic countries and in London showed especially strong progress. Handelsbanken is one of the leading players in Nordic equities, and customers outside the Nordic region accounted for over 38% of Capital Markets’ brokerage income. Business flows at corporate fi nance and debt capital markets remained strong. Handelsbanken was the largest player for IPOs in Sweden, and also one of the two largest bookrunners for syndicated loans. For several years, Handelsbanken Capital Markets has been the Nordic market leader in structured products. In 2006, Handelsbanken Capital Markets arranged SEK 18.6bn worth of capitalprotected products. For equity-linked bonds, the largest product in terms of volume, the Bank’s market share in Sweden was 24%. On the warrants and certificates market, Handelsbanken Capital Markets’ sales rose by 209% to SEK 20bn. The Bank’s Nordic market share grew by 10 percentage points to 53%. 2006 saw the launch of the Maxcertifi kat (discount certificate), an alternative to outright equity investments. Earnings from trading in fi xed income and foreign exchange instruments climbed by 26%. Research products were improved: rapid, close-to-the-market analysis was combined with more long-term research. The Bank’s market position improved, and the international fi nancial magazine Global Finance acclaimed Handelsbanken as Scandinavia’s best foreign exchange bank. Following the takeover of commodity broker, Svenska Metallbörsen’s operations in September, the Bank can now also offer fi nancial solutions in this product range. The acquisition made Handelsbanken the leading commodity broker in the Nordic region. During the fourth quarter, the Bank began working with a leading provider of direct equity trading services, which means that the Bank’s institutional clients will have access to direct trading in equities on all the leading European stock exchanges. The solution is expected to be ready for launch in Q1 2007. In the second stage of the launch, North American stock exchanges will also be included. Organisation Handelsbanken Capital Markets is Handelsbanken’s investment bank. Capital Markets was formed on 1 January 2003 and was the fi rst Nordic investment bank to integrate its operations in the fields of equities, foreign exchange, fi xed income instruments, corporate fi nance, debt capital markets and structured products in the same organisation. Corporate fi nance and debt capital markets comprise stock market introductions (IPOs), the raising of equity and loan capital on public markets, corporate mergers and acquisitions, and structured fi nancing. Operations are primarily oriented towards companies and their main owners. Stockbroking operations comprise equities trading and research on behalf of customers with a focus on the Nordic markets, as well as the production of independent research reports. Quantitative and macroeconomic research are also produced. Operations mainly focus on major Nordic and international investors. Foreign exchange and fi xed income trading comprise all trading in fi xed income, commodities and foreign exchange products, for both Nordic and international investors. The structured products unit provides customised fi nancial solutions suited to different customers’ needs and risk level, for example, equity-linked bonds, multi-asset bonds, credit-linked notes, warrants, equity certificates, baskets of equities or other types of assets and share redemption programmes. These products demand broad fi nancial knowledge and a strong capital base. The fact that Capital Markets is an integral part of Handelsbanken offers proximity to Nordic customers via the Bank’s branch office network. Marketing to international customers is done through Handelsbanken Capital Markets’ units in London, New York and Singapore. Handelsbanken’s strong balance sheet offers the opportunity to handle both complex transactions and high risk which is a necessity for its ability to compete effectively with international investment banks. HANDELSBANKEN MARKETS INTERNATIONAL AND FINANCIAL INSTITUTIONS Earnings performance Earnings for the Handelsbanken Markets International and Financial Institutions business areas, which make up the business core of the operation which, on 1 January 2007 became Handelsbanken International, totalled SEK 107m (116), a decrease of 8%. Income increased by 6% while expenses rose by 9%. The fall in profits was due to increased investments in newly opened units such as in Poland, Russia, China and India. Income increased in all international units. Corporate business in Germany, the US and Hong Kong and clearing services for foreign banks were particularly successful. The number of employees was 369 (326), some 70% of these being outside Sweden. Operating profit Handelsbanken Markets International and Financial Institutions SEK m Income Expenses Loan losses/recoveries Operating profit 2006 2005 Change % 631 594 6 -526 -481 9 2 3 -33 107 116 -8 Business development One long-term goal of the international expansion is to increase the number of markets where the Bank can conduct profitable universal banking operations via its own branch network. Handelsbanken was the fi rst Nordic bank to open a representative office in Mumbai, India. The representative office in St. Petersburg, Russia is expected to be converted to a branch during the fi rst quarter of 2007. Operations in Poland were expanded with two new branches, in Gdansk and Poznan. Since 2005, the Bank has been able to offer mortgage loans to local customers in Poland. In summer 2006, the HANDELSBANKEN ■ ANNUAL REPORT 2006 27 ADMINISTRATION REPORT ■ HANDELSBANKEN MARKETS Bank also started to offer leasing services to corporate customers. The plan is to continue expanding in Poland in the years ahead. Through the export and project fi nance unit, the Bank arranged the fi nancing of a road project in Finland. Handelsbanken’s position as a leading bank for trade fi nance was confi rmed when the Bank for the second year running was acclaimed “Best Trade Finance Bank and Provider in Sweden” by the international specialist periodical Global Finance. Organisation Handelsbanken Markets International is responsible for the branch offices and representative offices outside the Nordic region and Great Britain, clearing services for foreign banks, trade fi nance, export and project fi nance. Outside Sweden, its purpose is twofold: to support the Bank’s Nordic and British corporate customers by acting as a business partner in the international markets where the Bank’s customer base is strongly established, and to develop and enhance relationships with international corporate groups. Outside the Nordic region and Great Britain, Markets International has banking operations in New York, Luxembourg, Amsterdam, Paris, St Raphaël, Vienna, Frankfurt, Hamburg, Warsaw, Poznan, Gdansk, Moscow, Singapore, Hong Kong and Shanghai and representative offices in Beijing, Mumbai, Taipei and St. Petersburg. 28 HANDELSBANKEN ■ ANNUAL REPORT 2006 ADMINISTRATION REPORT ■ HANDELSBANKEN ASSET MANAGEMENT Handelsbanken Asset Management Handelsbanken Asset Management comprises fund management, discretionary management and Nordic custody services. Apart from services aimed at companies, institutions and private individuals, Asset Management provides support to the branch offices regarding investments, portfolio systems and accounting for foundations. Operations are conducted in the four Nordic countries, and in Luxembourg, Switzerland, France, Spain and Singapore. EARNINGS PERFORMANCE Operating profit increased by 35% to SEK 805m (598). Income, which was mainly based on the volume of assets managed, increased by 23% due to higher share prices and new sales. Expenses increased by 11%. Since autumn 2004, the Bank has invested in an enhanced management organisation and an expanded range of products, which have had an impact on both expenses and income. The volume of assets managed by Handelsbanken Asset Management grew to SEK 371bn (332). The total volume of assets under management by the Group was SEK 435bn (388). HANDELSBANKEN MUTUAL FUNDS 2006 was another good year for savers in mutual funds, with a good performance on most of the world’s stock markets. Several equity funds increased by 25-30%. The Nordic small cap funds reported the best performance among the Bank’s mutual funds with an increase of 36-38%. At the end of 2006, the Bank’s mutual fund management company managed 106 (106) mutual funds with a total value of SEK 220bn (184). Some 49% (49) of the assets under management were invested in equity funds, 25% (24) in fi xed income funds, 24% (25) in mixed funds, and just over 2% (2) in hedge funds. The average volume of assets under management in Handelsbanken’s mutual funds increased by 27% from the previous year and amounted to SEK 199bn (156). The gross margin, that is the management commission in relation to the assets under management, fell during the summer months with the decline in stock markets. However, it improved towards the end of the year due to rising share prices and the Bank’s launch of new mutual funds with higher management commissions. Net new savings in the Group’s funds on the Swedish mutual fund market were SEK 15.4bn (14.9), equivalent to a market share of 22% (18). This was the eighth year running in which the Bank’s market share of new sales was higher than its share of total mutual funds savings, which at year-end amounted to 14.0% (13.7). Handelsbanken was thus the third largest player on the market.In 2004, a major restructuring programme was launched to improve fund management performance. The programme has achieved the desired Quarterly performance Asset Management SEK m Net interest income Net fee and commission income Net gains/losses on financial items at fair value 2006:4 2006:3 2006:2 2006:1 Total 2006 Total 2005 Change % 41 51 43 33 168 113 49 296 282 320 295 1 193 985 21 7 4 15 7 33 42 -21 Other income 29 23 17 21 90 69 30 Total income 373 360 395 356 1 484 1 209 23 Of which internal -48 -25 -74 -93 -240 -408 -41 -183 -155 -178 -161 -677 -608 11 Administrative expenses Depreciation, amortisation and impairments of property, equipment and intangible assets Total expenses Profit before loan losses Loan losses/recoveries Gains/losses on disposal of property, equipment and intangible assets 0 -1 0 -1 -2 -3 -33 -183 -156 -178 -162 -679 -611 11 190 204 217 194 805 598 35 - - - - - - - - - - - 0 Operating profit 190 204 217 194 805 598 Return on equity, % 28.8 30.8 32.6 29.3 30.4 23.2 Average number of employees 357 344 328 325 339 320 35 6 HANDELSBANKEN ■ ANNUAL REPORT 2006 29 ADMINISTRATION REPORT ■ HANDELSBANKEN ASSET MANAGEMENT effect, not the least of which was an improved rating. Every month, the independent ratings institute Morningstar rates selected mutual funds from the fund management companies. In the December ratings from Morningstar (three-year ratings), Handelsbanken’s mutual funds received an average rating of 3.31, which was the highest among the major Swedish banks. In addition, Handelsbanken was best among the major Swedish banks in the equity and fi xed income funds categories for the same period. Balance sheet Asset Management 31 December SEK m Loans to credit institutions Loans to the public Interest-bearing securities 2005 Change % 14 752 11 095 33 NORDIC CUSTODY SERVICES 2 437 2 221 10 - - Custody holdings in the Bank’s Nordic custody services amounted to SEK 790bn, an increase of 4%. The number of securities transactions rose by 68%. This reflects increased activity among customers, as well as the strong performance of the Nordic stock exchanges. During the year, Handelsbanken’s institutional custody services entered into a collaboration agreement with one of the largest global custodian banks in the USA. The aim of the agreement is to offer a sophisticated range of products in institutional custody services to Nordic fi nancial institutions. Global Investor Magazine, which annually ranks institutional custody services, awarded Handelsbanken’s Nordic custody services a high rating in all the Nordic countries. Handelsbanken was acclaimed the best custodian bank in Denmark and Norway. 6 944 5 292 31 Total assets 24 133 18 608 30 9 367 6 001 56 11 352 8 493 34 - - Deposits and borrowing from the public Issued securities Other liabilities 1 508 2 359 Shareholders’ equity 1 906 1 755 9 24 133 18 608 30 Total liabilities and equity -36 Sweden Customer interest in regular savings in mutual funds increased sharply during the year, both in terms of number of customers and volume. The monthly amount saved in mutual funds during the year increased by approximately 16%. An independent customer survey reported that Handelsbanken’s mutual fund customers were again the most satisfied. Handelsbanken received the highest rating of the major banks for all 12 rating criteria and the highest rating of all fund management companies on 9 of the 12 criteria. Two new mutual funds were launched on the Swedish market – the India Fund and Garantifond Plus (Guarantee Fund Plus). Garantifond Plus was launched in June as the fi rst mutual fund of its kind in Sweden. The fund guarantees 80% of the highest price ever achieved for a fund unit. Finland and Norway There was a continued focus on increased sales via the Norwegian and Finnish regional banks during the year. Two new mutual funds were launched, the India Fund and Klick Norge 90. Good performance, especially by the equity funds and mixed funds, contributed to the sales increase. New sales in the Bank’s mutual funds in Finland were EUR 66m (47), and at year-end, volumes of Finnish customers’ mutual funds totalled EUR 367m (269). Net savings in the Bank’s mutual funds by customers in the Norwegian branch operations increased by NOK 0.8bn (0.2) and the volume of funds managed rose by 12% to NOK 2.7bn (2.4). Exchange-traded funds The assets managed in the XACT funds increased by 16% to SEK 17bn (14). The average volume increased by 105% to SEK 16.8bn. Three new mutual funds were launched, giving XACT a total of eight listed mutual funds. Six of these are traded on the Stockholm stock exchange, with the other two being traded on the Oslo and Helsinki stock exchanges respectively. XACT Bull increased by 33%, making it the best performance in the Swedish funds category for 2006, according to Morningstar. XACT Bull is a special fund with the objective of giving a daily return equivalent to approx. 150% of the daily change in the OMXS30TM Index. 30 HANDELSBANKEN ■ ANNUAL REPORT 2006 The Bank managed discretionary assets totalling SEK 177bn (169), of which 34% were exposed to equity markets and the rest to fi xed income markets. SEK 40bn (34) of the managed assets were invested in the group’s mutual funds. In 2006, portfolios under discretionary management generally achieved good returns, mainly due to strong equity markets, coupled with structured and customised management solutions. Discretionary management acquired several new institutional customers during the year, Q4 being the strongest quarter with net sales of approximately SEK 6.6bn. 2006 Other assets Due to credit institutions DISCRETIONARY MANAGEMENT PRIVATE BANKING OUTSIDE THE NORDIC COUNTRIES AND GREAT BRITAIN Private Banking outside the Nordic countries and Great Britain is conducted through Svenska Handelsbanken S.A. in Luxembourg, with a branch in Zurich, a representative in Singapore, and representative offices in Marbella (Costa del Sol), Nice (Côte d’Azur), and La Nucia (Costa Blanca), which was opened this year. The representative offices market private banking services to Nordic expatriates. The volume outside the Nordic countries and Great Britain was SEK 14bn (12), which represents an increase of 17% for the year and 12% in the fourth quarter. ADMINISTRATION REPORT ■ HANDELSBANKEN PENSIONS & INSURANCE Handelsbanken Pensions & Insurance Handelsbanken Pensions & Insurance comprises Handelsbanken Liv and SPP. On 1 January 2006, SPP became a profit-distributing company, as did Handelsbanken Liv in 2002. Together, these companies are among the market leaders, with a complete range of life insurance products for occupational and private pensions, as well as asset protection schemes for companies, organisations and private individuals. The companies sell their services via Handelsbanken’s branch offices, their own sales organisations, independent brokers, workplaces at corporate customers, and direct marketing. Breakdown of results Handelsbanken Liv SPP Pensions & Insurance 2006 2005 2006 2006 2005 Administration result 102 101 44 146 101 Risk result 218 194 353 571 194 Financial result 213 258 1 578 1 791 258 Other 100 12 130 230 12 SEK m 2005 SPP brand name -160 Operating profit 633 565 2 105 2 578 565 Total 2005 Change % Quarterly performance Pensions & Insurance SEK m Net interest income 2006:4 2006:3 2006:2 2006:1 Total 2006 68 25 23 23 139 -2 Net fee and commission income 832 518 340 614 2 304 857 Net gains/losses on financial items at fair value 160 -355 -123 1 225 907 65 Risk result - insurance 169 187 38 297 49 571 194 Other income 42 44 37 30 153 109 40 Total income 1 289 270 574 1 941 4 074 1 223 233 -91 -61 -69 -41 -262 -68 285 -303 -276 -335 -383 -1 297 -631 106 Of which internal Administrative expenses Depreciation, amortisation and impairments of property, equipment and intangible assets Total expenses Profit before loan losses 194 -48 -48 -49 -54 -199 -27 -351 -324 -384 -437 -1 496 -658 127 938 -54 190 1 504 2 578 565 356 Loan losses/recoveries Gains/losses on disposal of property, equipment and intangible assets - - - - - - Operating profit 938 -54 190 1 504 2 578 565 Return on equity, % 54.8 -8.0 6.2 86.0 34.7 35.9 Average number of employees 680 681 674 687 681 185 356 268 HANDELSBANKEN ■ ANNUAL REPORT 2006 31 ADMINISTRATION REPORT ■ HANDELSBANKEN PENSIONS & INSURANCE Balance sheet Consolidation of insurance operations Pensions and Insurance 31 December Income/expense Income statement Reported in the insurance companies’ sub-results Fees Net fee and commission income Administration result Yield split Net fee and commission income Financial result Yield on equity Net gains/losses on financial items at fair value Other SEK m Net gains/losses on financial items at fair value Capital contribution to meet guaranteed interest Net gains/losses on financial items at fair value Risk result Risk result – insurance Financial result Financial result Other income Other income Administration result Staff costs Staff costs Administration result Other expenses Other expenses Administration result Amortisation of intangible assets Depreciation, amortisation and impairments of property, equipment and intangible assets Other PERFORMANCE FOR PENSIONS & INSURANCE Operating profits were SEK 2,578m (565). Since 1 January 2006, SPP has been included in Handelsbanken’s consolidated accounts. 2006 was another good year for the policyholders at Handelsbanken. For Handelsbanken Liv, this was the fourth year running that policyholders’ insurance assets showed higher growth than the average for life insurance companies offering traditional savings. In its fi rst year as a demutualised company, SPP also offered higher return on customer’s assets than the sector average. These high returns meant that the full yield split was received for all insurance contracts within Handelsbanken Liv and SPP. Hence the companies received 10% of the total return in the yield split and the net income was SEK 745m. Handelsbanken Liv and SPP had a strong, positive net inflow. For the year, premium income less insurance claims were SEK 7bn. Together with a good total return, this means that assets under management increased by 10% to SEK 171bn, including SEK 59bn in unit-linked insurance. Definitions of the result components The administration result is the difference between the company’s actual costs and the fees charged on the insurance contracts to cover administration. The fees are either based on assets managed, the premiums, the number of contracts or the disbursement. The risk result is the difference between the fees the company charges to cover the insurance risks (mortality, longevity, disability and accident) and the actual cost of these. The financial result consists of the difference between the return on assets managed on behalf of the policyholders and that which has been allocated to the policyholders. When the total return exceeds the guaranteed rate, the company receives 10% of the total return as its share. If the value of a customer’s insurance contract is less than the guaranteed value, the company provides capital. A capital contribution of this kind affects the financial result. Other includes amortisation of intangible assets, interest expense on debentures loans and the change in value of assets not managed on behalf of the policyholders. 32 HANDELSBANKEN ■ ANNUAL REPORT 2006 Change % 22 276 8 391 166 Interest-bearing securities 75 317 15 420 388 Assets where the customer bears the value change risk 58 468 134 432 -57 Other assets 60 608 18 241 232 Total assets 216 669 176 484 23 24 223 90 Deposits and borrowing from the public 111 682 30 804 Liabilities where the customer bears the value change risk 58 473 135 926 -57 2 871 862 233 Insurance obligations Risk result 2005 Loans to credit institutions Due to credit institutions Yield – risk insurance 2006 Other liabilities Shareholders’ equity Total liabilities and equity 263 12 420 7 452 67 7 000 1 350 419 216 669 176 484 23 HANDELSBANKEN LIV Profits for Handelsbanken Liv improved sharply for the fourth year running. Operating profit increased by 12% to SEK 633m (565). SPP Liv Fondförsäkring AB was part of Handelsbanken Liv in 2005, but was sold to SPP on 1 January 2006. If the comparative period is adjusted for this, the profit figure improves by 20%. The administration result increased to SEK 102m (101). Excluding SPP Liv Fondförsäkring, the administration result rose by 50%, which was mainly due to rising income as a result of higher business volumes. Since demutualisation on 1 January 2002, the risk result has gradually improved, and totalled SEK 218m (194). Total return on policyholders’ funds was 8.24% (11.65). Since the total return was greater than the guaranteed rate, which is between 3% and 5% depending on when the contract was entered into, the company receives 10% of the total return for all insurance contracts. Policyholders saw their capital adjusted upward by 7.42% (10.49). Handelsbanken Liv’s share of the return was thus SEK 196m (237). The fi nancial result was SEK 213m (258). The Other component was SEK 100m (12), of which the return on assets corresponding to shareholders’ equity was SEK 146m (94). Interest expenses and depreciation of intangible assets reduced the result by SEK 46m (82). Assets managed rose by 16% to SEK 59bn (51), of which SEK 32bn (26) was invested in unit-linked insurance. The increase was due mainly to a continued positive net inflow, but also to a positive change in the value of the assets. At the end of the year, 34% of the assets were placed in equities, of which 12 percentage points in Swedish equities and 22 percentage points in international equities. In connection with demutualisation in 2002, Handelsbanken Liv became one of the fi rst life insurance companies to introduce the right for customers to transfer their insurance funds. In 2006, SEK 519m was transferred to Handelsbanken Liv, while 126m was transferred from the company. On 1 February 2007, the Swedish government proposed a temporary stop in transfers for pension insurance contracts entered into on or before 1 February 2007. The total net inflow was SEK 3.7bn. Premium income, reported in accordance with IFRS 4, was SEK 774m (680). Insurance claims reported in accordance with IFRS 4 were SEK 422m (368). The available solvency margin was SEK 3,239m. This should be related to the required solvency margin which was SEK 1,674m, implying a solvency ratio of 1.94 (2.41). ADMINISTRATION REPORT ■ HANDELSBANKEN PENSIONS & INSURANCE Investment assets, average exposure % Handelsbanken Liv Investment assets, average exposure % Full year 2006 Jan–Jun 2006 Full year 2005 SPP Full year 2006 Jan–Jun 2006 Full year 2005 Shares 37 38 34 Shares 36 36 18 Fixed income 55 54 58 Fixed income 60 60 79 Property 6 6 6 Property 0 0 0 Other 2 2 2 Other 4 4 3 100 100 100 100 100 100 Full year 2006 Jan–Jun 2006 Full year 2005 Full year 2006 Jan–Jun 2006 Full year 2005 8.24 0.52 11.65 Total return, % 6.76 -0.17 6.60 Assets managed, SEK bn, end of period 112 104 105 27 23 23 3.10 3.24 1.44 Total Key figures Handelsbanken Liv Total return, % Assets managed, SEK bn, end of period of which unit-linked Solvency ratio, end of period Total Key figures 59 53 51 32 27 26 1.94 2.39 1.43 SPP of which unit-linked Solvency ratio, end of period * Administration result for SPP 2005 is calculated proforma. SPP SPP’s profits were SEK 2,105m. The administration result was SEK 44m. This was a substantial improvement compared to the previous year, primarily due to a 39% reduction in operating expenses to SEK 636m. Increased business volumes also contributed to an improvement in this part of the result. The risk result was SEK 353m. The fi nancial result was SEK 1,578m. Total return was 6.76% (6.60). Since the return was higher than the guaranteed rate on all contracts, SPP received SEK 549m as its share of the return on these contracts. The guaranteed rate is between 2.50% and 5.20%, depending on when the contract was entered into. Some 75% of the assets under management have a guaranteed rate of 3.50% or less. Policyholders saw their capital adjusted upward by 6.08%. Prior to the demutualisation, some of SPP’s insurance portfolios were underfunded. At year-end 2005, the shortfall was estimated at SEK 3.6bn on the basis of prevailing interest rates. When calculating the insurance liability, a long-term market yield is used as the discount rate. At year-end 2006, the discount rate was 54bp higher than at the start of the year. This meant that the value of the insurance liability for previously underfunded contracts was lower than at year-end 2005, which had a positive impact on the fi nancial result. Since Q3, the company has hedged a large part of the sensitivity in the valuation of the underfunded contracts caused by market interest rates and share price movements. The positive impact on the fi nancial result was SEK 1,045m. Among other things, the Other component reports the yield on assets corresponding to the company’s equity. This figure was SEK 353m. In Q4, the portion of the company’s own funds previously invested in equities was reinvested in fi xed-income securities. Amortisation of intangible assets and interest expenses had a negative impact of SEK 224m on the Other component. SPP had a positive net inflow of SEK 3.3bn. Together with a good total return, this means that assets under management increased by 7% to SEK 112bn (105), of which 27bn (23) were invested in unitlinked insurance. At the end of the year, 32% of the managed assets were placed in equities, of which 11 percentage points in Swedish equities and 21 percentage points in international equities. Premium income, reported in accordance with IFRS 4, was SEK 612m. Insurance claims, reported in accordance with IFRS 4, were SEK 197m. The available solvency margin was SEK 10.9bn. This should be related to the required solvency margin, which was SEK 3.5bn, implying a solvency ratio of 3.10. Demutualisation of SPP In connection with the demutualisation of SPP, the surplus was distributed to the policyholders. Savers who held policies with guaranteed return shared over SEK 2.5bn. SPP introduced the right for customers to transfer their insurance in connection with the demutualisation. Activity in the fi rst year was extremely low: SEK 3m was transferred to SPP and SEK 40m was transferred out. CERTIFICATION ENHANCED SALES CAPACITY AT BANK BRANCHES Insurance plays a very important role in the Bank’s investment concept. As a further step in the integration of insurance in the banking business, the insurance advisers were transferred in organisational terms to the respective regional banks. During the year, some 3,000 Handelsbanken employees were trained and certified in compliance with the legal requirements for insurance advisers. CONTINUED FOCUS ON NORDIC BUSINESS A large number of companies in the Nordic countries became new customers, following a successful collaboration with the insurance company If. Thus, Handelsbanken Liv has become one of the major insurers of mandatory occupational pensions in Norway. In Denmark, preparations began to be able to offer occupational pension plans to existing customers of the regional bank during 2007. HANDELSBANKEN ■ ANNUAL REPORT 2006 33 FINANCIAL REPORTS ■ ACCOUNTING POLICIES Accounting policies The accounts have been prepared in accordance with international financial reporting standards, IFRSs, as adopted by the EU. The accounting also follows the additions and restrictions of the regulations in the Annual Accounts Act for Credit Institutions and Securities Companies (ÅRKL), and the directives issued by the Swedish Financial Supervisory Authority, (FFFS 2005:33) and where applicable, the Swedish Financial Accounting Standards Council’s recommendations. Classification and valuation of items in the income statement and balance sheet for the parent company follows ÅRKL, FFFS 2005:33 and where applicable, the Swedish Financial Accounting Standards Council’s recommendations if complete adjustment to IFRS is not allowed. Differences in the accounting policies between the Group and the parent company are presented under the appropriate heading below. The currency used for reporting is Swedish kronor. 34 CHANGED ACCOUNTING POLICIES ETC. ASSESSMENTS AND ESTIMATES As from 2006, SPP is a profit-distributing company. Previously it was run on mutual principles. When SPP was demutualised, the insurance contracts were amended, and all the surplus funds in SPP as at 31 December 2005 were allocated to the policyholders. The insurance capital is then individual for each policyholder. This results in a change in accounting policy with the purpose of reflecting SPP’s commitment. The change implies that the reported obligation per customer will be at least the amount of the guaranteed assets. The EU occupational pensions directive is now applied in Swedish legislation. One implication of this is that a market rate of interest must be used to calculate the insurance obligations. For the insurance obligations that were previously measured using a maximum interest rate established by the Financial Supervisory Authority, the valuation now applies a risk-free market interest rate. Through this change of accounting policy the group’s opening shareholders’ equity has decreased by SEK 3,265m. The defi ned-benefit policies for the employees in the insurance business were previously treated as defined-contribution in the consolidated accounts. It has now been possible to change the accounting policy so that the pension obligations can now be reported as defi ned-benefit. The opening shareholders’ equity has been adjusted by SEK 280m. New policies are applied concerning consolidation of mutual funds managed by the Group where it has significant holdings. Mutual funds managed by the Handelsbanken Group are consolidated if: • A company in the Group owns more than 50% of the total units in an individual fund. • The Group’s return from a fund exceeds 5% of the fund’s total return, regardless of the size of the Group’s fund unit holding. In the case of consolidation, the part of the fund’s assets corresponding to the ownership share is reported in the balance sheet as shares and participating interests. The part of the fund’s assets belonging to other unit holders is reported in the balance sheet as assets or liabilities where the customer bears the value change risk. Comparative figures for 2005 have been adjusted but this has not led to any change in shareholders’ equity. Due to a reclassification, all interest income and interest expense relating to fi nancial assets in the trading book are now reported under Net gains/losses on fi nancial items at fair value. This is in order to arrive at a figure for net interest income which is clear of fi nancial assets and liabilities in the trading book and to gain an overall view of activity in the trading book. The adjustment of the comparative figures has an impact only on the distribution within net interest income. When preparing the annual report and consolidated accounts, the accounting regulations require that the company makes assessments and estimates. These are based on experience, assumptions and assessments which the management considers to be reasonable. The critical assessments made by the company management when applying the accounting policies are stated under the respective section and in the descriptions pertaining to each note. The final accounting of individual transactions may deviate from the estimated values. Areas which are particularly complex where assessments and estimates are of crucial importance are: • Valuation of fi nancial instruments. Holdings of instruments where prices are lacking from well-functioning liquid markets means that standard valuation models must be used where assessments and assumptions are applied apart from the market parameters that can be used in the valuation models. • Insurance obligations. In order to calculate the technical insurance obligations which consist of insurance provisions and provisions for unsettled claims, advanced assessments of a technical nature are carried out with assumptions regarding for example mortality, future interest rates, expenses and taxes. • Pension provisions. A number of actuarial, demographic and fi nancial assumptions are used to calculate the Group’s various pension liabilities. The various parameters used for calculation are stated in the information given in the note on staff costs. • Loan losses/bad debts. The value of the loan receivables is tested at regular intervals. Such tests contain a great many various assumption and assessments that are objective in various degrees. This impairment testing includes, for example, testing the value of collateral and estimating the cash flows that can be expected to be received from the customer as well as the estimated times of receipt of these cash flows. • Intangible assets. Impairment testing is carried out annually regarding intangible assets with an undefi ned utilisation period by comparing the calculated recovery value with the value reported. The recovery value is calculated by estimating future cash flows and relevant discount interest rates. HANDELSBANKEN ■ ANNUAL REPORT 2006 CONSOLIDATED ACCOUNTS The consolidated accounts comprise all companies in which Handelsbanken directly or indirectly has a controlling influence. Normally Handelsbanken has a controlling influence when its holding is more than 50% of the voting rights. In exceptional cases, legal obstacles may prevent a controlling influence. In such cases, consolidation does not take place, even though the participating interest exceeds 50% of the number of votes. Subsidiaries are consolidated in accordance with the acquisition accounting method. FINANCIAL REPORTS ■ ACCOUNTING POLICIES Companies in which Handelsbanken directly or indirectly has a significant influence are reported as associated companies. A significant influence normally exists when the participating interest is at least 20% and at most 50% of the voting rights. Associated companies are reported in the consolidated accounts in accordance with the equity method. Since 2001, SPP Livförsäkrings AB has been 100-percent owned by Handelsbanken. The balance sheet has been consolidated since 31 December 2005. As of 1 January 2006, the company distributes profits, which means that the earnings risk in SPP’s operations is borne by Handelsbanken and the income statement is also consolidated. There may be significant holdings of units in mutual funds managed by the Handelsbanken Group. These mutual funds are consolidated if: • A company in the Group owns more than 50% of the total units in an individual fund. • The Group’s return from a fund exceeds 5% of the fund’s total return, regardless of the size of the Group’s fund unit holding. In the case of consolidation, the part of the fund’s assets corresponding to the ownership share is reported in the balance sheet as shares and participating interests. The part of the fund’s assets belonging to other unit holders is reported in the balance sheet as assets or liabilities where the customer bears the value change risk. All foreign operations have activities that could cause their functional currency to deviate from the currency that the Group uses for reporting. In line with the Group’s decentralised organisation, each operation is run independently, and transactions between the parent company and the respective unit represent only part of their operations. The foreign units also conduct their own funding and the parent company is only affected indirectly by each operation’s cash flows. Salary payments and purchases are normally made in local currency. When translating the foreign subsidiaries’ balance sheets and income statements, the current method has been used. Assets, liabilities and minority interests in equity have been converted at the closing day rate. Shareholders’ equity is translated at the rate applicable at the time of investment or earning. The income statement has been translated at the average annual rate. Liabilities in foreign currencies raised for the purpose of hedging exchange rate differences in the net investment in independent foreign units are recorded at the closing day rate. The resulting translation differences have been classed as shareholders’ equity. VALUATION OF RECEIVABLES AND LIABILITIES IN FOREIGN CURRENCIES Receivables and liabilities in foreign currencies have been recorded at the end-of-day exchange rate. In the parent company, liabilities raised for the purpose of hedging exchange rate differences in subsidiaries’ shares are recorded at the rate applicable on acquisition. measurement is considered to provide a fairer picture of the earnings trend than measurement at amortised cost. Assets available for sale comprise all instruments which do not come under any of the other three categories. These assets are measured at fair value in the balance sheet. Unrealised changes in value are classed as shareholders’ equity. However, changes in value attributable to interest as well as exchange rate fluctuations are recognised directly in the income statement. Impairment testing is performed in those cases where indications of an impairment loss are present. The impairment loss is recorded in the income statement. Loans to the public and credit institutions In the balance sheet, depending on the counterparty, receivables are reported either as Loans to the public or as Loans to credit institutions. This classification is independent of the measurement category. The items are reported in the balance sheet on the settlement date. Leasing agreements where the lessee bears the economic risks and acquires the rewards associated with ownership of the asset are also reported as receivables. Loan receivables which represent bad debts are reported on the balance sheet at their net amount, i.e. after deduction for probable and actual loan losses. Undrawn loans (including the risk related to fi xed advance interest rates) are regarded as an off-balance-sheet commitment until the settlement date. The accounting standards allow measurement at fair value or at the highest of fair value and carrying amount. If a loan receivable is redeemed ahead of time, any early redemption charge received is reported immediately under Net gains/losses on fi nancial items at fair value. Repo transactions Repurchase transactions, also called repo transactions, refer to agreements where the parties simultaneously agree on the sale of specific securities and the repurchase of these securities at a pre-determined price. The securities provided remain in the balance sheet while those received are not carried in the balance sheet. The securities provided are carried as Collateral pledged. Payment received is recognised under Due to credit institutions or as Deposits and borrowing from the public, depending on the counterparty. Payment made is recognised under Loans to credit institutions or as Loans to the public, depending on the counterparty. Securities loans Securities lent out are recognised in the balance sheet as securities and as collateral pledged. Borrowed securities are not recognised as assets. Securities which have been lent out are measured in the same way as other securities of the same type. In cases where borrowed securities are sold, an amount corresponding to the fair value of the sold securities is recognised as a liability. CLASSIFICATION AND MEASUREMENT RULES FOR FINANCIAL ASSETS Interest-bearing securities Financial assets are classified for measurement into the following categories: 1. Loans and other receivables. 2. Assets held to maturity. 3. Assets measured at fair value. 4. Assets available for sale. Categories 1 and 2 are measured at amortised cost. In simplified terms, this means that the individual instrument’s effective interest rate is used as a basis for calculating the carrying amount. Measurement is supplemented by impairment testing when indications of an impairment loss are present. The impairment loss is recorded in the income statement. Assets measured at fair value mainly comprise assets held for trading purposes. In addition, individual lending portfolios may be classified as measured at fair value in cases where such On the balance sheet, interest-bearing securities are carried either as Instruments eligible as collateral with central banks or as Bonds and other interest-bearing securities. This classification is independent of the measurement category. Interest-bearing securities acquired with the intention of being held until maturity are classified as Assets held to maturity. The acquisition value of discount and coupon instruments (held and issued) refers to the accrued acquisition value. This value is the discounted present value of future payments where the discount interest rate is the effective interest rate at the time of acquisition. This implies that acquired premiums and discounts on coupon instruments are allocated over the bond’s remaining period to maturity or, for loans with interest rate adjustments, until the next time the interest rate is adjusted. HANDELSBANKEN ■ ANNUAL REPORT 2006 35 FINANCIAL REPORTS ■ ACCOUNTING POLICIES Shares and participating interests PROPERTY AND EQUIPMENT Shareholdings are reported in the balance sheet as Shares and participating interests. This classification is independent of the measurement category. In the Group, measurement is always done at fair value in the balance sheet in those cases that can be reliably measured. Impairment testing is also carried out for shares classified as Available for sale if there are indications that an impairment loss may need to be recognised. Impairment losses, if any, are recognised immediately in the income statement. In the parent company, shareholdings in associated companies and subsidiaries are measured at their acquisition value. Assets where the customer bears the value change risk Buildings in the banking business are carried at historical cost after deductions for depreciation and impairment losses, if any. Depreciation according to plan is based on an estimated useful period for each sub-component of the buildings. The remaining useful period for each sub-component is tested annually. In addition, impairment testing is performed if indications of the need for impairment are present. Any impairment losses are recognised immediately in the income statement. Buildings owned as investment assets in the insurance business are reported at fair value in the balance sheet, since changes in the value of the latter are related to the size of the financial undertakings in the insurance contracts. In the balance sheet, assets where the change in value is completely linked to a liability are reported as Assets where the customer bears the value change risk. CLASSIFICATION AND MEASUREMENT RULES FOR FINANCIAL LIABILITIES Measurement at fair value of loan receivables and other unlisted financial items classified for measurement at fair value Financial liabilities are normally measured at amortised cost. However, financial liabilities are carried at fair value in cases where they have a trading book purpose. Assets are classified for measurement at fair value if such measurement is judged to provide a fairer picture of the earnings trend than measurement at amortised cost. When disclosing the change in fair value of the credit risk component in a fi nancial instrument, calculations are made by separating fair value attributable to changes in interbank interest rates. This method is applied since this component can be read directly in a liquid market and therefore gives a reliable objective measurement of the change in fair value. The method avoids the subjectivity attributable to measuring fair value of the credit risk component separately. The fair values of the credit risk component cannot be set at a single value. Measurement of the credit risk component offers a wide variety of possible outcomes. This is because several different models can be used and because usually there is no liquid market for the credit risk in these assets. REINSURANCE ASSETS Receivables related to reinsurance agreements classified as insurance contracts are reported in the balance sheet as Reinsurance assets. INTANGIBLE ASSETS An intangible asset is an identifiable non-monetary asset without physical form. An asset is a resource that is expected to provide future economic benefit over which there is control as a result of past events. When acquiring companies, an acquisition balance sheet is prepared in which identifiable assets and liabilities are measured at fair value at the time of acquisition. This measurement is also performed when acquiring intangible assets that do not yet fulfi l the requirement for classification as an asset. The reason for this is that this intangible right may nevertheless have a separable fair value. The part of the acquisition price that cannot be attributed to identifiable assets and liabilities is recognised as goodwill. Acquired brands are recognised in the balance sheet at cost, after deduction for any amortisation and impairment losses. Internally accrued values in the form of goodwill, trademarks, publishing rights, customer databases and similar are not reported as assets in the balance sheet. Investments in software developed by the Bank are carried as an expense on a current basis where the expenditure refers to maintenance of existing business operations or an existing intangible asset. For development of new intangible assets, or new business operations for existing intangible assets, the costs accrued are capitalised from the time when it is probable that economic benefit that can be reliably measured will arise. An impairment test is performed when there is any indication that the asset may have decreased in value. In addition, in cases where the intangible asset has an indefi nite useful life, an annual impairment test is performed at the same point in time each year. 36 HANDELSBANKEN ■ ANNUAL REPORT 2006 Due to credit institutions and deposits and borrowing from the public In the balance sheet, liabilities to credit institutions, as well as deposits and borrowing from the public are reported under Due to credit institutions and Deposits and borrowing from the public, respectively. This classification is independent of the measurement category. The fi nancial component separated from insurance contracts in traditional legal life insurance agreements is also carried here. In these contracts, the fi nancial portion of the insurance contracts has an annual yield split. The yield split means that the policyholders every year receive an amount which is the highest of the adjusted liability based on the original guaranteed yield and the yield arising as a result of the yield split model. The calculation is accumulated for each individual insurance contract. This means that the conditional bonus is reduced in those cases where the yield in an individual year is less than the guaranteed interest rate. The portion of the yield which according to the yield split model belongs to the Bank is reported as fee and commission income. If the yield is less than the guaranteed yield per contract, it is reported under Net gains/losses on fi nancial items at fair value. The fi nancial component in the liabilities relating to occupational pension contracts is measured at a market rate of interest. Issued securities Various types of securities issued by a stock exchange or other marketplace are reported in the balance sheet under Issued securities. This classification is independent of the measurement category. Other trading liabilities Trading liabilities are measured at fair value. These consist of short positions in various types of spot instruments. Other types of trading book liabilities are reported divided into categories of financial liability. Subordinated liabilities Subordinated liabilities contain various types of financial liabilities for which financiers are entitled to payment only after other lenders have been paid. The item may consist of securities issued on a stock exchange or of loans raised from individual counterparties. Subordinated liabilities are classed in this category regardless of the measurement category. INSURANCE OBLIGATIONS Insurance obligations comprise insurance contracts that have been classified in their entirety as insurance, as well as the insurance com- FINANCIAL REPORTS ■ ACCOUNTING POLICIES ponent in those insurance contracts that have been divided into a financial and an insurance component. Insurance obligations for which the insured party bears the entire value change risk are reported in the balance sheet item Liabilities where the customer bears the value change risk. Valuation of technical provisions Technical provisions consist of life insurance provisions and provisions for claims outstanding. The various components in the insurance obligations are measured using market-adapted valuation parameters. Mortality assumptions Mortality assumptions vary depending on when various insurance policies were taken out. The assumptions applied are based on joint industry statistics. For the main part of the portfolio, the mortality assumptions used were compiled in 1990. These assumptions take into account the expected future increase in life expectancy. EMBEDDED DERIVATIVES If there are liabilities or assets containing financial components that can clearly be separated, these are separated and then reported separately. Exceptions include items in the trading book of embedded derivatives carried at fair value, as well as instruments with similar changes in value in the different components. For example, the components may be separated in issued structured bonds – known as equity linked bonds and credit-linked notes. TRADE DATE OR SETTLEMENT DATE ACCOUNTING Purchases and sales of money market and capital market instruments on the spot market are subject to trade date accounting. The same applies to derivative instruments. Other financial assets and liabilities are normally reported on the settlement date. All instruments measured at fair value, however, are measured starting on the trade date. This also applies to the currency risk component in the financial assets and liabilities that are carried at cost or amortised cost. HEDGE ACCOUNTING Fee assumptions The fee assumptions vary depending on when various insurance policies were taken out and are based on the fees applying at the time the contract was signed. Principally, this means one fee that is proportional to the premium and one fee that is proportional to the life insurance provisions. Provision for claims outstanding Provision for claims outstanding consists of insurance indemnity due but not paid at the close of the financial year, together with the estimated future operating costs for settling these claims. The provision also consists of a reserve for claims incurred but not yet reported to the company at the close of the financial year. LIABILITIES WHERE THE CUSTOMER BEARS THE VALUE CHANGE RISK The item Liabilities where the customer bears the value change risk comprise various financial liabilities where the liability has a direct link to the value of a financial asset reported in the balance sheet but for which the Group bears no risk whatsoever for changes in the fair value of the asset. Hedge accounting is divided into two hedge categories depending on the purpose of the hedge: fair value hedges or cash flow hedges. In the case of fair value hedges, the item being hedged and the hedging instrument are both recognised at fair value. Changes in value are recorded directly in the income statement. This accounting policy is used in cases where the purpose of the hedge is to protect the company against unfavourable changes in market prices. In the case of cash flow hedges, the derivatives are recognised at fair value while the hedged item is carried at amortised cost. For the effective portion of hedges, the change in value of the derivative is recognised in equity. An effective hedge means that the cash flows on the hedged item correspond to the cash flows in the hedging instrument. The ineffective portion of the derivative’s change in fair value is recognised directly in the income statement. The change in fair value of the derivative is then transferred from equity at the same rate as the cash flows of the hedged item are recognised in the income statement. INCOME Income is reported in the income statement when it is probable that future economic benefits will be gained and these benefits can be reliably measured. PROVISIONS INTEREST INCOME AND EXPENSE Provisions consist of expected negative outflows of resources from the Group charged against earnings. Whether or not the outflow occurs, however, is dependent on some type of future event that is fully or partially beyond the control of the Group. Provisions are reported, when the Group has a legal or informal obligation, as a consequence of past events when it is probable that an outflow of resources will be required to settle the obligation. The provision is recorded in the amount estimated to be most probable taking into account the time of settlement. Interest income and interest expense on fi nancial assets and liabilities, excluding interest for trading purpose are recognised in the income statement using the effective interest method. Also reported under net interest income is interest attributable to derivative instruments used as formal or economic hedges of hedged items that have interest flows reported in net interest income. To arrive at a figure for net interest income which is clear of fi nancial assets and liabilities that are in the trading book and to gain an overall view of activity in the trading book, all interest income and interest expense relating to fi nancial assets in the trading book is now reported under Net gains/losses on fi nancial items at fair value. DERIVATIVE INSTRUMENTS Derivative instruments consist of financial derivative contracts. All derivative contracts are carried in the balance sheet at fair value. Where the fair value is positive, it is reported as an asset. When fair value is negative, it is reported as a liability. NET ACCOUNTING Receivables and payables with the same counterparty which can be set off, i.e. where a contractual relationship exists implying that there are legal grounds for applying set off, are reported net in the balance sheet in cases where there is an intention to settle the obligations by netting or at the same time. FEE AND COMMISSION INCOME AND EXPENSE Income and expense for various types of services are reported under fee and commission income and fee and commission expense, respectively. This means that brokerage income and various types of management fees are reported as commissions. Other types of income reported as commissions are payment commissions and card fees, as well as commissions from insurance operations. Positive results from the yield split in the profit-distributing part of the insurance business are also reported as commissions. HANDELSBANKEN ■ ANNUAL REPORT 2006 37 FINANCIAL REPORTS ■ ACCOUNTING POLICIES NET GAINS/LOSSES ON FINANCIAL ITEMS AT FAIR VALUE Net gains/losses on financial items at fair value includes all items with an impact on income which arose when measured at fair value and when realising financial assets and liabilities. Specifically, the following items are reported here: • Unrealised changes in fair value of those assets and liabilities classified as Assets at fair value, excluding the component of change in value reported as interest. • Unrealised changes in fair value of those assets and liabilities that are subject to fair value hedges, excluding the component of change in value reported as interest. • Capital loss or gain from the sale of fi nancial assets and liabilities. • Realised and unrealised changes in value as well as interest on assets and liabilities classified as held for trading. • Unrealised and realised changes in fair value on derivative contracts used as formal or economic hedges of other financial assets and liabilities in addition to the component of changes in value reported as interest. • Dividend income on those fi nancial assets classified as the trading book. • Negative yield split. This item contains the effects on operating profits of the yield on fi nancial assets in the insurance business being less than the change in guaranteed liability during the year. • Ineffective component of derivatives used as hedging instruments in cash flow hedges. RISK RESULT – INSURANCE Risk result – insurance comprises the changes that affect the operating profit in those liabilities classified as insurance obligations. OTHER DIVIDEND INCOME Other dividend income consists of dividends on shares other than those classified as holdings in the trading book. In the parent company’s income statement this item is called Dividends received. In the parent company, dividends from subsidiaries and associated companies, as well as dividend income from shares in the trading book are also reported here. SHARE OF PROFITS OF ASSOCIATED COMPANIES In the Group, the Bank’s share of the associated companies’ profit before tax is reported as Share of profits of associated companies. The share of the associated companies’ taxes is reported with other taxes. OTHER INCOME Income from sold services as well as external rental income relating to leases pertaining to the Bank’s own properties are reported under Other income. STAFF COSTS Staff costs consist of all direct staff costs, including various forms of social security costs and other payroll overheads. + Accrued pension rights during the year. This item refers to the year’s proportion of the calculated final total pension payment. The calculation is based on an estimated fi nal salary and is subject to actuarial assumptions. + Interest expense. The present value of the pension liability increases during the year since the time to disbursement becomes shorter. This increase in liability is reported as an interest expense. The interest rate applied is the current government bond rate for maturities corresponding to the remaining period until the pension liability is due to be disbursed. - Expected rate of return. The expected rate of return is based on an assessment of the average return which will be earned on the assets which are kept separate for securing defi ned-benefit pension obligations. The time horizon for the assessment is related to the entire term of the commitment. The return is reduced by the taxes and administrative costs for managing the pension obligations. In addition, individual years may include parts of the actuarial profits and losses carried in the income statement. For defi ned-benefit pension plans, the pension payable is based on the salary and period of employment implying that the employer bears all the material risks for fulfi lling the pension obligation. For the majority of defi ned-benefit plans, the assets are kept separate in pension foundations and a pension fund. The net amount of estimated pension obligations and fair value of the plan assets is reported in the balance sheet. The assumptions applied are shown in the note on staff costs. The difference between the actual and expected return on the assets which are kept separate for securing the pension obligations is called actuarial gains or losses. The part of the actual return on the assets which is kept separate for guaranteeing pension obligations and which is higher or lower than the expected rate of return is called actuarial profit or loss. Actuarial profits and losses also exist in those cases where the actual pension liability at the end of the reporting period differs from the pension liability which has been estimated to exist at the end of the period based on actuarial assumptions. These profits and losses can occur when actuarial assumptions are changed and as an effect of the assumptions differing from the actual outcome. Only that part of fair value on the plan assets which can be expected to accrue to the Group is recognised as a net asset. The amount is tested annually. The accounting standard allows that parts of actuarial profits and losses do not need to be carried in the income statement. Only that part of the actuarial profits and losses exceeding the higher of 10% of pension assets/liabilities at the opening of the reporting period is carried in the income statement. The amount outside this corridor is carried in the income statement on a straight-line basis during the average remaining period of employment. For Handelsbanken, this means capitalisation over a period of 20 years. Premiums paid for defi ned-contribution pension plans are reported as an operating expense. OTHER EXPENSES PENSION COSTS A pension cost computed on an actuarial basis, relating to pension obligations backed by the Bank’s own pension foundations, is reported as an operating expense in the parent company. The calculations comply with the Swedish Act on Safeguarding Pension Obligations. Premiums paid for pension insurance are also reported under Operating expenses. The actuarial pension premium is reversed as an appropriation under Settlement of pensions, where settlement is made against disbursed pensions and any compensation from the pension foundations. The net amount of three different items related to defined-benefit pension plans is reported as an operating expense in the Group: 38 HANDELSBANKEN ■ ANNUAL REPORT 2006 Other expenses consists of administrative expenses other than staff costs and depreciation. Operating expenses pertaining to own properties are also reported here. DEPRECIATION, AMORTISATION AND IMPAIRMENT OF PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS Depreciation and amortisation All assets that have been classified as Property and equipment are depreciated over an estimated useful life. A linear depreciation plan is usually applied. The property and equipment that consist of components with different set periods of useful life are divided into different categories with separate depreciation plans. Normally this only applies to properties. FINANCIAL REPORTS ■ ACCOUNTING POLICIES Personal computers are usually written off over 3 years and investments in bank vaults and similar investments in premises over 10 years. Other equipment is depreciated over five years. Intangible assets are divided into two categories. The fi rst category applies to assets for which it is possible to assess a useful period. These are amortised over this set period of useful life. The other category involves intangible assets for which it is not possible to establish a defi nite useful period. These are not amortised. Instead, they are the object of annual impairment testing. Goodwill is not subject to amortisation. Intangible assets for which it is possible to establish an estimated useful period are amortised, usually for a maximum of five years. Normally the useful period does not exceed five years. Acquired brands are normally regarded as having a very long useful life, and thus the amortisation period may be much longer. The same applies to acquired customer contracts in the insurance business. The amortisation period is tested on an individual basis at the time of new acquisition and also on a continuous basis if there are indications that the useful life period may have changed. Impairment losses Impairment losses on property and equipment and intangible assets as well as shares in subsidiaries, associated companies and any participation in joint ventures are reported when the recovery value is less than the carrying amount. The recovery value is calculated, at the cashgenerating unit to which the asset refers, as the higher of an asset’s value in use or net realisable value. The recovery value is determined when there is an indication that the asset has fallen in value. LOAN LOSSES Actual loan losses for the year and impairments in respect of probable loan losses for loan receivables and other receivables are reported as Loan losses, after an individual assessment has been made. A loan loss is reported in cases where the estimated value that can be recovered is less than the book value. Any part of the receivable for which there is no realistic possibility of recovery is reported as an actual loss. This is the case, for example, when a trustee in bankruptcy has estimated bankruptcy dividends, a scheme of arrangement has been accepted or the receivable has been reduced in some other way. An amount forgiven in connection with a reorganisation is always reported as an actual loss. For loans which have earlier been reported as actual loan losses in full, a reappraisal of the size of the loss is made in those cases where the customer is following a payment plan. Impairment for probable loan losses is made for bad debts if the value of the collateral together with other payments from the counterparty do not cover the book value of the receivable. Impairment losses are recognised down to the amount which is expected to be realised, taking into account the value of the collateral and the present value of expected payments from the customer. If the collateral is a listed asset, the valuation of the collateral is based on the list price; otherwise the valuation is based on the yield value or the market value estimated in some other manner. If the collateral consists of property mortgages, the underlying collateral valuation is made in the same way as for repossessed properties. In cases where the amount expected to be recovered has been calculated by discounting future cash flows, the method of calculation implies that the recovery value increases as the time for the payment from the customer approaches. The difference thus arising in the book value is recorded as interest income. Apart from the risk assessment for individual loan receivables made quarterly by all units in the Group that are responsible for customers and loans, a central assessment of homogeneous groups of loan receivables is made at the central level. This assessment takes into account whether there have been loan losses in these groups of loan receivables that cannot yet be allocated to an individual loan. If necessary, a group provision is made for these loan receivables. As soon as the receivable can be individually identified, the provision is transferred to probable loan losses. VALUATION OF REPOSSESSED PROPERTY Property repossessed to protect claims is measured at the time of repossession at fair value. Repossessed property is reported and valued thereafter together with other similar properties. In the parent company repossessed property, other than repossessed financial instruments, is valued according to rules for Valuation of inventory as stipulated in IAS 2, which means they are valued at the lower of cost and net realisable value. In the parent company, financial assets repossessed for protection of receivables must always be valued and reported as if they had been classified as available for sale. GAINS/LOSSES ON DISPOSAL OF PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS The differences between the remaining carrying amount for property and equipment and intangible assets and the sale price is reported under Gains/losses on disposal of property, equipment and intangible assets. TAXES The tax expense for the period consists of Current tax and Deferred tax. Current tax refers to taxes relating to the period’s taxable result. The item also includes the Bank’s share of associated companies’ taxes. Deferred tax is tax referring to temporary differences between the value of an asset or liability in the accounts and its taxable value. LOAN COSTS Loan costs are normally carried as expenses on a current basis. Where the expenditure refers to intangible assets developed by the Bank, the expenditure is capitalised from the date on which a decision is made to capitalise development costs. LEASING Leases are defined as finance or operating leases. A finance lease implies that the lessor transfers substantially all the risks and rewards associated with ownership to the lessee. Operating leases are all non-financial leases. In accordance with the Annual Accounts Act for Credit Institutions and Securities Companies, all leases in the parent company have been classified as operating leases. This means that leasing fees paid are reported as costs, regardless of whether the lease is of the finance or operating type. In the Group, the majority of leases for which the Group is lessor are finance leases. A finance lease implies that the leases are reported as loans. SEGMENT REPORTING Income and expenses are reported both by business area and by geographical area. Classification into segments is based on differences in risks and opportunities. The primary basis of classification is business areas, regardless of geographical location. Income and expenses in each segment are reported gross before transactions between the various segments have been eliminated. Transactions within the segments have been eliminated. HANDELSBANKEN ■ ANNUAL REPORT 2006 39 FINANCIAL REPORTS ■ INCOME STATEMENT – GROUP Income statement – Group The accounting and valuation principles applied are shown in the section titled Accounting Policies. GROUP SEK m 2006 2005 Interest income Note 1 50 133 39 134 Interest expense Note 1 -35 161 -24 044 14 972 15 090 Net interest income Fee and commission income Note 2 10 521 8 182 Fee and commission expense Note 2 -1 289 -1 127 Net fee and commission income 9 232 7 055 Net gains/losses on financial items at fair value Note 1 4 261 3 459 Risk result – insurance Note 3 571 194 193 158 Other dividend income Share of profit of associated companies Note 14 105 59 Other income Note 4 225 308 29 559 26 323 Total income Administrative expenses Staff costs Note 5 -7 714 -6 678 Other expenses Note 6 -4 180 -3 747 Depreciation, amortisation and impairments of property, equipment and intangible assets Note 17, 18 Total expenses Profit before loan losses -557 -513 -12 451 -10 938 17 108 15 385 261 Loan losses/recoveries Note 7 55 Gains/losses on disposal of property, equipment and intangible assets Note 8 1 4 17 164 15 650 Operating profit Taxes Note 26 Profit for the year -4 036 -4 296 13 128 11 354 13 128 11 354 - - 20.41 16.98 Attributable to Ordinary shareholders Minority interest Earnings per share * * No dilution. 40 HANDELSBANKEN ■ ANNUAL REPORT 2006 Note 9 FINANCIAL REPORTS ■ BALANCE SHEET – GROUP Balance sheet – Group The accounting and valuation principles applied are shown in the section titled Accounting Policies. GROUP SEK m 2006 2005 ASSETS Cash and balances with central banks 4 800 7 014 86 565 44 490 Note 11 177 175 136 546 Note 12 1 100 538 983 681 Bonds and other interest-bearing securities Note 13 180 178 140 220 Shares and participating interests Note 14 72 917 28 857 Assets where the customer bears the value change risk Note 15 62 827 134 432 Derivative instruments Note 16 53 703 68 169 Treasury bills and other eligible bills Note 13 Loans to credit institutions Loans to the public Reinsurance assets 108 48 Intangible assets Note 17 12 524 12 789 Property and equipment Note 18 3 545 3 318 Current tax assets 747 67 265 197 Deferred tax assets Note 26 Net pension assets Note 5 3 914 3 698 Other assets Note 19 21 012 13 629 Prepayments and accrued income Note 20 9 190 5 752 Total assets Note 10 1 790 008 1 582 907 Due to credit institutions Note 21 320 482 289 053 Deposits and borrowing from the public Note 12 533 885 407 617 Liabilities where the customer bears the value change risk Note 22 62 833 135 926 Issued securities Note 23 595 001 486 344 Derivative instruments Note 16 66 182 73 734 Other trading liabilities Note 24 51 829 48 137 Insurance liabilities Note 25 2 871 862 488 767 LIABILITIES AND EQUITY Current tax liabilities Deferred tax liabilities Note 26 6 810 5 950 Provisions Note 27 127 36 Pension obligations Note 5 422 - Other liabilities Note 28 15 537 10 180 Accruals and deferred income Note 29 15 643 11 748 Subordinated liabilities Note 30 51 672 46 795 Total liabilities Note 10 1 723 782 1 517 149 Minority interest Share capital Other reserves 0 0 2 888 2 879 3 972 3 583 Retained earnings 46 238 47 942 Profit for the year 13 128 11 354 Total equity 66 226 65 758 1 790 008 1 582 907 Total liabilities and equity HANDELSBANKEN ■ ANNUAL REPORT 2006 41 FINANCIAL REPORTS ■ STATEMENT OF CHANGES IN EQUITY – GROUP Statement of changes in equity – Group GROUP SEK m Shareholders’ equity 31 December 2004 Share capital Statutory reserves 2 878 2 751 Hedge reserve Fair value reserve Retained earnings Minority interest Total 55 743 0 61 372 Impact of transition to IFRS 2005 Net effects of transition to measuring at fair value according to IAS 39 -149 680 Provision by group for individually assessed receivables Impact of changed accounting policies in the insurance operations 2006 2 878 2 751 -149 680 Acquisition SPP Note 31 118 0 192 192 109 Note 31 380 - - 109 192 Profit for the year according to 2005 income statement -200 380 - 11 365 Impact of changed accounting policies in the insurance operations 2006 Profit for 2005 after adjustment Total changes before transactions with the owners - - 109 60 789 -580 109 Total changes in equity not recognised in the income statement 192 101 11 365 -11 -11 11 354 11 354 11 154 - 11 455 Dividend -4 018 -4 018 Repurchase of own shares -2 468 -2 468 - Reduction of share capital by means of cancellation -99 99 Bonus issue 100 -100 Shareholders’ equity 31 December 2005 2 879 2 751 -40 872 59 296 2 879 2 751 -40 872 55 644 Impact of changed accounting policies in the insurance operations 2006 Change in available-for-sale instruments, after tax Note 31 Total changes in equity not recognised in the income statement 0 62 106 -3 652 251 138 138 Note 31 -492 - - 138 251 Profit for the year Total changes before transactions with the owners 65 758 251 Change in cash flow hedges, after tax Exchange difference 0 -3 652 Opening equity 2006 after adjustment -492 -492 - 13 128 - - 138 251 12 636 -103 13 128 - 13 025 Dividend -4 543 -4 543 Repurchase of own shares -4 362 -4 362 -89 89 - 98 -98 Reduction of share capital by means of cancellation Bonus issue Shareholders’ equity 31 December 2006 42 54 629 -580 Change in cash flow hedges, after tax Exchange difference -341 -360 118 Opening equity 2005 after adjustment Change in available-for-sale instruments, after tax -872 -360 HANDELSBANKEN ■ ANNUAL REPORT 2006 2 888 2 751 98 1 123 59 366 0 66 226 FINANCIAL REPORTS ■ CASH FLOW STATEMENT – GROUP Cash flow statement – Group GROUP SEK m 2006 2005 17 164 15 650 OPERATING ACTIVITIES Operating profit of which paid-in interest 47 690 46 823 of which paid-out interest -31 639 -30 137 of which paid-in dividends 2 223 252 Adjustment for non-cash items in the operating profit Loan losses Unrealised changes in value Depreciation, amortisation and impairments Paid income tax 233 238 -2 088 1 364 557 513 -4 248 -6 735 Changes in the assets and liabilities of operating activities Loans to credit institutions -40 629 -27 470 Loans to the public -117 091 -121 494 Financial current assets -123 416 -21 463 Due to credit institutions 45 429 30 057 Deposits and borrowing from the public 122 648 65 374 Issued securities 108 657 43 708 6 879 -13 681 3 691 21 940 Derivative instruments, net positions Short-term positions Claims and liabilities on investment banking settlements -7 165 -150 Other -8 501 -2 675 2 120 -14 824 Cash flow from operating activities INVESTING ACTIVITIES Acquisition of subsidiaries Change in shares Change in interest-bearing securities Change in property and equipment Change in intangible non-current assets Cash flow from investing activities - - 266 342 0 5 -323 -276 -83 -23 -140 48 FINANCING ACTIVITIES Repayment of subordinated loans - - 4 876 21 613 Dividend paid -4 543 -4 018 Repurchase of own shares -4 362 -2 468 Cash flow from financing activities -4 029 15 127 Cash flow for the year -2 049 351 Issued subordinated loans Liquid funds at beginning of year 7 014 6 396 Cash flow from operating activities 2 120 -14 824 Cash flow from investing activities -140 48 Cash flow from financing activities -4 029 15 127 Exchange rate difference on liquid funds Liquid funds at end of year -165 267 4 800 7 014 HANDELSBANKEN ■ ANNUAL REPORT 2006 43 FINANCIAL REPORTS ■ NOTES – GROUP Risks and risk control HANDELSBANKEN’S UNIQUE WORK METHOD HANDELSBANKEN’S APPROACH TO CREDIT RISK At Handelsbanken, business transactions are always based on the customer’s requirements. The branch has responsibility for the customer and all decisions are made as close to the customer as possible. The branches aim to achieve sustainable and high profitability by offering high-quality services to satisfied customers. Handelsbanken’s decentralised method of working is a cornerstone in how it achieves its corporate goal. At Handelsbanken, credit decisions are made at the branches, which are also responsible for following up credit risks and being proactive in its risk management. The fact that all branches are so active in managing credit risk means that Handelsbanken in historic terms has had low loan losses. New capital requirements affect how capital adequacy will be calculated and how risks will be managed. Handelsbanken is currently working on developing new methods and tools in the area of risk management. The Bank’s approach to credit risk can be summarised in the following points: • The Bank strives to maintain its historically low level of credit losses in relation to other banks, thus contributing to the Bank’s profitability target and retaining its sound fi nancial position. • A new borrower should have a repayment ability which in the opinion of the Bank is normal or better than normal. • The Bank’s overall profitability target means that the credit risk must be in reasonable proportion to the profitability of the exposure. • The Bank aims for the individual employee’s responsibility for business transactions to be combined with the responsibility for risk. The person who best knows the customer and the market conditions is also in the best position to assess the risk. HISTORICALLY LOW LOAN LOSSES RISK ORGANISATION An excellent picture of Handelsbanken’s management of credit risks is obtained by looking at the actual outcome. For a long time – and particularly during the fi nancial crisis in the early 1990s – the Bank’s method of managing credit risk has led to significantly lower loan losses than for its competitors in relation to outstanding loan volumes. In the past five years, Handelsbanken’s average loan loss ratio has been 0.02%, compared to 0.08% for the other Swedish banks. This picture is further enhanced when looking at bad debts as a proportion of lending at Handelsbanken. In the past five years, Handelsbanken’s average bad debt reserve ratio has been 0.20%, compared to 0.47% for the other Swedish banks. The board is responsible for assessing and monitoring the risks arising in the Group’s operations. The board ratifies policy documents and instructions describing how various risks should be managed and reported. For credit risks, the board draws up a decision structure for limits but does not set any limit for the total exposure. The board decides on limits for other fi nancial risks in the banking operations and the CEO allocates these limits over various business areas. For the Group’s profit-distributing insurance companies, there is a risk that the yield agreed with the customer will not be attained and that the companies must therefore contribute capital. The board does not set a limit for this risk. The CEO ensures that this risk is subject to regular follow-up and that any risk exposure exceeding a certain amount determined by the board is reported to the CEO and the board. At the beginning of 2007, the credit risk control and fi nancial risk control units were merged into an independent risk control unit for the whole of the Handelsbanken Group, reporting to the head of Central Control and Accounting. At group level, risk exposure is checked by this unit which measures and follows up risks and reports to the Bank’s CEO and board. In each business area that has been allocated a limit, a local risk control unit reports the risk exposure to the central risk control units and to the business area. Loan losses as a percentage of lending (ANDELSBANKEN 44 HANDELSBANKEN ■ ANNUAL REPORT 2006 /THER3WEDISHBANKS FINANCIAL REPORTS ■ NOTES – GROUP DESCRIPTION OF RISK MAIN RISKS Credit risk Depends whether an individual borrower can fulfil his commitments to the Bank. WHERE THE RISK MAINLY ARISES Branch office operations Handelsbanken Capital Markets Handelsbanken International Handelsbanken Liv / SPP Following a detailed review, the Swedish Financial Supervisory Authority has assessed that the Bank’s method for internal risk classification is reliable. Their assessment included a condition concerning the organisational location of the independent risk control function. This condition has now been met by an organisational change. This means that the Bank meets the Supervisory Authority’s strict requirements for applying the internal rating method and that the method will be used to calculate the capital requirements. FINANCIAL RISKS Operational risks – Handelsbanken will use the standard model Market risk Impact on the Bank’s profits of changed market prices Handelsbanken Capital Markets where the capital requirement is based on the Bank’s income in its various business areas. Handelsbanken Liv / SPP Central Treasury Liquidity risk That the Bank cannot obtain funding at normal prices Whole Group OTHER RISKS Capital assessment and risk management – Pillar 2 Operational risk Manual efforts, errors in procedures and systems leading to losses Whole Group Insurance risk A life insurance contains uncertainty depending on the insured party’s longevity or health Handelsbanken Liv / SPP Business risk The risk related to variations in income and expenses Market risks – calculated in accordance with the Financial Supervisory Authority’s standardised directives and where there are relatively few changes. Whole Group NEW CAPITAL ADEQUACY RULES On 1 February 2007, new capital adequacy regulations were implemented – the Basel II rules. The new rules entail major changes in how the Bank’s capital requirement is to be calculated and how a satisfactory capital base is ensured. To avoid dramatic changes, there are transitional rules with gradual adaptation over a period of three years. The new regulations will be fully implemented from 1 January 2010. The changes apply in particular to banks which apply to use their own risk calculations – called the Internal Rating Based Approach – when calculating the minimum capital cover requirement. The work on adapting the Bank to Basel II has been in progress for several years with the main focus on the regulations regarding minimum capital. During 2006, the work continued of adapting the Bank to the regulations. The branches verified the credit information and new procedures. Development of system support for internal risk classification, risk calculation, internal and external reporting continued and is still in progress for use with capital assessment and risk management. The Bank’s work to fully implement the new regulations will continue until the end of 2009. The regulations cover three main areas, known as pillars. Pillar 1 deals with how the requirements for minimum capital will be fulfi lled and Pillar 2 with the supervision of the authorities and banks’ assessment and management of capital and risks. Finally, Pillar 3 deals with publication of information concerning risk management and capital adequacy. Minimum capital requirements – Pillar 1 Credit risks – Handelsbanken applies an internal method for risk classification and calculation of credit risk. The method is also called Internal Risk Classification and is based on the internal rating method which the Bank has successfully used for more than 25 years. The internal rating method is adjusted and developed, but the focal point of the credit process is the personal contact with the customer. An important starting point is to retain the strengths in the Bank’s credit process and credit culture. Banks must have a process for assessing their total capital requirement in relation to their risk profi le and a strategy for maintaining the capital level where the board is responsible for establishing the bank’s risk tolerance. The process is known as internal capital adequacy assessment (ICAAP). All significant risks must be identified, measured and reported in this process. The assessment must put special focus on the risks which are not managed under Pillar 1. Some risks are appropriate for capital cover while other risks such as liquidity risk, are better managed by other measures. All risks, including those which are not covered by capital, must be included in the internal capital adequacy assessment. The banks are expected to keep a larger capital base than the minimum level specified in Pillar 1. In 2006, substantial resources have been devoted to developing processes and methods for ICAAP. Handelsbanken has decided to base its ICAAP on an economic capital model (EC). The EC model provides a measure of the Group’s overall risks and corresponds to the capital which with very high probability will cover unexpected losses or decreases in value from the perspective of the shareholders. The calculation is made with a time horizon of one year and with a given confidence level. The confidence level is currently 99.97%. The rating agencies’ statistics show that for AA-banks, the probability is approximately 99.97% that they will meet their payments in time, with a time horizon of one year. The confidence level to be applied is determined by the board which also establishes the Board’s capital policy where the Bank’s approach to risk is set out. The capital available to meet risks is called Available Financial Resources, AFR. AFR consists of the Bank’s equity including other available fi nancial values. The head of Central Control and Accounting has the main responsibility for Handelsbanken’s ICAAP. His task is to weigh together all the significant risks and other factors for assessing and deciding the Bank’s and the Handelsbanken Group’s need of riskbearing capital and other fi nancial resources. Internally, the regional banks and business operations are steered towards the Bank’s overall profitability goal. To measure and steer the business operating units towards the Bank’s overall goal, all the capital requiring return is allocated to these units. Public disclosure – Pillar 3 Information which must be published mainly covers two areas: • Detailed mandatory information concerning models and data according to the minimum requirements in Pillar 1. • Information about how the Bank works with Internal Capital Adequacy Assessment and risk control according to Pillar 2. HANDELSBANKEN ■ ANNUAL REPORT 2006 45 FINANCIAL REPORTS ■ NOTES – GROUP CREDIT RISKS Credit organisation The Bank’s focus on understanding and individually assessing each customer in depth requires a strongly decentralised organisation. The credit responsibility lies with the branch manager or the employee delegated by the manager at the branch responsible for the customer. The day-to-day business relationship with the customer gives the branch an up-to-date picture of how the customer’s operations are progressing. The branch can quickly identify potential problems which may affect the Bank’s credit risk. The fi nancial consequences of the lending affect the earnings of the branch both positively and negatively and it is the branch that handles the problems arising if a customer’s ability to pay is impaired. The Bank’s method of working means that everyone who carries out transactions which entail risk, learns a well-established way of assessing what is an acceptable level of risk for the Group. This unambiguous responsibility and Proportion of limit volumes per risk class Decision levels for granting credits The board Proportion of number of limits 7% Proportion of limit amounts 74% Credit committee of the board Central Credit Department 36% Regional banks Credit committee 57% Branches Credit committee foreign branches Regional banks Credit committee Credit committee 21% 5% Handelsbanken Markets Handelsbanken Asset Management Handelsbanken Finans Handelsbanken Stadshypotek Credit risk exposure SEK m 2006 2005 1 100 538 983 681 Loans to credit institutions 177 175 136 546 Unutilised part of granted overdraft facilities 130 956 124 200 Credit commitments 166 576 149 664 22 392 9 387 Loans to the public Commercial paper programmes Other commitments 61 70 Guarantees, credits 18 395 12 052 Guarantees, other 39 618 33 144 Documentary credits 49 150 50 542 Derivatives 42 132 42 934 Treasury bills and other eligible bills 86 565 44 490 180 178 140 220 Bonds and other interest-bearing securities Shares and participating interests Total 72 372 28 461 2 086 108 1 755 391 Geographical distribution Off-balance-sheet commitments Lending SEK m Public Credit institutions Derivatives* Investments Guarantees Other Total Sweden 834 978 86 133 32 244 246 797 30 320 219 096 1 449 568 Norway 104 494 117 174 1 505 4 386 22 727 133 403 Finland 63 549 368 23 9 045 10 745 12 564 96 294 Denmark 34 659 8 132 169 2 067 2 387 5 206 52 620 Great Britain 37 022 442 115 2 851 1 793 8 552 50 775 Other countries Total 25 836 81 983 9 407 76 850 8 382 100 990 303 448 1 100 538 177 175 42 132 339 115 58 013 369 135 2 086 108 * Refers to positive market values after taking into account legally viable netting contracts. 46 HANDELSBANKEN ■ ANNUAL REPORT 2006 FINANCIAL REPORTS ■ NOTES – GROUP Loans to the public, by sector 2006 2005 Loans before provisions Provisions for probable loan losses Loans after provisions Loans after provisions 484 034 -341 483 693 432 118 338 087 -22 338 065 302 526 322 413 -481 321 932 298 870 79 179 -62 79 117 77 647 Corporate services 40 362 -71 40 291 37 160 Manufacturing 40 674 -239 40 435 38 513 Retail 37 368 -233 37 135 35 686 Transport and communication 17 333 -22 17 311 18 823 Construction 12 673 -51 12 622 11 888 Municipalities 7 880 0 7 880 8 542 Agriculture, hunting and forestry 6 371 -6 6 365 6 344 Hotel and restaurant 5 220 -21 5 199 5 173 SEK m Private individuals Of which mortgage loans Property management Of which ownership housing co-operatives Insurance operations Other sectors Total loans to the public, before taking into consideration collective provisions 10 671 0 10 671 4 520 117 532 -189 117 343 86 460 1 102 531 -1 654 1 100 877 984 097 Collective provisions Total -339 -416 1 100 538 983 681 2006 2005 Loans to the public, collateral SEK m 1 607 966 547 384 Agricultural property 14 334 10 059 Other property 88 128 83 593 Governments, municipalities and county councils 95 221 106 207 Floating charges on assets 17 767 21 283 Guarantees 17 912 13 348 Unsecured 138 440 116 454 Residential property Other collateral Total 1 120 770 85 353 1 100 538 983 681 Including ownership housing co-operatives. Bad debts and/or non-performing loans, by sector Bad debts SEK m Gross Provisions Net2 Of which non-performing Non-performing loans which are not bad debts Private individuals 750 -341 409 377 370 Property management/corporate services 952 -552 400 99 143 Manufacturing 451 -239 212 58 18 Retail 328 -233 95 79 17 Transport and communication 32 -22 10 9 4 Construction 59 -51 8 7 84 Hotel and restaurant Other Total 2 28 -21 7 5 0 272 -198 74 63 34 2 872 -1 657 1 215 697 670 Of which non-performing Non-performing loans which are not bad debts Book value after provisions. Bad debts and/or non-performing loans, geographic distribution Bad debts SEK m Gross Provisions Sweden 1 851 -1 071 780 483 453 Norway 136 -60 76 76 199 Finland 156 -31 125 106 0 Denmark 689 -462 227 25 18 Great Britain Net 3 33 -27 6 6 0 Rest of Europe 7 -6 1 1 0 North America 0 0 0 0 0 Asia 0 0 0 0 0 2 872 -1 657 1 215 697 670 Total 3 Book value after provisions. HANDELSBANKEN ■ ANNUAL REPORT 2006 47 FINANCIAL REPORTS ■ NOTES – GROUP proximity to the customer means that problems can be identified at an early stage and the Bank’s loan losses can thus be reduced. Most branch employees have a personal limit within which they have sole responsibility for their decisions. The limit determines the total amount of credit which the employee can grant to a customer. The size of the limit may vary depending on the customer category and collateral. If there is a need for larger credits, there are corresponding decision limits at the regional level. The largest credits are decided by the board’s credit committee. The credit process always starts at the branch, and any decision at a higher level of the Bank is based on the credit process planning prepared by the branch. No credit process may proceed at the Bank without the recommendation of the branch responsible for the customer, and thus the branch always has the credit responsibility. This does not mean, however, that the branches have no support from the regional and central functions. Regionally, there are credit departments that assist the branches with matters relating to business economics and risk assessment. For commitments over SEK 1 million – for mortgages, over SEK 4 million – the branch draws up a credit limit. This specifies a limit amount for the customer’s maximum credit commitment to Handelsbanken. The credit limit also contains information concerning the collateral requirements that apply to the limit amount. A business evaluation with an analysis of the customer’s operations and an assessment of the customer’s repayment capacity is attached to the credit limit. The amount and arrangement of the credit limit are determined by the customer’s need of various types of credit and the Bank’s risk assessment. Principles for managing credit risk The Bank must have a high capacity to grant credit and must always be able to offer good customers credit on competitive terms. This implies a commitment in terms of both competence and processing times. A high level of skills and competence on the part of those working with credits contributes to retaining the Bank’s low credit risk level and thus increasing the Bank’s profitability. This is based on business being done according to the Bank’s strict requirements. The Bank aims to be selective in choosing customers and the borrowers must be of high quality. The quality requirement must never be neglected in order to achieve a high loan volume. Some 96% of the overall limit volume for credit risks was to customers with a repayment capacity assessed as normal (risk category 5 according to the Bank’s rating model) or better than normal. This approximately corresponds to an investment grade rating from external rating agencies such as Moody’s and Standard & Poor’s. Skills and working methods are crucial in credit processing and are also important conditions for rapid organic growth. The Bank would not have been able to grow so quickly outside Sweden in the past ten years without such deeply rooted working methods and skills in the area of credits. An important stage in international expansion is to implement Handelsbanken’s credit culture on new markets. The Bank regards the Nordic region and Great Britain as domestic markets where it can maintain close contact with customers through a local presence. In future domestic markets such as Poland and Germany, the credit risk mandate will gradually become more similar to that which applies in the Nordic countries and Great Britain. Lending in other countries is mainly aimed at customers with a valuable relationship with the Bank in one of its domestic markets. Internal rating and risk assessment A risk assessment is made on which to base credit/limit decisions. This results in an assessment of the size of the credit risk in the Bank’s exposure to the customer. In particular, the customer’s repayment capacity is analysed. The Bank’s risk assessment for an 48 HANDELSBANKEN ■ ANNUAL REPORT 2006 individual customer is a combination of the customer’s repayment capacity, the size of the credit/limit and the collateral provided by the customer. The assessment is performed at least once a year for all customers with a limit, for both corporate customers and private individuals. The assessment of repayment capacity results in an internal rating of the customer. The Bank has applied the same rating system for 25 years. Each branch makes a quarterly risk report, where it reviews its credit commitments to identify and report credits where the borrower’s repayment capacity is impaired and the Bank’s collateral is insufficient. For each such commitment, the probability of loss is specified as well as the amount at risk. The risk is classified as low potential, high potential or probable loss. If it is considered probable that a borrower will not meet his or her obligations to the Bank, the credit is classified as a bad debt and will be written down to the value of the payments expected to be received. Low potential or high potential risk exists if the borrower’s repayment capacity is impaired, but it is still deemed probable that payments will be made. Normally, risks are identified and reported and risk-limiting measures are taken before a commitment becomes non-performing. The risk reports are presented each quarter to the boards of the regional banks and subsidiaries and to the board of the Bank. Measurement of credit risks To quantify its credit risks, the Bank calculates the probability of default (PD), the exposure at default (EAD), and the proportion of the loan that the Bank would lose in the case of default (loss given default – LGD). These factors are mainly calculated on the basis of previous losses incurred. This information is used for several important purposes, above all the pricing of risk and the calculation of capital requirements according to the Swedish Financial Supervisory Authority’s capital adequacy regulations. Credit risk in the insurance operations The investment policy for the insurance companies describes how the credit risk is to be managed. Investments in fi xed income securities that are not issued by governments, municipalities or bankowned mortgage institutions may comprise a maximum of 25% of the fi xed income investments. Investment in fi xed income securities with a credit rating from an external rating institution below “A” requires approval from the board of the insurance companies. The creditworthiness of issuers and counterparties is determined via both internal and external credit assessments. OPERATIONAL RISKS Operational risk is defi ned as the risk of loss due to deficient or incorrect procedures and systems, human error on the part of the Bank’s employees or external events. The Bank’s defi nition of operational risk also includes legal risks. Identification, management and control of operational risks is a clear and integrated part of managerial responsibility at all levels at Handelsbanken. The Bank’s decentralised method of work promotes cost-consciousness that results in vigilance against potential loss risk in the daily procedures. Operational losses are the subject of careful examination. Major efforts are put into analysing how to avoid recurrences. In 2006, the Bank’s operational losses were SEK 68m. This refers to the total of individual losses in excess of SEK 25,000. SEK 31m of these losses was due to external crime. Apart from the responsibility for operational risk borne by the managers responsible for various functions, there are managers with special responsibility for information security and physical security who report directly to the group chief executive. As an aid to identification, measurement and handling of operational risk, the Bank has a separate reporting system for operational incidents and losses. The risk FINANCIAL REPORTS ■ NOTES – GROUP control function at Central Control and Accounting has the overall responsibility for the methods used for identifying and quantifying operational risk and for monitoring and reporting these risks to the management and the board. To supplement the day-to-day control of operational risk, all main departments, regional banks and subsidiaries in the Group carry out annual self-evaluations of operational risk. This review is for the purposes of identifying operational risk and quantifying the losses that may arise. Following the review, measures are to be proposed and taken to reduce the risks. A general review of the Group’s operational risks is performed twice a year by the heads of the regional banks, main departments and subsidiaries. The outcome of these reviews is reported to the board. The head of Central Control and Accounting has overall responsibility for the independent control of market risks in the Group. This responsibility entails ensuring that documentation for decisions is produced for risk measurements and limits. The head of Central Control and Accounting is also responsible for appropriate information and report systems being produced for risk measurements and limits. The fi nancial risks and limit utilisation for the trading operation, the internal bank and the mortgage business are checked on a daily basis. Market risks are regularly assessed by the risk committee, led by the head of Central Control and Accounting. The risk committee’s analyses and observations are regularly reported to the group chief executive and the board of the Bank. FINANCIAL RISKS Market risk Interest rate risk The Group’s interest rate risks arise mainly at Handelsbanken Capital Markets, Central Treasury, the insurance operation and in the regular lending operations at subsidaries and the regional banking operations. Interest rate risk arises in banking operations as a result of the lending partly having longer maturities than the refunding. The Bank eliminates most of this risk by entering into interest rate swap agreements. In the insurance operation, the opposite applies, i.e. the liabilities have longer maturities than the assets. Furthermore, traditional life insurance products frequently offer a guaranteed yield. As a result of this, rising interest rates have a positive effect on the insurance operation’s activities. This fundamental difference between banking operations and insurance means that combined operations reduce the Group’s vulnerability to changes in interest rates. In general, interest rate risk is taken in markets which are characterised by good liquidity. Interest rate risk is measured at the Group in several ways. Value at Risk, VaR, is used for Handelsbanken Capital Markets’ trading portfolios and for the insurance operation. For other units and for the aggregate interest rate risk in the Group, the interest rate risk is measured as the effect on fair value of a major instantaneous parallel shift of all interest rates. As at 31 December 2006, the Bank’s interest rate risk in the case of a parallel shift in the yield curve of one percentage point was SEK –637m (–877). Market risk is the risk that price changes in the fi nancial markets – such as interest rates, currencies, equities, commodities or real estate – result in profits or losses for the Group. Market risks arise in Handelsbanken Capital Markets’ trading portfolios, insurance operations and the internal bank. Market risks also arise in the other banking operations. Handelsbanken Capital Markets is market maker for fi xed income products, currencies and equity instruments. Risks arise either through customer-related business or the Bank’s own positions. Central Treasury’s trading portfolio, with one or two exceptions, consists of securities that are eligible as collateral with the Riksbank and is used for securing payments in the daily clearing operations. In the insurance operations, management of the policyholders’ funds and the equity capital is exposed to market risk, mainly interest rate and equity price risks. Risk management and analysis The board establishes the Bank’s fi nancial risk policy, stating how the Group’s fi nancial risks should be measured and reported. Based on the fi nancial risk policy, the board determines the total market risk and liquidity risk limits for the entire Group within each type of risk. The limits are then allocated to the various business areas by the group chief executive. Interest rate adjustment periods for the Group’s assets and liabilities –3 mths 3–6 mths 6–12 mths 1– 5 yrs 5 yrs– Total Lending 783 063 52 601 46 787 208 929 32 943 1 124 323 Banks and other financial institutions 171 470 5 500 1 753 487 35 179 245 Bonds, etc. 105 858 23 673 28 610 61 641 51 020 270 802 1 060 391 81 774 77 150 271 057 83 998 1 574 370 SEK m Assets Total assets Liabilities Deposits 442 443 5 605 4 104 15 951 92 877 560 980 Banks and other financial institutions 286 902 17 679 7 796 2 262 2 916 317 555 Issued securities 340 154 101 382 152 040 36 581 15 895 646 052 Other liabilities 824 1 183 3 029 39 587 9 576 54 199 Total liabilities 1 070 323 125 849 166 969 94 381 121 264 1 578 786 Off-balance sheet items 42 910 -110 941 8 750 28 399 33 997 3 115 Difference between assets and liabilities including off-balance-sheet items 32 978 -155 016 -81 069 205 075 -3 269 -1 301 The above table shows the interest rate adjustment periods for the Group’s interest-rate related assets and liabilities as at 31 December 2006, reported by the trade date. Non-interest bearing assets and liabilities have been excluded. HANDELSBANKEN ■ ANNUAL REPORT 2006 49 FINANCIAL REPORTS ■ NOTES – GROUP Measured as the impact on net interest income for the period January to December 2006 in the event of an immediate parallel increase/ decrease in the yield curve of one percentage point, the net interest income risk in banking operations was SEK –153m (70). This risk measure is constructed so that it assumes that all interest-bearing assets and liabilities and off-balance-sheet items in the banking operation as at 31 December 2006 are held to maturity and that no new positions are taken. The non-linear interest rate risk is measured and a limit set in terms of the impact on fair value in the case of substantial changes in underlying market interest rates and volatilities. Equity price risk The Group’s equity price risk mainly occurs in the Bank’s strategic share portfolio and also at Handelsbanken Capital Markets and the insurance operations. Handelsbanken is a leading market maker for structured products which give rise to equity price risks in the trading operations. Apart from this, the Bank takes its own positions to a limited extent. In addition to positions in underlying shares, the equity price risk in the trading portfolio also contains positions in options which give rise to non-linear risk. The Bank has elected to set limits on and measure the risk in this portfolio using pre-defined stress scenarios. This means that the price risk is measured when there are significant changes in underlying shares prices and volatitilies. This method captures the non-linear risk in an appropriate manner. Value at Risk is used as a complementary risk measure for equity price risk in trading operations. The equity price risk is small in the Bank’s other operations. A limit is set for the risk and it is measured as the value change risk in the case of 10-percent fluctuations in share prices. For the equity price risk in insurance operations, see a separate section. The table below shows the risk in the Bank’s equity positions as at 31 December 2006 for hypothetical changes in underlying prices and volatilities. No correlation is taken into account between the equity markets in different countries. Equity price risk 31 December 2006 SEK m Change in equity price Change in volatility 25% 0% 10% 590 596 605 -10% -590 -567 -550 The Bank’s foreign exchange exposure mainly arises from Handelsbanken Capital Markets’ trading in the international foreign exchange markets. Most of this trading is intra-day trading. The board has established limits for Value at Risk and stress risk relating to the exchange rate risk arising in Handelsbanken Capital Markets’ trading operations. Foreign exchange exposure also arises in the normal banking operations as part of processing customers’ payment flows. The board has allocated small position limits for this part of the Bank’s exchange rate risk. The exchange rate risk was SEK 21m (5), measured as the impact on the Bank’s earnings if exchange rates change by 5%. Market risk in the insurance operations Asset management in the insurance operations manages traditional insurance portfolios, unit-linked insurance and the company’s own equity. Insurance obligations with guaranteed interest, known as traditional insurance, are managed in a diversified portfolio consisting of fixed income securities, equities, real estate and alternative investment assets. Unit-linked policies are mainly invested in mutual funds managed by Handelsbanken Asset Management. The insurance HANDELSBANKEN ■ ANNUAL REPORT 2006 Risk management at SPP The deficits at SPP – the deferred capital contribution (DCC) – are managed by the company carrying these as a liability. The main factor affecting the size of the fi nancial risk, apart from allocation in the traditional insurance portfolio, is DCC’s sensitivity to changes in valuation rates for liabilities, and its sensitivity to changes in returns in the traditional insurance portfolio. To reduce the sensitivity of the fi nancial result to these factors, fi nancial derivatives are traded on the company’s own behalf. The movements in the market that the company protects itself against are changes in interest rates and stock market performance. During the year, the company traded in interest rate swaps, interest rate swaptions, equity futures and share options. -25% Exchange rate risk 50 operations’ own equity is chiefly invested in fixed income securities. In traditional insurance with guaranteed returns, the insurance companies bear the risk of the policyholder not achieving a guaranteed return on paid-in premiums. If the total yield exceeds the guaranteed rate, the yield is split so that the policyholder receives 90% and the insurance company 10%. For savings in unit-linked insurance, the policyholder accepts the entire financial risk. The insurance company bears no risk; nor does it receive any of the yield. Asset management operations are exposed to market risks, liquidity risks, credit risks and operational risks. The insurance operations apply integrated management and risk assessment of assets and liabilities called Asset and Liability Management (ALM). In order to control exposure to different market risks, the insurance companies’ chief financial officer establishes a benchmark portfolio. The resistance of the balance sheet is calculated continually by measuring the theoretical effect of dramatic fluctuations in market prices on the company’s available solvency margin. Changes in prices on the financial markets may lead to the value of the insurance companies’ commitments to various customers exceeding the value of these customers’ total assets. Deficits arise either from a decrease in the valuation rate for liabilities, which pushes up the value of the discounted commitment, or from the return on managed assets decreasing, which causes the customers’ total assets to shrink. To measure the effect of price variations on the financial markets, the insurance companies follow up these risks on a regular basis. Risk control in insurance operations The risk control group is responsible for producing methods and processes for risk measurement, ALM analyses, and reporting. Insurance risks and market risks are regularly reported to the chief executive of the insurance companies and the Handelsbanken Group’s central risk control unit. Value at Risk Value at Risk (VaR )is used to measure the losses that may arise in risk positions due to movements in the underlying markets over a specified holding period and for an assumed level of probability. The VaR method implies that the various risk categories, equity risk, interest rate risk, exchange rate risk and commodity risk, are handled in a uniform way and that the risks can be aggregated into a total market risk. For Handelsbanken Capital Markets’ trading portfolios, VaR is calculated for the individual classes of risk and at the portfolio level with a 99% confidence interval and a one-day holding period. The calculations are based on historical simulation and measure the impact on the portfolio in question, revalued using the past year’s daily changes in interest rates and prices. The model used implies that every hundredth trading day, a loss will occur which exceeds VaR. Since VaR is based on model assumptions, it is important to continually verify the effectiveness of the model. VaR is a good estimate FINANCIAL REPORTS ■ NOTES – GROUP of the risk under normal conditions, but it does not capture extreme, individual market movements. VaR is therefore regularly evaluated using back-testing. This verifies the number of days when the actual loss exceeded VaR. Back-testing is performed both on the actual result and the hypothetical result, which measures the result excluding the impact on commission income and intra-day trading. The table entitled “VaR for trading portfolio. Capital Markets” refers to the trend in 2006 and 2005. The minimum and maximum amounts show the intervals within which VaR fluctuated during the specified period. The VaR trend relative to hypothetical results is presented in the below table. On two occasions, the hypothetical outcome was worse than the VaR. This is in line with the two to three occasions implied by a VaR model with a 99% confidence level. In the insurance operations, VaR is calculated using a 99% confidence interval and a one-month holding period. The calculations are based on historical simulation and measure the impact of the 250 most recent monthly changes in market prices. Worst outcome relative VaR, trading portfolio, Capital Markets Worst outcome scenario test SEK m VaR Multiplier Average 104 33 3.5 Maximum 158 59 7.7 Minimum 54 16 1.9 Year-end 104 44 2.4 Value at Risk in the insurance operations 2006 3%+M Stress tests and scenario analyses The VaR model does not identify risks associated with extreme market fluctuations, and thus VaR calculations are regularly supplemented by stress tests. The Bank performs stress tests on the trading portfolios compared to historical scenarios and, when necessary, compared to extreme hypothetical events. The historical scenarios comprise events on the fi nancial markets during the period 1994–2006. The most unfavourable result in these tests is always compared with the corresponding VaR estimate for that day. The relation between the worst outcome and VaR can be expressed as a multiplier. This multiplier provides an indication of the possible risk of loss in the case of extreme market movements. The table below shows the result of these stress tests during 2006. VaR for trading portfolio, Capital Markets *ANUARY Total *UNE $ECEMBER Fixed income and currencies Equities SEK m 2006 2005 2006 2005 2006 2005 Average 32 20 27 19 15 8 Maximum 61 42 46 41 49 26 Minimum 10 7 9 8 2 1 Year-end 44 22 24 23 29 7 Value-at-Risk in relation to hypothetical outcome 2006 trading portfolio, Capital Markets SEK m 40 20 0 -20 -40 Hypthetical outcome VaR -60 -80 January June December HANDELSBANKEN ■ ANNUAL REPORT 2006 51 FINANCIAL REPORTS ■ NOTES – GROUP Liquidity risk Maturity analysis for contracted payment commitments – remaining contractual time to maturity Up to 3 mths 3–12 mths 1–5 yrs Over 5 yrs Total Sight deposits from the public SEK m 319 750 - - - 319 750 Other borrowing from the public and credit institutions 383 204 33 264 17 259 100 890 534 617 Issued securities and subordinated loans 208 605 99 177 268 708 70 183 646 673 81 2 627 37 696 9 372 49 776 297 532 - - - 297 532 1 209 172 135 068 323 663 180 445 1 848 348 Short-term positions Unutilised credit commitments – unutilised part of overdraft facilities Total Short-term volatile financing by market 2006 Sweden 26 % USA 30 % Europe 40 % Asia 4 % Refers to the average market distribution during 2006 for issued securities with a residual maturity of less than one year and financing from credit institutions. Liquidity risk is the risk that the Bank will not be able to meet its payment obligations when they fall due, or that the Bank will not be able to raise new loans at acceptable prices to fund its obligations. Liquidity risk is measured and limited by carrying out a gap analysis of cash flows for various maturities and all currencies, and also gap analysis of groups of currencies. As a general rule, a larger exposure is permitted in currencies with high liquidity than in currencies where the liquidity is low. The liquidity deficit consists of the amount by which estimated out-payments exceed estimated in-payments, and is restricted by limits. With the purpose of managing disturbances on the fi nancial markets that may have a temporary or long-term effect on the Bank’s liquidity, the head of Central Control and Accounting ensures that a contingency plan for the Bank’s liquidity risk management is established annually. Under this plan, the Bank’s liquidity is regularly analysed by the liquidity committee, which is led by the head of Central Treasury. The liquidity analysis includes development of gap analysis, benchmarks for volatile funding and funding costs. The Bank also develops scenario tests in which the effect on liquidity is simulated, given factors such as substantially reduced deposit volumes and high utilisation of committed credit lines. Central Treasury has overall responsibility for the Bank’s liquidity and funding. It must ensure that the Bank has continuous control of its balance sheet and that the actual funding costs are allocated out in the organisation. The daily liquidity management is supplemented by contingency reserves to meet any disruptions in the market. The Bank therefore holds assets eligible as collateral that can be turned into liquidity at short notice through borrowing in central banks or on the capital market. The extra cost arising for funding this portfolio at a maturity which is sufficiently long to handle a temporary liquidity disruption, is distributed over the units at the Bank which use liquidity. Liquidity in Swedish kronor must normally be in balance at the end of each working day. The Bank aims for well-diversified funding in terms of currencies, markets and products. Liquidity is also created through the Group having good access to the international and Swedish capital markets. 52 HANDELSBANKEN ■ ANNUAL REPORT 2006 Short-term funding is obtained by means of active commercial paper programmes in Sweden, the US and Europe. These programmes are supplemented by funding in the international interbank market. Long-term funding is mainly obtained through mortgage bond issues in Swedish kronor and utilisation of other funding programmes at the Bank. If it is assumed that the concentration in the funding portfolio or maturity structure entails too high a risk, Central Treasury must make sure that this concentration is reduced or that the maturity structure of the balance sheet is changed. In autumn 2006, all outstanding bonds in Stadshypotek with a nominal value of some SEK 245bn, were converted into covered bonds. Covered bonds are bonds with priority in the issuing institution’s collateral. These bonds have received an Aaa rating from Moody’s. New issues under existing bond loans and new bond loans in Stadshypotek will in future be in the form of covered bonds. This is part of the Bank’s strategy to achieve liquid, easily available, longterm funding with competitive funding costs. The table above shows all sight deposits as maturing debt within one month. Historically, these deposits have been very stable over time and the Bank expects the majority of the sight deposits to be available to the Bank for a considerably longer period. The table shows credit promises and unutilised overdraft facilities for the contracted tenors. The total outstanding amount of these commitments does not necessarily represent future funding requirements. Liquidity risk in insurance operations Liquidity risk is the risk that the company will not be able to meet its payment obligations when they fall due, or that the company will not be able to sell securities at acceptable prices. This risk is greatly limited by most of the assets being invested in listed securities with good liquidity. INSURANCE RISKS The uncertainty in the outcome of an insurance policy which is dependent on the insured party’s life or health is called insurance risk. In Handelsbanken Liv/SPP, there are the following main groups of insurance risks: • death – payment in the event of the death of the insured person • life – payment as long as the insured person lives • disability/accident – payment in the event of illness/inability to work A policy often includes combinations of the three insurance risks. In mutual insurance companies, it is the policyholders collectively that take the risks, since they have the role of both owner and customer. In SPP and Handelsbanken Liv, which are demutualised (profitdistributing) insurance companies, the policyholders no longer need to bear the risks collectively; instead, the insurance companies bear the risks. Before risk insurance can be granted, a medical risk assessment is performed for the insured party. The purpose is to assess whether and on what terms the insured party can be granted insurance on FINANCIAL REPORTS ■ NOTES – GROUP the basis of his or her state of health. This is essential in order to be able to offer long-term insurance at a reasonable premium in a profitable manner. Future insurance risks Mortality in Sweden continues to fall. This is favourable with regards to death benefit insurance, but has little effect on the profit, as risk pricing is continually adjusted. On the other hand, falling mortality has consequences for pension insurance, since it means a rising average longevity. In savings insurance – products that provide fi nancial compensation as long as the insured person lives, e.g. endowment insurance and pension insurance – risk pricing usually applies to the entire duration of the contract. If actual mortality proves to be 10% lower than the assumptions that are normally used in the sector, thus representing an additional 1 to 1.5 years’ life expectancy, this will result in a total profit reduction of about SEK 40m per annum over a fifty-year period. Most of SPP’s risk products, which provide fi nancial compensation in the event of death and disability/accident, are priced annually and the company can unilaterally change the premium from year to year. Thus, an incorrect mortality assumption can be corrected, with a rapid effect on the results. BUSINESS RISK Business risk is the risk that Group earnings will be lower than expected over a one-year period. For example, unexpected changes in earnings may arise if demand alters in a manner which could not have been anticipated, or if competition has increased to an unexpected extent, resulting in declining volumes and squeezed margins. The size of the business risk depends on how much the income varies, the Bank’s cost structure, and the ease with which operations can be adapted to new business conditions in the short term. Only changes in earnings that cannot directly be linked to other categories of risk are included in estimations of business risk. The business risk is taken into account in the Bank’s internal capital assessment. INFORMATION GATHERING The data/documentation for the reporting of risk is obtained mainly from IT systems. Information relating to credit risk management is obtained from a central data warehouse. Not all credit systems have yet been linked up, but a permanent linking-up of credit ledgers is being carried out, and is going according to plan. Credit risk is calculated using special calculation models. The information which forms the documentation for fi nancial risks is obtained from the business information and risk systems of the various business areas. The Group’s risks are aggregated and analysed by the central risk control function. In 2006, substantial resources were devoted to improving system support and calculation capacity for risk control. In 2007, these improvements will remain in sharp focus. HANDELSBANKEN ■ ANNUAL REPORT 2006 53 FINANCIAL REPORTS ■ NOTES – GROUP Notes – Group NOTE 1 NET INTEREST INCOME AND NET GAINS/ LOSSES ON FINANCIAL ITEMS AT FAIR VALUE Specification of interest Credit institutions and central banks General public 2006 2005 6 650 4 838 40 486 35 937 Treasury bills and other eligible bills 2 878 986 Bonds and other interest-bearing securities 8 902 5 404 557 -279 Derivative instruments recognised as hedges Other interest income 1 114 619 Total interest income, including trading-related 60 587 47 505 Of which trading-related interest reported in net gains/ losses on financial l items at fair value 10 454 8 371 Interest income according to income statement 50 133 39 134 -11 681 -7 848 Credit institutions and central banks General public Issued securities Derivative instruments recognised as hedges -8 495 -5 339 -22 730 -16 955 1 020 877 Subordinated liabilities -2 299 -1 520 Other interest expense -4 333 -1 989 -48 518 -32 774 Total interest income, including trading-related Of which trading-related interest reported in net financial items at fair value -13 357 -8 730 Interest expense according to income statement -35 161 -24 044 14 972 15 090 Net interest income Includes interest income on bad debts SEK 61m (72). Total interest income on assets recognised at amortised cost during 2006 was SEK 46,341m (39,295). Total interest expense on liabilities recognised at amortised cost during 2006 was SEK 39,877m (29,319). Business volumes were larger than the previous year, see Note 12 Loans and deposits, the public. Specification net gains/losses on financial items at fair value Available for sale, realised of which hedging instruments of which hedged items Ineffective portion of cash flow hedges Instruments measured at fair value of which change due to changed interbank interest rate 2006 2005 937 992 54 85 -17 -1 035 -125 1 120 108 0 0 -184 -82 -186 -82 Loan receivables, valued at cost 359 604 Financial liabilities, valued at cost -165 -240 Gains/losses on unbundled insurance contracts 767 - Trading, incl trading-related interest 2 462 2 202 Total 4 261 3 459 HANDELSBANKEN ■ ANNUAL REPORT 2006 Hedge accounting The profit/loss item Fair value hedges includes the net result of unrealised and realised market value changes on fi nancial assets and liabilities which are part of hedging packages. Interest income and interest expense for these instruments are recognised under net interest income. The impact on earnings of the ineffective portion of derivative contracts which are used to hedge cash flows is reported under Ineffective portion of cash flow hedges. Further information about hedge accounting is shown in Note 16, Derivative instruments. Instruments measured at fair value Instruments measured at fair value refers to a small number of lending portfolios outside Sweden. The change in fair value for these lending portfolios largely corresponds to equally-sized opposite changes in value on other fi nancial instruments which are reported under Trading within Net gains/losses on fi nancial items at fair value. Interest income is reported under net interest income. Loan receivables and financial liabilities Loan receivables are capital gains/losses arising when loans are redeemed ahead of time. Financial liabilities contain the capital gains/losses generated from repurchases of the Bank’s own issued securities. Trading Hedge accounting Fair value hedges Net gains/losses on fi nancial items at fair value shows the unrealised and realised changes in value of items which are wholly or partly dependent on changes in market value. Trading contains unrealised and realised changes in market value of derivative instruments which are not used as hedges, and changes in market value of other fi nancial assets and liabilities at fair value. A change has been carried out whereby interest pertaining to activity in the trading book is now included in this item. Previously they were included in the net interest income. The change means that the net interest income has been positively affected by SEK 310m compared to the previous year. Gains/losses on unbundled insurance contracts The result consists both of gains/losses arising on revaluation of liability to policyholders due to changes in the valuation interest rate and of the results of hedging transactions carried out to counteract them. The sub-result also contains any negative yield split. FINANCIAL REPORTS ■ NOTES – GROUP NOTE 1 CONTINUED NOTE 5 STAFF COSTS Valuation techniques 2006 The result includes unrealised results as a consequence of measuring balance sheet items at fair value. The assessment is mainly made on the basis of market prices. When there are no market prices the assessment uses models based on official market prices. More advanced calculation models contain parameters that are not listed, where assumptions and estimates must be made instead. These more advanced valuation models are seldom needed and when they are, valuation models that are generally accepted by the market are always used. Net gains/losses on fi nancial items at fair value include an item of SEK -535m, where the fair value is partly based on the Bank’s own assumptions. The instruments included in this item are mainly equity index options. The positions are essentially matched by opposite positions in listed fi nancial instruments and instruments whose fair value has been assessed on the basis of models based on official market prices. 2005 Salaries and fees -5 297 -4 611 Social security costs -1 480 -1 287 Pension costs* -260 -147 Provision to profit-sharing foundation -135 -130 Other staff costs -542 -503 -7 714 -6 678 Total *Information about defined-benefit pensions is shown in the Net pension assets table. Insurance premiums paid to group companies are SEK 5m (5). 2006 Gender distribution % 2005 Men Women Men Women Total number of employees 46 54 48 52 Managers 64 36 65 35 CEOs and EVPs 94 6 90 10 Board 69 31 69 31 Board incl. subsidiaries 87 13 86 14 Sickness absence rate in Sweden 2006 NOTE 2 NET FEE AND COMMISSION INCOME 9 2006 2005 Brokerage 1 718 1 383 Mutual funds and custody 2 106 1 660 Insurance 2 338 937 Payments Short-term sick leave men Short-term sick leave women 8 7 5 4 1 983 1 875 Lending and deposits 793 835 3 Guarantees 402 388 2 1 181 1 104 1 10 521 8 182 0 Brokerage, mutual funds and custody -260 -208 Payments -888 -839 Other Total fee and commission income Other Total fee and commission expense -141 -80 -1 289 -1 127 9 232 7 055 Long-term sick leave men Long-term sick leave women 6 – 29 years 50 years– Sickness absence in the Swedish operations was 4.0% (4.3). The figure for men was 2.2% (2.3) and for women 5.4% (5.8). Sickness absence in the form of long-term sick leave fell to 2.4% (2.5). Salaries and other remuneration Net fee and commission income 30–49 years 2006 2005 Sweden -72 -75 Norway -6 -5 Finland -5 -5 Denmark -3 -5 Board, CEO and EVPs NOTE 3 RISK RESULT – INSURANCE 2006 Premiums written Insurance claims paid Change in provisions for unsettled claims 2005 1 194 593 -684 -433 Great Britain -4 -5 Luxembourg -2 -2 USA Sub-total -2 -2 -94 -99 -3 179 162 52 Others Other -101 -18 Sweden -3 593 Total 571 194 Norway -416 -333 Finland -306 -270 Denmark -312 -281 Great Britain -278 -204 Luxembourg -64 -58 Germany -28 -28 NOTE 4 OTHER INCOME 2006 Rental income 2005 USA -121 -97 Singapore -27 -23 -12 37 38 Hong Kong -11 Other operating income 188 270 Poland -17 -14 Total 225 308 Other countries -30 -13 Sub-total -5 203 -4 512 Total -5 297 -4 611 Other income includes income for services sold and external rental income relating to the Bank’s own properties. HANDELSBANKEN ■ ANNUAL REPORT 2006 55 FINANCIAL REPORTS ■ NOTES – GROUP Remuneration NOTE 5 CONTINUED Average number of employees 2006 2005 Men Women Sweden 7 829 7 228 3 523 4 306 Norway 623 569 324 299 Finland 572 542 229 343 Denmark 475 461 233 242 Great Britain 292 248 213 79 Luxembourg 79 72 46 33 Germany 41 50 21 20 USA 82 81 58 24 23 Singapore 40 39 17 Hong Kong 26 26 18 8 Poland 38 28 17 21 Other countries Total 66 51 32 34 10 163 9 395 4 731 5 432 PRINCIPLES FOR REMUNERATION TO SENIOR MANAGEMENT The remuneration for senior management is revised annually in accordance with the decision process described below. The main principle in this process is that remuneration is only given in the form of fi xed salary and customary benefits. Variable remuneration in the form of bonuses is not paid. Decision process for remuneration to senior management The board of the Bank appoints a special remuneration committee composed of three board members, one of whom is appointed chairman. The remuneration committee convenes when its chairman calls a meeting. Its assignment is to: 1) establish the principles and overall policy for the salaries, benefits and pensions of the executive vice presidents 2) prepare proposals relating to salaries, benefits and pensions for the group chief executive and the head of the auditing department, to be decided by the board 3) every year, report the results of its work to the board. TERMS AND REMUNERATION OF SENIOR MANAGEMENT Terms The Bank has no agreements on severance pay. The group chief executive, Pär Boman, has a retirement age of 58. His retirement pension is 65% of his salary immediately before retirement. The chairman of the board of the Bank and former group chief executive, Lars O Grönstedt, has a retirement age of 60. His retirement pension between the ages of 60 and 64 is 75% of his salary immediately before retirement, and from the age of 65 it is 65%. From the date that Lars O Grönstedt was appointed as chairman of the board his pension benefits accrue entirely in the Bank’s pension fund and pension foundation (see below). The lowest pension age for the Bank’s executive vice presidents is 60. Between the ages of 60 and 64, their retirement pension is 65% of their salary immediately before retirement. From the age of 65, their retirement pension is 10% of the annual salary up to 7.5 income base amounts. They also receive a pension under the general national insurance scheme. On the portion of the salary in excess of 7.5 income base amounts, a retirement pension of 65% is paid. Pensions for the chairman of the board, the group chief executive and executive vice presidents are accrued successively during the years until retirement age, and are fully accrued by the time the stipulated retirement age is reached. The Bank is charged annually for the cost at the same rate as the pension is accrued. Accrued pension commitments are guaranteed by the Bank’s pension foundation and pension fund, and are vested. If they leave the Bank before the stipulated retirement age, a paid-up policy is issued for the pension accrued. 56 HANDELSBANKEN ■ ANNUAL REPORT 2006 Lars O Grönstedt retired as group chief executive at the AGM in April 2006 and was simultaneously appointed chairman of the board of the Bank. This is a full-time position. The chairman also has overall responsibility for ownership issues relating to shareholdings in the Bank’s pension foundation, pension fund and staff foundation. In addition to the board fee from the Bank, Lars O Grönstedt is employed by the pension fund and pension foundation and receives remuneration accordingly. In 2006, Lars O Grönstedt received remuneration and other benefits from the Bank amounting to SEK 3.7m (7.5), with SEK 0.2m (0.3) of this amount being other benefits. This remuneration refers to salary and benefits for the part of the year Lars O Grönstedt was group chief executive of the Bank and the fee for his services as chairman of the board. Apart from this, remuneration and benefits have been paid by the Bank’s pension foundation and pension fund of SEK 4.5m, with SEK 0.2 of this amount being other benefits. Hence his total remuneration from the Bank, the pension fund and the pension foundation was SEK 8.2m (7.5), with other benefits being SEK 0.4m (0.3). External fees amounting to SEK 0.3m have been paid to the pension fund. The Bank’s former full-time chairman of the board Arne Mårtensson retired in 2006 with a pension in accordance with the terms of his employment contract. In 2006, Arne Mårtensson received remuneration and other benefits of SEK 10.1m (11.5), with SEK 0.1m (0,5) being other benefits. Board fees of SEK 0.9m (3.5) for serving on other boards have been paid to the Bank. Board members who are not employees of the Bank have not received any compensation from the company over and above the normal fees. Board members who are employees of the Bank receive remuneration and pension benefits by reason of their employment. No further remuneration or pension benefits are paid for serving on the board. The group chief executive Pär Boman has received remuneration and other benefits amounting to SEK 6.0m, with SEK 0.3m of this amount being other benefits. No external fees have been received. No variable bonuses are paid. The 21 (21) executive vice presidents have received remuneration and other benefits amounting to SEK 51.8m (61.1), with SEK 3.9m (4.5) of this amount being other benefits. External fees are paid to the Bank. No variable bonuses are paid. Like all other employees of the Bank, the chairman of the board, the group chief executive and other senior managers have been allocated one unit in Handelsbanken’s profit-sharing scheme, Oktogonen. A unit for an employee in Sweden amounted to SEK 21,932 (35,319). Pension obligations Accrued pension rights during the year have increased the pension obligations for the group chief executive by SEK 3.0m (1.6) and for the chairman of the board by SEK 8.1m (7.2). Accrued pension rights during the year have increased pension obligations for the 21 (21) executive vice presidents by SEK 22.2m (24.2). Accrued pension rights during the year relating to defined-benefit pension plans and premiums relating to defined-contribution pension plans for the present and previous boards, chief executives and executive vice presidents were SEK 51.2m (45.2) for the Group and SEK 46.0m (42.0) for the parent company. Pension obligations for the same people are SEK 1,575m (1,417) in the Group and SEK 1,410m (1,302) in the parent company. The number of people covered by these obligations is 70 (69), of whom 32 (32) are pensioners. The obligations are covered by the Bank’s pension foundation. All data concerning pension obligations and accrued pension rights during the year has been calculated in accordance with IAS 19. FINANCIAL REPORTS ■ NOTES – GROUP Loans to senior management 2006 2005 20 147 16 036 Plan assets Loans to the board, chief executives and executive vice presidents at the Bank or group companies are SEK 125m (122) for the Bank or other group companies and SEK 37m (57) for the parent company. Opening balance Expected return on plan assets Funds contributed by the employer PENSION PLAN – OTHER EMPLOYEES From the age of 65, a retirement pension is paid in accordance with the pension agreement between the Employer’s Association of the Swedish Banking Institutions (BAO) and Union of Finance Sector Employees and between BAO and SACO (the Swedish Confederation of Professional Associations). The amount is 10% of the annual salary up to 7.5 income base amounts. On the part of the salary between 7.5 and 20 income base amounts the retirement pension is 65% and in the interval between 20 and 30 income base amounts, it is 32.5% of the annual salary. On the portion of the salary over 30 income base amounts no retirement pension is paid. 185 -534 -9 Funds paid directly to employees -303 -215 3 126 3 142 Actuarial gains (+) / losses (-) Price differences -35 56 Closing balance 23 842 20 147 Return on plan assets Expected return on plan assets 1 014 952 Actuarial gains (+) / losses (-) 3 126 3 142 Real return 4 140 4 094 -3 310 -3 195 Provision for pension obligations Pension costs, defined benefit plans 16 -33 241 -304 Funds contributed by the employer -427 -185 Costs for early retirement pensions - - Redeemed Pension obligations - - Paid benefits The following provisions for pension obligations have been made in the balance sheet: 952 427 Funds paid to employer Opening balance Net pension assets 1 014 2006 2005 Pension obligations 14 343 13 709 Price differences -12 19 Fair value of plan assets 23 842 20 147 Closing balance -3 492 -3 698 Pension obligations minus plan assets -9 499 -6 438 2 740 884 -45 6 0 0 179 -1 286 3 126 3 142 7 -6 6 007 2 740 Retained income on accruals in previous periods Retained actuarial gains (+) / losses (-) Retained income in accordance with transitional rules Allocated for pensions - - 6 007 2 740 - - -3 492 -3 698 Net actuarial gains /losses Opening balance, actuarial gains (+) / losses (-) Actuarial gains (-) / losses (+) to be recognised Of the amount allocated for pensions, SEK -3 914m (-3 698) is pension assets and SEK 422m (0) a pension liability. Actuarial gains (-) / losses (+), redeemed pension obligations Total pension costs are distributed as follows: Actuarial gains (+) / losses (-), pension obligations Pensions accrued during the year -518 -359 Interest on pension liability -557 -554 1 014 952 Expected return on plan assets Write-off of retained income Write-off of retained actuarial gains (+) / losses (-) Pension costs, defined benefit plans Redemption of pension liability Costs for early retirement pensions Pension costs, funded plans Pension costs, defined-contribution plans Special employer’s contribution and policyholder tax, other pension costs Total pension costs - 0 45 -6 -16 33 Actuarial gains (+) / losses (-), plan assets Price differences Closing balance, actuarial gains (+) / losses (-) - - -18 -3 The plan assets mainly comprise shares and interest-bearing securities with the following market values on the balance sheet date: -34 30 Shares and participating interests -219 -172 Interest-bearing securities, etc. Total -7 -5 -260 -147 The actuarial calculation of pension obligations and pension costs is based on the following main assumptions: 20 712 16 638 3 130 3 509 23 842 20 147 The plan assets include shares in Svenska Handelsbanken AB (publ) with a market value of SEK 994m (946) on the balance sheet date 31 December 2006. In Sweden, Norway, Great Britain and Germany the pension plans are defined benefit, meaning that the pension is based on a certain percentage of the final salary. There are no post-retirement health care plans. Discount rate % 3.9 Expected salary increase % 3.6 3.9 3.6 History Expected rate of return on plan assets % 7.0 7.0 Pension obligations 14 343 13 709 Pension indexing % 2.1 2.1 Fair value of plan assets 23 842 20 147 Pension obligations minus plan assets -9 499 -6 438 Income base amount % 2.8 2.8 Staff turnover % 2.7 2.8 Expected remaining years of employment 19 19 Pension obligations, plan assets and provisions for pensions and net actuarial gains/ losses for the defined-benefit plans have developed as follows. Funds paid to the employer refer to funds paid for the employer’s pension costs. Pension obligations Opening balance Pensions accrued during the year Interest expense Paid benefits -1 286 209 -1 089 of which changed actuarial assumptions -30 -197 3 126 3 142 3 126 3 142 0 0 Outcome 2006 Forecast 2007 -596 -586 Actuarial gains (+)/losses (-) for the period, plan assets 11 957 518 359 of which experience adjustments 557 554 of which changed actuarial assumptions -596 -528 - - Redemption of pension obligations - - Actuarial gains (-) / losses (+) 179 of which experience adjustments 14 097 Costs for early retirement pensions Retained income on accruals in previous periods Actuarial gains (+)/losses (-) for the period, pension obligations - - -179 1 286 Price differences -54 81 Closing balance 14 343 13 709 Future cash flows Expected pension payments HANDELSBANKEN ■ ANNUAL REPORT 2006 57 FINANCIAL REPORTS ■ NOTES – GROUP NOTE 7 LOAN LOSSES/RECOVERIES NOTE 6 OTHER EXPENSES 2006 Property and premises 2005 -935 -894 -1 263 -920 Communication -386 -389 Travel and marketing -430 -343 Purchased services -696 -753 External IT costs Supplies -211 -186 Other expenses -259 -262 -4 180 -3 747 Total Minimum lease fee Variable fee Total -685 -579 -18 -146 -703 -725 Rental costs for premises normally have a variable fee related to the inflation rate and to property taxes. Only one of the major lease contracts has a variable fee (related to Stibor). In 2006, the cost of the largest individual lease contract was approx. SEK 61m (58). IT development at Handelsbanken is principally intended to meet the requirements of the business operations. This means that, since operational stability and delivery speed are the crucial factors, the Bank only changes to new technologies or environments in exceptional circumstances. At the same time there are constant efforts to increase the efficiency of existing processes and to enhance the Bank’s technical environment and IT architecture. In 2006, IT infrastructure was produced for several units worldwide. There are several different methods. When the Bank starts new branches in countries with existing branches, the work is based on the existing infrastructure. When starting up in a new country, the solution is based on local conditions, combined with using the Bank’s existing infrastructure as far as possible. IMPROVED INTERNAL SUPPORT During the past two years, the number of employees at internal IT support has decreased by 35%. This decrease was due to the implementation of a standard workstation for the Handelsbanken Group. There are thus fewer technologies used in the organisation. Audit Consulting 2006 2005 2006 2005 KPMG Bohlins AB -9.9 -8.5 -1.4 -1.9 Ernst & Young AB -1.2 -0.8 -0.0 -0.2 -2.4 -2.1 -0.7 -1.0 -72.2 -69.5 Auditors elected by the AGM Auditor elected by the Swedish Financial Supervisory Authority 58 Write-back of previous provisions for probable loan losses which are reported as actual loan losses in the year’s accounts 2005 -596 -550 499 380 -468 -480 Paid in from actual loan losses in previous years 265 476 Write-back of provisions for probable losses no longer necessary 302 366 2 192 77 84 The year’s provision for probable loan losses HANDELSBANKEN ■ ANNUAL REPORT 2006 B. PROVISION BY GROUP FOR INDIVIDUALLY ASSESSED LOAN RECEIVABLES Allocation to/dissolution of provision by group C. COLLECTIVELY ASSESSED HOMOGENEOUS GROUPS OF LOAN RECEIVABLES WITH LIMITED VALUE AND SIMILAR CREDIT RISK This year’s write-off for actual loan losses -44 -43 Paid in from actual loan losses in previous years 22 23 Allocation to/dissolution of reserve for loan losses -2 2 -24 -18 - - 55 258 Net expense for the year for collectively assessed homogeneous loan receivables IT PROCEDURES WHEN STARTING NEW BRANCHES Internal auditing This year’s write-off for actual loan losses Net expense for the year, individually valued loan receivables IT DEVELOPMENT Research and development PricewaterhouseCoopers AB 2006 A. SPECIFIC PROVISION FOR INDIVIDUALLY ASSESSED LOAN RECEIVABLES Of which lease expenses Auditing costs Actual and probable losses minus recoveries are reported as loan losses. Recoveries exceeded loan losses and net recoveries totalled SEK 55m as compared to net recoveries of SEK 261m in the previous year. The loan loss ratio was thus –0.01% (–0.03). Net bad debts decreased to SEK 876m (1,256), equivalent to 0.07% of lending. D. TRANSFER RISK Allocation to/dissolution of reserve for transfer risks Net expense for the year for loan losses (A+B+C+D) Change in value of repossessed property Total loan losses/recoveries - 3 55 261 Both actual and probable loan losses reduce the corresponding receivable amount on the assets side of the balance sheet. The reserve for probable loan losses has decreased by SEK 29m for the Group in the form of exchange differences. FINANCIAL REPORTS ■ NOTES – GROUP NOTE 7 CONTINUED 2006 2005 Impairment losses Claims on credit institutions 0 0 Claims on the public -611 -693 Total impairment losses -611 -693 Write-backs Claims on credit institutions 1 14 Claims on the public 378 438 Total write-backs 379 452 2006 2005 2 872 3 689 Bad debts etc (For definitions, see inside back cover) Bad debts Specific provision for individually assessed loan receivables -1 550 -1 910 Provision for collectively assessed homogeneous groups of loan receivables with limited value and similar credit risk -107 -107 Group provisions for individually assessed loan receivables -339 -416 876 1 256 Net bad debts Total bad debt reserve ratio, % 69.5 65.9 Proportion of bad debts, % 0.07 0.12 Bad debt reserve ratio excl. group provisions, % 57.7 54.7 Non-performing loans which are not bad debts, SEK m 670 602 Book value of loan receivables restructured during the year, before restructure, SEK m 46 47 Book value of loan receivables restructured during the year, after restructure, SEK m 50 55 171 391 Bad debts reclassified as normal loans during the year, SEK m NOTE 8 GAINS/LOSSES ON DISPOSAL OF PROPERT Y, EQUIPMENT AND INTANGIBLE ASSETS 2006 2005 Equipment 1 0 Property - 4 Total 1 4 The difference between the sale price and the remaining value for property, equipment and intangible assets is reported here. NOTE 9 EARNINGS PER SHARE Profit for the year, SEK m 2006 2005 13 128 11 354 Average number of outstanding shares (millions) 643.3 668.6 Earnings per share, SEK* 20.41 16.98 *No dilution. Earnings per share is calculated by dividing the net profits attributable to holders of ordinary shares by the weighted average number of ordinary shares in issue during the period. The denominator excludes the Bank’s holding of repurchased own shares. There are no potentially dilutive instruments, and therefore the calculation is the same for earnings per share before and after dilution. HANDELSBANKEN ■ ANNUAL REPORT 2006 59 FINANCIAL REPORTS ■ NOTES – GROUP NOTE 10 CL ASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES 2006 Recorded at fair value in income statement sub-divided into Trading Derivative instruments designated as hedging Other* instruments Investments held to to maturity Loans and customer receivables Financial assets available for sale Others financial liabilities Nonfinancial assets/ liabilities Total Assets Cash and balances with central banks 4 800 Treasury bills and other eligible bills 86 512 Loans to credit institutions 12 844 Loans to the public Bonds and other interest-bearing securities Shares and participating interests 4 632 86 565 164 331 177 175 1 095 906 1 100 538 170 838 9 340 180 178 66 410 6 507 72 917 Assets where the customer bears the value change risk Derivative instruments 4 800 53 61 390 51 916 1 437 62 827 1 787 53 703 Reinsurance assets Intangible assets Property and equipment 108 108 12 524 12 524 3 545 3 545 Current tax assets 747 747 Deferred tax assets 265 265 Net pension assets 3 914 3 914 Other assets Prepayments and accrued income Total assets 21 012 3 471 391 991 66 022 1 787 21 012 5 660 59 1 293 146 15 959 9 190 21 103 1 790 008 Liabilities Due to credit institutions Deposits and borrowing from the public 13 275 307 207 320 482 111 756 422 129 533 885 Liabilities where the customer bears the value change risk 61 396 Issued securities 40 681 Derivative instruments 61 677 Other trading liabilities 51 829 1 437 554 320 4 505 66 182 51 829 Insurance liabilities 2 871 Current tax liabilities 2 871 488 488 6 810 6 810 Provisions 127 127 Pension obligations 422 Deferred tax liabilities Other liabilities Prepayments and accrued income 181 15 356 2 944 Subordinated liabilities Total liabilities * Classified to be measured at fair value. 60 62 833 595 001 HANDELSBANKEN ■ ANNUAL REPORT 2006 282 343 61 396 4 505 422 15 537 12 699 15 643 51 672 51 672 1 363 383 12 155 1 723 782 FINANCIAL REPORTS ■ NOTES – GROUP NOTE 10 CONTINUED CL ASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES 2005 Recorded at fair value in income statement sub-divided into Trading Other* Derivative instruments designated as hedging instruments Investments held to to maturity Loans and customer receivables Financial assets available for sale Others financial liabilities Nonfinancial assets/ liabilities Total Assets Cash and balances with central banks Treasury bills and other eligible bills Loans to credit institutions Loans to the public Bonds and other interest-bearing securities Shares and participating interests 7 014 44 325 283 15 Derivative instruments 4 574 125 387 502 44 490 136 263 136 546 979 092 983 681 38 23 562 Assets where the customer bears the value change risk 7 014 165 14 293 140 220 5 295 28 857 134 432 63 522 134 432 4 647 68 169 Reinsurance assets Intangible assets Property and equipment 48 48 12 789 12 789 3 318 3 318 Current tax assets 67 67 Deferred tax assets 197 197 Net pension assets Other assets Prepayments and accrued income Total assets 3 698 446 2 1 282 258 822 139 006 4 647 13 181 11 4 459 515 1 140 047 3 698 13 629 5 752 19 753 20 117 1 582 907 Liabilities Due to credit institutions Deposits and borrowing from the public 420 288 633 289 053 24 255 383 362 407 617 Liabilities where the customer bears the value change risk Issued securities 52 462 83 464 146 200 Derivative instruments 66 110 Other trading liabilities 48 137 340 144 135 926 486 344 7 624 73 734 48 137 Insurance liabilities 862 862 Current tax liabilities 767 767 5 950 5 950 Deferred tax liabilities Provisions 36 Other liabilities 591 Prepayments and accrued income 187 9 589 Subordinated liabilities Total liabilities 285 900 52 462 7 624 36 10 180 11 561 11 748 46 795 46 795 1 080 084 91 079 1 517 149 *Classified to be measured at fair value. HANDELSBANKEN ■ ANNUAL REPORT 2006 61 FINANCIAL REPORTS ■ NOTES – GROUP NOTE 11 LOANS TO CREDIT INSTITUTIONS 2006 2005 Banks 44 781 23 861 Other credit institutions 26 179 7 130 Sub-total 70 960 30 991 Banks 31 652 24 793 Other credit institutions 74 565 80 762 106 217 105 555 Loans in Swedish kronor Loans in foreign currency Sub-total Probable loan losses -2 0 Total 177 175 136 546 Of which reverse repos 120 491 100 461 Over 5 yrs Total Payable on demand Within 3 mths 2006 95 108 69 269 7 109 3 109 2 580 177 175 2005 77 425 49 234 5 260 2 217 2 410 136 546 2006 2005 62 433 45 922 Remaining maturities Average volumes Loans to credit institutions in Swedish kronor >1 yr to 5 yrs Loans to credit institutions in Swedish kronor insurance operations 7 146 620 Loans to credit institutions in foreign currency 149 741 130 460 Loans to credit institutions in foreign currency insurance operations Total Of which reverse repos Of which reverse repos, insurance operations 62 >3 mths to 1 yr HANDELSBANKEN ■ ANNUAL REPORT 2006 451 57 219 771 177 059 46 975 32 882 7 109 387 FINANCIAL REPORTS ■ NOTES – GROUP NOTE 12 LOANS AND DEPOSITS, THE PUBLIC 2006 2005 Households 391 483 351 035 Companies etc 395 141 369 363 Sub-total 786 624 720 398 Loans in Swedish kronor Loans in foreign currency Households 92 551 81 539 Companies etc 223 356 184 176 Sub-total 315 907 265 715 Probable loan losses -1 993 -2 432 1 100 538 983 681 Of which reverse repos 21 947 7 930 Of which subordinated 91 101 Over 5 years Total Total Payable on demand Remaining maturities Within 3 months >3 months to 1 year >1 year to 5 years 2006 98 029 308 489 153 510 339 922 200 588 1 100 538 2005 41 581 266 466 142 831 320 885 211 918 983 681 2006 2005 Loans to the public in Swedish kronor 752 671 689 540 Loans to the public in foreign currency 295 599 241 090 1 048 270 930 630 18 022 7 417 2006 2005 533 885 407 617 2006 2005 Average volumes – loans to the public Total Of which reverse repos Deposits and borrowing from the public Deposits and borrowing from the public Deposits from the public Deposits in Swedish kronor Households 106 002 91 769 Companies etc 108 391 107 888 Total 214 393 199 657 23 800 23 930 Deposits in foreign currency Households Companies etc 103 922 96 826 Total 127 722 120 756 Total deposits from the public 342 115 320 413 Remaining maturities Payable on demand Within 3 months >3 months to 1 year >1 year to 5 years Over 5 years Total 2006 319 750 13 442 1 379 703 6 841 342 115 2005 294 331 21 032 3 379 501 1 170 320 413 2006 2005 Deposits from the public in Swedish kronor 203 245 184 719 Deposits from the public in foreign currency 126 861 111 660 Total 330 106 296 379 Average volumes of deposits from the public HANDELSBANKEN ■ ANNUAL REPORT 2006 63 FINANCIAL REPORTS ■ NOTES – GROUP NOTE 12 CONTINUED Borrowing from the public 2006 2005 Borrowing from the public Swedish kronor 151 674 46 780 Foreign currency 40 096 40 424 191 770 87 204 5 777 2 853 Over 5 years Total Total Of which repos Payable on demand Within 3 months >3 months to 1 year >1 year to 5 years 2006 2 460 70 709 9 401 15 965 93 235 191 770 2005 2 913 54 984 5 552 4 874 18 881 87 204 Remaining maturities Average volume of borrowing from the public Borrowing from the public in Swedish kronor Borrowing from the public in Swedish kronor, insurance operations Borrowing from the public in foreign currency Total Of which repos 2006 2005 38 852 29 560 107 693 22 352 48 996 41 335 195 541 93 247 7 558 3 931 LENDING AND DEPOSIT VOLUMES Loans to the public increased by 12% to SEK 1,101bn (984). Stadshypotek increased by 8% to SEK 480bn (445). Stadshypotek’s lending represented 44% of the Group’s loans to the public. Loans to the public in Sweden, excluding the National Debt Office rose by 10% to SEK 831bn (755), where household lending rose by 11% to SEK 391bn (352). The average volume of loans to the public excluding loans to the National Debt Office increased by 13% to SEK 1,045bn (927). Household lending rose by 13% to SEK 457bn (405), while corporate lending was up 13% to SEK 588bn (522). Average lending in Sweden increased by 10 % to SEK 797bn (727) while branch office operations outside Sweden increased by 24% to SEK 224bn(180). Deposits from the public, including the insurance operations went up by 31% to SEK 534bn (408). Household deposits went up by 14% to SEK 159bn (139) and deposits from companies increased by 39% to SEK 375bn (269). The consolidation of SPP partly explains the increase in deposit volumes. The average volume of deposits in Sweden, excluding insurance operations, increased by 13% to SEK 278bn (246), of which SEK 104bn (93) was from households. Outside Sweden, the average volume of deposits rose by 15% to SEK 140bn (122), of which SEK 29bn (27) was from households. NOTE 13 INTEREST-BEARING SECURITIES 2006 Nominal value 2005 Fair value Nominal value Fair value Interest-bearing securities Government instruments 79 415 84 145 32 663 Credit institutions 48 948 49 316 38 181 38 673 Mortgage institutions 47 507 47 817 27 497 28 249 Remaining maturities 84 492 85 465 76 957 83 277 Total 260 362 266 743 175 298 184 713 - -3 Total book value 266 743 184 710 Bonds and other interest-bearing securities 180 178 140 220 81 819 Total interest-bearing securities Of which unlisted securities Of which subordinated 64 HANDELSBANKEN ■ ANNUAL REPORT 2006 86 565 42 253 >3 mths to 1 yr >1 yr to 5 yrs Over 5 yrs Total 2006 253 18 808 65 833 119 694 62 155 266 743 2005 2 878 14 040 43 595 97 711 26 486 184 710 Average volumes Interest-bearing securities Interest-bearing securities, insurance operations Total Treasury bills and other eligible bills Within 3 mths 34 514 Other Adjustment to book value for investments held to maturity Payable on demand 44 490 266 743 184 710 1 061 7 926 499 146 2006 2005 194 516 160 508 70 905 15 190 265 421 175 698 FINANCIAL REPORTS ■ NOTES – GROUP NOTE 14 SHARES AND PARTICIPATING INTERESTS 2006 2005 65 169 22 744 Held for trading Listed Non-listed Total 1 241 818 66 410 23 562 5 160 4 537 Holdings classified as available for sale Listed Non-listed Total Holdings in associated companies, non-listed 802 362 5 962 4 899 545 396 72 917 28 857 Carrying amount at beginning of year 396 354 Participating interests added via consolidation of SPP 108 - Share of profit for the year 105 59 Taxes -29 -20 Total shares and participating interests Participating interests in associated companies Shareholders’ contribution Dividend 8 6 -32 -11 Exchange difference -11 8 Carrying amount at close of year* 545 396 * Of which goodwill 125 87 Book value Corporate identity number Registered office No. of shares Participating interest % Bankomatcentralen AB 556197-2265 Stockholm 1 100 21.9 0 0 BGC Holding AB 556607-0933 Stockholm 25 382 25.4 58 41 Centralen för Elektroniska Korttransaktioner CEK AB 556362-0383 Stockholm 370 37.0 16 16 BDB Bankernas Depå AB 556695-3567 Stockholm 8 000 20.0 2 - Finansiell ID-teknik BID AB 556630-4928 Stockholm 12 735 28.3 3 2 Associated companies Nordben Life and Pension Insurance Co Ltd. 2006 2005 14 861 Guernsey 3 000 000 50.0 127 - Privatgirot AB 556302-4552 Stockholm 290 29.0 6 5 Upplysningscentralen UC AB 556137-5113 Stockholm 2 429 24.3 12 7 VPC AB 556112-8074 Stockholm - - - 325 VPC Holding AB 556709-1763 Stockholm 443 700 24.8 321 - 545 396 Income Profit/loss Total Financial information on associated companies referring to 100% of the companies Bankomatcentralen AB BGC Holding AB Centralen för Elektroniska Korttransaktioner CEK AB 2006 Assets Liabilities 2005 Income Profit/loss Assets Liabilities 0 0 0 0 0 0 0 0 383 155 854 169 750 582 850 21 6 62 18 133 2 66 23 120 BDB Bankernas Depå AB 9 1 57 -12 - - - - Finansiell ID-teknik BID AB 40 29 46 -14 43 43 25 -26 7 801 7 547 338 16 - - - - 48 27 113 -6 49 33 138 1 110 59 30 0 163 138 224 0 - - - - 1 464 266 687 161 1 595 302 712 50 - - - - Nordben Life and Pension Insurance Co Ltd. Privatgirot AB Upplysningscentralen UC AB VPC AB VPC Holding AB VALUATION METHODS FOR UNLISTED SHARES Unlisted shares are valued on the basis of valuation models at fair value. The choice of model is applied consistently for each share. The choice of model is governed by what is considered appropriate for the individual share. Several of the unlisted shares are shares where the Bank in its capacity as shareholder cannot control the price at which the share will be sold, since this is regulated by the company agreement. These shares are valued at the pre-determined values. For example, there are cases where the shareholders’ meeting resolves the value at which transfers will be made. HANDELSBANKEN ■ ANNUAL REPORT 2006 65 FINANCIAL REPORTS ■ NOTES – GROUP NOTE 15 ASSETS WHERE THE CUSTOMER BEARS THE VALUE CHANGE RISK 2006 2005 - 83 664 58 468 48 594 Insurance assets in SPP Liv Unit- linked insurance assets Other fund assets 1 437 - Share of consolidated funds not owned 2 922 2 174 62 827 134 432 Total NOTE 16 DERIVATIVE INSTRUMENTS Nominal amount/maturity Up to 1 year Positive market values > 1 year to 5 years Over 5 years Total 2006 Negative market values Total 2005 2006 2005 2006 2005 2 632 Derivatives held for trading Interest rate-related contracts Options FRA/futures Swaps Other instruments 177 251 76 343 4 820 258 414 264 052 3 118 2 931 2 803 3 087 592 985 100 8 856 4 081 548 3 986 026 1 138 820 1 091 806 910 816 1 040 615 460 553 2 411 984 2 279 990 18 422 33 211 20 439 34 415 10 510 208 - 10 718 14 840 4 6 0 6 Currency-related contracts Options 33 203 2 183 - 35 386 50 775 88 439 98 365 Futures 1 129 468 13 057 405 1 142 930 1 351 482 13 313 17 255 18 159 12 590 152 025 162 158 23 293 337 476 269 470 4 526 2 652 5 115 3 689 Options 79 394 45 100 6 088 130 582 118 946 8 247 5 314 9 953 8 537 Futures 31 992 2 152 - 34 144 23 168 838 150 1 187 682 718 1 405 418 2 541 3 038 320 133 1 204 1 385 Swaps Equity-related contracts Swaps Other instruments Other derivative contracts Sub-total 32 - - 32 449 328 13 16 24 365 29 346 749 30 460 15 440 1 574 598 1 612 979 5 613 366 2 357 667 505 182 8 476 215 8 377 676 51 916 63 522 61 677 66 110 Derivatives for fair value hedges Interest rate-related contracts Options - - - - 4 290 - 13 - - 3 500 6 300 - 9 800 8 100 6 4 2 5 Swaps 22 821 101 676 54 670 179 167 249 528 794 3 300 3 251 6 171 Other instruments 29 206 - - 29 206 3 953 4 2 4 2 FRA/futures Currency-related contracts Options 45 - - 45 - 0 - - - Futures 71 092 15 344 - 86 436 89 197 658 1 161 1 183 1 222 - Other instruments Other derivative contracts Sub-total 345 48 - 393 - 0 - - 182 - - 182 - - - 0 - 127 191 123 368 54 670 305 229 355 068 1 462 4 480 4 440 7 400 Derivatives for cash flow hedges Interest rate-related contracts FRA/futures Swaps Sub-total Total Of which cleared - - - - 83 - 0 - - 4 671 15 018 3 223 22 912 14 231 325 167 65 224 4 671 15 018 3 223 22 912 14 314 325 167 65 224 5 745 228 2 496 053 563 075 8 804 356 8 747 058 53 703 68 169 66 182 73 734 2 878 349 2 992 847 2 973 5 412 1 776 5 693 Currency breakdown of market values SEK 174 936 11 032 250 432 96 620 USD -117 607 223 279 -221 426 122 327 EUR Others 66 HANDELSBANKEN ■ ANNUAL REPORT 2006 24 954 -62 449 5 556 -89 125 -28 580 -103 693 31 620 -56 088 FINANCIAL REPORTS ■ NOTES – GROUP NOTE 16 CONTINUED HEDGE ACCOUNTING Fair value hedges Handelsbanken mainly uses fair value hedges to protect itself against changes in fair value for lending and deposits at fi xed interest rates and to hedge foreign exchange exposure when borrowing in foreign currencies. The main hedge instruments used are interest rate swaps and currency forwards. In a very few cases, changes in fair value of credit risk exposures are subject to hedge accounting. In these cases, credit derivatives are used as the hedge. As at 31 December 2006, derivatives have been used as fair value hedges for a nominal amount of SEK 305bn (355). The fair value of these derivatives was SEK 1bn (4) in positive market values and SEK 4bn (7) in negative market values. The value change for the year for these derivatives is SEK –1,035m (–125) and this is reported in the income statement under Net gains/losses on fi nancial items at fair value. The change in fair value for the hedged items relating to hedged risk is SEK 1,120m (108), which is also reported under Net gains/losses on fi nancial items at fair value. Thus, the Group’s fair value hedges had a positive impact of SEK 85m (–17) on the year’s profits. Cash flow hedges Handelsbanken also hedges the uncertainty of future cash flows. Uncertainty in future cash flows arises when funding is at variable interest rates. These interest rates are fi xed for between one and six months. The maturity horizon of the loan is much longer, however: up to 15 years. To hedge the future interest payments for a required maturity, interest rate swaps are used. For future cash flows which are to be reinvested or refi nanced, interest rate swaps are used with value dates in the future so as to guarantee a known reinvestment or refi nancing interest rate. The future cash flows to be hedged have a high probability of occurring since they are contracted. As at 31 December 2006, derivatives which have been used as cash flow hedges have a nominal amount of SEK 23bn (14). The fair value of these derivatives was SEK 325m (167) in positive market values and SEK 65m (224) in negative market values. For the effective portion of hedges, the change in value of the derivative is recognised in equity. The change in value is transferred to the income statement at the same pace as the hedged item’s cash flows affect the profit/loss. At the end of the year, the hedge provision was SEK –136m (57). There were almost no ineffective hedges. HANDELSBANKEN ■ ANNUAL REPORT 2006 67 FINANCIAL REPORTS ■ NOTES – GROUP NOTE 17 INTANGIBLE ASSETS Goodwill Trademarks and other rights Customer contracts Internally developed software Total 2006 Total 2005 12 498 3 003 954 57 16 512 12 223 12 - - 71 83 4 120 -160 - - - -160 169 Cost of acquisition at close of year 12 350 3 003 954 128 16 435 16 512 Accumulated amortisation and impairments at beginning of year -2 956 -725 -35 -7 -3 723 -2 932 - - - - - -580 -150 -39 -5 -194 -178 Cost of acquisition at beginning of year Cost of acquisition of additional intangible assets Foreign exchange effect Accumulated amortisation of additional intangible assets Amortisation for the year according to plan Impairments for the year - - - -25 -25 - Foreign exchange effect 31 - - - 31 -33 -2 925 -875 -74 -37 -3 911 -3 723 9 425 2 128 880 91 12 524 12 789 Accumulated amortisation and impairments at end of year Closing residual value Information on goodwill referring to associated companies can be found in Note 14 Shares and participating interests. Assumptions Amortisation is based on the expected useful life. At present, this means that principally the following amortisation rates are applied. Goodwill Not amortised Trademarks 20 years Customer contracts On a straight-line basis over the life of the relevant contract Internally developed software 5 years Other intangible assets Individual testing ESTIMATES USED TO CALCULATE THE RECOVERABLE AMOUNT OF CASH-GENERATING ENTITIES WITH GOODWILL OR OF INTANGIBLE ASSETS WITH AN INDEFINITE USEFUL LIFE Goodwill and other intangible assets with an indefi nite useful life is allocated over the following segments/cash-generating units. Branch office operations SEK 5,796m Markets SEK 12m Asset Management SEK 12m Pensions & Insurance SEK 3,607m An impairment test that the recoverable amount exceeds the book value is performed by comparing the values in the balance sheet with the estimated recoverable amount. If the recoverable amount exceeds the value in the balance sheet, no impairment loss needs to be recognised. The recoverable amount for entities to which goodwill and other intangible assets have been allocated has been determined by calculating the value in use per entity. This means that future cash flows including an estimated closing value are estimated. The calculations are before taxes. – The assessment is that the difference between the recoverable amount and the book value is satisfactory. – An impairment loss has been recognised for capitalised software since it is not estimated to have any value. 68 HANDELSBANKEN ■ ANNUAL REPORT 2006 – The cash flow period used to calculate the recoverable amount is normally 20 years for cash-generating entities relating to banking operations and 40 years for insurance operations. The type of contract and nature of the operations dictates the choice of cash flow period. – Detailed forecasts are made for the fi rst five years. In the subsequent years, gradually declining changes in the future cash flows are assumed. Normally, the rate of increase of future cash flows is assumed to be no larger than the corresponding historical rise in GDP in the country in question. These forecasts are based partly on historical trends and partly on knowledge of future events which can affect the historical trend. The outcome in individual years is compared to the forecast values. These comparisons are used to decide whether an adaptation should be made of the forecasting method and the forecast values in the future. – The discount rate used is the weighted return requirement for the respective type of operations. Since capital is allocated on the basis of a risk assessment, normally the same discount rate can be used for all types of goodwill items and other intangible items arising when business operations are acquired. However, the discount rate is always tested on a case-by-case basis. The discount rate applied is 4.2%. Intangible assets with an indefinite useful life The individual assets which are not subject to annual amortisation are those where the economic life and the useful life cannot be regarded as defi nable. Examples of such items are brand names and in certain cases customer relations in cases where these are attributable to sectors which cannot be regarded as associated operations with a limited life. In cases where the Bank only has the exclusive rights to a brand name or other intangible asset for a limited period of time, the cost of acquisition of the brand name is amortised over this period at the rate it is used. FINANCIAL REPORTS ■ NOTES – GROUP NOTE 18 PROPERT Y AND EQUIPMENT Operating properties at fair value Opening cost of acquisition Other property and equipment Investment 1–4 years 5-9 years 10-19 years 20+ years No property depreciation depreciation depreciation depreciation depreciation Total 2006 Total 2005 4 815 1 380 - 742 911 124 1 212 593 4 962 Opening cost of acquisition, SPP 145 - 10 6 32 - 0 193 New acquisitions during the year - - 143 169 11 - 0 323 276 170 - - - - - - 170 70 - 96 40 -297 Changes as a consequence of revaluations during the year Capitalised new construction and rebuilding costs during the year 30 - - - - 66 Cost of acquisition of property and equipment sold during the year - - -194 -176 -24 -31 0 -425 Foreign exchange effect - - -13 -26 -3 - 0 -42 58 Total cost of acquisition 1 725 - 688 884 140 1 247 593 5 277 4 962 Accumulated depreciation at beginning of year - - -570 -655 -58 -554 -1 837 -1 764 Accumulated depreciation at beginning of year, SPP - - -10 -4 -24 - -38 Accumulated depreciation on equipment sold during the year - - 188 168 20 32 408 Year’s impairment losses recognised in the income statement - - - - - -10 -10 -5 Year’s depreciation - - -135 -135 -15 -36 -321 -316 281 Foreign exchange effect - - 11 17 -1 - 27 -33 Total accumulated depreciation - - -516 -609 -78 -568 -1 771 -1 837 7 7 20 - - 139 Book value of leasing assets taken over Book value of other repossessed property - - - - - 32 34 32 - - - - 7 39 193 32 172 275 62 679 600 3 545 3 318 Book value of property repossessed for protection of claims 32 Total collateral taken over Residual value according to plan 1 725 Of which land 762 Tax assessment value, Swedish properties 927 583 2 172 Apart from owned equipment, the Bank also has at its disposal equipment under operating leases. The residual value of leased equipment in the Bank was SEK 38m (54). Property held for use in the business at fair value was valued individually taking cash flows into account. The valuation was performed in December 2006 by an external valuer. The carrying 1 345 1 253 3 099 3 004 amount of the premises would have been SEK 1,555m, if they had not been carried at fair value. The year’s depreciation for other repossessed property is SEK 7m (14). Property repossessed to protect claims is sold as soon as reasonable market conditions exist. NOTE 19 OTHER ASSETS Claims on investment banking settlements Other Probable loan losses Total 2006 2005 17 610 8 645 3 403 4 985 -1 -1 21 012 13 629 NOTE 20 PREPAYMENTS AND ACCRUED INCOME 2006 2005 Accrued interest income 7 727 5 065 Other accrued income 1 248 542 215 145 9 190 5 752 4 3 Prepayments Total Of which subordinated HANDELSBANKEN ■ ANNUAL REPORT 2006 69 FINANCIAL REPORTS ■ NOTES – GROUP NOTE 21 DUE TO CREDIT INSTITUTIONS 2006 2005 Banks 52 133 48 532 Other credit institutions 15 635 3 027 Sub-total 67 768 51 559 239 122 214 654 Due in Swedish kronor Due in foreign currency Banks Other credit institutions 13 592 22 840 Sub-total 252 714 237 494 Total 320 482 289 053 35 743 10 783 Over 5 years Total Of which repos Remaining maturities Payable on demand Within 3 months >1 year to 5 years 2006 71 141 225 451 22 485 591 814 320 482 2005 47 046 217 876 22 064 1 047 1 020 289 053 2006 2005 Average volumes Due to credit institutions in Swedish kronor 55 996 58 792 Due to credit institutions in foreign currency 312 130 257 471 Total 368 126 316 263 29 468 17 396 Of which repos NOTE 22 LIABILITIES WHERE THE CUSTOMER BEARS THE VALUE CHANGE RISK 2006 2005 Insurance liabilities in SPP Liv - 83 464 Unit-linked insurance liabilities 58 474 48 634 Other fund liabilities 1 437 - Share of consolidated funds not owned 2 922 2 174 Other Total 70 >3 months to 1 year HANDELSBANKEN ■ ANNUAL REPORT 2006 - 1 654 62 833 135 926 FINANCIAL REPORTS ■ NOTES – GROUP NOTE 23 ISSUED SECURITIES 2006 2005 Nominal amount Book value Book value 26 579 28 037 26 428 19 298 19 250 26 428 7 281 8 787 - 219 379 218 616 207 217 Certificates Certificates in Swedish kronor Of which at amortised cost for trading Certificates in foreign currency Of which at amortised cost 174 538 173 775 188 263 for fair value hedges 12 955 12 947 18 954 for trading 31 886 31 894 - 245 958 246 653 233 645 265 631 276 769 222 301 195 306 202 325 177 911 70 325 74 444 44 390 73 412 71 579 30 398 at amortised cost 53 096 51 699 29 182 for fair value hedges 20 316 19 880 1 216 Sub-total 339 043 348 348 252 699 Total 585 001 595 001 486 344 Sub-total Bonds Bonds in Swedish kronor Of which at amortised cost for fair value hedges Bonds in foreign currency Of which Payable on demand Within 3 months >3 months to 1 year >1 year to 5 years >5 years Total 2006 1 657 204 474 96 236 241 846 50 788 595 001 2005 - 175 658 135 614 159 886 15 186 486 344 Remaining maturities carrying amount 2006 2005 Swedish kronor Average volume of issued securities 301 113 245 392 Foreign currency 285 467 273 391 2006 2005 1 403 1 491 Turnover of own issued securities Issued Repurchased Repaid 292 275 1 001 1 171 2006 2005 NOTE 24 OTHER TRADING LIABILITIES Short positions at fair value Equities Interest-bearing securities 2 053 3 868 49 776 44 269 48 318 41 755 Of which Other issuers Own issued Total 1 458 2 514 51 829 48 137 Payable on demand Within 3 months >3 months to 1 year >1 year to 5 years >5 years Total 2006 3 78 2 627 37 695 9 373 49 776 2005 - 2 035 5 735 29 333 7 166 44 269 2006 2005 Swedish kronor 41 014 22 674 Foreign currency 2 860 6 057 Remaining maturities short positions interest-bearing securities Average volumes of other trading liabilities HANDELSBANKEN ■ ANNUAL REPORT 2006 71 FINANCIAL REPORTS ■ NOTES – GROUP NOTE 25 INSURANCE OBLIGATIONS Liability for sickness annuities Liability for other unsettled claims Liability for prepaid premiums Total NOTE 27 PROVISIONS 2006 2005 2006 2005 2 158 437 Opening balance 410 318 Additional provisions when consolidating SPP 36 10 303 107 Provisions during the year 5 2 871 862 Utilisation - - Other changes -81 -10 Closing balance 127 36 2006 2005 5 505 3 705 167 36 NOTE 26 TA XES Deferred tax assets 2006 2005 17 - NOTE 28 OTHER LIABILITIES Loans to the public Shares and participating interests 6 8 Derivative instruments - 57 105 147 49 54 Intangible assets Property and equipment Pension obligations 118 - 18 46 Offsetting against deferred tax liability -48 -115 Total 265 197 2006 2005 Other Deferred tax liabilities Liabilities on investment banking settlements Other 10 032 6 475 Total 15 537 10 180 NOTE 29 PREPAYMENTS AND ACCRUED INCOME Accrued interest expense Loans to the public * 4 627 3 912 252 219 38 42 Intangible assets 611 643 Property and equipment 150 159 1 118 1 055 Shares and participating interests Derivative instruments Pension assets Other 62 35 -48 -115 Total 6 810 5 950 Net deferred tax liabilities 6 545 5 753 Recognised directly in equity Closing balance Offsetting against deferred tax assets * Of which leasing SEK 4 603m (3 858). Year’s change in deferred taxes Recognised Opening in the income balance statement Loans to the public 3 912 699 -1 4 610 Shares and participating interests 211 2 33 246 Derivative instruments -15 - 53 38 Intangible assets 496 5 5 506 Property and equipment Pension assets/obligations Other Total 105 -4 0 101 1 055 33 -88 1 000 -11 -10 65 44 5 753 725 67 6 545 2006 2005 -3 776 -3 636 465 55 Tax expenses recognised in the income statement Current tax Tax expense for the year Adjustment of tax attributable to previous years Deferred tax Changes in temporary differences -725 -715 -4 036 -4 296 28.0 28.0 Different tax base in insurance operations -3.8 -0.7 Taxes for previous years, and other -0.7 0.0 23.5 27.4 Total Nominal tax rate in Sweden, % Deviations Effective tax rate, % 72 HANDELSBANKEN ■ ANNUAL REPORT 2006 Other accrued expense Deferred income Total 2006 2005 13 509 9 636 2 084 2 026 50 86 15 643 11 748 FINANCIAL REPORTS ■ NOTES – GROUP NOTE 30 SUBORDINATED LIABILITIES NOTE 31 SPECIFICATION OF CHANGES IN EQUIT Y 2006 2005 Subordinated loans in Swedish kronor 349 349 Subordinated loans in foreign currency 51 323 46 446 Total 51 672 46 795 -23 Change in exchange differences in branches 176 Change in exchange differences in subsidiaries 417 Change in exchange differences in associated companies 8 -213 Exchange difference 31 December 2005 Subordinated loans in Swedish kronor 349 380 Subordinated loans in foreign currency 49 080 31 286 Specification, subordinated loans Currency Original nominal amount in each currency Change in exchange differences in branches -271 Change in exchange differences in subsidiaries -339 Change in exchange differences in associated companies -11 129 Exchange difference 31 December 2006 Interest rate % -127 Outstanding amount Specification of instruments available for sale (amount after tax) Other Swedish 7 349 Total 349 IN FOREIGN CURRENCY EUR 365 Change in exchange difference on financing of net assets in subsidiaries IN SWEDISH KRONOR 2005/20151 Exchange differences 31 December 2004 Change in exchange difference on financing of net assets in subsidiaries Average volumes Issue/conv./final paymt year Change in exchange differences 500 variable 4 517 2006 2005 Unrealised market value at beginning of year 872 680 Unrealised market value of holdings sold during the year -336 -303 2005/2017 2 EUR 700 variable 6 317 Unrealised market value change during the year for remaining and new holdings 587 495 2005/perpetual 3 GBP 500 5.000 6 506 Unrealised market value at end of year 1 123 872 2005/perpetual 4 EUR 500 4.194 4 261 2006/2016 5 EUR 600 4.000 5 372 2006/2016 6 USD 800 variable 5 477 Revaluations in insurance operations recognised directly in equity 2006 2005 Other foreign 7 18 873 Total 51 323 Changes in value of properties recognised directly in equity 170 70 51 672 Insurance liabilities recognised directly in equity -170 -70 - - Total 1 2 3 4 5 6 7 Fixed-term subordinated loan with 3-month variable coupon linked to Euribor. Premature redemption may occur in the case of changed tax regulations or on the interest due dates from 2010. Premature redemption requires the approval of the Swedish Financial Supervisory Authority. Fixed-term subordinated loan with 3-month variable coupon linked to Euribor. Premature redemption may occur in the case of changed tax regulations or on the interest due dates from October 2012. Premature redemption requires the approval of the Swedish Financial Supervisory Authority. Perpetual subordinated loan at fixed rate. Premature redemption may occur in the case of changed tax regulations or on the interest due dates from 2010. Premature redemption requires the approval of the Swedish Financial Supervisory Authority. In connection with the right of redemption, the interest rate becomes variable linked to Libor. Perpetual subordinated loan at fixed rate. Premature redemption may occur in the case of changed tax regulations or on the interest due dates from 2015. Premature redemption requires the approval of the Swedish Financial Supervisory Authority. In connection with the right of redemption, the interest rate becomes variable linked to Euribor. Fixed-term subordinated loan at fixed rate. Premature redemption may occur in the case of changed tax regulations or on the interest due dates from 2011. Premature redemption requires the approval of the Swedish Financial Supervisory Authority. In connection with the right of redemption, the interest rate becomes variable linked to Euribor. Fixed-term subordinated loan with 3-month variable coupon linked to Libor. Premature redemption may occur in the case of changed tax regulations or on the interest due dates from 2011. Premature redemption requires the approval of the Swedish Financial Supervisory Authority. Other subordinated loans which are not specified here are issued in the form of fixed-term or perpetual subordinated loans. Total HANDELSBANKEN ■ ANNUAL REPORT 2006 73 FINANCIAL REPORTS ■ NOTES – GROUP Other disclosures – Group CAPITAL ADEQUACY Capital base and capital requirement SEK m 2006 2005 Tier 1 capital 1) 59 272 58 424 Net tier 2 capital 23 976 30 890 Total capital base 83 248 89 314 Credit risks 827 649 723 658 Market risks 48 529 45 581 876 178 769 239 Capital ratio, % 9.5 11.6 Tier 1 ratio, % 6.8 7.6 Capital base 2006 2005 61 467 59 035 5 358 5 681 0 0 CAPITAL BASE RISK-WEIGHTED AMOUNT Total TIER 1 CAPITAL Equity1 Tier 1 capital contribution Minority interest Deducted items Goodwill and other intangible assets -5 917 -5 992 Revaluation -152 -159 Deferred tax asset -264 -197 Unrealised accumulated profit -1 123 Adjustments in accordance with stability filter Cash flow hedges -97 56 59 272 58 424 Perpetual subordinated loans 20 838 13 421 Fixed-term subordinated loans after reduction 25 072 26 548 Total tier 1 capital TIER 2 CAPITAL Adjustment unrealised accumulated profit Revaluation adjustment 152 159 47 190 40 128 Total 106 462 98 552 Less shareholdings in insurance companies and 5–50% in companies conducting banking business -22 148 -9 238 Total tier 2 capital Less adjustment, unrealised pension obligations -1 066 Total tier 1 and tier 2 capital 83 248 Enlarged capital base Total capital base 1 74 1 128 Tier 1 capital has been affected by the board’s proposed appropriations. HANDELSBANKEN ■ ANNUAL REPORT 2006 89 314 - - 83 248 89 314 FINANCIAL REPORTS ■ NOTES – GROUP CAPITAL COVER CONTINUED Risk-weighted amount for credit risks Balance sheet items 2006 2005 Risk-weighted Investments amount Weighting Investments Risk-weighted amount Risk weight 0% (group A) 0% 367 231 Risk weight 20% (group B) 20% 42 693 8 539 43 466 8 693 Risk weight 50% (group C) 50% 545 623 272 811 502 984 251 491 Risk weight 100% (group D) 100% 471 262 471 262 392 683 392 683 1 426 809 752 612 1 205 387 652 867 Total 266 254 2006 Off-balance-sheet items 2 Weighting Nominal amount 2005 Converted Risk-weighted amount amount Nominal amount Converted Risk-weighted amount amount Risk weight 0% (group A) 0% 21 925 12 264 16 614 10 075 Risk weight 20% (group B) 20% 174 099 14 269 2 854 42 061 12 670 2 534 Risk weight 50% (group C) 50% 430 084 3 362 1 681 88 346 2 487 1 244 Risk weight 100% (group D) 100% 136 290 70 502 70 502 125 777 67 013 67 013 762 398 100 397 75 037 272 798 92 245 70 791 1 527 206 827 649 1 297 632 723 658 Total Total credit risks 2 The nominal amounts for off-balance sheets items are recalculated using a factor which varies according to the credit risk in the commitments. The recalculated amounts are subsequently allocated according to the same principles (group A-D) which apply for the balance sheet items. Risk-weighted amount for market risks 2006 Specific risk 2005 General Risk-weighted risk amount Specific risk General Risk-weighted risk amount Interest rate risks 24 620 10 466 35 086 20 584 10 844 31 428 Equity price risks 815 764 1 579 791 612 1 403 Settlement risks Counterparty risks and other risks 15 12 10 316 11 770 Exchange rate risks 1 533 968 Total market risks 48 529 45 581 876 178 769 239 Total risk-weighted amount for credit and market risks CAPITAL POLICY The Bank aims to maintain a satisfactory capital level corresponding to the risk implied by the Group’s operations and which exceeds the legal minimum requirement. A satisfactory capital level is needed to manage situations of fi nancial strain and also other events such as acquisitions and strong growth in volumes. In 2006, the Board established a new capital policy, which provides guidelines for Handelsbanken’s internal capital assessment. INTERNAL CAPITAL ASSESSMENT Handelsbanken must have available fi nancial resources corresponding to all the risks which lead to unexpected losses or reductions in value. Capital planning must be undertaken to ensure that capital is available when needed. The internal capital adequacy assessment also includes the groupwide risk control so that there is an overall assessment of the Group’s risks. Handelsbanken has decided to use an economic capital model (EC). The EC model provides a measure of the Group’s overall risks and corresponds to the capital which with very high probability will cover unexpected losses or decreases in value from the perspective of the shareholders. The assessment is carried out regularly and also monitors compliance with external statutory capital requirements. DESCRIPTION OF THE CAPITAL BASE FOR THE FINANCIAL CORPORATE GROUP The Bank’s capital base consists of tier 1 capital, tier 2 capital and the enlarged capital base (to cover market risks). Tier 1 capital consists of the equity belonging to the companies which are part of the fi nancial corporate group and issued tier 1 loans. Accumulated shareholders’ equity deriving mainly from the Group’s insurance companies is excluded when calculating the capital base for the fi nancial corporate group. Tier 1 capital loans (certain types of subordinated loans) can be included up to 15% of the total tier 1 capital excluding tier 1 capital loans, net after reduction items. Handelsbanken has included 9% so far. The items which must be excluded from the tier 1 capital are the impact of cash flow hedges, HANDELSBANKEN ■ ANNUAL REPORT 2006 75 FINANCIAL REPORTS ■ NOTES – GROUP CAPITAL COVER CONTINUED deferred tax assets and goodwill and other intangible assets. Tier 2 capital mainly consists of perpetual and fi xed-term subordinated loans. Tier 2 capital must never exceed tier 1 capital. The extended capital base also comprises subordinated loans and may only be used to cover parts of the capital requirement for market risks. LEGAL CAPITAL REQUIREMENT In 2006, the Bank complied with requirements of the Act on the capital adequacy and large exposures of credit institutions and securities companies (1994:2004). This Act states that at any time the Bank must have a capital base corresponding to 8% of its riskweighted assets. Risk-weighted assets are assets on the balance sheet, but also off-balance sheet items, sorted into different groups and allocated a capital requirement in the form of risk weights on the basis of risk classes defi ned in the Act. Handelsbanken has met the requirements of the Act (2006:531) on special supervision of fi nancial conglomerates, which came into force on 1 July 2006. Institutions and insurance companies which are part of a fi nancial conglomerate must have a capital base which is adequate in relation to the capital requirement for the fi nancial conglomerate. On 1 February 2007, new capital adequacy regulations were introduced in accordance with the Act on capital adequacy and large exposures (2006:1371). The Bank is expected to reserve a larger capital base than the minimum requirements to cover the risks arising in the operations in the form of credit risks, market risks and operational risks. For further information see the note on risks and risk control. COLLATERAL PLEDGED FOR OWN DEBT SEK m Book value pledged assets 2006 2005 407 390 78 433 Of the book value of pledged assets, interest-bearing securities represent 11% (61), repos 11% (32) and mortgage loans 69% (0). In addition there are cash funds, shares and securities loans representing 9% (7). Collateral pledges in the form of mortgage loans comprise the assets separated in favour of holders of covered bonds issued by the company. The collateral in Stadshypotek comprises loans to the public against mortgages in real property which are single-family dwellings, second homes, multi-family dwellings and ownership housing co-operatives with a loan to value ratio within 75% of the market value and additional collateral in the form of cash funds on a blocked account. A separate specification is kept of the assets and the covered bonds, and also derivatives relating to these. OTHER COLLATERAL PLEDGED SEK m Market value – collateral obtained Market value – sold or pledged collateral 2006 2005 180 126 164 932 - - 180 126 164 932 2006 2005 Guarantees, loans 18 395 12 052 Guarantees, other 39 618 33 144 Irrevocable letters of credit 46 211 46 678 Total Policyholders’ registered assets represent 91% (96) of the market value of collateral obtained. In addition there are cash funds, interest-bearing securities, securities and other loans of 9% (4). COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS SEK m Own acceptances Other Total 213 201 2 790 3 716 107 227 95 791 Commitments and contingent liabilities and assets total SEK 107,227m (95,791). This amount includes SEK 61m (49) relating to a number of civil actions which the Group is bringing in general courts of law. The largest individual amount in dispute is SEK 30m (24). The Bank’s assessment is that the actions will essentially be settled in its favour. None of the disputed amounts, nor any insurance compensation, has been recognised in income. The data for contingent liabilities is reported in nominal amounts and an assessed expected value is included in the “Other” amount for the civil actions that the Group is bringing. The Group is currently pursuing a tax dispute. The total claim is approx. SEK 20m, excluding interest, which in the case of a positive judgement would increase the Group’s income by the same amount. 76 HANDELSBANKEN ■ ANNUAL REPORT 2006 FINANCIAL REPORTS ■ NOTES – GROUP OTHER COMMITMENTS SEK m Commercial paper programmes Other commitments 2006 2005 22 392 9 387 61 70 22 453 9 457 Credit promises 166 576 149 664 Unutilised part of granted overdraft facilities 130 956 124 200 Total other commitments 297 532 273 864 Total 319 985 283 321 2006 2005 Total commitments regarding future payments Contracted irrevocable future operating lease charges distributed by the year they fall due for payment 2007 645 364 2008 487 264 2009 424 184 2010 249 125 2011 187 84 2012 106 67 2013 70 33 2014 46 26 2015 38 21 2016 28 13 2017 20 12 2018 and later 41 24 2 341 1 217 Other Total 2006 14 972 Total SEGMENT REPORTING 2006 SEK m Net interest income Branch offices Markets Asset Management Pensions & Insurance 14 324 572 168 139 -231 Net fee and commission income 4 174 1 728 1 193 2 304 -167 9 232 Net gains/losses on financial items at fair value 1 206 1 422 33 907 693 4 261 Other income 391 839 90 153 -950 523 Total income 20 095 4 561 1 484 4 074 -655 29 559 Of which internal -8 841 9 634 -240 -262 4 200 4 491 Administrative expenses -8 241 -3 244 -677 -1 297 1 565 -11 894 Risk result - insurance Depreciation, amortisation and impairments of property, equipment and intangible assets 571 571 -153 -21 -2 -199 -182 -557 Total expenses -8 394 -3 265 -679 -1 496 1 383 -12 451 Profit before loan losses 11 701 1 296 805 2 578 728 17 108 - 55 Loan losses/recoveries Gains/losses on disposal of property, equipment and intangible assets Operating profit Return on equity, % 53 2 - 0 0 - - 1 1 11 754 1 298 805 2 578 729 17 164 18.5 14.0 30.4 34.7 Assets 1 119 346 702 974 24 133 216 669 -273 114 1 790 008 20.9 Liabilities 1 074 401 696 177 22 227 209 669 -278 692 1 723 782 Other disclosures Investments in non-financial assets Average number of employees 152 33 4 30 283 502 6 155 1 244 339 681 1 744 10 163 HANDELSBANKEN ■ ANNUAL REPORT 2006 77 FINANCIAL REPORTS ■ NOTES – GROUP SEGMENT INFORMATION 2005 Branch offices SEK m Net interest income Markets Asset Management Pensions & Insurance Other Total 2005 15 090 14 655 482 113 -2 -158 Net fee and commission income 3 803 1 523 985 857 -113 7 055 Net gains/losses on financial items at fair value 1 261 1 010 42 65 1 081 3 459 Other income 369 521 69 109 -543 525 Total income 20 088 3 536 1 209 1 223 267 26 323 Of which internal -6 399 6 344 -408 -68 4 421 3 890 Administrative expenses -7 797 -2 550 -608 -631 1 161 -10 425 Risk result – insurance 194 Depreciation, amortisation and impairments of property, equipment and intangible assets 194 -138 -20 -3 -27 -325 -513 Total expenses -7 935 -2 570 -611 -658 836 -10 938 Profit before loan losses 12 153 966 598 565 1 103 15 385 -1 261 Loan losses/recoveries 259 3 - 4 0 0 - 0 4 12 416 969 598 565 1 102 15 650 Gains/losses on disposal of property, equipment and intangible assets Operating profit Return on equity, % Assets Liabilities 16.6 13.8 23.2 35.9 1 027 811 705 518 18 608 176 484 -345 514 1 582 907 17.9 971 313 700 252 16 853 175 134 -346 403 1 517 149 Other disclosures Investments in non-financial assets Average number of employees Internal income and expenses are included in the respective item on the income statement. Internal income consists of payment for services rendered according to the cost price principle. Expenses also include the distribution of costs made internally within the Group for services from business support operations. The Other operations business area includes Treasury and the central head office departments. It also includes capital gains/losses, dividends, and income and expenses that are not attributable to a specific segment. 96 14 6 4 103 217 4 436 6 018 1 102 320 185 1 770 9 395 Return on equity for the segments is computed after standard tax while for the whole Group and for Pensions & Insurance, it is computed after full tax. The shareholders’ equity, on which calculation of return on equity is based, corresponds to the assessment of the Group’s overall actual capital requirement. GEOGRAPHICAL SEGMENT INFORMATION Sweden Other Nordic countries Rest of world Eliminations Group SEK m 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 Income 22 031 20 579 4 747 3 779 2 912 2 042 -131 -77 29 559 26 323 1 466 953 1 223 920 246 230 221 206 461 163 421 439 -384 338 -283 658 1 790 008 1 582 907 399 4 388 60 29 43 19 502 4 436 Assets Other disclosures Investments in non-financial assets 78 HANDELSBANKEN ■ ANNUAL REPORT 2006 FINANCIAL REPORTS ■ NOTES – GROUP ASSETS AND LIABILITIES IN FOREIGN CURRENCIES SEK m USD EUR DKK NOK GBP JPY HKD SGD Other currencies Assets Loans to credit institutions 83 531 9 387 6 068 1 497 610 438 134 36 4 488 Loans to the public 22 506 106 208 33 717 102 718 34 779 920 2 052 288 7 324 Bonds and other interest-bearing securities 70 231 30 772 2 203 4 945 631 0 77 23 5 784 124 528 80 655 7 883 7 877 11 437 1 013 9 535 37 9 335 Liabilities Due to credit institutions Deposits and borrowing from the public Issued securities Subordinated liabilities Other assets and liabilities including positions in derivatives Net foreign currency positions 37 548 49 202 19 075 43 936 14 664 126 173 244 3 773 177 677 91 593 483 3 347 15 183 1 114 0 0 1 094 9 676 22 727 0 0 18 041 892 0 0 0 172 899 97 199 -14 419 -53 799 23 164 1 514 7 437 23 -2 934 -262 -611 128 201 -141 -273 -8 89 460 Book value 2006 Adjustment to fair value 2006 Book value 2005 Adjustment to fair value 2005 177 175 -34 136 546 -57 1 100 538 -14 983 681 5 775 FAIR VALUE DISCLOSURES SEK m Assets Loans to credit institutions Loans to the public Interest-bearing securities 266 743 - 184 710 3 Other assets 245 552 2 500 277 970 2 185 Total assets 1 790 008 2 452 1 582 907 7 906 331 Liabilities Due to credit institutions 320 482 76 289 053 Deposits and borrowing from the public 533 885 -14 407 617 -6 Issued securities 595 001 -2 169 486 344 2 626 Other liabilities 222 742 - 287 340 - 51 672 111 46 795 556 1 723 782 -1 996 1 517 149 3 507 Subordinated liabilities Total liabilities Total surplus/deficit In accordance with IFRS, a comparison is to be made between fair value and book value for both assets and liabilities in the balance sheet and also fi nancial items which are not reported in the balance sheet. Values which are based on customer relations are not to be taken into account, although they may be of importance in valuing, for example, deposit accounts and mortgage and consumer credits. The directives allow scope for choice of method and various assumptions. Thus, the methods applied and the assumptions made may vary among the credit institutions. Information concerning fair value is not a corporate valuation and therefore cannot constitute the basis of a comparison between credit institutions. For means of payment, current receivables and liabilities and also for receivables and liabilities with a variable interest rate, the fair value is considered to be the same as the book value. Receivables and liabilities with fi nal maturity or date for next interest rate fi xing within 30 days are considered to be short-term. Assets and liabilities which are traded on liquid markets have been valued at the average price on the balance sheet day. Market-listed 4 448 4 399 off-balance-sheet items are valued in the same way. Items which are not traded on liquid markets, irrespective of whether these are current assets, non-current assets, issued liabilities or off-balance-sheet fi nancial items are valued at the current market rate for the corresponding maturity adjusted to take into account the credit and liquidity risk. The credit and liquidity risk premium by which the market rate has been adjusted when making the valuation is assumed to be the same as the average margin for new lending at the time of the measurement. Properties are valued on the basis of an external valuation. With the method applied, the interest risk in the balance sheet gives rise to surplus values if short-term rates are falling and deficits if interest rates are rising. A surplus value also occurs when margins decrease, and a deficit when margins increase. In cases where the fair value of assets is less than the book value and for liabilities, the book value is less than the fair value, this is because these items are subject to hedge accounting. HANDELSBANKEN ■ ANNUAL REPORT 2006 79 FINANCIAL REPORTS ■ NOTES – GROUP RELATED PARTY DISCLOSURES SEK m Lending Associated companies Others Total Other assets Total assets Interest expense Fee and commission income - 23 -11 12 - 520 Total 6 514 520 Associated companies Associated companies Associated companies 23 -11 12 6 514 520 29 503 532 155 85 240 85 105 190 240 190 430 - 7 7 Others 674 102 776 Total 674 109 783 - Associated companies 1 -1 Others - - - Total 1 -1 247 Associated companies 156 91 Others 759 207 966 Total 915 298 1 213 2006 2005 Associated companies 1 1 Others - 65 Total 1 66 Associated companies -6 -3 Others -11 -144 Total -17 -147 Associated companies 185 201 Others Total Fee and commission expense 12 - 514 SEK m Interest income -11 - - Total Total liabilities 23 6 Others Other liabilities Closing balance Others Total Other financial liabilities Increase/Decrease Associated companies Others Deposits and borrowing Opening balance Associated companies Others Total 6 167 191 368 -209 -237 - - -209 -237 Net result on financial items at fair value Associated companies Other income Other expenses Total 80 - - Others -53 -14 Total -53 -14 Associated companies - - Others 2 154 Total 2 154 Associated companies - -53 Others -198 -69 Total -198 -122 -29 -91 Others Associated companies -254 159 Total -283 68 HANDELSBANKEN ■ ANNUAL REPORT 2006 FINANCIAL REPORTS ■ NOTES – GROUP RELATED PART Y DISCLOSURES CONTINUED The associated companies are listed in Note 14. These companies perform various types of services linked to the fi nancial markets. “Other” includes the various pension organisations: Svenska Handelsbankens Pensionsstiftelse, Svenska Handelsbankens Personalstiftelse and Pensionskassan SHB, försäkringsförening which use the Bank for customary banking and accounting services. Shareholders’ contribution to associated companies, see Note 14. For 2005, ”Other” in the income statement includes SPP Livförsäkring AB (SPP). Svenska Handelsbanken AB mainly performs IT-related services and asset management. Handelsbanken Liv Försäkrings AB and SPP also have close cooperation. Related-party transactions with CEO, EVPs and board of directors SEK m 2006 2005 Lending 85 98 2 2 2006 2005 16 10 0 0 Interest income Deposits Interest expense For other transactions, see Note 5, Terms and remuneration for senior management. Credit is granted after customary credit review. The interest rate is determined on normal commercial terms. However for employees of the Bank (not members of the board), the interest rate on credit up to SEK 1.5m is two percentage points lower than the equivalent interest rate for external customers. This benefit is taxable for the employee and constitutes a basis for social security charges payable by the Bank. Credit to close family members is granted on normal commercial terms and is not included in this report. In exceptional cases, if credit to a close family member is granted at the subsidised interest rate described above, this is reported as a taxable benefit for the employee. For deposits, the interest rate for employees is the same as for external customers. LEASES Disclosures on gross investment and present value of future minimum leasing payments SEK m 2006 2005 Gross investment 36 066 32 831 Present value of future minimum lease payments at balance sheet date 32 641 30 883 Later than 5 years Total Distribution of gross investment and minimum lease payments by maturity Within 1 year Between 1 and 5 years Distribution of gross investment 5 066 10 852 20 148 36 066 Distribution of present value minimum leasing payments 5 014 10 287 17 340 32 641 2006 2005 3 424 2 615 Unearned finance income SEK m Unearned finance income NON-GUARANTEED RESIDUAL VALUES ACCRUING TO THE LESSOR All leases have guaranteed residual values. PROVISION FOR BAD DEBTS REFERRING TO MINIMUM LEASE PAYMENTS The book value of the provision for bad debts with respect to minimum lease payments is SEK 5.5m (4.7). VARIABLE PART OF LEASE PAYMENTS INCLUDED IN EARNINGS FOR THE PERIOD Amounted to SEK 142m (38) for 2006 due to higher interest rates in 2006 than 2005. MAJOR LEASE CONTRACTS The largest individual lease exposure is worth SEK 8.3bn (7.4). HANDELSBANKEN ■ ANNUAL REPORT 2006 81 FINANCIAL REPORTS ■ FIVE-YEAR REVIEW – GROUP Five-year review for the Group As a consequence of the transition to IFRS the formats for the income statements and balance sheets for 2004 –2006 have changed. The accounting policies are described on page 34. The income statements and balance sheets for 2002 –2003 are reported in the format and according to the principles in force at the close of the respective years, as no retroactive restatements can be made for these years without considerable difficulty. Income statement SEK m 2006 2005 2004 14 972 15 090 14 808 Net fee and commission income 9 232 7 055 6 000 Net fee and commission income Net gains/losses on financial items at fair value Net gains/losses on financial items Net interest income Net interest income Dividends received 2003 2002 18 345 17 006 491 392 4 707 4 587 -1 827 -938 4 261 3 459 2 390 Risk result - insurance 571 194 44 Other dividend income 193 158 218 Share of profit of associated companies 105 59 104 Other income 225 308 399 Other operating income 243 320 Total income 29 559 26 323 23 963 Total operating income 21 959 21 367 Staff costs -7 714 -6 678 -6 380 Staff costs -6 216 -6 203 Other expenses -4 180 -3 747 -3 364 Other expenses -2 855 -3 267 -557 -513 -501 -12 451 -10 938 -10 245 17 108 15 385 13 718 55 261 -167 Administrative expenses Depreciation and impairments of property, equipment and intangible assets Total expenses Profit before loan losses Loan losses/recoveries Gains/losses on disposal of property, equipment and intangible assets General administrative expenses 1 4 2 Depreciation and impairments of property, equipment and intangible assets -807 -866 Total expenses before loan losses -9 878 -10 336 Profit before loan losses 12 081 11 031 -492 -392 199 -199 Loan losses incl. change in value of repossessed property Impairment loss/reversals of financial fixed assets Share of profit of associated companies Result of banking operations Result of insurance operations Operating profit 17 164 15 650 13 553 Operating profit Appropriations Taxes -4 036 -4 296 -3 693 13 128 11 354 9 860 13 128 11 354 9 860 - - - 20.41 16.98 14.55 20 11 817 10 460 -267 -270 11 550 10 190 -89 -80 Profit before taxes 11 461 10 110 Taxes -3 345 -2 817 Minority interest Profit for the year 29 Profit for the year - -11 8 116 7 282 11.70 10.50 Attributable to Ordinary shareholders Minority interest Earnings per share, SEK * * No dilution. 82 HANDELSBANKEN ■ ANNUAL REPORT 2006 FINANCIAL REPORTS ■ FIVE YEAR REVIEW – GROUP Balance sheet SEK m 2006 2005 2004 2003 2002 839 340 Assets Loans to the public 1 100 538 983 681 861 252 823 142 Loans to credit institutions 177 175 136 546 109 076 115 273 79 517 Interest-bearing securities 266 743 184 710 169 854 127 309 137 327 Other assets 245 552 277 970 176 607 194 730 221 330 Total assets 1 790 008 1 582 907 1 316 789 1 260 454 1 277 514 Deposits and borrowing from the public 533 885 407 617 342 243 303 326 292 838 Due to credit institutions 320 482 289 053 258 995 202 689 235 113 Issued securities 595 001 486 344 441 614 458 701 464 402 51 672 46 795 25 182 26 732 26 801 222 742 287 340 187 383 212 171 206 168 Liabilities and equity Subordinated liabilities Other liabilities Shareholders’ equity Total liabilities and equity 66 226 65 758 61 372 56 835 52 192 1 790 008 1 582 907 1 316 789 1 260 454 1 277 514 Memorandum items 111 535 125 570 Contingent liabilities Collateral pledged 71 311 78 958 Pension obligations - - Other commitments 5 954 068 6 594 156 HANDELSBANKEN ■ ANNUAL REPORT 2006 83 FINANCIAL REPORTS ■ INCOME STATEMENT – PARENT COMPANY Income statement – Parent company The accounting and valuation principles applied are shown in the section titled Accounting Policies. SEK m 2006 2005 Interest income Note P1 34 644 24 156 Interest expense Note P1 -25 510 -15 557 9 134 8 599 Net interest income Dividends received Note P2 3 362 815 Fee and commission income Note P3 7 107 6 430 Fee and commission expense Note P3 -1 276 -1 184 Net fee and commission income Net gains/losses on financial items Note P4 Other operating income Note P5 Total operating income 5 831 5 246 2 220 2 582 812 608 21 359 17 850 General administrative expenses Staff costs Note P6 -7 186 -6 629 Other administrative expenses Note P7 -3 695 -3 192 Depreciation, amortisation and impairments of property, equipment and intangible assets Note P16, P17 Total expenses before loan losses Profit before loan losses Loan losses, net Note P8 Operating profit Appropriations Note P9 Profit before taxes Taxes Profit for the year 84 HANDELSBANKEN ■ ANNUAL REPORT 2006 Note P24 -634 -310 -11 515 -10 131 9 844 7 719 -200 -160 9 644 7 559 4 365 4 712 14 009 12 271 -3 302 -3 404 10 707 8 867 FINANCIAL REPORTS ■ BALANCE SHEET – PARENT COMPANY Balance sheet – Parent company The accounting and valuation principles applied are shown in the section titled Accounting Policies. SEK m 2006 2005 ASSETS Cash and balances with central banks 4 676 6 919 Treasury bills and other eligible bills Note P13 37 484 37 031 Loans to credit institutions Note P11 338 037 312 391 Loans to the public Note P12 571 960 495 442 Bonds and other interest-bearing securities Note P13 153 935 149 057 Shares and participating interests Note P14 72 466 55 145 Assets where the customer bears the value change risk 1 437 - Derivative instruments Note P15 57 271 72 863 Intangible assets Note P16 1 597 1 918 Property and equipment Note P17 1 741 1 716 689 - Current tax assets Deferred tax assets Note P24 - - Other assets Note P18 20 842 12 683 Prepayments and accrued income Note P19 6 057 3 891 Total assets Note P10 1 268 192 1 149 056 Due to credit institutions Note P20 353 112 311 876 Deposits and borrowing from the public Note P21 412 664 376 947 LIABILITIES AND EQUITY Liabilities where the customer bears the value change risk 1 437 - Issued securities Note P22 254 484 217 774 Derivative instruments Note P15 67 719 76 724 Other trading liabilities Note P23 51 829 50 716 - 491 248 Current tax liabilities Deferred tax liabilities Note P24 382 Provisions Note P25 - - Other liabilities Note P26 13 282 9 122 Accruals and deferred income Note P27 9 419 7 286 Subordinated liabilities Note P28 51 672 46 795 Total liabilities Note P10 1 216 000 1 097 979 Untaxed reserves Note P29 1 183 1 397 Share capital 2 888 2 879 Statutory reserve 2 682 2 682 Retained earnings 34 732 35 252 Profit for the year 10 707 8 867 Total equity 51 009 49 680 1 268 192 1 149 056 79 319 Total liabilities and equity MEMORANDUM ITEMS Collateral pledged for own debt Note P31 121 978 Other collateral pledged Note P32 5 397 5 986 Contingent liabilities and commitments Note P33 136 268 126 703 Pension obligations Note P34 - - Other commitments Note P35 309 852 271 389 HANDELSBANKEN ■ ANNUAL REPORT 2006 85 FINANCIAL REPORTS ■ STATEMENT OF CHANGES IN EQUITY – PARENT COMPANY Statement of changes in equity – Parent company Restricted equity SEK m Shareholders’ equity 31 December 2004 Share capital Statutory reserve 2 878 2 682 2 878 2 682 Hedge reserve Fair value reserve Retained earnings Total 42 589 48 149 Impact of transition to IFRS 2005 Net effect of changeover to measuring at fair value according to IAS 39 Opening equity 2005 after adjustment Change in available-for-sale instruments, after tax 680 -347 112 680 42 242 48 261 Note P30 163 Change in cash flow hedges, after tax Exchange difference -221 -221 75 Note P30 176 176 176 414 8 867 8 867 9 043 9 281 Dividend -4 018 -4 018 Group contributions provided -1 376 -1 376 Repurchase of own shares -2 468 -2 468 - Total changes in equity not recognised in the income statement - - 75 163 - - 75 163 Profit for the year Total changes before transactions with the owners Reduction of share capital by means of cancellation -99 99 Bonus issue 100 -100 - 43 422 49 680 Shareholders’ equity 31 December 2005 Change in available-for-sale instruments, after tax 2 879 2 682 Exchange difference Total changes in equity not reported in the income statement -146 Note P30 843 259 Change in cash flow hedges, after tax Total changes before transactions with the owners 222 Note P30 - - 222 259 - - 222 259 Dividend Group contributions provided Repurchase of own shares Reduction of share capital by means of cancellation Bonus issue Shareholders’ equity 31 December 2006 HANDELSBANKEN ■ ANNUAL REPORT 2006 259 222 Profit for the year 86 163 75 -261 -261 -261 220 10 707 10 707 10 446 10 927 -4 543 -4 543 -693 -693 -4 362 -4 362 -89 89 - 98 -98 - 44 261 51 009 2 888 2 682 76 1 102 FINANCIAL REPORTS ■ CASH FLOW STATEMENT – PARENT COMPANY Cash flow statement – Parent company SEK m 2006 2005 OPERATING ACTIVITIES Operating profit 9 644 7 559 33 404 34 668 of which paid-out interest -23 729 -23 500 of which paid-in dividends 2 223 252 of which paid-in interest Adjustment for non-cash items in the operating profit Loan losses Unrealised changes in value Depreciation, amortisation and impairments 578 306 -2 271 1 360 634 310 -4 465 -6 783 Loans to credit institutions -25 646 -32 107 Loans to the public -77 096 -85 711 Financial current assets -7 469 -36 758 Due to credit institutions 41 236 41 507 Deposits and borrowing from the public 35 717 61 944 Issued securities 36 710 18 757 6 551 -12 882 1 113 24 519 Paid income tax Changes in the assets and liabilities of operating activities Derivative instruments, net positions Short-term positions Claims and liabilities on investment banking settlements Other Cash flow from operating activities -9 270 1 610 5 511 -2 949 11 477 -19 318 -12 180 -136 INVESTING ACTIVITIES Change in shares Change in interest-bearing securities Change in property and equipment Change in intangible non-current assets Cash flow from investing activities 0 54 -293 -258 -84 -23 -12 557 -363 FINANCING ACTIVITIES Repayment of subordinated loans Issued subordinated loans Dividends paid Group contribution paid - - 4 876 21 612 -4 543 -4 018 3 027 4 867 Repurchase of own shares -4 362 -2 468 Cash flow from financing activities -1 002 19 993 Cash flow for the year -2 082 312 Liquid funds at beginning of year 6 919 6 302 Cash flow from operating activities 11 477 -19 318 Cash flow from investing activities -12 557 -363 Cash flow from financing activities -1 002 19 993 Exchange rate difference on liquid funds Liquid funds at end of year -161 305 4 676 6 919 HANDELSBANKEN ■ ANNUAL REPORT 2006 87 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY Notes – Parent company NOTE P1 NET INTEREST INCOME NOTE P3 NET FEE AND COMMISSION INCOME 2006 2005 Credit institutions and central banks 11 033 8 414 General public 21 275 17 535 Insurance - 8 Treasury bills and other eligible bills 2 610 986 Payments 1 948 1 843 Bonds and other interest-bearing securities 8 902 5 406 409 -280 Interest income Derivative instruments recognised as hedges Other interest income Brokerage 869 454 Total interest income 45 098 32 515 Of which interest income reported in net gains/losses on financial items at fair value 10 454 8 359 Interest income according to income statement 34 644 24 156 Mutual funds and custody 2006 2005 1 575 1 269 936 935 Lending and deposits 586 667 Guarantees 397 386 Other 1 665 1 322 Total fee and commission income 7 107 6 430 Brokerage, mutual funds and custody -343 -302 Payments -862 -814 Other Total fee and commission expense -71 -68 -1 276 -1 184 5 831 5 246 Interest expense Credit institutions and central banks General public Issued securities Derivative instruments recognised as hedges Subordinated liabilities -14 172 -8 902 -8 417 -5 184 -10 646 -7 496 989 804 -2 299 -1 520 Other interest expense -4 322 -1 989 Total interest expense -38 867 -24 287 Net fee and commission income NOTE P4 NET GAINS/LOSSES ON FINANCIAL ITEMS Available for sale, realised -13 357 -8 730 Interest expense according to income statement -25 510 -15 557 9 134 8 599 Includes interest income on bad debts SEK 50m (55). Total interest income on assets recognised at amortised cost during 2006 was SEK 31,908m (23,849). Total interest expense on liabilities recognised at amortised cost during 2006 was SEK 33,509m (20,382). Fair value hedges NOTE P2 DIVIDENDS RECEIVED Dividend from associated companies 922 1 019 93 65 of which hedging instruments 115 62 of which hedged items -22 3 Ineffective portion of cash flow hedges 0 0 Written back from equity on cash flow hedges 0 - Ineffective portion of net investment hedges - - -184 -82 Instruments measured at fair value of which change due to changed interbank interest rate Dividend on shares and participating interests 2005 Hedge accounting Of which interest expense reported in net gains/losses on financial items at fair value Net interest income 2006 2006 2005 1 332 720 32 11 Dividend from group companies 1 998 84 Total 3 362 815 -186 -82 Loan receivables, valued at cost 78 - Financial liabilities, valued at cost 98 - Trading 1 213 1 580 Total 2 220 2 582 Valuation techniques The result includes unrealised results as a consequence of measuring balance sheet items at fair value. The assessment is mainly made on the basis of market prices. When there are no market prices the assessment uses models based on official market prices. More advanced calculation models contain parameters that are not listed, where assumptions and estimates must be made instead. These more advanced valuation models are seldom needed and when they are, valuation models that are generally accepted by the market are always used. Net gains/losses on financial items at fair value include an item of SEK -535m, where the fair value is partly based on the Bank’s own assumptions. The instruments included in this item are mainly equity index options. The positions are essentially matched by opposite positions in listed financial instruments and instruments whose fair value has been assessed on the basis of models based on official market prices. NOTE P5 OTHER INCOME 2006 Rental income 88 HANDELSBANKEN ■ ANNUAL REPORT 2006 2005 37 38 Other operating income 775 570 Total 812 608 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P6 STAFF COSTS NOTE P7 OTHER ADMINISTRATIVE EXPENSES 2006 2005 2006 2005 Salaries and fees -4 586 -4 205 Property and premises Social security costs -1 262 -1 172 External IT costs Pension costs * -718 -649 Communication -331 -345 Provision to profit-sharing foundation -117 -115 Travel and marketing -309 -272 -503 -488 Purchased services -671 -524 -7 186 -6 629 Supplies -188 -173 Other staff costs Total * SEK 468m (442) of the pension costs are costs calculated on an actuarial basis and SEK 302m (207) are pension premiums. The calculated pension cost which is charged to the operating profit is based on the number of employees in active service. See the specification of the Group’s pension expenses in Note P34. Insurance premiums paid to group companies are SEK 5m (5). Other expenses Total 2006 2005 -58 -67 Board, CEO and EVPs Sweden Norway -3 -3 Finland -3 -4 Denmark -3 -3 Great Britain -4 -5 -71 -82 Sub-total -810 -873 -141 -195 -3 695 -3 192 -697 -575 Of which lease expenses Minimum lease fee Variable fee Salaries and other remuneration -827 -1 228 Total -18 -146 -715 -721 Rental costs for premises normally have a variable fee related to the inflation rate and to property taxes. Only one of the major lease contracts has a variable fee (related to Stibor). In 2006, the cost of the largest individual lease contract was approx. SEK 61m (58). Audit costs Audit Consulting 2006 2005 2006 2005 KPMG Bohlins AB -7.0 -5.6 -0.2 -1.7 Ernst & Young AB -1.1 -0.8 0.0 -0.2 -1.3 -1.4 -0.7 -0.9 -64.9 -66.0 Auditors elected by the AGM Others Sweden -3 099 -2 935 Norway -377 -300 Finland -265 -234 Denmark -299 -270 Auditors elected by the Swedish Financial Supervisory Authority Great Britain -278 -204 PricewaterhouseCoopers AB Luxembourg -13 -14 Germany -28 -28 USA -88 -80 Singapore -27 -23 Hong Kong -11 -12 Poland -17 -14 Other countries -13 -9 Sub-total -4 515 -4 123 Total -4 586 -4 205 Gender distribution % 2006 Internal audit 2005 Men Women Men Women Board of directors 69 31 69 31 CEO/EVPs 90 10 90 10 Sickness absence rate in the Swedish operations % 2006 Age 2005 Men Women Total Men Women Total –29 1.6 2.8 2.3 2.3 2.5 2.4 30–49 1.9 4.6 3.3 1.8 5.1 3.6 50– 3.0 7.3 5.4 3.4 7.6 5.8 Total 2.2 5.3 3.9 2.3 5.8 4.2 Of which on long-term sick leave, percentage points of total sickness absence –29 0.6 0.7 0.6 1.0 0.4 0.6 30–49 0.8 2.8 1.9 0.5 3.2 2.0 50– 1.7 5.2 3.7 2.0 5.4 4.0 Total 1.0 3.4 2.3 1.0 3.8 2.5 See Group Note 5. Principles for remuneration to senior management. Decision process for remuneration to senior management. Terms and remuneration for senior management. Pension obligations. Loans to senior management. HANDELSBANKEN ■ ANNUAL REPORT 2006 89 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P8 LOAN LOSSES 2006 2005 -554 -574 A. SPECIFIC PROVISION FOR INDIVIDUALLY ASSESSED LOAN RECEIVABLES The year’s write-off for actual loan losses Write-back of previous provisions for possible loan losses which are reported as actual loan losses in the year’s accounts 490 406 -448 -466 Paid in from actual loan losses in previous years 377 144 Write-back of provisions for probable loan losses which are no longer necessary 273 324 Net expense for the year for individually assessed loan receivables 138 -166 -339 - The year’s write-off for actual loan losses 0 0 Paid in from actual loan losses in previous years 1 2 Allocation to/dissolution of reserve for loan losses 0 0 Net expense for the year for collectively assessed homogenous groups of loan receivables 1 2 The year’s provision for probable loan losses B. PROVISION BY GROUP FOR INDIVIDUALLY ASSESSED LOAN RECEIVABLES Allocation to/dissolution of provision by group C. COLLECTIVELY ASSESSED HOMOGENEOUS GROUPS OF LOAN RECEIVABLES WITH LIMITED VALUE AND SIMILAR CREDIT RISK D. TRANSFER RISK Allocation to/dissolution of reserve for transfer risks Net expense for the year for loan losses (A+B+C+D) Change in value of repossessed property Total loan losses - - -200 -164 - 4 -200 -160 2006 2005 Both actual and probable loan losses reduce the corresponding receivable amount on the assets side of the balance sheet. The reserve for probable loan losses has decreased by SEK 27m for the parent company in the form of exchange differences. Recovered from actual loan losses in previous years includes calculations relating to recoveries in the portfolio of overdue loans which is subject to monitoring. Previously these were only booked in the consolidated accounts but they can now be reported for a legal entity. For 2006, this has resulted in an income item of SEK 217m. Allocation to/dissolution of group provisions were previously only booked in the consolidated accounts but can now be reported for a legal entity. Impairment losses Claims on credit institutions 0 0 Claims on the public -851 -634 Total impairment losses -851 -634 Write-backs Claims on credit institutions 1 14 Claims on the public 272 310 Total write-backs 273 324 NOTE P9 APPROPRIATIONS 2006 2005 Settlement of pensions Calculated pension premiums in the Bank Pensions paid by the Bank Compensation from pension foundation 442 -438 520 - Total 454 4 Change in amortisation of goodwill in excess of plan 152 -208 Change in other untaxed reserves 90 468 -534 - 23 Group contribution 3 759 4 893 Total 4 365 4 712 HANDELSBANKEN ■ ANNUAL REPORT 2006 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P10 CL ASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES 2006 At fair value in the income statement divided into: Trading Other * Derivatives designated as hedge instruments Investments held to maturity Loans and customer receivables Financial assets available for sale Other financial liabilities Nonfinancial assets/ liabilities Total Assets Cash and balances with central banks Treasury bills and other eligible bills 4 676 37 439 45 Loans to credit institutions Loans to the public 4 676 4 632 37 484 338 037 338 037 567 328 571 960 Bonds and other interest-bearing securities 144 595 9 340 153 935 Shares and participating interests 18 746 53 720 72 466 Assets where the customer bears the value change risk Derivative instruments 1 437 55 910 1 437 1 361 57 271 Intangible assets 1 597 1 597 Property and equipment 1 741 1 741 689 689 Current tax assets Deferred tax assets Other assets Prepayments and accrued income Total assets 20 842 2 090 258 780 4 632 1 361 20 842 3 908 59 936 228 63 164 6 057 4 027 1 268 192 Liabilities Due to credit institutions 850 352 262 353 112 Deposits and borrowing from the public 108 412 556 412 664 40 681 213 803 Liabilities where the customer bears the value change risk Issued securities 1 437 Derivative instruments 65 227 Other trading liabilities 51 829 1 437 254 484 2 492 67 719 51 829 Current tax liabilities Deferred tax liabilities 382 382 Provisions Other liabilities Accruals and deferred income 181 13 101 3 196 6 223 9 419 51 672 51 672 Subordinated liabilities Total liabilities 162 072 2 492 1 049 617 13 282 1 819 1 216 000 * Classified to be measured at fair value. HANDELSBANKEN ■ ANNUAL REPORT 2006 91 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P10 CONTINUED CL ASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES 2005 At fair value in the income statement divided into Trading Other * Derivatives identified as hedge instruments Investments held to maturity Loans and customer receivables Financial assets available for sale Other financial liabilities Non financial assets/ liabilities Total Assets Cash and balances with central banks Treasury bills and other eligible bills 6 919 36 866 Loans to credit institutions 55 Loans to the public 15 Bonds and other interest-bearing securities 134 224 Shares and participating interests 14 495 Derivative instruments 71 373 6 919 165 4 574 502 37 031 312 336 312 391 490 853 495 442 38 14 293 149 057 40 650 55 145 1 490 72 863 Intangible assets 1 918 1 918 Property and equipment 1 716 1 716 Current tax assets Deferred tax assets Other assets Prepayments and accrued income Total assets 446 2 12 235 1 058 11 2 822 515 825 203 258 532 4 574 1 490 12 683 3 891 55 108 3 634 1 149 056 Liabilities Due to credit institutions Deposits and borrowing from the public Issued securities 420 311 456 311 876 746 376 201 376 947 146 200 71 574 217 774 Derivative instruments 73 995 Other trading liabilities 50 716 2 729 76 724 50 716 Current tax liabilities 491 491 Deferred tax liabilities 248 248 Provisions Other liabilities 591 8 531 Accruals and deferred income 187 7 099 7 286 46 795 46 795 Subordinated liabilities Total liabilities * Classified to be measured at fair value. 92 HANDELSBANKEN ■ ANNUAL REPORT 2006 272 855 2 729 821 656 9 122 739 1 097 979 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P11 LOANS TO CREDIT INSTITUTIONS 2006 2005 Loans in Swedish kronor Banks 32 291 23 690 Other credit institutions 178 385 170 858 Sub-total 210 676 194 548 Loans in foreign currency Banks 31 157 24 941 Other credit institutions 96 206 92 902 127 363 117 843 Sub-total Probable loan losses -2 0 Total 338 037 312 391 Of which reverse repos 108 067 100 461 Over 5 years Total Remaining maturities Payable on demand Within 3 months >3 months to 1 year >1 year to 5 years 2006 101 729 146 740 42 957 36 738 9 873 338 037 2005 78 510 135 232 61 657 27 636 9 356 312 391 2006 2005 Loans to credit institutions in Swedish kronor 214 911 195 967 Loans to credit institutions in foreign currency 164 299 146 631 Total 379 210 342 598 46 975 32 882 Average volumes Of which reverse repos HANDELSBANKEN ■ ANNUAL REPORT 2006 93 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P12 LOANS TO THE PUBLIC 2006 2005 Loans in Swedish kronor Households 46 525 42 166 Companies etc 226 764 202 948 Sub-total 273 289 245 114 Loans in foreign currency Households 87 900 77 869 Companies etc 212 613 174 307 Sub-total 300 513 252 176 Probable loan losses Total Of which reverse repos Remaining maturities 21 947 7 930 Over 5 years Total Within 3 months >3 months to 1 year 2006 84 317 87 438 96 087 146 245 157 873 571 960 2005 30 603 71 665 86 888 128 673 177 613 495 442 2006 2005 Loans to the public in Swedish kronor 258 960 234 094 Loans to the public in foreign currency 281 253 228 096 Total 540 213 462 190 18 022 7 417 2006 2005 Of which reverse repos Bad debts etc. For definitions see inside back cover Bad debts Specific provisions for individually assessed loan receivables Provision for collectively assessed homogeneous groups of loan receivables with limited value and similar credit risk Provisions by group for individually assessed loan receivables 2 483 3 158 -1 505 -1 848 0 0 -339 0 Net bad debts 639 1 310 Total bad debt reserve ratio, % 74.3 58.5 Proportion of bad debts, % 0.08 0.17 Non-performing loans which are not bad debts, SEK m 440 277 Book value of loan receivables restructured during the year, before restructure, SEK m 17 34 Book value of loan receivables restructured during the year, after restructure, SEK m 18 39 Bad debts reclassified as normal loans during the year, SEK m 40 83 Group provisions were previously only booked in the consolidated accounts, but are now booked on the legal entities. 94 -1 848 495 442 Payable on demand Average volumes >1 year to 5 years -1 842 571 960 HANDELSBANKEN ■ ANNUAL REPORT 2006 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P13 INTEREST-BEARING SECURITIES 2006 2005 Nominal value Fair value Nominal value Fair value Government instruments 34 611 35 265 25 797 27 080 Credit institutions 48 787 49 136 38 061 38 547 Mortgage institutions 29 583 29 838 39 260 41 082 Interest-bearing securities Other 76 891 77 180 73 395 79 382 Total 189 872 191 419 176 513 186 091 Adjustment to book value for investments held to maturity Total book value Bonds and other interest-bearing securities - -3 191 419 186 088 153 935 Government instruments eligible as collateral with central banks Other instruments eligible as collateral with central banks Total interest-bearing securities 149 057 34 611 35 265 25 797 2 221 2 219 9 570 9 951 36 832 191 419 35 367 186 088 Of which unlisted securities Of which subordinated 27 080 569 7 926 7 146 IFRS 7 is applied from 1 January 2005 onwards. Remaining maturities Payable on demand Within 3 months 2006 253 16 779 58 007 2005 2 878 14 445 37 014 Average volumes Interest-bearing securities >3 months to 1 year >1 year to 5 years Over 5 years Total 93 410 22 970 191 419 106 729 25 022 186 088 2006 2005 194 517 160 523 2006 2005 18 253 14 485 NOTE P14 SHARES AND PARTICIPATING INTERESTS Held for trading Listed Non-listed Sub-total 28 10 18 281 14 495 5 161 4 537 Holdings classified as Available for sale Listed Non-listed Sub-total Holdings in associated companies, non-listed 801 354 5 962 4 891 245 237 Holdings in group companies, non-listed 47 978 35 522 Total 72 466 55 145 HANDELSBANKEN ■ ANNUAL REPORT 2006 95 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P14 CONTINUED Associated companies Corporate identity number Registered office Bankomatcentralen AB 556197-2265 BGC Holding AB 556607-0933 Centralen för Elektroniska Korttransaktioner CEK AB 556362-0383 Book value Number of shares Participating interest % 2006 2005 Stockholm 1 100 21.9 0 0 Stockholm 25 382 25.4 4 4 Stockholm 370 37.0 0 0 BDB Bankernas Depå AB 556695-3567 Stockholm 8 000 20.0 4 - Finansiell ID-teknik BID AB 556630-4928 Stockholm 12 735 28.3 19 15 Privatgirot AB 556302-4552 Stockholm 290 29.0 1 1 Upplysningscentralen UC AB 556137-5113 Stockholm 2 429 24.3 0 0 217 VPC AB 556112-8074 Stockholm - - - VPC Holding AB 556709-1763 Stockholm 443 700 24.8 217 - 245 237 Sub-total Group companies Participating interest % Book value Corporate identity number Registered office Number of shares Handelsbanken Finans AB 556053-0841 Stockholm 1 550 000 100 145 145 Stadshypotek AB 556459-6715 Stockholm 162 000 100 26 870 26 870 Stadshypotek Bank AB 516401-9803 Stockholm 3 000 000 100 2006 2005 Swedish credit institutions Sub-total 361 361 27 376 27 376 Foreign credit institutions SH 2005 S.A 017277754 Warsaw 125 100 1 494 Handelsbanken Markets Securities, Inc 11-3257438 New York 1 000 100 23 23 Svenska Handelsbanken Delaware Inc., USA 13-3153272 Delaware 1 000 100 0 0 Svenska Handelsbanken S.A. RCS Lux B-15992 Luxembourg 1 000 000 100 147 147 ZAO Svenska Handelsbanken 1057711005384 Moscow 1 500 000 100 Sub-total 453 415 624 1 079 5 Other Swedish companies AB Handel och Industri 556013-5336 Stockholm 100 000 100 5 Fritidsvärden AB* 556192-4803 Göteborg 1 000 100 0 0 FV Fastighetsvärden AB 556043-2766 Stockholm 1 000 100 134 134 0 Förvaltnings AB Lejontrappan* 556481-1551 Göteborg 1 000 100 0 Handelsbanken Fondbolagsförvaltning AB 556070-0683 Stockholm 10 000 100 1 1 Handelsbanken Försäkring AB 516401-8326 Stockholm 1 500 100 300 300 1 538 Handelsbanken Liv Försäkrings AB 516401-8284 Stockholm 100 000 100 3 238 Handelsbanken Mezzanine Management AB 556679-2668 Stockholm 5 000 100 1 1 Handelsbanken Mezzanine Fond 1 KB 969710-3126 Stockholm Participation 100 95 100 Handelsbanken Skadeförsäkrings AB 516401-6767 Stockholm 1 500 100 30 15 Siboelf Shipping AB* 556482-2525 Göteborg 1 000 100 0 0 SPP Fonder AB 556397-8922 Stockholm 1 000 100 51 51 SPP Livförsäkring AB 516401-8524 Stockholm 2 000 100 15 464 4 264 19 319 6 409 Sub-total * Shares taken over to protect claim. Other foreign companies Ejendomsselskabet af 1. januar 2002 A/S Registered office Number of shares Participating interest % 2006 2005 392 38300512 Herning 2 460 000 100 393 Forva AS 945812141 Oslo 4 000 000 100 1 1 Rådstuplass 4 ASA 910508423 Bergen 40 000 100 146 146 SHB Verwaltungs- und Beteiligungsgesellschaft mbH HRB 29714 Frankfurt Participation 100 - - 1932320 London 100 100 - - 0055 97 705 Rotterdam 10 200 100 84 84 SIL (Nominees) Limited Svenska Finans International BV Svenska Property Nominees Limited Svenska Re S.A. Sub-total Total 96 Book value Corporate identity number HANDELSBANKEN ■ ANNUAL REPORT 2006 2308524 London 100 100 - - RCS Lux B-32053 Luxembourg 19 999 99.99 35 35 659 658 47 978 35 522 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P15 DERIVATIVE INSTRUMENTS Nominal amount/maturity Up to 1 year Positive market values > 1 year to 5 years Over 5 years Total 2006 Negative market values Total 2005 2006 2005 2006 2005 2 644 Derivatives held for trading Interest rate-related contracts Options FRA/futures Swaps Other instruments 179 614 82 034 8 545 270 193 272 728 3 118 2 944 2 874 3 086 800 985 100 8 856 4 080 756 3 986 109 1 138 820 1 085 806 934 920 1 224 515 563 425 2 722 860 2 668 322 22 425 41 034 23 882 42 239 10 510 208 - 10 718 14 841 4 6 0 6 Currency-related contracts Options 33 204 2 183 - 35 387 50 775 89 439 98 365 Futures 1 109 219 12 238 405 1 121 862 1 354 674 13 196 17 270 17 834 12 639 170 209 162 158 23 293 355 660 269 470 4 594 2 651 5 115 3 689 Options 79 285 47 452 6 089 132 826 118 947 7 892 5 314 10 310 8 537 Futures 30 683 2 152 - 32 835 23 168 1 232 150 1 197 682 718 1 404 418 2 540 3 038 320 134 1 204 1 385 Swaps Equity-related contracts Swaps Other instruments Other derivative contracts Sub-total 32 - - 32 449 328 13 16 24 365 29 346 749 30 460 15 440 1 574 598 1 612 979 5 635 559 2 548 790 611 780 8 796 129 8 777 961 55 910 71 373 65 227 73 995 Derivatives for fair value hedges Interest rate-related contracts FRA/futures 3 500 6 300 - 9 800 8 100 6 4 3 5 Swaps 22 821 46 709 18 872 88 402 58 806 545 326 1 260 1 472 Other instruments 29 206 - - 29 206 3 953 4 2 4 2 Currency-related contracts Options 45 - - 45 - 0 - - - Futures 71 092 15 344 - 86 436 76 032 658 1 141 1 183 1 028 - Other instruments Other derivative contracts Sub-total 345 48 - 393 - 1 - - 182 - - 182 - - - 0 - 127 191 68 401 18 872 214 464 146 891 1 214 1 473 2 450 2 507 1 677 6 611 3 223 11 511 10 942 147 17 42 222 1 677 6 611 3 223 11 511 10 942 147 17 42 222 5 764 427 2 623 802 633 875 9 022 104 8 935 794 57 271 72 863 67 719 76 724 2 878 349 2 992 847 2 973 5 412 1 776 5 693 Derivatives for cash flow hedges Interest rate-related contracts Swaps Sub-total Total Of which cleared Currency breakdown of market values SEK 166 787 15 754 268 692 105 342 USD -120 028 223 253 -234 722 120 697 EUR Others 33 307 -62 451 5 649 -91 711 -22 795 -103 693 28 100 -57 604 See Group Note 16 for a description of Hedge accounting. HANDELSBANKEN ■ ANNUAL REPORT 2006 97 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P16 INTANGIBLE ASSETS Goodwill on the purchase of net assets Internally developed software Total 2006 Total 2005 2 170 29 2 199 2 066 12 72 84 23 -104 - -104 110 2 078 101 2 179 2 199 Accumulated amortisation and impairments at beginning of year -280 -1 -281 -265 Amortisation for the year according to plan -297 -2 -299 -1 Impairments for the year - -25 -25 - Foreign exchange effect 23 - 23 -15 -554 -28 -582 -281 1 524 73 1 597 1 918 Cost of acquisition at beginning of year Cost of acquisition of additional intangible assets Foreign exchange effect Cost of acquisition at close of year Accumulated amortisation and impairments at end of year Closing residual value Amortisation Amortisation is based on the expected useful life. At present, this means that principally the following amortisation rates are applied: Goodwill 20 years Internally developed software Other intangible assets 5 years Individual testing The useful life of goodwill on acquisition assets in the parent company is assessed to have a life which is virtually without limit. The depreciation period has been set at 20 years. NOTE P17 PROPERT Y AND EQUIPMENT Other property and equipment Investment property 1–4 years depreciation 5–9 years depreciation 10–19 years depreciation 20+ years depreciation No depreciation Total 2006 Total 2005 Opening cost of acquisition - 671 831 117 1 212 593 3 424 3 345 New acquisitions during the year - 132 151 9 - 0 292 258 Capitalised new construction and rebuilding costs during the year - - - - 66 - 66 40 Acquisition value of property and equipment sold during the year - -192 -171 -4 -31 0 -398 -275 Foreign exchange effect - -12 -25 -2 - 0 -39 56 Total cost of acquisition - 599 786 120 1 247 593 3 345 3 424 Accumulated depreciation at beginning of year - -510 -588 -56 -554 -1 708 -1 630 Accumulated depreciation on sold property and equipment - 187 166 4 32 389 271 Year’s impairment losses recognised in the income statement - - - - -10 -10 -5 Year’s depreciation - -128 -125 -11 -36 -300 -304 Foreign exchange effect - 10 15 0 - 25 -40 Total accumulated depreciation - -441 -532 -63 -568 -1 604 -1 708 Book value of repossessed property for protection of claims - - - - 0 Total collateral taken over - - - - 0 Residual value according to plan - 679 593 1 741 1 716 Of which land - Tax assessment value for Swedish properties - 158 254 Apart from owned equipment, the Bank also has at its disposal equipment under operating leases. The residual value of leased equipment in the Bank was SEK 99m (117). 98 HANDELSBANKEN ■ ANNUAL REPORT 2006 57 583 2 172 583 583 2 172 2 172 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P18 OTHER ASSETS Claims on investment banking settlements 2006 2005 14 866 3 481 Other 5 976 9 202 Total 20 842 12 683 NOTE P19 PREPAYMENTS AND ACCRUED INCOME 2006 2005 Accrued interest income 4 854 3 394 Other accrued income 1 171 464 Prepayments Total 32 33 6 057 3 891 NOTE P20 DUE TO CREDIT INSTITUTIONS 2006 2005 Banks 44 146 30 753 Other credit institutions 23 793 10 160 Sub-total 67 939 40 913 240 951 217 401 Due in Swedish kronor Due in foreign currency Banks Other credit institutions 44 222 53 562 Sub-total 285 173 270 963 Total 353 112 311 876 23 318 10 783 Over 5 years Total Of which repos Remaining maturities Payable on demand Within 3 >3 months to months 1 year >1 year to 5 years 2006 77 722 248 852 24 409 2 079 50 353 112 2005 49 079 234 285 25 766 2 645 101 311 876 2006 2005 Average volumes Due to credit institutions in Swedish kronor 53 452 40 688 Due to credit institutions in foreign currency 350 047 286 595 Total 403 499 327 283 29 468 17 396 Of which repos HANDELSBANKEN ■ ANNUAL REPORT 2006 99 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P21 DEPOSITS AND BORROWING FROM THE PUBLIC Deposits and borrowing from the public Deposits and borrowing from the public Deposits from the public 2006 2005 412 664 376 947 2006 2005 Deposits in Swedish kronor Households 101 636 87 484 Companies etc. 108 701 108 810 Sub-total 210 337 196 294 22 976 23 249 Deposits in foreign currency Households Companies etc. 104 870 97 955 Sub-total 127 846 121 204 Total 338 183 317 498 Remaining maturities Payable on demand Within 3 months >3 months to 1 year >1 year to 5 years Over 5 years Total 2006 315 551 13 321 1 401 701 7 209 338 183 2005 290 549 21 631 3 376 500 1 442 317 498 2006 2005 Deposits from the public in Swedish kronor 208 299 187 277 Deposits from the public in foreign currency 127 596 112 798 Total 335 895 300 075 2006 2005 Swedish kronor 36 457 21 012 Foreign currency 38 024 38 437 Total 74 481 59 449 5 777 2 853 Average volumes of deposits from the public Borrowing from the public Borrowing from the public Of which repos Remaining maturities Payable on demand Within 3 months >3 months to 1 year >1 year to 5 years Over 5 years Total 2006 2 473 64 040 6 814 793 361 74 481 2005 2 948 50 461 4 947 1 081 12 59 449 2006 2005 Borrowing from the public in Swedish kronor 35 916 26 775 Borrowing from the public in foreign currency 46 844 39 343 Total 82 760 66 118 7 558 3 931 Average volume of borrowing from the public Of which repos 100 HANDELSBANKEN ■ ANNUAL REPORT 2006 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P22 ISSUED SECURITIES 2006 2005 Nominal amount Book value Book value 7 281 8 787 5 353 5 353 Certificates Certificates in Swedish kronor Of which at amortised cost for trading Certificates in foreign currency - - 7 281 8 787 - 166 389 166 137 163 872 Of which at amortised cost 121 548 121 296 144 918 for fair value hedges 12 955 12 947 18 954 for trading 31 886 31 894 - 173 670 174 924 169 225 29 081 25 647 18 151 at amortised cost 18 176 14 831 18 151 for fair value hedges 10 905 10 816 - 55 334 53 913 30 398 53 096 51 700 29 182 2 238 2 213 1 216 84 415 79 560 48 549 258 085 254 484 217 774 Sub-total Bond loans Bond loans in Swedish kronor Of which Bond loans in foreign currency Of which at amortised cost for fair value hedges Sub-total Total Remaining maturities carrying amount Payable on demand Within 3 months >3 months to 1 year >1 year to 5 years >5 years Total 2006 1 657 2005 - 132 064 70 008 48 644 2 111 254 484 94 779 101 592 20 606 797 217 774 2006 2005 Average volume of issued securities Swedish kronor 34 566 26 463 Foreign currency 231 438 228 167 Turnover of own issued securities 2006 2005 Issued SEK bn 872 1 019 Repurchased 153 109 Repaid 668 922 2006 2005 NOTE P23 OTHER TRADING LIABILITIES Short positions at fair value Shares Interest-bearing securities 2 053 3 868 49 776 46 848 49 626 46 848 Of which Other issuers Own issued Total Remaining maturities short positions interest-bearing securities Payable on demand Within 3 months >3 months to 1 year >1 year to 5 years 150 - 51 829 50 716 >5 years Total 2006 3 78 2 627 37 695 9 373 49 776 2005 - 2 037 5 735 31 910 7 166 46 848 2006 2005 Swedish kronor 41 014 22 674 Foreign currency 2 860 6 057 Average volumes of other trading liabilities HANDELSBANKEN ■ ANNUAL REPORT 2006 101 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P24 TA XES Deferred tax assets Derivative instruments Property and equipment Other Offsetting against deferred tax liability Total Deferred tax liabilities 2006 2005 - 57 46 48 2 10 -48 -115 - - 2006 2005 Shares and participating interests 252 219 Property and equipment 148 144 Derivative instruments 30 - Offsetting against deferred tax assets -48 -115 Total 382 248 Net deferred tax liabilities 382 248 Recognised directly in equity Closing balance 252 Year’s change in deferred taxes Recognised Opening in the income balance statement Shares and participating interests 219 33 Derivative instruments -57 87 Property and equipment 96 7 30 103 Other -10 10 -3 -3 Total 248 17 117 382 2006 2005 -3 449 -3 677 164 45 Tax expenses recognised in the income statement Current tax Tax expense for the year Adjustment of tax attributable to previous years Deferred tax Changes in temporary differences -17 228 -3 302 -3 404 28.0 28.0 Non-taxable dividend -4.1 -0.2 Non-taxable income/non-deductible expenses -0.0 -0.1 Tax relating to previous years -0.3 - 23.6 27.7 Total Nominal tax rate in Sweden, % Deviations Effective tax rate, % NOTE P25 PROVISIONS 2006 2005 Opening balance - 10 Provisions during the year - - Utilisation - - Other changes - -10 Closing balance - - 2006 2005 Liabilities on investment banking settlements 4 764 2 650 Other 8 518 6 472 Total 13 282 9 122 NOTE P26 OTHER LIABILITIES 102 HANDELSBANKEN ■ ANNUAL REPORT 2006 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P29 UNTA XED RESERVES NOTE P27 ACCRUALS AND DEFERRED INCOME 2006 2005 Accrued interest expense 7 556 5 404 Other accrued expense 1 829 1 851 34 31 9 419 7 286 Deferred income Total 2006 2005 Accumulated amortisation on goodwill in excess of plan 1 183 1 397 Total 1 183 1 397 NOTE P30 SPECIFICATION OF CHANGES IN EQUIT Y NOTE P28 SUBORDINATED LIABILITIES Change in exchange differences 2006 2005 Subordinated loans in Swedish kronor 349 349 Subordinated loans in foreign currency 51 323 46 446 Exchange difference 31 December 2005 Total 51 672 46 795 Change in exchange differences in foreign branches -261 Exchange differences 31 December 2006 -107 Exchange differences 31 December 2004 -22 Change in exchange differences in foreign branches 176 154 Average volumes Subordinated loans in Swedish kronor 349 380 Subordinated loans in foreign currency 49 080 31 286 Specification of instruments available for sale (amount after tax) Unrealised market value at beginning of year Specification, subordinated loans Issue/conv./final paymt yr Currency Original nominal amount in each currency Unrealised market value of associated holdings sold during the year Interest Outstanding rate % amount Unrealised market value change value during the year for remaining and new holdings Unrealised market value at end of year 2006 2005 843 680 -327 -303 586 466 1 102 843 2006 2005 IN SWEDISH KRONOR Other Swedish 7 349 Sub-total 349 IN FOREIGN CURRENCY 2005/2015 1 EUR 500 variable 4 517 2005/2017 2 EUR 700 variable 6 317 2005/perpetual 3 GBP 500 5.000 6 506 2005/perpetual 4 EUR 500 4.194 4 261 2006/2016 5 EUR 600 4.000 5 372 2006/2016 6 USD 800 variable 5 477 Other foreign 7 18 873 Sub-total 51 323 Total 1 2 3 4 5 6 7 51 672 Fixed-term subordinated loan with 3-month variable coupon linked to Euribor. Premature redemption may occur in the case of changed tax regulations or on the interest due dates from 2010. Premature redemption requires the approval of the Swedish Financial Supervisory Authority. Fixed-term subordinated loan with 3-month variable coupon linked to Euribor. Premature redemption may occur in the case of changed tax regulations or on the interest due dates from October 2012. Premature redemption requires the approval of the Swedish Financial Supervisory Authority. Perpetual subordinated loan at fixed rate. Premature redemption may occur in the case of changed tax regulations or on the interest due dates from 2010. Premature redemption requires the approval of the Swedish Financial Supervisory Authority. In connection with the right of redemption, the interest rate becomes variable linked to Libor. Perpetual subordinated loan at fixed rate. Premature redemption may occur in the case of changed tax regulations or on the interest due dates from 2015. Premature redemption requires the approval of the Swedish Financial Supervisory Authority. In connection with the right of redemption, the interest rate becomes variable linked to Euribor. Fixed-term subordinated loan at fixed rate. Premature redemption may occur in the case of changed tax regulations or on the interest due dates from 2011. Premature redemption requires the approval of the Swedish Financial Supervisory Authority. In connection with the right of redemption, the interest rate becomes variable linked to Euribor. Fixed-term subordinated loan with 3-month variable coupon linked to Libor. Premature redemption may occur in the case of changed tax regulations or on the interest due dates from 2011. Premature redemption requires the approval of the Swedish Financial Supervisory Authority. Other subordinated loans which are not specified here are issued in the form of fixed-term or perpetual subordinated loans. Turnover of own shares SEK bn Issued 16.1 11.5 Repurchased 20.4 14.0 NOTE P31 COLL ATERAL PLEDGED FOR OWN DEBT 2006 2005 Government instruments and bonds 44 356 47 982 Repos 42 999 25 803 Shares - 366 20 330 4 442 Cash Securities loans Total 14 293 726 121 978 79 319 NOTE P32 OTHER COLL ATERAL PLEDGED 2006 Cash funds 2005 783 233 Government instruments and bonds 2 778 3 994 Securities loans 1 836 1 759 Total 5 397 5 986 HANDELSBANKEN ■ ANNUAL REPORT 2006 103 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY NOTE P33 COMMITMENTS, CONTINGENT LIABILITIES AND ASSETS 2006 2005 Guarantees, loans 48 106 44 358 Guarantees, other 41 614 35 288 Irrevocable letters of credit 46 211 46 678 Own acceptances 201 Other 136 178 136 268 126 703 Total 201 Commitments and contingent liabilities and assets total SEK 136,268m (126,703). This amount includes SEK 61m (49) relating to a number of civil actions which the parent company is bringing in general courts of law. The largest individual amount in dispute is SEK 30m (24). The Bank’s assessment is that the actions will essentially be settled in its favour. None of the disputed amounts, nor any insurance compensation, has been recognised in income. The data for contingent liabilities is reported in nominal amounts and an assessed expected value is included in the amount under ”Other” for the civil actions that the parent company is bringing. The parent company is currently pursuing a tax dispute. The total claim is approx. SEK 20m, excluding interest, which in the case of a positive judgement would increase the parent company’s income by the same amount. NOTE P34 CONTINUED The plan assets mainly comprise shares and interest-bearing securities with the following market values on the balance sheet date. Shares and participating interests Interest-bearing securities, etc. Total 2006 2005 22 492 18 297 819 987 23 311 19 284 The plan assets include shares in Svenska Handelsbanken AB (publ) with a market value of SEK 994m (946) on the balance sheet date 31 December 2006. From the age of 65, a retirement pension is paid in accordance with the pension agreement between the Employer’s Association of the Swedish Banking Institutions (BAO) and Union of Finance Sector Employees and between BAO and SACO (the Swedish Confederation of Professional Associations). The amount is 10% of the annual salary up to 7.5 price base amounts. A retirement pension of 65% is paid in the interval between 7.5– 20 price base amounts. In addition a commitment has been made which is part of the Bank’s profit-sharing system Oktogonen (regarded in the Group as a non-defined benefit plan). Changes in this commitment are included in Other increase in capital value. The pension commitments are SEK 2,495m (2,787) in the Bank’s pension fund (Pensionskassan SHB, försäkringsförening) and the market value of the assets is SEK 9,786m (8,308). The surplus value in this pension fund is thus SEK 7,291m (5,521). NOTE P35 OTHER COMMITMENTS NOTE P34 PENSION OBLIGATIONS Pension obligations, plan assets and pension commitments are calculated in accordance with the Act on Safeguarding Pension Obligations and the Swedish Financial Supervisory Authority’s regulations, and have developed as follows. The pension obligations are entirely covered by assets in the pension foundations and are not reported on the balance sheet. 2006 Commercial paper programmes Other commitments Total commitments regarding future payments 2005 Pension obligations 17 358 15 258 Fair value of plan assets 23 311 19 284 Surplus value (not reported) -5 953 -4 026 2005 9 307 61 66 22 453 9 373 Credit commitments 156 618 137 985 Unutilised part of granted overdraft facilities 130 781 124 031 Total other commitments 287 399 262 016 Total 309 852 271 389 2006 2005 2007 633 372 2008 471 266 2009 403 184 125 Pension costs -527 -911 Interest expense -281 -268 Yield 4 547 4 675 Cost of own retirement plans 3 739 3 496 -302 -207 -3 753 -3 934 -316 -645 2010 225 -14 -438 2011 174 84 2012 100 67 33 Insurance premiums Costs covered by surpluses in specially designated assets/ increase of surplus in specially designated assets Pension costs Of which reported under appropriations Contracted irrevocable future operating lease charges distributed by the years they fall due for payment. 2013 63 15 258 12 512 2014 39 26 Pension costs 527 911 2015 31 21 Interest expense 281 268 2016 20 13 2017 13 12 2018 and later 24 24 2 196 1 227 PENSION OBLIGATIONS Opening balance Pensions paid by the Bank Other increase in capital value Closing balance -534 -438 1 826 2 005 17 358 15 258 19 284 14 609 4 547 4 675 PLAN ASSETS Opening balance Return Funds paid from pension foundation Closing balance Percentage return on specially separated assets 104 2006 22 392 HANDELSBANKEN ■ ANNUAL REPORT 2006 -520 - 23 311 19 284 20 24 Total FINANCIAL REPORTS ■ NOTES – PARENT COMPANY Other disclosures – Parent company CAPITAL COVER PARENT COMPANY Capital base and capital requirement SEK m 2006 2005 Tier 1 capital 48 366 48 893 Tier 2 capital, net 46 064 28 928 Total capital base 94 430 77 821 529 842 451 877 CAPITAL BASE RISK-WEIGHTED AMOUNT Credit risk Market risks Total Capital ratio, % 48 526 45 581 578 368 497 458 16.3 15.6 Tier 1 ratio, % 8.4 9.8 Capital base 2006 2005 45 935 45 085 5 358 5 681 TIER 1 CAPITAL Equity 1 Tier 1 capital contribution Minority interest - Deducted items Goodwill and other intangible assets Revaluation Deferred tax asset Unrealised accumulated profit -1 597 -1 918 -152 -159 - - -1 101 Adjustments in accordance with stability filter Cash flow hedges -77 204 48 366 48 893 Perpetual subordinated loans 20 838 13 421 Fixed-term subordinated loans after reduction 24 183 24 446 Total tier 1 capital TIER 2 CAPITAL Adjustment unrealised accumulated profit Revaluation adjustment 1 108 152 159 Total tier 2 capital 46 281 38 026 Total 94 647 86 919 Less shareholdings in insurance companies and 5–50% in companies conducting banking business Total tier 1 and tier 2 capital Enlarged capital base Total capital base 1 -217 -9 098 94 430 77 821 - - 94 430 77 821 Tier 1 capital has been affected by the board’s proposed appropriations. HANDELSBANKEN ■ ANNUAL REPORT 2006 105 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY CAPITAL COVER CONTINUED Risk-weighted amount for credit risks Balance sheet items Risk weight 0% (group A) 2006 2005 Risk-weighted Investments amount Weighting Investments Risk-weighted amount 0% 563 039 Risk weight 20% (group B) 20% 42 079 8 416 43 306 8 661 Risk weight 50% (group C) 50% 157 242 78 621 140 566 70 283 Risk weight 100% (group D) 100% 352 927 352 927 291 032 291 032 1 115 287 439 964 896 638 369 976 Total Risk-weighted amount for credit risks Off-balance-sheet items 2 Risk weight 0% (group A) 421 734 2006 Weighting Nominal amount 2005 Recalculated Risk-weighted amount amount Nominal amount Recalculated Risk-weighted amount amount 0% 150 561 47 668 174 315 45 190 Risk weight 20% (group B) 20% 141 923 13 702 2 740 28 896 12 518 Risk weight 50% (group C) 50% 428 478 3 343 1 672 91 573 5 959 2 979 Risk weight 100% (group D) 100% 151 203 85 466 85 466 134 903 76 417 76 417 872 165 150 179 89 878 429 687 140 084 81 900 1 265 466 529 842 1 036 722 451 876 Total Total credit risks 2 504 2 The nominal amounts for off-balance sheets item are recalculated using a factor which varies according to the credit risk in the commitments. The recalculated amounts are subsequently allocated according to the same principles (group A–D) which apply for the balance sheet items. Risk-weighted amount for market risks 2006 Specific risk Specific risk General Risk-weighted risk amount Interest rate risks 24 620 10 466 35 086 20 584 10 844 31 428 Equity price risks 815 764 1 579 791 612 1 403 Settlement risks Counterparty risks and other risks 15 12 10 316 11 770 Exchange rate risks 1 530 968 Total market risks 48 526 45 581 578 368 497 457 Total risk-weighted amount for credit and market risks See the Group for a description of the capital base, capital requirement and capital management. 106 2005 General Risk-weighted risk amount HANDELSBANKEN ■ ANNUAL REPORT 2006 FINANCIAL REPORTS ■ NOTES PARENT COMPANY CREDIT RISK EXPOSURE PARENT COMPANY 2006 2005 Loans to the public SEK m 571 960 495 442 Loans to credit institutions 338 037 312 391 Unutilised part of granted overdraft facilities 130 781 124 031 Credit commitments 156 618 137 985 22 392 9 307 Commercial paper programmes Other commitments 61 66 Guarantees, loans 48 106 44 358 Guarantees, other 41 614 35 288 Documentary credits 46 483 47 004 Derivative instruments 47 503 44 089 Treasury bills and other eligible bills 37 484 37 031 153 935 149 057 Bonds and other interest-bearing securities Shares and participating interests Total 24 243 19 386 1 619 217 1 455 435 LOANS TO THE PUBLIC, BY SECTOR PARENT COMPANY 2006 2005 Lending before provisions Provisions for probable loan losses Lending after provisions Lending after provisions Private individuals 134 425 -220 134 205 119 707 Property management 188 859 -447 188 412 161 455 4 398 -7 4 391 4 371 SEK m of which ownership housing co-operatives Corporate services 40 362 -71 40 291 37 160 Manufacturing 37 204 -242 36 962 35 222 Retail 34 097 -238 33 859 32 536 Transport and communication 13 604 -22 13 582 15 390 Construction 8 152 -51 8 101 7 207 Municipalities 6 374 - 6 374 6 990 Agriculture, hunting and forestry 5 526 -6 5 520 5 513 Hotel and restaurant 4 449 -21 4 428 4 390 Insurance operations 10 539 0 10 539 4 413 Other sectors 89 872 -185 89 687 65 459 573 463 -1 503 571 960 495 442 Total loans to the public LOANS TO THE PUBLIC, COLLATERAL PARENT COMPANY SEK m Residential property Agricultural property 2006 2005 157 242 134 631 4 865 1 816 Other property 72 939 66 572 Governments, municipalities and county councils 61 871 69 794 Floating charges on assets 17 767 21 283 Guarantees 17 890 13 318 Unsecured 133 210 112 060 Other collateral 106 176 75 968 Loans to the public 571 960 495 442 HANDELSBANKEN ■ ANNUAL REPORT 2006 107 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY BAD DEBTS AND/OR NON-PERFORMING LOANS, BY SECTOR PARENT COMPANY SEK m Nonperforming loans which are not bad debts Bad debts Gross Provisions Net* Of which nonperforming Private individuals 518 -220 298 288 171 Property management/corporate services 799 -518 281 89 113 Manufacturing 455 -242 213 58 17 Retail 335 -238 97 80 17 Transport and communication 31 -22 9 9 4 Construction 60 -51 9 6 84 Hotel and restaurant Other Total 28 -21 7 5 0 257 -193 64 53 34 2 483 -1 505 978 588 440 BAD DEBTS AND/OR NON-PERFORMING LOANS, GEOGRAPHIC DISTRIBUTION SEK m Gross Provisions Net* Of which nonperforming Nonperforming loans which are not bad debts Sweden 1 462 -919 543 374 224 Norway 136 -60 76 76 199 Finland 156 -31 125 106 0 Denmark 689 -462 227 25 17 PARENT COMPANY Great Britain Bad debts 33 -27 6 6 0 Rest of Europe 7 -6 1 1 0 North America 0 0 0 0 0 Asia 0 0 0 0 0 2 483 -1 505 978 588 440 Total FAIR VALUE DISCLOSURES PARENT COMPANY 2006 2005 Book value Adjustment to fair value Loans to credit institutions 338 037 -275 312 391 21 Loans to the public 571 960 3 495 442 895 Interest-bearing securities 191 419 - 186 088 3 Other assets 166 776 2 500 155 135 2 185 Total assets 1 268 192 2 228 1 149 056 3 104 -73 SEK m Book value Adjustment to fair value ASSETS LIABILITIES Due to credit institutions 353 112 22 311 876 Deposits and borrowing from the public 412 664 -19 376 947 2 Issued securities 254 484 -262 217 774 517 Other liabilities 144 068 - 144 587 - 51 672 111 46 795 555 1 216 000 -148 1 097 979 1 001 Subordinated liabilities Total liabilities Total surplus/deficit In accordance with the Swedish Financial Supervisory Authority’s directives (2006:16) a comparison is to be made between fair value and book value for both assets and liabilities in the balance sheet and also financial items which are not reported in the balance sheet. Values which are based on customer relations are not to be taken into account, although they may be of importance in valuing, for example, deposit accounts and mortgage and consumer credits. The directives allow scope for choice of method and various assumptions. Thus, the methods applied and the assumptions made may vary among the credit institutions. Information concerning fair value is not a corporate valuation and therefore cannot constitute the basis of a comparison between credit institutions. For means of payment, current receivables and liabilities and also for receivables and liabilities with a variable interest rate, the fair value is considered to be the same as the book value. Receivables and liabilities with final maturity or date for next interest rate fixing within 30 days are considered to be short-term. Assets and liabilities which are traded on liquid markets have been valued at the average price on the balance sheet day. Market-listed off-balance-sheet items are valued in the same way. 108 HANDELSBANKEN ■ ANNUAL REPORT 2006 2 376 2 103 Items which are not traded on liquid markets, irrespective of whether they are assets, issued liabilities or off-balance-sheet financial items are valued at the current market rate for the corresponding maturity adjusted to take into account the credit and liquidity risk. The credit and liquidity risk premium by which the market rate has been adjusted when making the valuation is assumed to be the same as the average margin for new lending at the time of the measurement. Properties are valued on the basis of an external valuation. With the method applied, a surplus value occurs in the assets when margins decrease and a deficit when margins increase. In those cases where fair value on assets is less than the book value and for liabilities, the book value is less than the fair value, this is due to these items being a) subject to hedge accounting and b) that they are to be regarded as fixed assets where the fall in value has been considered temporary. Adjustment to fair value for 2005 has been made in accordance with the Financial Supervisory Authority’s directives (2005:33). FINANCIAL REPORTS ■ NOTES – PARENT COMPANY RELATED PARTY DISCLOSURES PARENT COMPANY SEK m Lending Subsidiaries Associated companies Others Total Derivatives with positive market value Other assets Subsidiaries 12 - - - 178 246 -1 074 177 172 4 070 - Others - - - Total 4 700 -630 4 070 Subsidiaries 4 138 5 231 -1 093 Associated companies - - - Others 6 514 520 5 237 -579 4 658 188 154 -2 786 185 368 23 -11 12 6 514 520 188 183 -2 283 185 900 49 670 3 117 52 787 155 85 240 85 105 190 49 910 3 307 53 217 Subsidiaries Subsidiaries Others Total Subsidiaries - - - Associated companies - 7 7 Others 674 102 776 Total 674 109 783 Subsidiaries 3 195 -661 2 534 Associated companies - - - Others - - - Total 3 195 -661 2 534 Subsidiaries 2 216 -873 1 343 Associated companies 1 -1 - Others - - - 2 217 -874 1 343 Total Total liabilities 177 160 -11 - Associated companies Other liabilities -1 063 23 -630 Total Derivatives with negative market value 178 223 - Others Other financial liabilities Closing balance 4 700 Associated companies Deposits and borrowing Increase/Decrease Associated companies Total Total assets Opening balance Subsidiaries 55 081 1 583 56 664 Associated companies 156 91 247 Others 759 207 966 Total 55 996 1 881 57 877 Subsidiaries Off-balance sheet Derivatives nominal value Guarantees -4 438 -422 -4 860 Associated companies - - - Others - - - Total -4 438 -422 -4 860 Subsidiaries 34 731 870 35 601 Associated companies - - - Others - - - 34 731 870 35 601 Total HANDELSBANKEN ■ ANNUAL REPORT 2006 109 FINANCIAL REPORTS ■ FIVE-YEAR REVIEW PARENT COMPANY RELATED-PART Y DISCLOSURES CONTINUED SEK m Interest income Interest expense Subsidiaries 4 467 3 700 1 1 Others - 65 Total 4 468 3 766 Subsidiaries 2 387 -1 391 -6 -3 -11 -144 2 370 -1 538 Subsidiaries 569 316 Associated companies 185 201 6 167 760 684 Others Total Others Total Fee and commission expense 2005 Associated companies Associated companies Fee and commission income 2006 Subsidiaries Associated companies Others Total -27 -11 -209 -235 - - -236 -246 - Net gain/losses on Subsidiaries - financial items Associated companies - - Others -53 -14 Total -53 -14 Subsidiaries 710 439 Other income Associated companies - - Others 2 60 712 499 -166 -141 Total Other expenses Subsidiaries Associated companies Total - -52 Others -198 229 Total -364 36 7 940 2 912 Subsidiaries Associated companies Others Total -29 -88 -254 363 7 657 3 187 The subsidiaries and associated companies are listed in Note P14. These companies perform various types of services linked to the financial markets. “Other” includes the pension organisations: Svenska Handelsbankens Pensionsstiftelse, Svenska Handelsbankens Personalstiftelse and Pensionskassan SHB, försäkringsförening which use the Bank for customary banking and accounting services. Shareholders’ contribution to associated companies and Group companies, see Note P14. Group contributions received, see Note P14. Group contributions made, see Change in equity, Parent company page 86. For 2005, “Other” in the income statement includes SPP Livförsäkring AB (SPP). Svenska Handelsbanken AB mainly performs IT-related services and asset management. Handelsbanken Liv Försäkrings AB and SPP also have close cooperation. RELATED-PARTY TRANSACTIONS WITH CEO, EVPS AND BOARD OF DIRECTORS PARENT COMPANY SEK m 2006 2005 Lending 85 98 2 2 2006 2005 16 10 0 0 Interest income Deposits Interest expense For other transactions, see Note 5, Group, Terms and remuneration for senior management. Credit is granted to closely-related persons after customary credit review. The interest rate is determined on normal commercial terms. However for employees of the Bank (not members of the board ), the interest rate on credit up to SEK 1.5m is two percentage points lower than the equivalent interest rate for external customers. This benefit is taxable for the employee and constitutes a basis for social security charges payable by the Bank. Credit to close family members is granted on normal commercial terms and is not included in the accounts. In exceptional cases, if credit to a close family member is granted at the subsidised interest rate described above, this is reported as a taxable benefit for the employee. For deposits, the interest rate for employees is the same as for external customers. 110 HANDELSBANKEN ■ ANNUAL REPORT 2006 FINANCIAL REPORTS ■ NOTES – PARENT COMPANY Five-year review – Parent company Income statement 2006 2005 2004 2003 2002 Net interest income 9 134 8 599 8 469 12 213 10 925 Dividends received 3 362 815 716 600 500 Net fee and commission income 5 831 5 246 4 518 4 015 4 011 Net gains/losses on financial items -964 SEK m 2 220 2 582 2 053 -1 840 Other operating income 812 608 728 223 240 Total operating income 21 359 17 850 16 484 15 211 14 712 General administrative expenses Staff costs -7 186 -6 629 -6 284 -5 751 -5 742 Other administrative expenses -3 695 -3 192 -2 891 -2 374 -2 726 Depreciation, amortisation and impairments of property, equipment and intangible assets -634 -310 -307 -441 -482 -11 515 -10 131 -9 482 -8 566 -8 950 9 844 7 719 7 002 6 645 5 762 -200 -160 -325 -791 -715 - - - 199 -759 Operating profit 9 644 7 559 6 677 6 053 4 288 Appropriations 4 365 4 712 18 077 4 040 4 371 Profit before taxes 14 009 12 271 24 754 10 093 8 659 Taxes -3 302 -3 404 -6 746 -2 779 -2 207 Profit for the year 10 707 8 867 18 008 7 314 6 452 4 585 4 018 3 640 3 294 Total expenses before loan losses Profit before loan losses Loan losses, net Impairment losses/reversals on financial non-current assets Dividend for the year 5 074 * * As proposed by the board Balance sheet SEK m 2006 2005 2004 2003 2002 Loans to the public 571 960 495 442 408 842 398 859 438 372 Loans to credit institutions 338 037 312 391 280 285 256 462 246 014 Interest-bearing securities 191 419 186 088 155 189 127 500 139 666 Assets Other assets 166 776 155 135 162 223 183 696 208 387 Total assets 1 268 192 1 149 056 1 006 539 966 517 1 032 439 Deposits and borrowing from the public 412 664 376 947 315 004 296 470 286 226 Due to credit institutions 353 112 311 876 270 369 234 900 280 219 Issued securities 254 484 217 774 198 864 195 883 233 107 Liabilities and equity Subordinated liabilities Other liabilities Untaxed reserves 51 672 46 795 25 182 26 734 26 560 144 068 144 587 147 822 161 183 159 180 1 183 1 397 1 149 13 121 11 473 51 009 49 680 48 149 38 226 35 674 1 268 192 1 149 056 1 006 539 966 517 1 032 439 121 978 79 319 79 720 69 395 73 077 5 397 5 986 3 791 5 984 19 932 Contingent liabilities 136 268 126 703 109 182 102 782 122 022 Pension obligations - - - - - Other commitments 309 852 271 389 252 595 6 061 784 6 754 119 Shareholders’ equity Total liabilities and equity Memorandum items Collateral pledged for own debt Other collateral pledged HANDELSBANKEN ■ ANNUAL REPORT 2006 111 FINANCIAL REPORTS ■ RECOMMENDATION FOR APPROPRIATION OF PROFITS Recommendation for appropriation of profits and statement from the board In accordance with the balance sheet for Handelsbanken, profits totalling SEK 45,439m are at the disposal of the annual general meeting. The board recommends that the profits be distributed as follows: Dividend per share paid to the shareholders SEK 8.00 (SEK 7.00 for 2005) Balance carried forward Total allocated 5,074 40,365 45,439 When assessing the amount of the company’s proposed dividend, account has been taken of the nature of operations, their scope, consolidation requirement and risk-taking. Our assessment is that the above appropriation of profits is prudent and well-adapted to the operations as a going concern. Unrealised changes in value of assets and liabilities at fair value have had a net impact of SEK –4,542m on the shareholders’ equity. The capital base of the fi nancial corporate group exceeded the statutory capital requirement by SEK 13,154m at the year-end. The surplus capital in the parent company was SEK 48,161m. We hereby declare that to the best of our knowledge, this annual report has been prepared in accordance with sound accounting practices for limited companies, that the information provided corresponds to the actual circumstances and that nothing of material importance has been omitted which could affect the view of the company presented in the annual report. STOCKHOLM 20 FEBRUARY 2007 Lars O Grönstedt Chairman Hans Larsson Anders Nyrén Pirkko Alitalo Jon Fredrik Baksaas Ulrika Boëthius Tommy Bylund Göran Ennerfelt Sigrun Hjelmquist Fredrik Lundberg Sverker Martin-Löf Bente Rathe Pär Boman President and Group Chief Executive 112 HANDELSBANKEN ■ ANNUAL REPORT 2006 Audit report To the annual general meeting of the shareholders of Svenska Handelsbanken AB (publ) Corporate identity number: 502007-7862 We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the board of directors and the chief executive of Svenska Handelsbanken AB (publ) for the year 2006. The company’s annual accounts and consolidated accounts are included in the printed version of this document on pages 16–112. We have not audited the corporate governance report on pages 118–123. The board of directors and the managing director are responsible for these accounts and the administration of the company as well as for the application of the Annual Accounts Act when preparing the annual accounts and the application of international fi nancial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act when preparing the consolidated accounts. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit. We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. During the year, the auditing department of Handelsbanken has continuously examined the internal controls and accounts. We have received the reports that have been prepared. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the board of directors and the chief executive and significant estimates made by the board of directors and the chief executive when preparing the annual accounts and consolidated accounts as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the chief executive. We also examined whether any board member or the chief executive has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act for Credit Institutions and Securities Companies or the Articles of Association. We believe that our audit provides a reasonable basis for our opinions set out below. The annual accounts have been prepared in accordance with the Annual Accounts Act for Credit Institutions and Securities Companies, and give a true and fair view of the company’s fi nancial position and results of operations in accordance with generally accepted accounting principles in Sweden. The consolidated accounts have been prepared in accordance with international fi nancial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act for Credit Institutions and Securities Companies and give a true and fair view of the group’s fi nancial position and results of operations. The statutory administration report is consistent with the other parts of the annual accounts and the consolidated accounts. We recommend to the annual general meeting of shareholders that the income statements and balance sheets of the parent company and the Group be adopted, that the profit of the parent company be dealt with in accordance with the recommendation in the administration report, and that the members of the board and the chief executive be discharged from liability for the fi nancial year. STOCKHOLM 8 MARCH 2007 KPMG Bohlins AB Ernst & Young AB Thomas Thiel Torsten Lyth Authorised public accountant Authorised public accountant Ulla Nordin Buisman Authorised public accountant Appointed by the Swedish Financial Supervisory Authority HANDELSBANKEN ■ ANNUAL REPORT 2006 113 CORPORATE SOCIAL RESPONSIBILITY Handelsbanken in the community Handelsbanken makes a better contribution to society than other banks by having higher productivity, that is, more satisfied customers combined with higher cost-effectiveness. HANDELSBANKEN’S PURPOSE By delivering fi nancial services, Handelsbanken, together with other players in the fi nancial sector, fulfi ls an important function in society. The Bank’s purpose is to be a link between the different players in society so that capital can be transferred from those who have a surplus of liquid funds to those who need to borrow money. The banking system also maintains a functioning and efficient payment system. An efficient banking system is a condition for a modern, functioning society. The word economy means careful management of scarce resources. The company with the highest level of cost-effectiveness that can also deliver the best products or services, so that it has the most satisfied customers, has the highest productivity and thus makes the best contribution to society. In the banking sector, cost-effectiveness is usually measured as the proportion of costs to income, the C/I ratio. Handelsbanken has the lowest C/I ratio of the Nordic banks and also compares very favourably with other European banks. Handelsbanken had the most satisfied customers in the Nordic region. HANDELSBANKEN IN THE LOCAL COMMUNITY Handelsbanken has a nationwide branch network in Sweden and a large branch network in the other Nordic countries. High costeffectiveness allows Handelsbanken to retain a local presence and thus continue to fulfi l an important function in local communities including places where other banks have closed their local branches. Handelsbanken is convinced that a local presence is necessary. The basic concept of the Bank’s way of operating is that decisions are made as close to the customer as possible, including granting loans. In concrete terms, this means that loan applications are processed and – with few exceptions – decided by Handelsbanken’s local branch. It is the local branch which has the best knowledge of the customer’s circumstances. This work method gives Handelsbanken close ties with the local community. 114 HANDELSBANKEN ■ ANNUAL REPORT 2006 HANDELSBANKEN’S CONTRIBUTION TO THE COMMUNITY Handelsbanken is one of the largest tax payers in Sweden and for the past few years has paid over SEK 4bn in tax every year. As in all other issues at Handelsbanken, the local branch decides whether the Bank should sponsor various cultural and community projects. A guiding principle here is whether the project is perceived as having a link to the Bank’s business operations. Since all customer responsibility is decentralised to the local branches, there is usually no reason for Handelsbanken to make central decisions on these issues. Over the years, Handelsbanken’s board has decided to allocate funds to independent research foundations. These foundations are named after Jan Wallander, Tom Hedelius and Tore Browaldh, all previous group chief executives and chairmen of the board of Handelsbanken. In 2006, these foundations made 113 grants (92) totalling SEK 113m (88), representing resources greater than 250 full-time working years for research posts. CORPORATE SOCIAL RESPONSIBILITY A responsible business approach – delivering better service than other banks, at the same time as the Bank has lower costs – is necessary if Handelsbanken is to continue to have higher profitability and thus make a larger fi nancial contribution to society than other Nordic banks. CORPORATE SOCIAL RESPONSIBILITY Environmental issues In environmental terms, Handelsbanken’s policy is to promote long-term sustainable development by taking action to minimise the negative environmental impact by the Bank. Environmental issues are a vital element in the Handelsbanken Group’s operations, both in terms of the direct environmental impact of the Bank’s operations and any indirect impact. The latter includes environmental aspects of granting credits, offering savings in mutual funds with an environmental or ethical profi le and offering customers online and other electronic banking services. The Folksam Index for corporate social responsibility reviews all listed companies on the Stockholm stock exchange regarding their preparedness to handle risks related to environmental impact. Among the 35 companies reviewed in the fi nancial sector, Handelsbanken was awarded “Best in sector”. Environmental responsibility and organisation As in other areas at Handelsbanken, the responsibility for practical environmental issues is decentralised. All managers in the Handelsbanken Group have the primary responsibility for environmental issues at their units and all employees have a responsibility for the environment as part of their duties. For the Group as a whole, internal environmental issues are co-ordinated by the central administration department. The head of the central credit department is responsible for environmental issues related to granting credits. Environmental issues are an integral part of the introduction programme for new employees, and also of credit training courses. Environmental policy As far as technically and fi nancially possible, and to the extent that it is compatible with the Bank’s undertakings, Handelsbanken aims to promote long-term sustainable development. The Bank also aims to take measures to minimise any negative impact on the environment. Consistent and long-term improvements will generate benefits to the environment as well as cost savings. Handelsbanken has signed and complies with voluntary agreements, such as the ICC Business Charter for Sustainable Development and the United Nations Environmental Program Finance (UNEP FI), “Banks and the environment”. UNEP FI is a statement that economic development must be compatible with social welfare and a sound environment. DIRECT ENVIRONMENTAL IMPACT Carbon dioxide (CO2) emissions is an area where the Bank’s operations have a direct impact on the environment. For several years, the Bank has measured the carbon dioxide emissions generated by its own operations. The Bank’s direct impact mainly derives from business travel and the use of heating and electricity. Sweden is one of the few countries in the world where an increasing GDP is accompanied by diminished emissions of greenhouse gases. Handelsbanken is part of that trend. Over the past few years, the Bank’s earnings and business volumes have increased while its carbon dioxide emissions have decreased. In 2005, Handelsbanken’s carbon dioxide emissions fell by 20%. The proportion of purchased electricity with the Good Environmental Choice mark was 42% and the average use of electricity at the Swedish branches in 2005 was 133 kWh/m2 as compared to an average value of 150 kWh/m2 for premises in Sweden (Energy indicators – 2005, Swedish Energy Agency). Objectives and policy The aim of Handelsbanken’s environmental work is to promote long-term sustainable development. Action is taken to cause as little negative impact on the environment as possible, by minimising energy use, choosing environment-friendly materials and products and minimising residual products. The Bank has produced material with the purpose of inspiring and motivating its employees to act in an environmentally conscious way, so that environmental issues become a natural part of their daily work. Emissions CO2 tonnes 2005 2004 Electricity 3 886 5 762 Heating 1 719 2 474 Travel 2 693 2 577 Transport of goods 2 246 2 246 Other Total 5 85 10 549 13 144 Information concerning emissions in 2006 is not yet available. Electricity and heating refer to Handelsbanken’s Nordic operations. Other refers to operations in Sweden. HANDELSBANKEN ■ ANNUAL REPORT 2006 115 CORPORATE SOCIAL RESPONSIBILITY Actions to reduce negative environmental impact Handelsbanken makes continuous efforts to reduce environmental impact. Here are some examples from 2006: • The Bank launched an e-mailbox function as part of its online services, where customers can receive information in electronic form. Customers can cancel paper information online and instead receive this electronically. • Information to the same customer is put in the same envelope to a greater extent, leading to fewer mail items. • Movement detectors have been installed in the public areas at the Tegeluddsvägen property so that the lights are extinguished when there is nobody on the premises. • Several cooling plants in the Bank’s premises were shut down and these buildings were linked to district cooling facilities. • Heat recycling was installed in one of the Bank’s properties in Stockholm. • Waste separation at source is being gradually introduced in the Bank’s units. • When renovating the facades of the Bank’s premises in central Stockholm (Arsenalsgatan and Blasieholmstorg), environmentallyfriendly methods and material were used. • At the branches, the power installed in the machine rooms was lowered from 3kW to 2kW which affected the need for cooling. INDIRECT ENVIRONMENTAL IMPACT Environmental issues associated with granting loans The Bank can influence the environment in a broader perspective in the application of its credit policy. In accordance with Handelsbanken’s credit policy, environmental factors are taken into consideration when assessing the customer’s repayment capacity. For lending commitments over SEK 1m and in the case of mortgages over SEK 4m, a limit document is drawn up. For all customers with a credit limit, an annual review and analysis is made in the form of a business evaluation. This includes an assessment of possible environmental risks for each customer. This is particularly important when assessing the repayment capacity of a customer engaged in environmentally hazardous activities or selling products that involve environmental or health risks. The assessment may concern the required governmental authorisations, adherence to the prescribed limits for emissions, and 116 HANDELSBANKEN ■ ANNUAL REPORT 2006 that the products in question remain competitive after environmental and health risks have been taken into account. A large part of Handelsbanken’s lending portfolio consists of mortgage loans. For property-related credits, it is essential to take into account environmental factors pertaining to buildings or environmentally harmful activities conducted in the building now or in the past. Environmental factors in the vicinity of the property are also considered. It is always the customer who is responsible for how its own operations are conducted, but repayment capacity and thus the Bank’s credit risk is affected by the customer’s willingness or ability to manage these risks. Ethical and environmental mutual funds The Handelsbanken Group offers the opportunity to save in mutual funds with an ethical or environmental profi le. For several years, the Bank’s range of funds has included the SPP Global Sustainability Share Index Fund. This fund invests in companies which, in addition to fi nancial targets, also have social objectives and aim to use natural resources in a long-term sustainable manner. In 2005, the Bank started another fund with this focus. The Handelsbanken Sweden Index Ethical Fund invests in companies which have been examined on the basis of ethical criteria relating to the environment, human rights and business ethics. The assets managed in the two funds totalled SEK 3.3bn (2.3). The Bank also offers a global environmental fund via an external fund manager. This fund only invests in companies that are expected to offer good returns and that also comply with special environmental criteria. Environmental impact of purchases and projects Environmental requirements are always made on suppliers when the Bank procures goods and services. Environmental considerations are included in decisions on all investments and purchases. Handelsbanken maintains an ongoing dialogue with its suppliers to promote and develop environmental issues. When planning the Bank’s buildings, premises and furnishings, environmental guidelines are applied and declarations of environmental and material content are required. Materials and components must be long-life, recyclable and low-energy. CORPORATE SOCIAL RESPONSIBILITY Ethical standards and corporate social responsibility All operations at Handelsbanken must be characterised by high ethical standards. ETHICAL GUIDELINES Handelsbanken’s ethical guidelines state that operations must be characterised by high ethical standards. Employees must conduct themselves in a manner that upholds confidence in the Bank. The ethical guidelines are ratified every year by the board of Handelsbanken. A fundamental, 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 the Swedish Financial Supervisory Authority and other authorities must be observed when designing procedures and instructions. Money laundering and economic crime The Bank must not participate in transactions involving funds which may be suspected of originating from criminal activities, or in transactions the implication of which the responsible employees do not understand. Nor should the Bank participate in transactions which can be perceived as assisting tax evasion. The appropriate managers at Handelsbanken are responsible for keeping employees regularly informed of the content of legislation on combatting economic crime. Handelsbanken applies laws and regulations in its work against money laundering and particularly serious crime. The Bank has internal instructions for this purpose and all employees are regularly trained in issues relating to money laundering and the financing of particularly serious crime. Customer relations Financial advice must always be based on the customer’s needs, financial position and risk propensity. It is important that employees ensure that customers understand the implications of the decisions they make. The advice given aims to provide the customer with the most suitable product from the Bank’s range, regardless of what is best for the Bank in the short term. The Bank must not take advantage of its superior expertise and fi nancial position in relation to customers. Sound business practices, acting in a consistent manner and fair treatment of customers are key concepts at the Bank. No type of discrimination is allowed. In some cases, for example securities trading, where the Bank is acting on behalf of both customers and itself, a confl ict of interests may arise. Operations must be oriented in such a way to avoid this type of confl ict as far as possible. The Bank as customer Handelsbanken is a major purchaser of goods and services from both Swedish and international suppliers. Ethical considerations are just as important for the Bank in its role as customer as when it supplies services and products. To avoid incurring obligations to customers and suppliers, the Bank has rules regarding receiving and giving personal gifts and entertainment. Conduct of employees It is important that the Bank’s employees are not suspected of taking improper advantage of knowledge about the fi nancial markets which they obtain in the course of their work. All employees must be familiar with the local insider trading laws and observe the Bank’s own rules governing employees’ and closely-related persons’ private securities and currency transactions. In their work at the Bank and in their private affairs, employees must refrain from business transactions that violate the Bank’s rules or current legislation. Employees must not handle matters in which they or a relative have a personal interest nor matters for companies in which they or a relative have a material interest. Handelsbanken’s employees must also refrain from transactions or other commitments that may seriously jeopardise their own fi nancial position. Employees must notify the Bank of assignments outside the Bank and obtain approval. These rules also apply to secondary occupations and posts in clubs, societies and the like. Remuneration for being a member of a board on behalf of the Bank must be paid to the Bank. Employees who are in doubt regarding the Bank’s ethical guidelines and dealing with related issues must contact their immediate superior to discuss the correct action. CORPORATE SOCIAL RESPONSIBILITY The success of Handelsbanken in the market derives from the trust it enjoys from the public and authorities. The Bank’s work methods stem from a fundamental human outlook based on trust and respect. All employees are clearly responsible for their actions professionally and in social and ethical issues. Therefore, it is important that business decisions at the Bank can be justified also from a social and ethical perspective. Human rights Handelsbanken endorses the principles set out in the UN Universal Declaration of Human Rights. This means that the Bank strives to support and respect the protection of international human rights within the area which the Bank can influence. It also means that the Bank endeavours to ensure that it is not involved in any breach of human rights. When granting credits, the Bank takes account of its customers’ attitudes to human rights. Working conditions and union rights Handelsbanken complies with the laws and agreements on working hours in all countries where it has operations. In the Nordic countries, where 93% of the Bank’s employees work, Handelsbanken adheres to the collective bargaining agreements which regulate working hours, overtime, rest periods, breaks and holidays. All employees in the Handelsbanken Group have the right to organise and join a union. The Oktogonen profit-sharing foundation has a representative on the central board. The local boards of the regional banks include employee representatives. At Handelsbanken, all individuals with the same competence have the same right to employment, promotion, salary and professional development, regardless of gender, age, ethnic background or sexual orientation. Handelsbanken’s equal opportunity policy states that equal conditions shall apply to men and women regarding personal development within the Handelsbanken Group. HANDELSBANKEN ■ ANNUAL REPORT 2006 117 GOVERNANCE AND CONTROL Corporate governance Corporate governance is the term used to describe a set of regulations for management and control of companies. Handelsbanken strictly applies the Swedish Code of Corporate Governance. GOVERNANCE AND CONTROL Corporate governance is the term used to describe a set of regulations for management and control of companies. Handelsbanken strictly applies the Swedish Code of Corporate Governance. This corporate governance report, which comprises pages 118–123, has not been examined by the Bank’s auditors. INFORMATION ABOUT CORPORATE GOVERNANCE The aim of the board’s information policy is to ensure that stock market operators have access to fast, simultaneous, correct, relevant and reliable information. The Bank’s website (www.handelsbanken.se/ireng) includes all published information provided to the stock market during the past three years. The website also contains a section on corporate governance issues, where the information in the corporate governance report is continually updated. ANNUAL GENERAL MEETINGS (SHAREHOLDERS’ MEETINGS) Shareholders exercise their right to decide on matters relating to the company at general meetings of shareholders. The annual general meeting (AGM) appoints the board, the chairman of the board and the auditors, and also decides on their fees. The annual general meeting also decides on policies for salary and other remuneration for the group chief executive and other members of the Bank’s senior management. Information in preparation for meetings as well as minutes of annual general meetings can be viewed on the Bank’s website. Notice of general meetings and all proposals for the meeting are available on the website. APPOINTMENT OF THE BOARD AND AUDITORS The nomination committee is the AGM’s body for preparing the meeting’s decisions relating to appointment issues. By decision of the 2006 AGM, the four largest shareholders in voting terms each appointed a representative who, together with the chairman, would constitute the nomination committee until the next AGM appoints a new nomination committee. The nomination committee consists of Carl-Olof By (Industrivärden), Henrik Forssén (the Oktogonen Foundation), Tomas Nicolin (Alecta), Lars Öhrstedt (AFA Försäkring) and Lars O Grönstedt (chairman of the board of Handelsbanken). Together, the members of the nomination committee represent approximately 29% of the number of votes for all shares in the Bank. BOARD OF DIRECTORS In advance of the AGM on 25 April 2006, the chairman of the board, Arne Mårtensson had declined re-election. At the annual general meeting, Pär Boman was elected to the board and the other 118 HANDELSBANKEN ■ ANNUAL REPORT 2006 members were re-elected. The AGM elected Lars O Grönstedt as chairman of the board. At the subsequent fi rst board meeting, Hans Larsson and Anders Nyrén were appointed vice chairmen. At the same time, the board appointed Pär Boman as president and group chief executive after Lars O Grönstedt. Size and independence Handelsbanken’s board comprises 13 members who are elected by the Annual General Meeting. No employee representatives are elected. The employees are instead represented by two board members, elected by the AGM, who represent the Bank’s profit-sharing foundation, Oktogonen. The rule concerning confl icts of interest in credit matters means that the board members cannot participate in credit decisions concerning companies where they have ownership interests or where they are employed or are board members. The Bank’s board is therefore somewhat larger than is the case in other listed companies. The Stockholm stock exchange’s listing requirements make certain stipulations concerning the composition of the board. For example, the majority of the members elected by the AGM must be independent of the company and the management. At least two of the board members must also be independent of the company’s major shareholders. Handelsbanken’s board fulfi ls these requirements. Regarding the requirement that no more than one board member is allowed to work in the senior management of the Bank, it may be mentioned that the group chief executive is a member of the board. The composition of the board also fulfi ls the requirements concerning independence as expressed in the Swedish corporate governance code. The fundamental work of the board According to the Swedish Companies Act, the Board’s overall task is to manage the company’s business on behalf of the owners. The board of a universal bank such as Handelsbanken must also comply with a large number of industrial regulations. Central among these is the Swedish Banking and Financing Business Act (2004:297). In addition, there is specific legislation for operations such as securities and insurance. The industrial legislation is supplemented by regulations from Swedish Financial Supervisory Authority. Many of these regulations include instructions directed at the board of the Bank. Banking legislation requires the board to ensure that certain general operating regulations on fi nancial strength, liquidity, risk management, transparency and soundness are fulfi lled. Financial strength and liquidity A bank’s operations must be pursued in such a way that its ability to fulfi l its obligations is not jeopardised. Risks are inherent in all operations, but these risks must be adapted to the size of the buffer capital. Similarly, sufficient liquidity is vital for the Bank to also fulfi l its obligations in the short term, and not risk incurring temporary GOVERNANCE AND CONTROL payment problems. Good liquidity requires advanced liquidity planning and tight control of payment flows. The specific implications of the regulations on fi nancial strength and liquidity are set out in the more detailed provisions of other legislation. This include the regulations on capital adequacy. As of 1 February 2007, certain new capital adequacy regulations apply (Basel II), which place a greater focus on the responsibility of the board for total capital requirements and requirements for transparency. Risk management – internal control A bank must have systems adapted to its operations which enable it to identify, measure, govern, internally report and have control over the risks associated with its operations. In particular, the board must ensure that the combination of different forms of risk such as credit risks, market risks and operating risks does not jeopardise the Bank’s ability to fulfi l its obligations. This requirement can only be met if good internal control exists. Thus, good internal control is part of the risk management and capital evaluation functions. Risk control in terms of credit risks and operating risks is carried out by the credit risk control unit at the Central Credit department. Risk control in terms of other risks, such as market risks, liquidity risks, insurance risks and business risks, is carried out by the financial risk control unit at Central Control and Accounting. The responsibility for capital planning rests with the head of the capital unit at Central Control and Accounting department. Reporting to the head of Central Control and Accounting, the head of Treasury has responsibility for group liquidity and funding. The Bank applies strict methods for risk assessment and risk management to ensure that the risks to which it is exposed are managed within the established framework. The outcome of the company’s process for risk assessment and risk management is discussed annually by the board. Credit risks, operational risks, market risks and liquidity risks are regularly presented to the board. Financial reporting Internal control for fi nancial reporting is based on the Bank’s own control environment (organisation, decision paths, authority and responsibility) which is documented and communicated in governing documents such as internal policies, guidelines, manuals and codes. Examples of these are the division of work between on the one hand the board, and on the other hand the group chief executive and the other bodies which the board establishes, instructions for the right to approve costs, and accounting and reporting instructions. The risks which have been identified for fi nancial reporting are managed via the Bank’s control structures which are documented in descriptions of processes and internal control. The Bank has information and communication channels with the aim of achieving completeness and correctness in its fi nancial reports, for example by means of making the governing documents for fi nancial reporting available and known to the employees concerned. The Bank follows up how the control structures are managed and their efficiency. One of the tools for this is self-assessment tests. The company’s information and communication channels are also followed up to ensure that they are appropriate for their purpose with reference to the fi nancial reporting. Internal auditing The head of the Central Auditing department is appointed by the board. The Central Auditing department has some seventy employees, a large number of whom have competence corresponding to public authorised accountants. The Bank’s external auditors evaluate and perform quality control on the work of the internal audit department. The internal auditing department’s assignment is based on a policy for internal auditing operations established by the board. Following a co-ordinated risk assessment, the audit work should be planned so that it focuses on examining operations and procedures which are of material importance and/or involve risks. The planned auditing commitments are documented annually in an audit plan which is established by the board’s audit committee on behalf of the board. The result of internal audits, the actions to be taken and the status of these, are continually reported to the audit committee. Transparency A bank’s operations must be organised and pursued in such a way that the Bank’s structure, links with other companies and position are visible. The overall responsibility for the transparency of the institution’s fi nancial position and organisational structure rests with the board. The more detailed implications of the requirement for transparency are, for example, set out in the Swedish legislation for annual accounts. The Bank’s accounts have been prepared in accordance with international fi nancial reporting standards, IFRS, as adopted by the EU. The amendments and restrictions pursuant to the Swedish Annual Accounts Act for Credit Institutions and Securities Companies (ÅRKL) and the implementation directives issued by the Swedish Financial Supervisory Authority are also applied. The requirement for transparency also entails compliance with stock exchange regulations such as the listing agreement and listing requirements. Soundness In other respects, too, the operations of a credit institution must be pursued in a sound manner. This means that the Bank must maintain a level of quality in its operations, such that the confidence of the market can be upheld. The areas affected by this include the Bank’s conduct with respect to its customers. Guidelines and instructions The fundamental issues on the allocation of expertise among the board, the committees of the board, the chairman, the group chief executive and the internal auditing function are manifested in the board’s work regulations and its instructions to the group chief executive. The set of instructions that is established every year at the statutory meeting includes credit instructions for the Group, as well as various policies relating to the management of the fi nancial risks associated with the Group’s operations. Every year, the board sets funding limits and assumes responsibility for the Bank’s base prospectus (i.e. prospectus responsibility). In addition, every year, the board establishes a risk mandate relating to interest rate risks, liquidity risks and other risks. The board’s working instructions state that the chairman should assist the group chief executive in contacts with the Bank’s most important relationships, particularly the main owners. The chairman also has overall responsibility for ownership issues relating to shareholdings in the Bank’s pension foundation, pension fund and staff foundation. In the absence of the chairman, in order of seniority on the board, the vice chairmen of the board must fulfi l the chairman’s tasks and assist the chairman as decided by him. In other respects there is no other division of work for the board than that which involves the committees. The group chief executive also establishes a series of instructions and policy documents, either in response to assignments from the board, or to fulfi l regulatory requirements relating to the Bank’s senior management specified by the Swedish Financial Supervisory Authority. The work of the board in 2006 During the year, the board held 12 ordinary general meetings HANDELSBANKEN ■ ANNUAL REPORT 2006 119 GOVERNANCE AND CONTROL (including one telephone meeting) and one strategy meeting. It discussed the economic situation and the Bank’s strategy at regular intervals. One of the regular items discussed is a report on the Bank’s position compared to other Swedish and international banks. Also, risk limits for interest rate risks and other categories of risk were reviewed and followed up. In addition, the board was regularly informed about operating risks. It also took decisions on matters of borrowing, major credit-related matters, large investments and strategic issues. During the year, the board held an internal training day which included the Bank’s payment services. In December, as a result of the new capital adequacy regulations, the board established a new capital policy and fi nancial risk policy, etc. for the Group. This capital policy sets out responsibilities and guidelines for internal capital evaluation and capital planning. The board also established a confidence level for the calculation of economic capital and a target for the Tier 1 ratio and other relevant capital ratios, to apply from 1 February 2007. Responsibility for the Bank’s liquidity and fi nancing is set out in a fi nancial policy, while the fi nancial risk policy includes responsibilities and guidelines for the independent risk control function. As of 2007, the Bank will report more detailed information on capital adequacy and risk management. The board’s work is evaluated in individual discussions between the board members and the chairman of the board, supported by a questionnaire which is answered individually by the members. The results were compiled and discussed at the board meeting in November. The chairman reported the results of the evaluation and the board’s discussion to the nomination committee. The board also met on one occasion to evaluate the work of the group chief executive without him being present. Credit committee The credit committee consists of the chairman of the board, the two vice chairmen, the group chief executive and four other members. The head of the central credit department is also a member of the credit committee. The board’s credit committee met 11 times during the year. The credit committee makes decisions on behalf of the board regarding the majority of credit cases referred to the board for its decision. It also prepares credit cases which, due to their special importance, must be presented to the whole board. The rules regarding confl icts of interest in the Swedish Companies Act are carefully observed and are the subject of special attention. Remuneration committee The board’s remuneration committee consists of the chairman of the board and two other members, both of whom are independent in relation to the company and its management. The committee met three times during the year. The task of the remuneration committee is to prepare proposals to the board regarding adjustments to the salary and benefits of the group chief executive. The committee also prepares proposals to the board regarding adjustments to the salary and benefits of the head of the Bank’s internal auditing department. This committee also establishes the principles and overall policy for the salaries, benefits and pensions of the executive vice presidents. The committee reports annually on the results of its work to the board. It has also been assigned to prepare the board’s proposal to the AGM regarding remuneration principles and other employment terms for the Bank’s senior management. The audit committee/Work with accounting and audit issues The audit committee consists of the chairman of the board, plus two members who are independent of the company and its management. One of these members is also independent of the Bank’s major shareholders. One of the independent members is the committee’s chairman. The audit committee met three times during the year. The board’s audit committee prepares the work of the board to ensure compliance with the principles established for fi nancial reporting and internal control. The committee normally performs this by processing crucial accounting matters and material events after the balance sheet date, and any other circumstances which may affect the qualitative content of the fi nancial reports. The audit committee maintains regular contacts with the Bank’s external and internal auditors. In conjunction with the six-monthly fi nancial accounts, the internal and external auditors are to inform about the risk analyses which have been performed, including co-ordination between the internal and external auditors and observations made at their summary audit of the six-monthly fi nancial report. In conjunction with the full-year fi nancial accounts, the internal and external auditors are to inform about material uncertainties in reported values, observations relating to internal control, compliance, irregularities and observations made when auditing the full-year figures. A written annual report of observations from the regular audits and an examination of six-monthly and annual accounts is submitted every year by the external auditors to the chairman of the board and the group chief executive. In addition, the chairman of the external auditors commented on these reports at separate meetings of the auditors and the chairman of the board and the group chief executive, Handelsbanken’s board Information about remuneration refers to the 12-month period between the 2006 and 2007 AGMs Information about attendance refers to 2006 Nationality Swedish 1 415 000 13/13 100% Hans Larsson, vice chairman Swedish 745 000 12/13 100% Anders Nyrén, vice chairman Swedish 745 000 13/13 100% Finnish 440 000 12/13 100% - Pirkko Alitalo Jon Fredrik Baksaas Norwegian 365 000 8/13 Ulrika Boëthius Swedish - 13/13 - Pär Boman, CEO Swedish - 13/13 100% Tommy Bylund Swedish - 13/13 100% Göran Ennerfelt Swedish 555 000 10/13 82% Sigrun Hjelmquist Swedish 440 000 12/13 100% Fredrik Lundberg Swedish 365 000 13/13 - Sverker Martin-Löf Swedish 655 000 13/13 100% Norwegian 655 000 11/13 100% Bente Rathe 120 Remuneration (SEK) Attendance board meetings Attendance committee work Lars O Grönstedt, chairman HANDELSBANKEN ■ ANNUAL REPORT 2006 GOVERNANCE AND CONTROL respectively, and at an audit committee meeting. When the audit has been completed, the head of internal auditing and the chairman of the external group of auditors provide a verbal report of their observations to the board. The chairman of the external group of auditors also meets the board once a year without the group chief executive or other members of the Bank’s management being present. The chairman of the external auditors also presents a report of the Bank’s auditing to the annual general meeting of shareholders. AUDITORS The AGM appoints external auditors. Two auditing companies are appointed, which in turn nominate authorised public accountants who bear the main responsibility. The Swedish Financial Supervisory Authority also appoints an auditor for the Bank. As stipulated by law, the mandate period for the auditors appointed by the shareholders’ meeting is four years. At the 2004 annual general meeting, KPMG Bohlins and Ernst & Young were appointed for the next four years, that is until the AGM in 2008. Bank auditors are not permitted to own shares in the Bank or to be granted loans by the Bank. Handelsbanken aims to avoid purchasing other consulting services from the companies which are responsible for auditing the Bank. When procuring consulting services from the companies which are responsible for auditing the Bank, the auditing policy states that a special review must be made in accordance with the Swedish Institute of Authorised Public Accountants’(FAR) analysis model and the American SarbanesOxley Act. KPMG Bohlins AB This company was elected by the 2004 AGM for the period up to and including the 2008 AGM. They have been chief auditors since the 2000 AGM and since then the auditor in charge has been Thomas Thiel, authorised public accountant. Ernst & Young AB This company was elected by the 2004 AGM for the period up to and including the 2008 AGM. They have been auditors since 1998 and since 2005, the chief auditor has been Torsten Lyth, authorised public accountant. Authorised public accountant Ulla-Britt Nordin Buisman (Öhrlings Pricewaterhouse Coopers AB). Appointed by the Swedish Financial Supervisory Authority at the 2004 AGM. SENIOR MANAGEMENT See page 124 for information about the senior management and the shares they own in the company. REMUNERATION Neither the board members nor the Group management receive variable remuneration such as bonuses. There are no existing equityrelated or equity price-related incentive programmes for the board and the company management. Like all employees of the Bank, the management and board members who are employees of the Bank receive allocations made to the Bank’s profit-sharing system Oktogonen, when these are made. Remuneration to the board At the 2006 AGM, the board’s fees were set at SEK 6,380,000, of which SEK 1,050,000 to the chairman. The board has allocated the fees such that the vice chairmen receive SEK 555,000 each and the other members, SEK 365,000 each. Members of the credit committee receive another SEK 190,000 each, members of the remuneration committee SEK 75,000 each and members of the audit committee SEK 100,000 each. Members who work in the Bank’s operations receive no fee. Remuneration principles for senior management The 2006 AGM approved the following principles for remuneration and other conditions of employment for the group chief executive and senior managers who report directly to the group chief executive and are members of the senior group management: • The total remuneration shall be on market terms. • Remuneration is paid only in the form of a fi xed salary and customary benefits. • Variable remuneration in the form of bonuses is not paid. • The minimum retirement age is 60. However, the retirement age for the group chief executive may be lower than this. Pension benefits are defi ned-benefit. • The period of notice on the part of the employee is six (6) months and on the part of Handelsbanken, twelve (12) months. If the Bank terminates the employment contract later than five years after the person’s appointment as a member of the Bank’s management, the period of notice is 24 months. In exceptional cases, periods of notice may be shorter. • No severance pay is paid. • The senior managers in question are included in the Oktogonen profit-sharing system on the same terms as all employees of the Bank. The senior management positions to which these principles apply are the group chief executive and the senior managers who report directly to the group chief executive and are members of the senior group management. Terms for senior management The Bank has no agreements on severance pay. The group chief executive, Pär Boman, has a retirement age of 58. His retirement pension is 65% of his salary immediately before retirement. The chairman of the board of the Bank and former group chief executive, Lars O Grönstedt, has a retirement age of 60. His retirement pension between the ages of 60 and 64 is 75% of his salary immediately before retirement, and from the age of 65 it is 65%. From the date that Lars O Grönstedt was appointed as chairman of the board his pension benefits accrue entirely in the Bank’s pension fund and pension foundation. Further information about conditions and remuneration for senior management can be found in Note 5 on pages 55–57. Loans to senior management Loans to the board, chief executives, and executive vice presidents total SEK 125m (122) for the Group and SEK 37m (57) for the parent company. HANDELSBANKEN ■ ANNUAL REPORT 2006 121 GOVERNANCE AND CONTROL The board LARS O GRÖNSTEDT chairman HANS LARSSON vice chairman ANDERS NYRÉN vice chairman B.A. and Graduate in Business Administration Stockholm, year of birth 1954. Member since 2001. Chairman of the board’s remuneration committee and credit committee. Member of the board’s audit committee. Other assignments: Director of AB Industrivärden, Vice chairman of Stockholm Chamber of Commerce. Own shareholdings and those of immediate family: 9,025, of which 8,425 indirectly via the Oktogonen profitsharing foundation. B.A. Stockholm, year of birth 1942. Member since 1990. Member of the board’s credit committee. Other assignments: Chairman of Nobia AB, Biolight International AB, Attendo Holding AB, CreVal Partners Fund 1 AB, director of Holmen AB, Dynea Oy. Own shareholdings and those of immediate family: 18,600 Graduate in Business Administration and MBA. President and group chief executive of AB Industrivärden, Bromma, year of birth 1954. Member since 2001. Member of the board’s credit committee. Other assignments: Director of Telefonaktiebolaget L M Ericsson, Ernströmgruppen AB, AB Industrivärden, Sandvik AB, Skanska AB, Svenska Cellulosa AB SCA, SSAB Svenskt Stål AB and chairman of the Swedish Association of Listed Companies and the Association for Sound Practices in the Securities Market. Own shareholdings and those of immediate family: 2,000 PIRKKO ALITALO JON FREDRIK BAKSAAS ULRIKA BOËTHIUS TOMMY BYLUND Graduate in business administration, Helsinki, year of birth 1949. Member since 2000. Member of the board’s remuneration committee. Graduate in business administration and MBA, President and group chief executive of Telenor ASA, Sandvika, year of birth 1954. Member since 2003. Other assignments: Director of Aker ASA, Det Norske Veritas (council). Own shareholdings and those of immediate family: 0 Sciences programme Upper Secondary School, Bank employee, Stockholm, year of birth 1961. Member since 2004. Other assignments: Vice chairperson of Swedish Union of Financial Sector Employees. Own shareholdings and those of immediate family: 2,897, of which 2,897 indirectly via the Oktogonen profitsharing foundation. Upper Secondary School, Bank Vice President, Ljusdal, year of birth 1959. Member since 2000. Member of the board’s credit committee. Other assignments: Chairman of Oktogonen Foundation. Own shareholdings and those of immediate family: 11,812, of which 10,868 indirectly via the Oktogonen profit-sharing foundation. Other assignments: Director of Lagercrantz Group AB. Own shareholdings and those of immediate family: 2,500 122 HANDELSBANKEN ■ ANNUAL REPORT 2006 PÄR BOMAN Engineering and Business/Economics degree, Stockholm, year of birth 1961. Member since 2006. Member of the board’s credit committee. Other assignments: Director of the Swedish Bankers’ Assocation. Own shareholdings and those of immediate family: 3,627, of which 2,927 indirectly via the Oktogonen profit-sharing foundation. GOVERNANCE AND CONTROL GÖRAN ENNERFELT SIGRUN HJELMQUIST FREDRIK LUNDBERG SVERKER MARTIN-LÖF B.A. and Graduate in business administration, President and group chief executive of Axel Johnson Gruppen AB, Upplands Väsby, year of birth 1940. Member since 1985. Member of the board’s credit committee. Other assignments: Chairman of Axfood AB, director of Spirent plc. Own shareholdings and those of immediate family: 65,000 Graduate engineer and Licentiate of Technology. Chairperson and Partner of Sight Executive Group AB, Djursholm, year of birth 1956. Member since 2003. Member of the board’s remuneration committee. Other assignments: Director of Sandvik AB, IBS AB, E.ON Sverige AB (previously Sydkraft AB), RAE Systems Inc. Own shareholdings and those of immediate family: 1,000 Graduate Engineer and Graduate in business administration, Honorary Doctor of Economics and Honorary Doctor of Engineering. President and group chief executive of L E Lundbergföretagen AB, Djursholm, year of birth 1951. Member since 2002. Other assignments: Chairman of Holmen AB, Cardo AB, Hufvudstaden AB, Director of L E Lundbergföretagen AB, NCC AB, AB Industrivärden, Sandvik AB. Own shareholdings and those of immediate family: 1,849,500 Doctor of Engineering in Technology in Paper and Chemical Pulping, Stockholm, year of birth 1943. Member since 2002. Chairman of the board’s audit committee, Member of the board’s credit committee. Other assignments: Chairman of Svenska Cellulosa AB SCA, Skanska AB, SSAB Svenskt Stål AB, Vice chairman of Telefonaktiebolaget LM Ericsson, AB Industrivärden. Own shareholdings and those of immediate family: 1,500 Handelsbanken’s board of directors Refers to the 12-month period between the 2006 and 2007 AGMs Nationality Independent * Remuneration Lars O Grönstedt, chairman Swedish 1 415 000 Hans Larsson, vice chairman Swedish 745 000 Anders Nyrén, vice chairman Swedish Pär Boman, CEO Swedish Pirkko Alitalo Finnish Jon Fredrik Baksaas Norwegian • • • Credit committee Remuneration committee Audit committee chairman member chairman member 745 000 member - member 440 000 member 365 000 Ulrika Boëthius Swedish - Tommy Bylund Swedish - member BENTE RATHE Göran Ennerfelt Swedish 555 000 member Graduate in business administration and MBA, Trondheim, year of birth 1954. Member since 2004. Member of the board’s credit committee and audit committee. Other assignments: Chairman of Petoro AS and Enviro Energi ASA, Director of Kongsberg Automotive ASA, Powel ASA. Own shareholdings and those of immediate family: 1,330 Sigrun Hjelmquist Swedish • 440 000 Fredrik Lundberg Swedish 365 000 655 000 member chairman 655 000 member member Sverker Martin-Löf Swedish • • Bente Rathe Norwegian • member • This member is to be regarded as independent in relation to the company and its management. • This member is to be regarded as independent in relation to the company and its management and also to major shareholders in the company. * As defined in the Swedish Corporate Governance Code. HANDELSBANKEN ■ ANNUAL REPORT 2006 123 Senior management President and group chief executive PÄR BOMAN year of birth 1961 Employed: 1991 Shareholding: 3,627, of which 2,927 indirectly* Executive vice presidents at central head office BJÖRN BÖRJESSON year of birth 1951 Head of Handelsbanken International Employed: 1981 Shareholding: 9,901, of which 9,901 indirectly* MIKAEL ERICSON year of birth 1960 Head of Handelsbanken Capital Markets Employed: 1993 Shareholding: 2,248, of which 2,248 indirectly* ANDERS H JOHANSSON year of birth 1955 Head of IT Employed: 1999 Shareholding: 764, of which 764 indirectly* PATRIK HERTSBERG year of birth 1963 Head of Handelsbanken Asset Management Employed: 1994 Shareholding: 1,269, of which 1,269 indirectly* OLLE LINDSTRAND year of birth 1949 Head of Credit Department Employed: 1985 Shareholding: 6,586, of which 6,586 indirectly* ANNA RAMBERG year of birth 1952 Head of Human Resources Employed: 1971 Shareholding: 25,013, of which 24,104 indirectly* ULF RIESE year of birth 1959 Head of Control and Accounting Employed: 1983 Shareholding: 27,016, of which 8,359 indirectly* HÅKAN SANDBERG year of birth 1948 Employed: 1969 Shareholding: 25,715 of which 25,206 indirectly* Executive vice presidents at the regional banks Chief executives at the subsidiaries PER BECKMAN year of birth 1962 Head of Northern Norrland Employed: 1993 Shareholding: 1,073, of which 1,073 indirectly* MICHAEL ZELL year of birth 1950 Head of Handelsbanken Liv and SPP Employed: 1978 Shareholding: 14,667, of which 13,667 indirectly* Call options equivalent to 10,000 shares RAINER LAWNICZAK year of birth 1958 Head of Southern Norrland Employed: 1982 Shareholding: 9,246, of which 9,246 indirectly* YONNIE BERGQVIST year of birth 1961 Head of Handelsbanken Finans Employed: 1979 Shareholding: 10,314, of which 10,177 indirectly* LARS KAHNLUND year of birth 1954 Head of Stockholm City Employed: 1975 Shareholding: 18,574, of which 18,574 indirectly* FRANK VANG-JENSEN year of birth 1967 Head of Stadshypotek Employed: 1998 Shareholding: 1,232, of which 932 indirectly* THOMMY MOSSINGER year of birth 1951 Head of Central Sweden Employed: 1982 Shareholding: 9,161, of which 9,161 indirectly* ANDERS OHLNER year of birth 1955 Head of Eastern Sweden Employed: 1985 Shareholding: 5,365, of which 5,365 indirectly* M JOHAN WIDERBERG year of birth 1949 Head of Western Sweden Employed: 1972 Shareholding: 26,147, of which 22,647 indirectly* CLAES NORLÉN year of birth 1955 Head of Southern Sweden Employed: 1978 Shareholding: 13,667, of which 13,667 indirectly* MAGNUS UGGLA year of birth 1952 Head of Great Britain Employed: 1983 Shareholding: 38,333, of which 8,333 indirectly* ANDERS BOUVIN year of birth 1958 Head of Denmark Employed: 1985 Shareholding: 7,069, of which 6,569 indirectly* PETRI HATAKKA year of birth 1962 Head of Finland Employed: 1990 Shareholding: 1,143, of which 1,143 indirectly* INGA-LILL NICOLIN year of birth 1950 Head of Norway Employed: 1986 Shareholding: 5,060, of which 5,060 indirectly* Others at central head office KATARINA BERNER FRÖSDAL year of birth 1956 Head of Infrastructure Employed: 1979 Shareholding: 11,685, of which 11,685 indirectly* JAN HÄGGSTRÖM year of birth 1949 Head of Handelsbanken Markets Research Employed: 1988 Shareholding: 3,842, of which 3,842 indirectly* ELISA SAARINEN year of birth 1963 Head of Corporate Communications Employed: 1995 Shareholding: 1,190, of which 1,190 indirectly* Changes during the year Pär Boman, previously head of Handelsbanken Markets, was appointed president and group chief executive. Ulf Riese, previously head of Handelsbanken Asset Management, was appointed head of Central Control and Accounting. Mikael Ericson, previously head of Handelsbanken Capital Markets, was appointed executive vice president and head of Handelsbanken Capital Markets. Rainer Lawniczak was appointed executive vice president and head of Regional Bank Southern Norrland. Björn Börjesson, executive vice president, previously head of Handelsbanken Markets, was appointed head of Handelsbanken International. Katarina Berner Frösdal was appointed head of Infrastructure. In February 2007, Patrik Hertsberg was appointed executive vice president and head of Handelsbanken Asset Management. * Indirect holding of shares in Handelsbanken via the Oktogonen profit-sharing foundation. 124 HANDELSBANKEN ■ ANNUAL REPORT 2006 Branches and branch managers NORTHERN NORRLAND SOUTHERN NORRLAND Skutskär Tom Wallin Branch Branch manager Branch Branch manager Skärplinge Stefan Holmquist Arvidsjaur Hans Albert Lindgren Alfta Dan Silvroth Skönsberg Urban Strömbom Backe Berit Bölander Arbrå Pär Lindh Stora Tuna Catrine Stenback Bjurholm Vacant Avesta Pia Källarbo Storvik Helene Hedin Bjästa Mats Hållberg Bergby Ylva Wallén Svensson Strömsund Lars-Erik Olsén Björna Margareta Persson Bergsjö Ulrika Sjöström Sundsvall Owe Sundin Boden Eva Rångevall Bispgården Lars-Göran Fahlén Sveg Gunilla Bäckius Bredbyn Mats Ågren Bjursås Anders Rapp Svenstavik Bengt Adolfsson Bureå Helen Bergwall Björbo Gerd Kosjanow Säter Ingela Hedberg Burträsk Catharina Johansson Björk Bollnäs Irene Hörberg Söderhamn Kerstin Nordstrand Byske Sören Markström Borlänge Katarina Rülcker Sörberge Bertil Sjöstrand Domsjö Roland Wennerberg Bräcke Tomas Wallström Tierp Mats Hansson Dorotea Anna-Karin Öhnerud Delsbo Joakim Frithiof Timrå Johanna Lundberg Gammelstad Eva-Britt Lindström Edsbyn Anders Lundin Torsåker Kerstin Persson Gällivare Lars Beyron Fagersta Lars Annerman Vansbro Fredrik Hallqvist Haparanda Roger Keisu Falun Anders Forsgren Västanfors Mikael Johansson Holmsund Stenebo, Marina Fränsta Lars Gustafsson Ånge Stefan Mattsson Hoting Marianne Rullander Furudal Bengteric Andersson Åre Hans Pernelind Husum Thomas Kassman Föllinge Anette Nilsson Östersund Petter Dahlin Härnösand Johan Grahn Gagnef Kerstin Berg Lindgren Östervåla Ove Johannesson Jokkmokk Kent Aidanpää Gnarp Niclas Södergren Junsele Annica Olofsson Grangärde Maria Jonasson STOCKHOLM CITY Kalix Gunnar Sandqvist Grängesberg Eva Ludvigsson Branch Kiruna Vacant Gällö Tomas Wallström Danderyd Kramfors Lars Norlinder Gävle City Svante Larsson Djursholm Leif Jadvi Lugnvik Tommy Sjölund Hammarstrand Lars-Göran Fahlén Mörby centrum Fredrik Christofferson Luleå Storgatan Jan Persson Hammerdal Örjan Olsson Luleå Örnäset Lisbeth Aidanpää Heby Åsa Olsson Centrum Mia Hiljebäck Lycksele Henrik Johansson Hede Thomas Ohlsson Larsberg Vacant Lövånger Kjell-Ove Löfgren Hedemora Håkan Arvidsson Näset Evalena Holmqvist Malå Ann-Charlotte Renström Hedesunda Susanne Persson Sigtuna Nordingrå Tommy Sjölund Hudiksvall Thony Nylund Arlanda Lars Åsgårdh Nordmaling Ivan Forsgren Insjön Clas Bond Märsta Ann Lilja Norsjö Greger Holmström Järpen Henrik Lindqvist Stora gatan Katarina Fridén Näsåker Jan-Åke Sjömäling Järvsö Ove Larsson Pajala Per-Anders Juntti Kilafors Sten Morin Centrum Fredrik Andersson Piteå Stefan Uddström Kopparberg Lena Ragnarsson Vöks Rotebro Yvonne Orre Ramsele Vacant Krokom Ulf Hellström Robertsfors Jenny Berglund Kvissleby Per Pettersson Centrum Per Eldestrand Råneå Ellinor Eriksson Leksand Anders Ekström Frösunda Ulf Eliasson Skellefteå Göran Olsson Liden Inger Nordström Vreten Klas Bornälv Sollefteå Thomas Rönnberg Lima Lena Eggens Sorsele Hans Albert Lindgren Lit Mikael Hansson Birger Jarlsgatan Jörgen Nielsen Storuman Peter Persson Ljusdal Tommy Bylund Frihamnen Richard Nordgård Trehörningsjö Gunilla Näslund Ljusne Catarina Bengtsson Gamla Stan Linda Kyrkander Ullånger Tommy Sjölund Ludvika Mats Johansson Gustav Adolfs Torg Bo Kaijser Umeå Branch manager Lidingö Sollentuna Solna Stockholm Malung Åsa Björlin Humlegården Jörgen Larson City Peter Hansi Matfors Johan Billström Karlaplan Magnus Ericson Umeå Teg Catrine Danielsson Mockfjärd Håkan Eriksson Karlavägen Per Andersson Umeå Västra Vacant Mora Henrik Ragnarsson Kista Thomas von Schéele Vilhelmina Roland Wennerberg Mörsil Astrid Larsson Lindh Kungsträdgården Åsa Öhlund Vindeln Alexander Bagrov Norberg Leif Magnusson Norrmalmstorg Jan Ringblom Vännäs Ann-Christine Söderberg Rånman Ockelbo Karin Eriksson Norrtull Helena Ericsson Ånäset Eva Nordenstam Offerdal Jörgen Nordqvist Odengatan Carl-Magnus Gustafsson Åsele Anna-Karin Öhnerud Orsa Bengteric Andersson Odenplan Joakim Becker Älvsbyn Britt-Marie Stenvall Rättvik Martin Sellberg S:t Eriksplan Mats Byrstedt Örnsköldsvik Helena Johansson Sala Peter Gustavsson Stockholm Sergel Göran Lönnstad Överkalix Maria Fältmark Sandviken Sven-Erik Larsson Strandvägen Bengt Bohman Övertorneå Håkan Funck Skinnskatteberg Andreas Byrén Stureplan Mikael Westerback HANDELSBANKEN ■ ANNUAL REPORT 2006 125 BRANCHES AND BRANCH MANAGERS Sveavägen Malin Bergström Salem Catharina Persson Tessinparken Peder Wiberg Saltsjö Boo Hans Ek City Gert Lundmark Upplandsgatan Lisbeth Andersson Skanstull Per Anders Tranberg Tornby Anders Hallros Vanadisplan Richard Johnson Skultuna Lars-Åke Pettersson Mjölby Patrik Rosengren Vasagatan Maria Hellberg Skärholmen Kenneth Wadling Motala Michael Minnered Värtavägen Björn Åhlander Sköndal Vacant Mönsterås Karin Mattsson Östermalmstorg Anders Danielsson Spånga Anders Nygren Mörbylånga Marianne Wigforss Östra Station Thomas Anttila Stuvsta Mats Nordling Mörlunda Börje Samuelsson Carina Idberg Södertälje Peter Almström Norrköping Sundbyberg Täby Trosa Maria Westerfalk Drottninggatan Åke Stenberg Täby Centrum Johan Lurén Trångsund Malin Berglund Eneby Mats Borgsjö Näsby Park Mats Kivilä Tullinge Vacant Hageby Lars Blomqvist Upplands Väsby Urban Wolters Tyresö Lars Holm Nybro Manfred Sass Vallentuna Fredrik Enander Ulvsunda Karin Enestad Nyköping Eva Wahlberg Vaxholm Anneli Sönmez Uppsala Nässjö Mats Andersson Åkersberga Sune Werkell CENTRAL SWEDEN 126 Linköping City Jörgen Ericsson Oskarshamn Ingvar Persson Eriksberg Lars Olsson Slite Catarina Bylund Industriomr Baruch Grauman Strängnäs Wilhelm Trahn Luthagen Lars Sandberg Sävsjö Jonas Flink Branch Branch manager Alviks Torg Johan Lindblom Vällingby Thomas Wedholm Söderköping Michael Rimstedt Arboga Ulla-Karin Aufrecht Värmdö Per Anwret Tingsryd Ingela Nilsson Blackeberg Susanne Signell Västerhaninge Jenny Lööw Torsås Stefan Pålsson Brommaplan Peter Lindh Västermalm Lena Wennerberg Tranås Jens Fransson Bålsta Joakim Kihlgren Västerås Vaggeryd Jörgen Bruhn Dalarö Maud Lyckenius City Kent Johansson Vetlanda Olle Hagström Ekerö Jesper Hellström Emausgatan Cecilia Hallqvist Vimmerby Hans Will Enköping Ulla Reuterskiöld Köpingsvägen Lena Nilsson Virserum Maria Bjarnehäll Farsta Rickard Svallfors Stora Gatan Håkan Jansson Visby Fellingsbro Ingrid Persson Årsta Vacant Adelsgatan Madeleine Gottfridsson-Endrell Finnerödja Olle Jonsson Älvsjö Birgitta Billström Öster Stefan Lövkvist Fjugesta Anders Hedvall Örebro Vislanda Johan Isaksson Fleminggatan Jan Larsson Stortorget Kenneth Wallin Värnamo Lars-Eric Ericsson Fridhemsplan Niklas Hedblom Ekersgatan Christer Larsson Västervik Michael Skännestig Frövi Mikael Jansson Våghustorget Bengt Gunnarson Växjö Mikael Jismark Globen Hans Widmark Ösmo Renée Andersson Ålem Susann Svenzén Gnesta Mårten Larsson Österbybruk Christer Lindgren Åseda Peter Holmberg Götgatsbacken Anders Lindegren Östhammar Christer Lindgren Åtvidaberg Erik Torbrand Hallsberg Yvonne Bülow Hallstavik Roland Ericson EASTERN SWEDEN Hallunda Per Molin Branch Branch manager Branch Branch manager Hammarby Marion Ulander Alvesta Thorwald Burman Alingsås Peter Romedahl Haninge Mikael Wenngren Anderstorp Pernilla Åkestrand Arvika Göran Eriksson Hornsberg Anki Lenksjö Bankeryd Thomas Landén Bollebygd Eva-Lotta Duneskog Hornsgatan Mats Eriksson Borensberg Birgitta Östergren Borås Huddinge Kjell Andersson Borgholm Conny Johansson Hulta Thomas Strömberg Hägersten Susanne Norman-Taube Eksjö Karin Jönsson Norrby Thomas Bogsjö Hässelby Marie Lindström Emmaboda Sven-Erik Karlsson Viared Thomas Bogsjö Högalid Pernilla Eldestrand Eskilstuna Stora Torget Janne Pehrsson Högdalen Jörgen Nilsson Fristadstorget Jonas Elfridsson Falkenberg Michael Sterne Jakobsberg Marie Cedergren Östermalm Bo Vallin Falköping Magnus Kvarnmarker Järna Laila Jansson Finspång Dag Kinnerud Filipstad Peter Bergkvist Knivsta Agneta Nygården Flen Lotta Peppas Fristad Gunilla Lööf Kolbäck Eva Klang Fårösund Leif Närström Färjelanda Gunilla Andersson Kumla Thomas Ljungberg Färjestaden Jan Pilemyr Gällstad Kenneth Thörnqvist Kungsholmstorg Göran Almberg Gislaved Jörgen Asp Göteborg Kungsängen Maria Wedholm Hemse Magnus Gardell Almedal Anders Gross Kungsör Niklas Johansson Hultsfred Monica Carlenskog Avenyn Olle Eksell Kärrtorp Anders Hagman Huskvarna Hans Färemo Backa-Ringön Christina Hjälte Köping Peter Fällman Högsby Anne-Helene Markström City Jan Wergeland Lindesberg Larry Andersson Jönköping Claes Ericson Eriksberg Anders Hjälte Marieberg Karin Lundqvist Kalmar Frölunda Tommy Häggström Marievik Tomas Ejnar Kvarnholmen Mikael Fredriksson Första Långgatan Knut Pokorny Nacka Susanne Danielsson Kalmar Berga Markus Hagström Gårda Mats Berntsson Norrtälje Bo Schotte Katrineholm Göran Bjerke Hisings Kärra Anna Ekstrand Nynäshamn Stefan Zettergren Klintehamn Lars Cramér Hjällbo Christian Pennert Pålsboda Helene Wiberg Lammhult/Rörvik Per-Olof Lenegård Högsbo Annette Bertilsson Renstiernas G Katarina Alf Landsbro Kent Lind Kortedala Jan Gottberg Rimbo Tina Nylén Landala Michael Åhman HANDELSBANKEN ■ ANNUAL REPORT 2006 WESTERN SWEDEN BRANCHES AND BRANCH MANAGERS Lilla Bommen Katarina Helgen Karlskrona Jan Erik Dahl Kolding Majorna Marie Jakobsson Kivik Andreas Jeppsson Copenhagen: Marieholm Britt-Marie Linse Klippan Lena Johansson Odinsgatan Christian Sjöberg Knislinge Ingela Ström Frederiksberg Henrik Bengtsson Sisjön Assar Larsson Kristianstad Mikael Rubin Østerbro Carsten Heger Torslanda Veronica Wallin Kävlinge Göran Camitz Køge Brian Arnvig Volvo Eva Hasselström Laholm Lars Andersson Lemvig Lars Balle Olsen Örgryte Ingemar Rask Landskrona Annila Hansson Odense Tom Skjellerup Övre Husargatan Jan Sahlin Ljungby Thomas Eldh Park Allé Henrik Eg Hagfors Pär Skogfeldt Ljungbyhed Eva Aurell Roskilde Boje Nielsen Herrljunga Acting – Gunnar Jönsson Lomma Mona Persson Sdr. Felding Kristian Hansen Hjo Lena Karlsson Lund Sdr. Omme Bent Egdal Karlskoga Charlotte Schreck-Pettersson Karlstad City Jesper Andersen Lars Moesgaard City Nils-Erik Persson Silkeborg Carsten Hjortflod Ideon John Persson Struer Poul Bakkegaard Staffan Werner Sunds Anders Frederiksen Vejle Peter Sørensen Stora Torget Peter Andersson Markaryd Våxnäs Fredrik Ekenberg Malmö Kristinehamn Mats-Ove Mattsson Amiralsgatan Per-Ove Kamlund Viborg Arnth Stougaard Kungsbacka Mats Rollof City Göran Johnsson Videbæk John Nyby Kungälv Anette Pettersson Dalaplan Jens Isaksson Vildbjerg Henrik Kristiansen Landvetter Claes Ahlström Fosie Dag Sundewall Aalborg Ole Dahl Nielsen Lerum Camilla Sjöberg Fridhem Gunnar Holmqvist Århus Jan Arup Lidköping Anders Stigson Köpenh.vägen Maria Zanichelli Lilla Edet Jan-Olof Strand Limhamn Bengt Rosendahl FINLAND Mariestad Kerstin Waller Lundavägen Bengt Nyquist Branch Mellerud Cecilia Blom Triangeln Ulf Dahlqvist Espoo Mölndal Martin Henriksson Värnhem Roger Håkansson Leppävaara Tuija Nuutinen Mölnlycke Ann Sundvisson Olofström Katarina Ring Tapiola Pekka Ursin Nödinge Lena Gillholm Osby Jonas Skyman Partille Liselott Mattson Ronneby Carl-Gustaf Larsson Pasila Sirpa Pensas Skara Martin Drebin Simrishamn Lennart Jirback Dianapuisto Mirjam Sarkki Skövde Niklas Standar Sjöbo Thomas Johansson Esplanadi Tiina Roschier Sollebrunn Hans-Göran Nilsson Skanör Christer Nilsson Hakaniemi Leif Grönlund Stenungsund Mats Ingemarsson Skurup Håkan Lennartsson Kamppi Nina Arkilahti Sunne Pär Olsson Staffanstorp Olle Svensson Munkkivuori Reima Jokela Surte Christian Nielsen Svedala Gert Nilsson Itäkeskus Hannu Oksanen Svenljunga Bengt Larsson Sölvesborg Helen Olofsson Hämeenlinna Jutta Ruuskanen-Tähtinen Säffle Elisabeth Korp Sösdala Karin Eriksson Hyvinkää Mervi Karsikas Tibro Marianne Bergman Tomelilla Bengt-Göran Grenander Imatra Pekka Lankinen Tidaholm Lena Lundh Trelleborg Marie Brunstam Joensuu Juha Saastamoinen Torsby Morgan Smegärd Tyringe Yvonne Liljeqvist Jyväskylä Tauno Virkki Tranemo Lars Nydén Veberöd Hans-Åke Mårtensson Kerava Kimmo Heiskanen Trollhättan Thomas Eriksson Vellinge Tomas Wall Kokkola Sören Björkgård Uddevalla Stefan Widlund Vittsjö Catharina Munkberg Kouvola Jorma Qvick Ulricehamn Kenneth Olofsson Vollsjö Bonnie Cederquist Kuopio Seppo Tujunen Vara Joakim Carlsson Ystad Jan-Olof Petersson Lahti Tarmo Kallio Varberg Jan Bogsjö Åhus Thomas Hansson Lappeenranta Acting - Martti Mäkelä Vårgårda Anna-Karin Heljegård Älmhult Fredrik Roghner Mikkeli Jouko Kervinen Vänersborg Mats Johansson Ängelholm Kenneth Persson Oulu Jari Murtoperä Åmål Bo Larson Pietersaari Anders Norrena Årjäng Peter Johansson DENMARK Pori Esa Yli-Sipilä Älvängen Peter Kornesjö Branch Branch manager Raisio Juha Vasanen Amager Claes Peulecke Rauma Erkki Nissilä Aulum Helle Bjerre Rovaniemi Pekka Pistokoski Ballerup Fin Mortensen Salo Juho Huovinen SOUTHERN SWEDEN Branch manager Helsinki Branch Branch manager Brande Benny Larsen Seinäjoki Esa Alkio Arlöv Jonas Sjöberg Esbjerg Morten Andersen Tallinn, Estonia Harri Tuohimaa Broby Peter Andersson Fredericia Jens Christian Jørgensen Tampere Båstad Joakim Holm Give Niels Peder Nielsen Kauppakatu Tarja Suvisalmi Eslöv Dag Olsson Hammerum Børge Thomsen Kyttälä Ilkka Pehkonen Halmstad Tony Bringevall Herning Helsingborg City Tornio Pirkko Lääkkölä Niels Viggo Malle Turku Markku Ropponen Norr Per Franklin Fredhøj Bruno Hansen Tammisaari Marika Lindholm Stortorget Göran Pelvén Holstebro Claus Gade Vaasa Yngve Svens Söderport Sven Rosenkvist Horsens Jann Due Vantaa Hässleholm Ola Tyrberg Ikast Morten Smith Tikkurila Jaakko Hara Höganäs Magnus Landbring Karup Gitte Nielsen Myyrmäki Stephan Björkell Höllviken Göran Fredriksson Kgs. Lyngby Knud Jacobsen Höör Annika Johansson Kibæk Preben Staal Karlshamn Per Bjerstedt HANDELSBANKEN ■ ANNUAL REPORT 2006 127 BRANCHES AND BRANCH MANAGERS GREAT BRITAIN NORWAY Branch Branch manager Branch Branch manager Arendal Per Olav Nærestad Birmingham Patrick Hanlon Asker Turid Williksen Bournemouth Tracey Davidson Bristol Tim Wilkinson Bergen Fana Arvid Føleide Cambridge Richard Waters Flesland Gunnar Røsland Cardiff Rick Spencer Fyllingsdalen Mette Skauge Chelmsford Justin Grainger Minde Erik Ramsdal Guildford Neil Truman Sentrum Arild Andersen Hull Pete Sumners Strandgaten Åse Fluge Nordgreen Leeds Andy Copsey Vest Christian Ravnå Leicester Sean Martin Åsane Tore Svein Nese Liverpool Sean Mcgurren Drammen Kirsti Jensås London Simon Silvester Fredrikstad Tove Anita R Torp Maidstone Jonathan Watson Halden Roar Elsness Manchester Simon Raine Hamar Hans Skjelbreid Newcastle Kevin Pattison Haugesund Knut Børge Lunde Norwich John Harper Kolbotn Geir Anders Sundnes Nottingham Colin Kirk Kristiansand Arild Andresen Oxford David Woodhead Larvik Hans Jørgen Ormar Plymouth Paul Wilmot Lillestrøm Line Thams Blikstad Reading Roy Arbon Lysaker Jørgen Misvær Sheffield Mike Harrison Molde Kolbjørn Heggdal Slough John Parker Moss Jan Fredrik Fogth Southampton Jeremy Tollworthy Stoke-on-trent Michael Smith Oslo Fyrstikktorget Glenn Steinbø Swindon Trevor Harrison Kirkegaten Harald Søreide Wolverhampton Mike Priddy Majorstuen Ronny Myreng Nydalen Torstein Haugland Olav Vs Gate Knut Berge UNITS OUTSIDE THE NORDIC COUNTRIES AND GREAT BRITAIN Skøyen Sven Ove Oksvik Unit Head of unit Sandefjord Ingelise Schliekelmann Amsterdam Brian Herring Sandnes Anette Wathne Luxembourg Göran Högvall Sandvika Cecilie Tvedt Hong Kong Göran Stille Sarpsborg Espen Lerkerød Singapore Jan Djerf Ski Hanne Fjellheim Shanghai Johan Andrén Skien Jan Egil Hafredal Germany Holger Namér Sotra Lisbeth Turøy Stavanger Mattias Metzger Hamburg Vacant Sentrum Hroar Gudbrandsen New York Mikael Green Straen Terje Lind Poland Mikael Sörensen Tromsø Bjørn Andreassen Trondheim Gdansk Beata Suchocka Poznan Jaroslaw Ladziak Heimdal Bente E Dahl Warsaw Marzena Malek Søndregt Ola Grøtte Paris Peter Einarsson Jan Erik Skjolden Russia Raimo Valo Jan Petter Larsen Moscow Svante Anderback St. Petersburg Markku Vasari Vienna Carl-Christian Prinz Zu Solms-Lich Mumbai John Ödmann Tønsberg Ålesund 128 Frankfurt HANDELSBANKEN ■ ANNUAL REPORT 2006 Definitions and explanations General definitions Explanation of insurance terms ADJUSTED SHAREHOLDERS’ EQUITY PER SHARE. Shareholders’ equity at the end of the period is adjusted by surplus/deficit values on financial assets classified to be held to maturity and reduced by the equity effect of cash flow hedges and the minority share of shareholders’ equity. Adjusted equity is then divided by the number of outstanding ordinary shares at the end of the period. AVAILABLE SOLVENCY MARGIN. Mainly comprising equity and any subordinated loans. BAD DEBTS. Loans where payments will probably not be met according to the conditions of the contract. A loan is not a bad debt if there is collateral which covers the principal amount, interest and penalties for late payments by a satisfactory margin. BAD DEBT RESERVE RATIO. Provision for probable loan losses as a percentage of gross bad debts. CAPITAL BASE. The capital base is the sum of tier 1 (primary) and tier 2 (supplementary) capital. Tier 1 capital comprises shareholders’ equity less goodwill plus 72% of untaxed reserves in the parent company. Tier 2 capital includes fixed-term subordinated loans with some reduction when the residual maturity is less than five years. These loans must not exceed 50% of tier 1 capital. With permission from the government or, following authorisation by the government, from the Swedish Financial Supervisory Authority, other instruments may also be included in tier 1 or tier 2 capital. However, tier 2 capital must never exceed tier 1 capital. The total of tier 1 and tier 2 capital is reduced by the book value of holdings in insurance operations and certain financial operations. To cover the capital requirement on the market risks, subordinated loans with an original maturity of at least two years can be included in the capital base. C/I RATIO. Total expenses in relation to total income. CAPITAL RATIO. Capital ratio or capital adequacy is the capital base in relation to risk-weighted volume. The capital ratio must be at least 8%. BONUS RATE. The interest rate, before fees and taxes, at which the insurance capital (the insured party’s savings) earn interest. This is the most important component when calculating the allocated bonus. This normally only applies at companies run on mutual principles. See Yield rate. COLLECTIVE CONSOLIDATION RATIO. The market value of the insurance company’s assets in relation to the insurance commitments. EXPENSE RATIO. Operating expenses in relation to premiums written. GUARANTEED RATE. The interest rate, before fees and taxes, which is used to calculate the guaranteed funds. PREMIUMS WRITTEN. Mainly the total of premiums paid in during the year. REQUIRED SOLVENCY MARGIN. Consists mainly of the sum of 4% of the life insurance provisions, 1% of the unit-linked commitments, 1% of conditional bonuses and 0.1–0.3% of mortality risks. SOLVENCY RATIO. Available solvency margin in relation to required solvency margin. The ratio, which should be at least 1, shows the company’s ability to meet its commitments. TOTAL RETURN. Mainly the sum of changes in value and return on the investment assets. YIELD RATE. The interest rate, before fees and taxes, at which the insurance capital (the insured party’s savings) earn interest. This is the most important component when calculating the conditional bonus. This normally only applies in profit-distributing life insurance companies. See Bonus rate. DIVIDEND YIELD. Dividend per share divided by the share price at year-end. EARNINGS PER SHARE. The profit/loss for the year divided by the average number of outstanding shares. Where applicable, the dilution effect is taken into account. Narva. Printing: EkotryckRedners Photos: Peter Hoelstad Photos of board: Bengt Wanselius LOAN LOSS RATIO. Loan losses and changes in value of repossessed property as a percentage of the opening balance for loans to the public, loans to credit institutions (excluding banks), repossessed property and credit guarantees. NON-PERFORMING LOANS. Loans where interest, repayments or overdrafts have been due for payment for more than 60 days. P/E RATIO. The share price at year-end divided by earnings per share. PROPORTION OF BAD DEBTS. Bad debts (net) in relation to total loans to the public and credit institutions (excluding banks). RETURN ON EQUITY. Profit for the year in relation to average shareholders’ equity excluding the equity impact of financial assets classified as available for sale, and cash flow hedges. An adjustment is also made for a weighted average of rights issues, dividends and repurchase of own shares. RETURN ON TOTAL ASSETS. Operating profit in relation to average total assets. RISK-WEIGHTED VOLUME. The risk-weighted volume is determined by the assets and off-balance-sheet items being placed in varying risk classes, in accordance with the Act on Capital Adequacy and Large Exposures of Credit Institutions and Securities Companies. The volumes are weighted taking into account the assessed risk such that they are included in the risk-weighted volume by 0%, 20%, 50% or 100%. HANDELSBANKEN ■ ANNUAL REPORT 2006 129 ALFTA ALINGSÅS ALVESTA ALVIKS TORG ANDERSTORP ARBOGA ARBRÅ ARLANDA SKY CITY ARLÖV ARVIDSJAUR ARVIKAAVESTA BACKE BANKERYD BERGBY BERGSJÖ BJURHOLM BJURSÅS BJÄSTA BJÖRBO BJÖRNA BLACKEBERG BODEN BO LLE BYGD BOLLNÄS BORENSBERG BORGHOLM BORLÄNGE BORÅS: HULTA NORRBY STORA TORGET VIARED BREDBYN BROBY BROMMAPLAN BRÄCKE BUREÅ BURTRÄSK BYSKE BÅLSTA BÅSTA DALARÖ DELSBO DJURSHOLM DOMSJÖ DOROTEA ED SBYN EKERÖ EKSJÖ EMMABODA ENKÖPING ESKILSTUNA: FRISTADSTORGET ÖSTERMALM ESLÖV FAGERSTA FALKENBERG FALKÖPING FALUN FARSTA CENTRUM FELLINGSBRO FILIPSTAD FINNERÖDJA FINSPÅNG FJUGESTA FLEN FRISTAD FRÄNSTA FRÖSUNDA FRÖVI FURUDAL FÅRÖSUND FÄRGELANDA FÄRJESTADEN FÖLLINGE GAGNEF GAMMELSTAD GISLAVED GLOBEN GNARP GNESTA GRANGÄRDE GRÄNGESBERG GÄLLIVARE GÄLLSTAD GÄLLÖ GÄVLE CITY GÖTEBORG: ALMEDAL AVENYN BACKA RINGÖN CITY ERIKSBERG FRÖLUNDA FÖRSTA LÅNGGATAN GÅRDA HISINGS KÄRRA HJÄLLBO HÖGSBO KORTEDALA LANDALA LILLA BOMMEN MAJORNA MARIEHOLM ODINSGATAN SISJÖN TORSLANDA VOLVO PVB ÖRGRYTE ÖVRE HUSARGATAN HAGFORS HALLSBERG HALLSTAVIK HALLUNDA TORG HALMSTAD HAMMARBY HAMMARSTRAND HAMMERDAL HANINGE CENTRUM HAPARANDA HEBY HEDE HEDEMORA HEDESUNDA HELSINGBORG: NORR STORTORGET SÖDERPORT HEMSE HERRLJUNGA HJO HOLMSUND HOTING HUDDINGE CENTRUM HUDIKSVALL HULTSFRED HUSKVARNA HUSUM HÄGERSTEN HÄRNÖSAND HÄSSELBY GÅRD HÄSSLEHOLM HÖGANÄS HÖGDALEN HÖGSBY HÖLLVIKEN HÖÖR INSJÖN JAKOBSBERG JOKKMOKK JUNSELE JÄRNA JÄRPEN JÄRVSÖ JÖNKÖPING KALIX KALMAR: BERGA K VARNHOLMEN KARLSHAMN KARLSKOGA KARLSKRONA KARLSTAD: VÅXNÄS KATRINEHOLM KILAFORS KIRUNA KISTA KIVIK KLINTEHAMN KLIPPANKNISLINGE KNIVSTA KOLBÄCK KOPPARBERG KRAMFORS KRISTIANSTAD KRISTINEHAMNKROKOM KUMLA KUNGSBACKA KUNGSÄNGEN KUNGSÖR KUNGÄLV KVISSLEBY KÄRRTORP KÄVLINGE KÖPING LAHOLM LAMMHULT LANDSBRO LANDSKRONA LANDVETTER LEKSAND LERUM LIDEN LIDINGÖ: CENTRUM LARSBERG NÄSET LIDKÖPING LILLA EDET LIMA LINDESBERG LINKÖPING CITY TORNBY LIT LJUNGBY LJUNGBYHED LJUSDAL LJUSNE LOMMA LUDVIKA LUGNVIK LULEÅ: STORGATAN ÖRNÄSETLUND: CITY IDEON LYCKSELE LÖVÅNGER MALMÖ: AMIRALSGATAN CITY DALAPLAN FOSIE FRIDHEM KÖPENHAMNSVÄGEN LIMHAMN LUNDAVÄGEN TRIANGELN VÄRNHEM MALUNG MALÅ MARIESTAD MARIEVIK MARKARYD MATFORS MELLERUD MJÖLBY MOCKFJÄRD MORA MOTALA MÄRSTA MÖLNDAL MÖLNLYCKE MÖNSTERÅS MÖRBY CENTRUM MÖRBYLÅNGA MÖRLUNDA MÖRSIL NACKA: FORUM NACKA NORBERG NORDINGRÅ NORDMALING NORRKÖPING: DROTTNINGGATAN ENEBY CENTRUM HAGEBY CENTRUM NORRTÄLJE NORSJÖ NYBRO NYKÖPING NYNÄSHAMN NÄSBY PARK NÄSSJÖ NÄSÅKER NÖDINGE OCKELBO OFFERDAL OLOFSTRÖM ORSA OSBY OSKARSHAMN PAJALA PARTILLE PITEÅ PÅLSBODA RAMSELE RIMBO ROBERTSFORS RONNEBY ROTEBRO RÅNEÅ RÄTTVIK RÖRVIK SALA SALEM SALTSJÖ-BOO SANDVIKEN SIGTUNA SIMRISHAMN SJÖBO SKANÖR SKARA SKELLEFTEÅ SKINNSKATTEBERG SKULTUNA SKURUP SKUTSKÄR SKÄRHOLMEN SKÄRPLINGE SKÖNDAL SKÖNSBERG SKÖVDE SLITE SOLLEBRUNN SOLLEFTEÅ SOLLENTUNA CENTRUM SOLNA SORSELE SPÅNGA STAFFANSTORP STENUNGSUND STOCKHOLM: BIRGER JARLSGATAN FLEMINGGATAN FRIDHEMSPLAN FRIHAMNEN GAMLA STAN GUSTAV ADOLFS TORG GÖTGATSBACKEN HORNSBERG HORNSGATAN HUMLEGÅRDEN HÖGALID KARLAPLAN KARLAVÄGEN KUNGSHOLMSTORG KUNGSTRÄDGÅRDEN MARIEBERG NORRMALMSTORG NORRTULL ODENGATAN ODENPLAN RENSTIERNAS GATA S:T ERIKSPLAN SERGEL SKANSTULL STRANDVÄGEN STUREPLAN SVEAVÄGEN TESSINPARKEN UPPLANDSGATAN VANADISPLAN VÄRTAVÄGEN VÄSTERMALM ÖSTERMALMSTORG ÖSTRA STATION STORA TUNA STORUMAN STORVIK STRÄNGNÄS STRÖMSUND STUVSTA SUNDBYBERG SUNDSVALL SUNNE SURTE SVEDALA SVEG SVENLJUNGA SVENSTAVIK SÄFFLE SÄTER SÄVSJÖ SÖDERHAMN SÖDERKÖPING SÖDERTÄLJE SÖLVESBORG SÖRBERGE SÖSDALA TIBRO TIDAHOLM TIERP TIMRÅ TINGSRYD TOMELILLA TORSBY TORSÅKER TORSÅS TRANEMO TRANÅS TREHÖRNINGSJÖ TRELLEBORG TROLLHÄTTAN TROSA TRÅNGSUND TULLINGE TYRESÖ TYRINGE TÄBY CENTRUM UDDEVALLA ULLÅNGER ULRICEHAMN ULVSUNDA UMEÅ: CITY TEG VÄSTRA UPPLANDS VÄSBY UPPSALA: CITY ERIKSBERG INDUSTRIOMRÅDE LUTHAGEN VADSTENA VAGGERYD VALLENTUNA VANSBRO VARA VARBERG VASAGATAN VAXHOLM VEBERÖD VELLINGE VETLANDA VILHELMINA VIMMERBY VINDELN VIRSERUM VISBY: ADELSGATAN ÖSTER VISLANDA VITTSJÖ VOLLSJÖ VRETEN VÅRGÅRDA VÄLLINGBY VÄNERSBORG VÄNNÄS VÄRMDÖ VÄRNAMO VÄSTANFORS VÄSTERHANINGE VÄSTERVIK VÄSTERÅS: CITY EMAUSGATAN KÖPINGSVÄGEN STORA GATAN VÄXJÖ YSTAD ÅHUS ÅKERSBERGA ÅLEM ÅMÅL ÅNGE ÅNÄSET ÅRE ÅRJÄNG ÅRSTA ÅSEDA ÅSELE ÅTVIDABERG ÄLMHULT ÄLVSBYN ÄLVSJÖ ÄLVÄNGEN ÄNGELHOLM ÖREBRO: EKERSGATAN STORTORGET VÅGHUSTORGET ÖRNSKÖLDSVIK ÖSMO ÖSTERBYBRUK ÖSTERSUND ÖSTERVÅLA ÖSTHAMMAR ÖVERKALIX ÖVERTORNEÅ ALFTA ALINGSÅS ALVESTA ALVIKS TORG ANDERSTORP ARBOGA ARBRÅ ARLANDA SKY CITY ARLÖV ARVIDSJAUR ARVIKA AVESTA BACKE BANKERYD BERGBY BERGSJÖ BJURHOLM BJURSÅS BJÄSTA BJÖRBO BJÖRNA BLACKEBERG BODEN BO LLE BYGD BOLLNÄS BORENSBERG BORGHOLM BORLÄNGE BORÅS: HULTA NORRBY STORA TORGET VIARED BREDBYN BROBY BROMMAPLAN BRÄCKE BUREÅ BURTRÄSK BYSKE BÅLSTA BÅSTA DALARÖ DELSBO DJURSHOLM DOMSJÖ DOROTEA ED SBYN EKERÖ EKSJÖ EMMABODA ENKÖPING ESKILSTUNA: FRISTADSTORGET ÖSTERMALM ESLÖV FAGERSTA FALKENBERG FALKÖPING FALUN FARSTA CENTRUM FELLINGSBRO FILIPSTAD FINNERÖDJA FINSPÅNG FJUGESTA FLEN FRISTAD FRÄNSTA FRÖSUNDA FRÖVI FURUDAL FÅRÖSUND FÄRGELANDA FÄRJESTADEN FÖLLINGE GAGNEF GAMMELSTAD GISLAVED GLOBEN GNARP GNESTA GRANGÄRDE GRÄNGESBERG GÄLLIVARE GÄLLSTAD GÄLLÖ GÄVLE CITY GÖTEBORG: ALMEDAL AVENYN BACKA RINGÖN CITY ERIKSBERG FRÖLUNDA FÖRSTA LÅNGGATAN GÅRDA HISINGS KÄRRA HJÄLLBO HÖGSBO KORTEDALA LANDALA LILLA BOMMEN MAJORNA MARIEHOLM ODINSGATAN SISJÖN TORSLANDA VOLVO PVB ÖRGRYTE ÖVRE HUSARGATAN HAGFORS HALLSBERG HALLSTAVIK HALLUNDA TORG HALMSTAD HAMMARBY HAMMARSTRAND HAMMERDAL HANINGE CENTRUM HAPARANDA HEBY HEDE HEDEMORA HEDESUNDA HELSINGBORG: NORR STORTORGET SÖDERPORT HEMSE HERRLJUNGA HJO HOLMSUND HOTING HUDDINGE CENTRUM HUDIKSVALL HULTSFRED HUSKVARNA HUSUM HÄGERSTEN HÄRNÖSAND HÄSSELBY GÅRD HÄSSLEHOLM HÖGANÄS HÖGDALEN HÖGSBY HÖLLVIKEN HÖÖR INSJÖN JAKOBSBERG JOKKMOKK JUNSELE JÄRNA JÄRPEN JÄRVSÖ JÖNKÖPING KALIX KALMAR: BERGA KVARNHOLMEN KARLSHAMN KARLSKOGA KARLSKRONA KARLSTAD: VÅXNÄS KATRINEHOLM KILAFORS KIRUNA KISTA KIVIK KLINTEHAMN KLIPPAN KNISLINGE KNIVSTA KOLBÄCK KOPPARBERG KRAMFORS KRISTIANSTAD KRISTINEHAMN KROKOM KUMLA KUNGSBACKA KUNGSÄNGEN KUNGSÖR KUNGÄLV KVISSLEBY KÄRRTORP KÄVLINGE KÖPING LAHOLM LAMMHULT LANDSBRO LANDSKRONA LANDVETTER LEKSAND LERUM LIDEN LIDINGÖ: CENTRUM LARSBERG NÄSET LIDKÖPING LILLA EDET LIMA LINDESBERG LINKÖPING: CITY TORNBY LIT LJUNGBY LJUNGBYHED LJUSDAL LJUSNE LOMMA LUDVIKA LUGNVIK LULEÅ: STORGATAN ÖRNÄSETLUND: CITY IDEON LYCKSELE LÖVÅNGER MALMÖ: AMIRALSGATAN CITY DALAPLAN FOSIE FRIDHEM KÖPENHAMNSVÄGEN LIMHAMN LUNDAVÄGEN TRIANGELN VÄRNHEM MALUNG MALÅ MARIESTAD MARIEVIK MARKARYD MATFORS MELLERUD MJÖLBY MOCKFJÄRD MORA MOTALA MÄRSTA MÖLNDAL MÖLNLYCKE MÖNSTERÅS MÖRBY CENTRUM MÖRBYLÅNGA MÖRLUNDA MÖRSIL NACKA: FORUM NACKA ALFTA ALINGSÅS ALVESTA ALVIKS TORG ANDERSTORP ARBOGA ARBRÅ ARLANDA SKY CITY ARLÖV ARVIDSJAUR ARVIKAAVESTA BACKE BANKERYD BERGBY BERGSJÖ BJURHOLM BJURSÅS BJÄSTA BJÖRBO BJÖRNA BLACKEBERG BODEN BO LLE BYGD BOLLNÄS BORENSBERG BORGHOLM BORLÄNGE BORÅS: HULTA NORRBY STORA TORGET VIARED BREDBYN BROBY BROMMAPLAN BRÄCKE BUREÅ BURTRÄSK BYSKE BÅLSTA BÅSTA DALARÖ DELSBO DJURSHOLM DOMSJÖ DOROTEA ED SBYN EKERÖ EKSJÖ EMMABODA ENKÖPING ESKILSTUNA: FRISTADSTORGET ÖSTERMALM ESLÖV FAGERSTA FALKENBERG FALKÖPING FALUN FARSTA CENTRUM FELLINGSBRO FILIPSTAD FINNERÖDJA FINSPÅNG FJUGESTA FLEN FRISTAD FRÄNSTA FRÖSUNDA FRÖVI FURUDAL FÅRÖSUND FÄRGELANDA FÄRJESTADEN FÖLLINGE GAGNEF GAMMELSTAD GISLAVED GLOBEN GNARP GNESTA GRANGÄRDE GRÄNGESBERG GÄLLIVARE GÄLLSTAD GÄLLÖ GÄVLE CITY GÖTEBORG: ALMEDAL AVENYN BACKA RINGÖN CITY ERIKSBERG FRÖLUNDA FÖRSTA LÅNGGATAN GÅRDA HISINGS KÄRRA HJÄLLBO HÖGSBO KORTEDALA LANDALA LILLA BOMMEN MAJORNA MARIEHOLM ODINSGATAN SISJÖN TORSLANDA VOLVO PVB ÖRGRYTE ÖVRE HUSARGATAN HAGFORS HALLSBERG HALLSTAVIK HALLUNDA TORG HALMSTAD HAMMARBY HAMMARSTRAND HAMMERDAL HANINGE CENTRUM HAPARANDA HEBY HEDE HEDEMORA HEDESUNDA HELSINGBORG: NORR STORTORGET SÖDERPORT HEMSE HERRLJUNGA HJO HOLMSUND HOTING HUDDINGE CENTRUM HUDIKSVALL HULTSFRED HUSKVARNA HUSUM HÄGERSTEN HÄRNÖSAND HÄSSELBY GÅRD HÄSSLEHOLM HÖGANÄS HÖGDALEN HÖGSBY HÖLLVIKEN HÖÖR INSJÖN JAKOBSBERG JOKKMOKK JUNSELE JÄRNA JÄRPEN JÄRVSÖ JÖNKÖPING KALIX KALMAR: BERGA KVARNHOLMEN KARLSHAMN KARLSKOGA KARLSKRONA KARLSTAD: VÅXNÄS KATRINEHOLM KILAFORS KIRUNA KISTA KIVIK KLINTEHAMN KLIPPAN KNISLINGE KNIVSTA KOLBÄCK KOPPARBERG KRAMFORS KRISTIANSTAD KRISTINEHAMN KROKOM KUMLA KUNGSBACKA KUNGSÄNGEN KUNGSÖR KUNGÄLV KVISSLEBY KÄRRTORP KÄVLINGE KÖPING LAHOLM LAMMHULT LANDSBRO LANDSKRONA LANDVETTER LEKSAND LERUM LIDEN LIDINGÖ: CENTRUM LARSBERG NÄSET LIDKÖPING LILLA EDET LIMA LINDESBERG LINKÖPING: CITY TORNBY LIT LJUNGBY LJUNGBYHED LJUSDAL LJUSNE LOMMA LUDVIKA LUGNVIK LULEÅ: STORGATAN ÖRNÄSETLUND: CITY IDEON LYCKSELE LÖVÅNGER MALMÖ: AMIRALSGATAN CITY DALAPLAN FOSIE FRIDHEM KÖPENHAMNSVÄGEN LIMHAMN LUNDAVÄGEN TRIANGELN VÄRNHEM MALUNG MALÅ MARIESTAD MARIEVIK MARKARYD MATFORS MELLERUD MJÖLBY MOCKFJÄRD MORA MOTALA MÄRSTA MÖLNDAL MÖLNLYCKE MÖNSTERÅS MÖRBY CENTRUM MÖRBYLÅNGA MÖRLUNDA MÖRSIL NACKA: FORUM NACKA NORBERG NORDINGRÅ NORDMALING NORRKÖPING: DROTTNINGGATAN ENEBY CENTRUM HAGEBY CENTRUM NORRTÄLJE NORSJÖ NYBRO NYKÖPING NYNÄSHAMN NÄSBY PARK NÄSSJÖ NÄSÅKER NÖDINGE OCKELBO OFFERDAL OLOFSTRÖM ORSA OSBY OSKARSHAMN PAJALA PARTILLE PITEÅ PÅLSBODA RAMSELE RIMBO ROBERTSFORS RONNEBY ROTEBRO RÅNEÅ RÄTTVIK RÖRVIK SALA SALEM SALTSJÖ-BOO SANDVIKEN SIGTUNA SIMRISHAMN SJÖBO SKANÖR SKARA SKELLEFTEÅ SKINNSKATTEBERG SKULTUNA SKURUP SKUTSKÄR SKÄRHOLMEN SKÄRPLINGE SKÖNDAL SKÖNSBERG SKÖVDE SLITE SOLLEBRUNN SOLLEFTEÅ SOLLENTUNA CENTRUM SOLNA SORSELE SPÅNGA STAFFANSTORP STENUNGSUND STOCKHOLM: BIRGER JARLSGATAN FLEMINGGATAN FRIDHEMSPLAN FRIHAMNEN GAMLA STAN GUSTAV ADOLFS TORG GÖTGATSBACKEN HORNSBERG HORNSGATAN HUMLEGÅRDEN HÖGALID KARLAPLAN KARLAVÄGEN KUNGSHOLMSTORG KUNGSTRÄDGÅRDEN MARIEBERG NORRMALMSTORG NORRTULL ODENGATAN ODENPLAN RENSTIERNAS GATA S:T ERIKSPLAN SERGEL SKANSTULL STRANDVÄGEN STUREPLAN SVEAVÄGEN TESSINPARKEN UPPLANDSGATAN VANADISPLAN VÄRTAVÄGEN VÄSTERMALM ÖSTERMALMSTORG ÖSTRA STATION STORA TUNA STORUMAN STORVIK STRÄNGNÄS STRÖMSUND STUVSTA SUNDBYBERG SUNDSVALL SUNNE SURTE SVEDALA SVEG SVENLJUNGA SVENSTAVIK SÄFFLE SÄTER SÄVSJÖ SÖDERHAMN SÖDERKÖPING SÖDERTÄLJE SÖLVESBORG SÖRBERGE SÖSDALA TIBRO TIDAHOLM TIERP TIMRÅ TINGSRYD TOMELILLA TORSBY TORSÅKER TORSÅS TRANEMO TRANÅS TREHÖRNINGSJÖ TRELLEBORG TROLLHÄTTAN TROSA TRÅNGSUND TULLINGE TYRESÖ TYRINGE TÄBY CENTRUM UDDEVALLA ULLÅNGER ULRICEHAMN ULVSUNDA UMEÅ: CITY TEG VÄSTRA UPPLANDS VÄSBY UPPSALA: CITY ERIKSBERG INDUSTRIOMRÅDE LUTHAGEN VADSTENA VAGGERYD VALLENTUNA VANSBRO VARA VARBERG VASAGATAN VAXHOLM VEBERÖD VELLINGE VETLANDA VILHELMINA VIMMERBY VINDELN VIRSERUM VISBY: ADELSGATAN ÖSTER VISLANDA VITTSJÖ VOLLSJÖ VRETEN VÅRGÅRDA VÄLLINGBY VÄNERSBORG VÄNNÄS VÄRMDÖ VÄRNAMO VÄSTANFORS VÄSTERHANINGE VÄSTERVIK VÄSTERÅS: CITY EMAUSGATAN KÖPINGSVÄGEN STORA GATAN VÄXJÖ YSTAD ÅHUS ÅKERSBERGA ÅLEM ÅMÅL ÅNGE ÅNÄSET ÅRE ÅRJÄNG ÅRSTA ÅSEDA ÅSELE ÅTVIDABERG ÄLMHULT ÄLVSBYN ÄLVSJÖ ÄLVÄNGEN ÄNGELHOLM ÖREBRO: EKERSGATAN STORTORGET VÅGHUSTORGET ÖRNSKÖLDSVIK ÖSMO ÖSTERBYBRUK ÖSTERSUND ÖSTERVÅLA ÖSTHAMMAR ÖVERKALIX ÖVERTORNEÅ ALFTA ALINGSÅS ALVESTA ALVIKS TORG ANDERSTORP ARBOGA ARBRÅ ARLANDA SKY CITY ARLÖV ARVIDSJAUR ARVIKA AVESTA BACKE BANKERYD BERGBY BERGSJÖ BJURHOLM BJURSÅS BJÄSTA BJÖRBO BJÖRNA BLACKEBERG BODEN BO LLE BYGD BOLLNÄS BORENSBERG BORGHOLM BORLÄNGE BORÅS: HULTA NORRBY STORA TORGET VIARED BREDBYN BROBY BROMMAPLAN BRÄCKE BUREÅ BURTRÄSK BYSKE BÅLSTA BÅSTA DALARÖ DELSBO DJURSHOLM DOMSJÖ DOROTEA ED SBYN EKERÖ EKSJÖ EMMABODA ENKÖPING ESKILSTUNA: FRISTADSTORGET ÖSTERMALM ESLÖV FAGERSTA FALKENBERG FALKÖPING FALUN FARSTA CENTRUM FELLINGSBRO FILIPSTAD FINNERÖDJA FINSPÅNG FJUGESTA FLEN FRISTAD FRÄNSTA FRÖSUNDA FRÖVI FURUDAL FÅRÖSUND FÄRGELANDA FÄRJESTADEN FÖLLINGE GAGNEF GAMMELSTAD GISLAVED GLOBEN GNARP GNESTA GRANGÄRDE GRÄNGESBERG GÄLLIVARE GÄLLSTAD GÄLLÖ GÄVLE CITY GÖTEBORG: ALMEDAL AVENYN BACKA RINGÖN CITY ERIKSBERG FRÖLUNDA FÖRSTA LÅNGGATAN GÅRDA HISINGS KÄRRA HJÄLLBO HÖGSBO KORTEDALA LANDALA LILLA BOMMEN MAJORNA MARIEHOLM ODINSGATAN SISJÖN TORSLANDA VOLVO PVB ÖRGRYTE ÖVRE HUSARGATAN HAGFORS HALLSBERG HALLSTAVIK HALLUNDA TORG HALMSTAD HAMMARBY HAMMARSTRAND HAMMERDAL HANINGE CENTRUM HAPARANDA HEBY HEDE HEDEMORA HEDESUNDA HELSINGBORG: NORR STORTORGET SÖDERPORT HEMSE HERRLJUNGA HJO HOLMSUND HOTING HUDDINGE CENTRUM HUDIKSVALL HULTSFRED HUSKVARNA HUSUM HÄGERSTEN HÄRNÖSAND HÄSSELBY GÅRD HÄSSLEHOLM HÖGANÄS HÖGDALEN HÖGSBY HÖLLVIKEN HÖÖR INSJÖN JAKOBSBERG JOKKMOKK JUNSELE JÄRNA JÄRPEN JÄRVSÖ JÖNKÖPING KALIX KALMAR: BERGA KVARNHOLMEN KARLSHAMN KARLSKOGA KARLSKRONA KARLSTAD: VÅXNÄS KATRINEHOLM KILAFORS KIRUNA KISTA KIVIK KLINTEHAMN KLIPPAN KNISLINGE KNIVSTA KOLBÄCK KOPPARBERG KRAMFORS KRISTIANSTAD KRISTINEHAMN KROKOM KUMLA KUNGSBACKA KUNGSÄNGEN KUNGSÖR KUNGÄLV KVISSLEBY KÄRRTORP KÄVLINGE KÖPING LAHOLM LAMMHULT LANDSBRO LANDSKRONA LANDVETTER LEKSAND LERUM LIDEN LIDINGÖ: CENTRUM LARSBERG NÄSET LIDKÖPING LILLA EDET LIMA LINDESBERG LINKÖPING: CITY TORNBY LIT LJUNGBY LJUNGBYHED LJUSDAL LJUSNE LOMMA LUDVIKA LUGNVIK LULEÅ: STORGATAN ÖRNÄSETLUND: CITY IDEON LYCKSELE LÖVÅNGER MALMÖ: AMIRALSGATAN CITY DALAPLAN FOSIE FRIDHEM KÖPENHAMNSVÄGEN LIMHAMN LUNDAVÄGEN TRIANGELN VÄRNHEM MALUNG MALÅ MARIESTAD MARIEVIK MARKARYD MATFORS MELLERUD MJÖLBY MOCKFJÄRD MORA MOTALA MÄRSTA MÖLNDAL MÖLNLYCKE MÖNSTERÅS MÖRBY CENTRUM MÖRBYLÅNGA MÖRLUNDA MÖRSIL NACKA: FORUM NACKA ALFTA ALINGSÅS ALVESTA ALVIKS TORG ANDERSTORP ARBOGA ARBRÅ ARLANDA SKY CITY ARLÖV ARVIDSJAUR ARVIKAAVESTA BACKE BANKERYD BERGBY BERGSJÖ BJURHOLM BJURSÅS BJÄSTA BJÖRBO BJÖRNA BLACKEBERG BODEN BO LLE BYGD BOLLNÄS BORENSBERG BORGHOLM BORLÄNGE BORÅS: HULTA NORRBY STORA TORGET VIARED BREDBYN BROBY BROMMAPLAN BRÄCKE BUREÅ BURTRÄSK BYSKE BÅLSTA BÅSTA DALARÖ DELSBO DJURSHOLM DOMSJÖ DOROTEA ED SBYN EKERÖ EKSJÖ EMMABODA ENKÖPING ESKILSTUNA: FRISTADSTORGET ÖSTERMALM ESLÖV FAGERSTA FALKENBERG FALKÖPING FALUN FARSTACENTRUM FELLINGSBRO FILIPSTAD FINNERÖDJA FINSPÅNG FJUGESTA FLEN FRISTAD FRÄNSTA FRÖSUNDA FRÖVI FURUDAL FÅRÖSUND FÄRGELANDA FÄRJESTADEN FÖLLINGE GAGNEF GAMMELSTADGISLAVED GLOBEN GNARP GNESTA GRANGÄRDE GRÄNGESBERG GÄLLIVARE GÄLLSTAD GNESTA GRANGÄRDE GRÄNGESBERG GÄLLIVARE GÄLLSTAD GÄLLÖ GÄVLE CITY GÖTEBORG: ALMEDAL AVENYN BACKA RINGÖN CITY ERIKSBERG FRÖLUNDA FÖRSTA LÅNGGATAN GÅRDA HISINGS www.handelsbanken.com +46 8 701 10 00 SE-106 70 Stockholm KÄRRA HJÄLLBO HÖGSBO KORTEDALA LANDALA LILLA BOMMEN MAJORNA MARIEHOLM ODINSGATAN SISJÖN TORSLANDA VOLVO PVB ÖRGRYTE ÖVRE HUSARGATAN HAGFORS HALLSBERG HALLSTAVIK HALLUNDA TORG HALMSTAD HAMMARBY HAMMARSTRAND HAMMERDAL HANINGE CENTRUM HAPARANDA HEBY HEDE HEDEMORA HEDESUNDA HELSINGBORG: NORR STORTORGET SÖDERPORT HEMSE HERRLJUNGA HJO HOLMSUND HOTING HUDDINGE CENTRUM HUDIKSVALL HULTSFRED HUSKVARNA HUSUM HÄGERSTEN HÄRNÖSAND HÄSSELBY GÅRD HÄSSLEHOLM HÖGANÄS HÖGDALEN HÖGSBY HÖLLVIKEN HÖÖR INSJÖN JAKOBSBERG JOKKMOKK JUNSELE JÄRNA JÄRPEN JÄRVSÖ JÖNKÖPING KALIX KALMAR: BERGA KVARNHOLMEN KARLSHAMN KARLSKOGA KARLSKRONA KARLSTAD: VÅXNÄS KATRINEHOLM KILAFORS KIRUNA KISTA KIVIK KLINTEHAMN KLIPPAN KNISLINGE KNIVSTA KOLBÄCK KOPPARBERG KRAMFORS KRISTIANSTAD KRISTINEHAMN KROKOM KUMLA KUNGSBACKA KUNGSÄNGEN KUNGSÖR KUNGÄLV KVISSLEBY KÄRRTORP KÄVLINGE KÖPING LAHOLM LAMMHULT LANDSBRO LANDSKRONA LANDVETTER LEKSAND LERUM LIDEN LIDINGÖ: CENTRUM LARSBERG NÄSET LIDKÖPING LILLA EDET LIMA LINDESBERG LINKÖPING: CITY TORNBY LIT LJUNGBY LJUNGBYHED LJUSDAL LJUSNE LOMMA LUDVIKA LUGNVIK LULEÅ: STORGATAN ÖRNÄSETLUND: CITY IDEON LYCKSELE LÖVÅNGER MALMÖ: AMIRALSGATAN CITY DALAPLAN FOSIE FRIDHEM KÖPENHAMNSVÄGEN LIMHAMN LUNDAVÄGEN TRIANGELN VÄRNHEM MALUNG MALÅ MARIESTAD MARIEVIK MARKARYD MATFORS MELLERUD MJÖLBY MOCKFJÄRD MORA MOTALA MÄRSTA MÖLND MÖLNLYCKE MÖNSTERÅS MÖRBY CENTRUM MÖRBYLÅNGA MÖRLUNDA MÖRSIL NACK A : FORUM NACK A NORBERG NORDINGRÅ NORDMALING NORRKÖPING: DROTTNINGGATAN