Svenska Handelsbanken AB (publ)

Very welcome to the presentation of Q2 for Handelsbanken. Our president and CEO, Carina Åkerström, will begin together with Carl C. de Scheldt, CFO. They will present the report. There's a direct broadcast, and Handelsbanken.com Investor Relations will get you to the right link.

Find the presentation translated simultaneously by choosing English in the menu.

After the presentation, we will have a short break, and then there will be a Q&A session in English, and instructions for how to connect can be found on the same website. There you go, Carina. Thank you very much, Louise, and good morning, and welcome to this presentation of the performance for Handelsbanken for the first six months of the year, and for Q2. Let's start by looking at a more general level. Handelsbanken is in a strong, stable position in a world which continues to be characterized by a great deal of uncertainty. Interest rates are high, also against the backdrop of the inflation, which persists. and the result is a macro financial uncertainty, which is visible in all the home markets of the bank. For just over four years ago, we stated that we will focus, simplify, and clarify the bank's direction towards financing, savings, and asset management. And in keeping with our customers and general development, we also said that we would speed up and increase our investments in IT and data, broaden our digital accessibility, make efficiency improvements to a lot of the manual tasks in our branches and of course also on future proofing our customer relations and future potential revenue generation. The performance for the bank six months is strong and it's stable. The operating profit up by 46% for the first six months and if we adjust for items affecting comparability, The operating profit is up by 60%. This is entirely in line with expectations, and we continue to do what we have set out to do. And we're doing it, and you can see through the way we focus our business, we develop and improve the business. You can see it in the performance, in profitability, income growing more rapidly than our expenses, and not least important, in all of our home markets. Customer satisfaction exceeds the industry average in our region. So income is increasing more rapidly than cost. CI ratio for the first six months is now down to 37.8. And the degree of activity amongst our customers, both in households and the corporate business during a large part of 2022 and going into 2023 has been high. But during Q2, we see a slowdown, a calmer period that we expect. Now, leave behind us one. We're currently operating at a slower pace, both for households and companies, but we're doing the business we want to do. And our fees and commission income is keeping up well. The good savings business is developing with us, the band of management is continuing to develop well. ROE... is at a solid 15.6 for the first six months. That's the highest level we've seen in a while. It was a little bit higher still during the quarter, 16.2. And credit losses, once again, at a low level. The strength and stability of the bank were reflected at the end of the quarter and at the beginning of July also in the fact that the three leading rating institutes, Moody's, S&P and Fitch, confirmed their short- and long-term credit ratings for the bank. No other privately owned bank in the world has a higher rating combined from those three leading rating institutes. Moody's also upgraded its rating to the bank's senior non-preferred debt instrument, and this is very rewarding since this suggests that there is a comfort in the credit risk and stability of the bank. the bank's strong and robust credit procedures, skilled employees, good order in the finances of our customers, large buffers in terms of collateral, a strong capital position, and sustainable and high levels of profitability. We continue to be very confident in terms of the quality of our credit portfolio. Lending to real estate companies, nothing new. This is something we've worked with for a long time and over the longer perspective this is something we regard positively. Low LTVs and cash flows, good long-standing relationships with the owners who can support their own companies, local entrenched, and it's possible for us to take out collateral. That means that out of the total lending in the bank, about 90% of our lending is secured with real estate collateral and with LTV ratios at approximately 50% in addition. The basis for stability and the long-term perspective remains financial strength and stability. And we have this CET1 ratio now amounts to 19.8%. This is self-evident to us in these times, which have to continually be considered to be uncertain. We see this as a prerequisite for a long-term approach, regardless of the global situation. We need the flexibility to give support to the bank's customers and also have the possibility to continue to invest and develop our operations. Let's have a look at the second quarter, comparing it to the first quarter in 2023. I mentioned earlier that the CI ratio is further improved to the lowest level ever, amounting to 37.1%. The profitability was up during the quarter to 16.2%, in spite of the fact that we have more capital buffers, larger capital buffers than in many years, and whilst maintaining a higher continuous pace of investment than in previous years. The underlying income remained stable and were basically unchanged between the quarters. Costs were down by 2%. The underlying relatively flat and credit losses remains, as I mentioned, at low levels also in absolute numbers. So all in all, we see an increase in the reported operating profit by 4% and marginally underlying result down a very stable quarter once again. All in all, if we look at the accumulating result for the first six months comparing it to last year we see all in all that for the key ratios there are more or less the same as for the second quarter the underlying operating profit is up by just over sixty percent compared to last year and income is up by thirty five percent underlying as a result of relatively high level of activity we had in twenty twenty two and coming into twenty twenty three but still a high interest rate situation and an increased net interest income as a result of recovered margins. Costs are up compared to last year, underlying by 9%. The costs are impacted. during the spring by the overall inflation situation in all of our home markets. It impacts salaries and our costs generally and we continue to invest to counteract financial criminality and we continue to invest in cyber security which is so very important. As we've communicated over the past few quarters we continue to develop our development capacity And we are stable in terms of development investments for the third quarter in a row, entirely in line with what we've communicated before. The current pace we're keeping in IT and development of operations is making it possible for us to develop our meeting places, making the bank's offering much more available on a broader scale, making it easier for customers to meet the bank, to strengthen our offering to our customers. and improve the efficiency of our operations wherever we can. Customer benefit, income generation enhanced, efficiency and satisfied customers, and credit losses more or less increased. non-existent, we have good order in our credit portfolio. When we look a little bit closer also at how we develop what we call our core business in financing and savings, very important to us, we see that we've moved our positions forward. It is rewarding to note because we can see continuous improvements in the digital meeting places, but also an enhanced efficiency in advisory services in our branches. It can be seen in the stability in the lending to households and corporate lending stable increased market positions and net inflows in our asset management positive development development in our private banking activities with more customers and larger volumes we're strengthening our customer relations and we're making it possible to have an increase in income if you look all in all for sweden Overall, we are the biggest lending bank in Sweden if you look at households and corporates jointly. And it is also the fact that we are the bank which has had the largest net inflow in Sweden over time into mutual funds is Handelsbanken. decade and if we look a little bit at lending volume the trend since last summer with a higher pace of amortization is still present today when we look at both household and corporate lending in total if we look at household lending the overall slowdown in the market is obviously having an impact with a lower expected growth but we're keeping our ground and our market position Growth levelling out, amortisation taking place to a greater extent, but we see some recovery in the second quarter and we are doing the business we wish to do, as I mentioned earlier. We continue to assist our customers to more sustainable financing. Green mortgages remain a small part of total volume, but it is on the increase. And if we look at lending to corporates, the pattern is a little bit different based on our core business. We're still growing at a stable pace and yet again we see a positive growth in the past quarter with some leveling out or slowdown, it makes perfect sense. And we also see that sustainability linked volumes to our corporate customers are gradually increasing. So all in all, in our home markets, we see that volumes at the end of the quarter are up both on the private side for households and corporates.