Stadshypotek's operating profit for the period was SEK 2,229m. The profit for the corresponding period in 2006 was SEK 2,452m. The change in the profit figure is mainly due to lower net interest income. During the first half of 2007, there was major price pressure in the market and thus the pressure on margins continued. Stadshypotek's lending volume in the private market has continued its very positive trend during the period. However, compared to the same period last year, it has not been possible to fully compensate for the falling lending margins. Moreover, net interest income was negatively impacted during the first half of the year by effects relating to decisions concerning repurchase of bonds resulting from the transition to IFRS. These effects will gradually decline until 2008. Compared to the first quarter of 2007, net interest income was SEK 48m lower in the second quarter, which was mainly due to decreasing margins. 

 

Recoveries exceeded new loan losses. The net amount recovered was SEK 49m (65), corresponding to a loan loss ratio of -0.02 % (-0.03) of lending. As at 30 June 2007, Stadshypotek's bad debts before deduction of the provision for probable loan losses amounted to SEK 284m (508). SEK 32m (44) of the bad debts were non-performing loans and SEK 252m (464) 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 283m (306) that are not assessed as being bad debts. After deduction of the provision for probable loan losses, the volume of bad debts was SEK 204m (384).

 

Lending to the public was SEK 501bn - an increase of SEK 21bn during the period. The first six months have continued to see a very favourable increase in Stadshypotek's share of net growth in the private market. Stadshypotek's overall share of Swedish mortgage institutions' lending on the private market was 26.5%. Stadshypotek has retained its position as a leading player on the Swedish corporate market, with a market share of 34.3%.

 

On 1 February 2007, new capital adequacy regulations were implemented - the Basel II rules. The new rules 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 gradually implemented since the transitional rules allow for an adaptation over three years. The capital ratio was 10.0 (8.4) as at 30 June 2007. As at 30 June 2007, the Tier 1 capital ratio was 7.1  (7.1). Further information about capital adequacy is provided in the section entitled capital base and capital requirement.

 

Stadshypotek's rating was unchanged.

  

Moody's                                                Aaa

 

Stadshypotek has decided to submit an application to the Swedish Financial Supervisory Authority for setting up branches in Finland and Denmark.

 

The accounts comply with the IASB accounting standards adopted by the EU. The regulations of the Annual Accounts Act for Credit Institutions and Securities Companies and the directives issued by the Swedish Financial Supervisory Authority are also applied. The interim report is also adapted to these. The same accounting policies and calculation methods have been applied in the interim report as in the latest annual report.

 

Stockholm, 18 July 2007

 

 

Lars Kahnlund

Chief executive