Svenska Handelsbanken AB Class A · OMXSTO:SHB_A
Svenska Handelsbanken AB Class A — Handelsbanken — Debt Investor Presentation (February 2015)
38 slides from Svenska Handelsbanken AB Class A's debt investor presentation, February 2015
Slide 1: AT1 Investor Presentation February 2015
Handelsbanken AT1 Investor Presentation February eb ua y 2015 0 5
Slide 2: Handelsbanken: Key highlights
Handelsbanken: Key highlights • Scalable and repeatable business model, unchanged and proven by 43 years of stable track record Proven business • 15% annual average growth in equity plus dividends since the beginning of the financial crisis model • No central bank support, no government support and
Slide 3: Handelsbanken: Key highlights - continued
Handelsbanken: Key highlights - continued • Financial goal: To have a higher RoE than average of the bank’s peers • For the past 43 consecutive years, the bank has reached this financial goal through: High and stable • More satisfied customers than peers profitability • Lower operating costs, fundin
Slide 4: Handelsbanken's proposed transaction
Handelsbanken’s Handelsbanken s proposed transaction Transaction CRD IV-eligible Additional Tier 1 Capital issued by Svenska Handelsbanken AB (publ) Maturity Perpetual maturity, callable after 6 years and every 5 years thereafter at the outstanding principal amount Trigger gg 8% fully y loaded CRD I
Slide 5: Transaction rationale
Transaction rationale • Handelsbanken aims to combine the lowest risk with top p of the class capitalisation p Capital Structure • Proposed transaction provides additional buffer on top of already very high CET1 position • Handelsbanken has a strong excess CET1 position with regards to capital requi
Slide 6: Table of contents
Table of contents - Handelsbanken business position - Handelsbanken capital position - Proposed transaction Appendix A: Handelsbanken additional information A Appendix di B: B H Handelsbanken d l b k additional dditi l capital it l information i f ti
Slide 7: Handelsbanken Business Position
Handelsbanken Business Position
Slide 8: 15% average annual growth in equity (including dividends)
15% average annual growth in equity (including dividends) High and stable profitability with high growth and low volatility, without any need of support from central banks, g government or shareholders SEK / share Adjusted equity per share Accumulated dividends since 2008 325 300 275 250 225 200 175
Slide 9: Total return versus European banks
9 (100)% (50)% 0% 50% 100% 150% 200% Handelsbanken 167 DNB Nordea Swwedbank Source: Factset 31 December 2014 SEB HSBC Baankinter San ntander Staan Char Danske D BNP Natixis BBVA Intesa Mediobanca KBC Agricole Credit A Ba arclays ING Banco de SSabadell Unione d di Ban It Erste Euro STOXX X Banks (63)
Slide 10: Earnings stability in an unstable environment
Earnings stability in an unstable environment RoE has not been below 12% any year since the start of the financial crisis 18% 16% 14% 12% 10% 8% 6% 4% 2% 1 0% 2008 2009 2010 2011 2012 2013 2014 10
Slide 11: Consistent operational and risk management excellence
Consistent operational and risk management excellence Cost-to-income and loan loss average (2008-2013) 85% Deutsche Bank RBS 80% Commerzbank 75% KBC Ratio Ave 2008-2013 70% Lloyds Société Générale Barclays 65% Crédit Agricole 60% SEB Erste Bank RZB C/I R Danske Bank 55% StanChart HSBC Nordea Swedban
Slide 12: Consistently low and stable loan losses
Consistently low and stable loan losses Historical loan losses 1997 – 2014 1 10 1,10 1/4 of the average loan losses for Nordic peers in 1997 – 2014 Handelsbanken Annual average other Nordic banks 20bp 1 Annual average SHB 5bp Other Nordic banks 0,90 0,70 0,50 0,30 0,10 (0,10) 1997 1998 1999 2000 20
Slide 13: Increasingly diversified income from organic growth outside Sweden
Increasingly diversified income from organic growth in markets outside Sweden Proportion of operating profit before loan losses from home markets outside Sweden1 40% 38% 36% 34% 32% 30% 28% 26% 24% 22% to 35% in 3 years 22% 20% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2012 2012 2012 2012 2013 201
Slide 14: Handelsbanken Capital Position
Handelsbanken Capital Position
Slide 15: 15% average annual growth in equity (including dividends)
15% average annual growth in equity (including dividends) High and stable profitability with high growth and low volatility, without any need of support from central banks, g government or shareholders SEK / share Adjusted equity per share Accumulated dividends since 2008 325 300 275 250 225 200 175
Slide 16: Continuous improvement of core capital
Continuous improvement of core capital Common Equity Ratio, Basel II Common Equity Ratio, CRD IV 25% 25% 20.7 % 20.4 % 20.1% 19.5% 19.3% 19.2% 18.9% 18.8% 18.2% 18.0% 17.9% 17.8% 7.5% 20% 7.3% 20% 1) % 16.1% 17 1 1 1 % 15.8% 17 15.6% 14.8% 14.7% 14.5% 13.8% 13.1% 15% 12.3% 15% 12.1% 11.9% 11.1% 0.3%
Slide 17: Strengthened capitalisation through retained earnings and conservative lending
Strengthened capitalisation through retained earnings and conservative lending, not through model changes Evolution of Customer Risk Profile Focus on high quality lending 66% of lending volume in risk 34% of lending volume in risk class 4-D in 2009 Handelsbanken’s increase in core capital ratio from
Slide 18: Handelsbanken best in class in the EBA stress test 2014
Handelsbanken best in class in the EBA stress test 2014 CET1 ratios in 2016 with adverse scenario stress test 18% 16.9% 16% 14% 12% 10% 8% 6% 4% 2% 0% Source: EBA 18
Slide 19: Core capital position significantly in excess of SFSA's requirements
Handelsbanken core capital position significantly in excess of SFSA’s requirements Handelsbanken’s buffer to minimum core capital and combined buffer requirements (Q4 ’14) (excluding pre pre-provision provision profit generation) 20.4 % 20% 2.7 % 7.2 % 1.5 % 9.9 % 15% 3.6 % 10.5 % 2.0 % 10% 2.5 % Pi
Slide 20: Pillar 2 capital requirement not part of MDA restrictions
Pillar 2 capital requirement not part of MDA restrictions 2.8.6.2: “….As stated in the legal g basis,, neither the Pillar 2 basic requirement q nor the capital p planning p g buffer affect the automatic restrictions on distributions, as long as a formal decision on a specific own funds requirement h
Slide 21: Considerable buffers at hand in the unlikely event of stress
Considerable buffers at hand in the unlikely y event of stress for the bank SEK 4.1bn Income taxes Tools that are available SEK 1.6bn IT investments to directly 2014 pprofit before tax,, counteract Oktogonen and expensed IT- any negative investments: SEK 0.8bn Oktogonen impact of a severe SEK 21.6bn
Slide 22: Total capital ratios far exceeding regulatory minima
Total capital ratios far exceeding regulatory minima TotalCapital capital requirement (SFSA Release November 2014) Current total capital position (Q4 ’14) Capital target Under normal circumstances, 25.6 % Handelsbanken’s common equity tier 1 ratio should be between 1 and 3 percentage 3.5 % points ab
Slide 23: Negligible historical loan losses in context of expected buffer to trigger
Negligible historical loan losses in the context of expected buffer to trigger Annual loan losses, 2010–2014 (SEKm) Total buffer to 8% trigger of SEK60bn Loan loss 0.10 0.05 0.08 0.07 0.10 equals 45 times the annual average ratio (%) loan losses 2000 1800 Total buffer to 10.5% MDA of SEK47.5bn e
Slide 24: Capital requirement vs. annual loan losses
Capital requirement vs vs. annual loan losses Risk weights and Historical loan losses Model capital requirement Capital requirement for credit risk as a multiple of annual loan losses1 40 37 H d l b k ’ capital Handelsbanken’s it l requirement i t for f 35 credit risk equals 37 times annual loan los
Slide 25: Proposed Transaction
Proposed Transaction Handelsbanken
Slide 26: Summary of the Terms & Conditions
Summary of the Terms & Conditions Issuer Svenska Handelsbanken AB (publ) (the “Bank”) Expected ratings of the Notes • Expected Baa3/BBB/BBB (Moody’s/S&P/Fitch) • Deeply subordinated Status • Senior onlyy to share capital p and other obligations g of the Bank ranking, g, or expressed p to rank jjunio
Slide 27: Equity dividend distribution versus indicative AT1 coupon
Equity dividend distribution versus indicative AT1 coupon 3Y avg. dividend vs Dividend paid, 2012–20141 (SEKm) indicative AT1 coupons (SEKm) 12,000 10,000 9,000 10,000 8,000 , 7,000 8,000 6,000 6,000 5,000 4,000 4,000 3,000 2,000 2 000 2,000 1,000 0 0 2012 2013 2014 3Y avg dividend AT1 annual coupon
Slide 28: One of the largest CET1 buffers of all AT1 issues to date
Handelsbanken enjoys one of the largest CET1 buffer of all AT1 issues to date… 25,0% 21,2% 20,4% 20,0% 16,2% 15,3% 15,2% 14,7% 15,0% 13,2% 12,4% 12,9% CET11 12,6% 11,6% 11,3% , 8 2% 8,2% 10 9% 10,9% 7,2% % C 7,7% 10,3% 10,3% 10,2% 9,6% 9,6% 10,0% 5,6% 7,8% 4,3% 6,5% 3,3% 2,6% 5,8% 5,2% 4,5% 5 0% 5,0
Slide 29: One of the highest buffers to Pillar 1 and MDA restrictions
… As well as one of the highest buffer to Pillar 1 and MDA restrictions 25,0% 21,2% 20,4% 20,0% 16,2% 10,6% 15,3% 15,2% 9,9% 14,7% 15,0% CET11 12,9% ,6% 12,6% 5 8% 5,8% C 5,0% 4,4% 11,6% 6,3% 11,2% 10,9% 2,6% 1,2% 10,3% 10,3% 9,6% 1,7% 9,6% 10,0% 5,9% 2,9% 2,3% 3,3% 1,6% 5,0% 10,5% 10,6% 10,4% 10,2%
Slide 30: Strong organic capital generation in context
St Strong organic i capital it l generation ti ini context t t Lowest Full Year Net Income (2007 to Date) / Q3 2014 RWA2 Swedish banks Other European banks 4,0% 3,0% 2,1 % 2,0% 1,6 % 1,0 % 0,9 % 0,7 % 1 0% 1,0% 0,5 % 0,3 % 0,2 % 0,1 % 0,0 % 0,0% -1 0% -1,0% (1,0)% (1,1)% -2,0% (1,7)% -3,0% 3 0% (2 8
Slide 31: Investment considerations
Investment considerations • Scalable and repeatable business model, unchanged and proven by 43 years of track record Proven business model • Increased geographic diversification through organic growth with 35% of operating profits with extremely conservative before risk profile • 15% annual average
Slide 32: Appendix A: Additional Business Position / Macro Information
Appendix A: Handelsbanken Additional Business Position / Macro Information
Slide 33: Loan losses for Swedish residential mortgages have been low
Loan losses for Swedish residential mortgages have been low – low even during the severe banking crisis of the 1990’s Robust housing market dynamics Stable loan book, tested in severe crises Loan loss levels are very low for Swedish mortgages due to Loan loss ratio for Stadshypotek’s private marke
Slide 34: UK business testament to conservative risk profile and organic growth
UK business testament to Handelsbanken’s conservative risk profile and focused organic growth strategy Continued expansion and increased availability 188 branches including appointed branch managers More than 1,750 employees in the UK Earnings increased by 28% in local currency in January – De
Slide 35: Appendix B: Additional Capital Information
Appendix B: Handelsbanken Additional Capital Information
Slide 36: Summary of the Terms & Conditions
Summary of the Terms & Conditions Issuer Svenska Handelsbanken AB (publ) (the “Bank”) The Notes • Additional Tier 1 Notes Expected ratings of the Notes • Expected Baa3/BBB/BBB (Moody’s/S&P/Fitch) Maturity • Perpetual • Fixed until the First Reset Date, reset every 5 years thereafter (non-step) Rate
Slide 37: Disclaimer (1/2)
Disclaimer (1/2) THIS DOCUMENT AND ITS CONTENTS ARE CONFIDENTIAL AND IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION AND FOR USE AT A PRESENTATION TO BE HELD IN CONNECTION WITH THE PROPOSED OFFER OF SECURITIES REFERRED TO HEREIN AND MAY NOT BE REPRODUCED IN ANY FORM OR FURTHER DISTRIBUTED TO AN
Slide 38: Disclaimer (2/2)
Disclaimer (2/2) This presentation and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person. The distribution of this presentation and/or any other documents related to the proposed offering of the N
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