Highlights of Stadshypotek's annual report 2010

January - December 2010

FINANCIAL PERFORMANCE

Full year 2010 compared with full year 2009
Operating profit for 2010 decreased by SEK 353 million to SEK 5,408 million
(5,761), which can be attributed to a decrease in net interest income of SEK
566 million. The decrease is mainly due to higher funding costs, partly since
Stadshypotek opted to extend the maturities of its funding during the year.
Covered bonds for a total of SEK 160 billion were issued during the year. Net
interest income amounted to SEK 5,501 million (6,067), with the branch in Norway
accounting for SEK 438 million (491) and the branch in Denmark, which was
established on 1 May 2010, accounting for SEK 24 million (-). Net gains/losses
on financial items at fair value amounted to SEK 129 ­million (-101).

Expenses rose by SEK 30 million to SEK 242 million (212), mainly due to an
increase of SEK 22 million in administrative expenses. This increase was mainly
related to the cost of establishing the loan scheme for covered bonds in the US
and of services purchased from the parent company.

Recoveries exceeded new loan losses and the net amount recovered was SEK 38
million (31), which corresponds to a loan loss ratio of -0.01 per cent (-0.00)
of lending. Before deduction of the provision for probable loan losses, the
volume of impaired loans was SEK 108 million (116). Of this amount, non-
performing loans account for SEK 49 million (61), while SEK 59 million (55)
relates to loans on which the borrowers pay interest and amortisation, but which
are nevertheless considered impaired. There were also non-performing loans of
SEK 509 million (591) that are not regarded as being impaired loans. After
deductions for specific provisions totalling SEK -41 million (-55) and
collective provisions of SEK -6 million (-11) for probable loan losses, impaired
loans totalled SEK 61 million (50).

Q4 2010 compared with Q3 2010
Stadshypotek's operating profit for the fourth quarter of 2010 was SEK 1,507
million (1,297), an increase of SEK 210 million. The higher operating profit was
chiefly due to an increase of SEK 176 million in net interest income, to SEK
1,486 million (1,310), with the branch in Norway accounting for SEK 113 million
(103) and the branch in Denmark accounting for SEK 20 million (3). The increase
in net interest income was chiefly due to an increase in lending volume and to a
lower funding cost. The average margin for the private market in Sweden during
the fourth quarter was about 0.68 per cent (0.67). Net gains/losses on financial
items at fair value were SEK 92 million (34).

GROWTH IN LENDING
During the year, loans to the public increased by SEK 74 billion or 11 per cent
to SEK 759 billion (685). On 1 October, Stadshypotek's branch in Denmark
acquired a loan portfolio of around DKK 3 billion from the parent company's
branch in Denmark. Stadshypotek's share of the private market in Sweden was
approximately 25 per cent (25) and its share of the corporate market in Sweden
was approximately 32 per cent (30).

CAPITAL ADEQUACY
The capital ratio according to Basel II was 48.9 per cent (39.9) while the Tier
1 ratio calculated according to Basel II was 36.8 per cent (28.4). Following
approval from the Swedish Financial Supervisory Authority, the advanced IRB
approach is applied for medium-sized companies, housing co-operative
associations and property companies with effect from 31 December 2010. Further
information on capital adequacy is provided in the 'Capital base and capital
requirement' section on page 15.

RATING
Stadshypotek's rating remained unchanged during the year, with a stable outlook.

Stadshypotek

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



Stockholm, 9 February 2011

Lars Kahnlund
Chief executive



The full report including tables can be downloaded from the following link:


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