Highlights of Stadshypotek's Annual Report 2002

Summary
 
  •          Operating profit increased to SEK 4 711m
  •          Net interest income rose by SEK 212m to SEK 4 820m
  •          Expenses fell by 20% due to ongoing improvements in efficiency
  •          Recoveries exceeded new loan losses
  •          Increased marketshare for corporate lending and stable growth of private market volumes
  •          Increased customer benefit through development of new Internet-based services
  •          Redemption of preference shares in Handelsbanken Hypotek
  •          Merger process between Stadshypotek and Handelsbanken Hypotek going according to plan

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    Results continue to be strong
    The Stadshypotek Group's operating profits increased to SEK 4 711m (4 543), the highest result ever for Stadshypotek. This means that operating profits have improved each year since Handelsbanken acquired the company in 1997. The higher result is mainly due to increased net interest income and lower expenses.

     
    Operating income
    Net interest income rose by SEK 212m to SEK 4 820m (4 608). The increase is the result of higher lending volumes and an improved lending margin due to further increase in private market lending. Lower interest rates in 2002, combined with lower shareholders' equity, have had a negative impact on net interest income.
     
     
    Expenses
    The Group's total expenses continue to fall, mainly as a result of ongoing improvements in efficiency. They were SEK 259m (323), a decrease of SEK 64m or 20%. Expenses include the agents' commission which Handelsbanken Hypotek pays to Handelsbanken. Due to the subsidiary's lower lending volumes, agents' commission was reduced by SEK 48m.
    Loan losses
    Recoveries exceeded new loan losses and the net amount recovered was SEK 160m (193), which corresponds to a loan loss ratio of -0.05% (-0.06) of lending.
     
    As at 31 December 2002, Stadshypotek's volume of bad debts before deduction of the reserve for probable loan losses amounted to SEK 1 939m (2 717). Of the bad debts, SEK 310m (620) were non-performing loans and SEK 1 629m (2 097) were loans on which the borrowers pay interest and amortisation but which are considered doubtful in view of the borrowers' repayment capacity and due to uncertainty as to the value of the collateral. After deduction of the reserve for probable loan losses, the volume of bad debts was SEK 1 350m (1 887).
     
    Lending
    Lending to the general public continues to increase and was SEK 366.2bn (349.9) as at 31 December 2002. Private market lending shows stable growth with an increase of SEK 17.4bn (20.5). Stadshypotek's share of the corporate market increased despite total corporate lending decreasing by SEK 1.1bn (3.4). 
     
    Focus on customer benefit
    During the year, Stadshypotek launched two new Internet-based services which have been very well received by customers. In the summer, "Fixing interest rates on the Internet" was introduced, which since then has been used for some 25% of all rate fixings by customers.
    In the autumn, customers were able to use a function called "Changing loan terms on the Internet" which makes it easier and more flexible to select a new interest rate fixing period.
    The application procedure for the e-giro billing service was also improved and simplified in the autumn, which has led to a substantially increased interest in this service.
     
    Capital ratio
    As at 31 December 2002, the capital ratio was 9.8% (10.8). The lower capital ratio compared to the same date in the previous year is mainly due to increased lending volume.

    Mortgage company merger
    Stadshypotek and Handelsbanken Hypotek have applied to the Swedish Patent and Registration Office to implement the merger plan decided by the two companies in October 2002 whereby Handelsbanken Hypotek will be incorporated into Stadshypotek. The merger is expected to be completed in spring 2003 after which remaining loans in Handelsbanken Hypotek will be transferred to Stadshypotek's loan system.
     
     
    Stockholm, 18 February 2003
     
    Claes Norlén
    Chief Executive

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