Handelsbanken

Pär Boman, CEO

Merrill Lynch Banking & Insurance CEO Conference 2009September 30, 2009

2

Handelsbanken – a decentralised universal bank

Handelsbanken’s share was first listed in 1873 – the oldest listed share on the Stockholm stock exchange.

706 branches – The Branch is the Bank

Better return on equity for 37 years running

More satisfied customers

Higher cost-effectiveness than in comparable banks

Stable finances

3

-5

0

5

10

15

20

25

30

1973 1979 1985 1991 1997 2003 2009 H1

Handelsbanken Other comparable banks*%

Return on shareholder's equity after standard tax.* Since 2003 the comparable banks are: SEB, Nordea, Swedbank, Danske Bank samt DnB NOR.

Handelsbanken Group

Return on shareholder’s equity, 1973 – 2009:H1Handelsbanken’s goal is to have higher return on equity after standard tax

than the average for banks in the Nordic countries and Great Britain.

4

Handelsbanken Group

Method to achieve the goal

The Bank aims to achieve its profitability goal by having:

More satisfied clients

Lower costs than peers

5

Handelsbanken Group

Improved service and availability

Everyday service at 706 branches

Online service

Phone service – Handelsbanken Direct (free of charge and open 24/7)

Card services

6

Handelsbanken Group

Branch operations in Sweden – Active customers

1 600

1 700

1 800

1 900

2 000

2004 2005 2006 2007 2008 2009

All values as of June 30 in the respective year.

Private customers, thousands Corporate customers, thousands

120

130

140

150

160

170

2004 2005 2006 2007 2008 2009

7

1,0

2,0

3,0

4,0

5,0

6,0100 80 60 40

C/I-ratio %

Danske Bank

UBS

Société Générale

SEB

BNP Paribas

Swedbank

Deutsche Bank

DnB Nor

Commerzbank

Nordea

Intesa SanPaolo BBVA

CS Group

Lloyds TSB

HSBC

Unicredit

Barclays

Standard Chartered

Royal Bank of Scotland

Banco SantanderAllied Irish Banks

Bank of Ireland

KBC

Erste

Handels-banken

MPS

Cost-effectiveness, European universal banksComparison of listed European universal banks with total assets > EUR 125 bn.Costs including loan losses Jan-Dec 2008.

Cost/ Total loans* %

Source: Deutsche Bank: European Banks - Running the Numbers, March-09/Spring-edition.* Refers to loans to the public or deposits if deposits > lending

8

Handelsbanken Group

Branch operations in Sweden – increased productivity

The average working hours spent on talking to customers has increased by 51% since 2006

The goal of increasing the time spent with customers by 50% between 2006 and 2010 was already achieved in 2009

There is potential for even more improvement

100

151

0

50

100

150

2006 2009

Index2006 = 100

+51%

9

Credit policy

Business control system

Responsibility and Accountability

Handelsbanken Group

Business model

Decentralisation Nonnegotiable

No central marketing

The branch is the bank

No budget

No bonus

Customer

10

Credit Responsibility

Basic Guidelines

Handelsbanken Group

Credit policy

The assessment always starts with the borrower’s repayment capacity

Weak repayment capacity can never be offset by collateral or high margins

Quality requirements must never be neglected in favour of large volume

Credits must normally be adequately secured

Credit responsibility always at branch level

Customer and credit responsibility closely related

The branch holds full economic responsibility for granting the credit

If necessary, the branch obtains support from the regional head office and the central credit department

The credit policy is the same in all markets and remains unchanged over the business cycle

11

As little as 30% of loan losses are related to the initial credit decision

A majority, all as much as 70%, of loan losses are related to how you manage and monitor the credits over time

Handelsbanken Group

Our experiences of loan losses

Staying close to the customer is crucial

12

-0.25

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

1994 1997 2000 2003 2006 2009

Handelsbanken Other Swedish banks*

%

Handelsbanken Group

Loan losses as a percentage of lending

: H1

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Handelsbanken

Other Swedish banks*

Handelsbanken

Other Swedish banks

%

* Average of SEB, Nordea and Swedbank.

Stadshypotek acquired in 1997Loan loss ratio, average 1997-2009:H1Handelsbanken 0.04%Other Swedish banks 0.22%

Loan loss ratio, average 1989-1998Handelsbanken 0.87%Other Swedish banks 1.72%

13

Handelsbanken Group

Net interest income after deduction of loan losses

0

1 000

2 000

3 000

4 000

5 000Q

2 06

Q4

06

Q2

07

Q4

07

Q2

08

Q4

08

Q2

09

* SEB, Nordea, Swedbank, Danske Bank and DnB NOR** Q2 09: Danske Bank is included with figures for Q1 2009

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

Q2

06

Q4

06

Q2

07

Q4

07

Q2

08

Q4

08

** Q

2 09

SEK m SEK m

Handelsbanken Peers *

14

Handelsbanken Group

Financial strength

Senior funding,deposits etc.

Lending etc.

Capital base 18.4%

Liquidity reserve >450 SEK bn

Assets LiabilitiesLong-term Short-term

Moody’s Aa2 P-1

S&P AA- A-1+

Fitch AA- F1+

Rating

Handelsbanken has not participated in any governmentor central bank aid programmes

15

Handelsbanken Group

Capital ratio and Tier 1 ratio, June 30

2009 2008 Change

Capital ratio, Basel II 18.4% 16.1% + 2.3

Tier I ratio, Basel II 12.6% 10.6% + 2.0

Capital base, SEK m 122 105 + 17

Tier I capital, SEK m 83 69 + 14

Shareholders’ equity, SEK m 77 70 + 7

16

Mortgage

loanSyndicated loan before the crisis

Loan 1 000 1 000

Margin (assumption) 0.65% 0.30%

Net interest income 6.50 3.00

Operating profit (C/I=45%) 3.58 1.65

Profit after tax 2.63 1.22

Dividend to shareholders (40%) -1.05 -0.49

Retained earnings (New equity) 1.58 0.73

Average Pillar I risk weight 5.7% 45%

Capital requirement (10.0%) 5.7 45.0No. of years to build-up enough equity to support a new loan 3.6 61.6

Sustainable growth rate 26% 1.3%

Return on equity, Pillar I 46% 3%

Handelsbanken Group

High RoE is needed to grow the businessAn example:

17

Handelsbanken Group

Not a mass market bank

- income i medel 220.000,- kr per år- Hushållen äger sin bostad - Customer profitability max + SEK 2,000/yr

Generate more costs than income for their bank

Don’t generate much profit

Handelsbanken’s target:Better cash flow than average

Customer segment

Demand complex and tailor-made solutions

40%

20%

40%

18

Growth strategy – a repetitive business model

Surplus from profitable business

1. Existing branchCovers our segment

2.Existing branchMoves into other segments

1. Existing branchCovers our segment

2. New branch in other locationFinanced by profitable branches

NO! Increased credit risk

3. ”New” branch in other locationCovers our segment

Surplus from profitable business

19

Branch office

operations outside Sweden

Branch office

operations outside Sweden

2009:H1 2006

Handelsbanken Group

Total income per segment

27% 21%

Branch office

operations in Sweden

Branch office

operations in Sweden

Capital Markets

19%

Total income (annualized): SEK 33.2bn Total income: SEK 26.3bn

53% 59%

Capital Markets

14%

20

Operating profit, SEK 4,516m

RoE 17.5%

C/I-ratio 36.1%

Operating profit, SEK 1,583m

RoE 8.6%

- excl. operating deficit 10.3%

C/I-ratio 54.0%

Branch office operations in Sweden

Handelsbanken Group

Branch office operations, January – June 2009

Branch office operations outside Sweden

21

Operating profit SEK 1,583m

RoE 8.6%

- excl. operating deficit 10.3%

Total income increased by 31%

Net interest income increased by 40%

C/I ratio 54.0%

Number of branch offices 245

Average number of employees 3,013

Average volumes, SEK bn

Loans 516

Deposits 171

January – June 2009

Handelsbanken Group

Branch office operations outside Sweden

Handelsbanken has a branch

office in Brighton…..

…and in 61 other locationsin Great Britain

22

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000Q

1 04

Q2

04

Q3

04

Q4

04

Q1

05

Q2

05

Q3

05

Q4

05

Q1

06

Q2

06

Q3

06

Q4

06

Q1

07

Q2

07

Q3

07

Q4

07

Q1

08

Q2

08

Q3

08

Q4

08

Q1

09

Q2

09

100

110

120

130

140

150

160

170

180

190

200

210

Branch offices outside Sweden Number of branch offices within regional banks outside Sweden

SEK m

Handelsbanken Group

Net interest income outside Sweden, quarterly

No

* Lokalbanken’s 14 branch offices are included from October 21 2008.

23

0

5

10

15

20

25

30

35

40

Y 0 Y 1 Y 2 Y 3 Y 4 Y 5 Y 6 Y 7 Y 8 Y 9 Y 10 Y 11 Y 12 Y 130

5

10

15

20

25

30

35

40

No. of branch offices Income/branch, avg. Expenses/branch, avg.

No. of branch offices, June 2009

SEK, m*

* Refers to figures for 2000 – 2008 / ** Refers to the period January – June 2009

**

An organic growth model – branch by branchHandelsbanken Group - Regional banks in Denmark, Finland, Norway and Great Britain

Income and expense trend – 153 branches opened 1995-2009

Branches by age

Stable earnings growth

24

1988London

1989Manchester

1994Birmingham

2000Nottingham

2001LeedsReading

2002BristolNewcastle upon Tyne

2003CardiffSouthampton

2004NorwichGuildfordChelmsfordStokeHull

1988London

1989Manchester

1994Birmingham

2000Nottingham

2001LeedsReading

2002BristolNewcastle upon Tyne

2003CardiffSouthampton

2004NorwichGuildfordChelmsfordStokeHull

2005LiverpoolBournemouthPlymouthMaidstoneCambridge

2006SloughSheffieldWolverhamptonOxford Leicester Swindon

2007DoncasterBrightonPrestonBathTees ValleyCroydonPortsmouthLondon West EndMilton KeynesNorthamptonWakefieldEnfieldCoventryBasingstokeCarlisleChester

2005LiverpoolBournemouthPlymouthMaidstoneCambridge

2006SloughSheffieldWolverhamptonOxford Leicester Swindon

2007DoncasterBrightonPrestonBathTees ValleyCroydonPortsmouthLondon West EndMilton KeynesNorthamptonWakefieldEnfieldCoventryBasingstokeCarlisleChester

2008ExeterSwanseaSt AlbansCrawleyBradfordGrimsbyDartfordKingstonShrewsburyHarrogateLincolnScarboroughStockportTunbridge Wells

2009DerbyHuddersfieldWarringtonHarrowGlasgowEdinburgh

2008ExeterSwanseaSt AlbansCrawleyBradfordGrimsbyDartfordKingstonShrewsburyHarrogateLincolnScarboroughStockportTunbridge Wells

2009DerbyHuddersfieldWarringtonHarrowGlasgowEdinburgh

Handelsbanken had 62 branches in Great Britain

Net interest income rose by 24% (Q2/Q1 +25%) Lending volumes rose by 18% Loan loss ratio: 0.12%

January – June 2009

25

Handelsbanken Group

Summary

January - June 2009 compared with January – June 2008

Operating profit increased by 14% till SEK 7,251m (6,352)

Return on shareholders’ equity increased to 13.1% (12.9)

Net interest income rose by 24% to SEK 11,031m (8,893)

The C/I ratio improved to 45.3% (49.0)

The average volume of loans increased by 13%

Household deposits rose by 21%

The capital ratio increased to 18.4% (16.1)

Tier 1 capital according to Basel II went up to 12.6% (10.6)

The liquidity reserve exceeded SEK 450bn