Handelsbanken’s (OMX: SHB A) strong quarterly report satisfied the markets. Net interest income was up both sequentially, albeit marginally, and compared to Q4 2010 to approach 6.4 billion SEK. Total income was nearly 8.4 billion. Costs were somewhat higher than in Q3 but almost on par with last year’s meaning profit before loan losses was up 5% year-on-year and down 4% sequentially.
Net loan losses during the quarter were 243 million as compared to 293 million last year and 157 million in Q3 2011. Operating profit was therefore just above 4 billion and net profit after taxes just over 3 billion (EPS after dilution of 4.75).
Full-year total income was 32.8 billion and net profit after taxes over 12.3 billion, which translates to earnings per share of 19.37 after dilution for 2011. This is up solidly from 17.44 a year ago. The Board of Directors proposes dividend hike to 9.75 SEK. Dividend policy target is somewhat ambiquously worded as "competitive in relation to other listed Nordic bank shares".
Basel 2 Tier 1 capital ratio is a solid 18.4%. Handelsbanken estimates that transition to Basel 3 will push that number down by 15 to 1.7% explained mainly by higher risk-weighted assets. The bank says it has no problems getting long-term funding on attractive terms.
Handelsbanken has now reached its goal of higher than average profitability in comparison to its peers for 40 years in a row. For all this time it has run a flexible decentralized organization devoid of budgets. The bank targets high net worth individuals and corporations. For 2011 strong profit growth in the UK was highlighted as a major positive. The stock gained 2.5% to close the day at 218 kronor.
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