Highlights of Stadshypotek’s Annual Report January – December 2017

Stadshypotek’s operating profit increased by 8%, or SEK 883m, to SEK 12,249m (11,366). Net interest income grew by SEK 995m to SEK 13,357m (12,362), mainly due to higher lending volumes to the private market in Sweden. However, this change in net interest income was adversely affected by SEK 391m as a result of the significant increase of the fee to the Resolution Fund in 2017. Net interest income was affected positively by SEK 250m due to changes in the terms and conditions of subordinated loans. Of the net interest income, SEK 896m (598) was attributable to the branch in Norway, SEK 377m (385) to the branch in Finland and SEK 422m (345) to the branch in Denmark. The increase in net interest income at the Norwegian branch was mainly attributable to a lower funding cost, but also to an increase in lending volumes. Excluding the branches, net interest income increased by SEK 624m. Net gains/losses on financial transactions decreased by SEK 40m to SEK 42m (82).

Expenses increased by SEK 87m to SEK -1,134m (-1,047). This increase is mainly attributable to an increase in the sales compensation paid to the parent company for the services performed by the branch office operations on behalf of Stadshypotek in relation to the administration and sale of mortgage loans, and to higher pension costs. The increase can also be explained by higher costs of IT development and costs relating to the updating of funding programmes and ratings.

Recoveries exceeded new loan losses and the net amount recovered was SEK 10m (-2).

Compared with the end of the corresponding period of the previous year, loans to the public increased by 6%, or SEK 71bn, to SEK 1,222bn (1,151). In Sweden, loans to the public increased by 7%, or SEK 68bn, to SEK 1,051bn (983). Loans to the private market in Sweden increased by 7%, or SEK 46bn, to SEK 717bn (670).

The credit quality of lending operations remains very good. Impaired loans, before deduction of the provision for probable loan losses, totalled SEK 135m (103). Of this amount, non-performing loans accounted for SEK 58m (41), while SEK 77m (62) related to loans on which the borrowers pay interest and amortisation, but which are nevertheless considered impaired due to uncertainty regarding the borrowers’ payment capacity and/or the value of the collateral. There were also nonperforming loans of SEK 236m (328) that are not classed as being impaired loans. After deductions for specific provisions totalling SEK -33m (-32) and collective provisions for individually assessed loans of SEK -4m (-4) for probable loan losses, net impaired loans totalled SEK 98m (67).

Issues of Stadshypotek’s benchmark loans during the year totalled SEK 109.8bn (112.7). In 2017, a nominal volume totalling SEK 102.5bn (82.7) matured or was repurchased. Issues of covered bonds under the EMTCN programme totalled approximately EUR 1.75bn (2.75). The outstanding volume at year-end was about EUR 10.6bn (10.3). Issues of bonds under the US programme totalled USD 1.25bn (1.0). The outstanding at the year-end totalled USD 5bn. No issues were made in NOK or AUD during the year. The outstanding volume at the year-end totalled NOK 23bn (27). There is no longer any outstanding volume in AUD.

During 2017, some of the terms and conditions in Stadshypotek’s subordinated loans were changed, which led to the loans being reclassified in the accounts as equity rather than liabilities, thereby increasing equity by SEK 21.7bn. In connection with the change in terms and conditions, the interest to the parent company in respect of 2017 has been reclassified as dividend, thereby reducing retained earnings.

The total capital ratio according to CRD IV was 53.1% (67.4) while the common equity tier 1 ratio calculated according to CRD IV was 30.7% (39.2). Further information on capital adequacy is provided in note 15, Capital adequacy, on page 19.

Stadshypotek's ratings remained unchanged during the year.

Stadshypotek Covered bonds Long-term Short-term
Moody’s Aaa - P-1
Standard & Poor’s AA- A-1+
Fitch AA F1+

Stockholm, 7 February 2018

Ulrica Stolt Kirkegaard
Chief Executive

Stadshypotek discloses the information provided herein pursuant to the Securities Markets Act.
Submitted for publication on 7 February 2018, at 11.00 CET.