Stadshypotek's operating profit for the first quarter of 2008 was SEK 767m (1,097). The decrease was partly due to the net interest income being SEK 137m lower than the same period in the previous year. Net result on financial operations also decreased by SEK 170m, compared to the same period in the previous year, which was mainly due to unrealised changes in market value of financial assets and liabilities subject to hedge accounting and derivatives. Unrealised changes in market value have had a negative impact due to falling market interest rates in the first quarter of 2008.

 

For the past few years, competition for private customers' mortgage loans has led to reduced margins, with a negative impact on the net interest income. However, the margins for mortgage loans where the rate is newly set was stable during the second half of 2007, and increased slightly in the first quarter of 2008. Stadshypotek's lending volume in the private market continued to perform well during the period. But when comparing the net interest income to the corresponding period in the previous year, the increase could not offset the falling lending margins. Net interest income was also negatively affected by the remaining effects from previously repurchased bonds. When comparing the first quarter of 2008 and the fourth quarter of 2007, however, net interest income has increased by SEK 54m, mainly due to higher margins and increased lending volume.

 

Recoveries exceeded new loan losses and the net amount recovered was SEK 11m (29), which corresponds to a loan loss ratio of -0.01% (-0.02) of lending.

 

After deduction of the provision for probable loan losses, the volume of bad debts was SEK 266m (328). SEK 58m (35) of the bad debts were non-performing loans, while SEK 208m (293) 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 416m (221) that are not assessed as being bad debts. After deduction of the provision for probable loan losses, the volume of bad debts was SEK 191m (236).

 

Lending to the public was SEK 533bn, an increase of just over SEK 9bn in the first quarter. The trend for Stadshypotek's share of net growth in the private market was favourable and the market share was 25.5%. Stadshypotek retained its position as a leading player on the Swedish corporate market, with a market share of 31.8%.

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 implemented gradually, since the transitional rules allow for an adaptation over three years. As at 31 March 2008, the capital ratio was 9.6% (10.3). As at 31 March 2008, the Tier 1 capital ratio was 6.8% (7.3). Further information concerning capital adequacy is provided in the section entitled capital base and capital requirement.

Stadshypotek's rating was unchanged.

 

 

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 (ÅRKL) 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, 22 April 2008

 

Lars Kahnlund

Chief executive

 

 

The report can be downloaded from the following link: