Stadshypotek's operating profit for the nine-month period was SEK 3,408m. The profit for the corresponding period in 2005 was SEK 4,212m. The change in the profit figure was chiefly attributable to lower net interest income, mainly due to decreasing lending margins. Stadshypotek's lending volumes on the private market showed a positive trend during the period, but this did not fully offset declining lending margins resulting from price competition on the market. In addition, lower interest rates than in the corresponding period last year had an adverse effect on net interest income, due to a reduced return on equity.

 

The company's expenses dropped from the same period in 2005, and were SEK 97m (103).

Recoveries exceeded new loan losses and the net amount recovered was SEK 82m (75), which corresponds to a loan loss ratio of -0.02% (-0.03) of lending.  As at 30 September 2006, Stadshypotek's bad debts before deduction of the provision for probable loan losses amounted to SEK 430m (790). SEK 45m (57) of the bad debts were non-performing loans and SEK 385m (733) 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 328m (390) that are not classed as bad debts. After deduction of the provision for probable loan losses, the volume of bad debts was SEK 317m (594).

 

Lending to the general public was SEK 469bn - an increase of SEK 25bn during the period. The past quarter has seen 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 26.3%.

 

As at 30 September 2006, the capital ratio was 8.2 % (8.7). As at 31 December 2005, the capital ratio was 8.8 %. The decrease is due to a higher risk-weighted volume. As at 30 September 2006, the Tier 1 capital ratio was 6.9 % (7.3).

 

Stadshypotek's rating

Stadshypotek's rating was unchanged.

 

	Long-term	Short-term
Moody's	Aa1	P-1
Standard & Poor's	AA-	A-1+
Fitch	AA-	F1+

 

 

In September, all outstanding bonds were converted into covered bonds. These bonds have received an Aaa rating from Moody's. New issues in Sweden and abroad will be in the form of covered bonds.

 

	Covered bond
Moody's	Aaa

 

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". The same accounting policies have been applied in the interim report as in the most recent annual report.

 

Stockholm, 24 October 2006

 

 

Frank Vang-Jensen

Chief executive