Stadshypotek's operating profit for the nine-month period was SEK 3,110m. The profit for the corresponding period the previous year was SEK 3,408m. The change in the operating profit was chiefly attributable to a decrease in net interest income. Price competition on the market has persisted, which meant that the pressure on margins continued during the third quarter. Stadshypotek's lending volume on the private market maintained its very positive trend during the period. However, compared to the same period last year, it was not possible to offset the falling lending margins. Moreover, net interest income was adversely affected during the January to September period 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 second quarter of 2007, net interest income was SEK 42m lower in the third quarter, mainly due to decreasing margins.

 

Recoveries exceeded new loan losses, and the net amount recovered was SEK 58m (82); this corresponds to a loan loss ratio of -0.02% (-0.02) of lending. As at 30 September 2007, Stadshypotek's bad debts before deduction of the provision for probable loan losses amounted to SEK 273m (430). SEK 35m (45) of the bad debts were non-performing loans, while SEK 238m (385) 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 297m (328) that are not assessed as being bad debts. After deduction of the provision for probable loan losses, the volume of bad debts was SEK 197m (317).

 

Loans to the public were SEK 511bn - an increase of SEK 31bn during the period. During the period January-September, Stadshypotek's share of net growth in the private market maintained its very favourable increase. Stadshypotek's overall share of mortgage institutions' lending on the private market was 26.6%. Stadshypotek has retained its position as a leading player on the Swedish corporate market, with a market share of 34.4%.   

 

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 30 September 2007, the capital ratio was 9.7% (8.2). As at 30 September 2007, the Tier 1 capital ratio was 6.9% (6.9). Further information concerning capital adequacy is provided in the section entitled capital base and capital requirement.

 

Stadshypotek's rating was unchanged.

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

Covered bonds
Moody's		Aaa

 

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, 23 October 2007

 

Lars Kahnlund

Chief executive

 

 

 

The report can be downloaded from the following link: