Stadshypotek: Highlights of Stadshypotek's annual report January-December 2006

  • Lending increased by SEK 35bn (32) to SEK 480bn.
  • Operating profit was SEK 4,581m (5,599).
  • Recoveries exceeded new loan losses.
  • Covered bonds were issued in Sweden and internationally during the fourth quarter.
Highlights of Stadshypotek's
annual report January - December 2006
Stadshypotek's operating profit for 2006 was SEK 4,581m. The figure for the previous year was SEK 5,599 m. The change in the profit figure was chiefly attributable to lower net interest income, partly due to decreasing lending margins. Stadshypotek's lending volumes on the private market showed a very positive trend during the year, but this did not fully offset declining lending margins resulting from price competition on the market. In addition, net interest income was burdened by effects attributable to the changeover to IFRS, which will gradually diminish until 2008. Moreover, return on equity was lower than in the previous year.
Low loan losses
Recoveries exceeded new loan losses; the net amount recovered was SEK 278m (133), which corresponds to a loan loss ratio of -0.06% (-0.03) of lending. As at 31 December 2006, Stadshypotek's bad debts before deduction of the provision for probable loan losses amounted to SEK 393m (600). SEK 44m (54) of the bad debts were non-performing loans, while SEK 349m (546) were loans on which the borrowers pay interest and amortisation, but which are considered doubtful in view of uncertainty as to the borrowers' repayment capacity and the value of the collateral. In addition, there were non-performing loans of SEK 229m (325) that are not assessed as being bad debts. After deduction of the provision for probable loan losses, the volume of bad debts was SEK 284m (454).
Growth in lending
Lending to the general public was SEK 480bn - an increase of SEK 35bn during the year. Last year saw a very favourable increase in Stadshypotek's share of net growth in the private market. Stadshypotek's overall share of mortgage institutions' lending on the private market was 26.4%. Stadshypotek strengthened its position as the leading player on the Swedish corporate market, with a share of 34,8 %.
Capital adequacy
As at 31 December 2006, the capital ratio was 8.3% (8.8). The decrease was due to a higher risk-weighted volume. As at 31 December 2006, the Tier 1 capital ratio was 7.1% (7.4). In February 2007, a decision was taken to raise a subordinated loan of SEK 4,800m from the parent company, with the aim of reinforcing the capital base.

Stadshypotek's rating was unchanged.

Standard & Poor's        
Covered bonds
Moody's                        Aaa
In September, all Stadshypotek's outstanding bonds were converted into covered bonds, which received an Aaa rating from Moody's. In the fourth quarter, new issues of covered bonds were carried out in Sweden and internationally.
Events after the balance sheet date
Stadshypotek will submit an application to the Swedish Financial Supervisory Authority regarding the establishment of a branch in Norway.
Accounting policies
Accounting in the parent company and Group follows the regulations of the Annual Accounts Act for Credit Institutions and Securities Companies (ÅRKL) and the directives issued by the Swedish Financial Supervisory Authority (FFFS 2005:33). These directives mean that the Swedish Financial Accounting Standards Council's Recommendation 32 is applied, and that the accounting complies with IFRS through what is known as "statutory IFRS".
Stockholm, 20 February 2007
Frank Vang-Jensen
Chief executive
Private market = lending secured by mortgages in single-family or two-family houses, housing co-operative apartments or residential farms.
Corporate market= lending secured by mortgages in multi-family dwellings, family farms, commercial and office buildings or state and municipal loans.
The full report including tables can be downloaded from the following link:

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