Svenska Handelsbanken AB (publ)

Welcome! For those of you who want to follow the presentation simultaneously translated into English, please choose English in the top right menu. Välkommen till presentationen av Handelsbankens bokslutskommuniké för 2023. Mikael Gren, vd och koncernchef, presenterar resultatet. Presentationen direktsänds och publiceras därefter på handelsbanken.se slash ir. Efter presentationen blir det en kort paus och sen inleds en frågestund på engelska. Information om hur du ansluter till frågestunden finns på handelsbanken.se.

Presentation of the bank's result for the full year and for Q4 2023. We put behind us a tumultuous year with escalating geopolitical instability, raising interest rates, and also runaway inflation and a business cycle in decline. I find that the year for Handelsbanken 2023 can be described as stable. ROE was up to close to 16%, driven of an underlying growth of 37%. The income... outperformed expenses and contributed to our CR ratio. As expected, our customers show good resilience in spite of an environment with higher interest rates and the credit quality remains to be strong with credit losses amounting to only 0.01%. The capital position of the bank is very solid with a CET1 ratio of 18.8 percentage points, which is one percentage point above the The target reach of the bank under normal circumstances that is 1.3 percentage points above regulatory requirements. The robust financial position makes it possible for the board to propose a total dividend of 13 krona per share. 50% of that 6.5 krona per share is an extraordinary dividend. Over the year, 2023, we've strengthened our customer offering in physical digital channels. We have in our local branches expanded our competencies, capacities, and mandate. And at the same time, we're improving our app and the web. The customer satisfaction we see in the... Ratings that we have, it has gone up even further according to independent external surveys. Not to least, the bank's robust business model, credit quality and financial position is reflected in the ranking as being one of the most stable banks according to leading rating agencies. So the bank has a position of strength. Looking at results for the full year 2023, we can find that ROE was up to just under 16%. Total income was up with 24%, mainly due to the high interest rate situation, which has led to return on equity and liquidity reserves going up, as the Swedish Riksbank indicated. increased its interest rates in spite of lower margins for mortgages. Expenses underlying 8%, and that is explained with development capacities increasing, and well, since end of 2022, it's been stable. We've also increased our resources within AML and cyber risk. And, of course, 2023 has been a year with generally high inflation and increased costs in all our home markets. CI ratio was down to 37.2%. Credit loss is low, 141 million. corresponds to a credit loss ratio of 0.01. All in all, we had operated profit going up with 37% to some 36 billion, which is the highest level for the bank. Continuing with the Q4 2023, the profit was down somewhat compared to Q3. This is due to seasonal higher costs, ROE 15.2%. NII 2% adjusted for FX. Net fee commission income stayed more or less the same. Total income adjusted for FX was down with 1%. And compared to the previous quarter, we have to remember that NFT was unusually strong. Expenses were up 7% due to seasonal variations, and the CI ratio was up to 38%. For the third quarter consecutively, we had a credit loss ratio of 0%. All in all, the operating profit was down somewhat. And then if we look at our NII for the quarter, we see that it was up 2%. I've already mentioned that. Adjusted for FX. Volumes stayed relatively neutral, which is natural when we see a crunch in monetary policy and a slowdown in the business cycle. We've also seen that the amortization rate for private and corporate customers remain at a historically high seen relatively high levels. Our customers act in a rational manner. They amortize as much as they can. Another pattern that we have seen for some time now. And in the quarter, we had the final settlement for the fee deposit guarantee that contributed with 97 million. The adjusted NII is explained by the margins recovering compared to the previous quarter, but it is clear that they leveled out over the fall. Net fee commission income, apart from the pandemic period, it has been growing steadily. Savings related business is two thirds of the net fee commission income. And we see the same trend that we have for one and a half years. In spite of volatile stock exchanges, we have a stable net inflow from our customers who want to save the money with us. If we look at this evening's business in Sweden, we see that we have a long positive trend that we have had since 2010, if I remember correctly, and it stays strong. Our market share of mutual funds in Sweden is about 12%, but since 2010, as I've said, we have had a market share of around 25% of the net inflow that we've seen in the market for years. savings in funds. The savings business is and will remain a very important growth engine for the bank, and we see that this is something that builds a stable value over time. It's good for our customers. In addition to good performance in our funds, another success factor has been that our customers appreciated that we have a sustainability focus. Today, 95% of the fund volume that we offer is categorized in the two highest categories in the SFDR and the disclosure requirements that we have in Articles 8 and 9. Another important explanation for the success of the bank is that we have a strong way of reaching our customers with digital services, but also local strong branches in our home markets and savings advisory services, a natural part of the customer meeting. And particularly for a private banking customer, a good relationship with the bank is decisive. Of course, all private banking customers do not necessarily live in our major cities where we traditionally have had these services. existing and potential customers there in other parts of the country and that is why we the last few years have strengthened our local personal offerings so that customers can now meet for example a private banker advisor locally local branches where they live or work and this might seem elementary but it is a way of working that stands out in the market today and we see that it drives the inflow customer satisfaction and business for the bank

When it comes to expenses, they were up by barely 7% and follow the normal seasonal pattern where we usually see a rise in costs in Q4 as a consequence of the development of profitability in the bank. Compared to our competitors during the quarter, we allocated 83 million kroner to Octogonen, and this effect was significant. basically entirely balanced by positive FX effects of 85 million kroner. The staff costs, Justice for Currency and Octagon contributed by 2% to the total increase in costs, and other costs were up as a usual consequence of higher activity compared to the preceding quarter that included the summer months. If we look at net credit losses, they are almost non-existent. At the same time, the management add-on remained unchanged over the quarter and amounted to just over 600 million. Handelsbanken has historically, especially in periods of economic decline, reported significantly lower net credit losses than the rest of the banking industry. That is not a coincidence. It is a result of the structure of our lending portfolio and a consistent, strict approach to risk. Also, the business model with a strong local presence with a decentralized operating mode means that the bank can identify situation at an early stage and take action when necessary. And we are very confident in the quality of our lending portfolio. We can describe the bank as having five parts. We have our four at-home markets, and then we have the central functions that have as their ultimate responsibility to provide support to our business and ensure compliance. If we start by looking at the UK, they now represent 17% of the group operating profit. and the CI ratio is just below 48%, and return on allocated capital is 21%. The UK is the country where we have the highest level of customer satisfaction and an offering that really stands out on the local market. Local decision-making and accessibility to advice experts is very rare in the UK now, and recently we've seen a strong recovery in our profits, but at the same time, we see a decline both in private and corporate lending. The degree of amortization continues to be high, and the demand for new loans on the market remains low in general. The strong credit rating of the bank, however, continues to contribute to good inflows of corporate deposits that were up by 3% over the year. Going forward, our focus is to continue to upgrade our offering in our digital offering and to continue to always enhance local competence in our offices around the UK. Today, we hold a very small market share and we have great potential to grow significantly over time, but we never scramble to get volume. We don't have short-term incentives like a bonus. We Don't stress to create volume. We work with a long-term approach and focus on creating strong, good relationships with local customers, and that's how we maintain our strong credit quality, growth, and profitability over time. If we now look at Norway, Norway represents just over 7% of the operating profit in the group. The CI ratio is 44%, and return on allocated capital is just over 9%. In recent years, we have significantly invested in IT and business development to enhance our digital offering. to extend our very much appreciated advisory services in our offices. We have a strong credit portfolio in Norway and customer satisfaction is high and we've made significant progress when it comes to enhancing our offering. But we've had to up our staffing, especially within AML and IT development in recent years, which has had an impact on the CI ratio and the return on allocated capital. The next step is now to increase our focus on enhancing profitability in Norway And therefore, we have undertaken an overview where we will, on a regular basis, see where there's potential to increase profitability. When we look at the Netherlands, that represents 3% of the group operating profit, and the CEI ratio is 47%, and return on allocated capital is 17%. In the Netherlands, our operations are somewhat niche, where we focus on mortgages and financing of real estate. When we look to the future, the plan is to continue to operate a relatively simple, focused and profitable operation. In Sweden, Sweden today represents three quarters of the group operating profit. The CI ratio is 28% and the return on allocated capital is 18% for the full year 2023. Over the year, we have continued to enhance our customer offering by increase in resources, competence and decision-making power in our advisory services across our 206 offices in sweden at the same time our savings business is growing as i mentioned before but we have somewhat declining volumes on the market overall both in lending and deposits both in corporate and households of course this has an impact in the swedish organization we can see that we can improve efficiency in the business support aspects, and this is addressed by having a new organization for those central parts of our operation, which will be put into place in coming months. Last week, I received a telephone call for our manager in Gothenburg who had decided to do something strange. as opening a new banking office. And I thought that sounded amazing. And the new office will be in Huvos in Gothenburg. And if you know where that is, you just get in your car, you take your bicycle and you go 10 kilometers to the south on 158 Road. And then on the south, you can see new Huvos. This decision was, of course, based on great demand from the customers and therefore great business potential for the bank to place our advisor in that local setting. Sometimes people think that digitalization has made local banking obsolete. I'm convinced that the opposite is true. Thank you very much. I think that the local and digital offering, that they complement each other very well. And our enhanced offer to enhance local offices and digital offering is now an even greater competitive edge than before. And we can see that reflected in the high level of customer satisfaction. In 150 years, we've always adapted to customers' demand and wishes when it comes to where and how we meet and interact. And it's an obviously important thing to the bank to this day. And that is why we've opened this new branch in Hovos. Finally, when it comes to central aspects of the bank, after the strategic shift in last year's where the bank has left countries and markets where we don't see enough potential for profitability and growth, it's now natural to increase our focus on making central parts of the bank more efficient and to consolidate them. Our tradition is based on a simple organization without unnecessary structures and inefficiency and decentralized responsibility to avoid inefficiency and unnecessary costs. We really have to be mindful of our costs like any other business. We've now launched an overview to identify and take action against costs in our central functions, and therefore we will enhance our competitive edge. Thank you very much. Significant geopolitical tension and macroeconomic uncertainty is a fact. To ensure that the market trusts us as an attractive and stable counterpart with the full capacity to meet potential increase in credit demand, the assessment is that in the current situation it is motivated to have a CET1 ratio that is higher than the bank's normal target range with 1.3 percentage points above regulatory requirement. The CIT1 ratio, after deducting the proposed dividend, amounted to 18.8%, which corresponded to 4 percentage points above the FSA minimum requirement. To adapt the bank's capital level to the usual target range of the bank, our intention is to accept... Anticipated dividends to align the CIT1 ratio at 4.0 percentage points above the regulatory requirement. Finally, the bank stands strong, and that is crucial to build and cultivate customer relations and drive growth over time and to build stable shareholder value over time. It appears that... In the year 2023, we'll again reach our goal to have higher profitability compared to the average to comparable market at home markets. And we handle expenses with discipline and we will increase our focus on this in coming years. The customers show their appreciations for us. And last but not least, our credit quality is good, as it should be in spite of upheaval in the world around us. And that means that we continue with the long-term stable trend we've seen for many years with an average value creating per year of almost 15% for our shareholders. So thank you very much for listening to me. And now we will take a short break before we go to the Q&A. Thank you for now.