Stadshypotek's operating profits for the year were SEK 3,682m (3,926), a decrease of SEK 244m, or 6.2%, compared to the previous year. As of August 2008, Stadshypotek's branch in Norway has been included, which had a SEK 108m positive effect on operating profit for the period. Thus, excluding the branch in Norway, operating profits were down by SEK 352m on the previous year. The decrease was chiefly attributable to a negative net result on financial operations of SEK -71m, compared with a positive figure of SEK 360m the previous year. This stemmed mainly from unrealised changes in market value of financial assets and liabilities subject to hedge accounting and derivatives. Unrealised changes in market value were negatively affected, due to falling market interest rates in the second half of the year. On the other hand, during the first half of the year, unrealised changes in the market value were positively affected, due to rising market rates.

 

Net interest income totalled SEK 3,900m. This was an increase of SEK 197m over the previous year, of which SEK 123m was attributable to the branch in Norway. Thus, excluding the branch in Norway, net interest income grew by SEK 74m, chiefly due to higher volumes, as well as favourable funding costs in the prevailing market situation. For a number of years, the competition for private customers' mortgage loans has led to sharply reduced margins, which has had a negative impact on net interest income. In 2008, margins on Stadshypotek's lending volume to the private market were down somewhat on the previous year. 

 

Recoveries exceeded new loan losses and the amount recovered was SEK 75m (70), which corresponds to a loan loss ratio of -0.01% (-0.01) of lending. 

 

Bad debts before deduction of the provision for probable loan losses amounted to SEK 193m (267) at the end of 2008. SEK 56m (41) of the bad debts were non-performing loans, while SEK 137m (226) were loans on which the borrowers pay interest and amortisation, but which are considered doubtful in view of the uncertainty as to the borrowers' repayment capacity and the value of the collateral. In addition, there were non-performing loans of SEK 605m (318) that are not assessed as being bad debts. After deductions for specific provisions SEK -73m (-77) and provisions by group for individually assessed loan receivables SEK -12m (-) for probable loan losses, bad debts totalled SEK 108m (190).

 

Stadshypotek's lending volume continued to increase during the period. Lending to the public totalled SEK 615bn. This was an increase of SEK 91bn, of which SEK 44bn was attributable to the branch in Norway which was added during the third quarter. Stadshypotek's share of the private market in Sweden was maintained at around 25%. Stadshypotek retained its strong position as a leading player on the Swedish corporate market, with a market share of some 30%.

 

On 1 February 2007, new capital adequacy regulations were implemented - the Basel II regulations. The new regulations entail major changes in how the capital requirement is to be calculated and how a satisfactory capital base is to be ensured. They will be implemented gradually, since the transitional regulations allow for an adaptation over three years. As at 31 December 2008, the capital ratio in accordance with Basel II was 37.1% (40.3). As at 31 December 2008, the Tier 1 capital ratio in accordance with Basel II was 25.9% (28.5). Further information concerning capital adequacy is provided in the 'Capital base and Capital requirement' section.

 

Stadshypotek's rating was unchanged, with a "stable outlook".

 

 

The accounts comply with the IASB accounting standards adopted by the EU.  The regulations of the Swedish Annual Accounts Act for Credit Institutions and Securities Companies and the directives issued by the Swedish Financial Supervisory Authority are also applied.

 

Accounting policies are unchanged from the previous annual report.

 

Stockholm, 10 February 2009

 

 

 

Lars Kahnlund

Chief executive